only been born of sincere convictions, but has been tempered by his careful regard for the rights of others. Mr. Brandeis never permitted the apparent or superficial logic of his contentions to carry him to extremes; he never exaggerated. For this very reason he became the most dangerous opponent of those who sought to hide their schemes to rob the public behind approved institutions of commerce such as our great railroad systems. On the other hand, the great public service corporations who are trying honestly to serve the public and to secure legitimate returns on their investment should find in Judge Brandeis a powerful protector and friend.

The country is to be congratulated that after an ordeal that few men could have stood so successfully, the nomination of Mr. Brandeis has at last been confirmed. Any other result would have been a public misfortune, since it would have aroused suspicion, however untrue and unfair such suspicion might have been, that big business and ultra-conservatism had succeeded in defeating a man whose only offense seemed to be that he had espoused the public interests too ardently.

A. H. R.

NOTES OF IMPORTANT DECISIONS.

COMMERCE-NOTICE

OF LOSS TO INITIAL OR CONNECTING CARRIER. In Northern Pac. Ry. Co. v. Wall, 36 Sup. Ct. 493, it was held that where it was stipulated in a bill of lading for a through shipment, that notice of loss was to be given to "said railroad,” meaning, literally, the initial carrier, as a condition precedent to the bringing an action for loss or damage to the shipment, this meant notice either to it or the connecting carrier.

The Supreme Court of Montana had held that the requirement of the stipulation for notice to an agent of the initial carrier, was unreasonable, as it had no agent at the point of destination and plaintiff, therefore, was not bound to comply.

The Federal Supreme Court said: "It seems plain that the stipulation (in the bill of lading) meant and contemplated that the notice might be given at the place of destination to an officer or agent of the connecting carrier, and that

notice to it, in view of its relation to the initial carrier, should operate as notice to the latter. This interpretation treats the stipulation as designed to be fair to both shipper and carrier, permits it to serve a useful purpose, and gives due effect to the statute under which it was issued. True, the words 'said carrier' in the stipulation, if read only in connection with an introductory sentence in the bill of lading, would seem to refer to the initial carrier alone, but when they are read in connection with the statute and other parts of the bill of lading, including the provision that its terms and provisions 'shall inure to the benefit of' any connecting carrier, it is apparent that they embrace the carrier making the delivery as well as the initial carrier, especially as the former is, in legal contemplation, the agent of the latter."

This decision is important, chiefly as showing an exception to the rule of printed contracts, and especially those of carriers, as to whom the courts have ruled individuals of the public do not deal with them at arm's length, and they are construed most strongly against the proposers of the contracts.

Justice McReynolds, with whom concurred Justice McKenna, dissented from the conclusion, among other grounds on that above noticed, and he thought that the bill of lading followed an old form adopted prior to the Carmack amendment and its construction was not to be influenced thereby.

On its face, the bill of lading seems unambiguous, and there is no doubt it could serve as well for the benefit of a connecting as an initial carrier, but it would not protect either as fully as were the notice to be given to the latter, as the deliverer at destination.

BILLS AND NOTES-QUALIFYING WORDS AFECTING NEGOTIABILITY.-In Snelling State Bank v. Clasen, 157 N. W. 643, decided by Minnesota Supreme Court, a brand new question seems suggested. While many cases are cited in the opinion of the court, none seems to embrace the precise facts involved.

In this case the note in question was, on its face, in perfect form as a negotiable instrument. On the back of the note and above the name of payee's indorsement appeared the words, "As per contract." There was an agreement between original parties for a rescission and return of the note at the option of maker in a certain contingency.

The court very rightly held, we think, that the delivery of the note was not conditional, but the question remained, whether the words "as per contract" affected negotiability.

Several cases are instanced of words not giving notice of possible references to a collateral

agreement, but none with the precise words in this note. The nearest case we find is a recital on the face of the note, "Value received as per contract," but we think the words "value received" differentiate the two cases. Natl. Bank v. Wentworth, 218 Mass. 30, 105 N. E. 626. The same may be said where the words inserted were "on account of contract." Bank

v. Lightner, 74 Kan. 736, 88 Pac. 59, 8 L. R. A. (N. S.) 231, 118 Am. St. Rep. 353, 11 Ann. Cas. 596.

These statements could only mean a notation for the benefit of the maker as between him and payee so far as possible dispute might arise. There is a plain admission of the sufficiency of the contract as a consideration. Simply, however, to say, "per contract," is am

for its clientele; particularly the collection of the check. This is due to the increasing popularity of the check as a medium of payment and of the growth in the domestic business of the United States. In fact, the average small deposit almost always includes an out-of-town item and the deposits of the manufacturing, mercantile and other large business enterprises are largely made up of checks, payable at a place other than in the city or town where deposited.

To effect the collection of such a volume of business is quite a practical problem and necessitates the establishment of separate

open to be inquired about, and its place on the note is to give notice to others. It is not an expression of satisfaction with the consideration, in an absolute way.

But does the placing of these words on the back of the note make any difference, so far as subsequent purchasers are concerned? If there for a purpose, who could be affected? Certainly if one takes with notice of a condition to absolute liability, he is not a purchaser for value free from defenses. The indorsement of these words to have any effect at all must carry some obligation of inquiry. The very fact of an indorsement having any super-added words itself challenges inquiry. It is laid down, that the only thing necessary is to indorse a name and the law deduces the result. If you add to this, a purpose must be presumed.

THE BANK AS A COLLECTING AGENT-DUE CARE IN THE SELECTION.

The activities of the modern bank differ widely from activities exercised by the old time banker. The banker of thirty or forty years ago was a banker in the strict sense of the word; viz., he received deposits and made loans. Modern banking activity, how ever, necessarily entails the performance of duties which were negligible some years back.

The particular activity of a bank that has risen to an important plane during the last fifteen or twenty years, and which is constantly assuming more important proportions, is the collecting of negotiable paper

of the same.1

The legal question involved, however, is this what agency shall the bank (with which the check is deposited) use to collect the instrument so as to guard itself from liability in the event of the failure of the agent to duly collect or account for same? Prior to considering this question it is important to determine a further inquiry; viz., In what branch of the law does this inquiry arise? Do the rules of negotiable instruments apply or do the rules of agency govern the case? The distinction between the bank as a holder, and the bank as an agent is a vital one and fraught with difference as to the legal liability entailed.

To illustrate: A bank receives a check payable to and endorsed by X in payment of an obligation owing to the A bank. The instrument is drawn on the Z bank of Joliet, Illinois. The check is sent to the Y bank of Joliet for collection, and is duly presented. and proceeds paid to the Y bank which fail: without remitting the amount collected.

If the relationship between X and the bank be that of endorser and holder X is discharged, as the ordinary steps necessary to charge an endorser have not been taken, and, furthermore, as to the drawer, the instrument is paid. In either view of the situation the loss falls upon a bank. However, if the legal relationship be that of principal and agent, the bank as agent can

(1) The Federal Reserve Act recognizes the importance of this branch of a bank's activity. (2) The correct view.

perform the service of collecting, it was necessary in turn to choose a sub-agent and that the selection was made with due care and, therefore, it is absolved from any liability.

The Bank as a Holder.-The pertinent question is this: When the bank gives the depositor credit for an out-of-town check, has it become a purchaser thereof in the accepted use of the word? In Hobart National Bank v. McMurraugh (103 Pac. 601) the court said:

"When the endorser (McMurraugh) received credit for the check, the bank became indebted to him in a sum equal to the amount of the credit. The check itself became the property of the endorsee (Hobart National Bank) and the endorser's relation to it became that of one who had transferred title to it by endorsement. If the bank did not intend to accept the check as money, it should have entered it as paper and not as cash, or otherwise should have made manifest its intention to collect merely."

And in Brown v. People's Bank (52 So. 719) the court said:

(3) A bank frequently is the owner of negotiable instruments in its own right. For instance, as the buyer of commercial paper in the market, discounting, etc. Except under exceptional circumstances, the question of due care in selecting an agent to effect collection of such instruments will not arise. The bank is in no sense an agent. In practice the ordinary discount stands on a different footing from a check. Therefore it may be fairly stated that the bank becomes a holder of such paper and not an agent, although such discount were credited to a customer's account and the ordinary stipulation as to not being liable for agent's acts was present. Such stipulation it seems should be specially noted in reference to a discount. Furthermore, it would seem that if a bank cash a check for someone not a customer, the bank would become a holder of such item, unless the fact of agency were specially noted.

The ordinary situation under discussion assumes a general indorsement and not one for collection, etc. The general practice in the banking field is to insist on the general indorsement. To this effect is the rule of the Chicago Clearing House, and other prominent clearing house associations.

In some jurisdictions no combination of circumstances makes the bank with which the item is deposited, the holder thereof, irrespective of whether credit is given or not, or whether or not there is any stipulation inserted in the contract between the depositor and the bank, that the relationship is that of principal and agent. Bank v. Hendrix, 147 Ala. 670.

check the depositor engaged that on due presentation, the check would be paid, and -if not honored and the necessary proceedings on dishonor be duly taken, that he would pay the amount, to the holder of the check."

And in Strong v. King (35 Ill. 9) the court said by way of dictum:

"If a banker receives a check and gives the depositor credit therefor, the check from that time becomes the absolute property of the banker with whom it is deposited. But the depositor of a check may as well employ his banker as an agent to collect it as any other person, and if the depositor deposits the check with his banker for collection, such deposit is precisely the same in its legal effect, as handing the check to a messenger for the same purpose."

A bank, therefore, to establish its position as an agent and not as a holder, should (agreeably to the suggestions noted in the preceding decisions) inform its depositor to that effect. A stipulation to the following effect will suffice:

"Checks deposited for credit are taken. at the risk of the depositor. This bank will assume no responsibility for neglect or default of collecting agents."

The notice may be printed on deposit tickets or in a pass book. This is not, however, a certain method of bringing the notice home to the depositor. The only posi

(4) The stipulation inserted should also take notice of the Federal rule (noted post), viz., expressly agree not to be liable for acts of subagents. This fact is important because of the likelihood of the action getting into the Federal courts, where the court under the principle of Swift v. Tyson, 16 Peters 1x, will recognize its own rulings.

The law of the particular jurisdiction, if the suit were in the state court, would be the law of the state, as between the plaintiff and the defendant, where the deposit was made. Thus, if in Ohio, deposit with the B bank in New York, which forwards the item to C bank in Illinois, which, in turn, forwards it to Missouri, the place of payment; and the suit were between B and C, the Illinois law would govern. Bank v. Bank, 221 Ill. 319.

For a general discussion on the conflict of laws, see Seelove on Banking, No. 6.

A stipulation purporting to allow the sending of items to the drawee bank might be sustained. It has, however, the appearance of contracting to avoid the effect of the negligence in selecting a subagent and might like other stipulations to avoid the effect of negligence, be held void.

tive method is to have the stipulation inserted in the signature card of the depositor at the time the account is opened. A pass book may not be given to the depositor and he may not use the ordinary deposit tickets.

The Bank as an Agent.-On the assumption that a bank has established its status as that of an agent, the further question remains: Can a bank by exercising due care in the selection of its agent, divest itself of liability?

The Federal rule on this point is an answer in the negative with certain qualifica

tions. The rule is illustrated by Bank v. Bank (190 Fed. 318). In that case:

The California National Bank, Sacramento, forwarded an item on Ponderay, Idaho, to the Utah National Bank of Salt Lake City, who, in turn, forwarded it to their correspondent at Ponderay. Through the negligence of the Ponderay Bank, the California National Bank lost all recourse against prior parties and sought to hold the Utah National Bank liable, contending it was responsible for the act of its agent at Ponderay.

The court said:

"In the absence of expressed or implied contract that it should not be liable for the misconduct of its sub-agents, we would be required under the authority of Exchange National Bank v. Third National Bank (112 U. S. 276) to hold the defendant responsible for the negligence of the agents employed by it."

But the court notes that as the Utah National Bank had incorporated in its receipt to the California National Bank, the following stipulation:

"In receiving checks and other paper on deposit or for collection, the Utah National Bank acts as agent, and assumes no responsibility for the acts, omissions, neglect or default of agents or sub-agents at other points."

The case comes within the exception of the ruling of the case cited; and that the Utah National Bank is not liable unless it negligently selects a sub-agent. The reasoning of the federal rule is that:

"The bank necessarily had far better opportunities to know of the safest agencies

for the collection of the check and it made its own selection of its agents without reference to the depositor."

The General Rule.-The general rule which obtains in the United States is, however, different from the rule noted, and is simply expressed. That the collecting bank is liable for the act or default of its subagent only if it has been negligent in its selection. Thus in Insurance Co. v. Bank (25 Ill. 221) the planitiff deposited a check for collection with the defendant drawn on the Citizens Savings Bank, St. Louis. The

plaintiff sent the check to Benoist & Co., bankers of responsibility in St. Louis who failed to protest the check at the time of dishonor, discharging several endorsers in consequence thereof. The court in holding, for the defendant stated:

"The bank fully discharged its duty by sending the instrument in due season to a competent, reliable agent with proper instructions for its collection."

A further distinction of fact is noted in Milling Co. v. Kuenster (158 Ill. 261). In that case the plaintiff deposited for collection with the defendant, a draft drawn on M. J. Heyer, Wilmington, N. C. The defendant forwarded the draft to the First National Bank, Wilmington (the only bank in the town) which collected the proceeds. and failed without remitting. The court

said:

"The defendant fully discharged its duty by transmitting the draft in due season to a suitable agent at the place of residence of the drawee with necessary instructions and it is not liable for loss occasioned by the negligence or default of the collecting agent thus employed. Such collecting agent becomes the agent of the holder of the draft and not of the bank with which it is deposited for collection."

The rationale of the rule is usually expressed thus:

(5) The question of due care in the selection of an agent is frequently confused with the question of circuitous routing. The question of circuitous routing is one of the law of negotiable instruments, to-wit: A reasonably direct route must be used to forward the instrument for collection, so as to safeguard the interests of persons secondarily liable. Gifford v. Hardell, 88 Wis. 538.

"When a customer deposits with a bank, a note, bill of exchange, certificate of deposit, check, etc., for collection, at a point distant from the location of the bank, he must know that the bank cannot send one of its officers or agents to make the collection. He is presumed to know the method employed by banks in making such collections.

He knows that the bank must select some other bank or agency to effect this purpoze. He has employed the bank to do, through its method of making collections, that which would cost him much money to do himself."

In Missouri, a somewhat peculiar distinction obtains, although the general rule is recognized. The case in which the point arose is that of Landa v. Traders Bank (Court of Appeals, 1906). In that case the plaintiff deposited his draft on the United States Brewing Company of Chicago, with the defendant for collection, under an arrangement whereby the plaintiff was to pay 10 per cent per $100.00 as a collection fee. The defendant's correspondent in Chicago, surrendered the bill-of-lading upon receiving a worthless check..

The court held for the plaintiff, although the Chicago correspondent was selected with due care:

"The distinction is clear where an agent for a consideration agrees to collect a bill of exchange and he employs another agent for the purpose, and where he simply accepts one for collection without any agreement for a consideration and employs. another agent for the purpose. In the former instance the act of the sub-agent is the act of the original agent and not of the principal. In the latter instance, the subagent is the agent of the principal, and not. of the original agent. It is insisted, however, that the consideration the plaintiff agreed to pay the defendant was a mere nominal consideration. It is true the consideration was not great, but we are not to conclude for that reason it was only nominal.

It was the express consideration and in the absence of proof to the contrary, the presumption is that it was sufficient and customary.'

(6) A special agreement relative to exchange is contemplated. The ordinary exchange rate fixed by the various clearing houses or the rate

The court goes on further to state in sub

stance:

"That the printed stipulation in the passbook that the bank is not liable for the acts of the sub-agent will not change the rule, as the stipulation is subordinated to the contract for the consideration. The stipulation should be inserted in the arrangement for the payment of the exchange."

Due Care in the Selecting of a Sub-agent. -In the cases noted the very clear rule was announced, that if a check or draft is sent to some responsible bank other than the drawee bank, such selection is a matter of law, the exercise of due care. Furthermore if the instrument be drawn on an individ

ual, and there be only one bank at the place of payment which is responsible, the item may with safety be sent to that bank. The above rules are not open to exception."a

The more difficult question, however, is the one in which the sub-agent selected is the one who is called upon to pay the instrument. Is this selection not due care as a matter of law, or may the worth and responsibility of the sub-agent be inquired

into?

usually charged the clientele is by fair inference excepted from the ruling.

The del credere doctrine noted in the principle case has not had a full expression in the United States. It seems, however, to be a sound one. (6a) Insurance v. Bank, 25 II. 221; Milling Co. v. Kuenster, 158 III. 261.

(7) The court by way of dictum touches on a supplementary rule; viz., the necessity for tracing up an item sent for collection; although, as a matter of fact, the agent has been selected with due care. "The collecting bank not having received payment of the check by return mail