UnW.!ll«^ of CUComt^

DIGEST of LEGAL OPLNIONS

THOMAS B. PATON, General Counsel of the American Bankers Association,

which have been published in the issues of the Journal of the American

Bankers Association from July, 1908, to June, 1919, inclusive

With an Index

Digested by

THOMAS B. PATON, Jr.

of the New York Bar, Assistant to the General Counsel

Published by the

AMERICAN BANKERS ASSOCIATION

5 Nassau Street

New York

1919

ri<-

:50/

by the

American Bankers Association

New York

PREFACE

FROIV I July, 1908 , t o June , 1919, th ere h ave been publ is hed in the Journal of the American
Bankers Association the legal opinions of its General Counsel. Inasmuch as there have
accumulated during the past eleven years as many as 1,346 of these opinions, it was
thought advisable by the Executive Council in the interests of all the members that a digest
of them be made and pubUshed. Accordingly this Digest has been prepared and an attempt
has been made in each case to write, in concise form, a statement of the facts, followed by
the opinion. It seemed best from the busy banker's point of view, not to deal too much
in detail in a book of this kind but rather to state in a terse way the conclusions which a
banker or other business man may wish to know, without taking the time to read through
the citations of legal decisions or the discussion of underlying principles or reasons upon
which the opinions are based. A fuller treatment of the subject quoting the basic legal
authorities or discussion can always be had by referring to the full text from which the
digest was made.

For the variety of subjects treated and their practical bearing upon banking operations,
the bankers are solely responsible as it is they who have voluntarily submitted questions
on the problems confronting them in every day business. It would then seem to follow
that the book has the advantage of containing a selection of subjects confined to those mat-
ters only which have been troubling bankers most and which have already proved of suf-
ficient interest to cause them to request legal advice.

It is, of course, understood that the opinion of a lawyer, even though based on de-
cisions of the courts of last resort or, in the absence of legal precedent, reasoned out upon
sound legal principles, still remains an opinion. At most the reader can choose to use it
and to depend upon it as a possible guide and source of information, and for these objects
this book is published.

Thomas B. Baton, Jr.

New York, N. Y., July 1, 1919.

ACCEPTANCE AND CERTIFICATION

Certification after banking hours

1. (Ala.) A bank certifies or pays a
customer's check after banking hours and
the customer, before banking hours of the
next day seeks to stop pa}Tnent. The ques-
tion was raised whether the payment or
certification was binding on the customer.
Opinion: Sucli payment or certification is
probably valid, although the point has never
been directly passed upon by the courts in a
case between the customer and the bank.
Vol. 5, p. 19, July, 1912.

Acceptance must be written

2. (Ark.) A livestock company in-
structed its bank to honor a draft drawn
in its name by C and D, who were buying
stock for it, and the bank agrec<l to such in-
struction, telephoning a prospective seller of
live stock that the check for $4,000 was good.
Eelying on this oral promise to pay the
amount, the cattle are turned over to C and
D. Later, the live stock company stopped
payment on the check, claiming that C and
D had no authority to draw it or to buy so
large an amount of stock. The holder seeks
to hold the bank liable on its statement.
Opinion: While a bank which promises over
the telephone to pay a check cannot be held
on such promise, the acceptance not being
in writing, the bank may be held liable to
the holder Avhcre, by agreement between the
bank and depositor, the deposit is aj)i)ropri-
ated for the paymciit of such check. If there
are special circumstances from which it
would appear that the depositor assigned a
certain amount of his deposit witli the con-
sent of the bank, the latter, although it
could not be held liable as acceptor of the
check, might be held as trustee of a specific
deposit or as a debtor to the assignee for the
amount so assigned. Vol. 9, p. 827, Ajiril,
1917.

3. (111.) A bank was requested to cer-
tify check by wire. It refused on the alleged
ground that the check did not transfer tlie
funds until it reached the bank and that the
depositor could revoke the paynieiit after it
was certified. Opinion: A bank can certify
by wire and after such certification the
drawer has no right to stop payment. While
an acceptance, to be valid, must be in writing,
there is no requirement that the acceptance

in all cases must be written on the bill. Vol.
10, p. 4GG, Dec, 1917.

4. (Ind.) In all states where the Negoti-
able Instruments Law is in force and in other
states where the statutt>s require acceptance
to be in writing, a promise over the telephone
to pay a check, not being in writing, does
not bind the drawee; but in Indiana where
the common law rule prevails that verbal
acceptances are valid, such telephone promise
would probably bind the drawee in favor of
one who in reliance thereon cashed the
check. Where, however, the drawee simply
answers that the check is ''good'' or "all
right" without coupling with such answer
any specific promise to pay, such answer is
insufficient to bind the bank as an acceptor.
Vol. 3, p. 337, December. 191(».

Note: The Negotiable Instruments Law re-
quiring acceptances to be in writing was passed
in Indiana in April, 1913.

5. (Ohio) The indorser of a check at-
tempted to cash it at Bank A, which bank
as a precaution teleplioned Bank P, the
drawee. In reply to tlie question whether or
not the check was good, Bank P said "yes,''
and when asked if it would protect Bank A
on the check, it replied over the telephone,
"We will.'' Bank A cashed the check on
these representations and upon dishonor
wishes to hold the drawee liable, because the
indorser proved wothless. Opinion: Bank A
cannot hold Bank P on the hitter's oral
promise to pay the check, because the Nego-
tiable Instruments Act requires acceptance to
be in writing; nor is Bank P l)ound to Bank
A, the holder, who has cashed tiie check on
faith of such promise, on the principle of
estoppel, as this principle is inaj)plicable in
tlie face of positive statutory nx|uiremcnt of
written acceptance. Bank .\, however, would
liave a right of recoverv against the drawer of
the check. Vol. 7, p." 165, Sept., ^'^\■\.

6. (Okla.) A bank purchased a chock
from the payee after receiving a statement
over the telephone Ity the drawee that the
check was good. Payment wa*; stopped.
Opinion: Umler the leading case construing
the Negotial)l(> Instruments Law of Colorado,
the bank had no recourse upon non-payment
against the drawee, as certification over the
telephone is invalid, not being in writing.
The bank's sole recourse is against the
drawer and payee. Vol. 5, p. 104, Aug., 1912.

DIGEST OK LKdAL OPINIONS

7. (Tex.) All nccoptaiicc of a check or
(Inift l)y ti'k'pliono in Texas is valid, because
there is no Nej^otiable Instruments Act, or
any otiier statute in force requirinj^ accept-
ances to he in writing'. Vol. (i, p. ;'>:{, July,
1913.

Notk: Tlic Negotiable IiiHtnimcntH I.aw re-
quiring aceej)tances to l)e in writing was passed
in Texas in Marih, 1919.

Acceptance on note

8. (Pa.) A re«j;ular form of a negoti-
able promissory note, made by A payable to
his own order forty-five days after date at
the X bank, was indorsed in blank by A.
Across the face the following acceptance was
written by a third party: "Accepted payable
at the X bank, signed B." The question is
asked what is the liability of the acceptor.
Opinion: Where a third person whites an
acceptance across the face of a promissory
note, the holder has the option of treating
the instrument as either a bill or note and
the person so signing can be held liable as
acceptor of a bill of exchange. Vol. 10, p.
528, Jan., 1918.

Bank's obligation to pay, not to certify
See 24

9. (Iowa) A check was presented at
the drawee bank at a time when there were
sufficient funds. The drawee returned it for
proper indorsement and inquires if it was
under obligation to first certify the check
in case of subsequent depletion of the
maker's account. Opinion: The certification
is optional not obligatory, and the bank
would not be liable for refusal to certify, if
the check in this case thereafter became "not
good." Vol. 2, p. 538, June, 1910.

10. (Mass.) A customer gave instruc-
tions to his bank not to certify any of his
checks and the bank desires to know if there
is any ruling which makes it compulsory for
the bank to certify upon demand if the funds
are sufficient. Opinion: The bank is not
obliged to certify a check when requested.
Its only obligation is to pay. The customer's
instruction is sufficient reason for the bank's
refusal. Vol. 5, p. 28, July, 1912.

11. (Pa.) A check made payable to a
firm was brought to the bank by the firm's
agent with the request that it be certified.
The bank doubted the authority of the agent
and refused to certify. Opinion: Certifica-
tion is a matter of favor on the bank's part
and cannot be claimed as a right. Vol. 4,
p. 681, May, 1912.

Certified checks post-dated

12. (Nev.) A bank certified a post-
dated clieck before its date at the request of
tlio iiolder. The bank questions its responsi-
bility should it refuse another check not
post-dated, which would have been good but
for the certification of the post-dated check.
Opinion: The bank has no right to pay or
certify a post-dated check at the request of
tlie holder, before its date and .so acts at its
peril. Such certification at tiie request of
the drawer is also held irregular, although in
Idaho, it is held proper, if the funds are
sufficient, when the amount becomes im-
mediately chargeable to his account and pay-
able to the holder irrespective of the date.
Vol. 5, p. 750, May, 1913.

13. (Ark.) A check payable to A was
post-dated December 1, 1912, and was certi-
fied June 1, 1912, before its date. It was
delivered to a trustee in escrow. The trustee
in breach of the trust delivered it to A, who
negotiated it to a purchaser for value four
months after its date. Opinion: It might
be held by the courts (1) that the irregular
certification put the purchaser on inquiry,
or (2) that the check was overdue when
negotiated, so as to deprive the purchaser of
the status of a bona fine holder. If such
were held, the check in the hands of the
purchaser would be subject to the same de-
fenses as if held by the payee. Vol. 6, p. 210,
Sept., 1913.

14. (Okla). A gave B a check post-
dated. B wTote to the bank on which it was
drawn, asking that payment be guaranteed.
The cashier sent B a written guaranty that
the check wiU be paid when due. Opinion :
The cashier has no authority to certify a post-
dated check before the due date and a holder
taking with notice, cannot recover thereon
from the bank. In this case B could not
hold the bank upon its cashier's letter. Vol.
8, p. 322, Oct., 1915. See 180.

Certification equivalent to acceptance

15. (N. H.) The Negotiable Instru-
ments Law of New Hampshire requires that
"an acceptance must be in writing" and
further provides that "certification is equiva-
lent to an acceptance." Vol. 4, p. 375, Dec,
1911.

Certifying bank's liability to fraudulent
holder

16. (Conn.) According to a New Jer-
sey decision, a certifying bank can refuse

ACCEPTANCE AXD CERTIFICATION

payment to a fraudulent holder where a
check has been certified for the drawer, but
cannot so refuse where the certification is
for the holder. If this decision is sound law,
there might be a desirability for separate
certification stamps to indicate for whom the
check was certified. An Ohio decision ignores
this distinction and holds that a bank must
pay fraudulent holder whether the check is
certified for the drawer or for the holder.
Vol. 5, p. 740, May, 1913.

Drawer's liability on accepted draft

17. (Tex.) A draft was drawn by Smith
and Company on Jones & Company at sixty
days' sight and accepted by Jones & Com-
pany. Opinion: The effect of the acceptance
is not to discharge the drawer but to con-
stitute the acceptor the principal debtor.
In Texas, the liability of the drawer of an
accepted draft is fixed by due protest and
notice, or without protest, by suit against
the acceptor as provided for by statute.
Vol. 8, p. 326, Oct., 1915.

Certification of forged checks
See 21, 47

18. (111.) A bank certified checks bear-
ing forgery of the payee's indorsement. The
checks were purchased by another bank which
received payment therefor. Opinion: The
certifying bank does not warrant the gen-
uineness of the pa5'ee's indorsement and is
not responsible to the purchaser. If money
is paid by the certifying bank thereon, it
may be recovered. Vol. 5, p. 590, March,
1913.

19. (Kan.) A forged check was given
in payment of a diamond ring. Before ac-
cepting the check, the seller required a
responsible indorser, and the latter before
indorsing the check telephoned the bank
which promised to pay the check. The bank
did not pay the forged check. Opinion:
The bank's promise to pay was not binding
where the check was a forgery, as its promise
related to a valid check; even in case of a
valid check, the bank would not be bound
because its promise was not in writing. Vol.
2, p. 153, Oct., 1909.

20. (Pa.) A bank certified its custom-
er's check, wliich remained outstanding and
which was claimed by the drawer to be forged.
The bank doubted the fact of forgery and re-
fused to reimburse its customer's account.
Opinion: If the check remains outstanding
the bank in a suit by the customer would be

held liable for the amount of the deposit,
for his positive testimony of the forgery
would probably outweigh the presumption of
genuineness arising from the fact of certifi-
cation. Vol. 6, p. 576, Feb., 1914.

Certification guarantees signature and
sufficiency of funds

21. (N. J.) A bank certified a check
payable to a specified person for a stranger
who was not entitled 'to tivic instrument.
The holder negotiated the check under a
forged indorsement to an innocent purchaser
for value. Opinion: The certifying bank
binds itself that there are sufficient funds to
pay the check and guarantees the genuine-
ness of the drawer's signature. The bank is
not responsible to the innocent purchaser
because (1) it does not guarantee the gen-
uineness of the payee's indorsement, and (2)
it is not negligent in certifying a check for
an unidentified person. Vol. 9, p. 582, Jan.,
1917.

Holder in due course

22. (Okla.) A check to drawer's order
was certified for the drawer, who indorsed it
to B. B cashed the item at the D bank. The
drawer upon learning that B was guilty of
fraud, stopped pa}'ment, and the certifying
bank refused to pay the D bank. Opinion:
D bank paid value to B for the certified check
without notice of the fraud and as a holder
in due course can recover from the certify-
ing bank. Had B presented the check to
the drawee some (but not all) authorities
hold tluit the certifying bank could refuse
payment and plead in defense the fraud upon
its depositor. Vol. 6, p. 820, June, 1914.
See 21, 55.

Indorsement must be properly made
See 42, 380

23. (Cal.) A check for $5,000 wa^^
presented at the drawee bank and payment
was refused because tlie check was not in-
dorsed. The presenting bank then indorsed
the payee's name for the payee and again
presented the thcck which was again refused.
The holder demanded tliat the bank certify
the check. Opinion: The drawee bank was
under no obligation to the holder to certify
the check. Its only obligation was to pay
when dulv presented. Vol. 5, p. 311, Nov.,
1912.

24. (N. Y.) A bank although in funds
refused payment of a check because it lacked

DIGEST OF LEGAL OPINIONS

tlic payee's indorsement. Later, when the
check properly indorsed was presented, there
were no funds to meet it. The holder claimed
that drawee was liable for failure to certify
the check in Ihe first instance. Opinion:
The hank was not obliged to certify, but only
to pay. Banks frcfiuently certify such checks
"n^ood wlicn jiroperly indorsed," but do so
})urelv out of accommodation. Vol. 2, p.
188, Nov., 1909.

25. (Pa.) A bank received through the
mail a check drawn on one of its customers,
but whicli was improperly indorsed. The
bank returned the check for correction and in
the meantime the customer reduced his ac-
count so that check was not good. Opinion:
The drawee bank is not liable to the holder
for failure to certify the check before return-
ing it for proper indorsement. Many banks
do certify "good when properly indorsed"
but the bank is under no obligation to certify
a check. Vol. 7, p. 165, Sept., 1914.

Immediately charging customer's account

26. (D. C.) A bank certified a check
payable to a distant firm at the request of
the holder who was its traveling salesman. Of
this fact the depositor was ignorant. The
depositor believing that the check could not
be presented for several days, drew a second
check, which overdrew^ the account because
of the certification. He threatened suit for
damages because of the bank's refusal to pay.
Opinion: The bank had the right to certify
the first check when presented by the holder
and immediatelv charge same to the custom-
er's account. Vol. 5, p. 170, Sept., 1912.
See 55.

Language expressing certification

construed

See 4, 35, 36

27. (Cal.) A bank in which A. Brown
is a depositor sent the following telegram,
"Check of A. Brown for five hundred dollars
now good." Opinion: This telegram would
not constitute a sufficient acceptance to bind
the bank. It is not an absolute promise to
pay, and there is an implication that the
bank would not answer for B^o^^^l's check
aft^r sending the wire. Vol. 9, p. 147, Aug.,
1916.

28. (Ind.) The drawee of a check in
answer to an inquiry by the holder replied
over the telephone simply that the check was
good. Notwithstanding a subsequent stop
payment order, the check w^is paid. Opinion :

Jn Indiana, where the Negotiable Instru-
ments Law has not been enacted, oral accept-
ances are valid. But it is doubtful if the
mere oral answer that a check is good, so
clearly indicates an- absolute promise to pay
as to be binding as an acceptance. Vol. 3,
p. 675, May, 1911.

Note: Tlie Ncf^otiahle Instruments Law wliich
requires acci'ptaiieeH to he in writing wae passed
in Indiana in April, 1913.

29. (Mo.) A bank received a wire:
"Will you pay check signed A, $335?" and
replied by wire, "A's check good for amount."
Opinion: The reply will be held an accept-
ance binding the bank to })ay check to a bona
fide liolder who has purchased same on faith
thereof. Vol. 6, p. 33, July, 1913.

30. (N. M.) A check may be accepted
by telegram which is a sufficient compliance
with the statutory requirement that accept-
ance must be in writing, but to be binding
the telegram must clearly import an absolute
promise to pay. Where a bank wired, "Will
you pay A's check on you $100 ?" and the
drawee wired reply, "A's check on us good
for $100." Opinion: That the reply wire
sufficiently imports an absolute promise to
pay and is binding as an acceptance. Vol.
10, p. 527, Jan., 1918.

31. (N. Y.) In reply to a telegram ask-
ing "Is John Smith good on your books for
$50?" A bank answered by wire and con-
firmed by letter as follows : "John Smith
good on our books for $50 today." When
the check reached the bank it was refused
because the funds had been withdrawn.
Opinion: The bank's wire confirmed by letter
was not binding on the bank as an acceptance.
It was not a promise but merely a statement
of fact as to the condition of the customer's
account on a given dav. Vol. 4. p. 680, Mav,
1912.

32. (Okla.) A bank before advancing
value in reliance upon a telegram concern-
ing some particular check should see that the
answer by wire contains or imports an ab-
solute and unequivocal promise to pay. For
the wording of telegrams illustrating this
point, see Vol. 3, p. 338, Dec, 1910.

33. (Okla.) A drew two checks of
$303.40 and $75 respectively and had his
bank wire the purchasing bank as follows:
"We will honor Mr. A's draft for $400 this
attached." Later A stopped payment and A's
bank refused to pay the amount claiming that
its acceptance was of a single draft of $400
and did not accept the particular checks of

ACCEPTANCE AXD CERTIFICATIOX

amount less than $400. Opinion: The drawee
is not bound to honor the two checks, as an
agreement to pay a single draft of $400 would
not bind the bank to pay two drafts of a
lesser amount. Vol. 1, p. 367, April, 1909.

34. (Tex.) Bank A phoned Bank B
saying that C wants to draw on Bank B and
is informed that C has no credit with Bank
B. Thereupon, Bank A reads a letter from
C stating that he will be at Bank B's place
before the draft reaches and will give security
for the draft. Bank B replied, "let him draw
draft then." Opinion: Although an oral
acceptance is binding on the drawee in Texas,
Bank B's promise should be construed as a
conditional promise to pay after C docs what
he says he Avill do, and wliere C lias not per-
formed the condition, Bank B will not l)e
liable. Vol. 4, p. 490, Feb., 1912.

Note: The Negotiable Instruments Law re-
quiring acceptances to be in writing was passed
in Texas in March, 1919.

Letters "O. K." as certification

35. (Ark.) Opinion: The letters "0. K."
placed on check with signature of certifying
oflficer constitute a certification equally as
if "good"' were written, and if placed upon
an overdraft, contrary to provisions of the
National Bank Act, would subject officer to
criminal penalty. Vol. G, p. 269, Oct., 1913.

36. (Cal.j The letters "0. K." were
placed on a check by the Vice-President of
the drawee bank over his signature, there be-
ing no funds on deposit at the time to meet
the check. Tlie understanding was that the
maker of the check would deposit sufficient
funds. Payment was refused. Opinion:
The "0. K." of the Vice-President would
constitute a certification provided the officer
had power or authority to certify. Where tlio
check was certified witliout funds, the bank
is liable to the bona fide payee for value.
Vol. 3, p. 587, April, 1911.

Limitation as to time

37. (N. Y.) A l)ank ccrtiluation stamp
bears the clause "good if presented within six
months." Upon the supposition tliat the
bank after the expiration of tlie six months
repaid the funds to its depositor wlio claimed
he had lost the certified check, and later the
check was presented l)y a holder in due course,
the bank inquires, first, as to the legal effect
of such a clause and, second, would the inser-
tion of the clause afford it better protection
than if it was omitted. Opinion: In the ab-

sence of judicial interpretation, the contract
would probably be construed not as relieving
the bank entirely from its promise to pay
after six months, but as permitting the bank,
if the check is afterwards presented, to plead
any equities which it might have in defense
of 'payment. Vol. 11, p. 484, March, 1919.

38. (Pa.) A bank uses a certification stamp
which reads ''good if presented within five
days" with a place and date of certification.
It has adopted this form as protection against
a possible form of fraud wherein the deposi-
tor after issuing his check to a confederate
who procures its certification, claims forgery
and obtains the amount from the bank, after
which the check is negotiated to a bona fide
holder. The bank asks whether such condi-
ti{»nal form of certification is valid and
whether it could refuse payment if the check
was presented after five days. Opinion:
Such form of certification is valid and would
seem to have utility in affording the desired
protection. In a case where the bank cred-
ited the money to the depositor after the ex-
]»iration of the period of certitication, it would
be relieved from liability and whatever
recourse the bona fide holder would have
would be solely against the drawer. Vol. G,
p. 576, Feb., 1915.

Outstanding certified checks
See 340

39. (Pa.) A bank certified a check pay-
able to a corporation at the request of its cus-
tomer. The check has been out>?tanding five
years and never presented. Opinion: In
Pennsylvania, the statute of limitations begins
to run against the holder from the date of the
bank's refusal to j>ay. The bank remains
liable to pay the check until the statute comes
to its relief. Vol. 5, p. 449, Jan., 1913.

40. (Pa.) The provision of the Nego-
tiable Instruments Law that, where an instru-
ment is jiayable on demand, jiresontation
must be made within a reasonable time after
its issue, has reference only to charging
])arties contingently liable. A \n\uk remai.is
liable on an outstanding certified check until
the statute of limitations comes to its relief,
and such statute does not begin to run until
pavment of the check has been demanded and
refused. Vol. 5, p. 449, Jan., 1913.

41. (Pa.) A bank certified the check of
its dejKisitor in favor of an attorney who
acted as bondsman for the depositor. The
check was lost and lias remained outstanding
for ten years, and at the same time the do-

DICIEST OF LEGAL OPINIONS

])osit is not released. Opinion: The certified
(;lu'(;k is not outlawed iu PLMinsylvania until
six years after payment has l)('en demanded
and the hank heforc payinj,' the amount of
the deposit represented hy the lost certified
check is entitled to satisfactory indemnity, or
conclusive proof of its destruction. Vol. 7,
p. 4i)0, Jan., 11)15.

42. (Mont.) A check to the drawer's
order was certified for the drawer. The drawer
delivered the check without indorsement to a
third person at an auction sale hefore he be-
gan bitlding. Through some misunderstand-
ing the dealings fell through. On present-
ment of the check by the holder, payment was
refused by the drawee because it lacked the
payee's indorsement. The check remains out-
standing and the drawer wants the use of
his money. Opinion: The drawee bank is
not liable to the holder of the check, as one of
the conditions of certification upon which the
bank's obligations to pay depends, is that the
check shall be indorsed by the drawer, who is
also payee. To release his money, the drawer
may bring replevin to recover the check, or he
may give the bank satisfactory indemnity
against the possibility that the check may
thereafter be presented properly indorsed.
Vol. 7, p. 165, Sept., 1914.

Rule of twenty-four hours for acceptance

43. (Conn.) Opinion: The section of
Negotiable Instruments Law allowing drawee
twenty-four hours after presentment in which
to decide whether or not he will accept, does
not apply to sight drafts which, under the
law, are payable on demand, and collect-
ing bank is not obliged to hold twenty-four
hours for convenience of drawee. Possible
doubt created bv law can be cured bv amend-
ment. Vol. 3, p. 82, Aug., 1910.

44. (Kan.) The rule allowing the drawee
twenty-four hours to decide whether to accept
is not applicable to checks or demand drafts,
but only to drafts legally presentable for ac-
ceptance. Vol. 6, p. 432, Dec, 1913.

45. (Miss.) The drawee of a bill of
exchange is entitled to twenty-four hours
after presentment in which to decide whether
he will accept, and is entitled to have the bill
left with him for that period ; but in the ab-
sence of agreement, drawee is not entitled to
documents of title att^ached to the draft, prior
to acceptiince, and a collecting agent, unless
expressly instructed, should withhold the at-
tached documents upon leaving the draft with
the drawee for acceptance. Vol. 9, p. 819,
April, 1917.

46. (Tex.) The rule allowing a drawee
twenty-four hours to determine whether or
not he will accept does not apply to checks
or drafts payable on demand, but only to
drafts legally presentable to the <lrawee for
accejjtance. Checks and demand drafts there-
fore should be immediately protested if pay-
ment is refused. In Texas a sight draft
carries grace and is presentable for accept-
ance. Vol. 4, p. 557, March, 1912.

Note: The Negotiable Instrumenta Law, which
abolislies grace, was enacted in Texas in March,
1!)19, and thereunder, an instrument drawn pay-
able nt sight is payable on demand.

Certification of raised check

47. (N. Y.) In a decision in New York
it was held that a bank certifying a check
which had been raised, was entitled to
recover the amount from a bank which had
cashed the certified check for a forger and
received payment from the certifying bank.
The court held the latter bank was entitled to
recover under the general rule that money
paid under mistake of fact is recoverable;
that certification does no more than afl&rm
the genuineness of the signature of the drawer
and that he has funds to meet it, but does not
warrant the genuineness of the body of the
check; and that the certifying bank was not
guilty of negligence in not having detected
the alteration, by w^hich it was claimed the
bank advancing value on the check was mis-
led. A New York banker has questioned the
soundness of this decision. Opinion: It seems
unjust that an innocent purchaser of a check
certified for one thousand dollars should have
to repay nine hundred dollars thereof where
the check was originally for one hundred
dollars, but it w'ould be equally, if not more
unjust, if the certifying bank had to suffer.
The bank has no means of knowledge in its
possession to detect the alteration, and to hold
it liable on every certified raised check would
impose a serious burden. Vol. 8, p. 1013, Mav,
1916.

Revocation of mistaken certification of
stopped check

48. (Conn.) On Jan. 2, 1919, payment
was stopped on a certain check of a depositor
of a bank. Several weeks later it was pre-
sented by an agent of a reputable manufac-
turing company who requested that it be cer-
tified. The agent stated that he was not
going to negotiate the check until after a
settlement of a dispute regarding certain
goods. The bank through a mistake certified
the check and upon discovery of the error
the next day, wired the company not to use

ACCEPTANCE AND CERTIFICATION

[57

the check. The company failed to reply and
the bank now seeks redress. Opinion: Where
a hank througli mistake certifies a check upon
which payment has previously been stopped
and the check remains in the hands oi the
payee at the time he receives notice of revo-
cation of the certification and no change of
circumstances nor harm nor injury to the
payee has resulted, the bank is not lial)le to
the payee upon its certification. If the
payee thereafter wrongfully negotiates the
che&k so as to make the bank liable there-
on to an innocent purchaser for value, the
bank would have recourse upon the payee for
money received to his use. Vol. 11, p. 605,
May, 1919.

Stamp including amount certified not
advantageous

49. (Pa.) The certification stamp used
by a bank is as follows :

"Good when properly indorsed

$1,500 and 00 cents

Jan. 14, 1918

Do not destroy this check

Teller"

The wisdom of including the amount in the
stamp is questioned. Opinion: Certification
of check without re-stating the amount in the
certification is. of course, valid and in the
past has been the common practice. A bank
is not bound to know more than its drawer's
signature and the sufficiency of his funds; it
is not bound to know correctness of the
amount of a check and, in a case where it cer-
tifies a check raised from $15 to $1,500, it
would probably be an unwise practice to in-
clude such amount in its certification stamp
for it might ])C estopped from questioning the
amount as against a holder in due course,
whereas upon an ordinary certification it
would not be liable for the raised amount.
A'ol. 10, p. 59,1. Feb., 1918.

Stopping payment of certified checks

50. (Ala.) Drawee bank promising by
wire to pay customer's check is liable to holder
and drawer cannot thereafter stop payment,
but similar promise over telephone is not
I)in(ling, because acceptance must be in wri-
ting and drawer's riglit to stop payment con-
tinues. Vol. 7, p. 304, Nov., 1914. See 55,
1237 et seg.

Certification by telegraph
See 30, 31

51. (Kan.) The drawee of a bill tele-
phones to a telegraph agent to wire accept-

ance. Opinion: The acceptance is valid and
binding as being an acceptance in writing by
the drawee by the hand of his agent. Vol. 7,
p. 491, Jan., 1915.

52. (Okla.) A bank cashing a check
upon another bank on faith of a telegram by
the drawee that it will pay tiie clieck can hold
the latter as an acceptor. Vol. 1, j). 140,
Oct., 1908.

53. (Okla.) In reply to a request to pay
a certain check, the drawee bank telegraphed
"Signature being genuine, will pay John
Smith's check for two hundred dollars."
Opinion: The drawee bank would be liable
as an acceptor under the Negotiable Instru-
ments Law to one, who on faith of the tele-
graphic promise, purchased the check for
value. Vol. 3, p. 338, Dec, 1910.

54. (Tex.) After the drawee bank has
wired the holder that it will pay a specified
check, it is too late for the drawer to stop
payment. The telegraphic promise by the
drawee to pay binds it as an acceptor of the
check. But where the drawee promises to
pay the check over the telephone, it is not
bound, the acceptance not being in writing,
except in Texas where an oral promise to pav
will bind the bank. Vol. 9, p. 903, Mav,
1917.

Note: The Negotiable Instruments Law requir-
ing acceptances to be in writing was passed in
Texas in March, l'J19.

55. (Tex.) A bank received a wire,
"Will you pay John Doe's chock for one hun-
dred dollars?*' and replied by wire "Yes, we
will pay John Doe's check for one hundred
dollars." Payment of the check was stopped.
Opinion: The drawee bank was bound to pay
the amount of the check to one who purehased
it on faith of the telegra])hic promise. The
bank accejiting the check by wire luid tlie
right t(j cliarge the amount to the drawer's
account the same as in the case of a check,
certified over tiie counter, and the drawer
cannot thoreaft^'r stop pavmont. Vol. 5,
p. 175, Sept., 191 '3.

Certification by telephone
Si'e 2, T), 0, 7. 10, 2.S

56. (Ala.) A bank answered an in-
quiry over the telephone that certain specified
checks drawn on it were good, but before pre-
sentment the drawer stopped payment. Opin-
ion: The bank was not liable to the holder of
the checks. Vol. 5, p. 374, Dec, 1912.

57. (Conn.) The drawee of a check an-
swering the holder's inquiry concerning John

i)I(;KST OF I.KCAL oriNiox.s

Doc's dicck for $170 replied over the tele-
phone "Ves, John Doe is <,'oo(l for $170." Be-
fore the check is presented, the maker stops
})ayinent. Oiiinion: The certification over
tiic tcleplionc is not valid under tlie Negoti-
ahle Instruments Law which requires an ac-
ceptance to be in writing. Vol. 3, p. 277,
Nov., 1!)10.

58. (Mo.) A ])ank certified its custom-
er's check over the telephone and subsequent-
ly the account was att^ached by a creditor of
the customer, who claimed that the certifica-
tion was invalid. Opinion: The certification
not being in writing, was not legal and bind-
ing under the Negotiable Instruments Law.
Vol. 3, p. 102, Jan., 191L

59. (N. J.) A promise over the tele-
phone to pay a check is not binding as an ac-
ceptance, not being in writing. Notwith-
standing a verbal promise over the telephone
to pay, the bank is bound to pay another
check, first presented, which would reduce the
balance below the amount necessary to pay
the first stated check. Vol. 3, p. 587, April,
1911.

60. (Okla.) A bank has been in the
habit of accepting checks of its customers
over the telephone. It immediately charges
the customer's account with the item and
credits the "certified checks'' account, treating
it as though it had been certified over the
counter. Opinion: A promise to pay a check
over the tcleplione not being in writing is
not valid nor binding as an acceptance. Vol.
4, p. 375, Dec, 1911.

61. (Ohio.) The certification of a check
by telephone is not valid under the Negoti-
able Instruments Law of Ohio, because not
in writing. Vol. 2, p. 231, Dec, 1909.

62. (Pa.) A drawee bank receiving an
incjuiry over the telephone whether the check
of Mr. A is good and will be paid re-
plies in the affirmative, and afterwards re-
fuses to pay the check because payment has
been stopped. Opinion: Oral promise over
telephone or otherwise by a drawee of check
to pay same not binding because acceptance
must be in writing — Nor can bank in absence
of fraud be held liable to holder wdio has
cashed check on faith of promise on equitable
principle of estoppel, as this principle inap-
plicable in face of positive statutor}^ require-
ment of written acceptance. (The courts of

I'cnnsylvania would probablv follow this
rule.) Vol. n, p. 023, Marcii, 1914.

63. (Tenn.) A gave B his check. B
took it to a hank in another town which asked
the drawee over the telephone '"Is clieck of A
good?" The drawee replied that check was
good if signature was genuine. Before pre-
sentment A stopped payment. The purchasing
bank threatens suit unless check and protest
fees are paid. Opinion: An oral promise
over the telephone by the drawee to pay
a check is not binding under the Negotiable
Instruments Law because the acceptance must
be in writing. Vol. 7, p. 583, Feb., 1915.

64. (Tex.) A gave B his check for $500
u])on wliich was indorsed by B the condition
that the check was given "when contract to
be drawn is satisfactory to both parties."
B cashed the check at his bank, but only after
the bank received the oral promise of the
drawee over the telephone. Failing to agree
upon a satisfactory contract, A stopped pay-
ment on the check. The facts show that B's
bank did not give the drawee the information
on back of the check. Is the drawee bound
by its oral promise? Opinion: In Texas an
oral promise to pay a check will bind the bank
but the check must conform to the terms of
the promise, and where a bank promises to
pay a check for $500 and the check as pre-
sented is coupled with a condition making it
payable only if a future drawn contract is
satisfactory, the check does not conform to
the promise and the bank is not bound. Vol.
10, p. 42, July, 1917.

Note: Under the Negotiable Instruments Law
passed in Texas, in March, 1019, an acceptance
must be written.

65. (W. Va.) A bought an ice plant
from B for $900, but discovered that certain
parts of the machinery amounting in value to
$80 were missing. A delivered to B two
checks in pavmcnt. one for $820 and another
for $80. In the $80 check, he stated that
the sum was for the parts of the machinery
he did not get. The bank at the request of
B promised over the telephone to pay the
checks. Before presentment A notified the
bank not to pay the $80 check. Opinion:
The bank is not legally bound to pay the
check because a telephone promise is not bind-
ing as an acceptance, and where payment is
subsequentlv stopped the bank should not pav.
A^ol. l,p. 267, Jan., 1909.

[74

ACCOMMODATION INDORSERS

Accommodation and commercial paper
distinguished

66. (Va.) A firm sold a certain amount
of its furniture to P for the purpose of join-
ing with him in the formation of a new part-
nership, and for which they received P's
notes secured by a deed of trust on real estate.
The firm indorsed the notes and discounted
them with a bank. The bank examiner
claimed that the firm signed as accommoda-
tion indorsers, and that the notes were accom-
modation paper and were subject to the stat-
utory restrictions on money borrowed by a
single firm. Opinion: The notes should be
considered commercial or business paper,
within the meaning of the Virginia statute
excepting such paper from restrictions on
money borrowed, and not speculative or ac-
commodation paper. Vol. 4, p. 429, Jan.,
1912.

Indorsement after delivery

See 985

67. (Ala.) An accommodation indorser
signing a note after delivery, and after the
consideration has passed between the parties,
is not liable, unless there is a new considera-
tion. But no new consideration is required
where the note is indorsed pursuant to an
agreement made prior to delivery. Vol. 7,
p. 36, July, 1914.

68. (Kan.) A bank makes a loan to A
for $500 upon his note, witli the understand-
ing and agreement that B would sign later as
accommodation indorser. B afterwards comes
to the bank and signs the note. Opinion:
One who signs a note as accommodation in-
dorser after its delivery and the passing of
consideration is not liable, without a new
consideration, unless such indorsement is
made pursuant to an agreement in advance
of delivery. In this case B is liable if iiis
subsequent indorsement was in pursuance of
the prior agreement. Vol. 9, p. 48, July,
1916.

69. (N, Y.) A bank discounted a tliree
montlis' note of a corporation, indorsed indi-
vidually by two oflicers of the corporation.
After the expiration of one month, the bank,
wishing further protection, re(iuosted tlie sig-
nature of an additional indorser. Opinion:
The additional indorser by indorsing for ac-
commodation could not be held liable, as there
would be no consideration to support his in-
dorsement. Vol. 5, p. 751, May, 191:5 .

Liability of accommodation indorser

70. (Iowa.) Where tiie payee presents
a check, which has been raised by him, direct-
ly to the drawee, and the drawee pays the
same on the strength of an accommodation
indorsement, the liability of the accommoda-
tion indorser to the drawee is somewhat
doubtful under present law, although in a re-
cent New York case the accommodation in-
dorser was held liable to the drawee. In
case such check is cashetl liy another bank for
the payee, the acconunodation indorser would
be liable to the purchasing bank and the latter
to the drawee. Vol. 7, p. SG, July, 1914.

71. (N. Y.) Under the Negotiable In-
struments Act an accommodation indorser is
liable on a note to a holder in due course, not-
withstanding such holder at the time of tak-
ing the instrument knew him to be only an
accommodation partv. Vol. 3, p. 519, March,
1911.

72. (Tenn.) A l)ank cashed a check for
the indorser by telephone request of the
drawee. Presentment was duly made and be-
fore payment the drawee failed. Indorser
claimed freedom from liability because check
was cashed for the benefit of the drawee and
not for his l)enefit. Opinion: Indorser was
liable on his indorsement irrespective of
whether he was accommodated. Vol. 7, ]).
106, Aug., 1914.

Liability as between themselves

73. (N. Y.) B and C indorse a note in
the order named for the accommodation of A,
and C is compelled to pay the note. C seeks
to hold B liable for the full amount of the
note. Opinion: C can hold B liable for the
full amount unless there has been some speci-
fic agreement between the accommodation in-
dorsers that they shall only be ratably liable.
The NegotiaI)le Instruments Act of New
York provides ''As respects one another, in-
dorscrs are liable prima facio in the order in
which they indorse, but evidence is admissible
to show that as between or among themselves
tliev have agreed otherwise." Vol. 10, p. 851,
June, 19is'.

74. (Pa.) A note of a corporation hav-
ing three imlorsers was protested for non-
j)ayment in 1909, and since that time inter-
est thereon has been paid by the corporation
but nothing has been paid thereon by the in-
dorsers except that one of the indorsers made
partial ]iayments in reduction of the prin-
cipal, the last of which was in January, 1913.

DIGEST OF LEGAL OPINIONS

What are tlic liabilities of the parties? Opin-
ion: The ri^lit of action of the holder of the
note accrued against all parties when the note
was protested in January, 1D09, and due no-
tice was given the indorsers. The note is
barred by the Statute of Limitations (six
years in Pennsylvania) as to all indorsers and
the sole remaining liability is that of the cor-
poration maker. Interest paid by the cor-
poration maker and not by the indorsers op-
erates to suspend the running of the statute
as to it, but partial payment made by one of
several joint debtors without the acquies-
cence, consent or ratification of the other
joint debtors will not operate to suspend 'the
running of the statute as to him. Any ac-
tion for contribution which the indorser who
made partial payment may have had against
the company indorsers has likewise been
barred by the statute. Vol. 11, p. 491,
March, 1IU9.

75. (Va.) A made a negotiable note
payable to the order of B, bearing three in-
dorsements of B, C and D in the order
named, who indorsed for accommodation. D
paid the note and demanded full payment
from the previous indorsers; B and C will
only contribute one-third. Opinion: The ac-
commodation indorsers are liable for the full
amount in the order in which they indorse
unless as between or among themselves they
have acrreed otherwise. Vol. 2, p. 190, Nov.,
1909. ^

Liability on corporation note

76. (Mich.) A corporation discounted
its note payable at a bank. The note was in-
dorsed for accommodation by several of the
directors of the company and signed "X Com-
pany, by C. II. Jones." The company failed
before maturity. Opinion: The accommoda-
tion indorsers were liable on the note pro-
vided demand and due notice of dishonor
were given them. The fact that the indors-
ers were directors of the bankrupt company
does not dispense with these steps. The pos-
session by the bank of the note at maturity
constituted sufficient demand. C. H. Jones's
signature imports a corporate, not a personal
obligation. Vol. 3, p. 520, March, 1911.
See 1023, 1024.

77. (Pa.) A corporation in the hands
of a receiver issued its promissory note, in-
dorsed for accommodation by several respon-
sible persons. The note was issued pursuant
to a court order, but the legality of said order
was questioned by the bank about to purchase
the same. Opinion: The bank should not
purchase the note until it has ascertained
whether the note is void or illegal. Accom-
modation indorsers are liable on a corpora-
tion note, although the corporation because of
incapacity is not liable, but if the note is void
for illegality, this defense is open to the ac-
commodation indorsers. Vol. 5, p. 166,
Sept., 1912.

For Advertising for "Savings" Accounts, see 188, 870

Advertising of capital

78. (Ark.) A bank with capital of $50,-
000 has $30,675 actually paid in, and wishes
to advertise that its capital is $50,000. Opin-
ion: No statute in Arkansas expressly pro-
hibits the bank from so advertising, although
a certain statute providing that a false report
with intent to deceive as to the condition of
a bank is a criminal offense, may have appli-
cation. Vol. 4, p. 309, Nov., 1911.

Advertisement with United States Flag

79. (Mass.) Until the Massachusetts
Act of 1913 prohibiting the misuse of the
United States flag is judicially construed, it
would be unsafe for banks in that state to im-
print such flag upon their statement folders.
Vol. 7, p. 169, Sept., 1914.

80. (Mo.) The placing of a representa-
tion of the flag upon a draft or certificate of

deposit, disconnected from any advertisement,
would not violate the Missouri statute against
using the flag for advertising purposes. Vol.
9, p."982, June, 1917.

81. (N. Y.) A bank's statement folder
showing its condition and used for advertis-
ing purposes contains an imprint of the like-
ness of the United States flag. Opinion:
There is no Federal statute prohibiting such
imprint; the extent of Federal legislation on
the subject is to prohibit the use of the flag as
a trade mark. While the New York statute
in regard to the desecration and improper
use of the United States and New York State
flags expressly provides that it shall not apply
to a newspaper, pamphlet or circular on which
the flag is printed or painted disconnected
from any advertisement, it would be safer to
consult the District Attorney of the Coimty
before imprinting the flag on the bank's
statement folder. Vol. 6, p. 817, June, 1914.

[91

ALTERED AND RAISED PAPER

See Forgery, 512-G2U

Blank form of another bank used

See 97

82. (Mass.) In Kansas it has been held
not negligent for a bank to pay a check where-
in the name of the drawee has been changed
in a handwriting other than the drawer's ; but
the safer practice is to refuse payment of such
a check until the bank receives satisfactory
evidence that the alteration has been author-
ized. Vol. 6, p. 32, July, 1913.

83. (N. J.) A check was drawn payable
to John Doe only, upon the blank form of
another bank, whose name was erased and the
drawee bank's name substituted. Opinion:
A check to the payee only is not negotiable.
The fact that the check was drawn on the
blank form of another bank did not render
the instrument invalid, but places an addi-
tional burden on the drawee bank to safe-
guard itself against fraud. Vol. 4, p. 221,
Oct., 1911.

84. (N. J.) It is legal but somewhat un-
safe for a bank to pay a check drawn on the
check form of another bank, with name sub-
stituted as drawee. Vol. 5, p. 176, Sept.,
1912.

Check raised after certification

85. (Cal.) Where a check is certified
and afterwards raised and paid by the certi-
fying bank at the raised amount, the bank
has a right of recovery under the rule that
money paid under mistake of fact is recover-
able, provided the position of the holder, by
reason of receiving such payment, will not be
changed for the worse as a result of such
mistake. Vol. 7, p. 96, Aug., 1914.

"Collection" rubber stamped on
instrument

86. (Ore.) It is a general custom of
bankers to place a collection stamp on notes
and the inquiring bank uses a rnl)her stamp
with name of bank and the word "collection,"
followed with blank space for their collection
number, placing same on face of the note in
the margin, or any other blank space thereon.
A local attorney cautions the bank not to
place the collection stamp on any part of the
notes received for collection, stating tliat in
suit on the note, it might be used by the
maker as a defense in refusing payment.
Opinion: The word "collection" rubber
stamped on the face of an instrument, as de-

scribed, does not constitute a material altera-
tion and does not affect the validity thereof.
Vol. 8, p. 252, Sept., 1915.

Erasure by acid

87. (Mass.) Where a bank paid its cus-
tomer's check, the amount of which was raised
after erasure by acid, it is responsible to the
customer, the customer not being bound to
safeguard his check against every possible al-
teration. Vol. 1, p. 31, July, 1908.

88. (Pa.) A check was dra\\'n on a Bos-
ton bank, from which the name of the payee
and the amount were washed by acid, and a
different payee and an increased amount in-
serted. After indorsement by the purj)orted
payee, the check was cashed by a customer of
a Philadelphia bank, but only after he had
deposited the same for collection and had re-
ceived advice that it had l)een paid. Opin-
ion: Irrespective of the Philadelphia bank's
guaranty of indorsement- there is a clear right
of recovery by the Boston bank either against
the former bank as apparent owner of the
check, or if the check was indorsed "for col-
lection," against the customer. Vol. 1, p. 33,
July, 1908.

Liability for payment

See 204, 200

89. (Me.) Where a bank paid a raised
check, and there were no exceptional circum-
stances of negligence on the drawer's part, it
cannot charge the raised amount to the cus-
tomer's account. In the absence of gross or
inexcusable neglect, a bank oflicer or minor
official is not personally liable for a mistake
in paving such check. Vol. 1, p. 333, March,

90. (Mass.) A drawee bank paid a
cheek upon which the drawer's signature was
genuine, but the body of the check was forged
in a dilTerent handwriting, there being no
sign of an alteration. Opinion: If the check
was signed in blank, stolen and filled out or
was originally unfilled or partly unfilled and
afterwards altered by filling the blanks, the
payment by the drawee would be chargeable
to the customer; but if the check was issued
in ordinary and complete form and after-
wards altered without authority, the p.ay-
ment would not be chargeable. Vol. 7, p.
385, Dec, 1914.

91. (Mo.) A bank which takes from the
payee a check raised from $2 to $200, and ra-

DlCiKST OF J.K(JAL Oi'JMuXS

(civcs the full amount thoroon from dnothcr
liaiik, is iTspoiisihU; to tlic latter for the
ainouiit, such hitter hank l)eiii^' resi)()iisil)h;
to the drawee froiii whom it lias collei'ted the
full amount. Vol. 2, p. 11'.), April, lUlO.

92. (N. Y.) A cheek for $5 was rai.scd
to ^'^:){) and the name of payee erased and
hearer inserted. It was paid hy a teller in
violation of his instructions not to pay a hear-
er clieck in excess of $100. Opinion: The
hank is responsihle to its customer and the
teller is liahle to the hank. Vol. 1, p. 205,
Dec, 1!I08.

93. (S. Dak.) A gave B a clieck supposed
to he for the sum of ninetv-nine cents, hut
which was cashed by B for ■$'jy.!)9. B made
out the check, which A signed but without
noticing just how it was filled out. Opinion:
If the check was originally drawn for $99.99,
A is liable. If the amount was subsequently
raised the rule applies that the drawer is not
bound so to prepare a check that nobody can
successfully t-amper with it, but if he careless-
ly executes the check so as to facilitate or in-
vite raising of the amount without giving the
check a suspicious appearance, the bank may
charge the full amount paid to the drawer's
account. Vol. 8, p. 803, March, 1916. See
341 et seq.

94. (Tex.) Where a draft to bearer is

d^a^vn for " twelve dollars," the

word ''twelve'' being written at the right of
the line a space also being left between the
dollar mark and the figures "12," and is in-
dorsed in that condition and afterwards
fraudulently raised to "five hundred and
twelve dollars" in words and figures, and ne-
gotiated to a bank by the drawer on faith of
the indorsement, the authorities conflict as to
the right of recourse of the bank upon the in-
dorser for the full amount. The generally
accepted rule of the law merchant is that
where blanks negligently left are filled, the
party who has invited the fraud by leaving
the blanks should stand the loss, rather than
a holder for value. Vol. 1, p. 265, Jan., 1909.

Material alteration

See 132!)

95. (Kan.) A bank held A's note of
$1,300 for several years, which indebtedness
was renewed from time to time. B, a third
person, came into the bank and indorsed the
note as surety, at the same time paying $350
on the principal. B never received any con-
sideration for his indorsement which was
made without the knowledge or consent of the

maker. The maker disclaims liability on the
note ix'cause of material altcjration. Opin-
ion: The fact that nfU'.r a note is delivered,
another person without the knowledge or con-
sent of the maker adds his name as surety,
does not release the maker from liability on
the ground of material alteration. \'ol. 11,
p. OTl, June, 1919.

96. (Mass.) Where the amount of a
note is written in the body and also given in
figures in the margin, the deduction from
such marginal figures of the amount of a par-
tial pavment is not a material alteration of
the note. Vol. 9, p. 417, Nov., 1916.

Place of payment altered

See 1328

97. (Miss.) A was the holder of a check
drawn by B on a bank which returned it to A
indorsed "not sufficient funds." Thereupon
A changed the name of the drawee to the
bank of C, where B also had an account, and
obtained the money. Later a subsequent
good check, dra^vn by B on the bank of C
was presented, and dishonored because of a
shortage created by payment of the altered
check. Opinion: As to the altered check, the
alteration constituted forgery and rendered
A criminally liable, and as between B and
bank of C, the bank must bear the loss. The
alteration by A would also avoid any possible
liability on the part of B to A. As to the
good check, the bank is answerable in dam-
ages should B prove injury to his credit aris-
ing out of the bank's failure to honor his
check in the hands of a third partv. Vol. 3,
p. 82, Aug., 1910. See 82, 83, 84,' 1328.

98. (N. Y.) A note was altered by draw-
ing lines through the place of payment. Opin-
ion: The note was materially altered and
avoided, except that a holder in due course
may enforce it according to its original tenor.
In this case the purchaser could not be a
holder in due course, when a mere inspection
of the note shows the alteration. Vol. 8,
p. 1102, June, 1916.

Raised checks

99. (Md.) A bank innocently cashing a
raised check cannot hold the drawer for
raised amoimt but only for the amount for
which he drew check. Vol. 3, p. 677, Mav,
1911. See 344.

100. , (Okla.) A bank through inadver-
tence cashed a check raised from $8.75 to $80,
notwithstanding the fact that the check bore
evidence of alteration on its face, by reason
of the words stamped thereon "not over ten

ALTERED AXD RAISED PAPER

108

dollars." Opinion: If bank is a holder in
due course, it can recover for amount of
check as originally drawn, but from the facts
stated, it is doutbful that bank is such holder
in due course. Vol. 6, p. 631, Feb., 191-i.

Recovery of money paid

Recovery by drawee from accommodution indorser
of raised check. See 70

101. (Ark.) A drawer filled out a check
in figures $11.85, leaving the line for the
written amount blank. The payee changed
the figures to $831.85 in a way not discern-
ible except under glass and filled in the writ-
ten part of the check for that amount. Opin-
ion: Bank which pays check is not respon-
sible because of drawer's negligence. Vol. 5,
p. 828, June, 1913.

102. (Colo.) A check, made payable to
two joint payees, was altered by one of the
payees by erasing the name of the other. It
was then negotiated to a local merchant who
deposited it in his bank which collected the
amount from the drawee. The drawee having
Iteen apprised of the alteration demands re-
imbursement from the depository bank.
Opinion: The check was avoided by the al-
teration ; the local merchant took no title and
the drawee bank is entitled to recover the
amount from the depository bank, which, in
turn, has recourse upon the merchant. Vol.
10, p. 311, Oct., 1917.

103. (Iowa.) A drawee bank paid two
checks bearing the genuine signature of its
customers, but their amounts of nine dollars
and six dollars were raised to ninety dollars
and sixty dollars respectively. Opinion: The
drawee bank has a right of recovery of the
excess paid upon the raised checks from the
owner who received payment upon the prin-
ciple that money paid under a mistake of fact
is recoverable. Vol. 9, p. 584, Jan., 1917.

104. (N. H.) A bank paid its custom-
er's check for $80 to another customer. Ten
flays later it was advised that the check had
been raised from $S. Opinion: The drawer
is not chargeal)le unless he had left bhuiks in
the check which the holder wa.s able to fill out
without suspicion. In the absence of such
negligence the drawer is chargeable with $8
and the sum of $72 representing the raised
amount is properly chargeal)le against the
other customer. Vol. 8, p. 327, Oct., 1915.

105. (N. Y.) A customer presented for
deposit to his account a draft, the body of
which was visibly altered. The bank refused
to receive the draft, taking the position that

the amount should be properly authenticated
by the maker or a new draft issued. Opinion :
If the check was raised, the drawee paying
the same could recover the money paid. The
bank would not be safe in receiving such
draft for collection and should send the draft
back, rather than forward it for payment or
rejection and thus avoid correspondence and
trouble. Vol. 6, p. 35, July, 1913.

106. (Ore.) A bank paid a check, raised
from $20.90 to $40.90. The alteration was
apparent on the face of the check. Opinion:
The drawee bank can recover the money as
paid without consideration in the absence of
special circumstances of negligence or laches
making it lial)le. The fact that the altera-
tion was plainly shown does not prevent re-
covery, as such fact is equally apparent to the
holder. Vol. 8, p. 913, April, 191G.

107. (Pa.) A drawee who pays a raised
check is entitled to recover the money paid
from the person receiving payment, in the
absence of negligence in giving notice after
discovery of the forgery. Vol. 1, p. 141,
Oct., 1908.

Statement of consideration altered

XoTE: III a number of cases wliere a creditor
takin;;' a check for a disputed account containing
a condition tliat it is in full has. without the
knowledge or authority of the dcl)tor, erased
the condition and collected the check and then
sued the debtor for the balance claimed to be due,
it has been held that his acceptance and collection
of the check binds him to the condition and he
can recover nothinjj further. Hussey v. Crass,
.5.3 S. W. (Tenn.) DSO; Worcester Color Co. v.
Henry Woods' Sons Co. {1.5 X. E. (Mass.) 392;
Hulfr. .Johnson. 4(5 Atl. (R. I.) 182; Kerr v.
Sanders, 2!) S. E. (X. C.) 043: Smith r. Rron-
stein. 107 X. Y. Sui)p. lO^^; Griblde r. Raymond
Van Praa-,' Supply Co. 10!) X. Y. Supp. 242. Ac-
cording to tlie view of these cases as the altera-
tion is unauthorized, it does not affect tlie rights
of tlie debtor and is therefore immaterial. Xone
of tliese cases, however, involved tiie rigiit of the
drawer to refuse to be cliarfjed witli tlie amount
by the bank on tlie j,'round tiiat jjuynient of the
altered check was without autliority. .Should
sucli a case arise there is fair "ground to conclude
tiiat tlie payment would be held uiiaiitliorized and
non-chargeable.

108. (Conn.) A clieck in tiie ordinary
form I'ontainiMl above the signature of drawer
the words "For account indebtedness Doe
to Roe." These words were .'scratched out or
partially erased by the })ayee. The drawee
refused payment on the ground that it was an
altered check. Opinion: The bank should
not pay because (1) alteration of the state-
ment of consideration would probably be held
material and avoid check, and (2) bank as
paying agent of depositor would not properly

100

DIGEST OF LEGAL OPINIONS

protect liis interests in making payment.
Vol. 4, p. (i20, April, 1912.

109. (N. J.) A drawee bank paid its
customer's check in which the words "for
full payment of account" were erased by the
payee. Opinion: The bank should not have
])aid the check as the erasure of the words was
a material alteration and the check could not
be char<red to the customer's account. Vol.
3, p. 588, April, 1911. See Note supra, 307
ct scq.

110. (Ohio.) The erasure by the payee
of the words "in full of all accounts or
claims" is probably a material alteration,
which would avoid the instrument. Bank
should not pay check containing such era-
sure. Vol. 5, p. 827, June, 1913. See Note
supra, 307 et seq.

111. (Pa.) A bank should not pay a
check which shows alteration in the statement
of consideration, and should obey the request
of a customer to refuse payment of checks
thus altered. Vol. 5, p. 107, Aug., 1912.

Time of payment altered

112. (Ind.) Where payee of note changes
time of payment without assent of maker,
this constitutes a material alteration and
avoids instrument unless change is made to
make instrument conform to intent and
agreement of parties. Where note avoided
by material alteration, original consideration
generally held recoverable unless alteration
fraudulently made, in which case considera-
tion is forfeited. Vol. 10, p. 44, July, 1917.

113. (N. J.) The alteration of the date

by the maker of a note before delivery does
not affect its validity. If the change in date
were made by the holder without the maker's
consent, the note would be avoided as to him.
Vol. 4, p. 309, Nov., 1911.

114. (N. J.) A check after indorsement
by the payee was stolen, the date altered, and
then negotiated to a bona fide holder. It
was presented through the exchanges and
paid by the drawee bank. Opinion: Bank is
not liable for payment of check, it having
been negotiated after the alteration to a
holder in due course, who, under the Nego-
tiable Instruments Law, was entitled to pay-
ment according to its original tenor. Vol. 3,
p. 73G, June, 1911.

115. (Pa.) The payee altered the date
of a cheek drawn by A to six months later
and then negotiated it. The bank cashing
the check forwarded it to A's bank, where it
was protested. The payee could not be found.
Opinion: The cashing bank cannot recover
from the drawer if the alteration was appar-
ent; but if not apparent, the check is en-
forceable according to its original tenor and
the purchaser's right of recovery depends on
whether the check was negotiated within a
reasonable time after issue. Vol. 7, p. 39,
July, 1914.

Check written in lead pencil

116. (Ark.) The drawer who writes his
check in lead pencil is not, for that reason,
liable for the difference to the purchaser of
such check after it has been raised. Vol. 4,
p. 752, June, 1912.

ATTACHMENT AND GARNISHMENT

Account owned by one person in name
of another

117. (Ark.) A customer carries his ac-
count in his father's name which is subject
to checks d^a^vn by him in father's name.
The bank is served with garnishment writ
against the customer in his own name and
asks whether it will affect the balance. Opin-
ion: The bank knowing that the deposit be-
longs to the customer and not to his father,
the account is subject to garnishment al-
though carried in the father's name. Vol. 4,
p. 306, Nov., 1911.

Attachment of insufficient deposit by
two creditors

118. (Me.) A bank is served simultan-
eously with two writs of trustee process
against the account of the same depositor in

behalf of different creditors. Each writ
called for $7,000, and the deposit amounted
to $13,000. The deposit being insufficient
for both, the bank asks which writ is given
the preference. Opinion: The rule in Massa-
chusetts and probably in Maine is that the re-
spective plaintiffs are entitled to recover an
aliquot part of the deposit, each being en-
titled to one-half the fund, although their
claims are for unequal amounts. In Penn-
sylvania the rule appears to be that each
would share in the deposit pro rata, accord-
ing to their respective claims. In the instant
case, the claims being of equal amount, each
would take one-half in anv event. Vol. 10,
p. 313, Oct., 1917.

Bank garnished for debt of check holder

119, (Ark.) A having an account with
a bank gave his check to B who indorsed it

ATTACHMENT AND GARNISHMENT

127

over to C. Before presentment C was sued
by creditors and a writ of garnishment was
served on A's bank against "Anything in your
possession belonging to C." Opinion: The
garnishment will not hold good, because it is
incorrect to assume that the bank was in-
debted to C before the check was presented.
Even if the bank were indebted to C, the
order should require the surrender of the
check as a condition of making pavment.
Vol. 1, p. 141, Oct., 1908.

120. (S. Dak.) Certain creditors of A
learned tliat he was to receive commissions in
a land deal. A bank in the same town was
served with a writ of garnishment for any
funds that might pass through its hands be-
longing to A. A's attorney gave his check
to A, drax^ai on the said bank, and the bank
asks if it is proper to pay the same. Opin-
ion: Check is not an assignment of deposit
and drawee bank is not indebted to payee,
who is defendant in garnishment proceedings,
and not liable where check is paid to payee
after service of writ. Nor is bank held for
funds of defendant received after service of
writ. Vol. 9, p. 822, April, 1917.

Bank not indebted at time writ is served

121. (Ark.) A customer purchased
drafts from a bank. The bank is served with
garnishment writ against the customer. At
time of service, the customer has not cashed
the drafts. Opinion: Judgment will not be
rendered against the garnishee bank unless
the drafts are delivered into court or until
they mature and it is shown the customer
still holds them. Vol. 4, p. 306, Nov., 1911.

122. (Wash.) A bank received a tele-
graphic request from its correspondent to
pay a specified person a certain sum. A cred-
itor of such person served a writ of garnish-
ment upon the bank before it received a re-
mittance from its correspondent. Opinion:
The garnishment would not hold, because the
bank was not indebted to the person at the
time the writ was served. Vol. 5, p. 664,
April, 1913.

Note: Now hy judicial const ruction of the
Washington Code, a writ of parnislimcut holds
the moneys or poods of defendant in liands of
garnishee at the time of the service of tlie writ,
or at any time tliereafter until the service of the
answer of the garnishee, but not debts created
between time of service of the answer of the
garnishee and the time of the trial of the issue.

Bank's obligation to disclose balance

123. (Mich.) A bank is under obliga-
tion to disclose the amount of the balance

wliere it is garni(^hed bv a creditor of the cus-
tomer. Vol. 4, p. 26, July, 1911.

Funds represented by certificate of deposit

124. (III.) Tnder the law of Illinois a
bank, national or state, is not liable to gar-
nishment by a creditor of its depositor for
funds represented by an outstanding nego-
tiable certificate of deposit. Vol. 6, p. 211,
Sept., 1913.

125. (Iowa.) A bank sul)mits tiie fol-
lowing form of certificate of deposit and asks
Avhether it is subject to attachment by cred-
itors of the payee.

''Tlie Blank National Bank,

Blank, Iowa, Dec. 1. 1917.
John Doe has deposited in this bank One
Hundred Dollars payable to tiie order of
himself in current funds on the return of this
certificate properly indorsed three months
after date with interest at the rate of 4 per
cent, per annum. No interest after maturity.
Certificate of Deposit

Not subject to check Cashier"

Opinion: A certificate of deposit in the hands
of the payee is property subject to attach-
ment but where a bank is garnished for funds
represented by an outstanding negotiable cer-
tificate it is entitled, under the law of Iowa,
to complete indemnity before sulforing judg-
ment; if, however, the certificate is non-ne-
gotiable paper, the bank can be charged as
garnishee of the payee before notice of assign-
ment. The above certificate being payable
*'in current funds" has been held according
to Iowa decisions a non-negotiable instru-
ment. Vol. 10, p. 530, Jan., 1918. See
271, 272.

126. (R. I.) A deposited funds in a na-
tional bank in Khode Island and received
therefor a negotiable certificate of deposit
payable to himself. A creditor of A seeks to
attach the deposit. Opinion: The deposit is
exempt from attaclimcnt under the provisions
of till' l{hode Island statute exempting d(4)t.s
scoured by bills of exchange or negotiable
promissory notes. Vol. 9, p. 145, Aug., 191().

127. (R. I.) I> tin- wife of A, dcposita

money with a bank as collateral security on a
note discounted by .\ for bis business. B
wants the fund free from attachment and the
bank advises her to indorse a certificate of
deposit in blank and leave it with the bank
accompanied by a letter stating the desired
purpose. Opinion: A creditor of the hus-
band would have no right to att<ach a fund l>c-
longing to the wife specially pledged by her

128

DK!EST OF LEGAL OPINIONS

as security for lior luishaiid's deljt. In Rhode
Island a deposit represented l)y an outstand-
ing nefifotiablc certificate is exempt from at-
tachment; but the certificate itself is subject
to seizure l)y cr<Mlitors of the owner. Vol. 5,
J). ()70, April, l!)i;3.

Funds represented by outstanding nego-
tiable instrument

128. (Ala.) A bouglit a pair of mules
from B giving his note in payment, payable
to B's wife. C had judgment against B and
served a writ of garnishment on A for the
amount. Later D bought the note with no
notice of the garnishment, and C claims the
amount of the garnishment out of the note.
Opinion: In Alal)ama, while a negotiable note
is current as negotiable paper and subject to
be transferred to a bona fide purchaser with-
out notice and before maturity, the maker of
the note is not subject to garnishment, nor
chargeable as a garnishee of the original
payee of the note. A's answer shows his only
indebtedness was to B on a note not yet ma-
tured made payable to B's wife, in which case
A would not be chargeable as garnishee. Vol.
11, p. 328, Dec., 1918.

129. (111.) A purchased a draft issued
by a bank in favor of B. A claimed that B
lost the draft and requested a duplicate. Be-
fore the duplicate was issued, a creditor of B
serves a writ of attachment upon the maker
of the draft. Opinion: Where a negotiable
draft has been issued by a bank and it is out-
standing, the drawer is not liable to garnish-
ment in suit of a creditor against the payee,
imder the law of Illinois, unless it can be
shown that the draft has matured and is still
in the hands of the payee. The bank should
not issue a duplicate draft unless indemnified
against loss. Vol. 9, p. 46, July, 1916.

130. (Tex.) A bank issued its cashier's
check of $1,000 to its customer, whose account
was later garnished while the check was still
outstanding. The customer had nothing to
his credit in open account and the bank seeks
to know its liability as garnishee at suit of
the creditor. Opinion: Where a bank has
issued a cashier's check which is outstanding
and unpaid, it is not liable as garnishee at
suit of a creditor of the payee, or indorsee
unless the check is shown to be in the hands
of such payee or indorsee after maturity;
that is to say, after such time as it would be
presumed overdue so that it^ transfer there-
after would subject the subsequent taker to
equities. Vol. 10, p. 781, May, 1918.

Notice with incorrect name

131. (Ala.) A bank having funds only
of "John Jones, Agent" is served with a writ
of garnishment against the funds of "John
Jones." The bank disregarded the writ and
was threatened with a damage suit because
the funds in fact belonged to John Jones.
Opinion: The bank not knowing the real
owner of the funds should not have taken the
risk of answering that it was not indebted
to Jones and then subsequently paying him
the money on his check as agent. Vol, 5,
p. 588, March, 1913.

132. (Minn.) A garnishment notice
was served on a bank charging funds
of Mary Smith, and Ijank carries an account
in the name of Mrs. James Smith, and subse-
quently pays without knowledge or notice of
the identity of the two. Opinion: The bank
is not liable for the amount of Mrs. James
Smith's deposit, as it has no knowledge or
notice of its depositor's identity, and there
were no circumstances which would charge it
with the duty of making inquirv as to such
identity. Vol. 9, p. 821, April, 1917.

Precedence over checks not presented be-
fore service of writ

133. (111.) A depositor had a balance of
$•±0, which amount was garnished on Jan. 10,
1912. Two checks of $5 and $10, drawn
prior to Jan. 10 were presented after the ser-
vice of the writ. Opinion: The garnishment
takes precedence over the checks dated before
but not presented until after the service of
the writ. Deposits made after the service of
the writ are not covered by it. Vol. 4, p. 489,
Feb., 1912.

134. (Mo.) The check of a depositor
was presented after a writ of garnishment
Avas served attaching the deposit. The check
was issued before the service of the writ.
Opinion: The writ of garnishment takes pre-
cedence over the outstanding check, because
the check of itself is not an assignment of
the deposit, and the bank is not liable to the
holder unless and until it accepts or certifies
the check. Vol. 9, p. 146, Aug., 1916.

135. (R. I.) A check comes to a bank
for payment through its correspondent arriv-
ing at 8.30 A. M., and is charged to the cus-
tomer's account between 11 and 12 o'clock.
At 9.01 A. M. the account is attached. The
bank asks which takes precedence. Opinion:
A writ of garnishment served against a de-
posit account at 9.01 A. M. takes precedence

ATTACHMENT AND GA"RNISHMEXT

143

over the debtor's check received throu<,di the
mail at 8.30 A. M. but not charged against
his account until 11 A. M. There appears
to be no reason why a writ of attachment
against a bank served upon the proper officer
at the bank cannot be just as eii'ective when
served during non-banking hours at it would
be when served during banking hours. Vol.
11, p. 98, Aug., 1918.

Proceeds of bill of lading draft

See Bills of lading, 244-2(50

136. (Mich.) A draft with bill of lad-
ing attached was received by a bank from its
customer for collection. It was forwarded
to a collecting bank and the payor after pay-
ing the draft immediately garnislied the pro-
ceeds for an indebtedness of the customer.
The customer was obliged to settle on the
payor's terms and it is claimed that the col-
lecting bank wrongfully withlield the funds,
and tiiat they could not legally be reached by
garnishment proceedings. Opinion: Where
the proceeds of a bill of lading draft are gar-
nished in the hands of collecting bank for in-
debtedness of the shipper, the garnishing
creditor is not entitled to the proceeds if the
draft has been sold by the shipper prior to
collection. But if the bank was merely an
agent for collection, and the proceeds be-
longed to the customer, the amount would be
subject to garnishment proceedings. The
duty of the collecting bank when served with
process of garnishment is to advise the for-
warding bank of the service of the writ. If
the forwarding bank claimed the funds as its
property, the collecting bank should make
due answer, naming the bank as owner, and
pay funds into court taking receipt therefor.
If the customer owned proceeds, he should
have opportunity to contest proceedings to
release the funds under bond. Vol. 10, p.
312, Oct., 1917.

137. (Mo.) A l)ank forwarded for col-
lection a draft with a bill of lading attached.
The proceeds were garnished in tiie hands of
the drawee bank because of a claimed short-
age, but the ])rosecution of the garnishment
proceedings has been delayed three years.
Opinion: Application for dismissal of the
proceedings because of undue delay should
be made; it the proceeds belonged to the dis-
counting bank they are not subject in any
event to garnishment by a creditor of the
shipper. Vol. 8, p. 801, :March, 191G.

138. (Tex.) A bank purchased from its
customer a draft with a bill of lading at-
tached, and forwarded it for collection to a

neighboring bank. The latter bank, being a
creditor of the shipper, attached the proceeds
in its hands and refused to transmit the
amount to the purchaser of the draft. Opin-
ion: Bank purchasing draft with bill of la-
ding attached has a right to the goods, or to
the proceeds of the draft when paid, superior
to an attaching creditor of the shipper. Vol.
10, p. 853, June, 1!>18.

Proceedings may be instituted before
judgment

139. (Okla.) A customer overdrew his
account in a bank and opened up a new ac-
count in anotlier bank in Oklahoma. The
creditor bank wishes to garnish the new ac-
count. Opinion: The creditor bank should
bring an action against its del)tor and after
the action is brought, proceed at once by
writ of garnishment against the otlier bank.
Oarnishment proceedings may be instituted
before judgment against the principal debtor
under the laws of Oklahoma but the plaintiff
nuist have judgment in the princijial action
I)efore trial can be had in the garnishee ac-
tion. A'ol. 5, p. TjI, :Mav, 1!I13.

Property subject to garnishment

140. (Cal.) A bank rentiil a .safe de-
posit box to a holder, giving him two keys
and keeping a master key for all of the boxes
held. A creditor of the box holder desires
to attach the contents of the box. Opinion:
The contents of the safe deposit box belong-
ing to a box renter are subject to attachment,
and according to the weight of more recent
authority the bank may also be garnished for
such contents. Vol. (i, p. 505, Jan., 1014.

141. (Idaho.) A savings account is sub-
ject to garnishment, and it is doul)tful if the
garnishee bank can require n-turn of the
book, as it is the property of the dej)ositor and
is not negotiable. The dilTerence between a
negotiable certificate of dejiosit and a savings
bank book with respect to attachment or gar-
nishment proceedings is that in case of a ne-
gotialde certificate the debt of the bank runs
to the holder of the certificate and not to the
oriirinal depositor. Vol. 10, j). 3S0, Nov.,
1917.

142. (Mich.) An account rej)rescntcd
by a savings i)aidv pass-book is subject to gar-
nishment. Vol. 4, p. 21(), Oct., 1911.

143. (Mont.) In Mont-ana, where a
bank is served with a writ of attachment of
moneys owing its depositor, it is only liable
for the amount of the balance to the credit of
the depositor at the time the write is served.

144

Dir^KST OF LF/IAL OPIMOXS

This rule also liolds in California, (^miiccli-
cut, (jicorgia, Iowa, Kansas, iMaino, Michij^an,
Minnesota, Texas and Wisconsin. The statutes
in Alabama, Arkansas, Illinois, Maryland,
Massachusetts, Missouri, New Hampshire,
North Carolina, rcnnsylvania, Vermont,
West Vir<finia and Washint^ton, hold the bank
liable for subsequent deposits. Vol. 11, p.
G73, June, 1!)19.

144. (Ore.) A savings account is sub-
ject to attachment, but if the account has
been assigned before the service of the writ of
attachment on the bank, the assignee is pro-
tected, whether or not the bank has been no-
tified of the assignment. Vol. 9, p. 826,
April, 1917,

145. (Wash.) An account in a savings
bank equally as in a commercial bank is sub-
ject to garnishment by a creditor of the de-
positor in the absence of a statute exempting
such an account from garnishment. Vol. 7,
p. 308, Nov., 1914.

Set off by bank to defeat attachment

146. (Kan.) A bank makes a loan to a
customer and credits him with the proceeds.
Before the proceeds are checked out, the ac-
count is garnished and the bank desires to
cancel the credit. Opinion: The mere fact
that the account is garnished before the pro-
ceeds are checked out will not entitle the bank
to cancel the credit. But if the loan was

obtained Ijy fraud, the credit may be cancelled
or if the customer has become insolvent the
bank may, according to the law of some states
(Ca., Iowa, Ky., Mass., Minn., Tenn., N. J.,
Ohio, N. C. and Texas) a contrary rule ob-
taining in other state (Ala., Miss., N. Y.,
Pa., K. I., 8. C. and Wis.) set off the insolvent
customer's deposit against his unmatured
indebtedness. Vol. 9, p. 502, Dec, 191G.

147. (Mont.) A creditor learning that
its debtor had a deposit in a certain l)ank at-
tached the funds. The bank who owned a
past due note of the same debtor set off his
deposit against the note so as to defeat the
attachment and made a return to the sheriff
on the balance remaining after its note was
paid. Opinion: The bank had the right to
make such set off and such right, although
subsequently exercised, existed prior to the
attachment and enabled the bank to take
priority over the attaching creditor. Vol.
4, p. 95, Aug., 1911.

148. (W. Va.) A customer having a
balance with his bank of $500 was indebted
to the bank on a matured note of $2,500. A
writ of garnishment was served upon the
bank by a creditor of the customer on the
same day the note was due. Opinion: The
bank owning the note had a right to set off
the deposit against the note and make reply
that it was not indebted to its depositor. Vol.
6, p. 756, May, 1914.

ATTORNEY'S FEES

Attorney's fee note payable at bank

149. (Ariz.) A local attorney presented
a past due note payable at a bank for pa}'-
nient, adding thereto ten per cent, for his
fees, in accordance with clause expressed in
the note : "If this note is not paid when due
and is collected by attorney or legal proceed-
ings, we promise to pay an additional sum of
10 per cent, of the amount of this note as at-
torney's fees." The bank asks (1) whether
it should pay without the special authoriza-
tion of the maker and (2) was the amount
collectible on the note merely its face value
or the protest fees in addition. Opinion:
Where a note providing for attorney's fees if
not paid when due and collected by an at-
torney is made payable at a bank in which
the maker has sufficient fimds at maturity
and the note is not presented until after ma-
turity and then by an attorney, it is (1)
doubtful whether the bank has authority to

pay the overdue note without express author-
ization from the maker, and (2) in any event
the amount collectible is the face of the note,
without attorney's fees. The safest course
for the bank is to obtain an express instruc-
tion from the maker of the note. Vol. 11,
p. 437, Feb., 1919.

Claim of attorney's fee in bankruptcy
150. (Miss.) The maker of a note, con-
taining a provision for the payment of an at-
torney's fee of fifteen per cent, if not paid at
maturity, became a bankrupt before the note
fell due. The receivers of the bankrupt es-
tate refused to pay the additional attorney's
fee. Opinion: The claim for the attorney's
fee upon the note which did not mature until
after the maker became bankrupt was not
provable against his estate, because such
claim is not ''a fixed liability absolute^ owing
at the time of the filing of the petition in
bankruptcy." Vol. 8, p. 143, Aug., 1915.

ATTORXEY'S FEES

159

Negotiability of notes with attorney's fee
clause

151. (Mo.) The Xegotiable Instru-
ments Act provides that the instrument shall
be negotiable although it is payable "with
costs of collection or an attorney's fee in case
payment shall not be made at maturity," and
any clause which sufiiciently conforms to
such provision will not affect the negotia-
bility of the instrument. Vol. G, p. 630,
March, 1914.

152. (Mo.) A note containing a clause
providing for the payment of an attorney's
fee in case payment is not made at maturity
is valid in Missouri and negotiable under the
provisions of the Negotiable Instruments Act.
Vol. 6, p. G30, March, 1914.

153. (N. J.) Under the law of New Jersey
a note containing a provision for attorney's
fee if not paid at maturity is both valid and
negotiable. The following clause if inserted
in a note is valid and the note negotiable :
"I further agree that if this note is not paid
when due to pay all cost necessary for collec-
tion, including ton per cent, for attornev's
fees." Vol. 8, p. 419, Nov., 1915.

154. (N. Y.) The face of a note con-
tains the following statement : "The maker of
this note hereby agrees in the event of non-
payment of the note when due to pay an
amount equal to 10 per cent, of the face of
the note as attorney's fees, if such an amount
shall be charged as attorney's fees for the col-
lection of the note." Question is raised as
to the validity of this clause and negotiability
of note under the law of New York.
Opinion: The note is negotiable under the
Negotiable Instruments Law, and the clause
providing for attorney's fees although not
specifically passed upon by a New York Court
would undouhtodlv l)e held to be valid and
enforceable. Vol.' 9, p. 824, April, 1917.

155. (Okla.) Negotialde Instruments
Act makes note negotiable although it is pay-
able "with costs of collection or an attorney's
fee in case payment shall not be made at ma-
turity." Opinion: A note containing clause
promising to pay "as collection foes, tlie ad-
ditional sum of 10 ])er centum of ])rin(ipal
then due, if collection bo made through at-
torney" is negotiable under Act. Vol. G,
p. 630, March, 1914.

'Validity of attorney's fee clause

156. (Ark.) In Arkansas the courts
have held that the stipulation for an attor-

ney's fee does not affect the negotiability of
a note, but that the stipulation is itself void
and unenforceable. The subsequent passage
of the Negotiable Instruments Act may or
may not validate such stipulation. Vol. 7,
p. 773. April, 1915.

157. (Ark) Upon the question of the
effect of a stipulation for attorney's fees in
promissory notes, the four following con-
flicting views before the Negotiable Instru-
ments Act were held in the various states:
(1) that which sustains both the validity of
the provision and the negotiability of tlie in-
strument; (2) that which holds that the pro-
vision is valid and enforceable but that it de-
stroys negotiability; (3) that which holds
that negotiability is not affected but the pro-
vision is void and unenforceable, and (4)
that which holds that the provision for an ad-
ditional amount as attorney fee above the
higiiest rate of interest allowable renders the
transaction usurious. The Negotiable Instru-
ments Act which declares that the negotia-
bility is unaffected by a provision for attor-
ney's fee "in case payment shall not be made
at maturity" leaves uncertain the question
whether such provision is valid and enforce-
able in those states which held it void before
the Act was passed. In Ohio and West Vir-
ginia the Act does not validate the attorney
fee provision; but in Virginia and Colorado
such provision under the Act is held valid.
In Nebraska, North Carolina and South Da-
kota the Negotiable Instruments Act itself
expressly provides that nothing in the Act
shall be construed to authorize the enforce-
ment of the stipulation for the attorney's fee.
A^ol. 7, p. 773, April, 1915.

158. (Ind.) In Ohio, stii>ulations in
promissory notes providing for attorney's fees
are against public policy, void and unenforce-
able, and the Su])reme Court of Ohio has
held that the provision of the Negotiable In-
struments Act providing that buch stipula-
tions do not all'ect negotial)ilitv, does not
make them valid. Vol. 6, p. 759", May, 1914.

159. (Mich.) A note in Michigan con-
tained the following provision: "I further
agree to pay ten per cent, additional as at-
torney fee, if this note is not jiaid when due,
and is coll(>ited by or through an attorney at
law." Opinion: Prior to tlic passage of the
Negotiable Instruments Act in Michigan,
the attorney fee provision was void and un-
enforceable but under the Act which makes
a note containing such a clause negotiable it
has not been deci<led in Michigan whether or
not such provision is thereby validated and

IGO

du;kst of legal oimxioxs

ilie few (k'C'isioiis upon tlic point in other
states connict. Vol. 8, p. 701, Feb., liHG.

160. (Neb.) Under the })reseni hnv of
Nchraska, a provision in a inort<,'af(e that in
the event of foreclosure the defenchuit siiall
pay a reasonable attorney's fee, to be deter-
mined by tlie court and taxed as costs in the
case, is invalid and not enforceable. Sucli a
stij)ulation would not affect the ne2;otial)ility
of a note. For tlie history of the law of th(!
state on the subject see Vol. 8, p. 249, Sept.,
l!)ir).

161. (Okla.) In Oklahoma a note pro-
viding for "a reasonable amount" as attor-
ney's fee if not paid at maturity is negotiable,
and should suit be commenced would be en-
forceable for a reasonable amount charged by
the attorney Avhen pleaded and proved ; and a
note providing for "ten per cent." attorney's
fee would be enforceable for that amount, in
the absence of plea or proof that such fee was
unreasonable. Vol. 8, p. 29, July, 1915.

162. (S. Dak.) In South Dakota, the
]ir(n ision for an attc^rney's fee in a promissory
note has been held void and unenforceable,
but does not afl'ec^t its negotiability. In pass-
ing the Negotiable Instruments Act, the leg-
islature eliminated the provision that negotia-
bility is not affected by the attorney fee clause
and substituted a provision that nothing in
the Act should authorize inclusion in a judg-
ment on an instrument a sum for attorney's
fees or any other costs not now taxable by
law. Vol. 7, p. 774, April, 191;j.

163. (W. Va.) While in the far greater
number of states attorney's fee notes are both
negotiable and valid as to attorney's fees, the
question remains undecided in those states,
such as Virginia, where the courts have held
such stipulations to be penalties and against
public policy and void, and the legislature
has later enacted the Negotiable Instruments
Act whether such Act abrogates the decisions
and validates such stipulations. The proba-
bility is that the Act would be held to validate
such provisions. Vol. 4, p. 215, Oct., 1911.

BANKS AND BANKING

See National Banks, 870-887; Branch Banks, 261-265

Examination of books and records
See 175, 22G, 227

164. (Mich.) In a suit by a bank
against a depositor, the defense requested the
bank to produce its books and records from
1890 to date for the use of the defendant's at-
torney for such time as he may take to pre-
]iare his defense. Upon the bank's refusal
the defendant proposes to serve the process
of subpoena duces tecum. Opinion: In suit
by bank against depositor, bank officer served
with subpoena duces tecinn must produce
books called for containing evidence relating
to transaction, in absence of statute permit-
ting authenticated copy — but if subpoena is
unreasonable in its requirements bank may be
protected under the search and seizure clause
of the Fourth Amendment to the Federal
Constitution. Vol. 11, p. 331, Dec, 1918.

165. (Okla.) In a suit by a depositor
against a bank, an officer served with a sub-
poena duces iecum must produce the books
called for containing evidence relating to the
transaction in the absence of a statute per-
mitting an authenticated copy. Inconve-
nience to the bank or to the officer does not
justifv his refusal to obey the court order.
Vol. 7, p. 686, March, 1915.

Use of loose leaf books

166. (Wis.) The AYisconsin legislature
requires the books of original entry used in
banks to be permanently bound and prohibits
the card system as a sulistitute for a bank
ledger. This is probably the only state legis-
lation wdiich prohibits the use of loose leaf
books in banks. Vol. 4, p. 375, Dec, 1914.

Bank as agent to procure loan

167. (Mo.) Bank A offered to procure
a loan for Bank B which proposition was ac-
cepted. Thereupon Bank A sent a note it
had discounted to Bank B, which was taken
by the latter thinking it was an outside loan.
The note owned by Bank A was worthless.
Opinion : Bank A would be liable to Bank
B. It is a breach of duty for an agent em-
ployed to make an investment for his prin-
cipal to supply investments out of his own
property imless done with knowledge and con-
sent of the principal. Vol. 4, p. 753, June,
1912.

Bank as borrower on personal note of
executive officer

168. (Neb.) The cashier and manager
of a bank desiring to procure a loan for the

BAXKS AND BANKING

[17-4

bank, gave his personal note secured by his
bank stock. The money passed to the bank,
but the loan did not appear on the books or
reports of the bank as a liability. There
was no written disclaimer from the lender
bank that they did not in any way hold the
borrowing bank. Opinion: The circum-
stances would probably be held to evidence a
loan and benefit to the bank and that the
cashier pledged his personal stock as security
and therefore the bank would be liable.
Wlictlier the loan is to the cashier or to the
bank is tested byHhe inquiry for whose bene-
fit the loan is made, which is based upon the
entire circumstances constituting the contract
and not on the form of the note alone, and
sometimes on tlie ratification of tlie loan by
the bank. Vol. 8, p. 140, Aug., 1915.

169. (Neb.) A bank discounted the per-
sonal note of the cashier of anotlier bank and
the proceeds were placed to the credit of tlie
bank sending the note. Tlie lender bank
also accepted as collateral, notes with t!ie
payee blank unfilled. Opinion: The dis-
counting of the personal note of the cashier
of anotlier bank and crediting such bank
with the proceeds would probably be held a
transaction with the bank, which would make
it liable on the note. Where collateral con-
sists of notes with the payee blank unfilled,
the lender bank is put on inquiry and takes
subject to tlie maker's defenses. Vol. 6, p.
577, Feb., 1914.

Banking hours
Sec 1, 1101, 1102, 11G4, 1100

170. (Mo.) The banks in a city in Mis-
souri agreed to change their banking hours by
closing Thursday afternoon during July ami
August. The banks question the legal right
to close and what would be tlieir lial)ility in
case a check was presented on Thursday after-
noon and payment refused. Opinion: Bank-
ing hours are not estalilished by law, but by
the banks themselves. The courts hold that
ltaid\s may establish reasonal)le hours for
transaction of business. It is competent for
the banks in question to cliange the banking
hours as indicated, and the changed banking
liours having been announced to the ])ublic
by advertisement, a check afterwards pre-
sented on Thursday afternoon will not be
subject to protest. Vol. 9, p. 983, June,
1917.

171. (N. C.) An express company ten-
dered a package of money to a bank in North
Carolina at 7 o'clock in the evening upon the

arrival of tlie train. The bank refused to
accept the shipment at that time of the night,
while the company claimed that it had no
safe place to store the money over night and
refused to make further shipments unless the
bank keeps open to receive them at 7 P. ^l.
Opinion: A tender of delivery of an express
package of money to a bank is sufficient if
made within the reasonable business hours
general to the place, although such tender is
made after the close of banking liours. What
is a reasonalde time for delivery is a question
for the jury and in this case 7 o'clock at night
in the winter time might be held an un-
reasonable time. In no event can the express
company, being a common carrier, discon-
tinue handling shipments to the bank. Vol.
7, p. G87, Marcli, 1915.

General duty of secrecy as to customer's
affairs

172. (Conn.) The banking law of
('onnccticiit docs not prohibit a l)ank official
from giving information that a certain person
has an account in the bank, whether it be a
savings or commercial account, and provides
no penalty for the giving of such informa-
tion. Relation of banker and customer
creates duty of secrecy, and banker should not
disclose information as to account or affairs
of customer, except under legal compulsion ;
but in absence of statute, no legal conse-
quences would follow breach of tliis duty by
])anker except a possible lial^ility in damages
in case customer could prove injury. Vol. 7,
p. 169, Sept., 1914. ISee 477, 1324.

Compulsory disclosure of customer's

balance for tax purposes, etc.

See 503

173. (La.) The Collector of Internal
I\c venue, wiio is authorized "to take evidence
touching any part of the administration of
Internal Revenue Laws,'' would presumably
be acting within the scope of his authority if
in a given case he required a bank olfieer to
irive information whether or not a dejiositor's
check was paid. Vol. 3. p. 10, July, 1910.

174. (N. Y.) A tax assessor being a di-
rector in a rival concern demanded of a bank
tliat it furnish a statement of the names of
its stockholders with tlie number of shares
held by eacli, under penalty, tlie information
probably to be used 1)V the assessor to an un-
fair advantage. Opinion: Tlie bank was
obliged to make the required statement, and
the assessor could be removed if found

175

DIGEST OF LEGAL Ui'lMOXS

guilty of using the infoniiatioii in an im-
proper way. Vol. 5, p. 21, July, 1912.

175. (Pa.) The depositor of a hank
made returns to a tax assessor which did not
suit the oflicer. The assessor attempted to
(jet information from the hank concerning
the depositor's balance. Opinion: Decisions
protect hank ofhcers from heing compelled to
make disclosure of names of depositors in
gross and amounts of their deposits for pur-
poses of taxation — but in a proper proceed-
ing against one or more depositors, specified
by name, a bank officer is not privileged to
refuse to produce books and testify as to bal-
ances of such depositors. Vol. 5, p. 515,
Feb., 1913.

176. (Va.) In a proper legal proceed-
ing against a customer, the bank's officer can
be compelled to state the amount of his bal-
ance, the information not being privileged in
a legal sense. This case is differentiated
from those where the wholesale disclosure of
all of the depositors' balances is sought for
tax purposes, wherein the right to compel dis-
closure has been denied. Vol. 6, p. 431, Dec,
1913.

Guaranty by bank
See 874

177. (Kan.) A state bank in Kansas
wired that it would guarantee to pay a draft
by a drawer in Texas upon the Blank Produce
Co. in Kansas for a car of lemons. Opinion:
In the absence of express authority conferred
by statute, a bank has no power to guarantee
to pay the draft, it being a transaction in
which it has no interest and from which it
derives no substantial benefit and the bank
would not be liable upon the draft. Vol. 6,
p. 92, Aug., 1913.

178. (Fla.) A bill of lading draft w^as
drawn on a party in Mississippi and pay-
ment was guaranteed by a Mississippi bank.
The draft was marked paid and the bank
claimed to have fulfilled its guarantee, but
the proceeds were afterwards attached by the
consignee. Opinion: The draft in question
was a bill of lading draft within the meaning
of the Mississippi statute, which requires the
collecting bank to hold the proceeds 96 hours
after delivery of the bill of lading and not
an ordinary sight draft as to which it should
have remitted immediately. The bank which
guaranteed payment fulfilled its guarantee,
as it did not go to the extent of insuring that,
after payment, the proceeds would be paid
over free from attachment; but it is the pre-

vailing theory of the law that it is not com-
petent for a bank to bind itself by such a
guarantee. Vol. 2, p. 72, Aug., 1909.

179. (N. Y.) A bank guaranteed the sig-
nature to an assignment of a stock certificate
by using the words "signature guaranteed,"
duly signed by a qualified officer. The ques-
tion concerns the extent of lialjility incurred
by a guaranty of signature. Opinion: A.s-
suming a case where the bank has jjower and
the officer autliority to make the guaranty, it
binds the bank for the genuineness of the sig-
nature as well as for the authority of the
person signing when the signature is made by
a representative ; but does not extend to war-
ranting the validity of the acts of the per.son
whose signature is guaranteed with reference
to the use of the certificate. Vol. 7, p. 999,
June, 1915. See 517.

180. (Okla.) A gives B a post-dated
check. B writes the bank in regard thereto
and the cashier mails a written guarantee to
B that the check will be paid when due.
Opinion: The cashier by virtue of his office
had no authority to bind the bank by guar-
anteeing payment of the check before its due
date and the bank is not bound. Vol. 8,
p. 322, Oct., 1915. See 14.

Indemnity bond covering risk of unauthor-
ized indorsements

181. (Minn.) A bank receives a large
volume of checks and drafts payable to cer-
tain clients of an attorney, who indorses them
for deposit in his personal account. x\ bond
of indemnity will secure the bank against
loss by reason of a possible unauthorized in-
dorsement by the attorney. For suggested
form of bond see Vol. 5, p. 445, Jan., 1913.

Liability of person identifying payee

182. (Ariz.) AHiere A orally identified
the payee of a check to the purchasing bank,
A is not liable to make the check good in the
event of non-payment, provided no false rep-
resentations were made by A which were acted
upon by the bank to its injury. To hold the
person identifying the payee liable in the
event of dishonor such person should be re-
quired to indorse the check. Vol. 3, p. 518,
March, 1911. See 615, 616, 636.

Loan to bank official restricted

183. (N. J.) Opinion: Section 12 of
New Jersey Banking Act which prohibits
a bank from making a loan to an officer or
director or clerk until certain requirements

BANKS AND BAXKIXG

190

arc complied with might be construed to
apply to a loan to an executor, trustee or re-
ceiver who is an officer or director but not to
a loan to a corporation of which a director or
officer of the bank was an officer unless, in
reality, the officer was chief beneficiary of
such loan. Vol. 6, p. 375, Nov., 1913.

Investigation of private affairs by Con-
gressional Committee

184. (Ky.) The Committee on Banking
and Currency of the House of Representa-
tives required the state banks and trust com-
panies to fill out certain blanks in answer to
various questions concerning the private af-
fairs of the institution. For example, the in-
vestigation called for a list of the officers,
directors and stockholders, their stock-
holdings and loans, description of securities
hold, the dates and amounts of paper in-
dorsed for others, a list of borrowers, etc.
Opinion: Grave doubt as to jurisdiction
of House of Representatives or power of com-
mittee to investigate private affairs of state
banks and trust companies — questions of ju-
risdiction considered in light of Federal deci-
sions and 4th and 5th Amendments — further
question as to invasion of state rights — con-
clusion that general inquiry by a Congres-
sional Committee into the alfairs of all banks
of a state is probably beyond jurisdiction of
House of Representatives to authorize, and
tiiat national banks are not subject to pro-
posed investigation in view of provision of
National Bank Act limiting visitorial powers.
Vol. 4, p. 745, June, 1912.

Bank's right to pledge assets

185. (Ohio.) The City of D deposited
with an Ohio bank $30,000. The bank di-
rectors signed a bond to the city and to secure
themselves deposited $36,000 of the bank's
assets with a trustee. Opinion: In the ab-
sence of statutory prohibition there is no
reason of public jiolicy or otherwise why the
bank has not the right to pledge its assets to
secure the sureties on the bond. Vol. G, p.
99, Aug., 1913.

Bank as safe depositary

186. (Kan.) A bank leased a safe de-
posit box to A, who holds the key. His part-
nership business with B having failed, a re-
ceiver was appointed and A moved away.
A's wife who found the key demands the
right to open the box. Opinion: A bank
which leases a safe deposit box to a customer
who keeps the key is a bailee for hire under

duty to exercise reasonable care and should
not allow a person other than the customer
presenting the key access to such, except upon
written authority from the customer, whether
such person be the bailee's wife, or a receiver
of the bailee or any other person, unless com-
pelled to do so by valid judicial process. Vol.
11, p. 215, Oct., 1918. See 472.

Savings bank and bank prohibited from
transacting business in same room

187. (Ind.) New York legislation pro-
hibits the doing of business in the same room
by a bank and a savings bank. Massachu-
setts legislation includes the foregoing and
further prohibits officers of savings bank
from being officers of other banks. Vol. 3,
p. 4G9, Feb., 1911.

Use of word "Savings" by commercial
bank

188. (Ky.) A commercial l)ank in Ken-
tucky is not prohibited by statute from carry-
ing savings accounts and from having a sav-
ings department, but in that connection it
must keep separate books for savings business
and post the rate of interest allowed deposi-
tors and other regulations prescribed by the
directors. There is no statute in Kentucky
prohibiting the use or advertisement of the
word "savings" by a commercial bank. Vol.
9, p. 826, April, 1917. See S70.

Due diligence in examining statement

189. (S. Dak.) It is the duty of a country

bank receiving a daily statement from its city
correspondent to check up the statement, use
due diligence in examining it and to give due
notification of any errors. What constitutes
due diligence has not yet been specifically de-
fined by the courts. In the ligiit of a recent
New York decision in the Morgan case dis-
cussing the degree of diligence required by a
depositor, uj)on tiie return of a statement of
accounts and voucliers to a depositor, reason-
able diligence reciuires a very prompt exam-
ination of the acrount and rejwrting of errors,
failing which the bank will not be chargeable
in the event subsequent forged checks were
])aid which would not have been paid had the
depositor exercised due diligence in the
matter of prompt examination and notifica-
tion. Vol. 7, p. 381, Dec, 1911.

Liability for statement of customer's
financial condition

190. (Cal.) Tiie holder of a check
makes inijuiry of drawee over the telephone

191

DIGEST OF LEGAL OriNlOXS

as to drawer's account, and Ix'caiiso of defec-
tive wire the inquiry is understood to refer to
a diU'erent ])crson and answer is made that the
party lias no account, which leads to apprc-
liension of drawer whose cheek is good. Opin-
ion: The drawee is not liahlc to de])ositor in
action for slander, nor to inquiring bank, in
ease the latter is held liable in damages to the
drawer. Vol. 9, p. 498, Dec, 191G.

191. (Iowa.) A collection agency which
pulilislies in a "delinquent book'' tlie names
of debtors against whom it hold claims for
collection Avould be subject to action for libel,
and a bank furnishing to such agency the
names of certain of its debtors, with author-
ity and intention, if the debts are not paid,
that such names be so published, would be
likewise responsible. Vol. 9, p. 499, Dec,
1910.

192. (Iowa.) In response to an inquiry
by an Iowa bank concerning the financial
condition of its customer, a Georgia bank by

its officer returned words of general and
j)ointed praise and sjiecifically stated that tlie
customer "is worth apj)ro.\imately $'^0,000
and we are sure a note for $G00 on him is
j)erfectly good and collectible." These state-
ments, which proved false, were relied upon
to the injury of the Iowa bank in extending
credit to its customer. Opinion: The
Georgia bank was not liable for the unauthor-
ized act of its officer, unless the bank derived
some benefit, but the officer is personally
liable for damages in an action for deceit.
The authorities generally support the view
that the making of statements as to the finan-
cial responsibility of customers is no part of
the banking business and that a bank officer
has no authority to make such statements on
behalf of tlie bank and does not bind the bank
thereby, except that where the bank has pro-
fited by the false statement it will be held
liable, although such liability has been denied
in some cases. For a review of the law ap-
plicable to the recovery of damages for false
statements, see Vol. 6, p. 204, Sept., 1913.

BANK OFFICERS AND DIRECTORS

President of national bank as bond broker

193. (Ore.) A national bank president
acted as bond broker and in his personal ca-
pacity sold a bond to B and at the same time
verbally promised B that the bank would
take up the bond should B desire to cash it. B
seeks to compel the bank to take up the bond.
Opinion: A national bank has no power to act
as broker in stocks and bonds, and its presi-
dent who sells bonds in a personal capacity
has no authority to bind bank by promise that
bank will take up bonds thus sold. Vol. 4,
p. 427, Jan., 1912.

Bank as holder of director's note

194. (N. Dak.) A bank purchased a note
from one of its directors, who had knowledge
of an infirmity which would ordinarily render
the instrument unenforceable. Opinion:
The bank was an innocent purchaser and is
not chargeable with the knowledge possessed
by its director. The director's knowledge
was acquired outside his official duties and
was not attributable to the bank. Vol. 6,
p. 92, Aug., 1913.

Liability of bank for unauthorized acts of
cashier

See 14, 108, 169, ISO

195. (S. C.) The cashier of a bank al-
lowed its depositor an overdraft of $1,000.
To cover this amount the cashier accepted its

depositor's note, which was indorsed and
guaranteed by A, upon the cashier's statement
that A would not be held liable to the bank
upon his guaranty, and that the note was
only temporary to cover the amount during
the presence of the bank examiner. Opinion:
A is bomid by his guaranty. A bank cashier
has no authority by virtue of his office to
promise an indorser on a note to the bank that
he will not be liable upon his indorsement.
Vol. 3, p. 586, April, 1911.

196. (W. Va.) The cashier of a bank
without the authority, knowledge, or consent
of the board of directors, executed a bond to
indemnify a corporation against loss in issu-
ing a duplicate certificate of stock. The cashier
falsely represented that the original certificate
of stock had been held by the bank as collat-
eral and had been lost, but in fact, such
original had never been in the bank's posses-
sion. Opinion: The cashier had no inherent
power to execute such a bond, and his act
being without actual authority and not with-
in the scope of his implied powers did not
bind the bank. Vol. 2, p. 537, June, 1910.

Cashier of national bank need not be a
director

197. (Tex.) The cashier of a national

bank need not but may be a director. Vol. 7,
p. 776, April, 1915.

BAXK OFFICERS AXD DIRECTORS

207

Duty to deface counterfeit money

198. (Iowa.) The Federal law requires
United States and national bank officers to
deface counterfeit notes, but makes no similar
requirement as to counterfeit coins. Some
clearing house rules require defacement of
both counterfeit coins and notes and such
would seem the proper procedure for all
banks, national and state. Vol. 9, p. 350,
Oct., 1916.

Interlocking directorates

199. (Minn.) The right of an officer
and director of a national bank with re-
sources exceeding five million dollars, located
in a city of over two hundred thousand inhab-
itants, to be an officer and director in any
number of non-member state banks, elsewhere
located and none having resources equaling
five million which right exists under the
Clayton Act, is not restricted by the provi-
sions of the Kern Act which are cumulative
and additionally permit such officer, upon
consent of the Federal Reserve Board, to be
in not more than two other banks not in sub-
stantial competition, from which, but for the
Kern proviso, he would be excluded. Vol.
9, p. 421, Nov., 1916.

200. (Minn.) A director in a state bank
which is a member of the Federal reserve
system in a city of over 200,000 population
cannot be director of a trust company and of
a capitalized savings bank located in the same
place. The director of a state member bank
cannot also be a director in a national bank
in said place. Vol. 8, p. 908, April, 1916.

201. (N. Y.) A director of a national
bank located in New York is eligible to be-
come trustee of a savings bank in the same
state, provided a majority of the board of
trustees of the savings bank is not composed
of directors of the national bank. Vol. 11,
p. 435, Feb., 1919.

Officer as attesting witness

202. (Mo.) An officer, not a stock-
holder, of the ])ayeo bank is coni])etent to sub-
scribe to the mark of the maker of an instru-
ment as attesting witness. Where the officer
is a stockholder it is unwise for the bank to
act upon the assumption of such competency.
Vol. 2, p. 22, July, 1909.

Overdraft by director

203. (N. J.) The director of a bank in
pursuance of liis oral order received from the
bank certificates of deposit which were in ex-
cess of his account. A Xew Jersey statute
makes it criminal for a director to overdraw
his account. Opinion: This transaction con-
stituted a violation of the statute, for the
director made an oral order which was vir-
tually a draft upon his account in excess of
his credit and received payment in the bank's
negotiai)le certificates of deposit, wliit-h were
the equivalent of money. Vol. 9, p. 347,
Oct., 1910.

Personal liability

See ]'.)-2, y.S.-j, ,SS6

204. (Me.) A bank officer or minor offi-
cial is not personally liable for a mistake in
])aying a raised clieck in absence of gross or
inexcusable neglect. Vol. 1, j). 333, March,
1909. See 89.

205. (Miss.) By reason of the neglect
of certain directors of a ^lississippi l)ank in
holding regular examinations of the bank, the
stockholders suffer a loss. The directors dis-
claim liability because they were not paid for
their services. Opinion: The fact that the
bank directors received no comjiensation did
not relieve tliem from liabilitv for neglect of
duty. Vol. 6, p. 212, Sept., 1913.

206. (N. Y.) Bank teller, who in vio-
lation of instructions not to pay over $100,
])ays check raised from $5 to $250 is person-
ally liable to the bank. Vol. 1, p. 205, Dec,

1008.

Power to borrow money for use of bank

207. (Wash.) it is n..w well settled
that the executive officers of national banks
may legitimately in the usual course of bank-
ing business, and without special authority
from their board of directors, rediscount their
own discounts or otherwise l)orrow money for
the bank's use. It is likely that such officers
would have like autliority to bind the bank
by an independent blanket guaranty of pay-
ment covering all the notes transferred, the
notes themselves being indorsed witiiout re-
course. Vol. 5. p. 593, March, 1913.

208]

BANKRUPTCY AND INSOLVENCY

Fur Insolvency of Collecting Bank, see Collection, 410- 11. j
For Set Off, sec 1177-12:50

Certified checkholder not a preferred
creditor

208. (Wis.) The holders of checks cer-
tified by ;i national bank which becomes in-
solvent are not preferred over other creditors;
nor does the Wisconsin Banking Law give
such preference to the holders of certified
checks of insolvent state banks. Vol. 4, p.
152, June, 1912.

Claim to dividends

209. (Tenn.) A corporation pledged
$10,000 worth of bonds with a bank to secure
a loan from the bank of $7,000 as well "as
any other indebtedness." Later the bank
loaned the corporation an additional $3,000
to be paid out of the sale of its product in
preparation. Before the sale the corporation
became bankrupt, and the bank realized
$7,000 from the bonds. The bank claims
the unpaid balance against the estate. Opin-
ion: The bank is entitled to dividends on the
unpaid balance, over and above the amount
realized upon the security. Vol. 1, p. 266,
Jan., 1909.

Depositaries for estates in bankruptcy

210. (N. C.) National Bankruptcy Law
does not restrict deposits of money of bank-
rupt estates to national banks and the courts
of bankruptcy may designate, by order, state
banks as depositories. Vol. 3, p. 466, Feb.,
1911.

Discharge as bar to unlisted claim

211. (Miss.) A bankrupt owing a
bank on a claim intentionally omitted to list
the bank as a creditor in his schedules, be-
cause he intended to pay the claim. He ob-
tained his discharge and now refuses to pay
the claim. Opinion: The bank can recover
the full amount of its claim against the bank-
rupt, provided it had no notice or knowledge
of the bankruptcy proceedings prior to the
discharge. Vol. 3, p. 521, March, 1911.

Dividend check of failed national bank

212. (Fla.) A bank acquired by in-
dorsement a dividend check drawn by a na-
tional bank payable to one of its stockholders.
Before the check was presented the national
bank failed, and the receiver takes the posi-
tion that the claim on the dividend check
must be made by the original stockholder-

payee, and ]io assignment of the check can
be recognized because such stockholder may
be liable to assessment on his stock. The bank
holding the check seeks to file a proof of claim.
Opinion: The indorsee for value of the check,
acquiring the same before the failure of the
bank, has a right to prove its claim thereon
against the receiver free from counterclaim
by the receiver against the original payee for
assessment on stock. The position taken by
the receiver ignores the fact that such divi-
dend check is a negotiable instrument. If
the receiver disallows the claim the bank's
remedy is by action to establish claim by
judgment. Vol. 10, p. 310, Oct., 1917.

Liens within four months of bankruptcy
See 218

213. (Idaho.) A bank received a num-
ber of notes as collateral upon a loan due
December 1, 1910. The notes were collected
and applied on the indebtedness on January
5, 1911. The borrower became a bankrupt
April 28, 1911. Opinion: The assignment
of the notes as collateral more than four
months prior to the bankruptcy was not a
preference, although the notes were not col-
lected until within the four months. Vol.
4, p. 220, Oct., 1911.

214. (N. J.) A judgment obtained more
than four months prior to the filing of a pe-
tition in bankruptcy is a valid and enforce-
able lien against the bankrupt's estate, but
when obtained within four months, it is void
where the debtor is adjudged bankrupt. Vol.
10, p. 783, May, 1918.

Payment of check on insolvent bank

215. (Kan.) A check upon A bank is
caslied by B bank and immediately charged
to the former's account prior to forwarding
it to A bank, pursuant to an agreement be-
tween both banks. A bank became insolvent
after its account was charged but before it re-
ceived the item. Opinion: Bank B will not
be permitted to maintain the charge to the
account of Bank A, against the receiver of the
latter. Vol. 7, p. 899, :May, 1915.

Innocent purchaser of negotiable paper
transferred by bankrupt

216. (111.) A bankrupt's estate, from
the date of filing of petition against him,
being in custody of the court, the bankrupt

BANK STOCK AND STOCKHOLDERS

222

without power to thereafter transfer same
and such filing being notice to all the world
that the bankrupt's power of disposal is at an
end, it has been held that the innocent pur-
chaser of negotiable paper, transferred by
the bankrupt after filing of the petition is
not a bona fide holder, but is charged with
constructive notice. But this rule is not
firmly established, and in view of the inequity
and impolicy of charging innocent purchasers
of negotiable paper with constructive notice
in such cases, it is fair to assume that future
courts will create an exception of innocent
purchasers of negotiable paper from the doc-
trine of constructive notice because of the
filing of a petition in bankruptcy against a
prior transferor, as has already been done in
protection of a bank which has innocently
paid its customer's check in ignorance of
prior filing of petition in bankruptcy against
such customer. Vol. 11, p. 211, Oct., 1918.

Preference not created where collateral
renewed

217. (Ala.) A note secured by a real
estate mortgage was past due, although part
payment had been made by a sale of a part of
the mortgaged premises. The mortgagee de-
sires a new note, secured not only by a new
mortgage on the premises covered by tlie old
mortgage, but also by additional new security.
In case of the mortgagor's bankruptcy with-
in four months of the renewal the mort-
gagee questions the right of the creditors to
tlie mortgaged property. Opinion: Substi-
tution of new mortgage within four months

on same property covered by old mortgage
would not be a preference, but taking of ad-
ditional security would be a preference to
extent of such securitv. Vol. 5, p. 247, Oct.,
1912.

218. (Okla.) More than four months
prior to the liankruptcy of a firm a bank
loaned money to said firm on pledge of col-
lateral. Within the four months the bank
released the collateral on the promise of the
firm to substitute farmers' notes later. The
farmers' notes were afterwards substituted
for most of the loan and the balance was paid
by check. A month later the firm was forced
into bankruptcy, but the bank ha<l had no rea-
son to believe that the firm was not entirely
solvent. The question was raised whether the
settlement of the loan by the firm by sub-
stituted collateral and check constituted a
preference. Opinion: While a substitution
of new collateral within the four months in
exchange for collateral of equal value relin-
quished at the same time would not be a pre-
ference, it is doubtful whether it would be
so held where new collateral was afterwards
substituted for most of the loan pursuant to
a prior promise, the balance l)eing paid bv
check. Vol. 4, p. 220, Oct., 1911.

Propery inherited after adjudication

219. (N. Y.) Where a bankrupt inherits
property after the adjudication of his bank-
ruptcy, the creditors have no claim against
such after acquired propcrtv. Vol. 4, p. 557,
March, 1912.

BANK STOCK AND STOCKHOLDERS

Liability of transferor to assessment

220. (N. Dak.) A sold B in good faith
ten shares of his stock in a national bank.
Within one year after the sale the bank
failed. The question was raised whether A
was subject to liability. Opinion: If the
transfer was made in good faith and was
properly registered on the books, the trans-
feror was not liable to assessment when the
bank subsequently failed, even thougli the
l)ank was insolvent at the time of the trans-
fer. Vol. 4, p. 96, Aug., 1911.

Dividends
See 432, 433

221. (Neb.) After a dividend was de-
clared and became payable, the stock was

transferred to a liolder without any agree-
ment as to the dividend. Opinion : The divi-
dend belongs to the owner of the stock at the
time it was declared and does not pass with
a sul)sequent transfer of the stock unless by
express contract. Vol. 5. p. 2»s July, 1912.

Double liability
See 1206

222. (Miss.) A became the owner of
certain fully ]>aiil non-assessable stock issued
by a Mississip{)i bank at a time when the law
provided for no double liability of stork-
holders. Under the Mississippi Banking
Act of March, 1914, .V has been assessed
equal to the par value of his stock. Opinion:
A's stock is subject to the assessment. Al-
though the law under which the bank was or-

223

DIGEST OF TJOriAL OPIN'IOXS

gaiiized provides no double liiil)ility of stock-
holders, the k'^nslature may amend the law
and create such liability where the state con-
stitution, as in i\Iississipi)i, reserves power to
the legislature to amend the law of incor-
poration. Vol. 9, p. 145, Aug., I'JIG.

223. (N. J.) Section 23 of the Federal
lieserve Act provides in part: "The stock-
holders of every national banking association
shall be held individually responsible for all
contracts, debts and engagements of such
association, each to the amount of his stock
therein, at the par value thereof in addition
to the amount invested in such stock." The
question is raised as to the meaning of the
underscored ])hrase; whether it means the
price that is paid for the stock in the open
market. Opinion: In event of failure, stock-
holder loses the amount invested in the stock
and in addition is liable for debts, pro rata
with other stockholders, up to the amount
of the par value of his stock. If the stock-
holder has bought stock in an open market
above par and thereafter the national bank
goes into the hands of a receiver, he loses the
amount invested in such stock, namely, the
market price paid for it, and is also liable to
assessment to the extent of the amount of his
stock at the par value thereof. Vol. 11, p.
402, March, 1919.

224. (Utah.) A national bank held
stock of the B national bank as security for
a loan and bid in the stock, having it trans-
ferred to its own name upon the books of the
B bank. Thereafter B bank failed and
A bank is charged with payment of the stat-
utory assessment of 100 ])er cent. Opinion:
The A bank is liable for the assessment. The
fact that it became owner of the stock by
necessity and not by choice would not change
the result. Vol. 11, p. 438, Feb., 1919.

Increase of national bank stock

225. (Del.) Where stock of national
bank is increased by the vote of necessary
number of shareholders, and resolution
authorizing increase fixes premium at which
new stock shall be sold. Opinion: The
stockholder not participating or voting for
increase has right to purchase his proportion
of new shares at par. Vol. 5, p. 754, May,
1913.

Inspection of books and records

See 164 ct scj

226. (Pa.) A stockholder in a national
bank is entitled to inspect the books of the
corporation. In some states this right is ab-

solute, while in other states such as Pennsyl-
vania the law conditions the enforcement of
the right upon the proper motive of the stock-
holder. Vol. 7, ]). 090, March, 1915.

227. (Pa.) Opinion expressed that a
depositor as distinguished from a stockholder
has no such interest in the Ijank as would
give him the right to inspect its books and
records. The contrary statement in two
early cases that on all proper occasions a de-
])ositor has a right to inspect the books of
the bank is a mere expression of opinion, not
having the force of law. If any right of in-
spection exists in the depositor, it would at
most be confined to his particular account
and could not extend to the accounts of other
customers or to the general business of the
institution. Vol. 7, p. 578, Feb., 1915.

Lien for stockholder's indebtedness

228. (Ark.) The stockholder of an Ar-
kansas bank owed his bank on an overdraft
but had transferred to another his stock,
upon which the bank claimed a statutory lien.
After the stockholder died the bank trans-
ferred the stock to the purchaser but applied
part of the dividends to payment of the over-
draft and paid the balance of the dividends to
the decedent's administrator. Opinion: By
statute in Arkansas, a bank has a lien on the
stock and dividends of its stockholder for an
indebtedness to the bank, superior to the
claim of the transferee. The transferee,
however, can recover from the bank the bal-
ance of dividends paid to the administrator
in view of the due notice to the bank of the
transfer of the stock. Vol. 5, p. 597, March,
1913. See 237, 238.

229. (Kan.) The Kansas Banking
Law protects a bank against a transfer of
bank stock so long as the registered holder is
indebted to the bank, and provides that all
dividends, interest or profit shall be retained
by the bank and applied to the debt. The
bank cannot sell the stock, unless authorized
bv a court order granted in a proper case.
Vol. 5, p. 518, Feb^, 1913.

230. (Md.) The stockholder of a na-
tional bank owed the bank on several notes
which matured after his death. The bank
questions its right to claim a lien on its stock
for the indebtedness or to refuse to transfer
its stock to another upon the sale by the ex-
ecutor. Opinion: The national bank has no
lien and cannot refuse to transfer the stock
should the executor see fit to sell it to an-
other. Vol. 6, p. 100, Aug., 1913.

BANK STOCK AND STOCKHOLDERS

[239

231. (Mich.) A national bank has no
lien on its stock for the indebtedness of its
stockholder. Where such stock is in the
hands of a pledgee as security for a loan it is
not subject to any claim of lien by the issuing
bank. Vol. 7, p. 306, Nov., 1914.

232. (Mo.) A stockholder of a national
bank borrows money of the bank without se-
curity. When the note falls due, he fails to
pay it. The bank asserts a lien on his stock
for the indebtedness. Opinion: A national
bank has no lien on its stock for the indebt-
edness of a stockholder and cannot refuse to
transfer his stock until the debt is paid. But
it would seem that the national bank act
would not prevent the bank attaching the
shares for his indebtedness, where in posses-
sion of the stockholder at the time of the at-
tachment. Vol. 3, p. 401, Jan., 1911.

233. (Ohio.) By statute in Ohio, a bank
has a lien on the stock owned by its debtors
and may refuse to transfer the same mitil
the indebtedness is satisfied. For Ohio de-
cisions cited see Vol. 5, p. 753, May, 1913.

234. (N. Y.) The stockholder of a state
bank in New York pledged his stock to a na-
tional bank as collateral for a loan. The
stockholder was indebted to his own bank.
The national bank claimed the right to sell
the stock to secure themselves, while the state
bank claimed a prior lien on the stock pur-
suant to a provision of its by-law giving it a
secret lien. Opinion: The state bank has no
lien on its stock and cannot refuse to transfer
it. Section 51 of the Stock Corporation
Law of New York gives a bank or other cor-
poration a lien on its stock or right to refuse
to transfer while the stockholder is in-
debted to the bank, provided a copy of the
section is printed on the certificate — where
not so printed, a lien for indebtedness created
by the by-law is not effectual against a pur-
chaser of the stock for value without notice.
Vol. 6, p. 370, Nov., 1913.

235. (N. Y.) A bank holds its stock-
holder's note of $1,000. He has not paid his
indebtedness and claims he has sold his cer-
tificate of stock to a third person. The bank
refused to transfer the stock until the note
was paid. The certificate contains no pro-
vision claiming a lien for the indebtedness of
the stockholder. Opinion: Whore stock-
holder indebted to state liank in New York
has assigned his stock, bank may refuse trans-
fer to assignee until stockholder's indebted-
ness is paid, provided section of statute de-

claring lien is printed on certificate; other-
wise not. Vol. 10, p. 530, Jan., 1918.

236. (Pa.) A borrower pledged as col-
lateral for a loan the stock of a national and
of a state bank. The stockholder is indebted
to the banks which claim a prior lien. Opin-
ion: A national bank has no lien on the stock
for the indebtedness of its stockholder, and in
Pennsylvania there is a statutory prohibition
(Act of 1901) of a lien by state banks. The
Uniform Stock Transfer Act passed in Penn-
sylvania in 1911 provides that no corporation
shall have a lien upon its shares or restrict
their transfer unless notice is imprinted on
the certificate. It is doubtful if this would
be construed as repealing the Act of 1901
prohibiting banks from acquiring liens upon
their stock. Vol. 8. p. 14G, Aug., 1915.

Right to dividends on pledged stock
See 228

237. (Ga.) A loaned B $1,000 on 50
shares of the capital stock of X Company,
due notice of the pledge having been given to
the company. Dividends have accrued on the
stock and are due and payable. Opinion:
Dividends accruing on the pledged stock be-
long to the pledgee, and the company after
notice is liable to the pledgee therefor. If
the company went into liquidation, A would
be entitled to liquidation dividends. Vol. 5,
p. 6G7, April, 1913.

238. (W. Va.) A bank held as collater-
al certain stocks of a company indebted to
the bank, upon which a dividend was de-
clared. After the dividend was due and be-
fore received by the bank, the funds of the
pledgor with the company were attached by
one of his creditors. Opinion: The bank
had the right as unrecorded pledgee of the
stock to the dividends declared thereon, as
against an attaching creditor of the pledgor.
Vol. 5, p. 520, Feb., 1913.

Stock issued in name of partnership

239. (N. J.) Jolni Smith and Son, a
partncrshiji, have l)Ought bank stock and re-
quest that the certificate be issued under the
firm name. The bank is uncertain as to
whetber one of the firm under such issue
could qualify to act as a director of the bank.
Opinion: A certificate of bank stock may be
issued to a firm in the firm name and a di-
rector's qualification shares may be held by
tlie partnership of which he is a member.
Where a certificate of stock is issued in the
name of a partnership, a valid transfer there-

240]

DIGEST OF LEGAL OPINIONS

of may 1)0 cxocutocl by any nionibor of tlie
firm who is authorized to 8ip:n tlie firm name.
Vol. 10. ]K TIC, April, 1!H8.

Transfer of stock

Rc<> 220, Li.it!, KiM, KH, i:i:t!) ct scq

240. (Ga.) A, tlic owner of a ctTiificatc
of stock in a Georgia bank, pledged tlie same
as security for a loan from B, who held his
note for the amount. Afterwards the pledg-
or obtained a new certificate of stock from the
bank without returning the original certifi-
cate. A defaults on his note and B tenders
the original certificate to tlie bank, requesting
the issue of a new certificate of stock. The
bank refused on the ground that another cer-
tificate had been issued to the original stock-
holder. Oinnion: In issuing a new certifi-
cate without surrender of the original, the
bank took the risk of the original certificate
being outstanding in the hands of a bona fide
holder. The pledgee is entitled to damages
against the bank for such refusal, being the
amount of his loan and interest unless he has
bought the stock in, in which case the meas-
ure of damages is the value of the stock at
the time of refusal to transfer. Vol. 11,
p. 393, Jan., 1919.

24L (Va.) A Virginia bank purchased
at a private sale ten shares of stock of an Ar-
kansas bank which it had held as security
for a loan to a stockholder of the latter bank.

The Arkansas bank refused to transfer the
stock thus sold, claiming that under the Ar-
kansas statute the pledged stock was not
registered in the county clerk's office as re-
(juired by law. Opinion: Notwithstanding
])rovisions of Arkansas statutes that upon
transfer of stock a certificate of transfer must
be deposited w'ith county clerk, it has been
decided that a pledge of stock is valid without
such deposit and the statute is only applicable
to transfers by the stockholder bv way of sale.
Vol. 6, p. 213, Sept., 1!n .3.

Voting
See 225, 439, 440

242. (Iowa.) The pledgor of certain
stock in a national bank became bankrupt.
The trustee in bankruptcy claimed the right
to vote the stock at the stockholders meeting.
Opinion: The trustee had the right to vote
the stock in the hands of the pledgee of the
bankrupt, where the stock had not been trans-
ferred to the pledgee on the books of the
bank. Vol. 5, p. 378, Dec, 1912.

243. (N. Y.) It is a general rule of law
that an executor has the right to vote with
respect to the stock standing on the corpor-
ate books in the name of the testator on ex-
hibiting an exemplified copy of his letters
testamentary. There is nothing in the na-
tional bank act which restricts this right with
respect to stock in a national bank. Vol. 7,
p. 996, June, 1915.

BILLS OF LADING

For Attachment of Proceeds of B/L Draft, see 136 et seq; for Collection of B,^L Draft, see

367 et seq

Acceptor's liability on b /I draft

244. (Miss.) The drawee of a draft
with an attached bill of lading representing
cotton accepted the draft before checking the
invoice. Before the expiration of the three
days of grace, the drawee discovered an error
in the invoice and refused payment of the
draft at maturity, whereupon the instrument
was protested. Opinion: Under the Missis-
sippi law (the Anti-Commercial statute) the
acceptor of. the draft is not liable to a bona
fide holder where it has a good defense
against the drawer. Vol. 4, p. 613, April,
1912.

Note: Under tlie Negotiable Instruments Act,
which became a law in Mississippi in 1916, the
acceptor would be liable.

Recovery by drawee of money paid on
non-negotiable b 1 draft

245. (Mich.) A draft was drawn pay-
able "on arrival"' and provided that the "paid
freight bill will be accepted as part payment."
The drawer cashed the draft with the bill of
lading attached at the bank, which forwarded
the instrument for collection. The drawee
paid the draft upon surrender of the bill of
lading, but afterwards repudiated the trans-
action and recovered the money from the col-
lecting bank, claiming that the goods were
bought on sample from the drawer and were
not as represented. Opinion: The draft not
being an unconditional order to pay money
was not negotiable and the bank which pur-
chased the draft was liable to refund where it

BILLS OF LADING

253

was shown that there was failure of consider-
ation for the draft. Vol. 5, p. 519, Feb.,
1913.

Rights of attaching creditor of shipper

See 13G et scq

246. (Cal.) A bank discounted and be-
came owner of a draft with an attached order
bill of lading representing prunes. The
draft was paid by the consignee of the goods,
but wliile the funds were in the hands of the
collecting bank they were attached by a cred-
itor of the shipper. Opinion: The purchas-
ing bank has a right to the proceeds in the
hands of the collecting bank superior to that
of the attaching creditor. Vol. 4, p. 614,
April, 1912.

247. (Me.) Where goods, shipped under
an order bill of lading, are attached by a
creditor of the shipper, the courts quite gen-
erally hold that a bank to whom the bill has
been pledged for value as security for ad-
vances has a right to the property superior
to that of an attaching creditor. Vol. 1,
p. 203, Dec, 1908.

248. (N. Y.) A bank discounted a
shipper's draft with an accompanying bill of
lading representing hay, and credited the
shipper with the amount. The drawee re-
fused to pay the draft and attached the goods
because of an alleged prior indebtedness of
the shipper to him. Opinion: The bank was
not simply collecting agent of the shipper but
acquired special title to the hay superior to
that of an attaching creditor of the shipper,
even though the credit was not checked out.
Vol. 3, p. 11, July, 1910.

249. (N. Y.) It is the undoubted rule
of law that where a bank purchases or makes
advances upon a draft, to which is attached
a bill of lading as security, the purchasing
bank takes a right to the property su])eri()r
to that of an attaching creditor. Vol. 3, p.
11, July, 1910.

Bank's liability for violation of
instructions

250. (La.) A bank held a bill of lading
to be delivered to the consignee after he had
signed an attached agreement to buy a soda
fountain. In violation of instructions from
its principal, the bank as agent delivered the
bill of lading without procuring the signature
to the agreement. Opinion: The bank was
liable to its principal for the damages suffered
by reason of the violation of instructions, but
if the principal was not rightfully entitled

to have the agreement signed as a condition
of delivery of the bill of lading and the im-
posing of such condition was wrongful or
fraudulent, the loss of opportunity on the
part of the principal to drive an unconscion-
able bargain would not be legitimate actual
damage recoverable from the agent bank.
A^ol. 5, p. 101, Aug., 1912. See 3G8.

Liability for issuing bill of lading without
receipt of goods

251. (111.) A bank purchased and col-
lected of the drawee a bill of lading draft,
given for goods to be shipped on the Wabash
railroad. The goods were never delivered
to the railroad and the consignors failed.
The drawee sued the purchasing bank for
money paid under a mistake of fact. Opin-
ion: The purchasing bank was not liable to
the drawee as warrantor of the accompany-
ing bill of lading; but the drawee's remedy,
if any, was against the railroad for issuing
an accommodation bill of lading without the
receipt of the goods. Vol. 2, p. 3 To, March,
1910.

Consignor cannot change routing

252. (N. Y.) The consignor of goods
having transferred an order bill of lading as
security to a bank, has no right without the
bank's consent to have the shipment di-
verted en route, and it' the railroad obeys his
instructions it would be liable in damages to
the bank. In the case of a shipment from
California to New York, if the bank sued
the railroad for damages in converting and
injuring the property, the law of the state
where the injury occurred would govern ; but
if the bank sued the railroad for breach of
contract, the law of the state where the con-
tract was made would govern. Vol. 3, p.
335, Dec, 1910.

Shipper's indorsement supplied by collect-
ing bank

253. (Ala.) The shipper's indorsement
on an "urder notify'' bill of lading was sup-
plied by a collecting bank in order to facili-
tate the payment of the attached draft and
the delivery of the goods to the consignee.
Opinion: The collecting bank would incur
no resjionsibility in supplying the indorse-
ment where the transaction was bona fide
and the bill of lading represented the actual
goods, but might incur responsibility in the
event of a forged or false bill of lading. Vol.
5, p. 313, Nov., 1912.

254

DIGEST OF LEGAi. OPINIONS

Effect of absence of shipper's signature

254. (N. J.) 'I'lic ro(|iiiR'nu'iit of the
siffiiatui'c (if tlu" sliii)i)('r, wlicre a l)lank is
provided on the uniionn bills, is not a re-
(luircnuMit of law but a rcconmiondation of
the Iiitorslato Commerce Commission. It is
a matter of practice, not of law, and the ab-
sence of tiie shipper's signature does not ren-
der the document invalid. Vol. 2, p. 37G,
March, 1910.

Uniform Bill of Lading Act relative to
purchase and collection

255. (N. Y.) Tender Sections 37 and 39
of the Pomcrene bill (embodying the main
features of the Uniform Bills of Lading Act),
which has passed the United States Senate
and is pending in the House

1. Where a bank purchases a draft witli
an order bill of lading attached and assigns
it with indorsement to a European bank for
value, the bank guarantees the genuineness
of the bill to the purchaser but

2. Where a bank forwards the draft with
the attached bill of lading for collection from
the drawee, the bank does not warrant the
genuineness of the bill of lading to the payor.
Vol. 5, p. 246, Nov., 1912.

Note: The above bill became a law August 29,
1916, and took effect January 1, 1917. In the law
as passed the sections above referred to are
numbered .34 and 36 respectively.

Rights of payor of draft where goods not

according to contract

See 252

256. (Minn.) A bank purchased a num-
ber of drafts covering cars of hay with order
bills of lading attached and forwarded the
same to another bank for collection. The
drawee paid the drafts but later attached the
funds in the hands of the collecting bank, be-
cause the goods were not according to the
contract. Opinion: The purchasing bank
had a right to the proceeds in the hands of
the collecting bank as against the drawee.
Vol. 5, p. 518, Feb., 1913.

257. (Colo.) A bank received payment
of a draft with bill of lading attacTied for
consignment of goods, in payment of pur-
chase price. It later develops that the goods
were not according to contract and the ques-
tion is raised as to whether the receiving bank
is liable as an agent of the seller guaranteeing
performance of the contract, unless it dis-
claims such warrantor liability by indorse-
ment on the bill of lading. Opinion: The

almost universal judicial rule in this country,
now enacted in statutory form as to inter-
state bills by Section 3(> of the Federal Bill
of Lading Act is that a bank which purchases
a draft witii bill of lading attached is not re-
sponsible to the drawee who pays the draft
for the genuineness of the bill or the quan-
tity or quality of the goods therein described.
There is no necessity of stamping on the
draft an express disclaimer of such warrantor
lial)ility except ])ossibly in the case of intra-
state bills of lading in Mississippi. Vol. 11,
p. 278, Nov., 191S.

258. (Ga.) A purchasing bank placed a
rubber stamp indorsement on a draft with a
bill of lading attached, whereby it dis-
claimed liability as warrantor of the quan-
tity, quality, and delivery of the goods
affected. The bank questions the effect of
such disclaimer. Opinion: Xo decision by a
court of last resort has been rendered testing
the effect of such disclaimer. It is almost
the universal rule that the bank does not
incur this warrantor liability and it would
probably be held that the written disclaimer
would be surplusage and would not give a
bank any more protection than it already
had. Vol. 1, p. 142, Oct., 1908.

259. (Mich.) A bank indorses a draft
with a bill of lading attached, using its
rubber stamp as follows: "By indorsing this
draft or receiving a payment thereon we do
not warrant the genuineness of the bill of
lading attached, nor the quantity or quality
of the goods therein.

Bank

Michigan."

The bank asks whether this disclaimer of
warrantor liability invalidates its title to the
goods covered by the bill of lading. Opin-
ion: Bank which purchases and collects draft
to which bill of lading is attached as security
holds a special title to the goods as pledgee
which is divested upon payment of the draft,
but does not warrant the quantity or qual-
ity of the goods therein described. A dis-
claimer of such warrantor liability, stamped
upon a bill of lading draft is unnecessary,
except probably in case of drafts drawn on
Mississippi, where the warrantor doctrine
still prevails; but if such disclaimer stamp is
indorsed upon the draft, opinion expressed
that it would not weaken the bank's special
title in the security. Vol. 10, p. 713, April,
1918.

260. (Ohio.) It is almost universally
held that a bank which purchases a draft
with a bill of lading attached does not war-

BRAXCH BANKS

268

rant to the drawee who pays the draft the
quantity and quality of the goods. An e;s-
press disclaimer by the bank of such liability,
where it is thought necessary to guard against

a possible liability, should be placed on the
draft rather than on the bill of lading and
such stipulation would probably be binding
on the drawee. Vol. 3, p. 277, Nov., 1910.

BRANCH BANKS

Presentment and payment of checks

261. (Ala.) The drawer of a check on
his deposit in a brancli bank can stop pay-
ment thereof after the check has been pur-
chased by the parent bank but before it has
been presented at the branch bank, and the
parent bank is not a payor of the check but
a holder in due course, entitled to enforce
payment against the drawer and prior in-
dorsers. Vol. 9, p. 905, May, 1917.

262. (Ga.) In the city of C, there is
the "Bank of C" and also a branch located in
a different part of the cit}^ known as the
"Bank of C Home Savings Branch." A
check drawn on the branch was presented for
payment at the parent bank. Opinion: The
presentment of the check was not sufficient
and therefore would be no basis for a pro-
test. In case of a check dra^\^l on the parent
bank and presented at that bank where pay-
ment was refused although the drawer had
all his funds in the branch, the bank would
not be responsible for damages. While the
branches of a bank are agencies and not dis-
tinct banks, the courts recognize that for cer-
tain purposes, including the presentment and
payment of checks, the dilferent branches are
to be regarded as distinct. Vol. 4, p. 552,
March, 1912.

263. (S. C.) A clieck drawn by a cus-
tomer of a brancli bank upon sucli l)ranch
bank against funds deposited therein is pay-

able only by the branch upon which drawn
and not by the parent bank. Presentment
at the parent bank would not be sufficient
presentment and would not justify a pro-
test. Vol. 7, p. 169, Sept., 1914.

Presentment and payment of note

264. (Mich.) A note for $500 was made
payable at a designated branch office of a
bank. The notary presented the note at the
main office and the item was protested for
non-payment. The indorser claims non-lia-
bility. Opinion: Presentment for payment
at the main office of the bank was not suffi-
cient to hold the indorser. Vol. 4, p. 305,
Nov., 1911.

Right to establish branches

265. (Mass.) Under the present Fed-
eral law, national banks are not permitted
to establish branches, either in or outside of
the city in which they are located. Under
the ^lassachusetts law a savings bank can es-
tablish branches for deposit only within a
certain area and under certain restrictions.
A'ol. 8, p. 1102, June, 191G.

XoTE: Section 25 of the Federal Reserve Act
authorizes national banks liaviiii,' cajiilal of
.51. 0(10, 000 or more, Jipon j)ornii-;si()ii <if Federal
Reserve Board, to establisli hrauelies in foreign
eouiitries or dependencies or insular possessions
of the United States.

CERTIFICATE OF DEPOSIT

Demand and time certificates dis-
tinguished

See 4 it 7

266. (Colo.) The provision printed on
the back of a certificate of deposit payal)le on
return that "this certificate is payable twelve
months after date" is part of the terms of the
contract on tlio face so that the instrument is
not a demand but a time certificate of de-
posit. A'ol. 7, p. 894, May, 1915.

267. (Mo.) The provision in a certi-
ficate of deposit payable on return properly

indorsed for "interest at the rate of 4 per
cent, per annum if \vit twelve months" does
not prevent earlier presentment if the holder
chooses to waive interest. Vol. 3, p. 584,
April. 1!)11.

268. (Okla.) Where a certificate of de-
posit provides that the money has been de-
posited payable in one year from date at
4 per cent, interest, the certificate is not due
until the expiration of twelve months from
date, and the holder cannot compel payment
before maturity, although payment of inter-
est is waived. Vol. 3, p. 733, June, 1911.

269

1)1 C; EST OF LEGAL OPINIONS

Presentment after death of payee

269. (Mich.) Wlierc a no^^otiiible cor-
tilieate ol" deposit properly indorsed was ])re-
s(Mil(>d for })a}meiit at a l)ank by a bona fide
liolder after tbo payee's death. Opinion:
that the l)ank should pay such certideate.
The case dilfers from that of a clieck, in
which the death of the drawer revokes the
authority of the bank to pay, in the absence
of statute expressly authorizing post mortem
])ayment. A'ol. -i/p. G85, May, 1913.

270. (Miss.) A bank should pay a ne-
gotiable certificate of deposit to a bona fide
indorsee of the payee, although not presented
until after the pavce's death. Vol. G, p. 274,
Oct., WU.

Payable "in current funds"

See 125

271. (Ind.) A certificate of deposit pay-
able '"in current funds" is not negotiable in
Indiana. The decisions of other states con-
flict upon this proposition. Vol. 3, p. 468,
Feb., 1911.

272. (Minn.) The original owner of a
certificate of deposit payable "in current
funds" was held up by a thief and forced to
indorse and part with the certificate. The
thief negotiated it to an innocent purchaser
for value. In the meantime the issuing bank
was notified to stop payment. Opinion:
According to a Minnesota decision, the certi-
ficate is negotiable, and for that reason the
innocent holder is protected as against the
original owner. Vol. 2, p. 20, Jul}^, 1909.

Rights of innocent purchaser

273. (Pa.) A bank issued a negotiable
certificate of deposit for $500 to one of its
depositors in exchange for her check on the
same bank for $500, which, as it turned out,
was an overdraft of $100. The bank seeks
to know if it can refuse payment in case the
certificate should come to it through an inno-
cent purchaser. Opinion: So long as the
certificate remains in the depositor's hands
or is presented by her in person, the bank has
the right to withhold papnent of the excess
over $400. But if the certificate had been
negotiated. to a holder in due course the bank
would be liable for the full amount and would
have to look to the depositor for the over-
draft. Vol. 9, p. 750, March, 1917. •

274. (Wash.) A bank issued a nego-
tiable demand certificate to a depositor
against deposit of his check upon another
bank. Four days later the bank over the

long distance telej)liono, uj)on depositor's re-
<{uest, advised tiiat the certificate could be
cashed 0. K., as the dcposite<l ciieck had not
been returned. After the certificate was
caslied, the depositor's account in the other
bank was attached. Opinion: Where a bank
issues a negotiable demand certificate against
deposit of a check upon another bank, the
fact that the deposited check is dishonored
is no defense to the liability of the bank to
an innocent purchaser of the certificate. This
transaction illustrates the unwisdom of issu-
ing a negotiable certificate against uncollected
funds. Vol. 10, p. 467, Dec, 1917.

Insanity of payee

See 84G, 847

275. (111.) A certificate of deposit was
issued to a depositor, who later became in-
sane. The certificate was indorsed in blank
and the bank is doubtful Avhether the depos-
itor was insane at the time of the indorse-
ment. A relative was the holder of the cer-
tificate. Opinion: The bank should refuse
payment to the holder of the certificate in the
absence of positive proof that the indorse-
ment in blank and the delivery took place
while the depositor was sane. A guardian
or committee of the lunatic should be ap-
pointed to receive pa3'ment. If the holder
sues the bank a bill of interpleader should be
filed. Vol. 8, p. 32, July, 1915.

Negotiability
See 271, 272

276. (Mich.) A bank upon receiving
from an attorney $500, delivered its certifi-
cate of deposit to John Doe. The certificate
was made payable to John Doe in case of
default of a certain bond in the case of People
vs. Jones. The court records showed that
Jones was acquitted, and as there was no de-
fault on the bond, the attorney requested re-
turn of the certificate, which was refused.
The bank, however, returned the money to
the depositor without the surrender of the
certificate. Later, the certificate indorsed by
John Doe in blank was presented to the bank
and payment refused because of no evidence
to show that Jones had defaulted on his bond.
Opinion: A certificate of deposit payable on
condition is not negotiable, and where the
condition does not eventuate the issuing
bank may safely return the money to the de-
positor without surrender of the certificate.
The condition not being performed, neither
the payee nor an assignee acquires any en-
forceable rights therein. Vol. 10, p. 312,
Oct., 1917.

CERTIFICATE OF DEPOSIT

283

277. (Cal.) A certificate of deposit
drawn payable to specified payee with the
words "non-transferable" written on or across
the face of the instrument is not negotiable.
Yol. 5, p. 374, Dec, 1912.

Statute of limitations

278. (Iowa.) A national bank in Xe-
braska issued a certificate of deposit on Jan-
uary 1, 1903, ''payable on return properly in-
dorsed one year from date." Eleven years
have elapsed and said certificate has not been
presented for payment. Opinion: The
weight of authority (a few cases contrary) is
to the effect that a certificate "payable on re-
turn properly indorsed" is not due until de-
manded and the statute of limitation begins
to run only from the time of demand. Where
the certificate is "payable on return properly
indorsed one 3"ear from date" some courts
apply the same rule that the statute does not
begin to run until demand of payment is
made, while other courts hold that the statute
begins to run at the time when the certificate
specifies it is due and payable. Yol. 6, p.
624, March, 1914.

279. (Minn.) A Minnesota bank carries
on its books two time certificates of deposit
issued in 1907, payable in six months. One
was issued to a party since deceased and the
other to a stranger, who cannot be located.
The bank seeks to dispose of the certificates.
Opinion: In Minnesota, a time certificate of
deposit is outlawed six years after maturity,
and the bank may credit undivided profits
with the amount of an unpaid certificate. In
some states statutes exist requiring unclaimed
deposits to be paid over to the public author-
ities. Vol. 9, p. 908, May, 1917.

Bank's obligation to know payee's

signature

See 512, 515, 5G3

280. (Ohio.) A bank issued a certifi-
cate of deposit without keeping a record of
tbc payee's signature. The certificate was
presented at the clearing house and paid by
the bank of deposit, althougli the presenting

bank refused to guarantee the payee's indorse-
ment. In the event the payee's indorsement
was a forgery, the paying bank questions its
right of recover}'. Opinion: Where bank
keeps file of signatures of payees to whom
certificates of deposit issued it is bound to
know payee's indorsement upon such certi-
ficates and cannot recover money paid on
forgery thereof. But this rule is limited to
cases where signature is kept on file. Vol. 9,
p. 5S4, Jan., 1917.

Transfer without indorsement

281. (111.) A certificate of deposit is-
sued to A was pledged by A to B for value,
without indorsement. After its maturity A,
upon a false written statement that he had
lost and had not negotiated the certificate,
obtained payment from the bank. B not
having been paid by A now seeks to hold tbe
bank liable on the unindorsed certificate
pledged by A. Opinion: The bank is not
liable to B who, taking without indorsement,
holds the certificate subject to any defense
good against A. A is criminally liable for
obtaining monev under false pretenses. Vol.
5, p. 668, April, 1913.

Withholding payment of time certificate

282. (Iowa.) The Iowa statute allows
savings banks to require sixty days' notice of
withdrawal of a savings deposit and question
is raised whether a bank would have the right,
by giving pul)lic notice, to withhold payment
of time certificates of deposit sixty days after
due date. Opinion: A bank must pay its
time certificate of deposit at maturity accord-
ing to its terms, in the absence of a contract
with the debtor expressed in certificate
or otherwise binding, which would give
it the right to require notice of withdrawal
given at a specified time before payment, un-
less there is some statutory provision which
gives it such right. Iowa statute giving sav-
ings banks rigiit to require sixty days' notice
of withdrawal of savings deposits interpreted
not to apply to time certificates of deposit
having fixed and definite time of maturitv.
Vol. 10, p. 123, Aug., 1917. See 497, 504. "

CHECKS -PAYMENT OF

For Eevocation of Check by BankruptLy, 216; by Death, 4o2 et seq.; by Insanity or Incom-
petency, 816 et seq.; see also 275, 302

Ambiguous and incomplete checks

See 891

283. (Cal.) The amount written in tbe
body of a check is $100.89 and in the margin

$189. The presenting bank protested it for
non-payment, as the drawee refused to pay
without a guaranty of the amount, which the
})resonting bank would not furnish. Opin-
ion: Wbere the amount written in the body

284

DKJKS'r OF LEGAL OPiXiONS

of a chock is $I()().S!) niul in tlic niar^^Mii $189,
the sum denoted in llio body is llic amount
])ayal)l(' and the check is proiostahlc n\Hm re-
fusal to pay tliat amount, though not if the
refusal is to i)ay the larger amount expressed
in the margin. Vol. 11, p. 2in, Oct., 1918.

284. (Pa.) Wlure a check has a pen
line drawn through the payee blank or the
pa3ce blank is unfilled, it is an unsafe in-
strument for a purchaser to acquire or a
drawee bank to pay. In the present condi-
tion of the law, it might 1)C held to be payable
to the bearer or it might be held an incom-
plete and invalid instrument. Whore the
drawer indorsed the instrument, it would be
extremely doubtful whether such indorse-
ment would cure the defect. Vol. 7, p. 489,
Jan., 1915.

285. (Pa.) Under the Negotiable In-
struments Law, where the drawer of a check
with payee blank unfdled entrusts the instru-
ment to a holder with authority to use it for
a specified purpose and the holder in breach
of trust fills in his own name as payee and
negotiates it to an innocent purchaser for
value, the purchaser w^ould be protected as
would be the drawee bank which paid such a
check; but if the holder who committed the
breach of trust should negotiate it without
authority, leaving the payee blank imfilled,
the purchaser would take the check subject
to the defense of the drawer that it had been
used without his authority and if the drawee
bank paid such a check witli the payee blank
unfilled, the drawer could object to being
charged with its amount for like reason.
Vol. 7, p. 489, Jan., 1915.

Instruments purporting to be bearer
checks

286. (Mass.) A check was drawn pay-
able to the order of "John Smith (bearer)."'
A party indorsed it John Smith and pre-
sented the item to the drawee which paid it
without identification. Opinion: The check
was not payable to any bearer but to John
Smith, wlio was the bearer, and identification
was therefore necessary for the bank's safetv.
Vol. 4, p. 431, Jan., 1912.

287. (Miss.) Where the drawer uses a
form of check "pay to or bear-
er," scratches out "or bearer'' and makes the
check read "pay to John Jones," this is nei-
ther a bearer check nor an order check but is
one payable to John Jones only and is not
negotiable. Vol. 4, p. 613, April, 1912.

288. (Wis.) A check payable to the
order of "cash" contains several indorsements
in blank and one s])ecial indorsement. Ofnn-
ion: The instrument is jiayable to bearer and
is transferable by delivery. It does not re-
quire any indorsement at all, either of maker
or any one else, to make it transferable or
l)ayablc. Vol. 2, p. 303, Jan., 1910.

Bearer check without indorsement

Sec, 070, G80

289. (Ala.) A Jjank followed the prac-
tice of paying checks drawn on it payable
to "cash." Payment was made to the hold-
ers without indorsement of the drawer and
the bank questions the safety of paying such
checks ^vlien not presented by the drawer in
person. Opinion: A check drawn payable to
"cash" is payable to bearer and can be safely
paid by the drawee bank to a holder other
than the drawer without the indorsement of
the latter. The drawee is under obligation
to the drawer to pay in the absence of evi-
dence of circumstances indicating that the
holder may have come by the check wrong-
fully. Vol. 10, p. 311, Oct., 1917.

290. (111.) A check drawn payable to A
or bearer was lost by A and a bank paid the
amount to the bearer without A's indorse-
ment, A not receiving any money. The check
contained several special indorsements. Opin-
ion: The check being payable to bearer could
be negotiated by delivery even if indorsed
specially and payment by the bank to the
bearer was valid, and A was the loser. Vol.
4, p. 488, Feb., 1912.

291. (Pa.) A check payable to bearer
does not require indorsement, and payment to
bearer without indorsement is proper and
chargeable. ]\Iany banks request indorse-
ment by the holder, but if such request is
denied it is not sufficient reason for refusing
payment of the check. Vol. 3, p. 680, May,
1911.

292. (S. Dak.) Eichard Roe draws his
check payable to "John Doe or Bearer." Can
the paying bank be compelled to pay the
amount to a third party as bearer without the
indorsement of the payee? Opinion: A
check payable to "John Doe or Bearer" is
payable to bearer and does not require the
indorsement of John Doe to entitle the bearer
to receive pavment. Vol. 11, p. 393, Jan.,
1919.

Checks signed in blank

293. (Cal.) A thief stole from a check-
l)Ook a check bearing onlv the name of the

.^fi

CHECKS— PAYMENT OF

299

drawer, and negotiated it for value to an
innocent purchaser. Payment of the check
was stopped. Opinion: Payment can he
stopped and the drawer is not liahle to the
innocent purchaser. Vol. G, p. 94, Aug.,
1913. See 304, 800.

294. (111.) A certain liorse buyer in In-
diana had been sending dated and signed
checks to his agent in Illinois, who had au-
thority to fill in the amounts. On one oc-
casion the agent made out a check for $(568.25
which should have been for $550 and nego-
tiated it to a bank which had been in the
habit of cashing such checks. The drawer
stopped payment. The purchasing bank
seeks to hold the drawer. Opinion: Under
the common law rule the drawer would be
liable to a bona fide holder for the increased
amount, but not so liable under the Negoti-
able Instruments Law unless the amount was
filled in before negotiation and the purchas-
ing bank had no notice that the check was
filled in for an unauthorized amount. Vol.
3, p. 734, June, 1911.

Conversion of check by bank

295. (Md.) The holder of a check pre-
sents it to a l)ank for certification and the
bank, instead of returning it to the holder un-
certified, there being insufficient funds and
the drawer also having stopped payment,
hands the check over to the drawer. The
original holder threatens to bring suit against
the bank to recover the check. Opinion:
The bank is liable to the holder for conver-
sion of the check, unless it can affirmatively
prove that the drawer had a good defense
thereon against the holder. It is doul)tful
whether the bank could be held as acceptor
under the Negotiable Instruments Act. Vol,
11, p. 558, April. 1919. See 340.

Receipt as substitute for counter check

296. (N. Y.) A receipt signed by a de-
positor acknowledging payment of a dei)osit
would not be of equal protection to the bank
as a counter check, where payment was made
to one other than the depositor personally,
for sliould the reccii)t be presented by a
wrongful holder it would not l)e binding on
the depositor, as would a check wliich con-
tains an order and autliority to the bank to
pay. In case of savings deposit payable
only on presentation of book, payment to a
wrongful holder upon presentation of book
and receipt might be valid if reasonal)lc
care was used. Vol. 10, p. 853, June, 1918.

Crediting depositor's account with checks
on same bank operates as payment

297. (Cal.) A bank having a commer-
cial and savings department was in the habit
of receiving checks from its customer depos-
ited to his credit in his savings account, said
checks being drawn on the commercial de-
partment of the same bank. Occasionally the
checks so deposited, when presented to the de-
partment on which drawn were found to be
not good, or that payment of the same had
been stopped. In such cases it was the bank's
practice to charge the item back to its depos-
itor. It was claimed that when the bank ac-
cepted a check drawn on itself even though
on another department, for deposit over the
counter, that it constitutes payment of the
check and the bank has no right to charge the
item back to its depositor, even though said
check was found not good or payment thereon
had been stopped. Opinion: In California,
contrary to the majority of cases elsewhere, it
has been held that the credit to a depositor
of a check drawn on the same bank by another
depositor, is not equivalent to payment, but
the check is presumptively taken by the bank
for collection from itself and may be charged
back to the depositor at the close of the day if
the funds drawn against are insufficient.
Same rule applied to right of departmental
bank to charge back overdraft upon one de-
partment deposited in another. Vol. 10, p.
201, Sept., 1917.

298. (Okla.) A bank credited its cus-
tomer with the proceeds of a check drawn
upon it, and in sorting the checks discovered
that tlie drawer had no account. The drawer
happened in the bank a few minutes later
and instructed the cashier to change the name
of the drawee to another bank. The check
was presented to the new drawee the same
afternoon, but ])ayment had been stopped.
The dejxjsitor of the check obj(vts to being
charged therewith. Opinion: The amount is
not chargeable l)ack to the depositor, if he
acted in good faith, because of the rule
(adoj)ted by a majority of courts), that credit
of a check upon the depositary operates as
payment and is irrevocable. The fact that
the drawer, after the check had been paid by
the credit, changed tiie check and made it
payal)lc at another bank does not atTect the
rights of the pavee. Vol. 8, p. 801, ^larch,
191(;.

Relation of bank upon deposit of check

299. (111.) A bank received for deposit
a clieck of its customer drawn on an out-of-

300

DIGEST OF LEGAL OriXIONS

town point and credited him with tlic amount.
Before the check was paid, tlie customer de-
manded certilication of a check ai^ainst his de-
posit. Opinion: Tlie authorities are in con-
Hict whether tlie giving of credit for a de-
posited check makes the bank debtor or agent
for collection, but the relation is generally
eont rolled by custom or agreement making
l)ank an agent and not obliged to pay against
uncollected funds — certification as distin-
guished from payment is optional with bank
and not obligatory. Vol. 8, p. 40, July, 1915.
See -128, 42:').

Point of time when check received

through mail is paid

See 135

300. (Iowa.) Where a check against
suflicient funds is received by the drawee
through tlie mail, it is paid at the time it is
charged to the drawer's account and can-
celled; so that thereafter the drawer cannot
stop payment nor can a receiver or assignee
of the drawer claim the fund, although remit-
tance has not been made. Some courts hold
the check paid even before charged to account,
where it has been cancelled and filed as paid.
But where a check against insufficient funds
or a forged check received through the mail
is by mistake marked ''^paid" and the mistake
corrected before it is charged to the account,
some authorities support the conclusion that
the check is not finally paid but the mistake
can be corrected and the check returned. Vol.
11, p. 604, May, 1919.

301. (Mass.) A check against sufficient
funds is received through the mail by a
drawee bank for payment and remittance.
The drawee seeks to find out at what time in
the physical handling of the check by the
drawee it is paid, after which it will be too
late for the draw'cr to stop payment, or to
withdraw, or control the fund. Opinion:
The check is paid at the time the amount is
charged to the drawer's account, and the
check is cancelled ; thereafter the fund is held
for the credit of the holder and control of the
drawer ceases and he has no right to stop paj'-
ment, even though actual remittance has not
been made. Vol. 9, p. 899, May, 1917.

Drawer of check a fugitive from justice

302. (Pa.) A depositor committed a
crime and became a fugitive from justice, his
whereabouts being unknown. A check drawn
by him still remains outstanding and a cred-
itor notifies the bank to withhold pa}'ment

of the deposit. Opinion: While death, insan-
ity or insolvency of a depositor revokes the
authority of a bank to pay his check, it has
never been decided that the fact that a de-
positor is a fugitive from justice operates,
ipso facto, as a revocation. A bank should
I)ay his outstanding check in the absence of
circumstances showing that the fugitive is
seeking to defraud his creditors and that the
check is given in bad faith. \'ol. 1 1, p. 669,
June, 1919.

Drawer's liability on unpaid check

303. (Okla.) John Doe drew two checks
of the amounts of $196.50 and $53.50, which
he gave to Smith in payment of a note held
by Smith. Smith surrendered the note and
received the proceeds of the smaller check,
but the larger check was dishonored because
of insufficient funds. Doe afterwards in-
dorsed the larger check "0. K. after January
11, 1913," but subsequently refused to pay
same. Opinion: Smith has a right of action
against Doe based on the unpaid check and
Smith's possession of the note is not necessary.
Doe's indorsement did not alter his obliga-
tion on the check. Vol. 8, p. 914, April,
1916.

Duty of care of check-book

304. (Mo.) A customer carelessly leaves
his check-book lying around the office, ac-
cessible to clerks, and a blank check is stolen,
forged and paid by the bank. Opinion: The
bank is responsible to its customer for money
paid on his forged signature and the careless-
ness of the customer is not such negligence
as ■ will charge him with responsibility.
Vol. 6, p. 822, June, 1914. See 342.

Payment of exchange charge

305. (N. Y.) A drew his check upon the
B bank, payable to C, who is located at a dis-
tance and the check was collected through the
Federal reserve bank and the funds remitted
by B to that bank. The question was did the
B bank have the right without special con-
tract to charge A with the exchange or cost
of remitting the funds. Opinion: B bank's
obligation is to pay the check at its banking
house and if it remits the funds to another
place, such service is for the holder and it
cannot make an exchange charge against the
drawer without his consent. Vol. 9, p. 239,
Sept., 1916.

306. (N. M.) A bank wires B bank to
pay C $12,000 and promises to remit. B

CHECKS— PAYMEXT OF

314

thereafter receives from A bank its cashier's
check of $12,000, which is subject to the ex-
change charge of $30. Opinion: A's promise
is not fulfilled by remitting a cashier's check
which is subject to exchange. B bank is en-
titled to receive the full amount without de-
duction of the charge. Vol. 11, p. 167, Sept.,
1918.

For full payment of account

See Statement of consideration altered — 109, 110

and Note

307. (Cal.) The correct amount due to
a bank on a note was $150 and the debtor
tendered in payment a check for $140, con-
taining the words "in full payment of the
note." The bank accepted the check and ap-
plied it as a partial payment. Opinion: The
check did not settle the entire debt and the
l)ank can recover $10 more. Had the bank's
claim been imcertain as to amount, its ac-
ceptance would have barred recovery of the
balance. Vol. 4, p. 430, Jan., 1912.

308. (Idaho.) A contractor drew a check
payable to an electric company, and made a
notation thereon to the effect that the check
was in full payment of account on a certain
contract. The electric company indorsed the
check and added "This is to apply on account

amounting to $ and is not payment in

full." Opinion: Where the payee accepts
and collects check stated to be "in full of
account" for less than amount of his claim,
he is not debarred from recovering balance if
amount of claim is liquidated or undisputed,
but if amount is the subject of honest dispute,
his acceptance and collection of check oper-
ates as a bar to further recovery, even though
paj'ee negatives condition and asserts check
is received as part payment only. Vol. 8,
p. 699, Feb., 1916.

309. (111.) A debtor and creditor had
an honest dispute as to the amount due upon
an open account as shown by their respective
books. The debtor sent a check for less than
the amount claimed, stated to be "in full of
account." Opinion: Where the dispute be-
tween the debtor and creditor is bona fide,
the acceptance of the check for the less
amount Avould bar recovery of any further
amount. Vol. 7, p. 893, May, 1915.

310. (Md.) Where check "in full" is
given for a fixed and undisputed claim of
greater amount, acceptance by creditor does
not bar recovery of balance — but where claim
is disputed and unliquidated, acceptance by
creditor prevents further recoverv. Vol. 5,
p. 590, March, 1913.

311. (Mass.) The maker of a check
given for a debt has written thereon "in full
to March 1, 1911." The payee desires to
know whether the acceptance by him of the
check will operate as an acknowledgment on
liis part that the amount of the check is in
full to March 1st. Opinion : Where the check
is given for an unliquidated debt or claim,
acceptance by the payee bars further recov-
ery; but it is otherwise where the amount is
not in dispute and the check is less than the
sum due. Vol. 4, p. 218, Oct., 1911.

Instrument payable at future date

312. (Ark.) An instrument drawn on a
check form, bearing date ]May 16, 1918, was
presented at a bank and paid May 20th. In
the bodv of the check form was written "Due
and payable Tuesday, May 21, 1918." Opin-
ion: The instrument is not a post-dated
check but a bill of exchange drawn by a cus-
tomer upon the bank, payable on May 21.
The bank is governed by the words "due and
payable Tuesday, May 21, 1918," contained
in the body over the drawee's signature, and
should not pay it before that time. The in-
strument is a bill of exchange and is subject
to the rule governing bills of exchange which
gives the holder the right to present for ac-
ceptance and protest for non-acceptance at
any time after he receives the instrument and
before its maturity. Vol. 10, p. 854, June,
1918.

Check given for gambling debt

313. (111.) Richard Roe issues his check
to his own order and after indorsing it de-
livers it to John Doe in payment of a gam-
bling debt. The check was presented by Doe
and returned to him by the bank without no-
tation, in obedience to Roe's stop order. Later
Roe cashed the check at another bank, wliich
had no knowledge of the whole transaction.
This bank regarding the instrument as a
bearer check seeks to hold the drawer respon-
sible. Opinion: In Illinois and many other
states a check or other instrument given in
jiayment of a gambling debt is void and has
l)een held unenrorceal)le even in the hands of
a bona fide holder. In some states, it has
been held the Negotiable Instruments Act
protects the holder in due course of such an
instrument, while in other states the contrary
has been held. Vol. 11, p. 277, Nov., 1918.

314. (W. Va.) A bank cashed a check
in good faith drawn by A, payable to B.
Payment was stopped by A, who declared that

31')

DIGEST OF LEGAL OPINIONS

the clieck was fijivcn for a <,fanil)linf( debt.
Opiniun: Before the Negotiable Instruments
Act it was held that the bank which inno-
cently purchased a check or note given for a
gambling debt and declared void by state
statute iiad no right of recovery. The de-
cisions conflict whether the Negotiable In-
struments Act protects a holder in due course
in such cases. Tiiat Act ])rovi(lcs that "a
holder in due course holds the instrument free
from any defect of title of prior parties and
free from defenses available to prior parties
among themselves," and it has not been de-
cided in West Virginia whether this provi-
sion repeals the state statute declaring gaming
contracts void. Vol. d, p. 348, Oct., 1!J16.

Effect on negotiability of provision "in

exchange"

See 901, 1142

315. (Iowa.) A Chicago bank sends an
Iowa bank for collection and remittance a
check drawn on X bank in Iowa payable "in
exchange." The collecting bank remits the
Chicago bank the face of the check, adds the
exchange and presents to the X bank which
refuses to pay the amount plus exchange.
The X bank contends the collecting bank has
no right to charge it with exchange for the
service of remitting. The latter contends
that on a check so drawn, the drawer agrees
to pay the exchange charges which would
otlierwise fall on the payee. It asks as its
right to protest the check. Opinion: Accord-
ing to some courts the check is not negotiable
because not payable in money and it is there-
fore questionable whether it is properly pro-
testable. Vol. 2, p. 33-i, Feb., 1910.

316. (N. Y.) Checks are sometimes
made ])ayable "in New York exchange" or "in
New York exchange at current rates" and
the question frequently arises as to the nego-
tiability of an instrument so payable. Opin-
ion: In ^Minnesota, Missouri and Illinois it
has been held that the instrument is not
payable in money, but in a bill of exchange
which is commodity or property and therefore
is not negotiable. Another view taken by a
Federal Court holds that the instrument is
payable in money with exchange added and
is therefore negotiable. A more recent case
in the Federal Court holds that the instru-
ment is payable in money (i.e. "in" or bv
giving) a bill of exchange therefor on New
York and is negotiable under the Negotiable
Instruments Act. It is obvious in view of
the above conflict that no opinion can be
asserted with positiveness either in affirma-

tion or denial of the negotiability of a check
payable "in New York exchange." Vol. 9,
p. 741, March, 1917.

Effect of memorandum on check

Sec :y.n, 128!)

317. (N. Y.) A check was dated Feb.
(ith and in the loft hand corner was a pencil
memorandum "to l)e used Feb. 8th." Opin-
ion: The bank could not safely pay before
February 8th. Vol. 3, p. 518, March, 1911.

Checks for more than balance

318. (Fla.) Where a number of checks
are presented to a bank simultaneously
through the clearing house or by mail which
aggregate more than the amount to the cus-
tomer's credit, the bank is bound to pay the
checks to the extent of the amomit on deposit
and has the option to select wliich it will pay
and which reject in the absence of a clearing-
house rule or custom to the contrary. Vol.
ll,p. 485, March, 1919.

319. (Ky.) AVhere a number of checks
aggregating more than the customer's balance
are presented at the same time through the
Clearing House and the balance is sufficient
to pay only some of them, the l}ank must pay
such of the checks as the deposit is sufficient
to meet and may choose which to pay and
which to reject, but it will be liable in dam-
ages if it returns all such checks unpaid.
Checks presented through the morning's mail
have priority over checks later presented
through the clearing house. Vol. 7, p. 778,
April, 1915.

320. (La.) Two or more checks are
simultaneously presented at a bank, each
taken separately for less, but any two aggre-
gating more than the customer's balance.
Opinion: The bank should not send all the
checks back, but should pay any one of them
and return the rest. Vol. 3, p. 202, Oct.,
1910.

321. (La.) Two checks of $30 and $10,
respectively were simultaneously presented,
the smaller check being within and the larger
check in excess of the customer's balance.
Opinion: It is the duty of the bank to pay the
smaller check rather than to dishonor both
checks. Vol. 3, p. 14G, Sept., 1910.

322. (S. C.) The customer of a bank
with $50 to his credit drew four checks of
amoimts of $10, $25, $50 and $60, respec-
tively, in favor of four different parties. The
checks bore the same date and were presented
through the clearing house at the same time.

CHECKS— PAYMENT OF

328

Opinion: Where a number of checks aggre-
gating more than the depositor's balance are
presented at the same time through the clear-
ing house and the balance is sufficient to pay
some of them, the bank must pay such of the
checks as the deposit is sufficient to meet and
may choose which to pay and which to reject,
but it will be liable in damages if it returns
all such checks unpaid. Vol. 7, p. 31, July,
1914.

Draft drawn on particular fund

323. (Ala.) Explanation is asked of
meaning of and distinction between provi-
sions of Negotiable Instruments Law that
(a) order or promise to pay is unconditional
though coupled with indication of particular
fund out of which reimbursement is to be
made and (b) order or promise to pay out of
particular fund is not unconditional. Opin-
ion: The first stated provision relates to an
instrument not payable out of a particular
fund but payable generally and merely indi-
cating such fund as a source of reimburse-
ment. The last stated provision covers a case
where the instrument is payable only out of
a particular fund, and payment depends upon
the sufficiency of the fund. Hence, in the
latter case, the instrument is non-negotiable
because not payable absolutely, while in the
first stated case negotiability is not affected
because payment is absolutely and uncondi-
tionally promised. Vol. 5, p. 312, Nov.,
1912.

Containing provisions affecting negotia-
bility

See 347, 513, 801, 1280

324. (Kan.) The following bank checks
are submitted for criticism : Check No. 1 is
the ordinary form of bank check, except that
the payee blank contains the words "pay to
the order of payee shown on back." The
payee blank of cbeck No. 2 contains the words
"pay to the order of payee and all indorsers
shown on back," Opinion: A check made
payable "to the order of payee shown on back"
designates the payee with sufficient certainty
and is negotiable. The use of this form in
check No. 1 is not preferable to tbc old style
of forms. The other form sul)mittcd which
is made payable to the "order of payee and all
indorsers shown on back" would not serve a
useful purpose because it provides for a mul-
tiplicity of payees. Vol. 11, p. 328, Dec,
1918.

Not payable through express company

S.'o ;!!I2

325. (Miss.) A check stamped "not
payable through an express company" was
presented by an express company and the
drawee refused payment, although the funds
were sufificient. The ex])ress company caused
the check to be protested. The bank desires
to know whether by refusing payment it in-
curs liability to the drawer for damages or
whether payment was rightfully refused.
Opinion : The drawer cannot hold the drawee
liable thereon in damages for injuring his
credit. The restriction is valid, does not
affect negotiability, and the check was not
properly protestable.Vol. 6, p. 371, Nov.,
1913.

326. (N. Y.) Where the drawer of a
check stamps the same "not payable through
an express company" (1) such provision is
valid and does not affect the negotiability,
(2) the duty of the drawee is to refuse pay-
ment when the check is presented through the
prohibited agency, (3) the drawee so refusing
would not incur liability either to the drawer
or the holder, (4) the check could not be law-
fully protested and the holder causing protest
would be liable to the drawer in damages.
Vol. 9, p. 902, May, 1917.

327. (S. Dak.) The words "not payable
through an express company" printed on the
face of a check are a valid provision, and do
not affect the negotiability of the check, which
can be presented through other channels.
Vol. 7, p. 305, Nov., 1914.

OfHcial checks for private use
See 500, 670

328. (Conn.) A customer gave his
check drawn payable to a company to the com-
pany's agent, who liad the same certified at
the bank before indorsement. After certifi-
cation the agent indorsed tiie company's name
and then his own name individually, and
thereupon John Jones also indorsed the
check and the same was cashed for the agent
by a bank where John Jones had a personal
account, relying upon John Jones's warranty.
The check was paid by the drawee, but the
company did not receive the amount. Opin-
ion: Assuming the agent had no authority to
indorse for the company, the cashing bank
which paid tiie check upon tiie unauthorized
indorsement is liable to certifying bank, and
can recover from John Jones upon his in-
dorsement. If the agent's indorsement was

329

DIGEST OF LEGAL Oi'INlOXS

authorized, the amount is chargeable against
the drawer's account. Vol. 7, p. 4D1, Jan.,
Iiil5.

329. (Ga.) The clicck of a corporation
signed in tlie name of tlie corporation by "A,
Treasurer,'' or by A in some otlicr official
ca])acity, given in payment of a draft drawn
on A individually, would carry notice from
the form of the check and charge the holder
with the duty of inquiry as to the authority of
A to use the corporate funds to pay his pri-
vate debt. Vol. 5, p. 168, Sept., 1913.

330. (111.) Under the existing condition
of the law, there is some doubt whether the
drawee bank is safe in paying a treasurer's
clicck to his personal order without inquiry.
It would be safer for a bank paying such
cliecks to require a resolution of the corpora-
tion authorizing the bank to pay its checks
when made out to the official's own order or
to bearer as well as to third persons. Vol. 3,
p. 584, April, 1911.

331. (Mo.) John Jones presented for
credit to his individual account a check for
$7,000 drawn on another bank to his own
order by himself as treasurer of a company.
The check was indorsed by him in blank. It
afterwards develops that the treasurer is mis-
appropriating the company's funds. Opin-
ion: It has been held by the Appellate Di-
vision of the New York Supreme Court in a
similar case that the mere form of the check
charged the bank of deposit with notice that
the treasurer was using corporate funds for
his private purposes and made it liable to the
corporation therefor. Vol. 2, p. 413, April,
1910.

Note: The above decision was subsequently re-
versed by the New York Court of Appeals which
hold that if it be conceded a diity of inquiry
rested upon the bank of deposit, such inquiry was
sufficiently made and the duty discharged by pre-
sentment to the drawee bank, and payment of the
check was an answer to the inquiry.

332. (S. Dak.) A check made payable
to and owned by the N Trust Company was
indorsed in the name of the trust company
by its secretary to his individual order, fol-
lowed by his personal indorsement, and then
was negotiated by him to the P Banking
Compan}^, which paid him part thereof in
currency, credited the balance to his personal
account and thereafter collected the draft.
Opinion: The P Banking Company was liable
to the N Trust Company for the proceeds, as
the indorsement of the secretary was without
express or implied authority of the trust

company, and furthermore the collecting

hank was put on inquiry by the apparent ir-
regularity in the form of the transaction.
Vol. 5, p. 370, Dec, 1912.

Checks for less than one dollar

333. (Hawaii.) Checks in sums less
than one dollar, issued in the regular course
of business payments, are not prohibited by
hiw — Section 178 of the United States Crim-
inal Code of 1909 (substance of such section
liaving been enacted in 1863) which forbids
the making of a check for a less sum than one
dollar intended to circulate as money — has
been misconstrued, and does not apply to
checks issued for purposes of pavment not of
circulation. Vol. 3, p. 590, April, 1911.
See article in Vol. 2, p. 152.

Partnership checks

See 487, 488

334. (N. J.) Upon death of one part-
ner, survivor has right to draw checks on
partnership account. Vol. 1, p. 203, Dec,
1908.

Checks payable in one state and negoti-
ated in another
See 1113, 1148

335. (Utah.) Check drawn and payable
in same state does not become a foreign bill
because indorsed in another state and protest
is not required but optional. Vol. 3, p. 585,
April, 1911.

336. (Wyo.) A check dated at Sheri-
dan, Wyoming, and drawTi on a bank of that
place bears the indorsement of a bank out-
side of the state. It is questioned whether by
reason of the indorsement it becomes a for-
eign bill of exchange so as to require protest.
Opinion: Notwithstanding such indorsement
the check is an inland bill of exchange and
does not require protest. Vol. 2, p. 231, Dec,
1909.

Check payable to A for account of B

337. (Cal.) A drawee bank paid a check
drawn payable to A, upon which was written
"for the account of B" or ''to be placed to
the credit of B.'' Opinion: The drawee bank
in paying the check was not charged with the
duty of seeing that A applied the money to
B's account. The bank was tmder no duty
to procure B's indorsement or to see that B's
interest was protected. Vol. 7, p. 689, March,
1915.

CHECKS— PAYMENT OF

344

Check payable to drawee and presented
by third person

338. (Wis.) A customer drew a check in
•which the drawer ordered the bank to pay
itself, and delivered the check to a third per-
son, "who presented it to the bank. The bank
refused to pay without making inquiry from
the drawer, while the third party contended
that the check was in effect payable to bearer
and should be paid without such inquiry.
Opinion: Under the present condition of the
law, the best course is for the bank to refuse
to pay without inquiry as to the authority of
the holder to collect the money. Such check
is certainly not payable to bearer. Vol.
S, p. 511, Dec, 1915."

Form of payroll check to protect against
loss

339. (Minn.) A concern carrying a
large payroll fmds that three-fourth of its
payroll checks are cashed in saloons and de-
sires a check drawn in such a form that the
employee must cash it at the bank. Opin-
ion: A suggestion is made that the check be
drawn payable to the. payee only, and on the
back print a receipt for wages to be signed by
the payee and the signature witnessed by the
paymaster, and under such signature add an-
other Ihie for the payee's indorsement, which
lie must make in the presence of the bank
officer before payment. Such a system will
(1) safeguard payor bank from risk of iden-
tification; (2) relieve payee from risk of loss,
and (3) remove saloon-cashing evil. Vol. 7,
p. 579, Feb., 1915.

Right to possession of unused certified
check

340. (Idaho.) Tlie customer of a bank
drew a check of $250 in favor of the state
treasurer, Avhich was certified by the bank's
assistant cashier. A month later the check,
never having been used nor indorsed, was re-
turned to the bank by the customer with a
request that the bank send him a draft for
the amount. The request was refused and
the customer demanded the return of the
check. Opinion: The customer and not tiic
bank has a better right to the check, which
should be returned after cancellation of tiie
certification. Vol. 4, p. 553, March, 1912.
See 42, 295.

Duty of care in preparing check
See 93

341. (Iowa.) It is the duty of the
drawer to exercise ordinary care in preparing
his check. Tlie question of negligence does
not arise imless the depositor leaves blanks
unfilled or by some affirmative act of negli-
gence facilitates fraud. While he may be
liable where he draws the instrument in such
incomplete shape as to facilitate or invite
fraudulent alterations, he is not bound to so
prepare the check that nobody else can suc-
cessfully tamper with it. Xo judicial deci-
sion or statute exists at the present time
which would require the drawer of a cheek to
use a protectograph, check punch, safety
paper or other protective device in order to
absolve himself from the charge of negli-
gence in case the instrument were altered or
forged. Vol. 8, p. 1016, May, 1916.

342. (Iowa.) In the execution of a
check, it is the duty of the drawer to exercise
ordinary care. A drawer does not use ordi-
nary care when he fills in the amount of a
check in the middle of the line so that a per-
son can prefix an increased amount, or when
he signs a check in blank and carelessly leaves
it lying around. However, a drawer is not
responsible where he carelessly leaves his
check-book around unsigned. The courts
have never yet held tliat banker's drafts
must be safeguarded by a protectograph, nor
that the drawing of a check by a customer in
lead pencil is negligent. Vol. 3, p. 148, Sept.,
1910.

343. (Mass.) The amount of a check
was not expressed in words written in the or-
dinary way but in figures stamped by a
machine in the body of the instrument.
Opinion: The instrument is valid and nego-
tiable, and the maker is not negligent in so
drawing the check. Vol. 7, p. 892, Mav,
1915.

344. (N. C.) A bank in issuing a draft
filled it out in ])en and ink witii ordinary
care, but did not use a protectograph. The
draft was subseciucntly fraudulently raised to
an increased amount, perforated and negoti-
ated to an innocent purchaser. Opinion: The
innocent purchaser would have no recourse
upon the drawer except for the original
amount. Xo case has gone to the extent of
holding the amount must be protected by
perforation. Vol. 11, p. 99, Aug., 1918.

345

DIGEST OF LKOAL OPINIONS

Refusal to pay duly presented check

345. (Wash.) Exccj)! in few states
where check is an assignment, tlic holder of
a check (not certified) has no right of action
against the bank which refuses to pay same
but sole recourse is upon drawer and prior
parties. Vol. 5, p. :i:il, Dec, 11)152. See
346.

Note: With tlio almost uiiivorsal onactmcnt of
tlie Negotiable Instninieiits Law, the rule that a
check, of itself, constitutes an assignment of the
deposit to the payee, disappears.

Refusal to pay check with suspicious
appearance

346. (N. Y.) A check was presented
and payment refused by the bank because the
instrument written in indelible pencil con-
tained partly erased figures and the writing
was obscure. The bank telephoned the maker,
who stated that he had not drawn the check.
The check was protested and subsequently
the maker notified the bank that he had
drawn the check. Opinion: A bank is under
obligation to its depositor to pay his properly
drawn check when duly presented, if the
funds are sufficient, but where the check
when presented bears a suspicious appearance,
it is the bank's duty to refuse to pay until it
has had opportunity to make inquiry and
satisfy itself as to its genuineness. The de-
scription of the check would certainly indi-
cate a suspicious appearance sufficient to put
the bank on inquiry and having made in-
quiry, payment was properly refused. Vol.
10, p. 537, Jan., 1918. See 348.

Effect of remittance stamp

347. (Minn.) A customer issues checks
upon which has been stamped "The First
State Bank of B will remit for this check in
Eastern exchange, without charge" and ques-
tions whether the use of this stamp would
make the bank liable as upon certification or
simply convey the information that the check
will be paid at par. Opinion: The remit-
tance stamp having been placed on the checks
before they were issued would not have the
effect of a certification. A possible question
might arise whether the stamp affected the
negotiability of the check and the words "if
desired," if added would remove any doubt
thereon. Vol. 5, p. 756, May, 1913.

Signatures
See 280, 512 ef seq., 561 et seq.

348. (Ariz.) The first letter of a draw-
er's name, to wit "R," was written by another

and the drawer finished tiie signature in his
own handwriting, to wit "obert Moore."
Opinion: The drawer was bound by his sig-
nature, Ijut if tiie signature created doubt as
to the genuineness in the mind of the drawee,
refusal of payment would be justified until
verification was obtained. Vol. 4, p. 020,
April, 1912.

349. (111.) The signature of a depos-
itor to a check made with a hectograph copy,
if imprinted by the depositor or by his author-
ity, is valid and binding; but the payor bank
would take the risk in paying the check where
the imprint was unauthorized, unless the de-
positor was negligent or agreed to not hold
the bank responsible in such case. Vol. 8,
p. 519, Dec, 1915.

350. (D. C.) A bank would not be li-
able in damages for refusing to pay a check
because the signature does not agree with the
one left with the bank when the account was
opened. Where signature on file is "J.
Brown Smith" a bank would be justified in
refusing to pay a check signed "J. B. Smith"
or "John B. Smith," even though genuine.
Vol. 4, p. 682, May, 1912.

351. (S. C.) A, who had power of at-
torney from B to sign checks for B, signed
B's name and refused to sign his own name
as attorney under B's name. Opinion: The
signature of B's name without adding "per
A attorney" is sufficient, although bank
would probably have a right to insist upon
the attorney's name being added. Vol. 5, p,
760, May, 1913.

Stale checks

See 1105 et seq

352. (Ariz.) A check dat^d October 10,
1911, was presented for pa^Tnent June 25,
1913. The drawee refused payment on the
ground that the check was "stale." Opin-
ion: The bank's refusal was justified. Until
the "reasonable time" rule of the Negotiable
Instruments Law is more fully interpreted
the exact period of time required to make a
check stale remains uncertain. Vol. 6, p.
207, Sept., 1913.

Stamping check "Paid"

For stamping check "payment stopped,"
See 1259 et seq

353 (Neb.) A collecting bank stamps
checks "Paid" and receives payment from the
drawee. The question arises as to the re-
sponsibility of the stamping bank in cases of

CHECKS— PAYMENT OF

[361

forged or unauthorized indorsements. Opin-
ion: In the event the checks have been in-
dorsed "for collection" or otherwise restrict-
ively indorsed so as to indicate that the col-
lecting bank is an agent and not an owner,
the "Paid" stamp would not be sulTicient
and the drawee should require an express
guaranty of genuineness for its protection.
Vol. 4, p. 302, Nov., 1911. See 300.

354. (S. Dak.) A l)ank receiving pay-
ment of a check stamped the same "Paid ;"
the drawee bank which paid the check ob-
jected to such stamp and questioned the au-
thority of the presenting bank to place it pn
the check. Opinion: The stamping of the word
"Paid" would seem to come within the rights
of the presenting bank and drawee's re-
fusal to pay because of objectionable stamp
would prol)ably be held unjustifiable. Vol.
6, p. 755, May, 1914.

Check issued to stranger payee

Sec ')'u ct scq

355. (111.) A person claiming to be the
payee of a cashier's check presents the same to
the bank, properly indorsed, without proof of
his identity and requests the issue of two
checks to the same payee in lieu thereof. The
bank seeks to know whether it can safely com-
ply. Opinion: The bank in the absence of
suspicious circumstances may rely on the pre-
sumption that the holder is rightfully en-
titled thereto, and may issue the substitute
checks to the same payee, without lial)ility
thereon in the event the stranger is not the
true payee and negotiates such checks upon
indorsement of the name of the payee. Should
the holder prove an impostor and if the in-
dorsement of the original check proved a for-
gery, the bank would, of course, be liable to
the true payee of the original ])ut would not
be liable upon forged indorsements of the
substitute checks. Vol. 10, p. 308., Oct.,
1917.

Undated checks

356. (Ga.) A check, though not dated,
is a valid and negotiable order on the bank to
pay on demand, but the absence of date may
(although the point has not been decided)
afford justification f(U' drawee's refusal to pay
until reasonable time for inquiry as to age of
check, for. if check has been outstanding an
unreasonable length of time, pavment is at
bank's peril. Vol. 7, p. 98, Aug., 1914.

357. (N. Y.) An undated check is pre-
sented through the clearing house, and the

bank inquires as to its rights in paying same.
Opinion: An undated check is valid and ne-
gotiable under the Negotiable Instruments
Law, provided it is all right in other respects,
and should be paid upon presentment. Vol.
5, p. 241, Oct., 1912.

358. (N. Y.) A check is presented for
I)ayment, not bearing any date. The bank
questions whether the check should be paid
upon presentation. Opinion: Under the Ne-
gotiable Instruments Law "the validity and
negotiable character of an instrument are not
affected by the fact that it is not dated."
The undated check being a valid order to pay
on demand can be paid l)y the bank upon pre-
sentation. Vol. 3, p. 402, Jan., 1911. See
1144.

Return of cancelled vouchers wathout
receipt unsafe

359. (Ore.) Under the statement (new)
system as distinguished from the pass-book
(old) S3'stem the pass-book is simply used
for the entry of deposits, and the cancelled
vouchers with tbe list of amounts thereof
showing total and balance are returned to the
depositor without any entry in the pass-book,
the depositor receipting for the same. Any
bank which adopts this system would be un-
safe in mailing or otherwise parting with
possession of the cancelled vouchers before it
obtains a receipt therefor. It would not be
an impracticable method for a bank to make
a monthly statement and mail a notice to its
depositor to call and receipt for the same with
cancelled vouchers. Vol. 6, p. 268, Oct.,
1913.

Effect of provision "with exchange"

S.'(_' 1004. 1(»()1

360. (Iowa.) A check drawn and pay-
able at the same place contained the words
"with exchange.'' The last indorser at-
tempted to collect 10 cents exchange in addi-
tion to the face amount of the check. Opin-
ion: The words "with exchange" have no ef-
fect as in this case there could be no exchange.
Vol. 4, p. 430, .Tan., 1912.

361. (Neb.) Where a check is drawn
and payable at one and the same place, the
words "with excliange" tberein are without
elToet and meaningless. Where A in New
York draws his check on his bank in New
York "with exchange" and mails it to a
payee in Omaha, Nebraska, it is presumably
the drawer's intention that the New York
bank should pay the exchange on Omaha so

3G2J

DIGEST OF LEGAL OPINIONS

that tlie payee might receive the face amount;
but to carry out that intention tlie check
slioukl specifically provide "with exchange on
Omaha." Vol. 5, p. 411, Jan., 1913.

362. (S. Dak.) Where check is drawn
merely "with exchange" without specifying
exchange on another place, face of check is
proper sum payable. Vol. 4, p. 491, Feb.,
1912.

Words and figures differ

363. (Ind.) A check is presented at a
bank drawn for $12 so stated in writing in
the body of the instrument, but the marginal
figures are stated $10.50. The bank teller
in cashing the check paid out $1G.50.
Opinion: The sum payable on the check was
$12, The Negotiable Instruments Act pro-
vides in part: "Where the sum payable is
expressed in words and also in figures, and
there is a discrepancy between the two, the
sum denoted by the words is the sum payable ;
but if the words are ambiguous or uncertain,
reference may be had to the figures to fix the
amount." Vol. 11, p. 390, Jan., 1919.

364. (Okla.) A check w^as drawn for
the written amount of eighty dollars, but the
marginal figures are $8.00 and the words
"not over ten dollars" were stamped thereon.
The instrument w^as negotiated for eighty
dollars, and that amount paid by the drawee.
The drawer refused to be charged with the
eighty dollars. Opinion: While no positive

conclusion can be arrived at as to whether
the drawee can charge the full amount to the
drawer's account, it seems probable that the
words "not over ten dollars" would be notice
to the drawee and protect the depositor. If
the drawee were held responsil>le, it is prol)-
able that it would have a right to recover the
excess from the bank receiving payment.
Vol. G, p. 685, April, 1914.

365. (S. C.) A bank refused to pay its
customer's check, which was written for "two
dollars" but which contained the marginal
figures of "$200," the credit balance of the
customer being $190. The drawer threat-
ened to sue the bank, although the latter had
tendered the $2 to the holder on the same day
the check was presented, which tender was
refused by request of the drawer. Opinion:
AAHiere there is a discrepancy between the
words and figures, the words control, but
the court may justify the bank's refusal to
honor the check because the figures are an
index of the sum payable in the body and
contributed to mislead the bank. Nominal
damages at" most might be awarded the cus-
tomer. Vol. 6, p. 757, May, 1914.

366. (Wyo.) A check was presented
for payment in which the figures read
$181.50 and the body of the check read One
Eighty One and 50-100, the hundred being
omitted. Opinion: It would be safe for a
bank to pay $181.50, because where the words
are ambiguous, reference may be had to the
figures. Vol. 4, p. 426, Jan.', 1912.

COLLECTION

Bill of lading draft
See 136 et seq, 247, 254

367. (La.) A bank through error
mailed a draft and an indorsed order bill of
lading to the consignee. The consignee ob-
tained the goods upon the bill of lading w'ith-
out paying for the draft. Opinion: The
bank is liable to its customer for the amount
of the draft on the ground of negligence.
Vol. 4, p. 556, March, 1912.

368. (N. Y.) A bank received from a
firm for collection a draft with a bill of lading
for a motor cycle attached. The firm by
letter agreed with its customer that the ma-
chine would be shipped subject to examina-
tion, but the bill of lading was silent on this
point. KnoAving that this condition ex-
isted, the bank on receipt of the customer's

deposit for the amount of the draft surrend-
ered the bill of lading. The customer pre-
sented the bill of lading, received and tried
the machine, but being dissatisfied there-
with returned it to the freight office and
received a new bill of lading. This he at-
tached to the draft and returning same to
the bank was repaid his deposit. The firm
lost the sale. Opinion: The collecting bank
is not liable for any neglect of duty. It had,
in the absence of contrary instructions, a
right to rely on the letter of the firm permit-
ting inspection as evidencing the agreement
between seller and prospective buyer, and to
construe this permission as extendmg to an
actual test and for that purpose to surrender
the bill of lading, safeguarding its principal
by requiring a conditional deposit to be re-
funded if the machine proved unsatisfactory.

COLLECTION

375

Such deposit was not a payment of the pur-
chase price, the surrender of which would
have made the bank responsible. Vol. 5, p.
101, Aug., 1U12. See 250.

369. (Tex.) A bank receives for col-
lection a draft to which is attached a bill of
lading which allows inspection. The car has
not yet arrived. The bank questions whether
it shall hold for arrival of car or protest im-
mediately. Opinion: The better practice is
to hold the draft for a reasonable time before
presentment to permit of arrival and inspec-
tion. Vol. 4, p. 557, March, 1912.

Circuitous routing

370. (Mont.) A city in southern Mon-
tana is a conmiercial center for points along
two forks of a railroad running from there
south into Wyoming. A bank at the south-
ern end of one of these forks holds a check
on a town along the same line, a little distance
to the north. Instead of sending direct to
the town of the drawee, the check is for-
Avardcd to the central clearing point in south-
ern Montana. The question arises whether
this is reasonable diligence. Opinion: Such
circuitous method of presentment, although
declared negligent in some early cases, has
been held reasonable diligence by one court
under the Negotiable Instruments Act. A
special state statute legalizing the customary
mode of presentment through bank corres-
pondents is desirable in the interest of cer-
tainty. Vol. 2, p. 105, Sept., 1909.

371. (Pa.) ^Yhe^e a bank in Baltimore,
holding for collection a check on an interior
city in Pennsylvania, mails same to its Pitts-
burgh correspondent and the latter after
making the collection defaults as to the pro-
ceeds, the routing through Pittsburgh instead
of direct to an agent in the city of the drawee
is not negligent. Vol. 6, p. 209, Sept., 1913.

372. (S. Dak.) A bank in South Da-
kota receives from the payee a check drawn
on a bank eighteen miles distant. Instead of
forwarding direct to a bank in the drawee's
town, the collecting bank mails the check to
its Chicago correspondent and it reaches the
drawee by a circuitous route. Payment was
refused and the notice of dishonor docs not
reach the payee until live days after the payee
delivered the check. Did the collecting l)ank
exercise due diligence? Opinion: Under
the state statute which defines due diligence
in making collections, the collecting bank
did in this case exercise due diligence in
adopting such method of presentment. The

payee is responsible as indorser. Vol. 3, p.
144, Sept., 1910.

Selection of correspondent

373. (Ind.) A check drawn by B on a
bank in South Dakota was deposited by the
payee M in an Indiana bank, and was for-
warded to a Louisville, Kentucky bank,
thence to a Chicago bank, thence to a central
South Dakota bank, which forwarded it to
another South Dakota bank at the place of
the drawee. The drawee paid the check and
charged it to the accoimt of the drawer and
the collecting South Dakota bank remitted
therefor by its draft, which was not paid be-
cause of the failure of such bank. Opinion:
In case of loss, it would fall upon the payee
j\I, the owner of the check, and not upon any
of the banks which handled the check for col-
lection. The authorities of Indiana, Ken-
tucky, Illinois and South Dakota hold that
the collecting bank is not responsible, pro-
vided it uses due diligence in selecting a suit-
able correspondent. In South Dakota the
payee M would have a preferred claim against
the receiver. Vol. 4, p. 554, March, 1912.

374. (Miss.) In ^Mississippi the bank
undertaking the collection of paper merely
undertakes to use due care in selecting a sub-
agent and in transmitting the paper, and is
not responsible for the defaults of corres-
pondents, if duly selected, who arc not its
agents but the sub-agents of the owner of the
paper. Vol. 6, p. 90, Aug., 1913.

375. (Wis.) An item is entrusted for
collection by bank No. 1 to bank No. 2 and
by the latter to bank No. 3, and there is a
loss caused by the negligence of bank No. 3.
The question is asked whether bank No. 1
can hold bank No. 2, which has not been neg-
ligent, or must look to bank No. 3 with which
it has had no direct dealings. Opinion: In
some states a l)ank undertaking a distant col-
lection is an independent contractor liable
for the defaults of the correspondents wliom
it selects, unless such liability is changed by
agreement, while in other states, including
Wisconsin, such bank merely undertakes to
use due care in selecting a sub-agent and in
transmitting the paper, and is not responsible
for the acts or defaults of the latter. In
Wisconsin bank No. 1 would have to look di-
rectly to l)ank No. 3, which under such rule
is its sub-agent. It is quite customary for
banks in states where tlie rule first stated
prevails, to change tiieir legal liability in this
regard by notices or contracts printed on their
literature to the effect that in receiving out-

376

DIGEST OF LE(JAL OPINIONS

of-to\vn items they act as a^ent only and dis-
(;laiin iesponsil)ility for acts and defaults of
correspondents wliere didy sele(;ted. Vol. 11,

p. (;:;}, June, i!)r.>.

Liability for default of correspondent

376. (Ala.) A l)ank in Alabama casliiM'
for its customer a draft drawn on a hank in
Florida and forwarded the item to A, its cor-
respondent, for collection. A forwarded to
its correspondent hank B, which collected
from the drawee and failed before its draft
in remittance could he paid. Opinion: Bank
A, whether located in Alabama or Florida
(the location not being given), is not respon-
sible for the default of Jiank B, provided B
is a duly selected correspondent, because
under the law of both states a collecting bank
is not responsible for the default of sub-
agents. If the Alabama bank received the
check as agent for collection, it can charge
the amount back to its customer's account.
The authorities conflict on the question
whetlier the holder of B's dishonored draft in
remittance has a preferred claim against B's
receiver. Vol. 7, p. 218, Oct., 1914.

377. (Conn.) A bank in Connecticut
received as collecting agent a check on a bank
in Tennessee, which it forwarded to its cor-
respondent, a Philadelphia bank. The cor-
respondent in turn forwarded the item to its
correspondent, the C bank, which collected
from the drawee. Afterwards the C bank
failed and its draft in favor of the Philadel-
phia bank Avas protested. Opinion: In Penn-
sylvania and Connecticut the collecting bank
is not liable for the correspondent's default,
if duly selected. The owner of the check
probably has a preferred claim against the
failed bank. Vol. 6, p. 685, April, 1914.

378. (Miss.) A bank in Mississippi re-
ceived for collection a check drawn on a bank
in Louisiana. The check was sent to the
Bank of C of New Orleans, which in turn
sent the item to the bank of D. The bank of
D failed after it had collected of the drawee.
Opinion: Under the Mississippi law the Miss-
issippi bank, taking the check not as owner
but as a collecting agent, is not responsible for
the loss occasioned by the failure of the D
bank, and it can charge its depositors ac-
count. Under the Louisiana law the depos-
itor can collect from the C bank, wdiich is
liable for the default of its correspondent,
the D bank. Vol. 6, p. 433, Dec, 1913.

379. (N. J.) The bank of A in New
Jersey received for collection a clieck drawn

on a bank in Arkansas. The check was sent
to B bank of Philadelphia, which in turn
sent it to its correspondent in St. Louis. The
St. Louis bank forwarded it to tiie bank of
C, which collected the amount of the drawee
and later failed. Opinion: In New Jersey
the hanlv of A is liable for default of corres-
])ond('nt. As no such liability exists in
Pennsylvania and Missouri, the sole redress
of the bank of A is against the failed bank.
Vol. 6, p. 511, Jan., 1914.

380. (N. M.) A bank receiving a check
for collection forwarded the same to its cor-
respondent, the X bank of El Paso, Texas.
The Texas bank forwarded the item to its
correspondent, which collected from the
drawee and failed before remitting. Opin-
ion: In Texas tlie El Paso bank is liable for
the default of its correspondent, in the ab-
sence of an agreement relieving it from such
liability. In no event is the drawee which
paid the check responsible. Decisions of
other states conflict. Vol. 4, p. 554, March,
1912.

381. (Okla.) A check drawn on the H
bank of Texas was deposited by the payee
in an Oklahoma bank and was forwarded to
the M bank of Texas, thence to the F bank of
Texas, thence to the C bank of Texas, which
forwarded it to another Texas bank at the
place of the drawee. The drawee paid the
check and charged the account of the drawer,
and the collecting Texas bank remitted there-
for its draft, but failed while the said draft
was in transit. Opinion: Under the Texas
decisions a bank is liable for the default of
its correspondent and the loss would fall upon
the C bank, unless it had protected itself from
such default by an agreement. Assuming
all of the Texas banks were thus protected,
the question of responsibility for the loss
would arise between the Oklahoma bank and
the pa3-ee. Until the Oklahoma courts adopt
either the rule that the collecting bank is
liable for correspondents' defaults, or not
liable if a suitable correspondent is selected,
the question is uncertain. Vol. 4, p. G12,
April, 1912.

382. (Tex.) A bank in Texas received
from its customer an out-of-town check for
collection. The check was forwarded by it
to a bank in Fort \Yorth, Texas, and by it to
the E bank which in turn presented the in-
strument and received payment from the
drawee. Before remitting the proceeds to
the Fort Worth bank the E bank failed. On
whom should the loss fall? Opinion: Lender
the law of Texas, a bank receiving an out-of-

COLLECTION

389

town check for collection is an independent
contractor and is liable to its principal for the
defaults of subsequent banks to whom the
item is forwarded, unless, by stipulation, it
relieves itself from such liability. Vol. 10,
p. 47, July, 1917.

383. (Tex.) In Texas a bank receiving

a draft for collection at a distant point is re-
sponsible for the default of the correspond-
ent. Said collecting bank is treated as an
independent contractor and the subsequent
agents as its own and not the sub-agents of
the owner. Vol. 5, p. 379, Dec, 1912.

Disclaimer of liability for negligence

See 399

384. (Mo.) The validity of an agree-
ment, contained on a credit advice card and
remittance letter, that "when instructions to
the contrary are not given, items may be
sent to the banks upon which they are drawn"
as relieving the sending bank from respon-
sibility for loss through the failure of the
drawee presents an unsettled question upon
which the courts take different views. Vol.
4, p. 432, Jan., 1912.

Note: The Missouri legislature in 1919 passed
a law providing that the forwarding of items
direct to the payor shall be deemed due diligence.

385. (Ore.) A bank submits a form of
agreement to be signed by depositors, author-
izing the collecting bank to mail checks direct
to the drawee where there is only one bank
in the place. The agreement is as follows :

"Astoria, Oregon

To the First National Bank of Astoria :
Having deposited with you a check drawn

by on at

for $ , and there being no other bank

in the said town to which you can send this
cheek for collection, you are instructed to
send it direct to the bank on which it is
drawn, and I assume all responsibility for
any failure on your part to receive full and
final payment from the said bank, either by
failure of said bank to make returns or by the
return of a draft which you are unable to
collect." Opinion: In view of the numer-
ous decisions which hold sending to the
drawee negligent, such agreement might
possibly be held to contravene public policy
as a stipulation by the bank to be relieved of
its own negligence, but this would be an ex-
treme position in view of the fact that some
courts justify such method of collection and
the agreement would probably be held valid.
Vol. 2, p. 108, Sept., 1909.

XoTE: Tlie Oregon legi>latur.' in 1919 passed a
law providing tiiat the forwarding of items direct
to tlie i)ayor sliall be deemed due diligence .

Duty of collecting bank

S.-e 1097, 1118, 1119

386. (Ala.) A bank received for collec-
tion a check on which payment was refused
because not properly indorsed. The bank
returned the check for correction and in-
quired as to its liability for failure to request
certification, should the check afterwards be
protested for lack of sufficient funds. Opin-
ion: It is not unlikely that the courts might
hold that due diligence requires that the
collecting bank request certification before
returning the check for correction, for such
would seem the action a discreet person
would take in his own interest in an attempt
to insure ultimate payment. Although the
pa^'or bank is not obliged to certify, certifica-
tion in such case is a common practice. The
courts have not yet passed upon the precise
question whether it is the duty of a collecting
bank to request certification of an improperly
indorsed check before returning same for cor-
rection. Vol. 7, p. 33, July, 1914.

387. (Cal.) A check drawn by A in
favor of himself but not bearing his in-
dorsement, was forwarded by B bank to a
correspondent bank, which returned the item
to B bank for indorsement, without first
forwarding for payment by the drawee.
Opinion: The action of the bank as collection
agent was proper. Vol. 5, ]i. 100, Aug., 1912.

388. (Conn.) Bank A received a time
draft drawn on a party in the same state.
The item was forwarded to its correspondent
Bank B, which in turn forwarded it to its cor-
respondent Bank C, located in the same place
as the drawee. Bank C held the draft fifteen
days without presenting it for acceptance, but
l)rescnted it for payment at maturity, when
j)ayment was refused. Opinion: The collect-
ing bank must present a time draft for accep-
tance when received and is negligent if it
waits until maturitv and merelv presents the
draft for pavment". Vol. 8, p. 708. Feb.,
1916.

389. (Kan.) A collecting bank for-
warded a siglit draft delivered in Kansas upon
a bank in Missouri to its correspondent,
whicli ]>rcsented the same to the drawee. In
the meantime the drawer hurried home and
stopped })ayment and the draft was protested
and returned. Opinion: The l)ank used due
diligence when it forwarded the draft in the
usual course, and its customer has no reason

390

DIGEST OF LECJAL Oi'lMOXS

lo C()mi>laiii. In tlic nhsoiice of some special
reason or instruction given the collecting
hank, it was not inciuni)ent iii)on it in the ex-
ercise of due diligence to attempt to ])rocure
acceptance hy telegram. Vol. 4, p. 555,
March, 1912.

390. (N. M.) A Texas hank receiving
a note for collection forwarded it to a hank in
Utah, with specific instructions to have tlie
instrument collected hy that hank's attorney.
The Utah hank held the note for four months
hefore returning the same uncollected. 0pm-
ion: The Utah hank, having undertaken the
collection, must use reasouahle diligence, and
its retention of the note for four months
without advising the Texas hank is itself a
negligent act. If it can he proved that the
del)tor could have heen forced to pay by
])rompt action, but has since become insolvent,
the Utah bank is liable for the amount of
damages proved. Vol. 8, p. 911, April, 1916.

Express company as collecting agent

391. (Ala.) A collecting bank forwards
items by express for collection wdiich it has
been instructed to have protested in the event
of non-payment ; the bank knows that the ex-
press company does not undertake to have the
items protested. Opinion: The company is
not a suitable agent for collection of protest-
able items and the bank is negligent in select-
ing such agent. Vol. 4, p. 218, Oct., 1911.

392. (Tenn.) The Interstate Commerce
Commission has not ruled that express com-
panies have no right to make collections. A
drawer has a right to insert words in his check
restricting the collection through specified
channels, as for example "Not valid if paid
through the Y Express Company." Vol. 3,
p. 674, May, 1911. See 325, 326, 327.

Following instructions

393. (Ala.) Where a bank holds for col-
lection checks upon itself without a deposit
against the same and receives a specific de-
posit from its customer to he paid upon a
later described check, its duty is to obey the
instructions and in so doing it incurs no lia-
bility to the owners of the checks which it
holds for collection. Where several checks
are received any one of which would be an
overdraft, the bank if it chooses can pay an
overdraft and apply a future deposit thereto.
Vol. 8, p. 909, April, 1916.

394. (Cal.) A bank in California for-
warded to another bank in the same state a

note payable in Iowa, which had matured
nearly ten years previously, with instructions
lo collect, obtain a new note, or place in the
hands of an attorney, and failing in any of
the foregoing, to return the note within ten
days of its receipt. The collecting bank
undertook the collection hut neglected to
follow the instructions, and returned the note
after it became outlawed, to the owner's dam-
age. Opinion: The bank is liable for such
damages as were caused by its neglect of duty.
The owner lost his remedy at law and his
prima facie damages are the full amount of
the note. Vol. 5, p. 664, April, 1913.

395. (Kan.) A bank forwarded to its
correspondent a draft with the following in-
structions : "This item is payable on presenta-
tion and is not to be held for arrival of goods,
for the convenience of the drawee or for any
other reason. If not paid on presentation
protest and return immediately, advising by
telegraph. Our customer will hold the col-
lecting bank strictly accountable for failure
to follow the foregoing instructions." The
item was properly protested and handled in
accordance with instructions, except that the
bank failed to wire the protest. Had the
sending bank paid out money in the trans-
action, would the collecting bank have been
liable ? Opinion : A bank acting as agent for
collection is under duty to follow special in-
structions with regard to the collection and
for any neglect to follow instructions, from
which damage results, it will be liable to its
principal. Vol. 11, p. 166, Sept., 1918.

396. (Pa.) A bank received three in-
dorsed notes for collection w4th instructions
to protest if not paid, and upon learning that
renewals had been forwarded, returned the
notes to its principal without protesting or
taking steps to hold indorsers. The renewals
were not received by the principal, and would
have been unacceptable if received, as upon
non-payment the principal intended to bring
suit against the maker and indorsers. Opin-
ion: The collecting bank is liable to its prin-
cipal for any loss sustained because of viola-
tion of instructions. Vol. 5, p. 100, Aug.,
1912.

397. (Tex.) A draft is marked "no pro-
test," but the letter of instructions reads
"protest all items $10 and over unless marked
X," and there is no X marked on the letter
opposite the listed item. Opinion : It is safer
for the collecting bank to be governed by the
letter of instructions, as they are the instruc-
tions from the immediate principal. Vol. 4.
p. 556, March, 1912.

COLLECTIOX

405

Forwarding paper direct to drawee

Note: A bill recommended by the American
Bankers Association which provides that the for-
warding of an item by a bank directly to the
payor shall be deemed due diligence and the fail-
ure of the payor bank to account for the proceeds,
shall not render the forwarding bank liable,
provided it has used due diligence in other
respects, became law in 191!) in the following
states: Michigan, Minnesota, iiissouri, Nevada,
New Mexico, North Carolina, Ohio, Oregon, South
Dakota. A similar law was passed in Louisiana
in 1916 and in Montana in 1917.

398. (Ark.) A New York Itank sent a
check on the State Bank of G., Arkansas, to
a bank at H., Arkansas, which sent it to a
Little Rock bank. The latter sent it to its
Kansas City correspondent and the Kansas
City bank sent the check direct to the drawee,
receiving St. Louis exchange which was not
paid because of the failure of the G bank
drawee. Opinion: The Kansas City corres-
pondent was negligent in mailing the check
direct to the drawee and is responsible if the
loss is a result of this negligence. If, how-
ever, it can prove the check would not have
been paid if payment had been demanded by
an independent agent, it might escape liabil-
ity, for although negligent, no loss would have
resulted therefrom. Assuming the non-liabil-
ity of the Kansas City bank, the question of
negligence of the Little liock bank, and lia-
bility if loss resulted therefrom, depends upon
v.'hether the requirement of presentment with-
in a reasonalile time was violated by the cir-
cuitous method of forwarding, upon which
question the courts differ. Vol. 4, p. 494,
Feb., 1912.

399. (Ga.) A customer deposited for
collection a check drawn on a Texas bank.
The collecting bank mailed the item direct
to the drawee and failed to hoar from the
same for over two years, during which time
the drawee's name disappeared from the bank
directory. Depositor did not sign deposit
slip relieving bank from responsibility for
losses in the mail. Opinion: The collecting
bank was negligent and is liable to its cus-
tomer for the loss resulting. The sending
of the check direct to the drawee was a negli-
gent act and the presumption is the check
was received by the drawee and not remitted
for. But, assuming loss in mail, the failure
to promptly trace was negligence, and even if
depositor signed slip this would not relieve
the bank from the consequences of its own
negligence. Vol, 4, p. 154, Sept., 1911.

400. (111.) A bank in Illinois received
for collection certain checks which it for-

warded direct to the drawee, the only bank
in the place. The drawee remitted a draft
in payment, which was protested because of
the drawee's failure. Opinion: The sending
of the checks direct to the drawee, unless jus-
tified by custom, is such negligence as will
render the Illinois bank liable, whether it
took the paper as owner or as collecting agent.
As holder of the protested draft, it has no
preferred claim against the failed bank. Vol.
G, p. G28, March, 1914.

401. (La.) ]\railing a check direct to
the drawee is held an act of negligence in
Texas and other states, and if loss results the
sending bank is liable. Vol. 2, p. 19, Julv,
1909.

402. (Miss.) A bank sent a check re-
ceived for collection direct to the drawee.
The collecting bank received in payment the
drawee's draft, which was protested because
of the hitter's failure. Opinion: Sending
check direct to drawee is negligent and send-
ing bank is liable for resultant loss. Vol. 6,
p. 686, April, 1914.

403. (Mont,) The payee of a check de-
posited it in a bank for collection and the
bank mailed it to a correspondent, which
latter bank mailed check directly to tlie
drawee. After charging the amount to the
drawer, the drawee failed without remitting
to the correspondent. Opinion: The drawer
is discharged, the payee is relieved from re-
sponsil)ility and the correspondent of the first
bank is responsible because of mailing the
check direct to the drawee. Vol. 4, p, 2 IT,
Oct., 1!)11.

404. (N. Y.) A bank in Cleveland, to
whom a check had been forwarded for collec-
tion, mailed the item direct to tiie drawee in
Ohio, which hold it ten days and then re-
turned it un})aid and unprotested because the
drawee had failed. Opinion: The drawer is
discliargod to the extent of the loss caused by
tiie delay and the Cleveland bank is respon-
sible for its negligence. Vol, 6, p, 275, Oct.,
1913.

405. (N, M.) A draft on a bank at
Clovis, New ^lexico, was deposited in a bank
at Las Vegas, forwarded to a bank at Kl
Paso, Texas, from thence to a bank at Tu-
cunuari, New Mexico, and I)y the latter for-
warded by niai! direct to the drawee I)ank at
Clovis. The Clovis bank paid the same bv
its own draft, wiiich was dishonored because
of the bank's failure. Opinion: The collect-
ing bank mailing the check direct to the
drawee and taking the worthless draft in pay-

400

DIGEST OF LEGAL OPINIONS

raciit is resj)oiisible for the loss. Vol. G, p.
35, July, 11)13.

406. (Okla.) Tlic majority of courts
hold that mailing a clicck direct to the drawee
is imi)roi)or, even though the drawee is the
only bank in the place. There is need of
legislation defining due diligence in the pre-
sentment and collection of distant items in
accordance with legitimate banking customs.
Vol. 2, p. 73, Aug., 1909.

407. (Pa.) A collecting bank which
sends a check direct to the drawee for pay-
ment does not use due diligence and is liable
for any loss resulting. Vol. 6, p. 820, June,
1911.

408. (Pa.) A bank receiving for collec-
tion a check forwarded the same direct to the
drawee and not to its correspondent, for the
purpose of facilitating collection. The
drawee failed before its draft in payment
could be collected. Opinion: Sending check
to drawee is negligent and the collecting bank
is liable if loss results therefrom. Vol. 6,
p. 208, Sept., 1913.

409. (Tex.) A customer deposited for
collection a check which was forwarded by
mail by a correspondent bank in Dallas to the
drawee bank, being the only bank in the place.
The drawee sent the Dallas bank its draft, but
in the meantime failed. Opinion: Assuming
a custom can be proved of sending a check to
the drawee where the only bank in the place,
the Texas courts will probably hold the Dallas
bank free from negligence, and the customer
would have to look solely to the assets of the
drawee. Vol. 6, p. 34, July, 1913.

Insolvency of collecting bank

410. (Ala.) A check was forwarded ''for
collection and returns" and the collecting
bank failed after making the collection.
Opinion: The proceeds in the hands of the
failed bank are recoverable as a trust fund
provided their identity can be traced. ^Yhe^e
a failed bank in Alabama is not a trustee but
a debtor for collection proceeds, a creditor,
unless he is a depositor, is subordinated to
claims upon non-interest bearing deposits.
Vol. 8, p. 40, July, 1915.

411. (Del.) A bank in Delaware re-
ceived from its customer ''subject to final
payment" a check drawn on a trust company
in North Carolina, The check was for-
warded to a Baltimore correspondent, thence
to a bank in the same place as the drawee,
which collected from the drawee and failed
two d'Axs later without remitting. Opinion:

The amount is chargeable back by the Bal-
timore bank to tlie Delaware bank, and by the
latter to its customer, who, however, has a
claim upon the receiver of tlie failed bank for
the full proceeds as a trust fund. Under the
law of Maryland a collecting bank is not liable
for its correspondent's defaults, and this
would relieve tlic Baltimore Ijank. In Del-
aware, the point is not decided, but the credit
of the check "subject to final payment" would
relieve the Delaware bank. Vol. 9, p. 49,
July, 1916.

412. (Fla.) A check drawn on a Florida
bank is cashed in Kansas City, is forwarded
through the mail and the proceeds remitted
by the drawee to the last collecting bank,
w^hich fails before itself remitting. The
Kansas City bank seeks to recover from the
drawer. Opinion: When the proceeds w^ere
remitted by the drawee to the collecting bank,
this constituted payment which discharged
the drawer. The owner bank in Kansas City
which first cashed the check, would, therefore,
have no recourse upon the drawer but must
look to the assets of the failed bank for reim-
bursement. Vol. 9, p. 828, April, 1917.

413. (Kan.) A customer shipped a car
of corn and deposits with his bank a draft
drawn on the consignee with bill of lading at-
tached, with instructions that the same should
be sent to the First National Bank of X,
Kansas, for collection. The draft was col-
lected and remitted for by the collecting
bank's draft, which was dishonored because
of insolvency. Opinion: The customer's
bank because of the special instructions took
the draft not as owner but as agent for collec-
tion and can charge the amount back to the
customer. Although the customer received
credit for the draft, it would be regarded
merely as provisional, which could be re-
voked upon non-payment. The customer
would be entitled to payment of the proceeds
in full by the receiver of the collecting bank.
Vol. 1, p. 366, April, 1909.

414. (Mich.) An item drawn on B
bank sent for collection to C National Bank
in Michigan was collected and remitted for
by that bank's draft, which was dishonored
because of the bank's failure. Opinion:
Under the law of Michigan (the authorities
elsewhere being in conflict) bank owning
item collected is entitled to pa^-ment of pro-
ceeds in full bv receiver. Vol. 2, p. 417,
April, 1910.

415. (Mont.) Where A deposits money
in H bank to pay a draft which is forwarded

COLLECTION

[424

by B to H bank for collection and II bank
applies money and sends its own draft in re-
mittance, which is dishonored because of its
failure, the loss falls on B, not on A. Vol.
5, p. 379, Dec, 1912.

Preferred claim against insolvent collect-
ing bank
See 373, 376

416. (Wash.) A bank took a check for
collection and credit, but credit was not given
at the time of deposit and the returns were
not received until after the bank had failed.
Opinion: The depositor is entitled to the en-
tire proceeds. The check was deposited at a
time when the bank was insolvent and re-
mains the property of the depositor. ^""01. 7,
p. 387, Dec, 191-1.

417. (Wis.) A note was sent to the
First National Bank of X for collection, and
the amount was paid to said bank at matu-
rity, by a check against the account of one ^M
in said bank. Two days later )the bank
failed. The receiver forwarded to the owner
the draft of the First National Bank of X
which had been drawoi for the purpose of re-
mitting for the collection. Opinion: The
owner of the draft has no preferred claim
against the insolvent bank, there being no
increase of the bank's assets by the trans-
action. Vol. 2, p. 484, May, 1910.

Collection of draft covering interstate
shipment of liquor

418. (Mo.) A bank collecting a draft
with a warehouse receipt for intoxicating li-
quor attached, coming from another state,
would not violate Section 239 U. S. Criminal
Code, under which, according to a Federal de-
cision in N'orth Dakota, it is unlawful for a
bank to collect a bill of lading draft covering
an interstate shipment of intoxicating liquor.
A^ol. 5, p. 169, Sept., 1912.

419. (Pa.) Section 239 of the United
States Criminal Code makes it criminal for
a bank to collect a draft with a bill of lading
attached covering a shipment of intoxicating
liquor from one state to another. Vol. 4, p.
C14, April, 1912.

Items received oy insolvent banker

420. (Va.) Where a private banking
firm receives paper for collection, knowing at
the time that it is insolvent and will not be
able to make a return. Opinion expressed
that this is such fraud as will entitle the de-

positor of the items to reclaim the same or
their full proceeds from the receiver or as-
signee. Vol. 3, p. 522, March, 1911.

Lien on paper forwarded

421. (W. Va.) The bank of A received
for collection from the bank of C, which
thereafter failed, a note drawn by B and in-
dorsed in blank by the payee, "Pay to the
order of any bank, banker or trust company."
Opinion: This form of indorsement indi-
cated that the bank of C was not tiie owner
but the collecting agent for the note. A bank
therefore acquired no right of lien upon tlie
paper for an indebtedness to it of the bank of
C. A^ol. 6, p. 372, Nov., 1913.

422. (W. Va.) The bank of A received
from the bank of C for collection a draft
drawn by B, both banks having mutual deal-
ings. After the C bank had failed the draft
was paid and the A bank, having no knowl-
edge from the form of the draft that the C
bank was not the owner, credited the latter
bank with the amount. Opinion: Unless the
A bank knew that the C bank was the col-
lecting agent of the drawer, it had a lien upon
the paper or its proceeds for a balance of
account due from the failed bank. Vol. 6,
p. 91, Aug., 1913.

Liability for not turning over proceeds

423. (Ind.) Where J gave D his check
to take up a note upon which J was surety
and after the check had been paid, the collect-
ing bank returned tlie money to the drawee
because the latter claimed payment had been
made by mistake, and that J had counter-
manded it. Opinion: That such collecting
bank is liable to D for tlie money so collected,
and that this liability would exist, even
tliough the note for which the check was
given was based on an illciral consideration.
Vol. 1, p. 60, Aug, 1908.

Recovery of proceeds paid in advance of
collection

424. (N. Y.) A New York bank re-
ceived for collection a chock drawn on Bank
A of N'orth Carolina and forwarded it to its
Kaleigh correspondent. The Ealeigh bank
forwarded the item to its correspondent,
Bank B, which collected from the drawee.
The Raleigh bank took its correspondent's
draft as cash and in advance of collection re-
mitted to the New York bank. Bank B
failed and its draft was dishonored. Opin-
ion: In North Carolina a collecting bank is
not liable for its correspondent's default, if

425

DICIEST OF LEGAL OPINIONS

duly selected, and in the absence of ne^'li-
<,^'nce on the part of the IJaleigli bank and
iniless ])aynK'nt of the i)r()cee(ls led the New
York bank to do somethint; whicli if repay-
ment was made would result to its injury, the
])aymcnt by the Haleigh bank is not iiiuil but
can be recovered as money paid by mistake
without consideration. Vol. 4, p. 91, Aug.,
IDIL

Charging note against subsequent deposit

425. (Ohio.) A bank received for col-
lection a note payable at the same bank and
the maker's account is insuflficient at matu-
rity. The maker made a subsequent deposit,
sufficient to meet the past due instrument.
Opinion: The bank should not charge the
instrument against the subsequent deposit
without express instructions from the maker.
Vol. 5, p. 309, Nov., 1913. See Notes pay-
able at bank, 1007 et seq.

Duty to trace unacknowledged items

426. (Ark.) A collecting bank which re-
ceives and forwards an item to a correspond-
ent which is not acknowledged or remitted
for in due course, must promptly trace such
item and notify its principal, and a delay of
47 days is unreasonable and will make the col-
lecting bank responsible to its principal for
the loss. Vol. 11, p. 557, April, 1919.

427. (Tex.) On July 31, 1918, a cus-
tomer deposited a check drawn on a bank in
L., Texas. The bank of deposit sent the
check as a cash item to its correspondent at
A., Texas, which at once sent it to the drawee
bank. On November 22, 1918, four months
later, the correspondent bank at A. reported
that the check had been lost between A. and
L. The correspondent bank contends that it

took the check subject to final payment and is
not responsible. Opinion: It is tiie duty of
a collecting bank to ascertain within a rea-
sonable time whether paper entrusted to it
for collection and transmitted by it to a cor-
respondent has been received by such corres-
pondent; and if not, to advise its customer of
such fact and it is liable for loss resulting
from its failure to do so. Just what consti-
tutes a reasonable time depends upon the
facts of each individual case. In a Kentucky
case a delay of eight davs was held to amount
to negligence. Vol. if, p. GIO, May, 1919.

Payment against uncollected funds

Ivflatioii of iMiik upon deposit of check. See 299

428. (Conn.) The majority of courts
hold (some decisions contra) that upon
credit to a depositor of a check indorsed in
blank, title passes to the bank and the de-
positor has an immediate right to check
against the credit unless there is a contrary
understanding or agreement based on (1)
general usage not to pay against uncollected
funds, (2) notice printed in pass-book or on
deposit slip, (3) special agreement with par-
ticular depositor, (4) crediting deposit as
paper and not as cash. Vol. 2, p. 333, Feb.,
1910.

429. (111.) A bank credited its depos-
itor with a check on an out-of town point,
still uncollected. The depositor presented
his check against said item for certification.
Opinion: The bank is not obliged to certify
the check. Lender the law of Illinois, in the
absence of a contrary agreement or usage, a
bank becomes a debtor for deposited items
immediately upon credit, but the custom is
quite universal not to pay checks against such
credit prior to the collection of the items it
represents. Vol. 7, p. 1001, June, 1915.

CORPORATIONS

Power to indorse for accommodation

430. (N. J.) As a general proposition
no corporation in any state, in the absence of
statutory authority, has power to make or in-
dorse paper for accommodation. Such paper
is valid and enforceable only in the hands of
a holder taking the same before maturity, in
good faith and without notice. Vol. 8, p.
250, Sept., 1915.

Failure to adopt by-laws

431. (Miss.) A corporation transacts
business without adopting any by-laws. The
corporation becoming involved in damage

suits and approaching insolvency questions
the validity of its corporate acts by reason of
the omission. Opinion: When the govern-
ing statute in express terms confers upon a
corporation the power to adopt by-laws, the
failure to exercise the power will be ascribed
to mere non-action, which will not render
void any acts of the corporation which would
otherwise be valid. Vol. 5, p. 6<o8, April,
1913.

Nature of unpaid dividends

432. (N. J.) "Where a dividend has been
declared, but remains unpaid, conflicting

COEPORATIOXS

439

authorities reviewed showing view more gen-
erally prevailing to be (a) if dividend special-
ly set apart or segregated it is a trust fund,
]iot liable for debts of corporation, and in
event of insolvency unpaid stockholder is
])roi'erred to common creditor, but (b) if not
specially set apart it remains property of cor-
poration, liable for its debts and unpaid
stockholders not preferred in case of insolv-
ency. Some courts, however, hold that mere
declaration constitutes a trust fund without
special sesreaation. Vol. 6, p. 373, Xov.,
1913. See 212, 221, 228, 237, 238.

Right of purchaser of stock to dividend

433. (N. Y.) A man purchased stock
through a brokerage firm. After the stock
had been sold, and before it had been trans-
ferred on the company's books, a dividend
was declared and the check mailed to the
previous owner. The brokerage office claims
the check should be given to the new owner.
Opinion: Where a dividend is declared after
stock is sold, it belongs to the purchaser,
although the transfer has not been recorded
on the books and the company has paid the
dividend to the person appearing on its books
as the ovnaev. Vol. 10, p. 660, March, 1918.

Signature to corporation note

434. (Me.) An order, note or agree-
ment was signed "John Smith Company,
John Smith, Treasurer," without the prefix
"by" before "John Smith." Opinion: Such
form of signature is generally held to be the
signature of the corporation alone (such is
the case in Maine) although in one or two
states it has been held to import an obligation
both of the company and John Smith indi-
vidually. Vol. 5, p. 755, May, 1913.

435. (N. Y.) A corporation note was
executed as follows :

$1,000 Buffalo, N. J., June 4, 1911.

On demand after date, mc promise to pay
to the order of oiirselves at the First National
Bank, Buffalo, X. Y., one Thousand Dollars.
Value received with interest. Home Hard-
ware Co. IT. I. Jones, Trcas. Indorsed
Home Hardware Co., H, I. Jones, Treas.
The question was raised as to the personal
liability of H. I. Jones, thereon. Opinion:
A note reading "We promise to pay" signeil
"Home Hardware Co., H. I. Jones, Treas."
is generally held to be the note of the
corporation alone equally as if the word
"by" were prefixed to the name of the treas-
urer and the latter is not personally liable.

The point has not yet been decided in Xew
York. Vol. 4, p. 306, Xov., 1911.

436. (N. Y.) Where the name of the
corporation is not designated as the sole
promisor in the body of the note and it is
signed merely "John Jones," Treasurer," the
weight of authority is that the word "Trea-
surer" is merely descriptive of the person and
not of the character of the liability and that
Jones will be personally liable. Had John
Jones in the above case signed "As Treasur-
er," without disclosing his principal he would
not have been shielded from personal liabil-
ity. Vol. 3, p. 466, Feb., 1911.

437. (N. Y.) Where a corporation note
simply reads "I" or "We" promise to pay,
\\ithout reciting in the body of the promise
that "The Smith Manufacturing Co." pro-
mises to pay, the form of the signature whicli
should be used by an officer authorized to
sign, in order to free himself from personal
liability, should be either "The Smith Man-
ufacturing Co. by John Jones, Treasurer,"
or "For the Smith Manufacturing Co., John
Jones, Treasurer." Vol. 3, p. 466, Feb.,
1911.

438. (N. C.) According to the weight
of authority a note signed "Doe ilanufactur-
ing Company, John Doe, President, Jim Doe,
Treasurer," is held to be the obligation of the
corporation alone, although the word "by" or
"per" is not prefixed to the signature of the
officers, but in a few states where the form of
the note reads "we promise to pay" the sig-
nature would be prima facie evidence binding
both corporation and officers individual! v.
Vol. 7, p. 386, Dec, 1914.

Voting control by fraction of share

439. (Wash.) A corporation organized
with a capital stock of 1,000 shares at $100 a
sliare has three shareholders. A, B and C.
A owns two certificates for 499.80 shares and
40 sliares, totaling 500.20 shares, as against
li and C, the owners of two certificates of
2l!).90 each, totaling 499.80 shares. The
question is raised as to whether A could con-
trol the cor)>oration l)y a fraction of a share.
Opinion: The control of the corporation
would be held to rest in A because he is the
majority stockholder. A single share is the
voting unit and a fraction of a share cannot
be voted in the absence of an express provi-
sion therefor in a statute or by-laws of the
corporation. But if A was unable to exercise
control by inability to vote the fraction, a
court of equitv would doubtless enforce his
rights. Vol. 7, p. 995, June, 1915.

440

DRJEST OF LEGAL OPIIS'IONS

Voting power of stockholder

See li2."i, 242, 2V.i

440. (Wash.) At common law each
stockliolder in a corporation has one vote, ir-
respective of the number of shares lield l)y

him. This has been changed by statute in
most states, which hohl tiiat tlie stockholder
has one vote for each share of stock owned by
him, and in some states cumulative voting is
])rovided for. Vol. 7, p. 995, June, 1915.

DEATH AND DECEDENT'S ESTATE

Payment of deposit to administrator

441. (Kan.) A bank refused to pay a
chock drawn against the account of its de-
ceased depositor until further evidence of the
drawer's authority. The drawer, wlio was
the administrator, claimed that the indorse-
ment of the bank through whom the check
was presented was sufficient assurance that
he had been legally appointed administrator.
Opinion: A bank has the right to demand the
production of letters of administration before
paying the deposit of a decedent upon check
of one claiming to be administrator. Vol.
10, p. 852, June, 1918.

Right to credit decedent's account

442. (N. J.) Several certified checks
payable to a decedent were offered for deposit
to the credit of the decedent's account by one
of the executors, prior to the qualification of
the executors under the will of the decedent.
Opinion: A bank whose customer has de-
ceased may properly, in the interests of his
estate and before an executor or administra-
tor has qualified, receive money or checks
offered by a debtor of the decedent and place
them to the credit of his account, but until
the bank has been duly authorized to receive
such money or receive and collect such checks,
payment of the latter would not be a dis-
charge of liability to the estate and the payors
would, in the event of the failure of the bank,
remain liable to the estate. Vol. 5, p. 245,
Oct., 1912.

443. (N. Y.) A owes a customer of the
bank, who is deceased, and wishes to deposit
the amount in the hank for him. The ques-
tion is whether the amount should be credited
to the account of the decedent or to the ac-
count of his estate. Opinion: Strictly the
bank has no right to receive the deposit to the
credit of the estate unless authorized by the
legal representative. But it might be con-
venient for the bank to credit it to the estate
to be held for and paid to the representative.
Vol. 5, p. 176, Sept., 1912.

Deed for annuity

444. (Okla.) A, the owner of a tract of
land, proposes to deed it to B upon the condi-
tion that B pay A an annuity of $1,000 during
A's lifetime, and thereafter upon A's death
to continue the annuity to C during C's life-
time. A wishes to construct the proper form
of deed. Opinion: The deed could be drawn
with a condition subsequent incorporated
therein by the use of the words "upon condi-
tion" with a clause providing for the reentry
of A or his heirs upon the land on the breach
of such condition. Vol. 5, p. 104, Aug.,
1912.

Delivery of deed after death

445. (Mo.) A widow with two children
owns land, and does not want to make a will.
She proposes to make deeds to each child,
which she can hold until her death and then
have them delivered to the two children.
Opijiion: Deeds executed by the grantor to
her two children and held by her with inten-
tion that tliey shall be delivered after death
would be ineffectual, if not delivered during
her lifetime, to pass title to the grantees.
A"ol. 10, p. 380, Nov., 1917. See 499.

Disposal of funds of intestate by bank

446. (N. J.) A New Jersey bank asks
how to dispose of funds which it has on de-
posit in the name of a depositor who died
intestate, his only survivors being a son and
a former wife who was divorced and re-
married in his lifetime. Opinion: The mar-
ried woman is not the widow of the deceased,
and the only surviving son is entitled to the
entire deposit under the provisions of the
New Jersey statutes. Vol. 10, p. 598, Feb.,
1918.

Authority to renew notes of testator

447. (Pa.) In the absence of statute or
of express authority in the will, an executor
would have no power to bind the estate of the
testator by making, as executor, a new note
in renewal of one made by the testator or by
renewing indorsements on notes originally in-

DEATH AXD DECEDEXT'S ESTATE

455

dorsed by the testator, and such acts bind
only the executor personally. No such stat-
ute exists in Pennsylvania. Vol. 7, p. 104,
Aug., 1914.

Heir's note for decedent's debt

448. (111.) A widow and daughter of
the decedent gave their notes to a bank in
part payment of a note of the decedent which
the bank neglected to prove against the de-
cedent's estate within the time required by
law. Opinion: The authorities are in con-
flict whether such notes of widow and daugh-
ter, receiving assets of the estate, given in part
pa3'ment of a note of the decedent, outlawed
by non-claim, are supported by a sufficient
consideration and enforceable. In Illinois, the
question is yet to be litigated. Vol. 5, p.
375, Dec, 1912.

Payment of check after drav^er's death

See 004

449. (Mass.) The death of a drawer
revokes the authority of a bank to pay his
outstanding checks, and payment by the bank
after knowledge of the death of the drawer is
unauthorized, but the bank is protected where
it pays the clicck in ignorance of the death.
A statute in ^Massachusetts, however, author-
izes a bank to pay a check of a depositor, not-
withstanding his death, if presented within
ten davs after date and tliis applies to nation-
al banks. Vol. 7, p. 307, Nov., 1914.

450. (N. C.) Except where a contrary
rule is provided by statute and in the few
states where check is an assignment, death of
drawer of check revokes bank's authority to
pay, although if bank pays in ignorance of
death it is protected. Vol. 5, p. 523, Feb.,
1913.

Note: Rule that clicck is assignment has been
abrogated by Negotiable Instrument Law, passed
in all states except Georgia.

451. (Wash.) While the common law
rule estal)lisbed l)y tlie weight of authority in
this country is that death of tlio principal
revokes an agent's authority and payment
thereafter to the agent, even though in ignor-
ance of such death, does not discharge the
obligation, the courts whicli administer such
rule admit its harshness, and some courts
have made an exception wliere a bona fide
payment is made in ignorance of the princi-
pal's death. The New York Court of Ap-
peals in a recent decision has declared in
view of long-established custom that payment
of a check by a banker in ignorance of the

drawer's death constitutes an exception to
the common law rule and is valid, and the
reasoning of the court would lead to a like
conclusion where payment of the check of an
attorney in fact is made in ignorance of the
principal's death. It is reasonable to assume
that courts in future cases will so hold. Vol.
11, p 1G4, Sept., 1918. See 4G2.

452. (Ga.) A Imsband, critically ill,
drew and delivered to his wife a check for "all
of my deposit." The husband died and the
wife is likely to present the check. Opinion:
The bank would be safe in paying the wife
after the husband's death, on the ground that
the check constituted an assignment of the
entire deposit, and its delivery completed a
gift causa mortis, by virtue of which the de-
posit belonged to the wife and not to the
husband's estate. Vol. 5, p. 661, April, 1913.

453. (Idaho.) A check draw^l on a
I)ank in Oregon was given in pajinent for
goods sold and delivered. The check in due
course reached the drawee bank which re-
fused payment on the ground that the drawer
was dead. Opinion: The death of the drawer
operated as a revocation of the authority of
the bank to pay liis check. Vol. 6, p. 434,
Dec, 1913.

454. (Kan.) The death of the drawer
revokes the bank's authority to pay his check
except where the check is an assignment, or
the statute expressly authorizes pa\iuent dur-
ing a limited time after the drawer's deatli;
but where the bank pays in ignorance of
the death it is protected. In Kansas a check
is not an assignmeiit — the Negotiable Instru-
ments Law expressly provides the contrary.
Vol. 5, p. 107, Aug., 1912.

455. (111.) Several checks of a decedent
were presented for payment at the bank,
wliere the depositor had sufficient funds. The
bank, having received notice of the depositor's
death, refused payment and was sued by one
of the holders. Opinion: Under the Nego-
tiable Instruments Law of Illinois the bank
was not liable to the holder on the narrow
ground that death of drawer revoked the
bank's authority to pay and on the broader
ground that the bank owed no duty to the
holder. Death of the drawer revokes the
authority of a bank to pay his checks wherever
the rule prevails that a check is not an assign-
ment, except in a few states where special
statutes authorize payment within a limited
period after death. Vol. 5, p. G59, April,
1913.

456]

DIGEST OF J.ECJAL Ol'lMOXS

456. (Mass.) In Massaclmsctls Ji bank
is iiiilliorizcd lo pay a clicck after the draw-
er's (loalh within ten days (and a savings
bank within thirty days) after its date. A
check is dated June 3, and ten days would
bring it to the 13th, but that day being Sun-
day, wouhl the 14th, Monday, be considered
the 10th day? Opinion: The authority does
not extend the time limited, although the last
dav falls on Sunday. Vol. 9, p. !)04, May,
11)1 7.

457. (Minn.) In Minnesota, by a recent
decision of the Supreme Court, a check op-
erates as an assignment and the death of the
drawer does not revoke the authority of the
bank to pay. Vol. 4, p. 610, April, 1912.

Note: This rule is overturned by tlie Negotiable
Instruments Act passed in Minnesota in April,
1913.

458. (Pa.) In the absence of a statute,
the death of the drawer revokes the bank's
authority to pay the draw^er's checks, and
payment after knowledge of the death is un-
authorized. Vol. 3, p. 276, Nov., 1910.

459. (S. C.) In South Carolina, where
the rule prevails that a check is an assign-
ment, a check is payable by a bank to a bona
tide holder notwithstanding the death of the
drawer before its presentation for payment.
Vol. 6, p. 434, Dec, 1913.

Note: Tliis rule is overturned by the Negotiable
Instruments Act jiassed in South Carolina in
March, 1914.

460. (S. Dak.) Under the Negotiable
Instruments Act a check is not an assignment
and death of the drawer revokes the author-
ity of the bank to pay his outstanding checks,
in the absence of a special statute authorizing
the bank to pav within a limited period after
death. Vol. 6^, p. 434, Dec, 1913.

461. (W. Va.) A gave B his check in
the afternoon and died that evening. B pre-
sented the check the next morning. Opin-
ion: The death of the drawer revokes the au-
thority of the bank to pay his check and pay-
ment with notice or knowledge of death is
at the bank's peril in the absence ot a statute
providing for payment after death of the
drawer. Such a statute exists in West A'^ir-
ginia but is applicable only to savings banks.
Ohio has no statute on the subject. Vol. 8,
p. 420, Nov., 1915.

Power of attorney affected by death

462. (Tenn.) A depositor gave instruc-
tions to her bank that checks against her ac-

count should be signed cither by herself or
by lier nephew signing her name by him.
Jler nephew presented checks signed in the
usual manner, but before payment the bank
learned of its customer's death. The bank
refused payment but questions whether if the
checks had been paid in ignorance of the de-
l)ositor's death it would have been protected.
Opinion: The general rule at common law
is that a power of attorney, unless coupled
with an interest, is revoked by tiie principal's
death. The Appellate Division of the New
York Supreme Court has held that payment
by a bank to an agent under power of attor-
ney after the priiicipal's death does not bind
the estate, although the bank was ignorant
of the death at the time of payment. Under
the existing conditions of law there is con-
siderable danger and risk to banks which pay
checks signed under power of attorney in case
of unknown death of principal. Doubtless
in many states the courts would not hold to
the rule of the common law in all its rigor
but would apply equitable principles and hold
that payment to the attorney after death of
the jDrincipal and before notice thereof would
be valid. Vol. 4, p. 558, March, 1913. See
451, 1074.

Transfer of stock of decedent
See 1340

463. (N. J.) A bank holds stock as col-
lateral security for a loan made to a person
since deceased, with power to transfer on the
back of the certificate, duly executed by the
decedent. The bank is about to transfer but
is advised that new powers must be executed
by the administrator of the estate, since the
death of the principal terminated the bank's
authority. Opinion: Bank holding stock as
security for loan with power to transfer on
back of certificate, has right to transfer of
stock notwithstanding death of borrower,
since power to transfer being coupled with an
interest is not revoked by death of the giver of
the power. Vol. 10, p. 466, Dec, 1917.

464. (Okla.) The adminstratrix of an
estate is entitled to the transfer of the de-
cedent's stock upon delivering to the bank
an authenticated copy of the letters of ad-
ministration, but where there is no will and
no administrator appointed the next of kin is
not entitled to the transfer in the absence of
a court order. Vol. 9, p. 347, Nov., 1916.

474

DEPOSITS

Assignment of deposit

465. (N. Y.) There is nothing in the
law which will prevent a national bank in
New York State from making a loan to a
depositor in a savings bank and taking an
assignment of his deposit evidenced by his
savings bank-book as security. But as a
savings bank-book is not a negotiable instru-
ment, notice of the assignment should be
given to the savings bank to safeguard it
against subsequent withdrawals, which might
be effected by the depositor upon the claim of
loss without production of the book. Vol. 9,
p. 50, July, 1916.

466. (Ore.) In the case where a depos-
itor has been paid a savings deposit under
false claim of loss, an assignee to whom the
depositor had assigned his deposit would have
no rights against the bank. A savings pass-
book is not a negotiable instrument and an
assignee takes no greater rights than the as-
signor. Vol. 9, p. 826, April, 1917.

467. (Pa.) A deposit account in a na-
tional bank or a trust company may be as-
signed by the depositor like any other debt or
chose in action, and the assignment is Ijinding
upon the bank when notified thereof. Vol.
6, p. 435, Dec, 1913.

Use of assumed name

468. (Cal.) A woman, married a second
time, desired to open an account in a bank
under her former name. Opinion: It would
be lawful and proper to receive the married
woman's account under her former name,
provided the purpose is honest and not fraud-
ulent. Vol. 7, p. 898, May, 1915.

Bank not obliged to receive deposits

469. (N. J.) A bank is under no obli-
gations to receive deposits from undesirable
persons and may close an accoimt at any time
it chooses by tendering to the depositor the
amount due and declininii' to receive more.
A'ol. 5, p. 590, ]\rarch, 19 13.

470. (Ala.) A customer opened a small
checking account with a ])ank. The bank
later discovered that the customer was a pro-
fessional forger and questions its legal right
to close the account. Opinion: A l)ank, un-
like a common carrier, has power to select
its customers and may refuse to receive a
deposit of a particular customer or can close

an account out at anv time bv tendering the
amount due. Vol. 4,^p. G88, May, 1912.

Banks as depositaries

Ste 210

471. (Wash.) Moneys belonging to In-
dians on Reservations under the supervision
of an agency may be deposited in either state
or national banks which submit bids therefor,
giving the rates of interest on open accounts
and time deposits and otherwise complying
with certain requirements. Vol. 7, p. 689,
March, 1915.

Deposit for safe-keeping

472. (Wis.) A bank which undertakes
the safe-keeping of securities or valuables for
a customer, either gratuitously or for hire,
as by receiving rental of safe deposit boxes,
is not an insurer against loss by fire, burglary
or theft, but in the absence of special contract
of hire which would define the terms of lia-
bility is under duty to exercise reasonaljle care
in the safe keeping of property. Where the
bank is a gratuitous bailee it is responsible for
gross negligence, and where it receives com-
pensation it is responsible for ordinary neg-
ligence. Vol. 5, p. 065, April, 1913. See
186.

Nature of deposit slip

473. (Ala.) B deposited in a bank $: 3.-
44, and transferred to D a deposit ticket,
which read : "deposited and pending settle-
ment with D." B claimed he owed D $55.44,
wliereas D claimed B owed him $73.44. The
bank refused to honor the deposit ticket pre-
sented by D. Opinion: A deposit slip given
l)y a bank to a depositor is simply an ack-
nowledgment of the receipt of money and its
delivery by the depositor to a third person
does not operate to assign the deposit. Vol.
8, p. 806, March, 1916.

474. (N. Dak.) A duplicate deposit
slip showing a deposit of $10 currency was
issued to a depositor who checked against the
account and obtained cash from A, thereby
exhausting the credit. Thereafter the depos-
itor meets B and obtains $10 cash from him
on the original deposit slip. Opinion: B
cannot hold the bank. The duplicate deposit
slip is merely evidence of a receipt of de-
posit on a stated date. It is not a binding
obligation or promise of the bank to pay the

475]

DIGEST OF LEGAL OPINIONS

amount to the transferee of the deposit slip,
like a negotiable certificate of deposit. Vol.
5, p. 176, Sept., 1912.

475. (N. M.) The payee of a check
leaves it with the teller of the drawee hank
for safe keepin<i^ and states it is not to l)e pre-
sented for a few days })cnding the consum-
mation of a contract hetwoen tlie drawer and
the payee. The teller issues a deposit slip
therefor but does not credit the check to
the payee's account and afterwards the con-
tract fails of consummation and the drawer
does not provide funds suiTicient to cover the
chock. Tlic bank asks if it is liable on ac-
count of having given the deposit ticket, for
checks drawn by the payee. Opinion: The
bank is not lial)le for the amount to the payee
and has the right to refuse payment of the
latter's check drawn against such conditional
deposit. The deposit slip is in the nature of
a mere receipt subject to explanation. Vol.
10, p. 782, May, 1918.

476. (Okla.) A deposit ticket or entry
of deposit in a pass-book made by one in
authority in the bank is evidence that the
amount has been received as a deposit by the
bank at the time stated, but like any other
receipt it is only prima facie and not con-
clusive evidence, and may be explained by
other evidence or shown to have been issued
by mistake. It is not a binding obligation
or promise of the bank to pay the amount.
Vol. 3, p. 677, May, 1911.

Disclosure of customer's balance
See 172 et seq., 503

477. (La.) Where a check was pre-
sented and refused for insufficient funds, the
bank is not obliged to disclose the amount to
the credit of the customer by making part
pajTuent nor to receive from the holder or
anyone other than the drawer or his agent, a
deposit sufficient to make the check good.
Vol. 7, p. 896, May, 1915.

Deposit by one person crediting account
of another

478. (Ark.) Money is deposited in a
bank by A to the credit of B with instructions
to pay on check of A. The bank seeks to
know whether it can without liability cash A's
checks in the absence of authority from B to
honor such checks. Opinion: Where money
is deposited in a bank by A to the credit of B
with instructions to pay on check of A, the
bank can safely honor A's check only in the
event it is assured the deposit belongs to A

and has been put in B's name simply for con-
venience. If the money Ijolongs to B and
has been deposited by A as his agent, tlie bank
cannot safely pay A without express author-
ity from B. It would Ite unsafe for bank to
pay A without first ascertaining the true
owner of the money. Vol. 11, p. 171, Sept.,
1918.

479. (N. J.) Where a bank carries a de-
posit to the credit of "A Agent" for certain
heirs. Opinion that upon death of A his
agency is revoked and deposit is payable to
A's principals and not to his administrator.
Rule is different where deposit is in name
of "A trustee for B," in which case it may be
paid to administrator of A, except where
changed by statute. Vol. 6, p. 273, Oct.,
1913.

Guaranty fund of depositors

480. (Okla.) Where a deposit in an Ok-
lahoma state bank represented by interest-
bearing certificate is included in the daily
average upon which annual assessment is
levied, and it bears no greater rate of interest
than is permitted by the Commissioner, the
depositor is protected by the Depositor's
Guaranty Fund equally as if his deposit is on
open account subject to check. Vol. 7, p.
581, Feb., 1915.

Deposit made outside of bank

481. (Md.) A depositor on his way to
the bank delivered to one of the bank clerks
a deposit consisting of cash and checks tied
up in a package. When the clerk arrived at
the bank, it was discovered that there was
$100 less than the amount indicated on the
deposit slip. The depositor claims that the
full amount was turned over and that the
bank should stand the loss. Opinion: It is
essential that a depositor should deliver his
deposit at the bank to one authorized to re-
ceive same, and if he delivers the deposit to
an officer or agent away from the bank, he
makes the latter his o^vn agent and takes the
risk of the monev reaching the bank to his
credit. Vol. 11, p. 43, July, 1918.

482. (Pa.) A customer claimed to have
given the cashier of a bank a deposit of money
away from the bank, which is denied by the
cashier. The customer had no receipt for
the deposit. Opinion: The customer cannot
hold the bank liable because (1) it is difficult
to prove the receipt of the money by the cash-
ier and even if proved (2) the cashier had
no authority to receive deposits away from

DEPOSITS

491

the bank, according to the weight of judicial
opinion, and the bank is not liable unless the
money was delivered to the bank to the credit
of the customer's account. Vol. 4, p. 210,
Oct., 1911.

Deposit of military company

483. (Iowa.) Funds of a military com-
pany are deposited in a bank under the name
"Company Fund— (Officer's Name)." The
officer is transferred to another company and
the regiment is miles away. The new com-
manding officer writes the bank for a state-
ment of the account. Opinion: Where the
fimds of a military company are deposited in
a bank by its commanding officer and such
officer is succeeded by a new commander, the
latter is entitled to control the deposit as the
representative of the company. It would
seem perfectly proper to send the new com-
mander a statement of the accoimt, but the
bank should have satisfactory evidence of his
authority to control the fund. Vol. 11, p.
94, Aug., 1918.

Mistaken payment of deposit
See 1052 et seq

484. (Mont.) Where a bank erroneous-
ly credited its depositor with $G00, which
the depositor drew out, it is not precluded
from suing and recovering judgment against
him for the amount, provided it can prove
the mistake. Vol. 3, p. 523, March, 1911.

485. (Pa,) Wliere a bank credits a de-
posit to the wrong account and the amount is
checked out, the bank can recover the amount
from the depositor as having been paid l)y
mistake, without consideration. Vol. 5, p.
106, Aug., 1912.

Payment on oral order

486. (Colo.) A having an account in
bank came to the bank in person and ver-
bally in the presence of the bank officials
ordered the bank to jiay B $300 after certain
conditions were complied with. The condi-
tions were performed and B was paid the
money, A claimed that the oral order was
not binding and should have been in writing.
Opinion: The bank is entitled to require a
check or other written order from the custom-
er to pay a deposit, but if it is willing to and
does pay on the customer's oral order, the
payment is valid and chargeable, assuming
the bank can prove such order. Vol, 5, p.
827, June, 1913.

Deposit by partnership
See 334, 708

487. (Cal,) Under the firm name of
"Smith Bros," a partnership opened an ac-
count in a bank. By agreement with the
bank the signature "Smith Bros," was to be
used on all checks and notes, drawn by either
partner. Opinion: The signature "Smith
Bros," as the firm name to checks and notes
is legally sufficient without adding the name
of the individual partner who signs the firm
name. Vol, 5, p. 26, July, 1912.

488. (Wash.) A and B are partners
and open an account in a bank in the name
of "The Star Grocery," subject to the signa-
ture of A or B. A dies. Opinion: B can
draw checks against the partnership account
and the bank would not be liable to the heirs
of A for the money thus paid. Vol. 7, p.
581, Feb., 1915.

Postal savings

489. (111.) State banks which are non-
members of the Federal reserve system may
be depositories of postal savings funds under
certain specified conditions, namely, if mem-
ber banks fail to qualify to receive such de-
posits or in the event there are no member
banks in the same city; otherwise, where
there are one or more member banks in the
city where postal savings deposits are made,
the law provides that such deposits shall be
placed in such qualified member banks. Vol.
10, p. 379, Nov., 1917.

Note: The law at the present time remains un-
changed.

490. (Wis.) The law of Wisconsin
prohibits a bank from pledging its assets as
security for deposits. It is somewhat doubt-
ful whether bonds borrowed l)y the bank could
be lawfully pledged as security for postal
savings deposits. Vol. 4, p, 153, Sept,, 1911.

Public deposits

491. (Ky,) A national bank to secure
public deposits deposited United States cou-
pon bonds with the Treasurer of the United
States, The Treasurer without the consent
of tbe national bank cancelled the coupon
bonds and substituted registered bonds, tbere-
by causing the bank an actual loss of $350,
Opinion: No statutory authority exists to
convert the coupon bonds into registered
bonds as in the case of bonds to secure circu-
lation. In the absence of an authorizing
statute or the express consent of the depos-
itor of the bonds, the conversion would

492

DIGEST OF LEGAL OPINIONS

afford a basis of a claim for damages.
8, p. 1015, May, 1916.

Vol.

Reserve against savings deposits

492. (Wash.) Under the banking law
of Washington all banks are required to main-
tain a reserve of twenty per cent, of their de-
mand liabilities. The state examiner holds
savings deposits to be demand liabilities and
the banks carrying savings deposits question
this ruling, for wliile savings deposits are in
a sense demand liabilities, they can be held
subject to notice of withdrawal. Opinion: A
construction of the law that a savings deposit
subject to notice is not a demand liability is
not unreasonable in view of the purpose for
which reserve is required. The opinion of
the Attorney General should be requested
construing the law, or, in the event of an un-
favorable opinion, the banking law should be
amended expressly providing a separate and
smaller reserve against savings deposits.
The ordinary demand for such deposits does
not warrant such a high percentage of reserve,
and the bank is protected by its right to re-
quire notice of withdrawal. Vol. 4, p. 617,
April, 1912.

Note: The banking law of Washington has been
amended (1915) so as to read: "Every bank and
trust company doing business under this act, shall
have on hand at all times in available funds, not
less than fifteen per cent. ( 15% ) of its total de-
posits."

Specific deposits

See 2, 393, 787, 1222

493. (Fla.) A customer closed his ac-
count and left the sum of $350 with the bank
for the specific purpose of paying two out-
standing checks, one for $250 and one for
$100. Afterwards his checks of $50 and $75
were presented and paid, leaving insufficient
funds to meet both outstanding checks.
Opinion: The mistake of the bank in paying
the checks out of the specific deposit was due
to the action of the customer and the bank
w^ould not be held responsible therefor. A
deposit for the purpose of paying specified
checks is no longei" a general one, subject to
check, but is a specific or trust deposit, appli-
cable solely to the payment of such specified
checks, and not to be appropriated in any
other manner, but in this case payment was
justified. Vol. 2, p. 21, July, 1909.

Mistaken credit to account

494. (Ariz.) A. Doe, a member of the
firm of Doe and Doe, and who also conducted

an independent business, deposited checks to
the credit of the firm, but tlie bank mistak-
enly credited the amount to A. Doe's personal
account. Before the mistake was discovered
A. Doe sold his business to a successor, in-
cluding his credit in bank. Opinion: The
bank has a right to charge the amount back
to the depositor's account, unless the depos-
itor, relying on the truth and accuracy of the
statement of account rendered him by the
bank, is led to act to his detriment in a man-
ner he would not have done but for his faith
in the correctness of such statement, then the
bank is bomid to stand the loss. The right of
the bank to hold A. Doe liable would depend
on whether he would be prejudiced by the
mistake if compelled to pay the money back.
Vol. 7, p. 896, May, 1915.

495. (Miss.) M bank erroneously cred-
ited a deposit to N bank instead of to H bank,
and rendered a statement of account from
time to time to H bank, which was acquiesced
in for seven years without objection, during
which time N bank became defunct. Opin-
ion: After a reasonable time the accounts
rendered became accounts stated, subject to
correction only for fraud or mistake. The
seven years' delay of the H bank by which
the M bank was prejudiced in its recourse
upon the N bank, was such laches as would
preclude the H bank from questioning the
correctness of the account. Vol. 7, p. 386,
Dec, 1914.

Giving cash instead of credit for deposited
item

496. (Ore.) A depositor brought to the
bank for credit a check for $550. After the
clerk at the window made out the deposit
ticket, the depositor asked for $250 cash
to be taken out of the check and returned
to him. The clerk thereupon wrote upon
the deposit ticket "cash $250'' and sub-
tracted that amount, leaving a total of $300,
^vhich amount was placed to the credit of
the customer. The bank afterwards delivered
to him his balanced pass-book showing the
amount credited and the depositor retained
the book for over a 3ear without objection.
Afterwards he denied receiving the $250 cash.
Opinion : The fact that the customer retained
the balanced pass-book for over a year with-
out objection makes the balance an account
stated, which is conclusive unless the depos-
itor can show fraud, mistake or omission. If
the depositor impeaches the account, the bank
can show facts connected with the deposit.
In cases where a customer at the time of de-

DEPOSITS

503

posit wants the whole or part cash, it would
be better for the bank to enter credit for the
entire deposit and have the customer draw a
check for the cash in the regular way. Vol.
5, p. 28, July, 1912.

Time deposits

See 282

497. (Pa.) A savings deposit evidenced
by pass-book requiring thirty-five days*
notice of withdrawal but providing that the
bank may waive the notice, is a time deposit
within the definition of Section 19 Federal
Eeserve Act as further defined by Regulation
D, Series of 1916, But a certificate of de-
posit payable on return and "thirty-five days
demand if required" is not a time certificate
as defined by Eegulation D, although a court
might hold that it came within the definition
of time certificates provided by Section 19 of
the Act Vol. 9, p. 907, May, 1917.

Trust funds
See 410, 432, 668, 1191

498u (Ark.) Dfeposits skve held by a
trust company, acting as executor, guardian
and depository. In the event of failure, the
tendency of the courts is to class such de-
posits as general indebtedness and not to give
the claimant a preference unless (1) such
funds are kept separate and specially marked
as trust funds, or (2) where the organic law
provides that funds so held shall be preferred
to commercial deposits or general creditors.
In Arkansas the beneficiary would only come
in for a pro rata share with the other depos-
itors, unless the funds were kept separate and
marked as trust funds. Vol. 7, p. 98, Aug.,
1914.

499. (N. J.) Under a decision of the
New York Court of Appeals a deposit by A in
trust for B is revocable at will until the de-
positor dies, or unless he completes the gift
in his lifetime by some unequivocal act such
as delivery of the pass-book or notice to the
beneficiary. Under a New Jersey decision,
such deposit in trust was held testamentary
in character and would not be effectual unless
made in accordance with the statute of wills.
Vol. 3, p. 334, Dec, 1910.

500. (N. Y.) A bank carrying an ac-
count for John Doe, Trustee, or John Doe,
Agent, does not inquire as to the identity of
the cestui que trust or principal, nor as to
the extent of John Doc's authority. Th((
question arises whether banks are safe in

carrying such accounts without making
inquiry. Opinion: It is unlikely the New
York courts will go to the extent" of holding
that where John Doe deposits checks payable
to himself as agent or trustee, the bank is
under duty of inquiry for whom he is acting
or the extent of his powers ; the presumption,
according to the weight of authority else-
where, is that Doe is acting honestly and
within his powers. It would be only where
the bank has knowledge of additional facte,
as where a trustee check is g4ven for a person-
al debt to the bank, or where two accounts,
an individual and trustee, are carried, and a
deficit in the individual is made good from
the trustee account, or where there are other
suspicious facts, that the bank would be put
upon inquiry. But it might be safer, in view
of the uncertainty in the New York law, es-
pecially where numerous transactions arp
carried through such an account, to make in-
quiry as to the person for whom Doe is acting
and the extent of his authority. Vol. 5, p.
440, Jan., 1913. See 328 et seq, Official
checks for private use.

501. (Pa.) Under the laws of North
Carolina, guardians, trustees and other fidu-
ciaries may invest trust funds in United
States securities and in consolidated bonds of
the state. Vol. 3, p. 468, Feb., 1911.

Deposit in two names

See 1012

502. (N. J.) Where a deposit is made
in two names the certificate of deposit or
pass-book should read payable to A or B or
survivor, and under the law of New Jersey
applicalde to banks, trust companies and sav-
ings banks, the institution is authorized to
pay the survivor without administration.
Vol. 3, p. 587, April, 1911.

Unclaimed deposits required to be pub-
lished
See 172 et scq., 477

503. (N. M.) A Now ^fexico statute
rciiuiros national and state banks to publish
lists of doniiant and unclaimed deposits, with
a view to informing tlie heirs of deceased de-
positors of sucli deposits, failing which it
provides escheat of the money to the state.
Opinion: The state is probably without the
power to enforce such a statute against the
national hanks. In its application to state
banks, tlio statute is probably constitutional,
thougli it,s valid it v is not entirelv free from
doubt. Vol. 6, p.' 753, May, 1914.

504

DIGEST OF LEGAL OPINIONS

Notice of withdrav/al of savings deposit
in national bank

504. (Pa.) There is nothing in the Na-
tional Bank Act which denies the right of a

national bank to rcfu.se payment on demand
and require thirty days' notice Ijcfore with-
drawal of a savings deposit where the pass-
})ook rules provide for such notice. Vol. 6,
p. 95, Aug., 1913. See 283.

DISHONOR

See Presentment of Instrument with Indorsement Lacking, 1131-1134:

Drawer's liability on unpaid draft

505. (Kan.) A bank in Kansas pur-
chased a sight draft on a Nebraska bank.
The draft was drawn by a depositor of the
Nebraska bank but was signed in his name
at his request by his cousin, who was a cus-
tomer of the Kansas bank. The draft was
dishonored. Opinion: The Kansas bank has
recourse upon the drawer only, and not upon
its customer who introduced the drawer and
signed the drawer's name to the draft on the
latter's request. Vol. 5, p. 108, Aug., 1912.

Wrongful dishonor of checks

See 1268

Note: The following law recommended by the
American Bankers Association has been passed in
the states below named: "No bank shall be liable
to a depositor because of the non-payment through
mistake or error and without malice of a check
which should have been paid, unless the depositor
shall allege and prove actual damage by reason
of such non-payment and in such event the liabil-
ity shall not exceed the amount of damage so
proved." 1915, Idaho, Montana, New Jersey, Ore-
gon; 1917, Californiaj 1919, Michigan, Missouri,
North Carolina, Ohio, West Virginia.

506. (111.) Where a bank through error
and without malice refuses to pay the check
of a customer dra^vn against suflRcient funds,
all the courts which have passed on the ques-
tion except those of New York hold that the
customer, if a merchant or trader, may re-
cover substantial damages without proving
actual damage. Where the customer is a
non-trader most cases require proof of sub-
stantial damage as a basis of recovery. The
best method to abrogate the rule that sub-
stantial damages will be presumed without
proof of actual damage would be in procuring
legislation which will provide that damages
will be limited to such as the customer can
prove. For collection of cases see Vol. 4,
p. 755, June, 1912.

Note: For legal decisions on this subject see
Vol. 6, p. 433, Dec, 1913.

507. (111.) A bank through error and
without malice refused to pay its customer's
check for $11.40, although in sufficient funds.
The clieck was presented a second time and

paid at the request of the payee, who stated
that the drawer's credit with him was not
damaged. The customer sued tlie bank for
$1,000 damages. Opinion: Assuming that
the customer was a merchant or trader, the
bank would probably be held liable for sub-
stantial damages, without proof of actual
damage or any malice on the part of the
banl'. Vol. 4, p. 755, June, 1912.

508. (La.) A depositor who was in the
habit of overdrawing his account made a
small deposit, for which a credit slip was
placed on file. Later in the day a check was
presented and payment refused although
drawn against sufficient funds. Opinion:
Assuming that the depositor was a trader, he
can recover damages for dishonor of the
check without proving special damage, but
the fact that he had been in the habit of over-
drawing his account could be used in mitiga-
tion of damages. Vol. 5, p. 832, June, 1913.

509. (Miss.) A bank, through a mis-
talce in its bookkeeping, refused the pajment
of two checks of its depositor, one for $10,
another for $"?5. The depositor sued the
bank for $10,000 for not paying his checks
when there were sufficient funds. Opinion:
The bank was liable to the depositor (1) if a
merchant or trader, for substantial damages
though no actual damage is proved; (2) if
not a merchant or trader, for such actual
damages as are alleged and proved. Vol. 7,
p. 222, Oct., 1914.

510. (Pa.) A customer who was a car-
penter threatened suit against a bank for fail-
ure to pay a check drawn against sufficient
fimds. The bank credited a deposit by the
customer to the wrong account through a
clerical error. Opinion: Where a check is
refused payment because of clerical error, and
the depositor is a merchant or trader, sub-
stantial damages are by most courts presumed
without his proving actual damages, but
where a non-trader, some courts hold he must
prove actual damage to recover anything
rnore than nominal damages. In Pennsyl-
vania the question has not been passed upon.
Vol. 6, p. 210, Sept., 1913.

FORGERY

517

511. (S. C.) A bank received for de-
posit from its customer a check drawn on a
small country bank, and it immediately sent
the item to its correspondent bank for collec-
tion. The check was returned unpaid by the
correspondent and the bank collected the
amount from its depositor who in turn col-
lected the amount from the drawer. It after-
wards developed that the check had never
been presented. The drawer claims damages
for wrongful dishonor of the check on ground

that check was never presented. Opinion:
Where a check which has never been presented
is returned unpaid, implying lack of funds,
there is an injury to the credit of the drawer
for which the holder will be responsible to
him in damages. In this case the bank
would be held liable to the drawer for the
wrongful act of its correspondent and in turn
Avould have recourse on such correspondent
whose act caused the injury. Vol. 10, p.
3? a, Nov., 1917.

FORGERY

See Altered and Raised Paper, 82-110

Note: A statute recommended by the American
Bankers Association, limiting the time of liabil-
ity of a bank to its depositor for payment of
forged or raised checks, the time limit ranging
from thirty days to one year after the return of
the paid vouchers to the depositor, or in some
states after notice that they are ready for de-
livery has been passed in the following states:
California, Idaho, Iowa, Kansas, Louisiana,
Maine, Massacliusetts, Michigan, Minnesota,
Missouri, Montana, Nebraska, Nevada, New
Jersey, New York, North Carolina, North Da-
kota, Ohio, Oregon, Rhode Island, South Dakota,
Vermont, Washington, West Virginia, Wisconsin
and Wyoming.

Bank bound to know depositor's

signature

See 280, 561, 563

512. (Iowa.) A bank is bound to know
the indorsement of its depositor as payee of
a certificate of deposit, similarly as in the case
of a signature on a check, and cannot recover
money paid to a bona fide holder on the for-
gery thereof. But this rule is based on and
limited to cases where the bank keeps a file of
the signatures of depositors to whom certif-
icates are issued, and where such signatures
are not kept the rule would not apply, and
money paid on a forged indorsement would
be recoverable. Vol. 6, p. 501, Jan., 1914.

513. (Kan.) The rule that a drawee is
bound to know the drawer's signature and
cannot recover money paid to a bona fide hold-
er on forgery thereof is supported by the fol-
lowing two underlying reasons: (1) The
drawee is in a better position than the holder
to judge as to the genuineness of the drawer's
signature. (2) The drawee bank should be
regarded as the place of final settlement of the
transaction of payment. A stipulation on
the face of the instrument providing that
"All indorsers guarantee that the maker's sig-
nature is genuine" does not alFect the nego-
tiability of the instrument, but extends the

existing liability of the indoreer upon a
forged check to subsequent holders to the
drawee. Vol. 7, p. 584, Feb., 1915.

514. (N. H.) The Massachusetts deci-
sions adhere with certain modifications to the
old rule established in the case of Price v,
Xeal, 3 Burrows 1354, that the drawee of a
draft is bound to know the drawer's signature,
and is precluded from recovering money paid
to an innocent holder upon a forgerv thereof.
Vol. 3, p. 146, Sept., 1910 .

515. (Ohio.) A bank is bound to know
the indorsement of its depositor as payee
of a certificate of deposit, similarly as in the
case of the signature on a check. Where a
bank paid a certificate of deposit upon tJie
forged indorsement of its depositor as pavce,
it is liable. Vol. 6, p. 89, Aug., 1913.

516. (Pa.) On June 17 a customer
deix)sited a check drawn on the Scranton
bank payable to the order of "cash" and
signed and indorsed with the name of A. B.
Jr., which })rovcd to be forged. On July 1
the bank receiving payment was notified and
asked to refund. Opinion: The rule that the
drawee is bound to know the drawer's signa-
ture and cannot recover money paitl on the
forgery thereof, has been changed by a statute
in Pennsylvania passed in 1840, permitting
recovery where there has been due diligence
in the discovery and notice of flie forgery.
In this case the drawee used due diligence.
The Xegotiablo Instruments Act has been
held in a recent case not to have repealed the
Act of 1849. Vol. 7, p. 105, Aug., 1914.

517. (S. Dak.) A bank received its de-
positor's check of $1,G00 and as a condition
of jiayment required that the drawer's signa-
ture I)e guaraTiteod by the holder liank. Opin-
ion: Apart from the exceptional case where
a depositor cannot write, the bank has no
right to require guaranty of the drawer's sig-

518

DIGEST OF l.EUAL OPINIONS

nature to the check as a condition of payment,
and refusal to pay the genuine check without
such guaranty would be a dishonor for which
the bank would be liable to the drawer. Pay-
ment of the check, should the signature prove
to be forged, even though guaranteed by the
holder bank, could not be charged to the
drawer's account. Vol. 5, p. 657, April, 1913.

Payment of forged check not chargeable
to drawer

518. (Ala.) A drew his check for $27
to order of "John Jones.'* B, a merchant,
cashed the check for a merchant giving the
name of John Jones, and deposited and re-
ceived credit for the check with the drawee
bank. Two days later A notified the bank
that the check had been stolen and the in-
dorsement was a forgery. B claims there
was carelessness on the part of A and objects
to being charged with the amount. Opinion :
The check having been paid on a forgery of
the indorsement cannot be charged to the
drawer's account, and the drawee can recover
from the person receiving payment. The
amount is therefore chargeable to B. The
facts stated disclose no negligence on the part
of A, which would estop him from question-
ing the validity of the payment. Vol. 6, p.
760, May, 1914..

Pajnnent chargeable where drawer
estopped

519. (Md.) A bank cashed a check
drawn by an insurance company upon an in-
dorsement of a fictitious payee forged by its
agent and cashed upon his identification.
The agent was in the habit of identifying the
payees of the company's checks, and of wit-
nessing their indorsements. Opinion: The
bank is responsible unless it could be shown
that the agent was acting within the scope of
his authority, in which case the company
would be estopped from asserting that the in-
dorsement was a forgery. Vol. 2, p. 482,
May, 1910.

520. (Minn.) A check was cashed for a
third person by the payee A in ignorance that
it bore his own forged signature as drawer
and was deposited by him in B bank and col-
lected from C bank upon which it was drawn,
A carrying an account in both banks. Opin-
ion: The check is chargeable by drawee bank
to A's account, he being estopped to assert the
forgery of his own signature. Vol. 7, p. 584,
Feb., 1915.

521. (Ala.) A depositor having know-
ledge that his signature was forged to certain
checks, which were returned to him as paid
vouchers by tlie bank, omitted for a consider-
able period of time thereafter to give the bank
notice. Opinion: It was the depositor's duty
to promptly notify the bank upon the discov-
ery of the forgery of the checks. Neglect of
such duty relieved the bank of liability, if it
can show resulting damage, and in some
jurisdictions the bank is absolved from
liability, irrespective of such damage. Vol.
9, p. 143, Aug., 1916.

522. (Neb.) A bank cashed a check of
$45 signed by John Doe and indorsed by
Kichard Roe and Peter Roe. When John
Doe received the cancelled check from his
bank, he discovered forgery of his signature
but did not notify the bank until eight
months thereafter. It also developed that
Richard Roe's indorsement was forged. The
bank seeks to escape liability to its depositor,
or if recovery is allowed to have recourse on
Peter Roe. Opinion: Where a bank pays a
forged check and returns same to its customer
as a voucher and the customer, after dis-
covering the forgery, fails for eight months
to notify the bank thereof, the bank can
hold the customer responsible for the amount,
if the unreasonable delay has worked to
its injury. Wheue a bank pays a check
upon which both drawer's signature and
payee's indorsement are forged, some courts
hold, and others deny, the bank can recover
the money as paid upon a forgery of the in-
dorsement, and in Nebraska the Supreme
Court has expressed the opinion that the rule
allowing recovery in such case is sound. In
this case the bank could probably prove injury
caused by delayed notification and hold the
customer responsible ; furthermore would have
right of recovery from Peter Roe. Vol. 11,
p. 274, Nov. 1918.

Check bearing forged and genuine
signatures

523. (Mo.) The treasurer of a corpora-
tion signed checks in blank and left them in
the drawer of the desk of his confidential
clerk for countersignature of the president
by rubber stamp. The desk drawer was ac-
cessible to a bookkeeper who wrongfully ap-
propriated the checks, affixed the rubber
stamp signature of the president thereto,
filled out and negotiated the checks to a bank,
which collected the same from the drawee.
Opinion: Under the law of Missouri the cor-

FORGERY

531

poration is estopped by its negligence from
denying the genuineness of its signature, and
from asserting that such checks never had a
valid inception by delivery. It can hold
neither the purchasing bank nor the payor,
but is chargeable with the amount of such
checks. The facts here make out a case of
conduct on the part of the corporation so
grossly negligent as to estop it from denying
the delivery of the checks as completed in-
struments. Vol. 11, p. 486, INfarch, 1919.

524. (N. Y.) A corporation check re-
quiring the signature of the treasurer and the
countersignature of the manager was signed
in blank by the treasurer, carelessly exposed,
then stolen, the countersignature of the man-
ager forged and afterwards paid by the bank,
after it had been cashed by another bank upon
the forgery of the indorsement of a fictitious
payee. The corporation failed to notify its
bank of the theft. Opinion: While the mere
carelessly leaving exposed of a check book con-
taining blank checks has not Deen held re-
sponsible negligence on the part of the cus-
tomer, the leaving of such checks exposed con-
taining the genuine signature of oiLe of
two officials required to sign, coupled with the
fact that the customer did not notify the bank
and place it on its guard, might be held suffi-
cient to relieve the bank from the application
of the general rule that money paid on a
forged check is not chargeable and to make
the customer responsible. Vol. 1, p. 446,
June, 1909.

525. (Ohio.) A bank paid a check of a
corporation drawn payable to bearer, signed
by the treasurer, the countersignature of the
president being forged. The check was
stolen and cashed by an employee. The
understanding between bank and customer
was that all checks should have both signa-
tures. The bank questions as to its right to
charge the amount to the corporation's ac-
count. Opinion : A check signed by one only
and bearing a forgery of the other signature
is not an authority and direction to the bank
to pay, and is not chargeable in the absence
of negligence on the customer's part. Vol.
1, p. 448, June, 1909.

526. (Ohio.) Where an instrument con-
tains both forged and genuine signatures it
is valid in the hands of a bona fide holder
as to the makers whose signatures are gen-
uine, although they are ignorant of tlie for-
geries. Vol. 1, p. 448, June, 1909.

Drawer's duty of examination and
verification

527. (S. C.) A series of checks covering
a period of over a year, signed by a wife pay-
able to her husband, were caslied by a bank
for the husband and paid by the drawee.
During this time the pass-book was balanced
several times and no olijection to the vouchers
was made by the wife. Three years later she
claimed that all of the checks were forgeries.
Opinion: The drawee is not responsible to
the depositor who is estopped by the neglect
of duty to make examination and give notice
of the forgeries. The bank receiving pay-
ment is not liable because after the first
check was paid it was justified in cashing the
successive checks. Vol. 6, p. 206, Sept.,
1913.

528. (S. Dak.) A statute in South Dakota
relieves a bank from liability to depositor for
payment of a forged check unless the deposi-
tor notifies the bank of the forgery within
three months after return to him of forged
check as voucher. Vol. 6, p. 437, Dec, 1913.

Forged order on savings deposit

529. (Kan.) A forged check and a pass-
book were presented at a bank by a man who
had been in the habit of making deposits for
the customer of the bank owning the savings
deposit. The signature of the forged check
seemed identical with the genuine signature.
Opinion: The bank is protected where the
person receiving payment presents the pass-
book and reasonable care is exercised by the
bank in making the pavment. Vol. 3, p. 521,
March, 1911.

530. (Kan.) Where payment is made by
a savings bank on a forged order to one pre-
senting the depositor's pass-book, and the rule
of the bank is that payment to one presenting
the pass-book is valid, the bank is protected
if reasonable care is used ; otherwise not. Vol.
2, p. 373, March, 1910.

531. (Ky.) A man not purporting to be
a depositor on presentment of a pass-book
and a forged order received payment from a
savings bank. One of the by-laws of the bank
sul)scribed to by the depositor road that "a
payment on presentment of a pass-book shall
1)0 a discharge to the bank for the amount so
paid." Opinion: The by-law protected the
i)ank where reasonable care was used. In the
absence of suspicious eircumst-ances. where the
bank compared the signatures and found
them similar, a court would likely hold that

532

DIGEST OF LEGAL OriNIONS

it used reasonable care. Vol. 5, p. 305, Nov.,
1912.

532. (Ohio.) The printed regulations
in a savings pass-book are binding upon the
depositor, but tlicy do not absolutely relieve
the bank from responsibility in ease of pay-
ment to a wrong person who presents the
book with a forged order, because the courts
add thereto the implied condition that the
bank in making such payment must have
exercised reasonable care. Vol. 6, p. 761,
May, 1914.

533. (Tex.) Where a bank exercises due
care, it is not responsible when it pays a
savings deposit to the wrong person on pre-
sentation of the pass-book with a forged
order. Vol. 5, p. 22, July, 1912.

Non-recovery of money paid on forged
check

534. (111.) D, who was employed by B,
made out a check to himself, forging B's
name. L, who received the check in pay-
ment for goods, deposited it two days later
at the drawee bank and received credit there-
for. Opinion: By the greater weight of au-
thority under the Negotiable Instruments
Law, there can be no recovery from L in
such a case where the drawee mistakes the
drawer's signature and pays a forged check
to a bona fide holder not guilty of negligence.
Vol. 5, p. 447, Jan., 1913.

535. (Kan.) A bank' paid a check
upon which the drawer's signature was forged
and which was presented by a merchant who
had taken the check from another persoQ.
Opinion: The bank can neither charge the
amount to the drawer nor recover from the
bona fide holder who received payment. Vol.
8, p. 911, April, 1916.

536. (Mo.) Under the law of Missouri
a bank cashing a check upon which the
drawer's signature is forged, is not liable to
refund the money to the drawee which has
paid the check. Vol. 3, p. 676, May, 1911.

537. (Mont.) Bank A paid its custom-
er's check after presentation by Bank B which
had cashed it for one of its customers. Later
the drawee discovering that it bore a forgery
of the drawer's signature, returned the clieck
to the first indorser, who was the customer
of Bank B, , and received cash for same, but
during tlie same day the customer presented
the same check to Bank A and received pay-
ment. Bank A then claimed the right to re-
turn the check to Bank B and recover the

money. Opinion: Bank A, mistaking the
signature of its customer and paying money
upon a forged check, eannot recover same
from Bank B, the innocent holder, who re-
ceived payment, and the fact that a prior
indorser, after discovery of the forgery, re-
turned the money to the drawee, but after-
wards demanded and received the same back
again, does not alter the case. Vol. 11, p.
480, March, 1919.

538. (Okla.) According to the law of
Oklahoma, the drawee paying a forged check
cannot in the absence of negligence or fraud
recover the amount from a bona fide holder
receiving payment. Vol. 5, p. 307, Nov.,
1912.

539. (Ore.) Where the drawee pays a
check bearing the forged signature of the
drawer to a holder who has received the same
in due course, without fraud or negligence, it
cannot afterwards recover the monev paid.
Vol. 6, p. 437, Dec, 1913 .

540. (S. Dak.) It is the general rule
that the drawee is bound by the pa)Taent of
a forged check and cannot recover money paid
to a bona fide holder. There are exceptions
in some States. The question has not yet
been passed upon in South Dakota. Vol. 8,
p. 705, Feb., 1916.

541. (Tex.) A check drawn on a Texas
bank was deposited for collection. After it
was paid and the amount paid out by the
collecting bank, forgery of the drawer's sig-
nature was discovered. Which bank stands
the loss? Opinion: Drawee bank which pays
check upon which drawer's signature is
forged to a bank receiving same in good faith,
and paying out the money before notice of the
forger}'', cannot recover the money back. Vol.
11, p. 96, Aug., 1918.

542. (Tex.) A draft was forged by the
payee, indorsed by him and by his brother,
cashed by a bank on faith of the brother's
signature, and paid by the drawee. Opinion:
The drawee must stand the loss where it can
be shown that the bank was a bona fide holder
and that the forger's brother was not a guilty
participant. Vol. 1, p. 334, March, 1909.

543. (Wash.) A check upon which the
drawer's signature is forged is deposited in
bonk by a customer and paid by the drawee
through the Clearing House. Three days
later the forgery is discovered and re-pay-
ment demanded. Opinion: The Supreme
Court of Washington held in 1902 that a
drawee which paid a forged check to another
bank, which had negligently cashed the check

FORGERY

550

upon the payee's indorsement, without in-
quiry or identification, could recover if it
acted within a reasonable time ; and also per-
mitted recovery where the recipient would
not be prejudiced by the repayment. Xo
reference in this case Avas made to the Ne-
gotiable Instruments Law M'hich had been in
force in 1899, but since that decision the
courts in New York, Missouri, Oregon and
Oklahoma have held the drawee is bound and
precluded from recovering money paid on a
forged check to a bona fide holder not guilty
of negligence. The right of recovery in the
present case would be denied if the Washing-
ton court should place a similar construction
upon the Negotiable Instruments Act. Vol.
5, p. 308, Nov., 1912.

544. (W. Va.) Drawee which pays a
check upon which the drawer^s signature has
been forged, to a bona fide holder free from
negligence, has no right of recovery from
such holder of the money paid. Vol. 10, p.
595, Feb., 1918.

545. (Iowa.) A bank paid three checks
aggregating $35, upon which the drawer's sig-
nature was forged. The checks were in-
dorsed by three different indorsers and came
to the drawee bank through the clearings.
The bank seeks to recover from the indorsers,
if possible. Opinion: The general rule sup-
ported by numerous authorities is tliat the
drawee, which pays a forged check to a bona
fide holder cannot recover the money back.
The indorsement does not warrant the gen-
uineness of the drawer's signature. But in
Iowa, if the first holder is negligent recovery
may be had of him, but such negligence can-
not be imputed to subsequent holder so as to
make him. liable. Vol. 10, p. C59, March,
1918.

546. (Neb.) On June 2nd, Ur. A. gave
his emplo3ee, R. W., a check for $11.25, and
the latter made a copy, forging the name of
Mr, A. on tlie copied check. The forged
check was cashed and later deposited at the
B bank, who in turn presented the check to
the drawee bank and received the money.
Several months later v/hen Mr. A. received
his checks, he discovered the forged check
and called upon the drawee bank for the
amount. Opinion: Under the law of Ne-
braska the drawee who pays a check upon
which the drawer's signature has been forged
cannot recover back the money imless he
pleads and proves that the lioldcr was negli-
gent in purcliasing or indorsing the instru-
ment, or guilty of bad faith. Vol. 9, p. 981,
June, 1917.

547. (Tenn.) A retailer accepted checks,
upon which drawer's signature was forged, in
payment of merchandise, indorsed and trans-
ferred them to a wholesaler and the latter
deposited them in a bank which collected
them from the drawee. The drawer's pass-
book was not balanced for eight or ten
months, at which time the forgery was dis-
covered and notice thereof given. The
drawee seeks to recover the amount paid.
Opinion: The drawee bank has no right of
recovery, under the decisions in Tennessee,
from the bank receiving payment and prob-
ably under such decisions would be denied
recovery from the retailer, even tliough the
latter was guilty of first negligence in accept-
ing the checks without proper identification.
Vol. 10, p. 717, April, 1918.

Recovery of money paid on forged check

548. (111.) It is the general rule that
the drawee bank having paid a check bearing
a forgery of the drawer's signature cannot re-
cover the money from a person wlio has re-
ceived payment of the same in good faith.
Whether the fact that the holder would not
be prejudiced if compelled to refund consti-
tutes an exception to the general rule is un-
certain in Illinois. It was held in an Illi-
nois case where tlie holder before receiving
payment on a forged check had knowledge of
suspicious fact^i, which was not imparted to
the drawee and would be in no worse posi-
tion if compelled to refund, that an exception
to the rule existed and the drawee could re-
cover, but in that case the holder was deprived
of a status of good faith holder. Most
courts hold that the single fact that the holder
would not be prejudiced if compelled to
refund, is not of itself suificient to create an
exception to the general rule denying the
drawee the right of recovery from a bona fide
holder. Further, a drawee cannot recover
from a bona fide holder who has received
jiayment of check drawn by a person having
no account in the bank. Vol. 10, p. 852,
June, 1918.

549. (Miss.) The drawee of a check
on which the drawer's signature is forged
can recover from jiayoc the money i)aid there-
on. The payee should know with whom he
is dealing, and if the check is a forgery he is
liable to the drawee. Vol. 5, j). 7. "jo. May,
1913.

550. (Iowa.) A customer deposited for
collection a check drawn on a local bank
which was duly paid through the clearings.
Thirty days later the drawee bank discovered

551

DIGEST OF LEGAL OPINIONS

that the drawer's signature liad been forged
and seeks to hold the collecting bank liable as
indorser. Opinion: In Iowa a drawee which
pays to a bona fide holder a check upon which
the drawer's signature is forged cannot re-
cover the money, but if the holder has been
negligent in acquiring the check without due
inquiry, recovery is allowed. Where payment
is made to a bona fide indorsee of a negligent
holder, the latter is not liable but the drawee
has recourse upon the prior indorser who is
guilty of negligence. Vol. 10, p. 464, Dec,
1917.

551. (Term.) A customer cashed a
forged check at his bank, which in turn re-
ceived payment from the drawee bank. A
month later the drawee discovered the forgery
of its depositor's signature. Opmion: Re-
covery of payment by the drawee, under the
law of Tennessee, depends on whether or not
the customer was negligent in taking the
check from the forger. Vol. 2, p. 303, Jan.,
1910.

552. (Pa.) On August 19th a check
bearing the forged signature of the drawer
was deposited by a merchant, a bona fiHe
holder, and was paid by the drawee. On Oc-
tober 11th the forgery was discovered and the
drawee notified. Opinion: In Pennsylvania
the drawee can recover from the holder re-
ceiving payment under the Act of 1849, pro-
vided prompt notice of the forgery is given.
The question of what is prompt notice is
somewhat uncertain under the Pennsylvania
decisions. Delay in giving notice will relieve
the person receiving payment from liability
unless he is not prejudiced by such delay.
Vol. 8, p. 417, Nov., 1915.

553. (Neb.) Where the drawee paid a
forged check, it can under the law of Ne-
braska recover the money paid from the party
who cashed the same, but who failed to re-
quire proof of the identity of the person pre-
senting the check. Vol. 1, p. 168. Nov.,
1908.

554. (Pa.) A cheek bearing the ficti-
tious name of a payee was cashed by a bank
for the payee and paid by the drawee. One
mouth later the drawee discovered the forgery
of the drawer's signature. Upon whom
should the loss fall? Opinion: In Pennsyl-
vania, under the Act of 1849, a bank which
pays money upon a forged check, purporting
to be drawn upon it, is not precluded from
recovering the money paid, provided it gives
notice with reasonable diligence. WHiat is
reasonable diligence and whether a delay of

thirty days between payment and notification,
notice being given immediately upon dis-
covery would be unreasonable, is not clearly
defined by Pennsylvania decisions. Vol. 11,
p. 556, April, 1919.

555. (Pa.) A bank paid a forged check
upon which the signatures of the drawer and
payee were the same. Two months later the
forgery was discovered. The bank receiving
payment guaranteed prior indorsements.
Opinion: The drawee bank would have a fair
chance of recovery from the bank receiving
payment. The Act of 1849, still in force in
Pennsylvania, favors the drawee's recovery.
Furthermore, the courts may hold that the
bank receiving payment has by its indorse-
ment specially guaranteed the genuineness of
the drawer's signature, he being also indors-
ing payee. Vol. 5, p. 242, Oct., 1912.

556. (S. Dak.) A bank in South Dakota
paid a check drawn on it for $8.50, bearing
a forgery of the drawer's signature, said
check having been indorsed and presented
by another bank to whom the amount was
paid. A month later, when the depositor
had his bank book balanced, the forgery was
discovered, and the presenting bank imme-
diately notified. The holder of the check dis-
claims responsibility. Opinion: The general
rule is that drawee cannot recover money
paid on forged check to bona fide holder who
is free from negligence. In South Dakota
exceptional rule exists that money is recover-
able on theory that drawee has right to rely
on' holder's indorsement as vouching for gen-
uineness of signature. Vol. 10, p. 203, Sept.,
1917.

Checks cashed for strangers

See 355

557. (111.) A drawee bank paid six
forged checks to banks which cashed them for
strangers without identification. Opinion:
The drawee cannot charge them to drawer's
account, but would probably have a right of
recovery against the banks under the Illinois
decisions, unless the Negotiable Instruments
Law is construed as precluding recovery. Vol.
6, p. 271, Oct., 1913.

558. (Okla.) In Oklahoma, drawe who
pays forged check to a bona fide holder free
from negligence cannot recover money paid.
Since the passage of the Negotiable Instru-
ments Act in 1912 the question is an open
one in the state, whether holder taking check
from stranger without inquiry as to identity

FORGERY

564

is negligent and responsible to the drawee.
Vol. 9, p. 654, Feb., 1917.

559. (Okla.) A check upon which the
drawer's signature was forged was cashed by
a bank in Oklahoma, which took it from a
stranger without identification. Relying
upon the express guarantee of the bank that
the payee's indorsement was genuine, the
drawee paid the check. Opinion : The drawee
can recover the money. Vol. 3, p. 589, April,
1911.

560. (Minn.) A drawee bank paid two
checks upon which the drawer's signature was
forged. The checks had been cashed at sa-
loons in the town and the saloonkeepers were
unable to identify the indorsements. The
bank admits its liability to the drawer but
seeks to hold the indorsers responsible for
cashing the checks for strangers. Opinion:
Drawee cannot recover money paid upon
check bearing forgery of drawer's signature
from bona fide holder, but may recover when
payment is made to one not a bona fide holder.
If the holder takes the check under circum-
stances which would put an ordinarily pru-
dent man upon inquiry and makes no attempt
to ascertain the truth, he is not a bona fide
holder, but in Minnesota the one circumstance
that holder takes check from an entire stran-
ger without inquiry is not sufficient to
deprive him of status of bona fide holder.
If payee's indorsement is also forged, the
drawee, under Minnesota rule, may recover
from subsequent indorser as warrantor of
genuineness, notwithstanding forgery of
drawer's signature. Vol. 10, p. 202, Sept.,
1917.

Forgery of signature by mark

561. (Cal.) A customer left his written
signature at a bank and two years later his
check was presented signed by a mark with
two witnesses unknown to the bank. The
check had been cashed by another bank which
refused to guarantee the signature. Opin-
ion: The drawee before paying the check is
entitled to require a guaranty or satisfactory
evidence of the genuineness of the signature.
In the event the drawee should pay the check
and it should prove to be a forgery, the rule
that a bank is bound to know its customer's
signature and cannot recover money paid a
bona fide holder on a forgery thereof, has
never been applied where the check was
signed by mark with witnesses, and in such
case the bank receiving payment is equally
bounil with the drawee to know the genuine-

ness of the signature and the credibility of
the witnesses. Vol. 5, p. 833, June, 1913.

562. (Ga.) Sam Smith has an account
with a bank, and being unable to write, signs
checks with a mark, having someone to wit-
ness the same. Henry Jones, representing
himself to a merchant as Sam Smith, fills out
a check on the bank to his own order, which
bears the forged signature

his
"Sam X Smith"
mark
and the signature of the merchant as a wit-
ness. The bank paid Henry Jones the cash
on tliis check, and seeks to hold the merchant
liable. Opinion: When a person signs his
name as witness to a signature Viy mark upon
a check, which signature is a forgery, the wit-
ness is liable to the drawee bank which pays
the check in reliance upon such signature as
witness. Vol. 10, p. 780, May, 1918.

563. (Wis.) Bank A issued a time cer-
tificate of deposit to Mr. and Mrs. John Doe,
who are illiterate and give their signature by
mark. Dick Smith having forged the sig-
natures of the payees by mark deposited the
certificate in Bank C, which in turn for-
warded it to Bank B and received a ri'init-
tance, although before maturity. Bank B
held the instrument for three months until
the date of maturity and upon presentment
the amount was paid by Bank A. The payees
claimed that their purported indorsement was
forged and sue Bank A for payment. Ojnn-
ion: A bank wliich pays a certificate of de-
posit upon forgery of the payee's signature,
made by mark and witness, remains liable to
the payee for the money but has right of re-
covery from the bank which collected tlio cer-
tificate upon forged indorsement. Bank C,
therefore, must bear the loss. The rule
v.'hich has been held in one or two cases that
a bank is bound to know the payee's indor.<e-
ment upon its certificate of deposit has no ap-
plication where the indorsement is bv mark
and witness. The fact tliat Bank B remitted
to Bank C before maturity of the certificate
and held the same until maturity before col-
lecting from Bank A would have no bearing
on the question of liabilitv. Vol. 11, p. 40,
July, 1918. See 280, 512, 515.

Forged telegraph order to pay money

564. (Ark.) A bank received a tele-
grapli message purporting to be signed by an-
other bank. "Pay John Jones $75, waive iden-
tification, we remit." The message was not

565

DIGEST OF LEGAL OPINIONS

sent by any bank but by a person unknown to
the telcf^jruph company, Avhicli cannot find out
the identity of the sender. Tlic bank })aid
the money on failh of the tele<^frani. Opin-
ion: Where a telc^ra])h company receives and
transmits a forged telegram purporting to be
sent by one bank to anotlier, ordering the
payment of money, the company is not liable
as an insurer of the genuineness of the mes-
sage, but is bound to exercise reasonable care
to receive and transmit only genuine mes-
sages and is responsible for negligence in that
regard. Where a telegraph company re-
ceives from a person a message signed in the
name of a bank, without making inquiry of
the bank or ascertaining the authority of the
sender to sign the bank's name, it does not
use due care and is responsible. Vol. 4, p.
686, May, 1912.

565. (Cal.) A telegraph company wir-
ing a forged message purporting to be from
one bank to another, requesting the payment
of money to a person named, without identi-
fication, is not an insurer of the genuineness
of the message, but is bound to exercise rea-
sonable care and is responsible for negligence.
The use of the American Bankers Associa-
tion cipher code affords increased protection.
Vol. 7, p. 163, Sept., 1914.

566. (N. M.) A bank received from the
delivery boy of a telegraph company a mes-
sage purporting to be signed by another bank
requesting it to pay L. $600. The money was
paid L., who disappeared. Later in the day
the telegraph company informed the bank
that the message was forged. Opinion: The
telegraph company is liable to the bank.
While the telegraph company is not a war-
rantor of the truth of messages, it is bound
to exercise due care in ascertaining the au-
thenticity of a received message, and its act
of delivery is a representation that the mes-
sage was received from the bank whose sig-
nature is affixed. Vol. 3, p. 735, June, 1911.

Recovery of money paid on forged
indorsement

567. (Okla.) Where a check on which
the payee's indorsement is forged is cashed
by a merchant, is deposited in a bank and col-
lected of the drawee, the latter cannot charge
payment to the drawer, but has the right of
recovery from the bank receiving payment
which in turn has recourse upon the mer-
chant. The elapsing of several days before
discoverv of the forgerv would not affect the

was

right of recovery where prompt notice
given. Vol. 6, p. 271, Oct., 1913.

568. (Pa.) A check payable to a, firm
whose indorsement was forged was paid to an
express company by a bank after it had tele-
phoned the maker. Opinion: The bank can-
not cliarge the amount to the drawer's account
unless tlie latter was negligent in giving no-
tice after the discovery of the forgery. The
bank has a right of recovery against the ex-
press compaTiy, provided the indorsement to
the latter was in unrestricted form. Vol. 9,
p. 414, Nov., 1916.

569. (Pa.) A bank which cashes for
the second indorser, who is its customer, a
check upon which the payee's indorsement is
forged, has the right to charge the amount to
the customer's account. Vol. 2, p. 155, Oct.,
1909.

570. (Idaho.) Bank A, in excliange for
$150 currency and a forged check for $75.50,
issued to a forger its cashier's check payable
to a different person for $225.50. The
forger indorsed the payee's name and forged
the indorsement of another person as identi-
fier and succeeded in cashing the check at
Bank B in a neighboring town, to which
Bank A paid the full amount. Bank A de-
manded that Bank B refund the amount.
Opinion: Bank A cannot recover the $150
for which it received full value. As to the
$75.50, it can recover the amount on the
ground that Bank B took the check under a
forged indorsement and acquired no title.
Although the check was payable to a name
supplied by the forger, it cannot be regarded
as payable to bearer under the Negotiable In-
struments Act, as the drawer was without
knowledge that the payee was fictitious. Nor
can the indorsement be regarded as made by
the precise person intended to receive the
money and therefore not a forgery, because
the bank did not intend to make it payable
to the person who received the check but to
a different person whose name was supplied
by the forger. Vol. 9, p. 579, Jan., 1917.

571. (Kan.) A bank paid its own
cashier's check, upon which the payee's in-
dorsement was forged. The check was pre-
sented bearing the previous indorser's stamp
guaranteeing prior indorsements. Opijiion:
The bank may recover the money paid. It
is not bound to know the signature of the
payee which is not kept on file. Vol. 8, p.
1015, May, 1916.

572. (Tenn.) A bank which cashes a
check bearing the forgery of the payee's in-

FORGERY

578

dorsement acquires no title, aud where it re-
ceives payment from the drawee must refund.
Vol. 6, p. 33, July, 1913.

573. (Wyo.) A forger impersonating
A deposited for collection a draft payable to
A. To make sure that the payee's indorse-
ment was genuine, the bank holding the draft
sent a sample of the supposed A's signature
to the drawer (with whom A formerly had
an account) for verification. The drawer
having compared the genuine and the forged
signatures of A, returned the signature sent
on for verification, also a sample signature of
their customer, to the bank, with the state-
ment that in its judgment the two signatures
agreed. Opinion: The bank cashing the
draft on the forgery and collecting from the
drawee is obliged to refund. The drawer by
its statement is not estopped from denying
the genuineness of the payee' signature. Vol.
4, p. 94, Aug., 1911.

574. (Wash.) John Doe gives his check
to Richard Roc. It was indorsed as follows :
"Richard Roe, by S. E. T.", "Pay to the order
of any bank, banker or trust company
Bank of Smallville, Washington," "Pay to
any bank, banker or trust company. Bank
of Oregon, Portland, Oregon," and mailed
by the latter to the drawee for col-
lection and credit. It developed later that
"S. E. T." had no authority to indorse. On
whom does the loss fall? Opinion: The
drawee paying the check upon which the
payee's indorsement was unauthorized may
recover the money from the party receiving
payment, unless there was unreasonable delay
in giving notice after discovery of the forged
or unauthorized indorsement. There is con-
flict of authority whether indorsement "pay
any bank or banker" is general or restrictive.
There is a line of cases to the effect that said
form of indorsement is not title-conveying
but restrictive and agent-creating, and does
not of itself guaranty prior indorsements.
The courts in Massachusetts, Georgia and
l^Iissouri hold this view. A Nebraska case
held such form of indorsement not a restric-
tive but a general indorsement, or title-con-
veying form, and this rule is supported by the
better reason. Under either rule, the IBank
of Smallville is the ultimate loser, provided it
received prompt notice of the error. Vol. 10,
p. 121, Aug., 1917. See 521, 522, 552, 581,
583, 584.

Effect of delay in giving notice of forgery

575. (Mass.) A bank received for col-
lection several checks from C, its depositor,

who was acting as collector of B, a French
Fund for Orphans, which was named as payee
and to whom the checks were donated. The
checks bore the indorsements of the payee
and of C, and were paid by the drawee bank.
After two years liad elapsed, B claims that his
indorsement was a forgery and demands res-
titution. Opinion: Where tiie payee's in-
dorsement on certain checks is forged and the
forger deposits the checks in a bank which
collects them from the drawee, the payee has
a right of action against the indorsee bank for
the proceeds of such checks and a delay of two
years before giving notice will not affect iiis
right of recovery unless the indorsee bank
has been prejudiced by such delay or suffered
a loss, which an earlier notice might have pre-
vented. Vol. 11, p. 488, March, 1919.

576. (Miss.) A drawee bank paid a
draft, upon which the payee's indorsement
was forged, and eiglit months later discovered
the forgery. Three and one-half mouths
after said discovery- the drawee notified the
bank which cashed the draft and demanded
a return of the money. Opinion: According
to the rule adopted in a number of States, the
drawee's delay in giving notice after discov-
ery bars its recovery, provided the bank re-
ceiving payment was damaged by such delay ;
but under the theory of the United States
Supreme Court, the drawee can recover upon
breach of warranty, irrespective of the un-
reasonable delay in giving notice. The right
of recovery would, therefore, seem to depend
upon the jurisdiction in which the action i.s
brought. Vol. 6, p. 512, Jan., 1914.

Recovery where indorsement guaranteed

577. (Fla.) A check on A bank, payable
to and indorsed in blank by D, followed by
indorsement of R, to order of Bank of B, and
indorsed by latter "previous iiulorsements
guaranteed," was ])aid to li bank. Drawer
pronounces check a forgery. Opinion: The
drawee cannot hold B bank. Money paid
upon forged cliock cannot be recovered frora
a bona fide holder who received payment.
The guaranty of prior indorsements does not
warrant genuineness of drawer's signature.
Vol. 3, p. 734, June, 1911.

578. (Ky.) Whore C bank draws its
draft on G bank in favor of D. F. Co., and
the indorsement of the payee is forged and
the draft deposited in II bank, which guaran-
tees the indorsement and collects Troni the
drawee through I bank, C bank on learning
of the forgery six months later has the right
of recover}' against drawee G, which in turn

579

DIGEST OF LEGAL OPINIONS

has a remedy against I and H banks, the
latter being the ultimate loser. Vol. 1, p. 94,
Sept., 1908.

579. (Okla.) A bank as drawee received
a check of $15,000, payable to James Smith.
It was indorsed "James Smith, by Florence
Smith" and had the regular stamp indorse-
ments of several banks, reciting "all previous
indorsements goiarajnteed." Would draWee
be protected in paying check in event James
Smith claimed he never received the money?
Opinion: Where the payee's indorsement is
forged and such indorsement is followed by
the indorsement of a bank guaranteeing prior
indorsements, the drawee bank is protected
in making payment for, while liable for the
amount to the drawer or to the payee, the
drawee has full recourse upon the guaran-
teeing bank. Vol. 11, p. 329, Dec, 1918.

580. (Pa.) A drawee bank paid a check
upon the forged indorsement of the payee in
violation of the maker's stop payment order.
The indorsement was expressly guaranteed.
Opinion: In this particular case the drawee
could recover upon the special guaranty. In
a given case where there is no such guaranty
there might be ground for a contention that
a stop payment notice puts the drawee on in-
quiry as to equities which would estop it from
recovering from a bona fide holder. Vol. 6,
p. 514, Jan., 1914.

581. (Ark.) A drawee bank paid a
check bearing forgery of the payee's signature
to the collecting bank, which had guaranteed
all prior indorsements. Thirty days elapsed
before the drawer notified the drawee of the
forgery and the drawee in turn promptly
notified the bank receiving payment, which
bank refused to refund. Opinion: The
drawee bank has a right of recovery from
the collecting bank and the fact that 30 days
elapsed before notice of the forgery was given
to the collecting bank, such bank having been
notified as soon as the forgery was discovered,
does not bar the right of recovery. The rule
is that notice should be given within a reason-
able time after the forgery has been dis-
covered. Vol. 10, p. 718, April, 1918.

Non-recovery of money paid on forged
indorsement

582. (Ohio.) An Ohio bank drew its
draft upon a German bank, payable to A.
The draft was paid by the drawee upon a
forged indorsement. A claims that neither
the draft nor its proceeds were ever received
by her, and demands refund of the purchase

money from the Ohio bank. Opinion : Under
the German law the paying drawee is not re-
sponsible for the genuineness df indorse-
ments. IIa<l the payee received this draft
over the counter of the Ohio bank, she would
be the loser. Assuming the draft was for-
warded by mail to and never received by the
payee, the question of responsibility would
depend upon whether the method of forward-
ing was by her authority. If authorized, the
risk of miscarriage would rest with the pur-
chaser; but if forwarded at the risk of the
bank, it would remain liable for a considera-
tion never delivered. Vol. 5, p. 517, Feb.,
1913.

583. (S. Dak.) Where the drawee bank de-
layed the giving of notice for more than two
months after the discovery of the forgery of
the payee's indorsement, it cannot recover
under the rule adopted in a number of States,
provided the bank receiving payment can
show that the delay caused it a loss. Under
the rule laid down by the United States Su-
preme Court, the drawee can recover, regard-
less of the unreasonable delay in giving notice
of the forgery. Vol. 6, p. 512, Jan., 1914.

584. (Utah.) On February 6th a bank
cashed a check upon which the payee's in-
dorsement was forged, the forger having been
introduced to the bank as the payee by one of
its depositors who left the city in April and
cannot be located. On June 27th the bank
was notified of the forgery by the payor of
the check. Opinion: If there was unreason-
able delay after discovery of the forgery in
giving notice thereof, accompanied by loss
sustained by the bank, the drawee of the
check could not recover. Mere delay, how-
ever, in discovering the forgery is no defense.
If the forgery was discovered soon after the
check was paid, the delay in giving notice to
the bank might be a good defense, assuming
there was recourse, which was lost, upon the
depositor who misrepresented the forger as
the payee. Vol. 5, p. 109, Aug., 1912.

Indorsement by person of same name

See 743, 744

585. (Fla.) An indorsement of a draft
by a person of the same name but not the
payee intended is a forgery, and the bank
cashing the draft is responsible for the loss,
in the absence of any negligence on the part
of the drawer. Vol. 4, p. 157, Sept., 1911.

586. (Ind.) The purchaser of a draft
mailed it to himself at his home city with no
particular street address, and draft was de-

FORGERY

5d4

livered to a person of the same name, who
cashed it at the bank upon his forged indorse-
ment. The bank collected the draft. Opin-
ion: The indorsement was a forgery and the
purchasing bank derived no title and is liable
to the drawee. It is doubtful if a defense of
negligence can be successfully maintained.
Vol. 2, p. 301, Jan., 1910.

587. (La.) A bank purchased a draft
payable to "G. Smith." The draft was in-
dorsed by a person of the same name, not the
real payee. Opinion: The indorsement is a
forgery and purchaser derived no title. Vol.
5, p. 596, March, 1913.

588. (Okla.) A check payable to John
Smith was mailed by the drawer to the payee,
but was delivered to another person of the
same name, who was personally known to the
drawee, and who received payment on his in-
dorsement. Opinion: The indorsement is a
forgery and the drawee cannot charge the
amount to the drawer, in the absence of draw-
er's negligence in mailing the check, but can
recover from the person receiving payment.
Vol. 8, p. 1101, June, 1916.

589. (W. Va.) The drawer of a check
mailed it to one J. Smith, to whom payable,
at No. 2701 A Street instead of No. 2701 B
Street. Another J. Smith, who happened to
live at the former address, received the check
and cashed it at a bank, whicTi was an in-
nocent purchaser for value. Opinion: The
indorsement was a forgery and the purchaser
took no title nor right to enforce against the
maker. Where the drawer negligentlv mails
a check to the wrong address, and it gets into
the hands of a person of the same name, who
forges the indorsement, an Ohio case holds
that the drawer is liable to the drawee which
pays the check; but it is doubtful that such
liability wouid extend to the purchaser of the
check from the forger. Vol. 7, p. 223. Oct.,
1914.

590. (W. Va.) A check was mailed to
the payee and delivered to the wrong person
of the same name who indorsed and nego-
tiated it to a purchaser for value. Opinion:
The indorsement was a forgery and the pur-
chaser took no rights, unless the maker of the
check was guilty of negligence in letting the
check get into the hands of the wrong person.
Vol. 2, p. 538, June, 1910.

Indorsement by precise person intended

See 711, 712

591. (Idaho.) A railroad pay-check
payable to R. E. Jones was through a mistake

delivered by an agent of the railroad to the
wrong person, who impersonated Jones. The
impersonator indorsed the check R. E. Jones
and cashed it at a bank. The real pavee
seeks to hold the bank liable. Opinion:' It
might be held that under the circumstances
the indorsement was not a forgery but by tlie
precise person intended by the drawer to
receive the money, in which case the railroad
company would be liable. Vol. 4, p. 3ii3
Nov., 1911.

592. (Minn.) A chock is drawn and de-
livered to an impostor, the drawer believing
him to be the person named therein. The
impostor indorsed in the name he had as-
sumed, and upon being properly identified
cashed the same for value at a bank. Opin-
ion: The bank cashing the check is protected,
as the indorsement is not a forgery, but by
the precise person intended to receive the
money. The majority rule is as above, but
there are a few cases contra. Vol. 4, p. 157,
Sept., 1911.

593. (Mo.) A stranger representing
himself as B presented to the drawee bank a
check payable to the order of B, and the bank
delivered to the stranger its cashier's clieck
payable to the order of B.. The stranger in-
dorsed the cashier's check in the name of B
to another bank and that bank received pay-
ment. Opinion: As between the bank de-
livering the cashier's check and the bank re-
ceiving payment, the former would be the
loser in the event the indorsement is not tliat
of B. Vol. 3, p. 733, June, 1911.

594. (Ohio.) A savings bank received
by mail from an impostor, who imj)ersonated
a depositor, tlie depositor's pass-book and a
forged order with a letter rorjuesting payment
of the full amount due. .\ few days previous
the pass-book had been presented with an
order for part of the funds, but payment was
refused because the signatures did not corres-
pond. The savings bank dealt with the im-
postor, believing him to be its depositor, and
mailed to the impostor in another city its
check payable to tlie depositor. The impos-
tor indorsed the check in the name of the de-
positor to a bank, which collected it and then
jiaid the proceeds of the ciieck to the impostor.
Opinion: The I)ank would have a fair ground
of defending against liability to the savings
bank (1) because the check was indorsed by
the precise person intended by the drawer to
receive payment, and (2) because the savings
bank would probably be estopped in setting
up forgery l)y reason of negligence in mailing
the check under such suspicious circum-

595

DIGEST OF LEGAL OPINIONS

stances. As a furtlicr fi^rouiul, if llie bank
could show that it appeared on the check as
collecting agent, it could escape liability, after
payment of the proceeds to the impostor.
Vol. (), p. 823, June, 1914.

Effect of waiver of identification

595. (Mich.) A customer cashed a
stolen railway pay-check upon a forged in-
dorsement. The check was drawn on the
same bank in which the customer kept his
account and upon deposit the customer's ac-
count was credited. Two weeks later the
payee who lost the check notified the bank.
The makers of the check had sent the
drawee a letter in which they stated : "We
will waive identification of the person pre-
senting check for payment." Opinion: The
customer must refund to the bank. The two
weeks delay will not affect the drawer's right
of recovery nor the payee's claim against the
company. The waiver is available as a pro-
tection only to the bank and not to the
merchant cashing the check upon a forged in-
dorsement. Vol. 7, p. 579, Feb., 1915.

Recovery of money paid on forged bearer
check

596. (Miss.) The Y Trust Company
cashed and received pa3'ment of a forged
check drawn on the X Bank, made payable
to cash or bearer. The check bore the sig-
nature and indorsement of E. G. W., both of
which were forgeries. It developed that the
handwriting of E. G. W. as drawer and on
the back of the check was that of a former
customer of the Y Trust Company, whose
signature they had on file, and that this
person had disappeared immediately after
the check was cashed. Opinion: The general
rule is that money paid upon a forged check
to a bona fide holder is not recoverable, but
the special circumstances in this case that
the loss was incurred before payment was
received from the drawee, and that the signa-
ture and indorsement were made by a former
customer of the Trust Company, which
should have kno^\^l the identity of the person
receiving the cash, and that he was not
R. G. W., would probably be held to modify
the general rule and permit recovery. Vol.
4, p. 428, Jan., 1912.

597. (N. Y.) A customer presents a
forged bearer check to the drawee, indorses
it, and receives the money. The forgery is
discovered the same day. The question arises
as to the drawee's right of recovery. Opin-

ion: Under the general rule money paid upon
a forged check is not recoverable. A lower
New York court has held that where a forged
bearer check is indorsed by tlie person re-
ceiving papnent, this constitutes an excep-
tion to the rule, as the indorsement is un-
necessary and tends to divert the drawee from
scrutiny of the drawer's signature; but this
decision has not been taken to the highest
court and has been criticized. Vol. 4, p.
156, Sept., 1911.

Signature and indorsement both forged

598. (Cal.) A bank paid a check upon
which the signatures of both drawer and
payee were forged, and payment was made to
the supposed payee upon the indorsement of
one T, a customer of the bank, below the
forged indorsement of the payee. Opinion:
The bank could recover from T on his breach
of warranty of the genuineness of the forged
indorsement. Vol. 2, p. 188, Nov., 1909.

599. (Conn.) A bank paid several
forged checks, upon which the indorsement of
the payee, a fictitious person, was also
forged. Opinion: The decisions are in con-
flict upon the drawee's right of recovery from
the bank to which the checks were paid. In
Connecticut the question has not been passed
upon. Vol. 8, p. 1014, May, 1916.

600. (La.) A presented a check signed
by B and indorsed in blank by the payee.
The check was paid by the drawee, and upon
faith of such payment A paid over the pro-
ceeds. Later it was discovered that B's sig-
nature was forged. Opinion: The drawee
cannot recover from the bona fide holder. If
payee's indorsement was also forged, author-
ities conflict as to drawee's right of recovery.
The decisions in Illinois and Nebraska allow
recovery, while a decision in Iowa denies
right of recovery. Vol. 4, p. 25, July, 1911.

601. (Neb.) Two checks were drawn on
a Nebraska bank on which the signatures of
both the drawer and of the payee were forged.
These checks were cashed for the forger by
two banks in Nebraska and indorsed over to
two banks in Iowa, which banks received
payment from the drawee bank. Opinion:
Under the law of Nebraska the drawee can
recover from the last endorser as warrantor
of a prior forged indorsement. Under the
law of Iowa the drawee could not recover.
Vol. 3, p. 588, April, 1911.

602. (N. Y.) A bank in New York, a
bona fide holder, cashed a check iipon which
the drawer's signature and the payee's in-

FORGERY

608

dorsement were forged. Opinion: Under the
New York law the drawee bank which paid
the check is the loser, and cannot recover from
the New York bank. Vol. 5, p. 448, Jan.,
1913.

603. (Okla.) A drawee bank paid a
check upon which the drawer's signature and
the payee's indorsement were forged. The
bank receiving payment stamped the check
"prior indorsements guaranteed." Opinion:
The question of drawee's right of recovery
has never been passed upon in Oklahoma. The
decisions of other states on this proposition
are conflicting. Vol. 8, p. 35, July, 1915.

604. (Wash.) A forged check bearing
a forged indorsement was deposited in a
bank by its customer and paid through the
clearing house by the drawee. The drawee
returned the check to the collecting bank with
notation "forged indorsement." Before
charging the customer with the amount, it
was discovered that the drawer's signature
was also forged, and the collecting bank
seeks to hold the drawee liable. Opinion:
Where the drawer's signature and payee's in-
dorsement are both forged, the decisions con-
flict as to the drawee's right to recover money
paid on check to a bona fide holder. In
Washington, the drawee paying the forged
check is held entitled to recover unless the
holder receiving payment would be in a worse
position if compelled to refund than before
he received payment. Vol. 11, p. 96, Aug.,
1918.

Statute of Limitations as applied to forged
indorsement

605. (Cal.) A bank paid a check which
bore a forged indorsement. A year and two
months later it was notified of such forgery.
A statute in California provides a one year
limitation for the commencement of an ac-
tion "by a depositor against a bank for the
payment of a forged or raised check." The
bank is uncertain as to whether said statute
covers forged indorsements. Opinion: A
New Jersey case holds that such a statute
applies to forged indorsements, but it is
doubtful whether the courts will construe the
statute in California to cover forged indorse-
ments. It is probable that it was the inten-
tion tliat the statute should apply to a check
bearing forgery of drawer's signature, or to a
raised check, and that the limitation applies
to depositors who are negligent in failing to
discover the forgery or alteration and notify
the bank. Vol. 11, p. 435, Feb., 1919.

606. (N. J.) A bank paid a check with
a forged indorsement. The question is asked
how long after such pa}'ment, or the return
of the check to the maker, has the maker a
right of action for the recovery from the
paying bank. Opinion: Where a bank pays
a check upon a forged indorsement and re-
turns the item to the depositor as a paid
voucher, the latter's right of action for the
deposit, in the absence of specific statute upon
the subject, does not accrue until demand
made and the statute of limitations does not
begin to run until the bank is in default,
unless the bank has disclaimed liability so as
to make demand unnecessary, in which case
riglit of action would accrue at time bank is in
default by such denial and would be barred
within six years. New Jersey and a large
number of states have passed the following
statute : "No bank shall be liable to a depos-
itor for the payment by it of a forged or
raised clieck, unless within one year after
the return to the depositor of the voucher of
such payment such depositor shall notify the
Ijank that the check so paid was forged or
raised." It is doubtful whether this statute
will be held to apply to actions by a depositor
against his banker for money paid on checks
bearing forged indorsements. Vol. 10, p.
718, April, 1918.

607. (N. J.) There is a statute in Now
Jersey which limits the liability of a bank to
its depositor for the payment of forged or
raised checks to one year after tlie return of
the voucher, unless notice is given the bank.
A certain New Jersey decision seems to take
the view that this statute covers the payment
of a check upon a forged indorsement, but
the point was not positively decided and sucii
statute has not been generally understood to
cover forged indorsements as distinguished
from forged or raised checks. Vol. 4, p. 221,
Oct., 1911.

Forged counter-signature to traveler's
check or money order

608. (Mo.) An express company tra-
velers' check, upon which there was a forged
countersignature of the purciiaser, was cashed
])y a bank for a stranger and paid by the ex-
])ress company. The signature of tiie pur-
chaser was placed upon the check at the time
it was issued by the company. Opinion:
])<>th bank and express company had equal
means of knowing genuineness of counter-
signature, and the express company could
recover from the bank which received pay-
ment under the rule that money paid under

009

DIGEST OF LEGAL OlMNIONS

a mutual mistake of fact, without coiiHiflo ra-
tion, is recoverable. Vol. 2, ]>. IKl April,
1910.

609. (Tex.) A travelers' cheek, sold by
a bank in Nebraska, issued to one II, and pur-
chased by a bank in Texas, was lost by II, and
his countersignature thereon was forged.
Opinion: That the Texas bank having cashed
the check upon the forgery took no title and
must look solely to the person from whom it
purchased for reimbursement. Vol. 6, p.
816, Jime, 1914.

610. (W. Va.) A bank became the in-
nocent purchaser of an express money order
bearing the forged countersignature of the
issuing agent. The order was paid by the
company before the forgery was detected.
Opinion: In the absence of decided cases on
the right of an express company to recover
money paid on the forged countersignature
of an agent, the question depends upon
whether the courts will apply the rule (1)
that money paid under mistake of fact is re-
coverable, or (2) that the payment is final
and irrevocable on the theory (a) that the
paying agent is bound to know the signature
of the countersigning agent, and (b) that be-
tween parties equally innocent the law will
place the loss where the course of business has
placed it. Vol. 5, p. 668, April, 1913.

Check signed in fictitious name

611. (N. Y.) A person signs a check in
a fictitious name with intent to defraud. The
question is raised as to whether he can be
punished as a forger or whether the crime
is simply that of larceny or obtaining money
under false pretenses when he actually ob-
tains money or property thereon, or whether
he can be punished under some of the special
statutes making criminal the mere issuing of
checks against insufficient funds. Opinion:
According to the decisions in the various
courts, it is well settled that the signing of
a check in a fictitious name, with intent to
defraud, is a forgery. The importance of
this question lies in the fact that the penalty
for forgery is more severe than in the other
offenses above stated and it is more desirable
to prosecute under the forgery statutes. Vol.
9, p. 492, Dec, 1916.

Indorser's warranty to subsequent
purchaser

612. (111.) A bank cashed a check, pay-
ment of which was refused on the ground that
the drawer's signature was a forgery. The

bank sought to recover tli(; amount from the
indorser. Opinion: The indorser of the check
warrants the genuineness of the check to a
subsequent purchaser and if the check is
forged is liable upon breach of such warranty.
Vol. i), p. 656, Feb., 1917. See 556, 560,
737.

Estoppel to assert forgery of indorsement

613. (111.) A, the maker, forges the in-
dorsements of B and C to his note, which is
discounted for A by a bank. At maturity B
and C are notified but pay no attention there-
to, and afterwards B sees the note and instead
of disclosing the forgery, says he will en-
deavor to get A to renew with additional in-
dorsers. Afterwards, upon A's death, leav-
ing no estate, B and C assert forgery. Opin-
ion: If C's silence when it was his duty to
speak, and B's affirmative representation of
the genuineness of the indorsements were in-
tended to and did prevent the bank from pro-
tecting itself from the loss, there would seem
fair ground for holding B and perhaps C
liable. Vol. 8, p. 1099, June, 1916.

614. (N. Y.) The maker of a note upon
which the indorser's name is forged lets it go
to protest. The purported indorser, upon
being notified and questioned, does not in-
form the bank of the forgery, but makes an
evasive reply. After the dishonor of a second
note likewise forged, the purported indorser
for the first time notified the bank of both
forgeries. The maker died insolvent. Opin-
ion: The purported indorser is liable if he
knew of the forgery of the first note and his
failure to notify the bank caused a loss. Vol.
6, p. 208, Sept,. 1913 .

Liability of person identifying
impersonator

615. (Ark.) A bank cashed a forged
draft for a forger identified at the bank by A.
Opinion: A is liable to the bank, provided
he made a false statement of fact upon which
the bank relied to its injury. Vol. 7, p. 167,
Sept., 1914.

616. (Colo.) The customer of a bank
who identified the holder of a forged check as
the payee is liable to the bank cashing the
check, because of a false representation,
though innocentlv made. Vol. 6, p. 275,
Oct., 1913.

617.

Forged name of drawee
(Okla.) A's check on D bank, in-

dorsed by B, is paid, and afterwards A trans-

FEAUD AND CRIMES

625

fers his account to C bank. One year later
the same check with date altered, name of
drawee changed to C bank, and hearing an
additional indorsement under that of B, is
presented by D bank to C bank and paid. The
cashier of 1) bank does not know where he got
the check and refuses to make its amount
good to C bank. Opinion: C bank can re-
cover from I) bank which first cashed the al-
tered check, under the rule that money paid
under a mutual mistake, without considera-
tion, is recoveral)le. Vol. 4, p. 308, Nov..
1911.

Altering name of drawee on forged check

618. (Neb.) A check signed "II.
Greve/' whose signature was forged by the
payee, was presented by the payee to the First
National Bank of X, Nebraska, as drawee.
That bank, having no account with Greve,
took it to the X National Bank, where Greve
had an account, struck out the word "First,"
inserted "X," indorsed the check, received the
money and paid over the proceeds to the
payee. Opinion: In view of the policy of the
Nebraska courts to place the responsibility in
case of a forged check upon the bank which

first takes it from the forger, rather than
upon the drawee which mistakes the signature
and pays it, as between the two banks, the
First National Bank would be responsible for
the loss. Vol. 2, p. 415, April, 1910.

Forged draft against lost letter of credit

619. (Wyo.) A bank purchasing a
forged draft against a lost letter of credit is
the loser unless the draft is paid by the
drawee, in which case the latter would prob-
ably be bound by payment. Vol. G, p. 817,
Juno. 1914. See 812.

Check dated on Sunday

620. (Ind.) A decision in Michigan
holds that the uttering of a forged check,
dated on Sunday, is not a crime because an
instrument void on its face cannot be the
subject of forgery. The decisions bearing on
the subject of the forgery of checks, dated on
Sunday, both in states where the common
law prevails that Sunday contracts are valid,
and in states where such contracts are made
void by statute, are collected and discussed in
Vol. 4, p. 547, March, 1912.

FRAUD AND CRIMES

Criminal liability for issuing bad checks

Note: A statute rccommcMided by tlie American
Bankers Association to punish the giving of cliecks
or drafts without sufliciont funds in bank and
making the issue of the insufficient check prima
facie evidence of intent to defraud lias })een passed
in nearly all tlie states, with various modifica-
tions. States still needing this law arc Mary-
land, Massachusetts, Oklahoma and Pennsylvania;
also the District of Columbia.

621. (Ark.) Where a per.son gave a
worthless check and obtained money or any-
thing of value therefor, he could be prosecuted
criminally, but if he simply gave the check
in payment of some existing indebtedness,
there would not be a criminal offense. Vol.
6, p. 36, July, 1913.

622. (Colo.) A corporation having its
account in a Colorado bank has been in the
habit of overdrawing. The bank seeks to
punish the president and treasurer of the cor-
poiation, although none of the checks bear
their signatures. Opinion : Where a st^itute
makes it a misdemeanor for any person, with
intent to defraud, to issue a check upon a
bank wherein the maker lias insuflicient
funds, and a corporation depositor habitually
overdraws its account, the corporation as well

as the issuing officer is liable to prosecution,
and the president and treasurer who do not
sign such checks but have knowledge of and
power to prevent their issue are, probably,
also subject to jirosecution. Vol. 11, p. 42,
July, 1918.

623. (Fla.) A owed a bank $500. evi-
denced by a note which at maturity the bank
agreed to renew. A sent a renewal note upon
which the bank surrendered the original. A
also sent a worthless check for the advance
interest. Ojnnion: The giving of the worth-
less check did not violate the Florida criminal
law.s, because A did not obtain anything of
value thereby. Vol. 5, p. 171, Sept.. 1912.

624. (111.) A person in Illinois negoti-
ated a worthless check against an account in
which he had only a nominal Italance of 48
centos. The drawee bank had refu.^ed many
similar checks and the depositor could not
claim that he thought he had money on de-
posit. Ojnniou: The person could be pun-
ished ( riiniiuilly for obtaining money under
false preten.ses and with intent to defraud.
Vol. 8, p. 39. July, 1915.

625. (Kan.) A person issued a check
on a Kansas bank where he never carried an

62G

DIGEST OF LEGAL OPINIONS

account. Tlie bank seeks to liold liini liable
for obtaining money under false pretenses.
Opinion: The burden is upon the state to
prove the drawer's intent to defraud, but it es-
tul)lif;lics a prima facie case vhcre it sliows
that the drawer issued a check on a bank
where he never carried an account. Vol. 5,
p. 83'.\ July, 1013.

626. (Mich.) A man drew two checks
on his bank in Wasliington without having
sufficient funds to meet them, and obtained
cash thereon from a bank in ^lichigan. The
drawer has returned to Washington. Opin-
ion: The purchasing bank can bring an action
to recover the amount of the protested checks.
If the drawer can be located in Michigan, he
probably can be punished criminally for ol)-
taining money under false pretenses. A^ol.
3, p. 585, April, 1911.

627. (S. Dak.) xV person issued checks
on a bank in South Dakota where he never
had an account. Under the law of that state
he is guilty of a felony where he either ob-
tains or attempts to obtain money or prop-
erty thereon. There is no statute in South
Dakota similar to that enacted in several of
the states, which makes the mere issuing of
a "not good" check, with intent to defraud,
a crime. Vol. 3, p. 335, Dec, 1910.

Obtaining bill of lading under false
pretenses

628. (Ala.) A bank received for collec-
tion a draft with a bill of lading attached.
The consignee obtained the bill of lading
upon tender of a check to the bank and re-
ceived the goods. The consignee, asserting
that the freight on the goods was not prepaid,
stopped payment on the check, but at the
same time retained the goods and refused to
pay the bank. Opinion: The consignee can
be convicted of obtaining goods under false
pretenses if it can be proved that, at the time
he gave his check in order to get the bill of
lading and the goods, he intended to stop
pajTnent. The action must be brought with-
in three years if a felony, and within one year
if a misdemeanor. Vol. 6, p. 99, Aug., 1913.

Burglary policy of the American Bankers
Association

629. (Miss.) The American Bankers
Association Burglary Policy covers opening
safes by "chemicals or electricity," as well as
by "tools or explosives." Vol. 5, p. 246, Oct.,
1912.

Conspiracy to commit robbery

630. (Ark.) A person, learning that a
shipment of currency is to be made by one
bank to another, proposed to another person
to commit robbery, pointing out the subject
of the robbery and outlining a plan; but the
second person refused and the first person
went no further. Opinion: The first person
was guilty of a misdemeanor in soliciting a
person to commit robbery. Vol. 8, p. 39,
July, 1915.

Conversion of notes by innkeeper

631. (Fla.) W. S. S., a lodger at a
boarding house, died, and among his effects
were two notes for $200 and $180 respec-
tively, which were not indorsed by him.
W. W. S., the boarding-house keeper, indorsed
the notes in his own name, cashed them at a
bank, and appropriated the money thus col-
lected in satisfaction of an alleged board bill.
The makers who through a Nebraska bank
paid the notes are sued by the estate of
W. W. S. Opinion: The innkeeper in col-
lecting the notes in the method used was
guilty of conversion, and the makers are still
liable to the estate, although the makers in
turn can recover from the Nebraska bank the
money as having been paid under a mistake
of fact without consideration; and the Ne-
braska bank can recover from W. W. S. on the
same grounds. W. W. S. would not be crim-
inally liable for larceny or embezzlement if it
could be shown he collected the notes in good
faith under a supposed claim of title. Vol.
4, p. 619, April, 1912.

Delivery of goods without taking up
w^arehouse receipt

632. (N. Y.) The Uniform Warehouse
Receipts Act passed in Louisiana in 1908
among other provisions contains one punish-
ing an officer or agent of a warehouse who
delivers goods represented by a negotiable
receipt without taking up the receipt. Vol.
1, p. 204, Dec, 1908.

Fidelity bonds

633. (Cal.) Upon application for re-
newal of a fidelity bond for its employee, a
banking corporation upon request execut-es a
certificate to the surety company stating
that his books and accounts have been ex-
amined and found correct in every respect.
A loss through a dishonest employee was
thereafter discovered, wliich had actually

FRAUD AXD CRIMES

[640

taken place during the life of the original
policy. Opinion: The surety company would
be liable for the loss under the original policy
and the certificate of renewal would not affect
such liability. The execution of such form
of renewal certificate is objectionable from a
banker's standpoint because there is danger
that the renewal bond may be declared by the
courts to be void if the certificate is regarded
as a false representation of a material fact.
Vol. 5, p. 26, July, 1912.

634. (N. Y.) The teller of a bank without
authority dishonestly allows overdrafts and
hides them from the management of the bank.
The bank holds the American Bankers As-
sociation's Standard Form of Fidelity Bond.
Opinion: Such bond insures the bank against
any loss that shall happen '^through the dis-
honesty of any of the (bonded) employees
or through any act of omission or commissioTi
of any of the employees done or omitted in
bad faith and not through mere negligence,
incompetency or error in judgment. This
bond is broad enough to cover the loss in this
case. Bad faith and dishonesty is the test
by which liability under the bond is deter-
mined. Vol. 6, p. 684, April, 1914.

Firm checks issued through fraud
of employee

635. (Tenn.) A firm through tlie fraud
of an employee signed checks (1) payable to
the order of the employee, (2) payable to the
order of the X bank, and (3) payable to
other persons bearing forged indorsements of
the payees. These checks were all deposited
by the employee in the X bank and checked
out by the employee, and the firm seeks re-
imbursement from the bank. Opinion: (1)
As to the checks payable to the employee, the
X bank is not responsible to the firm; (2) as
to the checks payable to the X bank, there is
conflict of authority whether or not the bank
is responsible; and (3) as to checks payable
to third persons whose indorsements were
forged, the bank is responsible, according to
the weight of authority, notwithstanding the
trust and confidence imposed by the firm in
the employee. Vol. 1, p. 96, Sept., 1908.

Introducing swindler to bank

636. (Tenn.) A bank cashed a check
in the sum of $105 for a stranger who was
correctly introduced by a customer using
these words : "This man is all right, ])lease
wait on him." The stranger was a swindler,
and his check was no good. Opinion: The
customer was not liable for the swindler's

fraud because his statement was a matter of
opinion and not of fact. Vol. 2, p. 20, Julv,
1909. See 182, 615, 616.

Obtaining money under false pretenses

Sue 28 1, 04U

637. (Pa.) A customer drew two checks,
for $200 and $300 respectively. Although
the customer's deposit was insufficient the
bank promised to pay the checks upon the
customer's false promise that he would have
enough money to cover the checks when his
wagons came in the next morning. The
checks were paid, but the customer closed out
his business without reimbursing the bank.
Opinion: The customer could not be held
criminally for obtaining money under fals-.*
pretenses, because the pretense relied upon by
the bank must relate to a past or an existing
fact and not upon any representation as to
the future, as in this ease, Vol. 4, p. 427,
Jan., 1912.

638. (Tenn.) A daughter signed her
father's name to a check per her own and
cashed it at a bank. Payment of the check
was refused because tlie father, upon beinof
notified of the check by the drawee, refused
to pay any attention to it. Twice before the
daughter had signed such checks, the first
one being paid Init the second refused, the
daughter afterwards inducing her fatiier to
settle. The forwarding bank delayed two
months, expecting either the father or daugh-
ter to settle. Opinion: If the check was un-
authorized, the daughter can be prosecuted
criminally for obtaining money under false
pretenses, but not for forgery. The bank has
no recourse against the father but only
against tlie daughter, and its delay would not
affect its rights. Vol. 6, p. 98, Aug., 1913.

639. (Wyo.) A bank in Wyoming asked
its correspondent at L. to pay Mr. F. $100,
wliich was due him from a bank in >raryl;ind.
In the meantime and through error the ^fary-
land bank wired the correspondent at L. to
l)ay Mr. F. $100. :\rr. F. received the $20(»,
knowing that he was only entitled to $1(KI.
Opinion: A person receiving money knowing
he is not entitled to it, from one who believes
he is entitled to it, without making any other
false representiition or preten.«;e. is proliably
not guilty of a crime under the false pretense
statute of \Vvomin<r. Vol. 5, p. 98, Aug.,
1912.

Passing worthless state bank bill

640. (Tenn.) A person passing for value
a genuine but worthless bill of a state bank

641

DIGEST OF LECAL OPINIONS

no longer in existence, is not guilty of any
crime under the Federal law, but might in a
proper case be held under a state statute pun-
ishing the obtaining of money under false
pretense. Vol. 4, p. 426, Jan., 1912.

Photographing United States notes

641. (Pa.) The United States Criminal
Code prohibits the making of photographs of
any obligation or other security of the United
States, except under authority of the Secre-
tary of the Treasury. Vol. 9, p. 900, May,
1917.

Possession of forged instrument with
intent to defraud

642. (Ark.) A person of criminal ten-
dencies has in his possession and exhibits a
forged certified check in the sum of $5,000
upon a bank in another state, but so far as
known has made no attempt to realize any-
thing on the instrument. Opinion: A per-
son may be convicted of forgery by having
possession of a forged instrument with intent
to defraud, although never uttered by him,
but unless something was said or done by
the possessor to indicate an intent to defraud,
the mere possession of the forged instrument
would not constitute a crime. Vol. 8, p. 39,
July, 1915.

Renunciation of interest by heir procured
by fraud

643. (Kan.) A died without a will,
leaving a widow and no children. His estate
consisted of 320 acres of land and other prop-
erty worth $10,000. The widow falsely rep-
resented to A's sister that it was necessary to
obtain her afhdavit renouncing lier interest in
her brother's estate in order to probate the
estate. On these representations the sister
gave her affidavit. Opinion: A court of
equity would revoke the sister's renunciation
and enable her to claim her share as heir of
the estate. Vol. 6, p. 821, June, 1914.

Statement to procure credit

544. (Conn.) The question is raised as
to whether the requirement of verification
under oath by the maker of a statement of
his financial condition for the purpose of pro-
curing credit, would result in the imposition
of a heavier i^enalty in case of falsity than
where the statement is unsworn. Opinion:
The taking of a false oath by the maker of a
false financial statement would not be per-
jury, the statement not being required by law
or made in a judicial proceeding. It would
be "false swearing," but as such is not a
crime. The only effect of requiring a sworn
statement would seem to be the moral effect
upon the judge in whose discretion rests the
severity of the penalty. Vol. 11, p. 610, May,
1919. "

HOLDER IN DUE COURSE

Rediscounted note

645. (Cal.) A negotiable note payable
to a national bank is rediscounted with a
Federal Eeserve Bank and the maker without
knowledge thereof and before maturity, pays
the note to the national bank, which misap-
propriates the money and two days later closes
its doors. The maker did not obtain a sur-
render of the note. The Federal Reserve
Bank demands payment of the note. Opin-
ion: The maker is liable on the note to the
Federal Eeserve Bank, which is a holder in
due course, but is probably entitled to pre-
ferred payment for the full amount from the
assets of the failed national bank. Vol. 11,
p. 560, April, 1919.

Holder in due course of stopped check

See 1235, 1265 et scq

646. (Cal.) A gave B a check for $500
which was indorsed by B to C and was sup-

posed to cover the pay roll of B. C issued his
checks payable to B's employees and later dis-
covered that A's check was not good. C
then stopped payment of his checks. Opin-
ion : Under the common law rule the payees of
C's checks are protected as holders in due
course and as such they are free from C's de-
fense of fraud or lack of consideration, which
he mav have against B. Vol. 9, p. 419, Nov.,
1916.'

647. (Ind.) A purchased a draft of
Bank B, drawn on Bank iST, payable to C.
A mailed the draft to C, who negotiated it to
D, a holder in due course. Bank B at A's
request stopped payment. Opinion: D, the
holder in due course, can enforce paAinent of
the draft against Bank B, the drawer, free
from defenses available against C, the pavee.
Vol. 7, p. 305, Xov., 1914.

648. (Iowa.) A bank which purchases a
cashier's check from the holder, assuming it

HOLIDAYS, SATURDAY AND SUNDAY

660

is properly indorsed and within a reasonable
time after its issue, can recover the amount
from the issuing bank free from any defense
which that bank may have against the payee.
The innocent purchaser of a stopped check
may enforce payment from the drawer. Vol.
6, p. 629, March, 1914.

649. (N. Dak.) A bank issued a draft and
afterwards stopped payment because the
payee gave as part payment a worthless check
of a third person. Opinion: The issuing
bank cannot be held liable by the payee for so
much thereof as is represented by the worth-

less check; but if the draft was transferred,
the bank would be liable to a holder in due
course for the full amount. Vol. 5, p. 447,
Jan,. 191:^.

650. (N. Y.) A customer deposited a
check and received credit for the amount,
$295 of which he checked out before payment
of the deposited check was stopped. Opin-
ion: The bank of deposit was a holder in due
course to the extent of the amount paid out
against such deposit, and in this case can re-
cover $295 from the maker of the deposited
check. Vol. 5, p. 25, July, 1912.

HOLIDAYS, SATURDAY AND SUNDAY

Instrument executed on holiday

651. (Miss.) A document signed on a
legal holiday is valid unless the act is ex-
pressly prohibited by the statute creating the
holiday. Vol. 9, p. 146, Aug., 1916.

652. (S. Dak.) In South Dakota a check
or note dated on Sunday or on a holiday
would in all probability be held valid, al-
though there is no decision on the point.
Vol. 6, p. 758, May, 1914.

653. (Wash.) In Washington a note
and mortgage executed, acknowledged and
delivered on a legal holiday is not prohibited
by statute and is valid. Vol. 5, p. 656, April,
1913.

Instrument maturing on Saturday

See 660

654. (Mo.) Under the Negotiable In-
struments Law of Missouri a negotiable in-
strument falling due on Saturday, other than
one payable on demand, cannot be presented
for payment and protested until the next suc-
ceeding business day. Vol. 4, p. 617, April,
1912.

655. (N. C.) Saturday afternoon in
North Carolina is not a half holiday and pre-
sentment and protest can be made on Satur-
day afternoon the same as on the afternoon of
any other business day. Vol. 1, p. 204, Dec,
1908.

Note: In 1019 a statute recommended by tlic
American Bankers Association was passed provid-
ing that the payment, certification or accei)tance
of a check or other nej^otiahle instrument, if done
or performed on a Saturday afternoon or on a
legal lioliday, is valid. In 1007 the Saturday
half holiday recognized by the Negotiable Instru-
ments Law was abolished by statute.

656. (Pa.) By statute in Pennsylvania,
a note otherwise presentable for payment on
Saturday is "payable" on the next business
day, hence a bank owning a note so payable

would be entitled to interest for two added
days and a renewal note should be dated
Monday. Vol. 7, p. 38, July, 1914.

Note: In 1917 a statute recommended by the
American Bankers Association was passed, mak-
ing the payment of a negotiable instrument on
a Saturday afternoon valid.

Notes executed and delivered on Sunday

657. (N. Y.) At conmion law a note
executed and delivered on Smiday is valid,
but in many states the courts have held such
notes void by reason of Sunday statutes. In
New York the execution and delivery of such
notes not being acts characterized as "serious
interruptions of the repose and religious
liberty of the community" would probably be
held valid. Vol. 4, p. 308, Nov., 1911.

658. (Tex.) At common law, Sunday
contracts are lawful and except in those states
where, by statute, the execution and delivery
of a note on Sunday is prohibited, a note
dated on Sunday is valid. Texas has no such
prohibitory statute. Vol. 6, p. 9(i. Aug.. 1 !»!:!.

Payment of check on holiday

659. (Ala.) In tiic absence of judicial
decision upon the precise point, payment of
a check on a holiday would be of uncertiiin
validity and at the risk of the bank, !?iiould
the drawer stop payment at the o|)ening of
business on the next l)usiiiess dav. Vol. 5,
p. 829, June, 1913.

660. (111.) In Illinois (1) Saturday is
a legal half-holiday in cities of 200,000 or
more, and in such cities paper maturing on
Saturdays matures and is presentable and
protestable the following business day, except
checks and other demand paper are at the
holder's option presentable on Saturday fore-
noon and protestable the same day (2) ; in
cities of under 200,000 Saturday is not a legal

661]

DIGEST OF LEGAL OPINIONS

half-holiday except tliat tlie Negotiable In-
struments Act postpones presentment of all
Saturday maturing paper to the following
business da}^, with like option to the holder of
checks and other demand ])aper to present
Saturday forenoon and protest the same day.
Vol. 9, p. 750, March, 1917.

661. (Kan.) It is unsafe in the present
condition of the law for a bank to pay a
check upon a holiday. Saturday afternoon
is not a half-holiday in Kansas, but in view
of the Negotiable Instruments Law relating
to presentment for payment on Saturday,
payment of a check on Saturday afternoon
except to the drawer would be at the risk of
the bank. Vol. 7, p. 582, Feb., 1915.

Note: In May, 1915, a statute was passed,
making the payment of a negotiable instrument

on 11 Satmdiiy afternoon or upon any legal holi-
day valid.

662, (Ohio.) In the present condition
of the law and in the absence of direct judicial
precedent, jiayment of a check on a holiday
or lialf lioli(hiy would be of uncertain validity
and at the risk of the bank, should the
drawer stop payment at the opening of Ijusi-
ness on the next business day. Vol. 5, p.
654, April, 1913.

Note: In May, 1913, a statute was passed,
making the payment of a negotiable instrument
on a Saturday afternoon, which is by law a half
holiday, valid.

663. (S. C.) In view of the authorities
and in the absence of a prohibitory statute,
it would seem that a bank in South Carolina
could safely pay a check dated on Sunday or
on a holiday. Vol. 5, p. 589, March, 1913.

HUSBAND AND WIFE

See Married \Y
Authority to draw checks

664. (Cal.) A depositor who authorized
his wife to draw against his account died,
leaving a balance of less than $500. Opin-
ion: The husband's death revoked his wife's
authority to draw^ checks, and also revoked
all his outstanding checks; but by a statute
in California, not exceeding $500 of a de-
cedent's deposit may be paid to a surviving ■
wife or husband upon affidavit. A"ol. 6, p.
578, Feb., 1914.

665. (La.) A man deposits $100 to the
credit of his wife and informs the bank that
his wife has instructed him to sign checks.
The bank asks if it would be safe in relying
upon the husband's word without proof of
authority from the wife. Opinion: The bank
would not be safe in paying the husband's
checks because if the deposit Avas her separate
property and under her separate administra-
tion, the husband would have no right to
withdraw the deposit, and payment to him
where he had not been authorized would not
protect the bank ; although if the deposit was
community property or constituted a portion
of her separate estate that Avas under the
control and administration of the Imsband,
the latter would probably have the right to
withdraw the deposit without authority of
the wife. The system of community prop-
erty prevails in some of the Southwestern and
Pacific states, including Louisiana and Texas.
Vol. 7, p. 582, Feb., 1915.

666. (N. Y.) A check signed "John Doe
per Jennie Doe" was presented to a bank,

omen, 834-843

which carried an account for John Doe.
Jennie Doe was John Doe's wife but no au-
thorization to pay was filed with the bank.
Opinion: In the absence of authority from
John Doe, the bank should not pay such
check. If checks so signed are honored, the
husband can recover unless he has authorized
or ratified the act. Vol. 5, p. 245, Oct., 1912.

Husband's account in name of wife

667. (Pa.) A married man opened a
savings account in the name of his wife and
daughter. The husband and wife having sep-
arated, both claim owmership and control of
the amount deposited. Opinion: The mere
opening of a savings account by a husband
in the name of his wife and daughter does
not constitute a completed gift in tlie absence
of delivery of the pass-book or other evidence
of the deposit or of other facts indicating per-
fection of the gift, and so long as the gift is
not completed it may be revoked bv the hus-
band. Vol. 8, p. 609, Jan., 1916. '

Husband's account in trust for wife

668. (N. Y.) ^Yhe^e a savings account is
held by a husband in trust for his wife and
both perish in same disaster, no presumption
at common law^ that one survived the other,
but survivorship must be proved — if wife sur-
vived husband, her next of kin entitled to de-
posit, but if husband survived wife or both
died simultaneously, deposit goes to hus-
band's next of kin. Vol. 5, p. 593, March,
1913.

G77

INDORSER— INDORSEMENT

Absence of payee's indorsement

St-e (iSO, 715, 1132, 11:M

669. (Mass.) A check payable to two
persons was indorsed by one and deposited.
The bank stamped "indorsements guaran-
teed" and the check was paid by the drawee.
Opinion: The indorsement would be held to
guarantee tlie drawee against loss or injury
caused by the absence of the indorsement.
Assuming the transfer was without authority
of the non-indorsing payee, the drawee could
recover. Vol. 4, p. 300, Nov., 1911.

Indorsement by alternative payee

670. (Kan.) A bank issued a certificate
of deposit payable to the order of John Smith
or Mary Smith. The hank raises the ques-
tion wliether such certificate requires the in-
dorsement of both parties. Ojnnion: The
order to pay is complete and sufficient upon
the indorsement of either pa3'ee. Vol. 9, p.
652, Feb., 1917.

Authority of agent to indorse
See 328, 332, 447, 708, 900

671. (Ala.) An attorney who was em-
ployed by a merchant to collect a note payable
to said merchant, received from the maker a
check covering the amount, which was drawn
in favor of the merchant. The attorney in-
dorsed the check as attorney for tlie merchant
and then by himself personally and deposited
it to his personal account in his bank. He
later used all the money from his own account
and moved away. The merchant seeks to re-
cover from the bank. Opinion: An attorney
employed to collect a note has no authority,
solely by reason of such employment, to in-
dorse his client's name to a check, payable to
such client, received in collection, and the
drawee which pays such clieck upon such in-
dorsement is responsible if the money is mis-
appropriated, unless it can prove that the
client authorized the attorney to so indorse.
Vol. 10, p. 206, Sept., 1917.

672. (111.) Where the clerk of a depos-
itor entrusted with a rubber stamp containing
an indorsement by depositor to bank, uses the
stamp upon checks of which the depositor is
payee and receives the cash thereon from the
bank, which he misappropriates, concealing
his crime for a considerable period ])ecause of
his function to receive the monthly state-
ments. Opinion: The liability of bank to de-

positor depend upon whether (1) the clerk
had authority to collect as well as to indorse
to the bank; (2) if without original author-
ity, depositor has ratified his acts, or (3) de-
positor has been negligent, and if none of
above conditions e.xist, the bank is liable.
Vol. 10, p. 204, Sept., 1917. _

673. (Me.) A employed B as his agent
to collect his accounts. A check was drawn
payable to A, on which B without authority
indorsed his principal's name, as well as his
own. The drawee, knowing that B was the
agent of A, paid the check. Opinion: The
drawee is liable to the drawer for having paid
the check upon the unauthorized forged in-
dorsement of the payee. B's authority to
collect accounts does not include authority to
indorse his principal's name to checks payable
to the principal. Vol. 4, p. 26, July, 1911.

674. (Md.) A bookkeeper authorized
to indorse checks for deposit to the credit of
a firm has no authority to indorse notes pay-
able to his firm for the i)urpose of discount
and credit, and the bank should require a
power of attorney. Vol. 4, p. 432, Jan.,
1912.

675. (Minn.) A check payable to John
Doe & Co. is indorsed to B by an unauthorized
agent. B indorsed to C and guaranteed all
prior indorsements and C collected from the
drawee. Opinion: The drawee bank can re-
cover from C as the apparent owner of the
check. Vol. 4. p. 3:6, Dec., 1911.

676. (Mont.) The agent of a railroad
company deposited to his personal account
two checks payable to the company and in-
dorsed '"U, Agent C L'aihvay Co." Opin-
ion: In the absence of exjiress or implied an-
tliority, a railroad agent cannot indorse checks
])ayable to his comiJany and deposit them to
his ])ersonal credit, and the depository bank
would be liable if the agent misapplied the
funds. Vol. 6. p. 2:6, Oct., 1913.

677. (Neb.) A check payable to a firm
is given to its agent and cashed by a bank
upon the indorsement of the firm by the
agent. The check is collected. Thirty days
later it turns out the agent had no authority
to indorse and the firm did not receive the
money. Opinion: The bank which cashed
the check is liable to refund to the drawee,
and the elapsing of thirty days before the dis-
covery does not relieve it from liability. Vol.
4, p. 302, Nov., 1911.

678

DIGEST OF LEGAL OPINIONS

678. (Wis.) A check payable to a firm
was indorsed by the agent of the firm witfiout
authority, was cashed by a bank, and paid by
the drawee. Opinion: The cashing bank wa^
lial)le to the drawee for a return of the money,
irrespective of whether the indorsement was
guaranteed. The rule stated is that money
paid under a mistake of fact without consid-
eration is recoverable. Vol. 2, p. 830, Dec,
1909.

Bearer checks do not legally require
indorsement

See 288 et seq

679. (La.) A check was presented "pay
to the order of bearer, ten dollars," and a
bank refused to cash it until the bearer in-
dorsed it. Opinion : The indorsement cannot
legally be required. A check payable to
"order of bearer" is the equivalent of one pay-
able to bearer. Vol. 3, p. 732, June, 1911.

680. (S. Dak.) Where a check is indorsed
in blank by the payee it is payable to bearer
and does not require indorsement by each
successive holder. Where a check is pre-
sented in person by a payee some courts hold
that he cannot be compelled to indorse as a
pre-requisite of payment, others holding the
contrary view, which is preferred. Vol. 6,
p. 755, May, 1914.

Blank indorsement followed by special
indorsement

See 288, 726

681. (Minn.) Where an indorsement in
blank is followed by a special indorsement,
the instrument remained payable to bearer
under the common law rule, but under the
Negotiable Instruments Act, the question is
in doubt w^hether Section 9(5) deprives such
instrument of bearer character, or whether
Sections 34, 35 and 40 apply, under which
the instrument would still be payable to
bearer. Where the instrument is on its face
payable to bearer, a special indorsement does
not change its character. Vol. 8, p. 509,
Dec, 1915.

682. (Mont.) A check was indorsed in
blank by the payee A and given to B, who in-
dorsed specially to C. The check was lost
and cashed for the finder by E without C's in-
dorsement. Opinion: Under the existing
condition of the law it is very doubtful
whether E holds a check payable to bearer, or
takes a good and enforceable title as holder
in due course without C's indorsement. Vol.
4, p. 29, July, 1911.

683. (Wash.) A note on its face pay-
able to bearer and note payable to order in-
dorsed in blank by payee are both payable to
l)earer and negotiable by delivery, Ijut first
cannot while second can be converted into
order instrument by special indorsement writ-
ten over blank indorsement. Whether special
indorsement written under blank indorsement
converts paper into order instrument unde-
cided and uncertain. Vol. 10, p. 119, Aug.,
1917.

Right to charge indorser's account

684. (Pa.) A bank has the right to
charge a dishonored note to the indorser's ac-
count, provided the latter's liability is duly
fixed by protest and notice. Vol. 3, p. 146,
Sept., 1910. See 1203 et seq. Set off
against indorser's account.

"Credit account of within-named payee"

685. (N. J.) A issues his check to the
order of B. B deposits it unindorsed in his
bank, which stamps on the back "deposited
to the credit of the within-named payee,"
followed by the name of the bank. A gen-
eral discussion is requested of the duty and
obligation of the drawee in cases of this
nature. Opinion: The drawee is not legally
obliged to pay a check unindorsed by the
payee, even upon guaranty of the missing in-
dorsement. But in general the drawee would
be justified in paying upon guaranty as such
paj^ments in the large majority of cases would
facilitate business. In a minority of cases
vrt-l^e the payee had no title, or the check was
raised, or other valid reason existed, why the
check would not be chargeable to the drawer's
account, the guaranty would protect the bank.
In special cases where the drawer might desire
the personal indorsement of the payee, pay-
ment even upon guaranty should be refused.
Payment without guaranty would be at the
risk of the bank in jurisdictions where an in-
dorsement for deposit is held restrictive and
to create a mere agency to collect in, and not
to confer title, upon the bank of deposit, for
a mere agent is not responsible after turning
over the proceeds. The sufficiency and effect-
iveness of different forms of indorsement and
of guarantv are considered in Vol. 4, p. 300.
Nov., 19 IL

686. (N. J.) The indorsement of the
payee of a check was missing and the follow-
ing indorsement was used : "credited to the
account of the within-named payee with the
Blank National Bank." Opinion: For all

INDORSEE— INDORSEMENT

694

practical purposes the drawee in paying the
check would be as safe as it would where the
payee had personally indorsed. Vol. 2, p.
302, Jan., 1910. See 669.

"For identification only"

687. (Ark.) The payee's indorsement of
a check was forged and a subsequent holder
indorsed the same and procured cash from
the purchasing bank upon faith of an in-
dorsement by a customer of the bank "for
identification only." Opinion: The indorser
for identification warranted not only that the
indorser was the person he represented him-
self to be, but also that he is bona fide in-
dorsee with good title. Vol. 6, p. 503, Jan.,
1914.

Form and language of indorsement

See 08.3, 686

688. (Ark.) A check payable to "Mrs.
M. E. Smith" was indorsed "M. E. Smith"
and cashed at a bank who forwarded the
same with the indorsement "all prior indorse-
ments guaranteed." The drawee refused
payment. Opinion: The indorsement with-
out the prefix "Mrs." was regular and valid
and drawee should have honored the check.
In a case where an indorsement is insufficient
or irregular the drawee is not compelled to
pay the check even upon a guaranty, although
payment upon such guaranty is customary,
but is entitled to a reasonable opportunity of
verifying the endorsement before making pay-
ment. Vol. 5, p. 756, May, 1913.

689. (Kan.) A check was made payable
to "Mrs. Mary Osage" and indorsed "Mary
Osage." When presented to the bank pay-
ment was refused upon the claim that the in-
dorsement v/as incorrect. Opinion: The in-
dorsement "Mary Osage" was proper and
legal, and the drawee bank is not justified in
refusing payment because of the omission of
prefix "Mrs.," said prefix not being part of
the name of the payee, but only a title. Vol.
11, p. 40, July, 1918.

690. (Pa.) A check drawn by D. Smith,
payable to himself, was certified and paid by
the drawee, after the same had l)oen j)ri'sentod
by the Blank National Bank, bearing the fol-
lowing indorsement: "Pay to the order of J.
Hinds, Attorney, D. Smith. Deposit to the
credit of J. Jones, Trustee, J. Hinds, Attor-
ney. Pay any bank or banker, Bhink Nation-
al Bank." Opinion: There is a technical de-
fect in Hind's indorsement, which does not
show that the deposit is to be credited in the
Blank National Bank. The drawee would

probably be safer in paying if the check was
indorsed for deposit in the Blank National
Bank to the credit of Jones, Trustee. It
would not l)e necessary for the Blank Nation-
al Bank to show by its indorsement that the
deposit was properly credited as a condition
precedent to receiving payment of the check.
Vol. 4, p. 27, July, 1911.'

691. (Pa.) A check was drawn to the
order of "Miss E. M. Taylor" and bore the
indorsement of "E. M. Taylor." Opinion:
The indorsement is in the proper form, as tiie
prefix "Miss" is not recognized in law as a
part of the payee's name. Vol. 2, p. 233,
Dec, 1909.

692. (Vt.) Where a check is payable to
and indorsed by "Treasurer, Congregational
Church," such indorsement, while not satis-
factory to bankers, assuming the indorsement
is by the authorized official, is legally suffi-
cient. Vol. 7, p. 1000, June, 1915. "

693. (Wis.) The indorsement of a check
"Pay yourselves or order" would be construed
as an indorsement to the drawee and not to
another holder to whom the check wiis for-
warded. Vol. 5, p. 313, Nov., 1912.

Drawee's right to require guaranty

694. (Ore.) A check is drawn by a cus-
tomer on his bank in Oregon, payable to a
Brick and Tile Company of Newark, New
Jersey, and by them indorsed to the Blank
National Bank of Newark, who in turn in-
dorse with the usual form "Pay to any bank
or l)anker or trust company, all prior indorse-
ments guaranteed. Blank National Bank."
Other indorsements by a national hank and
the Federal Reserve bank, both of New York,
and by the Federal Reserve bank of San Fran-
cisco follow, all making their indorsements
read substantially the same as the first in-
dorsement with the exception that the last
named indorsement makes the check jiayablc
direct to tiie Wells Fargo Express Company,
guaranteeing all previous indor.'^ements. The
local agents of the Express Company indorse
without guaranteeing prior indorsements and
present the check to the Oregon bank for
{)ayment. The bank as a condition of pay-
ment, requires the Expres.'^ Company to guar-
antee prior indorsements. Opinion: The
Express Company appearing from the in-
dorsements to 1)0 only an agent for collection,
the bank is entitled to a guaranty of prior
indorsements a.s a prerequisite to making
payment and in the absence of such guar-
anty the bank is justified in refusing pay-

G95

DIGEST OF LEGAL OPINIONS

ment without ineurriii^' rosponsihility to llic
drawer of the check. Vol. i), p. 744, March,
1917.

695. (Tenn.) A check was presented to
tlic drawee hank by an express company, an
agent for collection, which refused to guar-
antee the indorsements on tlie check. The
drawee bank refused to pay the check until
such guaranty was given. Opinion: The
drawee bank has a right to require such guar-
anty as a pre-requisite of payment, and its
refusal will not subject it to liability to the
drawer for dishonoring his check. Vol. 8,
p. 415, Nov., 1915.

Guaranty of defective indorsement

See 688

696. (111.) A check payable to J. E. Doe
was indorsed Elmer Doe by mistake; the in-
dorsement was guaranteed, and when pre-
sented, payment of the check was refused.
Opinion: Where the indorsement of the payee
is defective, the drawee is not obliged to pay
upon the guaranty of the indorsement. In
the event the drawer withdrew his account
before the check w\as properly presented, the
loss, if any, would fall upon the owner of the
check, who could recover against the drawer.
Vol. 6, p. 438, Dec, 1913.

697. (N. J.) A check drawn payable to
"John Jones" is indorsed "John Jones Mill-
ing Company," and is indorsed by a bank
"prior indorsements guaranteed," and mailed
to the drawee. Opinion: The draw^ee can pay
if it chooses, relying upon the guaranty. Due
diligence or courtesy to the sending bank do
not require paying bank to return the item
for proper indorsement, as presumably the
item has been forwarded with knowledge
of the irregularity, and in the hope that it
will be paid upon the guaranty. Vol. 5, p.
247, Oct., 1912.

698. (Pa.) A check payable to the "Bor-
ough of X" was certified by a bank. The check
was presented bearing the indorsement of the
"Borough of X, by its attorney, John Smith,"
and payment was refused because of the im-
proper indorsement. The presenting bank
then stamped the check "Indorsement guar-
anteed" stating that it was satisfied that the
attorney was duly authorized to indorse.
The Borough of X claimed that John Smith's
indorsement was unauthorized and that he
misappropriated the funds. Opinion: The
presenting bank is liable on its guaranty to
the drawee who paid on faith of such guar-

anty, which covers the capacity of John Smith
to indorse. Vol. 3, p. 203, Oct., 1910.

Indorser discharged by payment

699. (Iowa.) An agent located at S., of
a grain company at D., drew a draft on the
grain company payable at a bank at S. The
company kept no checking account with the
bank, but the latter cashed the draft on the
indorsement of the l)ayee, and attaciied its
own sight draft on the company for reim-
bursement. Opinion: The payment of such
draft by the bank was not a purchase, but
was a discharge of the draft and of the in-
dorser thereon, so that there would be no
recourse upon such indorser in the event the
company failed to take up the draft. Vol. 7,
D. 221, Oct., 1914.

Indorser as guarantor

See 966, 1005

700. (Pa.) Persons other than the payee
indorsing on a note "for value received we
hereby guarantee payment of the within note"
are liable as guarantors and not as indorsers.
It would be preferable to have such persons
indorse "for value received we hereby guar-
antee prompt payment of the within note at
maturity" in order to hold them liable as
sureties. Vol. 5, p. 172, Sept., 1912.

Indorser's liability preserved by demand
and notice

See 1109

701. (Kan.) A indorsed in blank a note
payable to a bank without the words "protest
waived and payment guaranteed." Opinion :
A is liable to payee as indorser. Demand and
notice (but not formal protest, which is nec-
essary only in case of a foreign bill of ex-
change) are necessary to preserve the indorse-
er's liability. Vol. 5, p. 520, Feb., 1913.

702. (Pa.) A note was made payable at
and held by a bank. The indorser was not
notified of the non-payment of the note at
maturity. Opinion: Demand and notice of
dishonor are necessary to preserve the in-
dorser's liability unless waived. In the pre-
sent case the holding of the note at maturity
by the bank was sufficient demand, but the
omission to notify the indorser discharged
him from liabilitv. A'ol. 7, p. 307, Nov.,
1914.

Indorsement before payee

703. (Md.) A made his note payable to
C for $1,000. B indorsed the note before the

INDORSEE— INDORSEMENT

712

payee. Opinion: Under the Negotiable In-
struments Law in force in Maryland, B's con-
tract and liability is that of an indorser. Vol.
1, p. 267, Jan., 1909.

704. (N. J.) One indorsing before the
payee is liable as an indorser under the Nego-
tiable Instruments Law. Vol. 2, p. 233.
Dec, 1909. See 701.

Indorsement by mark

705. (N, M.) A bank issued a cashier's
check, which the payee indorsed to the holder
by his mark, witnessed by two reputable per-
sons. The issuing bank refused to pay the
check on the ground that the payee could
write. Opinion: The bank should pay. An
indorsement b}^ mark of a negotialile instru-
ment is valid and title is transferred tliereby,
even though the marksman can write. A"ol.
9, p. 237, Sept., 191G.

706. (Term.) Where the payee of a check
indorses by mark and his signature is wit-
nessed, the witness' signature can be looked
upon as a warranty of the genuineness of the
payee's indorsement, the same as a subsequent
indorser warrants the genuineness of the sig-
nature of each prior indorser. Vol. 1, p. 407,
May, 1909.

707. (Wyo.) A check was presented for
payment containing as the payee's indorse-
ment an unwitnessed mark. In the absence
of an express guaranty of the indorsement the
drawee bank may safely pay to a responsible
owner who would be liable to refund if the
indorsemcTit was forged or unauthorized. Vol.
6, p. 376, Nov., 1913.

Indorsement by partnership

See 487, 488

708. (N. Y.) Where a check payable to
A and B, who are not partners, is indorsed
*'A and B per A" and is ofTered for deposit
to the credit of A's personal account, the bank
before accepting the deposit sliould be satis-
fied tiiat B has authorized A to make such in-
dorsement. Where A and B are partners the
general rule is that in the case of a trading or
commercial firm, any member has implied au-
thority to indorse and transfer paper by in-
dorsement in the firm name, and such trans-
fer may be made to himself. Such authority
is not implied in the case of a non-trading
firm. Vol. 5, p. 310, Nov., 1912.

"Pay any bank or banker"
See 574

709. (Ga.) A drew a check payable to
himself, which he indorsed and deposited for

collection in the L bank. Before collection
and at A's request the check was returned to
him with the bank's uncancelled indorsement,
*'pay any bank or banker, prior indorsements
guaranteed." A merchant, relying on this
indorsement, cashed the check for value and
deposited it for collection in the J bank. The
check is returned to J bank unpaid, and un-
protested. Opinion : The L bank is not liable
to the merchant on its indorsement, under
which the merchant took no title. The J
bank is not liable to tlie merchant for negli-
gence as protest in this case was unnecessary
to charge the indorser. The form of in-
dorsement in this case is generally held to be
agent-creating and not title-conveving. Vol.
4^ p. 754, June, 1912.

710. (Pa.) A check payable to John
Doe & Co. was indorsed "John Doe & Co.,
James Roe, Treasurer, per G.," and it was
stamped "pay to the order of any bank, etc.,
prior indorsements guaranteed," Ijy the City
Trust Company. Opinion: The indorsement
by the City Trust Company which is tlie cus-
tomary bank indorsement, was a sufficient
guaranty of the genuineness and validity of
the prior indorsement, and would protect the
paying bank in event the payee's indorsement
was unauthorized. Vol. 3, p. 468, Feb.,
1911.

Indorsement by precise person intended
See 585, 591 ct scq

711. (Ark.) The drawer of a clieck pay-
able to the order of C. E. Spencer mailed the
same to the payee named, but intended to
pay J. W. Spencer. The check was indorsed
by C. K. Spencer, and negotiated to Jones,
who also indorsed it. Later the check was
paid. Jones has disappeared. The bank
questions its liability. Opinion: Payment by
the drawee on the indorsement of C. E. Spen-
cer was good and chargeable, as it was tlic
drawer's own fault tiiat the person intended
did not receive the money. Vol. 8, p. 416,
Nov., 1915.

712. (Miss.) Wiiore a check is made
payable to "John Smith, Tax Collector,"
after Smith has ceased to hold that oflTice. and
is negotiated by indorsement of the payee to
a bank which guarantees prior indorsements
and receives payment. Opinion: The l)ank
receiving payment is a holder in due course
and not lial)le to refund, for the indorsement
is by the precise payee intended ; there is no
l)reach of the guaranty of genuineness, and
the suffix "tax collector" is descriptio pcrsonae

713

DKiKST OF ].EGAL OPINIONS

and does not put the indorsee upon iiuiuiry.
Vol. y, p. 984, June, 1917.

Indorsement as pre-requisite of payment
See 201, 292, 079, «80

713. (Cal.) A chock lacking the in-
dorsement of ilie payee, but indorsed in blank
l)y the drawer, is not payable to bearer. It
is not safe for a hank to ])ay to tlie holder
without express instructions from the drawer.
Vol. 4, p. 430, Jan., 1912.

714. (111.) T) drew a check on the X
hank, payable to P or order, and P presented
the check direct to the X bank for payment.
P refused to indorse the check. Opinion:
The majority of courts would he likely to up-
hold the rule established by custom that the
X bank may refuse payment if the payee de-
clines to indorse. At common law, however,
the debtor could not require a receipt as a
condition of payment, and it has heen held in
some cases that a bank cannot require the
payee's indorsement where the payee presents
the check in person. The insertion in the
check of "order of P," instead of "P or
order," would not make any difference, as
there is no legal distinction between the two
phrases. Vol. 5, p. 521, Feb., 1913.

715. (Miss.) A check is indorsed by the
payee to J. J. Taylor, who cashed it without
indorsement with a merchant. The merchant
forwarded the item for credit to his account.
The drawee refused to pay or to give credit.
Opinion : The drawee is not obliged to pay or
give credit for a check Avhere a necessary in-
dorsement is lacking. Vol. 5, p. 23, July,
1912. See 669.

716. (Ore.) A made his check payable
to B for $50 and indorsed it in blank. B
presented it in person to the drawee without
indorsing it. Opinion: Some courts hold
the payee need not indorse when he presents
the check in person, while others uphold the
right of the bank to require the indorsement.
It is customary to require the payee's indorse-
ment as evidence that he has received pay-
ment, and this requirement is none the less
necessary because the drawer has indorsed
the check in blank. Vol. 7, p. 897, May,
1915.

717. (Pa.) A check was drawn payable
"to the order of John Jones," and signed
"S. A. Smith." It was not indorsed by the
payee, but was indorsed in blank by the
drawer "S. A. Smith." Opinion: The check
is not payable to bearer. Bank should refuse

payment until properly indorsed. Vol. 1,
\). 268, Jan., 1909.

"Prior indorsements guaranteed"

718. (Ala.) A gave to B his check which
bore the genuine indorsement in blank of B
and was deposited by C, a transferee, without
the latter's indorsement. The bank guar-
anteed tlie prior indorsements and collected
from the drawee. The payee obtained the
check from the maker by fraud. Opinion:
The guaranty of prior indorsements would
not make the collecting bank liable. The in-
dorsement does not warrant that the payee is
free from fraud. Vol. 4, p. 550, March,
1912.

719. (Kan.) A check payable to Mrs.
John Doc is indorsed without authority
"Mi-s. John Doe by John Doe," and the bank
which cashed the item indorsed "all prior in-
dorsements guaranteed." The drawee bank
paid the check and Mrs. Doe did not receive
the money. Opinion: "All prior indorse-
ments guaranteed" warrants genuineness of
the payee's indorsement, not only where the
name of the payee is forged, but also where
the payee's name is signed without authority
by another. Vol. 4, p. 679, May, 1912 .

720. (N. Y.) A check is presented pay-
able to A and bearing the indorsement of "A
by B." It is also indorsed by the presenting
bank "all prior indorsements guaranteed."
Opinion: The drawee is safe in paying the
check. "All prior indorsements guaranteed"
warrants the genuineness of payee's indorse-
ment, not only where the name of payee is
forged but also where payee's name is signed
without authority. Vol. 5, j). 174, Sept.,
1912.

721. (Okla.) A cashier's check payable
to John Jones was indorsed "John Jones by
James White" and later indorsed by a bank
"all prior indorsements guaranteed." The
check was paid and it developed that John
Jones did not receive the money. Opinion:
The indorsement "all prior indorsements
guaranteed" covers the sufficiency of the in-
dorsement "John Jones bv James White."
Vol. 4, p. 432, Jan., 1912.

722. (Okla.) A drawee bank paid a
check upon which an indorsement was forged.
Two banks had subsequently indorsed with
the words "previous indorsements guaran-
teed." Opinion: The words "previous in-
dorsements guaranteed" are an express guar-
anty of the validity of prior indorsements
and the bank which pays a check bearing a

INDOESER— INDOESEMEXT

730

prior forged indorsement may recover of the
guarantor. Vol. 3, p. 520, March, 1911.

723. (W. Va.) The stamp ''prior in-
dorsements guaranteed" guarantees the gen-
uineness of prior indorsements, and covers
imperfections and irregularities therein. Vol.
1, p. 407, May, 1909.

724. (Wis.) A certificate of deposit
payable to John Jones bore the indorsement
of "John Jones by Mary Jones." The col-
lecting bank indorsed it "all prior indorse-
ments guaranteed." Opinion: The payor
would be protected in paying, as the guaranty
by the collecting bank is suflicient to cover
the authority of Mary Jones to indorse. Vol.
G, p. 212, Sept., 1913.

Restrictive indorsement

See 574, 685

725 (Cal.) A four months' sight draft
after acceptance by the drawee is held by
the collecting bank of Y, to whom it was
transferred by an unqualified indorsement.
The drawee desires to discount the draft be-
fore maturity and the collecting bank seeks
advice as to the proper form of indorsement.
to be made by it to the drawee to protect it-
self against any fraudulent transfer to a
holder in due course. pinion.: The in-
dorsement "pay bank of X only" is a form
which would transfer title and restrict the
further negotiablitv of the instrument. Vol.
9, p. 984, June, 1917.

726. (N. J.) A check drawn to the order
of bearer is deposited in a bank, indorsed by
the depositor, and is indorsed by the bank
to its New York correspondent. The check
is lost and later is cashed by another bank.
Opinion: The bank whieli cashed the check
is protected. Where an instrument is payable
to bearer and is indorsed specially, it may.
nevertheless, be further negotiated by deliv-
ery; but the person indorsing specially is
liable as indorser to only such holders as make
title through his indorsement. Vol. 7, p.
690, March, 1915. See 681 et seq. Blank
indorsement followed by special indorsement.

727. (N. Y.) A note payable to the X
Manufacturing Company was indorsed by the
payee as follows: "Pay to the order of A for
collection on account of the X Atfg. Co., X
Treasurer." B, the indorsee of A, presented
the note to a bank for discount. Opinion:
The bank should not discount the note. The
indorsement is restrictive and conveys no
right to the holder to negotiate the instru-
ment. Vol. 7, p. 168, Sept., 1914.

728. (N. C.) John Smith drew a draft
on the Brown Manufacturing Company for
$40, payable to the X Bank. The draft was
cashed ffjp- Smith by tlie X Bank but only
upon the indorsement of John Jones, to whom
Smith was known. Afterwards Jones becom-
ing suspicious of Smith had him refund to
the bank. The draft was returned to Smith,
but tlirough error it contained uncancelled in-
dorsements of the X Bank "Pay to the order
of any bank, etc.," and also of John Jonc&
Smith succeeded in cashing the check at the
Y Bank, who regarded the indorsement of
the X Bank as a virtual certification. The
draft having been dishonored by the Brown
Manufacturing Company, the Y bank now
seeks to hold the X bank and John Jones
liable. Opinion: The indorsement placed
upon the draft by the payee, the X Bank,
was restrictive. It did not purport to pass
any title to the draft, but was simply an
authority to any bank to collect it. 'I'iie re-
strictive indorsement being first upon the
draft, Jones, whose name appeared under
that of Smith, could at most be regarded
only as a successive agent to collect with no
authority to negotiate. Vol. 1, p. 445, June,
1909.

729. (S. C.) A check payable to John
Doe was indorsed by the payee "indorsed only
for exchange of draft to the order of John
Doe." The check was cashed and forwarded
for collection, with the usual indorsement
guaranty. Opinion: The drawee bank was
safe in paying check so indorsed, es[)ecially
where the indorsement was guaranteed. The
indorsement is more likely a conditional
rather than a restrictive one. The signature
of the payee, John Doe, in the indorsement
is sufliciently made without further subscrib-
ing his name, ^'ol. 6, p. 821, June, 1914.

730. (Wyo.) The weight of authority
is to tlie ellVet that an indorsement "for de-
posit to the credit of" the depositor is re-
strictive. Cnder Section 37 of the Nego-
tiable Instruments Act "a restrictive indorse-
ment confers upon the indorsee the right (1)
to receive payment of the instrument, (2) to
bring any action tliereon that the indorser
could bring, (3) to transfor his right.« as
such indorsee, where the form of the instru-
ment authorizes him to do so." \ bank of
deposit should have no particular objection
to an indorsement "for deposit" except that
under the rules of certain Clearing Houses
such indorsement^! are declared to be restric-
tive and tlie instrument not payable through

731

DIGEST OF LEGAL OPINIONS

the Clearing House unless prior indorsements
are guaranteed. Vol. 8, p. 325, Oct., 1915.

Rubber stamp
See 523

731. (Cal.) A check payahle to John
Doe is indorsed l)y a ru])hcr stamp as follows:
"For deposit with the Blank National Bank
of Blank to the credit of John Doe." Opin-
ion: The rubber stamp indorsement is valid
except in localities where Clearing House
rules forbid the form of indorsement "for
deposit." For all practical purposes the in-
dorsement *'for deposit" by a rubber stamp is
as good a receipt to the drawer as a hand
written indorsement. Vol. 3, p. 81, Aug.,
1910.

732. (N. Y.) A check drawn on a na-
tional bank was indorsed by rubber stamp in
blank by the payee and deposited in his bank,
which forwarded it to the national bank with
the usual stamp guaranteeing prior indorse-
ments. The national bank returned the
check with the following printed slip at-
tached: "This check is returned for indorse-
ment of the payee. A plain stamp indorse-
ment without 'For Deposit,' or 'For Credit/
is no indorsement whatever. This bank will
refuse payment on all checks bearing this
kind of indorsement whether 'guaranteed' or
not.'* Opinion: A rubber stamp indorse-
ment in blank of the payee's name to a check
is legal and where the check is deposited in
tlie payee's bank, the drawee bank is protected
by such guaranty in making payment equally
as if the words "for deposit" or "for credit"
are prefixed to the indorsement. Of course
a drawee bank is not under obligation to
honor a check presented by an indorsee unless
properly indorsed by the payee, but if the
payee imprints or authorizes the imprint of
his indorsement by rubber stamp, the courts
have held such indorsement to be legal. Vol.
11, p. 331, Dec, 1918.

733. (N. Y.) A note made payable by
John Jones to John Brown, bearing the
rubber stamp indorsement of the payee's
name was discounted at a bank and the pro-
ceeds placed to the credit of Brown's account.
The proceeds were afterwards embezzled by a
party holding a power to sign checks against
such account. Brown claimed that the in-
dorsement was unauthorized and unratified.
Opinion: Indorsement of name of payee of
note with rubber stamp conveys good title if
placed on note by one having authority and
with intent to indorse, but if indorsement is

unauthorized and not ratified no title passes.
Vol. 4, p. 753, June, 1912.

734. (Pa.) An indorsement by a rubber
stamp is legal, but in some cases it would be
more difficult to prove its authenticity than if
handwritten. Vol. 5, p. 374, Dec., 1912.

735. (Wis.) A bank has several custom-
ers who cash payroll checks and indorse them
by rubber stamp. The bank receiving such
checks asks if it could hold the customer liable
if checks were not good, and what would be
its status if the customer received cash but
later claimed that he did not get the money
on the ground that the checks had been stolen
and the stamp placed thereon without his au-
thority? Opinion: An indorsement by a
rubber stamp is valid when made by the payee
or indorsee or by one having authority from
him, and may be relied upon by a bank when
the amount of the instrument is credited to
the account of the indorser. But where cash,
instead of credit to account, is requested upon
an instrument so indorsed by a customer, the
bank, if afterwards confronted with the claim
that the instrument was stolen from the in-
dorser, the stamp placed thereon without his
authority and that- he had not received the
amount, would be at a disadvantage in dis-
proving such claim. The safer practice,
whether the indorsement of a customer is
handwritten or by rubber stamp, is to place
the amount to his credit and require his own
check in withdrawal. Vol. 10, p. 659, March,
1918.

736. (Wis.) A corporation discounted
a trade note, indorsing the same with its
rubber stamp without the written signature
of an authorized official. Opinion: The in-
dorsement is valid and effectual to transfer
title, but good banking practice requires in
addition the written signature of an author-
ized official, as better evidence of authenticity.
Vol. 3, p. 467, Feb., 1911.

Indorsement does not warrant genuine-
ness of signature

737. (N. Y.) A bank is the drawee of
a draft drawn by the executor of the estate
of its deceased depositor for the balance to the
credit of his account. The draft is accom-
panied by a certified copy of letters testament-
ary showing right of the executor to with-
draw, as well as the necessary waiver, but the
executor himself has never filed his signature,
so that the bank has no means of determining
whether his signature is genuine or not. The
drawee asks for a guaranty of genuineness of

INDORSEI^-INDORSEMENT

r44

this signature before making payment, but
the bank to whom the draft is made payable
contends that such guaranty is unnecessary,
as its indorsement guarantees the genuineness
of the instrument in every respect, including
the maker's signature. Opinion: An in-
dorsement of a check signed by an executor
is not a warranty to the drawee of the gen-
uineness of the drawer's signature, but where
the indorsing bank is the payee of the check,
and receives payment thereof from the
drawee, it would be liable to refund, should
the drawer's signature be non-genuine, be-
cause of having received money to which it
was not entitled, although it made no express
warranty of genuineness, and in such case the
rule holding the drawee bound to know the
drawer's signature and precluding recovery
from a bona fide holder would not apply.
Vol. 11, p'. 673, June, 1919. See 556, 560,
612.

"Without recourse"

738. (Kan.) A gave his note for $5,000
to a cattle company, secured by a chattel
mortgage on certain cattle. The cattle com-
pany indorsed the note "without recourse"
and sold the note and mortgage to a bank.
The note and the mortgage proved fraudu-
lent, there being no such cattle as described in
the mortgage. Opinion: The cattle company
is liable to the bank, as tlierc was a breach of
implied warranty of the validity of the tiling
sold. Vol. 9, p. 47, July, 1916.

739. (Mich.) An indorsement "without
recourse" does not relieve the indorscr from
responsibility in case the note is a forgery.
By this indorsement, the indorser warrants
that the instrument is genuine and in all re-
spects what it purports to be. Vol. 4, p. 434,
Jan., 1912.

740. (Okla.) B gave his note to A,
which A indorsed to a bank "without re-
course," receiving credit in liis account. B
refused to pay the note at maturity, claiming
that A obtained the note through fraud.
Opinion: The bank can enforce payment from
B, provided the proceeds of the note have been
checked out before tlie notice of fraud. The
indorsement "without recourse" does not
affect the bank's status as a holder in due
course. Vol. 5, p. 830, June, 1913.

741. (Pa.) A gave his note to B, who
indorsed it over to C without recourse. Pay-

ment was refused by A because B failed to
give value for the note. Opinion: A is liable
to C if the latter is a holder in due course, and
the mere fact that B indorsed without re-
course does not constitute notice of B's defec-
tive title. Vol. 2, p. 230, Dec, 1909.

742. (Wis.) Where a note is indorsed
in blank by the payee with the words "with-
out recourse" written over his signature, and
is later indorsed by a second indorser, such
words qualify the payee's indorsement only,
and do not apply to the second indorser, who
failed to insert the words. Vol. 4, p. 621,
April, 1912.

Indorsement by person of same name as

payee

See 585 et scq

743. (N. C.) Two checks were issued
and fell into the hands of a person of the
same name as the payee, but not the real
payee. One of these checks was paid by the
drawee bank. Payment was stopped upon
the other check, but not before tlie same had
been cashed by a bank for the purported payee
upon tlie identification of a responsible per-
son, who, liowever, did not indorse the check.
Who stands the loss? Opinion: Where a
bank pays a clieck upon the indorsement of a
person of the same name, but not tlie true
payee, the bank cannot charge the amount to
the drawer's account, unless the latter is neg-
ligent, for the indorsement of the purjiorted
payee is a forgery and confers no authority
on the bank to make payment. The payor
bank, however, has a right of action against
the person receiving payment to recover the
money as paid by mistake. A bank purchas-
ing a clieck upon which the payee's indor.se-
ment is forged as al)ovo indicated ac<iuiro.'^ no
enforceable rights;. Vol. 10, p. 658, March,
1918.

744. (S. C.) The drawer of a check,
who owed "(tcorge P. Bent," by mistake drew
and mailed his check to "George A. Bent."
The latter received and cashed the check.
Opinion: The general rule is that indorse-
ment by a person of the same name, or nearly
the same name, is a forgery and that the de-
positor is not liable for payment. In this
case, which is an exception to the rule, the
maker is loser, as payment was made by the
bank as a result of liis negligence. Vol. 4,
p. 303, Nov., 1911.

745

INTEREST AND USURY

Attorney's fee as cover for usury

745. (Okla.) A national bank loaned B
$10U for ninety days and charged $0 interest,
making the note $10G. The note also pro-
vided for the payment of an attorney's fee of
$15 and ten per cent, additional. Opinion:
Id this case usurious interest was charged but
not paid. Under the National Bank Act the
entire interest is forfeited and the principal
alone is recoverable. The usurious element
does not vitiate the entire contract, but the
provision for the attorney's fee might be re-
garded as excessive and as a cover for usury,
so that such amount would be non-recover-
able. Vol. 5, p. 755, May, 1913.

Blank space for interest left in note

746. (Pa.) A promissory note is drawn
payable after date "with interest at the rate
of .... per cent, per annum until paid."
Opinion: The note containing a blank space
for the statement of the rate draws legal in-
terest from date. But if a pen line is drawn
through the blank after the words "at the
rate of," this would indicate an intentional
erasure of the entire interest clause. Vol. 5,
p. 240, Oct., 1912.

Calculation of interest

747. (Iowa.) The custom of banks to
compute interest on the basis of 30 days to a
month is generally held valid by the courts
and in some cases sanctioned by statute, but
in a few states, including Iowa, such method
is held illegal. Vol. 8, p. 612, Jan., 1916.

748. (Okla.) A note in the sum of
$100,000, dated July 10, 1915, was executed
payable to B "four months" after date with
interest at the rate of eight per cent, per
annum. B insisted that the interest be com-
puted and paid for the actual number of days
from the date of the note to maturity, to wit,
123 days, instead of on the basis of 4/12 of a
year. Opinion: The strict legal rule is to
calculate interest according to the actual
number of days. In some states (not in Ok-
lahoma) the custom to calculate interest on
the monthly instead of daily basis has been
legalized bv statutes. Vol. 9, p. 144, Aug.,
1916.

Collection annually and at maturity

749. (Kan.) A three year note contains
a provision "with interest from date at the

rate of six per cent, per annum." Opinion:
The interest is not collectible annually, as no
part of the interest is due until maturity o£
the principal. The words "payable annual-
ly" should be added to make the interest col-
lectible annually. Vol. 6, p. 683, April, 1914.

750. (Kan.) A five year note provides
"with interest at the rate of seven per cent,
per annum from date until paid." Opinion:
Interest is not collectible annually, as no part
of the interest is due until maturitv of the
principal. Vol. 2, p. 107, Sept., 1909.

751. (Okla.) A three years' note con-
tains a provision "with interest at the rate
of eight per cent, per annum from date until
paid." It further provides "interest to be-
come as principal when due and bear the same
rate of interest." Opinion: The provision
does not call for interest payable annually
but only at maturity of principal and there-
fore there can be no compounding of unpaid
interest. A^ol. 4, p. 490, Feb., 1912.

752. (Ore.) A mortgage note was made
payable ten years after date "with interest
at the rate of 5 per cent, per annum until
paid." The mortgage securing the note con-
tains a copy of the note and provides that
payment of the note is made in accordance
with its terms. The makers of the note re-
fused to pay the interest annually. Opinion:
The note does not call for interest payable
annually but only at maturity of the princi-
pal. If the mortgage provided that interest
should be payable annually this would prob-
ablv govern the provisions of the note. Vol.
7, p. 167, Sept., 1914.

Compound interest

753. (Kan.) A note is payable three
years after date with interest at the highest
legal rate allowed in Kansas, namely, 10 per
cent., and contains a provision "Interest pay-
able annually and if not paid when due to
bear the same rate of interest as the princi-
pal." The holder questions the validity of
the provision. Opinion: (1) Some courts,
for example in Illinois, hold such a provision
usurious; (2) the majority hold such pro-
vision invalid and unenforceable as contrary
to public policy; (3) while a few courts (Ar-
kansas, Georgia, Mississippi, Oklahoma,
South Carolina and Washington) hold such
provision valid and enforceable. The ques-
tion has not yet been decided in Kansas. An
agreement made after interest is due to pay

INTEREST AND USURY

r62

interest thereon is valid. If a note such as
above provided in any case for sucli a rate of
interest that the compounding thereof down
to the time of maturity of the principal would
not exceed the simple interest at the highest
legal rate, the stipulation would in any event
probably be valid. Vol. 6, p. 682, April,
1914.

754. (Miss.) Note bearing highest rate
of interest with provision that unpaid over-
due interest shall bear interest not usurious
in Mississippi. Vol. 6, p. 683, April, 1914.

755. (S. Dak.) A note running for a num-
ber of years contains a provision "with in-
terest payable annually at the rate of" etc.,
but contains no provision that upon the de-
fault in payment of any installment of inter-
est, such interest shall itself bear interest.
Opinion: It has been held in Missouri, Wash-
ington and West A''irginia, that without spe-
cial agreement interest cannot be collected
upon unpaid interest. (Kentucky and Texas
contra.) The point has not been decided in
South Dakota, but the statute providing "that
interest is payable on all moneys at the rate
of seven per cent, per annum after they be-
come due on any instrument of writing" may
be construed to include interest on unpaid in-
terest. Vol. 3, p. 403, Jan., 1910.

Discount greater than legal rate

756. (N. J.) Where a national bank
buys a note from a broker acting directly for
the maker at a discount of eight per cent.,
the excessive discount of the note for the
maker is usurious, but if the note has legal
inception and is acquired from an indorser
without recourse, the question of usury is
doubtful. Where the note is discounted at
an excessive rate with recourse on the in-
dorser, the transaction is usurious as to the
indorser but recoverable in full from the
maker. Authorities on subject collected in
Vol. 8, p. 514, Dec., 1915.

757. (Tenn.) A makes his note to B for
value, and B indorses it to C without recourse
at a discount greater tlian the legal rate of
interest. Opinion: The rule in Tennessee is
that the note is not usurious in its inception
and that an indorser, who has transferred a
note at a discount greater than legal interc-t
and has paid the same to the holder, has no
right of recovery of the excess over the legal
interest. There are different views held by
courts as to the usurious nature of the trans-
action. Vol. 8, p. 1104, June, 1916.

Legal rate collectible after maturity

758. (Pa.) A note was issued in 1906
for $1,000 payable one year after date and
bearing four per cent, interest. Interest was
regularly paid at the rate of four per cent,
until 1910. Opinion: The legal rate of in-
terest (six per cent, in Pennsylvania) governs
after maturity, whether the rate fixed by con-
tract be greater or less than the legal rate.
The holder of the note should claim the extra
two per cent, not paid by the maker after
maturity, unless he has waived his right to
collect. ' Vol. 8, p. 612, Jan., 1916.

759. (Ohio.) Where a demand note in
Ohio provides for interest at eight per cent,
''payable semi-annually after maturity," such
semi-annual interest is collectible running
from date. Where the note is drawn for
three months with eight per cent, interest
payable semi-annually "after date," it ia
doubtful if more than the legal rate (six per
cent, in Ohio) is collectible after maturity,
for where the contract does not fix the rate
after maturity, the law fixes the legal rate.
If the interest clause were changed to read :
"with interest at the rate of eight per cent.
per annum, payable semi-annually from date
until paid," the eight per cent, would be col-
lectible throughout. Vol. 7, p. 895, Mav.
1915.

Legal rate on loans

s.i" St;:

760. (Tenn.) A loan was originally
made at the legal rate of six per cent. After
maturity the lender increased the rate to
eight per cent., which was received for sub-
sequent indulgence and forbearance of the
debt. Opinion: The taking of the eight per
cent, was usurious under the law of Ten-
nessee. Vol. 7, p. 780, April, 1915.

761. (N. C.) \ bank loaned money to
its depositor at six per cent., the maximum
rate of interest, on condition that the borrow-
er keej) a stated amount on deposit during tlie
period of the loan. Opinion: The loan ia
usurious. The borrower would be ]»aying in-
terest on the full amount but would only be
given the use of a portion of that amount.
Vol. 5. p. 25. July, 1912.

Discount at meiximum legal rate
See 867

762. (Ark.) A note for $100 having ten
months to run was discounted t)y a bank by
taking $10, — representing 10 per cent., from

7G3

DICJEST OF LEGAL OPINIONS

its face valiio. Tlie Arkansas statutes with
respect to usury provide that all contracts for
greater rate of interest than 10 per cent. ])er
annum shall he void as to principal and in-
terest, and further that all notes whereupon
there shall be reserved any greater sum than
is prescribed shall be void. Is the note in
question usurious? Opinion,: It has been
held in Arkansas that the taking of the high-
est legal rate of interest in advance on a ne-
gotiable note payable twelve months after
date does not constitute usury. In the case
under consideration interest was collected in
advance for one year, whereas the note actual-
ly matured in ten months. This plainly
amounts to usury. Vol. 9, p. 747, March,
1917.

763. (Fla.) In Florida and Georgia de-
duction of interest in advance at highest legal
rate is usurious but in Texas, North Carolina,
North Dakota and some other jurisdictions,
such deduction is permissible. Vol. 10, p.
123, Aug., 1917.

764. (Miss.) While, generally, a bank
may reserve interest in advance at the highest
legal rate, in Mississippi, neither a national
nor a state bank can collect such discount
without incurring the penalty of usury. Vol.
5, p. 591, March, 1913.

765. (Okla.) In Oklahoma the maxi-
mum rate of interest, not exceeding one year's
amount, may be deducted in advance without
incurring liability on the part of the lender
for usury. Vol. 9, p. 585, Jan., 1917.

766. (Tex.) Under the Texas statute
regarding the legal rate of interest Avhich pro-
vides that "the parties to any written contract
may agree to and stipulate for any rate of
interest not exceeding ten per cent, per an-
num on the amount of the contract," it is not
usury to deduct interest in advance at the
highest legal rate of ten per cent. Vol. 9, p.
982, June, 1917.

Negotiability affected by interest clause

767. (Kan.) A note was drawn payable
one year from date with ten per cent, inter-
est, and contained provisions that if the in-
terest was not paid annually it was "to be-
come as principal and draw the same rate of
interest" and to bear "only six per cent, in-
terest if paid when due." Opinion: The note
is negotiable under the decisions in Kansas.
Vol. 5, p. 524, Feb., 1913.

768. (Kan.) A note, providing for in-
terest from date until paid, contains the fur-

ther provision "if paid when due no interest
will be charged." Opinion: In Kansas a note
with such ])rovision is negotiable. \\\ other
states some courts hold it ncgotialde and
some non-negotiable. Vol. 3, p. 81, Aug.,
1910.

769. (Okla.) A note contains a provi-
sion "if the interest be not paid annually
when due, the same to be added to the prin-
cipal and draw the same rate of interest."
The question was raised as to the negotia-
bility of the note. Opinion that such provi-
sion does not destroy negotiability. Vol. 5,
p. 174, Sept., 1912.

Parol evidence to prove usury

770. (Okla.) A made his note payable
to a bank for $193 due in ten months, with
interest from maturity at ten per cent. The
bank collected the note and thereafter A sued
the bank for usurious interest to the amount
of double the interest paid at time of loan.
A introduced note as his material allegation
and bank objected to any other parol evidence
being introduced to alter terms of note. Opin-
ion: Where an action is brought for usurious
interest and the note, pleaded as the material
allegation in support of the usury, does not
itself indicate that the transaction was usur-
ious, parol evidence would be admissible to
prove the usury. Vol. 5, p. 661, April, 1913.

Partial payment applied to reduce interest

771. (111.) A gave B his note for $435.50
for two years, dated March 2, 1914, inter-
est at 5 per cent., payable semi-annually. On
March 8, 1915, A made his first payment of
$20, and B indorsed payment on the note as
follows : "Received on the within note $20."
B left the note with a bank for collection,
with no explanation regarding the indorse-
ment. Opinion: The partial payment of $20
should be applied first to the reduction of in-
terest before applying the surplus, if any,
upon the principal. Compound interest can-
not be charged unless contracted for. Vol.
8, p. 1103, June, 1916.

Payment of interest in advance

772. (Fla.) Where a note is executed to
bank, payable on demand with interest, and
at the time of execution the maker pays three
months' advance interest which the bank in-
dorses upon the note, such transaction is
prima facie evidence of an agreement to ex-
tend the time of payment during the period
for which the interest is paid, which will

INTEEEST AND USURY

781

prevent the bank, unless it can prove a con-
trary agreement, from enforcing payment
before the end of the extended period. Note
payable at bank can be charged to maker's
account at maturity without notification or
his consent and bank owning note has right
of set off at maturity. Vol. 10, p. 465, Dec,
1917.

773. (N. J.) The maker of a demand note
pays interest for three months in advance to
the bank holding the note. The bank wishes to
enforce payment on demand before tlio date
to Avhicli the interest is paid. Opinion : Such
payment does not of itself constitute an a.^rree-
ment extending the time of payment of the
principal for three months. In some states
such payment is, and in others is not, prima
facie evidence of agreement to extend, but it
is in no case conclusive evidence. Vol. 5, p.
311, Nov., 1912.

Payment of principal before maturity

774. (111.) A promises to pay B $6,000
one year after date with interest at five per
cent. ; in other words, a total of $G,300. Six
months before maturity A paid B $3,000 by
consent of both parties, nothing being said
as to rebate of interest, and at maturity in
final settlement B demands the balance and
full interest, $3,300, while A claims that there
should be deducted six months' unearned in-
terest on $3,000, or $75, and all that he owes
is $3,225. Opinion: Although the precise
question has never been decided it is probable
that if B accepted partial payment of tlie
principal in advance, he impliedly forfeited
his right to future interest upon such prepaid
amount. Vol. 7, p. 101, Aug., 1914.

775. (Miss.) It is not usury to receive
payment l)efore maturity of the full amount
due at maturity u])on note discounted at. or
carrying, highest legal rate of interest. Vol.
6, p. 681, April, 1914.

776. (N. C.) A person carries a note of
$5,000 with a bank, {layable in 5 years. In-
terest at 6 per cent, is payal)le in advance for
six months at a time, being due Decemlier
3rd and June 3rd of each year. The maker
with the bank's consent paid the full amount
of the note in the middle of March after
having paid up the interest to June 3.
The bank allows rebate of 3 per cent., but the
maker demands the full 6 per cent, for the
unexpired term. Opinion: Wliere a loan,
upon Avhich interest has been paid in ailvance,
is paid by the del)tor to the creditor before
maturity, the latter is not liable for rel)ate of

the unearned interest, in the absence of an
agreement to make such rebate, and the fact
that he voluntarily rebates part, does not
make him liable for the remainder. A pre-
payment of the principal by the debtor, with
the consent of the creditor, would be deemed
a voluntary relinquishment of the interest for
the unexpired period. Vol. 11, p. 607, May,
1919.

Penalty for usury
See 74.5

777. (Okla.) The usury laws of Okla-
homa apply equally to individuals and to
firms and corporations, but in the case of the
national banks, the penalty for usury is pro-
vided for in the national and not in the stiite
law. Vol. 6, p. 574, Feb., 19 11.

778. (Okla.) The provisions of the pro-
posed Oklahoma usury law (1 ) making usury
a misdemeanor, (2) making it a misdemean-
or for the original holder to sell or transfer
a usurious instrument, (3) prohibiting the
filing of a mortgage or other security given
for a usurious loan, and (4) prohibiting suit
in court upon a usurious contract, will not, if
enacted, be applicable to national banks.
Vol. 6, p. 30, July, 1913.

Rate on loans outside of state

779. (Mo.) The National Bank Act allows
bank to charge interest (1) at the rate al-
lowed by the laws of the state wliere a bank
is located and no more, (2) except wliere a
higher rate is charged by state banks of issue
they can charge such higher rate, and (3)
where no rate is fixed by the state law, not
exceeding seven per cent. This state rate
applies even though money is loaned to bor-
rowers outside the state where a liigiier rate
is allowed. Vol. 9, p. 45, July, 1916.

780. (N. J.) A note drawn and payable
in Canada for $106. S4 is presented to a bank
in New Jersey. The note e(Uitains a .state-
ment of the consideration for which it was
given, as follows: (Being $105.00 j)]us 7 per
cent, per annum). The New Jersey bank
raises the question of invalidity by reaj^on of
usury. Opinion: The note is not invalid by
reason of (be statement. In Canada the
legal rate of interest is 5 per cent., l)ut banks
may stij»ula(e for and take not exceeding 7
per cent. Vol. 7, p. 104, Aug., 1914.

781. (N. Y.) A note drawn in New
York payable in another state, with interest
but without specifying the rate, carries inter-
est at the loijal rale of the state where it is
payable. Vol. 9, p. 907. May, 1917.

782

DIGEST OF LEGAL OPINIONS

782. (N. C.) The state rate of interest
applies, even though money is loaned to hor-
rowers outside the state where the higlier
rate is aUowed. A national hank in North
Carolina where the rate is (5 per cent, would
be subject to tlie penalties for usury where it
loaned funds to South Carolina parties at H
per cent., the legal rate in that state, even
though the note is made payable in South
Carolina and suit was brought thereon in the
South Carolina courts. Vol. 10, p. 854,
June, 1018.

Minimum charge of $1 for small loans

783. (Mass.) A national bank in Massa-
chusetts follows a custom of making a min-
imum charge of $1 to cover both interest and
service in small loans. The bank seeks to
avoid the liability for usury because the comp-
troller contended that the whole charge
should be counted as interest and that so
counted it would constitute a usurious charge
in the case of small loans. Opinion: Under
the Massachusetts statute, which allows
parties to contract for any rate of interest or
discount, a minimum charge of $1 deducted
by a national bank as an interest and service
charge upon a small loan is lawful, and with-
in the permission granted by the National
Bank Act to charge and receive interest at the
rate allowed by the laws of the state. Where
a national bank in Massachusetts makes a
small loan and deducts $1 as an interest and
service charge by oral agreement with the bor-
rower, the conclusion seems warranted that
such rate of interest and charge is lawful
under the law of Massachusetts, although the
amount deducted exceeds 6 per cent, interest
on the amount of the loan, and that such de-
duction is within the permission granted by

the National Bank Act that a national bank
may deduct interest at the rate allowed by the
laws of tiie state. Vol. 9, p. 749, March,
1917.

Slight excess interest

784. (Va.) A bank charged $7.67 in-
terest on a note for $500, payable in three
months. At this rate three renewals of the
note would produce a year's income from in-
terest of $30.42, whereas the straight interest
for one year would be $30. Opinion: The
slight excess interest is not usurious. Where,
for convenience of calculation, interest is
taken slightly in excess of the legal rate, the
transaction is not usurious. Taking the in-
terest of a note in advance by way of discount
is not usurious. Vol. 7, p. 689, March, 191.5.

Usury pleaded as a defense

785. (Okla.) A national bank loaned A
$100, taking his note for $106 signed by B as
surety. The loan, being for a period less
than one year, was usurious, and in a suit
against B to collect the note, B pleaded usury.
Opinion: The surety may defend on the
ground of usury to the same extent as the
principal debtor. If the defense was success-
ful, the bank could recover the principal sum
loaned, but no interest. A'ol. 6, p. 503, Jan.,
1914.

786. (Va.) Lender the laws of Tennessee
usurious interest paid on a loan is first ap-
plied to the payment of the principal and
legal interest, and until such debt is paid, the
claim for usury does not arise, and the action
is barred in two years. There is no statute
in Tennessee forbidding a corporation from
pleading usury. Vol. 6, p. 820, June, 1914.

LEGAL TENDER

Deposit in gold coin payable in legal
tender

787. (Vt.) A man deposited $1,000 gold
in his bank and at the end of the year wishes
to withdraw this amount and demands gold
from the bank. Opinion: A bank which re-
ceives gold coin as a general deposit is not
obliged to pay gold on demand of depositor,
but only legal tender, but if gold was placed
with the bank as a special deposit, the identi-
cal thing must be returned. Vol. 10, p. 125,
Aug., 1917.

Legal tender qualities of money

788. (Colo.) Gold coins and standard
silver dollars of the United States are legal
tender at their nominal value ; subsidiary
silver coins smaller than one dollar are legal
tender up to ten dollars ; minor coins (nickel
and copper) are legal tender up to twenty-five
cents; United States notes, demand treasury
notes and interest bearing treasurj* notes are
legal tender in pa}Tnent for all debts public
and private except for duties on imports and
interest on the public debt ; treasury notes are
legal tender in payment of all debts public

LIBEL AND SLANDER

[796

and private and are receivable for customs,
taxes and all public dues ; gold and silver cer-
tificates, national bank and Federal reserve
notes are not legal tender, but gold and silver
certificates are receivable for all public dues;
national bank notes are receivable for all
public dues except duties on imports ; federal
reserve notes are receivable by national and
member banks and Federal reserve banks and
for all taxes, customs and other public dues.
For detailed statement showing exceptions to
above see Vol. 10, p. 125, Aug., 1917.

Legal tender substitute for gold coin

789. (Cal.) A bank desires to eliminate
from all notes payable to it the words "Prin-
cipal and interest payable in gold coin of the
United States," and substitute the words
"Principal and interest payable in lawful
money of the United States." Opinion: A
note promising to pay so many dollars is pay-
able in lawful money, i. e., legal tender, and
there is no necessity for a provision specifi-
cally making it so payable. A note payable

in '"'gold coin of the United States" is speci-
fically payable and enforceable in that medi-
um. Vol. 11, p. 95, Aug., 1918.

790. (Minn.) The customer of a bank
holds a bond and mortgage which pro\ides
for payment at maturity in gold coin. At
maturity he insists upon specific performance
of the contract, although gold is unobtainable
at the banks. 0[yinion: Where a note and
mortgage provide for payment in gold coin,
the creditor is entitled to payment, speci-
fically in gold, and can recover and enforce
judgment payable specifically in that medium.
Should it become physically impossible to ob-
tain gold, the promisor would ))e liable in
damages for non-performance but it is dit!l-
cult to see how badly damaged he would be,
since paper legal tender is on a par with goM.
Vol. 11, p. 277, Nov., 1918.

Standard silver dollars

791. (S. Dak.) Standard silver dollars are
legal tender for any amount. Vul. 4, p. 687,
May, 1912.

LIBEL AND SLANDER

XoTE: A statute recommended by the American
Bankers Association which punishes the wilful
and nialieious circuhition of statements, written
or oral, deio^ratory to banking institutions, lias
been passed in tlie foUowinij states: Arkansas,
California, Connecticut, Delaware, Florida, Kan-
sas, Kentucky, Louisiana, Maryland, Miehi;j;an,
Missouri, Nevada, New Jersey, New Mexico, New
York, North Carolina, Ohio, Oklahoma, Oregon,
Pennsylvania, Rhode Island, Wasiiington, West
Virginia, Wyoming.

Derogatory statements affecting banks

792. (N. Y.) The editor of a newspaper
wilfully pulilished a statement concerning two
banks that "the deposits of the First Xational
are falling off and of the Citizens are slowly
increasing," such statement l)eing contrary to
fact. Opinion: To establish the editor's
criminal liability for libel, the test is, was the
publication not only untrue but malicious and
did such publication have a tendency to in-
jure the bank in its l)usiness? It is doubtful
if the editor can be convicted. Vol. 5, p. 97,
Aug. 191-?.

793. (Pa.) A hotel num nuule a public
utterance of the derogatory and untrue state-
ment that a certain national bank "has
closed," thereby causing lo-:s to the bank.
Opinion: The person can be prosecuted crim-
inally under the "derogatory statement" act,
in force in Pennsylvania. The bank can also

maintain an action for slander. For the De-
rogatory Statement Act advocated by the
American Bankers Association see Vol. 6, p.
i:52, Dec, 1913.

794. (Pa.) A rival banker made a de-
rogatory and untrue statement to the effect
that a certain national bank was not safe and
would "bust" and advised his friend to with-
draw his money therefrom. Opinion: The
making of the derogatory statement would
render the banker punishal)le under the stat-
ute enacted in Pennsylvania in 1909, and also
liable in a civil action for slander. Vol. 5. p.
97, Aug., 1912.

795. (Pa.) Certain luiscrupulous per-
sons circulated malicious reports of the un-
soundness of a bank, and such st^itomcnts in-
jured the bank but not to a great extent.
Opinion: Under a Pennsylvania statute such
persons can be punished. Tiie bank should
lay the facts before the county prosecuting
otiicer for the proper action, ^'ol. 'A, p. 27«),
Xov., 1910.

796. (Tenn.) .\ person tells several
customers that the bank is in bad shape.
This statement, wiiich is untrue, causes the
depositors to become frigiitened and to with-
draw their funds. The bank wants the
offender punished criminally. Ojnnion:

797

DIGEST OF LEGAL OPLMOXS

Slander or oral (leraiiKitioii is not a crime at
common law and a person uttering deroga-
tory and untrue statements affecting the sol-
vency of a hank oamiot be punislied crimi-
nally in the absence of a statute making such
offense a crime. The "Derogatory State-
ment" Act drafted on behalf of this Associa-
tion has been enacted in a number of states
but not, as yet, in Tennessee. A civil action
for slander will lie. Vol. G, p. 577, Feb.,
1914.

797. (Va.) The former president of a

bank circulated derogatory and untrue state-
ments affecting its credit and solvency by ad-
vising customers to withdraw their money,
as the bank was going to "bust" and also
causing publication of untrue statements in
the local newspajicr. Opinion: The bank
may maintain an action in libel and slander
for damages. The offender is probably not
punishable criminally under the existing
statutory law of Virginia, and legislation
covering this case similar to that of other
states is necessary. A^ol. 5, p. 241, Oct., 1912.

LOST AND STOLEN PAPER

Checks lost in mail

See 390, 817, 818

798. (Ind.) Bank A cashed a check in-
dorsed to it by its customer and the check
was forwarded by mail for collection to cor-
respondent bank. The check was lost in the
mail. Opinion: The right of the correspond-
ent bank to charge the amount of the check
back would depend on whether prompt in-
quiry was made and Bank A was notified.
In the event the amount was charged back
Bank A would have recourse upon its custom-
er as indorser, by causing substituted present-
ment to be made by means of a copy or de-
scription of the check, and upon refusal to
pay by giving due notice to the indorser.
Had Bank A taken the check as collection
agent, its duty would be to notify its prin-
cipal without unreasonable delay and the
burden would be upon the customer of pro-
curing a duplicate or a copy upon which to
make a substituted presentment. Vol. 2, p.
484, May, 1910.

799. (Tex.) Bank A sent Bank B a
draft on Bank C, which Bank B credited to
Bank A. The draft was drawn by a stranger
and had been indorsed to Bank A by one of
its customers. Two months later Bank B
notified Bank A that the draft was lost in the
mails and charged the amount back against
Bank A. Opinion: Bank B in delaying two
months is guilty of such negligence as to
make the draft its own, and cannot charge the
amount back to Bank A. \o\. 2, p. 154,
Oct., 1910.

Checks signed in blank

800. (Mo.) A drawee bank paid three
checks, which were signed in blank by the
drawer, and never delivered, but were stolen,
filled out and negotiated. Opinion: The

drawee which paid the checks can charge the
amount to the drawer's account because of
breach of an implied contract duty to exercise
care. The drawer, however, has a right of
recovery from the banks which purchased and
collected such checks, because under the rule
of the law merchant and the Negotiable In-
struments Act an incompleted instrument not
delivered is not a valid contract in the hands
of any holder, notwithstanding its subsequent
unauthorized completion and negotiation.
Vol. 7, p. 219, Oct., 1914. See 293.

Holder in due course of stolen paper

See 272, 293, G47, 823, 827, 894

801. (Minn.) A draft by a bank on its
correspondent, issued to A, its customer, and
indorsed by A to B, was claimed to have been
lost. A duplicate was issued and later paid
by the bank in addition to stopping payment
upon the original. Eight and one-half
months after date of the draft, the original
having been found, was cashed by B at a
bank, Avhich presented it to payor bank where
it was protested for non-payment. Opinion :
The Xegotiable Instruments Act provides that
if an instrument payable on demand is nego-
tiated an unreasonable length of time after
its issue, the purchaser is not a holder in due
course. Under this, the negotiation of a
check of a customer on a bank eight months
after its issue would probably be held not
within a reasonable time, but a distinction
has been taken in some cases between an or-
dinary check and a banker's draft as to time
limit for negotiation and the question of the
period of time for free circulation of such
instruments before they are discredited has
not yet been definitely settled. As to banker's
drafts, the question will remain somewhat
problematical until a more definite rule is es-
tablished bv the courts indicating what is an

100

LOST AND STOLEN PAPER

SIO

unreasonable length of time of negotiation
under Section 53 of the Negotiable Instru-
ments Act to deprive a purchaser of the status
of a holder in due course. Vol. 11, p. 489,
March, 1919.

802. (Ore.) A bank cashed a check
which was indorsed in blank by the payee
and stolen from him. The bank had no
notice of the loss. Payment of the check was
stopped. Opinion: The bank acquired per-
fect title to the bearer check and can enforce
payment from the drawer and the payee. Vol.
7, p. 776, April, 1915.

803. (S. Dak.) A banker's draft was
stolen from a payee, who was forced to in-
dorse the draft. Payment was stopped on
tlie draft and the same was protested. The
payee wants a duplicate draft. Opinion:
Assuming tliat the original draft was not sur-
rendered, it would not be safe for the issuing
bank to issue a duplicate without receiving
indemnity as protection against liability on
the original which might have been acquired
by an innocent purcliaser for value before
presentment and protest. The fact that the
indorsement was under duress would be no
defense against a holder in due course. Vol.
7, p. 580, Feb., 1915.

804. (W. Va.) The Baltimore and Ohio
Pailroad Company issued its check for $60 to
John Doe, who indorsed it in blank and
cashed it with a pool room proprietor. Short-
ly after the proprietor lost the check and im-
mediately notified the company not to honor
the check if presented without his indorse-
ment. The check was stolen and negotiated
to an innocent purchaser for value. Opin-
ion: Where a check, bearing indorsement in
blank of tlie payee, is stolen from the owner
and negotiated to an iiiuocont purchaser for
value, the latter is a hohler in due course and
acquires title to the check with ri^lit of en-
forcement. Vol. 10, p. 378, Nov., 1917.

805. (Wyo.) A's clicck to H, iiidorscd
in blank by the hitter, is stolen and ncgotiatcil
to K, an innocent purchaser, for value. Pay-
ment was stopped by A. Opinion: K as
holder in due course has a right to enforce
payment from tlie drawer and indorser. Tlie
check was nuide payable to bearer by the in-
dorsement in blank and E was an innocent
holder in due course, notwithstanilinu' it had
been stolen. Vol. 10, p. 378, Nov., liMT.

Instrument indorsed in blank and stolen

806. (Ariz.) A bank ])iirchiiscd in good
faith l)efore maturitv and for value a ncLfo-

tiable certificate of deposit, indorsed in blank
by the payee. The seller from whom the
certificate was acquired had stolen the same
from the payee. The issuing bank refused
payment because of a stop payment order.
pillion: The purchasing bank is a holder in
due course and may enforce payment from
the issuing bank. The certificate indorsed
in blank is payable to bearer and good title
could be acquired, even through one who
had stolen it. Vol. 10, p. 851, June, 1918.

807. (111.) A check was indorsed in
blank by the payee, stolen from him without
delivery and negotiated to a merchant for
value. The drawee under a stop payment
order refused to pay the check. Opinion:
The bank is not liable but the merchant as a
bona fide purchaser can recover from the
drawer and the payee, although the check
was never delivered bv the payee. Vol. 7, p.
1001, June, 1915.

808. (N. Y.) Where a stock certificate
indorsed in blank is lost by the owner and sold
by the finder to an innocent purchaser for
value, latter acquires title as against owner
under Stock Transfer Act which gives full ne-
gotiabilitv to certificates of stock. Vol. 9, p.
M7, Aug., 1916.

809. (Okla.) A cashier's check indorsed
in h\i\nk liy the payee was lost and purchased
by the proprietor of a drug store from the
finder. The purchaser knew the seller to be
a ganilder, and that he was not the jierson
named as payee. Payment of the check was
stopped and the bank seeks to know whether
it must reimburse the payee and also whether
it can demand a return of the check. Opin-
ion : Where a cashier's check is indorsed in
blank by the payee and lost and is purchased
by a nicrrhant frtun the Under, in good faith
and for value, the latter is a holder in due
course with right to enforce payment of the
instrument, and the fact that the purchnser
knew the seller to be a gambler is not, of it-
self, sullicient to deprive him of his stjitus an
holder in due course, in the absence of know-
ledge of facts which would make his tiking
the instrument an act of bad faith. Vol. 11,
p. 27!>, Nov., 1918.

810. (R. I.) A gave his note payable at
a bank to B, who lost the instrument. C
found it and negotiated it to an innocent pur-
chaser for value, who received payment at the
bank before B could serve notice. Opinion:
Where a note indorsed in blank by the payee
is lost and negotiated by the finder to a holder
in due course, the latter acquires a good title

101

811

DIGEST OF LEGAL OPINIOXS

as a;j:ainst the payee. Assuminf2[ payment has
been stopped and notice of the loss published
in the newspaper, this wouhl not be sulhcient
to protect the maker and payee from liability,
unless it could be ])roved that the purchaser
for value read the article. Vol. 11, p. 279,
Nov., 1918.

811. (W. Va.) A check indorsed in
blank by the payee was stolen and cashed at
a bank. The drawer stopped payment before
the check reached the drawee. Opinion: The
cashinfj bank was a bona fide purchaser from
the thief, and being a holder in due course
can enforce against the drawer and the in-
dorser. Vol. 7, p. 168, Sept., 1914.

Lost letter of credit

812. (Cal.) A Texas bank issued a gen-
eral letter of credit to one J. E. C, authoriz-
ing the latter to draw drafts up to $200.
The letter contained the signature of J. E.
C. for identification. The letter was stolen
and attached to a forged draft for the full
amount and cashed by a bank in California
Opinion: The California bank is the loser and
cannot hold the bank issuing the letter of
credit responsible. Vol. 7, p. 34, July, 1914.
See G19.

813. (N. M.) A bank issued a letter
of credit addressed generally and authorizing
a specified customer, and not the bearer to
draw for amount within thirty days from date.
The letter became lost before any checks were
drawn, and the customer desired a duplicate.
Opinion : A duplicate can safely be issued by
the bank without indemnity except as against
the customer's dishonesty. The bank would
be liable to bona fide purchasers of checks ne-
gotiated bv the customer. Vol. 8, p. 908,
April, 1916.

Lost pass-book

814. (Cal.) The fund in a savings bank
had been withdrawn by a depositor upon
claim of loss of his pass-book. Later he
fraudulently negotiated to an innocent pur-
chaser his draft and pass-book on the ac-
count. Can payment of the instrument be
enforced against the bank? Opinion: A
bank which pays a savings deposit to its de-
positor without production of the book, upon
claim of loss, is not liable to an innocent pur-
chaser to whom a draft upon the bank, ac-
companied by the pass-book, has been nego-
tiated, the pass-book not being a negotiable
instrument. Vol. 9, p. 820, April, 1917.

815. (Cal.) A savings bank depositor
claimed tliat his bank-l)Ook was either lost or
stolen. ^J'he bank re'juired an indemnity
Ijond in douijle the amount of the deposit, be-
fore issuing a duplicate book or before paying
over the balance. Oirinion: It is customary
for savings banks to print in pass-books a rule
that indemnity will be required before mak-
ing payment in case of loss. These pass-book
rules are generally held contracts, but the
courts are divided as to enforcing the contract
of indemnity. A majority hold that the
pass-book being non-negotiable, the bank is
protected if it pays or issues a duplicate with-
out indemnity. But where the bank is not
satisfied as to the identity of the depositor
who claims payment, the right to indemnity
may be upheld'. Vol. 4, p. 618, April, 1912.

816. (Pa.) The depositor of a savings
bank lost his pass-book and applied for a
duplicate. The bank asks as to the necessity
of a bond of indemnity before issuing the du-
plicate. Opinion: There is no necessity for
a bond of indemnity before paying money or
issuing a duplicate, except where the bank is
uncertain as to the identity of its depositor.
Ordinarily, there is no necessity for such re-
quirement, the pass-book being non-negoti-
able. Where there is a by-law providing for
such indemnity, the courts will refuse bank's
right to require a bond unless some necessity
is shown. Vol. 5, p. 662, April, 1913.

Duplicate for lost checks
See 824

817. (Colo.) A check was lost in the
mail after the payee had deposited it in his
bank. Opinion: Where the bank takes the
check as owner, it has the burden of obtaining
a duplicate and the duty of presenting the
item in order to charge the indorser in case
of dishonor ; but if the bank received the item
for collection, its duty is simply to notify the
customer of the loss without unreasonable de-
lay. The legal right of the bank to charge
back to a customer a check lost in the mail
depends on where title to the check rests,
which must be determined by the rule of law
in the state where the bank is located, or may
depend upon agreement or custom. Vol. 2,
p. 155, Oct..- 1909. See 798.

818. (N. C.) A customer mailed to his
bank several checks for deposit. The bank
acknowledged receipt by regular card but the
checks were misplaced by the bank before
they were entered in the books to his credit.
After seven months, the customer claimed

102

LOST AXD STOLEN PAPER

S25

credit for these items, which the bank refused
to give without receiving duplicates of the lost
checks. The bank had forwarded monthly
statements of the depositor's account, in each
of which there was an omission of the credit.
Opinion: The bank cannot refuse to give the
customer credit before obtaining duplicate,
but there is an equitable obligation on his
part to give the bank all the information in
his power to enable the bank to frame dupli-
cates or written particulars upon which pre-
sentment for payment can be made, and the
drawer ultimatelv looked to for payment.
Vol. 4, p. 192, Feb., 1912.

Duplicates for lost government bonds

819. (W. Va.) Where coupon bouds of
the government are lost or stolen and are ac-
quired by a bona fide purchaser from a finder
or thief, the hitter's title is superior to that of
the former owner and there is no provision
of the Federal Statutes to protect the original
owner in such case. But where such bonds
are wholly or partly destroyed or defaced and
can be identified, the Federal Statutes provide
for the issue of duplicates upon giving of in-
demnity and also provide for the issue of dup-
licates for lost or destroyed registered bonds.
Vol. 11, p. 41, July, 1918.

Duplicate for lost stock certificates

820. (N. J.) A stockholder in a bank
claimed to have lost his certificates of stock
unindorsed. The bank wishes protection
against dishonesty. Opinion: The l)ank
should issue duplicate certificates and re<iuiro
a sufficient bond of indemnity of tlie stock-
holder. The object of the boiul is to protect
the bank against tlie claim of a bona fide pur-
chaser for value of the lost certificates who
derived title tiirough the stockholder, wlio
may have been dishonest. Vol. 3, p. (576,
May, 1911.

821. (Ohio.) A stockhohlcr of a na-
tional bank claims to have lost his certificate
and requests a duplicate. Opinion: As a cer-
tificate of stock is freely transferable by the
owner, the bank is entitled to a bond of in-
demnity to ]irotect it against liability upon
the oris,nnal certificate. Vol. 11, \^. 391, Jan.,
1919. "

822. (W. Va.) A corporation refused to
issue a new certificate of stock to replace one
stolen from the owner, unless the owner fur-
nished a surety conijiany bond. The owner
tendered an individual indemnity bond,
which was refused by the corporation, pur-

suant to a provision in its by-laws. Opin-
ion: The corporation cannot enforce the
by-law, which requires a surety company as
distinguished from an individual bond before
issuing dujjlicate for stolen certificate. The
character and sufficiency of the bond is for
the court to determine if the jiarties cannot
agree. Vol. G, p. G84, April, liH4.

823. (W. Va.) Certain certificates of
stock were lield by a national bank as collat-
eral security and were lost through robbery.
To enable the owners of the lost stock certifi-
cates to procure (luj)licates, the bank became
surety on indemnity bonds. Opinion: It was
not an ultra vires act for the bank to become
surety, for although the loss of stock certifi-
cates imposes no real loss upon the owner in
the absence of statute conferring full nego-
tiability, but only the burden of obtaining
duplicates, the bank has a special title in such
certificates and an interest in obtaining du-
]^licates to be lodged with it as security, so
long as the loan is unpaid, which would make
the giving of indemnity an act in its own in-
terest aiul within its powers. Vol. 4, p. 425,
Jan., 1912.

Indemnity bond for issue of duplicates
Si-e 81G, H-22, 82.S

824. (Mo.) A bank issued to A its
cashier's check which was lost. Before issu-
ing a duplicate, the bank rcijuested an indem-
nity bond in double the amount. A refused
to give the bond, but produced an affidavit
that the check was lost witluuit indorsement.
Opinion: The bank is entitled to re(|uire in-
demnity as a pre-requisite to paying the cash-
ier's check alleged to be unindon-^ed when
lost, for notwithstanding the affidavit, the
bank would not be relieved from liability to
pay an innocent purchaser should the affidavit
prove false or should the payee thereafter find
and negotiate the original cashier's check.
Vol. 8, p. 707, Feb., 191G.

825. (Neb.) A depositor, who claimed
he had lost his certificate of deposit, in-
structed the bank to stop ]>ayment thereon
and applied for a duplicate certificate, al-
though he could not alTord an indoninity
boiul. The l)ank was not well aci]uainted
with the depositor. Opinion : Whore a dejws-
itor claims that his neirotiable certificate of
deposit has been lost or stolen, the only safe
course for the bank is to require a bond of
indemnity before issuing a second certificate.
But if the amount of certificate is small and
the bank believes the statement of the depos-
itor, it can waive the bond and take the de-

103

82G

DKIKST OF LEGAL OPINIONS

positor's adidavit. Vol. 5, p. 301, Nov.,
1912.

826. (N. Dak.) Where a bank issues its
tlral't upon its correspondent in favor of a
third party who claims to have lost same and
requests a duplicate, tlie issnin<i; bank as a
pre-requisite to issuing such duj)licate is en-
titled to a l)ond of indemnity to save it harm-
less should tlic original be negotiated under
indorsement of the payee, but where a draft
is made payable directly to the correspondent
upon which drawn and is lost, duplicate may
safely be issued without indemnity. Vol. 10,
p. 598, Feb., 1918.

Effect of "duplicate unpaid" on draft

827. (Wash.) A Washington bank
issued to its customer a draft on New York,
which was stolen from the payee after he had

indorsed it. A duplicate draft was issued
and paid. Afterwards the st^jlen draft was
cashed for value, was forwarded by the holder
for })ayment and was protested. Opinion:
I'lic Wasl)ington bank is lialjle to the holder
and would have remedy over against its cus-
tomer. If in this case the original draft had
upon it the words "duplicate unpaid," the
drawer would not be liable to the holder.
Vol. 4, p. 28, July, 1911. See 909.

Unsigned bank currency stolen and
circulated

828. (Pa.) Where national bank notes
are lost or stolen and put into circulation
without the signature or upon forged signa-
tures, the public is protected, and the bank
and not the holder stands the los?. Vol. 6,
p. 684, April, 1914.

MAIL

Acceptance of offer by mail

Loss of registered mail

829. (Utah.) A from Salt Lake City
makes an offer to B in New York City, which
B accepts by mail. The question is asked
whether the contract is made when B places
his acceptance in the mail, and would B have
power to revoke his acceptance by telegraph
before A received it. Opinion: Where an
offer is made by mail, acceptance by post, dis-
patched in due time as far as the acceptor is
concerned, concludes the contract, notwith-
standing delay or miscarriage of the letter of
acceptance. It is always sufficient that the
offer be accepted in the mode either expressly
or impliedly required by the offeror. There
is a contrary view in Massachusetts. Eevo-
cation of an acceptance is valid if communi-
cated before the acceptance is communicated.
Vol. 11, p. 493, March, 1919.

Gift of bank draft through mail

830. (111.) A sister, intending to make
a gift to her brother, purchased a bank draft
payable to his order and mailed it to him.
The brother died before the mail was deliv-
ered, O'pini'On: The gift was not completed
for want of delivery and the sister and not
the brother's estate is entitled to the money
represented by the draft. In this case, the
post-office is not to be regarded as the agent
of the brother, and delivery to the post-office
is not delivery to the addressee. Vol, 6, p. 92,
Aug., 1913.

831, (Ark.) Where a bank receives for
collection a draft with Liberty bonds payable
to bearer attached and forwards same through
the registered mail, it would appear that such
method of forwarding (without insuring the
package unless the amount is unusually large)
is the exercise of reasonable care and the bank
would not be responsible where the securities
are lost through robbery of the post-office.
The fact that the draft was mailed direct to
the payor, although held by some courts a
negligent method, would not charge the bank
with responsibility where neglect or failure of
the pavor was not the cause of loss. Vol. 11,
p. 559; April, 1919.

832, (Kan.) A mail pouch containing a
registered package addressed from one bank
to anotlier was stolen from one of the trucks
at a railroad depot. The package contained
$1,500 currency and was being transported by
the railroad company. Opinion: The nature
of the railroad's employment in carrying
registered or imregistered mail is as public
agent and not as common carrier for the in-
dividual, and there is no liability to the in-
dividual owner for loss of registered mail
caused by negligence or even theft of a rail-
road employee, unless in' a particular case the
negligence of the corporation itself, as distin-
guished from its subordinates, was the direct
cause of the loss. Vol. 3, p. 678, :\fay, 1911.

833, (W, Va,) A bank received a letter
and check purporting to be signed by A, its

104

MARRIED WOMEN"

843

customer, requesting the amount be sent by-
registered mail to A at a place named. The
check and letter were forged b}- a person im-
personating A. The bank sent the money by
registered package addressed to A at the
place named, and the postmaster delivered it
to the impersonator. The bank reimbursed
its customer and seeks to hold the postmaster
liable because he failed to procure proper
identification before delivering the registered

package. Oinnion: The postmaster would
not be personally liable unless guilty of neg-
ligence in the performance of his official duty,
and where he delivered the package to the
precise person who had asked that the money
be forw arded and whom the bank intended as
the person to receive it in mistaken belief
that such person was its customer, it is doubt-
ful if the postmaster could be held liable.
Vol. 4, p. 757, June, 1912.

MARRIED WOMEN

See Husband and Wife, 664-6(58.

Married women as surety and accommo-
dation party

834. (Ga.) Under the laws of Georgia,
a woman cannot bind herself as surety or ac-
commodation indorser, except that she will
be held liable thereon to a bona fide holder for
value without notice of the character of the
indorsement. Vol. 9, p. 418, Nov., 191G.

835. (Minn.) A married woman in
Minnesota owning eighty acres of land be-
came surety on the note of another person.
Opinion: A married woman in Minnesota has
capacity to bind herself as surety upon the
note of another, and her property is liable for
her debts the same as if unmarried. Vol. G,
p. 270, Oct., 1913.

836. (Mo.) In Missouri a married
woman has power to make contracts in lier
own name and bind herself as suretv upon her
husband's note. Vol. 6, p. 270, Oct., 1913.

837. (N. J.) A note dated and payable
in New York, and bearing the indorsement of
a married woman wlio was a resident of New
Jersey, was presented at a New York bank for
discount. Opinion: In New Jersey a mar-
ried woman cannot bind herself as accommo-
dation indorser or surety, unless estopped to
deny liability. But the bank has the right
to presume that the indorsement was made in
New York, where the same is valid, and the
married woman is estopped from denying
that lier inrlorsemcnt is a New York contract.
Vol. 9, p. 238. Sept., 1916.

838. (N. J.) In New Jersey, a married
woman cannot bind herself upon a note ex-
ecuted for the accommoflation of another un-
less she or her sej)arate estate derives a bene-
fit therefrom. But a married woman can
make a note for a loan to herself, although in-
tending to turn the money over to her hus-
band. In such a case a note executed by the
married woman as sole maker, jiayable to a
bank and indorsed by her husband, would be

safe as an enforceable instrument, and the
proceeds should be paid bv the bank to tlie
wife. Vol. -i, p. 597, March, 1913.

839. (N. J.) Under the law of New
Jersey a married woman cannot bind herself
as accommodation indorser, and the fact that
the paper so indorsed is made by a corpora-
tion, of which she is a stockholder, does not
make the indorsement binding upon her
under the New Jersey statute. \o\. 3, p.
401, Jan., 1911.

840. (Pa.) A bank discounted tlie note
of a married woman, where it contained a
declaration that the funds were for her pri-
vate use, chargeable against her separate es-
tate. Opinion: Payment could be enforced
Iiy the bank unless it knew that the married
woman was in fact a mere accommodation
maker. In Pennsylvania, a married woman
can bind herself on a note executed for her
own lienefit, but not as accommodation maker
for another. Vol. 6, p. 758, May, 1914.

841. (Pa.) In Pennsylvania every re-
striction im]H»sed by the common law upon
the capacity of a married wi»man to contract
has been removed, except in two cases: (1)
she cannot become accommodation indor.ter.
maker, guarantor or surety for another; and
(2) she cannot, unless her husband joins, con-
vey or mortgage her real estate. For a cita-
tion of decisions showing detailed develop-
ment of the law. see Vol. 5, p. 65H, April.
1!M3.

842. (Pa.) .\ married woman in Penn-
sylvania has no power to bind herself as ac-
commodation indorser, whether it be for the
accommodation of her hupi>and or other
maker. The Enabling .\ct of 1893 exprcs.sly
excepts contract.^; of this character. Vol. 3,
p. 1 i:.. Sept.. 1910.

843. (W. Va.) In West Virginia a mar-
ried woman can bind herself as .•surety upon
note of her husband. Vol. 7. p. 383, Dec.,
1914.

105

844

MINORS AND INCOMPETENTS

Contracts of persons under guardianship

844. (Minn.) An old man was put
uiuler j^aiardiHiisliip on May 2G, 11)10. Not
knowiiifj^ this, a bank on October 31, ]!)10,
consolidated three notes, which he owed it,
into one and surrendered the old ones. Two
of the notes were dated prior to the guardian-
ship. Opinion: The ]\Iinnesota statute makes
contracts of a person put under guardianship
void — but notes given before the guardian
was appointed are collectible, if acquired in
good faith and without notice of the incom-
petency. The bank would have a right in a
proper proceeding to recover the amount of
the two notes, which were surrendered under
mistake of fact. Vol. 5, p. 99, Aug., 1912.

Liability of minor as stockholder

845. (Fla.) A minor was presented with
a share of stock in a national bank, the trans-
fer being registered on the books. Fifteen
months later the bank failed and the receiver
is trying to enforce the full 100 per cent,
assessment against the parent of the child.
Opinion : The minor cannot be held liable for
the assessment, as he has no capacity to assent
to become a stockholder, but the person mak-
ing the transfer is not relieved from liability.
The parent of the minor cannot be held liable
for the assessment unless he himself owned
the stock and transferred it to his child.
Vol. 11, p. 5G1, April, 1919.

Payment by bank to incompetent deposi-
tor unsafe
See 275, 302

846. (Cal.) A "trusty" in a hospital for
treatment of the insane had earned and de-
posited in a bank a considerable sum of
money. The "bank questions its right to
allows the depositor to withdraw any of his
deposit. Opinion: The bank should make
payment only to the legally appointed guard-
ian. It would be unsafe to pay the "trusty"
who has been judicially declared insane and
has not been discharged as cured. Vol. 5, p.
380, Dec, 1912.

847. (N. Y.) Checks are signed by a
depositor, who is in a sanitarium taking the
"gold cure" for alcoholism and wdiose father
notified the bank that the depositor is in-
competent. Opinion: The safest course is for
the bank to refuse to honor the checks until
it is reasonably sure that, in issuing them, the

drawer was in possession of his reason sujfi-
ciently to know the nature of his acts. The
liability a bank would iiK.ur for injuring the
depositor's credit in a case of pos^ilde com-
petency would be negligible. Vol. 2, p. 229,
Dec, 1909.

Payment of check to infant agent

848. (Wis.) A customer sends his son,
a minor, to the bank to cash checks amount-
ing to $1,000. In the event the boy is robbed
on his return to his father, would the bank
in any way be liable? Opinion: An infant
or minor may act as the agent of another per-
son and a bank which pays a check to an in-
fant, who has been authorized by his prin-
cipal to collect same, is protected, although
the money is lost by or stolen from tlie infant
and never reaches the principal. Vol. 10, p.
714, April, 1918.

Withdrawal of deposit by minor

849. (N. Y.) Tlie Xew York statute
allowing banks to pay deposits to minors
w^ould probably be held applicable to national
banks. The statute contemplates a deposit
by or in the name of any minor, and requires
that the bank shall hold the deposit for the
benefit of the minor with the authority to pay
the same to him. There is no provision fix-
ing a minimum aae limit. Vol. 9. p. 502,
Dec, 1916.

850. (N. Y.) A minor deposited $25 in
a bank, obtaining the bank's certificate of de-
posit. The minor indorsed the certificate to
a firm in payment for a suit of clothes. Be-
fore the certificate reached the bank for pay-
ment, the minor's father stopped payment.
Opinion: The bank has the right to pay the
amount of the certificate to a bona fide in-
dorsee of the minor, although the father or-
dered the bank not to pay. The indorsement
by the minor would pass the property in the
certificate to the indorsee, although the minor
might not be lialile on the indorsement. Vol.
5, p. 243, Oct., 1912.

Withdrawal of deposit by parent

851. (Cal.) A bank which holds a de-
posit of a minor receives the following letter :

"First Xational Bank of , Gentlemen :

You and each of you are hereby notified not

to cash any more checks drawn by ,

my son, he being a minor, until further notice

106

MORTGAGES

S59

from his father. Signed, his father." The
bank asks if it should obey the instructions.
Opinion: Where a minor makes a deposit to
his personal credit and there is a statute, as
in California, exempting such deposit from
the control of all persons except creditors and
authorizing pa3'ment to the minor, it is be-
yond the power of the father of the minor to
stop payment of the minor's check. A par-
ent, as natural guardian, cannot control or
withdraw a deposit to the credit of a minor
in the absence of leijal appointment as guard-
ian of the estate. Vol. 11, p. G09, May, 1919.

852. (Cal.) A father, who deposited
money in a bank in California to the credit
of his son, a minor, has no right to withdraw
the same. By statute in California, the bank
holds the deposit free from the father's con-
trol and may pay the same to the minor,
taking his receipt or acquittance therefor.
Vol. 5, p. 244, Oct., 1912.

853. (N. J.) A parent cannot withdraw
a deposit to the credit of a minor without
letters of guardianship. When the New Jer-
sey statute provides that such deposit shall be
held for the ''exclusive right and benefit" of

the minor and "free from control of all other
persons except creditors" and "shall be paid"
to the minor whose receipt shall be a dis-
charge to the bank, it is doubtful whether
even a legally appointed guardian would
have the right to withdraw the deposit; and
it is uncertain whether this statute applies to
a national bank. Vol. 5, p. 52(j, Feb., 191 :i.

854. (Pa.) Inder decisions in Penn-
sylvania a parent has no right to withdraw a
deposit to the credit of a minor child, even
though the parent made the dejiosit; the par-
ent cannot control the child's property unless
he ha? been duly appointed as guardian and
the judicial policy of Pennsylvania is not to
appoint the parent as curator of the child's
estate. The statute in Pennsylvania on this
subject allows the bank to pay the deposit to
a minor free from the control of the legally
ap))ointed guardian. Vol. 6. p. 32, Julv,
1913.

855. (Tex.) A parent, as natural guard-
ian, cannot withdraw a deposit to the credit
of a minor in the absence of a legal appoint-
ment as guardian of the estate. Vol. 9, p.
422, Xov., 1916.

MORTGAGES

Mortgage in name of cashier

856. (Wis.) A mortgage runs to "John
Doe, Cashier, First National Bank," and an
assignment of such mortgage is executed by
"John Scott, Cashier, First National Bank,"
successor of Doe. Opinion : The courts would
be likely to hold that the mortgage so drawn
and assignment so executed were instruments
running to and executed by the bank and not
the person named as cashier individually, but
the authorities are not all uniform. Although
a national bank has no power to take a real
estate mortgage for a present loan, only the
Government can complain and the mortgage
as ])etween the parties is not invalidated.
Vol. 5, p. 1 Of), Aug., 1912.

Chattel mortgages
See 738, 864

857. (Colo.) A note was payable on de-
mand, and the chattel mortgage given to se-
cure the same provided that if the mortgagor
shall pay the note of even date "due on de-
mand after date, or if no demand is made,
then note is due two years from date," the
mortgage shall be void. Opinion: A reason-
able construction is that the debt matures in
two years unless sooner demanded and the

holder is protected for thirty days thereafter
under the Colorado statute allowing thirty
davs after maturitv of the debt to take posses-
sion of the chattels. Vol. 8. p. :^1. Julv.
1915.

858. (Iowa.) A chattel mortgai:*' wms
given to secure the purchase price of personal
property bought by a man at a farm sale.
The bank to wiiom the mortgage was exe-
cuted asks whether it is necessary to have his
wife join in the mortgage. The question is
raised in view of the Iowa Code (Sec. 290('i,
Code 1897) which provides as follows: "That
no incumbrance of personal property which
may be held exempt from execution by the
head of a family, if a resident of the state.
shall be of any validity as to such exempt
property, utdess the husband and wife, if both
are living, concur in ami sisrn the same joint
instrument." Opinion: Iowa statute which
invalidates chattel mortpige of exempt prop-
erty unless both husliand and wife join in
mortgage, does not require joinder of wife
where mortgage executed to secure purchase
price of propertv. Vol. 11, p. 609, May,
1919.

859. (Kan.) In the absence of a statute
requiring the specific amount .secured to be

107

800

DIGEST OF LEGAL OPINIONS

stated in the cliattel mortf]faKe, tlio weight of
authority is to the elTect tliat a provision in
the mortpjagc that it is given to secure a speci-
fied amount and "any other indehtedness" to
the mortgagee on future advances is valid and
enforceahle. Where the statute (as in Kan-
sas) requires the filing of an affidavit upon
renewal sjuHMfically stating the amount yet
due and un])aid under the chattel mortgage,
it is qnestionahlc whether additional advances
therafter made would he protected as against
a subsequent incumbrance under the terms of
the chattel mortgage which secures "any
other indehtedness," and it would be unsafe
to make an additional loan during the pen-
dency of the renewal. Vol. 6, p. 62G, March,
3914.

860. (Kan.) A note was dated and de-
livered in January and a chattel mortgage to
secure its payment was given by the maker
of the note the following February. Opin-
ion: The chattel mortgage was valid. The
mortgage should bear the date of its actual
execution, reference being made in the body
thereof to the note. Vol. 6, p. 213, Sept.,
1913.

861. (Neb.) The owner of a farm filed
a lease containing an agreement by the lessee
to execute a chattel mortgage on the crops as
soon as planted and growing. Opinion: The
lessor would not be protected against a sub-
sequent mortgagee of the crops after they
were grown, in the event the promised mort-
gage was not given. Vol. 7, p. 308, Nov.,
1914.

862. (Neb.) An order of release of a
chattel mortgage in Nebraska must be at-
tested and unless a chattel mortgage w'hich
has been paid is discharged in one of the two
modes prescribed by the statute within ten
days after request, the mortgagee would be
liable to the statutory penalty. Vol. 5, p.
23, July, 1912.

863. (N. J.) A bank, through its exec-
utive committee, sanctioned a loan of $1,500,
crediting this amount to a mortgagor and
taking as evidence three four-months' notes
of $500 each, secured by a chattel mortgage.
The mortgagor orally agreed with the bank's
cashier that, in case the committee a week
hence should object to the amount of the loan,
the mortgagor would then consent to charging
back $500 before maturity. The bank under
the New Jersey chattel mortgage act, filed an
affidavit of consideration, which did not in-
clude the oral agreement. The statute pro-
vides that a mortgage is absolutely void as

against creditors of the mortgagor unless it
has annexed thereto an affidavit stating the
consideration of tiie mortgage. The mort-
gagor became bankrupt and the bank relies on
the validity of the mortgage to recover the
loan. Opinion: It would seem that the affi-
davit stating that the consideration of the
chattel mortgage was for $1,500, was the
substantial truth and should not be held
defective, and the mortgage should not be
held void because it did not include a state-
ment of the oral agreement. Vol. 5, p. 446,
Jan., 1913.

Foreclosure of mortgage

864. (Iowa.) In the case of the fore-
closure of a mortgage on realty in Iowa, a
personal judgment is rendered against the
mortgagor (save in some excepted cases), and
a special execution issues against the mort-
gaged property; and where the debt is not
satisfied a general execution for the deficiency
issues against any other realty than held by
the mortgagor. In the case of the fore-
closue of a chattel mortgage in Iowa, where
the proceeds of a sale of the mortgaged chat-
tels are insufficient to pay the mortgage, the
mortgagor is personally liable for the defi-
ciency. Vol. 7, p. 99fi, June, 1915.

Mortgage notes
See 790

865. (Colo.) A mortgage note payable
to a bank was indorsed by the bank to John
Doe or Anna Doe without recourse. John
Doe died and the mortgagor is ready to pay
the note at maturity, but hesitates to receive
the release signed by Anna Doe. Opinion:
Anna Doe could execute a good release to the
mortgagor upon payment and surrender of
the note. The note indorsed by the bank
payable to alternative payees is negotiable
imder the Negotiable Instruments Law and
the indorsement by either one of the payees
passes title. Vol. 8, p. 611, Jan., 1916.

866. (Mo.) A first mortgage real estate
note gave the maker the option to pay $100 or
any multiple thereof on the principal at the
maturity of any coupon by giving the holder
of the note thirty days' notice in writing of
his intention. The maker gave notice that
he would pay the whole note at maturity of a
certain interest coupon. At such maturity
the maker paid the interest but concluded not
to pay the principal until it was due. Opin-
ion: The mere giving of notice of intention
does not mature the note, where the intention

108

NATIONAL BANKS

872

has not been carried out by payment of the
principal. Vol. 3, p. 586, April, 1911.

867. (Neb.) A real estate mortgage
given to secure a loan drawing ten per cent,
interest, the highest legal rate in Nebraska,
contains a clause providing that the mort-
gagor shall pay taxes levied upon the mort-
gage or debt, or against the holder. Opinion:
The clause would probably render the trans-
action usurious, because it calls for payment
of taxes in addition to the highest legal rate.
Such a clause was formerly held to render
the mortgage note non-negotiable but a Ne-
braska statute now provides that its negotia-
bility is unaffected. Vol. 8, p. 419, Nov.,
1915.

Priority between mortgage and mechan-
ic's lien

868. (N. C.) A mortgagor caused some
improvements to be made upon his property
after he had mortgaged it to a bank. The
party making the improvements was not paid
and duly filed a mechanic's lien. Thereupon
the property was sold, but the proceeds were

only sufficient to cover the mortgage. Opin-
ion: In the absence of a statute giving the
mechanic's lien priority, a prior recorded
mortgage takes precedence over a subsequent
mechanic's lien. Vol. 1, p. 140, Oct., 1908.

Wrong description in mortgage

869. (Okla.) A national bank as mort-
gagee of certain real estate recorded the
mortgage and learned tliat the mortgage
papers described a different parcel of land
from that intended. Opinion: If the owner
of the real estate which through error was not
described disposes of his rights therein by
sale or by mortgage to an innocent purchaser
for value, the latter's rights are superior to
those of the bank, regardless of the recorded
mortgage, but the bank has an equitable title,
good against the owner or attacliing creditor.
The course to pursue is to have the owner cor-
rect the mistake by giving a new correct mort-
gage and have that mortgage recorded ; if the
owner refuses, to file a bill in equity to compel
reformation of the mortgage. Vol. 4, p. 431,
Jan., 1912.

NATIONAL BANKS

See Banks and Banking, 164-193 ; Branch Banks, 261-265.
Advertising for "savings" accounts Deposits with trust company permitted

870. (N. Y.) A national bank about to
establish a savings department asks if there
is any state law prohibiting it from using the
words "savings department" or "savings" in
advertising in this connection. Opinion:
The conclusion seems warranted, despite
state laws prohibiting other tiian savings
banks from using or advertising the word
"savings" or from transacting business as a
savings bank, that it would be held within
the power of a national bank, free from con-
trol of state laws, to establish and advertise
a savings department and for savings ac-
counts (in so doing necessarily using and
advertising tlie word "savings''), and to carry
on sucli department in the same manner that
a savings bank carries on its business subject,
of course, to national laws and regulations of
tlie Federal Reserve Board. The question
will not be positively settled until decided by
the court of last resort. Wliile there may be
danger of violating a state law and of incur-
ring a penalty of $100 a day, it is for tlie na-
tional banks to consult their own attorneys
upon the proposition. Vol. 9, p. 404, Nov.,
1910. See 188.

871. (Ind.) Tlie Federal Reserve Act
permits a national bank to carry on deposit
with a trust company to the extent of ten
per cent, of its own paid-up capital and sur-
plus. Vol. 8, p. 805, March, 1916.

Examination by revenue officer

872. (N. J.) The Collector of Internal
Revenue of a certain district in New Jersey
sent a man to examine the notes of a national
bank to see if they were properly stam{>cd.
The bank officer refu-sed him permission.
Opinion: According to the decision of a Fed-
eral district court in Pennsylvania (contrary
to the decision of another Federal district
court), a national l)ank officer lias no right to
refuse permission to an int<'nial revenue
officer or agent, acting luider Section 3177»
Rev., Stat., to examine tlie notes in its pos-
session to see if properly stamped, and the
bank is not exempted because of Section 5241,
Rev. Stat., limiting visitorial powers to the
Comptroller and the courts, but only an
officer or agent authorized l)y the statute has
such power of examination, whicli cannot be
delegated to a clerk or other person. Section

109

873

DIGEST OF LECJAL OPINIONS

21 of the Federal Eeserve Act lias amplified
Section 5241, Eevised Statutes, and provides
"No bank shall lie subject to any visitorial
powers other than such as are authorized by
law, or vested in the courts of justice or such
as shall be or shall have been exercised or di-
rected by Congress, or by either House there-
of, or by any committee of Congress, or of
either house duly authorized." Vol. 11, p.
390, Jan., 1919. * See 173, 1312, 1324.

Federal jurisdiction

873. (N. Y.) The United States courts
had jurisdiction in cases brought by and
against the Second United States Bank but
not in cases by and against the First United
States Bank. The Federal statutes formerly
conferred jurisdiction upon the circuit court
in all suits brought by or against national
banks in the district, but this was repealed
in 1882 and the statute now provides that the
jurisdiction of suits by and against national
banks, except suits between them and the
United States or its officers and agents, shall
be the same as and not other than the juris-
diction of suits by or against banks not or-
ganized under any law of the United States.
Vol. 6, p. 504, Jan., 1914.

Guaranty of draft

See 177 ct seq

874. (Tenn.) B in Tennessee drew on
A in Ohio and a national bank in Ohio wired
a bank in Tennessee that it would guarantee
that B's draft would be paid. The Tennessee
bank paid B the amount of the draft, but
could not collect from the national bank
which was enjoined from making payment.
Opinion: The national bank had no power to
guarantee B's draft in which it had no inter-
est and from which it derived no substantial
benefit. The guaranty was idtra vires and
unenforceable. The same underlying prin-
ciple applies as well to state bank and trust
companies. Vol. 4, p. 27, July, 1911; Vol.
4, p. 152, Sept., 1911.

Limit of loan by national bank

875. (Col.) A national bank with a cap-
ital and surplus of $90,000, having loaning
capacity of $9,000 to any one borrower, dis-
counted a note of a state bank for $8,000 and
allowed such bank to overdraw its account by
$2,500. Opinion: The national bank ex-
ceeded the legal limit of its loaning power.
Vol. 9, p. 422, Nov., 1916.

876. (111.) When the limit is loaned by
a national bank to a corporation, an addi-
tional loan to a stockholder is not excessive
unless corporation is maker or indorser on
paper or loan to stockholder is for its benefit.
The National Bank Act contemplates that no
loan in excess of the limit shall be granted to
any one interest. Vol. 5, p. 108, Aug., 1912.

877. (N. Y.) Certain national bank ex-
aminers made a ruling that the purchase of
drafts with bills of lading attached in excess
of ten per cent, of the capital and surplus of
the bank created an excess loan to the concern
issuing the drafts ; that such excess loan was
a violation of Section 5200, United States Ee-
vised Statutes, unless the drafts are accepted
by the drawee before the purchase by the
bank. Opinion: Such ruling is not war-
ranted by the law and will not be sustained
by the courts. The Comptroller of the Cur-
rency concurs in the opinion that Section
5200, U. S. Revised Statutes, excepting from
the 10 per cent, limit of indebtedness of any
one person of money borrowed '^the discount
of bills of exchange drawn in good faith
against actually existing values*' does not re-
quire that such bills of exchange must be first
accepted before purchase. Vol. 1, p. 300,
Feb., 1909.

878. (N. Y.) Section 5200 U. S. Eev.
Stat, limiting loans by any association to a
single borrower to ten per cent, of capital and
surplus, although not judicially passed upon
is construed as not including liability of the
borrower for the interest upon the principal
sum loaned. Vol. 10, p. 780, May, 1918.

879. (Pa.) A national bank with a cap-
ital and surplus of $50,000 loaned A and B
as individuals $1,500 and $2,500 respectively.
A and B as partners want to borrow in ad-
dition ten per cent, of the capital stock
and surplus. Opinion: The National Bank
Act limits liability of any one borrower for
money borrowed to ten per cent, of capital
and surplus and includes in the liability of a
firm the liabilities of the several members.
The proposed loan would therefore be ex-
cessive. Vol. 9, p. 350, Oct., 1916.

880. (Tex.) A national bank loaned to
a firm ten per cent, of it^ capital and surplus.
An individual member of the firm asked for
a further loan of ten per cent. Opinion:
The further loan to such individual member
of the firm would be excessive and violative of
the National Bank Act. Vol. 4, p. 758, June,
1912.

110

NATIONAL BANKS

887

881. (W. Va.) Section 24 of the Fed-
eral TJeserve Act empowering national banks
to make loans on farm lands in an aggrcgaie
sum equal to 25 per centum of its capital and
surplus does not modify Section 5200, U. S.
Revised Statutes, limiting loans to a single
borrower to 10 per cent, of capital and sur-
plus and no national bank may loan to any
person upon real estate more than 10 per
cent, of its capital and surplus. Vol. 11, p.
559, April, 1919.

Loan on certificates of deposit

882. (N. J.) There is nothing in the
National Bank Act to prohibit a bank from
loaning money on the security of its own cer-
tificates of deposit. It cannot, however, loan
on the security of its own shares of stock.
Vol. 2, p. 374, "March, 1910.

Power to donate services of clerk

883. (111.) The right and power of a
national bank to furnish such gratuities as
check books, pass-books, calendars and other
articles of utility has never been brought into
question. Should a dissatisfied stockholder
complain, the furnishing of such gratuities
to a reasonal)le extent would proliably be held
within the implied powers of the bank, as in
case of gratuitous collections. It has been
held an executive officer has no power to do-
nate the bank's funds for erection of a paper
mill. The donation of services of a clerk to
assist in conduct of a public sale as a means
of getting business for the bank might be
witliin its implied powers ; at all events not a
serious abuse of power. Vol. 5, p. 063, April,
1913.

Power to loan on mortgage

See S.jC), 8S1

884. (W. Va.) A customer borrowed
money from a national bank, and e.xecuied a
mortgage as security. The customer later
became bankrupt. Opinion: The security is
valid as against the borrower and his credit-
ors, and only the Governnient can attack the
transaction as an ultra vireff act. Tiie liank
can hold the security as against the trustee in
liankru|)tcy of the borrower. Vol. 4, p. 755,
June, 1912.

National bank as surety

885. (Tenn.) -\ national liank has no
power to become guarantor of the obligation
of another person in which it has no inter-
est. The individual members of the board
of directors of a national bank desiring to be-

come sureties on the bond of a county oflRcial
have the power so to do, but cannot bind the
bank upon such a contract. A'ol. G, p. 212,
Sept., 1913.

886. (W. Va.) A national bank as
pledgee of certain stock certificates pledged
as collateral becomes surety on an indemnity
bond authorized by its directors to enable the
owner to obtain duplicate for the stock col-
lateral, which has been stolen from the bank.
Opinion: The execution of such indemnity
bond by the bank either as principal or surety
was probably within the power of the bank
and even if ultra vire.<i the directors would not
Ije held personally liable by reason of such
authorization. Vol. 4, p. 688, May, 1912.

Trust powers

887. (Mo.) Inquiry is made as to the
right and extent a national liank having been
vested with trust powers can exercise func-
tions of executor and trustee in states other
than the state where it is located. Opinion:
Congress has now granted national banks,
when permitted by the Federal Reserve
Board, and when not in contravention of state
or local law. "the right to act as trustee, ex-
ecutor, administrator, registrar of stocks and
bonds, guardian of estates, assignee, receiver,
committee of estates of lunatics or in any
other fiduciary capacity in which state banks,
trust companies or other corporations which
come into competition with national banks
are permitted to act under the laws of the
state in which the national bank is located."
Section 11 K, Federal Reserve .Act. as
amended September 20, 191S. It would
seem to follow from this that whenever a
trust company or other corporation is em-
powered by the laws of the state in which ft
national bank is located, or has the power by
general grant witho\it restriction as to place,
to exercise the functions of executor or trustee
in a state other than that of its location, the
national bank, if otherwise eligible, would
have like power, subject, of course, to the re-
strictions, liinit^ations or prohibitions imposed
l)V the laws (»f such other state upon the exer-
cise by foreign corporations of trust powers
witliin its borders. .Assuming that a trust
company in any state and consequently a
national bank grant^^d etpiivaletit trust powers
has the power to exercise the function of ex-
ecutor and trustee outside the state, then the
abilitv to exercise such functions in another
state would depend upon the restrictions, lim-
itations or prohibitions imposed upon foreign
trust corjiorations. if anv, bv the laws of such
state. Vol. 11. p. 553, April. 1919.

Ill

888

NEGOTIABILITY

Effect of acceptance indorsed on back of
bill

888. (Pa.) All acceptance by the drawee
imlorsed on tiie back of the bill, instead of
being written across the face, while unusual,
is valid at coniiuou law. Under the Nego-
tiable Instruments Act, however, the holder
is entitled to acceptance '^on the bill," pre-
sumable on its face, but if the holder takes the
indorsed acceptance, the instrument is valid
and negotiable. Vol. 11, p. 673, June, 1919.

Certainty as to payee

See 8(55

889. (Del.) A note is made payable to
"A, B, C, and others" because there is not
room enough to insert the names of all the
payees. The negotiability of the note is
questioned and it is also asked how a nego-
tiable form of note could be drawn to cover
such case. Opinion: The note is not nego-
tiable because of uncertainty as to the payee.
Where it is desirable to draw a note to a
number of payees and the blank form of the
note does not provide sufficient space for their
names, a special blank form w^ith sufficient
space should be provided. Vol. 5, p. 449,
Jan., 1913.

890. (Minn.) A customer offers for sale
a note in which the name of the payee is
missing. Is the note payable to bearer?
Opinion: A note wherein no payee is named
or indicated with reasonable certainty is in-
complete and not negotiable. But where the
note contains a blank for the name of the
payee which is unfilled, under the law mer-
chant the instrument was payable to bearer
and negotiable and carried impliedly author-
ity to a bona fide purchaser to fill the blank
and complete the instrument; but under the
Negotiable Instruments Act the blank must
be filled strictly in accordance with the au-
thority given and if the holder negotiates
such an instrument without authority, the
purchaser is put on inquiry and it is subject
to defenses in his hands. Vol. 11, p. 94,
Aug., 1918. See 960.

Certainty of place of payment

891. (Mass.) A check is drawn upon a
bank in Vermont "'payable if desired at the
Blank National Bank,' Boston." In view of
the two places of payment, negotiability is
questioned. Opinion: The negotiability of a
check drawn on one bank "payable if de-

nired at" another bank is uncertain. It de-
])ends on whether the instrument is construed
to be drawn on two drawees in the alternative,
in which case it would be non-negotiable, or
whether on one drawee with two places of
jiaymcnt, in which case it would probably be
negotiable. Checks drawn "payable if de-
sired at" are prohil)ited in the New York
Clearing House. Vol. 5, p. 377, Dec, 1912.

Certainty as to time of payment
See 895, 989

892. (Cal.) A note contained the fol-
lowing provision : "Said interest payable
quarterly, and if not paid when it becomes
due, the principal and all accrued interest
shall at the election of the payee immediately
become due and payable." Opinion: In Cal-
ifornia this provision destroys the negotia-
bility of the note, but this is contrary to the
weight of authority. Vol. 7, p. 221, Oct.,
1914.

893. (Md.) A note contains a clause,
"It is agreed that failure to pay any one note
at maturity shall, at the option of the holder,
mature all unpaid notes of this series."
Opinion: There is conflict of authority as to
the effect this clause has upon the negotia-
bility of the note, and it would not be safe for
a bank to treat it as negotiable unless located
in a jurisdiction where the law was favorable.
Vol. 5, p. 752, May, 1913.

Negotiability of certificate of stock

894. (N. J.) The holder of a stock cer-
tificate of a corporation properly indorsed in
blank transferred it to a bank as security for
a loan. The loan was unpaid and the cer-
tificate was presented by the bank to the cor-
poration, which refused to transfer or return
it, claiming that the same had been stolen.
Opinion: Except in states which have passed
the Uniform Transfer of Stock Act a certifi-
cate of stock, though properly indorsed in
blank, is not completely negotiable, and a pur-
chaser from a finder or thief takes no title
as against the true owner. Vol. 5, p. 248,
Oct., 1912.

895. (N. Y.) A note payable "on or be-
fore" a certain date is a negotiable instrument
and to hold the indorser must be presented
at maturity and the indorser notified. The
provision "on or before" gives the maker an
option to pay before maturitv and possiblv
save interest. Vol. 2, p. 187, Nov., 1909.

112

NEGOTIABILITY

903

Effect of extension clause
See 772, 773, 896 et scq., 963 ct seq

896. (Iowa.) A form of note is sub-
mitted by an Iowa bank containing an exten-
sion clause as follows: "We further agree to
the extension of this note on payment of the
interest by either of us," and the question is
asked whether such clause affects its negotia-
bilit3\ Opinion: Presumably one of the
makers is principal and the others sureties,
but, however this may be, it provides a con-
sent by the makers that time of payment may
be extended on payment of interest. The
extension clause does not give the holder, of
his own motion, an absolute right to extend
the time of payment, but contemplates a
future agreement of extension between the
holder and some one of the makers. Under
the reasoning of the Supreme Court of Iowa
the clause would destroy the negotiability of
the note, because the time of payment is un-
certain to all of the makers save one. An-
other extension clause reads as follows : "The
indorsers and guarantors of this note consent
that time of payment may be extended with-
out notice thereof." This clause would not
destroy the negotiability of the note because
neither the maker nor the holder could of his
own motion postpone the time of payment.
Vol. 10, p. 655, March, 1918.

897. (Okla.) A note contains a clause,
"the makers and indorsers x x x hereby con-
sent that time of payment may be extended
without notice thereof." Negotiability of
such a note is questioned. Opinion: The de-
cisions in different states conflict upon the
question of negotiability. There is nothing
in the Negotiable Instruments Act specifically
relating to such a provision which settles this
conflict. The point is undecided in Okla-
homa. Vol. 3, p. G79, May, 1911. But see
900.

898. (S. Dak.) The following clause
appears on the face of a note: "the makers,
giuirantors, sureties and indorsers of tliis
note severally waive presentment for ])ay-
mcnt, protest, notice of non-])aymcnt, and
diligence, and agree that time of payment
may be extended without affecting their lia-
bility." Opinion: The waiver provisions do
not destroy the negotiability of the note, but
the decisions conflict as to the effect upon ne-
gotiability of the provision agreeing t« ex-
tension of time of payment without prejudice
to the holder. The point has not l)een de-
cided in South Dakota but cases liolding such
a note negotiable are supported by better
reason. Vol. 3, p. 467, Feb., 1911.

899. (Mo.) In Missouri the provision
in a promissory note that "the makers and in-
dorsers each waive demand, notice and pro-
test of this note, and severally agree that the
time may be extended without notice" does
not affect its negotiabilitv. Vol. 10, p. 780,
May, 1918.

900. (Okla.) A promissory note con-
taining clauses (1) waiving presentment,
(2) consenting to extension of time of pay-
ment without notice, (3) providing for pay-
ment of attorney's fees if not paid at matur-
ity, (4) authorizing confession of judgment
if not paid at maturity, and (5) authorizing
sale of collaterals if not paid at maturity, is
negotiable under the law of Oklahoma. Vol.
10, p. 781, May, 1918.

Instrument payable "in exchange"

901. (Va.) A bank is offered for dis-
count three notes payable at Richmond, Vir-
ginia "in New York Exchange," and ques-
tions whether this phrase makes the notes
non-negotiable. Opinion: It would be safer
for the bank to proceed on the theory that the
notes were non-negotiable, as the decisions
conflict upon the negotiabilitv of notes so pay-
able. Vol. 8, p. 608, Jan., "1916. See 315,
316, 1142.

Note reciting executory consideration

902. (Tenn.) A number of banks have
purchased notes, concerning whose negotia-
bility they are uncertain. The note contains
the following promise, "Please enter my name
for 110 weeks' subscription to (certain pub-
lications named), for which I promise to pay
to your order $5.50 six months from date.
Signed, John Smith." Opinion: Wiiore a
note recites that it is given for a considera-
tion to be performed in the future, a majority
of courts hold that such recital does not affect
negotiability nor prevent the indorsee from
enforcing free from defen.'jes. unless at the
time of acquiring the note he lias knowledge
of the l)reach of the executory agreement.
The courts in a few states iiohl. to the con-
trary, that tiie indorsee takes sul)jeet to the
performance of the cxccutnrv ( misideralion.
Vol. 10, p. 314, Oct., 1917.

Note retaining lien

903. (Ark.) Negotiability of the follow-
ing note is questioned : "This note is secured
by a vendor's lien retained on the (description
of real estate)

113

001

J)|(;kst of leual oi'INIOxs

Ian 1in7.

On or beloro after

date I promise to pay to the order of

$500.00 Five Hundred

and no/100 Dollars with interest from date

at the rate of per cent, nntil i)aid.

\^ilue received.

Si<j^ned "

Opinion: In most Jurisdictions, including Ar-
kansas, a provision in a note reserving title
or retaining lien upon the property for which
the note is given, until ])ayment, does not de-
stroy negotiability. But a provision that the
note is subject to a certain deed would make
the instrument non-negotiable. Vol. 9, p.
823, April, 1917.

Effect of waiver of protest and exemptions

See 899, 900, 978

904. (La.) A note containing a clause
(1) waiving presentment, (8) waiving ex-
emptions and homesteads, and (3) providing
for costs of collection and attorney's fees, if
not paid at maturity, is a valid obligation and
is negotiable under the Negotiable Instru-
ments Law. Where the note contains a
clause giving '"consent that time of payment
may be extended without notice," the deci-
sions of a number of states conflict as to
whether or not it destroys negotiability. Vol.
5, p. 173, Sept., 1912.

Warehouse receipts

905. (S. Dak.) The agent of an ele-
vator company borrowed money upon a forged
elevator storage ticket, which was issued with-
out authority by him in the name of the
company to a fictitious person and indorsed
by the same name. The agent also indorsed
tiie ticket in his own name. Opinion: The
elevator company is not liable to the pur-
chaser. The ticket is not negotiable and is
not transferable as a bearer instrument be-
cause the supposed goods are made deliverable
to a fictitious person. The purchaser required
no title as in case of a negotiable
instrument, and was put in inquiry in any
event because of negotiation by the issuing
agent. Vol. 6, p. 819, June, 1914.

Warrant drawn for municipal debt

906. (N. M.) Tlie general rule is that
warrants, drafts or orders drawn for payment
of municii)al debts by one i)ublic ollice on an-
other are not negotiable instruments, and this
class of instruments includes school district
warrants. Vol. G, p. 507, Jan., 1914. See
1140.

Words affecting negotiability
See 277, 324, 899, 1289

907. (Minn.) A note contained the pro-
vision : "this note is given for six drain heads
to be delivered in good condition at (name of
place)." The note was negotiated to a pur-
chaser for value. The drain heads were never
delivered. Opinion: The holder can enforce
against the maker, because the note is nego-
tiable. The provision above quoted is a
statement of the transaction which gives rise
to the instrument and the fact that it is an
executory contract which may never be per-
formed does not make the promise to pay
conditional, nor destrov negotiabilitv. Vol.
7, p. 222, Oct., 1914.

908. (Okla.) A promissory note to pav
$5,000 had the following clause added, "The
foregoing note is made and delivered in pur-
suance of the escrow agreement between John
Smith and John Brown, dated the 31st day
of May, 1917." Does the clause affect the ne-
gotiability of the instrument? Opinion: A
note promising to pay the amount "in pur-
suance of escrow agreement" between A and
B would probably be held negotiable on the
ground that the quoted phrase was a mere
statement of the transaction giving rise to the
instrument rather than one making payment
subject to the terms of the escrow agreement.
Yoi. 10, p. 780, May, 1918.

909. (S. Dak.) The words "duplicate
unpaid" do not affect the negotiability of a
draft but they constitute notice to the pur-
chaser of the existence of a second draft, pay-
ment of which would discharge the draft he is
buying. Vol. 4, p. 491, Feb..''l912. See 827.

NOTARIES

The law advocated by the American Bankers
Association relating to competency of bank and
corporation notaries has lieen passed either in
full or with modifications in the following
states: Delaware, Kansas, Maine, Michigan, ;Min-
nesota, Mississippi, Montana, Nevada, New
Jersey, New York, (examine revised code of North

Dakota, Sec. 5593) South Dakota, Vermont,
Washington, West Virginia, Wyoming.

The law stated in full is as follows: "It shall
be lawful for any notary public who is a stock-
holder, director, officer or employe of a l)ank or
other corporation to take the acknowledgment
of any party to any written instrument executed

114

NOTARIES

923

to or by such corporation or to administer an
oath to any other stockholder, director, officer,
employe or agent of such corporation, or to pro-
test for non-acceptance or non-payment bills of
exchange, drafts, checks, notes and other nego-
tiable instruments which may l)e owned or held
for collection In' such corporation: Provided, it
shall be luihiwful for any notary public to take
the acknowledgment of an instrument by or to
a bank or other corporation of which he is a
stockholder, director, officer, or employe, where
such notary is a party to such instrument, either
individually or as a representative of such cor-
l)oration, or to protest any negotiable instrument
owned or lield for collection Ijy such corporation,
where such notary is individually a party to
such instrument."

Acknowledgment by party in interest

910. (Miss.) A Mayor of a city, author-
ized to take acknowledgments, is disqiialitied
to take the acknowledgment of the grantor to
a deed of trust in which he is named as
trustee. Vol. 9, p. 824, April, 1917.

Acknowledgment over telephone

911. (Wash.) Opinion that acknowl-
edgment of mortgage or other instrument
taken by notary over telephone would be
invalid as law requires personal (physical)
appearance of person making acknowledg-
ment. Vol. 7, p. 686, March, 1915.

912. (W. V.) An acknowledgment
taken by a notary over the telephone where
the statute requires a certificate that the per-
son "personally appeared" before the notary
has been held invalid in several states; but
in California its validity has been upheld in
the absence of fraud, duress or mistake.
Question not decided in West Virginia. Vol.
9, p. 659, Feb., 1917.

Notary's fee in Alabama

913. (Ala.) A fee of $5.11 charged by
a notary in Alabama for protesting a check is
excessive and is in violation of Section 5174
of the Alabama Code. Vol. 10, p. 852, June,
1918.

Competency of bank officers, directors,
stockholders and employees as notaries

914. (Ala.) In Alabama, notary who is
stockholder of mortgagee hank is incompetent
to take acknowledgment of mortgage, but
where he is an officer or employee, not a
stockholder, he is competent. Question of
notary's competency to protest paper for the
bank undecided. Vol. 4, p. 615, April, 1912.

915. (Cal.) A notary public who is as-
sistant cashier and stockholder of a bank is
not, under the law of California, disqualified
to take the acknowledgment of the mort-
gagors to a mortgage executed to the bank.
Vol. 11, p. 441, Feb., 1919.

916. (Cal.) In California, notary who
is stockholder is incompetent to take acknowl-
edgments of instrument's running to the
bank, although competent to acknowledge in-
struments executed by the Ijank. But may
acknowledge paper running to the bank where
he is an otlicer but not a stockholder. Vol. 4,
p. 551, March, 1913.

XoTE: In 1914, Supreme Court of California
held notary competent, thougii stockholder, to
take acknowledgments of instruments running
to bank. First Nat. Bank r. Merrill, i:J'J Pac

lOGG.

917. (Cal.) An assistant cashier of a
national bank in California is competent, as
notary, to protest i)aper for the bank, where
he is not a stockholder of the institution. Vol.
4, p. 489, Feb., 1912.

Kote: See previous note.

918. (Colo.) A notary in Colorado is
competent to take acknowledgment of instru-
ments running to a bank, although he is a
stockholder thereof. Vol. 8, p. 42. Julv.
1915.

919. (Colo.) ]\rany states, where law
unchanged by statute, hold stockholder of
bank disqualified to act as notary in taking
acknowledgments of instruments running to
bank. Vol. 7, p. 688, March, 1915.

920. (Idaho.) In Idaho a notary who is
an otlicer but not a stockholder is probably
competent to take acknowledgments of instru-
ments running to his bank. Vol. 4, p. 683,
May, 1912.

921. (Idaho.) Stockholder of bank gen-
erally held by courts disqualified, as notary,
to take acknowledgments of instruments run-
ning to bank. In Idaho where question not
decided, safer to follow this rule. Vol. 4, p.
428, Jan., 1912.

922. (111.) Opinion that notary of bank
in Illinois who is an officer of the bank, but
has no stock interest therein, is competent to
protest paper owned bv the bank. Vol. 7,
p. 166, Sept., 1914.

923. (111.) By statute in Illinois, a no-
tary who is a stockholder or officer of a bank
is competent to take acknowledgments of in-
struments relating to real estate to which the
bank is a party. Vol. 4, p. 683, May, 1912.

115

924

DIGEST OF LEGAL OriNJONS

XoTE: Sep Miixwcll r. Lincoln Builditif; & Loan
Assn., 210 III. f^f) lioldinp statute Milld and con-
stitutional. Statute, liowcvcr, covers (jiily deeds
and niortgaffes of real estate. It cliangca law as
held in Og(len Buildinj^ & Loan Assn. v. Meuscli,
11X5 111. 554 which held that acknowledgment of a
mortgage taken before a notary who is stock-
holder of the mortgagee is invalid In-cause of the
notary's pecuniary interest. The statute does not
cover chattel mortgages and tlie r\ile as to the
competency of notary-stockholder to take ack-
nowledgment of chattel mortgage to l)ank re-
mains uncertain.

924. (111.) In Illinois, question whether
notary who is partner of private bank compe-
tent to protest checks drawn on bank not de-
cided and uncertain. Vol. 4, p. 616, April,
1912.

925. (111.) In the absence of judicial de-
cision in Illinois a notary-stockholder of a
bank is competent to protest paper held by the
bank as collection agent, and, wiien held by
the bank as owner, it is probable that such
notary is likewise competent to protest. Vol.
4, p. 92, Aug., 1911.

926. (111.) Under law of Illinois, stock-
holder of corporation is disqualified, as
notary, to tack acknowledgments of deeds
running to the corj^oration — enactment of
remedial legislation suggested. Vol. 2, p. 23,
July, 1909.

Note: Law changed. See note imder 923.

927. (Ind.) By statute in Indiana a no-
tary public who is an officer or employee of a
bank or trust company cannot act as notary
in the business of the bank. Vol. 7, p. 104,
Aug., 1914.

928. (Ind.) Under Indiana statute, no-
tary who is officer of bank is prohibited from
protesting paper running to bank or other-
wise acting as notary in the business of the
institution. Vol. 4, p. 550, March, 1912.

929. (Iowa.) In Iowa officer of a bank
not a stockholder is competent to take ac-
knowledgments of instruments whether exe-
cuted by or running to the bank. Vol. 7, p.
779, April, 1915.

930. (Iowa.) Under decisions in Iowa,
stockholder of bank is incompetent, as notary,
to take acknowledgments of instruments run-
ning to bank, but if notary is officer and not
stockholder, he is not disqualified. Vol. 7, p.
166, Sept., 1914.

931. (Kan.) In Kansas, cashier and
stockholder of Xational Bank is competent
as notary to take acknowledgments of instru-
ments running to the bank. Taking fee as

notary would not violate Federal Reserve Act.
\'ol. 7, p. 1002, June, 1915.

932. (Kan.) In Kansas the statute of
1905 authorizes a notary-stockholder to take
acknowledgments of instruments executed to
his bank except "when acting himself in be-
Iialf of the corf)oration." Where a notary
draws up a mortgage for })ank, and his name
is not mentioned in the papers, it seems un-
reasonable to hold that he is acting himself
in behalf of the bank. The Kansas statute
does not require an affidavit of ownership
upon the original filing of a chattel mortgage,
but such affidavit is necessary for a renewal.
Vol. 4, p. 616, April, 1912.

933. (Kan.) In Kansas a notary,
though a stockholder, officer or employee of
a bank, is competent to take acknowledgments
of instruments executed to and by such bank,
except where he acts for himself in behalf of
such bank. Vol. 4, p. 489, Feb., 1912.

934. (Kan.) In Kansas a notary who is
an officer and stockholder of a bank is com-
petent to protest the bank's paper as well as
take acknowledgments of real estate mort-
gages to the bank, except where he himself
acts in behalf of the ))ank in taking the mort-
gage. Vol. 4, p. 308, Nov., 1911.

935. (La.) Notary who is stockholder
probably incompetent to take acknowledg-
ments of instruments running to the bank,
although disqualification may not extend to
protests. Officer, not a stockholder, is com-
petent. Vol. 5, p. 21, July, 1912.

936. (La.) A notary when a stockholder
of a bank is generally held incompetent to
take acknowlegments of instruments running
to the bank. The law is uncertain as to com-
petency to protest paper. These questions
have not been passed upon in Louisiana. Vol.
2, p. 74, Aug., 1909.

937. (Minn.) In Minnesota a notary
who is a stockholder and officer of a bank is
competent to take acknowledgments and make
protests of paper in which the bank is inter-
ested. Vol. 4, p. 683, May, 1912.

938. (Miss.) Xotary who is stockholder
of bank probably incompetent, in Mississippi,
to take acknowledgment of deed of trust
wherein bank is beneficiary, but not incom-
petent wli£re bank is grantor of a deed. In
case where notary is officer, but has no stock
interest, competencv probably not affected.
Vol. 6, p. 760, May.'l914.

939. (Miss.) In Mississippi a notary is
competent to protest checks drawn on the

116

NOTAEIES

955

bank of which he is an officer and stockholder.
But probably is incompetent to acknowledge
instruments running to the bank. Vol. 4, p.
552, March, 1912.

940. (Miss.) In Mississippi a notary
who is a stockholder of a bank is presumably
incompetent to take the acknowledgment
of an instrument running to the bank. Such
notary would be competent to make protests
of instruments held by the bank for collec-
tion, but when held by the bank as owner the
question of competency is unsettled. Vol. 4,
p. 428, Jan., 1912.

941. (Mo.) In Missouri a notary who
is a stockholder would probably be held in-
competent to take acknowledgments of instru-
ments running to his bank. Vol. 4, p. 552,
March, 1912.

942. (Mo.) Under the existing condi-
tion of the law in Missouri, a bank would be
safe in using its notary for protests and ac-
knowledgments, where such notary is a non-
stockholding officer, but not when he is a
stockholder. Vol. 3, p. 202, Oct., 1910.

943. (Mont.) A statute in Montana
qualifies notaries who are stockholders of
banks to take acknowledgments and make
protests of paper in which the bank is inter-
ested. Vol. 4, p. 154, Sept., 1911.

944. (Neb.) Notary who is stockholder
not competent to take acknowledgments of in-
struments running to the bank. But officer
who is not stockholder is competent. A^ol. 5,
p. 24, July, 1912.

945. (N, H.) In the absence of any es-
tablished rule in New Hampshire, a notary,
who is a director of a bank, is competent to
protest paper held by the bank for collection,
but when the paper is owned by the bank tlie
question is unsettled. Vol. 4, p. 376, Dec,
1911.

946. (N. J.) In New Jersey a Commis-
sioner of Deeds is competent to take the ac-
knowledgment to a mortgage to a l)ank of
which he is cashier, director and stockholder.
Vol. 4, p. fi84. May, 1912.

947. (N. C.) In North Carolina, no-
tary who is an officer of a bank, l)ut not a
stockholder, is competent to take acknowl-
edgments of instruments running to a bank.
If officer is a stockholder he is discjualified.
Vol. 7, p. 899, May, 1915.

948. (N. Dak.) A statute in North Da-
kota expressly provides that the acknowledg-
ment of an instrument to which a corporation

may be a party before a notary or other au-
thorized official is valid, though such notary
be an officer, director, employee or stock-
holder of such corporation. Vol, 2, p. 108,
Sept., 1909.

949. (Ohio.) A statute in Ohio prohib-
iting a director, officer or clerk of a bank from
acting as a notary in any matter in which the
bank "is in any way interested" does not dis-
qualify a stockholder holding no official rela-
tion from taking acknowledgments or making
protests, but a director who is a notary can-
not protest paper owned by the bank. Whether
a director-notary can protest paper held for
collection is doubtful. Vol. 8, p. CIO, Jan.,
191G.

950. (Okla.) In Oklahoma a notary is
prol)ably competent to acknowledge instru-
ments to and from a bank or to protest the
bank's paper, although a stockholder of such
bank or holding other official relation. Vol.
4, p. 683, May, 1912.

951. (Pa.) Opinion: Under the Act of
1909 a bank clerk would be competent, as
notar)', to take acknowledgments of instru-
ments executed by or running to the bank.
The competency of a stockholder to take ac-
knowledgments, as notary, of instnnuents
running to the bank would depend on whether
he is disqualified by his stock interest, which
has not been decidecj in Pennsylvania. A
stockholder other than a director would be
competent to make protests. Vol. 4, p. 758,
June, 1912.

952. (Pa.) A Pennsylvania statute pro-
hibits directors of banks from acting as no-
tary for the bank. Opinion that this statute
disqualifies a notary who is a director of a
national bank from protesting a check for
his own bank. Vol. 4, p. 307, Nov., 1911.

953. (S. Dak.) In South Dakota no-
tary who is stockhohltr and director is com-
petent to take acknowledgement of mortgage
executed to bank. Vol. 7, p. 1001, June.
1915.

954. (Tenn.) The courts of Tennessee

disapprove acknowledgments of instrument,*?
running to bank by a notary who is a stock-
holder of bank, but hold that such acknowl-
edgments arc not void but merely voidable
upon proof of fraud, oppression or other
ground for invalidation. Vol. 2, p. 107,
Sept., 1909.

955. (Wash.) In Washington notary
public who is stockholder of corporation has
been held competent to take acknowledgment'

117

950

DKIKST OF LEGAL OPINIONS

of mortgages running to his institution.
rroI)ably also coni])otent to protest bank's
paper. "A'oI. 4, p. 428, Jan., 1912.

956. (W. Va.) In absence of judicial
decision a notary in West Virginia wlio is a
stockholder and director is competent to pro-
test paper held by the bank for collection.
When held by the bank as owner the question
is uncertain. Vol. 4, p. 154, Sept., 1911.

957. (Wis.) Cashier of Wisconsin bank
who is notary but not a stockholder, compe-
tent to take acknowledgments of instruments
running to the bank. If casiliier also a
stockholder, this fact would probably disqual-
ify him. Vol. 7, p. 900, May, 1915.

Relationship to mortgagee

958. (Neb.) B and his wife executed a
mortgage to A. A's brother having no pe-

cuniary interest in the transaction took the
acknowledgments as notary public. Opinion:
The relationship of the notary to the mort-
gagee did not disqualify the notary and the
acknowledgment is valid. Vol. 8, p. 418,
Nov., 1915.

Form of acknowledgment

959. (Cal.) A notary public in making
out an acknowledgment to a deed used the
words "and has duly acknowledged to me"
etc., instead of "and he duly acknowledged to
me" etc. Opinion: Where the statute, as in
the case in California requires that a certifi-
cate of acknowledgment must be substantial-
ly in a form therein provided, the certificate
will be valid though not in the precise lan-
guage of the statute if it substantially com-
plies therewith. Vol. 7, p. 102, Aug., 1914.

NOTES

Blank space filled in "in accordance
with authority"

960. (W. Va.) B and C signed a note
in blank with A as principal maker, author-
izing A to fill in the note for $100. A, in
violation of the agreement, borrowed $2,500
from a bank upon the note, and the bank fills
in that amount. Upon default of A, the
bank seeks to recover from B and C, who
claim their liability is only for $100. Opin-
ion: The bank was put on inquiry as to the
extent of the authority of A and cannot re-
cover from the accommodation makers the
full face value of the note, but only the
amount authorized. Section 14 of the Nego-
tiable Instruments Act provides that the
blank must be filled up "strictly in accordance
with the authority given," and when the bank
received the note in that condition, it was
put on notice that it must proceed at its
peril. A^ol. 11, p. 437, Feb., 1919. See 890.

Cashier buying his own note for bank

961. (Tenn.) The cashier of a bank
gave his ow^n two year note for a personal in-
debtedness to John Doe, and then used the
bank's funds to buy the note, which con-
tained a guaranty of payment by John Doe.
The cashier died almost six years after the
maturity of the note, which had never been
paid, and the bank seeks to hold Doe liable.
Opinion: John Doe would be held liable to
the bank on his guaranty of payment, which
right could be enforced within six years

after the date of maturity of the note. Upon
the question whether Doe could be held upon
the note as participant in a breach of trust,
it is likely that the discount of the note by
the bank for Doe with his personal guaranty
thereon, especially as Doe was an innocent
party free from actual fault, would be held a
sufficiently legitimate transaction to make
him not chargeable as constructive trustee.
Vol. 6, p. 509, Jan., 1914.

Days of grace abolished

962. (Miss.) The Negotiable Instru-
ments Act of Mississippi, which abolished the
three daj's of grace formerly allowed, would
not affect the terms of a contract entered into
liefore the Act took effect. A note executed
before but not due until after the Act became
operative would carry three days of grace in
time of payment. Vol. 9, p. 145, Aug., 1916.

Extension of time of payment

See 772, 773, 896 et seq. 1005

963. (111.) A note contained the follow-
ing words : "The joint signers agree to waive
any extension of time without notice." Opin-
ion: Such clause constitutes an express con-
sent by the surety-makers to the extension.
But even though consent were not given by
the surety-makers they are primarily liable
under the Negotiable Instruments Act, and
ar6 not released bv the extension. Vol. 9,
p. 48, July, 1916. "

118

NOTES

970

964. (N. Y.) A bank purchased a note
made by Smith, payable to Jones's wife, in-
dorsed both by her and Jones. At maturity
it is protested for non-payment and the in-
dorsers regularly notified. Two years later
Jones agrees with the holder to make weekly
payments of $10 each. The bank asks if
agreement will affect the wife's liability.
Opinion: An agreement by the holder of a
protested note with the last indorser to ac-
cept payment by weekly installments does not
discharge a prior indorser from liability. Had
the agreement been made l)y the liolder
with the maker the wife would have been re-
leased. Vol. 10, p. 464, Dec, 1917.

965. (Okla.) A note contains a waiver
of protest and extension clause providing that
"after maturity, the time of payment may be
extended" etc., so worded to remove any ques-
tion of negotiability of note. The question
arises whether, if a bank extends the note be-
fore maturity, the other makers and indorsers
would be released. Opinion : The consent to
extension only applies when made after ma-
turity, and extension by the holder to the
principal debtor before maturity would re-
lease the sureties, except those who signed on
the face as makers. Vol. 8, p. 420, Xov.,
1915.

966. (Okla.) A's note for $1,000 was
indorsed by B and C who guaranteed pay-
ment. The holder extended the time of
payment on the note in consideration for A's
payment of 30 days' interest in advance.
Opinion: The extension of the time of pay-
ment by the holder without the consent of
B and C released them from liability. If
B and C had signed the note as surety-makers
they would not have been released from liabil-
itv under the Xegotial)le Instruments Law.
Vol. 4, p. 9:3, Aug., 1911.

967. (Tenn.) A's note in payment of a
loan was signed on its face by B and C.
There was no waiver of demand and protest.
After maturity A upon a forged order pur-
porting to be signed by B and C obtained an
extension of the time of payment, wliich was
duly granted by the holder. B and C con-
test liability because as indorsors they were
discharged for failure to protest the note, and
because of the extension agreement given
without their consent. Opinion: B and C
signed as makers and were not entitled to
protest, and under the Xegotiable Instru-
ments Act the surety-makers of a note are
primarily liable and are not discharged l)y

the extension of the time of payment granted
to the principal maker without their consent.
\o\. 9, p. 147, Aug., 191G.

968. (Tenn.) A joint and .several note
of *1.jO was executed by two makers, one of
whom was a surety. $T5 was paid on the
note after maturity, in consideration of which
an extension of time was given the principal
maker to pay the balance. The priucijial
maker did not pay as agreed and became in-
solvent. Opinion: The surety was not re-
leased by such extension of time because (1)
the agreement was not binding, being with-
out valid consideration, and even if other-
wise, (2) under the Xegotiable Instrument-
Act a surety-maker is not discharged by tiie
extension given the principal maker witiiout
his consent. The Statute of Limitations
(five years in Kentucky, where the note was
made) begins to run from the date of nia-
turitv of the note. Vol. 7, p. 103, Aug.,
1914'.

Enforcement of note by holder

969. (La.) X gives his note i<>r
•S?00 to Bank A for borrowed money;
Bank A indorses same and pledges to Bank B
as collateral for a note. Afterwards X pays
Bank A $100 on the note and takes cashier's
receipt for same. Bank .\ does not advise
Bank B to make proper credit on note. Bank
A becomes insolvent. Opinion: Assuming
the note was transferred by Bank A to Bank
B before maturity, the paynjent l)y the maker
to Bank A was inelTective against Bank B,
which can recover the full amount of the note
from the maker, or so much thereof as is nec-
essary to satisfy the lien. Vol. 8. p. 147,
Aug." 1915.

970. (Md.) A bank discounted for its
customer three notes, the proeeetis of which
were credited to the indorser's account. At
maturity of the notes payment was refused by
tiie makers, who claimed fraud. The in-
dorser cliecked out the credit he had received
from the bank, hut has a de|>osit with the
hank sutlicient to meet the notes. Opinion:
Tlie bank at maturity of the notes can enforce
payment of the nuikers free from the defen.se
of fraud in procurement, provided the pro-
ceeds credited to the indorser were withdrawn
prior to maturity. The bank is not obliged
to apply a sutlicient deposit of the indorser in
."Satisfaction of the notes, in preference to
suing the makers. Vol. 8, p. 706, Feb., 1910.

110

971

DIGEST OF LEGAL OPINIONS

971. (Mich.) A gave B in part pay-
ment fur real estate two time notes bearing
interest at the rate of six per cent. On A's
default at maturity B wrote A that he would
charge 7 per cent., because the payments were
not met when due. A did not respond to
the letter. B seeks to enforce the payment
of seven per cent, interest, and until such
payment refuses to give A a deed. The
agreement was that deed should be delivered
when notes were paid. Opinion: B has no
right to enforce payment of seven per cent,
interest, because there was no binding agree-
u\Qi\t between A and B changing the original
contract, and has no right to refuse deed
when balance of principal and six per cent,
interest are tendered. Under the laws of
Michigan it is lawful to contract for a seven
per cent. rate. Vol. 4, p. 375, Dec, 1911.

972. (Miss.) The maker and indorser
of a note having become liable thereon, the
holder desires to know which to sue first to
recover the money. Opinion: Under the law
merchant, the holder of an indorsed instru-
ment upon which the indorser has been duly
charged, can sue both maker and indorser in
separate actions at the same time or either, at
his election, but cannot join both in the same
action in the absence of statutes authorizing
such joinder, which have been passed in many
states. Negotiable Instruments Act does not
alter the rules as to remedy "by suit. The
Code of Mississippi denies the right of sep-
arate action against indorser where the maker
is a resident of the state and requires joinder
of maker and indorser in the same action.
Vol. 10, p. 122, Aug., 1917.

Governed by law of place where payable

973. (111.) Where a note is made in one
state or jurisdiction and is payable in another,
the law of the place where payable governs the
instrument. Vol. 6, p. 213,' Sept., 1913.

Note with impossible date

974. (Ga.) A bank receives for collec-
tion a note reading "February 30th after date
I promise to pay." The collecting bank in-
quires as to the liability of the maker, and
whether if collection is made and the maker
later discovers the error in date and contends
that it was collected illegally, the collecting
bank would be liable. Opinion: The note is
not illegal or void, but is payable on the near-
est date of the same month, namely February
28. Vol. 1, p. 407, May, 1909.

Joint and several notes
Sec 092

975. (Ga.) At common law, a note
drawn *'We promise," etc., signed by two or
more is joint only, but "1" promise, so signed,
is joint and several. By statute in some
states a joint note in form is made joint and
several. In absence of statute, bank desiring
joint and several note should have it read
"We or either of us," or "We jointly and
severally" promise. Vol. 6, p. 215, Sept.,
1913.

976. (111.) Note reading "I" promise
to pay, signed by two or more makers, is joint
and several under the law merchant and Ne-
gotiable Instruments Law and is a better form
from the standpoint of the holder than one
reading "we" promise to pay, which at com-
mon law is a joint note only. Vol. 5, p.
109, Aug., 1912.

977. (W. Va.) A note written "We
promise to pay" is joint only, in the absence
of a statute making it joint and several and
all the makers must be joined in an action
thereon, but each maker is liable for the full
amount. Vol. 6, p. 756, May, 1914.

Judgment notes

978. (Del.) A note contains a clause
confessing judgment if payment is not made
at maturity, and an express waiver of de-
mand, protest and notice embodied in the in-
strument itself. Opinion: The note is valid
and negotiable under the Negotiable Instru-
ments Law, and neither demand nor notice is
necessarv to hold indorsers. Vol. 4, p. 493,
Feb., 1912.

979. (Pa.) A form of note, submitted
on the question of negotiability, contains a
stipulation in addition to the promise to pay,
that the maker will "confess judgment for
the above sura with 5 per cent, added for col-
lection fees." Opinion: Where a promissory
note contains a clause authorizing confession
of judgment without the restriction "if not
paid at maturity" so that thereunder judg-
ment may be entered at any time, negotiabil-
ity of the note is destroyed. The Negotiable
Instruments Act declares that negotiability
is not affected by a provision which author-
izes confession of judgment if the instrument
is not paid at maturity and a note conforming
to this provision would be negotiable. Vol.
11, p. 669, June, 1919.

980. (Pa.) A, who borrowed $5,000
from a bank, executed a promissory note for

120

NOTES

[989

$5,000 and a judgment note for a like sum.
After he had paid $3,000, he requested a new
loan of $3,000. The bank questions the ad-
visability of taking a new judgment note or
of permitting the old judgment note to cover
the old and new debts. Opinion: The old
judgment note would not be enforceable for
the amount of the new loan, and a new judg-
ment note should be taken. Vol. 9, p. 241,
Sept., 1916.

981. (Pa.) A promissory note contains
a clause empowering any attorney of record
"to appear for and confess judgment for the
above sum, with or without declaration, with
costs of suit, release of errors, without stay of
execution.^' Opinion: The provision would
destroy negotiability of the note, as there-
under judgment could be entered up before
maturity. Such notes were held non-nego-
tiable in Pennsylvania before the Negotiable
Instruments Act, and that act makes the note
negotiable only where the clause authorizes
confession of judgment "if the instrument be
not paid at maturitv." Vol. 7, p. 895, Mav,
1915.

982. (Pa.) A clause in a note authoriz-
ing confession of judgment "at any time" de-
stroys its negotiability. A surety consenting
to the entry of judgment prior to maturity is
not discharged by such entry. Vol. 7, p. 306,
Nov., 1914.

983. (Pa.) When a note contains a
judgment clause constituting an immediate
confession of judgment, upon which judg-
ment could be entered before maturity, it is
non-negotiable, both under decisions in Penn-
sylvania and under the Negotiable Instru-
ments Act. Vol. 4, p. 374, Dec, 1911.

984. (Pa.) A and B borrowed $1,000
from S, giving therefor a note containing
power to confess judgment, a seal being op-
posite their signatures as makers. C signed
tlie note for acconnnodation only and no
seal follows his name. A and B liavo as-
signed and C contends that he cannot be held
because his signature was not under seal.
Opinion: The validity of a judgment note is
not affected bv the fact that it is not given
under seal. Vol. 4, p. 156, Sept., 1911.

Liability of surety

985. (Tex.) A signed a {jroniissory note
in favor of a bank, whicli discounted it for
him. The understanding witli A was that B
would also sign as surety, but B was not pres-
ent at tlie time. Later B did sign as surety.

On A's failure to pay, payment is sought to
be enforced against B. Opinion: B's signa-
ture is without consideration and not binding
unless made in pursuance of a promise made
in advance of discount. Vol. 8, p. 145, Aug.,
1915. See 67, 68, 69, TOO. t»82.

Maturity of notes

986. (Miss.) The rule of the law mer-
chant is that the term "month" in a bill or
note means a calendar and not a lunar month.
A note dated January 31st payable in one
month, fixed, after date, matures on Febru-
ary 28. The common law rule is tiiat when
the date of maturity falls on a Sunday or hol-
iday it is pavable on the next succeeding bus-
iness day, but if the instrument carries grace,
it must be presented on the business day pre-
ceding. The due date of holiday maturing
paper is now quite generally regulated bv
statute. Vol. 1, p. 297, Feb., 1909.

987. (Neb.) Under the law merchant
and the Negotiable Instruments Act, in com-
puting the time an instrument lias to run, the
day of the date is excluded and the day of the
payment is included. A note dated January
1, 1915, given for one vear, i< pavable Jan-
uary 1, 1916, not December 31, 1915. Vol.
6, p. 759, May, 1914.

988. (N. Y.) A note dated December
29, 30 or 31, payable two months after date,
falls due on February 28, or in leap year.
February 29. It is the rule of the hiw
merchant that when a note payal)le one or
more months after date is dated on a day of
the month which has no corresponding day in
tlie month of maturity, the day of maturity
is not carried over to the following montli
but falls on the last day of the month in whicli
it is i)ayablc. Vol. 10, p. 715, April, 1918.

989. (Pa.) A provision in a collateral
note authorizing the holder to demand addi-
tional security from time to time and in de-
fault thereof immediately maturing the note.
destroyed negotiability under the majority of
earlier decisions, as it made the note uncer-
tain as to amount and time of payment.
Since the enactment of the Negotiable Instru-
ments Law, the question of nrgotinbility is
still doubtful, except in Wisconsin, where a
special provision of the Negotiable Instru-
ment.s Law makes such a note negotiable, and
it would be safer for a bank to regard such
note non-negotiable until the question is de-
cided. Where such a note is held negotiable
and is indorsed, the question of precii^e date
{,f maturitv. whether the note immediately

121

9901

DIGEST OF LEGAL OPINIONS

matures upon default or only at tlic o])tion of
the holder, is important (1) as respects the
rights of suhpcqucnt purchasers (2) as to
charging indorsers. There is a difference
between the Wisconsin and federal courts
upon this question. Vol. 2, p. 533, June,
1910. See 893, 893, 895.

Note collected by agent without authority

990. (Okla.) The purchaser of a cream
separator gave the company selling the same
his note of $60, The company's agent, who
liad authority only to sell, collected payments
on the note, giving a receipt therefor, and
did not account to his principal. The com-
pany sought to hold the purchaser liable on
the note. Opinion: Authority to the agent
to sell did not include authority to collect the
note unless the company intrusted the agent
with the possession of the note. Payment to
the agent was at the purchaser's risk, unless
he can prove that the agent had actual or os-
tensible authority to receive payment without
having possession of the note. Vol. 7, p. 35,
July, 1914. See 671 et seq.

Renewals

991. (Fla.) Where there is a binding
agreement supported by a valid consideration
between the holder and maker to extend the
time of payment of a note, the extension is
just as bincling if the contract is evidenced by
indorsement on the note and the giving of a
receipt for the interest for the extended per-
iod, as if a new note is taken in renewal. The
effect of such an agreement indorsed on the
note is to postpone the holder's right of action
and the commencement of the running of the
statute of limitations until expiration of the
period for which extension is granted. Vol.
10, p. 597, Feb., 1918.

992. (Mich.) A and B sign a joint note
for $500, due in three months. A signed a
new note in renewal, but B being absent was
unable to sign. Both notes were retained.
Opinion : The new note does not operate as a
payment of the original, but only as a sus-
pension of the debt evidenced thereby. Vol.
7, p. 997, June, 1915.

993. (Pa.) A, B and C were makers of
a note held by a bank. The bank, not wish-
ing to carry the note as overdue paper, caused
A and B to execute a new note in renewal of
the indebtedness, which C, because of sick-
ness, was unable to sign. The bank did not
destroy the old note but kept both. Opinion :
Where a new note is given in renewal of an
old note and the latter is retained, the weight

of authority is to the efTect that the old note
is not extinguished unless the intention is to
accept the new note in satisfaction and dis-
charge of the first. Vol. 6, p. 272, Oct., 1913.

994. (Wis.) A gave a note to B Corpor-
ation for goods sold, and at maturity by ar-
rangement with B for renewal of part of the
debt, paid the note to the holding bank and
executed a new note for a less amount. The
B Corporation indorsed and discounted the
renewal note. Opinion : The transaction con-
stituted a renewal and not a payment, and
the new note is based on the same considera-
tion as the old note. The indorsement of the
B Corporation is therefore not for accommo-
dation, and the bank can hold the corporation
in the event of non-pavment bv the maker.
Vol. 8, p. 323, Oct., 1915.

Use of seal
See 984

995. (Fla.) A note is drawn by the
maker, payable to his own order, and in-
dorsed by him to another. It provides for
costs of collection, attorney's fees, and con-
tains provisions waiving the benefit of certain
laws intended for the benefit of the obligors.
A seal is attached to the maker's name.
Opinion: The note is negotiable under the
Negotiable Instruments Law, although at
common law the seal would destrov the nego-
tiability. Vol. 4, p. 95, Aug., 1911.

996. (Pa.) It is a well settled doctrine
that a corporation may make promissory
notes and simple contracts without affixing
its corporate seal. LTnder the law merchant,
the affixing of a seal to an individual note de-
stroyed its negotiability but this rule was
generally held not to apply to corporate notes
under seal. Under the Negotiable Instru-
ments Act the validity and negotiable char-
acter of an instrument are not affected by the
fact that it bears a seal. Vol. 5, p. 523, Feb.,
1913.

997. (Pa.) A seal is not necessary to
the validity of a corporation note, but the use
of a seal does not affect its negotiability. Un-
less the charter or governing statute requires
it, the act of a corporation need not be evi-
denced by its corporate seal, except where a
seal would be required in the case of indivi-
duals. Vol. 5, p. 523, Feb., 1913.

998. (S. C.) At common law a note of
an individual under seal is not negotiable,
but under the Negotiable Instruments Act,
the nee:otiabilitv is not destroved bv the ad-
dition of a seal." Vol. 6, p. 274, Oct., 1913.

122

NOTES

1006

Statute of Limitations on demand note

999. (Cal.) In California the Statute of
Limitations begins to nm against the maker
from the date of a demand note, not from the
date of its apparent maturity, and the note
is outlawed four years from date. Vol. 9, p.
825, April, 1917.

1000. (La.) In Louisiana, the Statute
of Limitations begins to run from the date
on a demand note and not from demand,
such being the rule in most other states and
the note is outlawed unless an action is
brought within five years from the date. Vol.
6, p. 757, May, 1914.

1001. (N. J.) A corporation issued its
demand note in 1911, there being several in-
dorsers each waiving presentment, demand
and notice of protest. No demand upon the
instrument Avas made until 1918. Are the
indorsers liable? Opinion: The six year lim-
itation provided by the New Jersey Statute
of Limitations will not only bar recovery
from the makers but also the indorsers. The
statute begins to run from the date of the
instrument, whetlier or not it draws interest.
Vol. 11, p. 171, Sept., 1918.

1002. (N. Y.) A bank received as se-
curity for a loan of $15,000 made to a fruit
growers' association, thirty demand notes of
$500 each, payable to the order of the asso-
ciation. The bank raises three questions.
First: Should a place of payment be desig-
nated in the notes ? Second : How long is the
demand note good? and third: Would a de-
mand note draw interest where it contained
no provision to that effect? Opinion: Tt
would be preferable as a matter of conven-
ience to have the demand note payable at the
bank. The Statute of Limitations begins to
run \ipon a demand note from its date and
an action is barred after six years. Where
the note makes no provision for interest the
rule in New York is that it does not draw in-
terest before demand or commencement of an
action. Vol. 11, p. 670, June, 1919.

1003. (N. Y.) Under the Statute of I>im-
itations in New York the person wlio guar-
antees payment of a note and any renewal of
the same is liable for six years from the time
the cause of action on tlie note accrues, which
would be the date of maturity of the note —
or of the renewal if such was the case. The

guaranty of payment of a demand note would
run six years from the time of delivery. Vol.
4, p. 28, July, 1911.

Notes containing words "with exchange"

1004. (Ind.) A note for .^'i.oUO wjis
drawn and made payable at one and the same
place "with exchange," without designating
that the exchange is on another place. The
full amount of the note was paid witiiout de-
duction. Opinion: The words ''with ex-
change" in the note were meaningless and no
exchange charges were collectible from the
payor bank. Vol. 0, p. 701, May, 1914. See
300, 3(J1, 362, 1061.

Indorser released by extension of time

1005. (Ore.) A gave B his nt-gutialde
promissory note, due in six months, jiaynient
of which was guaranteed by B, who dis-
counted it at the bank. At maturity the
bank extended A's time of payment thirty
days. The note also contained the accom-
modation indorsement of C. Opinion: An
indorser who guarantees payment is second-
arily liable under the Negotiable Listruments
Act and if a binding extension of time is
granted to the principal maker without his
consent he is discharged from liability. Under
the Negotiable Listruments Act a surety who
signs as maker is not discharged by such ex-
tension, the common law being changed in
this particular. Vol. 9, p. 657, Feb., 1917.
See 964-967.

Accommodation maker not released by
extension of time

1006. (S. Dak.) A note ha.l lioen signed
bv two jiarties. one who received tiie money,
the other acting as accommodation maker.
The note being past due, the payee took a
new note from the first party. Does the ex-
tension of the time of paNTnent release the
accommodation maker? Opinion: The doc-
trine of the hiw of suretyship that a binding
extension of time by the crnlitor to the prin-
cipal debtor releases a non-consenting surety
has, according to a number of authorities,
been abrogated by the Negotiable Instruments
Act where the surety signs the instrument as
one of the makers. This point has not been
decided in South Dakota, but according to the
weight of authority the accommodation
maker being primarilv liable would not be re-
leased. Vol. 11, p. 213, Oct.. 1918.

123

1007

NOTES PAYABLE AT BANK

For Stoi)j)in;,^ J'iij'inout of iS'otes i'liyablc at Jiuiik, Suo l2l'.)-\252

Equivalent to order to pay at maturity
See 772, 1212, 1330

NoTK: TIic Ncpjotiablc Instnimont.s Act, Sec. 87,
])rovide.s: "U'lierc the iiislnmiiMit is made ])iiyivl)le
at a bank it is equivalent to an order to tlie l)ank
to pay the same for the account of tlio jirincipal
debtor thereon." The Negotiable Instruments
Act has been passed in all the states except
Georgia. As passed in Illinois, Nebraska, and
South Dakota, however, the above provision is
omitted; in Kansas, the section, while originally
enacted, was repealed by chapter 94, Laws of
1915, and in Minnesota the word "not" was in-
terpolated. In tliose states, therefore, the bank
is not authorized or obliged to pay its custom-
er's note, made payable at the bank (as indicated
in the opinions digested below), without express
instructions from him. In all other Negotiable
Instruments Law states it is so authorized and
obliged. In Missouri, the legislature by amend-
ment in 1909, added the following at the end of
the Section : "But where the instrument is made
payable at a fixed determinable future time, the
order to the bank is limited to the day of ma-
turity."

1007. (Mo.) Under the rule of the Ne-
gotiable Instruments Law a man who makes
his note payable at his bank thereby orders
it to pay it at maturity and the bank is
obliged to carry out this order, when in suffi-
cient funds, the same as if the order was by
check. Vol. 3, p. 276, Nov., 1910.

1008. (N. C.) Under the Negotiable
Instruments Law it is probable that the au-
thority of a bank to pay a time instrument,
payable at the bank, is limited to the day of
maturity only, although the point lias not yet
been passed upon in this country. Vol. 3,
p. 524, March, 1911.

1009. (Okla.) In Oklahoma, under the
rule of the Negotiable Instruments Law, a
depositor who issues his note payable at the
bank wherein he keeps an account, thereby
orders the bank to pay the same at maturity.
It becomes the duty of the bank, if in funds,
to pay the note, and the bank incurs no lia-
bility to the depositor for so doing, even
though he afterwards objects to the payment
and claims he had good reason for having
payment of the note refused. Vol. 3, p. 336,
Dec, 1910.

1010. (Pa.) A note is made payable at
a bank. At maturity the account is good for
the amount. No order has been given not
to pay. The bank inquires whether a specific
notice must be given the bank by the maker
to entitle it to pay the note. Opinion : LTnder
the Negotiable Instruments Law it is the au-
thority and duty of a bank to pay a customer's

note made payable at the bank without ex-
press instructions from the customer. Vol.
4, p. 304, Nov., 1911.

Express instructions to pay

See 425

1011. (Cal.) Notes made payable at a
California bank, where the maker had suffi-
cient funds, were forwarded to the bank for
collection. The bank inquired of the maker
by mail and telephone whether it should pay
or refuse payment but received no response.
Opinion: The law in California is uncertain
whether the note operates as an order or au-
thority to the bank to pay and charge to the
maker's account, or whether the bank has no
right to do so in the absence of express in-
structions from the maker. Vol. 7, p. 383,
Dec, 1914.

Note: In 1917, California passed the Nego-
tiable Instruments Act, Sec. 87 of which (Civ.
Code §3168) provides: "Where the instrument is
made payable at a bank it is equivalent to an
order to the bank to pay the same for the account
of the principal debtor thereon." See note under
heading "Notes payable at bank."

1012. (Cal.) ^Miere A and B have a
joint account in bank payable on presenta-
tion of pass-book, and A makes her individual
note payable at bank. Opinion: That bank,
holding note for collection at maturity, has
no right to charge same to joint account, but
should protest unless funds to pay note are
taken out of joint account by A on presen-
tation of pass-book or are otherwise provided
by A for purpose of meeting the note. Vol.
6, p. 96, Aug., 1913.

1013. (111.) In Illinois the Negotiable
Instruments Law omits the provision 'Where
the instrument is made payable at a bank it
is equivalent to an order to the bank to pay
the same for the account of the principal
debtor thereon" which is contained in the uni-
form law of other states. Under the judi-
cial decisions of Illinois it would seem that a
bank has no authority to pay its customer's
note made payable at the bank, unless express-
ly ordered to do so by its customer, the note
itself not constituting such order. Vol. 3,
p. 337, Dec, 1910.

1014. (Minn.) Where customer makes
note payable at bank it is bank's duty, under
Negotiable Instruments Act, to pay and
charge same up to customer's account with-
out special order. In a few states, however,
including Minnesota, the rule of the Nego-
tiable Instruments Act has been changed and

124

NOTES PAYABLE AT BAXK

1023

bank should not pay without special order
from customer. Vol. 10, p. 854, June, 1918.

1015. (Miss.) In states having the Ne-
gotiable Instruments Law (\<qth a few ex-
ceptions) a note payable at the maker's bank
is equivalent to an order on the bank to pay
the same for his account. In Mississippi the
point has not yet been decided, but the safer
practice is for the bank to refuse to pay in
tlie absence of instructions. Vol. 5, p. 106,
Aug., 1912.

Note: The Negotiable Instruments Act was
passed in Mississippi in 191G; see note under
lieading "Notes payable at bank."

1016. (Mo.) Under Negotiable Instru-
ments Act, except where modified in certain
states, it is the duty of a bank whose depos-
itor has made his note payable at the bank
to pay the same at maturity, the funds being
sufficient, althougli tlicre is no other express
instruction from the depositor to pay. Vol.
6, p. 506. Jan., 1914.

1017. (Okla.) A holds note of B pay-
able to order of A at C bank. B has money
on deposit at C bank at maturity of note. C
bank is uncertain of its right and duty to pay
when presented at maturity. Opinion: The
Negotiable Instruments Law provides :
"Where the instrument is made payable at
a bank it is equivalent to an order to the bank
to pay the same for the account of the prin-
cipal debtor tliereon." Vol. 4, p. 219, Oct.,
1911.

1018. (W. Va.) The purpose of the sec-
tion of the Negotiable Instruments Law mak-
ing a note payable at a bank equivalent to an
order to pay for the account of the maker, is
to oblige as well as to authorize the bank to
pay when in funds, and it was enacted to
clear up a conflict in decisions. Vol. 4,
p. 304, Nov., 1911.

Maker's readiness to pay stops interest

1019. (Okla. A made his note payable
at a bank on demand after date. The note
was not presented at the bank where the
maker always had sufficient funds. Opinion:
The maker is liable in an action by the payee,
but if the maker pleads and proves that he
had sufficient funds in the bank at maturity
and pays the money into court, he is lial)le
only for the principal without interest after
maturity or costs. Vol. 8, p. 518, Dec, 1915.

1020. (Iowa.) Where maker has funds
in bank at maturity, failure of bank owning
note payable at bank to charge to account, or
of outside holder to present for payment, will
stop tlie running of interest. Vof. 5, p. 831,
June, 1913.

Payment after maturity
See 1335, 133G

1021. (Kan.) Where a customer makes
a note payable at a bank, the Negotiable In-
struments Laws provides that the instrument
is an order to the bank to pay the same for the
account of the principal debtor thereon.
Where the note is payable "thirty days after
date," tlie bank should pay at maturit)'. If
j)resented after the maturity the bank slinuld
first require express authority from the
maker. If the note is "payable on demand
after date" the bank should pay, provided the
note was presented within a reasonable time.
Vol. 5, p. 524, Feb., 1913.

Note: This section of the Negotiable Instru-
ments Act making an instrument payable at a
bank equivalent to an order to pay was ropeale<l
by the Legislature of Kansas, I'h. 04, Laws of
1915. See note \inder heading "Instruments pay-
able at liank."

NOTICE OF DISHONOR

Accommodation indorser entitled to
notice

See 1173

1022. (D. C.) Three accommodation
notes intended for discount were drawn as
follows: No. 1, payable to and indorsed by ac-
commodation party and discounted for tlie
maker; No. 3, payable to bank, indorsed by
the accommodation party and discounted for
the maker; No. 3, made by accommodation
party and discounted for the payee. Ojnn-

ion : The bank is equally protected by notes 1,
2 or 3, except that in case of notes No?. 1 and

2, demand and notice would bo required to
preserve the liability of the indorser, unlc^js
the notes contain a waiver. As to note No.

3, no demand and notice are necessary to hold
the accommodation party who is liable as
maker. Vol. 7, p. 218, Oct.. 1914.

1023. (111.) A corporation oxooutcd its
note payalilc on demand to B. and indorsed
for accommodation by C. one of its officers.
Payment was demanded ninety days later

125

1024

1)u;e,st of le(j;al oi'INions

and rel'iised. C was not notified of its non-
})ayment until several weeks thereal'tcr.
Opinion: Under the Ne;^otial)le Iiistniinerits
Act, C, the indorser, is released from liability.
Irrespective of the (juestion whether demand
of payment was made in due season, the fail-
ure to give C due notice of dishonor released
C. Vol. 8, p. 326, Oct., 1915. See 76.

1024. (Ind.) A customer discounted
and forwarded for collection a note given T:)y
a corporation and indorsed by officers of the
company as individuals. The corporation
went into the hands of a receiver. At ma-
turity the note was presented by a notary at
the place of business of the company, which
was also the place of business of the indors-
ers, but being closed he was unable to make
formal demand. The notary notified the
payee of the dishonor but no notice of pro-
test was sent to the individual indorsers.
Opinion: The officers of a corporation who
indorse its note are entitled to due present-
ment and notice of dishonor unless the facts
constitute an implied waiver or the indorser
is the person to whom the instrument is pre-
sented for payment. Under the facts there
would seem a fair ground for holding the in-
dorsers liable, although there was an
omission of notice of dishonor. Assuming,
however, the accommodation indorsers were
discharged, neither the collecting bank nor
notary would be liable, because it is only ob-
ligatory upon a collecting bank to notify its
immediate principal. Vol. 9, p. 236, Sept.,
1916.

Duty to notify

1025. (Colo.) A bank in Colorado re-
ceived from its customer a promissory note
for collection in Milwaukee. The note was
signed by A and indorsed unqualifiedly by B,
and was forwarded to its Milwaukee corres-
pondent, who presented the same on the date
of maturity. The instrument was not paid,
but the bank as collecting agent failed to
notify B of non-payment. It did, however,
immediately notify the Colorado bank, which
notified its customer, who in turn notified the
indorser. The indorser has refused to pay
the note. Opinion: Formal notarial protest
was not required to hold the indorser, the in-
strument not being a foreign bill of exchange,
and the collecting agent in IMihvaukee gave
notice to his immediate principal — that is,
the Colorado bank — apparently in due sea-
son; the principal immediately notified its
customer, the prior indorser, and he in turn
notified B, his prior indorser, who is the

party sought to be held liable. Consequently
due notice of dishonor was given. An agent
for collection may either himself give notice
of dishonor to all parties liable or he may
give notice to his principal and the principal
himself notify prior indorsers. Vol. 11, p.
168, Sept., 1918.

1026. (N. Y.) Bank receiving note for
collection is only obliged to send notice of
dishonor or protest to immediate principal.
Express agreement would be necessary to
create duty to notify all prior parties. Vol.
4, p. 434, Jan., 1912.

1027. (N. Dak.) A drawee received
through the mail an indorsed inland check,
payment of which had been stopped. The
drawee bank, having returned the item to the
presenting bank, asks if it is its duty to notify
all the indorsers of dishonor. Opinion: The
drawee is not obliged to notify all of the in-
dorsers but notice to the immediate principal
is sufficient. It is customary, however, for
the collecting bank to protest an inland check
as a convenient means of proving dishonor.
Vol. 9, p. 499, Dec, 1916.

Notice upon default of instalment

1028. (Mich.) The principle is well
established that where the principal of a
note is payable in instalments, a failure to
pay one of them when due makes the note
dishonored paper. An indorser is discharged
by failure to give notice of dishonor upon
default in payment of an instalment, but
according to some cases, is liable for subse-
quent instalments of the non-pa}'ment of
which he is duly notified. Vol 7, p. 998,
June, 1915.

1029. (Mich.) A gave B his note for
$825, payable in monthly instalments of
$25. A made sundry payments but not ac-
cording to the agreed instalments and finally
owed $135 on the note on the day the whole
debt would have been discharged had the
payments been regular. Xotice of protest
was duly mailed to C, the indorser, who
claimed non-liability because he received no
notice of A's failure to pay each instalment
according to the terms of the instrument.
Opinion: Upon the first default in payment
of any instalment, the note became overdue
and dishonored. C the indorser was dis-
charged by failure to give notice of dishonor
upon the default in payment of the instal-
ment. According to some cases, if the in-
dorser is notified of the non-payment of sub-
sequent instalments, he can be held, but this

126

NOTICE OF DISHONOR

1037

rule would not apply in the present case ex-
cept, possibly, as to the Kist instalment. Vol.
7, p. 998, June, 1915.

Provisions in the Negotiable Instruments
Law

See 1034, 1173

1030. (Pa.) The Negotiable Instru-
ments Law governing notice of dishonor
provides that : "The notice may be in writ-
ing or merely oral, and may be given in any
terms which sufficiently identify the instru-
ment, and indicate that it has been dishon-
ored by non-acceptance or non-payment. It
may in all cases be given by delivering it
personally or through the mails." For a
form of notice see Vol. 2, p. 190, Nov., 1909.

Sufficiency of notice

1031. (Colo.) A check of $111 on a
hank in Ohio was indorsed on October 26th
to a bank in Colorado by one of its depositors
and forwarded for collection. Notice of pro-
test was not received by the bank until No-
vember 11th and the amount was described
as $110. The bank immediately notified its
depositor that it had received such notice of
protest. The depositor refused to reimburse
the bank on the ground that the notice of
protest did not refer to the item indorsed
iiy him. Notice of protest of a further check
deposited at the same time was not received
by the bank until November 14th. Opinion:
The mere inaccuracy in the statement of the
amount of the dishonored check did not in-
validate the notice of protest where the in-
dorser was not misled thereby. But assum-
ing the checks were presented and protested
on October 31st (the inquiry omits the date
of forwarding) the notice of dishonor should
have been mailed not later than November
2d, and the fact that the notice was not re-
ceived in one case until November llth and
in the other until November 14th would in-
dicate that the notice Avas not mailed in due

season and the indorser would be discharged.
The Colorado lank, however, can recover
from the collecting bank if the latter was
responsible for the delay which responsibility
would extend to the negligence of the notary
employed by it. Xo]. 9, p, oSO, Jan., 1917.'

Surety-maker of note not entitled to
notice

>.<-e !U)7

1032. (Neb.) B and C made a note
payal)U' to A. At maturity B refused to pay.
Six months later A demanded payment from
C, who refused on the ground that he received
no notice of dishonor. Oinnion: No notice
was required to bind C, who is one of the
makers, even though he is suretv for another
maker. A'ol. 4, p. 94, Aug., 1911.

1033. (S. C.) Notice of dishonor is not
required to be given the maker of a note, and
a joint maker, though a surety, is not entitled
to such notice. Vol. 6, p. 687, April, 1914.

Waiver of notice of dishonor
See 1170 et scq

1034. (Mass.) Under the Negotiable
Instruments Law a waiver of demand and
notice if embodied in the instrument binds
all parties, but where it is written above the
signature of an indorser it binds him only.
The law does not recpiire the waiver to be
handwritten. Vol. 9, p. 415, Nov., 1916.

1035. (S. C.) In the body of a note was
inserted "notice of ])rotest is hereby waive<i
by all parties liable herein.'' Ofiinion: This
is binding on all parties as a waiver of notice.
but miglit not be construed as a waiver of
l)reseiitmcnt. Vol. 6. p. 687, April, 1914.

1036. (S. C.) W here a note payable to
a l)ank was signed on its face by John Doe
and on its back l»y IJichard IJoo the latter is
liable as an indorser and is entitled to notice
of dishonor, uidess the instrument contains
a waiver. V»L «i. p. 687, April, 1914.

PASS-BOOKS

Assignment of pass-book

1037. (N. H.) r.ank A loaned an iinli-
vidual $1,000 upon the collateral security of
a written order and a pass-book connected
with a savings account in Bank B. Bank li
received and accepted notice of the assign-
ment and later failed. The depositor was
also a stockholder in Bank B, lial)le to assess-
ment. The receiver of Bank B refused to

obey tiie written order given by its depositor
and jiroposed to hold the account to soiMirc
the depositor's lialiility as stockholder. OjAn-
ion: Bank A is entitled to the deposit and
sueli right is .^^uperior to any claim of lien
by the receiver for B. In this case the as-
signment would have been valid, even without
the notice to or acceptance bv Bank B. Vol.
8, p. 510, Dec., 1915.

127

1038

DIGEST OF LEGAL OPINIONS

1038. (N. C.) A savings bank or sav-
ings (l('i)artnient pass-hook contains a rule
reiiuiring its present nient wlien money is
withdrawn in order that j)aynu'nt may he
duly ent^^red therein. A check was cashed
without sucii presentment and no entry ol" the
witlidrawal was made in the pass-book. An
innocent assignee or pledgee of the book ad-
vanced value thereon upon faith of the entries
shown. Opinion: A savings pass-book
is not negotiable and the assignee cannot hold
the bank liable where the withdrawals have
not been entered as provided by the rules
printed in the book. The savings bank is not
estopped to show the tnie state of the account.
Vol. 7, p. 306, Nov., 1914.

1039. (S. Dak.) A depositor of a sav-
ings bank withdrew from his account of $500
the sum of $100, but, contrary to the rules
printed in his pass-book, the withdrawal was
not entered therein. He then assigned the
book, showing a balance of $500 to Bank A,
which cashed his check for $500. The sav-
ings hank admitted liability only to the
extent of $400. Opinion: Bank A is the loser
of $100 unless it can recover that amount
from the depositor. The savings bank is not
liable, because the pass-book is not a nego-
tiable instrument and Bank A took no greater
rights than the depositor. Vol. 3, p. 9,
July, 1910.

1040. (S. Dak.) A savings t)ank or
savings department pass-book is not a nego-
tiable instrument, and an assignee of the
book and account from the depositor takes
no greater rights than the latter against the
bank. Vol. 3, p. 9, July, 1910.

Duty of depositor to examine pass-book

1041. (W. Va.) An item of $50 cred-
ited in a pass-book in December, 1911, was
not entered on the bank's ledger to the credit
of the depositor and was omitted in the bal-
ancing of the account in January, 1912, and
in subsequent balancing. No claim was made
that the bank had made an error until more
than six years later, and then by the admin-
istrator of the depositor. In the meantime,
the deposit tickets of December, 1911, were
destroyed and the administrator could not
produce the checks which entered into the
balance of January, 1912. Is tlie bank liable
for the amount? Opinion: In this case it
would undoubtedly he held that the failure
on the part of the depositor to examine his
pass-hook and returned vouchers without un-
reasonable delay, and to report errors to the
bank will free the bank from liability. It is

the duty of a depositor to examine his pa.s8-
book and report errors within a reasonable
time after balancing and his failure so to do
will, according to some cases, estop him from
thereafter questioning its correctness, if the
bank would be thereby prejudiced, while other
cases hold he is not thereby estopped, but that
the burden of showing error is placed on the
depositor. Vol. 11, p. 98, Aug., 1918.

Nature of pass-book

Soe 141, 4G6, 814, 1038

1042. (Colo.) Bank A cashed several
checks for a party drawn on a bank at Sul-
phur Springs, Colorado, upon the strength
of a pass-book given him by that institution,
sliowing a credit of $300. The Sulphur
Springs bank refused payment of the checks,
stating that credit was given the drawer by
mistake and the entry in the pass-book was
invalid. Opinion: The pass-book was not a
letter of credit, but merely prima jade evi-
dence of a deposit and the bank may show
that credit was given by mistake or for an
invalid item. A check not being an assign-
ment under the Negotiable Instruments Law
Bank A has no right of action thereon against
the drawee. Vol. 4, p. 492, Feb., 1912.

Presentation of savings pass-book

See 529 et seq., 1012

1043. (Pa.) A depositor having a sav-
ings account issued his check to the order of
B in negotiable form. The check was de-
livered to B without the pass-book, which
provided that the bank will not honor any
checks on the account unless accompanied by
the pass-book. B indorsed to the order of C,
who had the check certified by the bank.
After the bank charged the amount to the
drawer's account, it learned that B obtained
the check through fraud. Opinion: Pa}Tnent
of such a check without production of the
pass-book would probably be valid, the condi-
tion of production being waived by both
drawer and drawee; and, payment being
valid, certification of the check in the hands
of a bona fide holder would be equally charge-
able to the depositor. Vol. 5, p. 525, Feb.,
1913.

Rules in savings pass-book
See 504, 530, 531, 532, 1038

1044. (Pa.) A check drawn on the D
national bank was cashed by a bank and pre-
sented to the drawee, which refused pavTiient,
stating that the drawer had a savings account
which was good for the amount but the rules

128

PAYMENT

1051

required that a check on the savings depart-
ment must be accompanied by the customer's
bank-book. The holder questions the right
of the drawee to refuse payment under such
rules. Opinion: The rules constitute a con-
tract between bank and depositor under
which the bank would have a right to refuse
to pay a check unless accompanied by the
book. The remedy of the holder of the
check is against the drawer and prior parties,
unless the book can be procured from the de-
positor to accompany the check. Vol. 2, p.
412, April, 1910.

1045. (W. Va.) The by-laws contained
in a savings bank pass-book provide : ''If any
person shall present a book and falsely allege
himself or herself to be the depositor named
therein, and thereby obtain the amount de-

posited, or any part thereof, this institution
will not be liable to make good any loss tlie
actual depositor may sustain thereby, unless
previous notice of his or her book haring
been lost or taken shall have been given at the
office of the bank." A book of a depositor
was stolen, presented to the bank and pay-
ment was made on a forged signature. The
liank received no notice of the loss of the book
until the day after tiie forgery was perpe-
trated. Under the above rule what are the
bank's rights? Opinion: A rule printed in
the pass-book of a depositor that the bank will
not be liable fur payment to a person pre-
senting the book who falsely alleges himself
to be the depositor, will not relieve the bank
making payment to such person upon forged
order unless it uses reasonable care. Vol. 10,
p. 46, July, 1917.

PAYMENT

Payment after notice of assignment

1046. (Ariz.) The purchaser of a bill
of goods from a firm in New York City
brought the invoice of the goods to his bank,
which at his request made and sent a draft
payable to the firm in payment for the goods.
The invoice contained the following notation
printed in red ink, which Avas overlooked by
the bank and the debtor : "This bill is as-
signed and payable to A, B, & Co., Bankers."
Opinion: In the event the firm did not refund
the amount of the draft which was paid by
mistake, the debtor who had notice of the as-
signment must pay again to the assignee.
The notice of the assignment printed in red
ink was of such prominence as to be regarded
as suificient. The bank would not be lialile
for negligence in overlooking the notice of
assignment, because debtor also overlooked
same and the mistake was mutual. Vol. 7,
p. 100, Aug., 1914.

1047. (Tenn.) A dealer who sold a bill
of timber to a ship building company made
an account against the company and trans-
ferred it to a bank, at the same time notifying
tiie company of the assignment. The com-
pany nevertheless sent its check to the dealer.
Opinion: After the notice of assignment to
the debtor, ])uynient to the assignor is at its
risk and renders the company liable in case
of loss. Vol. 5, p. 173, Sept., 1012.

Application of payment

1048. (Mont.) A gave his note to a
baid-c and B signed Avith him. After matur-

ity A tendered the money to the bank with the
request that it be applied on such note. The
bank applied the money on other notes of A.
Opinion: B as surety has a perfect defense to
a suit on the note in the plea of payment.
A debtor voluntarily paying money to liis
creditor has the primary and paramount
right to direct the application of his money
to such demands as he chooses. Vol. 7. j). 38,
July, 1914.

1049. (Wyo.) A bank held two past
due notes, one insufficiently secured by real
estate, and the other over-secured by chattels.
In satisfaction of the chattel mortgage note,
the debtor tendered his check marked "for
chattel mortgage." The bank refused to
apply payment as specified and in.sistod upon
applying payment upon the real estate note.
The debtor ae<|uieseed in the action by the
bank. Opinion: T\\o deljtor had tiie ]>riniary
rigid to have the money applied in payment
of the chattel nmrtgage note, but where the
bank ap|)lied the {)ayment upon another debt,
asc(|uiescen('e bv the debtor ratified such ap-
plication. Vol". 7, p. 37. July. 1:M I.

Conditional payment by check

1050. (N. Y.) .\ check taken a» abso-
lute payment of a note will operate to extin-
guish the note, but, in the absence of an
agreement, the giving and receipt of a check
is usually considered a conditional payment
onlv and not ab.'iolute until the check itself is
paid. Vol. '\ p. 829, June, 1913.

1051. (Wis.) A check was received by
a bank to take up a note held by it due on

129

1052

DKii'is^r oi' lI':(;ai. oimxions

the fitli. The noto was rctaiiul until jmy-
iiiont of the check on the 7th. Oijinioii: The
checjk was received as conditional payment,
and the stainpin*^ of the note "paid on the
7th" is correct as indicating the date of ac-
tual i)avnicnt. Vol. 0, p. J)4, Aug., 1913.
See 11(5').

Payment by mistake

Sec 4-24, 4S4, 4S.j, (iUi, (V.U

1052. (111.) A customer handed in to
liis hank several checks aniountin_ti; to several
hundred dollars, and from this amount a
note and interest was deducted and a halance
struck in favor of the customer, which was
paid over. It was afterwards discovered that
the balance was incorrectly figured at an ex-
cess of $30. Opinion: The bank can recover
the money as being paid under a mistake of
fact. The fact that the error was made in
figuring the balance makes the case stronger
for the bank than if the balance was correctly
struck and the mistake occurred in paying
over the cash, for the teller's testimony of
over-payment would be supported bv the orig-
inal figures. Vol. 4, p. 493, Feb.,"l912.

1053. (Mont.) A bank in Montana re-
ceived from a Kentucky bank a sight draft
for $72. G7 with a bill of lading attached
covering a balance claimed due on a shipment
of liquor from a Kentucky distillery to a local
liquor dealer. The local dealer paid the
Montana bank the amount, surrendered the
bill of lading and obtained his goods. The
Montana bank by mistake sent its draft pay-
able to the distillery instead of to the bank.
The distillery under the misapprehension that
the draft came from the local dealer, instead
of turning it over to its bank or returning it
to the Montana bank, indorsed it in blank and
returned it to the local dealer. The dealer
cashed it at the Montana bank and held the
money, claiming that "the distillery was in-
debted to him for $68. The Montana bank
wishes to be advised. Opinion: The local
dealer is not a holder in due course and the
Montana bank has a right of recovery of the
money paid to him under the rule that money
paid under mistake of fact is recoverable.
Vol. 10, p. o9G, Feb., 1918.

1054. (Mont.) A bank in the ordinary
course of business pays to a bona fide holder
a check drawn on it, under the mistaken be-
lief that the drawer had funds when he had
not. Opinion : Payment cannot be recovered,
and the fact that the holder would be in no
worse position if com])elled to refund than if
payment had not been made does not author-
ize a recovery. Vol. 10, p. 377, Nov., 1917.

1055. (Neb.) A will bequeathed a leg-
acy (o John iirown of Howard, 111,, the real
legatee intended being John Brown of Hall,
III., who had never lived at Howard. The
executrix notified John I>rown of Howard,
sending him a receifjt and instructing a bank
to forward him the amount upon receiving
the receipt. The instruction was cariied out
by the bank. Opinion: There is no liability
on the part of the bank but the executrix is
liable to the real legatee, unless the misde-
scription of his address in the will should
be held sufficient to estop him from question-
ing the validity of the payment. Vol, 10, p.
715, April, 1918.

1055. (Pa.) A deposit of $105 made by
one depositor was erroneously credited to an-
other depositor, who checked out the amount.
Opinion: The bank has a right of action
against the custom.er to recover the amount of
the overdraft with interest from the time
overdrawn. Vol. 7, p. 492, Jan., 1915. See
484, 485.

1057. (Tex.) A bank collected A's bill
of lading draft from B and remitted the pro-
ceed by mistake to C, who was a creditor of
B on open account; C took the money and
applied it on B's debt and thereafter settled
with him and relinquished security for in-
debtedness. The bank paid A and having
paid twdce made demand on C. C refused to
refund, claiming that it is B's duty to return
the money to the collecting bank. Opinion :
It is a general rule that money paid under a
mistake of fact may be recovered back, and
unless C received this money in the honest
belief that it was intended as a pav'ment on
account of B's indebtedness and on faith
thereof surrendered the security to B, C
would be liable. Vol. 8, p. 34, July, 1915.

Payment of overdrawn letter of credit

1058. (Kan.) A bank issued a letter of
credit for $100, promising to honor drafts to
that amount. The letter required that the
amount of each payment be indorsed on the
letter and negotiation of the draft to consti-
tute a guaranty that the requisite indorse-
ment Avas made and that all drafts "be drawn
against our letter of credit No. 101." Five
drafts of $25 each were drawn and paid,
creating an overdraft of $25. The first draft
stated it was drawn against the letter; the
next three did not so state and the letter was
attached to the last draft drawn. Opinion:
The bank has recourse upon its customer for
the overdraft but will have no recourse
against anv of the cashing banks unless it

130

PLEDGE AND COLLATERAL

10G3

can prove the drafts were negotiated against
the letter and the requirements not complied
with. The bank should have refused pay-
ment of drafts not indorsed as drawn against
the letter, for otherwise such drafts could be
negotiated witliout showing the letter. Vol.
6, p. 573, Feb., 1914.

1059. (Okla.) A bank issued a general
letter of credit authorizing drafts to a certain
amount to be indorsed upon the letter of
credit. The question is raised as to whom
would be the loser, if another bank m.iking
a payment on the letter of credit neglected to
make a notation of this payment and through
this neglect gave the holder an opportunity
to draw more than the face of the letter of
credit. Opinion: The bank issuing the letter
of credit is liable to the innocent purchaser
of a draft drawn against the latter and within
its amount, notwithstanding the holder of the
letter has previously exhausted the credit by
drafts not so indorsed. It would be liable for
an amount within the unindorsed total of
the letter of credit, although it had paid the
full amount of the letter upon drafts which
had not been indorsed thereon. In order to
safeguard the issuing bank from being misled
into paying an ordinary draft i)y the drawer
of the letter but not indorsed there, the only
protection would be to require that drafts
drawn against the letter should specify upon
their face that they were so drawn and that
their amount had been indorsed upon the
letter; the bank refusing to pay such drafts
as did not contain this statement. The
draft might contain a clause : "Drawn against

your letter of credit No and the

amount of this draft has been indorsed there-

on." If the draft itself contained such state-
ment, this would be an express warranty by
the purchaser to the drawee of a material
fact which, if false and the drawee relied
thereon to his injury, would entitle him to
recourse upon such purchaser. Vol. 11, p.
494, March, 1010.

Partial payment
S,-.. 771. <)Glt, 11^8, 1211

1060. (Mo.) A credit of $1,000 on a
note as part payment was in the maker's
handwriting. The executor of the payee
doubts that such payment was ever made,
and inquires iiow to proceed to overcome the
indorsement. Opinion : The burden of proof
is on the maker to establish the fact of part
payment, unless the indorsement is in tlie
liandwriting of the creditor. Vol. 5, p. 517,
Feb., 1!)i:].

Effect of words "with exchange"

1061. (Conn.) A draft payable in Phil-
adelphia "with New York Exchange" was
presented for payment. The acceptor ten-
dered the face amount in New York exchange,
which was refused by the collecting bank.
The collecting bank considered "with New
York Exchange" meant "plus New York Ex-
change" and required the payment of the
cost of exchange on New York. Opinion:
The draft called for payment of tiie face
amount plus the cost of exchange on New
York, and the collecting bank would be jus-
tified in protesting and returning the draft.
Vol. (), p. fi;n, :March, 19 H.

See 3C)0, ofil, 302, 1004.

PLEDGE AND COLLATERAL

Accounts receivable as collateral security

1062. (Pa.) To constitute a valid
pledge of an account receivable there must
be an assignment in writing, mere delivery of
a copy of the account being insufficient. In
case of such assignment of accounts, tbe bank
is safe if the debtor is notified before ]iay-
nent to the assignor; or where the borrower
acts as the lender's agent to colloct tiie ac-
counts, a bond or security for tbe fidelity of
the agent should be required. Where the as-
signment is for the ])urpose of securing credit
and not for a prior debt, the bank in the event
of the borrower's bankruptcy, would have a
prior claim upon such accounts for the
amount of its advances ; but wliere the as-

signmtMit is made within four months of the
borrower's l)ankruptcy for the purpose of ise-
(iiring an existing debt, such assignment
would pnibablv be void as a preference. Vol.
8, p. (507. Jan., 101 fi.

Application of surplus security pledged
for specific debt

1063. (Ala.) It is a well established
rule at cDniinon law that in the absence of an
agreement to the contrary, securities pledged
to a bank to secure a specified demand cannot
be held for other demands though against the
same debtor. It is owinir to such rule that
clauses are inserted in collateral notes makinj?
the provision that such collateral is not only

131

1064

DIGEST OF LEGAL OPINIONS

pledf^c'd for a particular debt but for any
otbcr liability of tbe pledgor. Vol, 3, p. 10,
July, 1910.

1064. (Pa.) Tbe following clause in-
serted in a note is legal and can be enforced :
*'aud it is. bcreby agreofl tbat sucb surplus, or
any excess of collateral upon tins nolo, sliall
be applicable to any other note or claim

against beld by said bank."

Tbis form would be improved by adding a
provision that the collateral might be held
and applied upon any other note or claim
against the individual maker or against any
firm of which he is a member. Vol. 5, p.
169, Sept., 1912.

1065. (Pa.) A bank held a firm note
which was secured by collateral and also held
a past due note of a third person which bore
the indorsement of one of the firm members.
The firm became bankrupt and the bank, after
selling the collateral in satisfaction of the
firm debt, attempted to apply the surplus on
the indorsed note. Opinion: The bank can-
not appropriate the surplus of the collateral
upon the independent debt of the individual
member of the firm, in the absence of an
agreement. Vol. 1, p. 202, Dec, 1908.

1066. (Tenn.) Bank A borrowed $5,000
from Bank B, executing its note therefor, and
pledging $10,000 as collateral in good receiv-
ables. The note did not provide that the col-
lateral was to secure "this or any other in-
debtedness that may be incurred." Bank A
overdrew its account by $5,000 and became
bankrupt. Bank B desires to apply all the
proceeds of the $10,000 collateral in payment
of the overdraft as well as the note. Opin-
ion ; The collateral being pledged for a speci-
fic debt, Bank B cannot in the absence of an
agreement apply the surplus to another in-
debtedness. Bank B cannot claim the sur-
plus under the doctrine of banker's lien, be-
cause the collateral was not received in the
ordinary course of business but for a specific
purpose. Vol. 8, p. 252, Sept., 1915.

Bond for title given as security

1067. (Ga.) A purchased a farm from
B, giving him cash and notes therefor, and re-
ceiving from B a bond for title. A transferred
the bond to a bank as security for a loan.
After the bond and transfer had been duly
recorded, the bank temporarily surrendered
the bond to A but A wrongfully disposed of
it. B was notified of the transfer and the
recording clerk was also notified not to can-
cel the entry. Opinion: The bank has not

lost its security and is protected in such bond
as against a subsequent innocent purchaser or
assignee of the bond. Vol. 5, p. 103, Aug.,
1912.

Corporate stock as collateral
Sec 403

1068. (N. Y.) A bank holds fifty shares
of common stock of an industrial corporation
as collateral. Some time later, without knowl-
edge on the part of the bank, the corporation
issues preferred stock to the original holder,
which depreciates the value of the collateral.
The bank seeks to protect its rights as
pledgee. Opinion: Where common stock of
an industrial corporation is pledged with a
bank as collateral, the bank to protect its col-
lateral and right to dividends should either
have the stock transferred or notify the cor-
poration of the pledge; for otherwise, if the
corporation without notice of the pledge,
issues preferred stock to the original holder
which depreciates the value of the collateral
and the latter negotiates the stock, the trans-
feree or pledgee thereof w^ould have a superior
right thereto than the original pledgee. Vol.
11, p. 606, May, 1919.

Enforcement of collateral notes

1069. (Iowa.) Bank loaning $250, and
taking as collateral an unmatured negotiable
note of third person for $500 is a holder for
value to the extent of the amount advanced
with interest and can enforce the collateral
note for that amount, free from defenses
available to the maker against the payee.
If the collateral note is not subject to defense
the full amount is recoverable, the bank being
accountable for the surplus to the pledgor.
Vol. 9, p. 416, Nov., 1916.

1070. (La.) X issued his negotiable
note of $200 payable to A, which was in-
dorsed to B as collateral. X paid A $100 on
the note, taking A's receipt, but A failed to
advise B to make the proper credit on the
note. A failed and B seeks to collect the full
amount from X. Opinion : Payment by X to
A was inefl'ective against B, who can recover
the full amount of the note or so much there-
of as will satisfy his lien. Vol. 8, p. 147,
Aug., 1915.

1071. (Minn.) A wholesale house de-
livered machinery to a retail firm, title to
which was to remain in the former until paid
for by virtue of a contract which was put on
record. The firm received several notes from
various purchasers of the machinery, which

132

PLEDGE AND COLLATERAL

1078

notes it pledged as collateral security for a
loan from the firm's bank. The notes con-
tained statements to the effect that they were
in payment for a plow or other specified ar-
ticles. The borrowing firm became insolvent.
The bank seeks to enforce the notes and the
wholesale house, as owner of the machinery,
makes a demand on the bank for a portion
of the notes. Opinion: The recital in the
notes that they were given in payment for
certain articles of machinery does not affect
their negotiability. The notes are enforce-
able by the bank free from any equities and
the bank is entitled to the proceeds as against
the claim of the owner of the machinery.
The fact that the wholesale house held the
machinery under contract, which was re-
corded, whereby title thereto should remain
in the house until the machinery was paid
for would not affect the rights of the bank as
holder in due course of the collateral notes.
Vol. 9, p. 583, Jan., 1917.

Liberty Bond as collateral security

1072. (S. Dak.) A bank loaned its de-
positor $100, taking his note therefor, pay-
able October 23, 1918, and holding his $100
Liberty Bond which he purchased with the
money borrowed as security for the note. In
view of the fact that his bond is a little below
par, the bank seeks to hold $10 of his deposit
balance as additional security, while the de-
positor seeks to withdraw the entire bahmce.
Opinion: A bank which holds the unmatured
note of depositor secured by a Liberty Bond,
purchased with proceeds of note, cannot re-
tain a portion of depositor's balance, before
maturity of note, as additional security for
its payment, in the absence of express con-
tract. Vol. 10, p. 720, April, 1918.

Life insurance policy assigned as collat-
eral security

1073. (Mich.) The insured and the ben-
eficiary assigned a life insurance policy to a
bank as collateral. The policy contained a
provision that all parties must join in any
settlement of the policy. Opinion: Tiie bank
holds the policy subject to the right of the
insurance company to require all parties to
join in the settlement of the policy. Where
there exists a disability on tlie part of the
beneficiary, the rule varies as to the right of
the insured or the beneficiary to make a valid
assignment in such a case. Vol. 5, p. 592,
March, 1913.

Power of attorney to sell collateral

1074. (Pa.) A promissory note was
given with collateral security coupled with a
power of attorney to the holder to sell the col-
lateral. Before the sale the maker died.
Opinion: The power of sale, being an author-
ity coupled with an interest, is not revoked
by the maker's death. Vol. 7, p. 167, Sept.,
1914.

Sale of collateral on outlawed note

1075. (N. C.) A bank held a note for
$300 secured liy a stoc-k certificate with
power of sale. The note became outlawed by
the Statute of Limitation.^. Tlie bank wishes
to sell the collateral and apply the proceeds
towards payment of the note in order to re-
vive the indebtedness. Opinion: The bank
has the right to sell the stock, but the note
once outlawed could not be revived by credit-
ing the proceeds on the note. Vol. 6, p. 215,
Sept., 1913.

Securities guaranteed by salesman

1076. (111.) The liability of a bond
salesman as individual guarantor of securities
sold where he is not interested in the securi-
ties beyond his profits on the sale would ex-
tend or be limited to the terms of his agree-
ment strictlv construed. A'ol. 4, p. 307, Nov.,
1911.

What constitutes valid pledge
Soo -241. 101)2

1077. (Tenn.) A form of pledge of per-
sonal proper as security for a loan is legally
sufficient in Tennessee where it contains a
provision constituting the pledgor the agent
of the pledgee to retain possession and care
for the property as such agent. To consti-
tute a valid pledge there must be delivery of
the j)roperty to the pledgee and in some
states (Georgia and Kentucky for example)
a pledge wherein the pledgor retained posses-
sion as agent would be invalid ns against a
bona fide purchaser of the projvrty without
notice of the i)ledge. But in Tenncpf^ec it
has been held the pledgor can holil the prop-
erty as agent of the i)le<lgee. For form of
pledge sec Vol. 5. j). IdS. .\ug.. 1912.

Warehouse receipt — validity as pledge

1078. (Ariz.) A milling company own-
ing three warehouses issued receipts uj)on its
own grain and pledged tlie receipts to a bank

133

1079

DIGEST OF LEGAL OPINIONS

as security I'ur a loan. In the event of tlie
bankruptcy of the conij)any, the bank wishes
to hold tiie grain as a.^^ainst the bankrupt's
creditors. Opinion: Warehouse receipts is-
sued by grain warehouseman on his own goods
in store are generally held invalid and are in-
sullicicnt security to a bank as against the
trustee in bankruptcy of the issuing ware-
houseman. An additional provision might
be framed in connection with the Uniform
Warehouse Receipts Act, when presented for
enactment in Arizona, which in substance
would validate receipts of warehousemen,
whether or not issued for their own grain in
store, upon a proper system of registry of
such receipts. Vol. 4, p. 4S7, Feb., 1912.

1079. (Kan.) The following note is sub-
mitted and the question raised as to its nego-
tibility and eligibility for rediscount by a
Federal Eeserve Bank:

" $5,000 Topeka, Kansas,

Sept. 16, 1918.

Ninety days after date we promise to

pay to the order of ourselves Five Thousand
Dollars at First National Bank, Topeka,
Value Received. Having deposited as col-
lateral security Warehouse Receipt No. 1721,
of even date covering 3,000 bushels of wheat
which the holder of this note is authorized
to sell, etc., in case of non-payment.

The A. B. Milling Company,

By John Doe, President.
Attest : John Roe,

Secretary.
Indorsements by the Company and Joe Doe,
President and John Roe, Secretary."
Opinion : A note which contains a provision
authorizing sale of collateral upon non-pay-
ment is negotiable but where the note is issued
by a warehouse corporation to its own order
and is secured by a warehouse receipt issued
by the same corporation it is ineligible for re-
discount by a Federal Reserve Bank. The
Federal Reserve Board has ruled that paper

secured by warehouse receipts may be redis-
(;ounted if otherwise eligible, Ijut the ware-
house receipt must be issued by a warehouse
which is independent of the borrower. \'ol.

11, ]K -i] 1, Oct., 1918.

1080 (Wash.) A bank loans money upon
the security of whiskey certificates issued by
the proprietor of a bonded warehouse repre-
senting his own whiskey. The warehouse-
man goes into bankruptcy. Opinion: Under
a recent decision the pledge of such whiskey
certificates is valid and protects the bank as
against tiie trustee in bankruj)tcy. Such
certificates are distinguishable from ware-
house receipts for grain or flour issued by a
warehouseman upon his own goods, pledge
of which is invalid as against creditors. The
delivery of the last stated certificates does
not, while that of bonded warehouse receipts
does, operate as delivery of the goods, suffi-
cient to constitute a valid pledge. Vol. 4,
p. 214, Oct., 1911.

1081. (Wash.) A bank loaned money
upon the security of warehouse receipts for
grain and flour, issued by the warehouseman
to himself. The warehouseman became
bankrupt. Opinion: Such receipts are in-
valid as against creditors and the trustee in
bankruptcy, and do not protect the bank.
Vol. 4, p. 150, Sept., 1911.

War Savings Certificates as collateral
security

1082. (Miss.) Several customers of a
bank desire to pledge their War Savings
Stamps as security for payment of notes given
for the balance of the purchase money of such
stamps. Opinion: W^ar Savings Certificates
cannot be lawfully pledged to a bank by the
owner whose name appears therein as col-
lateral security for a loan, in view of the con-
dition therein that the certificate is "not
transferable." Vol. 11, p. 170, Sept., 1918.

POST DATED CHECKS

Duty of collection

1083. (N. C.) Wliere a bank receives
for collection and returns a post dated check,
it is no part of its duty to present the same
for acceptance. It can either hold it, pre-
sent it at maturity, or, if time permits, may
return it at once with advice that it is not
yet due. Vol. 2, p. 230, Dec, 1909.

Payment of post dated checks

1084. (Ind.) It is not illegal to date a
check ahead but if a post dated check is paid
before its date, the pa3'ment is at the risk of
the bank. Vol. 3, p. 468, Feb., 1911.

1085. (Mo.) A bank pays a post dated
check and subsequently checks correctly dated
are presented and refused on account of in-

134

POST-DATED CHECKS

1096

sufiRcient funds. Opinion: Pa\Tiient of the
post dated check before its date is at the risk
of the bank, which has no right to charge it
up against the customer before the due date,
nor to refuse checks which would be good l)ut
for such premature charge. Vol. 4, p. 430,
Jan., 1912.

1086. (N. C.) A bank paid its custom-
er's post dated check for $100 seven days be-
fore its date. When a second clieck of $3
was presented tlie bank refused payment be-
cause of insufficient funds. The customer
sued the bank for damages. Opinion: The
post dated check was not payable or charge-
able to the drawer's account until the day of
the date and if prematurely paid and charged,
a refusal to pay a subsequent check, good but
for the erroneous charge, is a wrongful dis-
honor. Vol. 9, p. 48, July, 1916.

1087. (Ohio.) On November 30 a bank
paid a check dated December 7 and after-
ward on the same day dishonored a check
dated November 29 because of "insufficient
funds." There would have been sufficient
funds but for the payment of the post dated
check. Opinion: The bank had no right or
authority to pay the post dated check before
the day of its date arrived, and no right to
refuse payment of another check where the
funds would have been sufficient except for
premature payment of the post dated check.
The wrongful refusal to pay the check sub-
jects the bank to damages recoverable by the
drawer, but the holder of the dishonored
check has no recourse upon the bank but must
look to the drawer and prior indorsers. Vol.
5, p. 523, Feb., 1913.

1088. (Tenn.) A check dated June 1
was paid on ^fay 31. The maker notified
the bank on the morning of June 1, before
banking hours, to stop payment. Opinion:
The money prematurely paid by the bank to
a bona fide holder of the check is non-recover-
able, but the bank, notwithstanding the stop
order before the due date, would probably
have the right to charge the amount to the
drawer's account, if the holdor had an en-
forceable right against the drawer. Vol. 9,
p. 240, Sept., 1916.

1089. (Wash.) A gave his post dated
check in ])ayiucnt for supplies. Yho holder
indorsed it for value to B, who presented it
on its date. Payment was refused by the
drawee because A had previously stopped pay-
ment. Opinion: The check, although post
dated, was negotiable before the day of its
date, and B wlio purchased before maturity

took an enforceable title. B had no recourse
upon the drawee but only upon the drawer
and prior indorser. Vol. 7, p. 779, April,
1915.

Protest of post dated checks

1090. (Ga.) A check dated the 15th of
the month was presented on the 12tii and
payment was refused. Should the check be
protested? Opinion: There is no legal au-
thority for protesting a post dated check,
payment of which has been refused on pre-
sentment before the due date. The bank on
which the check is drawn has no authority
to pay the same until the day of its date ar-
rives. Vol. 9, p. 496, Dec, 1916.

1091. (La.) A post dated check was re-
ceived by a bank for collection thirty days
before the due date and was protested and
returned in accordance witli printed advice
accompanying the check. The forwarding
bank refuses to pay the fees and contends the
collecting bank was in error in protesting.
Opinion: The drawee causing the protest can-
not charge protest fees. The printed advice
to protest should not be construed to cover a
post dated check before the time when the
check becomes payable. Vol. 5. p. 830, June,
1913.

1092. (Mich.) After the day of its date
arrives a post dated check is i)rotestable for
non-payment, the same as an ordinarv check.
Vol. 4,V 220, Oct., 1!»11.

1093. (Okla.) A post dated check is not
presentable until the day of its date arrives
and if presented before such date, it cannot
be protested for non-accei)tance. Vol. 5, p.
244, Oct., 1912.

1094. (Tenn.) A firm received a check
dated fifteen days after it was received, which
it deposited for collection. The check was
presented before it was due and was protested
by the drawee. Opinion: A j)ost dated check
is not payable until the day of its date arrives,
and a drawee bank which prematurely pro-
tests the post dated check of its customer does
so witiiout legal right and is })rol)ably liable
to him in damages therefor. Vol. 5. p. 829,
June. 1913.

1095. (Tenn.) A post dated check
should be held until the day of maturity,
and then presented and protested if not paid.

Vol. 1, p. 37"). Dec. 1011.

Set off of post dated check

1096. (Utah.) A bank piireha«ed a

135

1097

DKJEST OF LECAL OPINIONS

post dated check drawn on another banlc, count in tlie purchasing bank. Opinion: The

from an indorser in due course before ma- bank j)urchasjng the check can set off tlie

turity. In due time it was returned marked drawer's dejjosit against his indebtedness

"Payment stopped," The drawer had an ac- upon the ciieck. Vol. 8, p. 327, Oct., 1915.

PRESENTMENT

Due diligence

See 386 et seq

1097. (Mont.) A bank received for col-
lection a check from another place on Thurs-
day, and presented it for payment on Satur-
day forenoon, Friday being a legal holiday.
The check was dishonored, although it could
liave been paid if presented on Thursday.
Opinion: The collecting bank was not liable
for not presenting the check on the day it was
received, unless it had information that the
drawee was approaching insolvency or the
case required extraordinary diligence on the
part of the bank in protecting its principal.
Vol. 7, p. 780, April, 1915.

Presentment over telephone

1098. (Ark.) A bank receiving a sight
draft on a person living three miles away tele-
phoned him at his home, there being no bank
in his town. He was reported to be absent
quite a distance and not being able to locate
him, the bank liad the item protested for
non-payment. Opinion: Presentment and
demand of payment of a sight draft over the
telephone is not legally sufficient and protest
for non-payment in such a case is unauthor-
ized. It has been held that as presentment
must be made by actual exhibition of the
paper or, at least, by some clear indication
that the paper is at hand ready to be de-
livered, a demand over the telephone at the
place specified in the instrument is insuffi-
cient. Vol. 10, p. 657, March, 1918.

1099. (W. Va.) A demand of payment
of a negotiable instrument over the telephone
by a notary is insufficient legally to justify a
protest. It requires his personal attendance
with the note at the place of demand, in read-
iness to exhibit it if required, and to receive
payment and surrender it if the debtor is
willing to pay. A^ol. 4, p. 93, Aug., 1911.

Place of presentment

See 1024

1100. (Kan.) x\n indorsed note was
made payable at a bank, but presentment was
made to the maker in person, and then pro-
tested. The indorser seeks to recover the

protest fees from the payee. Opinion:
Where an indorsed note is made payable at
a bank, presentment for payment must be
made at the specified place in order to hold
an indorser and where the note is not pre-
sented at the bank, but to the maker person-
ally, and then protested, the instrument is
not duly presented and the protest unauthor-
ized. Vol. 10, p. 43, July, 1917.

1101. (Miss.) A draft drawn on the
County Treasurer was presented to the Treas-
urer's depository in another town where it
is customary to present all drafts drawn on
the Treasurer. Payment was refused because
of "no funds in general deposit" and the
draft was duly protested. Opinion: The
presentment was sufficient and the protest for
non-pavment was legal and valid. Vol. 4, p.
219, Oct., 1911.

1102. (N. H.) A note is made payable
at the office of the makers at a particular
street address, and before maturity the
makers have closed their office and moved to
another street. Opinion: To hold an in-
dorser, presentment at the place specified in
the note would be sufficient ; but where notary
knows the makers are at a new address, it
would be safer to make a supplemental pre-
sentment at that place. Vol. 4, p. 434, Jan.,
1912.

1103. (Okla.) Presentment of a draft
to bank in whose care, or through which, it is
made payable, is sufficient and authorizes
protest in the event of non-pa}Tnent without
necessity of further presentment to the
drawee. Vol. 3, p. 583, April, 1911.

1104. (S. C.) A draft was addressed to
the drawee "Jno. Jones, Jonesville, S. C,
care Dime Bank, Barnwell, S. C." The col-
lecting bank presented it at the Dime Bank.
Opinion: Presentment at the Dime Bank was
proper and sufficient. Vol. 3, p. 339, Dec,
1910.

Reasonable time for presentment
See 352

1 105. (Idaho.) A gave B a note of $100
payable in one year from date, bearing in-
terest at 10 per cent, payable annually. After
the expiration of a year B indorsed the note

136

PRESENTMENT

[ nil

over to C for value, and one year later the
note is presented to A for payment and re-
fused. Opinion: B's indorsement of a past
due note was valid, making it a demand in-
strument. The delay of one year in demand-
ing payment, under the circumstances, was
unreasonable, and the indorser was dis-
charged. Vol. 4, p. 155, Sept., 1911.

1106. (Kan.) A check must be pre-
sented within a reasonable time, but the ex-
act period of time after which a check be-
comes stale or discredited and puts a pur-
chaser or a bank of payment upon inquiry, is
not definitely fixed by the authorities. A
check becomes outlawed according to the
Statute of Limitations of each state. But
there is some divergence of opinion of differ-
ent courts as to whether the statute begins
to run from the date of a check or from a
reasonable time after date or from a time
after date beginning with the end of the stat-
utory period. Vol. 8, p. 910, April, 191G.

1107. (Ore.) Where a check is issued
and delivered in the place where the drawee
is located, the well established rule adopted
by the courts is that under the Negotiable
Instruments Act the reasonable time for pre-
sentment to hold the drawer ends with the
next business day after delivery of the check.
This rule applies to a bank in which the
I^ayee deposits a check for collection drawn
upon another bank in tlie same place. There
is no rule which would require the collecting
bank to make presentment the same day of
deposit, in the absence of some specific in-
struction from its depositor so to do. Where
there exists a custom of presentment through
a clearing house in any city or town, accord-
ing to the rule in some courts, such method
is within the requirements of diligence, and
as illustrated in a Pennsylvania case the

drawer will remain liable, although the check
was not presented until the third business
day following delivery. But a Nebraska
case refused to follow this decision and re-
quired presentment by the payee the follow-
ing day. A Texas case held that the drawer
was discharged where there was presentment
through a clearing house on the third day
because he had not impliedly consented and
was entitled to have his check presented di-
rectly to the drawee not later tban tlie day
following its delivery. The payee, however,
who deposited the check was bound by the
custom by reason of his implied consent.
Vol. 9, p.' 746, March, 1917.

1108. (Pa.) Presentment of a note
payable on demand must be made within a
reasonable time after its issue to liold the in-
dorser. In determining what is reasonable
time, regard is to lie had to the nature of
the instrument, the usage of trade or busi-
ness, if any, with respect to such instruments,
and the facts of the particular case. Vol. 4,
p. 156, Sept., 1911.

When presentment excused

1109. (N. C.) A made his note payable
to the order of B and indorsed before de-
livery, presumably for accommodation, by
C. C negotiated the note to Y bank. The
note was not presented on the day of ma-
turity. Opinion: Presentment on the day of
maturity and notice of dishonor are required
to hold B and C, the indorsers, but if the in-
strument was made for the accommodation
of either B or C, and such indorser had no
reason to expect it would he paid if presented,
neither presentment nor notice is required
to hold such indorser liable. Vol. 8, p. 324,
Oct., 1915.

1110.

PROTEST

Altered check
(N. J.) A check, the date of

which was apparently altered, was presented
for payment and was refused by the drawee-
pinion: The safer course for the collecting
bank was to protest the check for non-pay-
ment, although such protest would not be
necessary if it later developed that the alter-
ation was not authorized and the instrument
was not valid. Vol. 5, p. 217, Oct., 1912.

Certificate of protest
(N. C.) Bank C received a de-

1111

mand draft witli

)ill of lading for collection

and caused the item to be protested. The
notices were drawn regularly by one of the
clerks of C bank and signed hy him in the
name of the cashier of C hank who is the
notary. The forwarding liank refused to pay
the protest fee, saying that the notices and
protest, altliough signed in the name of the
cashier and notary, are not in his handwrit-
ing. Opinion: A certificate of protest signed
in the name of the notary hy his clerk is of
doubtful validity. The Negotiable Instru-
ments .\ct provides that the protest "must be
under the hand and seal of the notary making
it.'' The law rt><iiiir«^-: thnt demand and

137

1112

UKJEIST OF LK(iAl. OiMXlONS

notice must I)e Ity the notary personally, and
eannot be delcf^'ated to a elcrk, except that a
lew eases reco;;nize the custom for a clerk to
act, hut the validity of the custom is uncer-
tain. Vol. 7, p. 493, Jan., 1915.

1112. (111.) Tn Illinois the certificate
of protest of a foreign notary is competent
evidence of the dishonor of a forci;j;n hill of
exchange by virtue of the common law rule;
hut the certificate of a foreign notary as to
demand and notice in case of a promissory
note is not competent evidence and addition-
al legislation is necessary to effect this. The
certificate of protest of a notary within the
state is competent evidence of demand, dis-
honor and notice in case of inland hills, notes
and checks by virtue of Sections ]2 and 13
(unrepealed) of tlie Act of 187-2, notwith-
standing the repeal of Sections 10 and 11 of
that act bv tlie Negotiable Instruments
Law. Vol. 3, p. 516, March, 1911.

Checks payable in one state and negoti-
ated in another

See 335, 330, 1148

1113. (S. Dak.) A check, as shown on
its face, was drawn and payable in South Da-
kota, and was issued and negotiated in Illi-
nois. Opinion: Protest of the check is per-
missible but is not required by the Negotiable
Instruments Act, even though the check was
issued in one state and negotiated in another.
Vol. 6, p. 438, Dec, 1913.

Payment of protested check

See 1121, 1154, 1155, 1156

1114. (Ala.) A check was presented and
protested for non-payment on account of in-
sufficient funds. Later, the bank when in
funds, without express instructions from the
drawer, paid the check with the notary's fees.
Opinion: The bank in paying the check acted
at its peril and should have refused payment.
Vol. 7, p. 688, March, 1915.

Drawee's duty of protest

1115. (Miss.) A authorized B to sign
a check drawn on C bank. The check signed
"B by A" was presented through the clearing
house and the drawee, ignorant of A's author-
ity, refused payment and protested the item
because of the signature. Opinion: The
drawee rightfully refused payment and the
check being genuine and not a forgery, its
protest "was justifiable. The presenting bank
rather than the drawee, was the proper one
to hand the check over to the notary for pro-
test. Vol. 2, p. 333, Feb., 1910.

1116. (Wis.) A check for $160 was
drawn, f)ayal)le by A to B, who deposited it
for cdlh'ction. The check was forwarded di-
rectly to the draw('(! bank, where payment was
stop[)ed by A. The drawee questions the ad-
visability of protesting the check for non-
payment. Opinion: The drawee would not
be responsible in omitting protest, as protest
is not necessary in this case, there being no
contingent j)arti('s to be held liable. Vol. 8,
p. 805, JIarch, 1916.

1117. (V/is.) A drawee bank which re-
ceives a check for collection acts in a dual
capacity, (1) as agent of the drawer to pay
or refuse payment, (2) as agent of the holder
to collect and remit or to take the necessary
steps upon dishonor to hold parties contin-
gently liable. Vol. 8, p. 805, March, 1916.

Duty of collecting bank
S€e 395, 306, 113!), 1145

1118. (La.) The payee of a check de-
posits it in his Ijank for collection and before
the item is presented goes to the town of the
drawee and asks the latter if it will pay the
same when it comes through the regular
channels. The drawee promises to hold the
check awaiting a deposit by the drawer, there
being insufficient funds at the time. When
the check was presented, the drawee returned
it unpaid, because of insufficient funds, with-
out protesting it. The payee wants to hold
the drawee for not protesting. Opinion:
Drawee bank not liable to payee of check for
omission to protest before returning unpaid
because of insufficient funds. In this case
the check was owned by the payee, and there
was no discharge of parties contingently liable
and no loss resulted to the payee from the
bank's omission to protest. Bank's promise
to hold check awaiting deposit by drawer is
not binding on bank, not being an acceptance
nor supported by a consideration. Vol. 10,
p. 124, Aug., 1917.

1119. (Okla.) A collecting bank is
bound by law to exercise reasonaljle diligence
in making presentment and taking the neces-
sary steps upon dishonor to hold parties con-
tingently liable upon the paper. In case of
a small check under $10 payable in the same
state, in the absence of instructions it might
be proper to omit protest and merely give
due notice of dishonor. Vol. 4, p. 153, Sept.,
1911.

Protest fees
See 013, 1091

1120. (Ala.) A note was payable to a
firm at a bank in Alabama. The payees sent

138

PROTEST

1129

the note to the hauk for collection, and be-
cause payment was not promptly made the
note was protested. The bank claimed that
it is entitled to the amount expended for pro-
test fee. Opinion: It is doubtful if the bank
is entitled to the protest fees, as in an action
on the note by the payees a^rainst the maker
it is not necessary to prove demand and notice
and the certificate of protest would have no
utility as an item of evidence. Vol. 6, p. 436,
Dec, 1913.

1121, (Wash.) A depositor before leav-
ing town withdrew his balance at his bank,
and when a check in the sum of $38.50 was
presented it was protested for non-payment.
Later a deposit was made more than enough
to cover the check and protest fees, and the
bank paid the check but refused to pay the
fees. Opinion: The bank without express in-
structions is not authorized to pay the protest
fees on the protested check of the customer.
Vol. 3, p. 588, April, 1911. See 1114, 1154,
1155, 1156.

Protest for better security

1122. (Miss.) Section 158 of the Ne-
gotiable Instruments Act provides : "Where
the acceptor has been adjudged a bankrupt or
an insolvent, or has made an assignment for
the benefit of creditors, before the bill ma-
tures, the holder may cause the bill to be pro-
tested for better security against the drawer
and indorsers." Section 161 of the Act pro-
vides: "Where a bill of exchange has been
protested for dishonor by non-acceptance or
protested for better security, and is not over-
due, any person not being a party already
liable thereon may, with the consent of the
holder, intervene and accept the bill supra
protest for the honor of any party liable there-
on, or for the honor of the person for whose
account the bill is drawn." The utility of
this kind of protest seems to lie in the fact
that, wlien the acceptor becomes a bankrupt,
the causing of protest for better security and
giving of notice thereof to the drawer and
prior indorsers, will enable him or tlieni to
procure some friend or correspondent to ac-
cept the bill, supra protest, for their honor.
The Negotiable Instruments Act, while au-
thorizing a protest for better security, fails
to specify the requirements of such a protest.
It would seem that a certificate, made under
the hand and seal of the Tiotary, conlniniTig
a copy of the bill or liaving the original bill
annexed tliereto, which sboidd recite (foHow-
ing as closely as possible the language of the
Act) that the acceptor has been adjudged

bankrupt before the bill has matured, for
which cause the bill is protested for better
security against the drawers and indorsers,
would be sufficient. Vol, 9, p. 494, Dec.,
1916.

Forged checks

1123. (Ind.) A check bearing a forged
signature or one made without authority of
the j)erson whose signature it purports to be,
is not a valid negotiable instrument, but a
void document, and it is not properlv protest-
able. Vol. 9, p. 414, Nov., 1916.

1124. (Fla.) Protest of a forged check
is not necessary ; the indorser thereon
warrants that the check is genuine to all
holders in due course, and is liable without
demand, protest or notice. Vol. 2, p. 332,
Feb., 1910.

1125. (Wis.) A forged check is not
properly protestable nor is demand and notice
of dishonor necessary to hold an indorser who
is liable to an indorsee as warrantor of genu-
ineness. An agent holding such paper is duly
diligent by giving notice of the forgery with-
in reasonable time. Vol. 5, p. 760, Mav.
1913.

Formal protest

1126. (N. J.) Formal protest as distin-
guished from demand and notice of dishonor
is not required to hold indorser unless the
instrument is foreign bill of exchange. Vol.
6, p. 376, Nov., 1913.

1127. (Wash.) The object of permit-
ting j)rotcst of inland liills is to enal)le the
holder to obtain a convenient means of prov-
ing dishonor in case he is comindled to bring
suit on the paper, as the notary's certificate
of protest is admitted as prima facie evidence
to prove dishonor and obviate the necessity of
calling witness and proving that fact bv other
evidence. Vol. 4, p. 151, Sept., 1911.

1128. (Wis.) Protest is only required
in case of foreign bills of exchange, but is per-
missible on inland bills and checks, and the
drawer and indorser are liable for the protest
fee. Vol. 4, p. 617, April, 1912.

Indorsement of check incorrect

1129. (Pa.) To authorize the protest of
a check, it must be "duly"' presented for pay-
ment. The holder under an "incorrect in-
dorsement'' is not entitled to demand pay-
ment ; hence there can be no due presentment
of such a check and no dishonor by non-pay-
ment which would authorize a protest. Vol.
4, p. 307, Nov., 1911.

139

1130

DIGEST OF LEGAL OPINIONS

1130. (Wash.) A check sif^nicd l)y Jolm
Doc in favor of Will .loiies, guardian of Elsie
Smith, was indorsed by Will Jones only. On
presentment of the cheek payment was re-
fused because of the incomplete indorsement.
The collectinu: baid< then protested the check.
Opinion: The question is an nnccrtain one
wlielhcr the indorsement of "Will Jones"
without addiiif]^ his representative capacity is
a proper indorsement. Where a clieck is pre-
sented bearing an improper or defective in-
dorsement of the payee and payment is re-
fused for that reason, there is no due present-
ment and no dishonor which justified protest.
Tol. fi, p. 629, March, 1914.

Indorsement on instrument lacking

1131. (Ga.) Where a check is presented
by a third person without the indorsement of
the payee and payment is refused for that
reason, such refusal is not a dishonor which
would justify a protest. To constitute dis-
honor it is essential that there be due pre-
sentment of the check and it cannot be said
that a check without indorsement of the
payee and presented by a third person is duly
presented because the payee's indorsement
which is the order and authority to the bank
to pav the holder, is lacking. Vol. 9, p. 496,
Dec.,l916.

1132. (Ga.) When a check, payable to
order, is presented by a holder other than the
payee, lacking the payee's indorsement, there
is no due presentment and protest thereof
cannot be properly made, irrespective of
whether or not there are sufficient funds.
YoL 3, p. 149, Sept., 1910. See 669.

1133. (Kan.) A grain dealer in Okla-
homa drew a draft on a firm in Kansas. He
attached thereto a bill of lading and depos-
ited it in his bank for credit. On present-
ment through the Kansas City Clearing
House, payment was refused because the grain
dealer failed to indorse the bill of lading.
The question was raised whether the draft
should have been protested. Opinion: In the
absence of instructions not to protest, the
draft should have been protested upon dis-
honor. Vol. 6, p. 374, Nov., 1913.

1134. (Okla.) A check payable to order
was presented without the indorsement of
the payee. It was protested and returned
for indorsement. Opinion: The protest was
not justifiable. The refusal to pay a check
presented by a subsequent holder because it
lacks the indorsement of the payee is not a

dishonor. Vol. 4, p. 684, May, 1012. See
669.

Inland and foreign bills of exchange
distinguished

S.'<; IMS

1135. (Tenn.) A check drawn and pay-
able in the same state is an iidand bill of ex-
change and not a foreign bill, although the
payee is located in another state, and protest
uf)on dishonor, while customary, is not indis-
j)ensable as in case of a foreign bill of ex-
change. Vol. 6, p. 818, June, 1914.

1136. (S. Dak.) A check which origi-
nates and is payable in the same state, there-
fore called an inland bill of exchange, through
the course of clearing happens to be indorsed
in another state. Under the Negotiable In-
struments Law which does not require protest
in case of non-payment of inland bills of ex-
change, it is asked if the check in question
has become a foreign bill of exchange which
would require such protest. Opinion: A
check drawn in one state upon a bank in the
same state does not become a foreign bill of
exchange because indorsed in another state,
so as to make protest necessary to preserve
recourse upon parties contingently liable.
Vol. 10, p. 467, Dec, 1917.

Instructions to protest
See 395, 396

1137. (La.) A bank received a draft for
collection, accompanied by a letter "We en-
close for collection and credit. Items marked
X no protest." The bank protested the draft
(not marked X) but the sending bank re-
fused to pay the protest fee. Opinion: The
collecting bank was justified in protesting the
draft and could collect the protest fees. Vol.
5, p. 102, Aug., 1912.

1138. (Miss.) A collecting bank re-
ceived a check upon which was stamped "no
protest," and the letter enclosing the item in-
structed the same to be protested. Opinion:
The safer course for the collecting bank was
to protest. Vol. 3, p. 521, Marcli, 1911.

1139. (Pa.) A promissory note con-
tained two indorsers for value, only the first
of whom has waived over his signature pro-
test and notice of protest. On the face of
the note was the written instruction "protest
if not paid," The note was received by the
collecting bank five days after maturity and
was protested after the maker stated his in-
ability to pay. The bank did not know the

140

PEOTEST

[1151

circumstances of the delay in presentment.
Opinion: Had the instrument been a foreign
bill of exchange, the collecting bank would
have been justified in making protest to safe-
guard the interest of its principal, in case the
delay was excusable. In the case of a prom-
issory note, while formal protest is not essen-
tial, it is a convenient means of proving dis-
honor, and as the note contained tlie positive
instruction "protest if not paid" the collect-
ing bank was justified in assuming that the
principal desired the protest made and knew
of facts which would justify the delay and
make the protest efficacious. Vol. 8, p. 145,
Aug., 1915.

Instrument must be negotiable

1140. (Ala.) A county warrant pro-
viding for payment of money out of a par-
ticular fund is not negotiable under the Ne-
gotiable Instruments Law and is not subject
to protest. Vol. 7, p. 304, Nov., 1914.

1141. (111.) A check is drawn on a bank
that does not exist. Question was raised as
to the legality of protesting such an instru-
ment. Opinion: A check drawn on a bank
that does not exist is a negotiable instrument
and is subject to protest under the Negotia-
able Instruments Act. Vol, 10, p. 595, Feb.,
1918.

1142. (Kan.) By agreement with its
customer a bank stamped its checks "payable
in Kansas City Exchange." The holder of
such cliecks demanded cash, but only Kansas
City Exchange was tendered. The question
was raised whether the holder could refuse
the tender of exchange and protest the check
if not paid in money. Opinion: The checks
are not payable in cash but in drafts on Kan-
sas City, and the holder cannot have the
checks protested. All doubt as to whether
the checks would be payable in money would
be removed if the stamp read : "Payable by
the drawee's draft on Kansas City." Vol. 6,
p. 95, Aug., 1913.

1143. (N. Y.) A check on a savings
bank payable "on presentation of the pass-
book" was presented for payment unaccom-
panied by the book. The bank refused pay-
ment on the ground that the presentation
was incomplete and did not think it necessary
to protest tlie chock. Opinion: The check
was not negotiable and therefore not subject
to protest. Vol. 6, p. 210, Sept., 1913.

1144. (N. Y.) An undated negotiable
check was presented for payment at a savings

bank. The bank protested the item for non-
payment because of non-production of the
pass-book. Opinion: The check was properly
protestable and its negotiable character was
not affected by the fact that it was undated.
Vol. 6, p. 94, Aug., 1913.

1145. (Ohio.) A bank received for col-
lection a draft payable "at sight on arrival of
car," together with instructions to protest
upon non-payment. The draft was presented
and refused. The bank wired non-payment
but did not protest. Opinion: A draft pay-
able "at sight on arrival of car" is non-nego-
tiable, and is not properly subject to protest.
The bank exercised due diligence. Vol. 4,
p. 305, Nov., 1911.

1146. (Wis.) A check payable to "John
Smith or bearer" was stamped across its face
"non-negotiable counter check." The check
was presented through the Clearing House by
an indorsee of the payee and the drawee bank
refused payment. Opinion: The bank's re-
fusal to pay was justified and the check was
not properly protestable. Vol. 6, p. 376,
Nov., 1913.

Protest not abolished in any state

1147. (Pa.) The protest of negotiable
instruments has not been abolished in any
state. Vol. 5, p. 170, Sept., 1912.

Protest permissible but not compulsory

1148. (Del.) Where a man in Delaware

gave his check drawn on a bank in Delaware
and the payee deposits the item in a bank in
New York, protest for non-payment is per-
missible but not compulsory, because it is not
a foreign bill of exchange. Vol, 5, p, 450,
Jan., 1913. See 335, 336, 1113,

1149. (Va,) In the case of promissory
notes, due demand and notice of dishonor
without protest are all that is necessary to
hold the indorser, although protest is of
course permissible. Vol. 2, p. 232, Dec,
1909.

Persons authorized to make protest

1150. (La.) A statute in Louisiana au-
thorizes Justices of the Peace to make pro-
tests of negotiable instruments in default of
notaries and parish recorders, provided the
protest is witnessed by two persons of the
same parish. Vol. 5, p, 24, July, 1912,

1151. (111.) A notary who is an em-
ployee of a Federal Reserve Bank protests
paper owned by the bank or held by it for col-

141

1152

DIO.EST OF LEGAL OPINIONS

lection and receives the fee tlierefor. Opin-
ion: Siicli ])r()test is not prohibited by Section
22 of the Federal Reserve Act. A^ol. 7, p.
381, Dec, 1914.

Place of protest

1152. (La.) A drawee hank in a town
returned to a city l)ank a clicck nnpaid he-
cause of insulHcient funds, but failed to have
it protested because there was no notary in
the place. The officer of the drawee bank
went to the city bank and caused the check
to be protested. Opinion: The protest was
invalid because it Avas not protested at the
place where it was dishonored. The check
could have been protested in the town where
payable by "any respectable resident of the
place in the presence of two or more credible
witnesses." Vol. 4, p. 156, Sept., 1911.

1153. (Tex.) A draft was drawn on
John Smith, and erroneously addressed to
Galveston, Texas, at which city John Smith
was not located. The draft was protested for
non-payment. Opinion: The protest of the
draft at Galveston, which was the place ad-
dressed, was proper to preserve the liability
of the drawer and indorser. Vol. 6, p. 212,
Sept., 1913.

Second protest of check

See 1114, 1121

1154. (Ark.) A check which had been
protested for insufficient funds was presented
for payment a second time by the holder w^hen
the funds were sufficient. Opinion: The
safer course is for the bank to refuse payment
in absence of the drawer's express instruc-
tions and to suggest that the holder procure
a new check. Vol. 5, p. 670, April, 1913.

1155. (Ga.) There is no efficacy in pro-
testing a check a second time after it has
once been protested for non-payment, and is
again presented with demand for payment
which is refused. Such instrument has al-
ready been dishonored and the liability of the
parties fixed by the first protest. Vol. 9, p.
496, Dec, 1916.

1156. (Ind.) A bank received for pre-
sentment a protested check with protest fees
added, with instructions to protest if not
paid. Opinion: There is no justification for
protesting the check a second time. Vol. 7,
p. 1000, June, 1915.

Signature on instrument lacking

1157. (111.) By agreement between a
bank and its depositor, a check requires two

signatures to authorize payment. The' bank
refuses to pay because one of such signatures
is missing and incpiires as to the legality and
)»r()priety of protesting the check. Opinion:
To authorize or justify a protest the instru-
7nent must be "dishonored" and one of the
essentials to constitute dishonor is that the
instrument must be "duly presented." In
this case it would be held to he a genuine ne-
gotiable instrument duly presented and pro-
test would be justifiable and valid. Vol. 9,
p. 495, Dec, 1916.

Stopped check

1158. (Md.) Where payment of a check
has been stopped such countermand would
not excuse presentment and notice to the in-
dorser or protest in case the check is a foreign
bill of exchange. Vol. 1, p. 406, May, 1909.

1159. (Va.) A bank received an order
from its customer not to pay his check of
$143.40. The check in question was duly
protested at the request of the bank which
mailed it for payment. The depositor
claims that the check should not have been
protested, that his credit has been injured
and refuses to pay the protest fees. Opin-
ion: When a customer orders payment of
his check stopped, it is the duty of the bank
to refuse payment and it may properly cause
protest to he made at the request of the
holder. Vol. 11, p. 485, March, 1919.

Time of protest

See 660

1160. (Ark.) A bank received for col-
lection a note, payment of which was extended
one week. The makers defaulted in payment
and the bank protested the note. The owner
of the note refused to pay the protest fees,
claiming that the proper time of protest was
the date of original maturity. Opinion:
Where there is a valid extension of time of
payment of a promissory note, the date of ex-
piration of the extension and not the date of
original maturity is the proper time of pro-
test. Vol. (!, p. 96, Aug., 1913.

1161. (Ga.) A bank check can be pro-
tested inmiediately upon presentment and re-
fusal to pay and it is not necessary for the
holder to wait until the close of banking hours
before handing it to a notary for protest.
Vol. 7, p. 384, Dec, 1914.

1162. (La.) A check dishonored five
minutes after the opening hour of a bank
may be protested immediately and it is not
necessary to wait until closing time. Vol. 2,
p. 537, June, 1910.

142

PROTEST

1173

1163. (Miss.) A check may be protested
as soon as dishonored. Vol. 3, p. 202, Oct.,
1910.

1164. (N. J.) A note payable at the
place of business of the maker was presented
for payment at 3 o'clock on the day it fell
due. The note was protested for non-pay-
ment at that time, although the place of bus-
iness kept open until 6 o'clock. It is claimed
that the note should have been held the whole
day before presenting it. Opinion: The
note can be protested for non-payment before
the closing hour of the day of maturity.
Vol. 3, p. 73G, June, 1911.

Note: Tlie above is supported by several de-
cisions; but in German-American Bank v. Milli-
man, 31 Misc. (N. Y.) 87, it was held that a note
payable at a bank, presented and refu^<ed payment
during banking hours, should not be ])rotested
until tlie close of banking hours because the
maker had the whole of tlie day in which to pay
and the note was not dishonored until tiie end of
the day.

1165. (N. Y.) A check given in pay-
ment of a note was presented on the following
day and payment was refused because of "in-
sufficient funds." The holder still has the note
in his possession and wishes to protest the
same. Opinion: Although the case has never
been decided, probably a valid protest of the
note a day after its maturity could be made,
because the note would not be regarded as dis-
honored until the check given as conditional
payment was dishonored. Vol. 5, p. 829,
June, 1913.

1166. (N. Y.) A check is presented and
dishonored on Saturday forenoon. Opinion:
Protest should be made on Saturday, and the
check should not be held over without pro-
test until the following Monday. Vol. 4, p.
685, May, 1912.

1167. (N. Dak.) Protest of a check
must be made on dav of dishonor unless delay
excused. Vol. 3, p." 202, Oct., 1910.

1168. (Ohio.) Where a check is pre-
sented and refused payment, it is not neces-
sary for the notary to wait until the close
of banking hours, but protest may be made
immediately. The drawer, however, has the
right to tender payment to holder of the
amount and protest fee at any time during
the day. Although the point has not been
specifically decided, it would seem that a
tender to the notary, the same day, of the
amount due with protest fees, while he still
retains possession of the protested instrument
would be a valid tender, and that upon such
tender the drawer could demand a surrender
of the instrument. Vol. 9, p. 653, Feb.,
1917.

1169. (Va.) A check for $100 was pre-
sented at a bank at ten o'clock in the morn-
ing and was immediately protested for non-
payment because of no funds. Before the
close of banking hours on the same day the
bank received funds and notified the holder
that it would pay the check without the pro-
test fees. Opinion: The check having been
lawfully protested at ten o'clock, the holder
was entitled to recover the fees in addition
to the face of the check. In the absence of
instructions from the maker, the better course
for the bank is to leave the matter for direct
adjustment between the parties. Vol. 6, p.
274, Oct., 1913.

Waiver of protest
See 10:j4 ct *•<•(/

1170. (Ala.) A note contains on its face
above the signature a provision that "the
makers and indorsers waive demand, protest
and notice of protest." Opinion: The pro-
vision is binding on all the indorsers and dis-
penses with the necessity of those steps to
preserve their liability. Vol. G, p. 36, July,
1913.

1171. (Cal.) The clause in an indorsed
note "this note subject to privilege of one re-
newal for like period" is an implied waiver
of demand and notice of protest by the in-
dorser at least until the expiration of the ex-
tended period, and by later cases also waives
those steps at the end of the period of exten-
sion. It would be better to have an express
waiver of protest in the note to avoid all
question. Vol. 9, p. 240, Sept., 1916.

1172. (Kan.) A bank has in its files
certain notes indorsed by its customer "pay-
ment guaranteed, ]irotest waived.'' In case
of default in payment, the bank seeks to know
whether it must exhaust the security of the
maker before recovering from the indorser.
Opinion: Where the payee of a note transfers
it l)y indorsing "payment giiaranteod, protest
waived" this, according to the weight of au-
thority, is an indorsement in the commercial
sense, under which an innocent purchaser for
value before maturity becomes a holder in due
course with right to enforce against the maker
free from defense and with immediate re-
course upon the indorser upon dishonor at
maturity. Vol. 10, p. 594, Feb., 1918.

1173. (Minn.) The Negotiable Instru-
ments Act provides that a waiver of protest
is a waiver of presentment and notice of dis-
honor as well as of formal protest. Where
a note contains a clause "the drawer and in-
dorsers severally waive protest and notice of
protest," such waiver embodied in the instru-

14.3

117H

DIGEST OF LEGAL OPINIONS

ment itself is binding on the indorscrs. An
accommodation maker of a note is not entitled
to notice of dishonor, but an accommodation
indorsor, in tlio absence of a waiver, is so en-
titled. Vol. G, p. 575, Feb., 15)14.

1174. (Miss.) A bank received for col-
lection a note containin^]^ the followinpj waiver
printed on its face: "The drawers and in-
dorscrs severally waive presentment for pay-
ment, protest and notice of protest and non-
payment of this note." No instructions were
given as to protest. Opinion: The proper
course for the collecting bank was to omit
protest. A^ol. 5, p. 378, Dec, 1912.

1175. (Pa.) The payee of a note in-
dorses it as follows: "We hereby waive de-
mand, protest and notice of non-payment of
the within note. John Doe Co., John Doe,
President, William Doe, Secretary." The
holder is not certain whether the above con-

stitutes both a waiver of protest and an in-
dorsement, or is a waiver of protest only.
Opinion: Where the payee of a note indorses
the same by signing his name under a waiver
of prot(!st, such indorsement operates both as
a waiver of protest and as an indorsement
transferring title. Vol. 10, p. 311, Oct.,
1017.

1176. (W. Va.) The following waiver
of protest, "For value received here-
by guarantee the payment of the within note
and any renewal of the same, and hereby
waive protest, demand and notice of non-
payment thereof," was rubber stamped on the
back of an old note and attached to a renewal
note containing no such waiver. Opinion:
The waiver on the original note also consti-
tuted a waiver by the indorser of demand,
protest and notice of the renewal. Vol. 8,
p. 70G, Feb., 1916.

SET OFF

Collection proceeds set off against
bankrupt

1177. (Ga.) A bank received from its
customer notes deposited for collection at
a time when bankruptcy was not contemplated
by the customer. After the customer went
into bankruptcy, the notes were collected and
the bank applied the proceeds of the notes
upon a claim it held against the customer.
Opinion: The bank had a right to set off the
proceeds of the notes deposited for collection
at a time when bankruptcy was not contem-
plated and collected after the bankruptcy.
Vol. 7, p. 494, Jan., 1915.

Consent of depositor required in
Louisiana

1178. (La.) John Doe deposited funds
in his bank on the same day upon which his
note held by it became due. He had been
carrying the note from year to year for four
years, having it renewed each year. The
bank without Doe's consent charged the note
to his account, and refused to honor his
checks, whereupon Doe brings suit. Opin-
ion: Under the rule generally prevailing a
bank has a right to set off a matured debt
against a customer's account without his con-
sent, but in Louisiana a special rule prevails
that the bank is not authorized to apply a cus-
tomers deposit to payment of his debts, ex-
cept there is a special mandate from the de-
positor or agreement or course of dealing so
authorizing. Vol. 11, p. 276, Nov., 1918.

Consent of depositor unnecessary

1179. (Del.) A bank owned its custom-
er's note of $100 due at the bank August 5th.
On that date the customer had $100 to his
credit at the bank. Opinion: The bank had
the right at the maturity of the note to charge
it up to his account without first notifying
him or obtaining his consent. Vol. 2, p. 73,
Aug., 1909.

1180. (Miss.) A bank held collateral
security for two items of indebtedness of one
of its depositors who had an account with
the bank. The bank applied the deposit to
one of the debts before it had matured, re-
ducing the balance to $90. A check for $100
was presented after the debts had become due
and was refused. Opinion: The bank had a
right at any time to offset any matured in-
debtedness owing by the depositor against his
credit without prior resort to any collateral
security held by it and without first obtaining
the consent of the depositor. (A few states,
not Mississippi,) require prior exhaustion of
collateral. At the time the check for $100 was
presented, the bank owed the depositor $90
and was justified in refusing pavment. Vol.
8, p. 1101, June, 1916. See 1183 et seq.

1181. (N. J.) Bank A discounted and
became owner of a note drawn by its customer
Smith in favor of Jones, made payable to
Bank B, where Smith also keeps an account.
The note was protested at maturity. Opin-
ion: Bank A has the right to charge up the
note against Smith's account without special

144

SET OFF

1188

instructions from Smith, although he should
be notified that the note has been so charged
up. Vol. 3, p. 736, June, 1911.

County warrant set off against deposit
of county

1182. (Ga.) A bank in Georgia pur-
chased certain county orders or scripts, being
the matured obligations of the county, drawn
against the county treasurer by the board of
county commissioners. It was the practice
of the bank to cash these orders and hold them
until the end of the month, when the treas-
urer would give his check on the account to
take them up. Upon going out of office, at
the time the office of treasurer was abolished,
he refused to give his check taking up the
orders that had accumulated, but instead gave
a check for the entire balance to be used in
the new county depository. The bank seeks
to charge the said scripts to the treasurer's
account, before his balance check is presented.
Opinion: Where a bank purchased county
orders upon the county treasurer under an
arrangement by which, at the end of the
month, the treasurer would pay such orders
by his check upon the county deposit held by
the bank, the latter, upon the treasurer's fail-
ure so to do, would probably be held to have
a right to set off the county orders, as a ma-
tured indebtedness owing it by the county
against the deposit. Vol. 10, p. 203, Sept.,
1917.

Debt protected by collateral

See 1180

1183. (Cal.) A bank in California
owned a past due note for $500, drawn by its
depositor who had a balance of $1,000 with
the bank. At maturity of the note the maker
had refused to pay. Opinion: Under the law
in California the bank has a right to apply
the maker's deposit upon his unpaid note at
maturity unless it holds security for the in-
debtedness. This right also extends to a
note of the depositor purchased by the bank
from an indorser. Where a note has been
discounted for an indorser's benefit, his de-
posit may be api)lied in payment at the bank's
option. 'Vol. 8, p. 910, April, 1916.

1184. (Cal.) A bank holds a past due
note of its customer in favor of the l)aiik.
The customer's account is sufficiently large
to meet the indebtedness. Opinion: The
bank has the right to apply the deposit to
payment of the depositor's matured indebted-
ness, but in California, if the note is secured

by a mortgage of real or personal property,
the bank cannot apply the deposit until the
security is exhausted. Vol. 6, p. 434, Dec,
1913.

1185, (N. C.) The rule is well settled
that a bank may look to deposits in its hands
for the repayment of any indebtedness to it
on the part of the depositor and may apply
his deposits on his debts to the bank as they
become due. A bank holding a matured note
of its depositor has the right to apply his de-
posit to payment of the note. In some juris-
dictions, to wit, California, Kentucky and
Massachusetts, it has been held that a bank
is not entitled to apply a deposit to a debt of
a depositor which is fully protected bv other
collateral. Vol. 10, p. 783, May, 1918.

Debt must be contracted in good faith

1186, (Pa.) A bank held a deposit to
the credit of A. One B, who ov.ned an un-
matured note executed by A, asked the bank
to discount the note on his personal guaran-
tee, and to use A's deposit as a set off at ma-
turity. Opinion: Ordinarily the bank would
have the right to set off A's note indorsed by
B against A's deposit, but there is a possibil-
ity that a court would deny the right of set off
on the ground that the note was acquired by
the bank to enable B to gain an unfair advan-
tage over A, and that the indebtedness of A
to the bank was not a bona fide debt subject
to set off. Vol. 5, p, 376, Dec, 191-?.

Set off against debt of presenting check-
holder

1187. (in.) The payee of a check who
presents it to a bank owes the bank on a past
due note, the amount being less than the
amount of the check. The bank in cashing
the check desires to deduct the amount of the
indebtedness and deliver him the balance.
Opinion: Drawee bank upon presentment of
a clieck by the payee indebted to it cannot de-
duct tlic amount of indebtedness from the
amount of the check, paying only the balance
to the liolder. In so doing it would lie violating
its contract with the drawer, namely, to pay
his checks according to his order and direc-
tion. Vol. 10, p. 310, Oct., 1917.

Set off of demand note

1188. (Iowa.) A bank held a demand
note of its depositor, who had on deposit a
balance smaller than the amount of the note.
Tlie bank applied the deposit in partial pay-
ment of tiie note, and two months later the
depositor was threatened with bankruptcy.

145

1181)

DKiKST OF LECiAL UPiXlOXS

Opinion: Tlio application of the customer'a
(Icponit to Ilia (leiiiand note two niontlis before
it htTiune likely that the depositor would he
forced into bankruptcy was a valid set off.
The bank can retain such balance and prove
its claim for the amount remaininj;^ due
against the estate and recover its pro rata
share. Vol 5, p. 107, Aug., 1912.

1189. (Mich.) A ))ank has the right to
apply the funds to the general credit of a cus-
tomer toward payment of his demand note,
held by the bank, although no demand for
payment has been made. Where the demand
note is "secured by sundry notes deposited as
collateral'' the bank can set off the demand
note against the general deposit, and is not
compelled to first resort to such collateral.
Vol. 11, p. 39, July, 1918.

1190. (Ohio.) A had $2,000 on de-
posit with his bank, which owned his demand
note of $1,000. The bank applied the deposit
in payment of the note and two days after-
wards A failed. Opinion: The bank had the
right to apply the bankrupt's deposit upon his
demand note. Money deposited in a bank in
the due course of business by an insolvent
within four months of the time he is adjudged
a bankrupt, is not a transfer of property
amounting to a preference within the meaning
of the Bankruptcy Act of 1898. Vol. 3, p.
146, Sept., 1910.

Deposits impressed with trust character

1191. (111.) A note for $2,700 secured
by a chattel mortgage on cattle was given by
A to B, who sold it to Bank C. A Avrougfully
sold the mortgaged cattle and deposited the
proceeds with Bank D, part of which were
attached by one of A*s creditors and the bal-
ance was applied by the bank upon an in-
debtedness of A. B, knowing that the cattle
had been disposed of, re-purchased the note
and the mortgage from Bank C and brought
suit against Bank D to recover the proceeds
as a trust fund. Opinion: According to the
weight of authority (a few cases contra) Bank
D was entitled to apply the deposit upon the
indebtedness of A, and not obliged to account
for it as a trust fund if it had no knowledge
of its trust character. The bank, however,
has no such right of set off where it knows
that a general deposit is impressed with a
trust character. Vol. 8, p. 36, July, 1915.

Deposits made in view of insolvency

1192. (Mass.) The deposit balance of a
customer who has gone into bankruptcy may

be set off against his indebtedness to the bank
whether due or not, provided his deposits have
licen received in usual course subject to check
and not in view of his insolvency with an in-
tention to make a preferential a})propriation
in reduction of his indebtedness. Vol. 6, p.
575, Feb., 1914.

1193. (S. Dak.) A bank held certain
over-due iiotes of a lumber company. The
company made several deposits subject to
check which the bank applied to payment of
the notes. The company then became bank-
rupt. The bank had been employed by the
company as sales agent on salary. Opinion:
The deposits if made in the usual course, sub-
ject to check within four months of bank
ru])tcy, may be set off against the bankrupt's
notes, whether due or not, but it is otherwise
if the bank deposits were made by the com-
pany in view of insolvency with an intent to
give a preference. The Bankrupt Act pro-
vides that wages to salesmen are preferred
payments, but it is very doubtful that the act
would be construed to include the salary to
an incorporated state bank which acted as a
sales agent. Vol. 6, p. 683, April, 1914.

Deposit received after maturity of note

1194. (S. Dak.) A bank purchased
from the indorser a note which was not paid
at maturity by the maker, who claimed fail-
ure of consideration. After maturity the
bank received funds deposited to the general
account of the maker, against which funds it
set off the note. The bank had previously
started suit against the maker but discon-
tinued it after it had set off the note. Opin-
ion: The bank had a right to apply to the
payment of the note not only all the funds
deposited in the bank when the note matured,
but all funds afterwards received. Such
right is not affected by the fact that the bank
began and discontinued suit. Vol. 8, p. 142,
Aug., 1915.

Set off against city deposit

1195. (Ind.) A city in Indiana was in-
del)ted on an over-due note to a national bank
holding the city's funds, which were sufficient
to meet the note. The bank accordingly ap-
plied the deposit to payment of the note and
accrued interest. Opinion : In the absence of
a statute to the contrary (no apparent resttic-
tion in Indiana) the bank had the right to
apply such deposit to payment of the city's
indebtedness, the same as in case of an in-
dividual depositor. Vol. 7, p. 97, Aug., 1914.

146

SET OFF

1204

Set off of claim for interest

1196. (Mo.) A bank, reeeiviiiir a note
for collection, collected from the maker and
after payment to the holder and surrender of
the note discovered that through error the
maker still owed $4.04 interest. The bank
paid this amount to the payee, the maker
acknowledging his indebtedness. Later the
maker of the note became a depositor for
$200 and against this account the bank
charged the $4.64 for which the depositor
brings suit. Opinion : In the discharge of
the liability for $4.64, the bank l)ecame sub-
rogated to the rights and remedies of the
holder of the note and there arose a legally
subsisting cause of action in its favor against
the maker of the note. The bank had the
right to set off his matured indebtedness
against the deposit. Vol. 9, p. 748, March,
1917.

Set off against indebtedness of decedent

1197. (Mo.) The administrator of an
estate draws a check against the account of
the deceased, which the bank refuses to pay,
claiming that it is entitled to set off against
the account a debt due at the time of deposi-
tor's death. Opinion: The bank has a right
to set off against the account of the depositor
a matured debt owing by him at the time of
his death, and to refuse to pay the check of
the administrator upon the deposit so set off.
Vol. 9, p. 909, May, 1917.

1198. (Mont.) A bank held two past
due unsecured notes of a customer who carried
a balance with the bank subject to check. The
customer died. Opinion: Upon the death of
the depositor, the bank had the right to set
off the past due notes against his account.
The decisions conflict as to the right of set oft'
where the notes have not matured. In IMon-
tana such right is denied. Vol. 6, p. 637,
March, 1914.'

1199. (N. C.) The maker of a note
died, leaving a balance to his cnecking ac-
count. The bank seeks to know whether it
has the right of set off before returning the
balance to the administrator. Opinion: A
bank owning the note of a customer who has
deceased has the right, if the note has ma-
tured, to apply the maker's deposit upon the
note and in North Carolina if the estate is
insolvent, may apply such deposit, even
though the note is not due. If tlie deposit is
not sufficient to meet the note the balance
would be a debt payal)le by the administrator.
The administrator in declaring a dividend

would only be required to base same upon
the balance due after the deposit was set off.
Vol. 11, p. 493, March, 1919.

1200. (Pa.) A bank loans $100 receiv-
ing therefor a judgment note for that amount.
The maker of the note subsequently deposits
$600 in a savings account and several days
later dies, the note having one month to run.
The bank seeks to set off the unmatured in-
debtedness against the account. Opinion:
Bank in Pennsylvania has the right to set off
unmatured note against savings account of
solvent decedent if note matures prior to com-
mencement of suit for deposit ; but set off
not allowed if estate of decedent insolvent.
Vol. 9, p. 747, March, 1917.

1201. (Pa.) A customer was indel)ted to
a bank on a note which became due several
days after he died. The bank held sufficient
funds of the decedent to apply on the note.
Opinion: In Pennsylvania, the bank may
charge the note to the account of the maker,
though the note does not become due for sev-
eral days after his decease, provided his estate
is solvent, i)ut such right of set off does not
exist if the estate is insolvent. Vol. 6, p.
508, Jan., 1914.

1202. (Wyo.) When a depositor dies,
indebted to the bank, the latter has the right
to apply the balance t-o his credit at the time
of his death upon a matured indebtedness of
the depositor, and is not accountable to the
administrator therefor, except for the excess
when the balance exceeds the indebtedness.
Vol. 5, p. 310, Nov., 1912.

Set off against indorser's account
See (iS4. 121-2

1203. (N. Y.) A bank discounted for
the indorser, who was its customer, a demand
note. Tlie indorser guaranteed the payment
thereof. The note was dishonored by tlie
maker. Opinion: The bank had tlie right to
charge up the note when dishonored against
the indorser's account, assuming his liability
as indorser has been dulv preserved. Vol. 5.
p. 667, April, 1913. "

1204. (S. C.) A depositor was indebted
to a bank in South Carolina as an indorser on
a note discounted for him. The bank set off
the note against the depositor's account.
Opinion : The bank had the right of set off,
but under the law of South Carolina must
give the depositor notice of application of the
deposit, and checks drawn before such notice
must be paid. Where the note is discounted
for tlie maker and the depositor is an accom-

147

1205

DIGEST OP LEGAL OPINIONS

modation indorser, it is doubtful if the
lat tor's deposit can be set ofi". Vol. 8, p. 37,
July, 1915.

1205. (Tenn.) A bank cashed for its
depositor a cheek indorsed l)y him, payment
of which was refused l)y the drawee bank.
The depositor's liability as indorser was fixed
by due demand and notice of disnonor. The
bank wishes to set off his deposit against his
indebtedness as indorser. Opinion: There
existed a mutual debt between the bank and
its depositor, which would entitle the bank to
apply the indorser's deposit against his in-
debtedness as indorser. The bank would not
be compelled to first sue and obtain judgment
against the indorser who did not consent to
such application. Vol. 5, p. 309, Nov., 1912.

Depositor's right to set off against

insolvent bank

See 1214, 1215, 1216

1206. (Ark.) A depositor has (1) a
right to set off his deposit in an insolvent
national bank against his liability on a note
held by the bank, but (2) no right to set off
his deposit against his double liability as a
stockholder. Vol. 9, p. 241, Sept., 1916.

1207. (Ark.) Depositor in insolvent
bank has right to set off his deposit against
his indebtedness to the bank, whether due or
not. Vol. 6, p. 98, Aug., 1913.

1208. (Mass.) A bank held a note for
$5,000 of its depositor who had on deposit
$5,000. The bank failed before the note ma-
tured. Opinion: The depositor has the right
to set off the deposit standing to his credit
at time of insolvency against his liability on
the note. Vol. 5, p. 445, Jan., 1913.

1209. (Pa.) A is a depositor in a bank
which failed. A owed $500 on a note to the
bank and carried a balance of $500. B and
others are depositors but not indebted to the
bank. B asks if it is not discriminating
against him in favor of A to allow A to set
off his indebtedness. Opinion: A has a right
to set off his balance against his indebtedness
to the bank, whether due or not. The exer-
cise of such right is not discriminating
against B or the other depositors. Vol. 6,
p. 98, Aug., 1913.

Maker's account charged in interest of
indorsers

1210. (N. C.) "Where a bank owns an
indorsed note, and at maturity has sufficient

funds of the maker on deposit to pay it, the
decisions conflict as to wliether failure to
charge the note to the maker's account will
release the indorser. If, however, note by its
terms is payable at bank, under Negotiable
Instruments Law, being an order to the bank
to pay, indorser would be released by failure
to charge up. But bank is under no obliga-
tion, in interest of indorser, to apply maker's
deposit to note owned by it where funds
insufhcient at maturity, nor (according to
majority of courts, a few contra) to apply
sufficient subsequent deposits. Vol. 3, p. 5^3,
March, 1911.

1211. (Ohio.) At maturity of a note
made by a corporation and bearing several
indorsements, the maker had on deposit with
the bank o^vning the note a sum less than the
amount of the note. After maturity the cor-
poration drew out its balance and failed, leav-
ing the note unpaid. Opinion: A majority
of the courts hold that the bank is not obliged
to apply the maker's deposit towards a par-
tial satisfaction of the note in the interest of
the indorsers and sureties. The bank's omis-
sion to apply the partial deposit will not re-
lease the indorsers, although the maker sub-
sequently draws out the balance and then
fails. Vol. 6, p. 818, June, 1914.

1212. CPa.) A bank owned an over-due
note. The maker and indorser both carried
accounts with the bank. The maker's de-
posit was not sufficient to meet the note at
maturity. Opinion: The bank has a right
to set off against the indorser's account ; but
where the maker's account is sufficient at ma-
turity, the bank is bound to apply the maker's
deposit in relief of the indorser, and failure
so to do will discharge the indorser: if in-
sufficient at that time, subsequent deposits
will not raise that dutv. Vol. 8, p. 909.
April, 1916.

1213. (Pa.) A note of A was discounted
for B, the indorser, by a bank in which both
A and B were depositors. The note was not
paid at maturity and the bank charged the
note to A's account without first presenting
it at A's place of business, where it was
payable. Opinion: The bank probably had
the right of set off by charging the note to
A's account, without first presenting it to
him for pa^Tncnt at his place of business.
The same conclusion would apply where -the
note was discounted for A instead of for B.
In a case where such a note was presented
at A's place of business and protested, a
similar right of set off would exist against
A's account, but not against B's account,

14S

SET OFF

1220

where A's account was sufiBeient. Yol. 4, p.
685, May, 1912.

Note set off against insolvent bank by
indorser

1214. (Ky.) A bank has a deposit of
$5,000 subject to check in B Bank, and
owes B Bank a note of $10,000. B Bank
fails. A Bank desires to pay B Bank $5,000
and set off the other $5,000. Opinion: It
is generally held by the courts that when a
bank becomes insolvent, and holds the note
of a depositor who is the maker, whether
due or not due, and also has a balance to
the credit of the depositor, the latter has
the right to set off the deposit against the
note. But where the depositor is indorser
on note of a solvent maker some cases hold
that the right of set off does not exist. Yol.
7, p. 494, Jan., 1915.

1215. (N. J.) A bank holds a matured
note of a depositor for an amount larger than
his account in said bank. The bank becomes
insolvent. Opinion: The depositor may
have his deposit set off against his note,
whether matiired or unmatured at the time
of the bank's insolvency, whether state or
national. This right of set off could be exer-
cised by the depositor tendering to the
receiver of the bank the difference between
the amount of his balance and the amount
due upon his note. But it is questionable
whether a depositor who has indorsed such
a note can have it set off against his deposit
in the insolvent bank unless the maker is
insolvent. Where, however, the depositor
discounted his wife's note Avith his indorse-
ment, and is the accommodated party and
the real debtor, he is entitled to a set off on
equitable ground. Yol. G, p. 508, Jan., 1914.

1216. (Wash.) A depositor in an in-
solvent bank, who is indebted to the bank as
maker upon a note, has a right to set off" his
deposit against such indebtedness, whether
the note is due or not yet matured. Where
the depositor is an indorser, some courts hold
the same right of set off exists, but others
that the indorser cannot set off his deposit
unless the maker is insolvent. Yol. 7, p.
387, Dec, 1914.

Partnership debt set off against individual
account

1217. (Cal.) A and B, co-partners, gave
to a bank their note of $300, due one day
after date, and later assigned their business

to C for the benefit of creditors. C ran the
business as assignee and kept his account with
tbe bank. The not€ not having been paid,
tiic Ijank wants to charge it to the assignee's
account. Opinion: The bank has the right
to set off the partnership note against the
deposit existing at the time of the assignment,
but cannot exercise such right against the
deposits of the assicmee. Yol. 9, p. 351, Oct.,
191G.

1218. (N. C.) The firm of Doe and
Eoe owes a bank $165 upon its note. Doe
has sold out his interest to Smith, and has
deposited the purchase money in the bank to
his individual credit. Later, as a result of
a dispute, Doe agrees to refund part of the
purchase money to Smith, and has given
Smith an order on the bank for $1,000. The
bank has paid Smith all but $1G5 thereof,
claiming the right to set off the firm's note.
Opinion: Under the law of North Carolina
the bank cannot set off the firm's note against
the partner's individual account. But in an
action by Doe, the partner, or by Smith, the
assignee, for the deposit, the bank can plead
the firm's indebtedness by way of counter-
claim, or can recover the same in an inde-
pendent action against the partner. Vol. 6,
p. 97, Aug., 1913.

1219. (Tenn.) It is the general rule
that a bank has a right to set off a debt from
the depositor against his deposit, but the
mutual debts thus set off must be in the
same right; for example, it is generally held
that a bank cannot apply a deposit of an
individual to debt of a firm of which he is
a member, or cannot apply deposit of trustee
to debt of the trustee where his indebtedness
to the bank is personal. Yol. 5, p. 309, Nov.,
1912.

Where depositor has two accounts

1220. (111.) A bank which carries both
a coinnieri'ial and a savings account sul)mits
for consideration four check forms as fol-
lows : Check A is an ordinary form of bank
check, but underneath the name of the bank
are the words "savings department," and the
check contains the not<ition "Book must
accompany this check, otherwise it will not
be honored, unless entry is made in book, or
book is left for entry of check when pre-
sented." Cheek B is the ordinary form of
bank check. Check C is the same form
with the words "Commercial Department"
under the name of the bank. Check D is
the same as C with the notation "This check
is to be paid from funds on deposit in com-

149

1221

DICKST OF LKdAL OI'INIOXS

niorcial do|)artinent only." The bank uses
forms A and B, but suggests use of form C
to guard against customer who overdraws
his commercial account, and to avoid getting
the bank into tr()ul)le in declining payment
for insuflicient funds, even though the de-
positor has sudicient fuiuls in his savings
account. The bank asks desirability of using
forms C or D. Opinion: Where a bank
carries both a commercial and savings ac-
count and pays an overdraft on the commer-
cial account, it has the right to set off the
check against the customer's savings account,
but where funds in the savings account are
payable under special agreement, requiring
production of pass-book, bank is not obliged
to pay overdraft on commercial account and
charge same to sufficient funds in savings
account. The adoption of form C would
serve the useful purpose of training customer
that, in withdrawal of funds from either
commercial or savings account, a special form
is required. Form C is more desirable than
form D, for the reason that the notation
on the latter states a condition which may
affect its negotiability. Vol. 11, p. 169,
Sept., 1918.

1221. (N. J.) Where a depositor carries
both a commercial and savings account with
a bank and is indebted to the bank upon
matured notes, and the funds in the commer-
cial account are insufficient, a New York
court has held the bank has no right, with-
out the depositor's consent, to charge the
notes to the depositor's savings account.
The opinion in this case, however, is merely
obiter and would seem contrary to general
principles of set off. Vol. 11, p. 329, Dec,
1918.

1222. (N. Y.) A depositor besides his
ordinary account in a bank carried two other
accounts, one being marked "special" and
the other "agent." The bank did not know
whether the depositor owned the funds in
said two accounts or whether he held them in
a fiduciary capacity. The depositor became
indebted to the bank, created by an over-
draft on his personal account, and the bank
seeks to apply the balance in either of the
other accounts in settlement. Opinion: The
bank can set off the overdraft upon the ac-
counts styled "special" and "agent," pro-
vided such accounts are owned by the de-
positor in liis own right and are thus
designated merely for convenience. But, if
the accounts so marked are held as agent or
trustee for another, they cannot (according
to the weight of authority) be applied upon

the depositor's individual indebtedness, and
the bank is put upon inquiry by the form
of the account so styled. \'ol. 9, p. 577,
.Jan., iyi7.

1223. (S. C.) A depositor carries both
a cheeking and a savings account with a
bank and is indel)ted to the bank upon a
matured loan in excess of the checking but
witliin the savings account. Opinion: The
bank can charge the indebtedness to the sav-
ings account. Vol. 7, p. 384, Dec. 1914.

Unmatured debt set off against bankrupt

1224. (Ark.) A depositor owes his bank
$1,100 on a note not yet matured, and having
quarreled with the bank intends withdraw-
ing his account and doing business with
another bank. He refuses to allow the bank
to charge his account with the amount of
the note. Opinion: Unless the loan made
to the depositor upon his note was induced
by fraud upon his part or unless he is now
insolvent, the bank would have no right to
apply his deposit upon his unmatured note.
A bank has no right to apply a deposit to a
debt of the depositor until such debt matures,
unless (as held in some states, but denied in
others) the depositor becomes insolvent be-
fore maturity, or unless the debt has been
created by fraud, in which event the credit
given for the note can be rescinded. Vol. 11,
p. 169, Sept., 1918.

1225 (Mo.) A bank held two notes of
its depositor, one being a demand note for
$320, the other, pavable in six months, for
$1,000. The date of maturity of the latter
was extended three months by contract in-
dorsed on the note. Before the $1,000 note
matured, the depositor made a general assign-
ment to creditors. The bank, having on its
books $1,065 to the depositor's credit, debits
the amount of the demand note, and also
seeks to set off the unmatured note. Opin-
ion: In Missouri, bank holding unmatured
note of depositor cannot apply balance upon
note in event of depositor's insolvency.
Where maturity of note extended and depos-
itor becomes insolvent before end of period
of extension, note is unmatured paper and
cannot be set off unless contract of extension
can be rescinded, because of fraud or on other
equitable ground. Vol. 10, p. 120, Aug.
1917.

1226. (N. Y.) A depositor made a gen-
eral assignment. The bank held a note for
a larger amount than his balance, but not yet
due. The bank, claiming a set off. holds the

150

STOPPIXG PAYMEXT

1232

money until maturity of the note. Opinion:
Under the law of Xew York the bank cannot
set off the deposit against the unmatured
note, but the rule in the federal courts and
under the Bankruptcy Act allows a set off.
Vol. 6, p. 818, June, 1914.

1227. (N. Y.) A bank made a loan to
its customer on his personal note, crediting
the customer with the money loaned. The
customer has drawn 75 per cent, of the money
by check and is about to go into bankruptcy.
The note is past due. The bank cannot
obtain a new note for the balance due, but
has a verbal understanding with the customer
that no more money Avill be drawn out.
Opinion: The bank can apply the deposit
against the customer's matured note, and in
case of his bankruptcy can prove its claim
against the estate for the balance. The cir-
cumstances of this case do not sliow tliat a
preferential transfer was made. A^ol. (>, ]>.
575. Feb., 1014.

1228. (Ohio.) The general rule is that a
bank has a right to apply a deposit to the
payment of any nuitnred debt due the bank
from the depositor. It has been held in Ohio
and other states (but the right is denied in
many states) that a bank may apply a deposit
to the payment of the depositor's indebted-
ness not yet matured, provided the depositor
is insolvent. Under the Xational Bankrupt
Act a bank may set off an unmatured note
against the deposit of the maker. Vol. 5,
p. 828, June, 1913.

1229. (Pa.) The rule that a bank has a
right to set off a deposit against its cus-
tomer's matured indebtedness applies equally
to his indebtedness upon paper discounted

for the customer and paper of the customer
purchased from a third person in the usual
course of business. The bank purchasing
from a third person would have the right to
apply the deposit of the maker of a note
equally as if it had been discounted for the
maker directly, subject, of course, to the
limitation that the paper was acquired in the
usual course of business and not purchased
for the e.xpress purpose of enabling the seller
to realize out of the funds of the maker
aj)proacliing insolvency. The riglit of set
off of unmatured paper upon the depositor's
insolvency is not recognized in Pennsylvania.
The rule is conflicting in other states but it
exists under tiie Xational Bankruj^t Act.
It would seem competent for a bank to make
an agreement with its customer giving the
former the right to such set off. Vol. 10.
p, 48, July, 1917.

1230. (S. Dak.) Where a borrower l)e-
comes bankrupt, the bank has the right,
under the provisions of the Xational Bank-
rupt Law, to apply his deposit upon his
notes, though unmatured. Aside from the
Bankrupt Act, the right of set off of an un-
matured note against the deposit upon the
insolvency of the maker is recognized in
some states and denied in others, but where
the right is given by contract it can be
enforced. The following form of contract,
if inserted in the borrower's note, would
protect the bank: "the bank at which this
note is payable is hereby authorized, in the
event of the maker's insolvency before matur-
ity hereof, to thereupon apply any balance
in said bank standing to tlie credit of the
maker in pavmcnt of this note.'' Vol. 7, p.
221, Oct., lit 14.

STOPPING PAYMENT

For Revocation of Check by Bankruptcy, 210, by Death. 452 et seq.; by Insanity or In-
competency, 84G et seq.; see also 275, 302

Accuracy of notice

1231. (Ala.) In A])ril a customer wish-
ing to stop payment on his clieck, notified
the bank and described the check as being
for $50, payable to John Doe and dated some
time in April, the exact date he did not know.
A check payable to John Doe for $50 and
dated July 2 was presented and paid by the
bank. The customer seeks to hold the bank
liable for violating his stop order. He claims
he omitted to date the check and the payee
supplied the date. Opinion: The bank is
not liable, as the check was not described

witli sufficient accuracy. When stopping pay-
ment he did not describe the check as dated,
l)ut stated it was dated in April. This mis-
description was material. Vol. 9, p. 349,
Oct., 191(5.

1232. (Cal.) .\ l)ank having before it
an order sto})i)ing payment of a post-dated
check, describing the check by name of the
drawer, number, date, amount and payee,
nevertheless paid the check when presented
on the day of its date because the number of
the check (12) was different from that (13)
given in the stop order. The bank endeav-

151

1233

I)I(;est of legal opinions

ored in vain to rcacli the drawer before pay-
ment, but construed the order to refer to
another cheek. Opinion: Nolwithstandinf,'
a mistake in the number of the check, tlic
order was sunicient as an instruction to the
bank not to pay the presented ciieck. Vol.
8, p. 144, Aug., 1915.

Bank's liability for payment

1233. (N. J.) A depositor drew his
check and ten days later stopped payment.
Through an oversight the bank paid the
check. Opinion: The bank is liable to depos-
itor for any resultant damage; but if the
bank could prove payment had been made to
a holder who had enforceable rights against
the drawer, probably it would escape liabil-
ity. Vol. 5, p. 595, March, 1913.

1234. (Ohio.) A depositor, after his
check had been paid and returned to him as
a paid voucher, in ignorance thereof, issued
a duplicate check and notified the bank in
writing not to pay the original. Opinion:
The bank is not liable to the depositor because
the duplicate is paid. The bank is not
chargeable with knowdedge that the original
was paid and returned and that the stop
payment order was issued in error. Vol. 8,
p. 517, Dec, 1915.

1235. (Pa.) A gave B his check which
B lost, after he had indorsed it in blank.
A stopped payment, but the bank inadvert-
ently paid the check contrary to the stop
order. Opinion: If check paid to a holder
in due course, bank not liable for loss because
drawer not damaged, holder having right to
enforce payment from drawer and payee and
check operating as payment of drawer's debt
to payee ; but if check paid to finder or other
than holder in due course, drawer's debt to
payee would remain and bank would be liable
for loss. Vol. 10, p. 118, Aug. 1917.

Cashier's and certified checks

See 50, 54, 55

1236. (Mont.) A cashier's check upon
which there were three indorsements was piir-
chased by a bank and presented by it to the
drawee, where payment had been stopped be-
cause of fraud. Opinion: The purchasing
bank has recourse upon the drawer as well
as upon the indorsers, provided they have
been duly charged. Vol. 7, p. 898, May,
1915.

1237. (Ga.) A bank certified a check
for the drawer, who later requested the bank

to stop payment, as the agreement was not
fulfilled. Opinion: The drawer cannot stop
payment as a matter of right, but where the
drawer has been defrauded the bank may in
some cases comply with the drawer's request
and refuse payment upon receiving proper in-
demnity against ultimately being com])el!ed
to pay the holder. A^ol. 0, p. 750. May,
1914.

1238. (Mo.) The customer of a bank
})urchused its cashier's check of $600, pay-
able to his order. Afterwards without giving
any specific reason he wired the bank a re-
quest to stop payment and upon presentment
of the check payment was refused and the
item protested. Later the bank learned that
the customer had delivered the check in some
trade and becoming dissatisfied wired the
stop payment order. The bank is threatened
with a suit by the holder to enforce payment
of the check. Opinion: Certified and cash-
ier's checks, being used in place of money, the
courts refuse, as a general proposition, to per-
mit the issuing bank to refuse payment and
defend against the holder, even though he
has procured the check from the bank's cus-
tomer by fraud. In New Jersey, however,
it has been held — contrary to decisions else-
where — that where a check has been certified
for the drawer before delivery by him (as
distinguished from certification for the holder
after delivery by the drawer) the certifying
bank can plead fraud of the holder upon the
drawer in defense of pavment; In this case
the bank is the primary debtor upou the check
and is liable thereon to the holder who has
the legal title by indorsement. Vol. 11, p.
387, Jan., 1919.

1239. (N. J.) A contractor delivered
his certified check for $1,000 as liquidated
damages prior to entering upon a contract for
municipal improvements. The contract was
offered to him, but he refused to sign and do
the work. His certified check was deposited
and returned by the bank stamped "payment
stopped." The municipality seeks to recover
the amount. Opinion: Where check certified
for the drawer and payment is stopped by
the bank at the instance of the drawer, the
bank can defend against a fraudulent holder,
but where the certified check is delivered as
liquidated damages upon failure to perform a
contract according to bid, the certifying bank
and drawer are both liable thereon. Vol. 10,
p. 125, Aug., 1917.

1240. (N. Y.) A firm in New York re-
ceived a certified check on a New Jersey bank
in payment of merchandise. The check was

152

STOPPING PAYMENT

1247

forwarded through a local bank, and when
presented payment had been stopped by the
maker. Opinion: The courts generally hold
that after a bank has certified a check,
whether for the drawer or the holder, it is
obligated thereon as for so much money, and
cannot interpose, in defense of payment, an
equity of the drawer against the payee or
holder. In New Jersey, however, where a
check is certified for a fraudulent payee, the
bank is liable to him and cannot plead fraud
upon the drawer in defense; but where the
check is certified for the drawer the bank
can refuse payment and plead fraud of the
payee in obtaining check from drawer in de-
fense of liability to payee. Vol. 11, p. 440,
Feb., 1919.

1241. (Pa.) A purchases goods from B
giving in payment his check and B procures
its certification. B fails to deliver the goods
and A requests bank to refuse payment.
Opinion: Where check has been certified for
payee and drawer afterwards reqiiests bank
to refuse payment, some cases hold (a) bank
liable on check even to fraudulent payee
while others hold (b) bank not liable to payee
who has received check through fraud or with-
out consideration or where drawer has set off
against payee. The point has not been de-
cided in Pennsylvania. Bank is liable on its
certified check in any event to an innocent
purchaser for value. Vol. 6, p. 680, April,
1914.

Disclaimer of liability for payment of
stopped checks

1242. (Ala.) In a form submitted for
protection of a bank in case of payment of a
stopped check, the bank acknowledges receipt
of the stop-payment order and states that "we
will make every effort to protect you, but will
not hold ourselves responsible in case of pay-
ment.'' Opinion: According to a decision in
New York the bank, notwithstanding such
form of notice or agreement, will not be re-
lieved from responsibility for payment of a
stopped check unless it has been free from
negligence in making payment. Vol. 5, p.
594. March, 19i;i.

1243. (N. Y.) A depositor agrees to
hold a bank harmless in the event the bank
inadvertently pays a check after a stop pay-
ment notice has been received. In this case,
the stop payment agreement is not merely a
statement in the pass-book, but is actually
signed by the depositor. Is the bank ab-
solved from liability? Opinion: The agree-

ment being virtually one exempting the bank
from liability for its own negligence will be
strictly construed. Such exemption contracts
are not favored by the courts and will, if pos-
sible, be construed in such a way as not to
relieve from negligence. How a specific con-
tract of this kind would be construed has not
been decided and cannot be foretold with cer-
tainty. Contracts for immunity from negli-
gence will be upheld in the State of New York
if expressed in unequivocal terms. Vol. 11,
p. 495 March, 1919.

1244. (N. Y.) A clause is inserted in a
stop payment order to a bank which reads as
follows: "Should you pay this check through
inadvertency or oversight, it is expressly un-
derstood that you will in no way be held re-
sponsible." Opinion: It is doubtful wheth-
er under this clause the courts will relieve
the bank in all cases of mistaken payments of
stopped checks, irrespective of whether or not
the bank has used reasonable care. The ten-
dency of the courts to to attach to all agree-
ment relieving the bank from liability an
implied condition that the bank on its part
must exercise reasonable care. Vol. 9, p.
318, Oct., 1916.

Duty to obey instructions
See 850, 1159

1245. (Kan.) A gives his check in pay-
ment of a horse, and later, finding the horse
not as represented, stops payment on the
check, which had been indorsed to a holder
in due course. The bank refuses to pay.
Opinion: Such holder has no remedy against
the drawee bank, but must look to the drawer
and any prior indorsers. It is not for the
bank to go into the equities of the case be-
tween holder and drawer, as its duty is solely
to its customer. The rule is otherwise in a
few states where a check is regarded as an
assignment of funds. Vol. 2, p. 335, Feb.,
1910.

XoTK: The oiiactniont of the Negotiable Instru-
ments Law in all states except Georgia lias abol-
ished tins last stated rule.

1246. (Minn.) A depositor purchased
goods, giving his check in pa^Tiient. Upon
discovering an error he stopped payment.
Tiie holder presented the check at the drawee
hank and demanded payment. Opinion: The
l)ank was in duty bound to obey the instruc-
tion and refuse payment, and it incurred no
liabilitv to the holder for such refusal. Vol.
r, p. 897, :Nray, 1915.

1247. (Pa.) A depositor purchases
goods of a wholesaler giving his check in

153

1248

DIGEST OF LEGAL OriNIOXS

payinciit. Aflor rccoiviiifj the ^oods the de-
positor stops payment. Opinion: The draw-
er's liahility to punishment for obtaininj^
^^oods under false pretenses depends upon
proof of intent to stop payment at the time
of giving the check. A liank is not liable to
the holder for obeying tlic stop payment order
of its depositor, but where the drawer con-
tinually practices such fraud, the best course
for tlie hank is to close his account. Vol. 7,
p. 778, April, IDLl

1248. (S, C.) A customer issues his
clieek in payment of an automobile. Find-
ing the machine unsatisfactory, he instructs
his bank not to honor the check. A third
party, the collecting bank, presents the item
and payment is refused. Both the hank and
the customer are sued for non-payment.
Opinion: Drawee bank must obey customer's
instruction not to pay check where given be-
fore acceptance or payment and is not liable
to holder for refusing payment. Vol. 11, p.
40, July, 1918.

Notes payable at bank

1249. (Ala.) In the event the maker of
a note payable at a bank does not desire bank
to pay at maturity, it is necessary for him to
stop payment; where the bank wrongfully re-
fuses to pay a check when in funds, the courts
have in many cases awarded the depositor
damages for injury to his credit, and it would
seem, the same principle would apply to notes
payable at bank. Vol. 4, p. 304, Nov., 1911.

1250. (N. Y.) Note payable at bank is
equivalent to order to bank to pay same for
account of maker and latter has right to stop
payment. Vol. 7, p. 39, July, 1914.

1251. (Pa.) A gave his promissory note
to B, payable at A's bank. B negotiated the
note in his own bank and at maturity pay-
ment was stopped, although there were suffi-
cient funds to cover the note. Opinion: A
note payable at a bank constitutes an order
to the bank to pay the same for the account
of the maker, but payment should be refused
where the maker instructs the bank not to
pay. Vol. 6, p. 628, March, 1914.

1252. (Wash.) B purchased goods of
A, giving him in payment an acceptance
covering the invoice, payable at a bank at a
future date. Before maturity B stopped
pajnnent, although B had on deposit in the
bank sufficient funds. Opinion: An accep-
tance or note payable by the acceptor or maker
at a bank is not an assignment of the deposit

to the holder and is subject to countermand
by the maker before the bank has paid the
acc('[)tance or accepted or paid the note. Vol.
9, p. GGl, Feb., 1917.

Notice holds good indefinitely

1253. (N. J.) An order to stop payment
can be made by a customer to his bank before
the check has been paid or accepted and such
order does not expire after a certain time
limit, but holds good indefinitelv. Vol. 9, p.
582, Jan., 1917.

1254. (Va.) A hank which pays a check
after receiving a stop-order from its depos-
itor does so at its peril. The usual custom of
banks in Xew York City with respect to ac-
cepting notices of stop-payment is to keep
the orders on file indefinitely; if a check is
three or four years old, the banks inquire of
the drawer whether or not there was a stop-
payment order. Vol. 1, p. 296, Feb., 1909.

Oral notice

1255. (Ala.) Under the Negotiable In-
struments Law a drawee bank is not liable to
the holder of a check, unless it accepts or
certifies the check, and the maker has the
right to stop payment. An oral notice to stop
payment is probably sufficient and a written
order is not necessary, although the point has
not yet been judiciallv passed upon. Vol.
4, p. 376, Dec, 1911.

Note: In Peoples Sav. Bank it Tru«t Co. v.
Lacey, 40 So. (Ala.) 346 it was held that a de-
positor may prove a verbal notice given hy him
l)efore payment to the bank's receiving teller not
to pay a check, though afterwards at request of
the teller he reduced the notice to \vriting.

1256. (Del.) The customer of a bank
met its cashier at a social function and
verbally notified him to stop payment on a
certain check. The next day the cashier
made a written memorandum of the order.
About a month later the check was paid.
Opinion: The notice was valid and binding
on the bank. The law does not require that
the notice be in writing, and although an
oral notice might not be valid when given
outside of the bank, the fact that a written
memorandum of the notice was made by the
cashier at the hank would validate it. Vol.
1, p. 299, Feb., 1909.

1257. (N. Dak.) A made his check to
B in payment of a debt but later verbally
stopped payment because he had settled the
debt by giving B a note. Two years later,
after the debt was paid, B deposited the check
for collection and the same was paid. Opin-

154

STOPPIXG PAYMENT

1265

ion : The drawee cannot charge the amount to
A's account, because it has violated the stop
order and has paid a stale check. The
drawee, however, can recover from the payee
under the rule that money obtained by deceit
and in bad faith is recoverable. Vol. 9, p.
51, July, 1916.

1258. (Okla.) John Jones issued a
check, wliieh was presented and paid about
one year later. The depositor claimed that
he stopped payment a few days after the issue,
but the bank had no record of the stop order.
Opinion : If the depositor can prove an oral
instruction not to pay, he can recover, unless
the bank can prove that the check when paid
was in the hands of a holder in due course
•who could enforce the check against the
drawer. If a check is stale it places the bank
on inquiry before payment, but whether a
check one year old can be called stale is an
unsettled question. Vol. 5, p. 658, April,
1913.

Practice of stamping "payment stopped"

1259. (N. Y.) Following its usual cus-
tom, a bank to whom a check was presented
stamped across the face "payment stopped"
and returned the same to the payee. The
maker of the check had previously counter-
manded payment. The payee claimed that
as the check was his property, the bank had
no right to deface it by such stamp. Opin-
ion: Custom of bank to stamp a counter-
manded check "Payment stopped*' before re-
turning to the holder serves a beneficial pur-
pose without injury to a bona fide holder and
will doubtless be sustained by the courts. Vol.
10, p. 205, Sept., 1917.

1260. (N. Y.) There is no law express-
ly forbidding a drawee bank from stamping
"payment stopped" upon a check, which has
been refused for that reason. Such a prac-
tice has the beneficial result of warning sub-
sequent holders that payment has been stop-
ped, thereby preventing further negotiation.
A"ol. 4, p. 92, Aug., 1911.

1261. (Pa.) A bank refused payment of
a check in pursuance of instruction from the
drawer not to pay, and stamped "payment
stopped" upon the instrument, before return-
ing the same to the holder. The presenting
bank objected to this action, taking the posi-
tion that the drawee had no right to so mark
the check, which was not its property. Opin-
ion: The act of stamping "payment stopped"
upon the check was proper in view of the
custom so to do, the beneficial purpose there-

by served, and the fact that no substantial
right of the holder is violated. Vol. 4, p.
681, May, 1912.

NoTK: It has been held that no action for
dama<,'e will lie against a bank for defacing a
note, as by writing on the face there<if the words
"payment stopped." McKinlev r. American Ex-
change Bank, 7 Rob. (X. Y.) "603.

Recovery by drawee
See 580

1262. (Miss.) A bank was notified by
its customer not to pay his check and there-
after, in violation of the stop order, makes
payment to an innocent holder under a forged
indorsement. The bank contends that tiie
holder is liable upon the forged indorsement.
The holder claims that, payment having been
stopped, it should have been notified immed-
iately on payment, as it might have had op-
portiinity to protect itself. Opinion: It has
been held that the case does not fall within
the general rule allowing the drawee to re-
cover money paid upon a forged indorsement
but that the bank, making payment in face
of the stop order, is precluded from setting
up the forgery of the indorsement and can-
not recover the money paid from an innocent
holder who has received pavment. Vol. 11,
p. 93, Aug., 1918.

1263. (Mont.) Bank which pays stop-
ped check to a bona fide holder cannot after-
wards recover back tlie money, but payment
to fraudulent holder is probably recoverable.
Where, however, holder has taken check as
gift and receives payment in good faith with-
out notice of countermand by drawer it would
seem that payment is irrevocable. Vol. 9, p.
49. July, 1916.

1264. (N. Y.) The drawer of a check
stopped payment. The drawee attached a
slip to the item, indicating that payment was
stopped and returned it to the collecting
bank. Later, through the fraud of the payee,
tlie check was presented a second time and
paid by the drawee bank'. Opinion: The
drawee cannot charge the amount to the draw-
er's account, but wliere payee induced pay-
ment throiigh fraud, the general rule that
payment to a bona fide holder is a finality
does not apply, and the bank has the right of
recovery from the pavee. Vol. 7, p. 777.
April, 1915.

1265. (Pa.) A customer requested his
bank to sto]> payment on his check of $200.
The stop order was unfortunately overlooked
and the check was paid. The bank had evi-
dence from the holder that the maker re-

155

12GC:i

DIGEST OF LEGAL OPINIONS

ceivcd value for the check, and the hohler re-
fuses to refund the amount. In tlie event the
maker recovers the amount from the bank, it
believes he will be receiving double value.
Opinion: Where a bank pays a stopj)0(l check
it docs so at its peril, hut where i)ayment is
made to a liolder in due course or where the
drawer has received full value for the check,
there is ground for maintaining the conten-
tion that the bank can set oiT the amount
against the drawer's account as equitable
purchaser of the check. Where a stopped
check is an enforceable obligation against the
drawer in the hands of a holder in due course,
the former is not damaefcd because of its pay-
ment by the bank, for, if refused payment,
the drawer would be answerable to such
holder. Vol. 10, p. 463, Dec, 1917.

Rights of holder in due course

See 506 ct scq., 646 et seq., 1265

1266. (Ariz.) A bank purchased a New
York draft of $50 from A, who received the
instrument in payment for goods delivered to
B. The draft was presented and the payment
was stopped by the bank issuing the draft at
the request of B, the payee, who discovered
that the goods had been mortgaged. Opinion:
The purchasing bank, as a holder in due
course, can recover payment from the issuing
bank and from the prior indorsers and its
rights cannot be defeated by stopping pay-
ment. The drawee bank, however, is in duty
bound to obey the stop payment order. Vol.
9, p. 585, Jan., 1917.

1267. (Cal.) John Doe purchased from
a stranger an automobile appliance, giving
his check of $50 in payment. Having be-
come dissatisfied with the article, he stopped
pa}Tiient. In the meantime, a bank in good
faith cashed the check from the stranger, and
John Doe refuses to pay the amount. Opin-
ion: A bank which in good faith purchases a
check from the payee without notice of any
defense thereto is a holder in due course and
can hold the drawer liable for the full amount
thereof, free from his defense against the
payee. Vol. 11, p. 389, Jan., 1919.

1268. (Colo.) A client purchased from
a bank a draft drawn by it on its Chicago cor-
respondent for $2,500. Two days after said
issue, upon the payee's request given at the
time, the bank stopped payment on its draft,
which had come into the hands of an innocent
purchaser for value. The holder now seeks
to recover damages from the drawer of the
check, besides the amount of the draft.
Opinion: The drawer of a check who stops

its payment at the request of the payee is
liable thereon io a holder in due course for
its face amount with interest and protest fees,
together with court costs in case of suit; but
there is no additional liability to such holder
for damages because of such stoppage of ))ay-
ment. The rule is that where a bank wrong-
fully refuses payment of its customer's check,
the latter has a right of action for damages
in addition to the amount of the check, be-
cause of injury to his credit, but the reason
for allowing damages in such a case does not
apply to an indorser as in this case. The
holder does not receive injury to his credit
by non-payment of the check, because it is not
his check which has been dishonored, but the
check of someone else. Vol. 11, p. 275, Nov.
1918.

1269. (Colo.) A gave his check in pay-
ment for beaver hides. The check was pur-
chased from the payee by a bank. Later A
was arrested for having the hides in his pos-
session during the closed season, being
contrary to law, and accordingly stopped
payment of the check. Opinion: The bank
purchasing the check from the payee may
enforce payment from the drawer, if it ac-
quired the check without knowledge of the
illegal consideration. Vol. 6, p. 34, July,
1913.

1270. (Colo.) A bank in Colorado sold
its draft on a New York bank to A, who gave
it to B to close up a deal. B cashed the
draft with C. Payment was stopped by A
because of fraud. Opinion: C as bona fide
purchaser for value of the stopped draft which
has been duly protested has recourse upon the
drawer and prior indorsers. Vol. 5, p. 373,
Dec, 1912.

1271. (111.) A issued his check to B for
$650. Before negotiation A notified B that
he had stopped payment because of fraud.
Disregarding the notice, B negotiated the
check to C, who had no notice of the stop
payment and who gave part cash and the
balance for a bill owed by B to C. Opinion:
C may recover from A, as he was an innocent
purchaser for valuable consideration. Vol. 8,
p. 611, Jan., 1916.

1272. (Kan.) A check was issued in
pa3inent for certain goods. Shortly there-
after the drawer discovered he had been de-
frauded and stopped payment of the check.
In the meantime a bank cashed the check.
Opinion: The bank which cashed the check
for the payee was a holder in due course and
can enforce payment from the drawer. Vol.
8, p. 913, April, 1916.

156

STOPPIXG PAYMENT

1284

1273. (La.) A live stock dealer pur-
chased five head of cows, giving his check for
$95 in payment. He drove the cattle to an-
other state and then stopped payment of the
check, which, in the meantime, had been
purchased by a bona fide holder. Opinion:
The holder can enforce payment from the
drawer and prior indorser, assuming the
latter's liability has been preserved by due
notice of dishonor. As to criminal liability,
the drawer could be convicted of obtaining
goods upon false pretenses, provided a jury
could be convinced that he gave the check
and received the cattle with the fraudulent
intent to stop payment of the check. Vol. 7,
p. 777, April, 1915.

1274. (Neb.) A gave B his check,
which was indorsed by B to C. For some
reason of his own, B stopped payment of the
check. Opinion: B had no right to stop pay-
ment, but where the drawer stops payment
at the payee's request, a holder in due course
may hold both drawer and pavee liable. Vol.
7, p. 307, Nov., 1914.

1275. (Neb.) A gave B his check, which
was cashed by C. C was later notified not
to cash the check, because A had stopped
payment. Opinion: C having cashed the
check for B in good faith can recover from
the drawer. Vol. 5, p. 245, Oct., 1912.

1276. (Okla.) F. Brothers issued their
check to A. S. Brown, who used it in payment
of a bill which he owed to A. F. Brothers,
discovering that they had been defrauded by
Brown, stopped payment of the check.
Opinion: A, the innocent purchaser for value
of the check, can recover from F. Brothers.
Vol. 8, p. 33, July, 1915.

1277. (Okla.) The drawer of a check
who purchased several bales of cotton from
A, discovered that the cotton was mortgaged
and immediately stopped payment of the
check. In the meantime A had received the
money from a bona fide purchaser of the
check. Opinion: The drawer had the right
to stop payment of the check, l)ut he would
still be liable to the purchasing bank which
cashed the check in good faith. A^'ol. 4, p.
431, Jan., 1912.

1278. (Pa.) A gave his check to B, who
cashed it with C, and later payment was
stopped by A. Opinion: C, who purchased
from B without notice, was a holder in due
course and can enforce pavment from A.
Vol. 8, p. 1103, June, 1916.'

1279. (Pa.) A purchaser gave his check
in payment for some goods which were not

as represented. The drawer stopped pay-
ment, but in the meantime the payee of the
check cashed it at a national bank. The
payee was irresponsible. Ojnnion: The na-
tional bank, which purchased the check in the
regular course of business, is a holder in due
course and can recover the amount and pro-
test fees from the drawer. Vol. 6, p. 438,
Dec, 1913.

1280. (Tenn.) A customer issued his
check of $22 to a negro in payment for a cow,
and later stopped payment thereon when he
learned that the cow had been stolen. In
the meantime the negro had cashed the check
at a bank. Opinion: The liank was an inno-
cent purchaser for value and as such can en-
force pavment from the drawer. Vol. 8, p.
33, July; 1915.

1281. (Tex.) A gave B his check for
$100. B indorsed to C, who cashed it with
Jones, an innocent party. B on discovering
that C had defrauded him, requested the
drawee not to pay, which request was com-
plied with. Opinion: Jones can enforce pay-
ment from the drawer and prior parties, free
from the defense of fraud, l)ut cannot com-
pel the bank to pay. Vol. 7, p. 165, Sept.,
1914.

1282. (Wash.) A bank cashed a check
indorsed by the payee and another. Payment
of the check was stopped because the maker
received no consideration from the j>ayee.
Opinion: The bank which ])urchased the
check in good faith can enforce payment from
the drawer, free from the latter's defense
against the payee. Vol. 7, p. 776, April,
1915.

Where instrument is an assignment

1283. (111.) A draft on a Minnesota
bank, payable to Henry Brown, was indorsed
by Brown to an Illinois bank, a holder in due
course. Before the check was presented, pay-
ment was stopped. Opinion: In Minnesota,
where a check is an assignment, the drawer
cannot countermand payment when in the
hands of a bona fide holder and the latter has
a right of action against tlie drawee bank
which refuses payment, when in funds, be-
cause of stop order. Vol. 5, p. 372, Dec,
1912.

NoTK: The Xpj;otial)le In^trunionts Act passed
ill Miniiosota in .April. l!»l.{. iias chnnpod this
riilo liy providing; tliat tin* jjivinp of a clipck doos
not opprate as an assijjnnuMit of funds. This in
effect ijivcs the drawer the riglit of stop payment.

1284. (S. C.) Under the law of South
Carolina. (dilTering from the large majority

157

128^

Dir;T':sT of lec.al optxioxs

of states), the drawer of a clieek li.is no riglit
to stop payment of his check, unless perhaps
it was obtained from him by fraud and is
still in the hands of the payee, but if the
c-lieck has Iteen neij;otiated to a bona fide
liolder, tlic rigiit to countermand would be
lost. Vol. 2, p. 415, April, ]J)10.

NoTK: Tlu> Nof^'otialilo Tiistninitnts Act iia-^Hcd
in Soutli Carolina in iMaroli, 1914, lias clianpcd
this rule liy proviilinji that the givinir of a check
does not o|)erate as an assij^ninent of funds. This
in etrect {^ives the drawer tlie ri<i;ht of stop pay-
ment.

1285. (S. Dak.) In South Dakota, con-
trary to the rule in most of the states, a check
is an assignment to the payee which binds the
bank as soon as presented and, as a conse-
quence, the drawer cannot countermand pay-
ment, though he may withdraw his balance
before presentment of the check. Vol. 3, p.
336, Dec, 1910.

Note: The Negotiable Instruments Act passed
in South Dakota in February, 1913, has changed
this rule by providing that the giving of a
check dcK's not operate as an assignment of funds.
This in effect gives the drawer the right of stop
payment.

Where instrument is not an assignment

1286. (111.) A drew his check for $100,
payable to B, who indorsed for value to C,
an innocent holder. Before C presented the
check A ordered the bank not to pay. Opin-
ion: In Illinois where a check is not an as-
signment, the drawer may countermand
payment of a check and the holder has no
right of action against the bank thereon, but
his recourse is limited to the drawer and
prior parties. Vol. 5, p. 372, Dec, 1912.

1287. (111.) The former law in Illinois
has been changed by the Negotiable Instru-
ments Law, providing that the giving of a
check does not operate to assign the deposit.
The drawer now has the right to stop pay-
ment, and the bank is under no liability to
the holder for refusing payment, f)ursuant
to the stop order. Vol. 2, pj 481, May, 1910.

1288. (Mass.) .\ l)earer check not being
an as.signmoiit, but merely an order and au-
thority to tlie bank to pay, the drawer has
riglit lo stop piiyment e(jually as in case of a
check parable to order. Vol. 7, p. 106, Aug.,
1914.

1289. (Tex.) A check hears the follow-
ing notation, "given as earnest money on land
trade." The bank questions its right to pay
the instrument without first inquiring as to
the status of the land trade, also the right
of the drawer to stop payment. Opinion:
The check would be construed as an uncon-
ditional order to pay, the notation being a
mere statement of the consideration for which
the check was given. If the check operated
to assign the fund in the bank, as soon as
delivered, the drawer would have no right of
countermand, but if it was a mere order on
an authority to the bank to pay and did
not have the legal effect of assignment, the
drawer would have the right to stop payment.
According to the weight of authority in
Texas, a check does not operate as an assign-
ment. Vol. 9, p. 496, Dec, 1916.

Note: The Negotiable Instruments Law pro-
viding that a clieck does not operate as an as-
signment was parsed in Texas in March, 1919.

TAXATION

Canadian bank notes and currency

1290. (Idaho.) Bank which pays out in
the United States Canadian bank notes which
have been received by it, must pay tax of ten
per cent, on all notes so paid out. Vol. 3, p.
402, Jan., 1911.

1291. (N. Dak.) A bank in the United
States which pays out over its counter Can-
adian bank notes which it has received on de-
posit is subject to the Federal tax of 10 per
cent, on all notes so paid out, but a bank in
the United States may receive Canadian bank
notes on deposit and send them to Canada
for redemption without being required to pay
tax thereon. Vol. 3, p. 145,' Sept., 1910.

1292. (Wash.) A national or state bank
which receives on deposit and pays out Can-

adian currency is liable to the 10 per cent,
tax thereon under U. S. Eev. Stat., Sec. 3412,
but a bank may receive on deposit and send
such currency to Canada for redemption
without being required to pay tax thereon.
Vol. 11, p. 167; Sept., 1918.

Corporation tax law

1293. (Kan.) The Corporation Tax
Law passed by Congress on August 5, 1909,
providing for a tax on incomes for the year
1909, is enforceable and does not come within
the definition of ex post facto laws. Vol. 2,
p. 335, Feb., 1910.

1294. (Ohio.) A bank in making its
corporation tax return under the Federal Ex-
cise Tax Law of August 5, 1909, deducted
from its gross income the amount paid by it

I5S

TAXATION

1302

for the state, county and municipal taxes as-
sessed against its sliareholders. The Commis-
sioner of Internal Kevenue contended that
such taxes paid by tlie bank on its own stock
were chargeable to the individual stockhokler
and are not proper deductions from gross in-
come authorized by the law. Opinion: The
deduction was not authorized where the tax
sought to be deducted is levied against the
shareholder and the bank pays the tax for the
shareholder. Vol. 3, p. 519, March, 1911.

1295. (Pa.) It is very questionable
under the Corporation Tax Law whether a na-
tional bank can deduct from gross income the
depreciation in premium on United States
bonds when the depreciation is not evidenced
by the books, the premium being still carried
as an asset. Vol. 2, p. 335, Feb., 1910.

Deduction of government bonds
Soe 132.3

1296. (Ky.) Government bonds owned
by a national bank, whether held for circula-
tion or for investment, cannot be deducted
from the taxable value of the sTiares, A de-
cision in Kentucky holds tliat the Kentucky
tax law of 1906 imposes a tax upon national
bank shares which is payable by the bank and
collectible from the shareholders and not upon
the capital of the bank, and that the value
of United States bonds owned by the bank
cannot be deducted from the assessment.
The court makes no distinction between bonds
used as a basis for circulation and bonds held
as a pure investment. Vol. 1, p. 62, Aug.,
1908.

Deduction of real estate

1297. (Mass.) In ]\Iassachusetts the law
provides that bank shares shall be assessed to
the owner in the city or town in which the
bank is located and not elsewhere, in the as-
sessment of state, county and town taxes,
whether such owner is a resident of such city
or town or not. They shall be assessed at
their fair cash value on the first day of May,
first deducting therefrom the ])roportionate
part of the value of the real estate belonging
to the bank, at the same rate as other moneyed
capital in the hands of individuals is by law
assessed. The banks pay the tax and have a
lien on the shares for reimbursement. A"ol.
l,p. 170, Nov., 1908.

1298. (Mont.) A bank does not hold
title to real estate, but holds title to one-half
the sliares of a corporation which owns the
building in which the bank is located. The

Montana statute on taxation of banks pro-
vides that the value of the real estate to which
the bank holds title shall be deducted from
the total value of the bank shares and the real
estate assessed to the bank. Opinion: The
statute does not authorize deduction of the
value of the bank's holding of stock of the
company which owns the bank building. Vol.
8, p. 251, Sept., 1915.

1299. (N. Y.) Banks in New York
must pay tax, assessed against the share-
holders, at the rate of 1 per cent, of the tax-
able value of the shares and in arriving at
such taxable value the value of real estate
owned by the bank cannot be deducted, nor
can the bank deduct the value of real estate
mortgages owned by it upon which mortgage
tax has been paid nor the value of govern-
ment, state or village bonds owned by the
bank. Vol. 11, p. 214, Oct., 1918.

1300. (N. Y.) A bank pays a state tax

of 1 per cent, on its capital stock, surplus and
undivided profits. It is also assessed for
local and state taxes on its building which is
part of its capital and surplus. The bank
objects to the assessment on the ground of
double taxation of its real estate. Opinion:
The bank must pay taxes on its real estate,
notwithstanding such real estate is included
in the value of its shares upon which 1 per
cent, tax is levied. Vol. 7, p. 220, Oct:, 1914.

Deduction of taxes

1301. (Idaho.) A bank in Idaho de-
ducted from its return of income to the Com-
missioner of Internal Revenue, under the Cor-
poration Tax Act of 1909, the state taxes
which were paid on its shares for the years
1909, 1910, 1911. 1912 and 1913. In 'l914
the Commissioner claimed that such taxes
should not have been deducted and amended
tl)e return, requiring the bank to pay an ad-
ditional tax on such amounts. Opinion:
The Federal decisions hold that such state
taxes paid on shares of stock cannot be de-
ducted from gross income and the additional
tax on such amounts deducted in previous
vears should be paid on the amended return.
Vol. 6, p. 822, June. 1914.

1302. (N. C.) T'ndcr a North Carolina
statute, a tax is assessed against the value of
shares in national banks for school, county
and municipal purjioscs to be paid by the
bank and dedmted from dividends. A bank
questions the right of the state to collect from
it taxes assessed agaiiist certain of its stock-
holders, resident in Alabama, where it asserts,

159

i3o;i

DIGEST OF LEGAL OPIXIOXS

such stockholders nro also rompollod to list
and j)ay taxes on such shares under the laws
of Alai)ania. Opinion: Under the National
Bank Act shares of non-residents must be
taxed in the place where tiie hank is located
and "not elsewhere." It would, therefore,
he unlawful to tax such shares in Alabama
and there would be no double taxation. It is
lawful for a state to require a national bank
to collect the tax out of the shareholder's
dividends and pav it as his agent. Vol. 2,
p. 374, March, 1910.

1303. (Tenn.) A hank in Tennessee in
making its return under the United States
Income Tax Law, deducted as expenses from
its gross income the taxes assessed against its
shareholders, but ]iaid by the bank to the
state. A provision of said law allows a cor-
poration to deduct from the gross income "all
sums paid by it within the year for taxes im-
posed." The department of Internal Eev-
enue claimed that such deduction was not
lawful. Opinion: Where taxes are assessed
against bank stockholders as upon their prop-
erty, though paid by the bank, the Federal
courts hold tlie bank cannot deduct the taxes
so paid from its gross income, such taxes not
being assessed against the corporation or
its property. Vol. 7, p. 774, April, 1915.

Discrimination in assessment

1304. (Miss.) A bank complains
against discrimination of the state in taxing
national bank stock on full book value, w^hile
real estate and other kinds of property are
taxed only on a small percentage of actual
value. Opinion: The taxation of national
bank shares at a higher rate than moneyed
capital invested in real estate, stock and other
kinds of property, has been held not a viola-
tion of the anti-discrimination provision of
Section 529, U. S. Eevised Statutes, where
the "moneyed capital" so under-taxed is not
used in competition with that of national
banks. Vol. 9, p. 909, May, 1917.

1305. (Okla.) In some parts of the
state of Oklahoma, national bank shares are
assessed for purposes of taxation at full val-
uation of 100 per cent., while in other parts
of the state, shares of state and national
banks are assessed at only 65 per cent, of
their actual value. A national bank assessed
at full value claimed that it has been dis-
criminated against and demands relief.
Opinion: In order to get relief from such
discrimination the national bank would have
to prove at least three things — (1) that the

under-valued capital in one part of the state
is in comi)etition with the fully valued na-
tional bank shares in another part; (2) that
sucii undervaluation constitutes a discrimina-
tion in the proportionate amout of taxes lev-
ied for state purposes, as distinguished from
county and city purposes; and (3) that such
discrimination is systematic and intentional,
and not merely desultory and accidental.
Vol. 3, p. 582, April, 1911.

Erroneous return

1306. (Tenn.) Under the Corporation
Excise Tax Law of 1909 and the Income Tax
Law of 1913, where there is an erroneous re-
turn, discovery of the error must be made by
the Commissioner of Internal Eevenue with-
in three vears from the time the return is due.
Vol. 7, p. 775, April, 1915.

Federal income tax law

1307. (Porto Rico.) The Federal In-
come Tax Law, approved September 8, 1916,
is not unconstitutional because it imposes a
tax of 2 per cent, upon incomes received dur-
ing 1916, prior to the enactment of the law.
Vol. 9, p. 658, Feb., 1917.

Tax for fraction of year

1308. (N. Dak.) The stockholders of a
state bank organized after April 1 are not
liable to taxation for the current year, accord-
ing to a statute passed in North Dakota in
1913. Vol. 9, p. 749, March, 1917.

Occupation tax
See 1321

1309. (Idaho.) A national bank cannot
be forced to pay an occupation tax imposed
by the state. It has been repeatedly held that
a state has no power to tax national banks
except as Congress permits, and Congress has
not authorized any taxation of national banks
by the states, except as to real estate, but only
a taxation upon the shares of national banks
to the individual shareholders, subject to cer-
tain restrictions. Vol. 1, p. 169, Xov., 1908.

1310. (Okla.) States or municipalities
have no power to impose special or occupa-
tion taxes upon national banks. Vol. 3, p.
468, Feb., 1911.

Taxation of choses in action

1311. (Okla.) Oklahoma session law
passed in 1917 providing for payment of a
tax on bonds, notes and choses in action and

160

TAXATION

1320

excluding from the courts all such instru-
ments not registered and upon which the tax
is not paid in accordance with the Act, lias for
its underlying purpose the taxation of a class
of intangible personal property which would
otherwise escape taxation, Kegistration is
compulsory. It does not provide for double
taxation of banks holding such bonds, notes
or choses in action. A similar law exists in
Connecticut, and there is a general movement
among the states to provide methods by which
a larger share of personal property is subject
to taxation. Vol. 10, p. 44, July, 1917.

Penalty for delayed return

1312. (Miss.) A bank mailed its cor-
poration tax return to the Collector of Inter-
nal Ee venue on March 1st. The same was
not received by the collector until a day late
and a penalty of fifty per cent was imposed.
Opinion: That the return was made on
March 1st by placing it in the post-office at
that time. The safest course is for the bank
to pay the tax, plus the penalty, under pro-
test and to request of the Commissioner of
Internal Revenue that the penalty be re-
mitted, because the facts do not warrant the
imposition of such a heavv penaltv. Vol. 3,
p. 10, July, 1910.

1313. (Okla.) A bank made its annual
return for the Federal corporation tax before
March 1, 1911, but through an error of its
mailing clerk, made unintentionally, the re-
turn did not reach the collector until March
4, 1911. The law requires a return to be
made on or before March 1st and in case of
"refusal or neglect" autliorizes a penalty of
fifty per cent, additional. The collector in-
sists on collecting a substantial penalty.
Opinion: There being no wilful neglect by
the bank, a fifty per cent, penalty seems un-
just and should be remitted. The proper
course is to write the Commissioner of Inter-
nal Revenue at Washington imless a compro-
mise is made with the collector. Vol. 4, p.
152, Sept., 1911.

Savings deposits not exempted

1314. (N. Y.) Opinion that savings de-
posit in interest department of national bank
not exempted from taxation by provision of
tax law of New York exempting "the de-
posits in anv bank for savings which are due
depositors."" Vol. 7, p. 100, Aug., 1914.

1315. (Pa.) The statutes of Pennsyl-
vania do not exempt savings deposits from
taxation and such deposits are subject to the

four mill tax for state purposes as part of the
personal property of the depositor under the
Act of ilav 11, 1911. Vol. 9, p. 910, May,
1917.

Secured Debts Tax Law of New York

1316. (N. Y.) The question is raised
whether national and state banks, because of
the 1 per cent, tax on bank shares in lieu of
all other taxation, except real estate taxed
directly to the bank, do or do not come mulor
the provisions of the newly enacted Secured
Debts Tax Law of New York because of se-
cured debts owned by tlie bank ; and wliether
there is any ditrerence in the status of nation-
al and state banks in this regard. Opinion:
A national or stflte bank owning secured debts
is not taxable under the Secured Debts Tax
Law, the latter because exempted from all
taxation on personal property by Section 24
of the Tax Law, in view of the tax on shares,
and the former class of banks for the addi-
tional reason that the stiite cannot, in any
event, tax a national bank upon its personal
property. Vol. 8, p. 417, Nov., 1915.

Stamp tax

1317. (Ark.) A note was made and
dated prior to December 1, 1914, but nego-
tiated to the payee bank on or after that date.
The Federal Act of October 22, 1914, pro-
vides among other things for a stamp tax on
promissory notes to be levied on and after
December 1, 1914. Opinion: The promis-
sory note required a stamp to be cancelled as
of the date of deliverv to the bank. Vol. 7,
p. 494, Jan., 1915.

1318. (Md.) Under the War Revenue
Act of 1914, a stamp tax of $2 per $100 is
placed on a promissory note and there is no
tax on the mortgage securing said note. Vol.
7, p. 380, Dec, 1914.

1319. (Minn.) All promissory notes,
including demand notes, are subject to stamp
tax of 2 cents for $100 or fraction tlioroof,
except that promissory notes issued on or
after April 0, 1918, secured by United States
bonds and obligations issued after April 2-1,
l!n7, are exempt from stamp tax. Vol. 11,
p. 392, Jan., lit 19.

1320. (N. J.) A transferred shans of
stock to I^ with a 10 cent Internal Revenue
stamp aflixed. A new certificate was isniird
to V> and the old certificate was cancelled.
The question was raised whether or not tlie
new certificate required a 10 cent stamp.
Opinion: Under a ruling by the Conimis-

101

1321

DIOEST OF LEGAL OPINION'S

sioiior of Intornal Rovcnuo, no stamp is re-
quired on the n(>\v certificate. Vol. 7, p.
4!)r), Jan., IDIT).

State taxation of national banks

S(M' i;;()i, i.'fo,")

1321. (Cal.) A state or city has no
power to inii)osc a license or privilege tax
upon the national hanks. Vol. 7, p. 304,
Nov., 1!)1 !. See 1309, 1310.

1322. (Mo.) Income Tax Law of Mis-
souri imposing one-half of 1 per cent, tax
upon net incomes of individuals and corpor-
ations is inapplicable to national banks and
not enforceable against such institutions, as
the states cannot tax national banks except
as Congress permits and Section 5219, U. S.
Eev. Stat., which is the measure of permis-
sion by Congress, does not authorize such a
tax. Vol. 11, p. 410, Feb., 1919.

1323. (N. C.) An incorporated town in
North Carolina lias the right to assess for
town purposes the stock of national bank
shareholders owned by non-residents of the
state and to require the bank to pay the taxes
so assessed. Vol. 9, p. 503, Dec, 1916.

1324. (Okla.) A county tax assessor
sought to compel a national bank officer to
furnish a list of the names of shareholders
and the number of shares held by each.
Opinion: Under the Oklahoma statute, the
county assessor had the right to compel the
bank officer to furnish the list. The Supreme
Court of the United States has upheld such

right in a state official, acting pursuant to
state law. It lias been held that national
banks are subject to state legislation, except
where such legislation is in conflict with
some act of Congress or where it tends to
impair or destroy the utility of such banks
as agents or instrumentalities of the United
States, or interferes with the purpose of their
creation. Vol. 9, p. 140, Aug., 191(5. See
S7'?.

1325. (S. C.) It would seem that a
state has a right, in providing for the taxation
of national bank shares, to permit the owner
to deduct the value of non-taxable state bonds
owned by the bank, although denying to the
shareholder the right to deduct the value of
non-taxable United States Government bonds
so owned, the refu.-al to permit such deduc-
tion in the latter case being upheld by the
Supreme Court of the L'nited States. Vol.
9, p. 410, Nov., 1916.

Transfer tax of decedent

1326. (N. J.) A deposit of a non-resi-
dent decedent in a New York Savings bank
is subject to the Transfer Tax. The same
rule applies to similar deposits in a Trust
Company. Vol. 3, p. 675, May, 1911.

Treasury notes subject to taxation

1327. (N. C.) United Slates Treasury
notes are subject to state taxation as money
on hand or on deposit. Vol. 7, p. 898, Mav,
1915.

TRADE ACCEPTANCES

Acceptance payable at bank in another
locality

1328. (N. Y.) In view of the rule of
law that an acceptance made payable at an-
other place varies the terms of the bill as
drawn and discharges non-consenting parties,
it has been thouglit desirable to have inserted
in the instrument a clause protecting the
holder. Opinion: The following clause is
suggested : "The drawee may accept this bill,
payal)le at any bank, banker or trust company
in the United States which he may desig-
nate." This clause will operate to hold the
drawer and indorsers liable to the holder who
takes an acceptance pavable at a bank in an-
other state. Vol. 10. p. 461, Dec, 1917.

Completing signature of drawer after
acceptance

1329. (N. Y.) It has been the custom
among merchants to send out trade accep-

tances with only a printed signature of the
drawer, as for example "'Smith Manufactur-
ing Company," underneath which is a blank
line starting with the word "By." After the
acceptor has signed and mailed the instru-
ment back to the drawer there is added in
pen and ink after the word "By" the words
"John Smith, Treasurer." The purpose of
the foregoing is to protect the instrument
should it be lost in the mail or otherwise fall
into improper hands. The question is raised
whether there has been a material alteration
which would entitle the acceptor to repudiate
his obligation. Opinion: The completion of
the drawer's signature after the instrument
has been returned, accepted, would not be a
material alteration within the meaning of the
law. There is no change in the number or
relations of the parties and no change in the
legal effect of the instrument and further-
more, the execution of the instrument by the

162

TRADE ACCEPTAXCES

1335

acceptor, with the blank unfilled, would con-
stitute an implied authority to the drawer to
fill in the blank with his completed signature
upon return of the instrument to him. Vol.
10, p. 526, Jan.,"l918.

Effect of mechanic's lien rights

1330. (N. Y.) The question has arisen
as to the status of the material man who takes
a trade acceptance to cover shipment made
to a contractor for use in construction work.
Does he thereby lose any mechanic's lien right
which he would have had under the open
book accoiuit system? Does he become a
money creditor in place of a creditor for ma-
terial? Opinion: The material man who
takes a trade acceptance for material supplied
does not thereby lose mechanic's lien right
which he otherwise might have. The right
to enforce the lien would, however, be sus-
pended until maturity of the acceptance and
a pre-reqnisite to sucli right of enforcement
would be a tender of the return of the trade
acceptance as a condition precedent. If he
has negotiated same and cannot return it, the
mechanic's lien ri^ht would not be enforce-
able. Vol. 10, p. 591, Feb., 1918.

Negotiability

1331. (Cal.) When a trade acceptance is
not paid when due, the acceptor is liable for
the principal and interest. The drawer is
also lial)le, provided the necessary steps upon
dishonor are taken. Under the provisions of
the California statute a trade acceptance is a
negotiable instrument. Vol. 9, p. 501, Dec,
1916.

1332. (111.) A firm in Chicago has pre-
pared a form of trade acceptance, using the
standard form, but changing it to read: "Ac-
cepted (date.) Payable at (designated bank
or trust company) with Chicago or New
York exchange." A bank desires to know
whether the addition of the words "with Chi-
cago or Xew York exchange'' will destroy the
negotiability of the acceptance. Opinion:
The insertion of the words will not affect ne-
gotiability. The Negotiable Instruments
Act expressly provides : "Sec. 2. The sum
payable is a sum certain within the meaning
of the act, although it is to be paid x x x
4, with exchange, whether at a fixed rate or
at the current rate x x x ." Vol. 11,
p. 39, July, 1918.

1333. (Minn.) A business house uses
the regular form of trade acceptance and
prints on the face of the acceptance the fol-

lowing words: "5 per cent, discount will be
allowed if this acceptance is taken up within
thirty days from date." The business house
holds the acceptance until the thirty-day
period has expired. If the buyer sends them
the money they allow him 5 per cent, dis-
count, cancel the trade acceptance and return
it to him. If lie does not pay in thirty days
they offer the trade acceptance to the bank
for discount. At the time the acceptance is
thus offered, the discount clause means noth-
ing, for the discount period has expire<l. The
bank, however, desires to be sure that the ne-
gotiability of the acceptance has not been de-
stroyed by the added words. Opxnvm: A
Minnesota case holds that a provision of this
character does not affect negotial)ility. it
being stated that it did not make the instru-
ment uncertain as to amount. On the other
hand a decision in North Dakota holds that
such a provision renders an instrument non-
negotiable. Although the courts take differ-
ent views on the proposition, the ^linnesota
court seems to hold the better view. Vol. 11,
p. 39. July, 1918.

Trade acceptance propaganda not in re-
straint of trade

1334. (N. Y.) Various trade associa-
tions have adopted or are about to adopt res-
olutions recommending to their members, in
effect, that trade acceptances be substituted
for open accounts and that uniform terms of
credit based upon trade acceptances be
adopted. The question is asked wiiether co-
operation along the lines covered by the reso-
lutions is in contravention of the Sherman
Anti-Trust Law. Opinion: Sec. 1, Act July
2, 1890, provides that "Every contract, com-
bination in the form of trust or otherwise, or
conspiracy in restrain of trade or commerce
among the several states, or with foreign na-
tions, is hereby declared to be illegal. Every
person who shall make any such contract or
engage in any such combination or conspir-
acy, shall be deemed guilty of a misdemean-
or,'' etc. No violation of the foregoing would
result. Tiie action contemplated by the trade
associations would tend to promote rather
than restrain interstate trade. It, of course,
is not contemplated that members or others
not adojning the scheme should be boycotted
and refused all manner of credit, which would
present a ditfi^rent situation. Vol. 10, p.
375, Nov., 19 ir.

Overdue trade acceptance payable at bank

1335. (N. Y.) A makes his trade ac-
ceptance payable at a bank and at maturity

163

1336

DIGEST OF LEGAL OPINIONS

makes payment to tlic holder but allows the
latter to retain the acccptimce. The holder
in defraud of A, presents the acceptance to
the hank after maturity and receives payment
and it is ehiir^a'd to A's account. Should the
bank reciuire an express instruction from the
maker before niakiiifj payment? Opinion:
The safest course for the bank is to obtain
the express instruction from the maker before
payment of the trade acceptance. It is a
serious question, still undecided by the courts,
whether the authority of the hank to pay con-
tinues after maturity and whether the fact
that the trade acceptance is overdue when
presented at the bank is not sufTicient to put
the bank upon inquiry of the acceptor before
making pavment. Vol. 10, p. 849, June,
1918.

1336. (Wash.) Wliere n nore or trade
acceptance maturing at a fixed or determin-
able future time is made payable at the
maker's bank and is not presented for pay-
ment until after the due date, opinions differ
as to the authority of the bank to pay without
express instructions from its customer. An
Australian decision that the bank's authority
to pay continues after maturity until counter-
manded, is not regarded as controlling in this
country. The precise point has never been
decided in this country. It would be desir-
able to pass an amendment of the Negotiable
Instruments Law which would provide a de-
finite rule on this point. Such an amend-
ment has been passed in Missouri as follows :
"WTiere the instrument is made payable at a
bank it is equivalent to an order to the bank
to pay the same for the account of the prin-
cipal debtor thereon, but where the instru-
ment is made payable at a fixed or determin-
able future time, the order to the bank is
limited to the date of maturity only." Or it
might prove more advantageous for the
amendment to provide that a bank may pay
overdue acceptances and notes within a rea-
sonable time after maturitv. Vol. 10, p.
711, April, 1918.

Payment by acceptor's bank

1337. (N. Y.) The question has arisen
whether, when a trade acceptance is made

payable at a bank, the bank has the right to
charge the amount up against the acceptor's
account upon presentment at maturity, with-
out express instructions from the maker of the
acceptance, the same as it would charge up
a customer's check upon payment. Opinion:
Section 87 of the Negotiable Instruments Act
provides: "Where the instrument is made
payable at a bank, it is equivalent to an order
to the bank to pay the same for the account
of the principal dclitor thereon." Under this
provision the bank would not only be author-
ized, but it would be its duty, where the ac-
ceptor's funds were sufficient, to pay the ac-
ceptance upon presentment at maturity with-
out express instructions from the maker to
that end. In Illinois, Nebraska, South Da-
kota, Kansas and Minnesota, the above quoted
section has been either omitted or repealed
and therefore in those states some express
instructions from the customer would be
necessary before the bank could pay his
acceptance, unless the bank itself owned the
acceptance, in which case it would be charge-
able to the customer's account bv way of set
off. Vol. 10, p. 461, Dec, 1917.

Seller's right of replevin

1338. (N. Y.) The seller of goods re-
ceiving a trade acceptance asks if he is in any
worse position so far as his right of replevin
goes than the seller of goods who simply
charges the purchase price to the purchaser on
an open account. Opinion: In any case
where goods have been sold and delivered, and
an action of replevin would lie on behalf of
the seller because of some breach of contract
or fraud entitling him to annul the contract
and seize the goods as still his property, the
only difference between the position of the
seller who takes a trade acceptance and one
who has charged the amount in open ac-
count, would seem to be this : In an action of
replevin where a trade acceptance has been
taken and the seller seeks to rescind the con-
tract, a pre-requisite would be a tender of the
return of the instrument as a condition pre-
cedent to the right of recovery. Vol. 10, p.
461, Dec, 1917.

1339.

TRANSFER OF STOCK

See 220, 236, 240, 241, 463, 464

Book transfers
(Kan.) The owner of fifty shares

of national bank stock seeks to divide the
same equally among his five children. He

assigns each certificate in blank, leaving them
in a safe deposit box to be delivered upon his
death. The purpose is to avoid payment of
the national inheritance tax. Can the bank

164

TRANSFER OF STOCK

1345

legally transfer said stock without making
a transfer on the books? Opinion: A valid
gift of bank stock may be effected by delivery
of same to the bank to be delivered to the
donee upon death of the donor, provided
there is an absolute and unequivocal sur-
render by the donor of dominion over the
stock and it is clearly indicated that the bank
is constituted trustee of the donee and not
mere agent of the donor. Regarding the
bank as trustee, the necessity of transferring
the stock on the books could possibly be dis-
pensed with. In case of sale of bank stock
it has been held that title to national bank
shares is transferred by delivery of the cer-
tificate with power of attorney indorsed in
blank, without the necessity of transfer on the
books and presumably the same rule would
apply to a gift of bank stock. Yol. 11, p.
41, July, 1918.

1340. (N. J.) A signed a transfer and
power of attorney on a stock certificate and
delivered it to B for value. Before B had
the stock transferred on the books of the cor-
poration, A died. Opinion: A's subsequent
death did not affect B's rights to a transfer on
the books. In a case where A's death oc-
curred before the delivery of the certificate to
B, it is doubtful if the subsequent delivery
would be effectual. Vol. 5, p. 312, Nov.,
1912.

1341. (N. C.) It is not necessary, under
the law of North Carolina, for a bank holding
shares of a North Carolina corporation as
collateral security to have the same trans-
ferred on the books of the corporation.
Transfer on the books is not necessary to
protect the stock against the attacliing cred-
itors of the pledgor. Vol. 1, p. 2G8, Jan.,
1909.

1342. (N. Dak.) A bank in North Da-
kota loaned money ujKjn a pledge of stock of
a corporation in Montana. Being unable to
collect the loan, the bank requested that the
stock be transferred on the books of the cor-
poration and a new certificate issued to it in
exchange for the original one. The corpor-
ation refused the request, stating that at a
directors' meeting it was decided to cancel the
certificate of stock, as the stockholder had not
lived up to his agreement witli the corpora-
tion. Opinion : The hank has the right, upon
the default of the pledgor, to have the stock
transferred upon the books of the corporation
and a new certificate is issued to it, upon com-
pliance with the statutory requirements, and
the corporation is estopped from alleging the
invalidity of the stock because the holder
did not live up to his agreement with the cor-
poration. Vol. 11, p. 2T8, Nov., 1918.

MISCELLANEOUS

Attorney's delay in bringing suit

1343. (Fla.) An attorney following his
client's instructions, sued and recovered
judgment from A, the maker of a note. The
judgment against A was worthless, but the
amount was recoverable from two bondsmen
who had become sureties for A. Through
the attorney's negligence the bondsmen were
not sued and later one died and the other
became a bankrupt. Opinion: Where attor-
ney has specific instructions to proceed
against bondsmen, or, without specific in-
structions, is under duty to take necessary
legal steps to enforce liability and negligently
puts off bringing suit until claim against
bondsmen becomes worthless, he becomes
liable to client for damages suffered. Vol.
6, p. 214, Sept., 1913.

Contract to pay commission on sale

1344. (Ga.) A entered into a written
contract with a real estate agency, wherein

the agency was given power of attorney to
sell A's house for $1,000 within thirty days,
and upon cancellation of the contract by A
before its expiration A was obliged to jiay
the agency the five per cent, commission. A
cancelled the contract and the agency de-
manded the commission. Opinion: The
agency may recover the commission, because
the contract was founded upon sufficient con-
sideration. A employed the agency as l)rok-
ers to sell, and such employment was sufficient
consideration to support A's promise. Vol.
5, p. 757, May, 191.?.

Right to change name

1345. (Cal.) .\ man having the name
"Badasci'' wanted to cliange his name to
"Badasche." The deeds to his property, his
notes, mortgages and insurance policies were
executed in his original name. The question
was raised by a liank as to whether it was
safe in accepting such instruments as col-

1G5

134G

DIGEST OF LEGAL OPINIONS

latt'rnl from the lioldcr whoso name was
cliaiiffod without court order. Opinion: The
man has a common hiw ri<^ht to change his
name without court order but in transferring
his ])ro{)crty and contract rights there may
1)0 dilliculty in proving identity and it would
be more desirable to obtain a court order,
making tlic change a matter of record and
})r(n)f, unless the names are to be regarded as
idem sonans, wlicn such diificulty of proving
identity would not arise. It is unsafe for a
bank to accept the instrument as collateral
because of the difficulty of proof of identity
which could be obviated by a court order.
Statutes providing for a change of name by
judicial proceeding do not affect, but are in
aid of the common law right l)y affording an
easier means of proof of identity. Vol. 8, p.
702, Feb., 1916.

Voting pov/er of American Bankers Asso-
ciation delegate

1346. (Va.) Opinion that under the
constitution of American Bankers Associa-
tion and also of Virginia Bankers Association
a delegate is entitled to but one vote upon any
question, even though he may represent as a
delegate more than one member institution.
Vol. 4, p. 91, Aug., 1911.

Payment and credit of overdraft as
deposit

See 297, 208

1347. (Wis.) John Smith has an ac-
count at Bank A and presents the check of
Jones drawn on the same Imnk at the paying
teller's window and receives cash for the
same. Jones had not sufficient deposit to
protect the check and the bank asks if it can
charge back the overdraft to Smith's account.
Opinion: The great weight of authority is to
the effect that a payment of a check to a
bona fide holder in the ordinary course of
business by the bank upon which it is drawn,
under the mistaken belief that the drawer
has funds in bank subject to check, is final
and irrevocable and not such payment under
mistake of fact as will permit the bank to
recover the money so paid. Bank A having
paid Jones' overdraft to Smith in cash, the
latter is not liable to refund the money and
the bank cannot charge the same to his ac-
count. Vol. 6, p. G25, Mar., 1914.

1348. (Wis.) John Smith deposits with
the receiving teller of his bank a check drawn
on the same bank and receives credit for the
same. Later it appears that the maker of

the clieck had not sufficient funds to protect
the check. The Ijank asks if it can right-
fully charge back the overdraft to Smith's
account. Opinion: Where an overdraft of
one depositor is olfered for deposit by another
and credited to tlie latter's account, tlie legal
effect, according to a number of authorities
is the same as if the money was first paid
out and redepositcd ; in other words, the
])ayment by credit to account is final and
irrevocable. But in California the courts
hold that a bank which receives a deposit of
a check drawn on the same bank takes the
same for collection from itself and can cancel
the credit upon discovering on the same day
that it is an overdraft. And (according to a
Pennsylvania case) where a dejK)sitor knows
that the drawer has no funds lie is guilty of
fraud which will justify charging the check
back. Furtliermore, as was held in a New
York case, it is competent for the bank to
credit the depositor's account conditionally,
that is upon condition that if upon examina-
tion the check is found not good it will be
charged back. And a recent decision in the
Court of Appeals of Missouri is to the effect
that where the bank can prove a custom to
charge back, this will entitle the bank to
cancel the credit. In the light of the forego-
ing. Bank A cannot charge back to the ac-
count of Smith the check of another depositor
which has been placed to his credit upon
later discovering such check is an overdraft
unless (1) Smith knew that the check was
not good at the time he deposited it, or
(2) Bank A had an agreement with Smith
that the deposit should be conditional upon
examination as to the state of the drawer's
account, or (3) Bank A can prove an estab-
lished custom among the banks of the city
known to Smith of charging back later in the
day if the deposit is found to be an overdraft.
The latter is on the authority of the ^lissouvi
case and may not be universally followed.
To protect the bank in such cases it would
seem advisable to print a notice in the pass-
books or on the deposit slips of customers to
the effect that such deposits will be credited
conditionally and if not found good at the
close of business will be charged back and
depositors notified. Vol. 6, p. 62o, Mar.,
1914.

1349. (Wis.) John Smith deposits in
Bank A a check of Jones drawn on a New
York bank and receives credit for the same.
Payment of the check is refused by the New
York bank. Bank A asks if it can charge
back the item to Smith's account. It also

166

MISCELLANEOUS

1350

asks if Smith had received cash couhl his ac-
count still be charged. Opinion: The hank
of deposit has the right to charge the amount
back to Smith's account, but care must be
taken to preserve Smith's liability as in-
dorser, assuming he has transferred title to
the bank and not merely deposited it for col-
lection. Smith being duly charged as in-
dorser, he would be indebted on the chock
to the bank and even though cash had been
paid to him, the bank would have the right to
set off such indebtedness to his account. Vol.
6, p. 625, Mar., 1914.

1350. (N. Y.) Li Oddie v. Xational
City Bank, 45 N. Y., 735, the court held
that where the check of one depositor is de-
posited by another, and the teller gives him
credit therefor, such credit cannot be revoked
upon finding the check was not good. A Xew
York bank complains that this decision seems
unfair and is contrary to the decisions of
other states. It asks if this decision is still
law in New York, and if it would be possible
for a bank to protect itself by some sort of
contract or agreement printed in its pass-
books or on its deposit slips or both to the

effect that all checks received on deposit are
subject to final payment. Opinion: The rule
established in Oddie v. Xational City Bank
that a credit in a depositor's passbook of an
overdraft of another depositor is final and
irrevocable has not been overturne^l in New
York. Decisions in other states conflict.
The same rule has been held in Alabama and
Pennsylvania. On the other hand, in Cali-
fornia, it has been hold that "when a dieck
on the same bank is presented by a depositor
with his passbook to the receiving teller, and
he merely receives tiie check and notes it in
the passbook, nothing more being said or
done, this does not of itself raise the pre-
sumption that the check was received as
cash or otherwise than for collection." This
rule is the more equitable one, but it cannot
be said to be the law of New York ; therefore
it would be advisable to print on the dcjwsit
slip and probably also in the passbook a
properly worded clause giving the bank the
right to charge back a wrongly credited over-
draft on itself at any time before the close of
business on the same dav. Vol. 5, v. 50n,
Mar., 1913.

167

INDEX

ACCEPTANCE AND CERTIFICATION

Opinion Numbers

Acceptance after banking hours 1

Acceptance indorsed on back of bill 883

Acceptance must be written 2-7

Acceptance on note 8

Alteration of check after certification 85

Bank's obligation to pay, not to certify 9-1 1

Bank officer's authority to certify 3(5

Certification equivalent to acceptance 15

Certified check holder not a preferred creditor 208

Certified checks, stopping payment of 50

Certifying bank's liability to fraudulent holder 16

Check against uncollected funds 429

Check without funds 36

Drawer's liability on accepted draft 17

Duty to request certification 386

Effect of remittance stamp 347

Forged checks 18-20

Fraud, check obtained through 22

Guarantees signature and sufficiency of funds 21

Holder in due course 22

Immediately charging customer's account 26

Indorsement must be properly made 23-25

Language expressing certification construed 27-34

Letters "O.K." as certification. 35-36

Limitation as to time 37-38

Outstanding certified checks 39-42

Overdraft, criminal penalty 35

Post dated checks 12-14

Raised check 47

Revocation of mistaken certification of stopped check 48

Rule of 24 hours for acceptance 43-16

Stamp including amount certified not advantageous 49

Stamp to indicate whether at request of drawer or holder lt>

Statute of limitations 39-U

Stranger, certification for 21

Telegraph, certification by 51-55

Telephone, certification by 56-65

Trade acceptances . 132S-133S

ACCOMMODATION IND0R8ERS

Accommodation and commercial paper distinguished 66

Corporation's power to act as accommodation indorser 130, 994

Entitled to notice of dishonor . .76, 1022-1024, 1173

Illegality as a defen.se 77

Indorsement after delivery 67-69

Liability 70-72

Liability as between themselves 73-75

Liability on corporation note 76-77, 1023

Married woman as accommodation indorser 834-843

ACKNOWLEDGMENT
See Notaries

ADMINISTRATOR
See Executor and Administrator

Opinion Numt)C'r8

A<lvorti.siii{2; for "savings" accountH 188-870

Advcrtining of capital 78

Advertising with U. S. flag 79-81

AGENCY

Authority of agent to indorse 671-678

Bank as agent to procure loan 167

Bank's liabiHty for viohition of instructions 2o0, 3G8

Bank not chargeable with knowledge in possession of director 194

Death of principal revokes authority 451

Liability of bank for unauthorized act of cashier 195

Note collected by agent without authority 990

Notice of dishonor by agent to principal 1025

Payment of check to infant agent 848

Power of attorney coupled with interest 462-463, 1074

Protest by notary's clerk 1111

Railroad carrying mail as public agent 832

Set off against deposit marked "agent" 1222

Telegraph operator as accepting bank's agent 51

ALTERED AND RAISED PAPER

See Forgery

Blank form of another bank used 82-84

Certification of raised check 47

Check raised after certification 85

"Collection " rubber stamped on instrument 86

Duty of care in preparing checks 93, 341-344

Erasure by acid 87-88

Erasure of interest clause 746

Liability for paj'ment 89-94

Material alteration 95-96

Place of pajonent altered 97-98

Protest of check with altered date 1110

Raised checks 99-100

Recovery by drawee from accommodation indorser of raised check 70

Recovery of money paid 101-107

Statement of consideration, altered lOS-1 1 1

Time of payment altered 112-115

Written in lead pencil 116

ASSIGNMENT
See Pledge and Collateral

Check as an assignment 450-46 1

Notice of assignment 1046-1047

Of account 1046-1047, 1062

Of deposit 465-467

Of life insurance policy 1073

Of passbook 1037-1040

Set off against assigned deposit '. 1226

Transfer of deposit slip 473

ATTACHMENT AND GARXISHMEXT

Opinion Numbers

Account owned by one person in name of another 117

Attachment of insufficient deposit bj' two creditors 1 IS

Bank garnished for debt of check holder 1 HVrjO

Bank not indebted at time writ is served 121-122

Bank's obligation to disclose balance 123

Funds represented by certificate of deposit 124-127

Funds represented by outstanding negotiable instrument . 12JN-130

Notice with incorrect name 131-132

Precedence over checks not presented before service of writ 133-135

Proceedings may be instituted before judgment 139

Proceeds of bill of lading draft 13G-138

Property subject to garnishment 140-145

Set off by bank to defeat attachment 14tj-14S

ATTORNEY'S FEES

Attorney's fee note payable at bank 149

Claim of attorney's fee in bankruptcy loO

Excessive fee as cover for usury 745

Negotiability of notes with attorney's fee clause 151-155

Validity of attorney's fee clause 156-163

BANKS AND BANKING

Advertising of capital "S

Advertising with United States flag 79-Sl

Bank as agent to procure loan lt>7

Bank as borrower on personal note of executive officer 168-169

Bank loans. See Loan and Discount.
Banking customs. See Custom.

Banking hours 1 "0- 1 7 1

Books and records, examination of 164-165

Books, use of loose leaves 166

Branch banks 261-265

Cashier's unauthorized act, liability for 195-196

Customer's balance for tax purposes, etc., compulsory disclosure 173-176

Deposits, no obligation to receive 469-470

Deposits, unclaimed required to be published 503

Derogatory statements affecting banking institutions 792-797

Dishonor of check, liability for wrongful 506-511

Duty of substituted presentment when check is lost 798, 817-818

General duty of secrecy as to customer's affairs 172

Guaranty by bank 17/ -180

Guaranty of payee's indorsement, right to require 695

Indemnity bond, covering risk of unauthorized indorsements 181

Letter of credit, protection against overdraft 105.8-1059

Liability of bank to checkholder • 345-346

Liability to bank of pcr.son identifying payee 182

Lien of stockholder 228-236

National Banks 870-887

Notes payable at bank 1007-1021

Payment to minors and incompetents 844-8.)5

Postal savings depositary, right to act as 489-190

Private affairs, investigation by Congressional Committee 184

Right to pledge assets ^8"'

Safe depositary, bank as 1^'

Same room for savings bank and bank 1^'

"Savings, " by commercial bank, use of word 1^

iii

BANKS AND BANKING— Ojntinued

Opinion Numbers

Set off 1177-1230

Statement, due diligence in examining 189

Statement of customer's financial condition, liability for 190-192

Statement to procure credit 044

Taxation of l)ank8 1290-1327

Ultra Vires Acts 177, 178, 823, 874, 884

Vouchers returned without receipt unsafe 359

BANK OFFICERS AND DIRECTORS
See Cashier

Bank as holder of director's note 194

Bank's liability for officer's false statement 192

Bank's liability for unauthorized act of cashier 195-196

Cashier buying liis own note for bank 961

Cashier of national bank need not be a director 197

Director of national bank as surety 885

Duty to deface counterfeit money 19S

Interlocking bank directorates 199-201

Loans to bank official 183

Officer and director as notary 914-957

Officer as attesting witness 202

Overdraft by director 203

Personal liability 204-206

Power of officer to certify checks 14, 38, 180

Power to borrow money for use of bank 207

President of national bank as bond broker 193

Subpoena duces tecum served on officer 104-165

BANKRUPTCY AND INSOLVENCY

Assignee of accounts receivable as preferred creditor 1062

Certified checkholder not a preferred creditor 208

Claim of attorney's fee 150

Claim to dividends 209

Collecting bank's insolvency 410-417

Depositaries for estates in bankruptcy- 210

Discharge as bar to unlisted claim 211

Dividend check of failed national bank 212

Innocent purchaser of negotiable paper transferred by bankrupt 216

Liability of transferor of stock to assessment 220

Liens within four months of bankruptcy 213-214

Payment of check on insolvent bank 215

Preference not created where collateral renewed 217-218

Preferred claim against insolvent collecting bank 416-417

Property inherited after adjudication 219

Recovery of paper deposited for collection when bank insolvent 420

Rights and liabihties as to collection proceeds 410-415

Right of trustee in bankruptcy to vote national bank shares 242

Set off against deposit of insolvent borrower 1188, 1190-1193, 1227

Set off of unmatured note against insolvent's deposit 1224-1230

BANK STOCK AND STOCKHOLDERS
See Corporations, Dividends and Liens

Bank as lienor can refuse to transfer stock 230, 233-235

Corporation tax on bank shares 1301

Dividends 221

BANK STOCK AND STOCKHOLDERS— Continued

Opinion Xumbera

Double liability 222-224

Holder in due course of lost certificate 808

Increase of national bank stock 225

Inspection of books and records 226-227

Liability of minor as stockholder 845

Liability of transferor to assessment 220

Lien of national bank for stockholder's indebtedness .... 230-232, 236

Lien of state bank for stockholder's indebtedness 22<, 229, 233, 235

Loan on shares of stock by national bank prohibited 882

Right to dividends of pledged stock 237-238

Stockholder as notary 914-957

Stock issued in name of partnership 239

Transfer of bank stock 240-241

Voting ... 242-243

BILLS OF LADLVG

Acceptor's liability on B/L draft 244

Bank's liability for violation of instructions 250

Collection of B/L draft 367-369

Consignor cannot change routing 252

Disclaimer of warrantor liability 257-260

Effect of absence of shipper's signature 254

Guaranty of draft by bank 178

Interstate shipment of intoxicating liquor 418-419

Interstate shipment, — jurisdiction of cause of action 252

Liability for issuing B/L without receipt of goods 251

Obtaining B/L under false pretenses 628

Protest of draft 1133

Purchase of B/L drafts by national banks 877

Recovery by drawee of money paid on non-negotiable B, L draft 245

Rights of attaching creditor of shipper 246-249

Rights of payor of draft where goods not according to contract 256-260

Shipper's indorsement supplied by collecting bank 253

Uniform B/L Act relative to purchase and collection 255

BLANK SPACES

Check signed in blank -293-294

Payee blank unfilled puts bank on inquiry 890

Space filled in accordance with authority 960

Space for interest left on note 746

BONDS

Bank's liability on indemnity l)ond 886

Bank's right to require l)ond for lost paper 824-826

Bond to protect against payment upon unauthorized indorsement 181

Duplicates for lost government bonds 819

Fidelity bonds 633-634

President of national bank as bond broker 193

BRANCH BANKS

Presentment and payment of checks 2'U-263

Presentment and payment of note 2**'*

Right to estal)lish branches 265

BV-LAWS

Opinion Numbers

Bj'-law providing for secret stock lien 230

By-lHW re(|uirinn surety company bond 822

Disclaimer of liability iii)on loss of passbook 1045

Failure to adopt by-laws does not invalidate acts of corporation 431

Lost paper, requiring bond for » 816

CASHIER

Cashier buying his own note for bank 961

Cashier has no authority to bind bank in guaranty agreement 14, 180

Cashier of national bank need not be director 197

Cashier's checks 130, 570-571, 809, 824, 1236, 1238

Liability of bank for unauthorized act 195-196

Mortgage to national bank in name of cashier 856

Power to borrow money for use of bank 207

CERTIFICATE OF DEPOSIT

Attachment of funds represented by certificate 124-127

Bank's obligation to know payee's signature 280

Demand and time certificates distinguished 266-268

Forgerj' of payee's indorsement 280, 512, 515, 563

Holder protected by guaranty fund 480

Indorsement "all prior indorsements guaranteed" 724

Indorsement by alternative paj-ee 670

Rights of innocent purchaser 273-274

Insanity of payee 275

Issued in two names 502

Loan by national bank on security of its certificates 882

Lost certificate of deposit 281, 806, 825

Maturity 267, 278

Negotiability * 276-277

Passbook and negotiable certificate distinguished 141

Payable "in current funds" 271-272

Payable to minor 850

Presentment after death of payee 269-270

Statute of hmitations 278-279

Transfer without indorsement 281

Withholding payment of time certificate 282

CASHIER'S AND CERTIFIED CHECKS

Cashier's checks 130, 570-571, 809, 824, 1236, 1238

Certified checkholder not a preferred creditor 208

Postdated certified checks 12-14

Stopping payment of cashier's and certified checks 1236-1241

CHATTEL MORTGAGES
Chattel mortgages 857-863

CHECKS— PAYMENT OF

Ambiguous and incomplete checks 2S3-2S5

Bad checks, criminal liability for issuing 621-627

Bearer check without indorsement 2S9-292

Bearer checks, instruments purporting to be 286-2SS

Blank form of another bank used 82-84

CHECKS— PAYMENT OF— Continued

Opinion Numbers

Cashier's checks 130, 570-571, 809, 824, 1236, 1238

Certified checks, post dated 12-14

Certified checks, stopping payment of 1237-1241

Check as an assignment 450-461

Check drawn on another department of same bank 297

Check without funds 621-627

Checks for less than one dollar 333

Checks signed in blank 293-294

Checks with suspicious appearance S46

Conditional deposit of check 475

Conditional payment by check 1050-1051

Conversion of check by bank 295

Counter check, receipt as substitute for 296

Crediting depositor's account with checks on same bank operates as payment 297-298

Draft drawn on particular fund 323

Drawer of check a fugitive from justice 302

Drawer's liability on unpaid check 303

Duty of care of check book 304

Exchange charge, payment of 305-306

"For full payment of account" 307-311

Gambling debt, given for 313-314

Holder in due course. See Holder in Due Course.

Holiday, payment on G5<Mi63

"In exchange" effect on negotiabihty of provision 315-316

Instrument payable at future date 312

LfOSt or stolen checks. See Lost and Stolen Paper 798-828

Memorandum on check, effect of 317

More than balance, checks for 318-322

Negotiability, provisions affecting 324

"Not payable through express company " 325-327

Official check for private use, payment unsafe 32S-332

Partnership checks 334

Payable in one state and negotiated in another 335-336

Paj'able to A "for account of B " 337

Payable to drawee and presented by third person 338

Payable to two payees 708

Payroll check, form to protect against loss 339

Point of time when check received through mail is paid 300-301

Postdated checks .-^ 1083-1096

Preparing check, duty of care 341-344

Railway pay checks 591 , 595

Refusal to pay duly presented check 345

Relation of bank ujxjn deposit of check 299

Remittance stamp 347

Return of vouchers without receipt unsafe 359

Revocation of check by bankruptcy 216

Revocation of check by death 449—461

Revocation of death by insanity or incompetency 846-847

Right to pos.session of unused certified check 340

Rule of 24 hours acceptance not ai)plirablc to checks 43—46

Signatures 348-351

Special deposit, drawn against 393

Stale checks 352

Stamping check " PAID" 353-354

Stamping check "PAYMENT STOPPED" 1259-1201

Stopping paj-ment 1231-1289

Stranger payee 355

Strangers, checks cashed for 557-560

Traveler's checks 608-609

CHECKS— PAYMENT OF— Coiitiiiuod

Opinion Numbers

Undated chocks 356-358

" Willi exchange, " effect of provision 3(30-362

Words and figures differ 303-366

CLEARING HOUSE

Check drawn on A "payable if desired at B" prohibited . . 891

Presentation of checks for more than balance 318-319, 322

COLLECTION

Bill of lading draft 367-369

Checks lost in the mail 798-799

Circuitous routing 370-372

Correspondent, selection of 373-375

Crediting depositor's account with checks on same l)ank operates as payment 297-298

Default of correspondent, liability for 376-383

Disclaimer of liability for negligence 384-385

Drawee only bank in place 385, 406, 409

Duty of collecting bank 386-390

Duty of collecting bank where proceeds under garnishment 136

Duty to trace unacknowledged items 426-427

Express company as collecting agent 391-392

Following instructions , 393-397

Forwarding paper direct to drawee 398-409

Insolvency of collecting bank 410-415

Interstate shipment of liquor 418-419

Items received by insolvent banker 420

Liability for not turning over proceeds 423

Lien on paper fonvarded 421—422

Payment of exchange charge 305-306

Postdated checks 10S3, 1091

Preferred claim against insolvent collecting bank 416-417

Proceeds paid in advance of collection, recover}' of 424

Protest, duty of collecting bank to lllS-1119, 1137-1139, 1145

Set off of proceeds against bankrupt's indebtedness 1177

Specific deposit, charging items against 393

Subsequent deposit, charging note against 425

Substituted presentment of lost check collecting bank's duty of 798, 817-818

Title of bank to paper deposited 299, 421, 428

Uncollected funds, payment against 428-429

COMMON CARRIER

Bill of lading issued without taking up goods 251

Carrying mail as public agent 832

Delivery of package after banking hours 171

Indorsement by railroad agent of checks payable to company 676

Railway pay checks 591, 595

CONTRACTS

Acceptance of offer by mail 829

Disclaimer of liability for payment of stopped check 1242-1244

Disclaimer of liability of collecting bank's negligence 384-385

Check given for gambling debt 313-314

Contracts bj' persons under guardiansliip 844

Contract to pay commission on sale 1344

Married women as contracting parties 834-843

Validity of contract made on Sunday 652, 657-658

viii

CORPORATIONS
See Bank Stock and Stockholder

Opinion Numbers

Accommodation indorser's liability on corporation note 74, 76-77

Authority of officer to use corporate funds 32Q, 331

Books and records, inspection of 22(>-227

By-laws, failure to adopt 431

Corporation tax law 1293-1295

Criminal liability for issuing bad checks 622

Dividends, nature of unpaid 432

Dividend, right of purchaser of stock to 433

Double liability of bank stockholder 222-224

Indorsement by corporation on renewal of trade paper 994

Personal and corporate liability on note 434-438

Power to guaranty debt of another 874

Power to indorse for accommodation 430

Seal unnecessary on corporation note 996-997

Signature to corporation note 434-438

Transfer of stock on books 1339-1342

Ultra Vires Acts by banking corporations 177- ITS, 823, 874, 884

Usury pleaded as defense 786

Voting control by fraction of share 439

Voting power of stockholder 440

CURRENCY
See Legal Tender

Deposit of moneys belonging to Indiana 471

Duty to deface counterfeit coins 198

Legal tender qualities of money 788

Note payable in "legal tender" and "gold coin'' 789

Photographing United States notes 641

Taxation of Canadian currency 1290-1292

Theft of unsigned bank currency 828

CUSTOxM

Calculation of interest 747-748

Filing stop payment notices 1254

Lost checks and drafts charged back to customer's account 817

Mailing check direct to drawee 400, 409

Payee's indorsement as prerequisite of payment 714, 716

Payment of check after drawer's death 451

Presentment of check through clearing house 1 107

Protest by notary's clerk 1111

Stamping " collection " on notes 86

Stamping "Payment stopped " upon checks 1259-1261

DAMAGES

Bank's neglect to follow instructions in collecting paper 394

False statement of customer's financial condition 190-192

Refusal to transfer stock to bona fide purchaser 240

Violation of B/L instructions 250

Wrongful dishonor of check ... 506-51 1

DEATH AND DECEDENTS ESTATE

Agency revoked by death 47'J

Authority to renew notes of testator 447

Bank's right to credit decedent's account 442-443

DKA'IH AM) I )I':(;i': DENT'S ESTATE— Continued

Opluion Numbers

Dpo(1 for annuity 444

Doiivcry of deed after death 445

Delivery of K'ft after (lonce's death 830

Disposal of funds of intestate hy bank 446

Heir's note for dcc^cdent's debt 448

Partnership account where one partner dies 334, 488

Payment of check after drawer's death 449-461

Payment of deposit to administrator 441

Power of attorney affected by death 462

Presentment of certificate of deposit after payee's death 209-270

Renunciation of interest by heir procured by fraud 643

Set olT atr;ainst indebtetlness of decedent 1197-1202

Survivorship where husband and wife [)erish in same disaster 668

Transfer of stock of decedent 463-464

DEED

Deed for annuity 444

Delivery after death ineffectual 445

DELIVERY

Delivery necessary to constitute valid pledge 1077

Delivery of deed after death ineffectual 445

Delivery of express package after banking hours 171

Gift not complete without delivery 667, 830, 1339

Postmaster's liability for misdelivery of registered package 833

Transfer of stock by deUvery 1339-1340

DEPOSITS

Assignment of deposit 465-467

Bank not obliged to receive deposits 469-470

Banlcs as depositaries 471

Check as an assignment 450-461

Crediting depositor's accoimt with check on same bank operates as payment of check 297-298

Deceased depositor's accounts 441-464

Deposit by one person crediting account of another 478-479

Deposit for safe-keeping 4.2

Deposit slip, nature of 4/ 3-476

Disclosm-e of customer's balance 4i 7

Gift by delivery of pass book 667

Giving cash instead of credit for deposited item 496

Guaranty fund of depositors 480

Husband and wife, deposits of 664-668

Joint deposit • 502

Legal tender, pajTnent in "^87

Made outside of bank 481-482

Military company, deposit of 483

Minors and incompetents, deposits of 846-855

Mistaken credit to account 494-495

Mistaken payment of deposit 484—485

National bank deposit in trust company 871

Notice of withdrawal of savings deposit in national bank 504

Partnership, deposit by 4S7-488

Payment on oral order 486

Postal savings 489-490

Public deposits = 491

Reserve against savings deposits 492

DEPOSITS— Continued

Opinion Numbers

"Savings, " use of word ISS, S70

Set-off of deposits 1177-1230

Specific deposits 493

Subsequent deposits U3, 393 425, 1212

Time deposits 497

Trust funds 493

Two names, deposit in 502

Unclaimed deposits required to be published 503

Use of assumed name 408

DISHONOR

Drawer's liability on unpaid draft 505

Wrongful dishonor of checks 506-5 1 1

Presentment of instrument with indorsement lacking 1131-1134

DIVIDENDS

Dividend check on failed national bank 212

Nature of unpaid dividends 432

Pledgee's right to dividends of pledged stock 237-238

Right of purchaser of stock to dividends 433

DRAFTS

Draft drawn on particular fund 323

Drawer's liability for stopped draft 049

Drawer's hability on unpaid draft 505

Form of indorsement to restrict negotiability 725

Gift through the mail 830

Guaranty of draft by bank 874

Holder in due course of stolen draft 801, 803

Holder in due course of stopped draft 6 17, 049

Indorser discharged by payment ^099

Lost or stolen drafts 799-801, S03, 826, 827

Negligence in failing to notify of lost di-af t 799

Negotiation within reasonable time 801

Payable "through" or "in care of" bank 1103, 1104

Payable "with New York exchange" 1061

Payment by mistake 1053

Presentment of time draft for acceptance 3S8

Protest of draft 109S. 1133, 1145

Provisions affecting negotiability 2 1 1, 323. 909, 1 145

Rule of 24 hours for acceptance 43-40

EXCHANGE

Checks "not payable through express company" .■>25-327

Exchange charge 305-30«i

Instrument payable "in current funds" 271-272

Effect of words "in exchange" 315-316

Effect of words "with exchange " 300-302

EXECUTOR AND ADMINISTRATOR

Authority to renew notes of testator 1 17

Bank may demantl letters of administration 441

Decedent's stock claimcil by administrator 479, 1 197

Deposit of check by administrator l^efore lie has qualified 442

Transfer of stock to administrator 464

Voting 243

FORGERY

Sec Altered and Raised Paper

Opinion Numbers

Altering name of drawee on forged check OIH

Bank bound to know depositor's sinnature 512-017

Certifindion of forged cliocks 18-20

CJieck hearing forged and genuine signatures 52.'J-o2i)

Checks cashed for strangers 5!j7-'A')()

Check (hiled on Sunday 020

Checks signed in fictitious name Oil

Criminal ofTense, possession of'forged instnuuent 642

Drawer's duty of examination and verification 527-528

Effect of delay in giving notice of forgery 575-570

Effect of waiver of identification 595

Estoppel to assert forgery of indorsement 613-614

Forged counter-signature to traveler's check or money order 608-610

Forged draft against lost letter of credit 619

Forged name of drawee 617

Forged order on savings deposit 529-533

Forged telegrai)h order to pay money 564-566

Forgery of signature by mark 561-563

Indorsement by person of same name 585-590

Indorsement by precise person intended 591-594

Indorser's warranty to subsequent purchaser 612

Liability of person identifying impersonator 615-616

Non-recovery of money paid on forged check 534-547

Non-recovery of money paid on forged indorsement 582-584

Obtaining money under false pretenses 638

Payment of forged check not chargeable to drawer 51S

Payment chargeable where drawer estopped 519-522

Protest of forged checks 1123-1 125

Recovery of money paid on forged bearer check 596-597

Recovery of money paid on forged check 548-556

Recovery of money paid on forged indorsement 567-569, 572-574

Recovery where indorsement guaranteed 577-581

Signature and indorsement both forged 598-604

Statute of limitations as apphed to forged indorsements 605-607

FRAUD' AND;^ CRIMES

Bad checks, criminal liabihty for issuing 621-627

Bill of lading obtained under false pretenses 628

Burglary policy of the American Bankers Association 629

Certification by officer of overdraft 35

Check signed in fictitious name with intent to defraud 611

Collection items fraudulently received by insolvent banker 420

Conspiracy to commit robbery 630

Conversion of notes by innkeeper 631

Delivery of goods without taking up warehouse receipt 632

Derogatory statements affecting banks 792-797

Duty to deface counterfeit coins 198

False statement that certificate of deposit is lost 281

Fidelity bonds 633-634

Firm checks issued through fraud of employee 635

Forgery of check dated on Sunday 620

Fraud in overdrawing letter of credit 1059

Interstate shipment of intoxicating liquor 418-419

Introducing swindler to bank 636

Obtaining money under false pretenses 637-639

Passing worthless state bank bill 640

Photographing United States notes ."/. . T 641

xii

FRAUD AND CRIMES— Continued

Opinion Numbers

Possession of forged instrument with intent to defraud 642

Renunciation of interest by heir procured by fraud 643

Statement to procure credit 644

Theft of registered mail by railroad employee 832

GIFl'S

Gift of bank draft through the mail 830

Not complete without delivery 499, 667, 830, 1339

Of bank stock. 1339

GUARANTY

"All prior indorsements guaranteed " . . 71S-724

Cashier's guaranty of post dated check ISO

Defective indorsement 696-C98

Drawee's right to require guaranty of payee's indorsement 694-695

Guaranty fund of doiK)sitors 4S0

Guaranty of missing indorsement 669-685

Indorscr as guarantor 700

Power of bank to guarantee draft . . 177-17S

Release by extension of time . . 9(>4-9()6

Securities guaranteed by salesman . . 1076

Signature guaranteed 179, 517

Statute of limitations 961, 1003

HOLDER IN DUE COURSE

Certificate of deposit indorsed by minor 850

Certified check 22

Check given for gambling debt 313-314

Check payable to drawee and presented by third person 338

Check signed in blank 293-294

Effect of indorsement "without recourse" 740

Instrument indorsed in blank and stolen 806-81 1

Negotiable certificate of deposit 273-274

Paper indorsed for accommodation by corporation 430

Raised checks 99-100

Rediscounted note • ■ t>45

Stolen paper . . SOl-805

Stopped check . • t>4«)-650

Stopped draft (J-i7, 649

HOLIDAYS, SATURDAY AND SUNDAY

Forgery of check dated Sunday <''20

Instrument executed on holiday l>51-653

Instrument maturing on Saturday 654-656

Notes executed and delivered on Sunday 657-058

Payment of check on holiday • 659-<}63

HUSBAND AND WIFE