Ætna Insurance v. Alton City Bank

Walker, J. In this case it is agreed,that defendant received the bill in controversy, for collection in the usual and regular course of banking business. It is further agreed, that when a bank so receives a bill or note, on a drawee or maker residing at a place different from that of the bank, it is usual and customary for the bank to transmit the same, to a responsible correspondent, at the place of the residence of the drawee or maker, for collection. That in this case, the defendant did so transmit it to their correspondents, who were responsible bankers at the residence of the drawees. That they presented the bill to the drawees for acceptance, on the 29th of April, 1858, which was refused, but they failed and neglected to have it protested for non-acceptance. Subsequently however, on the 12th of May following, it was presented for payment, which was likewise refused, when it was protested for non-payment. Upon this agreed state of facts, the court below rendered judgment in favor of the defendant, and the plaintiff prosecutes this writ of error to reverse that judgment. This presents the question, whether the bank receiving such paper for collection, is bound for the acts of,their correspondents, and are responsible for their negligence. Or whether their undertaking requires anything more than that they- should use reasonable care and prudence in the selection of a responsible correspondent, to whom it shall be intrusted. That a bank receiving such paper for that purpose, in the usual course of business, is bound to use ordinary and reasonable care, in selecting an agent competent and responsible, there is no doubt. And a want of such precaution would clearly render them liable for consequent loss. It does not appear that there was any agreement on the part of the bank to become liable at all events, for any loss that might occur from the acts of their correspondents, and the law has imposed no such liability. Upon an examination of the adjudged cases, it will be found that entire harmony upon this question does not prevail. In the case of the Mechanics’ Bank v. Earp, 4 Rawle, 384, it was held that a bank in which bills had been deposited, having only received them for transmission to their agents for collection, at the place of the residence of the drawees, with the instructions of the depositors, was not liable for the failure of the bank to whom the bills were transmitted, to collect the money. In that case the court refers to the cases of Lawrance v. Stonington Bank, 6 Conn. 528, and the Bank of Washington v. Triplett and Neal, 1 Pet. R. 25, and Jackson v. The Union Bank, 6 Harris and John. 148, as sustaining the rule announced. Again in the case of The Bank of New Orleans v. Smith, 3 Hill N. Y. R. 560, the court held that when a bill is left with a bank for collection, and they transmit it in due season to a competent agent at the place of the residence of the drawee with the necessary directions, that they thereby fully discharge their duty and incur no further liability. In support of the rule the court refers to the cases of East Haddon Bank v. Scovil, 12 Conn. 304, and Fabans v. The Mercantile Bank, 23 Pick. 330. The court also refer to and approve of the case of Allen v. Merchants’ Bank of N. Y., 15 Wend. 482, where the same doctrine is announced. And we find on an examination of these cases, they fully sustain the rule announced by this case. It is true that the case of Allen v. The Merchants’ Bank, 22 Wend. 215, decided by the Court of Errors, announces a different rule, and reverses the decision of the Supreme Court. In that case the decision was by a divided court, the chancellor delivering a dissenting opinion. This last case extends the rule, so that a bank receiving commercial paper for collection is liable for loss resulting from neglect, to banks receiving such paper for transmission, where loss occurs by neglect of the agent to whom it is transmitted, and makes no distinction in the two classes of cases. Where a bank receives a bill or note for collection against a drawee or maker, resident at the place of the bank, or where the bank undertakes for its collection by their own officers, there can be no doubt that it would be liable for any loss that might result from neglect. But when received for transmission, it has fully discharged its duty by sending the instrument in due season to a competent reliable agent, with proper instructions for its collection. This is manifestly the rule clearly announced in a large majority of the adjudged cases. And whatever might be our impressions if the case were one of first impression, we regard the rule too well and firmly established to feel ourselves at liberty to disturb it. In this case it appears that the defendants received the bill in controversy for transmission for collection, and in due season forwarded it to their correspondents at the residence of the drawees. That they were competent and reliable, and that defendants in no way contributed to any loss that may have occurred. If then any liability has been incurred to the plaintiffs, it is by the St. Louis house, who became their agents, and not by the defendants. The judgment of the court below must therefore be affirmed. Judgment affirmed.