First National Bank v. Ocean National Bank

48 How. Pr. 148
CourtNew York Court of Common Pleas
DecidedJuly 15, 1874
StatusPublished
Cited by1 cases

This text of 48 How. Pr. 148 (First National Bank v. Ocean National Bank) is published on Counsel Stack Legal Research, covering New York Court of Common Pleas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
First National Bank v. Ocean National Bank, 48 How. Pr. 148 (N.Y. Super. Ct. 1874).

Opinion

Daly, C. J.

— The defendants, by their circular, solicited the accounts of the plaintiffs’ bank, and as an inducement offered to pass checks on certain places to its credit upon the day of their receipt, and to buy and sell government bonds, gold and stocks for the plaintiffs without charge. It is insisted by the appellants that this offer was so stated as to exclude the idea that the defendants gratuitously undertook the care and safe keeping of negotiable bonds; on the contrary, I think this was necessarily implied from the very nature of the offer. The plaintiffs were a bank doing business in the state of Iowa, and the defendants indirectly regarded it as an advantage to- them in the carrying on of their banking business to have the account of this distant bank in Iowa at the rate of four per cent on its daily balances; the substance of [150]*150the circular was that they would be happy to have its accounts, and it was obviously as an inducement to the Bank of Lyons to place its accounts with them, that the offer was made to gratuitously pass checks to its credit, and buy and sell for it here government bonds, gold and stocks, and there was necessarily implied in this proffered service a safe keeping of such bonds, &c., as they should buy whilst they remained with the bank subject to the plaintiffs’ order. It was an undertaking to exercise ordinary care or that degree of diligence which men of common prudence exercise in respect to their ordinary affairs (Giblin agt. McMullen, L. R. [2 P. C. App.], pp. 337, 338).

It is claimed that the safe keeping of such bonds as the defendants might buy for the plaintiffs formed no part of the business of a banking corporation, and that if undertaken by the cashier or other officer of a bank it was an individual undertaking on their part, being in no way connected with the purpose for which the corporation was created; that the authority which the defendants had was to exercise such incidental powers as should be necessary to carry on the business of banking, such as the discounting of paper, and the buying, loaning and issuing of notes, &c., and not by taking negotiable bonds for safe keeping, without reward, at the risk of the bank and of its stockholders. If there was nothing more than an offer on the part of the cashier, or other officers of the bank, to buy and sell bonds, &c., for the plaintiffs, there would be force in this reasoning, and I should have no hesitation in holding that, in such a case, the bank, as a corporation, would be under no obligation for the safe keeping of such securities. But it cannot be said that what was proposed in the printed circular, which the cashier sent the plaintiffs, and to nearly every western bank, was not in the business of banking. The receiving of deposits of money, and the paying of it out on the check or drafts of the depositors, forms a part, and a very considerable part of the business of banking. The eighth section of the act of congress of June 5, 1864, [151]*151enumerates, as among the incidental powers necessary to carry on the business of banking, the discounting and negotiating of notes,” &c., &c., and “ the receiving of deposits” (Laws of Thirty-eighth Congress, p. 106). By having a large number of small deposits the possession of a considerable amount of money is insured to a bank at all times, by which it is enabled to add to its discounts and thereby increase its gains. The inducement to the depositor is the convenience of having a safe place where he can put his money as he receives it, and from whence he can draw it as he wants it; and the inducement to the bank to keep such accounts, and render this service to the depositor gratuitously, is the advantage above stated, that it enables it to enlarge its discounts. This being a legitimate branch of its business, it is entirely within the scope of such a business that a bank should offer other and additional inducements to secure the deposits of institutions as well as of individuals, and this was what was done in this case. The cashier sent, as he testified, to nearly every western bank a printed circular, prepared and signed by him, stating that the defendants, The Ocean National Bank, solicited the account of the bank addressed, upon the terms above stated, and setting forth, as already recited, what they did for the banka whose accounts they had. Letters were also read, sent by the assistant cashier to the cashier of the plaintiffs, in acknowledgment of inclosures received from them of bonds, coupons, coin, &c., which letters are headed with the names of the president, the cashier and the assistant cashier, with the title of their respective offices beneath their names, and containing over the name of The Ocean National Bank of the City of New York, the words Designated Depository and Financial Agent of the IT. S.,” in the foot of which letters the assistant cashier writes to the plaintiffs’,cashier as follows: “We shall use our best efforts to prove to you the strength of our circular, and to make our correspondence an agreeable-one.” All of which shows that what was proposed was proposed by the bank through its ordinary officers, and that what[152]*152ever benefit or advantage was derived from its acceptance was derived by the bank alone.

Under these circumstances it is by no means clear to my mind that what was implied in this general offer, the custody, and safe keeping for their correspondents of such bonds, &c., as they should buy for them, whilst .they remained in their hands subject to the correspondent’s order, was in strictness a gratuitous bailment.

Bailments are divisible into three kinds: 1st. Those in which the trust is for the benefit of the bailor. 2d. Those in which the trust is for the benefit of the bailee. 3d. Those in which the trust is for the benefit of both parties (Story on Bailments, § 3), and this appears to ihe to come under the third subdivision. It is a case in which the defendants, by a general circular addressed to a number of banking institutions, offer to do certain things in this city for the institution addressed, if it will keep its account with the defendants, that is, keep its deposits in this city with them. This is something more than a mere naked or one-sided bailment. It is an arrangement for the benefit of both parties. It is an offer made by the defendants, and not a request proceeding from the plaintiffs. A bailment, it is true, may be gratuitous, where the offer is made in the first instance by the bailor, but- that is when it is understood by both parties that the service is to be performed without any recompense. But here the offer was conditional. It was an offer to do something for the advantage of the institution addressed, if it would do something else which was for the defendants’ advantage, whereas a gratuitous bailment is one where the benefit is all on one side. It was a request to deposit all the available funds which the western-institution might have in the city of New York with the defendants, at a low interest upon average balances, that the defendants, by having constantly a large amount on deposit, might increase its loans or discounts at the legal rate of interest. In other words, that they might get seven per [153]*153cent for the use of that for which they were to pay hut four per cent.

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Bluebook (online)
48 How. Pr. 148, Counsel Stack Legal Research, https://law.counselstack.com/opinion/first-national-bank-v-ocean-national-bank-nyctcompl-1874.