merchant and the Negotiable Instruments Law both apply the same rules to the presentment of the check as are applicable to the presentment of a bill of exchange payable on demand.33 d. What constitutes reasonable time.- The Negotiable Instruments Law lays down the rule that in determining what constitutes reasonable time regard is to be had "to the nature of the instrument, the usage of trade or business (if any), with respect to 9 34 such instruments, and the facts of the particular case.' In respect to the drawer of a check, unless injury is caused by the delay the question of time is not material, for as we have seen, the drawer will continue liable upon his check until its payment. But in order to charge an indorser it must be shown that the check was presented within a reasonable time. The law merchant has established the rule that where all the parties to the check reside in the same place the holder must present it not later than the next day after date.35 It is not to be claimed, however, that this rule is definite and absolute in all cases. What is reasonable time will depend upon circumstances, and will, in many cases, depend upon the time, the mode, and the place of receiving the check, and upon the relations of the parties between whom the question arises. 36 What has already been said in regard to the time of covery of the money so paid by mistake. Martin v. Home Bank, 160 N. Y. 190, 54 N. E. 717. Iowa.- Northwestern Coal Co. v. Bowman, 69 Iowa, 150, 28 N. W. 496. Kentucky.- Cawine v. Browinski, 6 Bush, 457, 99 Am. Dec. 648. Maine.- Veazie Bank v. Winn, 40 Me. 60. Missouri.-Wear v. Lee, 87 Mo. 358. 33. Neg. Inst. L. (N. Y.), § 321. 34. Neg. Inst. L. (N. Y.), § 4. 35. What constitutes reasonable time. The payee of a check must present it for payment within reasonable time in order to preserve his New York. Carroll v. Sweet, 128 right of recourse to the drawer or N. Y. 19, 27 N. E. 763, 13 L. R. A. indorser in case of its nonpayment; 43; Smith v. Miller, 43 N. Y. 171, and where such payee resides and re- 3 Am. Rep. 696; Syracuse, B. & N. Y. ceives the check at the place where R. R. Co. v. Collins, 57 N. Y. 641; the bank is located, such reasonable Burkhalter v. Second Nat. Bank, 42 time does not extend beyond the close N. Y. 538; Smith v. Miller, 6 Abb. of banking hours on the day succeed- Pr. 234; Kelty v. Second Nat. Bank, ing the receipt of the check excluding 52 Barb. 328; Benton v. Martin, 31 Sundays and holidays. Grange v. N. Y. 382; Horker v. Anderson, 21 Reigh, 93 Wis. 552, 67 N. W. 1130. Wend. 372; Smith v. James, 20 Wend. Among other cases to the same ef- 192; Gough v. Staat, 13 Wend. 549. fect are: North Carolina.- First Nat. Bank v. Alexander, 84 N. C. 30. California.- Simpson V. Pacific Mutual Life Ins. Co., 44 Cal. 139; Himmelman v. Hotaling, 40 Cal. 111, 6 Am. Rep. 600. Illinois. Rounds v. Smith, 42 Ill. 245; Bickford v. First Nat. Bank, 42 Ill. 238, 89 Am. Dec. 436. Tennessee.- Schoolfield v. Moon, 9 Heisk. 171. 36. United States v. Barker, Fed. Cas. No. 14,519; Bull v. First Nat. Bank, 14 Fed. 612; Knott v. Venable, 42 Ala. 186; Woodruff v. Plant, 41 presentment of a bill of exchange payable on demand is also applicable to the time for presentment of a check.37 § 168. Certification of check. 66 " 38 66 a. Equivalent to an acceptance.- The Negotiable Instruments Law provides that: Where a check is certified by the bank on "which it is drawn, the certificate is equivalent to an acceptance. Certification is not the only mode of accepting a check; it may be accepted in the same manner and under the same circumstances as a bill of exchange. And when so accepted the same rules and principles will apply thereto as in the case of the acceptance of a bill of exchange. Unless it is otherwise provided by statute a check may be accepted orally.39 A bank is under no legal obligation to the holder to accept or pay a check, whether the funds of the drawer are sufficient to meet it or not. But upon presentation of a check the bank must refuse to pay or accept within a reasonable time, and it has no right to retain the check for an indefinite time, and then refuse payment." An 40 Conn. 344; Pollard v. Bowen, 57 Ind. quiry whether checks of a person 323; Mohawk Bank v. Broderick, 10 named for a specified sum are good, Wend. (N. Y.) 304. In the case of is information that such person has Phoenix Ins. Co. v. Allen, 11 Mich. on deposit, subject to check, money 501, 83 Am. Dec. 756, it was held to that amount, it does not constitute that any draft payable at sight should an acceptance or certification of, or be presented for payment within rea- otherwise create an obligation on the sonable time; and that the court can- bank to pay checks which the inquirer not, as a matter of law, say that any may then hold. delay is reasonable beyond that which is required in the ordinary course of business without special inconvenience to the holder; or by the special circumstances of the particular case. 37. Neg. Inst. L. (N. Y.), § 131. See 91, ante. 40. Implied acceptance by retention of check.- First Nat. Bank v. McMichael, 106 Pa. St. 460. In this case it appeared that a check was sent by mail from one bank whose customer had presented it there for collection, to another bank on which it was drawn with 38. Neg. Inst. L. (N. Y.), § 323. instructions to return it promptly if 39. Acceptance implied by state- not paid. It was received on the day ments, etc.-Farmers' Bank v. Dunbar, following its date, and at that time 32 Neb. 487; Barnet v. Smith, 31 N. H. the drawer's account was sufficient to 256; Henrietta Nat. Bank v. State pay the check. Three days later the Bank, 80 Tex. 648; Espy v. National drawee received notice from the Bank, 18 Wall. (U. S.) 605. In the drawer not to pay the check. The case of Kahn v. Walton, 46 Ohio St. drawee accordingly caused the check 195, 20 N. E. 203, it was held that to be protested on the day following, a bank check, being an order on the and returned to the bank through bank by the drawer to pay his money whom it had been forwarded for colas therein directed, is irrevocable by lection. The holder of the check havhim before its presentation for pay- ing brought suit against the drawee ment, unless the bank on which it is bank for the amount thereof, it was drawn has accepted or certified it, held that it was for the jury to deor otherwise become committed to its termine whether or not the check had payment; and while an affirmative been accepted by the bank on which answer by the bank to a general in- it was drawn. officer of a bank cannot certify a check so as to bind the bank unless there is evidence from the character of the duties of such officer and the transaction of the bank's business by him, that it was his custom to certify such checks." A bank cashier, under his general authority, may certify checks drawn on the bank provided the drawer has funds on deposit sufficient to meet them; and a special restriction on his powers does not bind persons dealing with the bank unless they are known to them.12 41. Power of officers to certify bank applicable to its payment, and checks.- Mechanics' Bank v. State an agreement on behalf of the bank Bank, 10 Wall. (U. S.) 604, 19 that these funds should be retained L. Ed. 1008. In the case of Farm- and paid upon the check whenever it ers & Mechanics' Bank v. Butchers was presented. The cashier has a & Drovers' Bank, 28 N. Y. 425, 16 Am. Dec. 678, it was held that where the teller or other proper officer of a banking corporation, representing it and doing its business at the counter, certifies the checks of its drawers and depositors drawn upon it in the usual form and under a general power to certify, such banking corporation is responsible to holders in good faith and for value, notwithstanding private directions to such officer not to certify in the absence of funds without special permission. In the case of Mussey v. Eagle Bank, 9 Metc. (Mass.) 306, after describing in detail the official duties of a teller and concluding that the certification of checks is not properly within the scope of such duties, the court said: Such a power of certifying is, in effect, a power to pledge the credit of the bank to its customers; a power which, by the charter of a bank, can alone be exercised by its president and directors, unless specially delegated by them; and, consequently, it cannot be implied as a resulting duty or author. ity in any individual officer. Evi dence of usage, therefore, can imply no original, inherent, or implied power in tellers thus to certify, however it may bear on the question of binding a bank by the allowance of such a usage.' 42. Clark Nat. Bank V. Bank, 52 Barb. (N. Y.) 592. right, by virtue of his office, to make this certificate when the drawer has funds. He is the custodian of the funds of the bank and the books; he receives money and gives vouchers therefor; and whether upon receiving the check he pays it in money or gives the holder a certificate of deposit or draft, or a certificate that he will retain sufficient of the money standing to the drawer's credit to pay it when presented, he is in either case acting within the line of his duty and within the scope of the authority which necessarily attaches to his office. Whether the bank might not restrict this authority, so as to affect the rights of persons having notice, is not material. It is sufficient that the public have a right to regard his authority as coextensive with these duties, that such authority is inherent in the office. This is substantially conceded by the learned counsel for the appellant, but they insist that the cashier has no power to make the certificate when the drawer has no funds. I agree that he has not, as between him and the bank, and the liability of the bank is not based upon his power to bind them by such a contract without funds, but on the ground that the bank cannot dispute the fact that there are funds, hence the contract is enforced as though there were Albion funds to meet it. It follows that a bona fide holder only can enforce the liability against the bank where the certificate is given in the absence of funds." Cooke v. State Nat. Bank, 52 N. Y. 96, 114, 11 Am. Rep. 667, per Church, Ch. J. Certification by cashier; funds sufficient to meet check. The certification of a check, if written out, would contain a statement that the drawer had funds sufficient to meet it in the b. Effect of certification.- The Negotiable Instruments Law provides that: "Where the holder of a check procures it to be "accepted or certified the drawer and all indorsers are discharged "from liability thereon." 43 The rule of the statute is declaratory of the common law. The certification not only discharges the drawer and indorsers of the check from liability, but it substitutes as a principal debtor the bank which certifies the check. When the check is certified the funds of the original depositor cease to be under his control and pass to the control of the person in whose favor the certification was made.15 Upon the certification by the bank the holder is entitled absolutely to payment and his right cannot be defeated by the bank on the ground that the drawer has no funds upon deposit. The contract of the bank is that it will retain and apply the money belonging to the drawer in payment of the check. If the drawer of a check procures it to be certified the relations, duties, and obligations between him and the payee or holder are the same as if such check had not been certified; it is only where the holder of a check procures its certification after its delivery to him that the drawer and indorsers are discharged and the bank itself is substituted as a principal debtor.47 A bank by certification of a check simply guarantees the 43. Neg. Inst. L. (N. Y.), § 324. For same section in statutes of other States see Appendix. 44. Drovers' Nat. Bank v. Packing Co., 117 Ill. 100; Muth v. St. Louis Trust Co., 88 Mo. App. 596. 45. First Nat. Bank v. Leach, 52 N. Y. 350; Thompson v. Bank of North America, 82 N. Y. 1; Wright v. MacCarty, 92 Ill. App. 120. 46. Goshen Nat. Bank v. Bingham, 118 N. Y. 349, 23 N. E. 180, 16 Am. St. Rep. 765, 7 L. R. A. 595. Liability of bank as acceptor.-The certification of a check as good by the authorized officer of a bank is equivalent to the acceptance of a bill of exchange payable on demand, and makes the bank primarily liable to the holder, until discharged by payment, release, or the Statute of Limitations. Meads v. Merchants' Bank, 25 N. Y. 143; Farmers & Mechanics' Bank v. Butchers & Drovers' Bank, 28 N. Y. 425, 16 Am. Dec. 678; Irving Bank v. Wetherald, 36 N. Y. 335; Cooke v. State Nat. Bank, 52 N. Y. 96, 11 Am. Rep. 667; Bank of British North America v. Merchants' Nat. 47. Certification procured by drawer of check.- Cincinnati Oyster & Fish Co. v. Lafayette Nat. Bank, 51 Ohio St. 106, 36 N. E. 833, 46 Am. St. Rep. 560; Metropolitan Nat. Bank v. Jones, 137 Ill. 634, 27 N. E. 533, 31 Am. St. Rep. 403, 12 L. R. A. 492; Born genuineness of the signature of the drawer, and that there are funds sufficient to meet the check, and engages that those funds will not be withdrawn from the bank by the drawer; it does not warrant the genuineness of the body of the check either as to the payee or the amount. Therefore, where a certified check has been altered by changing its date, the name of the payee, or by raising the amount, and as so altered has been paid by the bank, the amount paid can be recovered back by the bank as for money paid by mistake.48 But if the amount of an altered check has been negligently paid by the bank, it cannot recover. If a bank certify a check on which the drawer's name has been forged it must pay the amount thereof.50 § 169. When check operates as an assignment. 49 a. Statutory provision.- The Negotiable Instruments Law provides that: "A check of itself does not operate as an assignment "of any of the funds to the credit of the drawer with the bank, "and the bank is not liable to the holder unless and until it v. Indianapolis First Nat. Bank, 123 Ind. 78, 24 N. E. 123, 18 Am. St. Rep. 312, 7 L. R. A. 442. he chose, and it is only because, instead of payment, the holder desires certification, that the bank certifies In the case of Minot v. Russ, 156 the check instead of paying it. * Mass. 458, 31 N. E. 489, 32 Am. St. So far as the question has been conRep. 472, 16 L. R. A. 510, the court sidered it has been decided that the said: "The bank owed no duty to the certification of a bank check is not, drawers to certify checks, although in all respects, like the making of a it could certify them if it saw fit, at certificate of deposit or the acceptance the request of either the drawers or of a bill of exchange, but that it is the holders, and if it certified them, a thing sui generis, and that the efit became bound directly to the hold- fect of it depends upon the person ers, or to the persons who should who, in his own behalf or for his own become the holders. In either case benefit, induces the bank to certify the the bank would charge to the ac- check. The weight of authority is, count of the drawer the amount of that if the drawer, in his own behalf the check, because by certification it or for his own benefit, gets his check had become absolutely liable to pay certified, and then delivers it to the the check when presented. When a payee, the drawer is not discharged; check payable to another person than the drawer is presented by the drawer to the bank for certification, the bank knows that it has not been negotiated and that it is not presented for payment, but that the drawer wishes the obligation of the bank to pay it to the holder when it is negotiated in addition to his own obligation. But when the payee or holder of the check presents it for certification, the bank 50. Hagen v. Bowen Nat. Bank, 6 knows that this is done for the con- Lans. (N. Y.) 492; Marshall Nat. venience or security by the holder. Bank v. Baltimore First Nat. Bank, 30 The holder could demand payment if Md. 11, 96 Am. Dec. 554. but that if the payee or holder, in his own behalf or for his own benefit, gets it certified instead of getting it paid, then the drawer is discharged." 48. Macine Nat. Bank v. National City Bank, 59 N. Y. 67, 17 Am. Rep. 305. 49. County Nat. Bank v. Tradesmen's Nat. Bank, 36 App. Div. 112, 55 N. Y. Supp. 543. |