case, it was contended by plaintiff's counsel that the defendant bank had no right to place the bills, which had been placed in its hands for collection, in the hands of another bank (the bills were payable at Washington and the defendants had no correspondents there), on the ground that an agent has no authority to delegate his authority to a sub-agent without the assent of his principal. This contention was, however, denied by Justice WILDE: "This, no doubt, is gen. erally true, but when from the na ture of the agency, a sub-agent or sub-agents must necessarily be employed, the assent of the principal is implied. * * If the defendants employed suitable sub-agents for that purpose, in good faith, they are not liable for the neglect or default of the sub-agents. * The defendant's liability was limited to good faith and due discretion in the choice of an agent to transmit the bills, and to procure a remittance of the money when paid.

The usage of a bank is binding on all persons dealing with the bank, whether they know of the usage or not."

The Courts in Mississippi hold that in the case of a receipt for collection, the bank is not liable: Tiernan et al. v. Commercial Bank of Natchez (1843), 7 How. (Miss.) 648, where a notary had been negligent in collecting a domestic bill; The Agricultural Bank of Mississippi v. The Commercial Bank of Manchester (1846), 7 S and M. (Miss.) 592, a case of a foreign bill; Bowling v. Artnur (1857), 34 Miss. 41, where it was held that the notary was liable directly to the payee. In Third National Bank of Louisville v. Vicksburg Bank (1883) 61 Miss. 112, Justice COOPER

followed the ruling in the previous cases, while Chief Justice CAMPBELL delivered a dissenting opinion: "I think the rule which prevails in England, and New York, New Jersey, and Ohio, and which is preferred by several eminent text writers, is the true one, and that a bank taking paper for collection is responsible for the default of its correspondent. I do not find fault with the cases cited from our own reports. They were where the claim was handed to a notary, and it was properly held that he was the agent, not of the bank, but of the owner of the paper, and that the bank was not responsible for the default of the notary. Where protest becomes necessary or proper, the paper must be handed to a notary, and the owner of the claim knows that, and is conclusively presumed to have authorized the bank to commit the paper to a notary if it should become necessary to protest it.✶✶✶ To this I agree, but I am unable to assent to the doctrine that a bank is not responsible for its own agents in the conduct of its regular business. It seems to be settled that a collection agency which takes a claim for collection at a distant point is responsible for the acts of its agent to whom the claim is sent for collection. I am not able to draw a distinction between a collection agency, by that name, and a bank, which is a collection agency, where it undertakes to collect claims for customers."

In the case of Capitol State Bank v. Lane (1876), 52 Miss. 677, the draft was a foreign one and was not protested, and the Court held the bank liable, saying: “As a legal proposition, it is undeniably true that a bank which receives a note or bill for collection is bound to use

due and proper diligence in making demand and giving notice and causing protest to be made, so as to hold all parties liable, and in default of such diligence, the bank itself becomes responsible to the party who deposited the note or bill."

V. The

The decisions in the State of Missouri also uphold the doctrine "that where the bank with which the bill or draft is placed or deposited for collection, uses due diligence and transmits the paper to a proper correspondent for collection, with proper instructions for the collection of the same, its responsibility is at an end, unless by some after act it makes itself responsible: Daly v. Butchers' and Drovers' Bank (1874), 56 Mo. 94. In this case, that of Gerhardt Boatman's Saving Institution (1866), 38 Mo. 60, was much commented upon by the Court. It was a case where the defendants with whom the plaintiff kept his regular deposit account, had delivered to it negotiable promissory notes for collection. The defendant employed a notary to do all its notarial business, and had required him to to give a bond, and appointed him by the year. The action lay for his negligence in not giving notice of dishonor, whereby the endorser was discharged, and the Court held the defendant liable for his acts, stating that it "having appointed the notary by the year, and required a bond for the faithful performance of his duties, made him its agent and an officer of the bank," and cited in support of its opinion the passage from Story on Agency. 8452, supra. At the same time the Court said: "If the subject of the controversy were a foreign bill of

exchange, it might present an entirely different aspect."

One of the earliest cases in Pennsylvania upon the question is The Mechanics' Bank of Philadeiphia v. Earp (1834), 4 Rawle (Pa.) 384; here the defendant drew upon parties in Virginia, and presented the bills to the bank to be transmitted for collection. The bills were not paid, and the bank refused to permit defendant to transfer his stock. In delivering the opinion of the Court, Justice ROGERS points out the distinction between the case of paper received for transmission for collection, and simply for collection: "If the undertaking of the bank was to collect, and not merely to transmit, they would be answerable for their Virginia correspondent; and this I understand to be the principle of the case of Van Wait v. Woolley, [supra] ** If the jury should be of opinion, that the Mechanics Bank undertook to collect the money, then it will be necessary to inquire, whether the bank of Virginia has done its duty, and what is the extent of the liability of the defendants. ** The bank would be liable in damages only as any other agent to his principal, to the extent of the damage which may have been sustained by their neglect." The next case which occupied the attention of the Court in that State, was that of a home bill or note: Bellemire v. The Bank of the United States (1838), 4 Whar. (Pa.) 105, wherein Chief Justice GIBSON expressed the rule as follows: "It has been ruled by this Court ** that a bank employed to transmit for collection, is bound to concern itself with the act of transmission alone; and that its correspondent becomes the agent for subsequent measures. It

is suggested, however, that a bank which has undertaken the whole business of collection, may be affected by other considerations; but though it be the holder by endorsement, there is nothing peculiar in its position. It is invested with the apparent ownership only to authorize it to present for payment; and standing in all other respects on the ordinary footing of an agent, it is sufficient to exonerate it that it has acted in good faith, and, though not to the best advantage, according to the regular and accustomed course of the business. * * A bank is compelled by the incorporeal nature of its essence, to act by the instrumentality of agents; and when it employs its own servant with the usual instructions, it performs its implied promise to use ordinary diligence. * * It performed its undertaking when, for the purposes of presentation and notice, it put it into the hands of its own notary." In this case the Chief Justice took the view that the bank acted gratuitously, and according to the usual practice, and that there was no recourse. This was followed by the case of Wingate v. Mechanics' Bank (1848), 10 Pa. 105, in which the action was for damages for undertaking to collect a foreign bill for a valuable consideration. In this case, it appeared that the bank had put up in its premises placards, and also distributed them to its customers, offering to collect drafts on certain points for seven per cent.

The notes were not col

lected and no notice was given. Justice COULTER in delivering the opinion of the Court dwells upon the difference between a draft handed to a bank for collection and one handed to it for transmission for collection: "Was the contract to col

lect the notes by the defendants for seven per cent., established; and if so, were they guilty of such negligence, under that contract, as to make them liable to the plaintiffs for the loss incurred in consequence of it? The law is clear, that if an agent undertake to do a specified thing for a stipulated reward, he is bound to exercise due diligence to accomplish what he has agreed to do; and to observe good faith towards his principal in every step, either of success or failure, towards accomplishing the end. The law implies a promise from brokers, bankers, or agents, and attorneys, that they will severally, in their respective callings, exercise competent skill and proper care in the service they undertake to perform; in which if they fail, an action lies to recover damages for the breach of their implied promise. * If the contract or agreement by defendants was not to collect the notes deposited, but merely an engagement to transmit them to a responsible person, * * the defendants were not liable, because they had committed them to a bank in good credit." With regard to the question of the obligation to give notice he referred to Story on Agency, 208, where it is laid down that, "it is the duty of agents to keep their principals advised of their doings, and to give them notice in a reasonable time of all such facts and circumstances as may be important to their interests," and continuing, observed: "In the exercise of good faith to his principal, the agent ought to be held to the giving such notice, whether the agent be an individual or a bank ; for banks are subject to the settled law of contracts, as well as individuals."

The still more recent case of Merchants' National Bank of Philadelphia v. Goodman (1885), 109 Pa. 422, shows that, "The agreement to transmit for collection is a contract between the bank and its customer; the valuable consideration which supports the agreement as a contract, is the use of the money to be collected by the bank so long as it shall be allowed to remain in their hands after it has been collected. This binds the collecting bank to do all that is incumbent on them to do; and that entire duty, ✶✶ is discharged when the check or draft is transmitted to a responsible sub-agent to collect the money. The agent to whom the instrument is sent to make demand for payment, then becomes the agent of the depositor or endorser, and is liable to such depositor for loss arising from failure on his part to perform the duty which is incident to an undertaking to collect the money; and such duty is not discharged when anything but money is accepted as payment, in the absence of special authority to the contrary." This was the opinion of the Court below and was affirmed as above, Chief Justice MERCUR dissenting. The case of Lee v. The First National Bank of West Chester (1880), I Chest. Cnty. Rep. (Pa.) 109, is to the same effect.

In Tennessee, the case of Bank of Louisville v. First National Bank of Knoxville (1874), 8 Bax. (Tenn.) IOI, supports the ruling in favor of the exemption of the bank from liability. The action was brought against the bank and Brown, a notary public, to recover damages for their failure to protest a bill of exchange sent by plaintiff to defendant. Here the Court said: "All that is required is, that the bank re

ceiving such bill in the first place, should act in good faith in the selection of a proper agent to protect the interests of the holder of the bill." The Circuit Court, in accordance with the New York case of Allen v. The Merchants' Bank, supra, had held the bank liable, and was reversed.

The Wisconsin courts also follow this doctrine, in the case of a note payable by a party residing at a distance from the bank's place of business, that the contract is not absolutely to make due presentment and give due notice, but to place the note in the hands of some competent and responsible agent doing business at the residence of the maker, and that having done this, it is itself discharged from liability. The case of Stacy and another v. The Dane County Bank (1860), 12 Wis. 629, shows that in such cases "there is an implied authority to employ a sub-agent, and that if the bank exercises reasonable care and skill in selecting one, it is not afterwards liable for his default." case supports a theory that if the note was in due season delivered to a notary public at the residence of the maker, for presentment and protest, such fact would constitute a good defense upon the ground "that those officers are appointed by public authority, and that therefore, at least in the absence of any direct notice to the contrary, parties have a right to assume that they are fit and proper agents to discharge the duties of their office."

This

In some cases, the bank actually making the collection, has been held to assume the entire agency, and to relieve the principal from liability, thus in The Bank of Washington v. Triplett & Neale (1828), 1 Peter (26 U. S.) 25, the bank contended

that it was not the agent of the plaintiffs, but of the Alexandria Bank, from whom it received the bill, and that where an agent, employed to transact a particular business, engages another person to do it, the latter is not responsible to the principal. This was denied by the Court, as the bill was not delivered to the Alexandria Bank for collection, but for transmission, and the Alexandria Bank by transmitting as directed performed its duty, and the whole responsibility of collection devolved on the defendant bank. Chief Justice MARSHALL, who delivered the opinion, said:"the deposit of a bill in one bank to be transmitted for collection to another is a common usage of great public convenience, the effect of which is well understood. * * The letter of [the Alexandria Bank] disclosed the real party entitled to the money, and the answer to that letter assumes the agency, if it had not been previously assumed. The Court is decidedly of opinion that the Bank of Washington, by receiving the bill for collection, and certainly, by its letter, ** became the agent of Triplett and Neale, and assumed the responsibility attached to that character."

It is submitted that the liability of a bank which has undertaken to collect commercial paper, either domestic or foreign, cannot differ from that of any other party who has contracted to do a specified thing; for the law is well settled that if a person promises or undertakes to perform a certain act, he is liable for all defaults and negli

gences, even though his action be gratuitous: Coggs v. Bernard (1704), 2 Ld. Raym. 909; therefore, if the paper has been placed in the hands of the bank for collection, in the absence of any express contract to the contrary, it is properly made liable for the acts of its agents and correspondents. There is in such case an implied contract co-ordinate and commensurate with duty, dictated by reason and justice; for, whenever it is certain that a man ought to do a particular thing, the law supposes him to have promised to do that thing: Illinois Central RR. Co. v. U. S. (1880), 16 Ct. Cl. 333

Upon this theory, which it is contended is the true one, the whole question ought properly to be made to hinge upon the contract or undertaking of the bank. Was the paper placed in its hands for collection or merely for transmission for collection? If for the former purpose, then it is liable, but if for the latter, then its liability properly ceases upon its handing the same to a responsible and well selected person to transact the business required, as has been decided by the Courts in England, and by those of Indiana, Michigan, New Jersey, New York, Ohio, and South Carolina, and by the Court in Minnesota, as shown by the principal case, and supported by the decisions of the Supreme Court of the United States as already pointed out in this annotation.

Philadelphia.

ERNEST WATTS.

VOL. XXXVIII.—42