1. Money collected by one bank for another, placed by the
collecting bank with the bulk of its ordinary banking funds, and
credited to the transmitting bank in account becomes the money of
the former. Hence, any depreciation in the specific bank bills
received by the collecting bank which may happen between the date
of the collecting banks' receiving them and the other banks'
drawing for the amount collected falls upon the former.
2. In a case where the trial has proceeded on merits and the
error has not been pointed out below, judgment will not be reversed
even though the form of action have been wholly misconceived and to
the case made by it a defense plainly exists.
In the spring of 1861, the Fulton Bank of New York sent for
collection to the Marine Bank, Chicago, two notes, one of Cooley
& Co. for $2,000, and one of Hunt & Co. for $1,037, both
due May 1-4 in that year. The currency at Chicago had become at
that time somewhat deranged and consisted exclusively of bills of
the Illinois banks. The Marine Bank, just afterwards, addressed a
circular to its correspondents informing them that in the disturbed
state of the currency it would be impossible to continue
remittances with the usual regularity, and that until further
notice it would be compelled to place all funds received in payment
of collections to the credit of its correspondents in such currency
as was received in Chicago -- bills of the Illinois Stock Banks --
to be drawn for only in like bills.
On the 1st May, the cashier of the Fulton Bank thus addressed
the cashier of the Marine Bank:
"Please hold the avails of the collections I have sent you
subject to my order and advise amount credited."
The two notes were collected by the Marine Bank in Illinois
currency, at that time
from five to ten percent below par.
Immediately after the notes were collected, the Chicago bank, in
reply to an inquiry from the Fulton Bank how the account stood,
advised the latter bank thus:
May 1. You have credit as follows: Cooley & Co. . . . . .
$2,000
May 6. Your account has credit as follows: Hunt & Co. . .
1,037
Page 69 U. S. 253
On the 21st April, 1862, that is to say, about a year after the
collection made, the New York bank made a demand of payment from
the Chicago bank, which was refused, unless the former bank would
accept Illinois currency, now sunk
fifty percent below
par.
The Marine Bank was a bank engaged, like other banks, in
receiving deposits, lending money, buying and selling exchange, and
the money collected on the two notes in question was not retained
in any separate or specific form.
On suit brought in the Northern Circuit for Illinois by the
Fulton Bank, the court charged that the said bank was entitled to
recover the value of the Illinois currency
at the time the
money was received by the defendant, and judgment went
accordingly. The question in this Court was whether this was right,
and whether the court below ought not to have charged, as it was
requested but refused to do, that the Fulton Bank was
"only entitled to recover of the defendant the value, in coin,
of such currency so received by the defendant at the
time of
demand made by plaintiff for payment with interest, and from
that date,"
the only instruction asked for by the defendant's counsel.
A question was also raised in this Court as to the form of
action below -- trespass on the case for having wrongfully received
the depreciated paper; but this point had not been raised in the
court below.
Page 69 U. S. 254
MR. JUSTICE MILLER delivered the opinion of the Court.
The Chicago bank was unquestionably the agent of the Fulton
County Bank, up to and including the receipt of the money from the
makers of the notes. If no change was made in their relation
subsequent to that time, then the former bank, having obeyed
instructions, should not be held liable to the latter for the
depreciation of its money. The agent, however, in this case was a
bank engaged in the usual banking business of discounting notes,
buying and selling exchange, and receiving deposits from its
customers, and some confusion may grow out of the peculiar
character of the agent.
If any person not a banker had received this sum of money for an
Eastern correspondent, with instructions to hold it subject
Page 69 U. S. 255
to order, he would probably have locked it up in his own safe,
or that of someone else, until called for, and when demanded, he
would have delivered the identical money which he had received,
thus discharging his whole duty as agent. If, however, instead of
this prudent and safe course, he had the same day that he received
it bought with it a bill on New York at thirty days, which, when
matured, was worth in Chicago one-half percent premium, it will
hardly be contended that when the principal demanded his money the
agent could pay him by buying in the market other bills of Illinois
banks fifty percent below par.
This, however, is substantially what the Chicago bank did, and
what it claims the right to do. It is true that it is not in
evidence what precise use was made by it of the money received for
these collections. But it is proved that it was placed with other
money of defendant, and used in its daily business as its own. That
business was to buy such drafts, to pay its own debts to its
depositors, to discount notes and bills. If it was defendant's
money it was all right, because he could do as he pleased with his
own. But if it was plaintiff's money, held by defendant as its
agent, then this use of it by defendant would seem to be a
conversion.
But here we are reminded of the banking character of the agent,
who insists that it was impossible to keep plaintiff's money
separate from its own, and that plaintiff knew this fact, and
secondly that from the course of business it was understood that
when the money was collected and placed to the credit of
plaintiff's account, the defendant would use it.
As to the first proposition, it cannot be admitted that there
was any impossibility in keeping plaintiff's money separate from
defendant's. It is every day business for bankers, who have vaults
and safes, to receive on special deposit small packages of
valuables, and even money, until the owners call for them. There is
not only no impossibility in this, but there is no serious
difficulty in it. It is simply an inconvenience, and but a slight
one, as a small slip of paper around the bills, labeled with the
owner's
Page 69 U. S. 256
name, would have marked their identity and their separation,
without occupying any additional space. Even this inconvenience the
defendant could have avoided at any time by refusing longer to hold
the deposit. But the truth undoubtedly is, as stated in the second
branch of the proposition, that both parties understood that, when
the money was collected, plaintiff was to have credit with the
defendant for the amount of the collection, and that defendant
would use the money in his business. Thus the defendant was guilty
of no wrong in using the money, because it had become its own. It
was used by the bank in the same manner that it used the money
deposited with it that day by city customers; and the relation
between the two banks was the same as that between the Chicago bank
and its city depositors. It would be a waste of argument to attempt
to prove that this was a debtor and creditor relation.
All deposits made with bankers may be divided into two classes
-- namely, those in which the bank becomes bailee of the depositor,
the title to the thing deposited remaining with the latter; and
that other kind of deposit of money peculiar to banking business,
in which the depositor, for his own convenience, parts with the
title to his money, and loans it to the banker; and the latter, in
consideration of the loan of the money and the right to use it for
his own profit, agrees to refund the same amount, or any part
thereof, on demand. The case before us is not of the former class.
It must be of the latter. The parties seem to have taken this view
of it, as is shown by the reply made by the Chicago bank, May 1 and
6, to the New York bank, when inquiring how the account stood.
The counsel have argued as to the effect of mixing the money of
plaintiff with that of defendant. In the view we take of the
matter, there was no such admixture. It being understood between
the parties that, when the money was received, it was to be held as
an ordinary bank deposit, it became by virtue of that understanding
the money of the defendant the moment it was received.
But let us look for a moment at the equity of defendant's
Page 69 U. S. 257
position. It receives this money when it is worth ninety cents
on the dollar. It places it with its other money, and perhaps, in
the course of a week, all the specific bank bills it then had on
hand are paid out by it. It uses it in paying the checks of its
depositors, in other words, its debts at par. It buys with it bills
on New York, which it converts into exchange worth a premium. But
it continues to receive of other parties this class of paper,
though constantly depreciating. There is no legal necessity that it
should do this. It only does so with a view to its own advantage.
When, however, it proves to be a loss instead of a profit, the bank
says to the man whose money it had used profitably months
before,
"I claim to impose this loss on you. I insist on the right to
pay the debt I owe you not in the specific bank bills I received
from you nor in those of the same value which I received from you,
but in bills of that general class, although, while I have been
using the money, they have depreciated forty percent."
If we are correct in these views, it would seem that the
relation of principal and agent was changed the moment the money
received was placed in the general fund of the bank and the
plaintiff credited on its book with the amount.
Does the notice of the Marine Bank to its customers, taken in
connection with the other facts of the case, change the relative
rights of the parties as thus stated? The obvious intent of the
circular is to convey to correspondents the fact of the great
depreciation in value of the Illinois currency, and to request
them, if they are not willing to have their notes paid in such
currency, to withdraw their collections. This was just and fair
between the parties, and was what the collecting bank had a right
to require. We think that it justified that bank in receiving the
Illinois currency, in all cases where the notice had reached their
correspondents and no contrary orders had been received. If the
Marine Bank had thus received depreciated money and kept it without
using it until called for, or had sent it by express to plaintiff,
it would have been relieved from further liability. In other words,
as long as the defendant retained strictly the character
Page 69 U. S. 258
of agent, and acted within the principle laid down in the
circular, it was protected. But, as we have already shown, the
defendant changed that relation by using the money as its own, and
became the debtor of the plaintiff for the sum collected.
The counsel for plaintiff in error raises the point that the
action was trespass on the case for wrongfully receiving the
depreciated paper, and that the circular is a sufficient defense to
such a count. This is undoubtedly true both as to the nature of the
action and as to the effect of the notice, and if it had been in
any manner made a point in the court below, we do not see how we
could avoid reversing the judgment. But nothing of the kind was
done. All the testimony was received without objection. No
instruction was asked of the court by either party as to the effect
of the testimony in sustaining plaintiff's case or as to the effect
of the notice in making good defendant's receipt of depreciated
paper. On the contrary, the only instruction prayed by defendant's
counsel recognizes the right to recover something with interest,
and only raises the question of the measure of damages.
* On that subject
we think the instruction asked was erroneous and properly refused.
It is too late now to object for the first time to the particular
form of the action.
Judgment affirmed with costs.
*
See supra, p. <|69 U.S. 253|>253.
