United States National Bank of New York v. First National Bank of Little Rock (64 F. 985)

In Error to the Circuit Court of the United States for the Eastern District of Arkansas.

This was an action which was brought by the plaintiff in error, the United States National Bank of New York, against the First National Bank of Little Rock and Sterling R. Cockrill, its receiver, to enforce the liability of said First National Bank of Little Rock as an indorser of five promissory notes. For convenience the two banks above mentioned will be referred to hereafter as the "New York Bank" and the "Little Rock Bank." Three of said notes were in the following form:

The three notes aforesaid, when received for discount by the New York Bank, bore the following indorsements:

Two of said five notes were in the following form, except that one was made payable five months after date instead of four months after that date:

The notes last aforesaid, when received for discount by the New York Bank, were indorsed as follows:

Business relations between the New York Bank and the Little Rock Bank were inaugurated in pursuance of the proposition contained in the following letter written by the second assistant cashier of the New York Bank to the cashier of the Little Rock Bank, to wit:

In response to said letter, negotiable paper to the amount of $50,728 was forwarded to the New York Bank to be discounted for and on account of the [p987] Little Rock Bank. The letter transmitting such paper was dated June 24, 1892, and was signed by H. G. Allis, as president of the Little Rock Bank. This paper was all indorsed by the Little Rock Bank, and the proceeds of the discount were placed to the credit of that bank. On July 9, 1892, negotiable paper to the amount of $50,301.88, duly indorsed by the Little Rock Bank, was forwarded to the New York Bank for discount, and the same was discounted, and the proceeds were placed to the credit of the Little Rock Bank, at its request. Further transactions of the same kind took place between the two banks on July 26, 1892, and on October 31, 1892. Between June 24 and November 25, 1892, paper to the amount of $175,476 appears to have been thus discounted by the New York Bank for and in behalf of the Little Rock Bank, all of which paper bore the indorsement of the latter bank. On November 25, 1892, the following letter was written by the Little Rock Bank:

The proposition contained in this letter was accepted by the New York Bank on November 28, 1892, and on the 13th day of December the following letter was written:

Among the notes inclosed and scheduled in the foregoing letter of December 13, 1892, were the five notes now in suit and two other notes made by the Dickenson Hardware Company, the whole remittance amounting to $32,500. On the 16th day of December, 1892, the Little Rock Bank was duly notified by the New York Bank that the paper sent to it on December 13, 1892, had been received and discounted, and that the net proceeds thereof, amounting to $31,871.17, had been placed to its credit. The receipt of this notice was duly acknowledged by the Little Rock Bank by the following letter written by its cashier, to wit:

During the trial of the case it was shown that the five notes in suit, aggregating $25,000, had never passed the scrutiny of the discount board of the Little Rock Bank, and that they had never been entered upon the books of that bank as forming part of its bills receivable. It was further shown that as soon as the New York Bank had discounted the paper, and had given notice of that fact, the amount realized from the discount was placed to the credit of the individual account of H. G. Allis on the books of the Little Rock [p988] Bank, pursuant to the order of said Allis, given to the bank's bookkeeper. Allis' individual account was at the time overdrawn to the amount of some $10,000 or $11,000. The credit thus given canceled the overdraft. There was no evidence that the New York Bank had any knowledge of the facts last aforesaid. It was shown, however, and the fact is undisputed, that the proceeds of the discount of the five notes in question were placed to the credit of the Little Rock Bank on the books of the New York Bank, and that they were subsequently drawn out on checks issued by the former bank.

On the foregoing state of facts the jury was directed to return a verdict in favor of the defendants, which was accordingly done, and the plaintiff has sued out a writ of error.

W. C. Ratcliffe and John Fletcher, for plaintiff in error.

Sterling R. Cockrill and Ashley Cockrill, for defendants in error.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

THAYER, Circuit Judge, after stating the case as above, delivered the opinion of the court.