Jones v. Clark , 30 S.W.2d 577 ( 1930 )

In this case Associate Justice SMITH has found it difficult to accept the view of Associate Justice COBBS in the disposition thereof and filed a separate opinion in which Chief Justice FLY will perhaps agree. Justice SMITH agrees with the writer that the negligence and want of care in handling this collection, as shown in the opinion, was with the City National Bank of San Antonio in forwarding the check to the payee bank itself when there was another reputable bank in the city where the payee bank resided. Other irregularities were committed in the handling of the collection, and it is to be presumed that another bank would have promptly collected it and saved appellant from his loss and damages. Now all being agreed that the improper sending of the check to the payee bank caused the damage, brings us to the consideration of the question as to the liability of any one and who.

Justice SMITH places his opinion on the case of Tillman County Bank v. Behringer, 113 Tex. 415, 257 S.W. 206, 36 A.L.R. 1302, in which an able opinion for the Supreme Court was written by Mr. Justice Pierson. This case in many respects is similar to the case under discussion, but may be differentiated in its discussion and findings of fact in reference to diligence. The facts in that case are:

"On June 1, 1920, Dell Behringer delivered to the Tillman County Bank a cashier's check issued by the Thrift-Waggoner Bank, of Thrift, Wichita county, Tex, in his favor for the sum of $3,150. The Tillman County Bank credited Behringer with the amount of the check, and he drew $400 out of the account. The Tillman County Bank immediately sent the check as a cash item to its correspondent, the City National Bank of Commerce of Wichita Falls, Tex. This was its customary way of collecting items drawn on the banks in the vicinity of Wichita Falls, Tex. Nothing was said by Behringer to the Tillman County Bank in regard to the manner or method of collecting this check, and no instructions were given in reference thereto. The Wichita Falls bank promptly notified the Tillman County Bank of the receipt of the check and credit of same to its account. The Thrift-Waggoner Bank was located at Thrift, Tex., a small town off the railroad, about 20 miles from Wichita Falls. There was another bank, Johnson Bros. Bank, located at this place. On June 3d, promptly after receipt of the check, the Wichita Falls bank sent it by mail as a cash item to the Thrift-Waggoner Bank, with instructions to remit in payment. The bank cashier testified that this was its customary way of handling such items. Receiving no report from the Thrift-Waggoner Bank, the Wichita Falls bank sent out successive inquiries about June 8th and June 11th, but received no response. It had been having trouble for some time before this transaction in securing remittances from the Thrift-Waggoner Bank on items sent it. At one time it had been clearing such items through the First National Bank of Burkburnett, but such bank refused to handle such collections further because of the trouble in securing returns from the Thrift-Waggoner Bank. On June 16th the Wichita Falls bank sent an agent to Thrift, and collected some $3,000 `to apply on some of its items,' but the plaintiff's check was not included in the amount thus collected. If the check had been presented and payment demanded `over the counter' at any time prior to the evening of June 16th, it would have been paid. The Thrift-Waggoner Bank failed on June 16th, without ever having remitted in payment of plaintiff's check, which it had received and retained. The Wichita Falls bank thereupon charged the amount of the check back to its account with the Tillman County Bank, and notified such bank of the facts. This was the first notice the Tillman County Bank had that the check had not been paid. This bank in turn charged the plaintiff's account with the amount of the check, and demanded payment of the $400 required to cover the deficiency.

"It is conceded that there are only two questions for decision on this appeal: First, whether the Wichita Falls bank was the agent of the Tillman County Bank, or of the plaintiff (Dell Behringer); second, whether the facts support a finding that the Wichita Falls bank was negligent in the matter of the collection of the check."

It is conceded that the City National Bank of San Antonio was under no obligation to collect the check, but it was under legal as well as moral obligation to use due diligence for its collection and due care in the selection of an agency for the purpose. I agree with Chief Justice Phillips in his statement in Waggoner Bank Trust Co. v. Gamer,113 Tex. 5, 213 S.W. 927, that the correspondent bank was not guilty of negligence in sending a check for collection direct to the drawee bank, for the reason that it was the only bank in the city; but in this case there were two banks in the city, besides there was a deed attached for the president of the bank, to be delivered upon the payment of money, and which should not be delivered otherwise.

Judge Pierson in his opinion, supra, cites a number of cases and says: "There is much conflict over this question. The New York Rule is that the correspondent bank to which commercial paper has been sent by a forwarding bank is the agent of the forwarding bank, and that the forwarding bank is liable to the depositor for the negligence of its correspondent. Allen v. Merchants' Bank, 22 Wend. (N.Y.) 215, 34 Am.Dec. 289. The Massachusetts Rule is that, when a bank receives negotiable paper to be collected at a distant point, and transmits the same with due diligence and care to a reputable and proper correspondent at or near the place where the collection is to be made, it has discharged its duty, and is not responsible for the negligence of such correspondent, but that such correspondent becomes the agent of the owner of the paper. Dorchester Milton Bank v. New England Bank, 1 Cush. (Mass.) 177."

Judge Pierson, in his opinion, further says:

"Notwithstanding the fact that the New York Rule is supported by such excellent authority and by the courts of a number of the states of the Union, yet it must be recognized that the prevailing rule, and, as we think, the more reasonable and just construction of the contract of the parties and of the undertaking of the first bank, is that, when paper is payable at another and distant place, said bank discharges itself of liability by transmitting the same with due diligence to a suitable and reputable bank at or near the place of payment.

"The confusion in the authorities, it seems to us, arises from an erroneous premise of assuming that the agreement of the parties and the undertaking of the receiving bank was to itself effect a collection of the paper, rather than the receiving of said paper for the purpose of forwarding same with due care and diligence to a proper correspondent more accessible to the place of payment, so that it may be presented and paid.

"Under the New York Rule and the courts that follow it, and under the application of that rule by the Supreme Court of the United States, the undertaking of the receiving bank is an undertaking `to do the business,' to collect the paper: `to do this thing, not merely to procure it to be done.' It would necessarily follow from such a holding that the bank at a distance to which the paper is forwarded is the subagent of the forwarding bank, to perform a part of that which it had contracted to do. Therefore the courts which follow that construction of the undertaking or contract between the owner of the paper and the forwarding bank necessarily hold that that bank is the agent of the owner to the full extent of effecting collection, and is liable to such owner for any negligence or misconduct of the correspondent bank. This we think assumes the very question that is to be decided. The real issue is: What is the undertaking of the parties?"

The person leaving the paper for collection knows it has to be forwarded to a distant bank for collection and presumes that it will be sent with due diligence to a competent agent to do what shall be necessary in the premises.

Judge Pierson has well said:

"Here the very heart of the undertaking is that the receiving bank will select for the depositor a competent agent for him, and will with dispatch forward the paper to that agent for collection. Too, the collecting bank is equally aware that it has for collection the owner's paper and accepts the duty of that service for the benefit of and on account of said owner. Under the system of banking we think there is no lack of privity between the collecting bank and the owner of the paper.

"We cannot see that this application of the contract of the parties violates, endangers, or abrogates the rule of law relating to the responsibility of the principal for the acts of his agent, as contended by the New York courts and as presented by the Supreme Court of the United States. It is, we think, only a proper construction of the contract or agreement the parties have entered into.

"It may be conceded also that the depositor had no part in the selection of the collecting agent, or in the collection, but the selection of such agent for him is what he has intrusted to the receiving bank, and that, together with the care required in such selection, and in regard to the further attention required of it in the matter, measures its duty and liability.

"The depositor knows that the receiving bank will not personally and through its own agents and servants collect the paper, but knows that it necessarily will transmit it to a distant place. This knowledge of the course to be taken, it seems to us, implies an understanding that the undertaking of the bank is, in good faith and with due discretion, to choose an agent for the depositor."

We think Justice SMITH is in error in thinking the case of Tillman County Bank v. Behringer, supra, is authority for his holding. The holding is directly in support of the theory that when the check is transmitted with due diligence and care to a reputable and proper correspondent at or near the place where the collection is to be made it has discharged its duty. Not so in this case, there is not a single issue of care shown. It was a careless neglect of duty to send the check for payment with the attached draft to the payee named and the deed to the grantee therein, the president of the bank. We think the very cases cited by Mr. Justice SMITH constitute a holding against his views.

The great thing to be accomplished at last in all cases is to see that a case has been fairly tried and justice administered. That would not be the case should we adopt the views of Justice SMITH. Let us come right down to the issue. The draft was placed in the hands of the Lyford bank; and when it was accepted by that bank there arose, by implication at least, a promise and agreement that it would promptly and properly present the draft for payment, and "select for the depositor a competent agent and with dispatch forward the paper to that agent for collection." This was not done. The receiving bank had no business to select the City National Bank of San Antonio, but should have forwarded the papers direct to some bank in the city of the drawee.

By selecting the City Bank to do the sending for it, instead of performing that duty itself, the Lyford bank made the City Bank its agent, and thereby it became liable to the maker of the draft for such breach of duty.

I adhere to my original opinion and think the case should be reversed and remanded. While in the judgment of the court there is a recital that the "Bank tendered into court the cashier's check in question, and that there has never been any demand on it for said check," we suppose the court refers to the cashier's check, for the draft was surrendered and the cashier's check was delivered in lieu thereof.

A careful examination of the record shows that the court's finding is not supported by any evidence and is challenged by counsel, and that neither the check nor receiver's certificate was ever returned or delivered.

I feel constrained to and do adhere to the original opinion filed herein.