
    Saint Nicholas Bank of New York v. State Nat. Bank.
    
      (Supreme Court, General Term, First Department.
    
    December 31,1890.)
    Banks and Banking—Collections—Drafts—Loss.
    Plaintiff bank sent to defendant bank a draft for collection. The drawer being a bank at D., defendant sent the draft to its agent at D., who collected it, and in the nsual course of business remitted the proceeds to defendant by his sight draft on his correspondent in New York. Defendant sent this draft to plaintiff in New York, but before it could be presented for payment both drawer and drawee therein had failed, and the original debt was lost. Held, that defendant was not liable to plaintiff for the loss, it having been guilty of no negligence in the premises.
    Appeal from trial term, New York county.
    Action by the Saint Nicholas Bank of New York against the State National Bank. There was judgment for plaintiff on a verdict directed by the court, and defendant appeals.
    Argued before Van Brunt, P. J., and Brady and Daniels, JJ.
    
      A. Walker Otis, for appellant. Chas. E. Hughes, for respondent.,
   Daniels, J.

The verdict was directed for the amount of a draft sent by the plaintiff, a banking corporation located and carrying on the business of banking at the city of New York, for collection, to the defendant, a banking corporation located and carrying on a like business at Memphis, in the state of Tennessee. Previous business transactions of a similar nature had taken place between.these banks, without any special agreement or arrangement beyond that of defining the defendant’s commission of one-fourth of one per cent., and the necessary expenses attending the collections. The draft in this instance transmitted is as follows:

“Dallas, Texas, Nov. 6, 1884.
“The National City Bank of Dallas: Pay to the order of Henry Levy & Son, four hundred seventy-three 57-100 dollars.
“$473 57-100. A. D. Aldridge & Co.
“Indorsed: Deposit St. Nicholas National Bank.
“Henry Levy & Son.
“Pay M. S. Buckingham, cashier, or order, for collection for St. Nicholas Bank of New York. Thos. G. Pollock, Cashier.”

On the day of the receipt of the draft the defendant sent it forward to Adams & Leonard at Dallas, in Texas, for collection there. They were a banking firm at that place, in good credit, and the correspondents of the defendant, through whom their collections had previously been made. Por that purpose its cashier indorsed the draft, “Payable to Adams & Leonard, ” for collection on its account; and they, on the 17th of November, 1884, presented it to the National City Bank for payment, which was then made to them. Adams & Leonard then drew their sight draft on Jemison & Co., of the city of New York, for the amount to be transmitted, and sent it to the defendant, and the, latter forwarded the same draft to the plaintiff; but before it could be presented for payment both Adams & Leonard, the drawers, and Jemison & Co., the drawees, failed, and the debt was lost. The court at the trial held this to have been the loss of the defendant, and directed a verdict against it for the amount, to which an exception was duly taken. It has not been maintained or charged that the defendant had become involved in any wrong, inattention, or carelessness; but that, where the proceeds of a collection of this nature have not been realized by the holder of the paper, the collecting agent will necessarily be liable for the loss. And whether that is the legal rule to be applied is the point upon the determination of which this appeal must depend.

Authorities have been brought to the attention of the court, (as they were also at the trial,) which are supposed to dispose of this point in the plaintiff’s favor. They commence with, and have chiefly followed, the case of Bank v. McKinster, 11 Wend. 473, where it was held that the bank, with Which a note was left for collection, was liable for the failure to give the notice of nonpayment, which was necessary to charge the indorsers. In the case of Allen v. Bank, 22 Wend. 215, this liability was again affirmed, and so far extended as to render the collecting agent liable for the default of agents employed by it for the effectual collection of the debt. There the bank receiving the bill from the plaintiff sent it to the Philadelphia Bank, in the city of Philadelphia, for collection; and that bank delivered it to its notary, who presented it for acceptance, which was refused. He then noted the bill for non-acceptance, but omitted to give notice thereof to the indorsers. When the bill became due it was in like manner presented for payment, and payment refused, when the notary protested it for non-payment. The question there was whether the Merchants’ Bank-of Hew York, which received the bill from the plaintiff, was liable to him for this omission of the notary to protest the bill for nonacceptance; and the court held that it was, although the defaulting notary was not selected to act by it, and was not its own agent or servant. The conclusion arrived at by the decision was declared by a formal resolution, holding that when a bank, broker, or other money dealer receives upon a 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 it for collection is liable for the neglect, omission, or other misconduct of the bank or agent to whom it is sent, either in the negotiation, collection, or paying over the money, by which it is lost, or other injury sustained by the owner, unless there be some agreement to the contrary, expressed or implied. Id. 243. And this has been followed, although differing from the rule followed in several other states, in Montgomery Co. Bank v. Albany City Bank, 7 N. Y. 459; Commercial Bank v. Union Bank, 11 N. Y. 203; Ayrault v. Bank, 47 N. Y. 570; Exchange Nat. Bank v. Third Nat. Bank, 112 U. S. 282, 5 Sup. Ct. Rep. 141,—and in cases also decided in other states. In this latter case, the bill was sent to the defendant, and under its authority presented to the drawee for acceptance, and he accepted it personally, when it had been drawn on him, as secretary of the Hewark Tea-Tray Company. Here, as well as in the other cases mentioned or referred to, there was a distinct act of misconduct or neglect producing the loss, on which the liability was directly placed; while in the present case there was neither wrong, inattention, nor carelessness, on which the liability of the defendant could be placed, but the prevailing mode of transmitting the funds collected was adopted and followed. This case also differs in a very material respect from Mackersy v. Ramsays, 9 Clark & F. 818, where the correspondent was held liable because it had received the money and afterwards omitted, by reason of their failure, to remit, or pay it over. The same result was reached after a very full examination of the authorities in Bradstreet v. Everson, 72 Pa. St. 124. But the principle followed by these cases cannot logically determine the one presented by this appeal, for here the defendant did not receive or retain the money; neither was there any default in that respect on the part of its correspondents in Dallas, for they at once remitted the proceeds of the collection by the means usually taken for that object, and they were lost, not by any misconduct at either place, but by failures in business, which will at times occur, but which ordinarily cannot be expected or anticipated. They are the misfortunes of business, entailing losses without fault or misconduct, which must be sustained by the parties upon whom they fall. In the case of Indig v. Bank, 80 N. Y. 100, the important facts were like those now presented. The plaintiff delivered a note for collection to the defendant. It was payable at the Bank of Lowville, to which the defendant sent it for payment. The maker was a depositor in that bank, but resided about 30 miles therefrom. His balance was sufficient within $30 to pay the note, and the bank thereupon sent back its draft on Hew York for the amount of the note, but before it could be presented the bank at Lowville failed, and payment of the draft was refused, and the action there was to recover the loss. But the court held that the defendant was not liable, as the ordinary course had been followed, and there was no fault or negligence in selecting and using the means adopted for remitting the money. And the principle followed in deciding that case has also been sanctioned in Massachusetts, (Buell v. Chapin, 99 Mass. 594,) and that seems to be likewise the law in the state of Tennessee, (Bank of Louisville v. First Nat. Bank, 8 Baxt. 101.) The case of Faulkner v. Hart, 82 N. Y. 413, justifies the application of no different rule to the decision of this case. That relates to a different subject, in no way including the present controversy. It is true that it is to be disposed of'under the general rules of the commercial law. But there is no authority for holding the rule necessarily invoked for this case to be in any respect at variance with that which was declared and followed in the cases last mentioned. There is no well-sustained principle declaring the liability of the defendant under the facts now appearing, and the judgment should be reversed, and .a new trial ordered, with costs to the defendant' to abide the result. All concur.  