Bank of Washington vs. Triplett & Neale.

duct of the Bank were confined to the demand of payment, and protest for non-payment, the first instruction asked by the defendants in the Circuit Court ought to have been given. But they are not confined to the demand of payment and to the protest for non-payment. They extend to the steps taken by the Bank, concerning the presentation of the bill.

The second instruction asked for, is in terms which are in some degree equivocal. It may imply, either that the recourse against the drawer of the bill was not lost, or that if lost, that circumstance would not entitle the plaintiff to recover against the Bank; as its decision is not essential to the cause, it will be passed over.

The third is more specific. The Court is asked to say, that the failure of the Bank to give notice to the drawer, that the drawee was not found at home when called upon to accept the bill, is not such negligence as discharged the drawer from his liability, and entitles the plaintiff to recover.

The question suggested by this prayer, is one on which no decision is found in the books. It depends on analogy, so far as it is to be decided by adjudged cases. Such a bill need not be presented; but if presented and acceptance be refused it is dishonored, and notice must be given. Had the Bank taken no step whatever to obtain an acceptance, no violation of duty would, according to these decisions, have been committed. Can any unsuccessful attempt to do that which the law does not require, place the agent in the same situation that he would have stood in, had the drawee been found, and had positively refused acceptance? Absence from home, with a failure to make provision for payment when a bill becomes due, is a failure to pay; but absence from home when the holder of a bill or his agent offers it for acceptance, is in no respect culpable. Had the drawee received advice of the bill, he could not have known that it would be presented for acceptance, because the law did not require it, and is consequently not blamable for his absence when the officers of the Bank came to present it for acceptance. Had the bill, under such circumstances, been protested for non-acceptance and returned, the drawer might not have been liable for it.

The bill, then, on general principles, ought not to have been protested; and the absence of the drawee ought not to be considered as equivalent to his refusal to accept. It might have been a prudent precaution to have given information that the

Bank of Washington vs. Triplett & Neale.

bill was not accepted, because the drawer had not been found, but we cannot say that the omission would subject the agent to loss, unless such was the special usage of this Bank.

The fourth prayer is for an instruction to the jury, that, if they believe, from the evidence, that the defendants conformed to their former usage in regard to such bills, in calling on the drawee for acceptance (the said drawee being from home), and not noting the same as dishonored, and giving notice thereof to the parties on the said bill, then, their failure to treat the said bill as dishonored, and to give notice accordingly of non-acceptance, did not discharge the drawer thereof from his liability to the plaintiff.

The Court has already indicated the opinion, that this omission to treat the bill as dishonored, in consequence of not finding the drawee at home, if the usage of the Bank was not to notice such a circumstance, did not discharge the drawer; consequently, this instruction ought to have been given, unless it should be supposed foreign to the case in which it was asked. In a suit brought by the holder against the Bank, the Court was not bound to declare the law as between the holder and the drawer, unless the liability of the Bank was determined by the liability of the drawer. Although in the general the one question depends on the other, yet it may not be universally so. The Bank was the agent of the holder, not of the drawer, and might consequently so act as to discharge the drawer without becoming liable to its principal. In this case, however, as the agent received no specific instructions, but was left to act according to the law merchant, a course of proceeding which did not discharge the drawer, could not render the agent liable to the principal. This prayer was, therefore, essentially the same with that which preceded it, with this difference:-the third prays an instruction, whatever might be the usage of the Bank; the fourth prays essentially the same instruction, provided the conduct of the Bank conformed to its usage. This instruction, therefore, ought to have been given as prayed. Upon a review of the whole case, the Court is of opinion, that if the Bank acted in conformity with its established usage in not noting the bill and giving notice thereof, when the ineffectual attempt was made to present it for acceptance, this action could not be supported. With respect to this usage the testimony is contradictory, and ought to have been submitted to the jury, in conformity with the last prayer

Bank of Washington vs. Triplett & Neale.

made by the counsel for the Bank. The Court erred, in not giving this instruction as prayed. The judgment, therefore, is to be reversed, and the case remanded for a new trial.

The first question raised in this case, as to whether there existed such a privity of contract between the parties as would support the action, has been more recently considered, and the general proposition laid down by Judge Marshall affirmed in Wilson & Co. vs. Smith, 3 How, 763. In that case, a bill, the property of the plaintiff, was transmitted to an agent, St. John, at Augusta, for collection, and by him transmitted to the defendant, at Savannah, where the drawer resided; no consideration being paid for the bill, either by the defendant or St. John. Chief Justice Taney, delivering the opinion of the Court, observes: According to the usual course of dealing among merchants, the transmission of the paper to St. John gave him an implied authority to send it for collection to a sub-agent at Savannah, for it could not be expected by the plaintiff that St. John was to go there in person, either to procure the acceptance of the bill or to receive the money, nor could St. John have so understood it. So far, therefore, as the question of privity is considered, the case before us is precisely the same with that of the Bank of the Metropolis vs. the New England Bank, 1 How, 234. In that case, the bills upon which the money had been received by the plaintiff in error, were the property of the New England Bank, and had been placed by it in the hands of the Commonwealth Bank for collection, and were transmitted by the last mentioned bank to the Bank of the Metropolis in Washington, where, the bills were payable. And, upon referring to the case, it will be seen that the Court entertained no doubt of the right of the New England Bank to maintain the action for money had and received against the Bank of the Metropolis; and the difficulty in the way of its recovery in the action was not a want of privity, but arose from the right of the Bank of the Metropolis to retain, under the circumstances stated in the case, for its general balance against the Commonwealth Bank. In that case, as in the present, the agent transmitting the paper appeared, by the endorsements upon it, to be the real owner, and the party to whom it was transmitted had no notice to the contrary, and the money received was credited to the Commonwealth Bank. We think the rule very clearly established, that whenever, by express agreement between the parties, a sub-agent is to be employed by the agent to receive money for the principal, or where the authority to do so may fairly be implied from the usual course of trade, or the nature of the transaction, the principal may treat the sub-agent as his agent, and when he has received the money, may recover it in an action for money had and received."

The main subject may be considered, first, as to the grounds, and, second, as to the extent of the responsibility of the bank.

The grounds upon which the responsibility of the bank undertaking the collection depends, are thus stated in Smedes vs. Utica Bank, 20 John Rep.

371.

"It will be conceded, that had this been an undertaking by an individual, to demand payment, and give notice, it would be a nudum pactum, unless something more appeared than is disclosed in this case: for no benefit could result to the promissor, in performing the service, and paying the money over

Bank of Washington vs. Triplett & Neale.

immediately after he received it; but the case of banking institutions is widely different; they are established to aid the commerce of the country, by giving facilities to the moneyed operations of the community; and on the strength of credit, to enlarge the amount of actual capital. The operations of a bank principally consist in loaning money and discounting notes, which are direct and immediate sources of profit. Incident to the business of a bank is the receiving of notes from customers for collection; when paid, the money is placed to the credit of the depositor, and remains in bank until called for. Where business of this kind is done extensively, it is evident that more or less of the money collected may be calculated on with safety to remain in the vaults of the bank. In some instances, the money may be immediately withdrawn; in others it will remain for a considerable time: and there is no doubt that thus, large sums frequently, and at all times some amount, may with entire prudence be calculated on.

The custom of receiving notes for collection is not founded on mere courtesy, but with a view to the interests of the institution, and it is a source from whence profit may, and does arise. It is no answer to this view of the subject to say, that banks have no fees or pecuniary advantages from the notes lodged for collection, by which is meant, I presume, specific compensation. It is enough for the plaintiffs to establish, as a general proposition, that the deposit of money in a bank is beneficial. This, I apprehend, has been done, and consequently the delivery of the plaintiff's note for collection, when nothing appears that either party knew or expected that the money would not be paid, must be considered as an act not imposing a burden; but as conferring a benefit, from which profit, however small, might arise. This act, then, was a good consideration for the defendant's promise, and removes the objection taken on that ground. It is not necessary to show that profit would inevitably accrue to the bank; it is enough that a reasonable expectation exists that such will be the result.-S. P. Bank of Utica vs. M'Cinster, 11 Wend. 473.

And in 6 Met. 13, Mechanics Bank at Baltimore vs. Merchants Bank at Boston, where the transaction occurred between banks located at distant points, C. J. Shaw says: "The benefit which the collecting bank derives from the use of the funds whilst in its custody, and the profits on exchange, are a valuable compensation for the labor and expense to which the business subjects it, and constitute such bank, in acting for others, an agent for reward.”

The general rule as to the extent of the responsibility was laid down in Fabens vs. Mercantile Bank, 23d Pick. 330, and Mechanics Bank at Baltimore rs. Merchants' Bank at Boston, 6 Metc. 13.

Where a bank receives a note for collection, it is bound to use reasonable skill in making the collection, and for that purpose it must make a seasonable demand on the promissor, and in case of dishonor give due notice to the endorsers, so that the security of the holder shall not be lost or essentially impaired by the discharge of the endorsers. By reasonable skill is understood such as is ordinarily possessed and exercised by persons of common capacity, engaged in the same business or employment; and by ordinary diligence is to be understood that degree of diligence which persons of common prudence

Bank of Washington vs. Triplett & Neale.

are accustomed to use about their own affairs. The rule in reference to banks intrusted with the collection of commercial paper, is not different from that which applies to private agents or factors. But in the case of Allen vs. Suydam & Boyd, 20 Wend. 321, the Court of Errors of New York held the agent to a stricter accountability than is warranted by the language of the cases cited from Massachusetts, or is consistent with the decision of C. J. Marshall in Hamilton, Donaldson & Co. vs. Cunningham, 2 Brock, 350.

Two interesting questions have arisen in this country on the application of these general principles. The first is, whether the collecting bank is responsible for the neglect of a notary, whom it is obliged to employ; and the second is, whether it is liable for an injury caused by a mistake in a doubtful point of law.

On the first question there is a conflict among the authorities. In Pennsylvania, Connecticut, Louisiana, and Mississippi, it has been held that the bank was not responsible for anything more than reasonable care and skill in the selection of a notary. Such, too, was the opinion of Chancellor Walworth in the case of Allen vs. the Merchants Bank, 22 Wend. 215, and the intimation of the Court in the Bank of Utica vs. Smedes, 20 Johns. Rep. 371. See Bellemire vs. Bank of the United States, 1 Miles, 173, Hyde & Goodrich vs. Planters Bank of Mississippi, 17 Louisiana Rep. 560, Tiernan vs. Commercial Bank of Natchez, 7 How. Miss. 648, East Haddam Bank vs. Scovill, 12 Conn. 303.

But in Allen vs. The Merchants Bank, 22 Wend. 215, the Court of Errors of New York lay down a different doctrine. As the question is one of great practical interest, we quote a portion of the opinion of Senator Verplanck, which was sustained by the majority of the Court.

"What then is the ordinary understanding, contract, or agreement of a bank with one of its dealers, in the case of an ordinary deposit of a domestic note or bill, payable in the same town received for collection? It is a contract made with a corporate body having only a legal existence, and governed by directors, who can act only by officers and agents; or if it be with a private banker, he too is known to carry on his business by clerks and agents. The contract itself is to perform certain duties necessary for the collection of the paper and the security of the holder. But neither legal construction nor the common understanding of men of business can regard this contract (unless there be some express understanding to that effect) as an appointment of the bank as an attorney or personal representative of the owner of the paper, authorized to select other agents for the purpose of collecting the note and nothing more. There is a wide difference made as well by positive law as by the reason of the thing itself, between a contractor undertaking to do a thing, and the delegation of an agent or attorney to procure the doing the same thing-between a contract for building a house (for example), and the appointment of an overseer or superintendent, authorized and undertaking to act for the principal, in having a house built. The contractor is bound to answer for any negligence or default in the performance of his contract, although such negligence or default be not his own, but that of some sub-contractor or under workman. Not so the mere representative agent, who discharges his whole duty if he acts with good faith and ordinary diligence in the selection of his materials, the forming his contracts, and the choice of his workmen. Now in the case of the deposit for