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IN THE DISTRICT COtJRT OF THE SEVENTH JUDICIA!. DISTRICT
OF THE SUTE OF IDAHO, IN AND FOR THE
COU1r.rY OF WASHINGTON.
B. W. Grover,
Plaintiff,
vs
The Federal Reserve Bank,
of San Francisco, California,
a corporation.
Defendant.
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Civil No. 2657
DECISION.
~!IDMORJu~UM
This action is brou~~t to recover from th~ defendant the amounts
of certain checks drawn upon the Fruitland State :Sank and delivered
to defendant by original ban...l.ts of deposit for collection. It is
admitted trui.t defendant received the checks llfor collection11 from
its correspondents, The Weiser l~ational :Sank, The First National :Sank
of Ontario, Oregon, The Pacific National Bank of :Boise, Idaho, and
the Boise City National Bank of Boise, Idaho. upon receipt of the
several checks defendant promptly sent them direct to the Fruitland
State Bank which stamped them "Paidll and returned the cancelled checks
td the several makers thereof, and remitted to defendant by draft upon
the Payette National or other Idaho :Sanks. Defendant without delay
forwarded t4e several drafts issued by the Fruitland State :Sank, received by it prior to November 16, 1922, to the drawees thereof for
payment, but before they could be presented the drafts were dishonored
by reason of the failure of the Fruitland State :Sank to open its doors
on November 16, 1922. The complaint contains six causes of action,
the first being founded upon a check for $533.00 drawn by Geo. P. Davis
on the Fruitland State :Sank in favor of plaintiff. Plaintiff received the check on November 7, 1922, at Fruitland, Idaho, and mailed
it the same evening, endorsed by him in blank, to the Weiser National
Bank, at Weiser, where he had an account. The latter bank gave
plaintiff credit for the Dl!lount u subject to final payment" and forwarded it to the defendant bank for collection. This check was received by defendant at Salt Lake on November 11, 1922, and forwarded
to the Fruitland State Bank on that date.
The second cause of action is based upon a check for $1,000.00
drawn by the Fruitland Fruitgrowers 1 Exchange in favor of A. G. Street,
dated November 3, 1922. ~e payee deposited this check about November 4, 1922, in the Western National :Sank at Caldwell, Idaho, and
on that day said bank endorsed the check and forwarded it to The Boise
City National :Sank, in due course of business for collection, and the
check was thereupon forwarded in due course of business to tho defendant
at Salt Lake City for collection. Defendant on the day of its reception
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for~arded the check to tho Fruitland State Bank at Fruitlond for
payment with instructions to pay said check upon prosont~tion and
if not paid to protest the somo for non-p~aent. Tho check arrived at the Fruitl~~d Bank on November 10, 1922, and at that time
the drawer did not ha~c sufficient funds to its credit with said
bank to pay said checlt. The check was held until No'lfambor 13,
1922, when the Fruitland Fruitgro~ers Exchange had sufficient
funds on deposit to pay the check when it was marked llpaid11 ood
charged to the drawer• s o.coount. A draft for the runount thereof
payable to defendant~ dated November' 10, 1922, drawn on The First
National Bank of Payette, was mailed to defendant. Said draft
was dated November 10, 1922, but was not received. by defendant
until November 15, 1922, when it was promptly ~iled to the drawee
bank for payment. Befo.re it was received at Payette, the Fruitland State Barik had closed its doors and the draft. Was thereby dishonored. The Fruitland State Bank did not protest the check for
non-palr.mont after its receipt on November 10, 1922, nor notify defondarit of the failure of the payor to pay it.
The third cause of action is basad upon thirty six checks
drawn by divers persons upon the Fruitland State Bank, payable to
Tho Golden Rule Store, aggregating $287.45 in. amount •. All of said
checks wete deposited by the C. c.. Anderson Company doing business
as tho Golden Rule Store, with the First National Bank at .Ontario,
Oregon, and wore by it sent to the Boise City National Bank at Boise,
and were by that b®k endorsed and duly forwarded to tho defendant at
Salt Lake City, Utah, for collection~ They were promptly sent by
defendant direct to 2ho Fruitland State Bank for p~ent and were ~ked
"paid11 , charged to tile res1jective accounts of the makers thereof and
returned to them. Drafts for the amounts covered by said checks,
dated November 13 and 14, 1922, respectively, were forwarded to de.fendant ood reached it on the 16 and 17 of November, 1922, respectively,
after tho failure of The Fruitland State Bank, and were promptly on
said dates forwarded by defendant for protest. They were dishonored
by reason of the Fruitland State Bank failing to open its doors on November 16, 1922, and wero therefore not paid.
The fourth cause. of action is based upon four several checks, thrG('
of which are payable to the Ontario Furniture Company and one payable to
Mrs. H. E. Duell and endorsed by her to the Ontario Furniture Company,
signed by divers persons and aggregating $70.20 in amount. All of said
checks were deposited by H. L. Peterson, doing business under the trade
name o:f the Ontario Furniture Company, with the First National Bank of
Ontario, and by it endorsed and sent to the defendant for collection.
All of said checks were mailed direct to .the Fruitland State Ban:k for
payment, which charged the amoun 1B of the several checks to the accounts of the respective drawers thereof t marked the checks 11 paid11 ~d
returned them to the several drawers. Drafts covering the amounts of
these checks, were sent to the defendant, dated November 10, 13 and 14,
1922, respectively, and were received by the defendant bank by mail on
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November 15, 16 and 17, 1922, respectively and those received on the
the 15th and 16th were forwarded for collection on the same day
they were received; that received on the 17th was forwarded for
protest on the day received. All were dishonored by reason of
the failure of tho Fruitland State Bank to open its doors on
November 16, 1922.
The fifth cause of action is based upon two checks drawn
on the Fruitland State Bank, aggregating $498.39, one for $100.00 ·
drawn by E. A. Stenger in favor of the Davidson Grocery Company,
and a check for $398.39 drawn by the Mohler Mercantile Company in
favor of the Davidson Grocery Company• Said checks were dated
on or about the 4th and 8th of November, 1922, respectively.
Each of said checks we.(; deposited with the Pacific National :Bank
at :Boise, Idaho, by the said payee therein named, and were in turn
endorsed and forwarded by said The Pacific National :Bank to the
defendant for collection, who in turn mailed .them to the Fruitland
State Bank for p~ent. The payee btmk marked each of said checks
paid, charged the accounts of the makers thereof with the several
amounts, and returned tho cancelled checks to the drawers. Said
bank mailed to defendant its draft dated November 10, 1922, for
$10Q.OO, the proceeds of tno first check, which said draft was received bY defendant on November 15, 1922, and on the same date
mailed for collection. The draft covering the item of $398.39,
was dated November 14. 1922, mailed by the Fr~itland State Bank to
defendant, was received by it November 17, 1922, and was mailed on
the same date for protest. The Fruitland State Bank having closed
its doors before either draft was presented, they were not paid.
The sixth cause of action is based upon a check for $65.80
dated November 4, 1922, drawn by Fruitland Drug Company,on the
Fruitland State :Bank in favor of Haas 'Wholesale Company.
Said
check was the~aafter deposited by tho payee thereof in the First
National Bank of Weiser, which endorsed and delivered said check to
The Pacific National Bank at Boise, which endorsed and mailed it for
collection. Thereafter the dofendant without dola1 ~ilod said
check to.-tho Fruitlrovl State :Sank for peyment. It was marked 11 paid11
by the payee bank, charged to the drawee's account, and on November
15, 1922, defendant rece!ved at Salt Lake City, Utah, a dl•aft drawn
upon anothe1· bank for said amount, which draft was on said last named
date mailed to drawee for payment. Said draft was not paid because
of the failure of the Fruitland State Bank to open its doors on November 16, 1922, before it could be presented for payment. The
check sued on was not admitted in evidence.
It was stipulated at the trial that all of the checks involved
in the last five causes of action were deposited with tho initial
banks of deposit for collection, to tho credit of the assignors of
the plaintiff, their respective accounts credited with tho amounts
thereof, and that subsequently the several amounts wore charged back
to the several accounts.
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None of the checks in the second, third, fourth, fifth and
sixth causes of action are in evidence. There is no testimon1
as to the character or form of the endorsement~a thereon, if any.
Thare is likewise no proof of any custom by the banks in the
territory in which the said deposit banks are situate, to require
the endorsement of checks, before accepting them for deposit.
On the other hand, there has been no offer of proof of any special
contract with the banks of deposit. Nothing to show that said
checks were not in fact endorsed in the usual manner. The burden
of this proof being upon the plaintiff, I incline to the view that
the court would be justified in finding that the checiks were enThe record being silent as to any
dorsed as well as deposited.
special form of endorsement or contract for the collection of those
checks, it would seem justifiable to conclude that they were deposited by tho holders in their accounts in the usual ~~or, because it is stipulated that credit wa.s given for tho amounts thereof
and on failure of Pa¥ment of the drafts, they were charged back to
the several accounts.
Plaintiff's counsel concede that it was not negligence on the
part of the defendant to send the various checks direct to the payee
for presentation and payment. They contend that because in each
instance tho defendant accepted d:..·:\ft;:. in pavmont of the sev:cral
checks in lieu of cash, it was negligent and plaintiff should, on
that ground alone, recover.
I shall not attempt to
no useful purpose here.
dis~ss
the question as it would serve
On the question as to whether the defendant has been guilty of
any negligence, the answer sets up a general custom of all banks ond
bankers obtaining in the states of IcL"lho and Utah, o.t the Mme of the
transactions complained of, to accept in settlement of collection
items received from banks in other cities or towns, exchange upon
correspondent banks, and that plaintiff and his assignors ond ngents
in forwarding said checks for collection, did so with full knowledge
and notice of the existence of said custom. This defense is clearly
sustained by the evidence.
It is true that it was not shown that the depositors had actual
notice of such a cuotom,.;:rtiJ.l, the circumstances were st::cl;, that they
mu.st be charged with notice. All of the persons receiving the checks
were business men, as may be inferred from the evidence. They were
apparently receiving checks from time to time and knew or were charged
with knowing, how checks wore collected on out of town banks. Tho
custom must be held to be ~easonable under the evidence here. It may
be said to be dictated by necessity since it would not be possible,
·owing to the great volume of business transacted in this country, for ·
banks to function if compelled to make collections in cash or currency.
On the other hand, the rule docs not hold that a person cannot make a
special contract for the collection of commercial paper in a..w way he
desires. It simply goes to the extent of holding that when paper
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is deposited for collection, in the ordinary and usual course of
business, without any special agreement, it will not bo negligence
for the collecting agents to follow the prescribed custom.
flaintiff alleges that on presentation of each of tho several
checks involved, there was sufficient cash on hand in tho Fruitland
Stt:.to · Bank to have paid them in cash or currency.. The proof is
not sufficient to sustain this allegation, and so I find.
I run constrained therefore to find for the defendant on all
six causes of action.
At the trial defendant asked leavo to amend its answer in
certain particulars referred to on page 55 of defendant 1 s brief.
The amendment was resisted and the court reserved the ruling~
tt does not appear that any SU.b'stantial right of the plaintiff
will be jeopardized, and ! therefore rule that the amendment may
be made a.s preyed for.
. . dounsel for d.efendan t may p:tepare findings and decree' :furniShing copies thereof to counsal fo~ plaintiff.
Dated at Weiser, Idaho, July 31, 1926.
(Signed)
B. D. Varian
District Jud€;e
Rice & Bicknell Es qs. ,
Caldwell, Idaho,
George Donart Esq.,
Weiser,
Attorneys for Plaintiff....
A. C. Al!;new Esq.,
San Francisco, Cal.
Merrill & Merrill Esqs.,
Pocatello, Idaho,
Atto~eys for Defendant.
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