Hamburger Bros. & Co., Inc. v. Third National Bank & Trust Company of Scranton

• Decision Date: 15 July 1938
• Docket Number: 55-1938
• Citation: 132 Pa.Super. 421,200 A. 696
• Parties: Hamburger Bros. & Co., Inc., Appellant, v. Third National Bank & Trust Company of Scranton et al
• Court: Pennsylvania Superior Court

200 A. 696

132 Pa.Super. 421

Hamburger Bros. & Co., Inc., Appellant, v. Third National Bank & Trust Company of Scranton et al

No. 55-1938

Superior Court of Pennsylvania

July 15, 1938

Argued March 9, 1938

Appeal from judgment of C. P. Lackawanna Co., Nov. T., 1935, No 1202, in case of Hamburger Bros. & Co., Inc. v. Third National Bank & Trust Company of Scranton and First National Bank of Scranton.

Assumpsit. Before Leach, P. J., without a jury.

The facts are stated in the opinion of the Superior Court.

Judgment entered for defendants and against plaintiff. Plaintiff appealed.

Errors assigned, among others, were various findings and conclusions.

Judgment affirmed as to the First National Bank of Scranton and reversed as to the Third National Bank & Trust Company of Scranton.

Philip V. Mattes, with him Jacob Meadow, for appellant.

Walter L. Hill, of O'Malley, Hill, Harris & Harris, and M. J Martin, for appellees.

Before Keller, P. J., Cunningham, Baldrige, Stadtfeld, Parker and Rhodes, JJ.

OPINION

Rhodes, J.

This is an action of assumpsit by the payee and holder of a promissory note brought against the First National Bank of Scranton, Pa., to which the note was sent for collection, and the Third National Bank & Trust Company of Scranton, Pa., to which the note was presented for payment. By agreement the case was tried by a judge of the court below, without a jury. The trial judge, after hearing the evidence, made findings of fact, conclusions of law, and entered judgment nisi in favor of both defendants and against plaintiff. Plaintiff's exceptions thereto having been dismissed and the judgment nisi made final, it appealed.

There is no material dispute concerning the facts. The maker of the note in question was the Continental Cigar Company, of Scranton. Shortly before the note became due, plaintiff deposited it in the Colonial Trust Company of New York for collection. The Colonial Trust Company, through the Central Hanover Bank & Trust Company of New York, sent the note to the First National with instructions to protest the note if not paid. Although the note as originally made was payable at the office of the maker, the First National was instructed by the maker to present the note at the Third National. On the morning of the due date the First National sent the note to the Third National, but it was not paid at that time, and the First National was requested to present the note again at 3 p. m. At that time the First National sent a notary public with the note to the Third National. When he arrived there, H. E. Barthel, assistant cashier of the Third National, telephoned to the maker, and was instructed to O. K. the note. Accordingly, Mr. Barthel wrote upon the note "O. K. H. E. B.," and it was returned to the notary who thereupon started for the First National. At the time the O. K. was placed on the note the balance in the maker's account was $ 3,150.11, more than sufficient to pay the note, the amount of which was $ 1,574.03. Shortly after the notary public had left the Third National, and before he had arrived at the First National, Mr. Barthel received a telephone call from the maker stating that it did not want the note paid or O. K.'d, and that the maker desired the note to be presented at its office. Thereupon Mr. Barthel telephoned to A. C. Richards, assistant cashier in charge of the collection department of the First National, and told him that he wanted to remove the O. K. At that moment the notary entered the latter bank, and the telephone call was turned over to him. After speaking with Mr. Barthel he erased the O. K. and protested the note, which was returned to appellant, the answer in the protest being "not provided for."

It was the custom of the banks in Scranton, upon presentment of commercial paper, to mark it O. K. instead of making actual payment by cash or otherwise, and the paper was then settled for as an obligation of the bank so marking it in the exchanges at the clearing house on the following day.

Appellant had no knowledge of this transaction relating to the placing of the O. K. upon the note and its subsequent erasure, and proceeded to obtain judgment against the maker. The presentment of the note took place on March 4, 1935, and on March 6, 1935, a petition in bankruptcy was filed against the maker. Appellant filed its claim in the bankruptcy proceeding, but when it discovered that the note had been O. K.'d this suit was brought.

The propriety of the manner in which this suit was brought was not raised at any stage of the proceedings. Reference to a possible misjoinder of parties is first made in the brief for the First National. As our conclusion is that the First National is not liable, but that the judgment entered in favor of the Third National must be reversed and judgment entered in favor of appellant, we do not deem it necessary to now consider the manner in which suit was instituted.

The trial judge found, inter alia, as a fact: "4. It was the custom of the banks in Scranton to mark commercial paper as 'O. K.' and to settle for it as an obligation of the bank at the Clearing House on the following day."

The term "certification" is used in the briefs of counsel, and will be used in this opinion, to designate the action of the Third National in marking the note O. K. on presentment for payment. Although the Negotiable Instruments Act of May 16, 1901, P. L. 194 (56 PS § 1 et seq.) makes no provision for the acceptance or certification of promissory notes or for the revocation and cancellation of such acceptance after certification, section 196, art. 1, ch. IV (56 PS § 497) provides: "In any case not provided for in this act, the rules of the law merchant shall govern." Payment by such method of settlement as may be customary in a local clearing house or between clearing banks is now recognized by statute. See Bank Collection Act of June 12, 1931, P. L. 568, § 9 (7 PS § 220).

There was ample evidence to support the finding of the trial judge, and the custom of marking instruments O. K. so that they might be presented for payment at the clearing house the following day, as obligations of the bank to which they had been presented for payment, apparently is conceded by all the parties in this action. The court below was of the opinion that on the facts found judgment should be entered in favor of defendants and against appellant on the ground that the Third National had the right to withdraw its certification. In this conclusion we think the court below erred.

It is not material that no rights of any other person had attached, or that there had been no acceptance of the certification by the First National before the erasure of the O. K. by the notary public at the direction of the Third National. The First National was the agent of appellant (Act of June 12, 1931, P. L. 568, § 2 (7 PS § 213), and the notary public selected by the First National to make presentment for payment of appellant's note at the Third National was also the agent of appellant (Parke v. Lowrie, 6 Watts & Serg. 507). In Parke v. Lowrie, supra, at page 508, it was also held: "What, then, was the defendant employed to do? Just as much at it was customary for other notaries to do; and it is not pretended that he did less. . . . . The usage was his instruction; and if more had been expected of him, he ought to have been specially directed. Had he undertaken the business on special terms, he would have been bound to the extent of them; but as he undertook it on the basis of the practice, no more than the duties indicated by the practice could be required of him."

In the instant case the notary properly made presentment of appellant's note at the Third National. There it was...