Schafer v. Olson

• Decision Date: 15 March 1912
• Citation: 139 N.W. 983,24 N.D. 542
• Parties: SCHAFER v. OLSON
• Court: North Dakota Supreme Court

139 N.W. 983

24 N.D. 542

SCHAFER v. OLSON

Supreme Court of North Dakota

March 15, 1912

[Copyrighted Material Omitted]

FISK J. BRUCE, J., SPALDING, Ch. J., (dissenting).

OPINION

FISK, J.

A rehearing having been allowed herein, the questions involved have been fully and elaborately reargued by counsel. No new light, however, has been furnished us on such reargument, and after mature deliberation we are unable to discover any sound reason why we should change our former views upon either of the points involved; nor do we deem it necessary to add anything to what is said in the former opinion, further than to remark that we are not here confronted with a state of facts such as confronted the Michigan Court in State Bank v. Byrne, 97 Mich. 178, 21 L.R.A. 753, 37 Am. St. Rep. 332, 56 N.W. 355. There the evidence disclosed the insolvency of the bank at the time it received the check. The language in the opinion clearly shows such to be the fact. In the case at bar, however, no such proof was made, and in the absence thereof the presumption is that it was solvent and therefore had funds to pay all checks presented in the usual course of business; it appearing that it was a going concern, engaged in transacting its ordinary banking business by receiving and paying out deposits in the usual course. In the light of these facts, it would be a most extraordinary and unusual rule which would require defendant's agent Baird, on presentation of his check, to require the bank to count out to him the cash on such check and then pass the same back to the bank in payment of the draft.

In addition to the authorities cited in the former opinion, see Sayles v. Cox, 95 Tenn. 579, 32 L.R.A. 715, 49 Am. St. Rep. 940, 32 S.W. 626; State ex rel. North Carolina Corp. Commission v. Merchants' & F. Bank, 137 N.C. 697, 50 S.E. 308, 2 Ann. Cas. 537; Smith Roofing & Contracting Co. v. Mitchell, 117 Ga. 772, 97 Am. St. Rep. 217, 45 S.E. 47; Harrison v. Legore, 109 Iowa 618, 80 N.W. 670; Hare v. Bailey, 73 Minn. 409, 76 N.W. 213; Oddie v. National City Bank, 45 N.Y. 735, 6 Am. Rep. 160; Howard v. Walker, 92 Tenn. 452, 21 S.W. 897; 1 Morse, Banks & Bkg. §§ 248, 305; 3 Randolph, Com. Paper, §§ 1395, 1456; 2 Bolles, Bkg. p. 557.

In Sayles v. Cox, supra, the syllabus is as follows: "Collection by bank in a check upon itself is equivalent to collection in cash, even if the bank failed on the same day."

In State ex rel. North Carolina Corp. Commission v. Merchants' & F. Bank, supra, the facts were that, just prior to the suspension of the Merchants' & Farmers' Bank a milling company forwarded to it for collection a draft in the sum of $ 693, attaching a bill of lading thereto covering a shipment of a carload of flour to the Purdie-Hooks Company, drawee of such draft. On February 8, 1904, the bank delivered the draft and bill of lading to the drawee, accepting therefor a check of such drawee against a deposit in the bank. On the following day, such bank voluntarily closed its doors because of insolvency, and the bank did not account for the proceeds of said collection; and among other things, the court said: "The transaction between the Purdie-Hooks Company and the bank amounted to a payment of the draft. . . . While the bank was open and doing business, . . . the transaction was a payment, and the same results would follow whether the bank was solvent or insolvent."

In Smith Roofing & Contracting Co. v. Mitchell, supra, the syllabus is as follows: "Where one gave to another, in payment of a debt, a check upon a bank at which he had on deposit sufficient money to meet the payment of the check, and the payee deposited the check for collection in another bank, which immediately forwarded it to the drawee bank for payment, an entry on its books by the drawee bank, charging the amount of its depositor with the amount of the check, was equivalent to the payment thereof. The drawee bank then held the amount of the check as the agent of the payee, and the drawer was discharged from liability on the debt for which the check was given."

In the opinion of said case it was said: "The entry on the books of the Barnesville Savings Bank, charging the account of its depositor with the amount of the check, was the same as if it had paid the money over its counter to itself as agent for the bank which had sent the check for collection; and the fact that it fraudulently withheld the money from that bank and failed to enter the proper credit to its account does not render any less complete the payment by the depositor."

In Harrison v. Legore, supra, the syllabus reads: "Where an agent of a mortgagee accepts a certificate of deposit in payment of a mortgage, and deposits it in the bank which issues it, to the credit of his own account therein, the transaction is equivalent to a payment in cash."

In Hare v. Bailey, supra, one of the questions involved was whether a certain transaction between plaintiff and A. F. and L. E. Kelley, former loan agents at Minneapolis, constituted payment of a note and mortgage owing by the plaintiff to the defendant Bailey. Just prior to the maturity of such note and mortgage, plaintiff procured a loan through the Kelleys from one Dean, in which to make such payment. The Kelleys had Dean's money on deposit in their name in a bank, and they agreed to replace the Bailey loan out of the Dean money thus on deposit in their name, and accordingly took from plaintiff new loan papers payable to Dean. On the execution of the note and mortgage to Dean, the Kelleys charged him on their books with $ 1,100, and credited this sum to defendant Bailey, but they never remitted such money to defendant. It was contended that the transaction by which the Kelleys merely made a transfer of a credit on their books from Dean to defendant, that they did not receive any money as defendant's agents, and plaintiff did not pay them any as such agents; that no money actually passed, and that this matter of mere bookkeeping cannot be held to be a payment of defendant's note and mortgage; and the court, among other things, said: "The case is the same as if the Kelleys had drawn $ 1,100 out of the deposit to their credit in the bank, and had said to plaintiff, 'This is the money which Dean has lent to you and with which he will pay Miss Bailey,' and had then redeposited it in the bank just as it had been deposited before it was drawn out; but this idle ceremony of drawing the money out of their account and redepositing it in the same account could add nothing to the binding character of the transaction. In our opinion the transaction amounted to a payment of the money to defendant."

In Howard v. Walker, supra, we quote from the opinion as follows:

"In his work on 'Commercial Paper,' Mr. Randolph says: 'If the holder of a bill directs that it be paid to a certain banker, procuring credit with such banker will amount to a payment of the bill. So, if the amount of a note is credited to a bank holding it for collection (according to the custom of dealings between the banks), it will be a payment, although the bank making the note and giving the credit failed on the day it was so credited,' vol. 3, §§ 1395, 1456. See also Commercial Bank v. Union Bank, 11 N.Y. 203; Briggs v. Central Nat. Bank, 89 N.Y. 182, 42 Am. Rep. 285; First Nat. Bank v. McClung, 75 Tenn. 492, 7 Lea 492, 40 Am. Rep. 66.

"The doctrine has been extended, and collecting banks have been recognized as authorized to receive their own certificates of deposit in payment, and the debtor is discharged, even though the bank fails before remitting. 1 Morse, Banks & Bkg. § 305.

"These principles are not in contravention of that which permits an agent to receive only money in payment of his principal's debt. If the principal select a bank as his collecting agent, he is presumed to understand the business methods by which such transactions are affected through usages of banks. Actual ignorance of them is of no avail as an excuse; for, as said in the case cited by Mr. Morse on the last proposition herein stated, in respect to the transaction as a question of custom, ignorance of the plaintiff as to the existence of such usage was of no moment. Every business man must be held to know the method by which nearly all the banks in the country transact business by checks, drafts, and certificates of deposit. British & A. Mortg. Co. v. Tibballs, 63 Iowa 468, 19 N.W. 319."

Morse on Banks & Banking, 4th ed. § 248, announces the rule as follows: "Collection by a bank of a debt sent to it for collection in a check upon itself, is equivalent to collection in money, even if the bank failed the same day."

And in § 305 the rule is thus stated: "By custom, banks receive their own certificates of deposit as payment, and such custom will be judicially noticed by the courts, and will justify a collecting bank in receiving its own certificate of deposit in payment of paper it holds for collection; and the debtor is discharged, even though the bank fails before remitting. And especially will this be so where the owner of the paper directed the bank to remit by draft, for he is presumed to have intended a draft of the collecting bank.

"From the language of the court in this case it would seem that custom or not, the payment ought to be good. 'The plaintiff in effect claimed that the debtor should have presented his certificates of deposit at the bank counter, and had the money counted out to him, and then counted it back to the cashier. The law does not require any such vain and unnecessary formality.'

"This is sound, of course, if the certificate would really have been paid by the bank, and the fact that the bank received it as payment is proof that it would have paid cash if demanded. In respect to the transaction as...