Full text of Mimeograph Letters and Statements of the Board : Copy of Correspondence of Counsel re Legal and Practical Problems Arising Under the Bank Collection Code, Number X-7008, Volume 35, Page 493

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FEDERAL RESERVE BOARD
WASHINGTON

X-7008

ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD

November 6, 1931.

SUBJECT:

Legal and P r a c t i c a l Problems a r i s i n
Under the Bank Collection Code.

Dear Sir •
On April 1, 1531, I sent you copies of correspondence
(X-S851) between Mr. Walter S. Logan, Deputy Governor and General Counsel of the Federal Reserve Bank of Few York, and the
undersigned with reference to the above subject and on June 11,
1931, I sent you copies of l e t t e r s (X-6910) written by Counsel
of the various Federal reserve banks on the same subject.

On

July 24, 1931, I sent you copies of an opinion of the Supreme
Court of New York in the case of In re Jayne & Mason, P r i v a t e
Bankers, and a copy of Mr. Logan's memorandum of a u t h o r i t i e s
in that case, which also dealt with the Bank Collection Code.
I now enclose f o r your information copies of the f o l lowing correspondence on the same subject;
1.

Undated memorandum addressed to me by Mr. ?. Gr.

Await, Deputy Comptroller of the Currency, enclosing copies of
telegraphic correspondence dated May 27 to June 5, 1931, in
elusive, between him and the Federal Reserve Bank of San Fran-




— 2 —

X-7008

cisco with reference to the a p p l i c a b i l i t y of the bank c o l l e c t i o n
code to checks drawn on insolvent national banks.
2.

Letter with enclosures addressed to me under date

of June 11, 1931, by Mr. Walter S. Logan, Deputy Governor and
General Counsel of the Federal Reserve Bank of New York.
3.

Letter addressed to me under date of June 15, 1931$

by Mr. Albert C. Agnew, Counsel to the Federal Reserve Bank of
San Francisco.
4.

L e t t e r addressed to me by Mr. M. G. Wallace, Counsel

to the Federal Reserve Bank of Richmond, June 17, 1931, enclosing
copy of a l e t t e r addressed to Mr. Logan on the same date with
r e f e r e n c e to a recent decision of the Supreme Court of South
Carolina in the case of Ex Par t i e Wachovia Bank and Trust Company
158 S. 3. 214.
5.

Letter addressed to me by Mr. M. G. Wallace, Counsel

to the Federal Reserve Bank of Richmond, of July 17, 1931, enclosing copy of a memorandum to the Executive Committee of the Federal
Reserve Bank of Richmond r e method to be used when checks sent to
a national bank are charged to the drawers but remittance i s not
received by the Federal Reserve Bank.
6.

L e t t e r addressed to me by Mr. Walter S. Logan, Sep-

tember 30, 1931, enclosing a copy of a l e t t e r addressed to the
Comptroller of the Currency r e Checks on Insolvent National Banks
t r e a t e d as dishonored under Section 11 of the Bank Collection
Code.




7.

Letter addressed to me by Mr. Logan, October 6, 1931,

' 495

— 3 —

X-7008

enclosing copy of l e t t e r to the Comptroller of the Currency r e
Checks on Peoples National Bank of Pulaski, New York.
I r e g r e t exceedingly that the great pressure of matters
upon which i t has "been necessary f o r me to advise the Federal
Reserve Board has made i t impossible f o r me to give t h i s subject
s u f f i c i e n t study to enable me to answer the above l e t t e r s in det a i l , and I f e a r that i t w i l l be impossible f o r me to give t h i s
subject the study which i t deserves at any time in the near
future.

The subject i s one of such i n t e r e s t and importance to

a l l Federal reserve banks, however, that I f e e l that I should
not delay longer in transmitting to Counsel for a l l the Federal
reserve banks the information and views contained in the attached
correspondence, in the b e l i e f that an interchange of views on t h i s
subject between the Counsel f o r the various Federal reserve banks
would be h e l p f u l .
If Counsel f o r any Federal reserve bank sends me an expression of h i s views on any of the questions discussed in the
enclosed correspondence, I shall send copies to Counsel f o r a l l
of the other Federal reserve banks f o r t h e i r information as
promptly as p o s s i b l e , without waiting u n t i l I have an opportunity
to discuss the subject, in order that an interchange of views
between Counsel for a l l of the Federal reserve banks may proceed without f u r t h e r delay.
I understand that the Comptroller of the Currency s t i l l
has under advisement the question presented in Mr. Logan's l e t t e r
of September 30th, 1931; but, as soon as he takes a d e f i n i t e p o s i t i o n



X-7008
- 4 in the matter, I s h a l l advise Counsel f o r a l l Federal reserve hanks.
I hope that Counsel for each of the Federal reserve hanks
who has w r i t t e n to me on t h i s subject w i l l consider t h i s communication an acknowledgment of h i s l e t t e r , and w i l l excuse my f a i l u r e
to acknowledge i t more promptly, and to discuss the questions which
he has r a i s e d .

Whenever I can f i n d time to do so, I s h a l l study

t h i s subject c a r e f u l l y and attempt to answer each of these l e t t e r s
in d e t a i l ; hut, from the present outlook, I f e a r that i t w i l l be
many months before I can f i n d such an opportunity.
I t has occurred to me that i t might be advisable to
arrange f o r a conference of counsel f o r a l l Federal reserve banks
to discuss t h i s subject; but the counsel with whom I have d i s cussed the matter seem to f e e l that t h i s problem has not developed
to such a point that a conference would be very p r o f i t a b l e .

More-

over, the present conditions are such that i t might be d i f f i c u l t
for Counsel to spare the time to come to Washington f o r a conference.

If Counsel f o r a number of the Federal reserve banks

f e e l that such a conference should be arranged, however, I shall
be glad to do everything in my power to arrange i t .
Very t r u l y yours,

Walter Wyatt,
General Counsel.
TO COUNSEL FOB ALL FEDI3AL RESERVE BAHCS.




X-7008-

COPY
TREASURY DEPARTMENT
WASHINGTON
COMPTROLLER OF THt CURRENCY

Memorandum fof Mi*. Wyatt*
Counsel,
f e d e r a l Reserve 3oat*d.

Pursuant to your request there are attached hereto
copies of the communications between t h i s o f f i c e and
the Federal Reserve Bank of San Francisco concerning the
application of c e r t a i n provisions of the Uniform Coll e c t i o n Code to checks sent the Farmers National Bank
of Pomeroy, Washington, for c o l l e c t i o n and remittances,
the insolvent "bank's remittances therefor having f a i l e d
to clear p r i o r to i t s suspension.
(Signed)

F. G. A.

F. G. A A T
WL
Deputy Comptroller.

Enc.




COPY

X-7008-a-l
COPY

Sanfrancisco 10-37 May 27
Comptroller of the Currency
Washington
Farmers n a t i o n a l "bank Pomeroy Washn closed May 16th. On May 13th
and 14th our cash l e t t e r s of these dates were forwarded aggregating
$4,548.16 f o r which on May 16th we received two d r a f t s of closed
tank drawn on i t s correspondent f i r s t n a t i o n a l t r u s t and savings
"bank spokane. These were presented May 16th and payment r e f u s e d
account "bank closed. Washington adopted j&Brican bankers a s s o c i a t i o n
uniform c o l l e c t i o n code 1929. See chapter 203 laws of Washington
1929 under the p r o v i s i o n s thereof the a s s e t s of the payer bank a r e
impressed with a t r u s t in favor of the owners of the items included
in the cash l e t t e r i r r e s p e c t i v e of whether the fund r e p r e s e n t i n g
such items can be t r a c e d into and i d e n t i f i e d a s p a r t of the a s s e t s
of t h e closed bank. Attorneys f o r one of the banks f o r which we
handled items and to which we have charged back the items embraced
in the unpaid d r a f t s without the r e t u r n of the items themselves
have advised t h e i r c l i e n t t h a t c o l l e c t i o n code a p p l i e s to n a t i o n a l
banks and t h a t owners a r e e n t i t l e d to p r e f e r e n c e . This s i t u a t i o n i s
s i m i l a r to t h a t which r e c e n t l y arose in connection with f e d e r a l
r e s e r v e Newyork except t h a t in t h a t case the c o l l e c t i n g bank e l e c t e d
to Treat the items as dishonored under another s e c t i o n of the code
and reclaimed the same with the consent of your o f f i c e . See l e t t e r
await to Logan a p r i l 15, 1931 r e f i r s t n a t i o n a l bank Macedon.
Kindly advise by wire as to your opinion regarding the a p p l i c a b i l i t y
of the p r e f e r e n c e s e c t i o n of the code to n a t i o n a l banks doing
business in Washington.




Hale, Federal r e s e r v e bank Sanfrancisco

499
COPY

X-7008-a-2
COPY

May 28, 1931.
Federal Reserve Bank,
San Francisco, California.

Your telegram 27th. National Bank Act provides for winding up a f f a i r s of an insolvent National Bank as in a code
by i t s e l f . Uniform Collection Code and a l l other S t a t e
s t a t u t e s wholly inapplicable to insolvent National Banks
where they c o n f l i c t with the mandate of Congress r e q u i r i n g
pro r a t a d i s t r i b u t i o n of bank's a s s e t s among a l l c r e d i t o r s .
Cook County National Bank v. United S t a t e s 107 U. S. 445;
Davis v. Elmira Savings Bank 161 U. S. 275; Easton v. Iowa
188 U. S. 220. To e s t a b l i s h a p r e f e r r e d claim against Pomeroy no augmentation and tracing p o s s i b l e . Unless a l l three
e s s e n t i a l s a r e a f f i r m a t i v e l y established to Comptroller's
s a t i s f a c t i o n without reference to the Uniform Collection
Code Receiver w i l l vigorously defend s u i t e to e s t a b l i s h same
in Federal Court which has cognizance independent of amount
involved, hence Federal r u l e controlling. Macedon case you
r e f e r to did not involve p r e f e r r e d claim. The collowing
cases discuss c o n t r o l l i n g p r e f e r r e d claim p r i n c i p l e s . Itatpire
State Surety Co. v. Carroll County 194 Fed. 593; Studebaker
Corp. v. Bank 10 Fed. (2nd) 590; Larabee Mills v. Bank 13
Fed. (2nd) 330, c e r t i o r a r i denied 273 U. S. 727; Farmers
National Bank v. P r i b l e 15 Fed. (2nd) 175; Ellerbe v.
Studebaker Corp. 21 Fed. (2nd) 993; Burns National Bank v.
Spurway 28 Fed. (2nd) 40.




F. Gr. A A T
WL
Deputy Comptroller.

500

COPY

X-7008-a-3
COPY

Sanfrancisco 239p June 2
Comptroller of the Currency
Washington
Re Farmers National Bank Pomeroy Washington See our t e l e gram May 27th and your reply May 28th r e l a t i v e to claim
f o r preference on items embraced within unpaid remittance
d r a f t involved in our cash l e t t e r s of May 13th and 14th.
In view of your r e f u s a l to grant preference as s t a t e d in
your telegram of May 28th in behalf of our endorsers we
hereby e l e c t to t r e a t the items embraced in our cash l e t t e r s of May 13th and 14th agregating $4,548.16 as dishonored
by non payment and request the return of said items to us
duly p r o t e s t e d . This pursuant to the provisions of section
137 subdivision 2 chapter 203 laws of Washington 1929. We
are advised by Eckerson examiner in charge of pomeroy bank
that cancelled items are s t i l l in h i s possession and w i l l
be held pending drains a r r i v a l . We have made similar demand
upon Eckerson who has suspended action u n t i l Drains a r r i v a l .
Kindly acknowledge r e c e i p t of t h i s telegram and advise us
of your decision.




Hale

F. B Sank of Sanfrancisco.

• . 501
COPY

X-7008-a-4

COPY

June 4, 1931.

Federal Reserve Bank,
San Francisco, California.

Reference your telegram June 2nd advising of your
election under the Washington s t a t u t e to t r e a t
as dishonored items included in your cash l e t t e r s
dated May 13th and 14th to Farmers National Bank
Pomeroy. As we understand i t the Washington s t a t u t e you r e f e r to i s intended to continue the
l i a b i l i t y of the drawers and indorsers independent
of the item i t s e l f and without recourse on the
f a i l e d hank under the circumstances here presented.
Accordingly we f a i l to see why the Receiver i s
i n t e r e s t e d or has any duty to return the cancelled
items although he has been instructed by telegraph
to forward to you p h o t o s t a t i c copies of the canc e l l e d items unprotested f o r use as evidence. As
we view i t notice of your election to t r e a t the
items as dishonored should be directed not to the
Receiver but to the drawers or indorsers based upon
the p h o t o s t a t i c copies such drawers or indorsers
when making payment of the amounts of the items to
thereby become owners of a proportionate share of
the claim against the Receiver based upon the case
l e t t e r remittances.




F. G. AWAIT
Acting Comptroller.

502
C 0 F Y

X-7008-a-5

COPY

San Francisco

June 4

504p

Await
Acting Comptroller

Washington

Your wire today replying to ours of June second Farmers National
Bank Pomeroy stop Washington Statute r e f e r r e d to i s i d e n t i c a l
with section three f i f t y J of New York negotiable instruments
law sto^ In t h i s connection see your l e t t e r April f i f t e e n t h
addressed to Logan general counsel Federal Reserve New York
r e l a t i v e F i r s t National Bank Macedon stop the s i t u a t i o n presented
there and the one presented by our demand f o r the return of the
items are i d e n t i c a l except that we are demanding return of a l l
items embraced in our cash l e t t e r s May t h i r t e e n t h and fourteenth
instead of only one stop Return of items w i l l not c r e a t e any
preference w i l l leave a s s e t s of involvent bank in same condition
as at present giving drawers of checks claims predicated upon
deposits r a t h e r than payees thereof predicated upon unpaid remittance d r a f t stop Notice of our election to t r e a t items as
dishonored i s properly addressed to Receiver inasmuch as if
items have not been returned to makers we are e n t i t l e d to
possession thereof duly protested as evidence of dishonor through
nonpayment stop Ultimate l i a b i l i t y will then r e s t upon drawees of
items who are undoubtedly e n t i t l e d to possession of unpaid checks
stop The s t a t u t e c l e a r l y contemplates that upon return of items
as dishonored e n t r i e s charging same to drawees accounts w i l l be
reversed and owners thereof restored to t h e i r o r i g i n a l p o s i t i o n
stop P o s i t i o n taken your wire June f o u r t h seems to us contrary
to intent of s t a t u t e and c e r t a i n l y contrary to p o s i t i o n taken by
you in Macedon case Kindly consider f u r t h e r and wire decision




Hale.

COPY

X-7008-a-6

COPY

June 5, 1931.

Federal Reserve Bank,
San Francisco, California.

Your telegram f o u r t h . Macedon case was f i r s t p r e s e n t a t i o n
of t h i s question and action taken therein was with express
understanding i t was not to be considered a precedent. Since
that time the matter has been given f u r t h e r consideration
and the p o s i t i o n adopted outlined in our telegram of f o u r t h .
We believe t h i s p o s i t i o n sound from both an administrative
and legal viewpoint. We deny that your bank is e n t i t l e d to
have the items p r o t e s t e d or delivered and a s s e r t t h a t the
placing of the unprotested p h o t o s t a t i c copies in your hands
by the Receiver permits you to obtain f o r your customers a l l
the r e l i e f the s t a t u t e a f f o r d s . Statute provides quote where
the item i s received by mail by a solvent drawee or payor bank
i t s h a l l be deemed paid when the amount i s f i n a l l y charged
to the account of the maker or drawer unquote. National banks
become insolvent when t h e i r a f f a i r s are taken over by the
Comptroller. The r i g h t s of a l l o a r t i e s against such banks
a r e f i x e d by suspension. Scott versus Armstrong one hundred
f o r t y six United S t a t e s four hundred ninetynine. The s t a t e
s t a t u t e cannot change t h i s r u l e and we do not believe i t was
intended to do so. Accordingly if as we understand was the
case the items were charged to the Pomeroy depositors accounts
and cancelled before the banks a f f a i r s were taken over by the
Comptroller the Washington Statute not providing f o r p r o t e s t
by insolvent bank or return of the items the Receiver i s without
a u t h o r i t y to reverse e n t r i e s p r o t e s t the items or d e l i v e r them
to your bank.




F. G. AWAIT,
Acting Comptroller.

X-7008-b

C0 P Y

504.

fthtiRAL RESERVE BANK
OF H W Y R
E OK
June 11, 1931.
Walter Wyatt, Esq., General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Walter;
You w i l l r e c a l l that some time ago I had some correspondence with
you regarding the exercise of the election to t r e a t items as dishonored, pursuant to Section 350-j of the Negotiable Instruments Law of New York (Section
11 of the Uniform Bank Collection Code), when a remittance d r a f t received by
a Federal Reserve Bank from a national bank i s dishonored due to the closing
of the national bank; and that in one instance t h i s bank exercised t h a t
e l e c t i o n , the o f f i c e of the Comptroller of the Currency authorizing the r e turn of the dishonored item but explaining in a l e t t e r to me, dated April
15, 1931, that t h i s should not be regarded as a precedent in f u t u r e cases.
We have been considering t h i s subject since t h a t time, and have
about made up our minds t h a t , if a t some f u t u r e time we should again
f i n d ourselves holding an unpaid remittance d r a f t of a closed national
bank in New York or New Jersey (in both of which s t a t e s the Bank Collection
Code has been adopted), we would ask our endorsing banks to i n s t r u c t us
whether or not to t r e a t the items which we received from them as d i s honored in accordance with t h i s section.
I am enclosing a memorandum,
dated June 8, 1931, addressed by me to Mr. Sailer and Mr. G i l b e r t , which
discusses the matter and to which are attached suggested forms of l e t t e r s
and debit advice. I t occurs to me that these might be of some i n t e r e s t to
you, and I shall of course be glad of any comments you may care to make r e garding them.
I think t h e only legal question involved i s whether, if the suggested program were followed, i t might possibly be contended that the election to
dishonor had not been "exercised with reasonable diligence". Personally, i t
seems to me that the c o l l e c t i n g bank would be acting with "reasonable diligence"
if i t delayed the exercise of the election while i t communicated with i t s ern
dorsers for the purpose of obtaining i n s t r u c t i o n s from them. The owners of the
items and not the c o l l e c t i n g bank are the i n t e r e s t e d p a r t i e s and should have the
opportunity to decide whether they p r e f e r to preserve the l i a b i l i t y of the
makers of the checks o r to have a claim against the closed bank, and I think a
construction of the law which would n e c e s s a r i l y deprive them of t h i s opportunity
would be unreasonable.
Yours f a i t h f u l l y ,
(Signed) Walter S. Logan
Ends.



Walter S. Logan,
Deputy Governor and General Counsel.

505
COPY

FEDERAL RE55&VE 3AHK OF N W Y R
E OK

OFFICII CORRESPONDENCE

DATE

X-7008-Td-I

June 8, 1931.

!T0 Mr. Sailer and Mr. Gilbart
FO
RM

Walter S. Logan

When a national bank closes with i t s unpaid remittance d r a f t
in our possession the owners of the items covered by the remittance d r a f t
probably do not have p r e f e r r e d claims. Under the Bank Collection Code,
however, we as the c o l l e c t i n g bank apparently have the r i g h t to t r e a t the
items covered by the remittance d r a f t as dishonored, the e f f e c t of which
i s that the owner's r i g h t of recourse i s preserved and that the maker
instead of the owner i s the c r e d i t o r of the closed bank. In most cases
I assume t h a t the owner would p r e f e r to have h i s recourse against the
maker preserved, r a t h e r than to have a claim against the closed bank which
may not r e a l i z e 100 cents on the dollar and payment of which will in any
event be delayed. In some cases, however, the claim against the closed
bank may be more valuable than recourse against the maker.
In view of these considerations we might (1) Ask our endorsing banks for i n s t r u c t i o n s as to whether
or not to t r e a t t h e i r items as dishonored.
(2) N o t i f y the Receiver or Examiner and the Comptroller of the
Currency that we have asked f o r such i n s t r u c t i o n s .
(3) Immediately upon receipt of i n s t r u c t i o n s from endorsing banks
give notice to the Receiver or Examiner and to the Comptroller of the
Currency of e l e c t i o n to t r e a t p a r t i c u l a r items as dishonored.
(4) Communicate again with endorsing banks from which we do
not receive prompt i n s t r u c t i o n s , and possibly advise them that unless
we receive i n s t r u c t i o n s to the contrary we w i l l on a s p e c i f i e d date
(say, one week a f t e r the closing) elect to t r e a t t h e i r items as d i s honored by giving appropriate n o t i c e to the Receiver or Examiner and t o
the Comptroller of the Currency.
The attached forms of debit advice and l e t t e r to endorsing
banks, and l e t t e r to t h e Receiver or Examiner, might be used to carry out
steps (1) and (2) of t h i s procedure. What would you think of sending
such debit advices and l e t t e r s if another national bank should close with
i t s unpaid remittance d r a f t in our possession?
The possible objection to
t h i s course, as I see i t , i s that i t might be confusing to our endorsing
banks and to the owners of the items; and that by r a i s i n g the question
we might make more work and trouble f o r ourselves and possibly increase
the likelihood of controversies as to whether or not we have handled the
matter properly.
Ends.
WSL: GSR




» 506
.
X-7008-b-2

C 0 PY

F3D3ELAL RESERVE B N
AK
OF N W Y R
E
OK

DEBIT

ADVICE

BOOKKEEPING DIVISION
ADJUSTMENT SECTION
DATE

MAIL
TO

Y U ACCOUNT HAS BEEN DEBITED today $
OR
f o r an item of
t h i s amount drawn on .
National Bank,
, New York, included
in your cash l e t t e r to us dated
, totaling $
, sheet
. We presented said item by mail to said bank in our cash
$
l e t t e r dated
and received a d r a f t of said bank on another
bank in remittance f o r said item and other items included in our
said cash l e t t e r , which d r a f t was not paid in due course but was dis~
honored upon presentation f o r payment. We have been advised t h a t
said
National Bank,
New York, has been closed.
FEDERAL RESERVE BANK OF N W Y R
E OK




BY

I

5 0 7

X-700S-b-3

COPY
Form of l e t t e r

endorsing banks

(Date)
(Fame of bank)
(Address)
SUBJECT:

Enclosed advice of debit of $

for items of $
drawn on Blankville National Bank & Trust Co., Blankv i l l e , M. Y., included in your cash l e t t e r to us
dated

, totaling $

, sheet $

.

Gentlemen;
We enclose our advice of debit in the above amount made today to
your account f o r items drawn on Blankville National Bank & Trust Co.,
Blankville, N. Y., and which became involved in the closing of t h a t
bank. We presented said items by mail to said bank in our cash l e t t e r
dated
and received a d r a f t of said bank on another bank
in remittance f o r said items and other items included in our said cash
l e t t e r , which d r a f t was not paid in due course but was dishonored upon
presentation f o r payment, due to the closing of said Blankville National Bank & Trust Co., Blankville, New York.
Section 350-j of the Negotiable Instruments Law of New York
provides as follows:
1
1

Sec. 350-j. Election to t r e a t as dishonored
items presented by mail.
Where an item i s duly p r e sented by mail to the drawee or payor, whether or not
the same has been charged to the account of the maker
or drawer thereof or returned to such maker or drawer,
the agent c o l l e c t i n g bank so presenting may, at i t s
e l e c t i o n , exercised with reasonable diligence, t r e a t
such item as dishonored by nonpayment and recourse may
be had upon p r i o r p a r t i e s thereto in any of the following cases:
(1) Where the check or d r a f t of the drawee or
payor bank upon another bank received in payment therefor
s h a l l not be paid in due course;
*
*
*
*
*
it
I t i s our opinion that t h i s provision of law a p p l i e s to items



5
—3 ~

X-7008-V3

drawn on national 'banks located in 17ew York as well as to New York State
tanks and t r u s t companies; and that under i t s terms we, as the agent coll e c t i n g bank, may, by giving proper notice to said Blankville National
Bank & Trust Company or to the Receiver or Examiner in charge thereof,
elect to t r e a t the items remitted for by said unpaid d r a f t of said bank
as dishonored by nonpayment; and that if said items are t r e a t e d as d i s honored pursuant to the terms of t h i s provision the owners of said items
w i l l be e n t i t l e d to have said items returned to them and w i l l have
recourse against the makers or drawers of said items but w i l l have
no claims against said Blankville National Bank & Trust Co., whereas if said items are not t r e a t e d as dishonored the owners w i l l have
claims against said Blankville National Bank & Trust Co. f o r the
amounts of the respective items but the l i a b i l i t y of the makers or
drawers on said items w i l l be discharged.
Please i n s t r u c t us whether or not to t r e a t as dishonored
the items above r e f e r r e d to* drawn on said Blankville National Bank &
Trust Co., which we received from you. Such i n s t r u c t i o n s should be
forwarded to us j u s t as soon as possible, as you w i l l note t h a t the
election to t r e a t items as dishonored pursuant to the above quoted
provision should be "exercised with reasonable diligence."
Very t r u l y yours,

End.




X-7008-0-4

COPY

To
Hat'ional Bank,
, Hew York.
and
Beceiver or Examiner in Charge,
National Bank,
, Hew York.
Gentlemen:
The d r a f t of
National Bank,
, Hew
York, dated
drawn on
, Hew York, H. Y.,
to the order of Federal Reserve Bank of Mew York for $
,
received by us in remittance for certain items drawn on said
Hational Bank,
'
Hew York, which we had p r e sented to i t by mail, was not paid in due course but was d i s honored upon presentation for payment, due to the closing of
Hational Bank,
Hew York. We t h e r e f o r e charged
the items, f o r which remittance was made by said d r a f t , back to the
banks from which we had received them for c o l l e c t i o n . For your information we enclose a copy of the form of l e t t e r we have w r i t t e n
today to each of these banks.
In these l e t t e r s we r e f e r to section 350-j of the negotiable Instruments Law of Hew York and request our endorsing banks
to i n s t r u c t us whether or not to t r e a t as dishonored by nonpayment
under the terms of t h i s section the items which we received from
such banks and which were remitted for by the d r a f t of
national Bank f o r $
. We expect to receive such i n s t r u c t i o n s
shortly and to send appropriate notice to the
national
Bank, and to the Receiver or Examiner in charge thereof, to the
e f f e c t t h a t we e l e c t to t r e a t some or a l l of these items a s d i s honored, and that we request the return of such items. In the
meantime, we request
national Bank and the Receiver or Examiner In charge to keep possession of a l l of these items and, of
course, not to return them to the makers or drawers.
Very t r u l y yours,
End.

WSL:GSR(MAR)




(Copy to Comptroller of the Currency)

X-7008-c

COPY
FEDERAL 'RESERVE EAITK OF SAtt FRANCISCO

Juna 15, 1931.
Walter Wyatt, Esq.,
General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Wyatt:
A s i t u a t i o n has recently arisen with regard to
check c o l l e c t i o n s in t h i s d i s t r i c t , which I think I should
c a l l to your a t t e n t i o n .
The 1929 Session of the Legislature of the S t a t e
of Washington adopted the Uniform Check Collection Code
proposed by the American Bankers Association. The same
s t a t u t e has been r e c e n t l y adopted by the 1931 Legislature
in the S t a t e s of Idaho and Oregon. In the l a t t e r s t a t e ,
the Uniform Code was adopted with some s l i g h t amendments
which are not material to the matter here under discussion.
In the State of Washington, p r i o r to the adoption
of t h i s code, when a member bank f a i l e d and we were l e f t
with an unpaid remittance d r a f t in our hands, we were r e quired to f i l e f o r the e n t i r e amount of the unpaid d r a f t
and were given a c l a s s i f i c a t i o n as a general c r e d i t o r .
In Oregon a d i f f e r e n t method of procedure was f o l lowed p r i o r to the adoption of the code. The Superintendent
of Banks, acting under an opinion of the Attorney-General
of the State of Oregon but apparently without any d i r e c t
warrant of law, pursued the p r a c t i c e of reversing the
e n t r i e s on the records of the f a i l e d bank, marking the
checks "Paid in Error" or with other appropriate symbol
and returning the checks themselves to us. We, in turn,
delivered them to our endorsers and the p a r t i e s were
restored to t h e i r o r i g i n a l p o s i t i o n .
In Idaho, p r i o r to the adoption of the code, we
were given a c l a s s i f i c a t i o n as a general creditor of an
insolvent member bank.
Since the adoption of the code in Washington,
we have had occasion to f i l e claims against two or t h r e e




X-7008-c
Walter Wyatt, Esq*

- 2 *-

June 15, 1931.

insolvent s t a t e banks predicated uoon unpaid remittance
d r a f t s . Action has been taken in only one of these cases,
and in that one, we have been accorded a p r e f e r r e d s t a t u s .
We have r e c e n t l y had one insolvency in Oregon, in which
the same question i s involved, and we are informed by our
Portland Branch that the s t a t e banking a u t h o r i t i e s of
Oregon intend to give us a p r e f e r r e d s t a t u s .
We have not yet had any experience under the new
code in the State of Idaho.
You are, of course, f a m i l i a r with the Uniform
Check Collection Code proposed by the American Bankers
Association and are conversant with the f a c t that under the
provisions of Section 11 thereof, the agent c o l l e c t i n g
bank presenting the checks may, at i t s election, exercised
with reasonable diligence, t r e a t the items as dishonored
by non-payment, with recourse against p r i o r p a r t i e s in a l l
cases where the d r a f t of the drawee or payor bank upon
another bank, received in settlement, shall not be paid in
due course.
Under the provisions of Section 13 of the same
code, except in those cases where the item or items are
t r e a t e d as dishonored by non-payment under the provisions
of Section 11, the a s s e t s of the drawee or payor bank
are impressed with a t r u s t in favor of the owner of the
items involved in the unpaid remittance d r a f t .
Heretofore, under our Failed Bank Manual, i t has
been our uniform p r a c t i c e immediately upon the insolvency
of a member bank to demand the return of any check involved
in an unpaid remittance d r a f t .
Since the adoption of the Uniform Code in the
s t a t e s mentioned, i n s t r u c t i o n s have been issued to our
branches not to demand from the agent in charge of an insolvent s t a t e bank the return of the items. We have taken
t h i s p o s i t i o n f e a r i n g that if we demanded the return of
the items themselves, such demand would be construed as an
election on our p a r t to proceed under the provisions of
Paragraph 11 of the Uniform Code, and t h a t i t might be
held that we had elected to t r e a t the items as dishonored
by non-payment, thereby preventing us from g e t t i n g a
preference in behalf of our endorsers.




512
X-7008-C
Waited Wyatt, Esq.

- 3 -

June 15, 1931.

Recently, we have had some correspondence "by
telegraph with Mr. Logan, Counsel to the Federal Reserve Bank
of New York, r e l a t i v e to t h i s matter. Mr. Logan informs us
that in New York a l l claims f o r preference have to be submitted to a court f o r determination p r i o r to the granting of
the preference. He s t a t e s that the attorneys f o r the Superintendent of Banks of the State of ITew York take the p o s i t i o n
that if the Federal Reserve Bank charges the items involved
in an unpaid remittance d r a f t back to t h e i r endorsers,
such charge-back c o n s t i t u t e s in i t s e l f an election on the
p a r t of the Federal Reserve Bank to t r e a t the items as d i s honored, thereby foreclosing any r i g h t under Section 13
of the code which would otherwise grant a preference. ?e
have had no such contention r a i s e d in any of the s t a t e s of
t h i s d i s t r i c t which have adopted the Uniform Code. I s t a t e d
to Mr. Logan that I could not possibly see how the act of
the Federal Reserve Bank in charging back the checks involved in an unpaid remittance d r a f t constituted an election
on i t s p a r t to accept the r e l i e f granted under Section 11
of the code r a t h e r than that under Section 13. I t seems to
me t h a t the act of charging the items back to our endorsers
i s e s s e n t i a l l y a matter between the Federal Reserve Bank
and i t s endorsers and in no way involves the r i g h t of the
Federal Reserve Bank or i t s endorsers as a claimant against
the insolvent bank. If you agree with me in t h i s contention,
we w i l l continue to charge the items back as soon as we are
n o t i f i e d of the insolvency of a s t a t e member bank in a l l
cases where we hold an unpaid remittance d r a f t .
To do otherwise than charge back would seem to me
to be extremely dangerous f o r the Federal Reserve Bank. If
we do not n o t i f y our endorsers that the items which they have
sent to us f o r c o l l e c t i o n remain unpaid and that the c r e d i t
given them under the immediate a v a i l a b i l i t y schedule has
been reversed, i t may very e a s i l y occur that our endorsers
w i l l claim t h a t t h e i r r i g h t s were prejudiced by not having
been n o t i f i e d of the f a t e of t h e i r items.
Another complication a r i s e s on account of the f o l lowing f a c t s . Two d i s t i n c t r i g h t s are granted to our endorsers - that of t r e a t i n g the items as dishonored under the
provisions of Paragraph 11, and that of obtaining a p r e f e r r e d claim against the insolvent bank under the provisions
of Paragraph 13. In nearly every s t a t e , we are not oermitted to f i l e
f o r l e s s t h a n the amount of t h e unpaid remittance d r a f t ; in
other words, we are not e n t i t l e d under our general procedure



X-7008-c
Walter Wyatt, Esq.

June 15, 1931.

to p r e d i c a t e our claim upon anything other than the unpaid
remittance d r a f t . I t may well occur that some of our endorsers
would p r e f e r to have t h e i r original checks back, t r e a t e d as
dishonored by non-payment, so that they might have recourse
against the makersof the checks, while others of our endorsers
would p r e f e r to obtain a preference against the insolvent bank.
In such event, we w i l l be placed in a dilemma, a r i s i n g from
one set of i n s t r u c t i o n s from one set of endorsers and other
i n s t r u c t i o n s from other endorsers.
For the p r e s e n t , however, we intend to pursue our
r i g h t s under Paragraph 13 of the Uniform. Code and obtain
p r e f e r r e d claims f o r our endorsers in every case where t h i s
may be done.
You w i l l doubtless r e c a l l some correspondence
had f a i r l y r e c e n t l y between your o f f i c e and the Federal Reserve Bank of New York, involving the question of the
r e t u r n of items drawn on an insolvent national bank, the name
of which now escapes me. In that case, if my memory serves
me c o r r e c t l y , Mr. Logan requested the receiver of the insolvent national bank to return the items to him as d i s honored. The matter was r e f e r r e d to the Office of the Compt r o l l e r of the Currency, and a f t e r some correspondence, and
I believe a f t e r negotiations on your p a r t , the Comptroller
agreed to r e t u r n the items as dishonored by non-payment,
s t a t i n g , however, that h i s act in so doing was not to be considered as a precedent f o r f u t u r e cases.
Recently, we had an insolvency in a national
bank in Washington. Having in mind the experience of
Mr. Logan in obtaining the return of the items involved in
h i s matter, we demanded of the receiver that he return to
us the items involved in our unpaid cash l e t t e r . W also
e
transmitted t h i s demand to the O f f i c e of the Comptroller of
the Currency. The Comptroller's O f f i c e very promptly advised us that they would not permit t h e i r receiver to r e t u r n
the items to us. The New York case was c i t e d as a precedent,
but they s t a t e d that they had reversed t h e i r previous
p o s i t i o n and would not now consent to the return of the
items. We argued the matter a t some length by correspondence,
but obtained only a f l a t r e f u s a l , The Comptroller did,
however, authorize the agent in charge to f u r n i s h us with
photostat copies of the checks in question.




X"7008-c
''alter Wyatt» Eaqi

•» 5 -

June 15, 1931.

Having obtained, t h i s r e f u s a l , we informed the Compt r o l l e r ' s O f f i c e that we elected to proceed under the provisions of Paragraph 13 of the Uniform Code in Washington and
t h a t we would ask for a preference. We were equally promptly
advised by the Comptroller's Office that the would i n s t r u c t h i s
r e c e i v e r s not to grant a preference, inasmuch as t h i s would "be
a v i o l a t i o n of the provisions of the National Bank Act.
I r e f e r to these matters merely as a matter of int e r e s t . I think the Comptroller i s undoubtedly r i g h t in r e f u si n g to allow h i s receivers to proceed under the provisions
of Paragraph 13, but I cannot, for the l i f e of me, see why he
should r e f u s e to allow h i s receivers to proceed under 'the provisions of Paragraph 11. The return of the checks involved
in an unpaid remittance d r a f t , marked "Paid in Error", or
with other similar designation, the reversal of the e n t r i e s on
the books of the f a i l e d bank and the cancellation of the o b l i gation a r i s i n g out of the issuance of the unpaid remittance
d r a f t , i t seems to me places the drawee or payor bank exactly
in the p o s i t i o n i t was in before the transaction took place
and does not in any way involve a preference to anyone. I
took t h i s p o s i t i o n in the case which Mr. Logan r e f e r r e d to me
sometime ago and s t i l l believe that the provisions of Paragraph 11 of the Uniform Check Collection Code are applicable
to national banks and are binding upon the receivers of insolvent national banks. However, we s h a l l , unless otherwise
advised, continue to f i l e claims against insolvent national
banks, asking f o r and accepting a general claim.
This brings me to the discussion of another phase
of t h i s check c o l l e c t i o n question in which I am i n t e r e s t e d and
in r e l a t i o n to which I would l i k e your advice.
I have observed that some of the other Federal
Reserve Banks have, in the p a s t , indulged in l i t i g a t i o n involving unpaid remittance d r a f t s . In such cases, an attempt has
been made under the theory of the P e t e r s case to obtain
preference in behalf of the endorsers. I t has been and i s my
opinion that i t i s not a part of the duty of a Federal Reserve
Bank to indulge in l i t i g a t i o n as a p l a i n t i f f in a case involving the f a t e of an unpaid remittance d r a f t . I have always
taken the p o s i t i o n , and have so advised the o f f i c e r s of t h i s
bank, that the Federal Reserve Bank of San Francisco, a c t i n g
in i t s capacity as a gratuitous collection agent, i s under no
duty other than that of exercising ordinary care and diligence
in the c o l l e c t i o n of checks. I have also taken the p o s i t i o n




X-7008-c
Walter Wyatt, Esq.

June 15, 1531.

" 6 -

that where a member bank f a i l s with a cash l e t t e r outstanding,
we should advise our endorsers of the f a t e of the items in which
they are i n t e r e s t e d and await t h e i r i n s t r u c t i o n s as to the
f i l i n g of claims. I do not believe i t i s the duty of a Federal
Reserve Bank to enter l i t i g a t i o n in an e f f o r t to obtain in "behalf of i t s endorsers any s p e c i f i c kind of r i g h t against an
insolvent bank. In the case of the insolvent national bank in
Washington, to which I r e f e r r e d previously, one of our endorsers had been advised by i t s attorneys that Section 13 of the
Uniform Code was applicable to national banks and t h a t i t was
e n t i t l e d to a preference. Therefore, when we were advised by
the O f f i c e of the Comptroller of the Currency that no p r e f e r ence would be granted, we merely transmitted t h i s information
back to our endorsers, with the statement that if they desired
to l i t i g a t e the matter we would be glad to assign the claim
represented by the unpaid remittance d r a f t f o r such action as
our endorsers might see f i t to take.
This p o l i c y has, no doubt, saved us a great deal of
l i t i g a t i o n and, possibly, has saved us the establishment of
some precedents which would have proved embarrassing to t h i s
and other Federal Reserve Banks. We have been made defendant
in a number of check collection s u i t s , a l l predicated upon the
old theory of the Molloy case, but we have won them a l l and in
some cases have obtained opinions which have been of advantage
r a t h e r than disadvantage.
I am not attempting to c r i t i c i s e the action h e r e t o f o r e taken by other Federal Reserve Banks or the counsel thereof
but I do b e l i e v e that a uniform policy of "Hands Off" should be
adopted by a l l Federal Reserve Banks in a l l cases involving unpaid checks and unpaid remittance d r a f t s . I would l i k e very
much to have your opinion on t h i s subject.
I have wandered about considerably in t h i s l e t t e r ,
but I thought you would be i n t e r e s t e d in knowing of the new
conditions which have been created by the adoption of the
Uniform Check Collection Code in the three s t a t e s which I have
mentioned.
If anything which I have said herein does not agree wi
your opinion, I should l i k e very much to have your observations.
With kindest personal regards, I am
Very t r u l y yours,
ACA: M
A



(Signed)

Albert C. Agnew
Counsel.

COPY

X-7008-a
FEDERAL RESERVE BANK
OF RICHMOND

June 17, 1931

Federal Reserve Board,
Washington, D. C.

Attention Mr. Walter Wyatt,
General Counsel

Dear Mr. Wyatt;
I enclose a carbon copy of my l e t t e r today to Mr.
Loaan upon the subject of the decision of the Supreme Court
of South Carolina which may "be applicable to the Uniform
Bank Collection Code.
I remain
Very t r u l y yours,
(SIGNED) M. G. Wallace
M.

M W EC
G :
enclosure




Gr. Wallace,
Counsel.

X-7008-a-l

COPY

FEDERAL

OF RICHMOND
June 17, 1931

Mr. Walter S. Logan,
Counsel mid. Deputy Governor,
Federal Reserve Bank of ITew York,
Hew York, H. Y.
Dear Mr. Logan;
I have received from the Federal Reserve Board an i n t e r e s t ing f i l e of correspondence upon the subject of the a p p l i c a t i o n of Section 11 of the Uniform Bank Collection Code to n a t i o n a l banks. In connection with t h i s general s u b j e c t I am c a l l i n g your a t t e n t i o n to the
decision of the Supreme Court of South Carolina in a case e n t i t l e d
Ex p a r t e Wachovia Bank and Trust Co., 158 S. B. 214.
That p a r t i c u l a r case dealt with the c o n s t i t u t i o n a l i t y of an
a c t of the L e g i s l a t u r e of South Carolina which gave p r i o r i t y to claims
f o r c o l l e c t i o n items including checks on a f a i l e d bank. The Supreme
Court of the s t a t e has f i l e d three d i f f e r e n t opinions in the case*
In the f i r s t two i t held the s t a t u t e u n c o n s t i t u t i o n a l because i t s t i t l e
r e f e r r e d only to the l i a b i l i t y of banks in*tho s t a t e sending checks
f o r c o l l e c t i o n d i r e c t l y to the drawee, while the second s e c t i o n of the
act attempted, to define the p r i o r i t y of claims against banks in the
s t a t e . After r e a r gument, the second opinion of the court indicated
t h a t the act might bo u n c o n s t i t u t i o n a l upon other grounds, as making
a r b i t r a r y d i s t i n c t i o n between the r i g h t s of banks within the s t a t e
and banks without the s t a t e . The t h i r d opinion held the a c t uncons t i t u t i o n a l upon the grounds set out in the opinion. The court does
not s t a t e s p e c i f i c a l l y whether or not i t r e f e r s to the Federal or
s t a t e c o n s t i t u t i o n , but i t s statements appear to r e f e r to the f o u r t e e n t h
Amendment, and the court holds that the d i s t i n c t i o n mado between
checks forwarded by one bank to another and checks presented or
forwarded by i n d i v i d u a l s to a bank i s repugnant to the c o n s t i t u t i o n a l
p r o v i s i o n securing due process of law. The court probably intended to
say "the equal p r o t e c t i o n of the law."
The court r e f e r s in i t s opinion to the Act of 1930, 36
S t a t u t e s 1368, which i s the Uniform Bank Collection Code, and s t a t e s
that i t i s not r e t r o a c t i v e , - s o , of course, the decision cannot be taken
as r e f e r r i n g to the Collection Code, but some p a r t s of the reasoning
of the court would, be applicable to the code, as i t apparently makes
a d i s t i n c t i o n between checks presented by mail and those deposited or
presented a t the counter of the drawee bank, and apparently r e f e r s
only to checks presented through the mails by one bank to another.



X-7008-d-l
F2DTRAL BlMVB B I K OB RICHMOND
AT

Mr. Walter g. Logan,
Counsel and Deputy Governor,
Federal Reserve Bank of Hew York

Page 2

June 17, 1931.

I t seems to me that the d i s t i n c t i o n between checks handled
through banking channels and those presented by individuals i s a reasonable d i s t i n c t i a n and that the s t a t u t o r y r u l e might be applicable to the
payment of one class without offending the c o n s t i t u t i o n a l guarantee of
the equal p r o t e c t i o n of the law.
I have been endeavoring to a d j u s t a claim of t h i s character
with the attorney f o r the receiver of a f a i l e d s t a t e bank in South
Carolina and he has suggested that the Act of 1930 may be unconstitutional
upon the grounds suggested in the opinion to which I r e f e r . He has,
however, taken no d e f i n i t e stand as yet. I t occurred to me that inasmuch as you have been i n v e s t i g a t i n g t h i s question somewhat f u l l y you
would be i n t e r e s t e d in examining the opinion in the case mentioned
above.
With kindest regards, I am
Very t r u l y yours,

M. G. Wallace,
Counsel.
MOW:EC




COPY

X-7008-e
FEDHAL RESERVE BAH
OF RICHMOND
July 17, 1931

Federal Reserve Board,
Washington, D. C.
Attention;

Mr. Walter Wyatt, General Counsel.

Dear Mr. Wyatt;
I enclosc a copy of a memorandum dated July 8th
from myself to the Executive Committee of t h i s bank recommending
a method to "be used when checks sent to a national bank a r e
charged to the drawers but remittance i s not received by a
Federal reserve bank.
The "plan suggested in the memorandum has been approved by the Executive Committee and w i l l be followed by t h i s
bank in cases of the f a i l u r e of national banks in the s t a t e s
of South Carolina, West Virginia, and Maryland.
We have acted in accordance with t h i s system in
the case of the F i r s t National Bank of Federalsburg, Md.,
which closed '"hile we were discussing the inauguration of
the method outlined in the memorandum. I have not, however,
received d e f i n i t e advice as to whether or not the receiver
w i l l r e t u r n the checks which we may request him to r e t u r n .
You w i l l notice that the system outlined in the
memorandum i s in a l l material respects the same as t h a t suggested
by Mr. Logan in a similar case. I am merely sending you
copies of the memorandum and our forms in order that your
o f f i c e may be advised of the course that we are following.
For your information, I also enclose a l i s t of the s t a t e s
which have adopted the Bank Collection Code. I believe that
t h i s l i s t i s correct to July 1st.
Very t r u l y yours,
(Signed)

MW E
G




M. G. Walla.ce,
M. G. Wallace,
Counsel.

COPY

X-7008-e-l
July 8, 1931

Executive Committee
M. G-. Wallace, Counsel.

Handling of Checks Sent
to National Banks which are Charged
to the Drawers but for which No Remittance i s Made Before Suspension of
the Drawee Bank.

Dear Sirs:
The Uniform Bank Collection Code has been adopted in three s t a t e s of
t h i s d i s t r i c t ; that i s to say, Maryland, South Carolina, and 7 e s t Virginia, which
appears as Section 93, A r t i c l e 11, of the Code of Maryland, Laws of 1929, Page
1147, and as Section 11, Chapter 822, Statutes of South Carolina of 1930, Page
1371. In West Virginia the act has j u s t become e f f e c t i v e and has not been
o f f i c i a l l y p r i n t e d , but I am informed that i t w i l l appear in the Acts of the
Legislature f o r 1931.
Under Section 11 of t h i s code i t is provided that if any check be sent
to a drawee bank f o r remittance and the drawee bank f a i l e d to remit in solvent
c r e d i t s the forwarding bank may at i t s election t r e a t such check as dishonored and
proceed as in the case of a check a c t u a l l y returned dishonored, or at i t s election
e s t a b l i s h a claim against the f a i l e d bank. While the Act recognizes t h a t the
forwarding bank i s in most cases an agent f o r the depositor, i t apparently gives
to the forwarding bank the r i g h t of election, and provides t h a t no claim shall
be made against the forwarding bank because of i t s act in making e ithe r election
if i t has acted in good f a i t h .
Section 13 of the Code provides t h a t claims f o r checks and other
instruments sent to a bank for collection and remittance shall c o n s t i t u t e a
p r i o r l i e n on the a s s e t s of the f a i l e d bank.
The Uniform Code by i t s terms i s applicable to a l l banks in the s t a t e ;
consequently, I think i t clear that both of the sections mentioned above are
applicable to s t a t e b a nks.
I am inclined to think that the section providing that such claims
shall be p r i o r l i e n s i s not applicable to national banks. Claims against national
banks are determined by the National Bank law as i n t e r p r e t e d by the federal
courts, and these courts have c o n s i s t e n t l y held that the c o l l e c t i o n of a check
on a f a i l e d hank by the mere cancellation of i t and charging of i t to the
drawer does not c r e a t e a t r u s t fund but r e s u l t s in a mere t r a n s f e r of l i a b i l i t y
from the drawer of the check to the holder, so t h a t such a claim i s merely a
general claim. The National Banking Act provides that a l l c r e d i t o r s of national
banks s h a l l be paid equally and r a t a b l y , and I do not think t h a t a s t a t e s t a t u t e
could give p r i o r i t y to a claim against a national bank merely by declaring that
the obligation of a national bank should be deemed that of a t r u s t e e r a t h e r than
that of a debtor, when the federal courts had decided t h a t the r e l a t i o n s h i p was
that of a debtor. In other words, Section 13 appears to me to be a law providing f o r the p r i o r i t y of claims against insolvent e s t a t e s and t h e r e f o r e
inapplicable to national banks.



521
X-7008-e-l
M y 8, 1931
Executive Committee
M. G. Wallace, Counsel.

Handling of Checks Sent to national
Banks which are Charged to the Drawers "but
for which No Remittance i s Made Before
Suspension of the Drawee Bank.
— 2 —

I think, however, that Section 11, which gives to the forwarding bank
an option to t r e a t the check as dishonored and hold the drawer and p r i o r endorsers, i s not a s t a t u t e granting p r i o r i t y to any p a r t i c u l a r claim, f o r i t s
only e f f e c t i s to provide that the claim which in the absence of the s t a t u t e
the holder has against the f a i l e d bank s h a l l , if the holder e l e c t s to proceed on
the drawer, be t r a n s f e r r e d to the drawer. I t seems to me, t h e r e f o r e , that t h i s
section of the s t a t u t e i s merely a law of what c o n s t i t u t e s the payment of a
debt and t h e r e f o r e one which operates upon national banks as upon a l l other
persons within the j u r i s d i c t i o n of the s t a t e .
I t seems to me that the above conclusions w i l l n e c e s s i t a t e a s l i g h t
modification of the course which wo have been pursuing with respect to claims
a r i s i n g out of unpaid 'cash l e t t e r s to f a i l e d banks in the s t a t e s mentioned.
We have h e r e t o f o r e been charging the amount of chocks in such l e t t e r s to our
endorsing banks, n o t i f y i n g them that unless i n s t r u c t e d to the contrary we
would prove a claim f o r t h e i r b e n e f i t . I think we could lawfully continue
such course under the s t a t u t e , as we could in every case elect to-hold the
f a i l e d bank and prove a claim f o r the b e n e f i t of the owners or holders of
checks, as the s t a t u t e expressly provides t h a t we shall not be l i a b l e f o r o.ur
act in making such e l e c t i o n .
In the case of s t a t e banks, member and non-member, i t seems to me
wise to continue t h i s course, as in almost a l l cases the holders of the checks
will p r e f e r to e s t a b l i s h a claim against the f a i l e d bank if t h i s claim i s ent i t l e d to p r i o r i t y . In the case of national banks, however, since the claim
would not be e n t i t l e d to p r i o r i t y , most check holders w i l l probably p r e f e r to
proceed upon the drawers, and while we are under no legal obligation to advise
the holders of t h e i r r i g h t s in the premises, i t seems to me that our p o s i t i o n
as agents for the holders i s such that i t would be most proper to advise them
of the s i t u a t i o n before making a f i n a l election, especially as by the terms of
the s t a t u t e we are allowed a reasonable time in which to make the election.
I am t h e r e f o r e submitting f o r your consideration a t e n t a t i v e d r a f t
of three form l e t t e r s . Letter No. 1 i s a form f o r a l e t t e r which with appropriate
changes to meet the individual case we can use in advising our endorsing banks
of the f a i l u r e of a national bank to which checks have been sent but from which
we have not obtained f i n a l payment. Letter No. 2 i s a form l e t t e r to be enclosed
with l e t t e r No. 1 f o r use by our endorsing banks in giving us i n s t r u c t i o n s .
Letter No. 3 i s a form l e t t e r to be used as a suggestion in w r i t i n g to the
examiner in charge or the receiver of the bank n o t i f y i n g him of our action.




X-7008-e-l
July 8, 1931
Executive Committee
M. G. Wallace, Counsel.

Handling of Checks Sent to national
Banks which a r e Charged to the Drawers but
f o r which JTo Remittance i s Made Before
Suspension of the Drawee Bank.
- 3 -

I had intended submitting these l e t t e r s to you with the suggestion that
I might forward them to our Baltimore Branch and our Charlotte Branch with ins t r u c t i o n s to use them in any f u t u r e case; but before I was able to submit them
f o r your approval we were advised of the f a i l u r e of the F i r s t National Bank of
Federalsburg, Md., and, t h e r e f o r e , a f t e r discussing the matter with Mr. Peple
and Mr. Seay, and also discussing the matter by telephone with Mr. Dudley, I
seat to Mr. Dudley a d r a f t of l e t t e r s s u b s t a n t i a l l y in the form attached f o r
use in that s p e c i f i c case.
This p a r t i c u l a r question has received some consideration from counsel
for other Federal reserve banks, p a r t i c u l a r l y by Mr. Logan, General Counsel and
Deputy Governor of the Federal Reserve Bank of New York, i l l counsel for Federal
reserve banks who considered the question hold s u b s t a n t i a l l y the same views as
those expressed above as to the e f f e c t of the s t a t u t e and i t s application to
national banks. I might add that the s t a t u t e i s in force in sixteen s t a t e s and
so i s in force in at l e a s t one s t a t e of almost every Federal reserve d i s t r i c t .
jtfo d e f i n i t e opinions were expressed by counsel f o r the other Federal reserve
banks as to whether i t would be wiser f o r a Federal reserve bank to elect to
t r e a t checks as dishonored without r e f e r r i n g the matter to endorsing banks or
whether i t would be wiser to f i r s t r e f e r the matter to endorsing banks. In a
single case the Federal Reserve Bank of 2?ew York elected to t r e a t a l l checks
in an unpaid cash l e t t e r as dishonored and the Comptroller of the Currency
therefore returned the checks, but in doing so s t a t e d that the Comptroller's
Office would not commit i t s e l f as to i t s actions in f u t u r e cases. Mr. Logan
did not s t a t e in h i s correspondence whether the election was made without
reference to h i s endorsing banks or not, but I gathered from the correspondence
that the number of checks in the cash l e t t e r were few and that he seemed to be
confident that h i s endorsing banks desired to have them returned.
Very t r u l y yours,

M. G. Wallace,
Counsel.
MW S
G




523
X-7008-O-2

COPY

1;
Letter Giving Notice of Failure of a National Bank in West Virginia,
Maryland, or South Carolina, which has not Paid f o r Checks Drawn on
Such Bank Sent to I t .

TO THE M M E H N ADDRESSED:
E BR A K
The checks received from you in your cash l e t t e r as shown below
were sent by us to the
National Bank, on which they were
drawn, in our cash l e t t e r of
. In settlement f o r checks in
t h i s cash l e t t e r the drawee bank sent us (an authorization to charge i t s
reserve account) (a d r a f t ) covering the amount of checks (but before t h i s
authorization was acted on or honored by us we were advised that the
'
National Bank was closed) (but before t h i s d r a f t was
paid the
National Bank was closed.)
Since a l l checks are credited subject to f i n a l payment, we have
charged the amount of these checks to your account.
We are advised that under the Bank Collection Code which i s in
f o r c e in (West Virginia, South Carolina, or Maryland, as the case maybe)
we have an option to t r e a t such checks as dishonored or to f i l e a claim
against the f a i l e d bank, which claim we are advised w i l l probably be c l a s s i f i e d
under the national banking act as a general claim.
If you d e s i r e to t r e a t the check as dishonored, you should give
notice of dishonor to a l l p r i o r endorsers and the drawer and look to them for
payment and we w i l l demand and endeavor to obtain the return of the check.
If you f i l e a claim against the f a i l e d bank, you will r e l e a s e the drawer from
f u r t h e r l i a b i l i t y and w i l l receive dividends on the amount of the check from
the f a i l e d bank.
As we must n o t i f y the Receiver promptly whether we elect to prove
a claim against the f a i l e d bank or to t r e a t the checks as dishonored, please
advise us as soon as p o s s i b l e , using the enclosed form, and giving the name
of the drawer of the check, if obtainable.




Very t r u l y yours,

.

Federal Reserve Bank of Richmond.

X-7008-e-3

COPY

2.

Reply Letter to "be Enclosed, with Letter Ho. 1 Giving
Directions as to Proving Claim.

Federal Reserve Bank of Richmond
Dear S i r s :
Referring to your l e t t e r of
upon
the subjcct of items drawn o,n the
'
National
Bank, we e l e c t to prove a claim against the f a i l e d hank on
the following items, and i n s t r u c t you to f i l e a claim f o r
our b e n e f i t .
Date and Total of Our Letter

Drawer

Amount of Item

We e l e c t to t r e a t the following items as dishonored and
confirm your charge to our account. Please demand a r e t u r n of
them from the receiver of the drawee hank;
Date and Total of Our Letter




Drawer

Very t r u l y yours,

Amount of Item

525
X-7008-O-4

COPY

Letter to be sent to Receiver ;,r Examiner in Charge as soon as
Possible a f t e r Failure.

Bear Sir:
We c a l l your a t t e n t i o n to the checks contained in our cash l e t t e r
sent to the
National Bank on
.
In settlement f o r t h i s l e t t e r the f a i l e d bank sent us (an authorization to charge i t s reserve account f o r the sum of ip
) (a
d r a f t Ho.
drawn on
for $
).
(Before t h i s d r a f t was paid the
Motional Bank
closed) (Before t h i s authori za.t i : n was acted on by us we received notice of the
<
closing of the
national Bank.)
In pursuance of our collection c i r c u l a r s and the Regulations of the
Federal Reserve Board we have charged the amount of these checks to our
endorsing banks.
",re wish to c a l l your a t t e n t i o n to the Bank Collection Code (Section
93, A r t i c l e 11, Code of Maryland, Laws 1929, Page 1147; Section 11, Chapter
822, S t a t u t e s of South Carolina 1930, Page 1371; Section 11, Act 1931, ^est
Virginia, as the case may be.) Under t h i s Statute we have the r i g h t at our
election to t r e a t such items as dishonored or to prove a claim against the
f a i l e d bank.
V'e have w r i t t e n to our endorsing banks for whom we acted as agent
for i n s t r u c t i o n s . As soon as we receive such i n s t r u c t i o n s we shall advise
you f u r t h e r . In the meantime we n o t i f y you not to cancel any of the items
in our unpaid cash l e t t e r if not previously cancelled and not to surrender
a,ny of such checks t : the drawers, but to hold them pending f u r t h e r advice
from us.
Very t r u l y yours,

I






Idaho,
Chapter 60, Laws 1931, Page 98.
Indiana,
Chapter 154, Act 1929, Page 514.
Kentucky,
Chapter 13, Act 1930, Page 49.
Maryland,
Chapter 454, Laws 1929, Page 1143.
Michigan,
#240 Acts 1931, not published.
Missouri,
Laws 1929, Page 205 (Section 11 omitted).
Nebraska,
Chapter 4, Laws 1929, Page 177.
Hew Jersey,
Chapter 270, Laws 1929, Page 544.
Hew Mexico,
Chapter 138, Laws 1929, Page 324.
Mew York
Chapter 589, Laws 1929, Page 1267.
Oregon,
Chapter 138, Laws 1931, Page 189.
South Carolina,
Chapter 822, Statutes 1930, Page 1368.
Washington,
Chapter 203, Laws 1929, not published.
West Virginia,
Chapter 15, Act 1931, not published.
Wisconsin,
Chapter 354, Laws 1929, Page 542.
Wyoming,
Chapter 74, Laws 1931, not published.

527
0 P Y

X-7008-f
f S b m l I ^ S V E BARK
OF 1T3K Y R
OK
September 30, 1931.
Walter Wyatt, Esq., General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Wyatt:
I am enclosing a copy of l e t t e r which I have j u s t w r i t ten to the o f f i c e of the Comptroller of the Currency f o r the a t tention of Mr. Barse in an e f f o r t to persuade that o f f i c e to permit the r e t u r n of items involved in national bank closings and
t r e a t e d as dishonored under Section 350-j of the Negotiable Instruments Law of Hew York (Section 11 of the Uniform Bank Coll e c t i o n Code).

If you can do anything to help I shall g r e a t l y

appreciate i t .

I am convinced that as a matter of law the own-

ers are e n t i t l e d to have t h e i r items returned to them and t h a t
the policy which the Comptroller's o f f i c e has followed r e c e n t l y
of not permitting the returti. of the o r i g i n a l items r e s u l t s in much
inconvenience and hardship.
Yours f a i t h f u l l y ,
(Signed)

'"alter S. Logan

Walter S. Logan,
Deputy Governor and General Counsel.
End.




528
COPY

X-7008-f-l
F5D23AL kfiSSRVB BAM
OF 1 E Y R
TW O K

September 30, 1931.
Honorable J . W. Pole,
Comptroller of the Currency,
Washington, D. C.
Attention:

Mr. George P. Barse

Dear Sir;
I enclose a copy of l e t t e r dated September 29, 1931, which
we have addressed to The Peoples National Bank of Pulaski, Pulaski,
Hew York, (notice of the closing of which we received on that date),
advising that we have requested i n s t r u c t i o n s from our forwarding
banks as to whether to t r e a t the items involved in that closing as
dishonored by nonpayment pursuant to Section 350-j of the Negotiable
Instruments Law of Hew York (Section 11 of the Uniform Bank Coll e c t i o n Code).

TThen Mr. Barse was in Mew York about two weeks ago

I urged upon him the a d v i s a b i l i t y of your o f f i c e permitting r e ceivers of closed national banks to return items which we e l e c t to
t r e a t as dishonored pursuant to Section 350-j, in the same way that
the Banking Departments of New York and Hew Jersey have permitted
the return of such o r i g i n a l items by closed s t a t e banks.
Mr. Barse suggested at t h a t time that I write to your o f f i c e and s e t f o r t h at length the reasons and a u t h o r i t i e s in support
of our p o s i t i o n that the o r i g i n a l items which are thus dishonored
should be returned by the receivers of national banks.

Due to the

pressure of other work I have been unable to do t h i s , but neverthel e s s we want to urge your o f f i c e to reconsider t h i s question in



539
X-7003-f-l
2

Honorable J . W. Pole
September 30, 1931.

connection with the closing of the Peoples National Bank of Pulaski,
Pulaski, New York, and permit the return of such of the items involved in the closing of that bank as we may elect to t r e a t as d i s honored pursuant to the provisions of Section 350-j.

I believe there

i s no doubt t h a t the return of such o r i g i n a l items by national bank
receivers i s authorized by law and our experience has demonstrated
t h a t the r e f u s a l to return them causes much inconvenience and r e s u l t s
in denying the b e n e f i t s of t h i s section of the Bank Collection Code
to the owners of such dishonored items.
I w i l l attempt b r i e f l y to o u t l i n e in t h i s l e t t e r the reasons
which seem to me to make i t clear that the owners of items involved
in the closing of national banks are e n t i t l e d to the r e t u r n of the
items when they are t r e a t e d as dishonored pursuant to the provisions
of Section 350-j.
1.

There i s no question of preference involved.

We agree

with the p o s i t i o n taken by your o f f i c e that the provisions of subd i v i s i o n 2 of Section 350-1 of the Negotiable Instruments Law of New
York (Section 13 of the Uniform Bank Collection Code) in regard to
preferences i n favor of owners of items involved in bank closings do
not apply to national banks, because they are in c o n f l i c t with the
provisions of the National Bank Act providing f o r r a t a b l e d i s t r i b u t i o n among a l l c r e d i t o r s .

Te have advised our forwarding banks ac-

cordingly whenever the question has been r a i s e d .




2.

The present question r e l a t e s only to another section

530
3

X-7008-f-l
Honorable J . W. Pole September 30, 1931

of the Bank Collection Code, Section 550-j, which has nothing to do
with preferences, or with claims against closed i n s t i t u t i o n s as such,
and which i s not in any way in c o n f l i c t with the National Bank Act,
This section provides that when a remittance d r a f t i s dishonored the
agent c o l l e c t i n g bank which has presented the items so remitted for
may, at i t s election, t r e a t any of such items as dishonored by nonpayment and thereby preserve the recourse of the owners of the items
against p r i o r p a r t i e s .

I t also permits the exercise of the same elec-

tion in c e r t a i n other s p e c i f i e d circumstances.

These circumstances

are not at a l l confinsd to cases of bank closings, and in f a c t the
section makes no reference whatever to the subject of bank suspensions
or insolvencies.

For example, under the terms of Section 350-j the

option to t r e a t an item as dishonored a r i s e s whenever a drawee bank's
remittance d r a f t i s dishonored i r r e s p e c t i v e of whether the reason for
such dishonor i s the closing of the remitting bank or some other
reason.
According to the weight of a u t h o r i t y , in the absence of any
s t a t u t o r y provision, the drawer of a check is discharged when the
bank on which the check i s drawn issues i t s remittance d r a f t t h e r e f o r ,
and charges the check against the maker's account; so t h a t if the
remittance d r a f t i s not paid the owner of the item has only the obl i g a t i o n of the remitting bank.

In some s t a t e s , however, the law i s

otherwise, and the drawer of the check i s not discharged u n t i l the
remittance d r a f t i s a c t u a l l y paid.

The e f f e c t of t h i s section of the

Bank Collection Code is to amend and s e t t l e the law on t h i s p o i n t , by




4

X /008—f—1
—
Honorable J . ?« Pole

September 30, 1931

creating an option so that the owner of the item may choose whichever
he p r e f e r s , i . e . , to keep a l i v e h i s r i g h t s against p r i o r p a r t i e s including the maker, or to r e l y only on the obligation of the remitting
bank.

This section i s , t h e r e f o r e , merely an amendment of the local law

r e l a t i n g to negotiable instruments and, as i t does not c o n f l i c t with any
provision of the National Sank Act, i t seems to me that there can be
no doubt that i t applies to cases in which national bank depositors
issue checks to t h e i r c r e d i t o r s in settlement of o b l i g a t i o n s .
The incidental e f f e c t of the exercise of the option to t r e a t
a check as dishonored in accordance with the provisions of Section
350-j i s a l s o , of course, to c o n s t i t u t e the maker of the check, instead
of the owner, the c r e d i t o r of the drawee bank.

This does not, however,

prevent the application of the section to checks drawn on national
banks, f o r the general p r i n c i p l e of law i s well established that the
contracts and legal r e l a t i o n s h i p s between national banks and the p a r t i e s
with whom they deal are governed by local law i f such local law does
not c o n f l i c t with any provision of the National Bank Act.
For your convenience I quote Section 350-j of the Negotiable
Instruments Law of New York, (Section 11 of the Uniform Bank Collection
Code), in f u l l :
1
1

Sec. 350-j. Election to t r e a t as dishonored items
presented by mail. Where an item i s duly presented by mail
to the drawee or payor, whether or not the same has been
charged to the account of the maker or drawer thereof or
returned to such maker or drawer, the agent c o l l e c t i n g bank
so presenting may, at i t s election, exercised with reasonable
d i l i g e n c e , t r e a t such item as dishonored by nonpayment and
recourse may be had upon p r i o r p a r t i e s thereto in any of the
following cases:



, 532
5

X-7008-f-l

Honorable J .

Pole

September 30, 1931.

(1) Whore the check or d r a f t of the drawee or payor
hank upon another bank received in.payment t h e r e f o r s h a l l
not be paid in due course;
(2) Where the drawee or payor bank shall without r e quest or a u t h o r i t y tender as payment i t s own check or
d r a f t upon i t s e l f or other instrument upon which i t i s
primarily liable;
(3) Where the drawee or payor bank shall give an unrequested or unauthorized c r e d i t therefor on i t s books or the
books of another bank; or
(4) Inhere the drawee or payor shall r e t a i n such
item without remitting therefor on the day of r e c e i p t or
on the day of maturity if payable otherwise then on demand
and received by i t p r i o r to or on such day of maturity.
Provided, however, that in any case where the drawee oy
payor bank s h a l l return any such item unpaid not l a t e r than
the day of r e c e i p t or of maturity as aforesaid in the exerc i s e of i t s r i g h t to make payment only at i t s own counter,
such item cannot be t r e a t e d as dishonored by nonpayment and
the delay caused thereby shall not r e l i e v e p r i o r p a r t i e s from
liability.
Provided f u r t h e r that no agent c o l l e c t i n g bank shall be
l i a b l e to the owner of an item where, in the exorcise of
ordinary care in the i n t e r e s t of such owner, i t makes or does
not make the election above provided or takes such steps as
i t may deem necessary in cases (2), (3) and (4) a,bove."
3.

In cases in which the election to dishonor an item i s ex-

ercised pursuant to Section 350-j, the owner of the item continues to
have recourse against the p r i o r p a r t i e s including the maker, and the
owner has t i t l e to and r i g h t to possession of the item, j u s t as he
would have to any bond or other security belonging to him which the
bank had in i t s possession f o r safekeeping.

I t i s a great inconven-

ience, and a r e a l hardship and i n j u s t i c e , to the owner to deny him
possession of the dishonored item which i s his property.




To be sure,

6

X-7008-f-l

Honorable J . T. Pole

September 30, 1931.

i t may "be t h e o r e t i c a l l y possible for the owner of the item to bring
s u i t on a copy of i t against the maker and other p r i o r p a r t i e s , but
t h i s t h e o r e t i c a l a b i l i t y to sue i s not an adequate remedy.

He wants

to get h i s money without s u i t and as a p r a c t i c a l matter the f a c t that
he can not r e t u r n the o r i g i n a l item very o f t e n prevents him from accomplishing t h i s .

This has been brought out in a number of instances

in connection with the closed national banks in t h i s d i s t r i c t .

That

the i n a b i l i t y to obtain the o r i g i n a l item o f t e n r e s u l t s i n denying to
the owner the r i g h t s which i t was intended he should acquire under t h i s
provision of law i s shown by the f a c t that we are i n s t r u c t e d to t r e a t
as dishonored a much smaller proportion of the items involved in
national bank closings than of items involved in s t a t e bank closings.
In the case of the Queensboro National Bank, Corona, Hew York, the
l a s t national bank to close in t h i s d i s t r i c t p r i o r to The Peoples National Bank of Pulaski, Pulaski, New York, we have received i n s t r u c t i o n s
to t r e a t as dishonored only 51 per cent of the items concerning which
we have heard to date (55 out of a t o t a l of 212); whereas in the case
of the l a s t s t a t e bank closing, The Capitol Trust Company, Schenectady,
New York, we have received i n s t r u c t i o n s to t r e a t as dishonored 78 per
cent of the items concerning which we have heard to date (71 out of a
t o t a l of 91).
4.

I t does not seem to me that i t i s oossible f o r the Comp-

t r o l l e r ' s o f f i c e to avoid taking a d e f i n i t e stand on the question of
whether Section 350-j applies to national banks.

?hen the Federal

Reserve Bank, acting under i n s t r u c t i o n s from the owners of items,



7

X-7008-f-l
Honorable J . W. Pole

September 30, 1931.

t r e a t s the items as dishonored and demands the return of them by the
receiver on the ground that they are the property of such owners, I do
not see how, in the absence of an adverse claim on the n a r t of some
t h i r d p a r t y , t h f t demand can be refused, unless the Comptroller's o f f i c e takes the a f f i r m a t i v e position that Section 350-j does not apply
to national banks.
5.

If the receivers of closed national banks w i l l comply

with our demand f o r the return of the o r i g i n a l items which we elect
to t r e a t as dishonored under Section 350-j, we will be glad to make
p h o t o s t a t i c copies of such items at our own expense and send such
copies to the r e c e i v e r s , so that the records of the closed b^nk will
be complete.
I am sorry that I have not had time to supplement t h i s l e t t e r
with the c i t a t i o n of legal decisions in suoport of our p o s i t i o n , but,
f r a n k l y , i t does not seem to me that the c i t a t i o n of a u t h o r i t i e s i s
necessary or would be p a r t i c u l a r l y h e l p f u l .

I know of no court decision

on the p r e c i s e p o i n t , and I f e e l sure that there i s none; so that i t
would only be p o s s i b l e to c i t e a u t h o r i t i e s f o r the general p r i n c i p l e s
of law involved, and I believe these p r i n c i p l e s are a l l well established
and w i l l be conceded by your o f f i c e without the c i t a t i o n of any authorit i e s to support them.
We hope your o f f i c e will give t h i s matter c a r e f u l consideration, and w i l l permit the receiver of The Peoples National Bank of
Pulaski, Pulaski, Hew York, to return the items involved in the closing
of that bank which we may elect to t r e a t as dishonored under Section




8

X-7008-f-l

Honorable J . T. Pole
350-j Of the Negotiable Instruments Law of New York.

September 30, 1931.

We f e e l very

strongly that both as a matter of p r i n c i p l e and as a matter of p r a c t i c a l
j u s t i c e the owners of such items are e n t i t l e d to have t h e i r property
returned to them.

The Federal Reserve Banks, as you know, act only

as c o l l e c t i n g agents and t h i s bank has no i n t e r e s t in the matter except
to f u l f i l l i t s duty as such agent and to work out a procedure which
w i l l be as e f f e c t i v e and convenient as possible to a l l concerned.
We shall appreciate i t if you w i l l l e t us have your reply
as soon as p o s s i b l e .
Very t r u l y yours,

Walter S. Logan,
Deputy Governor and General Counsel.
End.
WSLrJMC




0

P

X-7008-f-2

Y
COPY
FEDHAL 3ESEHV3 EAFK
OF FEW Y R
OK

September 29, 1931.
Registered Mail
The Peoples Mational Bank of Pulaski,
Pulaski, New York.
and
Receiver, or Examiner in charge of
The Peoples Mational Bank of Pulaski,
Pulaski, Few York.
Gentlemen;
The d r a f t Ho. 12041 of The Peoples National Bank of Pul a s k i , Pulaski, Few York, dated September 28, 1931, drawn on the
Federal Reserve Bank of Hew York to the order of Federal Reserve
Bank for $3,192.28, received by us in remittance for c e r t a i n items
drawn on said The Peoples National Bank of Pulaski, Pulaski, Few York,
which we had presented to i t by mail, was not paid due to notice of the
closing of said The Peoples National Bank of Pulaski, Pulaski, Few
York, ^e have t h e r e f o r e charged said items back to the forwarding
banks from which we received them f o r c o l l e c t i o n , and have requested
such banks to i n s t r u c t us whether or not to t r e a t such items as d i s honored by nonpayment pursuant to the provisions of Section 350-j of the
negotiable Instruments Law of Few York (Section 11 of the so-called
Uniform Bank Collection Code).
If in reply to such requests wc are
instructed to t r e a t some or a l l of said items as dishonored, we w i l l
send appropriate n o t i c e or notices to said The Peoples National Bank
of Pulaski, Pulaski, ITew York, and to the receiver or examiner in charge
thereof, in accordance with such i n s t r u c t i o n s . In such n o t i c e or
notices we will of course demand the return of any items which we may
be instructed to t r e a t as dishonored. In the meantime, we request said
The Peoples National Bonk of Pulaski, Pulaski, Few York, and the r e ceiver or examiner in charge thereof to r e t a i n possession of a l l
said items and, of course, not to cancel any of said items nor r e turn any of said items to the makers or drawers.
Very t r u l y yours,
Walter S. Logan,
Deputy Governor and General Counsel.

WSL:GSR
(Copy to the Comptroller of the
Currency, Washington, D. C.)




X-7008-g
FEDERAL RESERVE 5AITK
OF A

YR
OK
October 6, 1931.

Walter Wyatt, Esq., General Counsel,
Federal Reserve Board.,'
Washington* D. C.
Dear Mr. Wyatt;'
I enclose a copy of a l e t t e r and i t s enclosure
which I have sent today to the o f f i c e of the Comptroller
of the Currency for the a t t e n t i o n of Mr. Barse, supplementing my l e t t e r of September 30, concerning The Peoples Nat i o n a l Bank of Pulaski, Pulaski, Hew York, copy of which
was forwarded to you on that day.
Yours f a i t h f u l l y ,

(Signed)

Walter S. Logan

Walter S. Logan,
Deputy Governor and General Counsel.
Encs.




P

Y

X-7008-g->l
C
0
P
Y

FIDF2AL RTSERVE BMK
OF FEW Y R
OK

October 5, 1931.
Honorable J .
Pole,
Comptroller of the Currency,
Washington, D. C.
Attention:

Mr. George p. Barse

Dear SirIn our l e t t e r of September 30, 1931, wo requested you to
permit the receiver or examiner in charge of The Peoples Fational
Bank of Pulaski, Pulaski, Mew York, to return such of the items
involved, in the closing of that bank as we might e l e c t to dishonor
pursuant to the provisions of Section 350-j of the Negotiable Instruments Law of iTew York.

I now enclose a copy of l e t t e r dated

October 5, 1931, which we have written The Peoples National Bank of
Pulaski, P u l a s k i , Few York, and to the receiver or examiner in
charge t h e r e o f , advising t h a t , in accordance with the i n s t r u c t i o n s
we have received to date, we e l e c t to t r e a t c e r t a i n items as d i s honored.
We w i l l be glad to receive your reply to our l e t t e r of
September 30, 1931, as soon as i t i s possible for you to l e t us
have i t .
Yours very t r u l y ,

Snc.
WSL:Jt,;C



Walter S. Logan,
Deputy Governor and General Counsel

C O P Y

X-7008-g-2

539

COPY
FFDrSAL ,aES"2V3 I AH
Of NET Y R
OK
October 5, 1931.
The peoples National Bank of Pulaski,
Pulaski, New York.
and
Receiver or Examiner in charge of
The Peoples National Bank of Pulaski,
Pulaski, New York.
Gentlemen:
We r e f e r to our l e t t e r dated September 29, 1931, in which we
advised you that the d r a f t #12041 of Peonies National Bank of Pulaski,
Pulaski, New York, dated September 28 drawn on the Federal Reserve Bank
of New York to the order of Federal Reserve Bank for $3,092.28, received
by us in remittance f o r c e r t a i n items drawn on Peoples National Bank of
Pulaski, Pulaski, New York, which items we had presented to i t by mail,
was not paid due to the closing of said Peoples National Bank of Pulaski,
Pulaski, New York.
As we also advised you in that l e t t e r , we have requested our
forwarding banks to i n s t r u c t us whether or not to t r e a t such items as d i s honored by nonpayment, pursuant to the provisions of Section 350-j of the
Negotiable Instruments Law of New York. ?e have now received i n s t r u c t i o n s
with reference to some but not a l l of such items, and in accordance with
the i n s t r u c t i o n s already received, we hereby e l e c t , pursuant to the provisions of Section 350-j of the Negotiable Instruments Law of New York,
to t r e a t as dishonored by nonpayment the items described below which were
among those in remittance for which we received the dishonored d r a f t above
r e f e r r e d to; and we hereby request the Peoples National Bank of Pulaski,
Pulaski, New York, and the ."Receiver or Examiner in charge of the a s s e t s
of said bank, to cause said items described below to be p r o t e s t e d (except
those opposite which we have w r i t t e n "Do not p r o t e s t " ) and any others on
which appears the A.B.A. no p r o t e s t symbol of a bank indorser) and to
cause a l l said items described below to be returned to us as soon as
possible. As we receive additional i n s t r u c t i o n s from our forwarding banks
to t r e a t other items as dishonored by nonpayment we w i l l send you appropriate
notice in accordance with such i n s t r u c t i o n s .
Kindly acknowledge receipt of t h i s l e t t e r .
Very t r u l y yours,
J . M. Rice,
Assistant Deputy Governor.

Copy to: Peoples National Bank of Pulaski,
Pulaski, N. Y. sent v i a Registered Mail.




COPY

X-7008-g-2

Peoples Hational Bank, Pulaski, F. Y.
and.
Receiver or Examiner in charge of
Peoples National Bank, Pulaski, IT. Y.
October 5, 1931.

Description of items r e f e r r e d to in above
l e t t e r which we hereby elect to t r e a t as dishonored.
Amount of
Items
Do not p r o t e s t
Do not p r o t e s t

$

Do not p r o t e s t

Do not p r o t e s t
Do not p r o t e s t

30.00
2.00
2.00
10.68
10.00
12.50
38.23
93.14
4.25
12.00
40.80

Do not p r o t e s t
Do not p r o t e s t

14.13
6.12
.98
37.01
67.08
18.00
200.00

HS : C
K




Fames of
Drawers
Ada Stowell
Lina C. Williams
ii

ii

ii

Fanes of our
Forwarding Banks
H. Y. State National Bank,Albany, F.Y.
II
ii
ii
ii
ii
ii
ii

II

ii

ii

ii

ii

C. 3. Williams

ii

ii

ii

ii

ii

it

•

ii

ii

ii

ii

ii

ii

ii

ii

Everett Eastman
Dairymen's League
Corp. Assoc.
F i r s t national Bank, Lacona, F. Y.
ii
n
ii
ii
ii
Parish or Rarish
ii
ii
ii
ii
ii
Stowell
Ida Dinnie
Merchants ITatl. Bank & Tr. Co. ,
Syracuse, Ii. Y.
Acker & Murray
Watertown National Bank, Watertown,
I . Y.
ii
ii
ii
ii
H. A. Broome
ii
ii
n
n
C. H. Williams
Charmaphone Co.
Central Penn F a t l . Bank, Philadelphia,
Pa.
Unknown
Corn Exchange F a t l . Bank & Tr. Co.
Philadelphia
ii
F i r s t Tr. & Deposit Co., Syracuse,F.Y.
ii

ii
ii

ii

11

ii

u

ii