Nat'l Revere Bank of Boston v. Nat'l Bank of the Republic of New York

• Decision Date: 07 October 1902
• Citation: 64 N.E. 799,172 N.Y. 102
• Parties: NATIONAL REVERE BANK OF BOSTON v. NATIONAL BANK OF THE REPUBLIC OF NEW YORK.
• Court: New York Court of Appeals Court of Appeals

172 N.Y. 102

64 N.E. 799

NATIONAL REVERE BANK OF BOSTON

v.NATIONAL BANK OF THE REPUBLIC OF NEW YORK.

Court of Appeals of New York.

Oct. 7, 1902.

Appeal from supreme court, appellate division, First department.

Action by the National Revere Bank of Boston against the National Bank of the Republic of New York. From a judgment of the appellate division affirming a judgment for plaintiff (66 N. Y. Supp. 662), defendant appeals. Affirmed.

George S. Hastings, for appellant.

George A. Strong, for respondent.

O'BRIEN, J.

The judgment recovered by the plaintiff at the trial has been unanimously affirmed below, and hence the facts, so far as they were in dispute, must, in this court, be deemed to be settled in its favor. At the close of the trial both sides moved for the direction of a verdict in its favor, but the trial judge refused both requests, and of his own motion submitted the case to the jury, and a verdict was found for the plaintiff. In moving for the direction of a verdict at the close of the case, counsel on both sides contended that there was no question of fact for the jury. The case has been argued in this court on both sides upon the theory that there was no dispute about the facts. Counsel differ, however, very widely with respect to the legal effect of the facts, each side claiming that upon the undisputed facts the judgment should have been in his favor. The submission of the case to the jury cannot be held to have prejudiced the parties, or either of them, provided the jury decided the case as the court ought to have decided it.

Although both sides asked the court to decide the case as matter of law, the record contains numerous requests in behalf of the defendant to the court to charge the jury on certain propositions, which are stated, which requests were refused, and exceptions taken. These exceptions can be of very little consequence in the case, unless there was some material question of fact involved in the controversy. If the case turned upon questions of law arising upon undisputed facts, as counsel on both sides insisted at the close of the case, and still insists, what the learned trial judge said to the jury or omitted to say is not material, if the case was correctly decided by the jury. On the 29th of August, 1895, the defendant received by mail from the plaintiff a sight draft or check drawn by one Watson two days before upon the Kearney National Bank of Kearney, Neb., payable to the order of and indorsed by one Lydia A. Scott, for $3,500. On the next day it received in the same way another draft or check, drawn two days before, by the same party, upon the same bank, to the order of and indorsed by the same payee, for $2,500. This paper was sent to the defendant, as is claimed, for collection, and was mailed by the defendant on the day of its receipt to the Nebraska bank upon which it was drawn. Nothing was heard from it until September 13, 1895, when the defendant received two drafts for the same drawn upon itself by the Nebraska bank. The defendant protested these two drafts on the ground that it had no funds of the drawer to pay them, and then forwarded the protested drafts to the plaintiff in discharge of whatever duties it assumed concerning the collection of the drafts originally delivered to it; but the plaintiff refused to receive them, and returned them to the defendant. In the meantime the Nebraska bank had failed, and suspended payment of all its obligations, including, of course, the two drafts upon the defendant, and, being insolvent, passed into the hands of a receiver. The two Watson drafts sent to the defendant by the plaintiff for collection were never returned, and were never protested, so that it is claimed that the payee and indorser was discharged. The plaintiff's cause of action, therefore, rests upon the claim that the defendant never collected the paper sent to it for collection, and never returned it, or fixed the liability of the indorser by protest.

The questions in this case are to be determined largely, if not entirely, upon legal presumptions. In the various and complicated transactions of banks in dealing with commercial paper with each other or with individuals, certain acts or things which may transpire have a certain legal significance which courts are bound to declare in the absence of proof that such acts indicate something else. The defense to this action consisted principally in an attempt to show that certain facts are to be given only a limited effect, or a peculiar and exceptional character, without any proof to show that such was the agreement or intention of the parties, or that they are to be held to mean something different from their ordinary legal import. For instance, it is asserted without any distinct proof that the plaintiff was not the owner of the paper; but it alleged that it was, and, having the possession of it, transmitted it to the defendant, as it claims, for collection. These facts entitle the plaintiff to be treated in law as the owner. So, also, it is asserted that the defendant was not the plaintiff's collecting agent, but assumed only a limited and special duty, namely, to send the paper to the bank which was the drawee for the purpose of presentation, all of which the plaintiff could have done itself just as well. But the plaintiff had no correspondent at the place of payment, and the defendant had, and hence the act of sending the paper by mail to the defendant, when taken in connection with the previous course of business between the two banks, imports an employment of the defendant by the plaintiff to collect the paper, and should be so understood, in the absence of proof that the paper was sent and received for some other purpose. The employment to collect, while not expressed in words, is a legal inference from the previous relations of the parties and the nature of the business. It was open to the defendant to show that the relations of the parties were in fact otherwise, but until such proof was given the transaction must be given its ordinary legal effect. In this state a bank receiving commercial paper for collection is, in the absence of some special agreement, liable for a loss occasioned by a default of its correspondents or other agents selected by it to make the collection. Where a subagent collects, but fails to pay over, and becomes insolvent, such insolvency will not shield the collecting agent from liability for the loss. St. Nicholas Bank v. State Nat. Bank, 128 N. Y. 26, 27 N. E. 849,13 L. R. A. 241;Briggs v. Bank, 89 N. Y. 182, 42 Am. St. Rep. 285. The collecting bank is liable for any neglect of duty occurring in the process of collection, in consequence of which any of the parties to the paper are discharged. Ayrault v. Bank, 47 N. Y. 570, 7 Am. Rep. 489. If the facts of this case bring the defendant within the scope of these decisions, it became liable to the...