is unable to collect the amount of the bill, the measure of damages is the face of the bill with interest," it appeared that the only parties whose liability was not discharged by the negligence in respect to protesting the paper were insolvent. And the latter case clearly bases the amount recoverable upon the actual loss, as the court says: "In the case before us, the note received for collection by the Citizens Bank was commercial paper, and the failure to protest it for nonpayment discharged the indorser. We think, therefore, that the facts averred in the complaint make the appellees liable to appellant for whatever damages he has sustained thereby."

Madison

So, also, in Downer v. County Bank (1844) 6 Hill (N. Y.) 648, where the measure of damages, in an action against a bank based on its failure to give proper notice of protest to a second indorser of a note which it held for collection, was said to be the amount of the note with interest, it appeared that the maker and first indorser were insolvent, but that the second indorser was abundantly able to pay.

And in Eichelberger v. Pike (1870) 22 La. Ann. 142, where a recovery for the face of the note was sustained against a bank, which, by its failure to protest it, had released an indorser, it appeared that the maker was insolvent.

The insolvency of the maker appeared, also, in Bellemire v. Bank of United States (1836) 1 Miles (Pa.) 173, in which one who had deposited with a bank, for collection, a note, sought to recover from the bank the amount of the note, with interest, and the expenses of an unsuccessful suit which he had brought against the indorser thereon, on the ground that the bank having demanded payment of the maker without success did not give notice of nonpayment to the indorser, thereby discharging him and resulting in the loss of the amount of the note to the plaintiff, and the court, while holding that the bank was not liable because whatever negligence there may have been was that

of a notary for whose act the bank was not responsible, stated that if the bank had "substituted for the notary one of its clerks, or any other individual, and loss had ensued from his inattention or mistake, we are strongly inclined to the opinion that this deviation from established usage would constitute conclusive evidence against the bank, and render it responsible to the full extent claimed by the plaintiff."

While in Hitchcock v. Bank of Suspension Bridge (1901) 57 App. Div. 458, 68 N. Y. Supp. 234, in which it appeared that the defendant bank had failed properly to protest a note which it held for collection, the court said: "Inasmuch as it is conceded that the maker of these notes was insolvent, the plaintiff's sole recourse was to the only indorser who was solvent, and, as he was released from his contract of indorsement by the failure on the part of the bank to properly protest the note, it follows that the measure of the plaintiff's damage was the principal of the note and interest due thereon, together with the necessary fees of protest."

And in Ayrault v. Pacific Bank (1863) 1 Abb. Pr. N. S. (N. Y.) 381, the court, in granting a new trial, said: "Upon such new trial, any too great positiveness in directing the jury to find a verdict for the amount of the note, in case they find against the defendant on the question of negligence, may be avoided, as the question of the plaintiff's loss seems to involve the question of the responsibility of the maker, as well as that of the indorser." The judgment on the final disposition of this case in (1872) 47 N. Y. 570, 7 Am. Rep. 489, was, however, for the amount of the note and interest.

And see National Pahquioque Bank v. First Nat. Bank (1870) 36 Conn. 325, 4 Am. Rep. 80, and Second Nat. Bank v. Merchants Nat. Bank (1901) 111 Ky. 930, 55 L.R.A. 273, 98 Am. St. Rep. 439, 65 S. W. 4, infra, III. c; Oakey v. Bank of Louisiana (1841) 17 La. 386, infra, this subdivision; Bank of Shaw v. Ransom (1916) 112 Miss. 440, 73 So. 280, and Commercial Bank

v. Union Bank (1854) 11 N. Y. 203, infra, III. e, 3; and Bank of Mt. Airy v. Greensboro Loan & T. Co. (1912) 159 N. C. 85, 74 S. E. 747, supra, III. a.

In Pritchard v. Louisiana State Bank (1831) 2 La. 415, however, an action against a bank for its negligence in respect of protesting and giving notice of dishonor of a note deposited with it for collection, by reason of which the owner of the note had failed in actions thereon brought against two of the indorsers, a recovery was allowed for the face of the note and interest, plus the costs in the suits brought against the indorsers, although there remained a chance of collection from other indorsers, but the issuance of execution on the judgment was conditioned upon the surrender to the bank of the note, and the transfer to it of all the owner's rights therein.

.

Patterson

And in Durnford (1820) 7 Mart. (La.) 460, 12 Am. Dec. 514, where a recovery for the amount of the note was allowed against a bank which had negligently released indorsers, it does not appear whether or not the maker was insolvent.

The view that the measure of damages for breach of duty by a bank, in respect to protesting paper intrusted to it for collection, is prima facie the face of the paper, but subject to the right of the bank to show that the actual loss was a smaller amount, has considerable support. Kriste v. International Sav. & Exch. Bank (1911) 17 Cal. App. 301, 119 Pac. 666; Borup v. Nininger (1861) 5 Minn. 523, Gil. 417; Ft. Dearborn Nat. Bank V. Security Bank (1902) 87 Minn. 81,91 N. W. 257; National Revere Bank v. National Bank (1902) 172 N. Y. 102, 64 N. E. 799, affirming (1900) 54 App. Div. 342, 66 N. Y. Supp. 662; Bridge v. Mason (1865) 45 Barb. (N. Y.) 37; Merchants State Bank v. State Bank (1896) 94 Wis. 444, 69 N. W. 170.

Thus, in Ft. Dearborn Nat. Bank v. Security Bank (1902) 87 Minn. 81,91 N. W. 257, an action by a bank to recover from a depositor the amount of a check deposited for collection, and credited to the depositor's account,

and by him checked out, but which the bank had been unable to collect, in which the defense set up was that the negligence of the bank in failing properly to protest the check had discharged the indorser and drawer thereof, it was stated in effect that the damages suffered in cases of this kind are, prima facie, the face value of the check subject to reduction and mitigation by evidence showing that the drawer and indorser were insolvent, and that the owner of the check, in fact, suffered no damage by their release and discharge from liability. It was also stated that solvency is ordinarily presumed, and the burden of proving the contrary is upon the party who asserts it.

And in National Revere Bank v. National Bank (1902) 172 N. Y. 102, 64 N. E. 799, affirming (1900) 54 App. Div. 342, 66 N. Y. Supp. 662, an action based upon the claim that the defendant had not collected paper sent to it for collection, and had never returned it, or fixed the liability of the indorser by protest, the court said: "In the case at bar there was an indorser who has been discharged, and the consequence is that prima facie the plaintiff has been damaged in a sum equal to the face of the paper." In reply to the suggestion that the payee may have been insolvent, or may not have actually indorsed the paper, or, if there was an indorsement, it may have been without recourse or with waiver of protest, the court said: “It was open to the defendant under the answer to show that the payee and indorser was insolvent, and that the plaintiff was, therefore, not damaged by the failure to protest the paper. That was matter of defense, but no proof was given upon that point, and, in the absence of such proof, the presumption is that the indorser was solvent."

While it was said in Bridge v. Mason (1865) 45 Barb. (N. Y.) 37, an action to recover damages of the defendants, who were bankers, for omitting to present a note for payment at maturity, and to charge the indorsers, and for sending to the maker an incorrect notice of the day the

note fell due, in consequence of which, as was claimed, the maker omitted to pay the note, and subsequently failed in business, whereby the plaintiff lost the note; "The amount of the note was prima facie the rule of damages. The defendants can show in mitigation of damages that the indorser is insolvent, or not worth property sufficient to enable the amount to be realized by process on a judgment. If the indorser is shown to be wholly insolvent and destitute of means, the defendants are entitled to a verdict. The plaintiffs are entitled to recover such damages only as they have sustained, having reference to the amount of property which it shall appear from the evidence that the indorser, whose liability has been lost by the negligence of the defendants, was possessed of as owner."

"The

And in Borup v. Nininger (1861) 5 Minn. 523, Gil. 417, an action against a banker based on his negligence in failing to give notice to an indorser of the nonpayment of a note deposited for collection, the court said: measure of damages in such cases is prima facie the face of the paper. The plaintiff must make out the insolvency of the maker and the solvency of the indorser discharged by the act of the defendants. The defendants may mitigate the damages by showing either the solvency of the maker, the insolvency of the indorser, or that the paper was partially or wholly secured, or any other fact that will lessen the actual loss to the plaintiff; the real loss occasioned by the improper conduct of the defendant being the fact for the jury to arrive at, in measuring the plaintiff's damages." It appeared in this case that the note in question, together with another note, was secured by a mortgage, and the evidence showing that the maker of the note was insolvent, and that the indorser who was discharged by the negligence of the bank was solvent, the damages were held to be the face of the note, less that portion of the proceeds on the foreclosure sale which were applicable to this particular note, and it was stated that the fact that the holder of the note bought it at a dis

count would not change the measure of damages, and that the defendant could not show that the value of the land mortgaged was more than the bid at the sale, unless the sale was fraudulent.

So, also, in Kriste v. International Sav. & Exch. Bank (1911) 17 Cal. App. 301, 119 Pac. 666, it was held that a bank which, by its failure to give notice of the dishonor of time checks deposited with it for collection, has caused the owner to lose his right to proceed against the indorser, is prima facie liable to the owner for the face of the check; but that if the indorser was insolvent, that fact may be shown in reduction of the damages.

And in Merchants State Bank v. State Bank (1896) 94 Wis. 444, 69 N. W. 170, in which the defendant bank was charged with failure to give notice to the indorsers of the nonpayment of certain notes, which it held for collection, the court said: "The plaintiff is entitled to recover such sum as it has lost by reason of the defendant's negligence. That sum is, prima facie, the amount of the notes. . . . There was no evidence to mitigate damages. The indorsers were solvent; the maker is insolvent. It does not appear whether the maker's estate, now in the hands of a receiver, will pay any part of the notes, or how much it will pay. Perhaps it should have gone in mitigation, if it had been shown how much the dividends properly applicable thereto would pay. But no such proof was attempted. The plaintiff deposited the notes in court for the benefit of the defendant, so that it may be reimbursed so far as the proper dividends may go."

That the bank has the burden of showing that its negligence did not cause the loss appears, also, from Capitol State Bank v. Lane (1876) 52 Miss. 677, holding that a bank which received, in part payment of a draft deposited with it for collection, a draft on a third person, and failed to protest it so as to charge the drawer when payment was refused at maturity, thereby became liable for the amount of the latter draft, where, in reply to the suggestion that the

drawers were not shown to have been solvent, the court said, "If they were insolvent, and that would make a difference, the bank should have shown it;" and Miranda v. City Bank (1834) 6 La. 740, 26 Am. Dec. 493, where a recovery for the amount of the note and the cost of an action against an indorser was allowed against a bank, because the notary whom it had employed to protest the note failed to give the indorser proper notice, and thus discharged him from liability.

2. Costs of action against discharged

indorser.

In New York, at least, the costs and expenses of an unsuccessful action by the holder of commercial paper against an indorser thereof cannot be included as a part of the damages recoverable in an action against a bank to which it was intrusted for collection, based on its failure to take the proper steps to preserve the indorser's liability. Hitchcock v. Bank of Suspension Bridge (1901) 57 App. Div. 458, 68 N. Y. Supp. 234; Gilpin v. Columbia Nat. Bank (1917) 167 App. Div. 46, 152 N. Y. Supp. 619, affirmed in (1917) 220 N. Y. 406, L.R.A. 1917F, 864, 115 N. E. 982; Downer v. Madison County Bank (1884) 6 Hill (N. Y.) 648; Ayrault v. Pacific Bank (1863) 1 Abb. Pr. N. S. (N. Y.) 381.

Thus, in Hitchcock v. Bank of Suspension Bridge (N. Y.) supra, it was held that the costs of an unsuccessful suit which the holder of a note' brought against an indorser could not be recovered against a bank to which the note had been intrusted for collection, but which had failed properly to protest it, where the bringing of the action was not induced by any request or misrepresentation on the part of the bank.

And in Downer v. Madison County Bank (1844) 6 Hill (N. Y.) 648, it was held that where the maker and first indorser of a note which had been placed in the hands of the defendant bank for collection were insolvent, but a second indorser was abundantly able to pay if he had been properly charged, the measure of damages, in an action against the bank based on

the failure to give proper notice of protest to the second indorser, was the amount of the note with interest, but that the costs and expenses described in the action against the second indorser could not be included, the court saying: "In consequence of the neglect to give a sufficient notice to Remer, the plaintiff has lost his debt, and that amount, with the interest upon it, constitutes the true measure of damages. That is the loss which has directly resulted to the plaintiff from the breach of the defendant's contract. I see no principle upon which the plaintiff can recover the costs and expenses which were incurred in the vain attempt to collect the note from Remer. If the suit against him had any necessary connection with the breach of the defendant's undertaking, it was only a remote consequence, for which the defendants are not answerable. The wrong complained of must be the proximate cause of the damage. Such is the general rule, and this case does not fall within any established exception to it. The injury was complete and the right of action perfect the moment the proper time for giving notice had gone by. The plaintiff was not obliged to sue Remer. He might have brought his action at once against the defendants, and recovered the full amount of his debt. True, the suit against Remer was brought upon the supposition that he had been duly charged as indorser. But that was the plaintiff's mistake and must be his misfortune. The defendants are not answerable for it; or, at least, not in this form of action. It is said that the defendants led the plaintiff into the error by returning the note with a notarial certificate annexed, which stated that notice had been given to the indorsers. But the action is based upon the implied undertaking of the defendants to give notice, and not upon any false representation by them that notice had been given. Nothing of the kind is mentioned in the declaration. Indeed, it would have been difficult to frame a count partly in assumpsit and partly in case. But it is enough that the action is founded on

!

the contract, and on nothing else. The only immediate or necessary damage which the plaintiff sustained by the breach was the loss of his debt; and the defendants are not answerable for the remote consequences of their default, however injurious they may have been to the plaintiff."

So, also, in Gilpin v. Columbia Nat. Bank (1915) 167 App. Div. 46, 152 N. Y. Supp. 619, affirmed in (1917) 220 N. Y. 406, L.R.A.1917F, 864, 115 N. E. 982, but without reference to this particular point, the court, on the authority of the two preceding cases, said: "The costs awarded against the plaintiff in his action against the indorser, we think, were improperly included in the recovery herein. the defendant was negligent, it was not necessary, as a condition precedent, to sue the indorser, and plaintiff's cause of action was complete, aside from the unsuccessful attempt to collect from the indorser."

If

While in Ayrault v. Pacific Bank (1863) 1 Abb. Pr. N. S. (N. Y.) 381, an action against a bank by the owner of certain promissory notes which it held for collection, based on its failure to make demand on the maker and to give notice of nonpayment to the indorsers, the court reversed a judgment in favor of the plaintiff, because of the inclusion therein of the costs of an unsuccessful action brought against the indorser, saying: "The costs of such former action are not a necessary consequence of the defendant's neglect, if any existed. On the contrary, if the indorsers were liable, the defendants were not, and vice versa. If the defendants had guaranteed the notes to be collectable, or in any other way actively induced the plaintiffs to bring the action, they would have been liable for the costs; as it is, the charge was erroneous, and the judgment must, therefore, be reversed."

In some other jurisdictions, however, such costs and expenses have been allowed as a part of the recovery.

Thus, in Oakey v. Bank of Louisiana (1848) 17 La. 386, a recovery of the face of the note, with interest and costs of an unsuccessful action

against the first indorser, was allowed in favor of second indorsers, who had taken up the note in ignorance of the fact that the notary employed by the bank had, by an error in protesting the note, discharged him.

And see Pritchard v. Louisiana State Bank (1831) 2 La. 415, Miranda v. City Bank (1834) 6 La. 740, 26 Am. Dec. 493, and Bellemire v. Bank of United States (1836) 1 Miles (Pa.) 173, supra, this subdivision.

Even in the New York cases cited supra, it is intimated that if the bringing of the action against the released indorsers had been induced by any misrepresentation or request on the part of the bank, or had been a condition precedent to the maintenance of an action against the bank, the costs and expenses incurred therein might have been recoverable, and it may be observed that in each of the Louisiana cases, at least, where the recovery of such costs and expenses was allowed, there was a certificate of protest apparently valid upon its face, and that the actions against the indorsers were brought in reliance upon such certificates.

c. As to notifying owner of nonacceptance or nonpayment.

The measure of damages for the failure of a bank with which paper is deposited for collection, to notify the owner of its nonacceptance or nonpayment, appears clearly to be the actual loss resulting from such failure, rather than the face of the paper.

United States. Merchants' & M. Bank v. Stafford Nat. Bank (1877) 44 Conn 565, Fed. Cas. No. 9,438.

Alabama.-Bank of Mobile v. Huggins (1841) 3 Ala. 206; Jefferson County Bank v. Hendrix (1905) 147 Ala. 670, 1 L.R.A. (N.S.) 246, 39 So. 295; Hendricks v. Jefferson County Sav. Bank (1907) 153 Ala. 636, 14 L.R.A. (N.S.) 686, 45 So. 136.

Indiana.-Citizens Nat. Bank V. Third Nat. Bank (1898) 19 Ind. App. 69, 49 N. E. 171.

Missouri.-Selz v. Collins (1893) 55 Mo. App. 55.

Nebraska.-Omaha Nat. Bank v. Kiper (1900) 60 Neb. 33, 82 N. W. 102.