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X-4644
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DISTRICT COURT
STATE GF MINNESOTA
:roURTH J."JDICW DIS'l!RICT
COUNTY 0 F DUTEPIN
Transcontinental Oil Company,
Plaintiff,
FINDINGS OF FACT
AND OONCWSIONS OF LAW.
'"'VS-
Federal Reserve lank of
Minneapolis,
Defendant.
This cause having been tried by the Court without a. jury on the
2nd, 3rd, and 4th days of
Feb~ary,
1926, Messrs. Rockwood
& MitChell ap-
peari:ng for the plaintiff, and Messrs. Ueland & Ueland for the defendant,
and. the Court having heard and considered the evidence adduced on the part
of plaintiff and on the part of defendant, f:i!nds as 'FACTS:
1.
That on Augu.tt2, 1920 the First National Bank of Eureka. issued to
the plaintiff its cashier's cheCk {Exhibit A to the compl.int) numbered
14896 in the sum of $1799.35, and transmitted said Che.ck on or about that day
by mail to the office of the plaintiff in Chicago, Illinois where the cheCk
was received by plaintiff on or about August 5, 1920.
2.
That em August 2, 1920 the First National Bank of Eureka issued to
the plaintiff its cashier's cheCk (Exhibit B to the complaint) numbered
14904 in the sum of $871.00, and transmitted said check on or about that day
by mail to the office o! the plaintiff in Chicago, Illinois where the cheCk
was received by plaintiff on or about lugust 5, 1920.
3.
That both of said mshier's checks were endorsed by plaintiff by
-2unrestricted e:1dorsements to the First National
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:Sa;.1)~
of Chicago and were
44
deposited by ~olaintiff in that bank on August 5, 1920, and the amount of
said checks was credited to plaintiff's checkb.g account in that bank.
Plaintiff's pass book il1 whic..'l the deposit of the chec'ks was entered contained the following provision:
"This bank in receiving checks or drafts on
deposit for collection acts only as your
agent, and beyond_ carefulness in selecting
agents at other points, and in forwarding to
them, assumes no responsibility. 11
4.
Thn t said First National Bank of Eureka was a member bank of de-
fendan t and said First lia ti ona.l Bank of Chicago was a. member bank of the
Federal Reserve Bank of Chicago.
5.
That during all of August, 1920, and prior thereto, defendant and
the Federal Reserve Bank of Chicago were exercising the fUnctions of a
clearing house for checks on behalf of their respective member bonkS pursuant
to the provisions of the Federal Reserve Act, and pursuant to on order of the
Federal Reserve Boord mde in accordance with such Act, which order of the
Federal Reserve Board was knoWn as
11 Regulation
J, Series of 1917 11 ; that in
the exercise of the functions of a clearing house for checks for defendant 1 s
member ba:iks, an
arr~~gement
had been entered into between
defend~~t,
the
Federal Reserve Bank of Chicago and the First National B~~k of.Chicago whereby the First National Bank of Chicago, instead of depositing checks drawn on
or payable bt member banks of defendant in the Federal Reserve Bank of Chicago,
was parmi tted to route such checks direct to the defendant, which privilege
was kl1ow:1 as the privilege of
11
direct routing"; that such arrangemel1t for
"direct routing" was ent erecl L:.,to merely for the pu:i.·pose of saving time in
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the collection of checks, the proceeds of checks so routed direct being
~15
credited by defendant to the Federal Reserve Bank of Chicago, and it was
understood and agreed between all three banks that their rights and liabilities should in all respects be the same as if cheeks so routed direct
:had been first doposi ted by the First National Bank of Chicago with the
Federal Reserve Bank of Chicago and by the Federal Reserve Bank of Chicago
deposited for colla ction with tho defendant.
6.
That said cashier's checlts for $1799.35 and $871.00 were, pursuant
to such arrangement for direct routing, forwarded by the First National
Bank of Chicago to defendant, and were received by defendant on August 6,
1920 and Augu.s t 7, 1920 respectively.
7.
That defendant on the days on which it received said ·checks for-
warded the same.for collection to the First National Bank of Eureka, together with other similar items drawn on or payable by said First National
Bank, ·the aggregate of all such i terns forwarded by defendant to the First
National Bank of Eureka on August 6 and 7, 1920 being $8277.30.
a.
That the defendant authorized the "Firs"t National Bank of Eureka
to rami t for said i tams by its draft on a Minneapolis or St. Paul bank but
did not authorize .said First National Batik to remit such a draft drawn
against insufficient f'Uilds.
9.
That said cashier's checks were received by said First National
Bank of Eu.rektl. either on .A:u€;ust 7, 1920, AugtLst 9, 1920, or August 10, 1920;
that on A1J€U.St 10, 1920 the First National Bank of Eu.reka attempted to remit
to defendont for said cashier's checks and for the other items forwarded
by defendant at the SDme timo by drawing its draft in the sum of $8277.30
upon the First & Secu.ri ty National :Baflk of Minnoap olis, Minnesota; that
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sD.id First National Bank of 3w.·elm. mo.iled sa.id draft to defendant which
4.6
received the same at Min..-·1ecr1olis, Minnesota either after ba..Ylking hours on
August 11, 1920 or early
011
.A:ug"U.St 12, 1920, and :9resented the some for
payment on August 12, 1920, and thnt payment of said dra.ft vms refused by
&Security
said First
National Batik which then had no funds to the credit
of the drawer bank and said draft has never been paid.
10.
That prior to
"Regulation
A~t
J, Series of
1920, the Federal Reserve Board promulgated
191711 with respect to the check clearing operations
of defendant and other Federal reserve banks; that said Regulation J provided in part a.s follo\vs:
"In handling items for member * * * banks, a
Federal Reserve !ank will act as agent only. The
Boo.rd will require tha. t each l:nember * * * bank authorize its Federal Reserve Ba~ to send checks for
collection to "Qo.nkS 011. which checks are drawn, and,
except for negligence, such Federal Reserve Ba..'Jk
will assume no liability. Any further requirements
that the Board ~ deem necessary rrill be set forth
by the Federal Reserve Banks in their le.tters of
instructions to their member * • Ill banks. Each
Federal Reserve Bank Will also promuigate rules and
regulations governing the details df its operations
as a clearing house, such rules and regulations to be
binding on all member * * * banks uhich are clearing
through the Federal Reserve Bank. 11
11.
That pursuant to al1d in accordance with said Regulation of the
Federal Reserve Board defendant did promulgate rules and regulations
governing the details of its operations as a clearing house under the Feder~l Reserve Act, in the form ~f its CheCk Clearing and Collection Circular,
No. 193 which circular was in force during all of August 1920
am
had boen
prior thereto mailed to and received by the Federal ·Reserve Ba.l"1k of Chicago
and the First National Bank of Chicago; that said Cirou.lar provided ill part
as follows:
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Checks received by the Federal Reserve :Bank
on its member banks uill be forunrded direct to
such member bnnks o.nd are to "be remit ted for by the
member banks on dny of receipt if possible, by their
draft on the Federal Reserve :Bm1k provided they have
n balance in excess of their required reserve, or by
their draft on a bonk in Minneapolis or St. Paul.
Member banks are reqQired by the Federal Reserve :Bo~rd
to proYide funds to cover at par all checks received
from, or for account of, their Federal aeserve Bank.
In handling items for member bonks, the Federal
Reserve Bank of Minneapolis acts as agent only. It is
understood that each memeer bank authorizes i t to send
cheCks for collection direct to batiks on ~hich cheCks
are drawn, and except for negligence the Federal Reserve
Bank of Minneopolis assumes no liability until ftu1ds
are actually in its hands, and is authorized to charge
back any item for which it has not received final payment, including items lost in transit."
11
dra~
12.
That during all of August 1920 and prior thereto it \las the es-
tablished, general, uniform and certain usage and custom omong banking institutions in Minnesota and South Dakota, uhere checks deposited for collection drm7:.1 on banks located at a distance had been forVTarded direct to
the drawee or payer bank for collection, for the drawee or payor bank to
remit the proceeds of the collection in exchange drafts drawn on banks in
the vicinity of the forwarding bank, and it
~as
the established, general,
uniform and certain usage ond custom among baPlting institutions in sa.id
states for the forwarding bank to permit such remittance by draft and upon
receipt of the exchange drafts to endeavor to collect the same; that plaintiff
had no actual knowledge of this custom.·
13.
That d1ll ing all of .August, 1920 it was understood and agreed be;,
4
tween defendant and the Federal Reserve Batik of Chicago that defendant should
forward all che.cks drawn on or payable by member banks of defendant which
were received by defendant from the Federal Reserve Bank of Chicag.o or for
its account direct to the drawee or :pa.YQr bank, and that such checks should
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be remitted for by the drawee or payor bank by its draft on a bank in
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Minneapolis or St. Paul.
14.
That during all of August 1920 it was ti.1e duly eno.cted statute law
of the State of South Dakota thD.t -
"Any bDllk banker or trust company 1 hereinafter culled
bank, organized under the laws of 1 or doing business
in, this State, receiving for collection or deposit,
any check, note or other negotiable instrument drawn
U')On or payable at any other ba.n..U;:, located in another
city or town whether within or uithout this State, ~y
forward such instrument for collection directly to the
bank on 11hich it is drawn or at \Vhich it is made payable and such method of for\1arding direct to the peyer,
shall bo deemed due diligence Dnd tho failure of such
payer bank, because of its insolvency or other default,
to account for the proceeds thereof, shall not render
tho forwarding ba.nk liable therefor, provided, ho\7evor,
such forwarding bank shall have used due diligence in
other respects in connection with the collection of such
ins tru.men t. II
15.
That on august 11, 1920 the First National Bank of Eureka suspended
payment and a receiver was subseq1ently appointed for said bank by the Comptroller of the CUrrency.
16.
That on August ? , 1920 o..."ld thereafter to the time of the suspension
of the First National Bank of Eureka there was sufficient money on hand in
said brut..";: so tha.t the two ca.shier 1s check:s, if the same had been presented
separately over the counter of said bank and payment thereof in money demn.nded,
would have been paid in cash, but there \"'las not sufficient money in said bank
to pay all of the $82??.30 in items held by defondnnt, and if all of said
items had been presented by defendant over the
cou_~ter
of said First National
Bank of Eurelro and payment thereof in money demanded, none of such i toms, including the two cashier's cheCks, would have boon paid.
1?.
That plaintiff has been paid on account of the
t~o
co.shier 1 s checks
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the following sums - $1231.03 on January 5, 1922, &~d $411.00 on December 9,
1925.
18.
That the only terms and conditions assented to by defendant
~ith
reference to the collection of the two cashier's cheCks were the terms and
conditions agreed upon by and between defendant and the Federal Reserve Bank
of Chicago as hereinbefore found$
19.
That there was no negligence on the part of defendant in forwarding
the cashier 1 s checks direct to
~1e
First National Bank of Eureka for col-
lection~
20.
That there was no negligence on the part of the defendant in au-
thorizing the First !rational Bank of.Eureka. to remit for said checks
by its
draft on a bank in Minneapolis or St. Paul and that no loss resulted to
plaintiff as a result of
~ch
authorization.
As CONCLUSIONS OF LAW the Court finds:
That defendant is entitled
to judgment of dismissal against the plaintiff and for its costs and disbursements to be taxed by the Clerk.
Let judgment be entered accordingly.
Dated July 27, 1926.
BY TEE OOURT:
(signed) Horace D. Dickinson
Judge.
Let all proceedings in the above action be stayed for forty
days from the date of the above order.
(signed)
H.D.D.
Judge.
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