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ey,125 although it may be the only currency available at the time.120 If no other currency is obtainable, the collecting bank must give notice of that fact to its principal, and get express authority to receive such currency.127 But it has been held, in Texas, that an agent might receive Confederate currency under a general power to collect.128 And even if he is not authorized to receive it, his act will be ratified, if it is afterwards taken from him by the principal.129

Payment by Check.

1456. An agent employed to collect a bill or note may, by usage, surrender it upon receipt of a check from the acceptor or maker, and will not be liable, although the check is not paid; although the drawer and indorser may be discharged by his taking the check.130 Where a vendor draws on his purchaser, and indorses the bill for collection to the purchaser's bank, and it is charged by the purchaser's direction to his account, and the bank's check transmitted to the vendor, it has been held to be a sufficient payment, although the check was not paid by reason of the failure of the bank.131 But it has been held in New York that an agent presenting a draft for collection to the drawee (a trust company) will be liable, if he takes a check in payment which is dishonored on due presentment on account of the failure of the trust company.132 So, it has

125 Fretz v. Stover, 22 Wall. 198; Alley v. Rogers, 19 Grat. (Va.) 366; especially after the death of the owner, King v. Fleece, 7 Heisk. (Tenn.) 273. 126 Mangum v. Ball, 43 Miss. 288.

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128 Reed v. Nelson, 33 Tex. 471, in 1863. So, where the note was made to the agent in 1862. Rodgers v. Bass, 46 Tex. 506.

129 Murray v. Walker, 44 Ga. 58.

130 Byles, Bills, 228; Chit. Bills, 451; 2 Pars. Notes & B. 216; Russell v. Hankey, 6 Term R. 12; Jefferson Co. Sav. Bank v. Commercial Nat. Bank, 38 Tenn. 337, 39 S. W. 338; but he cannot receive a check payable in "Illinois currency," Graydon v. Patterson, 13 Iowa, 256; and he cannot surrender a collateral bill of lading, and receive the drawee's check in payment, without negligence, Second Nat. Bank v. Cummings, 89 Tenn. 609, 18 S. W. 115. 131 Welge v. Batty, 11 Ill. App. 46.

132 Notwithstanding the custom of New York banks to receive trust company checks like those of banks, Nunnemaker v. Lanier, 48 Barb. (N. Y.) 234; whether the drawer of the original bill has been discharged by it (as evi

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been held that if a collection agent surrenders a bill of exchange on receiving the drawee's check, and thereby discharges the drawer of the bill, he will be liable for the amount of the bill, if the check is not paid.133 But his action will be ratified by the principal taking the check and transmitting it for collection.134

Default of Subagents.

§ 1457. A collecting agent will be liable for the negligence of an attorney employed by him to collect a note.135 So, an attorney who undertakes to collect a note payable in another place, and employs another attorney at that place for the purpose, will be liable if the amount is collected and embezzled by the attorney employed by him.136 And, in general, a bank or other collecting agent, undertaking to collect a bill or note at a distance, and employing a subagent or correspondent for that purpose, will be liable for the default of such correspondent, if he collects and fails to remit the amount; 137 even though the original agent took the bill only for collection, promising to credit it when paid, and had not given the owner credit for it as paid.138

In like manner, a collecting bank is liable for the negligence of its correspondent employed by it to collect a bill or note in another

denced by a judgment rendered in another state), First Nat. Bank v. Fourth Nat. Bank, 89 N. Y. 412; or not, Id., 77 N. Y. 320, reversing 16 Hun (N. Y.) 332. 133 Whitney v. Esson, 99 Mass. 308, any usage to the contrary being held to be unreasonable. But see, as to custom to receive certified check, Jefferson Co. Sav. Bank v. Commercial Nat. Bank, 98 Tenn. 337, 39 S. W. 338.

134 Rathbun v. Steamboat Co., 76 N. Y. 376. But, if the agent was directed to collect money and send it by express, he will be liable if he takes a check, although the principal received it without objection, until after he learned of the drawer's insolvency. Walker v. Walker, 5 Heisk. (Tenn.) 425.

135 E. g. in taking a note in payment, Weyerhauser v. Dun, 100 N. Y. 150, 2 N. E. 274, reversing 16 Wkly. Dig. 412.

136 Cummins v. Heald, 24 Kan. 600; Abbott v. Smith, 4 Ind. 452. contra, Plymouth Co. Bank v. Gilman, 9 S. D. 278, 68 N. W. 735.

But see,

137 Commercial Bank of Pennsylvania v. Union Bank of New York, 11 N. Y. 203; Naser v. Bank, 116 N. Y. 492, 22 N. E. 1077; Bank of Clarke Co. v. Gilman, 81 Hun, 486, 30 N. Y. Supp. 1111; Simpson v. Waldby, 63 Mich. 447, 30 N. W. 199; Power v. Bank, 6 Mont. 251, 12 Pac. 597.

138 Mackersy v. Ramsays, 9 Clark & F. 818.

place.139 And it has been held that it is alone liable to the principal, and that the liability of the correspondent for its negligence is to the bank that employed it.140 If a bank receives a check for collection, and forwards it to the drawee (its own correspondent), under an existing arrangement that all collections shall be credited in a collection account and settled weekly, it will be liable to its principal for the amount of the check as paid, although the drawee, after charging it to the drawer and crediting the amount to the collecting bank under the arrangement with it, failed the next day.141 An indorsee for collection under a general indorsement has authority to retain the proceeds of the collection against a debt due him from the indorser, the indorsement being itself prima facie evidence of his bona fide ownership.142 But in Maryland, if a bill is collected by a subagent, and credited to the intermediate agent employing him, who failed before making payment to his principal, the subagent will still be liable to the owner of the bill, unless he has made fresh advances or parted with value on the strength of it.143 If, however, the bill is indorsed to the agent 139 Titus v. Bank, 35 N. J. Law, 588; Kirkham v. Bank (Sup.) 49 N. Y. Supp. 767. But see, contra, Fabens v. Bank, 23 Pick. (Mass.) 330, where the first collecting bank held the note as collateral.

140 Montgomery Co. Bank v. Albany City Bank, 7 N. Y. 459; Castle v. Bank, 148 N. Y. 122, 42 N. E. 518, affirming 75 Hun, 89, 26 N. Y. Supp. 1035; Reeves v. Bank, 8 Ohio St. 465. But see, contra, Kelley v. Bank, 17 App. Div. 496, 45 N. Y. Supp. 533, where the representative character of the intermediate bank was known to the subagent.

141 Briggs v. Bank, 89 N. Y. 182. So, if an acceptance is deposited for collection in bank A., and forwarded by it to bank B., where it was payable, to be collected and remitted to another bank, C., and credited by it to the bank A., and payment is duly made to the bank C., and credited by it to A., and the A. bank advised of the credit, it will amount to payment in an action by the owner against the C. bank, although the bank A. failed the day before the credit was made, and never remitted the amount, Charlotte Iron Works v. American Exch. Nat. Bank, 34 Hun (N. Y.) 26; and see Hyde v. Bank, 7 Biss. 156, Fed. Cas. No. 6,970. So, if a note is indorsed in blank to an attorney for collection, and by him to a bank, and is collected by it and credited to his account, and afterwards allowed as a credit to him in a settlement between the bank and his assignee in bankruptcy, the holder cannot recover against the bank in an action brought immediately after learning of the collection a year later. Wood v. Bank, 129 Mass. 358. And see § 726, supra. 142 Bank of Metropolis v. New England Bank, 1 How. 234.

143 Miller v. Bank, 30 Md. 392. And it will be liable for the full amount

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"for my use," and is discounted by a bank, and afterwards collected and credited to the agent's account, on his failure in debt to the bank, it will be liable to the owner notwithstanding the credit given to the agent. So, if an agent receives and deposits a check for collection, and the money can be followed as that of the principal, the bank subsequently collecting it cannot set off against it a note made by the agent to the bank.145

§ 1458. If a collecting agent receives a note for transmission, and forwards it for collection, its correspondent is the agent of the owner, and liable to him for negligence in the collection.146 On the other hand, the forwarding bank has been held to have no duty but that of forwarding in due time, and therefore not to be liable for the negligence of its correspondent.147 Where the correspondent or subagent in the place of payment employs a notary, exercising ordinary diligence in the choice, the original bank will not be liable. for the negligence of the notary employed.148 But in New York collected, although it is insolvent and in the hands of a receiver, and the funds collected have not been kept separate. Thompson v. Institution (N. J. Ch.) 8 Atl. 97.

144 Sigourney v. Lloyd, 8 Barn. & C. 622, affirmed in 5 Bing. 525.

145 Overseers of Poor of Norfolk v. Bank of Virginia, 2 Grat. (Va.) 544. 146 Farmers' Bank v. Owen, 5 Cranch, C. C. 504, Fed. Cas. No. 4,662; Wilson v. Smith, 3 How. 763; Bank of Lindsborg v. Ober, 31 Kan. 600, 3 Pac. 324.

147 Etna Ins. Co. v. Alton City Bank, 25 Ill. 243;. Bank v. Cummings, 89 Tenn. 609, 18 S. W. 115; Planters' & Farmers' Nat. Bank v. First Nat. Bank, 75 N. C. 534; Bank v. Butler, 41 Ohio St. 519; Third Nat. Bank v. Vicksburg Bank, 61 Miss. 112. These cases do not seem to be supported by authority, except so far as notary's defaults are concerned.

148 Britton v. Niccolls, 104 U. S. 757. This case was decided on the authority of the Mississippi cases. In it Mr. Justice Field says (page 762) of Allen v. Bank, 22 Wend. 215: "The decision has since been followed in New York, and its doctrine, we believe, has been adopted in Ohio. But in the courts of other states it has been generally rejected, and the views expressed by the superior court approved." And of the notary employed by the collecting bank he says (page 766): "He was a public officer, whose duties were prescribed by law; and when the notes were placed in his hands, in order that such steps should be taken as would bind the indorsers if the notes were not paid, he became the agent of the holder of the notes. For any failure on his part to perform his whole duty, he alone was liable. The bankers were no more liable than they would be for the unskillfulness of a lawyer of reputed ability and learning, to whom they might have handed the notes

a bank is held liable for the negligence of the notary employed by it.149 And this rule has been followed in other states generally.150 And if a bank employed as a collecting agent selects a notary who is plainly incompetent or inexperienced, it will be liable for his negligence.151

Duty of Collecting Agent.

§ 1459. It is the duty of a notary, in general, to follow the instructions given him by the party employing him, and he will not be liable if he does so, although such instructions are not correct.152 If an indorsement is illegible, it is the duty of the agent to use reasonable diligence in discovering the name and address of the party; and such diligence must appear in order to excuse the giving of proper notice.153 A collecting agent must not only show due diligence on his part, but must return the note promptly."

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for collection, in the conduct of a suit brought upon them." So, too, Tiernan v. Bank, 7 How. (Miss.) 64S; Agricultural Bank v. Commercial Bank, 7 Smedes & M. (Miss.) 592; Warren Bank v. Suffolk Bank, 10 Cush. (Mass.) 582; Jack son v. Bank, 6 Har. & J. (Md.) 146; Dorchester & M. Bank v. New England Bank, 1 Cush. (Mass.) 177; Baldwin v. Bank, 1 La. Ann. 13; Frazier v. Banking Co., 2 Rob. (La.) 294.

149 Ayrault v. Bank, 47 N. Y. 570, affirming 1 Abb. (N. S.) 381; but not for expense in holder's suit against indorser, Downer v. Bank, 6 Hill, 648. These cases are decided on the authority of Allen v. Bank, 22 Wend. 215, reversing 15 Wend. 482. This case held only that a New York bank, sending a bill to Pennsylvania for collection, was liable for the failure on the part of the Pennsylvania notary to give notice of nonacceptance, as required by New York law, although the Pennsylvania law required no such notice. The New York bank had failed to inform its correspondent as to the New York law, and was liable by reason of its own negligence.

150 So held, as to notice of dishonor, in Davey v. Jones, 42 N. J. Law, 28; Bank of Lindsborg v. Ober, 31 Kan. 600, 3 Pac. 324; and as to demand, in American Exp. Co. v. Haire, 21 Ind. 4. In the words of Van Syckel, J., in Davey v. Jones, supra: "A bank which assumes the duty of a collecting agent is absolutely liable for any negligence or default of a notary or correspondent. as well as of its own immediate servants, in relation to it." But see, contra, First Nat. Bank v. Butler, 41 Ohio St. 519.

151 Smedes v. Bank, 20 Johns. (N. Y.) 372; Bank of Lindsborg v. Ober, 31 Kan. 599, 3 Pac. 324.

152 2 Daniel, Neg. Inst. 8.

153 McGeorge v. Chapman, 45 N. J. Law, 395.

184 Wingate v. Bank, 10 Pa. St. 104; Tyson v. Bank, 6 Blackf. (Ind.) 225:

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