Irwin v. Reeves Pulley Co.

• Decision Date: 19 November 1897
• Citation: 48 N.E. 601,20 Ind.App. 101
• Parties: IRWIN v. REEVES PULLEY CO.
• Court: Indiana Appellate Court

20 Ind.App. 101

48 N.E. 601

IRWIN

v.REEVES PULLEY CO.¹

Appellate Court of Indiana.

Nov. 19, 1897.

Appeal from circuit court, Bartholomew county; F. T. Hord, Judge.

Action by the Reeves Pulley Company against Joseph I. Irwin. From a judgment for plaintiff, defendant appeals. Reversed.

Robinson and Comstock, JJ., dissenting.

Stansifer & Baker, for appellant. Cooper & Cooper, for appellee.

HENLEY, J.

The question for determination in this cause is this: Did the appellant, in accepting for collection, in the ordinary course of business, the draft delivered to it by appellee, guaranty the solvency of the intermediate banks through which the said draft passed before it was finally presented to the drawee, and paid? It appears from the record that on the 10th day of July, 1893, appelleedelivered to appellant, who was engaged in the general banking business, at Columbus, Ind., a draft for collection. This draft was drawn upon the Baker Iron Works of Los Angeles, Cal., was for the sum of $414.25, and was made payable to the order of appellee. At the time of the delivery of the draft to appellant, appellee indorsed it as follows: “Pay to W. G. Irwin, Cash., or order, for collection. Reeves Pulley Co.” Appellant, not having a correspondent in Los Angeles, transmitted the draft to its regular correspondent at Indianapolis, Ind., the Indianapolis National Bank, for collection, indorsing the said draft as follows: “Pay E. E. Rexford, Cas., or order, for collection and credit, Irwin's Bank of Columbus, Indiana. W. G. Irwin, Cashier.” Upon receipt of the draft from appellant, the Indianapolis National Bank transmitted it for collection to its correspondent at Los Angeles, Cal., by the following indorsement: “Pay State Loan and Trust Company, or order, for collection, for the Indianapolis National Bank, Indianapolis, Indiana. E. E. Rexford, Cashier.” The State Loan & Trust Company presented the draft to the drawee, and received the full amount called for by it. Thus, it will be observed that, in the usual course of business, the draft was presented to the drawee, and paid. At the time the draft was so paid to the State Loan & Trust Company, the Indianapolis National Bank was indebted to said trust company in an amount greater than the amount of the draft, and the trust company credited the account of the Indianapolis National Bank with the amount so collected, and notified it of that fact. In the meantime the Indianapolis National Bank suspended, went into the hands of a receiver, and no money or proceeds from said draft has ever come into the hands of appellant. It is upon these facts that appellee's complaint is predicated, and upon which it seeks to hold appellant liable for the amount of the draft so deposited with appellant for collection. It is not shown or attempted to be shown in either paragraph of appellee's complaint that the appellant was negligent or did not exercise ordinary care in the selection of its correspondents, or that appellant knew, or in the exercise of ordinary care ought to have known, of the insolvency of the Indianapolis National Bank, to which appellant, in the ordinary course of business, transmitted the draft in question for collection. The complaint, then, presents the naked legal proposition, upon the facts averred: Is appellant the insurer of the solvency of the Indianapolis National Bank? The lower court overruled a demurrer to both paragraphs of the complaint. Appellant excepted, and has assigned the ruling as error to this court.

Appellant answered in three paragraphs. The first paragraph of answer is as follows: “Answer. First paragraph: For answer to plaintiff's complaint in the above-entitled cause, defendant says: That for a long time prior to and on the 10th day of July, 1893, he was engaged in and doing a general banking business in the city of Columbus, Indiana under the name and style of ‘Irwin's Bank, Columbus, Indiana,’ and, as a part of said bank's business, as was its custom and course of dealing with all its regular customers, said bank undertook, for the accommodation of its said customers, to transmit, for collection, to banks at other points or places, drafts or other evidences of indebtedness on parties residing at such points or places, without other cost or charges than the expense which defendant would have to pay to the bank making such collections when sent to a point where defendant or its correspondent bank had no correspondent bank; and, when defendant had no correspondent bank at the point or place where collection was to be made, defendant would, unless otherwise directed, in order to save expense to its said customers, send the same to its most convenient correspondent bank, which, in turn, had a correspondent bank at the point or place of collection. That prior to and on said 10th day of July, 1893, plaintiff was a regular customer of defendant's said bank, and fully acquainted with defendant's custom and manner of doing business, as aforesaid, and had long acquiesced therein; and plaintiff well knew, when the draft mentioned in plaintiff's complaint was delivered to said defendant, that the same would have to be transmitted to another bank or banks for collection. That on said 10th day of July, 1893, without any other direction, agreement, or understanding than that implied from plaintiff's knowledge of and acquiescence in defendant's custom and course of dealing, as aforesaid, and from the knowledge on plaintiff's part that said draft would have to be transmitted to another bank or banks for collection, plaintiff did deliver said draft to defendant's bank, to be transmitted for collection in the manner aforesaid, and, to facilitate such collection, indorsed thereon as follows: ‘Pay to W. G. Irwin, Cash., or order, for collection. Reeves Pulley Co.’ That defendant had no correspondent bank at Los Angeles, California, the place where the drawee resided, and where collection was to be made; and defendant's most convenient correspondent bank, which, in turn, had a correspondent bank at Los Angeles, California, was the Indianapolis National Bank, at Indianapolis, Indiana. That accordingly, and in order to save expense to plaintiff, as aforesaid, defendant transmitted said draft to said Indianapolis National Bank, to be by it transmitted to its correspondent bank at Los Angeles, California; and, to facilitate collection thereof, defendant indorsed said draft as follows: ‘Pay E. E. Rexford, Cas., or order, for collection and credit, Irwin's Bank of Columbus, Ind. W. G. Irwin, Cashier.’ That said Indianapolis National Bank, in turn, at once transmitted said draft to its correspondent bank, the State Loan and Trust Company, a bank doing a general banking business at Los Angeles, California, and, to facilitate collection thereof, indorsed said draft as follows: ‘Pay State Loan and Trust Company, or order, for collection, for the Indianapolis National Bank, Indianapolis, Indiana. E. E. Rexford, Cashier.’ That said draft was paid to said State Loan and Trust Company on the 19th day of July, 1893, and credited on said day by said bank to said Indianapolis National Bank; that, at the time of said entry and credit upon the books of said State Loan and Trust Company, the said Indianapolis National Bank was its debtor to an amount in excess of the sum so credited; that said Indianapolis National Bank failed and went into the hands of a receiver as insolvent on the 24th day of July, 1893, and notice of said collection and credit, as aforesaid, was received by said Indianapolis National Bank on the 26th day of July, 1893. That, at the time said draft was transmitted to said Indianapolis National Bank, said bank was generally supposed and reported in banking and commercial circles to be solvent and trustworthy, and defendant had no knowledge or information to the contrary, or reason to believe or suspect otherwise. That said Indianapolis National Bank still remains in the hands of a receiver, with its assets and liabilities yet unascertained; and that said State Loan and Trust Company still retains said sum so collected and credited, and claims the same as its own. Wherefore plaintiff ought not to recover.” Appellant's second paragraph of answer differs from the first in this: That, in addition to the facts averred in the first paragraph, it avers that appellant “undertook, for the accommodation of its said customers, and not otherwise, to collect by transmitting for collection, and not otherwise,” and that appellee delivered said draft to appellant “for collection in the manner aforesaid, and not otherwise.” The third paragraph of appellant's answer is substantially the same as the first, except that it is therein alleged that appellant's custom and course of dealing in undertaking to transmit for collection said draft in the manner in which the same was done, and without charge to its regular customers, was and is the custom of banks generally, but does not charge appellee with knowledge of the custom. The lower court sustained a demurrer to each paragraph of appellant's answer. Appellant excepted to the ruling of the court, and has assigned such ruling to this court as error. Appellant refused to further answer the complaint, and, upon such refusal, the court assessed appellee's damages at $459.10, and rendered judgment in appellee's favor for said amount.

The importance of the question herein involved is, we think, a sufficient excuse for the extended statement of the pleadings. It will be well to consider at the very threshold of the cause the contention of appellee's counsel that the question discussed herein is not an open question for this court, the same having been settled in appellee's favor by the supreme court of this state. With due regard for the opinion of appellee's learned counsel, the writer is of the opinion that the question presented herein has never been before the supreme court of this state for decision. The cases which are cited...