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( C.JFY) X-4706 . . :F:tDERAL RESERVE :BANK OF NEW YORK September 22, 1926. Walter Esq., General Counsel, Federal Reserve Board, Washington, D.C. ~yatt, Dear Mr. Wyatt: I beg to acknowlodg3 the receipt of your letter of September 17, with the enclosed copy of opinion of the United States District Court for the District of Nebraska in the case of War Finance Corporation v. Duff. I have read the opinion of the Court with much interest. to me that in a like case a reserve bank rediscounting p~per It occurs for one of its members might conceivably find itself subject to the same inference of agency. I have thought of means which might be adopted to prevent any inference that a member bank receiving payment on account of a note in like circumstances, received such payment as the agent of the reserve bank, if, after more mature consideration, it should be deemed advisable or naccr1sary to take action in this regard. The practice of making such payments in this cistrict, I am informed, is very rare indeed - so much so that the question is thought by some of our operating men to be of ~ great practical importance. Moreover, the present strong position of mem~er banks in this district minimizes the necessity of adopting such mcasill'es. may It has occurred to me. however, that the situation be very different in some of tho other Q.istricts, and I should like very much indeed to be advised ;;f what action has been taken, if any, by other reserve banks. It seems to me the principle is the same in all districts and that the case might be a good one for uniform treatmen~. Very truly yours, (signed) L. R. Mason L. :a. Mason, General Counsel. 264 (COPY) FEDERAL RESERVE BANK OF SAN F.RA..~CIS CO. X-4706-a September 22, 1926 Walter Wyatt, Esq., General Counsel, · Feder~l Reserve Board, 'fashirt.gton, D. c. Dear Mr. Wyatt: ~ thank you for your letter of September 17, 1926, transmitting copy of the d~cision of the District Court of the United States for the District pf N'ebraQka in the case of War Finance Corporation v. Duff. The same. qu.estion as that presented in this case has arisen several times in ~ experience hero. We have not suffered any considerable losses by reason of collections made qn paper held by this bank under rediscount and which collections we~e not rQmitted by the member bank prior to its failure, and I have not, tho~e fore, had an occasion to present the q1ostion to the court of last resort in any of tho states comprised in this district. I did, however, try tho mattor ov.t on a small item in tho courts of Utah and in that case it was dotermined by the court that the member bank, in .effecting the collection, acted as o~ agent and the maker of the paper co.uld not be required to duplicate the p~ymont. I feel, however, that when the maker of a. note ~s something on account and fails to see that the payment is indorsed on the note, or pays ~he obligation entirely and fails to requ.ire the surrender of the note, marke~ cancelled, such acts constitute negligence on the part of the maker which should prevent him from successfully maintaining that the bank to · which the payment is made is the t:igent of a discounting agency in whose possession the note is retained. For some years I have urged upon the officers of this ba.nk the advisability of recording assignments of chattel mortgages in those cases where we discount paper so secured. Our practice at the present time is to take an assignment of the mortgage but to hold it unrecorded as lor..g as the member bank from which we received it is going insti~tion. Of course in cases of this kind, the record shows that the member bank is the owner of the mort• gaga '\'lithout ass:lgnmtmt and in such casos the mortgagor might be warranted in paying the mortgage debt to the discounting bank, resting upon the assurance of the record. The officers of this bank feel, however, that the expense, time, and trouble c0nnected with recording assignments of chattel mortgages, coupled with the possible embarrassment to the member bank by reason of record notice that the mortgagor~s paper has been discounted, make it inadvisable to recorti su(:h nssignments. Perhaps it is tru.e that the practical consideration3 outweigh tho ~iek ~ntailed in leaving the assignments unrecorded. a Yours very truly, c. (Signed) Albe~t Agnew; Counsel. 265 FEDERAL LAW DEP.ARTl.IEN'T 422-430 Healey :Bldg. !\..:\i.!:!Xl'I2S RESERVE :BANK X-4706-'b OF ATLAI.1TA & P.;\.'a:CER General Counsel. September 28, 1926. Mr. Walter Wyatt, General Counsel, Federal Reserve Board, Washington, D.C. Dear Mr. Wyatt: We thank you for your letter of September 17th, enclosing copy of a recent decision in the District Court of the United States for the District of Nebraska in the case of War Finance Corporation v. ·Duff. The case is an interesting one, but one which, it seems to us, must necessarily be determinable u9on the particular facts at bar. Of course* had the note actually been in the hands of the bank for coilection, there would have been no doubt about the fact that a directed verdict in favor of the plaintiff would have been proper. We assttme that the decision of the Court must have been predicated U?On the general proposition that the War Finance Corporation had allowed persons generally to make payments for its account to the bank and that this copxse of conduct estopped the corporation from questioning the e;,:.t.hori ty of the bank to receive such PaYments. It does -~eem as if the Court went a long way in its decision. We had an alm6st identical case in Georgia involving an alleged ::_:>ayrnent which had been made to a bank shortly prior to its closing for the account of the War Finane~ Corporation. In the particular case we co~vinced op~osing counsel that the closed bank had not been in f~ct the agent of the Corporation for the pucyose of :'0(!•Ji v5.ng pa~JTnent and the matter finally tarmina•.:;cJ. in favor of the Corporation. Had the facts been d.tt':"e:r.ont, however, in our case, we would have been m1wh ·~roubled by the same. Yours very truly, (signed) Randolph & Parker General Counsel. f • 26S <con> FEDERAL aESERVE BANK OF RICHMOND. X-4706-c September 18, 1926 Federal Reserve Board, Washington, D. c. Attention of Mr. Walter Wyatt, General Co~el. My dear Mr. Wyatt: I have your letter of September 17th, enclosing . me a copy of the dccision.of th9 District Court of the Unit~d States for tho District of Nebraska in the case of War Finance Corporation v. Duff. The decision rests, of course, primarily upon the faets Qf the case, or rather the inferences which ~ be drawn from tho facts, but I agree with Mr .. ~errill that it may prove of great interest to the Federal Reserve Banks, and any bank which discaunts paper for another. It seems to me that the opinion is palpably illogical in that the court in the beginning states that any person who makes a negotiable note is bound to know that it maJ be transferred, but in the end apparently holds that the War Finance. Corporation is estopped to deny that tile originalpa.yee is itself agent simply because the War Finance Corporation lmows that the original p~ee is in the bu~iness of collecting notes, and that the.maker does not know the note has been transferred to the War Finance Corporation. I trust that the case may be appealed. Very truly yours , (Signed) M. G. Wallace, L G. Wallace • Caunsel. MGW:IB •• (COPY) 267 X-4706-d FEDERAL RESERVE BANX OF ST. :WUIS Septembe~ 20, 1926 Mr. Walter Wyatt, Genoral Counsel, Federal Reserve Board, Washington, D~ C. Dear Mr. Wyatt: P.E: - WAR FINANCE CORPORATION vs. I em jn receipt of your letter of the 17th enclcsi~g the Court's instructions to the jury in a recent decision of the District Court of the United States for the Nebraska District in the case of tha War Finance Corporation v~. Duff. I am inclined to agree with Mr. Merrill that the case was wrongly decided; - and, I have a case in the matter of the failure of one of ot~ member hanks involving several small OttOunts, in lihich I am going to try to convince the Court that the payment to the rediscounting bank (when the maker knew that we held the note) did not constitute payment to us. With kindest regards. Very truly yours, (signed) Jas. G. McConkey Counsel.
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