Wieczorek v. Rainey

NOURSE, J.,

pro tem.

Plaintiff, as owner of certain street bonds, delivered matured coupons to the city treasurer, and received from him his check drawn upon the bond funds which he had deposited in his commercial account with the Bank of Balboa. Plaintiff endorsed and deposited the check in her account with the Farmers and Merchants National Bank of Los Angeles. This bank endorsed and delivered the check to the Federal Reserve Bank of San Francisco, which forwarded it by mail to the Bank of Balboa for payment along with other checks drawn on the latter bank. On the same day that these checks were received, the Bank of Balboa drew its draft for the full amount on the Security-First National Bank of Los Angeles, mailed the draft to the Federal Reserve Bank, charged the city treasurer’s cheek to his account in the bank and marked the cheek paid. On the following day the superintendent of banks closed the Bank of Balboa, and the Security-First National Bank of Los Angeles refused payment on the draft. The Federal Reserve Bank assigned its interest to the extent of the check to plaintiff, and she presented her claim to defendant, demanding a preference over general creditors of the Balboa bank. In the ac

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tion on the claim plaintiff had judgment granting such preference. The cause was tried on an agreed statement of facts, with findings waived, and the appeal presents the single question whether the plaintiff is anything more than a general creditor to whom no preferential payment should be allowed.

As a part of the statement of facts it was stipulated that “The said Federal Reserve Bank did not demand payment of said items by said Bank of Balboa in cash. It was and is the ordinary, regular and customary course of banking business that settlement be made under such circumstances by draft, and the said Federal Reserve Bank of San Francisco, Los Angeles Branch, intended and expected settlement from said Bank of Balboa in accordance with the usual practice.” Upon these facts the appellant argues that the relation of debtor and creditor arose between the collecting bank and the holder of the paper because the latter entered into the transaction in contemplation of the ordinary course of the banking business which called for payment by draft drawn by the collecting bank when payment in cash was not specifically demanded; that this course of business required the extension of credit between the banks and the periodic settlement or clearance of mutual indebtedness through drafts drawn in this manner; and that the relation of trusteeship for which respondent contends is the unusual and neither the ordinary nor the customary course of the banking business.