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121 THE SUPREME COURT OF THE STATE OF WASHINGTON.
28:1
SPOKANE VALLEY STATE BANK
Respondent
Ho. 18317
v.
3. B. LUTES and LU3LLA LUTES,
his wife,
Department Two.
Filed Feb. 19,1925.
Appellants,
GEORGE T. BLACK and ISABELLA
BLACK, his wife,
Defendants
By this action the plaintiff seeks to recover from
the defendants E. B. Lutes and wife approximately the sum of
$3,400 with interest.
The trial before the court without a Jury
resulted in a judgment sustaining a recovery in the amount claimed.
From this judgment the defendants Lutes and wife appeal.
The facts are not in dispute and may be summarized as
follows:
The appellants owned a certificate of deposit issued by
the Citizens Bank of Laurel, Montana, for the sum of $3,296 with
accrued interest, matured on the 15th day of December, 1922.
On
October 2, 1922,. they purchased from George T. Black and wife a
tract of land for which they agreed to pay $3,500.
ficate of deposit was to be used in the payment.
The certi-
To accomplish
this, the deed and the certificate were under an escrow agreement
placed with the respondent as escrow holder, with directions to
collect the certificate when it became due.
The respondent sent
the certificate to the Exchange National Bank at Spokane, its
correspondent.
This bank a few days before the certificate became
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due sent it to the Citizens National Bank of Laurel, the issuing
bank.
It arrived there on December 15th, the day it matured, and
the Laurel bank immediately took up the certificate of deposit and
issued its draft for the same dr&Ytxuin favor of the Exchange
National Sank of Spokane and upon the Montana National Bank of
Billings, Kontana.
This draft was sent to the Exchange National
Bank and that bank in turn delivered the draft to the Spokane
Branch of the Federal Reserve Bank, for collection.
The draft was
then sent to the branch of the Federal Reserve Bank at Helena,
Montana, which bank forwarded it to the Billings bank upon which
it was drawn.
On the day it arrived at the Billings bank the
National Bank of Laurel, which had issued the draft, closed its
doors and payment of the draft was refused.
When the Exchange
National Bank of Spokane received the draft it notified the
respondent that there was placed to its credit the amount thereof.
Some days later the respondent paid over that amount to Black and
wife and delivered the deed, which it held in escrow, to the
appellants.
Shortly after this, the Exchange National Bank
received notice from the Billings bgzik that the payment of the
draft had been refused.
The Exchange National Bank then charged
the account of the respondent with the amount of the draft.
The
respondent notified the appellants of what had occurred and
demanded reimbursement, which was finally refused.
a&tion was then begun.
The present
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The first question to be determined, is whether the
Exchange National Bank of Spokane was negligent in sending the
certificate of deposit direct to the Citizens national Bank of
Laurel, the bank which had issued it.
Upon this question the
authorities are not in harmony, but the weight of authority, as
well as the more modern cases, support the rule that it is not
negligence to send a certificate of deposit, bill of exchange or
check to the bank which is to pay it, when that bank is the only
bank in the city or town in which it is located, and that if the
instrument is sent directly to the bank which issued or is to
pay it, no liability arises by reason of this fact in the absence
of a showing that it worked a loss.
Hilsinger v. Trickett (Ohio), 99 IT.E.305;
Farmers Bank & Trust Co. v. ITewland (Ky.), 31 S .7/.38;
Kershaw v. Ladd (Ore.), 56 Pac. 402;
Wilson v. Carlinvilie national Bank (111.),58 N.E.250;
Citizens Bank of Eleasantville v. First National Bank
of Pleasantville (Iowa), 113 N.W. 481;
Waggoner Bank & Trust Co. v. Gamer Co. (Tex.),213 S.W. 92;
Indig v. National City Bank, 80 N.Y. 100;
In the present case it is not shown that any loss
occurred to the appellants by reason of the certificate of deposit
being sent directly to the bank that issued it.
It arrived at
that bank on the day it was due and immediately the draft was
issued and sent to the Exchange National Bank at Spokane.
In
addition to this there was evidence that it was the custom of banks
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234
to send a certificate of deposit, draft or check direct to the
tank which was to pay it, even though there was another "bank in
the city or town where that bank was located, providing it appeared
to "be the strongest "bank.
There was evidence that the officer of
the Exchange National Bank who handled the matter had looked up
the standing of the two banks at Laurel, one of which was a state
bank, and concluded that the issuing bank was the stronger bank of
the two, and so sent the draft direct to it.
There appears to be
some contention that it was negligence for the Exchange National
Bank to send the draft for collection through the Federal Reserve
Bank rather than sending it direct to Billings.
The evidence
shows that this was in accordance with the custom of banks.
If
the custom was a general one, as the evidence shows, and was
reasonable, the appellants were bound by it, even though it was
not actually known to them at the time they placed the certificate
of deposit with the respondent for collection, according to the
weight of authority, though there are cases holding the other
way.
The prevailing rule appears to be that the general usage
and customs of banks in making collections will bind persons
dealing with them in this business, whether such usage or
custom be known or not, this upon the theory that when a person
hands over a negotiable instrument to a bank for collection
without remark as to the course to be pursued, the bank is not
bound to thrust upon him a statement of its intended course.
Either he knows and approves of the ordinary and customary way
that collections arc handled by banks, or he voluntarily trusts
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to the wisdom
of the "bank in handling the matter.
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He
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impliedly consents to its collection in the usual and ordinary
v/ay.
Jefferson County Savings Bank v.Commercial national
Bank (Tenn), 39 S. T7., 338 ;
Lands v. Traders' Bank of Kansas City (Mo.). 94 S.17.770;
Dorchester and Milton Bank v. New England Bank,
55 Lass. (1 Gushing) 177;
British & American Mortgage Co. v. Tibbals (Iowa),
19 N.W., 319;
San Francisco National Bank v. American national Bank
of Los Angeles (Cal.), 90 Pac., 558;
Hilsinger v. Trickett (Ohio), 99 I T . E 3 0 5 , supra.
In the case last cited it is said:
"It is the rule of reason, sustained by sufficient
authority, that the party is charged with knowledge of the
general custom of "banks in the matter of collection of
commercial paper, and must "be assumed, in the absence of
other instructions, to have intended that the bank will
perform the duty imposed upon it in the usual and customary
way."
There was no negligence, therefore, on the part of
the Exchange National Bank in sending the certificate of deposit
direct to the issuing bank at Laurel, Montana, or in sending
the draft for collection through the Spokane branch of the
Federal Reserve Bank.
The next question is whether it was negligence for
the Exchange National Bank to receive the draft in exchange for
the certificate of deposit instead of requiring the cash to be
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actually shipped.
In considering this question, it will "be
assumed, "but not decided, that the Exchange National Bank acted
as the agent of the respondent and not of the appellants.
Upon
that question the authorities are in irreconcilable conflict
and we will leave its determination for future consideration
when it may necessarily be involved in the decision of a particular
case.
The evidence shows that it is the custom of "banks to make
*
remittances by draft and not by the shipment of cash*
It may be,
and there are some authorities to this effect, that the court could
take judicial notice that this was the custom and practice of banks
in ma&ing remittances, but it is not necessary in this case to go that
far, as the evidence establishes the custom.
The appellants, upon
this question, place special reliance upon the case of Federal
Reserve Bank of Richmond v. Malloy, 263 U. S., 160.
In that
• case the proof of custom there showed that remittances were made
,{,
by means of its (the drawee bank's) exchange draft or by a
shipment of currency.111
The distinction between that case and
this is in the proof as to the custom that prevailed in the
respective localities from which the cases arose.
The Exchange
Eational Bank, therefore, was not guilty of negligence in failing
to require the shipment of currency or gold instead of the draft.
The next question is whether the draft operated as
payment absolute or conditional.
Upon this question the evidence
again, shows the custom of banks upon receiving drafts to give
credit and then should the draft not be paid to charge the item
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tack to the customer.
. t& ^ellovue Bank v. Security national
Bank (Iowa), 150 1T.W., 1076, quoting from Griffin v. Erskine,
131 Iowa, 444, 109 K.W. 13, it is said:
"iChecks, drafts, and other bills of exchange are
the means of transferring the money, in adjusting nearly
all commercial transactions, and in authorizing an agent,
whether bank or individual, to make collections, it may be
assumed, in the absence of instructions to the contrary,
t h a t the authority is to be executed in the manner usual and
customary i n the commercial world. While the agent may not
a c c e p t a n y t h i n g but the actual cash in satisfaction of the
claim, he may receive a check or draft, negotiable and payable cn demand, which he has good reason to believe will be
honored on presentation, as a ready and more convenient
means of obtaining the money in conditional satisfaction of
the debt. Such a payment offers no greater temptation to
the agent than payment in cash to which ordinarily it is
equivalent. If honored by the drawee, payment relates back
to the time of delivery.1"
To the same effect are the following:
First national Bank of Memphis v. First National Bank
of Clarendon (Tex.), 134 S.W., 831;
Jefferson County Savings Bank v. Commercial National
Bank (Tenn.), 39 S.W., 338, supra;
Hi1singer v. Trickett (Ohio), 99 H.E., 305, supra;
Albert v. State Bank, 138 N.Y. Supp., 237.
The appellants further argue that their objection to
the evidence relative to the custom should have been sustained
and cite in support of this position, among other authorities,
the case from this court of American Sav. Bank & Trust, Co. v.
Dennis, 90 Wash., 547, 156 Pac., 559.
In that case the bank sought
to show its custom or rule in dealing with other customers in
such cases as was there presented, and it was held that this
rule or custom was not binding upon the defendant when he was
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2m
not aware of any such custom or rule.
The difference between
that case and this is that there &t tt&s 8L particular rule or custom
of the hank, while here the evidence went, not to a particular custom of a particular hank, "but to the general custom, and was properly
admissable.
In addition to this, the evidence in the present case
as to custom was not offered for the purpose of modifying the terms
or the effect of a contract, "but was offered upon the question of
whether the Exchange National Bank was guilty of negligence in the
manner in which it handled the transaction.
Finally it is contended that the respondent, in
paying out the funds to Black and wife "before the draft had actually
"been paid, had violated the escrow agreement, "but even if this were
true it would not change the result.
The appellants purchased
the real property from Black and wife at a stipulated price, making
a cash payment and agreeing that the money realized from the certificate should "be used to pay the "balance of the purchase price.
The appellants went into possession of the property.
They did not
plead breach of the escrow and offered no proof of damages • which
they claimed to have suffered for that reason.
Acting under the
mistaken "belief that the certificate: had "been paid, the respondent
made payment to Black and wife.
The appellants received and retained
the benefit of that payment in that they have title to and possession of the property.
The judgment will be affirmed.
Main, J.
We concur:
Bridges, J.
Mitchell, J.
Fullerton, J.
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