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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

7/17/2019 frsbog_mim_v34_0692.pdf


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,


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

mail

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 -

7/17/2019 frsbog_mim_v34_0692.pdf


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

7/17/2019 frsbog_mim_v34_0692.pdf


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 .

7/17/2019 frsbog_mim_v34_0692.pdf


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.

7/17/2019 frsbog_mim_v34_0692.pdf


sqt ni SiimpiS dsmpsey

X - 6 9 1 0 - c

COPY

Apri l

9 , 1931 .

M r. Walter S . Logan,

Counsel

and

Deputy Governor,


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 ,

7/17/2019 frsbog_mim_v34_0692.pdf


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

7/17/2019 frsbog_mim_v34_0692.pdf


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,


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 .

7/17/2019 frsbog_mim_v34_0692.pdf


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)

7/17/2019 frsbog_mim_v34_0692.pdf


£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

7/17/2019 frsbog_mim_v34_0692.pdf


C O P Y

X-6910-g

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 .

7/17/2019 frsbog_mim_v34_0692.pdf


7 0 3

X-6910-g

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.

7/17/2019 frsbog_mim_v34_0692.pdf


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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7 0 5

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,


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,


Washington,

D. C.

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frsbog_mim_v34_0692.pdf