Court Opinion

ID: 3226808
Source: CourtListenerOpinion
Date Created: 2016-07-05 16:03:14.220753+00
Date Added: 2024-06-11T13:38:09.254937
License: Public Domain

We are now persuaded that the case of Stanley v. Green, supra, should not control on this appeal. There the question was between the depositor who drew the check and the drawee bank. The depositor was claiming that his check had not been paid in the transaction, and it did not stand in the right of the bank to assert otherwise, having given its worthless exchange for it.
We concede that there is a distinction between that case and one between the drawer of the check and its payee, in a transaction in which the payee accepted in payment something else than money, which proved to be worthless, or less in value than cash. Many authorities to that effect are cited in note 52 A.L.R. 995 et seq. See Nat. Com. Bank v. Miller, 77 Ala. 168, 54 Am. Rep. 50; 5 R. C. L. 498-9; Fed. Reserve Bank v. Malloy,264 U.S. 160, 44 S.Ct. 296, 298, 68 L.Ed. 617, 31 A.L.R. 1261.
We also accept as true the further claim, supported by the same authorities, that when the payee or its agent negligently or voluntarily accepts payment of a check in some depreciated security or anything else than money, when it could then and there have had cash, the effect is a payment as between the drawer and payee, and the drawer's rights are not dependent upon a showing of loss otherwise.
The special counts were 3, 4, and 5. They all alleged as a conclusion that plaintiff's check was paid based upon the facts set forth. But as we interpret them, they averred facts which did not properly justify the conclusion. Their sufficiency is not here directly involved, because there is no error assigned on the ruling. We did not assert that there was reversible error in ruling on them. But whether sufficient or not, they can only be sustained by proof of the averment that the check was paid. *Page 259 
Plaintiff may likewise recover on the common counts by the proof necessary to sustain the special counts.
The evidence shows that Birmingham Trust  Savings Company sent the check by mail, within due time to Bank of Ensley, and that the latter bank sent by mail its check on the American Traders' National Bank to the Birmingham Trust  Savings Company, and that when such latter check was received, by the Birmingham Trust  Savings Company, Bank of Ensley had gone into liquidation. If there would be an acceptance of the exchange as a payment, for the Birmingham Trust  Savings Company to send it in course of collection, which would take several days to effect, but should have returned the check and demanded cash, that assumption would not affect this case, because when Birmingham Trust  Savings Company received the exchange, Bank of Ensley had then gone into liquidation, and it could not have accomplished the purpose of securing the cash by so doing. The fact that it took the precaution to present the check for collection at the clearing house, and did not thereby cause delay or work detriment to the drawer, but would have saved time and detriment if it could by any possibility have been thus collected, did not constitute an acceptance of the exchange as a payment of the check.
Again the question is whether or not the act of the Birmingham Trust  Savings Company in sending the check by mail to Bank of Ensley for payment or collection was an invitation to pay by exchange rather than in cash, and was therefore an acceptance of such exchange as a payment sent pursuant to such invitation.
In the case of Federal Reserve Bank v. Malloy, supra, the court was dealing with that situation. There was a regulation by which nonmember banks were required to authorize "its Federal Reserve Bank to send checks for collection to banks on which checks were drawn." That course was pursued, and in return the exchange of the drawee was remitted. That bank was a going concern when the Federal Reserve Bank received the exchange and sent it in due course for collection. Before it was collected, the bank issuing such exchange failed, and the Federal Reserve Bank was sued by the holder, and the court held that in accepting the exchange in lieu of cash, it was responsible as though it had collected cash. It claimed that the regulation, by which it was authorized to send by mail the check to its drawee for payment, impliedly authorized it to accept the exchange of the latter bank in payment, as an inference from the authority conferred by the regulation. The court treated such claim as follows: "A distinct and independent power cannot be brought into existence by implication from the grant of another distinct power. In other words, authority to do a specific thing carries with it by implication the power to do whatever is necessary to effectuate the thing authorized — not to do another and separate thing, since that would be, not to carry the authority granted into effect, but to add an authority beyond the terms of the grant. The authority expressed by the regulation is 'to send checks for collection to banks on which checks were drawn'; the authority now sought to be annexed by implication is 'to accept exchange drafts in payment,' instead of money as required by law. That neither is a necessary means of carrying the other into effect is clear. Nor are they necessary to each other in the sense that they are corollary or dependent. Certainly a check may be sent for collection to the drawee bank without entailing the necessity of remitting the amount in the form of exchange. Currency itself may be sent, and, as will appear presently, frequently is sent. The first form of remittance, to be sure, is more convenient; but it is not of such necessity as to exclude the second on the score of impracticability. There is nothing to prevent the sending bank from requiring the drawee to remit currency as a condition upon which the check may be satisfied and charged to the account of the drawer. We must not lose sight of the fact that we are here dealing with two distinct rules of law, both of which are sought to be avoided: (a) That which forbids a bank having paper for collection to use the drawee bank as a collecting agent; and (b) that which forbids a collecting agent accepting anything but money in payment. The first rule is probably based upon the theory that the drawee is not a suitable agent for the enforcement of his own obligation, and that commercial paper calling upon him to pay should not be surrendered to and satisfied by him, with the consequent release of the drawer, except upon previous or contemporaneous payment. The second rule proceeds upon the fact that the obligation of the drawee is to pay in money and nothing else. Plainly, the two rules are of such nature that one may be abrogated without the other."
The bank also defended upon the ground that it was justified in accepting the exchange by reason of a custom. The proof was that the custom was to remit by exchange or by a shipment of currency; that the exchange was used more often than a shipment of currency. It was said that if that meant that the collecting bank had the choice of methods, and elected to have remittance by draft instead of currency, such remittance would be at the risk of the collecting bank. It was also held that if the custom *Page 260 
to remit by draft be established, it must be known to the holder to bind him, otherwise he could expect that a remittance in cash be demanded and received. They held, however, that the custom shown being in the alternative did not authorize an election to accept remittance by draft. It was said also that: "The special situation which we are dealing with is controlled by a definite rule of law (to collect cash) which it is sought to upset by a custom to the contrary effect. It is not now necessary to consider the effect of a custom which contravenes a settled rule of law, or the limits within which such a custom can be upheld."
In our case of Farley Nat. Bank v. Pollock, 145 Ala. 321,39 So. 612, 2 L.R.A. (N.S.) 194, 117 Am. St. Rep. 44, 8 Ann. Cas. 370, it was held that a custom for a collecting bank to send by mail the check to the drawee bank for collection or payment, contrary to the rule of law then in existence, wasunreasonable and bad and not controlling. A "test formulated by the courts for determining the legality of alleged trade or business usages is that, where no statute or principle ofpublic policy intervenes, but a rule of law is a mere privilege which may be waived, the waiver may be made by usage as well as by express contract." 17 C. J. 473.
It has been several times held in this state that though there was a rule of the law merchant (not a statute) that when the holder and indorser reside in the same city, notice of dishonor must be personal, such notice may be given by mail, if the bill is payable at a bank which by usage has adopted that mode of giving notice. John v. City Nat. Bk. of Selma, 57 Ala. 96; Ray v. Porter, 42 Ala. 327; Gindrat v. Mechanics' Bk.,7 Ala. 324. (This is now regulated by statute, sections 9126, 9127, Code, in which the distinction is based upon residence in the same "place." The word "place" in those statutes seems to strengthen our interpretation of section 9222 as stated in the former opinion).
While it may be true that section 9222, Code, authorized the Birmingham Trust  Savings Company to send the check direct to Bank of Ensley for collection, it did not authorize such bank to collect in any other medium than currency. But the collection in currency is not required by statute or public policy, but is only the legal interpretation of the effect of the contractual relations of the parties, and is for the protection of the drawer. It could undoubtedly otherwise expressly contract. We see nothing in such custom which is unreasonable.
The evidence shows that Birmingham Trust  Savings Company in sending the check for collection gave no direction as to the manner in which remittance should be made. The contrary not appearing, it could assume that remittance would be according to the legal method of doing it — in currency. But if there was a custom between them to remit in exchange, it should have anticipated that method of remittance, and should have demanded currency rather than exchange, in order that remittance in exchange should not constitute a payment in the absence of its acceptance otherwise. But if plaintiff had notice of such custom, we think there was an implication of an approval of that method of doing it.
There was no acceptance of the exchange as a payment in this case by anything done after its receipt as we have shown, and in that respect it is different from the Malloy Case, supra. Whether it should have expressly called for currency rather than exchange, and whether the failure to do so was an election in the first instance to accept exchange, depended upon the custom between the banks. If there was such a custom, and remittance was made by exchange in the absence of a demand for cash, it was an election to accept the same amounting to a payment, unless plaintiff had notice of such custom when it issued the check. In that event, remittance by exchange was approved by plaintiff, and it was not an effectual payment in the absence of payment of the exchange.
As we now understand the case, the first question is whether or not the receipt of the exchange in remittance was its acceptance as a payment. That depends upon whether there was a custom to remit in that manner. If there was such a custom unknown to plaintiff, the receipt of such exchange was a payment, because it should have been anticipated, and demand made for currency in sending it for collection. But if plaintiff had notice of such custom, the mere receipt of the exchange pursuant to the custom did not operate as a payment. So that the proposal by appellant to prove the custom and that plaintiff had notice of it was material on that question. We have not overlooked section 6381, Code. But the evidence does not show facts which bring this case within its influence.
If there was no such effectual payment so as to bind defendant to plaintiff, then the question of negligence or breach of duty in sending the check direct to Bank of Ensley becomes the inquiry. If there was such breach of duty, the recovery would be under the common counts, and be limited to the damage sustained as expressed in the Hendricks Cases, supra.
We have expressed our views of the law in that aspect of the case, and upon a reconsideration of the principles which would then apply we are content with what was stated in the original opinion.
Application for rehearing overruled.
ANDERSON, C. J., and GARDNER and BOULDIN, JJ., concur. *Page 261