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(264 U. 8. 160, 68 L. ed. -, Adv. Op8. p. 288, 44 Sup. Ct. Rep. 296.) necessary implication, authority to will appear presently, frequently is accept a draft in payment from the sent. The first form of remittance, drawee. We assume, for the pur- to be sure, is more convenient; but poses of the argument, that the ob- it is not of such necessity as to exligation which the law imposes to clude the second on the score of imcollect only in money may be varied practicability. There is nothing to by a regulation, clearly and posi- prevent the sending bank from retively so providing, although, in quiring the drawee to remit curterms, it relates only to the banks rency as a condition upon which the inter se, upon the ground that the check may be satisfied and charged owner of the check is bound by the to the account of the drawer. We knowledge and consent of his sub- must not lose sight of the fact that agent. But to justify an extension we are here dealing with two disby implication of the terms of the tinct rules of law, both of which are regulation, it must be made to ap- sought to be avoided: (a) that pear, at least, that the addition which forbids a bank having paper sought to be annexed is a necessary for collection to use the drawee means to carry into effect the au- bank as a collecting agent; and (b) thority expressly given by the regu- that which forbids a collecting lation. See First Nat. Bank v. Mis- agent accepting anything but money souri, 263 U. S. 640, 68 L. ed. - in payment. The first rule is probAdv. Ops. p. 235, 44 Sup. Ct. Rep. ably based upon the theory that the 213, decided January 28, 1924. It drawee is not a suitable agent for follows from this limitation upon the enforcement of his own obligathe extent and purpose of implied tion, and that commercial paper powers, that a distinct and inde- calling upon him to pay should not pendent power cannot be brought be surrendered to and satisfied by into existence by implication from him, with the consequent release of the grant of another distinct power. the drawer, except upon previous or In other words, authority to do a contemporaneous payment. The specific thing carries with it, by im- second rule proceeds upon the fact plication, the power to do whatever that the obligation of the drawee is is necessary to effectuate the thing to pay in money, and nothing else. authorized, not to do another and Plainly, the two rules are of such separate thing, since that would be, nature that one may be abrogated not to carry the authority granted without the other; and it is obvious, into effect, but to add an authority since the law imposes upon a colbeyond the terms of the grant. The lecting agent the duty to collect in authority expressed by the regula- money, that none of the various subtion is “to send checks for collection agents receiving the paper to be colto banks on which checks were lected upon the basis of that duty drawn;" the authority now sought can waive the requirement of the to be annexed by implication is “to law in favor of the agent to whom accept exchange drafts in pay- it is transmitted. Indeed, in transment," instead of money, as re- mitting the check here in question to quired by law. That neither is a the Richmond bank, the intermedinecessary means of carrying the ate banks, in effect, served only as

other into effect is instruments for effectuating the -effect of right

clear. Nor are they transmission. In essence and in

necessary to each substance the check was delivered other in the sense that they are by its owners to the Richmond corollary or dependent. Certainly bank; it is to that bank, as we have a check may be sent for collection to said, they must look for redress; the drawee bank without entailing and the responsibility of that bank the necessity of remitting the is the same as though the check had amount in the form of exchange. been delivered directly to it for colCurrency itself may be sent; and, as lection by the owners.

to send checks to drawee.

In this connection, certain state rency, being wholly a matter of its statutes are also referred to; but, if discretion or even of its caprice, as applicable, we find nothing in them to which the owners are not conthat justifies a different conclusion sulted, would be at its peril rather from that reached in respect of the than at the risk of the owners of the regulation just considered. Their check. provisions are, in substance, the But the proof shows that the alsame.

leged custom was not known to 2. Finally, it is urged that the ac- plaintiffs; and they could not be ceptance of the drawee's own draft, held to it without

Custom-as to instead of money, was justified by such knowledge, be- bank collections custom. The testimony relied upon cause, all other rea

-how far bound. to establish the custom follows: sons aside, by its uncertainty and

“The business of check collecting lack of uniformity, it furnishes no is handled by the Federal Reserve definite standard by which the Bank in a way very similar to that terms of the implied consent sought in which it is handled by collect- to be established thereby can be deing banks throughout the country. termined. It furnishes no rule by When one bank receives checks on which it can be ascertained when another in a distant city, it usually an exchange draft shall be remitted sends them to the bank on which and when currency shall be rethey are drawn, or to some other quired, or who is to exercise the bank in that city, and receives set- right of election.

right of election. "A custom to pay tlement by means of an exchange 2 pence in lieu of tithes is good; but draft drawn by the bank to which to pay sometimes 2 pence, and somethe checks are sent upon some one times 3 pence, as the occupier of the of its correspondents. When checks land pleases, is bad for uncertainare sent with the expectation that ty.” 1 Bl. Com. 78. An alleged the bank receiving them will remit custom to remit either in exchange at once, we call it sending for col- or in currency, at somebody's option, lection and return. When this is means nothing more than a pracdone, the bank upon which the tice sometimes to remit by exchange checks are drawn is expected to and sometimes not, and therefore cancel the checks and charge them lacks the essential qualities of certo the accounts of the drawers, and tainty and uniformity to make it a to remit by means of its exchange custom of accepting payment by exdraft, or by a shipment of currency. change draft, binding upon the An exchange draft is used more owners of the check. Oelricks v. frequently than a shipment of cur- Ford, 23 How. 49, 62, 16 L. ed. 534, rency.”

538; Kalamazoo Corset Co. v. SiIt thus appears that the custom, mon, 129 Fed. 144, 146; Chicago, if otherwise established, does not M. & St. P. R. Co. v. Lindeman, 75 fix a definite and uniform method of C. C. A. 18, 143 Fed. 946, 949, 20 remittance. When checks are sent Am. Neg. Rep. 243; Foley v. Mason, for collection and return, the bank 6 Md. 37, 50; Wilson v. Willes, 7 is expected to cancel the checks and East, 121, 127, 103 Eng. Reprint, charge them to the account of the 46, 3 Smith, 167, 8 Eng. Rul. Cas. drawers, and remit “by means of 311, 8 Revised Rep. 604. A custom its exchange draft, or by a shipment to do a thing in either one or the of currency," the former being used other of two modes, as the person more frequently than the latter. relying upon it may

-alternative Whether the choice of methods is at choose, can furnish the election of the drawee bank or no basis for an im- performancethe collecting bank does not appear. plication that the If it be the latter, it would seem to person sought to be bound by it had result that the election to have re- in mind one mode rather than the mittance by draft instead of cur- other.

method of



(264 U. S. 160, 68 L. ed. Adv. Ops. p. 288, 44 sup. Ct. Rep. 296.) It is said, however, that there is now necessary to consider the effect a custom among banks to settle of a custom which contravenes a among themselves by means of

settled rule of law, or the limits drafts, so well established and no

within which such a custom can be torious that judicial notice of it upheld. See Barnard v. Kellogg, 10 may be taken. But the usage here Wall. 383, 390–394, 19 L. ed. 987, invoked is not that, but is one of

989–991. Decisions upon that quesspecial application to a case where

tion are in great confusion. But

whatever may be the doctrine in the collection of a check is intrusted

other respects, certainly a custom to the very bank upon which the

relied upon to take check is drawn, and where payment the place of a settled rule of law

-to supplant is accepted in a medium which the principle of


law, contract, read in the light of the

and therefore to have the force of law, forbids. The special situation

The special situation law, ought to be as definite and spewith which we are dealing is con- cific in negativing the principle as trolled by a definite rule of law the law which it assumes to supwhich it is sought to upset by a cus- plant is in affirming it. tom to the contrary effect. It is not Judgment affirmed.


Federal reserve banks and bank collections.

The cases on this question are collected and discussed in annotation in 30 A.L.R. 635.

An important contribution to the law on this subject is made by the decision of the Federal Supreme Court in the reported case (FEDERAL RESERVE BANK V. MALLOY, ante, 1261), where a Federal reserve bank was held not justified in accepting a draft instead of cash in the collection of a check, and was held liable to the payee of the check where the draft was dishonored. The court held that no custom was shown justifying the acceptance of the drawee's own draft in

stead of money, and that such method of collection was not warranted by a regulation of the Federal reserve banks that they would assume no liability in collections except for negligence, and that Federal reserve banks were authorized to send checks for collection directly to the drawee. For holdings of the lower Federal courts in this case, see the annotation in 30 A.L.R., on pp. 650, 651.

No other case appears to have passed on the present question since the preparation of the earlier annotation on this subject. R. E. H.


JAMES C. BOTHWELL et al., Receivers, Appts.

Maryland Court of Appeals - June 25, 1923.

(143 Md. 303, 122 Atl. 195.)

Set-off — of insurance loss on premium note.

1. A claimant under a strike insurance policy cannot set off his claim upon an assessment against his premium note, where the claims against the insurer exceed the aggregate of the assessments, while other policy

holders have paid their assessments, in whole or in part, and the funds collected from the assessments will be applied pro rata to the payment of claimant's demand.

[See note on this question beginning on page 1281.] Insurance -- against loss from strike strike, or continue business during the

- period for determining profits. period of partial production, but not

2. In determining the loss of net the wages of short-term hands whose profits due to a strike, for the purpose services can be dispensed with withof fixing liability under a policy of out impairing the efficiency of the strike insurance, the court may refuse organization. to select as the standard the months

- what are fixed charges. immediately preceding the strike,

6. The average daily fixed charges, which were a period of marked depres

against the loss of which, by a strike, sion in business, and also an extended an employer is insured, include rent, period before that time, so as to in- insurance, taxes, mortgage interest, clude a period of marked expansion, depreciation, and other expenses necbut may take a twelve months' period

essary to maintenance of the efficiency immediately before the strike, if that of the employer's organization. will best serve as a basis for estimat

how return to normal ascertained. ing the loss.

7. In ascertaining the time for terdepreciation of product as fixed

mination of liability under a policy charge.

insuring against strike losses, which 3. Depreciation in the value of

is to be when production reaches 80 manufactured product is not within

per cent of normal, a period of one a policy insuring a manufacturer

year prior to the strike may be adopted against the direct actual loss of

as fixing normal production, where average daily fixed charges because

the production for a few months imof a strike of employees.

mediately preceding the strike was construction meaning of words. abnormally low, and for the months 4. Contracts of insurance are to be immediately preceding the year so construed according to the sense and adopted it was abnormally high. meaning of the terms which the par- - average daily production. ties have used, and, if they are clear 8. Under a policy insuring against and unambiguous, these terms are to

strike losses, under which the liability be taken and understood in their plain, is to terminate when the daily average ordinary, and popular sense.

production equals 80 per cent of nor[See 14 R. C. L. 925; 4 R. C. Supp.

mal, a period of thirty days may be 930.]

adopted for ascertaining the daily prowages as fixed charges.

duction. 5. The average daily fixed charges, right to unpaid premium. against the loss of which, by a strike, 9. Upon the insolvency of a mutual an employer is insured, will include insurance company and cancelation of the salaries of officers and employees its policies, the unearned premium on whose term is of longer duration than a policy cannot be added to a claim the usual period of a strike, and whose for loss under it, but the whole services cannot be dispensed with premium note will be applied to paywithout loss and without rendering ment of losses. the employer unable to resume normal [See 14 R. C. L. 854; 3 R. C. L. Supp. production promptly at the end of the 301. See also note in 1 A.L.R. 598.]

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APPEAL by the receivers from an order of the Circuit Court No. 2 of Baltimore City (Stein, J.), sustaining exceptions to the auditor's report in a receivership proceeding as to adjustment of claims for strike losses and for unearned premiums alleged to be due by reason of the cancelation of strike insurance policies; and cross appeal to protect interests of policyholders. Affirmed in part.

The facts are stated in the opinion of the court.

Messrs. Walter L. Clark, Stuart S. Wright, and George S. Jones for reJanney, Morris A. Soper, J. Purdon ceivers, appellants.

(143 Md. 303, 122 Atl. 195.) Messrs. Sylvan Hayes Lauchheimer erally called "strike insurance," beand Malcolm H. Lauchheimer, for gan to issue policies in August, 1920, claimant:

but operated for a period less than The four months immediately pre

a year, when its activities were cripceding the strike is too short a period,

pled by a series of strikes and labor and is not a fair period upon which to estimate the profits to be gained

difficulties, appearing in different inby a company during the year 1921

dustries throughout the United had the strike not occurred.

States, but chiefly in the printing Manning v. Grinstead, 121 Ky. 802, industry. 90 S. W. 553; Buffalo Forge Co. v. It was a mutual company, and its Mutual Security Co. 83 Conn. 393, 76 policyholders and members were Atl. 995; Dickinson v. Hart, 142 N. Y. subject to an assessment equal to 183, 36 N. E. 801; Nelson Theatre Co.

the deposit premium, if such assessv. Nelson, 216 Mass. 30, 102 N. E. 926;

ment was required for the payment Kyd v. Cook, 56 Neb. 71, 71 Am. St. Rep. 661, 76 N. W. 524; Chicago Bond

of losses. And because of losses, ing & Ins. Co. v. Oliner, 139 Md. 408,

and the many claims filed against 18 A.L.R. 1081, 115 Atl. 502; McCau- the company, the board of directors sey v. Hoek, 159 Mich. 570, 124 N. W. found it necessary to levy and did 570, 18 Ann. Cas. 945; Chapman v. levy an assessment of 100 per cent Kirby, 49 Ill. 211; Pennsylvania Steel of the deposit premium upon each Co. v. New York City R. Co. 117 C. C. of its policyholders. But only a A. 503, 198 Fed. 721.

small number of them paid their asTo interpret the phrase "fixed

sessment, either in full or in part, charge" as covering all losses sustained in good faith because of a

leaving unpaid thereon, in the agstrike is entirely reasonable.

gregate, approximately $500,000. To 1 Joyce, Ins. 581; McEvoy v. Secu- prevent further loss, the outstandrity F. Ins. Co. 110 Md. 275, 22 L.R.A. ing policies were, in the last days of (N.S.) 964, 132 Am. St. Rep. 428, 73 October, 1921, canceled, and, as a Atl. 157; 14 R. C. L. 926; Worrell v. result thereof, claims were filed for Kinnear Mfg. Co. 103 Va. 719, 49 S. unearned premiums claimed to be E. .988, 2 Ann. Cas. 997.

due by reason of such cancelation. Coverage is only to stop when the

On the 9th day of November of average daily sales reach and main

the last-named year, while the comtain an average of 80 per cent over an appreciable period of either two pany was in the condition. menor three months, and, in the event of

tioned, receivers were appointed for ambiguity, "that construction should it upon the application of the insurbe adopted which will be favorable" ance commissioner of Maryland. At to the assured.

that time the assets of the company McEvoy v. Security F. Ins. Co. 110

consisted of $500,000 in cash and Md. 279, 22 L.R.A. (N.S.) 964, 132 Am.

$1,000,000 owing to it by the policySt. Rep. 428, 73 Atl. 157.

holders on the assessments levied The claim for the assessment can be offset by the assured against his against them, and by The Lloyds of claim for losses under the policy.

London and the Excess Reinsurance Baltimore Ins. Co. v. M'Fadon, 4

Company of London as reinsurance, Harr. & J. 31; Colton v. Drovers' Per- making the total assets of the competual Bldg. & L. Asso. 90 Md. 85, 46 pany approximately $1,500,000. L.R.A. 388, 78 Am. St. Rep. 431, 45 Against this sum have been filed Atl. 23; Cahill v. Original Big Gun with the receivers, claims aggregatBeneficial & Pleasure Asso. 94 Md. ing about $7,000,000. 353, 89 Am. St. Rep. 434, 50 Atl. 1044.

Upon their appointment, the rePattison, J., delivered the opinion ceivers proceeded with their task of of the court:

winding up the affairs of the comThe Employers' Mutual Insurance pany, and to this end an auditor was & Service Company of Maryland, appointed by the court, authorized which was incorporated under the to take testimony in connection with laws of this state for the purpose the proof of various claims of its of writing a class of insurance gen- policyholders. Accountants were al

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