The East-Haddam Bank against Scovil, 12 Conn. 303

Huntington, J. No exception has been taken to the instruction to the jury, that money paid by mistake, and under a misapprehension of facts, and where no laches are imputable to the plaintiff, (in respect to his omission to use the means of knowledge within his power) and when in equity and good conscience the defendant cannot retain it, can be recovered back. Milnes v. Duncan, 6 B. & C. 671.

Indeed, the principle involved in this instruction, has become almost an axiom in the law ; and is as just in itself, as it is fully supported by authority: Nor does any just exception exist to the charge, that the plaintiffs were bound to exercise due and ordinary care and diligence, as agents, in collecting the bill in question ; for this is the contract which the law implies, from the relation subsisting between the parties to this suit, who differ as much, perhaps, in (he application of the legal principles which are to govern our decision, as in their views of the principles themselves.

The defendant insists, that the plaintiffs were guilty of negligence,in several particulars. 1. In not indorsing the bill, previous to forwarding it to the Merchants’ Exchange Bank ; or, at least, in not informing the latter bank, of the places of residence of the indorsers. We believe it is a general practice of the banks in this state; when they transmit bills or notes for collection, to indorse them, by their cashier ; but we are ignorant of any rule of law which requires it.

The only benefit resulting from such a practice, is, that the note or bill, when so indorsed, will itself show from whom it was received, by the collecting bank. This, however, would seem to be of no importance to those interested in the bill; for it is to be presumed, the bank employed to make the collection, will preserve the letter of advice accompanying the bill, or cause such entries to be made in their books, as will show from whom it was received. This would be done, as well for their own security, as on account of the courtesy due their correspondents.

In the present case, the bill was forwarded, by the plaintiffs, in a letter dated “ East-Haddam Bank, July 12th, 1832,” and signed by the cashier; and when received, there was noted on it, “ for the Easl-Haddani Bank.” None of the parties to this bill were injured, or could have sustained any loss, by reason of the omission, on the part of the plaintiffs, to indorse the bilk The law does not impose the duty of indorsing a bill, on the bank who receives.it merely to be transmitted for collection.

Such a duty might become extremely onerous; for if their indorsement was in blank, they might be subjected, at the suit of a bona fide holder, for value, who should become possessed of the bill, before it came to maturity. Nor does the law require the bank who forwarded the bill for .collection, to communicate the places of residence of the indorsers.

Such information is necessary only to enable the collecting bank to give due and reasonable notice to the parties, of the dishonour of the bill, if not paid according to its tenour; and this object can be as effectually attained, without information of the places of residence of the indorsers, as with it.

If the forwarding bank transmit the bill to their cor-regponc|entSj ⅛ SUch a manner, and with such information as enable the latter to send notices of dishonour (when ne- „ , .... . , , , , - cessary) to all tne parties directly, or indirectly through the lor-warding4 bank, according to the general and known usages of banks in such cases, (and this duty the law imposes) the holder is made as secure in his legal rights to resort to the puevious parties, as if the bill had been indorsed, and the residence of each of those parties had been communicated, by the bank, to whom it was first delivered for the purpose of collection.

Baldwin v. Richardson & al. 1 B. & C. 245. Scott v. Lifford, 9 East, 347. Langdale v. Trimmer, 15 East, 291. Smith on Mer. Law, 148. Hartford Bank v. Stedman & al. 3 Conn. Rep. 489. Holland v. Turner, 10 Conn. Rep. 308. The motion states, that, in the case before us, the bill was sent, by the plaintiffs, to their correspondents, who knew from whom they received it, and who had the necessary information to enable them to transmit, through the plaintiffs, the proper notices to all the parties to the bill, if they were required at all.

The plaintiffs, who received the bill for collection merely, transmitted it, in due time, to their only correspondent in the place where it was payable — a bank in good credit, and on whose fidelity reasonable confidence was reposed — accompanied with information of every fact necessary to secure the rights of the defendant. No negligence was imputable to them. Up to the period when the bill came to maturity, the plaintiffs had discharged all the obligations which they had contracted to the defendant, by the receipt of the bill for collection.

Have they omitted to perform any duties imposed upon them, at a subsequent period ? Or have they so conducted as that the defendant can justly, and in good conscience, retain the money sought to be recovered of him, in this action ? 2.

It is claimed, by the defendant, that the Merchants’ Exchange Ba?ik were the agents of the plaintiffs, in the collection of the bill, and not the agents of the defendant; that the plaintiffs are responsible for the default of the collecting bank, who, it is insisted, were bound to give notice to the indorsers, of the dishonour of the bill, either directly, or indirectly through the plaintiffs: and having failed to do so, the defendant can equitably retain the money which has been paid to him.

If the defendant has suffered an actual loss, by reason of the want of notice, we should not say he was without remedy as against the Merchants’ Exchange Bank ; nor do we decide that their omission to give notice, would not subject them to an action in favour of the defendant, in which nominal damages might be recovered, although no real damage had been occasioned by their neglect. Van Wart v. Wooley & al. 1 M. M. 520. That bank was guilty of negligence, in not notifying the plaintiff, or the defendant, of the dishonour of the bill.

And we do not say the defendant has sustained no real injury; although it appears the drawer was duly notified, and the acceptors, “ before the bill became due, and ever since, were and have been, and now are, insolvent and wholly unable to pay the bill.” The facts which may have a bearing on this point, do not appear upon the motion.

The defendant, though in form an indorser, was clearly not entitled to notice, strictly as indorser, as in -ordinary cases; for the bill was his own ; he indorsed it for the purpose of collection only ; and therefore, no necessity existed to give notice to fix a liability upon him, to any subsequent holder. Notice to him was to be given in a reasonable time, not as indorser, but as holder, and to enable him to avail himself of any means within his power, to secure the eventual payment of the bill to himself.

We do not, however, deem it necessary to express an opinion upon the questions which may arise between the defendant and the Merchants’ Exchange Bank. Our enquiries are confined to the claims of the parties before us. The jury have found, under the direction of the court, that the plaintiffs have not been guilty of any such default or negligence in regard to the bill, as that the defendant has been prevented from collecting or recovering the amount of it from the parties liable to him.

If the defendant has suffered a loss, by reason of the default of the Merchants’ Exchange Bank, he cannot look to the plaintiffs for a reimbursement, unless they are responsible for the acts and omissions of the bank in default. And he insists, that the Merchants’ Exchange Bank were the agents of the plaintiffs, for whose fidelity, in every thing relating to the collection of the bill, they are responsible to him. We do not yield our assent to this claim. We think it has no foundation in principle, and is unsupported by authority. The plaintiffs’ place of business was East-Haddam.

The bill was payable in the city of New- York. It was necessary that it should be transmitted to the jajjer pjace for collection. These were facts known to the de-who also must have known that the plaintiffs could do no more than transmit it to the city of New- York, to a reputable correspondent, and according to their usual course of business, to be collected. All this was done by the plaintiffs-Under such circumstances, it cannot justly be claimed, that the plaintiffs should have become insurers against the defaults of their correspondents.

Such a doctrine would be as inequitable, as it might be oppressive and ruinous to banks, who are merely the medium through which the hqjders 'of# bills and drafts payable in other states, transmit them for collection. If they act in good faith in the selection of an agent to protect the interests of the holder of the bill, in cases where it is obvious an agent must be selected for such purpose, what principle of justice or commercial policy requires, that they should be held liable for any neglect of duty on the part ef-such agent?

To impose this liability, would make a special contract excluding it necessary, in all cases; or it‘would render the collection of bills of this description, extremely difficult. It would tend very much to destroy the facilities which at present exist, of making collections through the agency of banks, and subject the holders of bills to inconvenience and expense, and probably, in many cases, to serious loss. The mode now adopted and in general use, is well calculated to insure collections with promptitude, at a trifling expense, and without trouble to the holder.

It is highly reasonable he should assume the risk of the defaults of the collecting agent, rather than the bank, who merely transmit the bill, and select the agent, with the consent of the holder, and with a perfect knowledge on his part, that such selection must be made; and when the power is exercised in good faith, and with reasonable care, and according to general usage. The views we have thus expressed, so eminently just, and so well calculated to protect the rights of all concerned, are sanctioned, by many adjudications of high authority. Lawrence v. Stonington Bank, 6 Conn. Rep. 521. Smedes v.

Utica Bank, 20 Johns. Rep. 372. Bank of Washington v. Triplett & al. 1 Peters 25. In Van Wart v. Wooley & al. 3 B. & C. 439., the court, in giving judgment, say: — “ Irving Co. residing in America, had employed the plaintiff, residing at Birmingham, to purchase hardware for them iu England, by commission. By accepting this employment, he became, as between him and them, their agent. They then send him the bill in question as „ , . - . . j, - , further remittance on account of their order for hardware.

The bill is drawn upon persons residing in London ; the plaintiff, therefore, could not have been expected to present the bill himself; it must have been understood, that he was to do this through the medium of some other person. He employed, for that purpose, persons in the habit of transacting such business for him and others, and upon whose punctuality he might reasonably rely.

In doing this, we think he did all that was incumbent upon him, as between him and Irving Sf Co. ; that he is personally in no default as to them, and is not answerable to them for the default of the persons whom he employed under such circumstances.” 3.

It is further urged by the defendant, that the plaintiffs were guilty of negligence in not obtaining earlier information of the dishonour of the bill, and communicating it to the defendant ; at least, that they were in default in notifying him that it was collected and the proceeds were at his disposal: that in consequence of these acts and omissions, and the payment of the money to him, he was “thrown entirely off his guard,” and prevented from taking any measures to obtain payment or security from the previous parties to the bill; and therefore, the plaintiffs have made the bill their own; and in equity, the defendant ought to retain the money.

To this claim it would be sufficient to reply, that the jury have found, that the defendant has not been prevented from collecting or recovering the amount of the bill, by reason of any default or negligence on the part of the plaintiffs. If he has lost nothing in consequence of the acts or omissions of the plaintiffs, it is not easy to discover the equity of his claim to appropriate the plaintiffs’ money to his own use.

If his supposed right to retain it, is founded upon a presumed loss arising from the misconduct of the plaintiffs, all pretence of such right is removed, when it is found no such loss has in fact been sustained. Independent, however, of the finding of the jury on this point, we think the position taken by the defendant’s counsel cannot be maintained. The plaintiffs were perfectly justified in paying the money, under the circumstances disclosed in the motion.

According to their usage, (which is similar to that which prevails among the other banks in this state,) whenever they forward bills for collection, and do not, within a few days after they arrive at ■maturity, receive information that they are dishonoured, they charge the amount to the bank who hold them for collection, and credit and pay it to those who have deposited them for collection. Such an usage is reasonable and ought to be sanctioned ; and from the facts admitted, must be presumed to have been known to the defendant. Dwight & al. v. Whitney, 15 Pick. 179.

It is well adapted to promote the interests of the holders of negotiable paper, and, in general, can occasion no injury to them. It cannot be required of banks, who are mere agents to transmit to others bills for collection, to obtain information from their correspondents, of the payment of all the notes, bills and drafts which they forward, as soon as the time of payment arrives and they are paid ; nor can it be expected, that the collecting banks will subject themselves to the burden which the continuance of such a correspondence would impose.

Hence, it has been a known and general practice for the bank, which forwards for collection, to consider the bills as paid, when not notified to the contrary. In the present case, the plaintiffs acted in conformity with this usage. The bill was payable July 28th.

On the 10th of August, the plaintiffs having received no notice of its dishonour, and supposing it to have been paid, and a credit therefore given to them on the books of the Merchants’ Exchange Bank, gave a similar credit on their books to Ingham, (who had indorsed and sent it to them, at the request and for the accommodation of the defendant,) and advised Ingham accordingly, on whose check in favour of the defendant, dated August 11th, the money was paid to him.

Some time during the month of September, it was ascertained, by the plaintiffs, that the bill had been protested, and remained unpaid ; and within a week or ten days after they had knowledge of this fact, it was communicated to Ingham, with notice of the facts regarding the protest, and the payment of the money to the defendant; and some time in the month of October, a similar notice was given to the defendant of all these facts.

It appears, then, that the plaintiffs waited a reasonable time after the bill came to maturity, before they paid the avails to the defendant: that within a short time afterwards, and as soon as they were put upon enquiry as to the fact regarding the nonpayment of the bill, they sought and obtained the requisite information, which was communicated, without any nnreasoua-ble delay, to the defendant.

The plaintiffs have acted throughout, with entire good faith ; have proceeded in the usual manner, and in accordance with a general usage ; have been in no default; by mistake, and by reason of a misapprehension of the facts, not the result of their negligence, and without their laches, they have paid their money to the defendant, which no principles of equity known to us, will justify him in withholding from the plaintiffs, and which, in good conscience, he ought to refund.

The verdict which restores it to them, is sustained by the rules of law and the soundest principles of morality and fair dealing, and ought not to be disturbed. The view which has been taken of the case, renders it unnecessary to express an opinion upon the question of waiver, which has been argued before us ; and we wish to be understood as not intimating any opinion as to that part of the instruction, which has reference to that subject. Whether an absolute promise to pay a dishonoured bill, is indispensable to constitute a waiver of legal notice, we do not decide.

A correct decision of the case before us, does not require it. We leave that point open for examination, whenever it may become necessary to consider it. The motion for a new trial must be denied. In this opinion the other Judges concurred. New trial not to be granted.