First National Bank v. Buckhannon Bank

McSherry, J., delivered the opinion of the Court. The case of Anderson v. Gill, Extr., 79 Md., is clearly distinguishable from the one now before us. In Anderson v. Gill, Extr., we held that when the payee of a check drawn on a banker having funds of the drawer available to cash it, presents it in due time through his collecting agent, and the latter, instead of receiving money for it, surrenders it and takes in lieu of the money the drawee’s own check upon another bank having funds with which to pay the substituted check, and then fails to use proper diligence in presenting the substituted check for payment, which, when it is presented, is not paid, because of the supervening insolvency and suspension of the drawer of the substituted check, the loss must fall, as between the drawer and payee of the original check, upon the latter and not upon the former. It is not necessary to repeat the reasons, or again refer to the ⁴⁷⁸ adjudged cases upon which the conclusion reached in that case was founded.

It is" obvious that if the payee’s own negligence in not presenting the substituted check in a reasonable time before the suspension of its drawer has been the direct cause of its non-payment, or, stating it differently, if the substituted check was drawn upon a bank having funds of its drawer, and if it would have been paid, had due and proper diligence been used in presenting it, and after the expiration of the time beyond which its presentment would not be within the limits of due diligence, the drawer of it suspends and thesubstituted check is in consequence not paid; this negligence of the payee of the ¿original check in not presenting the substituted check at a time when it would have been paid, cannot be visited upon the drawer of the original check and he will be discharged. But this doctrine cannot apply where the facts fail to show that the drawer of the original check has been injured by the delay or the want of due diligence of the payee or his collecting agent. If the drawer of the original check has not been injured by the conduct of the payee, he is in no worse position in consequence of that* conduct, than if due diligence had been used by the payee without securing payment; and if the facts.show that the exercise of due diligence in making presentment of the substituted check would have been useless, because of the insolvency of the drawer thereof, and because the drawer thereof was without» funds to meet it, then the failure to use such diligence could not prejudice the rights of the drawer of the original check; provided the drawee thereof was insolvent when it was drawn, and was unable to cash it when presented. Assuming always that the original check would have been paid in cash, had cash been demanded and insisted on when it was presented; and assuming also that the exercise of due diligence would • have secured the payment of the substituted check, then the failure to exert that diligence, whereby loss occurs, would result in an injury to the drawer of, the Original check and would discharge him.

But injury can ⁴⁷⁹ not be predicated of the want of due diligence unless, but for the want of such diligence, the money would have been paid. Until it is shown that the use of due diligence by the payee or his agent would have resulted in the payment of the substituted check, the first step has not been taken' towards establishing injurious negligence on his part. Now, in the case at bar, the Buckhannon Bank óf West Virginia, being indebted to the First National Bank of Grafton, West Virginia, and having a deposit with J. J. Nicholson & Sons, of Baltimore, an amount greater than this debt, gave to the Grafton Bank a check on Nicholson & Sons for the amount of the indebtedness due to the Grafton Bank. This check was dated January the eleventh, 1892, and was on the same day mailed to the Grafton Bank, and was received by it on the succeeding day.

On that day, the twelfth, the Grafton Bank endorsed the check for collection for its account and forwarded it by mail to its correspondent, the Manufacturers’ National Bank of Philadelphia. On the thirteenth, the Manufacturers’ Bank received it and at once sent it by mail to its correspondent, the National Farmers’ and Planters’ Bank of Baltimore, for collection. On the next day, the fourteenth, the last named bank received it, and at one o’clock presented it, together with other checks and drafts, at the counter of J. J. Nicholson & Sons for payment. Payment was not made in cash, but instead thereof upon the surrender of these checks and drafts, Nicholson & Sons drew their own check on the Western National Bank of Baltimore for the total amount of this and the other checks and drafts, and delivered it to the messenger of the National Farmers’ and Planters’ Bank.

In thirty minutes afterwards Nicholson & Sons, having suspended, and being hopelessly insolvent, closed their doors. When the check of Nicholson & Sons to the National Farmers’ and Planters’ Bank was shortly afterwards, but on the same afternoon, and during banking hours, presented to the Western National Bank, payment was refused. Demand was immediately made for the return by the Nicholsons of the surrendered ⁴⁸⁰ checks, but admittance to their banking house was not obtained until next day, when the check drawn by the Buckhannon Bank was protested and then recovered by an action of replevin. It is admitted by the agreed statement of facts that had the check held by the Grafton Bank been presented to Nicholson & Sons at any time on the thirteenth or up to noon on the fourteenth, it would have been paid by them ; and it is further admitted that Nicholson & Sons had no-funds to their credit with the Western National Bank, but, on the contrary, were largely indebted to that- bank on account of overdrafts when they drew their check in favor ot' the National Farmers’ and Planters’ Bank at one o’clock on the fourteenth of ‘January.

It is also distinctly admitted that this check “ was in fact of no value.” We are now asked, in the light of these facts, to