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

United States Circuit Court of Appeals for the Eighth Circuit.
64 F. 985
United States Nat. Bank of New York v. First Nat. Bank of Little Rock et al.
Error to the United States Circuit Court for the Eastern District of Arkansas.
No. 507. --- Delivered: December 10, 1894.
* Court Documents
* Opinion of the Court
* Linked cases: 66 F. 518 79 F. 296 174 U.S. 125
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:
"Four months after date we or either of us promise to pay to the order of G. R. Brown and H. G. Allis five thousand dollars, for value received, negotiable and payable, without defalcation or discount, at the First National Bank of Little Rock, Arkansas, with interest from maturity at the rate of ten per cent. per annum until paid.City Electric St. Ry. Co.
"H. G. Bradford, Pt."
The three notes aforesaid, when received for discount by the New York Bank, bore the following indorsements:
"H. G. Allis.
"First National Bank, Little Rock, Ark.
"H. G. Allis, Pt."
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:
"Four months after date we or either of us promise to pay to the order of James Joyce five thousand dollars, for value received, a negotiable and payable, without defalcation or discount, at the First National Bank of Little Rock, Arkansas, with interest from maturity at the rate of ten per cent. per annum until paid.McCarthy & Joyce Co.
"Geo. Mandlebaum, Secty. & Treas."
The notes last aforesaid, when received for discount by the New York Bank, were indorsed as follows:
"H. G. Allis.
"First National Bank, Little Rock, Ark.
"H. G. Allis, Pt."
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:
"New York, June 21, 1892.
"W. C. Denny, Esq., Cashier, Little Rock, Ark.—Dear Sir: Can we not do business with your good bank? We should like to enroll your name upon our books, and we think the relation, if once established, could be made satisfactory to you in every particular,—at any rate, it would be our earnest endeavor to make it so. We will give you two per cent. on your daily balances, granting you our best collection facilities, taking all your foreign items east of the Mississippi river, and crediting them to your account immediately without charge. If you will send on $50,000 of your good, short-time, well-rated bills receivable, we will be pleased to place them to your credit at four per cent. We are anxious to do business with your bank having warmly and favorably known of it, and should be pleased to hear from you in reference to the above proposition.
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 First National Bank of Little Rock, Ark., Nov. 25, 1892.
"United States National Bank, New York City—Gentlemen: Kindly advise us if you can give us $25,000 more in discounts. We have not decided whether we will make further discounts this year, although it is more than probable that we will have to, as our cotton men do not want to sell at present. We believe the advance in price will cover shortage of crop, and that our collections will be equal to those of last year. If our cotton men continue to hold their cotton, it will be necessary for us to make further rediscounts, and we want to know what we can do in case they refuse to sell. If you can grant us this favor, kindly let us know what rate of interest you will want. Your immediate reply is requested.
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:
"Little Rock, Ark., Dec. 13, 1892.
"United States Nat. Bank, New York City—Gentlemen: In accordance with our letter of the 25th ult., and your reply of the 28th ult., we find that we shall need some more money, as our cotton men are not shipping out any cotton. It seems to be the inclination of all of them to hold for a better price, and we are now carrying $175,000 in demand loans on cotton, which we may have to carry two or three months longer. We inclose herein paper as scheduled below. Kindly wire us proceeds to our credit, and oblige,
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:
"The First National Bank of Little Rock, Ark., December 20, 1892.
"United States National Bank, New York City—Gentlemen: We have your favor of the 16th inst., inclosing the Dickenson Hardware Company note for completion, which we herewith return. We charge your account with $31,871.27, proceeds of $32,500.00 of discounts.
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.
This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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