State, ex rel. Sorensen v. Nebraska State Bank
| Decision Date | 07 January 1931 |
| Docket Number | 27428 |
| Citation | 234 N.W. 82,120 Neb. 539 |
| Parties | STATE, EX REL. C. A. SORENSEN, ATTORNEY GENERAL, v. NEBRASKA STATE BANK: CLARENCE G. BLISS, RECEIVER, APPELLANT: VICKERS PETROLEUM COMPANY, INTERVENER, APPELLEE |
| Court | Nebraska Supreme Court |
APPEAL from the district court for Richardson county: JOHN B. RAPER JUDGE. Affirmed.
AFFIRMED.
Syllabus by the Court.
A check is a bill of exchange drawn on a bank requiring payment on presentation of a sum certain in money to order or bearer.
In the absence of an agreement between the parties in interest to accept some other medium of payment, payment of check by drawee bank must be made in money.
It is incumbent upon one relying on a special custom as a basis of recovery or of defense, not only to allege and prove such custom, but also to prove that the person sought to be bound thereby had knowledge thereof and contracted with reference thereto.
When a bank receives an instrument for collection and remittance, it becomes the agent of the sender for such purpose, and in absence of other controlling facts is without authority to accept for its principal anything but that which the law declares to be legal tender or which is by common consent considered as money and passes as such at par.
Prior to the enactment of chapter 29, Laws 1925, due diligence ordinarily required that the agent for collection of a check must be a person other than the party on whom it is drawn but by that act it was provided that a collecting, bank " may forward such instrument for collection directly to the bank on which it is drawn," which by fair implication authorizes the drawee bank to act as agent of the sender and the assumption by it of a double capacity in the collection, payment and discharge of the instrument thus placed in its hands, but without eliminating any otherwise essential step to the completion of the transaction.
Where there is transmitted to a drawee bank for collection and remittance the check of its depositor for an amount covered by such deposit and such bank then possesses cash in an amount sufficient to pay the same and proceeds to complete the transaction by canceling such check and charging the account of such depositor, in the absence of a special agreement, it is required to allocate a sufficient amount of its cash on hand to the payment of such check, which moneys thereupon and thereafter constitute a trust fund in its possession.
Where one bank sends to another for collection and remittance a check, the latter bank holds the same and the proceeds thereof when collected as trustee for the former, which upon failure of the collecting bank is entitled to a prior lien therefor upon the assets of such failed bank to the extent the assets of such bank have been augmented by such trust funds, provided such assets have been traced into some existing assets of such failed bank.
The acceptance by a collecting bank of a check or draft drawn on another bank, in the absence of a specific agreement that such check or draft is to be accepted in payment of an instrument placed in the hands of such bank for collection, is presumed in law to be on condition that such check or draft is good. If the check or draft is dishonored, no payment is effected, and the rights of the respective parties in interest as existing prior to the issuance of such dishonored instrument are ordinarily unaffected thereby.
Appeal from District Court, Richardson County; Raper, Judge.
Proceedings by the State, on the relation of C. A. Sorensen, Attorney General, against the Nebraska State Bank of Humboldt, and Clarence G. Bliss, Secretary of the Department of Trade and Commerce, receiver, in which the Vickers Petroleum Company intervened, asserting a claim for preference against the insolvent bank. From the decree allowing intervener a preference, receiver appeals.
Affirmed.
C. M. Skiles, I. D. Beynon and John Wiltse, for appellant.
F. A. Hebenstreit, contra.
Heard before GOSS, C. J., ROSE, DEAN, GOOD, THOMPSON, EBERLY and DAY, JJ.
This is an appeal growing out of the failure of the Nebraska State Bank, of Humboldt, Nebraska. It may be said that the controlling facts are not in dispute and may be epitomized as follows: The Vickers Petroleum Company, doing business at Wichita, Kansas, in consideration of merchandise furnished, received on the 12th day of April, 1929, a check of $ 610.70 drawn by its debtor, the Star Oil Company of Humboldt, Nebraska, on the Nebraska State Bank of Humboldt (herein designated as Humboldt bank), wherein it is conceded the drawer was a depositor and had ample credit to cover the check. In due course this check was by the payee transmitted direct to the Humboldt bank for collection and return. On receipt of this instrument it appears that the latter institution charged it to the account of the Star Oil Company. It is evident that some delay ensued, but on April 24, 1929, there was issued by the Humboldt bank, to cover the amount of the check, a draft drawn by it on its correspondent, the Drovers National Bank of Kansas City, Missouri. When this draft was presented in due course, payment was refused by the drawee, though there was then a credit balance in favor of the drawer of $ 1,275.57; the Humboldt bank, it appears, having been taken over in the meanwhile by the department of trade and commerce as an insolvent institution. If affirmatively appears in the record, not only that the drawer of the check had at all times a sufficient credit balance to cover the same, but at the time of receipt of this check, as well as on April 24, 1929, the Humboldt bank possessed approximately $ 10,000 actual cash, which thereafter continuously increased until it attained the sum of $ 16,000, exclusive of exchange, which it possessed when it was placed in receivership. It may further be noted that in neither pleading nor evidence is there any reference to the existence of any general, or special, custom or usage in banking claimed to be applicable to the transaction at hand. The claimant prosecuted this proceeding as in the nature of a suit in equity to establish its claim to a trust fund forming a part of the cash in possession of the receiver. The district court determined the issues in favor of the claimant and allowed its claim to the extent of $ 610.70 as a trust fund in the hands of the receiver of the Humboldt bank and awarded priority as such. The receiver appeals.
Prior to the act of 1925 (Laws 1925, ch. 29) the cause of action would probably never have arisen, and since the enactment of chapter 41, Laws 1929, an adequate remedy for all interests concerned is provided. The act of 1929 was not approved until April 30, 1929, and did not go into effect until July following, and issues presented in this case must be determined without reference to this legislation.
It is to be remembered that, commencing with the establishment of the national banking system, during the civil war, the practice among bankers became current to accept out of town checks as deposits, giving immediate credit therefor, with the attendant privilege of drawing against such credit at once. Such items so received were then usually collected by what is usually referred to as the "circuitous routing" plan through a wide-spread network of correspondent banks, each of which would ordinarily handle such collections, at least of those embraced in the chain, without charge.
This course of business necessarily involved the shunting of collection items back and forth across the country for days, and even weeks, before being finally presented for payment, and for like reason there was also involved a similar delay in the ultimate payment of the draft of the drawee, when such draft was employed by it to transmit the proceeds of such collections. While this course of business was slow, costly, and, fraught with the risk of the additional handling, increased the chance of error, and necessarily increased loss through bank failures, still the drawee bank, especially in normal times, in the transaction indicated, "earned some profit by using the depositor's money during the period (sometimes weeks) in which the check was traveling the often circuitous route, with many stops, from the payee's bank to its own, and also while the exchange draft was being collected." American Bank & Trust Co. v. Federal Reserve Bank, 262 U.S. 643, 67 L.Ed. 1153, 43 S.Ct. 649.
Truly circuitous routing, to a certain extent, was necessary to the exercise of proper diligence on the part of the collecting bank. Direct routing of such collections to the drawee bank involved a liability for negligence on part of the sender. For whatever may have been the usual custom between banks as to sending checks direct to the drawee thereof, the general rule that obtained in the absence of special legislation was: 1 Morse, Banks and Banking (6th ed.) 582, sec. 236a. See Western Wheeled Scraper Co. v. Sadilek, 50 Neb. 105, 69 N.W. 765.
However, by chapter 29, Laws 1925, passed and approved March 24, 1925, it was expressly provided that as to a check forwarded for payment the collecting bank "may forward such instrument for collection directly to the bank on which it is drawn: * * * Provided, however, such forwarding bank shall have used due diligence in other respects in connection with the collection of such instrument." Thus, in Nebraska, there is a legislative approval of the direct, as distinguished from circuitous, routing of collections as between banks. This statute, however, though remedial, is limited to this clearly expressed purpose.
In their...
To continue reading
Request your trial
- State ex rel. Sorensen v. Nebraska State Bank, 27428.
-
Hogoboom v. State
...last referred to, in effect, eliminated the offenses of hog stealing and cattle stealing from the provisions of sections 114 and 119 of [120 Neb. 539] the Penal Code (now carried as sections 9599 and 9605, St. 1922) under which the crimes last referred to were formerly punishable, and to co......