CASES ADJUDGED

IN THE

UNITED STATES CIRCUIT COURT OF APPEALS.

FOR THE

SIXTH CIRCUIT,

AT

OCTOBER TERM, 1892.

FIRST NATIONAL BANK OF EVANSVILLE, INDIANA, v. FOURTH NATIONAL BANK OF LOUISVILLE, KENTUCKY.

ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE DISTRICT OF KENTUCKY.

No. 21. Submitted October 3, 1892. Decided June 8, 1893.

It is negligence for one bank acting as the agent for another bank to send a certificate of deposit, which had been sent to it by its principal for collection, to the makers of the certificate before receiving from them the amount due thereon, and the agent is liable for the damage resulting from such a violation of its duty.

Where a party to a stated account neglects to examine it or to have it examined within a reasonable time after receiving it, by reason of which negligence the other party, relying upon the account as having been acquiesced in or approved, has failed to take steps for his protection which he could and would have taken had timely notice of objections to the account been given, the former is estopped from questioning its conclusiveness.

Where letters are received by the bookkeeper of a bank whose duty it is

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Syllabus.

to receive, open and distribute letters addressed to the bank coming by mail, and the bookkeeper secretes the letters and keeps them from the actual knowledge of the bank, the bank is chargeable with notice of their receipt and of their contents, as delivery of the letters to the bookkeeper is delivery of the same to the bank.

Where letters have been properly mailed, the presumption is that they have reached their destination and were received by the persons to whom they were addressed.

On May 8, 1888, an Indiana bank sent to a Kentucky bank for collection a certificate of deposit made and indorsed in Illinois. On May 9, 1888, the day of its receipt, the Kentucky bank sent the certificate by mail to its makers for payment. On June 1, 1888, having heard nothing from the makers, although repeated inquiries had been made, the Kentucky bank advised the Indiana bank by letter of the receipt of the certificate, of the fact that it had been sent to its makers, and that without result, and asked the Indiana bank to "see the indorser and have him investigate it, and either obtain us a duplicate of it or have them [the makers of the certificate] remit to us for it." On June 22, 1888, the Kentucky bank, having received no answer to its letter of June 1, mailed a letter to the Indiana bank advising that it had charged to its account the amount of the certificate. On July 2, no objection having been made by the Indiana bank to the course suggested in the letter of June 22, the Kentucky bank mailed to the Indiana bank its account current for June, in which the amount of the certificate was charged back to the Indiana bank. Thereafter, and including the account for March, 1889, monthly accounts current omitting the item of this certificate were mailed by the Kentucky bank to the Indiana bank, which were not objected to until April 24, 1889. In the meantime the indorser of the certificate had been released, because under the Illinois law no action had been begun against him in time, and the makers of the certificate had failed. The letters of the Kentucky bank of June 1 and June 22, 1888, and the account current of July 1, 1888, came into the hands of the general bookkeeper of the Indiana bank, who concealed them, and they did not come to the actual knowledge of the officers of the bank until after April, 1889. Held, (1) That the letters of June 1 and June 22, 1888, from the Kentucky bank, and the charging back of the amount of the certificate of deposit, amounted to a renunciation of its agency, so far as it could renounce it, but that it could not put an end to the agency and relieve itself from liability, as the facts then were, without the consent, express or implied, of the Indiana bank; (2) that such consent would be implied from the silence of the Indiana bank after having been informed of the renunciation; (3) that as the Indiana bank made no objection to the renunciation, the Kentucky bank was not liable for damage resulting from events subsequent, and not from the sending of the certificate to its makers for collection; (4) that the Indiana bank by its acquiescence in the renunciation by the Kentucky bank of its agency caused the Kentucky bank to fail to take such steps as it might otherwise have taken for its protec

Statement of the Case.

tion, and that the charge of the court that the Kentucky bank was not in any event to be released from responsibility for any loss resulting from its negligence, but only from the consequences of its failure to act after the acceptance by the Indiana bank of the renunciation of the agency, was proper; (5) that the court correctly charged that if the jury found that the letters mailed by the Kentucky bank were delivered to the bookkeeper of the Indiana bank, they should find that they were delivered to the bank; (6) that as the loss to the Indiana bank resulted, not because no suit was brought by the Kentucky bank against the indorser of the certificate of deposit, but because the Kentucky bank was induced to believe by the Indiana bank's failure to respond to the letters and statements of account mailed by it from time to time, and had a right to believe, that the Indiana bank had accepted the renunciation of the agency and had undertaken the collection of the certificate of deposit on its own account, it was immaterial whether the charge of the court, that it was not the duty of the Kentucky bank to sue the indorser of the certificate, and that, while the Kentucky bank had no such authority, it was under the duty, or would have been, if the renunciation of its agency had not been accepted by the acquiescence of the Indiana bank, to push the matter, and, if it could not make the collection without suit, to inform the Indiana bank promptly, so that it might sue for itself, if it thought proper to do so, was right or wrong; and (7) that it was not error in the trial court to charge the jury that the letter of June 22, 1888, and the letter of July 2, 1888, with the account current charging back to the Indiana bank the credit on account of the certificate, amounted to a renunciation of the agency, and that if the Indiana bank did not object within a reasonable time it must be held to have accepted the renunciation, the trial court expressing the opinion that there was no evidence that the Indiana bank ever did anything, and, if that was so, that the Kentucky bank was not liable for any loss that resulted from its subsequent inaction, and that the trial court would have been justified in directing the jury to find that the agency was renounced by the Kentucky bank, that the renunciation was acquiesced in by the Indiana bank, and that the latter was entitled to recover only nominal damages. Leather Manufacturers' Bank v. Morgan, 117 U. S. 96, followed and applied.

Before JACKSON and TAFT, Circuit Judges, and SAGE, District Judge.

On the 8th of May, 1888, the plaintiff in error sent by mail to the defendant in error, for collection, a certificate of deposit, of which the following is a copy:

"BANKING HOUSE OF M. M. POOL & Co.,

"SHAWNEETOWN, ILL., February 9, 1888.

"Dr. Wm. N. Warford has deposited in this bank twenty

Statement of the Case.

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six hundred and sixty-six and dollars for three months, payable to the order of himself on return of this certificate properly indorsed. Interest at five per cent per annum from date until maturity.

"No. 1158.

M. M. POOL & Co."

The certificate was received by the Louisville bank on May 9, 1888, credited by it to the Evansville bank as $2700, and so entered on the account current mailed to that bank on June 1, 1888. Pool & Co., who issued the certificate, were then bankers in good credit at Shawneetown, Illinois, near the plaintiff and remote from the defendant. They continued in good credit and active business until some time after January 1, 1889, when they failed. Warford, who assigned and indorsed the certificate to the plaintiff, was a man of wealth. By the law of Illinois he was liable as indorser only upon condition that the holder of the certificate should bring suit against Pool & Co. at the then next term of the Circuit Court of Gallatin County, Illinois (in which county Shawneetown is located), being the term of September, 1888, and prosecute them to insolvency.

It does not appear from the record that the certificate was indorsed to the defendant, but it is averred in the complaint, and not denied in the answer, that Warford, before the maturity of the certificate, indorsed it to the plaintiff, and in a letter written by the counsel for the Louisville bank to the Evansville bank on the 14th of August, 1889, and put in evidence by the plaintiff, the certificate is referred to as indorsed by Warford to the plaintiff. The record does not show that any instruction or authority was given the defendant to bring suit upon the certificate.

The defendant, on the day on which it received the certificate, sent it by mail to Pool & Co., requesting them to remit. On the 1st of June, 1888, having heard nothing from Pool & Co., although it made repeated inquiries after the certificate, the defendant wrote to the plaintiff as follows:

"Dear Sir: On May 9 we received from you a certificate of deposit for $2700, issued by M. M. Pool & Co., bankers,

Statement of the Case.

Shawneetown, Illinois. We sent the item to them for collection and returns, but so far have heard nothing from them, notwithstanding we have sent several inquiries after it. Will you kindly see the indorser and have him investigate it, and either obtain us a duplicate of it or have them remit to us for it?"

Not receiving any answer to that letter, the defendant, on June 22, 1888, mailed another letter to the plaintiff, of which the following is a copy:

"We charge your account $2700 for item on Shawneetown, Illinois, in yours of May 8. We have written repeatedly for the item, but can get no returns. We also wrote to you for a duplicate several weeks ago, but have not received one as yet. We hope you can settle this matter without further trouble."

On Monday, July 2, 1888, the plaintiff having made no objection to the course suggested in the letter of June 22, the defendant mailed to the plaintiff its account current for June, in which the Shawneetown item of $2700 was charged back as stated in the letter of June 22.

Monthly accounts current were duly sent for every month thereafter up to and including the account mailed on April 1, 1889, for March, 1889. Each of these accounts omitted the Shawneetown item. No objection to the omission, nor to what had been done by defendant, was made until April 24, 1889, but in the meantime Warford had been released-in September, 1888, — and Pool & Co. had failed in January, 1889. With reference to the receipt of the letters of June 1 and June 22, 1888, and of the account current of July 1, 1888, it appears from the evidence that the mail was brought to the plaintiff's bank by a letter carrier, and there came into the hands of Mr. Schor, general bookkeeper of the bank, whose duty it was to open and distribute mail matter received. He had been guilty of certain irregularities, not, it is said, "involving any moral turpitude;" that is to say, he took no money belonging to the bank, but, falling behind in