Semingson v. Stockyards Nat. Bank

• Decision Date: 03 April 1925
• Docket Number: No. 24543.,24543.
• Citation: 162 Minn. 424,203 N.W. 412
• Parties: SEMINGSON v. STOCKYARDS NAT. BANK.
• Court: Minnesota Supreme Court

203 N.W. 412

162 Minn. 424

SEMINGSON v. STOCKYARDS NAT. BANK.

No. 24543.

Supreme Court of Minnesota.

April 3, 1925.

Appeal from District Court, Dakota County; W. A. Schultz, Judge.

Action by H. S. Semingson against the Stockyards National Bank. From order denying plaintiff's alternative motion for judgment or for new trial after verdict was directed for defendant, he appeals. Affirmed.

Arthur Le Sueur, of St. Paul, for appellant.

David L. Grannis, of South St. Paul, for respondent.

LEES, C.

Action to recover the amount of a check received by defendant for collection for plaintiff.

The court directed a verdict for defendant, and plaintiff has appealed from the denial of his alternative motion for judgment or a new trial.

Plaintiff is a cattle buyer at Crosby, N. D. He opened an account with defendant on October 29, 1923, and made a deposit and received a passbook. On November 3, 1923, he wrote to defendant, as follows:

"Inclose you will find draft for $1,063.42, and one check for $1,025.00, makes a total of $2,088.42; kindly send me credit slip for same. I do not care to buy drafts on this bank here any more."

The check mentioned was drawn by one Allen Person upon the First National Bank of Crosby. The material portion of defendant's reply, dated November 5, reads thus:

"We are to-day in receipt of your remittance of $2,088.42. We are crediting your account with the Chicago check of $1,063.42, and are entering the check of Allen Person for $1,024.00 drawn on the First National Bank of Crosby for collection and as soon as this is collected, we will credit your account with same and advise you."

On November 13, plaintiff wrote:

"If the $1,025.00 check given by Allen Person went threw O. K. kindly send credit slip for the two checks I sent you last. Amount $2,088.42."

Defendant sent the Person check to the Citizens' National Bank of Crosby for collection. The check was paid, and on November 10, the Citizens' Bank issued its draft on the First National Bank of Minneapolis for $1,024.50 and sent it to defendant. It was received on November 13th, and credited to plaintiff's account. The draft was put in the usual channel for collection and presented to the First National Bank of Minneapolis on November 14th, but payment was refused for want of funds, and the draft went to protest. On November 15th defendant charged the draft back to plaintiff, and on November 27th sent it by mail to plaintiff's attorney at Crosby, and this action followed.

The complaint did not charge defendant with negligence in selecting the Citizens' National Bank as an agent to collect the check. It alleged that defendant had accepted the check for collection and had made the collection and given plaintiff credit for the amount it received, and then wrongfully charged it back to plaintiff, and refused to pay it.

The answer pleaded a notice in the plaintiff's passbook which reads thus:

"All items not payable in South St. Paul, received by this bank for credit or collection, are taken at the owner's risk. This bank, as agent for the owner, will forward same to collecting agents out of this city, but should such collecting agents convert the proceeds, or remit in checks or drafts which are thereafter dishonored, the amount for which credit has been given will be charged back and the dishonored paper delivered to the owner. This bank assumes no responsibility for neglect or default of collecting agents."

The answer also alleged that plaintiff became a depositor under the conditions stated in the notice and that it was the custom of banks in South St. Paul, in taking foreign checks for collection, to send them to another bank in the town where the drawee bank was located, and that in handling the Person check the usual custom was followed.

The reply alleged that plaintiff had no knowledge of the notice in the passbook.

At the trial plaintiff offered to prove that he did not see the notice in his passbook before he sent the Person check to defendant and did not know that the book contained such a notice; but defendant's objections to this line of proof were sustained.

There is a divergence of opinion among the courts as to the responsibility of a bank to a depositor for whom it undertakes to collect commercial paper. In this state the rule is thus stated in Streissguth v. National German American Bank, 43 Minn. 50, 44 N. W. 797, 7 L. R. A. 363, 19 Am. St. Rep. 213:

"A bank with which a customer has left for collection his draft upon a party residing at a distant point is liable for the failure and default of a correspondent to whom it forwarded the draft for collection."

The rule was restated in Ft. Dearborn Bank v. Security Bank, 87 Minn. 81, 91 N. W. 257, and applied in Johnson v. Dun, 75 Minn. 533, 78 N. W. 98, to an agent for collection other than a bank. The cases in other jurisdictions are collected in a note in 19 A. L. R. pp. 263-267.

The principle which runs through the cases is this: If an agent employs a subagent for his principal, by authority of the principal, express or implied, the subagent is the agent of the principal. In such a case the agent is not liable for the negligence of the subagent, unless he failed to use due care in the selection of the subagent. If, however, the agent undertook to do the business for his principal and employed a subagent on his own account, he is responsible to the principal for the manner in which the business was done, whether by himself or by the subagent upon the theory that the agent stands in the position of an independent contractor at liberty to perform his undertaking by agencies of his own selection. Mechem on Agency, § 1311.

To determine whether a particular case is in the one class or the other, a court must know the terms of the contract between the principal and the agent. In the present case the bank relies on an express...