Crane v. Fourth Street National Bank , 173 Pa. 566 ( 1896 )

Opinion by

Mr. Justice Williams,

This appeal is from a judgment entered for want of a sufficient affidavit of defense, and the only question raised is that of the sufficiency of the allegation of payment which is the only defense set up in the affidavit.

The plaintiffs were on the 19th day of March, 1891, the owners of a draft drawn by the Anglo-Californian Bank on the Fourth Street National Bank of Philadelphia. On that day they indorsed the draft specially to the Keystone National Bank for collection, stating in the indorsement that its purpose was the collection of the amount for their oto credit. The effect of this indorsement was to make the Keystone National Bank the agent of the indorsers for the single purpose named. The title to the draft passed only so far as was necessary for the purposes of the agency created by the indorsement, and the ownership of the proceeds remained all the while in the indorsers. The Keystone National Bank and the Fourth Street National Bank were both members of the clearing house association. On the morning of the 20th of March, this draft was sent mth the other checks and drafts held by the Keystone Bank, against the other national banks of the city, to the clearing house for collection at the morning clearing. The process of passing the clearing house was begun in the usual manner. The balances due from and to the several banks represented were ascertained and the exchange of packages entered upon. It was then ascertained that while the Keystone Bank was credited with checks and drafts presented by it amounting to $70,005.46, it was debited with checks and drafts presented against it amounting to $117,085.21. The balance due from it to be paid in cash was therefore $47,029.75 and the bank could not clear until this sum was actually paid at the clearing house. At half past ten o’clock that morning the bank was closed by the action of the United States bank examiner. The balance was not paid or any part of it. The bank could not clear for this reason, and what had been done provisionally for that purpose became ineffectual and ceased to have any legal significance. The draft on the Fourth Street National Bank had not been collected and it remained the property of Crane and Parris as fully as before. The clearing house had no right to demand or receive the amount from the drawee unless it did so in completing the day’s clearing for the Keystone Bank, and if it had demanded and received it for that purpose it would have held the money for the owners of the draft and been accountable to them for it. But it did not assist the Keystone Bank to clear on that day. It demanded and received the amount of this draft from the defendant and appropriated it to the payment of the indebtedness of the Keystone Bank to the clearing house committee.

This is the payment set up in the affidavit. It is a payment to one who was a stranger to the draft and who had no interest in the proceeds, and no authority to act as agent for the owners. It should be noted that no question is raised by the defendant as to its liability to the holder. It rests upon the legal value of its payment of the money to the clearing house. If this was a good payment then a defense is set out in the affidavit. If it was not a good payment then the judgment appealed from was properly entered. No reason has been suggested for supposing that the clearing house had acquired, or could acquire, a title to the draft of Crane and Parris by the accident of having it in then possession. If the Keystone Bank had attempted to make title to the clearing house by indorsing the draft over to it, this would have been wholly ineffectual; for notice of the limited interest of the bank was written into the indorsement by the plaintiffs, and any party taking as the indorsee of the bank would be bound to take notice of its want of title and its inability to confer one.

The Fourth Street Bank had notice therefore, by the indorsements on the draft, that the clearing house had no title, and that payment made to it would be made at the' risk of the bank. If the clearing house had paid over the proceeds to the owners this would have discharged the drawee but the risk of this was the risk assumed when the bank paid the draft to one who was a stranger to it. The learned judge of the court below was right in his view of the transaction and of the worthlessness of the payment set up as a defense against the real owners. In one respect only, and that an immaterial one so far as this case is concerned, do we find ourselves constrained to differ from the learned judge.

We do not regard the clearing house as a mutual bank organized and operated by the associated banks. It is as we have said in Philler v. Patterson, 168 Pa. 468, an ingenious device to simplify and facilitate the work of the banks in reaching an adjustment and payment of the daily balances due to and from each other, at one time and place, on each day. In practical operation it is a place where the representatives of all the National Banks in this city meet, and under the supervision of a competent committee or officer selected by the associated banks, settle their accounts with each other, and make and receive payment of balances, and so “clear” the transactions of the day for which the settlement is made. These payments may be made in cash or by such form of acknowledgment or certificate as the associated banks may agree to use in their dealings with each other as the equivalent or representative of cash. The use among themselves of a certificate or other representative of money to save the inconvenience and labor of counting and recounting several millions of dollars daily is not the issuing of currency. It is not a violation of the law. It does not convert the clearing house into a bank of any sort.

The judgment is affirmed.

Mitchell, J., dissents.