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draft receives bank notes in payment by his own choice, the draft is paid, although the bank issuing the notes fails a few hours afterwards." So, if the bank notes are procured for the express purpose, at the request of the payee, and under his agreement to accept them in satisfaction. 100 And although the payee protests against receiving the bank notes (which are then depreciated) without a discount, yet, if he finally takes them without any such agreement, he cannot afterwards bring suit for the amount of the proposed discount.101 So, if current bank notes have been issued without legal authority, but are received by the payee and transferred by him to other persons at par, they are a sufficient payment.102

Notes of Insolvent Banks-Counterfeits.

§ 1403. A payment in bank notes, if made in good faith, is binding, although the bank fails the next day, 103 and although the payment was made by an agent, who exceeded his authority in agreeing to take back the notes if they were returned in a given time, and the bank failed before the agreement became known to the principal.104

Polglass v. Oliver, 2 Cromp. & J. 15; Tiley v. Courtier, Id. 16, note; Warren v. Mains, 7 Johns. (X. Y.) 476; Coxe v. Bank, 8 X. J. Law, 72; Cummings v. Putnam, 19 X. H. 569; Curtiss v. Greenbanks, 24 Vt. 536. And this is true, although they may only be worth half their face, and although the bank fail before suit brought. Lowrey v. Murrell, 2 Port. (Ala.) 280; especially if the bill or note is expressly payable "in the notes and issues of said bank,” Abbott v. Bank, 11 Smedes & M. (Miss.) 405. And in such case the tender is good without a continuing profert. Patton v. Hunt, 64 N. C. 163. As to notes payable in bank notes, see $ 100, supra. But a tender of depreciated bank notes is an offer of compromise, and not a tender of money, Newberry v. Trowbridge, 13 Mich. 263; and a tender of Bank of England notes may be refused, Grigby v. Oakes, 2 Bos. & P. 526.

99 Vernon v. Boverie, 2 Show. 296. 100 Dakin v. Anderson, 18 Ind. 52.

101 Phillips v. Blake, 1 Metc. (Mass.) 1.56. So, where he was entitled to specie. but received legal tender notes after objecting to them. Gilman v. Douglas Co., 6 Nev, 27.

102 Alexander v. Byers, 19 Ind. 301.

103 Ware v. Street, 2 Head (Tenn.) 609. But see, contra, where the bank failed before the close of business hours on the same day, Owenson v. Morse, 7 Term R. 64.

104 Show v. Perry, 9 Pick. (Mass.) 539. The notes were to be indorsed as a payment, if not returned, and were not returned within the time agreed.


But if the bank has already failed, its notes are not a payment, although offered and taken as such in good faith, and without knowledge of the failure." And this is so where the failure occurred on the day the payment was made, and only a few hours before: 106 and especially where the bank note was only taken on the assurance that it was good, or would be made so by the person who paid it.107 It has been held in Pennsylvania, however, that a payment made in good faith in current bank notes is good, although the bank had already failed, and the notes were worthless. 108

The transferror of a bank note, as of a bill or note, warrants that it is genuine.106 And a counterfeit is not a payment, unless there is an express agreement that the person receiving it shall take the risk. 1 And an action may be brought on the original debt, although the bank note was given in good faith.111 But a counterfeit bank note need only be taken back if it is returned in a reasonable time;

112 and it


105 Harley v. Thornton, 2 Hill (S. C.) 509, note. So, where taken for a precedent debt, Westfall v. Braley, 10 Ohio St. 188; Fogg 5. Sawyer, 9 X. H. 365; on being promptly returned, Ontario Bank v. Lightbody, 13 Wend. (X. Y.) 101: Townsends v. Bank, 7 Wis. 185. But it is not absolutely essential that the note itself should be returned immediately. Frontier Bank v. Morse, 22 Je. 88. And an action may be brought on the original consideration without returning the notes. Townsends v. Bank, 7 Wis. 185.

106 Houghton v. Adams, 18 Barb. (N. Y.) 515; especially where the taker was guilty of laches in not returning the notes promptly, Camidge v. Allenby. 6 Barn. & C. 373; or where the notes were not produced or tendered for a long time afterwards, nor presented to the bank, Rogers v. Langford, 1 Cromp. & M. 637.

107 Gilman v. Peck, 11 Vt. 516.
108 Bayard v. Shunk, 1 Watts & S. 92.
109 Edmunds v. Digges, 1 Grat. (Va.) 359. And see $8720, 752, supra.

110 Anderson v. Hawkins, 10 N. C. 568; Ramsdale v. Horton, 3 Pa. St. 330: although at the time believed by both parties to be genuine, Baker v. Bonesteel, 2 Hilt. (X. Y.) 397.

111 Markle v. Hatfield, 2 Johns. (N. Y.) 455; Mudd v. Reeves, 2 Har. & J. (Md.) 368.

112 Reasonable time being, in such case, a question of circumstances. Simms v. Clark, 11 Ill. 137. Thus, it is not unreasonable if the bank note is laid aside until wanted (two months after), and on discovering the forgery is then returned, Kenny v. Bank, 50 Barb. (N. Y.) 112; or if it was circulated and reissued in good faith a second time, and then returned, Burrill v. Bank, 51 Barb. (X. Y.) 105.

has the effect of a valid payment, if no notice is given or offer made to return the bill in such time. 113

Bank Notes-As a Set-Off.



§ 1404. In general, the creditor's own note is not available as a tender to him at common law, but amounts only to a set-off.1 And this is equally true of the notes of a bank. In some states, however, it is provided by statute that the notes of a bank shall be received by it as money in payment of debts to it.116 The statute of North Carolina requires such notes to be received by the parent or any branch bank, but not in payment of any sealed instrument. 117 In Georgia, it makes no difference whether the bank bills offered in payment are payable at the parent or branch bank.

In Tennessee, such tender is available against the assignee of an insolvent bank as well as against the bank.119 But a subscriber for bank stock can only be credited for depreciated bills of the bank to the amount of the value of the bills. 1 20

If a bank holds a note for collection, and receives in payment its own certificate of deposit as cash, it will discharge the note and release


113 Thomas v. Todd, 6 Hill (N. Y.) 340. As to diligence necessary in presenting bank notes, see § 1107, supra.

114 Ca ry v. Bancroft, 14 Pick. (Mass.) 315. But see Mayer v. Nias, 1 Bing. 311, where an overdue bill of the vendor was tendered to and refused by his agent, but was afterwards taken and handed by him to the vendor, and retained by him. And see Fair v. M'Iver, 16 East, 130; Foley V. Mason, 6 Md. 37.

115 In Massachusetts, bank notes are not even available as a set-off against the bank.

President, etc., of Hallowell & Augusta Bank v. Howard, 13 Mass. 235.

116 GEORGIA (Code, $ 1963); MAINE (Rev. St. c. 47, § 24); MINNESOTA (Gen. St. § 2510); VERMONT (V. S. § 4033); WISCONSIN (Sanb. & B. Ann. St. $ 2024, par. 44).

117 NORTH CAROLINA (Code, $ 2287). This act, passed originally in 1869, has been held to be constitutional. Exchange Bank of Columbia v. Tiddy, 67 N. C. 169; Bank of Charlotte v. Hart, Id. 264.

118 GEORGIA (Code, $ 1903). 119 TENNESSEE (Shannon's Code, $ 3245). 120 Marr v. Bank, 4 Lea (Tenn.) 578. But in Illinois the notes of the bank can be used in paying a note for stock, although the bank failed five days afterwards. Dunlap v. Smith, 12 Ill. 399.



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the maker. 1 But the indorsee of a note payable to a bank need not accept its notes in payment from the maker.1 And a bank need not (unless expressly required by statute) receive in payment its own notes which are payable at another place.1 So, where the notes of a state bank are made a legal tender for debts due to the state, they will nevertheless be unavailable for a debt due to it as trustee, and payable in specie.124

In some states, bank notes are available as payment or set-off against the bank's assignee in insolvency. But this is not the case where the bills are greatly depreciated, and were purchased by the defendant

after suit begun,128 or after the bank became insolvent,127 and the · original debt had matured. 128


Virginia Coupons.

§ 1405. The statute of Virginia, by act of 1870, providing for the funding of the public debt of the state, enacted that the new bonds and coupons “should be receivable at and after maturity for all taxes, debts, dues and demands due the state.” 12 9 This provision has

121 British & American Mortg. Co. v. Tibballs, 63 Iowa, 468, 19 X. W. 319.

122 Wynn v. Kelly, 22 La. Ann. 594; Housum v. Rogers, 40 Pa. St. 190; especially if bought by the maker after he has notice of the transfer by the bank, Philips v. Bank, 18 Pa. St. 391.

123 Bank of the State v. Bank of Cape Fear, 35 N. C. 75. 124 Paup v. Drew, 10 How. 218.

125 Blount v. Windley, 68 N. C. 1; Union Bank v. Ellicott, 6 Gill & J. (a.) 363. So, Clarke v. Hawkins, 5 R. I. 219. But see, contra, Dundas v. Bowler, 3 McLean, 397, Fed. Cas. No. 4,141.

126 Saunders v. White, 20 Grat. (Va.) 327; Exchange Bank v. Knox, 19 Grat. (Va.) 739.

127 Clarke v. Hawkins, 5 R. I. 219; Exchange Bank v. Knox, 19 Grat. (Va.) 739.

128 Diven v. Phelps, 34 Barb. (N. Y.) 224.

129 Laws 1870, c. 282. And this act is not unconstitutional by reason of its impairing or defeating a subsequent constitutional provision, which dedicates one-fourth of the revenue to the establishment and maintenance of public free schools; and the tender of the coupons is a tender of a receipt for so much money already presumed to be in the treasury. Willis v. Miller, 29 Fed. 238. But a mandamus will not be granted to compel the auditor to refund bonds which have not been presented for that purpose, in accordance with the act.

Wise v. Rogers, 24 Grat. 169.

been held to include such tax as a state license to practice as an attorney, 130 or fines and costs imposed in a criminal proceeding; 131 but not the liability of a state officer for moneys embezzled by him.132 In 1872 an attempt was made to repeal this act, but the repealing act was held to be unconstitutional as against holders of bonds already issued. 133

It was subsequently held that the exemption of such bonds from taxation was constitutional; 134 and that-deduction of the taxes levied on a particular bond could not be made from a coupon separated from the bond and held by a different owner; 135 and that the holder was entitled to a mandamus to compel the state treasurer to receive the coupons.136 And even where the coupon has been already paid in part by the state, it must be received for the balance remaining unpaid in payment of state taxes. 137

Virginia “Coupon Killers."

§ 1406. In 1882 and 1884, by a series of enactments, the Vi ginia legislature attempted to deprive the tax-receivable bonds and coupons of their vital force: First, by imposing on the coupon holder the burden of proving his coupon genuine in a suit to be brought for the purpose; the taxes to be paid meanwhile in other legal tender, and mandamus against the collector to be stayed on his return that he is ready to receive such coupons when legally ascertained to be genuine 138

130 Although, by statute, made payable in gold or silver coin, United States treasury notes, or national bank notes. Royall v. Virginia, 116 U. S. 572, 6 Sup. Ct. 510; Sands v. Edmunds, 116 U. S. 587, 6 Sup. Ct. 516.

131 Clarke v. Tyler, 30 Grat. 134.
132 Burgess v. Winston, 28 Fed. 559.
133 Antoni v. Wright, 22 Grat. 833.
134 Williamson v. Massey, 33 Grat. 237.
135 Hartman v. Greenhow, 102 U. S. 672.
136 Hartman F. Greenhow, supra; Williamson v. Massey, supra.
137 Lee v. Harlow, 75 Va. 22.

138 Laws 1881-82, c. 7. This act was amended two years later, so as to require an appeal by the state in all cases, and making such appeal a matter of right. The supplementary acts (January 26, 1886) requiring production in evidence of the bond from which the coupon had been detached, and (January 21, 1886) forbidding expert testimony as to the genuineness of the detached coupons, have both been held valid. Com. v. Weller, 82 Va. 721, 1 S. E. 102.

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