against previous parties to the paper. From the facts found, it is to be inferred that the New York Bank took the drafts from the plaintiff, as a customer, in the usual course of business. ** The taking by a bank, from a customer, in the usual course of business, of paper for collection, is sufficient evidence of a valuable consideration for the service. The general profits of the receiving bank from the business between the parties and the accommodation to the customer, must all be considered together, and form a consideration, in the absence of any controlling facts to the contrary, so that the collection of the paper cannot be regarded as a gratuitous favor. The contract then, becomes one to perform certain duties necessary for the collection of the paper and the protection of the holder. The bank is not merely appointed an attorney, authorized to select other agents to collect the paper. Its undertaking is to do the thing and not merely to procure it to be done. In such case, the bank is held to agree to answer for any default in the performance of the contract; and whether the paper is to be collected in the place where the bank is situated, or at a distance, the contract is to use the proper means to collect the paper, and the bank, by employing sub-agents to perform a part of what it has contracted to do, becomes responsible to its customer. This general principle applies to all who contract to perform a service." Continuing, he adds: "The distinction between the liability of one who contracts to do a thing and that of one who merely receives a delegation of authority to act for another is a fundamental one, applicable to the present case. If the agency is an

undertaking to do the business, the original principal may look to the immediate contractor with himself and is not obliged to look to inferior or distant under contractors or sub-agents, when default occurs injurious to his interest." Alluding to the means whereby a bank may relieve itself of this responsibility the same learned judge says : "Whether a draft is payable in the place where the bank receiving it for collection is situated, or in another place, the holder is aware that the collection must be made by a competent agent. In either case, there is an implied contract of the bank that the proper measures shall be used to collect the draft, and a right, on the part of its owner, that proper agents will be employed, he having no knowledge of the agents. There is, therefore, no reason for liability or exemption from liability in the one case which does not apply to the other. And while the rule of law is thus general, the liability of the bank may be varied by consent, or the bank may refuse to undertake the collection. It may agree to receive the paper only for transmission to its correspondent and thus make a different contract and become responsible only for good faith and due discretion in the choice of an agent. If this is not done or there is no implied understanding to that effect, the same responsibility is assumed in the undertaking to collect foreign paper and in that to collect paper payable at home. On any other rule, no principal contractor would be liable for the default of his own agent, I where, from the nature of the business it was evident he must employ sub-agents. The distinction recurs between the rule of merely personal representative agency and the re

sponsibility imposed by the law of commercial contracts. This solves the difficulty and reconciles the apparent conflict of decision in many cases. The nature of the contract is the test. If the contract be only for the immediate services of the agent and for his faithful conduct as representing his principal, the responsibility ceases with the limit of the personal service undertaken. But where the contract looks mainly to the things to be done, and the undertaking is for the due use of all proper means to performance, the responsibility extends to all necessary and proper means to accomplish the object, by whomsoever used."

In the case of East Haddam Bank v. Scovil (1837), 12 Conn. 302, a bill was drawn in Great Britain in favor of the defendant, upon merchants in New York, accepted by them, and subsequently endorsed by the defendant and one Ingham for the purpose of being transmitted to the plaintiff bank for collection, the sole interest being in the defendant, the endorsement by Ingham being merely for the purpose of accommodation. The plaintiff bank enclosed the bill with others and sent them to the Merchants' Exchange Bank of New York for collection. At maturity the bill was presented for payment, and being dishonored was protested, and due notice thereof given to the drawer, but none to the plaintiff, defendant or Ingham. Plaintiff subsequently credited the amount to Ingham, who drew his check in favor of defendant, which plaintiff honored. The acceptors of the bill were insolvent before the bill became due, and the plaintiff claimed the money as money paid under a mistake and misapprehension of facts, that

it had not been guilty of negligence or default of duty; that it was not by law bound or obliged to give any other notice to the defendant of the non-payment of the bill than that given; that if any other notice was by law necessary, the defendant had received it; that the Merchants' Exchange Bank was not the agent of the plaintiff in respect of this bill; and that the plaintiff was not liable for any default or negligence of that bank in regard to it, if any such default or negligence existed, which it denied: Justice HUNTINGTON in delivering the opinion of the Court in support of the theory that the Merchants' Exchange Bank was not the agent of the plaintiff, upon the ground that it was necessary to transmit to a reputable correspondent according to the usual course of business for collection, and that such facts were known to the defendant, remarks: "It cannot justly be claimed, that the plaintiffs should have become insurers against the defaults of their correspondents. Such a doctrine would be as inequitable, as it might be oppressive and ruinous to banks who are merely the medium through which the holders of bills and drafts payable in other States transmit them for collection. If they act in good faith in the selection of an agent to protect the interests of the holder of the bill, in cases where it is obvious an agent must be selected for such purpose, what principle of justice or commercial policy requires that they should be held liable for any neglect of duty on the part of such agent? * The mode now adopted and in general use, is well calculated to insure collections with promptitude, at a trifling expense, and without trouble to the holder. It is highly reasonable he

should assume the risk of the defaults of the collecting agent, rather than the bank, who merely transmit the bill, and select the agent, with the consent of the holder, and with a perfect knowledge on his part that such selections must be made."

"The general duty of an agent who receives for collection a bill of exchange," says the Court in Merchants' & Manufacturers' Bank v. Stafford Bank (1877), 44 Conn. 564, * is to use due diligence in presenting the same for acceptance, and in presenting it for payment, if it has been accepted, and to give the holder and other parties to the paper, by the next day's post, the notices of dishonor required by law in case acceptance or payment is refused, and to give to his principal any special notice which is required by the terms of the instructions to the agent, or of the contract which the agent has entered into with his principal. The agent is also required to protest, in case of non-acceptance or non-payment, if protest is not forbidden, and to send the protest to the holder."

To this may be added, the remark of Justice ELLSWORTH in The Bridgeport Bank v. Dyer (1848), 19 Conn. 136: "No principle of law is better settled than that a known practice, or one belonging to a particular branch of business is sufficient evidence of the understanding of the parties, when contractiug in relation to that business, unless there be evidence to the contrary."

In the case of The Etna Insurance Company v. The Alton City Bank (1861), 25 Ill. 221, although the facts as agreed upon between the parties clearly showed that the bill in question was received for collection, Justice WALKER treated

it as if received for transmission for collection, and held the bank not liable for the acts of its correspondents. "When received for transmission, it [the bank] has fully discharged its duty by sending the instrument in due season to a competent reliable agent with proper instructions for its collection. This is manifestly the rule clearly announced in a large majority of the adjudged cases.' This statement of the law is no doubt true where the bank receives the paper for transmission for collection, but not where, as the agreed facts in this case show, such paper is received for collection. The distinction is shown by the cases of The Bank of Washington v. Triplett & Neale, infra; Allen v. The Merchants' Bank of New York City, supra; and Jackson v. The Union Bank, infra; all of which are cited and referred to in the opinion. There is no doubt, however, that the learned Judge treated the bill as received for transmission, contrary to the facts, for in the last paragraph of the opinion he continues: "In this case it appears that the defendants received the bill in controversy for transmission for collection, and in due season forwarded it to their correspondents at the residence of the drawees. That they were competent and reliable, and that defendants in no way contributed to any loss that may have occurred. If, then, any liability has been incurred to the plaintiffs, it is by the St. Louis house, who became their agents, and not by the defendants." It may be difficult to define what amounts to a receipt for collection, and what is a receipt for transmission for collection, but still when the facts of the case absolutely

show that the document in question was received for collection there can be no reason for holding it as received for transmission only.

The case of Fay & Co. v. Strawn (1863), 32 Ill. 295, was one wherein the appellants were bankers, who had received from appellee a draft payable to appellants for collection, which they in turn had endorsed over to their correspondents, who failed three days after collecting the money without having remitted it to the appellants. The appellants were adjudged not liable, but it would seem solely on account of a special contract, for from the opinion it is gathered, that when first applied to, they positively refused to undertake the collection of the draft; when they were applied to a second time, they only agreed to send the draft forward, upon the condition that they were to incur no liability, and that the correspondents were to transmit the collection to the appellants by express.

The Iowa cases maintain the theory, that "The bank receiving the paper becomes an agent of the depositor with authority to employ another bank to collect it. The second bank becomes the subagent of the customer of the first, for the reason that the customer authorizes the employment of such an agent to make the collection. The paper remains the property of the customer, and is collected for him; the party employed with his assent, to make the collection, must therefore be regarded as his agent. A sub-agent is accountable ordinarily only to his superior agent when employed without the assent or direction of the principal. But if he be employed with the express or implied assent of the principal, the superior agent will

not be responsible for his acts. There is in such a case, a privity between the sub-agent and the principal, who must, therefore, seek a remedy directly against the subagent for his negligence or misconduct. These familiar rules of the law applied to the case, relieve it of all doubt when considered in the light of legal principles." BECK, J., Guelich v. The National State Bank of Burlington (1881), 56 Iowa, 434.

In Hyde & Goodrich v. Planters' Bank (1841), 7 La. 560, the action was brought to recover damages occasioned through the negligence of a notary, but the Court held it would not lie, as "to make the defendants responsible for his neglect of official duty on the part of the notary, would be rendering them the sureties of the officer; it would be changing the ground upon which alone they can be held liable, to-wit: that of negligence in the discharge of their duty to their principals." This is followed in Baldwin v. The Bank of Louisiana (1846), I La. Ann. 13.

In Maryland, the law would seem to be against the liability of the bank. In Jackson v. The Union Bank of Maryland (1823), 6 Har. & J. (Md.) 146, the plaintiff charged the defendant with negligence with reference to a bill of exchange drawn by the plaintiff upon a party in Washington, D. C., and placed in defendants' hands for collection. The bill was a foreign one and was forwarded by defendants to their agents in Washington. The demands for payment and protest were made on the fourth day ac cording to the custom of the banks in the District. In the opinion of the Court, which discharges the defendants, Justice BUCHANAN dwells

upon the custom of the defendants to collect paper for their customers through the agency of other banks; also upon the fact that the plaintiff was a customer, "and must be supposed to have had a knowledge of the uniform and established mode of making such cohections by the banks," further, he takes the point that "the placing" of the bill "with the defendants for collection was equivalent to an agreement that it should be sent by them for that purpose to some bank in the District of Columbia, * * their established agent, ** and if that agent did, in conformity with the custom ** neglect to cause demand and protest to be made on the proper day, the defendants are not chargeable with any negligence, or other improper conduct." Similarly, Citizens' Bank of Baltimore v. Howell & Brothers (1855), 8 Md. 530.

In Fabens v. The Mercantile Bank (1840), 23 Cush. (Mass.) 330, it was agreed, that the usage of the banks in Massachusetts, was to collect notes, the makers of which resided without the State, through some bank in the place of the maker's residence, if there were any bank in such place in good standing, and to transmit the notes to such bank for that purpose. A notice had always been posted up in the bank in question, “that the cashier may receive notes and bills of exchange for collection, for which neither the bank, nor any officer thereof shall be held accountable for any irregularity in notifying." Here Chief Justice SHAW said: "We think this question must depend upon the usage and custom of merchants and bankers, and the implied obligation upon the latter, resulting from their relations, as

*

no special contract was made, and no special instruction given in the present case. We think it very clear upon principle and authority that by a general usage, now so well understood as safely to be considered a rule of law, when a bank receives a note for collection, it is bound to use reasonable skill and diligence in making the collection, and for this purpose is bound to make a reasonable demand on the promisor and in case of dishonor, to give due notice to the indorsers, so that the security of the holder shall not be lost or essentially impaired by the discharge of indorsers. * But it is equally well settled, that when a note is deposited with a bank for collection, which is payable at another place, the whole duty of the bank so receiving the note in the first instance, is seasonably to transmit the same to a suitable bank or other agent at the place of payment. And as part of the same doctrine, it is well settled, that if the acceptor of a bill or promisor of a note, has his residence in another place it shall be presumed to have been intended and understood between the depositor for collection and the bank, that it was to be transmitted to the place of residence of the promisor, and the same rule shall then apply, as if on the face of the note it was payable at that place. * * We are therefore of opinion, that the defendants had performed their duty, when they transmitted the note to a solvent bank in good standing, and were not responsible for the misfeasance or negligence of that bank."

The case of The Dorchester and Milton Bank v. The New England Bank (1848), I Cush. (Mass.) 177, supports these principles. In that