Crane v. Fourth Street National Bank

Citations

• 173 Pa. 566
• 34 A. 296
• 1896 Pa. LEXIS 744

Syllabus

<p>Banks and banking — Clearing house — Check—Improper payment 0/ cheek.</p> <p>Plaintiffs, the owners of a draft on the F. National Bank, indorsed the draft specially to the K. National Bank for collection, stating in the indorsement that its pui'pose was the collection of the amount for their own credit. Both the F. and K. banks were members of a clearing house association. The draft was sent, with other checks and drafts held by the K. bank against the other national banks of the city, to the clearing house for collection at the morning clearing. The process of passing the clearing house was begun in the usual manner. The balances due to and from the several banks represented were ascertained, and the exchange of packages entered upon. It was found that there was a large balance due from the K. bank to be paid in cash. At half-past ten o’clock that morning the K. bank was closed by the action of the United States bank examiner. The balance was not paid or any part of it. The clearing house demanded and received the amount of the draft from the F. bank, and appropriated it to the payment of the indebtedness of the K. bank to the clearing house committee. Held, (1) that the effect of the indorsement was to make the K. bank the agent of the indorsers for the single purpose named, and that the title to the draft passed only so far as was necessary for the purposes of the agency created by the indorsement, and the ownership of the proceeds remained all the while in the indorsers; (2) that as the balance due by the K. bank had not been paid, the bank could not clear, and what had been done provisionally for that purpose became ineffectual, and ceased to have any legal significance; (3) that the payment by the F. bank was to one who was a stranger to the draft, and who had no interest in the proceeds, and no authority to act as agent for the owners; (4) that such a payment was no defense by the F. bank in an action brought against it by the owners of the draft, inasmuch