Court Opinion

ID: 3298728
Source: CourtListenerOpinion
Date Created: 2016-07-05 17:15:42.172601+00
Date Added: 2024-06-11T12:25:02.453840
License: Public Domain

I dissent.
There is a conflict in the authorities, on the question whether the original bank is liable for the negligence of the subagents. Exchange Nat. Bank of Pittsburgh v. Third Nat. Bankof New York, 112 U.S. 276 [28 L.Ed. 722, 5 Sup. Ct. Rep. 141, see, also, Rose's U.S. Notes], was a case involving the collection of a draft in which it was held that the original bank was liable for the negligent act of the subagent. I quote: "The bank is not merely appointed an attorney, authorized to select other agents to collect the paper. Its undertaking is to do the thing, and not merely to procure it to be done. In such case the bank is held to agree to answer for any default in the performance of its contract; and, whether the paper is to be collected in the place where the bank is situated, or at a distance, the contract is to use the proper means to collect the paper, and the bank, by employing subagents to perform a part of what it has contracted to do, becomes responsible to its customer. . . .
"Whether a draft is payable in the place where the bank receiving it for collection is situated, or in another place, the holder is aware that the collection must be made by a competent agent. In either case there is an implied contract of the bank that the proper measures shall be used to collect the draft, and a right, on the part of its owner, to presume that proper agents will be employed, he having no knowledge of the agents. There is, therefore, no reason for liability or exemption from liability in the one case which does not apply to the other. And, while the rule of law is thus general, the liability of the bank may be varied by consent, or the bank may refuse to undertake the collection. It may agree to receive the paper only for transmission to its correspondent, and thus make a different contract, and become responsible only for good faith and due discretion in the choice of an agent. If this is not done, or *Page 646 
there is no implied understanding to that effect, the same responsibility is assumed in the undertaking to collect foreign paper and in that to collect paper payable at home. On any other rule, no principal contractor would be liable for the default of his own agent, where from the nature of the business, it was evident he must employ subagents."
The foregoing states the rule which prevails in New York, New Jersey, and some fourteen other states. (7 C. J. 606.) In Massachusetts and certain other jurisdictions the contrary has been held.
Katcher v. American Express Co., 94 N.J. L. 165
[109 A. 741], relied on in the majority opinion, did not involve the liability of a forwarding bank for the negligence of its subagent. That action was brought to recover $194.50, the equivalent of 1,000 rubles, paid by plaintiff to the defendant express company for remittance to one Tese Kaczur in Russia. The money was not delivered and the question was whether plaintiff was entitled to his $194.50 or the value of the 1,000 rubles, the rate of exchange having meanwhile fallen. It was held by a divided court that by the terms of the contract the duty of the defendant was to send the money to the consignee by the usual course of the Russian mail and that delivery to the consignee was not agreed upon. An instruction was held proper wherein it was declared: "If the defendant's Russian correspondent . . . purchased a money order for said 1,000 rubles at the Russian postoffice, inclosed the same in an envelope with postage prepaid, addressed to Tee Kaczur at the address given, this constituted a remittance of the money in the manner contemplated by the contract, whether or not Tese Kaczur ever received the money order." But it was not there held that if the Russian correspondent negligently misdirected the envelope containing the money order the contract would have been fulfilled and the defendant not be liable, which in principle is held in the prevailing opinion in the case at bar.
Indig v. National City Bank, 80 N.Y. 100, cited as authority in Davis v. First Nat. Bank of Fresno, 118 Cal. 600
[50 P. 666], is not authority on the question presented here. In that case the plaintiff in New York placed in the hands of the defendant bank for collection a note payable at the Bank of Lowville, of which the maker was a customer. Instead of sending the note to all agent for presentment, the *Page 647 
defendant bank sent it directly to the Bank of Lowville. The latter sent its draft in payment, but subsequently failed, which resulted in nonpayment of the draft. It was held there was no negligence on the part of the defendant bank in the method of collecting the draft, inasmuch as it followed the custom approved in such cases. There was no question of subagency involved, as the note was presented directly to the Bank of Lowville. This was clearly pointed out inBriggs v. Central Nat. Bank of N.Y., 89 N.Y. 183
[42 Am. Rep. 285].
Dorchester Bank v. New England Bank, 1 Cush. (Mass.) 177, follows the Massachusetts rule.
In my opinion the rule laid down in Exchange Nat. Bank ofPittsburgh v. Third Nat. Bank of New York, supra, is more in consonance with justice and fair commercial dealing than the one followed in the majority opinion. It does not seem to me that the customer is afforded adequate protection unless the bank with which he dealt and in which he presumably had confidence should be responsible for the safe transmission of the money to the consignee. What the customer here undertook to bargain for was the payment of the money to his mother. Under the main opinion practically the only service rendered to him by the original bank was to select another bank to assume the responsibility. In this case the customer has lost his money and his only remedy is to proceed against the subagent or the party who actually received it. The prevailing opinion lays stress on the use of the terms "remit" and "transmit," but in view of the nature of the service to be performed the technical language employed should not be given a controlling effect. A much larger question is involved.
No hardship will result if in the absence of an express agreement the original bank is held liable, for transferring money is a part of its business and it can limit its liability by appropriate provisions in the contract. In the absence of such an agreement it is not fair to hold the public to a refined understanding of banking customs. Davis v. First Nat.Bank of Fresno, supra, and the later cases of Gonyer v.Williams, 168 Cal. 452 [143 P. 736], and San Francisco Nat.Bank v. American Nat. Bank of Los Angeles, 5 Cal.App. 408
[90 P. 558], to the extent they are at variance with the views herein expressed, should be disapproved. *Page 648 
Particularly is this true of the latter case, which holds that (syl.) "a reasonable custom of all the bank of a place that none of them shall be liable for commercial paper deposited with any one of them for collection elsewhere, until the proceeds thereof in actual money shall come to their possession, must be conclusively deemed known to the depositor and to be binding upon him as an implied condition of the contract of agency, without reference to his knowledge or want of knowledge of the custom." While evidence of the approved course of banking business might be relevant on the question whether a bank has been negligent, it should not be held that a group of banks could by agreement or custom alter their liability under the law of agency.
The judgment should be affirmed.