FlF,:rH, .:"
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BANK V. ARMSTl\ONG· 0'" .
, reserye agent, in,!lorsed for and the amo)lDt of it was counted :01 the :Bt.'sreserve fund, thougl:1 thls fact was not known to olaimant. Held. that, ,the ind()rsllmentbeing the F. acquired no title to it; and that upon the insolvency of the F., beforil :IlotUl.cation of the collection of the draft, the claimant agent. ' . WaBentitled to the proceedi ot iHn tl:1e handa of the
At Law. This ill a controversy between the defendants concerning .the ownership of a certain fund now in the custody of the complainant. The case 'is to be decided with reference to the following facts:, On June 6,J887, · the Farmers' National Bank of Portsmouth, Ohio, sent tothe Fidelity , National Bank a sight draft, in the usual form', drawn by Samuel J. 'Huston on Thomas Shelby, of Lexington, Mo., in the sum of $4,100. ''The draft was indorsed as, follows:. "Pay Fidelity National BankofCincinnati, Ohio, or order, 'for collection for Farmers' National Portsrpouth, Ohio. J. M, WALL, Cashier/' ·qn June 11. the 'Augusta National Banko(Staunton, Fidelity, :papk a similar draft for $1;216, drawn on Henry Rohr, St. Johns, Kan., which ,was indorsed in the llame form as last described. .Both .of tbese,drafts forwarded by the:Fidelity Bank to Mo., for its account; and tbe,latter barikprQqeeded · to collect tpe same thrQugh. bordinate agtrnciell"and was not,ifit¥!,9fthe 23d, : payrilet\t. tnereof ']3l1nk was fromo,nd after June was tlle ,cbmptroller of the Cl1rrency M. , June 21, put intoliquida:Hon. : and Staullt,<;>O banIql claimed tpe.pro;ceedsof the respective d,rafts, fouI,ld, iQ.the lJ,anqs, of the FiftJ1:Natipnal 'Bank, aq.d the latter bank .filed ita of on A l1gust 9, · It was the uniform practice of the Fidelity Bwk'. in itsde!\1ingswith batik" to wve :the. the day of for 'all checks, arllfts, etc., to It forcollecbon, that were' at " sight or on demand; and the balance created, 'Vas subject, ,t()-bl! dr,al'\'n upon by the Portsmouth bank.' The also paid at 21 per .cent. p'er. annum', on, the dailybal!l:nces Jill favor of · Inouthb'ank,arising if paper forwarded for poJ'leptioD, and credited asaJoresaid,was nO,1; paW,it wasthil invariable , custi:>.mtocparge the sameblj,cl,t against tlip accouJIt of the '.bank. 'The' method. described was well known. to the Pdrtsmouth ba.nk, and ,was assented toby it·. :The ShelqY;.d.Ji8.ft ,was 'credited bY the Fidelit'Y13anlt to the Portsinouthbank, . in cc;mJorIDity with the practicein questio,n. Notice Was given by mail :drltft 'liadbeen "subjecttp pll.ymentj" b,ut the was riqtdra,wu 'against bythePortstpo,l1th'qitnk, nor were any, a4vancesznade 9U.tbe 'strength thei-e9f,. and iIi ',ppint fact the Bimk closed, jts, PQOfS ,before that the draft was paid. '.The Portsmouth bank the Fidelity, but lDerely kept 'bmllWodid 'ri'ot, .,tandumof th,e"transmission of the same to the latter bank foJ:· CQU,eqtioll, by 'the'drawer tha,t}t would 'paid ·.
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FEDERAL REPOItTER,
vol. 40.
the.Shelby draft, after it was indorsed to the Fifth National for colleetion, was counted as a part of the reserve of the Fidelity,-the Fifth National being a designated reserve agent of the Fidelity; but the Portsmouth bank, so far as shown, had no knowledge of such fact. The method ,of dealing as between the Fidelity Bank and the Staunton bank did not differ from that last described with the Portsmouth bank, in any such ,respect ail will distingui'sh the two cases, or justify a different ruling as to the claims interposed by-the respective banks. The question arising on this state of facts is whet.her the Fifth National should turn over the pro6e&ls Of the two drafts, now in its hands, to the Portsmouth and respectively, or to the receiver: of the Fidelity Bank. William 'B.Burnet and Wm.G. Hammond, for the Fidelity National Bank. J.' M. ,McGilliVray and A. T·. Holcomh, for the Farmers" National Bank. Jrwi D: SteDehson, for theAugttsta National Bank. . "THAYER,J., (after stating fad8 as above.) The indorsement by which the of the drafts in controversy de:ws.scleaHy!irestrictive indorsement. It was an indorsement stroyed of tqe 4ra:rts, for purposes of collection, 'Iilia to'all parties through'whose hands. they passed that they were the Portsmouth and Staunton banks, respectively. By virtue of tl:ie indorsementsalollej the Fidelity Bank did not acquire the drafts, but was merely constituted an agent for their collection.· , Thus far there is no room for serious First National Ban'kv. Ren:o Cotlnty Bank,8 261, 262; Balbach v. F'reling':httysCn,15 Fed: 675; White Bank, 102 U. S. 661; Hoffmanv· . Bad, 46 N.J;. Law, 604; Blainev. BO'Urne, 11,'&. 1. 119; Bank v. Bahk, 76 Ind. 581; Sweeny v. Easter,l Wall. 170; Levi Bank, 5 Dill. ,107;' 1'Daniel, Neg. lnst. §§ 836,337. 'l'fie'contentiori is, however, thiit the practice Shown of crediting sight drafts,:whenreqeived for collection, as cash, and theallowance of interest On daily:balancesinto which such credits had entered, alters the case, and that, ," because of that methodM dealing, 'the. drafts became the property of the Fidelity Bank all Soon 'as a credit was given therefor upqn and that from that ti,ine forward the Fidelity Barik became th'e debtor'ofthe Portsmouth banks, respectively, for sums severally credited. When checks or sight drafts are indorsed gen,ernlly by the payee, and deposited with a balik, and credit is given therefor to the depositor, with his consent, as for ,much cash, with ,tbeiunderstapding,', express or that. may be draw,n prevailibg opit:Iion See'tl:lsto be that theJteljj,ti(>n of debtor ereditor is forthwith created,. betw,eenthe hank and bankbecomeslltonce the owner of the {laBer, and not merely 'ItnLltgent for its 6pI1ection. ,<\0 indorsement in bhtok,Or the order Qf J the receiving, 'is . entirely ,'colisistent that vie"\> Of. the transac. tiori. Bank' LbyrJ-, 90 N. Y. 534; and, tJases.citea;, Railway 00. v. Jo!h&6torif 27 Fed. Rep. 248; Holmat. v. BarJt, '46 N. J.Law, 605.
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FIl)"TH NAT. BANK tl. ARMSTRONG.
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But if paper is indorsed, II For collection for account of the depositor," and then deposited, and credit given, a different case is presented. The mere fact that paper thus indorsed is credited by a bank to the depositor as cash, and the privilege accorded to him of drawing against the credit, may not, as it seems, be sufficient to vest the bank with title to such paper. In SOlDe cases it appears to be held that such credits are merely provisional, that is, subject to revocation. until the paper is actually collected hy the receiving bank, or until the credit has been drawn against by the depositor, and that up to such time the title to the paper is in the'dapositor, and the bank is a mere agent of the depositor,: for collection. Bank v. Bank, (Mass.) 20 N. E. Rep. 193; Levi v. Bank, 5 Dill. 107-111; Balbach v. F'relinghuyseJll, 15 Fed. Rep. 683; 2 Morse, . Bank. §§ 583, 586. . In the opinion of the court, the true criterion, in a case such as is last stated, for determining the question oftitle to the paper before the same is actually collected, and before the credit has been drawn against, is whether the depositor intended to part with title, and whether the receiving bank intended to purchase the paper, and assume the risk of payment, and give an absolute credit therefor, as in cases of discount. Viewing the matter in that light, I have little difficulty in finding, in the case at bar, that the title to the two drafts, and their proceeds, remained in the Portsmouth bank and Staunton bank, respectively, up to the time the Fidelity Bank failed, and the government took possession of its assets. The indorsements placed on the drafts in question, when forwarded to the Fidelity Bank, is persuasive evidence, notwithstanding the previous course of dealing, that neither the Portsmouth bank nor Stauntonhlink intended to part with their title to the drafts in question, or to enable the Fidelity Bank to deal with the same as its own. It was a restrictive indorsement, and it must be assumed that that form of indorsemen;t was adopted for a well-defined purpose. It may well be doubted whether the legal effect of that form of indorsement can be controlled or modified by proof ofa usage existing to credit stich items as cash, and permitthe credit so given to be drawn agaiust; it being conceded that in the present case neither of the depositors saw fit to avail themselves of such privilege. But, be that as it may, it is also apparent that the Fidelity Bank did not intend to purchase the drafts in question, and give its customers an absolute credit for the par value thereof. In its letter acknowledging the receipt of the Shelby draft, the Fidelity Bank same, "subject to payment." This must be stated that it credited understood as meaning that the credit was merely provisional, that is, conditional on payment, and that it did not intend to assUme the risk of payment, or give an absolute credit, or pnt itself in any other relation to the paper than that of an agent for collection. This seems to me to be the proper interpretation of the transactio.n, looking at it merely with a view of determining what the parties thereto intended. . As the Fidelity BankJ1ever received proceeds. of the drafts, and was not even notified of their payment prior to its failure, and as the banks that had them for collection laid claim to the proceeds of the drafts, in v.40F.no.2-4