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- ' ... , .J FEDERAL RESERVE BOARD WASHINGTON X-3551 November 2; 1922. SUBJECT: Decision in Cleveland Par Clearance Case. Dear Sir: There is enclosed herewith for your information a copy of the opinion rendered October 14, 1922, by the Uni~ed States District Court for the Eastern District of Kentucky in the case of Farmers & Merchants Bank of Catlettsburg v. Federal Reserve Bank of Cleveland. It will be noted that this was merely a decision on a motion for a preliminary injunction, and the case has not yet been thoroughly tried on its merits. Before it decides whether or not to issue a permanent injunction the court will have to try the case on its merits, and on such a trial the evidence will be much more thoroughly presented. Furthermore, on the motion for a preliminary injunction the witnesses were not subjected to cross examination, while they will be subjected to cross examination during the trial on the merits. Very truly yours, Vice-Governor. (Enclosure) ..... ' -· .J JJ ,. X-355la • SN-RMc 10-19-22 5 car. October 14, 1922. UNITED STATES DISTRICT COTJRT E.!'.cSTERN DISTRICT OF J:;:ENTUCJ:-:1 FARI\ffiRS & f',ffiRCHJ ]1111'S B! J:'!J:= oF cATLETTSBURG, I\ENTucru ) ) ) vs ) ) THE FEDERLL RESFRVF B"' J:-t:\. OF CLEVEL'11D, OP.'IO, and f'IJ',RY B. 1\TcCall, ) ) ) DEFEliD.A!JTS This cause is before rr.e en plaintiff's rr.otion for a preliminary injunction. The plaintii'f is a 1\.entucky corporation doing banking business at Catlettsburg, a city •·cith a population of about 4,500 in this district. It has a q:tpi tal stock of ~:::.o, 000, surplus of about $40,000 and ieposits of about ~~00,000. The defendant bar~ is a national corporation and is the Federal RJserve Ba::ll: for the Fourth District of the Federal Reserve System of the United States. It has a Branch Ban£ in Cincinnati, Ohio, and plaintiff is in the Cincinnati Division of such district. is a r~si:;.ent The individU£tl defendant of Cutlettsburf! and, at the tirr.e this s-c:.i t was b:-ou;-ht, to-wit: July 15th, 1921, wa<> acting a;;; the defendsnt Ba.YJ1.: 1 s a~ent the daily collect ion in· cash over Plaint iff 1 s counter of checks drawn on it by its depositors, ·payable to person;; 2t a :listance from Catlettsbur",, ·-:hich had cor:,e into such defendant 1 s hendr. and had been .:>ent to her by the Branch Bank at Cincinnati for th£->.t in _, ,. ...... i~ X-3551a - 2 - purpose, and in the transmission of such cash to such Branch Bank by express or re~istered since March 23rd, 1920. mail, and she had been so acting continuously The suit was originally brought in the State Court, in 'Nhose territorial jurisdiction Catlettsburgh is situated, and it was removed thence to this Court upon the joint petition of the two defendants upon the ground that it arose under the constitution and laws of the United States. It is the plaintiff's practice where such cheds are sent to it through the mail for payment by other than one of its correspondent banks to remit exchange on one of such ba~'lks and to charge not exceeding one tenth of one per cent of the amounts of tho checks for so doing. By sending such checks as come into its hands for collection by an agent in cash over the: counter the d,;:fondant. :Bank though it incurs the expense of so doing avoids havinry to pay such charees. advertising for a year and half that it woull checks on plaintiff free of charge. colL~ct It had been all such ii1lat plaintiff seeks to have enjoined is such conduct,i. e., the collection of such checks by defendants in this way and the advertisement by defendant Bank that it will collect such checks free of charge. It claims that it is in- jurious to it in that it deprives it of suCh charges, requires it to keep a gree..ter reserve in cash than it would otherwise have to do, scandalizes it, affects its credit and humiliates it. A temporary restraining order was granteci by the Clerk of the State Court when the suit was brought and has been in force ever since. The case is of the same §';eneral character a;; that in the Northern District of ., 4 .... , ,, (., X-3551a - 3Georgia covered by the decisions in Federal American Bank & Trust Co~ v.fResarve Bank of Atlanta, same v. same same same 269 Fed. 4 256 U. S. 450 280 Fed. 940 and that in the District of Oregon covered by the decision in Brooking's 430. St,~te Bank v. Federal Reserve Bank of San Francisco, 277 Fed. Reference to these decisions relieves me in presenting the case here of doing more than calling attention to its particular facts and then proceeding to dispose of the question which it calls for decision. I will first state tha f.icts as they. appear from Plaintiffls affidavit. As early as January, 1918', t:'le defendant Bank began by letter to solicit the plaintiff to enter into a written agreement with it to remit 2xchan;e in payment of checks of the character stated at par, i. e., free of such charges. to do at intervals until D2cambe:r 1919. This it continued The plaintiff not yield- ing to such solicitations, at that time, it sent it=> traveling representative, E • .A. Ma;ee, who had in charge the matter of personally soliciting non-member banl:s, i. e., state banking institutions, to enter into suCh agreements, to Catlettsburg to inter- . view plaintiff on the subject. that purpose. He made four separate visits for Ee fircit attempted persuasion and, this failing, he insisted and demanded that plaintiff agree and finally threatened it with the consequences of a refus•l to do so. He said that the American Express Company would be employed to collect the checks in cash, which would be very embarrassing to plaintiff, that, though this would be expensive to the defendant Bank, it did not matter, as X-355la -· 4- there was a principle im•olved, and plaintiff would be mightYe;lad to sign up before long as no bank could exist thc;t did not - that the Federal Reserve System was like a mighty battleship coming up as it were from a smooth sea and all banks that did not affiliate with it could not stand its swells and must get in its wake for safety, and that in the next five years there would be no small banks. The plaintiff remainin~ recalcitrant, on January 6th, 1920, the defendant Bank employed the ~~erican collect such checks as came into its hands, at C'atlettsburg. The checl~s Express Company to throu~h its local a~ent would be d.elivered to tha Company at Cincinnati by the Branch I·ank, carried to Catlettsburg and there presented and payment in cash d.ernan:led by such agent and upon receipt of same would carry it back to Cincinnati. continued so to a·ct until February 26th, 1920, so any further. The Express ~rhen Compa~ it refused to do During this time Mage~ was in Catlettsburgh from time to time looking after the m:.tter and frequently visitin.!, the Bank. As the exprass agent would coll3ct lare;e sums in cash he would, shortly aftenve.rds, come in the bank and see '.:vhether or not the method usad had broken the spirit of those in charge and suggest that they submit to the desird of his principal that plaintiff go on the par list. About the middle of January 1920 he asked the plaintiff's assistant ce.shier to use his influence '!llith the cashier who was handling the matter on behalf of plaintiff, in an effort to have him agree to the par clearance method. He stated that if they did not consent to it the FedHal Reserve Bank would continue its .. r \. X-355la - 5method of collection by the Express Company de~anding cash at the counter and that it would be annoying and expensive to both banks and that plaintiff could not stand that method of paying items in cash. The reason for the Express Compa~'s refusal to act further was that the task was too burdensome. Thereupon Yagee went to Catlettsburg and for several days, possibly until March 3, 1920, made the collections himself. Each day during this time he went to a drug store on the corner opposite plaintiff's bank, where there was a soda fountain, the most prominent place in the city, and re~ained there from three to five hours walking up and do;vn in the store room and looking across the street at the bank as thou;.:;h he were on the watch for what was being done there. On that date he employed Frank K. Barbee, a resident of the city and night chrk in a hotel to act as agent. tinued so to act untii r~arch and the defendant McCall was employed. ~Uss He con- 23rd, 1920, when he surrendered the job Vbilst Barbee was acting as agent Magee was in Catlettsburg the most of the time instructing him and overseeing the performance of his duties. The place of instruction was the corner drug store heretofore referred to. ~ Magee spread the checks upon a refreshment table in front part of the store in a conspicuous plac2 where those coming in and out of the .;;tore oould readily see and hear what was going on 1 assor~~d and listed and endorsed them and explained to Barbee the details of presenting ths checks at ths counter and deroanding payment in cash. Frequently he accompanied Barbee to the bank. X-355la - 6- He stated to Barbee that the reaso.n and necessity for such method of collection was thr-Lt the defendant Bank insisted that the checks be cleared at par and such was the only method whereby plaintiff would be forced to an agreem::mt so to do and that though the method of collection was far wors <ZXpensive to the-defendant Bank than the payment of the clearance fees it was not the expense they cared about but '.vas simply the principle of the matter and that sooner or later the plainti_ff would be forced to sign an agrc::ement to clear all checks at par or that it would be forced out of business. He gave Barbee a number of pamphlets containing an exposition of the merits of universal par clearance and instructed him to call upon as ~aqy of plaintiff's depositors as he could see from time to time and leave one of those pamphL~ts with them. After Miss Magee's (ticCall's?) employment McCall (Magee?) re~ained in Catlettsburg for some time, possibly until April lOth, instructing her and overseeing the perforrranc2 of her duties. place of instruction and the ranner thereof as in the case of Barbee. frequently. wa~ The exactly the same ~ He also accompanied her to the Bank It should be said that both Barbee and Hiss McCall, at Magee's instance, inquired of plaintiff whether it was agreeable for them to act as such agent and vvere told that if any one was to be employed to render the services they mic-ht as "'ell secure the position. Miss McCall was a maiden lady who had the r2spect of the people of Catlettsburg. Magee's manner whilst in and about plaintiffls bank,as heretofore set forth, was domineering, dictatorial and boist~rous. He sought opportunity to attract attention of those who might be in ,. ··-· ('" ( - 7- X-3J5la or near the bank by loud and quarrelsome conversation. He took occasion to create scenes and distruoances at timss, when there At the time would be many custorr,:;rs in the lobby of th:: bank. when he undertook to colLet ch-ecks after th2 Express Company quit plaintiff suggested that it had not r<;ceived any letter dEsignating him as ae;ent. He made 0. ro".' P.bout this, intimatinG that it was refusing to recognize his authority. .!Vlu~h ' disturbance was caused in the bank by ths colloquy over this rne.tter. During Barbee 1 s agcmcy he brou'2;ht on a h"'ated yr,nx::>:m.f:. "'i th plaint iff t s assistant cashier over a certain checY.. \'ihilst the Express Comparw was acting as agent plaintiff ' countered by sta:rr::pin;o: upon a ;:::reat rrany of i tsb.lank checks furnished ·its depositors an endorsement in th2se words: 11 Payable in cash or exchan15e J.raft at the option of the Farmer's & Merchant r ::; Bank of Catlsttsburgh, Eentucky." 19, 1920, the defendant Bank accepted checl~s Up to February so endorsed an'i when presented for payment c;xchancG drafts wer2 acc3pted. From February 13th, to Fobruary 2:::th, 1920, it refused. to accGpt them. From February 20th, 1920, to Me_rch 9th, 1920, it again accepted them. Since then it has refused to do so. was acting as agent. endorsed amountino: to On February 28th, 1920, VJagee He presJnted on that date fourteen checks so ~573.80 and :iernanded an:i received fourteen separate drafts, one for each check in payment thereof. -s- X-355la On !'/larch lOth, 1920, during :0arbaa•s agency Magee visited C. C. Magann Vliho had the excl"L1S iva agency to handle and sell Ford cars at Ashland, Kentucky, a nei&~boring city, in the same county, and who was one of plaintiffts depositors at his place of business, introducing himself as a representative of defendant Jank and stated that he wanted to discuss some business with him. M3.~ann took him into his private office and he then statad that his check to the Ford Motor Company of date March 8th, 1920, for $3,756.72 on plaintiff had been prasantad and pa~ent thereof refused and 8Y~ibited a letter to him from the Cin- cinnati ::ranch corroborating his statement. Magan.YJ. immediataly went to Catlettwburg in his automobile and ascertained that his check had been paid that day and that it had not been presented for payment before then and payment thereof had nevar been refused. On March 26th, 192G, during Miss McCall's agency, Iv1a.e:;ee visited 0. H. Salyern, another of plaintiff's depositors, who owned and oporatad a store in Catlettsburg. Ha stated in the presence of Salyer's custorr~rs in an abrupt, high-handed and loud manner that he represented defendant Jank and, presentin 6 a check drawn by him on plaintiff for $108.29 in favor of a Cincinnati party which possibly cont:J.ined the endorsement to payment heretofore referred to, dem~ded to know of S~lyer why he had not filled the check out in the proper nunner, and stated tbut he had presented it for pa~ent and could not get any money on it. On the same day he visited F. H. D. H. Cn:rpentar & co., <:mgag,;d. in wholesi.lle c~rpantar, ~nd ::1S Secretary of retail dry goods ::md -9- \ X-355la notions business in Catlettsburg and a depositor of plaintiff, introduced himself as a Federal Reserve man, presented a check drawn by his company on plaintiff containing the endorsement referred to, inquired as to why his Company permitted the bank to put such an endorsement upon the check and stated that it was injurious to the credit· of his Company and that to J save its credit it should do business with some other bank. Magee whilst in Catlettsburg made .inquiries of Clerks in the drug store, post office plaintiff was g~tting ~d express eomp3ny office as to where the its cash from. He also made inquiries as to the worth and standing of plaintiff and the man in charge of its business. As stated M:~gee left Catlettsburg about April lOth, 1920. The reason for his leaving was that an indictment was re.turned against him by the state grand jury in which that city is situated charging him with making and circulating statements derog~tory to the plaintiff contrary to the Kantucky Statutes and he has never been back since. the defendant Bank's employ until Jul,.y 17th, 1920, He continued in Whilst he was in Catlettsburg he made reports of progress to the Ass.istant ·Cashier of defendant nank who was overseeing the matter. For a while after Miss McCall was employed it was her custom to go to the bank with a go cart in Which to carry away from it the mon~y c' received. Seemingly the plaintiff purposely could otharwise carry. pounds in silver. g~ve her more coin than she One day shQ was given as much as nin~ty fo~r And at timas it would wad the bills •. · Later on the go cart seems to have been abandoned, possibly because not needed. It took much tirr.e to wait upon her in countin[; the r.:cn0y and after she was wa.itoci ·" ...r -10- X-355la upon she took much time in recounting it, in separating it into the separate denomin:t tions and in rmiling a list thereof, which she was required to do. bearin~ She carried an instrument defendant Jank' s seal which was used in sealing with lead a. c.:1nvass sack in which the monay was ship)ed. Sha ::1lways c:.:trried openly a pistol to rnotact herself from robbery and often was :.1ccompaniad by one or two dogs. After defendant Jank refused to 3.ccept checks drawn on plaintiff bearing the endorsement as to payment in cash or exchxnge at plaintiffls option it did not content its~lf with returning the checks to the batiks from whom they came, but took pains to write to the payees of the checks giving its reason for not accepting them. That was that the cheaks by reason of the endorsement were non-negotiabla. .,'lhe concluding paragraph of each letter was: "Vle ar.;; writing this let tar in order that you may be advised that items bearing notation similar to that set forth on the check mantioned above are uncollacti bL; through a Fadaral Reserve :·ank and. for that reason as a medi~~ of pa~ment the usefulness of such checks are impaired. 11 · About two weeks 1:efore IVIa.y 18th, 1920, defendant Jank 1 s ::ranch =ank at Cincinnati wrote plaintiff 1 s main Cincinnati correspondent, a national bank and member of tho Federal Reserve System, a letter in which it said: "We are instructed by the he::l.d office to refuse to handle checks bearing the endorsement of the Kumars & Merchants ::::,ank of Catlettsburg. Accordingly in case any checks with their endorsemznt are deposited with us, by you, we shall return them. Please so instruct your Transit Department. This is effective at once and until further notice." \Vhile the American Express Company W3.S January and February, 1920, its ~neral ~cting as agent in agent at Cincinnati, and local agent at Ashland, ihich had supervision of the Catlettsburg office, cilled 1162 -11- upon the manager of the defend:mt ~ank' s X-355la · Lranch ::an1: ~t Cincinn..l.ti to ex.pl::l.in delay in two or three shipments of proceeds of checks collected by the Express Company. They inquired of the Manager how long such method of col- lection would be kept up and according to the General Agent, he replied: "I do not know how long it. will be continued, but i t will be continued until the Farmers & Merchants tank agrees to handle our collections without charge to us. n According to the local agent he replied that they would continue their method of collectin~ chJcks over the counter until they had forced the plaintiff to handle them at par ~d i~timated that it would not be long until it would be forced to clear at par. Such is the showing on substance made by the :U'fidavits introduced on behalf of plaintiff. As against it, so far as Magae 1 s conduct is concerned, defendants have introduced the affidavit of'Magee testimony of Miss McCall. ~nd the &ral In his o.ffid:1vit M;,1gee states that in his various conferences with plaintiff's cashier he nev3r endeavored to coerce the plaintiff into agreein6 to clear check drawn on it at par, but at all times sought to point out to him that the par collection system was a great.progressive rnovemant in banking practice and that plaintiff as a representative banking institution in Catlettsburg shonld give its sanction to this practice and that he never uttered to any person any to the reputation or solvency of plaintiff. Oth~r state~nt dQrogatory than these general stat3- llldnts he makes no denial of the stateiYJ<;nts in plaintiff 1 s affidavits as to his conduct. Possibly his affidavit is to be understood as stating that he was not in Catlettsburg any time Whilst the Express agent. If so, this stat;;;mmt may ba Compa~ was acting as said to amount to an indiroct denial of what is stated in plaintiff's affidavit as to his· conduct in Ca.tldttsbl.:-u:""' -12- X-3551a at that tirr:e, Miss McCall testified that Mr. Magee was never boisterou.&. or ungentlemanly in any way and was always quiet and gentlemanly when she was thrown with i1im. true. There is no reason for not accepting this testimony as Possibly i t can be reconciled Nit,h statements in plaintiff•s affi- davit by the f::.tct tlu t her presence had a res t:"air. . il:g influance upon hirr • It is to be noted, howevar, that seemingly the indictment was not returned against him until over two weeks after Miss McCall began to act as agent. In the light of the shaNing made on both sides I am constrained to accept that rra.de by plaintiff as to Mage0ts conciuct as being substantially true. It is hard to believe some of it, that as to his conduct in relation to Magann for insta.nce. tiff's affidavits. .And a tendency to exaggeratE: seems to pervade plainYet with this said, in view of the number of themand the persons w.aking tharr:, all. of '!\hom are in good standing I have not other recourse than that sta tt:Jd. The defendar.t banl;:-'s .Assistant Cast"idr who has represented it in this matter· testified that the conduct of Magee complained of was never authorized by the defendant bank and if he was guilty of any such conduct i t vva.s a·bsolutely anything at unkrl01JIJU to it and that h;;; never Catl~ttsburg intimat~d that he was doing axcept to carry out instructions which was to en- deavor to porsuade plaintiff to agree to remit at par and to treat it po~ 1 it ely. .At one time 1 however, a complaint of !Vlagee was conveyed to defendant bank through the president of plaintiff's principal Cinci~~ati correspondent. •· Ma.gee was ins true ted to see. such president about it. He did so and explained the matter to his satisfaction. The defendant bank learnad of !~gee's in- d.ictrr:ent and ina.,uired of him about the rratter. He gave an outlin_e of his actions >Vhilst in Catlettsburg and according to U.at outline there was nothing -13- X-355la in his conduct which would indicate that the indictment was based upon wall established facts. But it made no independent investigation in regard to the matter, ·sent no one to Catlettsburg to inquire into Magee's conduct, made no effort to have the indictment against him brought to trial, expressed no regret to plaintiff for his conduct if possibly he did go too far and continued to keep him in its employ until July 17th, 1920, the ryason for his then quitting not ap~earing. Seemingly the defendant Dank would have the Court, in disposing of this motion, turn its back on Magee 1 s conduct as a thing long of the past when this suit was brought and view it in the light of the fact that at that time all it had to apprahend was Miss McCall's daily visits, vvith her pistol by her side, accompaniad at times with one or t'NO dogs. But that conduct is relevant, notwithstanding that such is all that plaintiff has reason to apprehend in the future. It gives color to defendant 1 s Bank 1 s purposa in initiating and continuing this procedure directed against plaintiff. Possibly it may be true that it was not aware of Magee's con::tuct, at least to the full extent to which he went. is such con,:;.uct on McGee r s part to 1:e accounted for. :Jut how It ca::mot b.;; accounted for on any othar basis than knowleuga on his part of what ' defandant Bank's purposa was in setting on foot the movemant against It 'vas bagotten by such purpose and henca gives color to plaint iff. it. Thoa showing made by plaintiff's affidavits as to the oth2r particulars than Magaers conduct and as to his conduct except as stated ara uncontradictad. -14- X-3'55la The facts as to twc other matters should be stated. One of them is as to the accumulation of plaintiff's cheds by defendant There was no other accumu:ation than such as was caused by Bank. its advertisement that it would collect plaintiff's checks at par. This necessarily resulted in an accumulation to some extent. It can be ac.cepted that this undertaldng was availc::d of by all in whose hands C9ame) plaintiff 1 s checks; who othervcise would have been compelled to pay for remittances in payment thereof. And because of this plaintiff was obliged to keep a greater reserve than would have been the case had the chec1s been allowed to straggle in one at a time as they did before defendant bank set on foot the movement against it. The ,other is as to the effect on plaintiff of defendant Bank's course of procedure. It deprived it of income from remittance to the extent of from $800 to \ do • '~1,000 a year. It required it to lreep a greater cash reserve and, therefore. affected its income from loans to a certain extent. caused it to lose depositors. the time It There was a shrinkage in deposits in between the initiation of the movement and just before the bringing of this suit of nearly $100 1 000. But it cannot be said from this mere fact alone that·this shrinkage was caused by that movement. There was a greater shriril~age in the same time of the deposits of another banking institution of Catlettsburg. But the Cashier's affidavit gives the names of seven depositors which plaintiff lost for this reason and this statement is uncontradicted. Ana the movement. especially whilst Magee was at Catlettsburg, was calculated to cause plaintiff to lose depositors. The movement scandalized plaintiff in Catlettsburg and was calculated in injure its reputation and credit. .1166 X-355la - 15What was going on was a matter of public notoriety. made to keep it from the public. No attempt was And the procedure could not help being humiliating to plaintiff. Yet still another fact should be stated in order to a full presentation 01 ~n1s case. This is that when this suit was brought the checks which came into defendant bankl s hands for collection and which were presented by it for payment over the counter were dwindling At the time the move~ent was begun plaintiff had reason in number. to expect that checks amounting to as much as sented for payment at any time. $8,000 might be pre- At the time suit was brought the reasonable expectation did not exceed $3,700. This shrinkage was due to the endorsement on its checks, which were increasingly being .put there, to the effect that payment might be made in cash or exchange which checks the defendant Bank refused to handle. It remains to determine the law of this case. As to this there can be no question as it has been settled by the decision of the Supreme Court in the Atlanta case. It all depends on defendant Bank's purprse in adopting this unusual ana heretofore unheard of procedure of seeking out plaintiff's checks for collection • and presenting them in a body for payment over the counter, i. ?t, what was its immediate purpose in so doing. Was it for the purpose of breaking down the plaintiff's business as then conducted? If so, it was unlawful and subject to be restrained by a court of equity. It does not follow that because the holder of a check has a right to present it to the bank upon wh.ich it is drawn for payment over the - 16- X- 355la. if 67 counter that one has the right to seek to become the holder of all the checks drawn on a bank as they are drawn and then present them in a body for payment in cash over the counter. If such was defendant Bank's immediate purpose in so doing it was not· justified by the ulterior purpose which it has in view, to-wit of freeing commerce from the burden of such charges. Here, as never, did the end justify the means. Such a course of procedure is a kind of refined highwaymanship. It is aholdup. It is one of the inalienable rights of a person to be unprogressive, selfish and mean. This is said intending to so characterize plaintiff's position. has the right to coerce him into being otherwise. wit~out No other person The idea that there is such a right was at the bottom of the night rider troubles in Kentucky some years ago. Those who were in the ppol thought that those who were out were selfish. And they undertook to coerce them into joining the pool by shooting them into their homes. ~bat thenwas the defendant Bank's purpose in initiating this movement against plaintiff and ~eeping it up for over a year and a half, i. e. until stopped from further doing so by the temporary restraining order? There is but one answer to this question and that was to break down plaintiff's business as it was being conducted not to put it out of business, but to compel it to do business in this particular as it would have it do e.nl :not as plaintiff desired. Notwithstanding it was having its way in conducting its business it was not willing that plaintiff should have its way in conducting its business. It desired to impose its will on plaintiff. That such . " -17 - X-355la 1168 was defendant Bank's purpose is the meaning of the course of procedure adopted. It can be accounted for on no other basis. •. Such a} f ,.• purpose was avowed by those acting on its behalf, and it was ad.mi tted on the witness stand by its assistant cashier that i f the plaintiff at any time had signed an agrement to remit at par the agency would have been withdrawn. Each side appeal to the decision in the Oregon case as favoring its contention. to favor that of plaintiff. It seems to me In that case the Reserve Bank had been maintaining an agent at Brookings but at the time of the application for preliminary injunction that agent had been withdrawn and the Reserve J3ank had been forwarding to the State Bank checks drawn on it endorsing them for collection only and remittance in full without deduction for exchange, and, upon the State Bank returning them unpaid, had been returning them its correspondents advising them that the State Bank refused to pay and had not protested same and they must look to the State Bank for their protection w~iCh was in effect that the checks had been dishonored. A preliminary injunction was granted restraining the Reserve Bank from so advising its customers. That in the decision of Judge' ~olverton on which the defendant bank relies is his statement that the Reserve Bank was acting within its authority in maintaining an agent Brookings for making collections over the counter of plaintiff's bank and paying the·expenses thereof. But in ma~ing this statement he was merely referring to the corporate power of the .Reserve Bank and he based this on the decision in the Atlanta case. I I I ., . X-355la - 18 considerin~ He was not 1.169 the right of the Reserve Bank to so act as against the State Bank. On the contrary he seemingly condemns the action of the Reserve Bank in this particular as well as in the particular as to which the injunction was granted. He said: , "The question remains for determination as it respects the motive that induced the defendant bank to pursue the course it did in attempting to ~ake collection from the plaintiff bank. It appears by defenda~t's answer that it expended $1,915.32 in making collections over the counter of pla.intiffls bank of $102,850-33 during the year from October l, 1920 to October 1, 1921. The method employed, considering the occasion for it, or rather the lack of reasonable necsssity, was to say the least extraordinar7 , extr::-vagant and unbusinesslike." Again he said: _ "I am persuaded, however, that the action of the defendant bank in adopting the methods pursued by it toward the plaintiffls bank, Emd in persi::;tently adhering to them indicates most convircingly that it was for the purpose of coercing the latter bank into adopting the policy cf the Reserve Bank to remit at par- Although the policy may be commercially sound, the plaintiff was entitled to pursue its own method, without-being harrassed and annoyed because it pe;rsisted in so doing." It is not unlikely that the withdrawal of the agent from Brookings was dus to the decision of the Supreme Court in the Atlanta case and was an interpretation of that decision as condemning such action. The d&cision of Judge Evans in the Atlanta case after its return con~isted of certain t:inding;s in that case, based upon its particular facts. In so far as such findings may conflict with what I have held herein I am unable to follow it. The only thing ca~e th~t hc,s siven me any concern in this is plaintiff's delay in asserting its right. No explanation ,, . -·19- X- 355la 1170 is given of this~ Possibly it thought that it would be able to wear out the defendant B~nk in the long run. But it is not unlikely that under the influence of the decision of the lower courts in the Atlanta case it thought that the defendant Bank had the right to make collections as i t did and wa3 not advised to the contr.ary until the Supreme Court reversed those decisions. reversal that this suit was brought. It was shortly after such I cannot, however, rrake out from this delay any reason why defendant bank should be permitted to continue to make' collections in this unlawful manner. therefore, is sustained. restraining defendants The motion, A prelimin&.ry injunction is granted fro~;'l continuinq- so to make collections of checks dra\1\1!1 on plaintiff and the defendant Bank from advertisin:; that i t will collect such checks free of charga o.nd from doing anytl,ling else for the purpose of coercing plaintiff to remit at par.