payment, but, by agreement between him and the bank, the latter marks "good," or "good for $. . . . when properly indorsed," or "certified," on the paper; then it is the same as if the holder had been paid the money and redeposited it to his own credit. However, unless provided otherwise by statute, no special manner of certifying checks is necessary to make a proper certification; any words or form of expression intended to complete the act will suffice, whether it be signed or not." The custom followed strictly in banks is for the officer to write or stamp the word good, or its equivalent, on the face of the check and add his signature or initials. 42 In England, by statute, the certification is required to be in writing, and in some of the United States, also, certification is required to be in writing; by the negotiable instruments laws, where such have been enacted, the provisions concern the effect of certification and are silent as to the mode of certification." A verbal certification has been adjudicated to be sufficient under certain circumstances, but it is the usual and safer mode of certification to comply with the usual custom of banks.45 Certification may be by implied acceptance by a bank; as where a depositor settles his account and leaves the exact amount of an outstanding check expressly for its payment, the bank tacitly retaining the money and settling on that basis, the bank is liable to the holder of the check on the implied acceptance." To warrant the inference of acceptance from conduct, the circumstances must clearly indicate such an intention on the part of the drawee." A certification may also be by telegraphic communication; as, where the holder of a check wired to the bank: "Will you pay J. F.'s check on you, $22,000? Answer"; to which the drawee (the bank) replied: "J. F. is good. Send on your paper." This constitutes a contract to pay on presentment." The 41 83 N. Y. 318 (1881). 4 2 19 & 20 Vict., c. 97, Sec. 7. 43 Me. Rev. Stat., Sec. 533; Mich. (How.) Stat., Sec. 1,583; 62 Mich. 343 (1886); 72 Mo. 522 (1880). 44 N. Y. N. I. L., Secs. 323, 324 46 100 Pa. 23 (1882). 475 Colo. 185 (1879). 4851 Fed. Rep. 168 (1892). telegram sufficiently identified the check to sustain an action for breach of the promise to pay." 12. By Whom Certified. By virtue of their positions, the president, cashier, and teller of a bank may certify checks when presented to them in due course of business and thus bind the bank; these officials have implied power ex officio to certify checks.50 The power to certify checks depends somewhat on the general course of business in the bank. A teller may be clothed with power to certify checks, but in itself this would not affect the right of the cashier to do so; and the directors may limit the authority of a teller as they deem proper, but this would not affect those to whom the limitation is unknown."1 A bank officer cannot certify his own check; the doctrine rests on the principle that no person can act as agent of both parties to a contract." In such a case, the fact that the name of the drawer is identical with that of the certifying agent is sufficient to put third parties upon inquiry." 13. Effect of Certification. - In the United States, by the law merchant, the certificate of the bank that a check is "good" is equivalent to an acceptance;" by the negotiable instruments laws, where adopted, such certification is equivalent to acceptance, and the drawer and all indorsers are discharged from liability thereon." In England, the effect of marking checks "good" is similar to accepting a bill; for the banker thereby admits assets, and makes himself liable to pay.5" 56 Certification of a check implies that the check is drawn upon sufficient funds in the hands of the drawee (the bank), that they have been set apart for its satisfaction, and that they shall be so applied whenever the check is presented for payment. It is an undertaking that the check is good then 49 80 Tex. 648 (1891). 502 Dan. Neg. Inst., Secs. 1,609, 1,610; 3 Mas. (U.S.) 506 (1825); 10 Wall. (U. S.) 648 (1870); 114 N. Y. 70 (1889). 51 10 Wall. (U. S.) 649 (1870); See The Law of Banks and Banking: Duties of Officers. 522 Dan. Neg. Inst., Sec. 1,611. 532 Am. Law Reg. N. S. 92; 84 Mo. 304 (1884). 54 10 Wall. (U. S.) 647 (1870). 55 N. Y. N. I. L., Secs. 323, 324. 562 Taunt. (Eng.) 389 (1810), and shall continue good, and this agreement is as binding on the bank as its notes of circulation, a certificate of deposit payable to the order of the depositor, or any other obligation it can assume." The object of certifying a check, as regards both parties, is to enable the holder to use it as money. The transferee takes it with the same readiness and sense of security that he would the notes of the bank; it is available to him for all the purposes of money." 14. The Bank's Liability. - Certification of a check by a bank does not include an admission or guaranty of the body of a check; so that if the amount of a check be raised, without negligence by the bank, the bank will not be liable, and, if the bank pay such a check, without negligence on its part, the money may be recovered by it; but the bank will be liable to a bona-fide holder of a certified check when the signature is a forgery." A bank, as the drawee of a check which has been certified by it to be good, becomes, by such certification, and at once, the principal debtor; the certification constitutes a new contract between the holder and the bank;" in contemplation and operation of law, it is the same as if the holder had been paid the money and had redeposited it to his own credit, as we have said." Thus, the bank ceases to be the debtor of the original depositor, and becomes the debtor of the holder of the check, who may demand the amount and sue the bank for its recovery at any time, even after the lapse of many years." 63 ILLUSTRATION. -A check was certified October 7, 1852; the drawer withdrew his funds from the bank October 10, 1854; the holder demanded payment September 3, 1859. The bank was liable, the statute of limitations not having accrued.** In a bank in which business is conducted properly, it is the duty of the officer certifying a check to cause it to be 57 10 Wall. (U. S.) 647 (1870). 58 Ibid. 59 59 N. Y. 67 (1874). 6064 Barb. (N. Y.) 197 (1872). 61 10 Wall. (U. S.) 604 (1870). 63 39 Pa. 92 (1861). 64 Ibid. 66 immediately charged as paid to the account of the drawer; and when this is done, the sum thus charged will remain as a deposit in the bank to the credit of the check, and be forever withdrawn from the control of the maker, except as a holder of the check. Such a deposit stands exactly upon. the same ground as every other." Every well-regulated bank adopts the practice of charging the amount of a certified check to the account of the drawer in its bank-certificate account. It follows that, after a check is certified, the drawer cannot draw out funds then in the bank necessary to meet the certified check. That money is no longer his.** So that, after the certification of a check, the relation established between the bank and the holder of the check is that of debtor and creditor. It is not a trust relation, and the bank is not bound to set apart from its other funds a particular sum for the payment of the check, but the bank stands obliged to pay it, when presented for payment, out of its general funds." The certificate, in effect, says that the drawer has funds in the bank, and that the bank will retain it and apply it in payment, provided the check be indorsed by the payee. The bank may question the validity of a certified check which is transferred without indorsement;"" but where the bank certifies a check in the hands of the holder, who has purchased it for value from the payee without indorsement, the bank is liable to such holder for the amount." 68 - 15. Liability of the Drawer. While, usually, the drawer of a certified check is released by the certification, and the bank becomes the principal debtor, yet, where a drawer in his own behalf and for his own benefit has his check certified, and then gives it to the payee, the drawer is not discharged from liability;" so, where the payee of a check before delivery requests the drawer to have the check certified for him. But, if the payee or holder, on his own 652 Duer (N. Y.) 121 (1853). 66 52 N. Y. 350 (1873). 6777 Hun (N. Y.) 159, 611 (1894). 68 107 N. Y. 183 (1887). 69 118 N. Y. 349 (1890). 7076 N. Y. 352 (1879). 7191 U. S. 343 (1876); 17 Ont. Rep. 40 (1889); 51 Ohio St. 106 (1894). behalf or for his own benefit, get the check certified instead of getting it cashed, the drawer is discharged."* The liability of a drawer makes the certification of a check unlike the acceptance of a bill of exchange, because the effect of certification of a check depends to some extent upon the person in whose behalf it is made.” 73 By acceptance of a bill of exchange, the drawee who accepts becomes the primary and principal debtor as to all parties, even as to the drawer, if his acceptance be for value; whereas, the certification of a check is similar to an acceptance, in that it makes the bank the principal debtor as to the holder, but not as to the drawer of the check, when the drawer has had the check certified in his own behalf and for his own benefit. CROSSED CHECKS 16. The practice of crossing checks with the names of bankers is in very general use in England, occurring in very many instances not only in London but in other parts of the kingdom of Great Britain," where it has grown to be of such importance as to be accorded provisionary attention in the Bills of Exchange Act, 1882," and, in Canada, in the Bills of Exchange Act, 1890." ORIGIN, USES, AND BENEFITS 17. The crossing of checks had its origin in a custom that began in the clearing house and was afterwards adopted outside. The clerks of the different bankers who did business there were accustomed to writing across the checks the name of the employers, so as to enable the clearing house clerks to make up the accounts. It afterwards became a common practice to cross checks, which were not intended to go through the clearing house at all, with the name of a banker or with the words and company, and a custom or usage sprang up in regard to this also." 72 156 Mass. 460 (1892). 73 Am. & Eng. Encyc. Law (2d Ed.), Vol. 5, p. 1,056. 747 Exch. (Eng.) 398, 402 (1852). 75 Eng. B. of E. Act, Secs. 76-82. 76 Can. B. of E. Act, Secs. 75-81. 777 Exch. (Eng.) 402 (1852). |