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X-6227
DISTRICT COURT
S'l'ATE OF MIIDi!nSOTA
COUNTY OF
FOURTH JUDICIAL DISTRICT
HENl~IN
International Shoe Company,
Plaintiff,
vs.
Federal Reserve Bank of Minneapolis,
Defendant.
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FINDINGS OF FACT
CONCLUSIONS OF LAW
AND ORI!ER FOR JUroMENT
The above entitled cause was tried the 2nd
the court without a jury, a jury having been waived.
.
Reed appeared on behalf of the plaintiff and Messrs.
day
of April, 1928, before
Messrs. L.A. Reed and A.
P~
Ueland & Ueland appeared on
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behalf of· the defendant. The court having heard the evidence adduced and being
fully advised in the premises
FINre AS FACTS:
1.
That on o-ctober- 6, 1923 plaintiff was the owner of a check drawn
payable to its order by Schefter Clothing House, said check being in the sum of
$1376.23 and being drawn upon the Citizens State Bank of Langdon, North Dakota;
that on the same date plaintiff duly endorsed said check by unrestricted endorsement to the First National Bank in St. Louis and .deposited said check with said
bank for credit to its account with said bank;
that the pass book issued by said
bank in which said deposit was entered contained the following provision, to-wit:
NOTICE TO CUSTOMERS.
The First National Bank in St. Louis
accepts business on the following
conditions only:
Lil./iiTATION OF BANK'S LIABILITY FOR
COLLECTIONS OR·CREDITS.
All item~ received
accomodation ~nd at his·
more than ordinary care
items; and it shall not
for Collection or·credit are taken for depositor's
risk; and in no case shall ·this Bank be liable for
and diligence on its part with respect to such
be liable for the negligence or fraud of any person
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or corporation to whom such items may be sent for payment, nor shall it
be liable for returns on such items until such returns have been cashed.
In case any item is lost through faUure to collect, or failure of return
to be paid, this Bank shall have the right to charge back such item to the
depositor.
In the absence of written instructions to the contrary by the depositor
in each case, items may be sent for payment to the Batik, Banker or Trust
Company on which they are drawn, although a charge is made for such collectio~
This Ba_nk will accept items for collection or credit only on the above terms
and conditions and the delivery to this Bank of such items shall ·constitute
an acceptance of such terms and conditions by the customer.
FIRST NATIONAL BANK in ST. LOUIS
Deposited by
That on the deposit slip by which said check was deposited was printed the following:
"First National Barik in St. Louis. Deposited by International Shoe
Company. ·To depositors: Checks, drafts etc., are received and
credited for the accommodation of Depositors. The barik declines
responsibility for their collection and reserves the right to'
charge them back to the account if they, or the remittances received
for them, are not paid. When instructions to the contrary are not
given, items may be sent to the barik on ·which they are drawn, though
a Charge is made for the service, and when so sent, these conditions
are not waived or suspend.ed. 11
2.
That on October 6, 1923 the said First National Bank in St. Luuis
did then and there credit the amount of said check at its face value to the
checking or commercial account of plaintiff with said bank and did then and there
end<a·se the same as follows:
"P~ to the order of aey bank or banker.
Prior endorsements guaranteed.
Fil'st National :Bank in St. Louis, C. L. Allen, Cashier, 4-5, 614 Oct. 6,
1923. 11
and it qid then and there send the said check by mail to defendant with other
items enclosed with a letter dated October 6, 1923 which bore the direction:
11 Credi t 4-4 Federal Reserve Bank of St. Louis 4-4 For account of First
National Bank in St. Louis, Mo. 4-5. Protest of items over $10 except
those on the face of which appears this stamp 'no - pro 4-5' or similar
authority that can be identified by the collecting bank as that of a
preceding endorser. Telegraph nonp~nt of items $500 or over and
quote the name of last preceding endorser . 11
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X-62271_~Z.f'1
which said letter and check were received by the defendant on October 8, 1923.
3.
That thereafter and on October 8, 1923 the defendant endorsed the
said check on the back thereof as follows:
"Pay to the order of any bank, banker or trust Co. All prior endorsements
guaranteed October 8, 1923. Federal Reserve Bank 17-8 Minneapolis, Minn.
17-8. 11
and thereupon transmitted the said cheOk direct to said Citizens State Bank of
Langdon for ?ayment.
That said check for $1376.23 was forwarded by defendant to
said bank in Langdon on October 8, 1923 in a form letter bearing the following
printed
instr~ctions:
We enclose the following items for collection and returns. Do not hold
items for any reason whatever. Wire non-payment of items of $500 or over.
Do not protest items of $10 or over or those bearing stamp on the face -no pro 17-8 -- or similar authority of a preceding bank endorser. Prote~t
all other items. Return this letter with your draft. 11
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That said letter contained items aggregating $1812.31.
4.
That said Citizens State Bank received the said letter and eheck
and on October 10, 1923 issued for the said above described check and other checks
its draft drawn on the Nortbv;estern National Bank in Minneapolis in favor of
defendant for the said sum of $1812.31, stamped the said above described $1376.23
check 11 paid11 , debited the account of the said Schefter Clothing House with the
· amount thereof and returned the said check to the said Schefter Clothing House.
·~a,
on or after October 10, 1923 the said Citizens State Barik of Langdon trans-
mitted said draft by mail to the defendant and that on October 18, 1923 the
defendant received the same.
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5.
That on October 18, 1923 the defendant presented the said draft to
the said drawee bank for payment and payment was refused and the same was dishonored, and defendant thereupon caused said draft to be protested for non-payment.
That on October 19, 1923 the defendant charged the amount of said check to the
Federal Reserve Bank of St. Louis for the account of the said First National Bank
~n
St. Louis.
That on October 23, 1923 the said First National Bank in Sit. Louis
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notified plaintiff that the said check had not been collected and then and there
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charged the amount of the same to
said plaintiff and on October 24, 1923 the said
plaintiff duly repaid the amoun.t of said check to the said First National Banlc in
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St. Louia.
That said. check of $1376.23 has never been returned by defendant or
by any one else to said First National Batik in St. Louis or to plaintiff.
That
no demand. has ever been made by defendant on the said Citizens State Bank of Lang.don
for the
return of the said check subsequent to the dishonor of the said draft.
6.
That said check for $1376.23 was handled by defendant as a part of
defendant's clearing house. operations pursuant to Regulation J - Series 1920,
promulgated by the Federal Reserve Board, and that said check was received by
defendant direct from said First National Bank in St. Louis pursuant to an arrangement entered into between defendant, the Federal Reserve Bank of St. Louis and said
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First National Batik in St. Louis, whereby the privilege of routing checks direct
to defendant was extended to said First National :Sank: and whereby it was understood
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and agreed that all checks so routed direct to defendant shculd'be received and
handled by it in all respects in the same manner and subject to the same terms
and conditions that were pre.scribed by defendant from time to tme for the handling
of checks in its ·clearing house operations.
7.
That Regulation J - Series of 1920, promulgated by the Federal Re-
serve Board as aforesaid, also provided in part as follows:
11 In handling i teins for member *** batiks a Federal Reserve Bank will
act as agent only. The Board will require that each member *** batik authorize
its Federal Reserve Bank to send checks for collection to banks on which
checks are drawn~ and, except for negligence, such Federal Reserve Batik will
aseume no liability. Any fur\her requirements that the Board may deem
~ecessary will be set forth by the Federal Reserve ~~ in their letters of
instruction to their member *** banks. Each Federal Reserve Bank will also
promulgate rules and regulations governing the details of its operations as
a clearing house, such rules and reil:Ulations ";a 1::-e bindinp,: upon all member
and. nonL:.ember 'banz:s which are clearing tnrouch ·the ]'ederal Reserve Ba:.1l:. 11 ,
8.
That pursuant to and in accordance \7i th sc.id order e.nd regulation
of the Federal Reserve Board, defendant did promulgate rules and regulations
governing the details qf its operations as a clearing house Ul1uer said Federal
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Reserve Act; that said rules and regulations which were in force during all times
mentioned in the complaint, insofar as the same are material to the issues here
in controversy between plaintiff and defendant, provided as follows:
"GElrERAL CONDITIONS. Every bank sending checks to this bank,
or for its account to another Federal Reserve bank, will be
understood to have agreed to the terms and conditions of this
circular, and to have agreed that ~n receiving such items
this bank will act only as the collecting agent of the sending bank, and as such authorized to send such items for payment in cash or bank draft direct to the bank on which they
are drawn, or to forward them to another agent with authority
to present or send them for payment. in cash or bank draft
direct to the bank on which they are drawn, and that this
bank is authorized to charge back the. amount of any item,
whether returned or not, for which this bank has not actually
received payment either in cash or in the proceeds of the bank
draft. 11
9.
That said rules and regulations of defendant were contained in a
check clearing and collection circular of defendant known as.defendant 1 s circular
No. 286; that said circular No. 286 was furnished to the Federal Reserve Bank of
St. Louis long prior to October 8, 1923, but that no copy of said circular was ever
furnished to or received by plaintiff and that plaintiff had no direct dealings
either with defendant or the Federal Reserve Bank of St. Louis until long after
October 8, 1923.
10.
That on October 8, 1923 said Citizens State Bank of Langdon was in
fact insolvent and was unable to pay the checks of its depositors as presented,
and at *o time on or after October 8, 1923 could said check for $1376.23 have
been collected in cash.
11.
That the only loss in connection with the collection of said check
for $1376.23 was incurred from the fact that said Oi tlzens State Bank. of Langdon,
on October 10, 1923, wrongfully treated said check as paid, as hereinbefore set
forth, without having available funds to rami t for said check to defendant, whereby the drawer of said check was discharged on October 10, 1923.
12.
That defendant never agreed with plaintiff to act as the agent of
piaintiff in the
collecti~n
of said check for $1376.23.
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13.
Th.s.t the only te.rms and conditions -q.nder which d~f endant ever
agreed to handle said check were those terms and conditions contained in
Regulation J and defendants circular No. 286, as hereinbefore set forth.
· 14.
That until October 18, 1923 defendant had no knowledge or notice
of the insolvent condition of the Citizens State Bank of Langdon, and that defendant in handling said cheCk for $1376.23 for collection was not negligent in·
any particular.
AS CONCLUSIONS OF LAW the court finds that defendant is entitled to
ju~ent
·of dismissal against plaintiff and for
i~costs
and disbursements to be
taxed by the clerk.
LET JUDGMENT BE ENTERED ACCORDINGLY.
(S)
Dated ·January 12, 1929.
Enter a stay of 40 days.
(S) Johnson, Judge •
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Harry A. Johnson
Judge of District Court.
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