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69
X-6910
FEDERAL RESERVE
B SK
OF NEW
YORK
A p r i l 1 , 1 9 3 1 .
Walter Wyatt,
E s q . ,
General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Walter;
I have your le t te r o f March 31 and am very much obliged
t o y o u b o th f o r your comments o n t h e ques t ion I ra i sed concern-
i n g t h e
h a n d l in g
of
items covered
b y
d ishonored remi t tance d ra f t s
o f
close d na t i on al banks
a n d f o r
d i s c u s s i n g
t h e
mat te r wi th
t h e
C o m p t r o l l e r ' s o f f i c e a n d ask ing f o r a n express ion o f views from
counsel o f other Federal Reserve Banks.
I
s h a l l
o f
course
b e
very much in teres ted
t o
hear from
y o u again whenever yo u have any th ing fu r the r t o repor t regard ing
t h e p o s i t i o n o f t h e o f f i c e o f t h e Comptroller o f t h e Currency o n
t h i s q u e s t io n .
I
have given considerable thought
t o i t
s in c e
I
te lephoned
you on
March
30 , an d I
b e l i e v e th a t
t h e
p r o v i s i o n s
o f
t h e
Bank Collection Code, giving
t h e
c o l l e c t in g b an k
t h e
opt ion
t o t r e a t a s dishonored a n y items covered b y a d ishonored remi t -
t a nc e d r a f t , c l e a r l y do app ly t o items drawn on na t iona l banks a s
well
a s t o
items drawn
on
s ta te banks .
I t
seems
to me and to th e
o t h e r o f f i c e r s i n t h e bank with whom I have discussed t h e matter
tha t th i s p rocedure n o t on ly i s t h e mo s t p r a c t i c a b le way by which
a
Federal Reserve Bank
may
p r o t e c t i t s e l f
i n
t h e s e v e r y d i f f i c u l t
s i t u a t i o n s ,
b u t
a lso tha t
i t
wi l l opera t e ju s t l y upon
t h e
r i g h t s
o f a l l p a r t i e s . We hope very much, o f course , tha t t h e Comptrol-
l e r ' s o f f i c e w i l l t ak e t h e same view o f t h e mat te r .
Thanking
y o u
aga in
f o r
your help,
I am
Y o u r s f a i t h f u l l y ,
(Signed) Walter S . Logan
Walter S . Logan,
General Counsel.
C O P Y
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6 9 3
C O P Y X-6910-a
U H L M D UELAMD
A T T O B M f S
M >
COUNSELORS
800 Securi ty Bui lding
Minneapolis
Apr i l 8 , 1931.
Walter Wyatt, General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear
M r.
Wyatt : -
We
have read your l e t t e r
o f
Apri l
1 , 1931
with
e n -
c los ures , wi th re fe renc e t o Sect ion 11 o f th e Bank Collection
Code, with interest .
The e f f e c t o f Sect ion 1 1 appears t o b e t h a t a check
forwarded
b y
t o t h e
drawee bank
i s n o t
f i n a l l y p a i d u n t i l
t h e
r emi t t ance d ra f t
i s
pa id . This st at ut or y ru le would apply
both t o t h e drawer o f t h e check a nd t h e bank on which i t was
drawn. Hence re ga rd le ss o f whether o r n o t t h e check was
stamped paid
a n d
charged against
t h e
account
of t h e
drawer,
t h e drawee bank would remain liable t o i t s depos it o r un t i l t h e
t ime
o f
final payment
o f t h e
d r a f t .
Where t h e drawee bank suspends payment between t h e
time when
t h e
check
w as
stamped pai d
a n d
charged
t o t h e a c -
count
o f t h e
drawer
a n d t h e
time when
t h e
remi t tance dra f t
i s
dishonored,
a n d t h e
co l lec t in g bank e le c t s
t o
t r e a t
t h e
check
a s dishonored, t h e effect would appear t o b e tha t t h e insolvent
b a n k ' s l i a b i l i t y
t o i t s
depos i to r
i s
thereby made absolute,
a n d i t
ceases
to be
l i a b l e
o n t h e
dishonored remit tance draf t .
Supposing t h e i n s o l v e n t i n s t i t u t i o n to be a na t iona l
bank,
we
agree with
y o u
that this would
n o t
involve
a n y c o n -
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Walter Wyatt
- #2
X-6910-
Ap r . 8 , 1 9 3 1
f l i c t w i t h t h e p r o v i s i o n s o f t h e National Bank A ct . Th e
l i a b i l i t i e s
o f t h e
in so lv e n t
a r e n o t
inc reased ,
n o r can we se e
tha t the re
i s a n y
p re fe r e n c e e f f e c t e d .
We may
suppose that
t h e
d e p o s i to r
w as
indebted
t o
t h e
insolvent hank.
B u t i t i s
doubtful whether
h e
would have
a r i g h t o f s e t - o f f , a s such right would arise subsequent t o
t h e
suspension.
S ee
Richard Insurance
C o . , e t a l . , v s .
L i t t e e r ,
1 Fed . (2d) 311 ( C. C. A. 8 ) .
Very truly yours,
UELARD
&
UELAbTD,
By Sigu rd Ueland
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695
C O P Y X-6910-b
F E DE R A L H E S f i R V t i S A N K
O F S T .
L O U I S
M r.
Walter
S .
Logan, Ap ri l
8 , 1931 .
Counsel
a n d
Deputy Governor,
Federal Reserve Bank of Hew York,
w
York Ci ty .
Dear M r. Logan:
Upon
my
r e t u r n
t o t h e
o f f i c e a f t e r r a t h e r
an
extended absence
i n Mis s i s s ip p i a n d Arkansas on account o f l i t i g a t io n g ro win g o u t o f nun>-
erous bank fa i lu res , I found a l e t t e r f ro m M r, Wyatt enclosing copy o f
y o u r l e t t e r of March 2 6 , 1 9 3 1 t o h i m , a n d , h i s reply, under date o f
March
3 1 s t ,
toge ther with
M r.
Wyatt
1
s reques t th at
I
wr i t e
yo u
d i r e c t
a n y
comments
o r
sugges t ions
I may
care
t o
make
o n t h e
sub jec t the re in
r e f e r r e d
t o .
p r i o r
t o t h e
adoption
o f t h e
Uniform Collection Code, MISSOURI
an d ARKANSAS, under decisions o f t h e highest Courts o f t h e r e sp e c t iv e
S t a t e s - and fo l lo win g t h e PETERS case - allowed a p re fe r e n c e on t r a n s i t
i tems handled under circumstan ces s imi lar t o those ou t l ined i n t h e Code. I n
INDIANA
a n d
KENTUCKY l i q u i d a t i n g age nt s
of
State banks followed
t h e
Missouri
an d
Arkansas de cis io ns. These St at es adopted
t h e
Uniform
C o l -
lection Codo in 192 9 .
MISSOURI adopted t h e Uniform Collection Code i n 1 92 7 ; b u t , f o r
some reason l e f t
o u t S e c . 1 1
(your section 350-j
Meg.
In s t r . Ac t . ) ;
consequent ly , I have had no occasion t o examine t hi s sec tio n in *i t s
r e l a t i o n
t o t h e
l i q u i d a t i o n
o f
National Banks.
Rece ivers o f National banks refused t o adopt t h e dec is ions
laid down b y t h e State Courts covering t h e r i g h t t o p r e f e r e n c e , a n d , a f t e r
t h e Code h a d been adopted, I made a rather extended study of i t t o s e e
i f , perchance, t h e Code might b e claimed to be c o n t r o l l i n g i n t h e l i q u i -
da t ion o f National banks, a n d , notwithstanding what t h e Court said i n
t h e
case
o f
-ELMIRA SAVINGS BANK
v s .
DAVIS,
161 U. S. 375, I
became
c o n -
vinced that
- i n s o f a r a s t h e
preference r ights g iven under
t h e
Code were
d i f f e r e n t f ro m
t h e
pre fe rence r igh ts g iven
b y t h e
Federal Courts
i n c o n -
s t r u i n g
t h e
Federa l S ta tu tes
-
th a t
t h e
re levan t p rov is ions
o f t h e
Code
were n o t b ind ing on nat ional banks.
Sect ion 1 1 , however, approaches t h e subject from a n e n t i r e l y
d i f f e r e n t a n g le . The primary purpose i s t o deal with t h e r e sp e c t iv e r i g h t s ,
d u t i e s ,
a n d ,
l i a b i l i t i e s
o f t h e
p a r t i e s
t o t h e
paper ,
v i z . , t h e
holders ,
endorsers , drawers ,
a n d ,
drawee,
a l l o f
whom
a r e
sub jec t
to and
con t ro l led
b y t h e
Negotiable Instrument
A c t , a n d
fol lowed a l ike both
b y t h e
S t a t e
and
Federal courts ; consequent ly , I cannot se e how Se c . 11 c o n f l i c t s w i t h t h e
National Bank Ac t in th i s r e sp e c t .
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696
X-6910-t
M r. Logan.
On
account
o f
some urg en t ma tt er s cl aim ing
my
a t t en t i o n s i nce
my
r e t u r n ,
I
have
h a d t o
make
a
r a t he r hu r r i ed i nves t i ga t i on
o f t h e
questions
involved. I w i l l , a s soon a s I c a n , g e t some o f t h e more urgent matters
o u t o f t h e w ay , go
in to
t h e
ques t i on f u r t he r ,
and , i f a
f u r t h e r
inves t iga t ion produces anyth ing o f a s s i s t a n c e , I w i l l w r i t e t o you .
With kindes t personal regards ,
Very truly yours,
CC to Mr. Wyatt.
J a s . 0 . Mo donkey,
General Counsel.
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sqt ni SiimpiS dsmpsey
X - 6 9 1 0 - c
COPY
Apri l
9 , 1931 .
M r. Walter S . Logan,
Counsel
and
Deputy Governor,
Federal Reserve Bank
o f
ITew York,
YOHK.
Dear
S i r ; -
I am in r e c e i p t o f a l e t t e r f rom M r. Walter Wyatt enclosing
copies
o f
your l e t t e r
to h im of
March 26th
a n d h i s
rep ly there to
o f
March
3 1 s t ,
with res pec t
t o t h e
app l i ca t i on
o f
Section
1 1 o f t h e
Uniform
Bank Collection Code to na ti on al banks. He h a s reques ted me to write
you my
views
on
th i s ques t ion , wi th c i ta t ions
to any
p e r t i n e n t a u t h o r i -
t i e s
o f
which
I may
know.
The f i r s t quest ion which pres en ts i t s e l f i s whether t h e Uniform
Bank Collection Code
i s
app l i cab l e
t o
national Banks.
The
d e f i n i t i o n
o f
banks
i n
Sect ion
1 o f t h e
Code appears
t o b e
broad enough
t o
include
wi th in i t s terms na ti on al banks , a n d t o t h e ex ten t tha t p rov is ions o f
t h e
Code
a r e n o t i n
con f l i c t w i th
a n y
p rov i s ions
o f t h e
National Banking
A ct r e l a t i n g t o nat ional banks, I see no reason why they should n o t b e
he ld appl icab le
t o
nat ional banks.
Of
course , insofar
a s
Congress
h a s
l e g i s l a t e d
i t s
j u r i s d i c t i o n
i s
exc lus ive ,
b u t I do no t
find that Congress
h a s enacted a n y pro vis ion with resp ect t o national banks which might b e
sa id to be in con f l i c t w i th t h i s pa r t i cu l a r p rov i s ion o f t h e Uniform
Collection Code.
Furthermore I do n o t s e e how the p o s i t i o n o f a national bank
would
b e
a l t e r e d
i n
applying
t h e
uniform co ll ec ti on Code
i n
th i s respec t ,
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S Q U I S H , S A t o B S S D EM P SE Y
J C - 6 9 1 0 - c
698
COPY
—2—
a s depos i t o r s i n a nat ional bank a r e n o t pre fe r r ed over o ther c re d i to rs ,
a n d t h e t r a n s f e r o f t h e claim a s aga ins t t h e bank from t h e holder of a
check drawn upon i t t o t h e maker o f t h e check who i s a depos i to r i n t h e
bank, would n o t seem to in any wise a l te r t h e l i a b i l i t y o f t h e bank, o r
change t h e c l a s s i f i c a t i o n of t h e cla im against t h e bank.
The only possible exception which occurs to me i s t h e case i n
which t h e maker o r depositor might b e indebted t o t h e bank in an amount
greater than
t h e
amount
o f h i s
account
i f t h e
check were charged
t o h i s
account .
I n
such
a n
in s t ance ,
i f t h e
owner
o f t h e
check elected
t o
t r e a t i t a s dishonored o n t h e c lo s ing o f t h e bank, and recovered against
t h e maker o f t h e check, t h e maker would, through t h e r i g h t o f se t -o f f
of h i s own
indebtedness
t o t h e
bank,
b e
enabled
to
secure
a
prefe rence
t o t h e
ex ten t
o f h i s
indebtedness
t o t h e
bank.
See
Ardleigh
v .
Clo th ie r ,
51 Fed . 106 , Scot t v . Armstrong, 146 U. S. 49 9. However, a s p re f e r ences
r e su l t i ng f rom t h e r i g h t of set-off appear t o have been sustained a s n o t
con t r a ry t o t h e p rov i s ions of Section 5236, i t seems lo gi ca l th at t h e
preference which might
b e
obta ined
i n a
case such
a s
that instanced through
t h e a s s e r t i o n o f t h e r i g h t of set-off would n o t b e con t r a ry t o Section
5236 o f t h e National Banking Ac t .
Very truly yours,
c c - Mr .
Wyatt.
(Signed) Sterling Newell
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p t ' X-6910-d
FSSSSBUl SBlMYS BANK 0 9 g
OF HEW YORK
Apr i l 9 , 1931 .
Walter Wyatt,
E s q . ,
General Counsel,
Federal Reserve Board,
Washington,
D. C.
Dear Walter:
I am
enc l os i ng
a
copy
of a
l e t t e r wh i ch
I am
sending
o u t
tonig ht g iv in g no t i c e tha t
we
e l ec t , pu r s uan t
t o t h e
p r o v i -
s i ons o f Sect ion 350- j o f t h e Negot iable Ins t ruments Law of Hew
York, t o t r e a t a cer t a in i t em a s dishonored b y nonpayment which
w as covered b y a n unpaid r emi t t ance draf t of The F i r s t Nat ional
Bank, Macedon, New York, which, w as c losed yes terday . I t r i e d t o
r each y o u o n t h e te lephone l a t e th i s a f t e rnoon t o give y o u t h i s
l a t e s t i n f o r m a t i o n i n r ega r d t o t h i s ma t t e r .
I am sending o n e o f t h e o r i g i n a l s o f t h e l e t t e r t o t h e
Comptrol ler of t h e Currency, and I assume that t h e Receiver o r E x -
aminer i n Charge wi l l re qu es t t h e i n s t r u c t i o n s of t h e Compt ro l l e r ' s
o f f i c e a s t o whether o r n o t t o comply with o u r reques t tha t t h e item
b e p r o t e s t e d a n d r e t u r n e d . I am conf i de n t t ha t o u r i n t e r p r e t a t i o n
o f t h e l a w i s c o r r e c t a n d t h a t t h e i t em should , the re fo re , b e r e -
t u r ned ,
and I
hope that
t h e
Compt ro l l e r ' s o f f i c e wi l l t ake th i s
view also.
Your s f a i t h f u l l y ,
(Signed) Walter
S .
Logan
Walter S . Logan,
General Counsel.
E n d .
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CO P Y
FEDER L RESERVE B NK
OF NEW
YORK
X—6910—8
700
Apr i l
9 , 1 9 3 1 .
To
T he
First National Bank,
Macedon, ITew York. .
Comptroller o f t h e Currency,
Washington, D. C.
Receiver
o r
Examiner
i n
Charge,
T he
First National Bank,
Macedon,
New
York.
Gentlemen:
T he d r a f t of The First National Bank, Macedon, New York,
dated Apr i l 7 , 1 9 3 1 , drawn on Central Hanover Bank a n d Trust
Company, New York, N. Y . , f o r $7,541.06, received b y u s i n
r emi t t ance f o r t h e items drawn o*h sa id T he F i r s t Natio nal Bank,
Macedon, New York, which we p r es en t ed to i t by mai l a n d which were
l i s t e d i n o u r cash l e t t e r s da ted Apr i l 6 , 1 9 3 1 , w a s n o t p a i d i n
d u e course b u t w as dishonored upon presentat ion f o r payment due to
t h e c l o s i n g o f s a i d T he F i r s t Na ti on al Bank, Macedon, ITew York. I n -
cluded among t h e said i tems i n r emi t t ance f o r which we rec eiv ed said
d r a f t ,
was an
i tem dated April
1 , 1 9 3 1 f o r
$4,481.25 drawn
b y
Edith
C.
Wall ace , T re as u re r, Macedon, High Sch ool,
on The
F i r s t Nat ional
Bank, Macedon,
New
York,
t o t h e
order
o f
Comptroller
o f
S t a t e
of New
York
a n d
endorsed
b y t h e
l a t t e r
and by The New
York S ta te Nati ona l
Bank, Albany,
New
York, from which bank
we had
r ece i ved
t h e
i tem
f o r
col l ec t ion . Upon
t h e
i n s t r u c t i o n s
of The New
York State National
Bank, Albany,
New
York,
we
hereby e le c t , pur suant
t o t h e
p r ov i s i ons
o f
Sect ion 350- j
o f t h e
Negot iable Ins t ruments
Law o f New
York,
t o
t r ea t sa id i t em
of
$4,481.25
a s
dishonored
b y
nonpayment;
an d we
hereby reques t
T he
First National Bank, Macedon,
New
York,
a n d t h e
Comptrol ler o f t h e Currency a n d t h e Receiver o r Examiner i n charge
o f t h e
a s s e t s
o f
said bank
t o
cause said i tem
of
$4,481.25
to be
du l y p r o t e s t ed a n d r e t u r n e d t o u s immediately.
Kindly acknowledge receipt of t h i s l e t t e r .
Very truly yours,
FEDERAL RESERVE BANK
OF NEW
YORK,
By. :
Deputy Governor
a n d
General Counsel.
WSL:
GSR(MAR)
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£01
0 P Y
X-6910-f
MAYER, MEYER, AUSTRIAN & PLAIT
CONTINENTAL ILLINOIS BANK BUILDING
CHICAGO
Apr i l
1 0 , 1 9 3 1 .
M r.
Walter Wyatt
General Counsel Federal Reserve Board
Washington,
D. C.
Dear M r. Wyatt:
I am in
r e c e i p t
of
your l e t t e r
o f
Apr i l
1 s t ,
1 9 3 1 ,
r e l a t i v e
t o t h e
a p p l i c a t i o n
o f
Sect ion
1 1 o f t h e
Uniform
Bank Collection Code
t o
checks drawn
on
nat ional banks .
While
i t i s m y
opin ion tha t
t h e
Bank Collect ion
Code, which h a s been adopted i n t o t o b y t h e s t a t e s o f Indiana
a n d Wisconsin i n t h i s D i s t r i c t , i n s o f a r a s i t a t t empts t o give
a
p r e f e r e n c e
t o t h e
owners
o f
checks
i n
c e r t a i n i n s t a n c e s ,
i s
n o t
a p p l i c a b l e
t o
nat ional banks ,
I am
i n c l i n e d
t o
agree with
both
you and Mr .
Logan
i n
your conclusion that this code
i s
app l i cab l e i n s o f a r
a s i t
g i ves
t h e
col l ec t ing agent bank
t h e
opt ion
t o
t r e a t
a n
i tem
a s
dishonored where
t h e
drawee ' s r emi t t ing
d r a f t i s n o t p a i d i n d u e cour se. There appe ars t o b e no t h i ng i n
t h e
l a t t e r p r o v i s i o n
o f t h e
Bank Collection Code which
i s i n
c o n f l i c t w i t h
t h e
f e d e r a l
l a w a n d
t h e r e f o r e
I
b e l i e v e
i t t o b e
e q u a l l y c o n t r o l l i n g
i n t h e
case
o f
nat ional banks
a s
wel l
a s
s t a t e banks . Inso far
a s I
have been able
t o
as c e r t a i n , t he r e
have been
no
decis ions pass ing upon this ques t ion.
I am
very much int er es te d
i n
th i s ques t ion
and
would ap pr ec ia te your advis ing
me in th e
event ei ther
you o r
M r. Logan should change your opinions o n t h e suns.
Yours very truly,
(Si gned ) Carl Meyer
D
CD
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C O P Y
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FEfoMAL tiSSl&VB
BAM OF
RICHMOND
Ap r i l 1 4 , 1 9 3 1
M r.
Walter
S .
Logan, General Counsel,
Federal Reserve Bank of New York,
New
York,
N. Y.
Dear Mr. Logan;
I
rece ived f rom
M r.
Wyatt
a
copy
o f
y o u r l e t t e r
o f
March
3 1 s t b u t
have
been prevented from replying because o f t h e p r e s s u r e o f b u s i n e s s . The Uniform
Check Collection Code i s i n f o r c e in two s t a t e s i n th is d i s t r i c t , Sou th Caro l ina
a n d Maryland, b u t w e have h a d s in c e t h e adop t ion o f t h e Code no i n s t a n c e of a
f a i l u r e o f a na t iona l bank i n those s ta tes , which w as indeb ted t o u s f o r a n unpaid
cash l e t t e r . Sometime ago I endeavored t o f i nd au th or i t i es which might guide me
t o a
d e c i s io n
a s t o
whether
o r n o t
Sect ion
1 1 o f t h e
Code would apply
t o
n a t io n a l
banks.
I
found
no
au t ho r i t i es , however , which appeared
to me to
s e t t l e
t h e
quest ion.
Several capable lawyers have suggested that
t h e
entire Code
w as
a p p l i c a -
b l e t o na t iona l banks , say ing tha t t h e prov is ions which c rea ted a t r u s t i n favor
o f t h e forwarding bank amounted t o a r e g u l a t i o n o f t h e t i t l e t o p r o p e r t y , and
t h a t
a
s t a t e s t a tu t e u p o n th i s p o in t
w as
binding upon national banks upon
t h e
same
p r i n c i p l e t h a t a s t a t u t e r e g u l a t i n g t h e assignment o r n e g o t i a t i o n o f warehouse
r e c e i p t s , b i l l s - o f - l a d ^ g ^ o r other such instruments would b e binding upon a
na t ion a l bank . Th is /has ,
I
think, something
t o
commend
i t , b u t I am
r a t h e r
i n -
c l i n e d
t o
th in k th a t
t h e
Supreme Court
o f t h e
United States would riot hold that
a s t a t e s t a tu t e mig ht i n e f f e c t g i ve p r i o r i t y t o a c la im aga ins t a nat ional bank
mere ly b y d e c l a r in g th a t t h e bank should b e deemed a t r u s t e e i n a s i t u a t i o n i n
which
t h e
f e d e ra l c o u r t s
h a d
he ld tha t
t h e
r e a l r e l a t i o n s h i p
w as
t h a t
of a
debtor .
I t th er ef or e seems to me t h a t t h e Code would b e i n a p p l i c a b l e t o nat ional banks
under t h e r u l e e s t a b l i s h e d i n Davis v . ELmira Savings Bank, 16 1 U. S. 2 75 , in so
f a r a s t h e
Code un de rt ak es
t o
e s t a b l i s h
a
p re fe r e n c e ,
I can s ee no good reason, however, why S e c t i c a 1 1 should n o t apply t o
n a t io n a l b a n k s . A s y o u s a y , i t would n o t dis turb equal i ty among a n y cla imants
because under
t h e
p r e s e n t r u l e
t h e
ho lder
o f a
check which
h a s
boon cancel led
i s
a g e n e ra l c r e d i to r , a n d under Sect ion 1 1 t h e drawer would, a s y o u s a y , b e t h e
g e n e ra l c r e d i to r .
I t
seems
to me ,
th e re fo re , t h a t S o c t io n
1 1 i s
merely
a
d e f i n i -
t i o n
o f
wh a t c o n s t i t u t e s
t h e
d i s c h a rg e
o f a
nego t iab le ins t rument
and
r e g u la t e s
t h e r i g h t s a n d l i a b i l i t i e s o f t h e drawer a n d h o l de r wi th ou t s u b s t a n t i a l l y a f f e c t -
i n g t h e i n t e r e s t o f t h e drawee bank. I f , f o r example, some s t a t e should a l t e r
t h e
u su a l ru l e
o f t h e l a w o f
n e g o t i a b l e i n s t ru me n t s
an d
enact that
a
c e r t i f i c a t i o n
o f a
check, even
i f
made without
t h e
knowledge
a n d
consent
o f t h e
drawer, should
n e v e r t h e l e s s n o t r e l e a s e t h e drawer, I can s ee no reason why t h i s enact ment, which
m e r e l y a f f e c t s t h e r i g h t s o f t h e ho lder o f t h e check an d t h e drawer, should n o t b e
a p p l i c a b l e
t o
checks
on
nat ional banks
a s
well
as to
othe r ins t rum ents . Sect ion
1 1 does l i t t l e more than enact t h e same ru l e l i mi te d t o c a se s i n which t h e
drawee fa i l s .
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FEDERAL RESERVE BA H OF RICHMOND
r.
Walter
S .
Logan, General Counsel,
of New
York,
York, K . Y . - 2 - Aor i l 14 , 1931
T h e
Supreme Court
o f t h e
Uni to4 Sta tes
I n
Farmers
a n d
Merchants Sank
v .
de ra l Reserve: Bank, 2 62 U . S . 64 9 , he l d i n e f f e c t t h a t a n y per son rece iv ing a
w as
obl iged
t o
t ake no t i ce
o f t h e l a w i n
f o r c e
a t t h e
p l a c e
o f
payment
t h e
d i s cha r ge
o r
payment
o f t h e
ins t rument ,
a n d i t
seems
to me
t ha t
t h e
o f t h e
cour t
i n
t h i s cas e
i s
s u f f i c i e n t l y b ro ad
t o
s u s t a i n
t h e
p r opos i -
a n y person drawing a check on a national bank would b e ob l i ged t o take
t h e l a w o f t h e
state where that bank
w as
l o c a t e d
t h e
cance l l a t i on
check
b y t h e
bank would
n o t
c o n s t i t u t e
a n
abs o l u t e
b u t
on l y
a
condi t ional
This ques t ion
i s o n e o f
g r e a t i n t e r e s t
t o
Federal reserve banks ,
a n d , a s
s e e , i t i s o n e
which
i s
l i k e l y
t o b e o f
prac t i ca l impor tance
t o me a t a ny
time.
y o u
have r ece i ved l e t t e r s
on
this subject f rom
t h e
Counsel
f o r
other Federal
r e -
I would grea t ly apprec ia te i t i f y o u would send me c o s i e s o f t h e l e t -
a s I should l ike t o know their views. I f y o u have a n y correspondence with
e
o f f i c e
o f t h e
Comptroller
o f t h e
Currency,
o f
course,
i t
would
b e o f
great
to me to
know
t h e
views
o f
t ha t o f f i ce . L i ke
y o u , I
once discussed
t h e
r info rmal ly wi th M r. Barse and Mr . Await, b u t they , o f course, were n o t w i l l -
i n d i c a t e a n opinion.
T he
ques t ion
i s
s ca r ce l y
o f
suf f i c i ent impor tance
t o
j u s t i f y
a
conference
Counsel
o f
Federal reserve banks ,
b u t i t
does seem
to me
hig hly des i rab le tha t
b e reached wi th t h e Comptroller of t h e Currency a s soon
p o s s i b l e .
F o r
example,
i f t h e
Comptroller
o f t h e
Currency would agree
t o
recog-
o u r
r i g h t
t o
demand
t h e
r e t u r n
o f t h e
checks ,
t h e
Federal reserve banks might
t h e
genera l pol i cy
o f
e l e c t i n g
t o
demand
t h e
r e t u r n
o f t h e
checks, making
no
t o e s t a b l i s h a n y claim which they might have t o a p r e f e r ence .
I am
t ak i ng
t h e
l i b e r t y
o f
sugges t ing th a t
y o u
might continue your
t h e
Comptroller
a n d i f t h e
Comptroller
i s
w i l l i n g
t o
make
any
y o u
might communicate with
a l l t h e
Federal reserve banks
a n d
e might agree b y correspondence upon some defini te plan o f ac t ion .
Very truly yours,
M. 6. Wallace,
Counsel.
W R
to - Mr. Walter Wyatt, General Counsel,
Federal Reserve Board, Washington, D. C.
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O P Y
T Si t, -8 G R A M
FEDERAL RESERVE SYSTEM
(LEASED WISE SERVICE)
RECEIVED
AT
WASHIHGTON,
D. C.
92 gb
S an Franci sco Apl 21 922 am
Wyatt
Washington.
Reply t o you r l e t t e r a p r i l f i r s t r e f e r r i n g t o logans o f march
s i xt h reg ar din g sec t io n eleven bank co l l ec t i on code delayed
b y absence on b u s i n e s s t r i p t o hawaii s top I have today advised
Logan b y wire that in my opin ion th i s sec t ion i s a p p l i c a b l e t o
n a t i o n a l ba nks comma does
n o t
co nf l i c t w i t h p r ov i s i o ns
o f
na t i ona l
bank
a c t a n d
comes within
t h e
ca tegory
o f
s t a t e l e g i s l a t i o n
r e f e r r e d
t o i n
seven corpus juris page seven sixty note f ive
e i gh t y f i ve
a n d
cases c i t ed
Agnew
1232p
7 0 4
X-6910-h
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X-6910-i
C
0
P Aor i l 2 4 , 1 9 3 1 .
Y
M r.
Walter
S .
Logan, Counsel
a n d
Deputy Governor,
Federal Reserve Bank
of Hew
York,
New York City.
Dear
M r.
Logan:-
We
have
n o t
repl i ed sooner
to Mr .
W ya t t ' a l e t t e r
o f Apr i l 1 s t enclos ing copy o f correspondence passing between
y o u wi t h r e f e r en ce t o t h e p r ov i s i ons o f s ec t i on 1 1 o f t h e bank
co l l ec t i on code ,
d u e t o t h e
f ac t t ha t
o u r M r .
Stroud
h a s
been
o u t
o f t h e
c i t y qu i t e
a
good de al si nc e
t h e
r e c e i p t
o f
t h i s l e t t e r .
We
have
n o t
made
a n
i n v e s t i g a t i o n
o f t h e
decis ions wi th
r e f e r e n c e
t o t h e
m a t t e r ,
b u t i t i s o u r
o f f -h and opin ion th a t
t h e
s tatute would apply t o nat ional banks a s wel l a s s ta te banks .
T he
p r i n c i p l e s
o f
agency applying
t o t h e
c o l l e c t i o n
o f
checks
i n t h e
absence
of
s t a t u t e
a r e
merely common
la w
p r i n c i p l e s .
We see no
reason
why
these pr in c i p l es cannot
b e
r e g u l a t e d
b y
s t a t u t e .
Y ou a r e , o f
course , f ami l i a r wi th
t h e
s o - c a l l e d
New
York
a n d
Massachuset ts ru le s applyi ng
t o t h e
c o l l e c t i o n
o f
checks ,
a n d
w e a r e o f t h e opin ion tha t t h e s t a t u t o r y p r o v i s i o n s o f a n y p a r -
t i c u l a r s t a t e may a f f e c t th e se common l a w r u l e s .
I t
seems
t o u s
t h a t
t h e
s t a t u t e
i n
ques t ion
i s
nothing
more than
a
modern recogni t ion
of t h e
f a c t t h a t
i t i s n o t
p r a c t i c a l
f o r a n
agent co l l ec t ing checks
t o
always col lect
i n
cash.
As
p o i n t e d ou t to you in Mr . W y a t t ' s l e t t e r , t h e s t a t u s o f t h e i n -
solvent na t ional bank i n s o f a r a s i t s a s s e t s o r l i a b i l i t i e s a r e
concerned a r e i n n o wi s e a f f ec t ed b y t h i s s t a t u t e .
I t
seems
t o u s
th a t , t h ere be ing
a
s t a t e s t a t u t e c o v e r -
i n g
t h i s s i t u a t i o n ,
t h e
federal courts would, under well defined
pr i n c i p l e s , f o l l ow s uch s t a t u t e s , a n d t h e dec i s i ons o f t h e s t a t e
cour t s cons t ru ing t h e same i n a n y l i t i g a t i o n which might come b e -
f o r e
t h e
federal cour ts , even though
a
nat ional bank were
a
pa r t y
t he r e t o .
W e a r e
very much interes ted
i n t h e
ques t ion ,
a n d a s
soon
as we have a n oppor t un i t y we will make a fur ther s tudy-of t h e mat ter ,
a n d
w r i t e
y o u
again.
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7 0 6
X-6910-i
- 2
I n t h e meantime we s ha l l appr ec i a t e your l e t t i n g u s
know about
a n y
fur ther conclus ions which
you may
reach.
Yours very truly,
(Signed) Locke Locke Strand
&
Randolph
BBS: g
CO t o Mr. Walter Wyatt,
Federal Reserve Board,
Washington,
D. C.
Recommended