Bailie v. Augusta Savings Bank , 95 Ga. 277 ( 1895 )

Simmons, Chief Justice.

1. In the absence of anything indicating a different understanding, a hank which in the ordinary course of business receives from a depositor a check upon another bank and credits it on his deposit-book, not as cash, but as a check, will not be held to be an absolute purchaser of the check. “If a bank does not wish to assume the relation of a debtor for the paper to the depositor, this intention may be manifested in a very explicit manner by crediting the paper as paper.” St. Louis etc. Ry. Co. v. Johnston, 23 Blatch. 492 ; Thompson v. Giles, 2 Barn. & Cress. 422; 2 Morse, Banks, §583. This the bank did in the present instance, the entry on the depositor’s pass-book being: “Check on First National Bank of Wilmington, $1,000.” _ Nor will the.mere fact that the depostor is allowed to check against the credit change the import of the transaction so as to preclude the bank from charging hack the amount of the credit if the check is not paid. See on this subject, 2 Morse, Banks, §§583-587, and authorities cited.

2. The court instructed the jury, that “if the Augusta Savings Bank in the ordinary course of business selected the First National Bank of Wilmington to collect the cheek, and the hank of Wilmington negligently failed to collect the same, or if it collected the money and failed to remit, the savings hank is not liable to the plaintiff for such negligence or failure.” Error was assigned upon this instruction and others to the same effect, and it- was contended that, in the absence of any •agreement to the contrary, a hank which receives a cheek from a customer for collection is liable to the customer for any negligence whereby the collection of the check is defeated, whether such negligence is that of its own officers or that of an agent or correspondent to whom it sends the cheek for collection. In support of the holding of the court below, various decisions are relied on which hold that if the check is not payable in the place where the bank which receives it for collection is situated, but has to be sent to a distant place to be collected, the bank receiving the check from the customer is not liable for the default of the agent to whom it sends the cheek for collection, if it has exercised due care in the selection of such agent. These decisions are based upon the view that in such case the customer, knowing that the check cannot be collected by the ordinary officers or servants of the bank, but that this service must be performed by a sub-agent at the place where the check is payable, impliedly authorizes the selection of such sub-agent, and thereby assumes the risk of any failure of duty on the part of the latter; and that the benefit which may accrue to the bank, where no specific compensation is received for the service, is not a sufficient consideration from which to imply an undertaking on the part of the bank to assume that risk itself. Dorchester & Milton Bank v. New England Bank, 1 Cush. 177; Jackson v. Bank, 6 Har. & J. 146; Stacy v. Bank, 12 Wisc. 629; Ætna Ins. Co. v. Bank, 25 Ill. 248; East Haddam Bank v. Scoville, 12 Conn. 308; Daly v. Bank, 56 Mo. 94; Bank of Louisville v. First Nat. Bank, 8 Baxt. 101; Guelich v. Bank, 56 Iowa, 434; Third Nat. Bank v. Vicksburg Bank, 61 Miss. 112; First Nat. Bank v. Sprague (Neb.), 51 N. W. Rep. 846. And see 1 Morse, Banks, §268 et seq.

On the other hand, there are numerous decisions upholding the rule of liability contended for by the plaintiff in error. This is the rule laid down by the Supreme Court of the United States. See Exchange National Bank v. Third National Bank, 112 U. S. 276, in which the question is elaborately discussed. The decision in that case was unanimous, and the case of Bank of Washington v. Triplett, 1 Peters, 25, which was relied on in some of the cases above cited, as authority for the contrary view, is there explained and distinguished. This is also the rule in England. See decision of the House of Lords in Mackersy v. Ramsays, 9 Cl. & Fin. 818, s. c. 3 English Ruling Cases, 762; also, Van Wart v. Wooley, 3 B. & C. 439, s. c. 5 D. & R. 374. And the same rule has been adopted in the States of New York, New Jersey, Indiana, Ohio, Michigan, Minnesota and Montana. Allen v. Bank, 22 Wend. 215, 34. Am. Dec. 289; St. Nicholas Bank v. State Nat. Bank, 128 N. Y. 26, 13 Lawy. Rep. Annot. 241; Titus v. Bank, 25 N. J. Law, 588; Tyson v. Bank, 6 Blackf. 225; American Ex. Co. v. Haire, 21 Ind. 4, 83 Am. Dec. 334; Reeves v. Bank, 8 Ohio State, 465; Simpson v. Waldby, 63 Mich. 439; Streissguth v. Bank, 43 Minn. 50; Power v. Bank, 6 Mont. 270. See also, Kent v. Dawson Bank, 13 Blatch. 237, Taber v. Perrott, 2 Gall. 565. The question has not been dealt with in any prior decision of this court.

In our opinion the sounder doctrine is that which holds the bank liable. The collection of checks, drafts and other commercial paper constitutes an important feature of the business of banking as generally conducted, and for the transaction of this branch of their business banks have their regular correspondents in different parts of the country. In the selection of the correspondent the customer for whom the collection is to be made is not consulted. As a rule he does not know the name or the financial standing of the correspondent, and it is not contemplated that they shall have any communication with each other. Under these circumstances we think a customer from whom a bank receives paper for collection, has a right to assume, in the absence of any agreement to the contrary, that the undertaking of the bank comprehends the whole service to be performed, and that the agent employed by the bank in this service is its own agent, and not the agent of the customer. So treating the undertaking, the case falls within the general rule of agency, that by the employment of under agents to perform a part of the work which he has contracted to do, the employer becomes responsible to those with -whom he contracts or deals in his business, and will be held liable for the negligence or omission of any duty of his agent in the course of his employment. There seems to us to be no good reason why a different understanding should be inferred and a different rule of liability applied because the bank cannot make the collection itself but must employ an agent for that purpose. “The general rule of law that an agent is liable for a sub-agent employed by him, is not confined to cases where the principal has reason to suppose that the act may be done by the agent himself without employing a sub-agent.” (Lord Campbell, in Mackersy v. Ramsays, supra.)

This rule is applied to ordinary collecting agencies receiving claims for collection at distant places (Wharton, Agency, §544, and cases cited: Hoover v. Wise, 91 U. S. 308 ; Bradstreet v. Everson, 72 Penn. St. 124); and we do not see any substantial difference between the case of such an agency and that of a bank which receives such claims for collection.

It makes no difference that the bank does not charge anything for the collection. The benefits which the bank derives genei’ally in the making of such collections, from the use of the funds while in its custody, the advantages which may arise from business associations, and the profits on exchange, are held to be, and we think may properly be regarded, as a valuable considertion for the undertaking and as sufficient to uphold the liability incident thereto. (See Exchange Nat. Bank v. Third Nat. Bank, 112 U. S. 288; Titus v. Bank, 35 N. J. Law, 588, and other cases cited, supra.) What was said in the case of Merchants Bank v. Guilmartin, 88 Ga. 804, as to the insufficiency of casual or incidental benefits to constitute the bank a bailee for hire, has no application in a case like this. That was the case of a special deposit of bonds, and the bank of course had no right to make use of the deposit.

The doctrine that a bank is responsible for the acts of its sub-agents, in cases of this kind, is not only, it seems to us, in accord with the principles governing the law of agency, but there are considerations affecting the general welfare of the commercial, community which commend it to us as a wise rule of commercial law. “Any other rule,” as is said by Mr. Daniel in his work on Negotiable Instruments, “opens the door to carelessness in the conduct of banking business, which should be conducted with every safeguard to the customer who intrusts his business to the keeping of such agents. If they are averse to dealing with distant and unknown parties, they should decline undertaking the collection or handling of the paper; and if they assume it, they should do so for sufficient compensation, and be held responsible.” (Vol. 1, §342.)

Under the agreed facts in this case, there can be no question as to the negligence of the Wilmington bank. It received the check on Monday, November 23d, with a letter stating that the paper was inclosed “for collection and return,” and directing that all unpaid papers be protested at once unless otherwise ■ instructed. Up to the close of banking hours on the following day, it received deposits and paid checks, and on Wednesday the 25th, suspended payment, having made no remittance for this check. It then had to the credit of the drawer an amount considerably in excess of the amount of the check. It was contended that the bank was not bound to pay the check, because it had no account upon its books in a name corresponding to the signature on ;the paper. There is no merit in this contention. Although the check was drawh^by C. E. Borden as treasurer of the “ Carolina Interstate B. & L.,” and there was no account upon the books of the bank in the name of the “ Carolina Interstate B. &. L.'/^and none in which he was designated as treasurer of such a concern, the bank did have an account in the name of “ O. E. Borden, treasurer,” the money of the corporation referred to— the Carolina Building and Loan Association — was credited upon that account, and the bank recognized the check as drawn thereon by charging it accordingly.

There are decisions sustaining the contention of the plaintiff in error, that the defendant was negligent in sending the check directly to the bank upon which it was drawn, there being at that time in Wilmington another bank which was in good standing and credit. See Merchants Nat. Bank v. Goodman, 109 Penn. St. 422 ; Drovers Nat. Bank v. Anglo-American P. P. Co., 117 Ill. 100, s. c. 57 Am. Rep. 855; German Nat. Bank v. Burns, 21 Pac. Rep. 714, 12 Colorado, 539; Anderson v. Rodgers (Kansas), 86 Pac. Rep. 1069; First Nat. Bank v. Fourth Nat. Bank (U. S. Circuit Court of Appeals, Sixth Circuit), 56 Fed. Rep. 967; Farwell v. Curtis, 7 Biss. 160. And see 1 Daniel, Neg. Instr. (4th edition), §328a; 1 Morse, Banks (3d edition), §236. The view we take of the liability of the defendant for the negligence of the Wilmington bank, however, renders it unnecessary to pass upon this question. It is not likely that this question or others presented by the record will arise again in this case. Judgment reversed.