Massey-Harris Harvester Co. v. Federal Reserve Bank of Kansas City

• Citation: 48 S.W.2d 158,226 Mo.App. 916
• Parties: MASSEY-HARRIS HARVESTER CO., RESPONDENT, v. FEDERAL RESERVE BANK OF KANSAS CITY, APPELLANT
• Decision Date: 01 February 1932
• Court: Court of Appeals of Kansas

48 S.W.2d 158

226 Mo.App. 916

MASSEY-HARRIS HARVESTER CO., RESPONDENT, v. FEDERAL RESERVE BANK OF KANSAS CITY, APPELLANT

Court of Appeals of Missouri, Kansas City

February 1, 1932

Appeal from the Circuit Court of Jackson County.--Hon. Darius A Brown, Judge.

REVERSED AND REMANDED.

Reversed and remanded.

Samuel Feller for respondent.

James E. Goodrich, H. G. Leedy, C. A. Leedy and O. A. Weede for appellant.

OPINION

TRIMBLE, P. J.

Plaintiff brought suit seeking damages for loss alleged to have been sustained through the act of the defendant in the matter of collecting a cashier's check for $ 3180 payable to plaintiff and issued by the First State Bank of Cunningham, Kansas. A jury was waived, and the cause was tried by the court, resulting in the court's finding in favor of the Union Avenue Bank of Commerce and against the plaintiff, and in favor of the plaintiff against the defendant, Federal Reserve Bank of Kansas City. From this judgment the said defendant Federal Reserve Bank has appealed.

The petition alleged, among other things, that on or about August 22, 1925, plaintiff was the owner of a collection account with the defendant, Union Avenue Bank of Commerce, and on said date plaintiff deposited with said bank for collection a cashier's check for $ 3180 issued by the First State Bank of Cunningham, Kansas, drawn on itself, dated August 21, 1925, and payable to plaintiff; that at the time of such deposit, plaintiff endorsed said check "Pay to the order of Union Avenue Bank of Commerce, Kansas City, Missouri;" that the amount of said check was thereupon credited to plaintiff's account; that on or about the 22nd day of August, 1925, the Union Avenue Bank endorsed and delivered said check to Commerce Trust Company for transmission through the Kansas City Clearing House and to be delivered to the defendant for collection; that on August 22, 1925, the Commerce Trust Company endorsed and delivered said cashier's check to the defendant Federal Reserve Bank of Kansas City, for collection; that on or about August 25, 1925, defendant endorsed said cashier's check on the back as follows: "Pay to the order of any bank or banker or trust company, prior endorsement guaranteed, August 25, 1925, Federal Reserve Bank of Kansas City," and--"thereupon carelessly and negligently forwarded the same direct to the First State Bank of Cunningham, Kansas, for collection and payment, upon receipt of which said bank stamped said check paid and issued its draft in payment therefor drawn on the Federal Trust Company of Kansas City, Missouri, and forwarded the same to the defendant Federal Reserve Bank of Kansas City, Missouri.

"That thereafter, and on or about August 30, 1925, the defendant Federal Reserve Bank of Kansas City carelessly and negligently accepted said draft from the First State Bank of Cunningham, Kansas, in payment of said cashier's check, said draft being in the sum of $ 8262.28 and included other items; that said draft on the Federal Trust Company was protested for non-payment, as this plaintiff is advised and informed, on or about August 31, 1925.

"That in the collection of said cashier's check the defendant Union Avenue Bank of Commerce, through its agent the Commerce Trust Company of Kansas City, appointed defendant Federal Reserve Bank of Kansas City as agent for the collection of said cashier's check; that said defendants had no authority from this plaintiff to send said check direct to the First State Bank of Cunningham for collection or to accept from the First State Bank of Cunningham, the drawer thereof, a draft on the Federal Trust Company of Kansas City or anything else except lawful money of the United States in payment thereof; that it was the duty of said defendants in collecting said cashier's check to receive and accept from the First State Bank of Cunningham, Kansas, only lawful money of the United States in payment thereof and in sending said cashier's check direct to said First State Bank of Cunningham for collection and in accepting said draft in payment thereof defendants acted in a careless and negligent manner and failed to use due diligence in the collection of said check. That said check was not returned to this plaintiff by the defendants.

"That on or about the 8th day of September, 1925, the First State Bank of Cunningham, Kansas, failed and the banking commissioner of Kansas took charge of said bank.

"That at all times from August 21, 1925, to September 3, 1925, said First State Bank of Cunningham, Kansas, had money and available cash items on hand sufficient to pay said cashier's check of $ 3180, and the defendants by the exercise of due diligence could have collected the same in cash.

"That on or about the 8th day of September, 1925, the defendant Union Avenue Bank of Commerce notified this plaintiff that said cashier's check had been dishonored and that the amount thereof had been charged back on this plaintiff's account.

"That on August 31, 1925, plaintiff demanded from the defendants the payment of said $ 3180.

"That by reason of the premises the plaintiff has been damaged in the sum of $ 3180.

"Wherefore, the plaintiff prays judgment, etc."

To this petition, the defendant offered a general demurrer, i. e that "the petition does not state facts sufficient to constitute a cause of action." The demurrer being overruled, the defendant filed answer which, among other things, set up--

"2. This defendant admits and avers that upon or about August 25, 1925, it received from the Commerce Trust Company of Kansas City the check mentioned in plaintiff's petition, and that thereupon it forwarded the same to the First State Bank of Cunningham, Kansas, for collection and remittance; that on or about August 30, 1925, this defendant received from the said First State Bank of Cunningham, Kansas, its draft for the sum of eight thousand two hundred sixty-two dollars and twenty-eight cents ($ 8,262.28), drawn on the Federal Trust Company of Kansas City, which said draft was not paid by said Federal Trust Company and was protested for non-payment.

"3. This defendant denies each and every other allegation in said petition contained.

"4. For further answer defendant states that the nature and conduct of its business, and the extent of its powers and liabilities, are fixed, determined and limited by an Act of Congress, known as the Federal Reserve Act, and that its business is conducted under the control and supervision of the Federal Reserve Board, and that it operates under rules and regulations adopted by said Federal Reserve Board pursuant to authority vested in said Board by said Act of Congress, and under rules and regulations adopted by itself pursuant to authority vested in it by said Federal Reserve Act aforesaid, and the aforesaid rules and regulations of said Federal Reserve Board.

"5. That in receiving said check as aforesaid from said Commerce Trust Company of Kansas City, as alleged in plaintiff's petition, this defendant did so, and accepted said check as the agent of said Commerce Trust Company pursuant to the provisions of the aforesaid regulations of the Federal Reserve Board and its own rules and regulations; that in due course of business and without any negligence or default on its part, but in accordance with the aforesaid rules and regulations authorized by law, it promptly forwarded said cashier's check to the said First State Bank of Cunningham for collection and remittance; that said First State Bank of Cunningham thereupon became, and ever thereafter continued an agent to collect said check from itself and remit the proceeds thereof to this defendant, and if said First State Bank of Cunningham failed so to do, it was not due to the fault or negligence of this answering defendant, but to its own fault and negligence as an agent for collection and responsible for its own defaults and negligence.

"6. That pursuant to authority conferred on it by said Federal Reserve Act as aforesaid, said Federal Reserve Board on or about August 15, 1924, promulgated and made effective Regulation J, Series of 1924, which was in full force and effect at the times of the transactions and the happening of the events alleged in plaintiff's petition, the pertinent provisions of which said regulation are as follows, to-wit:

"'(1) A Federal reserve bank will act only as agent of the bank from which it receives such checks and will assume no liability except for its own negligence and its guaranty of prior indorsements.

"'(2) A Federal reserve bank may present such checks for payment or send such checks for collection direct to the bank on which they are drawn or at which they are payable, or in its discretion may forward them to another agent with authority to present them for payment or send them for collection direct to the bank on which they are drawn or at which they are payable.

"'(3) A Federal reserve bank may in its discretion and at its option, either directly or through an agent, accept either cash or bank drafts in payment or in remittance for such checks and shall not be held liable for any loss resulting from the acceptance of bank drafts in lieu of cash, nor for the failure of the drawee bank or any agent to remit for such checks, nor for the non-payment of any bank draft accepted in payment or as a remittance from the drawee bank or any agent.

"'(4) Checks received by a Federal reserve bank on its member or non-member clearing banks will ordinarily be forwarded or presented direct to such banks, and such banks will be required to remit or pay therefor at par in cash or bank draft acceptable to the collecting Federal reserve bank or at the option of such Federal reserve bank to authorize such Federal reserve bank to charge their reserve accounts or...