
120 S.E.2d 830 (1961)
255 N.C. 205
BRANCH BANKING AND TRUST COMPANY
v.
BANK OF WASHINGTON, Washington, North Carolina.
No. 240.
Supreme Court of North Carolina.
July 7, 1961.
*837 Carr & Gibbons, Wilson, for plaintiff-appellant.
Finch, Narron, Holdford & Holdford, Wilson, and Rodman & Rodman, Washington, for defendant-appellee.
BOBBITT, Justice.
Upon waiver of jury trial, the court's findings of fact, if supported by competent evidence, are as conclusive as the verdict of a jury. Moreover, a finding of fact to which no exception is taken is presumed to be supported by competent evidence. Constitution of North Carolina, Article IV, Section 13; City of Goldsboro v. Atlantic Coast Line R. R. Co., 246 N.C. 101, 107, 97 S.E.2d 486, and cases cited. Plaintiff's assignments of error must be considered in the light of these well established legal principles.
Plaintiff assigns as error the court's finding of fact and legal conclusion that Washington Hog Market, not defendant, was the drawee in the drafts, and the court's legal conclusion that defendant did not accept the drafts. Plaintiff contends defendant was in fact and in law the drawee, accepted them, actually or constructively, and is obligated on the drafts to plaintiff as owner and holder thereof.
Under G.S. § 25-143, "(t)he drawee is allowed twenty-four hours after presentment in which to decide whether or not he will accept the bill." (Our italics.) Under G.S. § 25-144, "(w)here a drawee to whom a bill is delivered for acceptance destroys the same or refuses within twenty-four hours after such delivery, or within such other period as the holder may allow, to return the bill accepted or nonaccepted to the holder, he will be deemed to have accepted the same." (Our italics.) Plaintiff contends defendant's failure to pay or return the drafts within twenty-four hours after it received them constituted acceptance of the drafts by defendant. This contention assumes defendant was the drawee.
Washington Hog Market purchased hogs from H & N Hog Market. H & N Hog Market asserted Washington Hog Market was indebted to it, for hogs listed on the invoices, in the amounts for which the drafts were drawn.
H & N Hog Market had no account with defendant. Defendant was not indebted or otherwise obligated to it. Washington Hog Market, which had an account with defendant, had not authorized defendant to charge these drafts or any drafts to its account.
A bill of exchange is defined as "an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer." G.S. § 25-133. Absent evidence of special arrangements, the reasonable inference is that a draft is addressed to a party obligated to the drawer to make such payment.
A check is defined as "a bill of exchange drawn on a bank payable on demand." G.S. § 25-192. It is an order to the bank on which it is drawn to pay the amount thereof *838 and charge it to the drawer's account. In respect of a check, the bank on which it is drawn is the drawee; and, when presented to the drawee, the provisions of G.S. § 25-143 apply.
G.S. § 25-94, to which plaintiff directs our attention, provides: "Where the instrument is made payable at a bank it is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon." But this provision contemplates a situation where the drawer of the instrument has or purports to have an account with the bank at which the instrument is payable.
To support its said contention, plaintiff cites Mt. Vernon Nat. Bank v. Canby State Bank, 129 Or. 36, 276 P. 262, 263, 63 A.L.R. 1133. In that case, the drawer drew a draft on itself, payable at a bank with which the drawer had an account. The opinion states: "Although in form a draft, it has all the essential elements of a check." Again: "When the drawer made this check payable at the Canby State Bank, it was equivalent to an order on that bank to pay the same and charge to its account." (Our italics.) Decisions relating (1) to checks, or (2) to drafts where the drawer draws the draft on itself, payable by or at a bank where the drawer has an account, where the bank, upon payment, can charge the amount thereof to the account of its depositor, are not relevant to the present factual situation.
It seems clear all parties understood the drafts were forwarded to defendant as collecting agent, not as drawee. The Vice-President of the Bank of Halifax testified: "I knew that these drafts were being drawn upon the Washington Hog Market. I knew that the Washington Hog Market had to accept and pay these drafts." Moreover, plaintiff forwarded the drafts to defendant "for collection and return of proceeds" and, by letter of February 1, 1960, requested defendant to present "these drafts for payment and if not paid return to us so we might clear our records."
Plaintiff contends apart from G.S. § 25-143 and G.S. § 25-144, defendant's alleged negligence in failing to return the drafts promptly to plaintiff or notify plaintiff of their nonpayment by Washington Hog Market, constituted a constructive acceptance by defendant of the drafts. The significance of defendant's negligence, if any, is discussed below. Presently, it is sufficient to say: If defendant was not the drawee, it cannot be held liable on the drafts on the theory that it constructively accepted said drafts as drawee. The court's legal conclusion that defendant "did not accept the said drafts," assigned as error by plaintiff, was correct.
A drawee (unless also the drawer) becomes liable for the payment of a draft only upon his acceptance thereof. G.S. § 25-68. "Until the instrument is accepted, the payee or holder of the bill must look to the drawer for his protection. The liability of the drawee to the payee or holder accrues when he makes a valid acceptance of the bill and when it is in the possession or is delivered to one who is entitled to enforce the engagement contained in the acceptance. The legal intendment of the acceptance is that the acceptor engages to pay the instrument according, but only according, to the tenor of his acceptance. It is, in short, a promise to pay." 8 Am.Jur., Bills and Notes § 524; 10 C.J.S. Bills and Notes § 171; G.S. § 25-67.
Washington Hog Market, when notified by defendant of its receipt thereof for collection, did not pay or otherwise accept the drafts. Whatever its indebtedness or liability to H & N Hog Market for purchase price for hogs, Washington Hog Market is not liable to anybody on the drafts absent its acceptance thereof.
Under the circumstances, the evidence was amply sufficient to support the court's findings of fact and legal conclusions that the drawee in each of these drafts was Washington Hog Market; that the drafts were forwarded to defendant for *839 collection from Washington Hog Market, not for acceptance by defendant as drawee; and that defendant did not accept the drafts and is not liable thereon. In a strikingly similar factual situation, it was so held by the Supreme Court of Texas in Tyler Bank & Trust Company v. Saunders, 159 Tex. 158, 317 S.W.2d 37.
Having reached the conclusion defendant is not liable to plaintiff on the drafts, we consider now whether defendant is liable to plaintiff for the amount of the drafts as damages caused by the alleged negligence of defendant. In this connection, it is noted: While the court found defendant acted in good faith in its efforts to collect the drafts, to which plaintiff excepted, no finding of fact was made as to whether defendant was negligent. Decision was based on a finding of fact and legal conclusions, to which plaintiff excepted, (1) that plaintiff had not been damaged by defendant's conduct, and (2) that plaintiff is not the real party in interest and therefore cannot maintain this action.
The author of the Annotation in 19 A.L. R. 555, 556, citing decisions from many jurisdictions, says: "Despite expressions to be found in some cases to the effect that the measure of damages for breach of duty by a bank in respect to the collection of commercial paper is the face of the paper involved, the true rule, supported by the overwhelming weight of authority, is that the damages are measured by the actual loss suffered by the owner of the paper, in consequence of the negligence or misconduct of the bank; at least, in the absence of bad faith, or positive wrongdoing, or failure to return the paper." In support of this statement, these North Carolina decisions are cited: Stowe v. Bank, 14 N.C. 408; Bank of New Hanover v. Kenan, 76 N.C. 340; American Nat. Bank v. Savannah Trust Co., 172 N.C. 344, 90 S.E. 302, and on subsequent appeal, American Nat. Bank v. Savannah Trust Co., 177 N.C. 254, 98 S.E. 595.
We think the evidence amply sufficient to support the court's finding of fact that defendant acted in good faith in its efforts to collect the drafts. There is no evidence of positive wrongdoing on the part of defendant. Defendant returned the drafts to plaintiff immediately when requested to do so. The drafts were presented by defendant to Washington Hog Market. Negligence, if any, on the part of defendant, consists in the failure to notify plaintiff promptly of its inability to collect the drafts from Washington Hog Market.
H & N Hog Market was a regular customer of the Bank of Halifax. When each draft was drawn, H & N Hog Market had nothing more than a creditor's claim against Washington Hog Market. The draft procedure was adopted as a method of collecting the debt.
When the drafts were deposited in the Bank of Halifax, the account of H & N Hog Market was credited with the amount thereof subject to the terms and provisions of the agreement set forth in Finding of Fact No. 5. It was agreed the Bank of Halifax was to act "only as depositor's collecting agent" and assumed "no responsibility beyond the exercise of due care." It was further agreed: "All items are credited subject to final payment in cash or solvent credits. This Bank will not be liable for default or negligence of its duly selected correspondents nor for losses in transit, and each correspondent so selected shall not be liable except for its own negligence."
The Bank of Halifax, a regular customer of plaintiff, stamped its endorsement on the drafts and promptly forwarded them to plaintiff. Upon receipt, plaintiff credited the account of the Bank of Halifax with the amount thereof subject to the terms, and provisions of the agreement set forth in Finding of Fact No. 6. It was agreed plaintiff was to act "only as depositor's collecting agent, until actual final payment in cash or solvent credits; and when such items are credited to depositor's account it *840 is with the understanding that same is subject to final payment and that any such items may be charged back at any time before final payment, and that until final payment, the Branch Banking & Trust Company may refuse payment of any check or draft drawn against such uncollected items." It was further agreed: "Branch Banking & Trust Company's liability is limited to the exercise of due care." Again: "* * * Branch Banking & Trust Company will not be held liable for failure, default or neglect of any such payor bank or of any duly selected correspondent, or for losses in transit." Plaintiff promptly forwarded the drafts to defendant "for collection and return of proceeds."
There is no evidence of negligence on the part of the Bank of Halifax. Nor is there evidence of negligence on the part of plaintiff. No reason appears why plaintiff was not legally entitled to charge the amount of these uncollected and unaccepted drafts to the Bank of Halifax or why the Bank of Halifax, in turn, was not legally entitled to charge the amount thereof to H & N Hog Market. Indeed, they were entitled to do so under the express terms and conditions of the agreements under which credit had been given. The credits given "were purely temporary and conditional." American Barrel Co. v. Commissioner of Banks, 290 Mass. 174, 195 N.E. 335, 338.
Since the drafts were neither paid nor accepted by the drawee, the only persons liable thereon were these: Bank of Halifax, as endorser, was liable thereon to plaintiff; and, in turn, H & N Hog Market, the drawer, was liable thereon to the Bank of Halifax. Apart from the express agreements under which the drafts were deposited and credited, the words "No Protest," were plainly printed on each draft. Thus, the drawer (H & N Hog Market) and initial endorser (Bank of Halifax) remained liable thereon notwithstanding a failure to make formal protest, presentment or notice of dishonor. G.S. §§ 25-118; 25-116; 25-117; Shaw v. McNeill, 95 N.C. 535; Pearson v. Westbrook, 206 N.C. 910, 174 S.E. 291; Daniel on Negotiable Instruments, Seventh Edition, Vol. II, § 1262.
Plaintiff concedes it received the drafts originally as agent for collection and was not, originally, the real party in interest under G.S. § 1-57. First Nat. Bank v. Rochamora, 193 N.C. 1, 136 S.E. 259; Worth Co. v. International Sugar Feed Co., 172 N.C. 335, 90 S.E. 295; Third Nat. Bank v. Exum, 163 N.C. 199, 79 S.E. 498. It contends it became the owner and holder of the drafts and the real party in interest by reason of its admission of liability to the Bank of Halifax under the circumstances set forth below.
On February 1, 1960, plaintiff requested defendant to present "these (listed) drafts for payment and if not paid return to us so we might clear our records." On February 2, 1960, defendant, upon receipt of plaintiff's letter, returned the drafts to plaintiff. Thereupon, as plaintiff's President testified, plaintiff "undertook to charge them back to the Bank of Halifax." Again: "The Bank of Halifax refused to accept the charge." The Bank of Halifax returned the drafts to plaintiff. On February 5, 1960, plaintiff's Vice-President wrote defendant, addressing the letter to defendant's Cashier. This letter, in part, reads: "Our depositor has refused to accept these items, due to the length of time they were held by you. Please forward us your check less your usual charge in payment of these items." Plaintiff enclosed with said letter a "Letter of Transmittal" dated February 5, 1960, on which the drafts were listed, in which it was stated the drafts were enclosed "for collection and return of proceeds."
Plaintiff made its first demand on defendant for payment after plaintiff's customer, Bank of Halifax, "refused to permit us to return the drafts * * * on account of the passage of time." "(S)ome time later," so plaintiff's President testified, when asked "a point-blank question," plaintiff "admitted *841 its liability on the drafts to the Bank of Halifax." This stipulation appears in the case on appeal: "* * * the Bank of Halifax declined to accept these items to be charged back to its account by the Branch Banking and Trust Company on the ground of the delay involved." This statement of plaintiff's President is of interest: "The Branch Bank does not assert any claim against the Bank of Halifax or the drawer of these drafts at this time." (Our italics.)
It is understandable that plaintiff would be disposed to acquiesce in the contention of the Bank of Halifax, its customer, and the Bank of Halifax would be disposed to act in the interests of H & N Hog Market, its customer. However, nothing in the record indicates the collected balance in the account of the Bank of Halifax with plaintiff was less than the amount of the drafts. Nor does it appear that the collected balance in the account of H & N Hog Market with the Bank of Halifax was less than the amount of the drafts. The Vice-President of the Bank of Halifax testified: "I had no suspicions about its (H & N Hog Market) financial condition. They were regular customers of our bank. They were solvent at the time as far as I know. We did not call them or attempt to charge these items back to our customers, the H & N Hog Market."
When plaintiff "admitted its liability" to the Bank of Halifax, absolutely or tentatively, it admitted a liability that did not exist. Its gratuitous admission of liability conferred no legal rights on plaintiff. The Bank of Halifax had no legal right to maintain an action against defendant on the drafts. Any right of action the Bank of Halifax had against defendant was for such loss, if any, as it suffered on account of defendant's negligence. Such an action, "not arising out of contract," was not assignable. G.S. § 1-57.
Plaintiff's legal rights were neither increased nor decreased by reason of its said admission of liability. Any right of action it had or now has against defendant was and is for such loss, if any, as it suffered on account of defendant's negligence. No such loss is alleged or shown. This action is by plaintiff, as the alleged owner and holder of the drafts, to recover the amount thereof. Loss resulting from plaintiff's gratuitous admission of nonexistent liability to the Bank of Halifax cannot be considered a loss proximately caused by defendant's negligence.
Each of the cases cited by plaintiff is factually distinguishable. It is deemed sufficient to consider in detail only Standard Trust Co. v. Commercial Nat. Bank, 166 N. C. 112, 81 S.E. 1074, and on subsequent appeal, Standard Trust Co. v. Commercial Nat. Bank, 167 N.C. 260, 83 S.E. 474, referred to in plaintiff's brief as the leading case and as setting forth the grounds on which "plaintiff framed its complaint."
In Standard Trust Co. v. Commercial Nat. Bank, 166 N.C. 112, 81 S.E. 1074, the plaintiff appealed from a judgment of nonsuit entered at the close of plaintiff's evidence. The judgment was reversed and the cause remanded for trial. As disclosed by plaintiff's evidence, the factual situation was as follows: (1) The action involved a check drawn on defendant (drawee) by Cone, its depositor. (2) The payee, Latham, Alexander & Co., was a customer of plaintiff. It deposited the check with plaintiff and was given immediate credit. (3) In accordance with their prior agreement, the payee drew out by his checks on plaintiff the amount of said deposit. (4) Defendant, after receipt of said check, did not pay it but held it for two days and then returned it, indicating it had been protested for nonpayment, notwithstanding its customer had funds to his credit more than sufficient to pay the check. (5) At or about the time defendant received the check, it also received word its depositor had attempted to commit suicide; and thereupon, having ascertained its depositor's financial condition, defendant charged against its depositor's account the sum of $10,000 to cover a note in that amount due by its depositor *842 to defendant. (6) Meanwhile, plaintiff's depositor went into bankruptcy. It had no funds on deposit with plaintiff out of which the check could be realized. (7) Defendant's depositor, the drawer of the check, was also insolvent. It is noted: Plaintiff's depositor had become bankrupt. Hence, plaintiff suffered actual loss because it could not charge back or otherwise collect from its depositor. None of the forwarding banks, which occupied the status of plaintiff herein, was a party to the action.
Plaintiff stresses these evidential facts: The drafts were forwarded by the Bank of Halifax to plaintiff along with numerous checks, "for collection and remittance Credit." When forwarded by plaintiff to defendant, the drafts were designated Cash Drafts on the Letters of Transmittal. Plaintiff contends the drafts were forwarded in each instance as cash items.
Checks, when presented to a drawee bank for payment, are subject to the twenty-four hour rule prescribed by G.S. § 25-143 and G.S. § 25-144; but these drafts forwarded to defendant for collection by it from Washington Hog Market, were not subject to the provisions of G.S. § 25-143 and G.S. § 25-144. It is noted that a draft may be payable "on demand or at a fixed or determinable future time." G.S. § 25-133. The notation, "Cash Draft," indicates it is payable on demand.
Plaintiff's President testified: "In our bank cash items mean checks and other credit instruments that are received for immediate credit." (Our italics) He testified further: "Our bank had forwarded various other drafts prior to these drafts to the Bank of Washington drawn on the Washington Hog Market. The Bank of Washington would make remittance to us by sending us a bank draft. Until we received that bank draft we couldn't know whether the drafts had been paid by the Washington Hog Market or not." (Our italics.)
Prior drafts, all of which were ultimately collected by defendant and remitted to plaintiff, had been held by defendant for various lengths of time before collected by defendant. In October and November of 1959, eight such drafts had been held by defendant, pending collection thereof from Washington Hog Market, for periods of time varying from fourteen to twenty days. Although plaintiff, by letter of February 10, 1960, after the present controversy had arisen, demanded that defendant pay to it the amount of the eight drafts now in controversy "plus 6% interest for the length of time they have been held by you," nothing appears to indicate plaintiff ever called on defendant for the payment of 6% interest on prior (collected) drafts for the length of time they were held by defendant pending collection.
The term "cash item" is not defined by statute. If it has a precise meaning in banking circles, the evidence does not disclose such meaning. In our view, the evidence tending to identify these drafts by the label, "cash item," is competent for consideration, along with all other circumstances, as bearing upon whether defendant was negligent, in a properly constituted action by a party in interest, namely, a party who has suffered actual loss on account of the alleged negligence of defendant. Plaintiff having failed to establish it has suffered actual loss on account of the alleged negligence of defendant, such evidence, whatever its probative value, is not pertinent to present decision.
Plaintiff suggests defendant's negligence caused H & N Hog Market to sell and deliver hogs to Washington Hog Market and thereby suffer loss on account of the alleged negligence of defendant. We are not now concerned with whether H & N Hog Market has a cause of action against defendant grounded on negligence. Suffice to say, no person connected with H & N Hog Market testified. There is no evidence as to the time, terms or other circumstances of the sales by H & N Hog Market to Washington *843 Hog Market. Nor is there evidence as to dealings, if any, between H & N Hog Market and Washington Hog Market during the time defendant held the drafts or subsequent thereto.
In Grant County Deposit Bank v. McCampbell, 6 Cir., 194 F.2d 469, 31 A.L.R.2d 909, cited by plaintiff, similar drafts were considered. But there the action was by the drawer of the drafts, not by a forwarding bank, against the collecting bank and the drawee. This would seem to be the proper procedure. In such action, the facts as to the dealings and relationships between the drawer and the drawee would be fully disclosed.
We do not hold the evidence insufficient to support a finding of fact that defendant was negligent. As to an action grounded on negligence, decision here, as in the court below, is on the ground plaintiff has failed to show it has suffered actual loss on account of defendant's conduct, its gratuitous admission of liability to the Bank of Halifax under the circumstances here disclosed being insufficient to establish a loss proximately caused by defendant's negligence.
The conclusions reached require that the judgment of the court below be, and it is, affirmed.
Affirmed.
RODMAN, J., took no part in the consideration or decision of this case.
PARKER, Justice (dissenting).
Branch Banking and Trust Company, hereafter called Branch Bank, received the drafts from the Bank of Halifax originally as an agent for collection. As such it was not originally the real party in interest under G.S. § 1-57, and nothing else appearing would not be entitled to maintain this action. First Nat. Bank v. Rochamora, 193 N.C. 1, 136 S.E. 259; Worth v. International Sugar Feed Company, 172 N.C. 335, 90 S.E. 295; Third Nat. Bank v. Exum, 163 N.C. 199, 79 S.E. 498.
The 6th finding of fact in part is: "The Bank of Halifax was given credit for the drafts upon their receipt by the Branch Bank."
According to the agreement between Branch Bank and the Bank of Halifax, set forth in the 6th finding of fact, when the Branch Bank gave the Bank of Halifax credit for the drafts upon their receipt, it had the right of timely charge back if the drafts were not paid. Unquestionably, Branch Bank expected to receive prompt payment within twenty-four hours from the Bank of Washington or timely notice from the Bank of Washington of nonpayment of the drafts, which would have enabled it to reverse its credit to the Bank of Halifax, and charge the items back. According to the agreement between them, Branch Bank's liability to the Bank of Halifax is limited to the exercise of due care.
This is the 17th finding of fact: "Following the return of the drafts in question to the Branch Bank by the Bank of Washington, the Branch Bank charged back to the Bank of Halifax the face amount of all eight drafts and returned the said drafts to the Bank of Halifax. The Bank of Halifax refused to accept the return of the drafts, and in turn forwarded the same back to the Branch Bank, which is now the holder of the same."
The parties stipulated in a pre-trial conference as follows: "It is stipulated that the Bank of Halifax declined to accept these items to be charged back to its account by the Branch Banking and Trust Company on the ground of the delay involved."
J. E. Paschall, president of Branch Bank, testified as follows: "The Branch Banking and Trust Company did not notify the Bank of Halifax of the nonpayment of these items prior to their return by the Bank of Washington. The Branch Bank did not notify the Bank of Halifax because they were *844 considered as paid. I know why we did not notify the Bank of Halifax. We did not notify them because we were looking to the Bank of Washington for payment. We were looking to the Bank of Washington for payment because of the lapse of time. The lapse of time was 24 hours plus mailing time and, after that, we considered them paid. When these drafts were returned by the Bank of Washington to the Branch Banking and Trust Company, the Branch Banking and Trust Company undertook to charge them back to the Bank of Halifax. The Bank of Halifax refused to accept the charge. The Branch Bank admitted its liability on the drafts to the Bank of Halifax. This admission of liability was when I was asked a pointblank question. The conversation that took place was some time later. I don't remember just exactly when, but we admitted it as soon as we found out they did not accept them. The Bank of Halifax refused to permit us to return the drafts as soon as the drafts got back to them on account of the passage of time. They claim that the drafts were paid or they thought they were paid. Of course, we knew that they were correct. We had received the drafts back from the Bank of Washington before the Bank of Halifax made that decision because they thought they were paid. The Branch Bank does not assert any claim against the Bank of Halifax or the drawer of these drafts at this time."
Fletcher H. Gregory, Jr., vice president of the Bank of Halifax, testified: "On February 2, 1960, the Branch Bank undertook to charge these drafts to our account. They returned the drafts to us. We did not accept the drafts. We did not accept the drafts (sic). In the absence of notice to the contrary, we considered that the transactions were closed and that the drafts had been finally paid and that we had final credit at the Branch. We had entered into a deposit arrangement at the Branch Banking and Trust Company under the terms of which items were deposited subject to final payment. We did not accept this charge back under the terms of that arrangement because we considered that final payment had been made. When the Branch Bank returned these drafts to the Bank of Halifax, we did not undertake to charge them back to the account of the H & N Hog Market. We did not call on the H & N Hog Market for all of them. The Branch Banking and Trust Company has admitted liability to the Bank of Halifax on these drafts. The Branch Banking and Trust Company paid the Bank of Halifax for these drafts."
Appellant states in its brief: "However it be viewed, whether under the deposit agreement or under the terms of the Negotiable Instruments Act, the plaintiff lost its right to charge the drafts back to its forwarder on account of the lapse of time. Thereupon, it admitted its liability."
The majority opinion states: "No reason appears why plaintiff was not legally entitled to charge the amount of these uncollected and unaccepted drafts to the Bank of Halifax or why the Bank of Halifax, in turn, was not legally entitled to charge the amount thereof to H & N Hog Market. Indeed, they were entitled to do so under the express terms and conditions of the agreements under which credit had been given. The credits given `were purely temporary and conditional.'" The majority opinion cites in support of the above statement American Barrel Co. v. Commissioner of Banks, 290 Mass. 174, 195 N.E. 335. As I read this case, it does not support the above statement. The facts in the Massachusetts case are entirely different, in that the vital point here of the long delay by Branch Bank to notify the Bank of Halifax of the nonpayment of the drafts was not presented in the Massachusetts case, and that opinion doesn't even mention such a point.
The majority opinion further states: "When plaintiff `admitted its liability' to the Bank of Halifax, absolutely or tentatively, it admitted a liability that did not exist. Its gratuitous admission of liability conferred no legal rights on plaintiff."
*845 I do not agree with the two above statements quoted from the majority opinion. In my opinion, Branch Bank's admission of liability to the Bank of Halifax is based upon the fact that Branch Bank realized it had breached its agreement with the Bank of Halifax to exercise due care, which exercise of due care means it was the positive legal duty of Branch Bank to notify in apt time the Bank of Halifax of the nonpayment of these drafts, so that the Bank of Halifax could protect itself against H & N Hog Market, to whom it is reasonable to infer from the findings of fact the Bank of Halifax had paid the face value of the drafts after it had not heard of their nonpayment for such a long time from Branch Bank.
The drafts here constitute commercial paper in the strictest sense, and must be regarded as favored instruments, as well on account of their negotiable quality as their universal convenience in mercantile affairs. Goodman v. Simonds, 20 How. 343, 15 L. Ed. 934, 941. The office of these drafts was to collect for the drawer, H & N Hog Market, Weldon, North Carolina, from the drawee, Washington Hog Market, at the Bank of Washington, Washington, North Carolina, money to which the former may be entitled. 7 Am.Jur., Bills and Notes, Section 6Bills of Exchange and Drafts.
These drafts are cash items. "Cash Items, in banking phraseology, mean notes, checks, or memoranda in the paying teller's possession at the close of a day's work which he, for the time being, treats as cash in order to make his books balance." Green v. Farmers & Merchants State Bank, Tex. Civ.App., 100 S.W.2d 132, 138. To the same effect, La Monte v. Mott, 93 N.J.Eq. 255, 116 A. 269, affirming 93 N.J.Eq. 229, 107 A. 462, 469.
This is the court's 7th finding of fact: "The Branch Bank forwarded said drafts to the Bank of Washington with its letter of transmittal on a form containing the following provisions: `We enclose for collection and return of proceeds as listed below. Deliver documents only on payment. Correspondents will be held liable for loss resulting from delay in returning papers. Return promptly all unpaid items. Please report by date of letter. Wire nonpayment of items of $1,000.00 and over. Do not protest items $1,000.00 or under, or those bearing this stamp or similar authority of a preceding endorser.' On the above form the Branch Bank typed the words `Cash draft,' followed by the amount of each of said drafts."
The drawee, Washington Hog Market, is allowed twenty-four hours after presentment of these drafts to it by the Bank of Washington in which to decide whether or not it will accept these drafts. G.S. § 25-143.
G.S. § 25-96 reads: "Except as herein otherwise provided, when a negotiable instrument has been dishonored by nonacceptance or nonpayment, notice of dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom such notice is not given is discharged."
G.S. § 25-111 reads: "Where the person giving and the person to receive notice reside in different places the notice must be given within the following times: (1) If sent by mail it must be deposited in the post office in time to go by mail the day following the day of dishonor, or if there be no mail at a convenient hour on that day, by the next mail thereafter; (2) if given otherwise than through the post office, then within the time that notice would have been received in due course of mail if it had been deposited in the post office within the time specified in the last subdivision."
The machinery, which is set up by modern banking to facilitate the flow of commercial, negotiable instruments, is geared to these statutes.
Branch Bank by its long delay in notifying the Bank of Halifax of the nonpayment *846 of these drafts lost its right to charge the drafts back to the Bank of Halifax under its agreement, and also lost its right to proceed against its forwarder, the Bank of Halifax, on its endorsement by virtue of the sections of our Negotiable Instruments Act above quoted. Due to its long delay, and at this point, Branch Bank became the owner and holder of these drafts for value.
In my opinion, the evidence and the findings of fact clearly show that Branch Bank is the owner and holder for value of these drafts in the amount of their face value $5,569.26 which it has paid to its forwarder, the Bank of Halifax, and which it realizes it cannot recover from the Bank of Halifax because it breached its duty with the Bank of Halifax to exercise due care, and is entitled to maintain this action against the Bank of Washington based upon negligence. American National Bank v. Savannah Trust Company, 172 N.C. 344, 90 S.E. 302; Id., 177 N.C. 254, 98 S.E. 595; Annotation, 6 A.L.R. 618.
In my opinion, the 3rd conclusion of law of the trial judge: "The Branch Bank has not been damaged by the conduct of the Bank of Washington in attempting to collect the drafts," and his 4th conclusion of law: "The Branch Bank is not the real party in interest and not entitled to maintain this action," are not supported by the findings of fact, and are erroneous and unrealistic. Unless Branch Bank can recover from the Bank of Washington, it will lose $5,569.26, the face value of these drafts.
Plaintiff alleges alternatively: "13. Even if it should be determined that the defendant did not accept said drafts, nevertheless, the defendant negligently failed in its duty as collecting agent to collect said drafts promptly or to return them promptly. The defendant extended credit to the Washington Hog Market, contrary to the plaintiff's instructions, by not requiring the prompt payment of said drafts upon presentment, although it knew or should have known, and is charged with the knowledge that the said Washington Hog Market was then in serious financial difficulties. The acts of the defendant as herein alleged constituted negligence in the performance of its duty to the plaintiff, as a result of which the plaintiff has been damaged in an amount equal to the face amount of said drafts, to wit, the sum of $5,569.26."
Defendant alleged as a further answer and defense a plea of estoppel, as set forth in the majority opinion.
The majority opinion states near its close: "We do not hold the evidence insufficient to support a finding of fact that defendant was negligent."
In my opinion, the facts found by the trial judge show as a matter of law that the defendant was negligent, and that such negligence has proximately caused Branch Bank a loss of $5,569.26, the face value of the drafts. I am further of opinion that the findings of fact show that Branch Bank is not estopped to maintain this action against the Bank of Washington.
The rapid flow of cheques, drafts and other commercial paper is vital to modern business and modern banking. The requirement that payment must be made or notice of dishonor given within the established and allowable time is essential to present day operations of business and of banking. To hold, as the majority opinion seems to hold, that a receiving bank is permitted to charge a cash item back to its customer, who has in all probability, paid such amount to its depositor, days and weeks after its dishonor, will create utter confusion, and tend to impair, and hamper our credit system and the operations of banking. As appellant aptly says in its brief: "a time honored maxim among bankers warns, `Never let the sun set on a Cash Item.'"
My vote is to remand the case back to the lower court to reverse the judgment below, and to enter conclusions of law upon *847 the facts found, as set forth above, and then to enter judgment for the plaintiff.
HIGGINS, J., joins in dissenting opinion.
