This Ohio case has since been followed as a leading case in upholding the doctrine first announced in America by the New York court of appeals.

The supreme court of Wisconsin, in 1860, decided, in the case of Stacy v. Dane County Bank, "that the contract implied from the receipt, by a bank, of a note for collection, payable at a distance from its place of business, is not absolutely to make due presentment of the note, and give due notice of its non-payment, but to place it in the hands of some competent and responsible agent for that purpose, and that, if the bank exercises reasonable care and skill in selecting such agent, it is not liable for his default." Stacy v. Dane County Bank, 12 Wis. 707.

In the case of Etna Ins. Co. v. Alton City Bank, decided by the supreme court of Illinois in 1861, Mr. Justice WALKER, delivering the opinion of the court, after reviewing many cases, says: "Where a bank receives a bill or note for collection against a drawee or maker, resident at the place of the bank, or where the bank undertakes for its collection by their own officers, there can be no doubt that it would be liable for any loss that might result from neglect; but, when received for transmission, it has fully discharged its duty by sending the instrument in due season to a competent, reliable agent, with proper instructions for its collection." Etna Ins. Co. v. Alton City Bank, 25 Ill. 243.

In 1872 the supreme court of Pennsylvania adopts the doctrine before announced in New York. The case of Bradstreet v. Everson, 72 Pa. St. 132, was a case where a collection agency received for collection in Pittsburgh certain acceptances, and transmitted the same to Wood, an attorney in Memphis, who collected, and failed to remit Bradstreet & Son. The collecting agency was held liable. The opinion in this case, rendered in 1872, reviews many similar cases, and clearly establishes the principle, which seems to us very applicable to the case at bar; the responsibility of bankers for collections undertaken appearing to be equally as great as that of collecting agents or attorneys at law.

The last New York case which has fallen under our notice was decided in 1872. In that case (Ayrault v. Pacific Bank) the court of appeals of New York decided a case under the following state of facts: Ayrault, a customer of the Pacific Bank, deposited with the said bank two promissory notes for collection. They were not paid, and were handed by the bank to a notary for demand and protest. He failed to properly protest the notes, whereby the indorsers were discharged, and collection was lost. The court in its opinion says: "The doctrine established by the court for the correction of errors in Allen v. Merchants' Bank, 22 Wend. 215, has been repeatedly reaffirmed, and has never been questioned in this state. By the receipt of negotiable paper for collection the bank or banker receiving it undertakes that the necessary means shall be taken to charge the drawer, indorser, and other parties, upon default, or refusal to pay or accept. A bank receiving a bill or promissory note for collection, whether payable at its counter or elsewhere, is liable for any neglect of duty occurring in its collection by which any of the parties are discharged, whether of the officers and immediate servants, or of the agents of the bank or its correspondents, or agents employed by such correspondents." Ayrault v. Pacific Bank, 47 N. Y. 573.

In 1874 the supreme court of Tennessee decided the case of Bank of Louisville v. Bank of Knoxville, 8 Baxt. 105, in which it reviews numerous cases, and holds "that the more reasonable and just construction of the undertaking of the bank in which the bill is deposited for collection is that, when the bill is payable at another and distant place, the bank so receiving the bill discharges itself of liability by transmitting the same, in due time, to a suitable and reputable bank or other agent at the place of payment; and in such case it is manifest that a subagent must be employed, and the assent of the principal is implied, as it cannot be said that the receiving bank was expected or

bound to send one of its own officers to the distant point of payment for the purpose of personally attending to the collection for the very inadequate coinpensation usually paid to banks for such service." Bank of Louisville v. Bank of Knoxville, 8 Baxt. 105.

There seem to have been four cases decided in the circuit courts of the United States, to-wit: Bank of Trinidad v. First Nat. Bank, 4 Dill. 290; Hyde v. First Nat. Bank, 7 Biss. 156; Kent v. Dawson Bank, 13 Blatchf. 237; Taber v. Perrot, 2 Gall. 565,-in all of which the case of Allen v. Merchants' Bank is believed to have been followed, though we have only been able to examine these authorities at second hand, the original reports not being accessible.

This brings us to an examination of the cases decided by the supreme court of the United States, in which the English doctrine, which had been previously followed in New York, is adopted, after a full examination of all the leading authorities.

The question at bar first came directly before the supreme court of the United States in 1875. In the case of Hoover v. Wise, 91 U. S. 308, Mr. Justice HUNT, delivering the opinion of the court, discusses a long line of cases, English and American, and concurs in the principles laid down in the case of Reeves v. State Bank of Ohio, 8 Ohio St. 466, and in Allen v. Merchants' Bank, 22 Wend. 215, and in other New York cases, and in Bradstreet v. Everson, 72 Pa. St. 124, and other cases to the same effect. This case presented the following state of facts: An account was delivered by its owners, Wise & Co., to Archer & Co., a collecting agency in New York, with instructions to collect. Archer & Co. sent it to McLennan, in Nebraska. Oppenheimer, the debtor, was in failing circumstances, and had already committed several acts of bankruptcy, when McLennan prevailed on him to confess judgment in favor of Wise & Co. The money was collected on this judgment, and paid over to Archer & Co., but was not by them paid over to Wise & Co. Oppenheimer was thrown into bankruptcy, and Hoover, his assignee, sued Wise & Co. to recover the money paid in violation of the bankrupt law. The supreme court held that McLennan was the agent of Archer & Co., and not of Wise & Co., and that Wise & Co. were not responsible for the guilty knowledge of the attorney, so as to render them liable for the money collected. This case, as viewed by the court, falls clearly within the principles laid down by the cases cited and discussed, and the dissenting opinion of Mr. Justice MILLER and others is not based on any doubt as to the correctness of the principles of those cases, but because, in their view, the facts of the case did not bring it within the principles announced therein; that the judgment having been taken in the name of Wise & Co., and they receiving the benefit of it, and they being liable for costs in the event of failure, and Archer & Co. not being liable, and having no interest in the account, and not being liable to the attorney for the fees, that McLennan was the attorney of Wise & Co., and not of Archer & Co. So the dissenting opinion by no means weakens the authority of this case in so far as the case under consideration is concerned. Hoover v. Wise, 91 U. S. 308.

The supreme court of Iowa, in 1881, reviews a large number of cases, and arrives at the following conclusion: "Where the holder of a bill of exchange, payable at a distant place, deposits it with a local bank for collection, he thereby assents to the course of business of banks to collect through correspondents, and the correspondent of the local bank to which the bill is forwarded becomes his agent, and is responsible to him directly for negligence in failing to present the bill for payment within the proper time." Guelich v. National State Bank of Burlington, 56 Iowa, 434; S. C. 9 N. W. Rep. 328. The cases of Hyde v. Planters' Bank, 17 La. 560; Buldwin v. Bank of Louisiana, 1 La. Ann. 13; Tiernan v. Commercial Bank, 7 How. (Miss.) 648; Agricultural Bank v. Commercial Bank, 7 Smedes & M. 592; Bowling 7.

Arthur, 34 Miss. 41; Jackson v. Union Bank, 6 Har. & J. 146; Citizens' Bank v. Howell, 8 Md. 530; and other cases,-are cited by the Iowa supieme court as sustaining this view of the question. 56 Iowa, 436, and 9 N. W. Rep. 328. These authorities are not accessible to us, and have not been examined. However, we presume they follow in the wake of Massachusetts and Connecticut cases, which seem to lead that line of decisions.

The case of Britton v. Niccolls, decided by the supreme court of the United States, (104 U. S. 757,) does not fall parallel with the cases at bar. It was decided in accordance with the decisions of the supreme court of Mississippi, and on the force of a local statute of that state prescribing certain duties of a notary public, and treating him as a public officer; and this merely holds that the notary was not, in this matter, the agent of the bankers, and that for any failure to perform his duties he alone was liable. 104 U. S. 766. The decision was not made upon any general principle of commercial law, and establishes none, and is clearly distinguished from the latest case of Exchange Nat. Bank v. Third Nat. Bank, 112 U. S. 284-287, S. C. 5 Sup. Ct. Rep. 141, where it is discussed, and from the case now under consideration, where no such questions as were there decided were involved.

The latest discussion and decision of the question presented in the case at bar by any court of last resort was, had in 1884 by the supreme court of the United States, in the case of Exchange Nat. Bank of Pittsburgh v. Third Nat. Bank of New York, 112 U. S. 280; S. C. 5 Sup. Ct. Rep. 141. The doctrine of the liability of the bank receiving a draft for any default of its correspondent is thoroughly discussed, and clearly enunciated. In that case the Pittsburgh bank had sent to the New York bank several unaccepted drafts for collection. The New York bank sent them to a bank in Newark. The Newark bank failed to take the proper acceptance, and by this negligence the payment of the drafts failed to be made. The supreme court held that the New York bank was liable to the Pittsburgh bank for all damages that it had sustained by the negligence of the Newark bank. In the course of the opinion, Mr. Justice BLATCHFORD, delivering the opinion of the court, says: "On its receipt of the drafts, under these circumstances, an implied undertaking by the New York bank arose to take all necessary measures to make the demands of acceptance necessary to protect the rights of the holder against previous parties to the paper. From the facts found, it is to be inferred that the New York bank took the drafts from the plaintiff in the usual course of business. * * * The contract then became one to perform certain duties necessary for the collection of the paper and the protection of the holder. The bank is not merely appointed an attorney, authorized to select other agents to collect the paper. Its undertaking is to do the thing, and not merely to procure it to be done. In such case the bank is held to agree to answer for any default in the performance of its contract; and whether the paper is to be collected in the place where the bank is situated, or at a distance, the contract is to use the proper means to collect the paper, and the bank, by employing subagents to perform a part of what it has contracted to do, becomes responsible to its customer. * * * Whether a draft is payable in the place where a bank receives it for collection, or in another place, the holder is aware that the collection must be made by a competent agent. In either case there is an implied contract of the bank that the proper measures shall be used to collect the draft, and a right on the part of the owner to presume that proper agents will be employed; he having no knowledge of the agents. There is, therefore, no reason for liability or exemption from liability in one case which does not apply to the other. Exchange Nat. Bank of Pittsburgh v. Third Nat. Bank of New York, 112 U. S. 280; S. C. 5 Sup. Ct. Rep. 141.

The reasoning of this opinion effectually obliterates all distinctions between the cases of the second and third classes which have been attempted to be drawn

in some of the courts of last resort, as hereinbefore adverted to, and as commented on by text writers in treating this subject; and the doctrine maintained in the first class of cases mentioned above, and upheld by Senator Daniel in his valuable work on Negotiable Instruments, is clearly and ably sustained, and established to our entire satisfaction. This is believed to be the latest enunciation of the views of the supreme court of the United States upon this subject, and is binding as an authority on this court, and, aside from this, it is beyond a doubt the correct doctrine, sustained by the weight of reason and the general current of authority.

The foundation for all the differences of opinion among the learned judges who have had the matter under consideration appears clearly to rest in the interpretation of the implied contract between the depositor and the bank at the time the negotiable paper is deposited for collection. Where there is an express contract, it must, of course, be followed, and there is no room for a difference of opinion; and all of the decisions herein styled cases of the second and third classes are founded on the idea that the course of business or the customs of bankers, or the necessities of the case, or the peculiar circumstances, raise some other presumption than the one that the bank receiving the deposit for collection undertakes to collect it, and assumes all the risks from the negligence or default of the agents which it employs. We do not believe that any other contract can be inferred from the mere tender and acceptance of negotiable paper for collection. No matter where the debtor may reside, nor what agencies are necessary to employ in the collection, the depositor is not supposed to be acquainted with the methods to be employed by the bank in collecting its paper, or the carefulness, skill, solvency, or honesty of the agents whom it may be necessary to employ in such collections. Besides, it is the universal custom of banks, on receiving collections, to pass them to the credit of the owner, and to indorse and transmit them to their correspondents, where they are in like manner passed to the credit of the indorser, and so on until collected; and, if the collection fails on account of the insolvency of the debtor, and through no fault of any intermediate bank or agent, the paper is returned, and charged back, until it reaches the original depositor and indorser, who is called upon to make it good. Such was the course pursued in the case at bar, and the defendant is clearly liable for the amount collected.

On mature consideration of the authorities, supporting all shades of opinion on this subject, we fully agree with the views expressed in Daniel, Neg. Inst. 342, and hold that, in the absence of a special contract, a bank is absolutely liable for any laches, negligence, or default of its correspondent whereby the holder of negotiable paper suffers loss. By such a rule alone can the depositor who intrusts his business to a bank be secure against carelessness or dishonesty on the part of collecting agencies employed by banks to carry out their contracts. Banks can easily avoid the effects of this stringent rule by making special contracts in special cases, or declining to undertake collections at points where they have any fears as to the reliability or solvency of the agents whom they will be obliged to employ; but when they undertake collections, either at their own location, or at distant points, without a special contract limiting their liability, they must be held to do so for a sufficient consideration, and to be responsible absolutely to the owner of negotiable paper for the payment of all money collected thereon, and for all losses occurring through the negligence of the agent, resulting in a failure to make such collection.

In accordance with these views, the judgment is hereby reversed, and the case remanded for a new trial.

NOTE.

A bank which sends a bill or draft to another bank for collection becomes responsi ble to the depositor for the honesty and competency of such other bank. Exchange Nat. Bank v. Third Nat. Bank, 5 Sup. Ct. Rep. 141, reversing S. C. 4 Fed. Rep. 20; Tradesmen's Nat. Bank v. Third Nat. Bank, 5 Sup. Ct. Rep. 149; Simpson v. Waldby. (Mich.) 30 N. W. Rep. 199. The contrary is held in Nebraska, Guelick v. Burlington Nat. State Bank, 9 N. W. Rep. 328; in Kansas, Bank of Lindsborg v. Ober, 3 Pac. Rep. 324.

(2 Ariz. 225)

GRAY v. SALT RIVER VALLEY CANAL Co.

(Supreme Court of Arizona. January 8, 1887.)

CONTRACT-CONDITION-WATER COMPANY.

In an action against an irrigation company, for failure to deliver water purchased, where it appears that there was a contract to be delivered to purchasers restricting the liability of the company for failure to deliver water in certain cases, and providing for a pro rata distribution when there was an insufficiency of water to fill all the orders, the plaintiff, not having received such contract, is not bound by the terms thereof, although, as a stockholder of the company, he is cognizant of its provisions.

Tweed & Hancock, for appellant, Salt River Valley Canal Co. Cox & Campbell, for appellee, Gray.

PORTER,. The plaintiff brings his action for damages for failure to deliver 100 inches of water, purchased by him. Gray was a stockholder in the defendant company, and, under its rules, an application for water during the water year" was required. He did so apply for 100 inches of water, and paid part of the purchase money, the treasurer telling him it was not sufficient, and would not enter such payment on the books. Subsequently, on receiving the required sum, viz., $125, he did enter such payment on the books of the company. When the payment was made, Gray did not sign a note for the balance, which was one of the rules of the company, and on the fifth of July, 1884, he paid all that was due, making the full sum of $250. There was a certain form of contract to be signed, restricting the liability of the company in many particulars, and in this, that there should be a pro rata division in case of insufliciency of water to supply all the customers where such insufficiency occurred by reason of such a rise in the river as would break the dam or ditch, or by some unavoidable accident, and fixing the damages of nondelivery of water at a fixed sum. These contracts were to be executed by the president of the company, and delivered to purchasers of water. No such contract was delivered to plaintiff. He paid the full amount due for the water on the fifth of July, 1884, to the treasurer, and it was entered upon the books of the company; and at such payment plaintiff refused to receive the usual contract.

It is contended that Gray, having been a director of the company, knew of the provisions of these contracts, and should be bound by them. We can see no good reason why he should be, when the company received his money without the onus of such a contract. The company ignored its own by-laws, and, having received the money, cannot now go behind its action. The case of Pixley v. Western P. R. Co., 33 Cal. 183, cited by respondents, well applies to this case. There the company had a certain by-law, by which no contract was to be binding on them unless made in writing. Pixley was attorney for the company, and performed his duties with knowledge of the company, and without such written contract. The court say: "It may be that, while such contract remains executory on both sides, an action could not be maintained by either party to enforce it; but, where one of the contracting parties has completely performed it on his part, and thereby rendered to the other the consideration stipulated, the party having received the consideration promised cannot be permitted to escape liability on the naked