Ward v. Smith
ERROR to the Circuit Court of Maryland.
In August, 1860, William Ward, a resident of Alexandria in Virginia, purchased of one Smith, of the same place, then administrator of the estate of Aaron Leggett, deceased, certain real property situated in the State of Virginia, and gave him for the consideration-money three joint and several bonds of himself and Francis Ward. These bonds, each of which was for a sum exceeding four thousand dollars, bore date of the 22d of that month, payable, with interest, in six, twelve, and eighteen months after date, 'at the office of discount and deposit of the Farmers' Bank of Virginia, at Alexan dria.'In February, 1861, the first bond was deposited at the bank designated for collection. At the time there was indorsed upon it a credit of over five hundred dollars; and it was admitted that, subsequently, the further sum of twenty-five hundred dollars was received by Smith, and that the amount of certain taxes on the estate purchased, paid by the Wards, was to be deducted.
In May, 1861, Smith left Alexandria, where he then resided, and went to Prince William County, Virginia, and remained within the Confederate military lines during the continuance of the civil war. He took with him the other two bonds, which were never deposited at the Farmers' Bank for collection. Whilst he was thus absent from Alexandria, William Ward deposited with the bank to his credit at different times, between June, 1861, and April, 1862, various sums, in notes of different banks of Virginia, the nominal amount of which exceeded by several thousand dollars the balance due on the first bond. These notes were at a discount at the times they were deposited, varying from eleven to twenty-three per cent. The cashier of the bank indorsed the several sums thus received as credits on the first bond; but he testified that he made the indorsement without the knowledge or request of Smith. It was not until June, 1865, that Smith was informed of the deposits to his credit, and he at once refused to sanction the transaction and accept the deposits, and gave notice to the cashier of the bank and to the Wards, obligees in the bond, of his refusal. The cashier thereupon erased the indorsements made by him on the bond.
Smith now brought the present action upon the three bonds to recover their entire amount, less the sum credited on the first bond when it was deposited, the sum of twenty-five hundred dollars, subsequently received by the plaintiff, and the amount of the taxes paid by the defendants on the estate purchased.
The court below instructed the jury, that if they found that the defendants executed the bonds, the plaintiff was entitled to recover their amounts, less the credit indorsed on the first one, and the taxes paid by defendants, and the subsequent payment to the plaintiff with interest on the same. The plaintiff recovered, and the defendants brought the case to this court by writ of error.
Messrs. Brown and F. W. Brune, for the plaintiffs in error:
1. When securities are left with a bank for collection, the bank is, ipso facto, made the agent of the payee, to receive payment thereof. It is the agent of the payee, not of the payer. 
2. The bank may release the payer by receiving payment in gold, silver, copper, drafts, or checks on other banks or private bankers, bank notes of its own or other banks, circulating at par or below par.
It matters not what may be the particular kind or forms of money accepted by the bank, its relation of agent towards its principal and the debtor ceases the moment the funds so received are mingled with its own funds, and credit is given on its books for the amount so collected as cash.
The relationship of debtor and creditor, from that moment, subsists between the bank and its former principal, and the bank is liable for the full amount so credited. 
3. It was stipulated in the bonds that they should be payable at the Farmers' Bank; and it was thus made part of the contract that all the bonds should be deposited in that bank by the payee, Smith, at maturity, or before; so that the obligors might be able to make payment of them at the bank, according to the law and usage of banks, in making collections and receiving payments. 
It is not pretended that the payee, Smith, gave any instructions to the bank, or made any communication to the obligors, attempting to modify or qualify the general law and practice of banks in reference to such matters.
4. The defendants were entitled to have credited to them the notes they deposited at the bank for the plaintiff, either at their par or actual value; and the court erred in allowing them only the three previous credits mentioned in its instruction; and in allowing plaintiff interest on the entire balance during the war. 
Messrs. R. J. and J. L. Brent, contra.
Mr. Justice FIELD, after stating the case, delivered the opinion of the court, as follows:
^1 Marine Bank v. Fulton Bank, 2 Wallace, 252.
^2 Wallace v. McConnell, 13 Peters, 136, 150; Bank of the United States v. Bank of Georgia, 10 Wheaton, 333, 341, 344, 346, 347; Levy v. Bank of the United States, 4 Dallas, 234; Marine Bank v. Birney, 28 Illinois, 90 Same v. Rushmore, Id. 463; Tinkham v. Heyworth, 31 Illinois, 522.
^3 Fitler v. Beckle, 2 Watts and Sergeant, 458, 462; Brabston v. Gibson 9 Howard, 263, 279.
^4 Jackson Ins. Co. v. Stewart, 15 American Law Reg. (6 New Series), 732, and note, 735; Tucker v. Watson, Id. 220; Brewer v. Hastie, 3 Call, 22; Hoare v. Allen, 2 Dallas, 102; Foxcraft v. Nagle, Id. 132. Letter of Mr Jefferson, 1 American State Papers, pp. 257, 304-312.