Commercial Bank of Pennsylvania v. Union Bank

Harris, J.

The Bank of Wilmington and Brandywine received the draft in question from Betts, Harlan & Hollingsworth, the payees and holders thereof, and gave them credit for the amount; that bank thereby became its owner. The Troy City Bank received the draft for collection, and failed either to collect the draft, or to protest it, so as to charge the parties who would have been liable to the owner for its payment. The Bank of Wilmington and Brandywine is therefore entitled to indemnity for its loss, and the Troy City Bank is liable for its failure to discharge the duty it took upon itself when it received the draft for collection. The question then is how the plaintiff and the defendants, the immediate parties to the transaction, are affected by the right of the Bank of Wilmington and Brandy-wine to indemnity, and this liability of the Troy City Bank. That the plaintiff is liable to the Bank of Wilmington and Brandywine, is settled by the authority of Allen v. The Merchants’ Bank of New York, (22 Wend. 215.) The resolution of the court for the correction of errors in that case is, that when a bank, upon a good consideration, receives a note, or a bill, for. collection at a distant place, the party receiving the same for collection, is liable for the neglect, omission, or other misconduct óf the bank or agent to whom the note or bill is sent, either in the negotiation, collection or paying over money, by which .the money is lost or other injury sustained by the owner of the note or bill, unless there be some agreement to the contrary, expressed or - implied. Upon this principle, the Merchants’ Bank of Hew York, which had received from the Messrs. Allen a draft upon a mercantile firm in Philadelphia for collection, and had transmitted it for the same purpose to the Philadelphia Bank, was held liable to the owners of the draft for the neglect of the notary of the latter bank in giving notice of the non-acceptance of the draft, so as to charge the indorsers. (See also Downer v. The Madison County Bank, 6 Hill, 648.)

*396In the Bank of Orleans v. Smith, (3 Hill, 560,) Nelson, Ch. J., while he still seems to prefer the rule as it had been declared by the supreme court in Allen v. The Merchants’ Bank, and as it undoubtedly exists in some-other states, considers the doctrine as settled by the decision of the court of errors. In the case last cited, it was held that the party who deposits commercial paper, payable at a distant place, with a bank for collection, may hold any of the parties through whose hands it has passed in its transmission to the place of payment, answerable for any default in the collection of the paper. In that case Smith was the holder of a note payable at Buffalo. He left it for collection with the Merchants’ and Mechanics’ Bank of Troy. That bank transmitted it to the Bank of Orleans, and the latter to the Commercial Bank of Buffalo. The Bank of Orleans supposing the note had been collected by its correspondent at Buffalo, paid the amount to the bank at Troy, and that bank had also paid it to Smith. It turned out that the note had not in fact been paid, and that no loches were imputable to any of the parties. The Bank of Orleans sued Smith for the money thus paid through mistake. It was insisted that the Merchants’ and Mechanics’ Bank of Troy alone was liable to the plaintiff. But it was held that the Bank of Orleans might be considered, as the agent of Smith as well as the bank from which it received the note; and having, as such agent, paid the money, and the same having been received by Smith as the owner of the note, the action,'though it might have been maintained against the bank at Troy, was properly brought against the principal. According to the principle of this case then, the Bank of Wilmington and Brandywine might at its election have maintained its action against either of the three banks to which the draft had been transmitted for collection. The Commercial Bank of Pennsylvania was liable not only for the default of the Union Bank, to which it transmitted the draft for collection, but also for the default of the agent at Troy, employed by the latter bank, and so passing by the Commercial Bank of Pennsylvania, the owners of the draft might have looked directly to the Union Bank or the Troy City Bank, and regarding it as. its *397own agent, have held either liable for the loches through which the draft was lost. The same evidence which would establish the liability of one, would equally establish the liability of either of the others. If the plaintiff in this action had been compelled to pay the amount of the draft to the Bank of Wilmington and Brandywine, by reason of the loches of the Troy City Bank, it will not he denied that upon the same evidence it might have sustained an action against either the Union Bank or the Troy City Bank.

The question still remains, whether being itself liable to the Bank of Wilmington and Brandywine, the plaintiff may maintain its action against the Union Bank or the Troy City Bank, without waiting for a recovery against it upon its own liability. To hold that the action cannot be maintained, would be contrary to the policy of the law, which always seeks to avoid a multiplication of suits by sustaining the action directly against the party ultimately liable. Why,” said Nelson, Oh. J., when the same argument was urged by the defendant, in the Bank of Orleans v. Smith—“why bring'the action against the Bank of Troy? They were but the agents of the defendants, and a recovery against them would only have the effect of multiplying actions, as they would have an immediate remedy over against the defendant.” If, according to the principle laid down by the supreme court, in Allen v. The Merchants' Bank, (15 Wend. 482,) the only duty assumed by the plaintiff upon receiving the draft, was, that the draft should be forwarded in due season to some competent agent at the place of payment; then, indeed, having discharged that duty, there would be no ground for maintaining the action—no injury could have been sustained by the plaintiff. But since by the doctrine established by the court of errors, in Allen v. The Merchants' Bank, the plaintiff became answerable for the diligence of the agents who might be employed in the collection of the draft, it had such a special interest in the draft as would enable it to maintain an action for the injury it ha,d sustained. Though the Bank of Wilmington and Brandywine was the general owner, the plaintiff, to which the draft had been indorsed and delivered for a special purpose, became a special owner. It *398was bound to return to the general owner of the draft either the money or the draft duly protested. And if, through the negligence of the defendants, or any agent employed by the defendants, it was unable to discharge this duty to the owner, I see no reason why it should not be permitted to maintain an action for the injury. The case, I think, falls within the principle of that larger class of cases, in which the ■ action ■ may be maintained, either by the principal or the agent. Thus, a factor may sue in his own name for the price of goods sold for his principal; so an auctioneer may maintain an action in his own name for goods sold by him. In these and similar cases, while the agent has such a special property in the subject matter of the action that he is authorized to sue in his own name, the principal also may maintain an action upon the contract of his agent, and, in general, a suit by one will supersede the right of the other to sue. (Story on Agency, § 393 to 402.) -

In this case the Bank of Wilmington and Brandywine had, by indorsement in due form, transferred the draft to the plaintiff. Having the possession of the draft thus indorsed, the plaintiff was clothed with the legal evidence of ownership. As such owner, the plaintiff transmitted the draft to the defendant. The parties dealt with each other as principals. By receiving the note from the plaintiff for collection, the defendants engaged with the plaintiff, as the plaintiff had engaged with the Bank of Wilmington and Brandywine, that-the proceeds of the draft, or the draft duly protested, should be returned to the plaintiff. Having failed in discharging this duty, it is no answer to the action to say, that the plaintiff is under a similar obligation to another party. Nor is it any answer to say, that the real principal has a right also, as an implied party, to avail himself of the obligation which the defendants had assumed with the plaintiff. It is by reason of the plaintiff’s responsibility to its principal that it has an interest in maintaining this action for its own indemnity. It may be laid down as a general rule,” says Story, “that wherever "an agent, although known to be such, has a special property in the subject matter of the contract, and not *399a bare custody thereof, he may in all such cases, sue upon the contract.” (Story on Agency, § 397; see also the Bank of Utica v. McKinster, 11 Wend. 473.)

It cannot be doubted, I think, that the plaintiff had such a special property in the draft, as entitled it to maintain an action against the defendants for the injury it had sustained by the default of the defendants’ agent in collecting or protesting the draft. The plaintiff had the legal right to recover the damages which the defendants had incurred by reason of such default, so that it might be indemnified against its own liability upon its own undertaking with its principal. It was upon this principle that it was held by the court of errors, in Miller v. Adsit, (16 Wend. 335,) that a receiptor of property taken in execution, being -bound to return the property or pay the execution, had such a legal interest in the property as entitled him to maintain ah action against a third person who had taken the property, although it had been left in the possession of the de fendants in the execution. I think, therefore, that the action was properly brought by this plaintiff, and against these defendants.

It has thus far been assumed that the facts in this case, in respect to which there was no dispute, showed such loches as would render the Troy City Bank liable for its failure to collect, or duly to protest, the draft. But as the "defendants’ counsel have made a point upon that question, it is proper that it should receive a moment’s notice. The draft was received at Troy on the morning of the 19th of November. At the opening of the bank on that day it was presented by the teller to W orren for payment. Though he had not funds upon deposit to pay the draft, his check for the amount of the draft, with some other items, was received, and the draft delivered up as paid. Subsequently, on that day, and the day following, cash deposits were made to an amount greatly exceeding the check which was used in the payment of the draft. I suppose that these deposits were applicable to the payment of. the check used for the purpose of taking up the draft in preference to other similar advances made subsequently. (Allen v. Culver, 3 Denio, 284. Webb v. Dickinson, 11 Wend. 62. Seymour v. Van Slyck, 8 *400Id. 403.) But if this be not so, it was quite too late to protest the draft oh the 22d. It had been received, and as the parties understood, paid and given up, on the 19th. If not paid, it should have been protested on the same day it was presented. Notice should have been given to the drawer and indorsers, at the latest, on the next day ; and yet the draft was suffered to remain in the hands of Warren from the 19th to the 22d, when it was obtained from him and protested. This was too late to charge the drawers and indorsers. It being a sight draft, no days of grace were allowed upon it, and without reference to what had-occurred on the 19th, the demand of payment on the 22d was too late.

Nor have I been able to perceive any sufficient grounds for suppressing the depositions of the two cashiers. A copy of the draft was annexed to the interrogatories, and the witnesses were asked, among other things, if they had ever seexi the original of such copy; and, if so, under what circumstances and when. By other interrogatories, the cashier of the Bank of Wilmington and Brandywine was required to state the facts in relation to the transfer of the draft by Betts, Harlan & Hollingsworth to the Bank of Wilmington and Brandywine, and the transmission of the draft for collection. The cashier of the plaintiff’s bank was also required to state the facts in relation to the transmission of the draft to New York for collection. At the taking of the deposition of each witness, the original draft was present and identified. Each verified the copy annexed to the interrogatories as being a true copy. The defendants’ counsel insisted, on the settlement of the interrogatories, that these interrogatories ought not to be allowed, because they related to a copy of the draft, without producing the original or proving it lost, thereby seeking to give paroi evidence of a written instrument. Upon the trial the further objection was taken that the plaintiff had no right to give evidence of the original draft without allowing the defendants to see the same before the witnesses were examined. In respect to the latter objection it is enough to say that it is hypothetical. It does not appear whether the defendants’ counsel in- fact saw the draft or' not. If he did not, there is no reason to believe he might not have seen it, *401if he had sought the opportunity. I think, too, that the other objection is equally unfounded. Instead of describing the draft in respect to which the witnesses were to be examined, in the body of the interrogatories, a copy was annexed and referred to. It was no more than a convenient mode of description. When several witnesses are to be examined under different commissions, in respect to the same instrument, I know of no other practicable mode of proceeding than that pursued in this case. Upon the examination, the original was in fact produced and identified by each witness. In all this I cannot see that any rule of evidence has been violated.

By one of the interrogatories administered to the cashier of the Bank of Wilmington and Brandywine, he was required to state the usual mode of transferring notes and drafts from one bank to another. This was objected to,- on the ground that it involved the decision of a question of law. In this, too, I think the defendant’s counsel is mistaken. The witness is interrogated in respect to a mere matter of fact; that is, how a certain kind of business is done. What might be the legal effect of doing the business in the mode described by the witness, is a question which would still remain to be determined.

In answer to the concluding general interrogatory, each witness has in substance repeated the facts he had previously stated in answer to the specific interrogatories, and perhaps has added some other statements. Ho motion was made to suppress the answer to this interrogatory, or any part of it. But ifr such a motion had been made, I do not see why it should be granted. So far as the same facts were re-stated by the witnesses, the defendants certainly could not be prejudiced, and if any new matter was stated bearing upon the matters in issue, it was no more than the duty of the witness required him to state. If the defendants had desired to cross-examine the witnesses in respect to any new matter there stated, they should have applied to have the commission sent back for that purpose. It was too late to raise such an objection at the trial.

It had appeared on the cross-examination of the plaintiff’s attorney, who was called as a witness upon the trial, that before *402the witnesses were examined under the commissions, he had at their request, framed in substance their answers to the interrogatories. This fact was relied upon by the defendants’ counsel, as of itself a sufficient ground for suppressing the depositions. Such a mode of preparing witnesses for their examination certainly is not to be commended; but I think, as it was held upon the trial, that these circumstances only affected the credibility of the witnesses. Testimony thus prepared, where it is designed to affect a controverted question, ought to be received with great caution. But the commission was executed in the manner prescribed by law. The commissioners obeyed their directions. There is therefore no ground for excluding the evidence. Like the testimony of any other witness who has been subjected to improper practices before he is examined, it must be taken for what it is worth. The circumstances affected the credibility and not the competency of the evidence. In this particular case there is no reason to believe that the witnesses had, in the slightest degree, varied from the truth. Indeed, the facts to which they testified were not controverted upon the trial. The defendants relied' exclusively upon the legal questions involved in the case. It was not even requested that the evidence should be submitted to the jury.

The only other point made by the defendants’ counsel is, that the erasure of the indorsements of the cashiers of the Bank of Wilmington and Brandywine, and the plaintiff’s and defendant’s bank, canceled the interest of the plaintiff in the draft, if it ever had any, and that for this reason the action cannot be maintained. These erasures were made, as the defendant’s counsel concedes, when the draft was returned under protest, and probably before the circumstances which establish the liability of the defendants were known. If the defendants were liable to the plaintiff at all, they were liable in consequence of the' failure of the Troy City Bank to discharge its duty in the collection of the draft. That liability was fixed before the draft was returned, and of course, before the indorsements had been erased. The fact that the indorsements were erased, or even *403that the draft itself had been destroyed, could not have the effect, of itself, and without any intention to discharge such liability, to destroy the plaintiff’s right of action. I am of opinion that no error was committed upon the trial, and that the motion for a new trial should be denied.

Parker J. concurred.