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15. Certificates of deposit.

A certificate of deposit is a receipt given by a bank or banker or any other person for money deposited whereby it is agreed to pay the person named therein, or order, the amount of money specified, in the manner agreed upon between the parties. If negotiable the certificate is a promissory note.89 But a certificate which states that a certain sum is subject to the depositor's order, but contains no express promise to pay is not a promissory note." L. R. A. 392, citing Colo. Gen. Stat. Beardsley v. Webber, 104 Mich. 88, 62 (1883), chap. 9, § 3; Ill. Rev. Stat. N. W. 173. (1884), chap. 98, § 3; Ind. Rev. Stat. (1881), § 5501; Iowa Code (1873), § 2085; Miss. Rev. Code (1880), § 1123, 1124.

89. Certificate as promissory note. A certificate of deposit of a certain sum of money, payable at a future day, with interest until due, for the use of a person named, and to his order, upon the return of a certificate, is a negotiable promissory note. Miller v. Austen, 13 How. (U. S.) 218, 14 L. Ed. 119. There are a number of other cases cited in the Century Digest (Bills and Notes, § 62), in support of this proposition, among which are:

Alabama.- Renfro v. Merchants & Mechanics' Bank, 83 Ala. 425, 3 South. 776.

California.- Welton v. Adams, 4 Cal. 37, 60 Am. Dec. 579; McMillan v. Richards, 9 Cal. 365, 70 Am. Dec. 655; Coye v. Palmer, 16 Cal. 158; Mills v. Barney, 22 Cal. 240; Brummaghim v. Tallant, 29 Cal. 503, 89 Am. Dec. 61. Connecticut.-Kilgore v. Bulkley, 14

Conn. 362.

Florida.- Maxwell v. Agnew, 21 Fla. 154.

Georgia.— Carey v. McDougald, 7 Ga. 84; Lynch v. Goldsmith, 64 Ga. 42. Illinois.-Peru Bank v. Farnsworth, 18 Ill. 563; Laughlin v. Marshall, 19 Il. 390; Swift v. Whitney, 20 Ill. 144; Hunt v. Divine, 37 Ill. 137.

Indiana.- National State Bank v. Ringel, 51 Ind. 563; Gregg v. Union Co. Nat. Bank, 87 Ind. 238; Drake v. Market, 21 Ind. 433, 83 Am. Dec. 358. Iowa.- Bean v. Briggs, 1 Iowa, 488, 63 Am. Dec. 464.

Maryland.-Fells Point Sav. Inst. v. Weedon, 18 Md. 320, 81 Am. Dec. 603. Michigan.- Cate v. Patterson, 25 Mich. 191; Tripp v. Curtenius, 36 Mich. 494, 24 Am. Rep. 610; Birch v. Fisher, 51 Mich. 36, 16 N. W. 220;

Minnesota.- Cassidy v. First Nat. Bank, 30 Minn. 86, 14 N. W. 363; Mitchell v. Eastman, 37 Minn. 335, 33 N. W. 910.

New York.-Orleans Bank v. Merrill, 2 Hill (N. Y.), 295; Pardee v. Fish, 60 N. Y. 265, 19 Am. Rep. 176; Frank v. Wessels, 64 N. Y. 155; Baker v. Adams, 9 App. Div. 365, 41 N. Y. Supp. 399.

North Carolina.- Johnson v. Henderson, 76 N. C. 227.

Ohio.- Howe v. Hartness, 11 Ohio St. 449, 78 Am. Dec. 312; Citizens' Nat. Bank v. Brown, 45 Ohio St. 39, 11 N. E. 799.

Texas. First Nat. Bank v. Greenville Nat. Bank, 84 Tex. 40.

Wisconsin.- Ford v. Mitchell, 15 Wis. 304; Lindsey v. McClelland, 18 Wis. 481, 86 Am. Dec. 786; Klauber v. Biggerstaff, 47 Wis. 551, 3 N. W. 357, 32 Am. Rep. 773; Curran v. Witter, 68 Wis. 16, 31 N. W. 705, 60 Am. Rep. 827.

90. Shute v. Pacific Nat. Bank, 136 Mass. 487. This case seems to stand somewhat alone among a great number of cases which are all to the effect that the ordinary certificate of deposit is a promissory note. But the case arose under a statute (Gen. Stat., chap. 53, § 10; Pub. Stat., chap. 77, § 14), providing that in an action on a promissory note payable on demand, brought by indorsee against the promisor, any matter shall be deemed a legal defense which would be a defense to a suit on such note brought by the promisee, except that no matter arising after notice of the indorsement or transfer of such note has been given to the promisor shall constitute a defense; and the court held that since certificates of deposit were not commonly known in the community as promissory notes, to include them

And it has been held that where the certificate does not designate any time for payment, but is payable on the return of the certificate, it is not a promissory note payable on demand. The negotiability of a certificate of deposit depends upon the wording of the instrument, and is governed by the same rules that control promissory notes.92

16. Checks.

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a. Definition. A check is a bill of exchange drawn on a bank payable on demand. This is the definition contained in the English Bills of Exchange Act of 1882,93 and also in the Negotiable Instruments Law recently adopted in many of the States.94 But in so far as these acts define a check as a bill of exchange, they are declaratory of the law as it existed at the time of their passage.

within the statute above cited would defeat entirely the purpose for which they are given. See also Hunt, Appellant, 141 Mass. 515, 6 N. E. 554; O'Neil v. Bradford, 1 Pinn. (Wis.) 390, 42 Am. Dec. 574; Patterson v. Poindexter, 6 Watts & S. (Pa.) 227,

40 Am. Dec. 554.

91. Shute v. Pacific Nat. Bank, 136 Mass. 487; Patterson v. Poindexter, 6 Watts & S. (Pa.) 227, 40 Am. Dec. 554; Charnley v. Dulles, 8 Watts & S. (Pa.) 353; Lebanon Bank v. Mangan, 28 Pa. St. 452; London Sav. Fund Soc. v. Hagerstown Sav. Bank, 36 Pa. St. 498, 78 Am. Dec. 390.

92. Negotiability.-A certificate of deposit may be made payable to A. B. when it is not negotiable. It may be made payable to A. B. or order, when it is negotiable by indorsement. It may be made payable to A. B. or bearer, when it is negotiable by simple delivery. If it be expressed as payable in currency or in current funds, or the like phraseology, it is not negotiable, because it is not made payable in money. Morse on Banks and Banking,

p. 65.

See also for particular instances of negotiable and nonnegotiable certificates for deposit, Welton v. Adams, 4 Cal. 37; Mills v. Carney, 22 Cal. 240; Poorman v. Mills, 35 Cal. 118; Carey v. McDougald, 7 Ga. 84; Lynch v. Goldsmith, 64 Ga. 42; Lafayette Bank v. Ringel, 51 Ind. 393; Bellows Falls Bank v. Rutland, 40 Vt. 377.

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On return of receipt.-A written instrument acknowledging the receipt of a specified sum of money in paper currency for account of a person named, and promising to pay the same to such person or order "on return of this receipt," with interest, is a negotiable promissory note. The words on return of this receipt" do not make it payable upon a contingency, or constitute a condition precedent; and its being payable in paper currency will be taken as meaning legal tender paper currency. Frank v. Wessels, 64 N. Y. 155.

Current funds.-A certificate payable in "current funds" is not negotiable. Lafayette Nat. Bank v. Ringel, 51 Ind. 393. This case does not seem to be in accord with other cases involving certificates of deposit payable

in current funds. See Citizens' Nat. Bank v. Brown, 45 Ohio St. 526, 11

N. E. 799, 4 Am. St. Rep. 526.

93. English Bills of Exchange Act, 1882, § 73 (see Appendix); Chalmers on Bills of Exchange, p. 245.

See Appendix. 94. Neg. Inst. L. (N. Y.), § 321.

95. M'Lean v. Clydesdale Bank, L. R., 9 App. Cas. 95, per Lord Blackburn, who says that a check is an unconditional order in writing addressed to a banker requiring him to pay a sum certain in money at a fixed or determinable future time, that is to say, on presentation; and coming within this definition it would clearly be a bill of exchange.

In considering the above definition, which is now more authoritative than any of those used by the text-writers, the definition of a bill of exchange should also be borne in mind.96 With the definition of a bill of exchange in view, a check may be defined as an unconditional order in writing addressed by a person to a bank or banker, signed by the person giving it, requiring the bank or banker to whom it is addressed to pay on demand a sum certain in money to order or bearer.9

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New Hampshire.— Barnet v. Smith, 30 N. H. 256.

New York.-Murray v. Judah, 6 Cow. 484; Smith v. Jones, 20 Wend. 192; Risley v. Phenix Bank, 83 N. Y. 318, 38 Am. Rep. 421; Duncan v. Berlin, 60 N. Y. 153.

The United States Supreme Court First Nat. Bank, 36 Neb. 744, 55 N. in discussing the similarity of checks W. 239. and bills of exchange used the following language: "Bank checks are not inland bills of exchange, but have many of the properties of such commercial paper; and many of the rules of the law merchant are alike applicable to both. Each is for a specific sum payable in money. In both cases there is a drawer, a drawee, and a payee. Without acceptance, no action can be maintained by the holder upon either against the drawer." Merchants' Nat. Bank of Boston v. State Bank, 10 Wall. (U. S.) 604, 19 L. Ed. 1008. See Bull v. Kasson Nat. Bank, 123 U. S. 105, 8 Sup. Ct. 62, 31 L. Ed.

97.

A bank check is substantially the same as an inland bill of exchange. It passes by delivery, when payable to bearer, and the rules as to presentment, diligence of the holder, etc., which are applicable to the one, are generally applicable to the other. Rogers v. Durant, 140 U. S. 298, 11 Sup. Ct. 754, 35 L. Ed. 481.

The following decisions of the State courts are to the effect that checks are substantially the same as bills of exchange (see Century Digest, Bills and Notes, 20):

Alabama.- First Nat. Bank v. Nelson, 105 Ala. 180, 16 South. 707.

Illinois. Bickford V. First Nat. Bank of Chicago, 42 Ill. 238; Rounds v. Smith, 42 Ill. 245.

Indiana.- Glenn v. Noble, 1 Blackf. (Ind.) 104; Henshaw v. Root, 60 Ind. 220.

Kentucky.- Shrieve v. Duckham, 11 Ky. 194; Humphries v. Bicknell, 12 Ky. 296.

Maryland.-Moses v. Franklin Bank, 34 Md. 574; Hawthorn v. State, 56 Md. 530; Laird v. State, 61 Md. 309. Nebraska.- Wood River Bank v.

South Carolina.- Sutcliffe v. McDowell, 2 Nott & McC. 251.

Tennessee.- Planters' Bank v. Merritt, 54 Tenn. 177.

Virginia.- Purcell v. Allemong, 22 Gratt. 739.

Contra. The following cases contain statements to the effect that checks are not bills of exchange, although the similarity is not denied:

Indiana.- Griffin v. Kemp, 46 Ind. 172; Harrison v. Wright, 100 Ind. 515, 58 Am. Rep. 805.

Iowa.- Roberts v. Austin, 26 Iowa,

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Maryland.- Exchange Bank v. Sutton Bank, 78 Md. 577, 28 Atl. 563, 23 L. R. A. 173.

Massachusetts.-Bullard v. Randall, 67 Mass. 605, 61 Am. Dec. 433; Way v. Towle, 155 Mass. 374, 29 N. E. 506. Missouri.- Hays v. Lathrop Bank, 75 Mo. App. 211.

96. Neg. Inst. L. (N. Y.), § 210. See Appendix.

97. A bank is defined by the Negotiable Instruments Law (§ 2) as including any person or association of persons carrying on the business of banking whether incorporated or not. See Wieland's Admr. v. State Nat. Bank, 23 Ky. L. Rep. 1517, 65 S. W. 617; s. c., 66 S. W. 26.

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98. Daniel defines a check as 66 "draft or order upon a bank or banking-house, purporting to be drawn upon a deposit of funds for the

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b. Distinction between checks and bills of exchange.- Notwithstanding the statement contained in the Negotiable Instruments Law, that a check is a bill of exchange, there are differences between checks and bills which must be recognized. "The chief points of difference are that a check is always drawn on a bank or banker. No days of grace are allowed. The drawer is not discharged by the laches of the holder in presentment for payment, unless he can show that he has sustained some injury by the default. It is not due until payment is demanded, and the Statute of Limitations runs only from that time. It is, by its face, the appropriation of so much money of the drawer in the hands of the drawee, to the payment of an admitted liability of the drawer. It is not necessary that the drawer of a bill should have funds in the hands of the drawee. A check in such a case would be a fraud." 99 It is provided in the Negotiable Instrupayment at all events of a certain Chicago, B. & Q. R. R. Co. v. Burns, sum of money, to a certain per- 61 Neb. 793, 86 N. W. 483. son therein named, or to him or "his order, or to bearer, and pay"able instantly on demand." (Daniel on Neg. Inst., § 1566.) In the note to this definition Mr. Daniel calls attention to the insufficiency of the definition employed by many of the textwriters. Among these are the following: Parsons on Notes and Bills (vol. 2), p. 57: "A check is a brief draft or order on a bank or banking-house, directing it to pay a certain sum of money." Edwards on Bills, 396: "A check drawn on a bank is a bill of exchange payable on demand." Story on Promissory Notes, § 487: "A check is a written order or request addressed Distinction between check and bill. to a bank, or to persons carrying on Mr. Justice Story, in stating the the business of bankers, by a party distinction in point of law between having money in their hands, request- checks and bills of exchange, refers to ing them to pay on presentment to an- the rule that a bill of exchange taken other person, or to him or bearer, or after the day of payment subjects the to him or order, a certain sum of holder to all the equities attaching to money specified in the instrument." it in the hands of the party from In view of the legislative declaration whom he receives it, and adds: "This as to what constitutes a check, con- rule does not apply to a check, for it tained in the Negotiable Instruments is not treated as overdue, although it Law, in force in many of the States, as well as the decisions of the courts in most of the States, it would seem that the definition in the text is accurate and sufficiently comprehensive.

Pay check issued by the paymaster of a railroad company, drawn on the treasurer, payable at a bank named therein, is not a check on such bank.

An indorsement on an architect's certificate reciting that a certain amount is due to the contractor, viz.: "P. H. & Co., pay to the order of E.” (contractor), and signed by the owner of the building, P. H. & Co. having in their hands funds of the owner to be paid out as required for the construction of the building, is a check and not a bill of exchange. Industrial Bank of Chicago v. Bowes, 165 Ill. 70, 46 N. E. 10.

99. Merchants' Nat. Bank of Boston v. State Bank, 10 Wall. (U. S.) 647, 19 L. Ed. 1019; Re Brown, Fed. Cas. No. 1,985 (2 Story, 502).

is taken by the holder some days after its date, and it is payable on demand. On the contrary, the holder, in such a case, takes it, subject to no equities of which he has not, at the time, notice; for a check is not treated as overdue merely because it has not been presented as early as it might be, or as a bill of exchange is required to be, to

ments Law and in the English Bills of Exchange Act that except as otherwise provided therein, the provisions thereof applicable to a bill of exchange payable on demand apply to a check.1

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c. Checks payable after date. The great weight of authority in this country upholds the doctrine that a draft or order upon a

charge the drawer, or indorser, or presenting a check in due time for transferrer. One reason for this seems payment would not discharge the latto be, that, strictly speaking, a check ter, unless he had been injured thereis not due until payment is demanded. Re Brown, Fed. Cas. 1,985; 2 Story, 502, 513; Story on Promissory Notes, § 491.

In Massachusetts the distinction has been thus expressed: "A check differs from a bill of exchange in this, that it is drawn upon a bank, or on the house of a private banker, is payable on presentment, and the bank or banker is not entitled to days of grace upon it, although payable on some other day than its date. It may also be passed from hand to hand, and a reasonable time is allowed to each party receiving the same to present it for payment. Taylor v. Wilson, 11 Metc. (Mass.) 44, 52. See also Daly v. New Jersey Steel & Iron Co., 155 Mass. 374, 29 N. E. 506.

In New York it has been held that a bill of exchange is not necessarily payable on demand, but a check is. Both may be drawn on a bank or banker. Bowen v. Newell, 8 N. Y. 190. In Ohio it has been held in a leading case that checks and bills of exchange are to be distinguished in the following particulars: (1) "A check is drawn upon an existing fund, and is an absolute transfer or appropriation to the holder, of so much money in the hands of the drawee; whereas a bill of exchange is not always or necessarily drawn upon actual funds in the hands of the drawee, but very frequently drawn in anticipation of funds, or upon a previously arranged credit. (2) The drawer of a check is always the principal; whereas the drawer of a bill frequently stands in the position of a mere surety. (3) As between the holder of a check and an indorser, demand of payment within due time is essential to the liability of the letter. But days of grace being allowed to bills of exchange, the time for demanding payment of a bill is different. (4) As between the holder and drawer, however, mere delay in

by, and then only to the extent of his loss; but a different rule in this respect prevails in case of a bill of exchange. (5) A check requires no acceptance, and when presented, the presentment is for payment. (6) It is not protestable, or in other words, protest is not requisite to hold either the drawer or an indorser." Morrison v. Bailey, 5 Ohio St. 632, 64 Am. Dec. 632. And see Andrews v. Blachly, 11 Ohio St. 89.

In England it has been held that "a check is clearly not an assignment of money in the hands of a banker:- it is a bill of exchange payable at a banker's. The banker is bound by his contract with his customer to honor the check, when he has sufficient assets in his hands; if he does not fulfil his contract he is liable to an action by the drawer, in which heavy damages may be recovered if the drawer's credit has been injured. Hopkinson v. Forster, L. R., 19 Eq. 74, 76, per Jessel, M. R.

Byles in his work on Bills (16th ed., p. 33), summarizes the chief points of difference between checks and bills as follows: "Checks are not accepted, hence the holder cannot sue the bank. The drawer is not discharged by the holder's failure to present in due time, unless the bank fail. Notice of dishonor to the drawer is rarely legally necessary, as absence of effects in the drawee's hands, the almost universal cause of dishonor, excuses it, as does countermand of payment. They must be drawn on a banker, and payable on demand, and are generally, though not necessarily, inland. And finally the banker is protected against a foreign or unauthorized indorsement of a draft on him to order on demand."

1. Neg. Inst. Law (N. Y.), § 321. See Appendix; English Bills of Exchange Act, 1882, § 73. See Chalmers on Bills of Exchange, p. 245.

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