City of Douglas v. Federal Reserve Bank of Dallas - 271 U.S. 489 (1926)
U.S. Supreme Court
City of Douglas v. Federal Reserve Bank of Dallas, 271 U.S. 489 (1926)
City of Douglas v. Federal Reserve Bank of Dallas
Argued April 28, 1926
Decided June 1, 1926
271 U.S. 489
1. When paper is indorsed without restriction by a depositor, and is at once passed to his credit by the bank to which he delivers it, he becomes the creditor of the bank; the bank becomes owner of the paper, and, in making the collection, is not the agent for the depositor. P. 271 U. S. 492.
2. Upon the deposit of paper unrestrictedly indorsed, and credit of the amount to the depositor's account, the bank becomes the owner of the paper, notwithstanding a custom or agreement to charge the paper back to the depositor in the event of dishonor. P. 271 U. S. 493.
3. A depositor who has thus surrendered his rights in paper which is later dishonored, and whose account, under his agreement with the depositary bank, has been charged with the amount previously credited, has no relation with a bank to which the depositary sent the paper for collection upon the basis of which he may recover from the second bank for its want of diligence in that regard. P. 271 U. S. 494.
2 F.2d 18 affirmed.
Error to a judgment of the circuit court of appeals which affirmed a judgment in favor of the Federal Reserve Bank, defendant, rendered by the district court (300 F. 573) in an action brought by the City of Douglas to recover the amount of a check, alleged to have been dishonored, and recharged to the plaintiff, because of defendant's negligence in failing to collect it.