Case Name: The Bank of Orleans vs. Smith
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1842-10
Citations: 3 Hill & Den. 560
Docket Number: 
Parties: The Bank of Orleans vs. Smith.
Judges: 
Reporter: Hill's Reports
Volume: 3
Pages: 560–564

Head Matter:
The Bank of Orleans vs. Smith.
If a note payable at a distance be deposited with a bank for collection, and the latter transmit it to another bank for the same purpose, both are to be regarded as agents of the holder. Per Nelson, Ch. J.
A bank at Troy received a note for collection, payable at Buffalo, and sent it to the Bank of Orleans for the same purpose; whence it was transmitted to a bank in Buffalo-. The cashier of the Bank of Orleans, acting under the mistaken supposition that the money due on the note had been collected and deposited to the credit of his bank, paid the amount to the bank at Troy, and the latter paid it over to the holder. Held, that the Bank of Orleans, having parted with the money under a plain mistake of fact, might maintain an action for it directly against the holder.
The Bank of Orleans would have been liable directly to the holder for negligence on their part in regard to collecting the note, had any occurred. Per Nelson,. Ch. J.
The case of Mien v. The Merchants' Bank of the City of New.York, (22 Wend. 215,) commented on and explained.
Assumpsit for money had and received, tried at the Orleans circuit, in October, 1841, before Dayton, C. Judge. The plaintiff claimed to recover a sum of money alleged to have been paid to the defendant by mistake. On the trial, the case was this ; About the 1st of January, 1838, the defendant endorsed and delivered to the Merchants and Mechanics’ Bank of Troy, for collection, á promissory note for $483,50, made by A. A. Hall, payable to the defendant or order six months after date, at the City Bank of Buffalo, and dated October 1st, 1837. In February, 1838, the cashier of the Merchants and Mechanics’ Bank of Troy endorsed the note and transmitted it for collection to the plaintiffs, whose cashier soon afterwards endorsed and sent it by mail to the Commercial Bank of Buffalo for the same purpose. No notice of protest having beep received by the plaintiffs’ cashier, he supposed the note had been paid; and accordingly, on the 14th of April, 1838, he sent to the Merchants and Mechanics’ Bank of Troy a draft for the amount of the note, the avails of which were paid over to the defendant. Some three weeks afterwards, the plaintiffs were informed that the note had not been received by the Commercial Bank of Buffalo; nor paid to them. Enquiry was then made, which resulted in satisfying the plaintiffs that the note had been lost in the course of transmission by mail. The plaintiffs thereupon advised the Merchants and Mechanics’ Bank of Troy of the circumstances, and claimed to have the amount of their draft refunded. The cashier of the latter bank communicated the facts to the defendant, who refused to return the money; whereupon this action was brought. The evidence ténded to show that Hall, the maker of the note, was utterly insolvent when it fell due, and that he had so remained ever since. The note was produced on the trial by a clerk of the Commercial Bank of Buffalo, who testified that he received it from the president of the bank a few days before, but did not know how or when the president received it. Evidence was given upon the question whether the last mentioned bank had not in fact recéivéd the note,’and‘been guilty 'of negligence in regard to the collection of it. The defendant’s counsel moved for .a nonsuit, on the ground that the plaintiffs’ remedy, if any, was against the Merchants and Mechanics’ Bank of Troy, there being no contract express or implied between the plaintiffs and the defendant. The circuit judge overruled the motion, and the defendant’s counsel excepted. The judge charged the jury that the plaintiffs were responsible for the negligence, if any, of the Commercial Bank of Buffalo ; and that if the jury should be of opinion there had been negligence either on the part of the plaintiffs or the Commercial Bank, they ought to find a verdict for the defendant, unless they believed that Hall, the maker of the note, was insolvent when it became due. That if they found the fact of such insolvency, and that the defendant had therefore lost nothing by the neglect or delay of the plaintiffs or their agent, they were entitled to recover. The defendant’s counsel excepted to that part of the charge relating to the effect of Hall’s insolvency. The jury rendered a verdict in favor of the plaintiffs for the amount of the note and interest; and the defendant now moved for a new trial on a bill of exceptions.
S. Stevens, for the defendant.
C. M. Jenkins, for the plaintiffs.

Opinion:
By the Court, Nelson, Ch. J.
I am of opinion that the ruling of the learned judge at the circuit was correct; or, at least, that it was as favorable to the defendant as the settled principles of law would warrant. The plaintiffs, so far as they were connected with the steps taken for the collection of the note in question, are to be regarded as the defendant's agents. As such, they were responsible to him for a faithful discharge of their duties and obligations, and are entitled to all the rights and privileges growing out of that relation. Had they collected the money, they might have been made directly liable to the defendant; or, if the debt had been lost by reason of their laches or other misconduct in dealing with the note, they would have been immediately answerable for the default. If, therefore, they have paid the money in question by mistake, and under circumstances which, upon established principles, entitle them to recover it back, the action is properly brought against the defendant. Why bring it against the bank at Troy 1 They were but the agents of the defendant, and a recovery against them would only have the effect of multiplying actions, as they would have an immediate remedy over against the defendant.
The only pretence for insisting that the action should have been brought against the bank at Troy, arises from the doctrine of the case of Allen v. The Merchants' Bank of the City of New-York, (22 Wend. 215, on error,) which holds that a bank receiving paper for collection at a distant place, is liable, in the absence of any special agreement to the contrary, for the negligence or misconduct of the foreign agent to whom they transmit it for this purpose ; a rule which, when applied to this case, would make the Troy bank responsible for the negligence of the plaintiffs, and, perhaps, of the Commercial Bank of Buffalo. This court decided in the case referred to, (15 Wend. 482,) that the only obligation which the bank incurred was, to forward the paper in due season to a competent agent at the place of payment with directions to take the necessary steps to charge the drawers and endorsers ; and such appears to be the general commercial rule. (The Bank of Washington v. Triplett and Neale, 1 Peters, 50 ; East Haddam Bank v. Scovil, 12 Conn. R. 304 ; Fabens v. The Mercantile Bank, 23 Pick. 330.)
But the doctrine of Allen v. The Merchants' Bank of the City of New-York, as settled by the court of errors, conceding it to be sound, in no way interferes with the view taken of this case. The distant agent may still be considered as the agent of the holder as well as of the bank transmitting the paper. That case proves only that he has an election as to the remedy and may resort to either party—the agent employed to transmit, or the one to whom the paper is transmitted for collection. It has not been decided that the relation of principal and agent does not exist between the holder and the foreign agent, or that an action could not be sustained by the former directly against the latter for negligence in respect to charging the proper parties.
New trial denied.