Minnesota Mut. Life Ins. Co. v. Tagus State Bank

• Decision Date: 02 August 1916
• Docket Number: 1915
• Court: North Dakota Supreme Court

158 N.W. 1063

34 N.D. 566

MINNESOTA MUTUAL LIFE INSURANCE COMPANY, a Foreign Corporation, v. TAGUS STATE BANK, a Corporation

No. 1915

Supreme Court of North Dakota

August 2, 1916

From a judgment against defendant in District Court, Ward County Leighton, Judge, defendant appeals.

Affirmed with costs.

Affirmed.

Palda & Aaker and I. M. Oseth, for appellant.

"Money received by a bank solely for the purpose of transmission to a correspondent bank becomes a special deposit." Cutler v. American Exch. Nat. Bank, 113 N.Y. 593, 4 L.R.A. 328, 21 N.E. 710.

"The fact that money so collected has been mingled in the vault with other funds of the bank does not alter or destroy the relation of bailor and bailee." Plano Mfg. Co. v Auld, 14 S.D. 512, 86 Am. St. Rep. 769, 86 N.W. 21; 3 R C. L. 633; Re Johnson, 103 Mich. 109, 61 N.W. 352; Wallace v. Stone, 107 Mich. 190, 65 N.W. 113; Griffin v. Chase, 36 Neb. 328, 54 N.W. 572; Continental Nat. Bank v. Weems, 69 Tex. 489, 5 Am. St. Rep. 85, 6 S.W. 802; Commercial Nat. Bank v. Armstrong, 39 F. 684; McLeod v. Evans, 66 Wis. 401, 57 Am. Rep. 287, 28 N.W. 173, 214.

Money so held is not in any sense the property of the bank. Plano Mfg. Co. v. Auld, 14 S.D. 512, 86 Am. St. Rep. 769, 86 N.W. 21; Minneapolis Sash & Door Co. v. Metropolitan Bank, 77 Am. St. Rep. 609, note; Bailie v. Augusta Sav. Bank, 95 Ga. 277, 51 Am. St. Rep. 74, 21 S.E. 717; Prescott v. Leonard, 32 Kan. 142, 4 P. 172; Re State Bank, 56 Minn. 119, 45 Am. St. Rep. 454, 57 N.W. 336; Griffin v. Chase, 36 Neb. 328, 54 N.W. 572; National Bank v. Johnson, 6 N.D. 180, 69 N.W. 49; Akin v. Jones, 93 Tenn. 353, 25 L.R.A. 523, 42 Am. St. Rep. 921, 27 S.W. 669; Beal v. Somerville, 17 L.R.A. 291, 1 C. C. A. 598, 5 U.S. App. 14, 50 F. 647; Commercial Nat. Bank v. Armstrong, 39 F. 684; Re Johnson, 103 Mich. 109, 61 N.W. 352; McLeod v. Evans, 66 Wis. 401, 57 Am. Rep. 287, 28 N.W. 173, 214; 3 R. C. L. 522.

For the loss of the subject of bailment, the bailee is liable only for negligence in its care, or for acts constituting conversion. The degree of negligence depends upon the character of the bailment. Coggs v. Bernard, 2 Ld. Raym. 909, 92 Eng. Reprint, 107; Cheshire v. Bailey, 1 Ann. Cas. 94, and note, [1905] 1 K. B. 237, 4 B. R. C. 553, 74 L. J. K. B. N. S. 176, 53 Week. Rep. 322, 92 L. T. N. S. 142, 21 Times L. R. 130; 2 C. J. 723, 732, § 396; Louisville & N. R. Co. v. Buffington, 131 Ala. 620, 31 So. 592; Richardson v. Futrell, 42 Miss. 525; Robinson v. Illinois C. R. Co. 30 Iowa 401; Rechtscherd v. St. Louis Accommodation Bank, 47 Mo. 181.

A crime or tort committed against the bank itself has never been held to be the act of the bank. A bank is not responsible for the acts of its officers, unless those acts are within the real or ostensible authority of the officers. Candiff v. Louisville, N. O. & T. R. Co. 42 La.Ann. 477, 7 So. 601; McKeon v. Citizens' R. Co. 42 Mo. 79, 4 Am. Neg. Cas. 471; Jackson v. St. Louis, I. M. & S. R. Co. 87 Mo. 422, 56 Am. Rep. 460, and other cases cited in note to Chase v. Waterbury Sav. Bank, 1 Ann. Cas. 96.

If the acts of these officers were not within their authority and powers, then they were not the acts of the bank, and the bank cannot here be held. National Bank v. Johnson, 6 N.D. 185, 69 N.W. 49.

In an action of this nature, where plaintiff has made out a prima facie case, the burden then shifts to defendant to account for the non-delivery of the property, and one of these methods is to show that the property was lost or stolen from him without his fault or culpable neglect, he having exercised all care and diligence commensurate with the circumstances, the nature of the property, and character of the trust. This being shown, the prima facie liability has been avoided, and it then becomes the duty of plaintiff to rebut such showing by affirmative proof of lack of care and diligence. Until plaintiff does this he cannot recover. Claflin v. Meyer, 75 N.Y. 260, 31 Am. Rep. 467; Lamb v. Western R. Corp. 7 Allen, 98; Kafka v. Levensohn, 18 Misc. 202, 41 N.Y.S. 368; Rothoser v. Cosel, 39 Misc. 337, 79 N.Y.S. 855.

Where the bank did not know of the dishonest practices of its cashier, and could not by the exercise of ordinary care have discovered same, it cannot be held liable for his unauthorized and dishonest acts and conduct. Preston v. Prather, 137 U.S. 604, 34 L.Ed. 788, 11 S.Ct. 162, 1 Am. Neg. Cas. 599; Cutting v. Marlor, 78 N.Y. 454; Ouderkirk v. Central Nat. Bank, 119 N.Y. 271, 23 N.E. 875; Gray v. Merriam, 148 Ill. 190, 32 L.R.A. 769, 39 Am. St. Rep. 172, 35 N.E. 810, 1 Am. Neg. Cas. 478; Foster v. Essex Bank, 17 Mass. 479, 9 Am. Dec. 168, 1 Am. Neg. Cas. 502.

The negligence of the bank in such cases must be gross, culpable. Smith v. First Nat. Bank, 99 Mass. 605, 97 Am. Dec. 59, 1 Am. Neg. Cas. 523; Merchants' Nat. Bank v. Guilmartin, 88 Ga. 797, 17 L.R.A. 322, 15 S.E. 831; First Nat. Bank v. Graham, 79 Pa. 106, 21 Am. Rep. 49; Ray v. Bank of Kentucky, 10 Bush, 344.

"The undertaking of banking corporations with respect to their officers is that they shall be skilful and faithful in their employment; they do not warrant their general honesty and uprightness." Foster v. Essex Bank, 17 Mass. 479, 9 Am. Dec. 168, 1 Am. Neg. Cas. 502; Pattison v. Syracuse Nat. Bank, 80 N.Y. 82, 36 Am. Rep. 582; Preston v. Prather, 137 U.S. 604, 34 L.Ed. 788, 11 S.Ct. 162, 1 Am. Neg. Cas. 599; Giblin v. McMullen, L. R. 2 P. C. 317, 5 Moore, P. C. C. N. S. 434, 38 L. J. P. C. N. S. 25, 21 L. T. N. S. 214, 17 Week. Rep. 445, 3 Eng. Rul. Cas. 613; Smith v. First Nat. Bank, 99 Mass. 605, 97 Am. Dec. 59, 1 Am. Neg. Cas. 523.

Bradford & Nash and E. R. Sinkler and Butler & Mitchell, for respondent.

"After the collection has been made the bank becomes a simple contract debtor for the amount, less commissions if any have been charged. If the party has no deposit account, the bank simply owes him the money on demand." 1 Morse, Banks & Bkg. § 248; Marine Bank v. Fulton County Bank, 2 Wall. 252, 17 L.Ed. 785.

"Proceeds received after the bank becomes insolvent are held in trust, and may be recovered in full." 1 Morse, Banks & Bkg. § 248 A. with cases cited; Plano Mfg. Co. v. Auld, 14 S.D. 512, 86 Am. St. Rep. 778, 86 N.W. 21.

"Where money is deposited, and the bank has but a simple duty to perform with respect to it, and it is the intent of the parties that this duty is to be performed upon the identical money deposited,--like paying it over to a third person,--the deposit is special, and the bank is the mere agent for the performance of that duty." Cutler v. American Exch. Nat. Bank, 113 N.Y. 593, 4 L.R.A. 328, 21 N.E. 710; Plano Mfg. Co. v. Auld, supra.

If the agent after receiving the deposit and contrary to his instructions and to his duty, mingles their funds with his own, he is certainly in no position to deny that the relationship of debtor and creditor arises. Plano Mfg. Co. v. Auld, supra.

"The bank may be guilty of negligence and liable accordingly in employing or retaining an unfit person in the position of cashier." . . . As far as the question of mere negligence is concerned, the bank can plead its not knowing or having cause to suspect the integrity of its officers. Merchants' Nat. Bank v. Guilmartin, 88 Ga. 797, 17 L.R.A. 322, 15 S.E. 831.

"The burden of showing the circumstances of the loss rests upon the bailee, and unless the evidence shows the exercise of due care by him according to the nature of the bailment, he will be held responsible for the breach of his contract to return the property." Ouderkirk v. Central Nat. Bank, 119 N.Y. 263, 23 N.E. 875; Merchants' Nat. Bank v. Carhart, 95 Ga. 394, 32 L.R.A. 775, 51 Am. St. Rep. 95, 22 S.E. 628.

"The detriment caused by the breach of an obligation to pay money only is deemed to be the amount due by the terms of the obligation, with interest." Comp. Laws 1913, § 7147.

"If a debt ought to be paid at a particular time and is not, owing to the default of the debtor, the creditor is entitled to interest from that time by way of compensation for the delay in payment." Young v. Godbe, 15 Wall. 565, 21 L.Ed. 251; Sullivan v. McMillan, 37 Fla. 134, 53 Am. St. Rep. 239, 19 So. 340; Wood v. Cascade F. & M. Ins. Co. 8 Wash. 427, 40 Am. St. Rep. 917, 36 P. 267.

GOSS, J. CHRISTIANSON, J., concurring in the result.

OPINION

GOSS, J.

This case was tried upon these stipulated facts: "It is stipulated by and between the parties to this action that on October 13, 1913, and all times mentioned in the complaint and answer in this litigation, the plaintiff was a foreign corporation, authorized to do business in the state of North Dakota, and the defendant was and is a domestic banking corporation organized under the laws of the state of North Dakota; that on or about October 13th, 1913, the Minnesota Mutual Life Insurance Company did send to the Tagus State Bank for collection two notes as follows: One note against O. J. Ness for $ 800 and interest. One note against Jno. J. Leon, for $ 900 and interest, the two notes amounting to $ 1,802; that the said notes were secured by real estate mortgages on lands in the vicinity of Blaisdell, then owned by O. J. Ness.

"It is further stipulated that on or about December 31, 1913, the said O. J. Ness paid to the Blaisdell State Bank of Blaisdell, North Dakota, the sum of $ 1,802 for the purpose of taking up said notes and mortgages above referred to, with instructions to send said moneys to the Tagus State Bank for such purpose; that thereafter and on December 31st, the Blaisdell State Bank did issue its cashier's checks for the sum of $ 1,802 which are marked exhibit A No. 1065, and B No. 1604, and which were sent to the Tagus State Bank with instructions that the same were for payment of the above-mentioned two loans; that...