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of an obligation owing by himself. Common sense teaches that such a person cannot and should not be employed; but very frequently this common sense rule is set aside and disregarded, and banks send a collection direct to the bank owing the debt requesting that it remit the amount.

If the debtor bank failed to do so and a loss occurs, this is gross negligence and the initial bank is liable.

In the case of German National Bank of Denver v. Burns, 12 Colo. 539, the court very pertinently asks this question: How can the debtor be the proper agent of the creditor in the matter of collections of debt?"

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The court continuing, says: "If the debtor is embarrassed, there is the temptation to delay, and, if wanting in integrity, there is the opportunity to destroy and deny the evidence of indebtedness."

The Supreme Court of Illinois presents the unreasonableness and negligence of such a practice in the following questions and language:

"Can it be said to be reasonable care in selecting an agent, to select one known to be interested against the principal? To place the principal entirely in the hands of his adversary?" The court further says:

"Surely it could not be reasonable care and diligence in an agent holding for collection, a promissory note given by one individual to another individual to send the promissory note to the maker, trusting to him to make payment, delay it or destroy the evidence of indebtedness and repudiate the transaction as his conscience might permit."

It is a very common custom and a rule generally followed by banks to remit drafts and checks directly to the bank owing them, and request that the remitting bank be credited with the collection and that notice of such credit be immediately given.

This custom or rule is not uncommon, and as stated is most always practiced especially between corresponding banks; but this custom although daily practiced, does not excuse or relieve the initial bank from liability in case of loss.

It is not reasonable care in selecting an agent to collect a debt, to select the debtor himself.31

31 The Drovers' Nat. Bank r. The Anglo-American Packing Co., 117 Ill. 100; Merchants' Nat. Bank of

Philadelphia v. Goodman et al., 109
Penn. St. 422, 78 N. W. 980.

The court holds, in the case of Davis v. First National Bank of Fresno, 118 Cal. 600, that a bank where negligence is charged, should be permitted to show the usage of banks in regard to the collection of paper presented by persons; and, if in making the collection it follows the course usually taken by banks under similar circumstances, it cannot be held to have been negligent; and in an action against the initial bank to recover the value of the collection on account of its negligence in so sending it, evidence is admissible that the conduct of the bank was in accordance with the usage of banks when making collections of paper presented by persons who were unknown to them. But a usage which is in contravention of law cannot be shown or pleaded to excuse a party in the performance of a reasonable duty.

§ 283, Banks employing notaries - Conflict of authority as to liability.

A bank has the authority to employ notaries to make protests, give notice, and generally to receive collections for it; and if employed by the cashier, the employment is construed to be an employment by the bank.

The important question affecting the bank is the one of laches and defaults by the notary. Does the bank become liable to the owner of the collection for such defaults?

This question has received considerable attention and has been discussed by the courts of many States at considerable length.

The Supreme Court of the United States, in the case of Britton v. Niccolls, 104 U. S. 757, in discussing the question as to the duty and liability of banks as collecting agents, and their responsibility for the acts of the notary to whom the notes sent to them for collection are delivered for presentment, demand and protest, states the law to be as follows:

"It is enough here that the notary was not, in this matter, the agent of the bankers. 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 by him 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 have been for the unskillfulness of a lawyer of reputed ability and learning to whom they might have handed the notes for collection in the conduct of a suit brought upon them."

The rule is undoubtedly established by a great majority of the courts of the various States and the Federal Courts, to be that if the collecting bank uses reasonable care in the selection of a notary, it cannot be held liable for his acts or defaults."

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$284. Officers of bank acting as notary.

Another important question to the banker upon this subject is: Can the president of a bank or other officer, who is also a notary public, act for the bank; and if so, does his laches or defaults as notary relieve the bank of liability?

In the case of Wood River Bank v. First National Bank of Omaha, 36 Neb. 744, the court holds that where a note is received by the bank with instructions to protest if not paid, and the president of the bank who is a notary, receives the note, it having been delivered to him for protest, he, failing to give the notice, which failure thereby operates as a discharge of the indorser, the bank is liable. The contrary doctrine is presented in the case of May v. Jones, 88 Ga. 308, 311.

The court in its opinion says:

"The plaintiff's theory is that, as Jones, the notary public, was also an employee and agent of the bank, the action of defendant Jones in the matter, he acting under the authority of the defendant bank, is the action of said bank.' This is all the allegation touching the bank's liability. Although there is conflict in the cases, the prevailing and better holding seems to be that a bank is not liable for the negligence or misconduct of a notary employed by it to protest negotiable paper. The reason is that the notary is not a mere agent or servant of the bank, but is a public officer, sworn to discharge his duties properly. He is under a higher control than that of a private principal. He owes duties to the public, which must be the supreme law of his conduct. Consequently, when he acts in his official

32 First Nat. Bank of Manning v. German Bank of Carroll Co., 107 Iowa, 543; Bellemire . Bank of United States, 4 Whart. (Pa.) 105;

Britton . Niccolls, 104 U. S. 766;
Bank . Butler, 41 Ohio St. 519;
Isham v. Post, 141 N. Y. 100.

capacity, the bank no longer has control over him, and cannot direct how his duties shall be done. * That the notary

*

is also an employee and agent of the bank does not alter the case. There is still a sharp dividing line between his duties as agent and his duties as a public officer. When his public service comes into play, his private service is for the time suspended."

The theory of this opinion is, that he is not a mere agent of the bank, but is a public officer, and while acting in this capacity he lays aside his private status, and that it is merged in his public office, he is not and cannot be performing the duties of his private office.

This logic and reasoning seems to be sound, but it is defective in this particular. The duties of his private office are not laid aside, they are not merged into those of the public office at any time. His position as the president of the bank and his office as notary public are positions which he may hold at the same time. If the bank of which he is president receives a note for collection and he, as a notary, assumes the authority or is directed to protest the note, if he acts and proceeds to protest the note (being president of the bank) he acts for the bank as its agent, and at the same time performs the acts required and defined of notaries by the law governing and prescribing their duties. If he neglects to serve the notice of protest within the time required, and the indorser is released, the bank could not deny that while acting as notary his position. as president of the bank or agent, which is one and the same thing, had been suspended to allow him to act as notary.

He is holding the dual position as agent and officer of the bank and the office of notary public, and acts in both capacities or positions at the same time.

And the dual position and responsibility, if assumed, should not excuse the bank for a failure by its agent in the performance of his duty while acting for it as notary public.

Where a bank selects or appoints a notary to act for it for a specified time, and for it required a bond for the faithful discharge of his duties, and failing to give notice to an indorser of a note by which the indorser was discharged, the notary is

not, in such a case, an independent officer, but is the agent of the bank." 33

The rule then may be laid down as follows: that where a bank delivers a note to a notary for protest, etc., it will not be liable for the default of the latter; but where an officer of a bank is a notary public and fails to discharge his duty as such notary, he is held to be the agent of the bank and the bank will be liable for his negligence.

§ 285. Initial bank's liability for default of its correspondent - Conflict of authorities.

The Supreme Court of the United States, in the case of The Exchange National Bank v. Third National Bank, 112 U. S. 276, with great care reviews the various cases of the States and finally lays down the general rule of law to be, that the initial bank is liable for such damages as it had sustained by the negligence of its agent or collecting bank.

The facts in the case and opinion of the court are given in full.

Statement of facts:

"The facts found were these, in substance: The drafts were drawn by Rogers & Burchfield, at Pittsburgh, to the order of J. D. Baldwin, and by him indorsed, on Walter M. Conger, Sec'y Newark Tea Tray Co., Newark, N. J.,' and were discounted before acceptance, by the plaintiff, at Pittsburgh, for the drawers. They bore different dates, from June 8, 1875, to September 20, 1875, and were in all other respects similar except as to the sums payable, and in the following form:

$1,042.75.

Pittsburgh, June 8, 1875.

Four months after date, pay to the order of J. D. Baldwin ten hundred and forty-two 75/100 dollars, for account rendered, value received, and charge to account of

To Walter M. Conger,

Rogers & Burchfield.

Sec'y Newark Tea Tray Co., Newark, N. J.'

33 Gerhardt r. Boatman's Sav. Inst., 38 Mo. 60; Wood River Bank

v. National Bank of Omaha, 36 Neb. 744.

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