
    The Cincinnati, Hamilton & Dayton Railroad Co. v. Bank.
    
      Negotiable paper — Bank check — Holder cannot maintain action against the bank.
    
    An action cannot be maintained against a bank by the holder of a check for refusal to pay it unless the check has been accepted, although there stands to the credit of the drawer .on the books of the bank a sum more than sufficient to meet the check.
    (Decided January 21, 1896.)
    Error to the Superior Court of Cincinnati.
    The action below was by the plaintiff in error against the defendant in error to recover on a bank check. The petition was in words and figures following:
    “The plaintiff is a corporation duly organized and existing under the laws of the state of Ohio. The defendant is a corporation duly organized and • existing under the laws of the United States.
    ‘ ‘There is due to the plaintiff from the defendant, upon the check a copy of which, there being no credits nor endorsments thereon, is hereto attached, made part hereof, and marked “Exhibit A,” the sum of three hundred and thirty-eight 31-100 dollars ($338.31), with interest from May 11, 1886. The plaintiff is the owner and holder of said cheek, and on May 11, 1886, presented it for payment to the defendant, who at that time, and at the time of the drawing of said check, had-funds of said J. E. Ash on deposit, more than sufficient to pay the same, but the defendant refused to pay said check.
    “Wherefore the plaintiff prays judgment against the defendant for said sum of $338.31, with interest from May 11, 1886, for its costs, and all other relief to which it may be entitled.-
    “EXHIBIT ‘A.’
    Cnsrcnsnsrati, May 10, 1886.
    
    
      “Metropolitan National Bank :
    
    “Pay to the order of C. H. & D. R. R. Co., three hundred and thirty-eight 31-100 dollars.
    “$338.31 (Signed) J. E. Ash.” .
    A general demurrer was interposed by the bank, and the holding of the superior court at general term was, in effect, to sustain the demurrer. Judgment for the bank followed, to reverse which the present proceeding is prosecuted.
    Ramsey, Maxwell <& Ramsey, for plaintiff in error.
    The single question presented for adjudication is, whether, in Ohio, the payee of a check can maintain an action upon it against the bank which wrongfully refuses to pay it. The right of action was denied by the general term upon the ground that no privity of contract exists between the holder of a check and the bank upon which it is drawn, and, therefore, that no right of action exists in the holder against the bank, until the bank has accepted the check. 27 W. L. B., 105; Covert v. Rhodes, 48 Ohio St., 66; the latter ease upsets the rule established in McGregor v. Loomis, 1 Disney, 247.
    The case of Covert v. Rhodes does not decide that an action may not, under any circumstances, be maintained against a bank by the payee of an unaccepted cheek, but simply that the drawer may revoke the check by notice to the bank prior to its presentation. Morrison v. Bailey, 5 Ohio St., 13; Stewart v. Smith, 17 Ohio St., 82 ; Kahn v. Walton, 46 Ohio St., 195.
    All the authorities agree that the implied contract of a banker with his depositor is to pay the depositor’s checks when presented. It is a breach of this implied contract, and a clear wrong, for the banker to refuse .to pay, when there are funds on deposit applicable to the check ; but it is said that the payee of the check can not complain nor maintain an action for breach of this contract, because he is not a party'to the. contract, but a third-party, between whom and the bank there is no privity of contract.
    This is a good objection to the action in those states which deny the right of a third party, for whose benefit a contract is made, to maintain an action upon it. All the cases cited by opposite counsel proceed upon this ground. Carr v. National Security Bank, 107 Mass., 45. In England the doctrine is carried to great extremes. Wald’s Pollock on Contracts, 204.
    But in Ohio the objection of want of privity cannot prevail, for it is the settled law of this state, contrary to the rule in England, in Massachusetts, and in the supreme court of the United States, that a third person for whose benefit a contract is made may maintain an action at law upon it. Thompson v. Thompson, 4 Ohio St., 333; Bagalay v. Waters, 7 Ohio St., 367; Trimble v. Strother, 25 Ohio St., 381; Brewer v. Maurer, 38 Ohio St., 543; Emmitt v. Brophy, 42 Ohio St., 82.
    It is true, as held in several of these cases, that the third, person’s right of action is lost if the original parties revoke the contract before the third party gives notice of his rights. And the case of Covert v. Rhodes is but the logical application of this doctrine to the case of a check revoked before presentation. Munn v. Burch, 25 Ill., 35; Insurance Co. v. Stanford, 28 Ill., 168; Bank v. Bank, 80 Ill., 212; Roberts v. Corbin & Co., 26 Iowa, 315; Lester v. Given, 8 Bush., 358; Gordon v. Muchler, 34 La. Ann., 608; Fonner v. Smith, 47 N. Y. Rep., 632; Fogartie v. State Bank, 12 Rich. Law, 518; Daniel on Negotiable Instruments, volume 2, section 1638.
    Many of the cases cited ag’ainst us hold merely, as was held in Covert v. Rhodes, that an action does not lie where the check has been countermanded before presentation. They are not authorities against the right to sue where there has been a wrongful refusal to pay, as at bar.
    
      Pogue, Pottenger & Pogue, for defendant in error.
    The payee of a check cannot maintain an action on it against the drawee, the bank, when the bank refuses to accept it. From the time of the earliest opinion expressed by Judges Storer and Spencer in McGregor v. Loomis, 1 Disney, 247 (1856), up to the present day, tlie views of many of the courts of our country have changed on this question of the right of the payee of a check to sue the drawee of a cheek who refuses to accept it, though he may have sufficient funds to pay it, and nearly every court of last resort in the United States and England which has passed upon this question for the first time since the decision on Bank of Republic v. Millard, 10 Wall., 152 (1869), has said that the payee has no . right to sue the drawee on failure to accept either at law or in equity. Covert v. Rhodes, 48 Ohio St., 66; Bank v. C. H. & D. R. R. Co., 27 W. L. B., 105; Bank of Washington v. Whitman, 94 U. S., 343; Laclede Bank v. Schuler, 120 U. S., 514; Florence Mfg. Co. v. Brown, 124 U. S., 391; Essex v. Bank, 7 Biss., 195 (U. S. Circ. Ct. Northern District Ill.); Dykers v. Leather Mfg. Co., 11 Paige, 616; Bank v. Bank, 46 N. Y., 82; Attorney General v. Life Ins. Co., 71 N. Y., 325; Risley v. Bank, 83 N. Y., 318; Ballard v. Randall, 67 Mass., 605; Carr v. Bank, 107 Mass., 48; Jermyn v. Maffitt, 75 Pa. St., 399; Saylor v. Bushong, 100 Pa. St., 23; Kuhn v. Bank, 11 Atl. Rep., 440; Bank v. Shoemaker, 117 Pa. St., 94, 101; Creveling v. Bank, 46 N. J. Law, 255; Moses v. Bank, 44 Md., 580; Purcell v. Allemong, 22 Grat., 742; Harrison v. Wright et al., 100 Ind., 538.
    This latter case is an exhaustive review of all the decisions on this question and was argued bysomeof the most prominent legal counsel of the day. Bank v. Williams, 13 Mich., 283; Grammel v. Carmer, 55 Mich., 201; Brennan v. Bank, 62 Mich., 343; Bank v. Coates, 17 Missouri, Rep., 17; Bush v. Foote, 58 Miss., 5; Bank v. Merritt, 7 Heisk., 177; Pickle v. Muse, 88 Tenn., 380; Cuchman v. Harrison, 90 Cal., 297: Boettcher v. Bank, 24 Pac. Rep., 582; Satter white v. Melezer, 24 Pac. Rep., 184; Hopkins v. Foerster, L. R. 19 Eq., 74.
    It is argued by counsel for plaintiff in error that the supreme court of the United States, maintaining the distinction between courts of law and courts of equity, has decided the proposition advanced, “that the payee of a check cannot sue the drawee for failure to accept a check, though he may have sufficient funds of the drawer to pay it — only as to an action at lato, that it has not decided that he can not maintain an action in equity. ”
    • An examination of authorities from other states which make no distinction between a legal and an equitable interest as our state does, and also of states and courts where the question has arisen, both in courts of law and equity, shows there is neither a legal nor an equitable interest in the payee which entitles him to sue the bank, the' drawee, and we refer to:
    
      Bank v. Bank. 46 N. Y., 82; Risley v. Bank, 82 N. Y., 318; Bank v. Shoemaker, 117 Pa. St., 94; Carr v. Bank, 107 Mass., 48; Ames on Bills and Notes, vol. 2, 735.
    Again it is argued by counsel for plaintiff in error that all the cases cited by opposing counsel proceed upon the ground that in those states which deny the right of a payee of a check to sue the drawee of a check on his refusal to accept a check, also deny the right of a third party, for whose benefit a contract is made, to maintain an action upon it, and for this latter reason a payee of a check cannot sue the drawee.
    To refute the statement of plaintiff’s counsel, we refer to decisions from the same states. Lawrence v. Fox, 20. N. Y., 268.
    
      Where one person makes a promise to another for the benefit of a third person, that third person may maintain an action on it. Burr v. Beers. 24 N. Y., 178; Campbell v. Smith, 71 N. Y., 28; Coster v. Albany, 43 N. Y., 411.
    Nor need the third person be privy to the consideration. Pike v. Brown, 61 Mass., 133; Mellin v. Whipple, 67 Mass., 317; Crawford v. Edwards, 33 Mich., 354; Miller v. Thompson, 34 Mich., 10; Merriman v. Moore, 90 Pa. St., 80; Huyler v. Atwood, 26 N. J. Eq., 504; Heim v. Vogal, 69 Mo., 529; Fitzgerald v. Baker, 70 Mo., 685; Bassett v. Bradley, 48 Conn., 225; Day v. Patterson, 18 Ind., 114; Deval v. McIntosh, 23 Ind., 529; Cross v. Truesdale, 28 Ind., 45; Brice v. King, 1 Head, 153; Moore v. Storall, 2 Lea, 543; Thompson v. Thompson, 2 Lea, 127: O’Neal v. County, 27 Md., 227; Green v. Morris, 5 Col., 18; Hutchinson v. Simon, 57 Miss., 628.
   Spear, J.

The question presented is whether or not a payee of a bank check can maintain an action against the bank, where the latter, on presentation, refuses to pay it, the drawer having at the time a credit on the books of the bank more than sufficient to meet the cheek?

Questions bearing some relation to this have been considered by this court, but the precise question has not heretofore been determined.

Authority is found supporting’ the affirmative of this proposition. The grounds' urged are not identical in all cases, nor is the reasoning wholly consistent, but the following is believed to be a fair resume of the conclusions: Because of the universal usage of banks to cash the checks drawn by a depositor, where he has sufficient unincumbered balance standing to his credit, a duty is implied on the part of the bank to so pay, and the holder takes the check relying upon this usage. Serious injury may result to the holder by the bank’s refusal to' pay, for, while he may have an action against the drawer, that would prove delusive in the frequent instance of the drawer’s insolvency, and the bank’s wrongful action would be the real cause of the loss. The law, therefore, implies a contract on the part of the bank with its depositors to pay their checks as presented so long as the fund is sufficient, and should, for like reasons, imply a contract with whomever may become the holder of such cheek to pay on presentation. The check is treated as an equitable assignment pro tanto of the fund in the hands of the bank, and, by the act of presentation the check-holder is brought in privity with the bank, his right to sue completed, and he may sue the drawer and the bank in one action, the former as drawer and the latter as an implied acceptor. He may also sue the drawer on the check’s dishonor, or the bank for money had and received.

Forcible and ingenious arguments in support of the right to maintain the action are presented by Mr. Morse, in his valuable work on Banking, by Mr. Daniels in his treatise on Negotiable Instruments, vol. 2, section 1638, where the arguments pro and con are stated and ably reviewed, and by a number of decisions, some of which áre the following: Munn v. Burch, 25 Ill., 35; Ins. Co. v. Stanford, 28 Ill., 168; Bank v. Bank, 80 Ill., 212 (but see opinion in Bank v. Bank, 7 Bissell, U. S., 195); Roberts v. Corbin, 26 Iowa, 315 Lester v. Given, 8 Bush, 358; Fogarties v. Bank, 12 South Carolina, 518 ; Gordon v. Muchler, 34 La. Ann., 608; Fonner v. Smith, 31 Neb., 107.

The contrary doctrine is maintained by many text writers and decisions. Following are some of the authorities: -Randolph on Commercial Paper, vol. 2, p. 280; Pomeroy’s Equity Jurisprudence, section 1284 ; Van Schaack on Bank Checks, 212; Bank v. Millard, 10 Wallace, 152; Bank v. Whitman, 94 U. S., 343; Bank v. Schuler, 120 U. S., 514; Mining Co. v. Brown, 124 U. S., 391; Bank v. Bank, 46 N. Y., 82; Attorney-General v. Ins. Co., 71 N. Y., 325; Bullard v. Randall, 67 Mass., 605; Carr v. Bank, 107 Mass., 48; Saylor v. Bushong, 100 Pa., St., 23; Kuhn v. Bank, 11 Atl. Rep. (Pa.), 440; Bank v. Shoemaker, 117 Pa. St., 94; Creveling v. Bank, 46 N. J., Law, 255; Moses v. Bank, 34 Md., 580; Purcell v, Allemong, 22 Grat., 742; Harrison v. Wright, 100 Ind., 538; Grammel v. Carmer, 55 Mich., 201; Brennan v. Bank, 62 Mich., 343; Bush v. Foote, 58 Miss., 5; Bank v. Merritt, 7 Heisk, 177; Pickle v. Muse, 88 Tenn., 380; Cashman v. Harrison, 90 Cal., 297; Boettcher v. Bank, 15 Col., 16; Satterwhite v. Melczer, 24 Pac. Rep. (Arizona), 184; Hopkins v. Forester, L. R. Eq., 74; Wald’s Pollock on Contracts, 190, 204; 2 Ames’ Bills and Notes, 735.

It is not doubted that, as a general proposition, there can be no cause of action upon a contract unless there is privity of contract between the obligor and the party complaining. But it is urged in argument here that while the want of privity is a good objection to the action in those states which deny the right of a third party for whose benefit a contract is made to maintain an action upon it, in Ohio the objection of want of privity cannot prevail for the reason, as held bjr this court in a number of cases, that an agreement made on a valid consideration by one person with another, to pay money to a third, can be enforced by the latter in his own name, and that the third person is not named does not affect the right to enforce it. The most recent case involving this principle is that of Emmitt v. Brophy, 42 Ohio St., 82. The action was upon a bond given by Emmitt to the county commissioners in the sale of a bridge by the Scioto Bridge Co., in which Emmitt obligated himself “to pay off and liquidate all claims and demands, whether in judgment or otherwise, existing against said bridge, so that the full use of said bridge may enure to the public without let or hindrance. ’ ’ Brophy at the time was a judgment creditor and the owner of all of the claims enumerated in the bond. Owen J., in the opinion, after reciting the facts, observes : “These facts are strongly suggestive that it entered into the contemplation of the parties to this bond at the time of its execution, that this particular lien of the plaintiff upon the bridge was to be ' discharged by Emmitt. Its existence was known to them, and they seem to have left nothing to conjecture. Indeed, if Brophy and Potter had been expressly named as the lien-holders, it is difficult to see how this would have added to the definiteness of the bond, or made more certain the intention of the parties. This seems *to be a conclusive answer to the suggestion that there is want of privity.”

No one of the cases cited carries the doctrine farther than the foregoing. In no one of them is it held that a right to sue in a stranger can be raised by mere implication. No where is it held that the obligation will attach in favor of future creditors not named and not known, and as to amounts not specified or then ascertainable, to the extent of giving to such creditors a right of action on the contract. It must be apparent, even on brief reflection, that it does not follow from these decisions that there is privity between check-holder and bank before acceptance, and that in order to cover the case at bar a marked extension of the doctrine must be made. Reasons urged for such extension, however plausible, do not seem sufficient.

On the contrary, strong reasons against the proposition may be adduced, among others, this: The transaction of giving the check does not, as will be shown further on, substitute the check-holder for the drawer. The latter may maintain an action for the breach of the contract to honor his check, and if the holder has a similar right, the result is that two persons may maintain separate actions upon the same instrument at the samé time to recover against the same defendant as a principal debtor. The inference that the right to recover by the check-holder is denied only in the states where a right of recovery is refused to one for whose benefit a contract is made by another, arises from a misapprehension of the authorities. In many states where the right of a check-holder to sue the bank is not assented to, the right of one for whose benefit* a contract is made to recover upon it is recognized. See Lawrence v. Fox, 20 N. Y., 268; Burr v. Beers, 24 N. Y., 178; Coster v. The Mayor, 43 N. Y., 399; Merriman v. Moore, 90 Pa. St., 78; Huyler v. Atwood, 26 N. J. Eq., 504; O'Neal v. Commissioners, 27 Md., 240; Crawford v. Edwards, 33 Mich., 354; Miller v. Thompson, 34 Ib., 10; Heim, v. Vogel, 69 Mo., 529; Fitzgerald v. Baker, 70 Ib., 685; Cross v. Truesdale, 28 Ind., 44 ; Brice v. King, 1 Head’s (Tenn.), 152; Greeny. Morrison, 5 Col.,. 18.

It is insisted that the ease should not turn alone on the legal idea of privity, for, under our system of procedure, it is immaterial whether the interest of the paj^ee against the hank is legal or equitable, and that the action here may be maintained on equitable grounds. In a well-considered case, Covert v. Rhodes, 48 Ohio St., 66, this court held that ‘ ‘a bank check or draft for a part of the sum due the drawer, does not, before acceptance by the drawee, constitute an equitable assignment of the amount for which-it is drawn.” The conclusion is amply sustained by the reasoning’ of the opinion, and no discussion is necessary. If there is no equitable assignment of the debt pro tcmto, how can equitable considerations prevail? The proceeding is not an equitable one; and .if it were, we do not understand that equity has different rules from thosé of law with respect to the rights and obligations of parties to negotiable paper. As applicable to such case we believe that reason, and the great preponderance, of authority,- establish the following conclusions : The relations of bank and general depositor is simply the ordinary one of debtor and creditor, not of agent and principal, or trustee and cestui que trust. The bank agrees with its depositor to receive his deposits, to account with him for the amount, to repay to him on demand, and to honor his checks to the amount of his credit when the checks are presented; and for any breach of that agreement the bank is liable to an action by him. The deposits become the absolute property of the bank, impressed with no trust, and the bank’s right to use the money for its own benefit is immediate and continuous, which right constitutes the consideration for the bank’s promise to the depositor. The bank’s agreement with the depositor involves or implies no agreement with the holder of a check. The giving of a check is not an assignment of so much of the creditor’s claim; it passes no title, legal or equitable, to the holder in the moneys previously deposited, nor ■ does it create a lien on the fund, for there is no special fund out of which the check can.be paid, nor does it transfer any money to the credit of the holder ; it is simply an order which may be countermanded and payment forbidden by the drawer any time before it is actually cashed or accepted. If accepted, then the agreement is to pay according to the terms of the check or acceptance; but until then the payee looks exclusively to the drawer. He can maintain no action against the bank, for the bank owes to the payee no legal duty, and an action at law cannot be maintained except there is shown to have been a failure in the performance of 'legal duty. Being liable to the drawer to account with him for failure to honor his check, the bank cannot, either on legal or equitable considerations, be held at the same time liable to the holder of the check.

Tested by these rules, the plaintiff could have, no cause of action against the bank, and the superior court committed no error in the judgment rendered.

Judgment affi/rmed.  