Pickett v. Thomas J. Baird Investment Co.

Bruce, J. (after stating the facts as above). Two questions are before us for discussion: (1) Was appellant negligent in depositing and transmitting the check received from the Baird Investment Company; and (2), if negligent, was respondent damaged by such negligence, so as to be discharged from liability? Section 6488, Rev. Codes 1905, requires that a check be presented for payment within a “reasonable time” after its issue, and declares that if not so presented the “drawer will be discharged from liability thereon to the extent of the loss occasioned by the delay.” On this subject of presentment, Bolles, in his work on Banking (vol. 2, p. 603), says: “As a check is not intended to circulate like money it should be promptly presented for payment. Indeed, the holder must observe very definite rules in presenting it; for if he does not his rights against the drawer may be impaired. First, when the holder and drawee live in the same place, a check must be presented on the same day or on the next after receiving it. Second, when they live in different places, the holder must send it forward, in a reasonably direct way, on the same day or the next, for presentation. Third, when there is a clearing house in the place of the drawer, a day longer may be given for collection through the medium of this institution. Fourth, on some occasions, for example, when the holder knows that the bank’s failure is impending, he must make an immediate presentation, if possible, to prevent the drawer from loss. This rule is with less urgent reason denied. Fifth, when the last day for making direct presentation, or sending it away for this purpose, falls due on Sunday, the check is payable the following day.” These statements are, no doubt, borne out in the main by the authorities. In order that negligence in presentment, however, shall preclude a recovery, it is necessary to prove that the defendant was injured thereby, and it is only the loss occasioned by the delay which can be used in avoidance of the original liability. Since, in the case at bar, the check was presented for payment before the suspension of the bank, and while it — 347 — •was still “enjoying a general good repute and paying out money,” there is nothing in the evidence to show that the defendant was injured by this negligent delay, and the question of delay in the presentment of the ■check is, as far as this suit is concerned, immaterial. But this is only part of the negligence claimed by the respondent to have been committed by the plaintiff. Its chief ground of complaint is that the plaintiff, Pickett, gave the check to the First National Bank of Duluth for collection, and that that bank acting as the Agent of plaintiff, instead of sending the same to the other local bank, the National Bank of Dakota, for collection in cash, sent it to the drawee of the check, the People’s State Bank. There can be no question as to the strength and conclusiveness of this contention. The law is well settled that a collecting bank “must not transmit its checks or bills directly to the bank or party by whom payment is to be made, with the request that remittances be made therefor. It is considered that no firm, bank, corporation, or individual can be deemed a suitable agent, in contemplation of law, to enforce, in behalf of another, a claim against itself.” See Dan. Neg. Inst. §§ 328a, 1599; National Bank v. Johnson, 6 N. D. 180, 69 N. W. 49; Drovers’ Nat. Bank v. Anglo-American Packing & Provision Co. 117 Ill. 100, 57 Am. Rep. 855, 7 N. E. 601; 5 Cyc. 506; German Nat. Bank v. Burns, 12 Colo. 539, 13 Am. St. Rep. 247, 21 Pac. 714; Western Wheeled Scraper Co. v. Sadilek, 50 Neb. 105, 61 Am. St. Rep. 550, 69 N. W. 765; Pinkney v. Kanawha Valley Bank, 68 W. Va. 254, 32 L.R.A. (N.S.) 987, 69 S. E. 1012, Ann. Cas. 1912 B. 115; Anderson v. Rodgers, 27 L.R.A. 248, and note (53 Kan. 542, 36 Pac. 1067); Bank of Rocky Mount v. Floyd, 142 N. C. 187, 55 S. E. 95; Winchester Mill. Co. v. Bank of Winchester, 18 L.R.A. (N.S.) 441, and note (120 Tenn. 225, 111 S. W. 248); Minneapolis Sash & Door Co. v. Metropolitan Bank, 76 Minn. 136, 44 L.R.A. 504, 77 Am. St. Rep. 609, 78 N. W. 980; First Nat. Bank v. Citizens’ Sav. Bank, 123 Mich. 336, 48 L.R.A. 583, 82 N. W. 66; R. H. Herron Co. v. Mawby, 5 Cal. App. 39, 89 Pac. 872; Givan v. Bank of Alexander, — Tenn. —, 47 L.R.A. 270, 52 S. W. 923; Bedell v. Herbine Bank, 62 Neb. 339, 86 N. W. 1060; Jefferson County Bank v. Hendrix, 147 Ala. 670, 1 L.R.A. (N.S.) 246, 39 So. 295; Farley Nat. Bank v. Pollock & Bernheimer, 145 Ala. 321, 2 L.R.A. (N.S.) 194, 117 Am. St. Rep. 44, 39 So. 612, 8 Ann. Cas. — 348 — 370; Inter-state Nat. Bank v. Ringo, 72 Kan. 116, 3 L.R.A. (N.S.) 1179, 115 Am. St. Rep. 176, 83 Pac. 119; American Exch. Bank v. Metropolitan Nat. Bank, 71 Mo. App. 451. Nor can there be any question that the Duluth bank was the agent of the plaintiff, Pickett, and that the negligence of this bank would be attributed to its principal. National Bank v. Johnson, 6 N. D. 180, 69 N. W. 49; Interstate Nat. Bank v. Ringo, 72 Kan. 116, 3 L.R.A. (N.S.) 1179, 115 Am. St. Rep. 176, 83 Pac. 119. The only possible contention that appellant can put forward is that there is nothing to show that if the check had been sent to the other-bank in Dakota for collection and presented for payment that payment would have been made in cash. On this question, however, the burden' of proof is under the authorities, upon the party guilty of the primary negligence to negative the presumption of injury, and where due presentment is not made the burden of proof is upon the holder of the-check to show that the drawer has not suffered injury. “In this case,” says the. supreme court of Kansas, in Anderson v. Bodgers, 53 Kan. 542, 27 L.R.A. 248, 36 Pac. 1067, “the check seems-to have-been forwarded for payment in due time, but it was sent directly to the drawee by mail, with the request that the bank of Kick-field remit the amount by mail in exchange in Kansas City. The Hamilton County Bank therefore selected the drawee of the check as its agent for collection. That this was negligence is well settled by the authorities. It is said, in 1 Daniels on Negotiable Instruments, § 328a: 'For the purposes of collection, the collecting bank must employ a suitable subagent. It must not transmit its checks or bills directly to the bank or party by whom payment is to be made, with the request that remittances be made therefor. It is considered that no firm, bank, corporation, or individual can be deemed a suitable agent, in contemplation of law, to enforce, in behalf of an other, a claim against itself.’ This proposition is sustained by abundant authorities. Drovers’ Nat. Bank v. Anglo-American Packing & Provision Co. 117 Ill. 100, 57 Am. Rep. 855, 7 N. E. 601; German Nat. Bank v. Burns, 12 Colo. 539, 13 Am. St. Rep. 247, 21 Pac. 714; Merchants’ Nat. Bank v. Goodman, 109 Pa. 422, 58 Am. Rep. 728, 2 Atl. 687; First Nat. Bank v. Fourth Nat. Bank, 6 C. C. A. 183, 16 U. S. App. 1, 56 Fed. 967; Farwell v. Curtis, 7 Biss. 160, Fed. Cas. No. 4,690. — 349 — “It is insisted that, inasmuch as the check was forwarded in due time, and came into the hands of the drawee, which refused payment •and returned the check with the statement, 'No funds in bank,’ the -defendant was not injured by the mode of presentment; that an answer of 'no funds,’ sent by mail, is as effectual a refusal to pay as though made across the counter at the bank. "Where due presentment is not made, the burden of proof is upon the holder of the check to show that the drawer has not suffered injury. Little v. Phenix Bank, 2 Hill, 425; Ford v. McClung, 5 W. Va. 166; 2 Parsons, Bills & Notes, 71; 2 Dan. Neg. Inst. § 1588; Daniels v. Kyle, 1 Ga. 304. From the agreed statement, it appears that the check reached Richfield on the 12th of December, 1889, after business hours; that the bank on which it was drawn was open, doing a general business, receiving deposits, ■and paying money on checks during its regular banking hours on the 13th. During that day a letter was written, addressed to the Hamilton 'County Bank, within which was inclosed the check and the statement, ■'no funds in bank.’ This letter was deposited’ in the postoffice after banking hours, and received at Syracuse after business hours on the 14th. . . . Gan it be presumed that if the check had been regularly presented over the counter to the Richfield bank, on the 13th, a false answer would have been given, as was in fact given by letter, and payment refused ? It is admitted that the defendant had more than money ■enough to his credit to meet the check. Had presentment been made by another agent of the plaintiff, and payment refused, steps might have •been taken immediately to protect the drawer’s rights; but, the check being in the hands of the drawee, of course, no effort would be made by it to prosecute itself, and the fact that payment was refused was not ■communicated to the Hamilton County Bank until the night of the day following the last one on which the Richfield bank was open for business. It might be that the answer, 'No funds in bank,’ was literally true, and that the Richfield bank had not the money with which to make payment at any time during the day of the 13th; but we are not at liberty to indulge in any presumption of that kind, the agreed facts showing that it received deposits and paid checks during the whole of that business day. This case must be decided in accordance with established principles; and the fact that the Richfield bank was a small concern in a very sparsely peopled part of the state, and, perhaps, — 350 — never had any large amount of funds in its possession, cannot be made a pretext for breaking down those wholesome rules of business which have been built up and defined with so much care and precision. The-request in this case by letter was not an ordinary demand of payment,, calling for current funds, but was a request for Kansas City exchange,, which the drawee would, of course, be at perfect liberty to refuse. In cases of this kind, a hardship necessarily results to one party or another. Courts, in their decisions, must be guided by fixed rules. The plaintiff,, having trusted in the good faith of the Richfield bank by sending the check to it, must bear the burden of the loss occasioned by its failure,, occurring after the day on which regular presentment should have been made.” This case discusses nearly all of the questions involved on this appeal, and is abundantly supported by authority. See Anderson v. Rodgers, 53 Kan. 542, 27 L.R.A. 248, 36 Pac. 1067; Little v. Phenix Bank, 2 Hill, 425; Ford v. McClung, 5 W. Va. 166; Daniels v. Kyle, 1 Ga. 304; Hamlin v. Simpson, 105 Iowa, 125, 44 L.R.A. 397, 74 N. W. 906; Watt v. Gans & Co. 114 Ala. 264, 62 Am. St. Rep. 99, 21 So. 1011. It is true that some cases, such as First Nat. Bank v. City Nat. Bank, 12 Tex. Civ. App. 318, 34 S. W. 458, seem generally to hold that the rule does not apply where the drawee bank was insolvent; but in these cases, unlike the case at bar, there appears to have been no evidence that, though technically insolvent, the bank was continuing to pay out money, and was of general good repute. Nor do we believe that any usage or custom among the banks, eve» if proved, would, as far as the respondent, the Baird Investment Company, is concerned, change the rule. The Baird Investment Company certainly had the right to rely upon the general rule of law, at any rate, without proof of a knowledge by it of the custom, and an express or implied consent thereto. Minneapolis Sash & Door Co. v. Metropolitan Bank, 76 Minn. 136, 44 L.R.A. 504, 77 Am. St. Rep. 609, 78 N. W. 980; American Exch. Nat. Bank v. Metropolitan Nat. Bank, 71 Mo. App. 451. The authorities just cited, indeed, even go so far as to hold that any such custom would be unreasonable and void, and such is undoubtedly the general rule. All authorities agree that, in-order that such a custom may be pleaded and taken advantage of, it must be proved to have been a custom which was general and welT — 351 — known, or consented to by tbe drawer of the check; and there is no-proof whatever of such a custom or consent in the record before us. The only evidence upon the point is to be found in the testimony of Mr. Drake, the cashier of the other, the National Bank of Lakota; and he testified that he spoke solely from his own experience “as cashier of the National Bank here in Lakota, and that he never had any experience in any other bank; that it was a frequent occurrence fox his bank to receive checks that were drawn on it, sent to it direct by the terminal' bank, but that, except in the case of correspondent banks, such collections were usually sent for collection to other banks than the drawee;, or, at any rate, all items in a town were sent to some one bank in that-town, regardless of whom they were drawn on. There is, in this testimony, no proof of a custom which would bind the respondent. The judgment of the District Court is affirmed.