Case Name: FIRST NATIONAL BANK OF ROXBORO, Inc., v. THE PEOPLES BANK
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1927-12-21
Citations: 194 N.C. 720
Docket Number: 
Parties: FIRST NATIONAL BANK OF ROXBORO, Inc., v. THE PEOPLES BANK.
Judges: 
Reporter: North Carolina Reports
Volume: 194
Pages: 720–723

Head Matter:
FIRST NATIONAL BANK OF ROXBORO, Inc., v. THE PEOPLES BANK.
(Filed 21 December, 1927.)
1. Banks and Banking — Parties—Exchange—Actions—Statutes.
A bank may maintain its action against another bank to enforce by mandatory injunction its payment of the exchange charges drawn through the one on the other, allowed by the statute, 3 O. S., 220 (z), and the fact that the plaintiff is a national and the defendant a State bank, does not vary this principle, and 3 O. S., 220 (dd) does not apply.
. 2. Same — “Remittance”—Words and Phrases.
The exchange or collection charges authorized by 3 O. S., 220 (z), apply only to “remittances” covering checks, and where checks, etc., are sent to a bank in the same town with the bank on which they are drawn, for which either money or bank entries are required, such transactions do not fall within the meaning of the term “remittances” which will entitle the hank on which they are drawn to the exchange charges specified in the statute.
Appeal by defendant from a judgment of Midyette, J., permanently restraining tbe defendant from charging exchange on certain drafts and checks. From PeksoN.
A jury trial was waived and the court found the following facts: “Both plaintiff and defendant are engaged in carrying on a banking business with their principal office in the town of Boxboro, N. C., and from time to time various banks and trust companies throughout this State and other states of the Union, remit through the regular course of mail, drafts and checks, drawn upon the defendant, to the plaintiff for collection and remittance; and the plaintiff presents all of said drafts and checks, during legal banking hours, at the counter of the defendant, the Peoples Bank, with the request that said drafts and checks be paid by the defendant at their face value, but the defendant positively declines and refuses to pay said drafts and checks either in cash or by exchange draft, unless it is permitted to withhold an exchange charge of one-eighth of one per cent, the defendant contending that it is the remitting bank, and, therefore, permitted and allowed to make an exchange charge of one-eighth of one per cent, under and by virtue of chapter 20, section 1, Public-Local Laws of 1921, 3 C. S., sec. 220 (z), upon all out-of-town checks or drafts sent to the plaintiff for collection, and the plaintiff is either forced to return the drafts and cheeks as dishonored or allow the defendant to withhold an exchange charge. The banks and trusty companies remitting drafts and checks to the plaintiff, drawn on the defendant, for collection, will not stand two charges, and the action of the defendant in collecting an exchange charge or returning drafts and checks as dishonored, compels the plaintiff to decline to receive said drafts and checks for collection and remittance, unless it renders its services without compensation.”
Upon these facts it was adjudged' that the defendant was not the remitting bank and was not entitled to an exchange charge upon checks and drafts presented for collection at its place of business, and that the defendant be permanently enjoined from making such charge under the circumstances described in the statement of facts and from returning such drafts and checks as dishonored for want of such exchange, provided the restraining order should not apply to checks sent to the plaintiff for collection by any Federal Reserve Bank. The defendant excepted and appealed.
Affirmed.
O. A. Hall and L. M. Garitón for plaintiff.
William B. Merritt and F. 0. Carver for defendant:

Opinion:
Adams, J.
The plaintiff, a National bank, and the defendant, a State bank, are engaged in the business of banking in the town of Rox-boro. The plaintiff alleges that in the course of its business it receives from other banks and trust companies checks drawn on the defendant, and in compliance with the request of the forwarding banks presents these checks to the defendant, requesting that it either pay them in cash or credit the plaintiff's account with their face value; that the defendant defines to pay the face value of any of the checks drawn on it and presented for payment at its place of business; that the plaintiff is forced to accept in payment less than the face value of the checks or return them as uncollected; and that the reason assigned by the defendant is its legal right to deduct an exchange charge of one-eighth of one per cent. Tbe plaintiff alleges tbe result to be tbat it must return as uncollected all checks wbicb it receives for collection on tbe defendant and tbat its legitimate business is to tbis extent impaired.
Tbe appellant's first ground of defense is tbe plaintiff's alleged failure to state a cause of action, tbe position being tbat no one but tbe drawer of a check can maintain an action against tbe bank on wbicb it is drawn for its refusal or failure to make payment. Tbe position rests upon a misconception of tbe complaint. Tbe action was not brought to recover damages, in tort or in contract, for refusing to honor tbe drawer's check, but to recover damages suffered by tbe plaintiff in tbe regular conduct of its business as a result of tbe defendant's failure to perform a duty enjoined by law. If tbe defendant owes to tbe plaintiff a duty wbicb it refuses to observe, performance may be compelled by mandatory injunction. Woolen Mills v. Land Co., 183 N. C., 511. True, it is provided tbat checks drawn on banks chartered by tbis State shall not be protested for tbe drawee's refusal to make payment merely because tbe bolder or owner will not pay tbe authorized exchange, and tbat there shall be no right of action for refusal to pay such checks when tbe only basis of the action is refusal to pay tbe authorized exchange (3 C. S., 220(dd); but tbe "exchange or collection charges herein authorized" are those referred to in section 220 (z). It is apparent, then, tbat tbe decisive question is whether tbe defendant has tbe legal right to make an exchange charge, and tbis involves tbe further question whether upon tbe facts found by tbe court tbe defendant is a remitting bank.
Section 220(z) is as follows: "For tbe purpose of providing for tbe solvency, protection and safety of tbe banking institutions and trust companies chartered by tbis State, and having their principal offices in tbis State, it shall be lawful for all banks and trust companies in tbis State to charge a fee, not in excess of one-eighth of one per cent, on remittances covering checks, tbe minimum fee on any remittance therefor to be ten cents."
Tbis statute and others were enacted in consequence of an effort of tbe Federal Reserve Foard to introduce universal par clearance and collection of cheeks through Federal Reserve Banks. We have no occasion for going into tbis history; it is clearly set forth in Farmers and Merchants Bank v. Federal Reserve Bank, 262 U. S., 649, 67 Law Ed., 1157. We are now concerned only with tbe statute just cited. Its purpose is to provide for tbe solvency, protection and safety of tbe banking-institutions and trust companies chartered by tbis State. It authorizes them to charge a fee, not in excess of one-eighth of one per cent, "on remittances covering checks"; and .the direct question is whether payment in cash or tbe entry on tbe defendant's books of a credit for the benefit of the plaintiff is a remittance. For according to the complaint this is what the plaintiff requested when the checks were presented — payment in cash or credit on its account at the face value of the checks. Neither request called for a remittance. The word "remit" has several definitions, but the sense in which it is used in the statute is that usually given it in commercial transactions: "To transmit or send, especially to a distance, as money in payment of a demand, account, draft," etc.; "to transmit or send, as money, bills, or other things in payment for goods received"; "to send or transmit, as to remit money"; "to transmit, forward, send." Webster's New International Dictionary; Century Dictionary; 3 Bouvier's Law Dictionary (3 Eevision), 2871; Black's Law Dictionary; Hollowell v. Ins. Co., 126 N. C., 398; 34 Cyc., 1207; 24 A. & E. (2 ed.), 461. See Hayden v. Chemical Nat. Bank, 84 Fed., 874. The transaction between the plaintiff and the defendant did not amount to a remittance or make the defendant a remitting bank so as to entitle it to charge the fee authorized in section 220 (z). The fact that the plaintiff was not chartered by the State is immaterial.
The appellant says that it will have no protection if the plaintiff is permitted to accumulate checks drawn on it and then demand payment in cash at their face value; but it is to be assumed that the defendant will have an equal opportunity to accumulate checks drawn on the plaintiff. At any rate, such considerations cannot control in our interpretation of the statute. The judgment is
Affirmed.