Louisville Banking Co. v. Asher

Opinion of the court by JUDGE HOBSON Reversing. The Louisville Ranking Company and the Pineville Banking Company were correspondents for each other. The Pineville Bunking Company made an assignment on July 28, 1893, to appellee, T. J. Asher, for the benefit of all its creditors, being then- hopelessly insolvent. As shown by the books of tbe Louisville Banking Company, the Pine-ville Banking Company had' then to its- credit with it $1,370.42. As shdwn by the books of the Pineville Bunking Company, this balance Was $4,928.83. But this omitted a credit of $500 which should have been entered, so that, as .shown by these books as corrected, the balance wals $4,428.-83. This litigation involves a settlement of these accounts. On February 28, 1890, five notes were executed by different persons to P. Barry, due six months after date, negotiable and payable at the Pineville Banking Company, aggregating in all $2,168.28. Barry discounted these notes to the Citizens’ National Bank of Cincinnati, and on August 15, 1890, that bank sent them to the" Louisville Banking Com — 149 — pany for collection, marked “Protestable.” On August 19th the Louisville Banking Company sent them to the Pineville Baking Company, its correspondent, at which they were payable. The notes matured ten 'days l'ater, and were neither collected nor protested for nonpayment by the Pineville Banking Company, but were ts'ent back by it to the Louisville Company without explanation. It returned them to the Cincinnati bank. The Cincinnati bank sent them back to the Louisville Banking Company, demanding the money on them upon 'the ground that it was responsible for the negligence of its correspondent, the Pineville Banking Company, in not protesting the .notes. The Louisville Banking Company then wrote the Pineville Banking Company, returning the notes to it, and demanded that it should pay the money. The Pineville bank claimed that the notes were sent to it marked “No protest,” and again returned them to the Louisville Banking Company. This was on September 11th. On September 12th it wrote the Pineville bank tills p “Tour's of 11-th returning notes received. In ordbr that we may fit the responsibility upon -the fight one in this office, will you kindly return for our inspection our instructions not to protest the notes? Our letter book shows that they were sent protestable.” On the 13th the Pineville hank replied that it had not preserved the letter, and was sorry it could not produce it. Some other correspondence ensued, and on October 6th the Pineville bank wrote, in answer to a letter received by it in regard to the matter, stating that it would have its Mr. Fish call and see the Louisville Banking Company during the week. On the 8th that bank replied thus: “Our Cincinnati correspondent from whom we received the items is whooping us up pretty 'lively. There is nothing left for us to do but to credit their account with proceeds of their collections, — 150 — ■and, while we regret it sincerely, we shall be compelled to look to you in like manner.” In answer to this letter on October 10th the Pineville Bank again wrote that Mr. Fish would call and investigate the -matter, and, after stating that Fish, who attended .to the nótete, understood they were sent without protest, added: “We certainly don’t want you to have any trouble about these items,, and will surely see that they are properly adjusted at once.” On October 20th the Louisville bank wrote again, inclosing a letter from the Cincinnati bank insisting that the matter be adjusted’, and repeated this-again in a letter of October 24th. .No further correspondence -appears in the record until November 20, 1890, when the Louisville bank wrote as follows: “Enclosed herewith you will find the five notes which have been charged to your account, as the cashier wrote you yesterday. We regret the circumstances that force us to do this, but can not help it.” On the same day the Louisville Banking Company charged the amount of the notes to the account of the Pineville Banking Company, .and credited the Cincinnati bank by the amount, and it was checked out by that bank. The Louisville Banking Company at the end of the month of November sent the Pineville bank a statement of its account, and received from it this in substance: “Your statement of-account for. November, 1890, is correct.” This statement showed the ■charge of the $2,168.28. Similar statements and acknowledgments were made at the close of bach month from that time until the Pineville bank failed, on June 28, 1893. But the Pineville Banking Company did not credit the Louis-vile Banking Company on its books with the amount. The Louisville Bankingv Company did not know this', and seems to have acted on the idea that the matter was settled until this controversy -arose. The evidence shows that the — 151 — notes were sent to the Pineville Banking Company marked for protest, and, we think the circumstances warrant .the conclusion that the Pineville bank realized that a mistake had been made by its man in not protesting the notes. It is earnestly insisted for appellant that after the numerous statements sent, and' acknowledged to be correct,, the account was stated, and the balance shown by the statments is conclusive between the parties. We think, under the evidence, it should be regarded as an account stated.. Henderson Cotton Mfg. Co. v. Lowell Machine Shops, 86 Ky., 668 (9 R., 831), 7 S. W., 142; Union Bank v. Planter’s. Bank, 31 Am. Dec., 113. The rule as to an account stated is., thus well put in 3 Enc. Law & Proc., pp. 451, 455. “Formerly the stating of an account was considered so deliberate an act as to preclude an examination into'the items, but since an early day a greater latitude has prevailed; and it may now be said to be the ruile that an account stated does not create an estoppel, and that neither a stated nor a settled account is conclusive, but simply affords strong presumptive evidence, which may be rebutted by showing fraud or mistake. And, while the practice uf opening accounts, which the parties have themselves adjusted is considered dangerous, yet a settlement must be so far considered as. made upon absolute mistake or imposition, if palpable errors are shown, as not to be obligatory upon the injured party. The presumption is one relating to the evidence. In determining whether am account stated can he impeached, the case is put upon the same footing as if the money had been paid. Such payment would be conclusive, subject to the right to recover it back on a failure of consideration; and so, on the statement of an account, if the case is one in which a payment, if made, could have been re — 152 — covered back, the facts which show tkie failure of consider.ation may be proved.” In the correspondence between the two banks it seems to have been assumed that the indorser of the notes had been released by the failure to protest 'them, and that the Pineville bank was responsible for the loss if the notes were sent to it by the Louisville bank with instructions to protest them if not paid. But promissory notes are only put on the footing of foreign bills of exchange when they are regularly discounted by the bank at which they are payable, or another bank in this State incorporated under its laws, or organized in this State under the laws of the United States. Kentucky Statutes, sec. 483; Carlisle v. Chambers, 67 Ky., 268, 96 Am. Dec., 304. Thie notes in question, having been discounted by the bank in Cincinnati, Ohio, and not by any bank in this State, were not, therefore, placed on the footing of a bill of exchange, but stood ns any other promissory note which had been assigned. The indorser was not released by the failure to protest them. The Cincinnati Ibank had not sustained any loss by reason of the failure to protest them. The protest would have been only an unnecessary expense. There was no liability of the Louisville bank to the Cincinnati bank, or of the Pineville bank to the Louisville bank, for the failure to protest the notes, which were executed! in this State, were payable here, and must be governed by its laws-. It is olear from the evidence that the parties to the notes were all insolvent at the time, and that the notes were in fact worthless. The question then arises, is' there such a palpable mistake here that equity should relieve against it, treating the account as stated, and applying the principles followed in this State in the case of a payment of money by mistake? The distinction made in some jurisdie — 153 — tions between a mistake of law and a mistake of fact has been rejected in this State, and it is settled that money paid without consideration under a palpable mistake of law or fact, which -was not owing in law or conscience, and ought not to be retained, may be recovered back. McMurtry v.. Railroad Co., 84 Ky., 462 (8 R., 455), 1 S.. W., 815, and cases cited. The mistake here is palpable, and • the charge against the Pine-ville bank can not be allowed to stand unless it has lost its rights by laches, amd is now estopped to assert them.. It does not appear from the evidence that the Pineville bank led the Louisville Banking Company to take the action it took. On the contrary, the correspondence would indicate that the Louisville bank charged the amount to> the Pineville bank, and credited it to the Cincinnati bank on the same day, expressing to the Pineville bank regret that it was compelled to do so. In other words, It acted on its own judgment, and not by the direction of the Pine-ville bank. It did not wait for the Pineville bank to affirm its action before crediting the Cincinnati bank by the money or paying its checks upon it, and it does not appé'ar that it was misled by the Pineville bank, or is- now in a, wmrse position than it would have been if the Pineville bank had promptly disaffirmed what it did. Nor doe's it appear that it will be unable now to get its money back from the Cincinnati bank. We are therefore of opinion thlat appellee was properly credited in the settlement of the account with the amount of these notes. The next matter in dispute arises in this way: The Pine-ville bank held a four-months note, dated March 30, 1893, on ’Wyman & Cairns. The Louisville Banking Company discounted the note on April 28, 1893. It was payable at the Pineville Banking Company. On July 25, 1893, the-Louisville Banking Company sent the note to the Pineville — 154 — Banking Company for collection. It was not paid at maturity. The Pineville Banking Company failed to demand payment, or to protest it for nonpayment. The Pineville bank was liable on this note as indorser, and, having failed to demand payment or protest, it became liable to the Louisville bank for the amount, and the court below properly so ¡held. The nest matter to be considered is the proper basis for the settlement of the accounts.. The commissioner adopted as'his basis the balance shown by the books of the Pineville Banking Company. This was error. The Louisville bank had no notice of the account as it was kept on these books. The entries were not shown to have been made at the time of the transactions, or in the regular course of business. The account as leapt on the books of the Louisville Banking Company had been submitted at the end of every month to the Pineville bank, and had been acknowledged by it to be correct. As we have said,-it must be treated as an account stated. The commissioner should have taken the balance as shown by this account as the basis. To this balance should be added the amount of the Barry notes' charged to the Pineville bank on the account, with six per cent. • interest from the time it was charged. We do not see from the record any other mistake in the account. If any appears, it may be .corrected according to the principles laid down above. The $1,200 note made by the Pineville Banking Company should be charged to the account at its maturity; also the Wyman & Cairns note, and the checks paid; and interest should be allowed on the balance, as it may appear, up to the time the proceeds of the Bell county bonds were received. This is not a bill of interpleader. The costs should be — 155 — paid as in -other equitable actions. No part of the attorney’s fees of appellant should be charged to appellee. Judgment reversed, and canse remanded for further proceedings consistent herewith. Petition for rehearing by appellant overruled.