Hoffman & Coppersmith v. Mechanics-American National Bank

Plaintiffs instituted an attachment suit against defendants, in the circuit court of the city *Page 649 of St. Louis, on June 3, 1919, on which date a garnishment was issued and served upon the Mechanics-American National Bank of St. Louis, a corporation organized and doing business under the laws of the United States. The garnishment was ancillary to the attachment suit. Interrogatories were filed by plaintiffs, to which garnishee answered that it neither owed the defendants, Feuer Spiegel, anything, nor had in its possession any of their property, and asked for an allowance for attorney's fees and expenses. Plaintiffs' denial of garnishee's answer, which is the first pleading proper in a garnishment proceeding, denied that at the time of the service of the garnishment upon the garnishee said garnishee did not have in its control and possession money belonging to the defendants; and further denied that said garnishee did not owe or have money in its possession belonging to the defendants; and "plaintiffs further state that on the third day of June, 1919, said plaintiffs paid to said garnishee a check in favor of the defendants, and that, at the time of the service of the said garnishment upon the said Mechanics-American National Bank, that the said bank did have in its possession belonging to the defendants, Feuer Spiegel, the sum of $887.27. Wherefore, plaintiff prays," etc. The garnishee's reply was a general denial, without any special plea. A trial of said cause resulted in a verdict and judgment for the plaintiffs, whereupon the court ordered that the garnishee, within twenty days, pay into the registry of the court the sum of $887.27, found to be due defendants, as aforesaid. After overruling motions for new trial, and the garnishee failing to pay the amount directed into the registry of the court, judgment was entered against the garnishee in favor of the plaintiffs for the sum of $887.27. The garnishee thereafter duly perfected its appeal to this court. The plaintiffs are junk dealers in the city of St. Louis, and the defendants are engaged in the same business *Page 650 in Springfield, Illinois. In the early part of June, 1919, plaintiffs received a shipment of "junk" from the defendants at Springfield, Illinois. They received notice from the garnishee that it had a bill of lading and a draft directed against them for a car of junk from Feuer Spiegel, of Springfield, Illinois. H. Hoffman, of H. Hoffman Co., went to the bank and paid the amount of the draft. Immediately after the payment of said draft, which occurred on June 3, 1919, the notice of garnishment was served upon the garnishee by the sheriff, he being stationed in the bank and ready to make service as soon as the amount was paid. Plaintiffs then received the draft, marked paid, as well as the bill of lading. The draft was in words and figures as follows: "Customers Draft. May 31, 1919. 8835 Springfield, Ill., May 29, 1919. At sight pay to the order of the Illinois National Bank $887 27-100 Eight Hundred eighty-seven and 27-100 dollars with exchange. Illinois National Bank. No. 1047. Springfield, Ill. To H. Hoffman Co. 1-11 Biddle St. FEUER SPIEGEL, St. Louis. by J. SPIEGEL, (Indorsed on back): Pay to the order of any bank or banker. All prior endorsements guaranteed. May 29, 1919. Illinois National Bank, 70-32, Springfield, Ill., 70-32. Logan Coleman, cashier." The deposition of John W. Spiegel, of Feuer Spiegel, was read in evidence, and, over the objections and exceptions of the garnishee, he testified that he and Morris Feuer were engaged in the junk business in Springfield, Illinois, and, that, when the shipment in question was made, he drew the draft on plaintiffs for $887.27, and signed the same "Feuer Spiegel, by J. Spiegel." The deposition of George H. Riecks was also read in evidence on behalf of plaintiffs, wherein he stated, over *Page 651 the objections and exceptions of the garnishee, that he was a collection teller for the Illinois National Bank of Springfield, Illinois, and that Feuer Spiegel presented said draft to the Illinois National Bank for collection; that the same was forwarded to the garnishee, and, on June 4, 1919, the regular and customary credit advice was received from the garnishee. The collection sheet of the Illinois National Bank disclosed that the draft was sent to the garnishee for "collection and return," with the further statement thereon that such was "received from Feuer Spiegel." Riecks testified that Feuer Spiegel's account at the Illinois National Bank was credited with the amount of the draft after it was notified by the garnishee that the same had been paid, but that no money was advanced nor any credit given Feuer Spiegel on this draft prior to the payment thereof by plaintiffs to the garnishee and the receipt of notice of such payment, and that the Illinois bank had no interest whatever in this draft except as collecting agents of Feuer Spiegel. He also testified that the instructions of the Illinois National Bank to the garnishee were that the amount was being collected for the account of Feuer Spiegel. The files in the attachment suit of Hoffman Co. v. Feuer Spiegel were introduced in evidence, and the petition disclosed that in said suit plaintiffs asked judgment against defendants in the sum of $694.29, this being the amount which plaintiffs claimed defendants were indebted to them. The return on the writ of attachment disclosed that the defendants could not be found in the city of St. Louis. The garnishee offered no evidence. The case was given to the jury under certain instructions given for plaintiffs and defendants, to which we will hereafter refer. The first question with which we are confronted is, whether or not the demurrer of the garnishee should have been sustained. The liability of the garnishee to the plaintiffs in the garnishment is no greater than it *Page 652 would be if the defendants were calling upon such garnishee to respond under the same state of facts, because the garnishee should not be put to the hazard of paying the same debt twice, and there must be some privity of interest between the garnishee and the defendants. [Dickinson v. Davis, 164 Iowa 449.] This rule of law is well established in this State. The authorities are collected and reviewed at length in the case of Atwood v. Hale, 17 Mo. App. 81. The question then is, whether or not there was any privity of contract between the Mechanics-American National Bank of St. Louis, and the drawer of the draft, Feuer Spiegel, of Springfield, Illinois. It is a general rule of law, as expressed in the maxim delegatus non potest delegare, that an agent has no power without the consent of his principal to delegate his authority to another. This consent of the principal, however, may be either expressly given, or implied, and, when given in either manner, there is a privity between a principal and a subagent employed with his consent. [Beach v. Moser, 4 Kan. App. 66.] There can be no serious question about the foregoing propositions being sound, but the serious question here is, whether or not, in the absence of an express consent by the principal, a bank, acting as agent to collect a draft payable in another State, has implied power or authority to appoint a subagent who shall be responsible to the principal. There are two well known and widely different rules recognized by the courts of this country. The one is known as the Massachusetts rule, the other as the New York rule. The Massachusetts rule is that, where one employs a local bank to collect, in a distant place, negotiable commercial paper, and does not make a special contract in relation to the transaction, he impliedly authorizes the bank to transmit the paper for collection and returns to a reputable, suitable, and competent subagent or correspondent bank; and, if such local bank in the usual course of business uses due diligence and transmits the *Page 653 paper to a reputable and competent subagent, its responsibility is at an end, unless it makes itself responsible by some later act. The New York rule is the antithesis of the Massachusetts rule, and is that, the local bank is the agent of the principal, and has no authority, in the absence of a special contract, to employ subagents, and such subagents are responsible to the forwarding bank, and the forwarding bank is responsible for the subagent's conduct. This rule dates from and rests upon the case of Allen v. Merchants Bank, 22 Wend. N.Y. 215. This was a divided opinion, fourteen to ten. The minority opinion written by NELSON, Chief Justice (afterwards of the United States Supreme Court) undertook to adopt the same doctrine as the Massachusetts rule, but the majority opinion was otherwise. In Missouri the Massachusetts rule has been adopted. [Daly v. Butchers' Drovers' Bank of St. Louis, 56 Mo. 94.] In that case it is held that, where a forwarding bank, with which a bill or draft is placed or deposited for collection, uses due diligence, and transmits the paper to a proper and competent correspondent, at a proper place to facilitate its collection, with proper instructions therefor, its responsibility is at an end, unless by some after act it makes itself responsible. It may not be amiss to observe that this is not only the rule of law in this State, but the same rule of law has been adopted in the State of Illinois, where the draft was drawn. [Wilson v. Carlinville National Bank, 187 Ill. 222; Anderson v. Alton National Bank,59 Ill. App. 587.] In Vickers v. Machinery Warehouse Sales Co., 111 Wn. 576, in an opinion by the Supreme Court of that State, en Banc, it is stated that, the custom of attaching bills of lading to drafts and passing the drafts along for collection has become so universal that the courts take judicial notice of the procedure. It is unnecessary for us to go that far in this opinion, because the procedure here is disclosed by the record. *Page 654 It appears from this record that the defendants employed the Illinois National Bank as their agent to transmit the claim to its correspondent (the garnishee here) for collection. The Illinois National Bank, in pursuance of such employment, sent the draft to the garnishee with instructions to collect the amount from the plaintiffs, thus qualifying the contractual relation between the Illinois National Bank and Feuer Spiegel. It may be said that the Illinois National Bank discharged its duty to Feuer Spiegel when it transmitted the draft to the Mechanics-American National Bank with directions to collect; that such transmission was made through it by Feuer Spiegel, and, the notice of garnishment having been served upon the garnishee immediately after the money was paid and before transmission to the Illinois National Bank, the garnishee may be deemed to have collected it as the agent of Feuer Spiegel, and the claim arising from the collection was due to Feuer Spiegel from the Mechanics-American National Bank. (Naser et al. v. First National Bank, 116 N.Y. 492 .] There is sufficient evidence in this record from which the jury could have found that the garnishee knew, when the amount of this draft was collected from plaintiffs, that it belonged to the defendants, and not to the Illinois National Bank. The reply of the garnishee was a general denial. It did not undertake to set up any plea that the money belonged to a third party, and the Illinois National Bank at no time made any claim to the funds. The undisputed evidence in this record shows that, the money which plaintiffs paid to the Mechanics-American National Bank on the draft drawn upon them by Feuer Spiegel, was not the money of the Illinois National Bank, the payee named in the draft, but belonged to and was the property of Feuer Spiegel, against whom the plaintiffs had filed an attachment suit; and we think that the evidence discloses a state of facts and a course of dealing in this case such as would have authorized defendants *Page 655 in the attachment suit to have maintained an action against the garnishee for the recovery of this fund. At any rate, the Illinois National Bank made no claim to it. If the evidence had disclosed that the Illinois National Bank had purchased the draft from the defendants before it was sent to the garnishee, then this fund would not have been subject to garnishment in the hands of the garnishee. [See Provident National Bank of Waco v. Cairo Flour Co. (Tex. Civ. App.), 226 S.W. 499, and Merchants National Bank of Indianapolis v. Parker, 142 Ga. 265.] On behalf of the garnishee, five separate instructions were given submitting the question to the jury as to whether or not the garnishee collected the draft in evidence and remitted to the Illinois National Bank before it was informed or knew that the proceeds of said draft were claimed or belonged to the defendants, Feuer Spiegel; and the jury by its verdict answered this question adversely to garnishee's contention. However, it nowhere appears in this case that any judgment was ever entered against Feuer Spiegel in the attachment suit. In Hauptman Co. v. Whittle, 85 Mo. App. 188, l.c. 191, it is said: "The law is settled by the statute and adjudications, as well as the statement of text writers, that before a judgment can be entered against a garnishee one must have been rendered against the principal defendant. [R.S. 1889, sec. 5332; Miller v. Anderson, 19 Mo. App. 71; Drake on Attachment, sec. 460.] A judgment against the principal defendant is the foundation upon which that against the garnishee must rest; and one prosecuting a garnishment should show that he has a valid judgment against the defendant before having one entered against the garnishee. The burden was on him and not the garnishee." There is nothing said in Marx v. Hart, 166 Mo. 503, 66 S.W. 260, relied upon by plaintiffs, which announces any contrary rule. In the Marx case, supra, there was *Page 656 a final judgment in the principal suit before any judgment was rendered in the garnishment proceeding. It follows, therefore, that the judgment cannot be permitted to stand. The Commissioner recommends that the judgment be reversed, and the cause remanded.