Merchants' Nat'l Bank v. National Bank of Commonwealth
| Decision Date | 23 June 1885 |
| Parties | Merchants' National Bank v. National Bank of the Commonwealth[1] |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Contract to recover $ 15,000, the amount of a check, dated September 3, 1883, drawn on the plaintiff by Benjamin F. Burgess and Sons, in favor of the Massachusetts Loan and Trust Company and by it deposited, on September 3, with the defendant. Trial in this court, before C. Allen, J., who reported the case for the consideration of the full court, in substance as follows:
The plaintiff and defendant banks are members of an unincorporated association called the Boston Clearing-House Association, whose rules and course of business are the same as set forth in the cases of Merchants' Bank v. Eagle Bank, 101 Mass. 281, and Exchange Bank v. Bank of North America, 132 Mass. 147, to which reference is to be made.
Benjamin F. Burgess and Sons were depositors with the plaintiff bank and kept a bank account with it, and Benjamin F. Burgess was one of the plaintiff's directors. They were indebted to the plaintiff in the sum of $ 83,000 on three notes, payable on demand, with a pledge of warehouse receipts for twelve hundred and seventy hogsheads of sugar as collateral security, and in the further sum of $ 129,500 on three other notes, payable on demand, with a pledge of United States bonds and other securities as collateral. Demand was made for the payment of the notes for $ 83,000 on the 23d or 24th of August, 1883, and, within two days after the demand, Burgess told the plaintiff's president that he had sold or bargained to sell two hundred and seventeen hogsheads of the sugar; and the warehouse receipts were thereupon entrusted to Burgess, as agent of the bank, to enable him to deliver the sugar so sold, with the understanding that the money received for the sugar should be brought to the bank and applied on the debt. The sugar was sold on August 23, to Nash, Spaulding, and Company, who gave their check for $ 7500, dated September 1, and payable to Benjamin F. Burgess and Sons. This check was deposited with the plaintiff by that firm, on September 1, to the credit of Benjamin F. Burgess and Sons, and the same was entered to their credit in their bank account, the plaintiff not knowing at the time, nor until September 5, that it came from the sale of the sugar. Prior to that time, when Burgess and Sons had been allowed to dispose of goods pledged by them as collateral security to the plaintiff bank, they had usually deposited the money or check received upon the sale thereof, and then given their own check for the same amount to pay to the bank the amount received from the sale of the collateral security. There was no evidence of any prior instance in which they had failed, in this or in some other way, to return to the bank the proceeds of such sale, to be applied upon the debt.
On the morning of September 4, there was an apparent balance of $ 17,145.56 to the credit of the firm of Burgess and Sons, the item of $ 7500 being included as an item to their credit, entered on September 1, as above stated. During the forenoon of September 4, three checks of Benjamin F. Burgess and Sons, of $ 1000, $ 225, and $ 200, respectively, were paid over the counter by the plaintiff. On the same day the check in controversy in this action came from the defendant bank to the plaintiff bank through the clearing-house, where it had been provisionally paid, in accordance with the usual course of business in the clearing-house. This check was received by the plaintiff at about noon, and was in the first instance entered to the debit of Benjamin F. Burgess and Sons on the plaintiff's books; but at about one o'clock the president of the plaintiff received the following communication, signed by the agent of J. S. Morgan and Company: "Please take notice that any and all property and merchandise in your hands, pledged to you by Benjamin Burgess and Sons, and the proceeds of any such property and merchandise, is, and the same are, so far as not required for the purposes of such pledge, the property of, and must be accounted for, and paid over to, J. S. Morgan and Company." This led the president to think that Burgess and Sons were in financial trouble, and he then discovered that no payment from the avails of the sugar had been made upon the indebtedness for which the sugar had been pledged as collateral security. He looked at the condition of their bank account, and immediately gave directions to send back the check of $ 15,000 to the defendant, and to demand the repayment of the money, as the check was not good; and the entry of it in the account of Burgess and Sons was erased. At the same time, by the direction of the president, there was debited to the account of Burgess and Sons $ 29,500, which was the amount of one of the notes held by the plaintiff bank against them, for which other collateral was held as security, and this was afterwards, on the same day, corrected by substituting $ 23,000, the balance of one of the notes for which the sugar was held as collateral, upon which demand had been made. The messenger started from the Merchants' Bank with the check at two or three minutes after one o'clock, and demand was accordingly made upon the defendant at from seven to twelve minutes after one o'clock, on September 4, on the ground that the check was not good; and repayment was refused. The defendant had entered the check of $ 15,000 to the credit of the Massachusetts Loan and Trust Company on the day of its deposit, and the defendant did not change its position towards said company in the interval between one o'clock and the time when the plaintiff's demand was made as aforesaid.
Where there is not enough money on deposit to pay a check in full, the ordinary custom is to return the check as not good.
The plaintiff held no surplus of security upon either branch of the indebtedness of Burgess and Sons which could be applied to make good the $ 7500. The president of the plaintiff bank, who was the only principal officer testifying, and who gave the directions for the return of the check, had no knowledge on September 4 that the sugar pledged as collateral security was not sufficient to secure all of the notes of Burgess and Sons held by the bank for which the collateral was given.
Burgess and Sons borrowed from the plaintiff, upon memorandum checks, $ 2000 on August 29, and $ 6000 on August 31, which sums were placed to their credit on those respective dates. Burgess handed the checks of his firm for these amounts to the teller of the plaintiff bank, asking that his firm might be credited with the amounts thereof, and the checks "held over and charged in the next day." These checks were not at the time entered in the account upon the plaintiff's books to the debit of Burgess and Sons, but were merely kept in the drawer as memorandum checks. Burgess was desirous of getting this transaction out of the books of the bank.
On September 1, after making the deposit of $ 7500 received from the sale of the sugar, Burgess directed the teller to charge the two memorandum checks in the account, which was accordingly done, and these two charges are shown by the items of $ 6000 and $ 2000 in the statement of account as checks charged on that day. In this way he returned and repaid the money credited in the two checks to Burgess and Sons. Burgess and Sons were not entitled to the credit obtained on September 1 by the deposit of the check for $ 7500.
The defendant contended that the remedy of the plaintiff, if any, was not against the defendant, but against the Massachusetts Loan and Trust Company; that the plaintiff got the benefit of the sale of the sugar by applying the proceeds on another loan; and that for the above reason, and also in any view of the case, there was no such mistake of fact as would entitle it to recover.
Judgment accordingly.
S. Bartlett & R. D. Smith, for the plaintiff.
H. D. Hyde & S. Lincoln, for the defendant.
Devens, J.
The rules and course of business of the unincorporated association called the Boston Clearing-House Association have been so set forth in the recent decisions of this court that they do not require to be here fully restated. They were adopted solely for the purpose of facilitating exchanges and the adjustment of accounts between the banks. By a contract between them, an association is formed, which is their common banker. To this association each bank, which is indebted by reason that more checks, &c. are presented, as drawn upon it, than it presents, as drawn against the other banks who are members, pays the balance found due from it to the association, while each bank that shows a balance in its favor receives from the association the amount by its check. Mistakes that may be made in this computation, because checks are not good, are not settled by the association, but between the banks themselves; and such checks are to be returned by the banks receiving the same to the banks from which they are received as soon as it shall be found that they are not good, "and in no case are they to be retained after one o'clock." To the regulations of this association, the customers of the banks are not parties, and, whatsoever effect is to be given to them as between the banks, their customers are not in a situation to claim the benefit of them, nor are they liable to be injuriously affected by them. Merchants' Bank v. Eagle Bank, 101 Mass. 281. Bank of North America v. Bangs, 106 Mass. 441. Manufacturers' Bank v. Thompson, 129 Mass. 438. Exchange Bank v. Bank of North America, 132 Mass. 147. By these regulations, it was, in substance,...
To continue reading
Request your trial
-
Liberty Nat. Bank of Kansas City v. Vanderslice-Lynds Co.
... 95 S.W.2d 324 338 Mo. 932 The Liberty National Bank of Kansas City v. Vanderslice-Lynds Company, Appellant Nos ... Macon Creamery Co., ... 46 S.W.2d 127; Jefferson Bank v. Merchants Refrigerating ... Co., 236 Mo. 407; Foristel v. Security Nat ... , 320 Mo. 442, 7 S.W.2d 997; Nomland v. First ... Natl. Bank of Kansas City, 64 F.2d 402; Security ... Natl. Bank v. Old Natl ... In ... Merchants National Bank v. National Bank of ... Commonwealth, 139 Mass. 513, 2 N.E. 89, it is ruled that ... as to "the regulations ... ...
-
Security Nat. Bank of Sioux City, Iowa, v. Old Nat. Bank of Battle Creek, Mich.
... ... [241 F. 3] ... This is ... an action by the Old National Bank of Battle Creek, Mich., ... against the Security National Bank of ... 119, 3 L.R.A. (N.S.) ... 1179, 115 Am.St.Rep. 176; Merchants' National Bank v ... National Bank of the Commonwealth, 139 Mass. 513, ... ...
-
Nat'l Shawmut Bank of Boston v. Fid. Mut. Life Ins. Co.
...his claim. This court held that the plaintiffs could not recover from the creditors. See also Merchants' National Bank v. National Bank of the Commonwealth, 139 Mass. 513, 520, 521, 2 N.E. 89. To the same effect are Fidelity Mutual Life Ins. Co. v. Clark, 203 U.S. 64, 27 S.Ct. 19, 51 L.Ed. ......
-
Liberty Natl. Bank. v. Vanderslice-Lynds Co.
...is not a member of the clearing house, hence cannot claim the benefit of the clearing house rules. In Merchants National Bank v. National Bank of Commonwealth, 139 Mass. 513, 2 N.E. 89, it is ruled that as to "the regulations of this association (clearing house) the customers of the banks a......