Case ID: utah_4/html/0353-01.html
Source: Caselaw Access Project
Author: {"author": "Zane, C. J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

MOUND CITY PAINT AND COLOR COMPANY, Respondent, v. THE COMMERCIAL NATIONAL BANK, OF OGDEN, Appellant.
    National Banks. -Implied Powers. -The business of collecting commercial paper is a part of the regular business of national banks, and is within the powers implied by the creation of such an institution.
    Negligence in Collecting Dbaft. -The defendant bank received from the plaintiff for collection a sight draft on B. & S., the draft was accepted and the plaintiff notified thereof; the defendant, without further notification or taking any steps to collect the draft, held it for forty-seven days and then returned it as uncol-lectible; during all of this time B. & S. were known by defendant to be insolvent, but had property worth more than the amount of the draft which was covered by an invalid deed of trust. Two days after the return of the draft B. & S. made an assignment for the benefit of creditors, to L. the vice-president and a director of defendant, preferring a debt due defendant; held that defendant was guilty of such neglect of duty in respect to the draft as to render it liable for the amount thereof.
    Appeal from a judgment of tbe district court of tbe first district. Tbe opinion states tbe facts.
    
      Mr. Ransford Smith, for tbe appellant.
    
      Mr. James N. Kimball, for tbe respondent.
   Zane, C. J.:

Tbe plaintiff (a corporation under tbe laws of tbe state of Missouri, and doing business at St. Louis in tbat state) instituted its action against tbe defendant (a corporation under tbe laws of tbe United States, engaged in the business of banking at Ogden, Utali), on a bill of exchange for two hundred and fifty-four dollars and forty-three cents, drawn by plaintiff on Bishop & Schaeffer, a firm at Ogden, payable at sight to the defendant.

The complaint contained the allegation, among others, that defendant undertook to collect the draft described. The defendant interposed a demurrer to the complaint, which was overruled by the court. This ruling the defendant assigns as error.

The defendant insists that the business of collecting drafts is ultra vires of a national bank, and for that reason the undertaking to collect was not binding on the defendant. “The business of collecting commercial paper is a part of the regular business of banking, and it is not necessary that the charter of the bank should specifically confer the power to engage in it upon the bank, as it is plainly within the powers implied by the creation of such an institution:” 1 Daniel on Negotiable Instruments, sec. 324. The business of collecting commercial paper is a part of the regular business of banking when carried on under national as well as under other bank charters: Exchange Nat. Bank v. Third Nat. Bank, 112 U. S., 276; Merchants’ Nat. Bank v. Goodman, 1 Cent. Rep., 428. This was the only ground upon which the demurrer was urged. We are of the opinion that the exception to the ruling of the court on the demurrer was not well taken.

When the cause came on for trial, counsel for the plaintiff moved for judgment on the complaint and answer, which motion the court allowed, and entered judgment against defendant for three hundred dollars, and thirty-two dollars and ten cents costs. This action of the court the defendant also assigns as error. The allegations of the complaint, with the admissions and denials of the answer, present the following facts, in substance. The plaintiff, a corporation doing business in St. Louis, Missouri, drew its bill of exchange on Bishop & Schaeffer, a firm doing business in Ogden, Utah, for a debt due the plaintiff, payable to defendant at sight, and sent this bill to defendant for collection without further instructions, who received it in the usual courge of itg business on November 24, 1884. On tbe same day defendant presented it to tbe drawers, and demanded payment. Tbey failed to make payment, and defendant took tbeir acceptance and immediately notified plaintiff of tbe receipt of tbe draft and of tbe acceptance. Tbe defendant beld it until tbe tenth day of January following, a period of forty-seven days, and tben returned it by mail to plaintiff, witli tbe statement tbat defendant bad been unable to collect. During- tbe time tbe draft was so beld defendant paid checks of Bishop & Schaeffer drawn on it largely in excess of plaintiff’s bill of exchange; sach checks were overdrafts, and paid out of funds of tbe bank. It also appears tbat before tbe defendant received tbe bill of exchange, Bishop & Schaeffer bad made a deed of trust of tbeir property, tbe value of which was largely in excess of tbe amount of sucli bill of exchange, to Harkness & Co., in order to secure a debt due tbat firm. And upon ascertaining tbat tbe same was defective and invalid, Bishop & Schaeffer, two days after defendant bad returned tbe draft, made an assignment of tbe same property to one Jesse M. Langsdorf, who was a member of tbe firm of Harkness & Co., and also vice-president and a director of tbe defendant bank. In this assignment defendant was preferred in a sum larger than tbe amount of plaintiff’s draft. Tbe amount so preferred was indebtedness due defendant, for tbe payment of which Harkness & Co. were indorsers for Bishop & Schaeffer. After this assignment Bishop & Schaeffer were totally insolvent. In view of these facts admitted by tbe pleadings, was tbe judgment erroneous? Tbe bill of exchange was due upon presentation. It was placed in defendant’s bands for collection. It was defendant’s duty to take appropriate steps necessary for its prompt payment and, if defendant could not collect tbe same, to return tbe draft at once, or promptly to inform tbe plaintiff of such non-payment. Tbe defendant states in its answer tbat Bishop & Schaeffer were insolvent during tbe time it beld tbe note, yet it did not inform tbe plaintiff to tbat effect. Tbe answer admits tbat during all tbat time tbe drawees bad a large amount of property on which there was an invalid deed of trust. Had tbe defendant promptly informed tbe plaintiff of tlie financial condition of Bisliop & Schaeffer, the plaintiff could have taken steps to subject the property covered by that deed of trust to the payment of this debt. It appears that the only information defendant gave plaintiff during the forty-seven days that it held the draft, was that’ the draft had been received for collection and had been accej>ted; and this information was given on the day that the draft was received.

The facts admitted by the answer show such neglect of duty by the defendant, with respect to the bill of exchange sued on, that it would render the defendant liable for the amount thereof and interest: 1 Daniels on Negotiable Instruments, sec. 327; Exchange National Bank v. Third National Bank, 112 U. S., 276; 3 Sutherland on Damages, 17, 18. At the hearing of this appeal, plaintiff remitted, by leave of this court, $ of the judgment of the court below, being all in excess- of the face of the draft, interest and costs.

The judgment of the court below is affirmed.

POWERS, J., and Boreman, J., concurred.