Nat'l Bank of Commerce of Seattle v. Johnson

• Decision Date: 14 November 1896
• Citation: 6 N.D. 180,69 N.W. 49
• Parties: NATIONAL BANK OF COMMERCE OF SEATTLE v. JOHNSON (GESCHKE, Intervener).
• Court: North Dakota Supreme Court

6 N.D. 180

69 N.W. 49

NATIONAL BANK OF COMMERCE OF SEATTLE

v.JOHNSON (GESCHKE, Intervener).

Supreme Court of North Dakota.

Nov. 14, 1896.

Syllabus by the Court.

1. When an instrument is intrusted to a bank for collection, the bank secures no title thereto, and no right to hold it in any other capacity than as agent.

2. If, from the indorsement, or the circumstances of the case, it appears that the bank was to credit the owner of the paper with the amount thereof, when collected, such bank becomes, upon receipt of the money, the debtor of the owner, and at this moment the relation of principal and agent is transmuted into that of creditor and debtor.

3. When the owner of paper indorses it for collection, this is notice to every person or bank into whose hands the paper may come that the owner has not parted with his beneficial title, but has merely parted with possession, for the sole purpose of collection. The paper remains the paper of the owner down to the moment of collection, no matter how many hands it may pass through in the process of transmitting for collection; and no one through whose hands it passes can, before such collection, by credits, advances, or in any other way, secure any lien thereon or right thereto as against the owner, who may at any time prior to collection follow it into the hands of any subagent.

4. In the absence of circumstances showing a contrary purpose on the part of the owner, the agent or subagent has authority to receive only cash in making the collection; and, if he accepts other paper instead of cash,-as a draft or check,-the owner may treat either the original or the substituted paper as his property, and may follow it in the hands of the bank receiving it, although such bank has credited it as cash to the bank transmitting the original paper to it for collection. The right to make such credit, and thereby change the relation of principal and agent to that of creditor and debtor, does not exist until the agent collects the claim in money, unless there is something in the circumstances of the case showing that the parties intended that the agent should be authorized to accept, at its own risk, a draft or check instead of cash.

5. But when cash is received, and credited to the transmitting bank, the relation of principal and agent between the collecting bank and the owner of the paper ceases; and thereafter whatever right the owner has as against the collecting bank is to the credit in favor of the transmitting bank, so far as he can trace the proceeds of his property into such credit.

6. Intervener held a certificate of deposit issued to him by the Lloyds National Bank. He indorsed it for collection and credit to the Anacortes Bank, which forwarded it for collection to the plaintiff. Plaintiff received from the Lloyds National Bank its draft on a St. Paul bank, and surrendered the certificate. It gave the Anacortes Bank credit for the amount of the draft, and that bank reported to intervener that the certificate had been collected, and, at his request, issued to him its certificate for the amount reported as collected. The St. Paul draft was not paid. The plaintiff immediately notified the Anacortes Bank that the collection had not been made, and charged the amount back to it. The Anacortes Bank notified the intervener of this fact, and he surrendered his certificate issued by it. That bank credited to the plaintiff the amount of the supposed collection. The plaintiff at no time since this has claimed to be the owner of the draft, or to have any interest therein, save as collateral to its claim against the Anacortes Bank for an overdraft. Held, that the intervener is the owner of such draft, and entitled to receive the dividends thereon payable out of the assets of Lloyds National Bank declared by the comptroller of the currency.

7. The fact that the intervener did not surrender up his certificate until after the Anacortes Bank had suspended operations does not affect the question; it appearing that the plaintiff had, in accordance with the facts, claimed that the collection had not been made, and had charged back the draft to the Anacortes Bank, and the intervener having acted on such claim, and acquiesced therein, by surrendering his certificate issued to him by the Anacortes Bank, without any withdrawal of such claim being made by plaintiff, and the plaintiff insisting down to and upon the trial that it had not made the collection, but that it merely held the draft as collateral to its demand against the Anacortes Bank for an overdraft.

Appeal from district court, Stutsman county; Roderick Rose, Judge.

Action by the National Bank of Commerce of Seattle against Caleb C. Johnson, receiver of the Lloyds National Bank of Jamestown. Adolph W. Geschke intervened, and from a judgment in his favor plaintiff appeals. Affirmed.

Edgar W. Camp, for appellant. Fredus Baldwin, for respondent.

CORLISS, J.

The contest before us relates to the rights of the parties to this litigation to two dividends declared by the comptroller of the currency, payable out of the assets of the Lloyds National Bank, which had become insolvent and had been placed in the hands of a receiver. The claim on which the dividends were allowed was presented by the plaintiff. But, after they had been declared, the intervener, who had attempted without success to prove the same claim against the assets in the hands of the receiver, notified the receiver not to pay such dividends to the plaintiff. As a consequence, the receiver refused to pay the plaintiff, and, being sued by him to recover the same, he asked to be released on paying into court the amount due. The intervener appeared in the action, and filed his complaint in intervention. The receiver, on paying the money into court, was discharged from all liability, and the struggle is now between the plaintiff and the intervener to obtain possession of this fund in court. The plaintiff answered the complaint in intervention, and the case was tried before the court without a jury. The learned trial judge awarded the fund to the intervener, and the plaintiff brings the case to this court for a trial de novo. No serious controversy with respect to the facts seems to exist. The intervener was the owner of a certificate of deposit issued by the Lloyds National Bank, payable to his order. On June 23, 1893, he left it with the Anacortes Bank of Anacortes, in the state of Washington, for collection, taking a receipt therefor from such bank. It was indorsed by him as follows: “Pay to the order of Bank of Anacortes for collection for account of Adolph W. Geschke.” The Anacortes Bank forwarded it in due course to the plaintiff, its regular correspondent at Seattle, Wash., for collection and credit. The intervener knew that it would be so forwarded for collection to a Seattle Bank. The plaintiff sent the certificate directly to the Lloyds National Bank, which, on receipt of the same, issued and sent to the plaintiff its draft for the amount due, on the National Bank of St. Paul, Minn. On receipt of such draft the plaintiff credited the Anacortes Bank with the amount due, and notified it of such credit, and also forwarded the St. Paul draft to its correspondent in St. Paul, the Merchants' National Bank of that city, for collection. The Anacortes Bank received notice of the credit July 13, 1893, and on that day charged up to the plaintiff the amount thereof; and thereafter it issued to the intervener at his request, a certificate of deposit for the amount of such collection, he surrendering to the Anacortes Bank the receipt given him by such bank for the certificate of deposit issued by the Lloyds National Bank at the time he intrusted it to the Anacortes Bank for collection. Shortly afterwards the plaintiff received word that payment of the St. Paul draft had been refused, and immediately notified the Anacortes Bank of that fact by wire and by mail, and charged back to it the amount of such draft. This was July 14th. On or about the 15th the Anacortes Bank credited the plaintiff with the amount of such draft, and the intervener returned the certificate of deposit issued by it to him. The Anacortes Bank, however, received word of the dishonor of the St. Paul draft on the 14th; and on that day the intervener was notified by it of such fact, and requested to surrender his certificate of deposit. At this time he did not respond to this request, but shortly thereafter he did surrender it, and take from the Anacortes Bank a duplicate receipt for the original certificate issued to him by the Lloyds National Bank. The Anacortes Bank did not open its doors to transact business after the close of business hours on the 15th of July. Whether the intervener surrendered his certificate before or after this suspension of business is not very clear. The only evidence which bears at all on the point is the testimony of Mr. Merritt, the cashier of the Anacortes Bank, that the intervener never, to his knowledge, surrendered the certificate while the bank was solvent, and the testimony of the intervener himself, that he thought that the duplicate receipt was issued to him after the bank had failed. It is perhaps a fair inference from this evidence that the surrender of the certificate was not made until after the bank had closed its doors. Upon these facts, we are to answer the question which of the two parties to this controversy has the legal right to the fund in court? What our answer to this inquiry will be will depend upon the further question whether the title to the claim against Lloyds National Bank, on which the two dividends have been declared, was and is in the plaintiff or in the intervener.

The certificate of deposit issued by the Lloyds National Bank was the property of the intervener. He did not sell it to the Anacortes Bank, but merely intrusted it to such bank as his agent to collect the same and place the amount of such collection to his credit. By...