Bank of the Metropolis v. New England Bank - 42 U.S. 234 (1843)
U.S. Supreme Court
Bank of the Metropolis v. New England Bank, 42 U.S. 1 How. 234 234 (1843)
Bank of the Metropolis v. New England Bank
42 U.S. (1 How.) 234
When there have been, for several years, mutual and extensive dealings between two banks, and an account current kept between them in which they mutually credited each other with the proceeds of all paper remitted for collection when received and charged all costs of protests, postage &c., accounts regularly transmitted from the one to the other and settled upon these principles, and upon the face of the paper transmitted it always appeared to be the property of the respective banks, and to be remitted by each of them upon its own account, there is a lien for a general balance of account upon the paper thus transmitted, no matter who may be its real owner.
At the trial in the circuit court, it appeared upon the evidence that the Bank of the Metropolis, one of the banking institutions of the District of Columbia, had been for a long time in the habit of dealing and corresponding with the Commonwealth Bank of Massachusetts. They mutually remitted for collection such promissory notes or bills of exchange as either might have which were payable in the vicinity of its correspondent, which, when paid, were credited to the party who sent them in the account current kept by both banks and regularly transmitted from the one to the other and settled upon these principles. The costs and expenses, such as protests and postage, were, of course, charged in such account.
The balance was sometimes in favor of one, and sometimes of the other. On 24 November, 1837, the Bank of the Metropolis was indebted to the Commonwealth Bank in the sum of $2,200, and in the latter part of the year 1837, the Commonwealth Bank transmitted to the Bank of the Metropolis, for collection in the usual way, sundry drafts, notes, and other commercial paper which would fall due in the ensuing months of February, March, April, May, and June. They were endorsed by E. P. Clarke, cashier, and made payable to C. Hood, cashier, and again endorsed by C. Hood, cashier, to G. Thomas, cashier. Clarke was the cashier of the New England Bank; Hood, of the Commonwealth Bank, and Thomas of the Bank of the Metropolis.
On 13 January, 1838, the Commonwealth Bank failed, and on that day Charles Hood, the cashier, wrote a letter to the Bank of the Metropolis directing them to hold the paper which had been forwarded, as above stated, "subject to the order of the cashier of the New England Bank, it being the property of that institution." When this letter was received, the account was examined, and it was discovered that on that day the Commonwealth Bank was indebted to the Bank of the Metropolis in the sum of $2,900.
The deposition of Charles Hood, which appeared to have been taken under the act of Congress, was read in evidence by the defendant in error. It stated, among other things, that
"the Commonwealth Bank never at any time owned any of said notes or obligations, or any part or either of them, and had never any
right, title, interest, claim, or lien thereon, but that the same were at the time of the receipt and ever afterwards the property of said New England Bank and subject to its order and control."
The reading of this deposition was objected to in the court below, and included in the bill of exceptions, but as the objection was not argued in this Court, it is presumed to have been abandoned.
The action was brought by the New England Bank against the Bank of the Metropolis, and the judgment in the circuit court was in favor of the plaintiff for the whole amount of the proceeds of the notes and bills in question.
At the trial, a bill of exceptions was taken by the defendant (the present plaintiff in error), which, after reciting the evidence, concludes as follows:
"Whereupon, the counsel for defendants prayed the court to instruct the jury that if it shall believe from the said evidence that the Commonwealth Bank did for a series of years transact business with defendants, and did from time to time transmit notes and other commercial paper to defendants for collection, which were all treated by both parties as if the same were the property of the said Bank of the Commonwealth, which was credited in its account current with the proceeds, and charged with the costs and expenses which accounts were from time to time adjusted upon these principles, that the notes and paper mentioned in said letter of 13 January, 1838, were endorsed and transmitted in the ordinary course of business, without any notification that any other party or person had any interest in said paper, were thus received by defendants, and held by them; that while thus held by them, the said Commonwealth Bank became insolvent or embarrassed in its circumstances, and after such embarrassment the letters aforesaid of 13 January, 1838, were written, and at the time of their receipt by defendants, said embarrassed state of said Commonwealth Bank was known to defendants, and there was at that period a large balance on general account due defendants from said Commonwealth Bank, and the said paper was all regularly endorsed by the cashier of said Commonwealth Bank to defendants; the said defendants had a right to receive said paper and the proceeds when recovered until such balance was paid, and plaintiffs are not entitled
to recover, which instruction, as prayed, the court refused to give."