Opinion
No. 2756.
October 29, 1928.
1. BANKS AND BANKING. Bank's sending draft to bank at which it was payable for collection was not negligence.
Where defendant bank, which was correspondent of bank in which plaintiff deposited draft, sent draft to bank at which it was payable, but which was not payee of draft, for collection, there was no negligence on defendant's part.
2. BANKS AND BANKING. Declaration held not to allege defendant bank's negligence in permitting bank to hold draft sent for collection without inquiry.
In an action for damages for negligence of bank in handling and collecting draft, declaration held not to allege negligence in permitting bank to which draft was sent for collection to hold draft from December 2d to December 6th without inquiry, where such allegation was contradicted by other allegations showing only six days elapsed between date of plaintiff's deposit of draft in C, bank, which forwarded draft to defendant bank, and receipt by defendant bank of exchange in payment of original draft.
3. BANKS AND BANKING. Declaration held not to show negligence of bank in not notifying plaintiff of dishonor of exchange given in payment of draft forwarded from correspondent bank which notified plaintiff.
In action for negligence of bank in handling draft forwarded from correspondent bank, declaration held not to show negligence in not notifying plaintiff of dishonor of exchange given in payment of draft where exchange was protested in Memphis, Tennessee, on December 10th and returned to defendant bank at Jackson, Mississippi, which bank forwarded it to plaintiff's bank at Tunica, Mississippi, and latter bank gave plaintiff notice on December 15th, and one Sunday intervened.
APPEAL from circuit court of Hinds county, First district; HON.W.H. POTTER, Judge.
J.D. Magruder, for appellant.
Appellee, in its demurrer, contends first, that the defendant bank was not the agent of the plaintiff, and, second, that no negligence is shown in the declaration.
The defendant bank was the agent of the appellant and therefore liable to him. 2 R.C.L. 622, pars. 251, 252 and 253; 31 Cyc. 1430, par. 4; Planters Merchantile Company v. Armour Packing Co., 109 Miss. 470, 69 So. 293; Bank of Shaw v. Ransom, 112 Miss. 440, 73 So. 280. Appellant contends also that appellee was guilty of negligence in the following particulars: First: In sending said draft through direct to the Fayette County Bank, the bank on which it was drawn; Second: In failing to promptly notify appellant of the dishonor of the Memphis exchange.
Discussing these in the order named we contend that chapter 246 of the Laws of 1926, is unconstitutional, as violative of the Fourteenth Amendment to the United States Constitution. This statute is discriminatory against resident banks and affords a privilege to nonresident banks which is not permitted under the United States Constitution. It also fails to afford uniform protection to the depositor. Anderton v. Milwaukee, 82 Wis. 279, 15 L.R.A. 830, 52 N.W. 95; Utsey v. Hiott, 30 S.C. 360, 14 Am. St. Rep. 910, 9 S.E. 338; Sanders v. Venning, 38 S.C. 502, 17 S.E. 134; State v. Barbroski, 111 Iowa, 498, 56 L.R.A. 570, 82 Am. St. Rep. 524, 82 S.W. 959; Shirk v. LaFayette, 52 Fed. 857; State v. Judlow, 129 Mo. 176, 29 L.R.A. 257, 50 Am. St. Rep. 443, 31 S.W. 781; Roby v. Smith, 131 Ind. 342, 15 L.R.A. 792, 31 Am. St. Rep. 439, 30 N.E. 1093; Sayre v. Phillips, 148 Pa. 482, 16 L.R.A. 49, 33 Am. St. Rep. 842, 24 A. 76; Gulf C. S.F.R. Co. v. Ellis, 165 U.S. 150, 41 L.Ed. 666, 17 Sup. Ct. Rep. 255.
The defendant was guilty of negligence also in the fact that it did not notify plaintiff until December 15th, that the exchange had been dishonored.
The Fayette County Bank of Somerville, Tennessee, was not authorized to make payment in anything but money, as held in the Bank of Shaw v. Ransom, 112 Miss. 440, 73 So. 280. When the defendant bank sent his draft direct to the Fayette County Bank it assumed the risk of not getting the money in cash. Watkins, Watkins Eager, for appellee.
We think it is apparent that appellant's remedy, if any, was against the Citizens Bank at Tunica. Bank of Shaw v. Ransom, 112 Miss. 452, 73 So. 280.
The declaration conclusively shows that appellee exercised all diligence and precaution from the time it received the draft for collection until it received notice of the nonpayment of the Memphis exchange. Learned counsel for appellant refers to the case of Planters Merchantile Company v. Armour Packing Company, 109 Miss. 470, 69 So. 293. We have no complaint with the decision in this case, and, in fact, read this opinion to the learned trial court, together with the opinion in the Bank of Shaw case, also cited by counsel upon the argument of our demurrer.
Appellant's case is not helped by the decisions, because in the Planters Merchantile Company case a check had been forwarded for collection direct to the bank on which it was drawn. In the case at bar no check was involved at all, and the draft was not drawn on the Fayette County Bank, but drawn on a third party, to-wit: V.B. Smith, and it was a part of the contract, as provided by the terms of the draft itself that it was to be presented for payment at this very bank.
Section 3891 of Hemingway's 1927 Code. We do not believe that this statute is material to the decision in the case at bar for the reason that the draft was drawn on Mr. Smith and not on the Tennessee Bank, but merely payable at this institution. But, even if the statute is applicable, we think the act of the bank is protected by the provisions of the statute.
Counsel says the appellee bank in Jackson, Mississippi, must be held accountable because the Fayette County Bank at Somerville, Tennessee, did not forward to appellee money, instead of exchange, and that furthermore that appellee bank "assumed the risk of not getting the money in cash" when it sent the draft direct to the Fayette County Bank. In this connection we direct the court's attention to 3 R.C.L. 630, section 257. Winchester Milling Company v. Bank of Winchester, 120 Tenn. 225, 111 S.W. 248, 18 L.R.A. (N.S.) 441.
It is the universal rule that where the result would have been the same on account of the existence of no funds to the credit of the drawer, or the insolvency of the bank, the negligence of forwarding directly to the drawee will not render the forwarding bank liable. First National Bank v. City National Bank, 12 Tex. Civ. App. 318, 34 S.W. 458; Gwan v. Bank of Alexandria, Tenn., 47 L.R.A. 270, 52 S.W. 923; Carson v. Fincher, 129 Mich. 687, 95 Am. St. Rep. 449; American Exchange National Bank v. Metropolitan Bank, 71 Mo. App. 451.
The act of the Tennessee bank in collecting the draft in money from Mr. Smith and remitting exchange in due course to the appellee bank constituted no negligence whatsoever. 3 R.C.L., sec. 245, p. 616. See Third National Bank of Louisville v. Vicksburg Bank, 61 Miss. 112, 48 Am. Rep. 78; Federal Reserve Bank of Richmond v. Malloy (U.S.S.Ct., Feb., 1924), 264 U.S. 160, 44 Sup. Ct. Rep. 296, 31 A.L.R. 1261.
Garrett, appellant here and plaintiff in the court below, sued the Merchants' Bank Trust Company, appellee here and defendant in the court below, for four hundred sixty-five dollars and fifteen cents alleging negligence on the part of the appellee in handling and collecting a certain draft, the proceeds of which appellant is seeking to recover from the appellee. The appellee, Merchants' Bank Trust Company, filed a demurrer to the declaration of the appellant, which was sustained by the court. Thereupon the appellant declined to amend his declaration or plead further, and judgment was entered by the court in favor of the appellee bank. From this judgment, the appellant, Garrett, appeals here.
The essential facts of the declaration are as follows:
Garrett, the plaintiff received from V.B. Smith, a draft for four hundred sixty-five dollars and fifteen cents, payable to the plaintiff, and drawn by Smith on himself. This draft was dated November 29, 1926, and payable at the Fayette County Bank of Somerville, Tenn. The plaintiff deposited said draft with the Citizens' Bank at Tunica, Miss., on December 2, 1926, which bank credited the plaintiff's account with the proceeds of the Smith draft and forwarded same to its correspondent, the Merchants' Bank Trust Company, the appellee, at Jackson, Miss. The defendant, the Merchants' Bank Trust Company, thereupon forwarded the Smith draft to the Fayette County Bank, at Somerville, Tenn., for collection, whereupon the latter bank collected the amount of the draft from Smith and forwarded to the defendant its Memphis exchange drawn on the First National Bank of Memphis, Tenn. Upon receipt of the Memphis exchange from the Fayette County Bank by the defendant bank on December 8, 1926, same was forwarded to defendant bank's correspondent, the Union Planters' Bank Trust Company, at Memphis, Tenn., which latter bank on December 10, 1926, presented it to the First National Bank of Memphis, Tenn., when and where payment was refused thereon, and the exchange was by the Union Planters' Bank Trust protested and returned to the defendant bank at Jackson. Whereupon the defendant bank forwarded the protested exchange to the Citizens' Bank at Tunica, and the latter bank, having previously given the plaintiff credit on receipt of the Smith draft, charged the plaintiff, Garrett, on December 15th, with the amount of the draft. On the same day, the plaintiff, Garrett, was notified of the nonpayment of the draft and the bank's action, and the protested exchange was turned over to him.
The declaration alleges that the plaintiff protested against the action of the bank in charging him back with the amount of the draft. The Citizens' Bank at Tunica failed and closed its doors December 17, 1926, and likewise the Fayette County Bank of Somerville, on the ____ day of December, 1926.
The appellant, Garrett, charged the appellee, the Merchants' Bank Trust Company, with negligence in the following particulars:
(1) That the defendant bank sent the draft direct to the Fayette County Bank, at Somerville, Tenn.;
(2) That the defendant bank permitted the Fayette County Bank, at Somerville, Tenn., to hold the draft from December 2d to December 6th without inquiry; and
(3) That the defendant bank failed to notify the plaintiff of the protest of the exchange until December 15th; and because of these several acts of negligence on the part of the defendant bank, the plaintiff alleges that the proceeds of the exchange were lost to him.
The demurrer to the declaration in its entirety was to the effect that negligence was not shown on the part of the defendant bank.
1. Counsel for appellant cites and relies on the case of Planters' Mercantile Co. v. Armour Packing Co., 109 Miss. 470, 69 So. 293, in which case it was held that a bank on which a check is drawn is not a proper agent to which it may be sent for collection, and to do so is negligence; consequently, this case is not applicable here. This was not a check drawn on the Fayette County Bank at Somerville, Tenn., but was a draft drawn by Smith on himself and payable at the Fayette County Bank. The distinction is obvious. The Somerville Bank was the proper bank to make this collection from Smith, and was in no sense the payee of the draft; and the rule announced in the above case cannot be applied because the facts are essentially different.
Counsel for appellant cites that chapter 246 of the Laws of 1926 authorizes the federal bank to send to the payee bank direct exchange checks and drafts, but states that such act is unconstitutional and argues that it affords a privilege to nonresident banks which is not permitted under the Fourteenth Amendment. We are not here called upon to decide this question for the reason that the bank at Somerville was not the payee of the check or draft here involved.
2. The allegation of negligence that the defendant bank permitted the bank at Somerville to hold the draft from December 2d to December 6th without inquiry, is not sustained, and is contradicted by the allegations of the declaration itself, because the Smith draft was not deposited in the Citizens' Bank at Tunica until December 2d, and could not have on the same day passed through the hands of the Jackson bank and the Tennessee bank. The exchange, as alleged by the declaration, was received by the Jackson bank on December 8th, and with Sunday intervening there were only six days elapsing between the date of the deposit in the Citizens' Bank at Tunica and the receipt by the Jackson bank of the Somerville bank exchange in payment of the original draft. We are unable to see how negligence could be predicated upon these facts.
3. It is alleged that it was negligence on the part of the defendant bank not to have notified the plaintiff of the dishonor of the exchange. This exchange was protested in Memphis on December 10th, and returned to the Jackson bank, which bank forwarded it to the Citizens' Bank, at Tunica, and the latter bank gave the plaintiff notice of such fact on December 15th. When we consider the fact that one Sunday intervened and the distance between the several banks named, it cannot be said, as a matter of law, that the defendant, the Merchants' Bank Trust Company, was negligent in anywise. Notice of the dishonor of the exchange was given the plaintiff in due course of the banking business, especially when we consider the fact that where there were only four banking days from the date of the protest to the date of the notice.
Taking the facts into consideration, we think the declaration of the plaintiff fails to show negligence on the part of the defendant bank.
Affirmed.