ically those courts which hold a bank responsible for the defaults of its correspondent bank ought to hold a bank liable for the acts of its notary, unless the fact that the notary is a public officer is entitled to a controlling consideration; but even then the exemption ought to be allowed only as to those duties which a notary must perform, and which are not merely ministerial. It is said in one court that if the bank makes use of its own notary it is not liable, but other cases assert that this is a good reason for making it liable."

§ 183. Waiver of negligence.— Where the collecting bank or one of its agents, where it is held liable for the acts of its agents, has been guilty of negligence or of improper conduct in the making of the collection, the owner may waive his right to claim anything therefor. But this rule is governed by the general rule applicable to all classes of ratification—the act must be done with knowledge of the circumstances. But if the bank returns a part of the proceeds of the collection and a note for the balance thereof and the owner accepts it, he thereby waives any right which he has to object to the bank's conduct. But if he withdraws the collection after the bank has been guilty of negligence, he does not thereby waive the bank's liability. Nor does the drawer of a bill, by paying to the payee in ignorance of the negligence of the bank, waive his claim upon the bank. If the bank has failed to present the paper, instructions given by

v. Bank of U. S., 4 Whart. 105; Stacy v. Dane Co. Bank, 12 Wis. 629; First Nat. Bank v. Butler, 41 Ohio St. 519; Bank of Louisville v. Bank of Knoxville, 8 Baxt. 101.

The same result follows if the collection is considered to be a bailment.

Inst., 38 Mo. 60; Wood River Bank v. First Nat. Bank, 36 Neb. 744.

1 Roanoke Nat. Bank v. Hamberck, 82 Va. 135.

2 Hughes v. Neal Banking Co., 97 Ga. 383. Or accepts check. Hazlett V. Comm. Nat. Bank, 132 Pa. 118. 3 Branch Bank v. Knox, 1 Ala.

Baldwin v. State Bank, 1 La. 148. Ann. 13.

4 Merchants' Bank v. Bank of

5 Gerhardt V. Boatmen's Sav. Commerce, 24 Md. 12.

the owner to protect it are not a waiver of the bank's neg·ligent failure.5

3

§ 184. Actions for negligence.-The bank of primary collection in the states which recognize its liability for the acts of its correspondent banks may maintain an action against the last-named bank for negligence,' but the holder of the paper cannot. In those jurisdictions which hold the rule that the correspondent bank is the agent of the owner of the paper, the owner may sue the correspondent bank for negligence; and this would seem to be the proper rule, even though the fact of the collection being for the owner, and not for the first bank, did not appear, as it would not, if the owner indorsed generally to the first bank. The real owner of the paper may maintain the action against the collecting bank, even though the paper had been pledged and the paper was not placed in the bank for collection by the pledgee.* Where note was returned to the owner after the negligence occurred, it is of course not necessary to show a redelivery to the bank. The fact that the note was received for collection by the bank is sufficient proof of the general contract of collection, and unless it is sought to charge the bank with knowledge of special instructions, it is not necessary to prove them or to allege them. It is said in one case that only that part of the contract of which the breach occurred needs to be set out in the pleading. The pleading and the proof

6

5 First Nat. Bank v. Price, 52 Bank, 44 Conn. 565, and note 32 to Iowa, 570.

1 See cases cited in note 32 to § 181, ante.

2 Montgomery Co. Bank v. Albany City Bank, 7 N. Y. 459. Bank of Washington v. Triplett, 1 Pet. 25, has a dictum to the contrary. Even in those states which consider the correspondent bank as the agent of the primary bank, the latter bank ought to have an action against its correspondent for negligence. See Merchants' Bank v. Stafford Nat.

§ 181.

3 All the cases recognize this principle.

4 Bank of Utica v. McKinster, 11 Wend. 473.

5 Merchants' Bank v. Bank of Commerce, 24 Md. 12.

6 Jagger v. National Germ. Am. Bank, 53 Minn. 386.

7 American Exp. Co. v. Pinckney, 29 Ill. 392. This case shows clearly the fact that a collection is a bailment from the form of the plead

8

must show damage. If it is alleged that certain parties to the paper were discharged, it must be alleged and proven that those remaining liable are not good and that the parties discharged were. If the negligence complained of was a delivery to the payer, the loss of the claim must be averred as a consequence.10 The allegation of a consideration is not material where an acceptance of the collection is averred." It certainly is not necessary where the action is one against the bank for conversion.12

§ 185. Matters of proof.- Where the negligence complained of consists in a loss of the paper in transmitting it, the burden is upon the bank to show that the loss happened without its fault. There arises, upon the fact being shown, a presumption of carelessness. Even though the paper was lost without its fault, the bank must show that it used due diligence in ascertaining the fact. Where the bank has failed to present the check or other paper for payment or has failed to give notice of non-payment, the fact of the indorser's insolvency ought to be proof in mitigation of damages. It has been held that the burden of proof is upon the

ing. First there is alleged the fact of deposit and acceptance for collection, next the duty, and then the breach of the duty. Yet the court with this before it talks about the contract, as if it were an express contract, and not the clearest case possible of a quasi-contract. See note 2 to § 186, and note 22 to § 181. 8 Morris v. Eufala Bank, 106 Ala. 383; Farmers' Bank v. Newland, 97 Ky. 464; Finch v. Karste, 97 Mich. 20.

9 Bank of Mobile v. Huggins, 3 Ala. 206. But the better rule would be that the insolvency of parties discharged goes in mitigation of damages. Stowe v. Bank of Cape Fear, 3 Dev. 408; Borup v. Nininger, 5 Minn. 523.

10 Farmers' Bank v. Newland, 97 Ky. 464.

11 The relation raises the duty. Special instructions and the posted terms of collection are material, since they may modify the relation. Wingate v. Mechanics' Bank, 10 Pa. 104.

12 Keyes v. Bank of Hardin, 52 Mo. App. 323.

1 Chicopee Bank v. Philadelphia Bank, 8 Wall. 641.

2 American Exp. Co. v. Parsons, 44 Ill. 312.

3 First Nat. Bank v. First Nat. Bank, Fed. Cas. No. 4810; Shepley v. Bowery Nat. Bank, 59 N. Y. 485.

4 Coghlan v. Dinsmore, 9 Bosw. 453; Borup v. Nininger, 5 Minn. 523.

But First Nat. Bank v. Fourth Nat.

plaintiff to show in regard to a check that the drawee was solvent and the check collectible. And where the negligence alleged is a failure to present a check which was given for a draft, whereby the payment of the check was lost, the holder must show that the drawer of the draft became insolvent." The fact that checks of the drawer were paid up to the day after the check should have been presented is proof that the check would have been paid if presented at the proper time. In proving insolvency of a particular person a return of nulla bona against him is competent proof, or a general reputation of insolvency within a reasonable time after the maturity of the paper on which he is liable." But the fact that a person was in embarrassed circumstances does not necessarily indicate insolvency.10 Other questions that have arisen are noticed in the note."

§ 186. Measure of recovery.- Where paper is a total loss the measure of recovery would be the face value of the

Bank, 77 N. Y. 320, and Bamberger v. Bank of Tupelo, 15 Ky. Law R. 361, are to the effect that plaintiff must show an actual loss.

5 Sahlien v. Bank of Lonoke, 90 Tenn. 221. Compare Lienau v. Dinsmore, 3 Daly, 365.

6 First Nat. Bank v. Fourth Nat. Bank, 77 N. Y. 320; Citizens' Nat. Bank v. Third Nat. Bank, 49 N. E. R. 171.

of damages. Borup v. Nininger, 5 Minn. 523. But the case of Fifth Nat. Bank v. Ashworth, 123 Pa. 212, decides that where a collecting bank has accepted a cashier's check for a collection, and thus made the collection its own, payment by the drawer of the check to the holder is no defense in favor of the bank against the holder of the check suing it for negligence.

7 First Nat. Bank v. Fourth Nat. The possession of collateral by the Bank, 77 N. Y. 320.

8 Eschelberger v. Pike, 22 La. Ann. 142.

holder is mitigating evidence. Mott v. Havana Bank, 22 Hun, 354. But not the fact that on a foreclosure

9 West v. St. Paul Nat. Bank, 54 sale the holder bought in real propMinn. 466.

10 Steele v. Russell, 5 Neb. 211. Just when a person becomes so embarrassed as to be insolvent is a matter of some apparent doubt in Nebraska.

11 Payments made on the collection after the negligence occurred are proper evidence in mitigation

erty for less than it was worth. West v. St. Paul Nat. Bank, 54 Minn. 466. A judgment in another state exonerating the drawer is conclusive as to the drawer's liability when the payee sues the bank. First Nat. Bank v. Fourth Nat. Bank, supra.

paper where there was no proof of the insolvency of the maker and of the other parties liable upon it.' The same rule would apply where negotiable paper is lost in the course of transmission, but not, of course, to non-negotiable paper. The other matters bearing upon the amount of the recovery will be found treated in the preceding section.

§ 187. Rights in proceeds.- It is apparent that this question may take different phases. First, we may consider the question as between the owner and the bank to which he consigns the paper for collection. This bank, for want of a better term, we will call, after the analogy of carriers, the initial bank. The situation as to the holder after collection of the proceeds and the final crediting of them in the initial bank differs from the situation before being credited there. If the proceeds have been collected and credited, the relation resulting between the depositor and the bank will vary with the instruction given or the course of dealing between the parties. It may also be varied by the fact that the initial bank was insolvent when it received the collection. Before collection has been made, the holder may have rights which are controlled by the form of indorsement to the initial bank or the form of its communication of the paper to a correspondent bank. Between the banks doing the collecting, the initial bank, when the paper is credited to it, will be in the same situation relative to the secondary bank as the holder occupies toward the initial bank when it has credited the proceeds after collection to him. The situation of the secondary bank may vary with its claims against the initial bank and the nature of the indorsements on the paper. The whole situation as between the various parties will be subject to a sudden change upon

1 Wingate v. Mechanics' Bank, 10 Pa. 104.

2 Am. Exp. Co. v. Parsons, 44 Ill. 312. This case is remarkable for two reasons: (1) In Illinois an express company collecting paper is liable for all connecting companies,

which is the exact contrary of the rule applied here to banks; and (2) the court recognizes that a deposit for collection is a bailment when given to an express company. See note 7 to § 184, ante.