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153 FEDERAL RESERVE BOARD WASHINGTON X ADDRESS OFFICIAL CORRESPONDENCE T O T H E FEDERAL RESERVE BOARD SUBJECT: _SV06 September 13, 1930. U. S. Casualty Company v, Nashville Branch of Federal Reserve Bank of A t l a n t a , e t a l . Dear S i r : I enclose f o r your information a copy of a B i l l i n Chancery f i l e d i n the above e n t i t l e d case. You w i l l note t h a t i t a l l e g e s t h a t the check i n question was deposited i n a Mew York t a n k , forwarded to the Federal Reserve Bazik of How York, and then to the N a s h v i l l e Branch of the Federal Reserve Bank of A t l a n t a . A decree a g a i n s t the Federal Reserve Bank of A t l a n t a i s sought on the ground t h a t i t was n e g l i g e n t i n sending the chock d i r e c t to the drawee "bank, I am c a l l i n g t h i s to your a t t e n t i o n because Mr. Edward J . Smith, Counsel f o r the N a s h v i l l e Branch of the Federal Reserve Bank of A t l a n t a , with the acquiescence of Mr, Robert S. Parker and the undersigned, has decided to f i l e a demurrer i n t h i s case; and I do not know of any case i n which a b i l l of t h i s kind has been demurred t o . Mr, Smith's theory i s t h a t the b i l l shows on i t s f a c e t h a t the New York r u l e i s a p p l i c a b l e ; and there i s no p r i v i t y of c o n t r a c t between the complainant and the Federal Reserve Bank of A t l a n t a ; and t h a t , t h e r e f o r e , the b i l l should be dismissed on demurrer. .As an a l t e r n a t i v e , ho a l s o contends t h a t the Court should take j u d i c i a l n o t i c e of Regulation J ; t h a t the r e g u l a t i o n has the f o r c e and e f f e c t of law; t h a t , under the r e g u l a t i o n , there i s no p r i v i t y of c o n t r a c t ; and t h a t the b i l l should bo dismissed* While we a r e not e n t i r e l y sure t h a t the Court w i l l s u s t a i n such a demurrer, Mr. Parker and I f e e l t h a t i t can do no harm to t r y i t and t h a t the f i l i n g of a demurrer i n t h i s case suggests i n t e r e s t i n g p o s s i b i l i t i e s , I f i t i s s u c c e s s f u l i t w i l l e s t a b l i s h an easy and e x p e d i t i o u s means of disposing of many of those check c o l l c c t i o n cases. This i s merely f o r your information, but I s h a l l be i n t e r e s t e d i n any views which you may care to express on t h i s s u b j e c t . With a l l b e s t r e g a r d s , I am Cordially yours, Walter Wyatt, General Conns c l , Enclosure. To Counsel f o r a l l F. R, Banks (Except A t l a n t a ) X-6706-a COPY MO. 42315 O.B F i l e d June 23, J.930 TO THE HONORABLE JAMES B. NEWMAN, CHANCELLOR, ETC HOLDING THE CHANCERY COURT OF DAVIDSON COUNTY TENNESSEE : UNITED STATES CASUALTY COMPANY, a n o n - r e s i d e n t corporation r e s i d e n t of the s t a t e of Now York, "being q u a l i f i e d and doing "business i n the s t a t e of Tennessee Complainant VS; FOURTH & FIRST NATIONAL BANK a n a t i o n a l banking i n s t i t u t i o n of Davidson County, Tennessee, NASHVILLE BRANCH FEDERAL RESERVE BANK, a "branch of the A t l a n t a Federal Reserve Bank, a n a t i o n a l "banking i n s t i t u t i o n , with i t s o f f i c e i n Davidson County, Tennessee, COLUMBIA BANK & TRUST COMPANY, a s t a t e "banking i n s t i t u t i o n r e s i d e n t of Maury County, Tennessee, and D. D. ROBERTS CUT, an a d u l t r e s i d e n t of Davidson County, Columbia, Tennessee, Receiver f o r t h e Bank & Trust Company, Defendants Complainant would r e s p e c t f u l l y show to the Court: That on J u l y 15, 1929, the Columbia Insurance Agency, a duly l i c e n s e d insurance agency r e p r e s e n t i n g the complainant a t Columbia, Tennessee, drew i t s check on the Columbia Bank & Trust Company f o r $277.83, payable to the complainant f o r the amount of the agency's account due complainant. The chock was i n due season forwarded to the complainant's home o f f i c e i n New York and was thon endorsed by i t and d e p o s i t e d i n the Continental Bank of New York f o r X-6706-e •m collection. 2 - That Bank forwarded tho check f o r c o l l e c t i o n through the Federal Reserve Bank of Now York. On J u l y 20, 1929 the Federal Reserve Bank of New York forwarded i t s cash l e t t e r to the N a s h v i l l e Branch Federal Reserve Bank i n t h e sum of $21,503.48, which included the check above mentioned. This l e t t e r was received "by the Nashville Branch Federal Reserve Bank, J u l y 22, 1929, and on tho same day, the s a i d N a s h v i l l e Branch Federal Reserve Bank s e n t to tho Columbia Bank & Trust Company i t s cash l e t t e r i n the sum of $4,376.62, which included the above mentioned check and which chock was t h e r e f o r e s e n t by the N a s h v i l l e Branch Federal Reserve Bank d i r e c t to the bank on which drawn f o r presentment and payment. At the time there were two other r e g u l a r banking i n s t i t u t i o n s , i n c l u d i n g a n a t i o n a l bank, doing business i n Columbia, Tennessee, which was known to the Nashville Branch Federal Reserve Bank.' On J u l y 24th, the Nashville Branch Federal Reserve Bank received from tho Columbia Bank & Trust Company a check drawn on the defendant Fourth & F i r s t National Bank of Nashv i l l e , f o r $4,362.52, being i n payment of s a i d cdah l e t t e r of tho Nashville Branch Federal Reserve Bank s e n t to tho Columbia Bank & Trust Company, l e s s r e t u r n e d items, and on s a i d day, J u l y 24th, 1929, tho Nashville Branch Federal Reserve Bank p r e s e n t e d s a i d check drawn by the Columbia Bank & Trust Company t o cthe Fourth & F i r s t National Bank f o r payment which was r e fused. p a i d by In the meantime the s a i d chock of $277.83 was marked !fche Columbia Bank & Trust Company and p l a c e d with i t s . JL - 3 - X-6706~a p a i d cancelled, checks and was returned to the Columbia Insurance Agency marked "paid" along with i t s other cancelled checks and i n "balancing i t s account. The check drawn on the Fourth & F i r s t National Bank was p a s s e d through the c l e a r i n g house of Naflhville and payment was not r e f u s e d when i t was f i r s t p r e s e n t e d to the Fourth & F i r s t n a t i o n a l Bank coming through c l e a r i n g s , but during the day, and probably 'bef o r e any e n t r y thereof a g a i n s t the account of the Columbia Bank & Trust Company, t h i s bank closed i t s doors and the defendant Fourth & F i r s t National Bank was a p p r i s e d thereof* At the time the Columbia Bank & Trust Company was indebted f o r borrowed money or r e d i s c o u n t s to the Fourth ifc F i r s t National Bank and t h a t bank then r e t u r n e d s a i d check f o r $4,362.52 to the N a s h v i l l e Branch Federal Reserve Bank, r e f u s i n g payment, and a p p l i e d the deposit with the Columbia Bank & Trust Company i n s a i d Fourth & F i r s t National Bank t o the amount due the l a t t o r by the former. II Wherefore, complainant i s advised and charges t h a t i t i s e n t i t l e d to recover s a i d amount of $277.83 from tho Nashville Branch Federal Reserve Bank f o r the reason t h a t s a i d bank was n e g l i g e n t i n the c o l l e c t i o n of s a i d check i n sending i t d i r o c t to tho Columbia Bank & Trust Company on whom i t was drawn, knowing t h a t t h e r e were o t h e r banks i n the same c i t y . That l i k e w i s e , or i f taken i n t h i s view, i n e i t h e r event, the defendant Fourth & F i r s t National Bank of Nashville i s l i a b l e «to complainant f o r the reason t h a t i t had no r i g h t or a u t h o r i t y to apply j^iea&eposit of the Columbia Bank & Trust Company as abs%g^ — 4 — X-6706-a s t a t e d without paying s a i d check s e n t to the Nashville Branch Federal Reserve Bank and "by i t c l e a r e d to the Fourth & F i r s t Hational Bank, the payment on the check not "being r e f u s e d when i t was p r e s e n t e d . That s a t i s f a c t i o n from o i t h o r of s a i d defendants would of course s a t i s f y the complainant's demand a g a i n s t a l l , l e a v i n g the o t h e r defendants to l i t i g a t e and a d j u s t the matter among thenw selves. That i f mistaken i n the foregoing views, complainant i s a t l e a s t e n t i t l e d to have and s o t up s a i d check as a claim a g a i n s t the a s s e t s of tho d e f u n c t Columbia Bank & T r a s t Company i n tho hands of i t s r e c e i v e r and r e c e i v e i t s dividend thereon. Ill The p a r t i e s r e s i d e as s t a t e d i n the caption and aro sui j u r i s PREMISES CONSIDERED, COMPLAINANT PRAYS: 1. That those named as defendants i n tho caption hereof bo made such by tho issuance and s e r v i c e of process upon them r e q u i r i n g them to appear and answor t h i s b i l l a t the e a r l i e s t p r a c t i c a l r u l e day of the Court; b u t t h e i r oaths to t h e i r answers aro waived. 2. That tho complainant bo g r a n t e d a decree a g a i n s t the N a s h v i l l e Branch Federal Reserve Bank and/or Fourth & F i r s t National Bank of Nashville f o r tho amount of s a i d chock, i n t e r e s t and c o s t s . 3. I f denied tho r e l i e f sought i n the foregoing p r a y e r , ^ - 5 - jt-6706-a then t h a t s a i d chock "be s e t up and e s t a b l i s h e d as a v a l i d claim and demand a g a i n s t t h e a s s e t s of the Columbia Bank & Trust Conn pany i n the hands of the r e c e i v e r and t h a t ho bo ordered to pay pro r a t a dividend thereon. 4. That complainant have a l l such f u r t h e r and g e n e r a l r e l i e f as i t may be e n t i t l e d to a t the h e a r i n g . Wo a r e s u r e t y f o r the costs of t h i s cause. McGugin & Evans. McGugin & Evans S o l i c i t o r s f o r Complainant.
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