It is a practice so universal that any one must be held to know it, that a bank will employ another bank to make collections at a distance. But the legal relations that result are matters upon which courts are not agreed. But most courts agree that if the collecting bank employs as its agent the bank upon which the paper is drawn, or where it is payable, it is guilty of negligence,1 and where that negligence can be considered the cause of an injury to the holder the first bank is liable.2 But if such a proceeding is customary, one court affirms that customary negligence is not negligence.3 All courts agree that if the bank of primarycollection does not use ordinary and reasonable care and diligence in selecting its correspondent bank, it is liable for the negligent acts and the defaults of that bank.4 If there is an express contract governing the liability of the initial bank, that contract will govern.5 But there being no express contract, the liability of the initial bank has been the subject of hot debate between the different courts. The Supreme Court of Pennsylvania has been unable to agree with itself,6 but it is probably to be classed upon one side of the question. The courts of the United States7 and of New York,8 New Jersey,9 Ohio,10 Indiana,11 probably Pennsylvania,12 Michigan,13 Montana14 and Minnesota,15 maintain the absolute liability of the first bank for all defaults of its correspondent banks. It need not be said that if the owner of the collection himself treats with the correspondent, he makes the correspondent his own agent. And the same result follows if he, himself, selects the correspondent. Many of these courts treat the question as one of delegation of power and not possession of power. The question is not whether the first bank is delegating any power, but rather, has it the power to appoint a sub-agent for the principal, if the relation is one of agency? The above cases make answer that it has no such power granted to it by the contract of collection, and therefore the initial bank is liable for all defaults of its correspondent, including a failure to pay over the proceeds. But the courts of Louisiana,16 Massachusetts,17 Iowa,18 Mississippi,19 Missouri,20

21 To determine to whom liable consult the next section.

1 First Nat. Bank v. Fourth Nat. Bank, 56 Fed. R 967, 16 U. S. App. 1; Germ. Nat. Bank v. Burns, 12 Colo. 539; Western Scraper Co. v. Sadilek, 69 N. W. R 765; Drovers' Nat Bank v. Anglo-Am. Co., 117 I1L 100; Merchants' Nat. Bank v. Goodman, 109 Pa. 422. Contra, Indig v. Nat. City Bank, 80 N. Y. 100; Briggs v. Cent. Nat. Bank, 89 N. Y. 182. But the New York court say the collecting bank does not make the second bank its agent St Nicholas Bank v. State Nat Bank, 128 N. Y. 26. And the English court so held. Heywood v. Pickering, 43 L. J. Q. B. 145.

2 This is simply the rule of proximate cause. First Nat Bank v. City Nat. Bank, 34 S. W. R 458.

3 Indig v. Nat City Bank, 80 N. Y. 100. See note 1, ante.

4 AEtna Ins. Co. v. Alton City Bank, 25 111. 243; Dorchester Bank v. New England Bank, 1 Cush. 177. See the cases cited in notes 16 to 28 to this section.

5 Exchange Nat. Bank v. Third Nat. Bank, 112 U. S. 276; In re State Bank, 56 Minn. 119; Power v. First Nat. Bank, 6 Mont 251. But it would be against public policy for the bank to contract against liability for its own negligence, although it could contract against liability for its correspondent's negligence.

See Minneapolis Co. v. Metropolitan Bank, 44 L R A 504

6 Compare Mechanics' Bank v. Earp, 4 Rawle, 384; Bellmire v. United States Bank, 4 Whart. 109, with "Wingate v. Mechanics' Bank, 10 Pa. 104; Bradstreet v. Everson, 72 Pa. 124

7 Exchange Nat. Bank v. Third Nat. Bank, 112 U. S. 276; Hoover v. Wise, 91 U. S. 308; Kent v. Dawson Bank, 13 Blatch. 237. The English rule is the same.

8 Castle v. Corn Exchange Bank, 148 N. Y. 122.

9Davey v. Jones, 42 N. J. Law, 28; Titus v. Mechanics' Bank, 35 N. J. Law, 588.

10 Reeves v. State Bank, 8 Ohio St 465.

11 Tyson v. State Bank, 6 Blackf. 225.

12 Siner v. Stearne, 155 Pa. 662; Bradstreet v. Everson, 72 Pa. 124

13 Simpson v. Waldby, 63 Mich. 439.

14 Power v. First Nat. Bank, 6 Mont. 251.

15 Streissguth v. National Germ. Am. Bank, 43 Minn. 50.

16 Hum v. Union Bank, 4 Rob. (La.) 109.

17Fabens v. Mercantile Bank, 23 Pick. 330.

18 Guelick v. National State Bank, 56 Iowa, 434

19 Third Nat. Bank v. Vicksburg, 61 Miss. 112.

20 Daly v. Butchers' Bank, 56 Mo. 94

Nebraska,21 Illinois,22 Connecticut,23 Maryland,24 "Wisconsin,25 Colorado,26 Tennessee27 and Kansas28 affirm that the first bank is liable only for due care and diligence in the selection of a trustworthy correspondent; that it is given power by the very fact of the deposit for collection to employ sub-agents, who thereupon become the agents of the holder. This divergence of authority is exceedingly unfortunate, since in the states which hold this rule, if a party can bring his action in a United States court, the state rule will not be followed, and the practitioner is confronted with one kind of law in one court and another kind of law in another court, both within the same state, and with, in some cases, concurrent jurisdiction. The primary difficulty with this latter view is that it is based upon the idea that the collecting bank is an agent of the holder, but the collecting bank is bailee and its agents are its own agents.29 What the collecting bank does is not in the principal's name, but in its own name as bailee and qualified owner of the paper.30 In the next place, if the collecting bank is merely an agent, and sends the paper to another agent, the primary bank could claim no lien as against a garnishment directed to the secondary bank against the owner, and hence it would lose its banker's lien, although checks might have been drawn against the very collection and paid. In the third place this view requires the holder of a collection, in order to protect himself fully, to ascortain the name of the correspondent bank and delay the collection until he can acquire satisfactory information. This argument ah inconvenienti ought to be controlling in the absence of some imperative rule of law. There are certain other states which, adopting the rule that the primary bank is not liable in general for the acts of the correspondent bank, yet claim the rule to be that, if the payee resides at the place where the collecting bank is located, that bank is liable for the acts of its correspondent at all events.31 It is hardly necessary to add that the correspondent bank is liable to whomever the particular rule adopted makes its employer.32

21 First Nat. Bank v. Sprague, 34 Neb. 31&

22 Waterloo Milling Co. v. Kuen-ster, 158 I11. 259. See Sec. 186, note 2.

23 East Haddam Bank v. Scovil, 12 Conn. 303.

24 Citizens' Bank v. Howell, 8 Md. 530.

25 Stacy v. Dane Co. Bank, 12 Wis. 629.

26 Bank v. Burns, 12 Colo. 539.

27 Bank of Louisville v. Bank, 8 Baxt. 101.

28 Bank v. Ober, 31 Kan. 599.

29 It is unfortunate tbat the question has been considered one of agency. Had it been discerned to be a bailment, the difficulty would not have resulted. See Sec. 171, ante. 30 No one probably would dispute that, if the paper were deposited as collateral security, a typical bailment, and the bank proceeded to collect it under a power, the agents used in the collection, whether banks or individuals, would be the agents of the bailee. It is conced-edly true in the case of common carriers that the successive carriers, unless the contract is special, are agents of the initial carrier.