frsbog_mim_v25_0043.pdf

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STATE GF MINNESOTA

COUNTY 0 F DUTEPIN

Transcontinental Oil Company,

Plaintiff,

'"'VS-

Federal Reserve lank of Minneapolis,

Defendant.

X-4644 4.~~

DISTRICT COURT

:roURTH J."JDICW DIS'l!RICT

FINDINGS OF FACT AND OONCWSIONS OF LAW.

This cause having been tried by the Court without a. jury on the

2nd, 3rd, and 4th days of Feb~ary, 1926, Messrs. Rockwood & MitChell ap-

peari:ng for the plaintiff, and Messrs. Ueland & Ueland for the defendant,

and. the Court having heard and considered the evidence adduced on the part

of plaintiff and on the part of defendant, f:i!nds as 'FACTS:

1. That on Augu.tt2, 1920 the First National Bank of Eureka. issued to

the plaintiff its cashier's cheCk {Exhibit A to the compl.int) numbered

14896 in the sum of $1799.35, and transmitted said Che.ck on or about that day

by mail to the office of the plaintiff in Chicago, Illinois where the cheCk

was received by plaintiff on or about August 5, 1920.

2. That em August 2, 1920 the First National Bank of Eureka issued to

the plaintiff its cashier's cheCk (Exhibit B to the complaint) numbered

14904 in the sum of $871.00, and transmitted said check on or about that day

by mail to the office o! the plaintiff in Chicago, Illinois where the cheCk

was received by plaintiff on or about lugust 5, 1920.

3. That both of said mshier's checks were endorsed by plaintiff by

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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unrestricted e:1dorsements to the First National :Sa;.1)~ of Chicago and were 44

deposited by ~olaintiff in that bank on August 5, 1920, and the amount of

said checks was credited to plaintiff's checkb.g account in that bank.

Plaintiff's pass book il1 whic..'l the deposit of the chec'ks was entered con-

tained the following provision:

"This bank in receiving checks or drafts on deposit for collection acts only as your agent, and beyond_ carefulness in selecting agents at other points, and in forwarding to them, assumes no responsibility. 11

4. Thn t said First National Bank of Eureka was a member bank of de-

fendan t and said First lia ti ona.l Bank of Chicago was a. member bank of the

Federal Reserve Bank of Chicago.

5. That during all of August, 1920, and prior thereto, defendant and

the Federal Reserve Bank of Chicago were exercising the fUnctions of a

clearing house for checks on behalf of their respective member bonkS pursuant

to the provisions of the Federal Reserve Act, and pursuant to on order of the

Federal Reserve Boord mde in accordance with such Act, which order of the

Federal Reserve Board was knoWn as 11Regulation J, Series of 191711 ; that in

the exercise of the functions of a clearing house for checks for defendant 1 s

member ba:iks, an arr~~gement had been entered into between defend~~t, the

Federal Reserve Bank of Chicago and the First National B~~k of.Chicago where-

by the First National Bank of Chicago, instead of depositing checks drawn on

or payable bt member banks of defendant in the Federal Reserve Bank of Chicago,

was parmi tted to route such checks direct to the defendant, which privilege

was kl1ow:1 as the privilege of 11 direct routing"; that such arrangemel1t for

"direct routing" was ent erecl L:.,to merely for the pu:i.·pose of saving time in


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the collection of checks, the proceeds of checks so routed direct being ~15

credited by defendant to the Federal Reserve Bank of Chicago, and it was

understood and agreed between all three banks that their rights and lia

bilities should in all respects be the same as if cheeks so routed direct

:had been first doposi ted by the First National Bank of Chicago with the

Federal Reserve Bank of Chicago and by the Federal Reserve Bank of Chicago

deposited for colla ction with tho defendant.

6. That said cashier's checlts for $1799.35 and $871.00 were, pursuant

to such arrangement for direct routing, forwarded by the First National

Bank of Chicago to defendant, and were received by defendant on August 6,

1920 and Augu.s t 7, 1920 respectively.

7. That defendant on the days on which it received said ·checks for

warded the same.for collection to the First National Bank of Eureka, to

gether with other similar items drawn on or payable by said First National

Bank, ·the aggregate of all such i terns forwarded by defendant to the First

National Bank of Eureka on August 6 and 7, 1920 being $8277.30.

a. That the defendant authorized the "Firs"t National Bank of Eureka

to rami t for said i tams by its draft on a Minneapolis or St. Paul bank but

did not authorize .said First National Batik to remit such a draft drawn

against insufficient f'Uilds.

9. That said cashier's checks were received by said First National

Bank of Eu.rektl. either on .A:u€;ust 7, 1920, AugtLst 9, 1920, or August 10, 1920;

that on A1J€U.St 10, 1920 the First National Bank of Eu.reka attempted to remit

to defendont for said cashier's checks and for the other items forwarded

by defendant at the SDme timo by drawing its draft in the sum of $8277.30

upon the First & Secu.ri ty National :Baflk of Minnoap olis, Minnesota; that


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sD.id First National Bank of 3w.·elm. mo.iled sa.id draft to defendant which

received the same at Min..-·1ecr1olis, Minnesota either after ba..Ylking hours on

August 11, 1920 or early 011 .A:ug"U.St 12, 1920, and :9resented the some for

payment on August 12, 1920, and thnt payment of said dra.ft vms refused by

said First & Security National Batik which then had no funds to the credit

of the drawer bank and said draft has never been paid.

4.6

10. That prior to A~t 1920, the Federal Reserve Board promulgated

"Regulation J, Series of 191711 with respect to the check clearing operations

of defendant and other Federal reserve banks; that said Regulation J pro-

vided in part a.s follo\vs:

"In handling items for member * * * banks, a Federal Reserve !ank will act as agent only. The Boo.rd will require tha. t each l:nember * * * bank authorize its Federal Reserve Ba~ to send checks for collection to "Qo.nkS 011. which checks are drawn, and, except for negligence, such Federal Reserve Ba..'Jk will assume no liability. Any further requirements that the Board ~ deem necessary rrill be set forth by the Federal Reserve Banks in their le.tters of instructions to their member * • Ill banks. Each Federal Reserve Bank Will also promuigate rules and regulations governing the details df its operations as a clearing house, such rules and regulations to be binding on all member * * * banks uhich are clearing through the Federal Reserve Bank. 11

11. That pursuant to al1d in accordance with said Regulation of the

Federal Reserve Board defendant did promulgate rules and regulations

governing the details of its operations as a clearing house under the Fed

er~l Reserve Act, in the form ~f its CheCk Clearing and Collection Circular,

No. 193 which circular was in force during all of August 1920 am had boen

prior thereto mailed to and received by the Federal ·Reserve Ba.l"1k of Chicago

and the First National Bank of Chicago; that said Cirou.lar provided ill part

as follows:


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11 Checks received by the Federal Reserve :Bank dra~ on its member banks uill be forunrded direct to such member bnnks o.nd are to "be remit ted for by the member banks on dny of receipt if possible, by their draft on the Federal Reserve :Bm1k provided they have n balance in excess of their required reserve, or by their draft on a bonk in Minneapolis or St. Paul. Member banks are reqQired by the Federal Reserve :Bo~rd to proYide funds to cover at par all checks received from, or for account of, their Federal aeserve Bank.

In handling items for member bonks, the Federal Reserve Bank of Minneapolis acts as agent only. It is understood that each memeer bank authorizes it to send cheCks for collection direct to batiks on ~hich cheCks are drawn, and except for negligence the Federal Reserve Bank of Minneopolis assumes no liability until ftu1ds are actually in its hands, and is authorized to charge back any item for which it has not received final payment, including items lost in transit."

12. That during all of August 1920 and prior thereto it \las the es-

tablished, general, uniform and certain usage and custom omong banking in-

stitutions in Minnesota and South Dakota, uhere checks deposited for col-

lection drm7:.1 on banks located at a distance had been forVTarded direct to

the drawee or payer bank for collection, for the drawee or payor bank to

remit the proceeds of the collection in exchange drafts drawn on banks in

the vicinity of the forwarding bank, and it ~as the established, general,

uniform and certain usage ond custom among baPlting institutions in sa.id

states for the forwarding bank to permit such remittance by draft and upon

receipt of the exchange drafts to endeavor to collect the same; that plaintiff

had no actual knowledge of this custom.·

13. That d1ll4 ing all of .August, 1920 it was understood and agreed be;,

tween defendant and the Federal Reserve Batik of Chicago that defendant should

forward all che.cks drawn on or payable by member banks of defendant which

were received by defendant from the Federal Reserve Bank of Chicag.o or for

its account direct to the drawee or :pa.YQr bank, and that such checks should


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be remitted for by the drawee or payor bank by its draft on a bank in

Minneapolis or St. Paul.

4.H

14. That during all of August 1920 it was ti.1e duly eno.cted statute law

of the State of South Dakota thD.t -

"Any bDllk banker or trust company 1 hereinafter culled bank, organized under the laws of 1 or doing business in, this State, receiving for collection or deposit, any check, note or other negotiable instrument drawn U')On or payable at any other ba.n..U;:, located in another city or town whether within or uithout this State, ~y forward such instrument for collection directly to the bank on 11hich it is drawn or at \Vhich it is made payable and such method of for\1arding direct to the peyer, shall bo deemed due diligence Dnd tho failure of such payer bank, because of its insolvency or other default, to account for the proceeds thereof, shall not render tho forwarding ba.nk liable therefor, provided, ho\7evor, such forwarding bank shall have used due diligence in other respects in connection with the collection of such ins tru.men t. II

15. That on august 11, 1920 the First National Bank of Eureka suspended

payment and a receiver was subseq1ently appointed for said bank by the Comp-

troller of the CUrrency.

16. That on August ? , 1920 o..."ld thereafter to the time of the suspension

of the First National Bank of Eureka there was sufficient money on hand in

said brut..";: so tha.t the two ca.shier 1s check:s, if the same had been presented

separately over the counter of said bank and payment thereof in money demn.nded,

would have been paid in cash, but there \"'las not sufficient money in said bank

to pay all of the $82??.30 in items held by defondnnt, and if all of said

items had been presented by defendant over the cou_~ter of said First National

Bank of Eurelro and payment thereof in money demanded, none of such i toms, in

cluding the two cashier's cheCks, would have boon paid.

1?. That plaintiff has been paid on account of the t~o co.shier 1s checks


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Ll9 the following sums - $1231.03 on January 5, 1922, &~d $411.00 on December 9,

1925.

18. That the only terms and conditions assented to by defendant ~ith

reference to the collection of the two cashier's cheCks were the terms and

conditions agreed upon by and between defendant and the Federal Reserve Bank

of Chicago as hereinbefore found$

19. That there was no negligence on the part of defendant in forwarding

the cashier1 s checks direct to ~1e First National Bank of Eureka for col-

lection~

20. That there was no negligence on the part of the defendant in au

thorizing the First !rational Bank of.Eureka. to remit for said checks by its

draft on a bank in Minneapolis or St. Paul and that no loss resulted to

plaintiff as a result of ~ch authorization.

As CONCLUSIONS OF LAW the Court finds: That defendant is entitled

to judgment of dismissal against the plaintiff and for its costs and dis-

bursements to be taxed by the Clerk.

Let judgment be entered accordingly.

Dated July 27, 1926.

BY TEE OOURT:

(signed) Horace D. Dickinson Judge.

Let all proceedings in the above action be stayed for forty

days from the date of the above order.

(signed) H.D.D. Judge.


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frsbog_mim_v25_0043.pdf