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X-4542
F D R L RESERVE BAH
EEA
O S N FRANCISCO
F A
February 17, 1926.
Walter Wyatt, Esq.,
General Counsel,
Federal Reserve Board,
Washington, D. C.
Dedr Mr. Wyatt:
I have received your letter of February 12, 1926, enclosing
copy of Mr. Strand's letter to you dated February 8, 1926, outlining
the proceedings in the case of Vacuum Oil Co. v. Federal Reserve Bank
of Dallas, et a l . Mr. Stroud's letter is very interesting and I believe he i s to be congratulated upon the result obtained.
I have had the same question presented in a l i t t l e different
form in the case of Denning against the Federal Reserve Bank of San
Francisco, f i l e d in the District Court of the State of Idaho. In this
case the Federal Reserve Bank was the only party sued. The plaintiff
was the payee of a check drawn by Fred Rush in the sum of $593. The
check was deposited by Rush in the Burley National Bank of Burley,
Idaho, and credited to his account. It was forwarded by the Burley
National Bank to the Continental National Bank of Salt Lake City and
by that bank delivered to us in the ordinary form of cash l e t t e r . The
check was sent by us direct to the drawee, Paul State Bank, of Paul,
Idaho, upon the day of i t s receipt and a remittance draft for this and
other items was received in purported payment. The draft upon presentation was dishonored by reason of the prior failure of the Paul
State Bank.
To the complaint in this action I interposed a demurrer,
general and special. In argument upon the demurrer, which I handled
personally, we contended for the adoption in Idaho of the so-called
"New York rule," the courts of that state not being definitely committed
to either rule. The argument necessarily was largely academic and in
making i t I attempted to stress the fact that the New York rule was
that adopted by the Federal courts, that i t had not been departed from
in the Malloy decision and that, in the absence of any controlling
decision, i t was the one which should be applied in this case. In a
very brief memorandum decision, copy of which I enclose, Judge Lee
adopts this position. Plaintiff having refused to amend or plead
further, judgment of dismissal has been entered. I am informed that
this case will be appealed to the Supreme Court of Idaho on the ruling
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X-4542
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upon the demurrer, in which event we will have the opportunity of a
definite decision as to the right of action on the part of the owner
of the item against the last collecting tank.
I have several similar cases pending in Idaho and Utah, in
one of which the facts alleged were similar to those alleged in the
Denning case. A general demurrer was also interposed in this other
case and the matter argued "by me upon the same brief as that used in
the Denning case. The trial court in the other case overruled the demurrer and we w i l l proceed to trial on the merits. As Mr. Stroud seems
to have done in the Vacuum Oil Co. case, i t i s our intention to stress
the question of custom.
Chapter 165 of the Idaho Session laws, 1921, to which Judge
Lee refers, in his memorandum decision, i s a statute expressly authorizing the direct routing of items by collecting banks and we shall also
contend that the enactment of this statute carries with i t by implication the right of the collecting bank to accept the drawee's draft
in payment.
Very truly yours,
(signed)
Albert C. Agnew
Counsel.
Enclosure.
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X-4542a
T. BAJLEY LEE
Judge Eleventh Judicial District
Burley, Idaho
Jan. 14, 1926
District Court
Denning vs Fed. Reserve
Mr. John S. Codding,
Burley, Idaho.
Hon. H. A. Baker,
Rupert, Idaho.
Gentlemen:An exhaustive study of this problem constrains me to
sustain defendant's general demurrer.
I am impelled to this conclusion "by the holdings of the
U. S. Supreme Court in Bank vs 1,{alloy, 68 L Ed
and Exchange
Bank vs Third Nat. Bank 28 L Ed 722 where the IIew York rule i s
expressly upheld.
Also by Chapter 165 of the Idaho Session Laws of 1921
which seems to exempt the i n i t i a l bank from l i a b i l i t y only where
with due diligence i t has attempted to collect by sending the item
to the drawee bank.
Defendant's Counsel will kindly prepare the proper order
Very truly yours,
T. BAILEY LEE
@FedFRASER