{
  "id": 1371723,
  "name": "Farmers' & Merchants' Bank v. Ray",
  "name_abbreviation": "Farmers' & Merchants' Bank v. Ray",
  "decision_date": "1926-02-01",
  "docket_number": "",
  "first_page": "293",
  "last_page": "298",
  "citations": [
    {
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      "cite": "170 Ark. 293"
    }
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    "name_abbreviation": "Ark.",
    "id": 8808,
    "name": "Arkansas Supreme Court"
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    {
      "cite": "99 Ark. 386",
      "category": "reporters:state",
      "reporter": "Ark.",
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    {
      "cite": "23 Pick. (Mass.) 330",
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      "reporter": "Pick.",
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        2044366
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  "last_updated": "2023-07-14T23:00:36.957476+00:00",
  "provenance": {
    "date_added": "2019-08-29",
    "source": "Harvard",
    "batch": "2018"
  },
  "casebody": {
    "judges": [],
    "parties": [
      "Farmers\u2019 & Merchants\u2019 Bank v. Ray."
    ],
    "opinions": [
      {
        "text": "McCulloch, C. J.\nAppellee, who was the plaintiff below, is a resident of Mulberry, Arkansas, and appellant is engaged in the banking business at that place.\nThis is an action instituted by appellee against appellant to recover the amount of a check received for collection by appellant, which it failed to account for. The case was tried before a jury, and the trial resulted in a verdict in favor of appellee.\nOn June 19, 1923, during banking hours, appellee delivered to appellant, for collection, a check for $1,150, drawn in his favor by Mrs. Etta B. Beard on the First National Bank of Sapulpa, Oklahoma. Appellant accepted the check, passed it to the credit' of appellee, and gave a deposit slip, and forwarded the check to its corresponding bank in Fort Smith. This was done in due course of mail on the same day that the check was received, and, according to the due course of mails, the check should have been received by the bank in Fort Smith the next morning, June 20. The Fort Smith bank forwarded the check to the Federal Reserve Bank at Oklahoma City, where it was received on June 22, 1923, and was by that bank forwarded directly to the First National Bank of Sapulpa for payment. The check was received by the Sapulpa bank on June 23, and on that day it drew its own draft on the Federal Reserve Bank at .Oklahoma City and forwarded it to the latter in payment of appellee\u2019s check. This draft probably reached Oklahoma \u00d3ity on June 24, which was Sunday, but was not delivered on that day, being delivered in due coiirse on Monday, June 25. Oh that day, and before the Federal Reserve Bank could forward the check, the First National Bank was found to be insolvent, and passed into the hands of the Bank Commissioner for liquidation.\nThe drawer of the check, Mrs. Beard, lived at Sapulpa, and, when the bank there received the check for payment, Mrs. Beard was informed that the check overdrew her account, whereupon she made a deposit of $500, which was more than sufficient to raise the credits on her account above the amount of the check. Thereupon the bank marked the check \u201cPaid,\u201d and surrendered it to Mrs. Beard.\nOn June 26 appellant received information of the failure of the Sapulpa bank, through its Fort Smith corresponding bank, and at once notified appellee. This was done by the assistant cashier of appellant bank. He testified that he notified appellee that the First National Bank of Sapulpa had closed its doors, that the check was not good, and that they would have to charge it back to him. He testified that he told appellee that they would wait a few days to see whether the check came back. On July 23 the item was charged back against appellee on his account, but he was not notified of the entry until about a month later. In the meantime, appellant, through its cashier, requested appellee to sign a preferred claim t\u00f3 be filed with the Oklahoma Bank Commissioner, but appellee refused to do so. He testified that his refusal was for the reason that appellant demanded that he accept what he received on the claim in full of all demands against the appellant bank.\nThere was testimony as to the course of the mails between Mulberry and Sapulpa via Fort Smith and Oklalioma City. A letter mailed at Mulberry would reach Fort Smith the next morning, and a letter mailed at Fort Smith during the day would leave there early in the evening and reach Oklahoma early the next morning. It was four or five hours by train from Oklahoma City to Sapulpa, there being four trains a day each way. There was no testimony from any one in the Fort Smith bank as to the time the check was received there and mailed out.\nThe trial court instructed the jury that appellant was liable for its own negligence as well as that of any - of the banks through whose hands the check passed for collection, and submitted the issue to the .jury as to whether or not there was a failure in collecting the check on account of negligence. Appellant asked the court to instruct the jury that all of the corresponding banks through which the check was transmitted for collection were the agents of appellee, that defendant was liable only for negligence of its own, and was not liable \u201cfor the default or negligence of any of the corresponding banks.\u201d The court refused to give that instruction, and this is the principal assignment of error in the case.\nIt is undisputed that the check was delivered to appellant merely for collection, and hence it becomes necessary to determine whether or not the court was correct, in its instruction that appellant was liable for any negligence of the corresponding banks through which the check passed.\nThere are two conflicting lines of decisions\u2014one originating in the New York Court of Appeals (Allen v. Merchants\u2019 Bank, 22 Wend. N. Y. 215), in which it was held that the initial collecting bank is responsible for the negligence of all the corresponding banks through whose hands the check may pass for collection, unless there is an express contract to the contrary between the' customer and the initial bank; and the other rule originating in the Supreme Judicial Court of Massachusetts (Fabens v. Mercantile Bank, 23 Pick. (Mass.) 330), to the effect that where a check on a bank at a distant point is delivered to the initial hank for collection, the corresponding hanks are the agents of the customer, and the initial hank is not responsible for their negligence. 3 R. C. L. p. 622; Morse on Banks, \u00a7 274 et seq. The Massachusetts rule seems to find rather greater support in the other authorities, but this court has already committed itself to the New York rule, and we are not disposed to change by overruling former cases. Second National Bank v. Bank of Alma, 99 Ark. 386; Perry State Bank v. Myers, 159 Ark. 253. In Perry State Bank v. Myers, supra, we said: \u2018 \u2018 The law requires a bank to use due diligence in collecting checks deposited with it for collection. What due diligence is depends on the particular circumstances in each case. * * * The negligence of the corresponding bank was necessarily the negligence of the sending bank. It had selected the corresponding bank as its agent for the collection of the check.\u201d In Second National Bank v. Bank of Alma, supra, we said: \u201cA bank which accepted a draft for collection is liable to the owner thereof for any loss sustained by reason of any default or breach of duty by a subagent to whom it forwarded the draft for collection.\u201d Counsel for appellant distinguish this case from Perry State Bank v. Myers, supra, by saying that in that case the draft was on another bank in the same county with the initial bank, and that, if the latter saw fit to send it to a corresponding bank outside of the county, instead of presenting the check directly, it did so at its own risk. That, we think, was not an important distinction, for the fact that the two banks are situated in the same county does not change the operation of the rule. If the banks were in the same town where there could be a direct and personal presentation of the check, then there would be a distinction, because, necessarily, the sending of the check to a corresponding bank would be an unnecessary act, and any risk attending it would be assumed by the initial bank. Where there are two banks in different towns of the same county, the matter of distance is merely one of degree, and, even though the hank is adopting ordinary hanking methods in forwarding the check to a correspondent instead of presenting it directly to the paying hank, the selection of the \u00a1agencies are those of the initial bank, and not of the customer, and the latter is liable for all negligence unless there is a special contract against liability for negligence of the corresponding banks.\nBut the rule of law thus announced by this court has been expressly changed by a statute which reads as follows :\n\u201cAny bank, whether within or with\u00f3ut this State, receiving for collection, or for deposit and recharge if not collected or remitted for, any check, note, bill, draft, certificate or other instrument or account, payable in another city or town, whether within or without this State, having exercised reasonable care to select a proper correspondent for the collection of such instrument or account, shall not be liable for the default of such correspondent or of any subcorrespondent selected by the latter, and negligence of any forwarding bank shall not be predicated upon the fact that it may have forwarded such instrument or account directly to the bank on which it is drawn or at or by which it is payable, but the owner of such instrument or account, or the person to whom the same is recharged if not collected or remitted for, shall have a cause of action for and on account of said default against any such correspondent orjsubcorrespondent itself failing to exercise reasonable bare in making said collection.\u201d Acts 1921, p. 514, \u00a7 14.\nThe rulings of the court in regard to instructions to the jury were in direct conflict with this statute. It is true that appellant\u2019s requested instructions were not in the exact language of the statute, but they came substantially within its terms, and one of the instructions given over appellant\u2019s objection told the jury, in so many words, that appellant \u201cis responsible for the conduct of all the other banks employed by it in collecting the check. \u2019 \u2019 The evidence in the case was sufficient to warrant the jury in finding that appellant was not guilty of any negligence in the selection of its correspondents, and that it was not negligent itself in forwarding the check for collection, hence the instructions of the court were erroneous and prejudicial.\nIt is unnecessary to discuss any other feature of the case, for the error of the court in its charge to the jury calls for a reversal.\nEeversed and remanded for a new trial.",
        "type": "majority",
        "author": "McCulloch, C. J."
      }
    ],
    "attorneys": [
      "James B. McDonough and Starbird $ Starbird, for appellant.",
      "Warner, Hardin & Warner, for appellee."
    ],
    "corrections": "",
    "head_matter": "Farmers\u2019 & Merchants\u2019 Bank v. Ray.\nOpinion delivered February 1, 1926.\nBanks and banking\u2014liability for negligence in collecting check.\u2014Under Acts 1921, p. 514, \u00a7 14, providing that a bank receiving for collection a check or draft payable in another city or town, and having exercised reasonable care to select a proper correspondent, shall not he liable for the default or negligence of such correspondent, held that it was error to instruct that a bank receiving a check for collection \u201cis responsible for the conduct of all other banks employed by it in collecting the check.\u201d\nAppeal from Crawford Circuit Court; James Cochran, Judge;\nreversed.\nJames B. McDonough and Starbird $ Starbird, for appellant.\nWarner, Hardin & Warner, for appellee."
  },
  "file_name": "0293-01",
  "first_page_order": 309,
  "last_page_order": 314
}