Montgomery County Bank v. Albany City Bank and Bank of the State of New York

Montgomery County Bank v. Albany City Bank and Bank of the State of New York " Responsibility of collecting bank. — Joint defendants. — Costs on appeal. ■ "Where a country hank sends to its correspondent hank, for collection, indorsed bills, payable at another place, and the latter bank indorses and transmits them to its own correspondent, at the place of payment, the immediate correspondent of the country bank is alone responsible to the latter, for a neglect to charge the indorsers; the third bank to which the bills were transmitted, is only liable to its immediate principal. "Where two defendants, not jointly liable, are sued, and the complaint shows no cause of action as to one of them, the objection may be taken on the trial, and the complaint must be dismissed as to such defendant. "Where a judgment against two defendants is reversed as to one, and affirmed as to the other, generally, the reversal should he with costs. Montgomery County Bank v. Albany City Bank, 8 Barb. 397, affirmed as to one of the defendants, and reversed as to the other. Appeal from the general term of the Supreme Court, in the fourth district, where a judgment entered upon a verdict in favor of the plaintiff had been affirmed. (Reported below, 8 Barb. 397.) This was an action against the defendants to recover the amount of a draft for $1800, which the plaintiff had transmitted to the Albany City Bank for collection, on the ground of omission to charge the indorsers. •*It was shown, on the trial, before Watson, J., that the plaintiff was the owner, and holder for value, of a draft bearing date the 7th day of June 1848, drawn on Morgan Gray, No. 15 South street, New York, by Loucks & Gray, at Canajoharie, payable to the order of Jones & Hart, thirty days after date, for $1800, and indorsed by the latter; that on the 6th day of July 1848, the plaintiff, by its cashier, indorsed the same, for collection, and transmitted it, by mail, to the Albany City Bank for that purpose, the latter being at that time its correspondent and agent for such, purposes at Albany; that that bank received it by mail, on the 8th day of July, and on that day, by its cashier, indorsed the draft, for collection, and transmitted it, by mail, to the Bank of the State of New York, at New York, for that purpose, the latter bank being at the time the correspondent and agent of the Albany City Bank for such purposes, at New York. The draft was received by the Bank of the State of New York, on the 10th day of July, being the day of its maturity, and was not paid. Neither of the defendants presented the draft for payment, on that day, or gave notice of the non-payment thereof to the drawers or indorsers, by means of which neglect, the plaintiff sustained damages to the amount of the draft. At the close of the testimony, there was a motion to dismiss the complaint, as to the Bank of the State of New York, on the ground that the contract was with the Albany City Bank, which was denied, and an exception taken. The jury, under the instructions of the court, found a verdict against both defendants, for $1917-05 ■; and the judgment entered thereon having been affirmed at general term, the defendants took this appeal. Classen, for the appellants. Wells, for the respondent. See Commercial Bank v. Union Bank, 11 N. Y. 203 ; Reeves v. State Bank, 8 Ohio (N. S.) 465. [MAJORITY — Jewett, J. Johnson, J.] Jewett, J. (after stating the facts.) — The most material question presented by the case for determination is, whether the defendants are jointly liable to the plaintiff to make good the loss thus sustained. I consider it a rule, of law, well settled in this state, that when a -bank receives from the owner a bill, for collection, payable either at the place where such bank carries on its business, or at. some distant place, it thereby becomes the agent of the owner, for the collection, and in the discharge of its obligations as such, if the bill has not been accepted, it is bound to present the same for acceptance, without unreasonable delay, as well as to present the same for payment, when it becomes payable; and if not accepted, when presented for that purpose, or * 461 1 n°* Pa^’ when presented *for payment, it must -* take such steps, by protest and notice, as. are necessary to charge the drawer and indorser,, or it will be liable to its principal, the owner, for the damages which the latter sustains by any neglect to perform such duties, unless there be some agreement to the contrary, .express or implied. And:if it be necessary-or convenient for the bank to employ some other bank or individual to collect the bill, either at the place of its location, or at a distant place, where the bill is payable, and it does employ another bank or individual, to whom .it transmits the bill for that purpose, the latter, on receiving the bill and entering. upon the discharge of the trust, becomes the agent of the former bank, and not of the owner, and .in the absence of any agreement to the contrary-, is. answerable to it, for any neglect in the discharge of. its duties as agent, whereby the former bank sustains any loss or damage. The principle is, that when a trust is confided to an agent, and he whose interest is intrusted is damnified by the neglect of one whom the agent employs in the discharge of the trust, the agent employed shall answer to the person damnified. (Smedes v. Bank of Utica, 20 Johns. 372, affirmed, in error, 3 Cow. 663; Allen v. Suydam, 20 Wend. 321; Allen v. Merchants’ Bank of New York, 22 Id. 215; Denny v. Manhattan Co., 2. Denio 115, affirmed, in error, 5 Id. 639; Colvin v. Holbrook, 2 N. Y. 126; Van Wart v. Wooley, 3 B. & C. 419.) In the case of Allen v. Merchants’ Bank, above referred to, the supreme court held, that the only obligation which the bank incurred was, to transmit the bill, in due season, to a competent agent, at the place of payment, with directions to take the necessary steps to charge the drawers and indorsers. Although the court for the correction of errors reversed that judgment, and held that the bank, on receiving the bill for collection, drawn in this state upon a person residing in another state, was liable for any neglect of duty occurring in its collection, whether arising from the default of its officers here, its correspondents abroad, or of agents employed by such correspondents; yet, the supreme court, in Bank of Orleans v. Smith (3 Hill 560) still insisted, that the general commercial rule was correctly *laid down _ , 1 ^ Afiv by that court, in the case of Allen v. Merchants’ Bank, citing, to sustain that opinion, Bank of Washington v. Triplet (1 Peters 35), East Haddan Bank v. Scovil (12 Conn. 304), and Fabens v. Mercantile Bank (23 Pick. 330). As it respects the case referred to in Peters, there is an obvious distinction between the contract as alleged in that case, and the contract in the case under consideration, the case of Allen v. Merchants’ Bank, or in the case of Bank of Orleans v. Smith. There, the case shows, that Triplet and Neal the owners and holders of a bill, drawn at Alexandria, by Briscoe, on Carnes, of Washington city, placed, it in the hands of the cashier of the Mechanics’ Bank of Alexandria, not for collection by that bank, but for the purpose of its being transmitted to a bank in Washington for collection, and indorsing it in blank for that purpose, there being no allegation that the bank at Alexandria made any contract to collect the bill, express or implied. Marshall, C. J., in delivering the judgment of the court, said, that the bill was not delivered to the Mechanics’ Bank at Alexandria for collection, but for transmission; that the bank in Washington became the agent of the holder; that the bank in Alexandria performed its duty by transmitting the bill, and the whole responsibility of the collection devolved on the bank which received it for that purpose. The case cited in Pickering is directly in point for which it was cited before the court in 3 Hill. It shows, that the note in that case was made by a person residing in Philadelphia, indorsed in blank by one Massey, and delivered by Fabens, the owner, to the defendant, a bank carrying on its business in Massachusetts, for collection; that this bank, in due season, transmitted the note to the Bank of the United States, in Philadelphia, for collection, the only bank in that place which the defendant employed to make its collections; demand of payment of the maker and notice to the indorser were neglected to be made and given, in time, to charge the latter, by means of which the note was not collectible. The court, in delivering its judgment, said, that as a * /¿¡Q t general ru^e) ^ was weU settled, that if a bank -* *receives a note for collection, it was bound to make a seasonable demand on the promissor, and in case of dishonor, to give due notice thereof to the indorser, so that the security of the holder should not be lost or essentially impaired by the discharge of the indorsers; and that it was equally well settled, that when a note is deposited with a bank for collection, which is payable at another place, the whole duty of the bank so receiving the note, in the first instance, is seasonably to transmit the same to a suitable bank or other agent at the place of payment; and as a part of the same doctrine, it was well settled, that if the acceptor of a bill, or promissor of a note, has his residence in another place, it shall be presumed to have been intended and understood between the depositor for collection and the bank, that it was to be transmitted tc the place of the residence of the promissor, and the same rule should then apply as if, on the face of the note, it was payable at that place. As sustaining this doctrine, that court cited the case referred to in Peters, Jackson v. Union Bank (4 Har. & Johns. 146), Lawrence v. Stonington Bank (6 Conn. 528), and the case of Allen v. Merchants’ Bank (15 Wend. 482), which, within a month after it had been followed by the court in Massachusetts, was reversed in this state, by the court of last resort, holding .that when a bank or broker, or other dealer, receives, upon good consideration, a note or bill for collection, in the place where such bank, broker or dealer carries on business, or at a distant place, the party receiving the same for collection is hable for the neglect, omission or other misconduct of the bank or agent to whom the note or bill is sent, either in the negotiation, collection or paying over the 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, express or implied. Whatever, then, may be considered to be the commercial rule,in- other states, on this subject, we are not at liberty to repudiate the rule as adjudged in our court of last resort. And I think it quite certain, that the rule, as stated by our supreme court, and in the cases referred to in Massachusetts and Connecticut, derives no support from the decision of the supreme court of the United States, in *the case referred to in that court. For there, the contract between the holder of * the bill and the bank in Alexandria was for transmission of the bill to the bank in Washington, and not for the collection of it. The bill or draft in this case should have been presented to the drawee for payment on the tenth day of July, and if neglected or refused, notice of demand and refusal, or neglect to pay, should have been given to the drawer and indorsers. The omission to do so, discharged the drawer and indorsers, by reason whereof the plaintiff suffered a loss of -the amount of the draft. The New York State Bank was the agent directly guilty of' the neglect;' that bank was employed to do the service, by the plaintiff’s agent, the Albany City Bank, as -its agent, to which it was alone responsible for its acts and neglects, and for which, the latter, according to the settled rule, was alone responsible to the plaintiff, there being no agreement to the contrary, express or implied: The gist of this action is the breach of duty arising out of an employment for hire, considering that breach of duty as tortious negligence, instead of considering the same circumstances as forming a breach • of promise, implied from the same consideration of hire. The Bank of the State of New York, not having been ‘ employed by the plaintiff as its agent, owed it no duty-in respect to the draft, and, therefore, is not • liable to the plaintiff for any neglect of -duty which it owed to its principal, the Albany City Bank, under its contract with it. Section 144 of the code provides for a demurrer to a complaint, in six distinct cases, and § 148 provides, that if the objection is not taken, either -by demurrer or answer, the defendant shall be deemed to have waived all except the first, which is, that the court has no jurisdiction of the person of the defendant or the subject-matter of the action, and the sixth, which is that the complaint does not state facts sufficient to ■ constitute a cause- of action. The defendant’s counsel took the objection, on the trial, substantially, that the defendants were not charged -by the complaint, or evidence, with a joint liability to the plaintiff for the neglect which * AfíK i occasi°ned the loss suffered. The objection *came ' 4bb -* in time. There was no cause of action shown by the plaintiff against the Bank of the State of New York, and, therefore, the complaint as against it should have been dismissed: The result is, the judgment as against the Albany City Bank must be affirmed, with costs, and-- reversed as to the Bank-of the State of New York, and the complaint as to that bank dismissed, with costs against the plaintiff. Johnson, J. Since the case of Bouchaud v. Dias (1 N. Y. 201), the - code of procedure has established rules regulating costs, which supersede all former rules upon the subject; under the code, as amended in 1852, by § 304, costs are allowed, of course, to the plaintiff, upon a recovery of money exceeding fifty dollars, and by § 305, if, in such action, the plaintiff be not entitled to costs, the defendant is. These provisions we have held to apply as well to appeals as to original suits. By § 306, when a judgment shall be affirmed in part and reversed in part, the costs of the appeal shall be in the discretion of the court. The judgment in this case comes within this provision, and the costs are, therefore, in our discretion. As there is a complete reversal as to one defendant, we think it a proper exercise of our discretion, to follow the analogy of the rule applicable in such a case to an action against a single defendant, and to give costs upon the reversal, where no special circumstances render a different disposition of the question proper. In this case, we find no such special circumstances, and, therefore, the reversal must be with costs. Judgment affirmed against the Albany City Bank, and reversed, with costs, as to the Bank of the State of New York