Old National Bank v. German-American National Bank

This case was tried by the court, a jury having been waived. A special finding of facts was made. From this it appears that during the month of June, 1887, the Fidelity National Bank of Cincinnati, Ohio (hereinafter called the Fidelity Bank), and the German-American Bank of Peoria, Ill. (hereinafter called the German-American Bank), the plaintiff in the court below, were mutually transacting the business of collecting mercantile paper each for the other, and were keeping ledger accounts with each other, under a contract entered into in the month of September, 1886. This contract was made by correspondence, which resulted in an acceptance by the German-American Bank of the following proposition of the Fidelity Bank: 'We will credit sight items on any point in the United States east of Illinois, where there are banks, at par; and make collections on same points, which, when paid, will credit at par.'

On June 14, 1887, the German-American Bank purchased from the Great Western Distilling Company of Peoria a draft, of which the following is a copy:

'Great Western Distilling Co., Distillers and Refiners of Spirits.

'$6,926.15. Peoria, Ills., June 14th, 1887.

'At sight pay to the order of Weston Arnold, cashier, sixty-nine hundred twenty-six 15-100 dollars.

J. B. Greenhut, Sec. and Treas.

'To Terre Haute Distilling Co., Terre Haute, Ind.

'No. 4,357.'

-And on the same day transmitted it to the Fidelity Bank in the following letter: 'Peoria, Ills., June 14th, 1887.

'Ammi Baldwin, Esq., Cash., Cin'ti, O.-Dear Sir: Inclosed find for collection and credit items as stated below.

'Respectfully yours,

'Weston Arnold, Cashier.

'Return at once if unpaid, giving reasons; protest all paper unless otherwise instructed.

'Terre Haute Dist. Co. .......... No pro $6,926.15.'

At the time of its transmission it was indorsed:

'Pay fidelity National Bank of Cincinnati, O., or order, for collection for German-American Nat'l Bank of Peoria, Ills.

'W. Arnold, Cash.'

-This indorsement being made by a rubber stamp, which had been forwarded to the German-American Bank by the Fidelity Bank. At the time the German-American Bank transmitted this draft to the Fidelity Bank it credited cash with the full amount of said draft, and charged the same to the said Fidelity Bank in its ledger account with said bank as a debit against the said Fidelity Bank. Such entries were made in pursuance of the right which the plaintiff claimed to have under its said contract and the custom of bankers, a custom expressly found to exist throughout the United States, to enter, at the time of transmission, sight paper transmitted to the said Fidelity Bank for collection upon its ledger account with the said Fidelity Bank; and were provisional, in that the plaintiff at the time of making said entries intended to exercise the right, which it also claimed to have under its said contract with the said Fidelity Bank and the like custom of bankers, to cancel each of said entries by a counter entry in case the draft was not paid. The making of such entries was not communicated to the Fidelity Bank. The draft was also before its said transmission to the Fidelity Bank entered on the remittance register of the German-American Bank as remitted to the Fidelity Bank.

The German-American Bank never at any time drew drafts upon the Fidelity Bank against collections transmitted to it until it had received from the latter notice of payment thereof. Upon the receipt of this draft, on June 15, 1887, no entry representing it was made by the Fidelity Bank in its general ledger account with the German-American Bank, but only on the collection register. Between the Fidelity Bank and the Old National Bank of Evansville, Ind. (hereinafter called the Old National Bank), the defendant in the court below, there then existed an arrangement for mutual and reciprocal collection business; and on June 16th the draft was forwarded by the former to the latter bank, with this additional indorsement: 'Pay Old National Bank, Evansville, Ind., cashier, or order, for collection. Please report by this number, 66,923. Fidelity National Bank, Cincinnati, O. Ammi Baldwin, Cashier.' The letter inclosing the draft was in these words:

'Cincinnati, 6/16, 1887.

'Old National Bank, _____, Cashier, Evansville, Ind.-Dear Sir: I inclose for collection and credit as below stated.

'Very respectfully yours,

'Ammi Baldwin, Cashier.

'Do not hold, but protest against all collections not accepted or paid, unless otherwise instructed by us. Advise by date of letter. Please report collections by numbers.'

On June 18th the Old National Bank acknowledged receipt by postal card, as follows:

'Evansville, Ind., June 18th, 1887.

'I have received your favor of the 16th, with stated inclosure.

'Entered for coll.

'Yours, respectfully,

'Henry Reis, Cashier.'

No entry was made by it at the time on its ledger account with the Fidelity Bank, but only in its collection register. On June 18th the draft was forwarded to the First National Bank of Terre Haute, received by the latter on June 20th, and paid to it by the Terre Haute Distilling Company on the afternoon of that day between 2 and 3 o'clock. On the same afternoon a letter was written by the First National Bank to the Old National Bank, advising the latter of the payment of the draft, and that its amount had been credited to the account of the latter, which letter was posted at about 4 o'clock of the same afternoon. The letter was received by the Old National Bank at or about 8 o'clock on the morning of June 21st. During the month of June, 1887, the banking hours of these banks were from 9 o'clock in the forenoon continuously until 3 o'clock in the afternoon, and, the letter having been received before banking hours of the 21st, the amount of the draft was, in accordance with its general practice, entered by the Old National Bank in its account with the Fidelity Bank as a credit to the latter as of June 20, 1887.

On June 21, 1887, the Old National Bank wrote and mailed to the Fidelity Bank a letter, notifying the latter of the payment of the draft and the entry to its credit. This letter was received by the persons in charge of the Fidelity Bank on June 22d.

'On June 20, 1887, and for ten days prior thereto, the Fidelity Bank was insolvent, but neither the German-American Bank, the Old National Bank, nor the First National Bank had knowledge of this fact, nor did either of said banks have knowledge of such fact until after the failure of the Fidelity Bank, as hereinafter stated. On the morning of June 20, 1887, Mr. Eugene Powell, bank examiner, came to the Fidelity Bank for the purpose of making an examination. He did so, to a certain extent. In the afternoon of June 20, 1887, the board of directors of the Fidelity Bank had a meeting at the office of the bank, which continued in session until after the close of banking hours. After the close of banking hours the board of directors adjourned, and immediately thereafter Mr. Powell, as bank examiner, took possession of the Fidelity Bank, and that night had the combination of the safe changed, of which combination he took possession. The Fidelity Bank kept its doors open for the transaction of banking business until the close of banking hours on June 20, 1887, and transacted such banking business as offered until that time. The board of directors of the Fidelity Bank met early in the morning of June 21, 1887, and about 8.30 o'clock, half an hour before the beginning of bank hours, it was announced to its officers that the bank would not open. The Fidelity Bank did not open for business on June 21, 1887, and has never opened for business since June 20, 1887.

'Mr. Eugene Powell, bank examiner, continued in possession of the Fidelity Bank, after taking possession of it in the manner aforesaid, until June 27, 1887, when Mr. David Armstrong was appointed receiver, which position he held at the beginning of this suit.

'No remittance of money, or any tangible representative of money, representing this draft, was ever made by the First National Bank to the Old National Bank or by the Old National Bank to the Fidelity Bank or by the Fidelity Bank or its receiver to the German-American Bank, and the proceeds of this draft never passed between said banks, if at all, otherwise than by the debit and credit entries above mentioned.

'Prior to the institution of this suit the Old National Bank and the First National Bank made a mutual settlement of their collection accounts up to and including the above-mentioned entries representing said draft. The mutual collection accounts between the Old National Bank and the Fidelity Bank have not been settled on account of the insolvency of the Fidelity Bank, but the Old National Bank claims upon such settlement the benefit of the amount of said draft as a debit on its account with the Fidelity Bank.

'On the books of the Fidelity Bank, as they stood at the beginning of this suit, the Fidelity Bank owed the German-American National Bank $17,844.77. On the books of the Fidelity Bank and of the Old National Bank, as they stood at the beginning of this suit, the Fidelity Bank owed the Old National Bank $14,391.57. The above balances are made by debiting the Old National Bank with the amount of said draft, and crediting the German-American Bank with the like amount.' Upon these facts judgment was entered in favor of the plaintiff for the amount of the draft and interest, to reverse which judgment the defendant brought this writ of error.



Alpheus H. Snow and John M. Butler, for plaintiff in error.

Chas. W. Smith, J. W. Warrington, and J. S. Duncan, for defendant in error.

Mr. Justice BREWER, after stating the facts in the foregoing language, delivered the opinion of the court.