Pinkney v. Kanawha Valley Bank
| Decision Date | 29 November 1910 |
| Citation | 69 S.E. 1012,68 W.Va. 254 |
| Parties | PINKNEY v. KANAWHA VALLEY BANK. |
| Court | West Virginia Supreme Court |
Submitted February 17, 1910.
Rehearing Denied Jan. 12, 1911.
Syllabus by the Court.
If the holder of a check indorses it, and deposits it for credit and collection in another bank, the collecting bank, if the check is not paid, and it is without fault in forwarding it for payment, has the right, on its return, to charge it back to its customer or recover the amount if he has in the mean time withdrawn the money.
The general rule is that if a collecting bank forwards a check directly to the drawee bank, and by custom or agreement it is authorized to credit the collecting bank and remit, or settle at stated periods, its receipt of the check, debiting it to drawer and crediting it to the collecting bank constitutes payment, and renders the forwarding bank liable to its principal for the amount thereof.
Such would be the effect of the transaction whether there was sufficient cash in the bank at the moment to pay the check or it be afterwards discovered that the check was an overdraft, and the drawee insolvent.
The qualification of the general two day rule, allowed for forwarding paper for presentment is, that if there be more than one mail on the second day it need not go by the first but, if there be but one, it must go by it, unless it leave or close at an unreasonably early hour. The whole of the second day is not allowed, unless the last mail of that day goes at the close of business. Approving Lewis, Hubbard & Co. v. Supply Co., 59 W.Va. 75, 52 S.E. 1017, 4 L.R.A (N. S.) 132.
A collecting bank, knowing of the depressed financial condition of the debtor, is delinquent in its duty if it neglects to inform its customer of such vital condition, and fails to take vigorous measures under the circumstances to secure payment, and if loss occurs by its negligence to exercise that degree of skill, care and diligence which the nature of its undertaking calls for, with reference to the time, place and circumstances surrounding the undertaking, it will incur liability to its principal for the loss sustained.
The general rule to which there are few, if any, exceptions, is that it is negligence for a collecting bank to send checks direct to a drawee bank. The drawee bank who is to pay the check is not a suitable agent for its collection.
And the fact that the drawee bank is the only bank at the place where it is located constitutes no exception to the general rule.
The custom of the banks at the place where the collecting bank is located, of sending checks to a drawee bank, will not justify the sending of a check directly to a drawee. Custom cannot justify negligence.
Where a collecting bank is negligent in transmitting a check for collection, and in forwarding it to the drawee bank, whereby such drawee, though in disregard of a special agreement, is enabled to debit the drawer of the check and credit the collecting bank, and control of the check is lost by the collecting bank and it is never returned to the customer, the latter may in an action of assumpsit, upon the common counts as for money had and received, recover the full amount of the check.
Error to Circuit Court, Kanawha County.
Action by Edward Pinkney against the Kanawha Valley Bank. Judgment for defendant, and plaintiff brings error. Reversed, and new trial awarded.
S. S Green, B. W. Moore, and Littlepage, Cato & Bledsoe, for plaintiff in error.
Brown, Jackson & Knight, for defendant in error.
In an action in assumpsit, upon the common counts, and bill of particulars filed, plaintiff seeks recovery of a balance alleged to be due from defendant. The bill of particulars consists of deposits debited and credits for checks paid, beginning February 5, 1900, with balance $1797.17, and covering other deposits ranging from $33.33 to $204.38, and concluding September 25, 1900, with a debit of $2500.00. On the other side the account is credited September 25, "By check to Dent Bros. of this date, $2500.00." The balance, $2130.34, is the amount sued for.
The defense was non-assumpsit, and sets-off with specifications of sets-off filed, as follows:
On the trial, on the issues joined on these pleas, and after the evidence on both sides had been introduced and the parties had rested, the jury, as instructed by the court on motion of the defendant, found the following verdict: On this verdict, the court below, overruling plaintiff's motion to set the verdict aside as contrary to the law and the evidence, and grant him a new trial, pronounced the judgment complained of, that the defendant recover of the plaintiff the said sum of $369.66, interest and costs.
The facts out of which this controversy arose are as follows: Dent Bros. and Pinkney, residing at Montgomery, where the drawee bank was located, by arrangements made September 24, exchanged checks September 25. The same day Dent Bros. sent Pinkney's check to a Charleston bank for credit to them, and Pinkney sent their check, the one involved here, to the defendant for credit to his account. The Montgomery Banking & Trust Company, drawee of the Dent Bros. check, was the only banking institution at that point. Prior to that time the defendant had had a special arrangement with the Montgomery bank for making collections, requiring remittances every Saturday, but this arrangement, as Dickinson swears, had been changed some three weeks before the transaction in question, the new agreement requiring the bank to remit whenever collections aggregated $500.00.
The defendant received from Pinkney the Dent Bros. check indorsed by him, September 25, about two o'clock P.M., and the letter enclosing it requested that it be placed to his credit. After being opened, the letter and check, along with other items, were laid aside by Dickinson for attention the following day. The next day, Dickinson, before forwarding the check for collection, phoned to Champe, the president, at Montgomery, to come to Charleston for consultation. Champe arrived about noon, saw Dickinson, who explained to him that his bank had this check of Dent Bros. for collection, and credit to Pinkney, but that he was unwilling to forward it to the Montgomery bank, unless assured that that bank was in a condition to send currency in payment. Champe professing to be ignorant about the actual condition of his bank, but expressing the opinion that it was all right and that the check would be paid, agreed to return to Montgomery, make an investigation and telephone Dickinson. About nine o'clock that evening, he did telephone Dickinson the message meaning, as arranged, that he had found his bank could and would send the money for the check. Dickinson, having held the check all that day, on receipt of this message, at once enclosed it and a letter of advice, printed form, in an envelope addressed to the drawee bank at Montgomery, and shortly afterwards deposited it in the post office at Charleston. The printed form of this letter said: "We enclose for credit," but plainly written below, the letter said: "Kindly ship us currency for above on No. 3," meaning No. 3, C. & O. train arriving at Charleston about noon. At the same time Dickinson wrote Pinkney on a printed form, advising him of the receipt of the check and saying: The letter to the bank reached Montgomery by the mail leaving Charleston about 3 A.M. of the morning of September 27, and was actually delivered to the bank at the opening of the bank that morning. The check was not otherwise presented for payment to the bank that day. The money was not sent as requested by defendant's letter of advice, but instead was some time that day debited to Dent Bros. and credited to the Kanawha Valley Bank. Champe was at the bank that morning when the bank opened, saw the check, was there several times afterwards during the day to see if a deposit which Sims, a director had gone after, and out of which it was intended to pay this Dent Bros. check, had arrived, the last time about 12 o'clock M., and the deposit not arriving, he returned to Charleston, reaching there about 2 o'clock P.M., explained to Dickinson the condition of the bank, and why the money had not been sent, consulted counsel, and as a result, on application, a receiver of the bank was appointed, and the bank closed. The defendant bank that evening sent an attorney to Montgomery to try and get the Dent Bros. check. On arriving he went to the bank, made demand for the check, with a view to making demand for payment, and if not paid to have it protested. But Coleman, in charge of the bank, refused his demand, giving some reason, probably that it had passed through the books, or had been charged to Dent Bros. and credited to the defendant. At all events the check was not recovered, protested or returned to Pinkney, but after the receiver was...
To continue reading
Request your trial