
    Willets v. the Phœnix Bank.
    (Before Oakley, Ch. J., Duer and Paine, J.J.)
    March 17, 1853;
    March 26.
    A bank-check, payable to the order of bills payable, as it cannot be passed by an endorsement^ is, in judgment of law, payable to bearer.
    It stands upon the same ground as a check payable to the order of a fictitious person.
    The certifying of a check as “ good,” is not a mere declaration of an existing fact, but creates a new and binding obligation on the part of the bank.
    The meaning is, not merely that the check was “ good ” when certified, but that it shall be “good” when presented for payment.
    A certified check is, therefore, as truly an absolute unconditional promise to pay upon demand the sum which it specifies, as an ordinary bank-note; and laches, in making the demand, is no more imputable in the one case, than in the other.
    
      Held, upon these grounds, that the plaintiffs, holders for value, were entitled to recover the sum advanced by them upon four checks, certified by the defendants, although payment was not demanded until two months after the checks were certified, and in the interval the maker had withdrawn, upon other checks, all his funds from the bank. Judgment for plaintiff accordingly.
    The action was brought to recover the amount of four checks certified by the defendants to be good.
    The complaint stated that the plaintiffs were the holders and owners of four checks drawn by A. B. Tripler on the defendants. That one of the checks, dated 9th of April, 1850, was for the sum of $800—another, dated 11th April, 1850, for the sum of $1201.80—another, dated 16th April, 1850, for the sum of $1662—and the last, dated 20th April, 1850, for the sum of $735. That these checks were respectively certified by the defendants to be good and payable by them, and that Tripler had then sufficient funds deposited with the defendants to meet the same. That the plaintiffs afterwards on the 6th of June advanced to Tripler the sum of. $4000 on the said checks on the consideration that the sums were certified by the defendants to be good and payable by them, and that on the 7th of June they presented the said checks for payment to the defendants, who then refused, and have ever since refused, to pay the samé.
    
      The answer admitted that the checks mentioned in the complaint, were, on the days they were respectively dated, at the request of Tripler, the maker, certified by the defendants to be good, and that Tripler had then fymds in the bank sufficient to meet the same.
    The defences set-up were that the usage of the banks in the City of New York, where all the parties transacted their, business, is to certify checks as good, when good, in order to save the counting out and transferring of money from hand to hand, and to receive the checks so certified as cash on the next day, in the usual exchanges between the banks. That it is not the custom of the banks to certify checks for the purpose of remittance to other places but to issue certificates of deposit, certified checks being considered merely as temporary vouchers, but certificates of deposit as absolute liabilities of the banks for any length of time, and that of this usage and custom Tripler and the plaintiffs were fully aware. That contrary to usage none of the checks so certified for Tripler were presented to the defendants for payment until the Yth of June succeeding their respective dates..
    That after the said checks were certified and before the same were presented for payment, the defendants paid out on other checks of Tripler all his money deposited in their bank, and that on the Yth day of June, and for several days prior, Tripler had failed in business and suspended payment.
    The answer further alleged upon information and belief, that Tripler passed the checks to one Hotchkiss as security for or vin satisfaction of a usurious loan, and that Hotchkiss well knew when he received the same that Tripler had then no funds in the bank to meet them.
    That Hotchkiss on the 6th or Yth of June passed the checks to the plaintiffs, who are merchants trading and "doing business in the City of New York, under the firm of S. & É. Willets, and who received the checks, not in good faith, nor in the way of their trade and business, but fraudulently and collusively, and without any present consideration therefor.
    The reply took issue upon the defences set-up in the answer.
    Upon these pleadings the cause was tried before the Chief Justice and a jury on the 20th of October, 1852.
    
      Upon the trial, the counsel for the plaintiffs, to maintain and prove the issue on their part, read in evidence four certified bank checks, in the words and figures following:
    
      ú “ Eo. 1707.”
    9 “ Eew York, April 20th, 1850.
    8 “ Phoenix Bank,
    “Pay to the order of Bills payable, seven hundred and PA thirty-five dollars.
    <j “ $735. “ A. B. Tbipleb.”
    «
    !
    a
    A
    <j
    “Eo. 1658.
    “ Eew York, April 11th, 1850.
    “ Phoenix Bank,
    .“ Pay to the order of 1658, twelve hundred and one t or dollars.
    “ $1,201t8o-V “ A. B. Teiplebi”
    g “ Eo. 1688.
    3 “Eew York, April 16th, 1850.
    E “ Phoenix Bank, *
    
    Eh *
    
    “ Pay to the order of Bills payable, thirteen hundred PA and forty-two dollars.
    “ $1,342. “ A. B. Tbipleb.”
    d “Eo. 1654.
    8 “Eew York, April 9,1850.
    E “ Phoenix Bank,
    “Pay to the order of Bills payable, eight hundred PA dollars.
    “ $800. . “A. B. Tbipleb.”
    The making and certifying of the said checks, their presentment on the seventh day of June, one thousand eight hundred and fifty, and non-payment, were all admitted.
    The amount of said checks and interest (subject to correction by calculation) was admitted to be four thousand six hundred and sixty-two dollars and fifty-six cents.
    And hereupon the counsel for the plaintiffs rested.
    
      The counsel for the defendants thereupon moved to dismiss the complaint.
    First, because a check certified by a teller is not binding on a bank, such act not being within the scope of a teller’s authority.
    Second, the checks were all payable to order of Bills payable, and were not negotiable, and did not pass by delivery, but by assignment only, and no assignment had been proved.
    But his Honor the Chief Justice denied said motion to dismiss complaint, to which decision the counsel for the defendants excepted.
    The counsel for the defendants then, to maintain and prove the issue on their part, called
    
      Isaac Gr. Ogden, Jr.: who, having been duly sworn, testified as follows:—I was the paying teller of the defendants for eight years, terminating in the summer of one thousand eight hundred and fifty; Tripler, the maker of these four checks, was a dealer with the bank; I certified these checks, and at the times they were respectively certified, we had the funds therefor in bank.
    The defendants, offered to prove, by this witness, the state of Tripler’s account, after the checks were certified; and plaintiff’s counsel objects to same being shown, except by production of Tripler’s checks, or the books of original entries.
    The defendants thereupon produced the books of the bank, containing original entries of Tripler’s checks.
    Said witness further testified: Tripler, afterwards and before the checks were presented, drew out all the funds he had in bank; his last check was drawn on the third day of June of one thousand eight hundred and fifty.
    The counsel for the defendants then offered to prove by this witness, the mode of business of the defendants’ teller and book-keeper in regard to certified checks, and to show how the mistake occurred in regard to these, but the counsel for the plaintiffs objected to such offer. The court sustained the objection, and the counsel for the defendants excepted to such decision. •
    
      The counsel for the defendants then called
    
      William B. Meeker, who, being duly sworn, testified as follows :—I was assistant book-keeper in the Phoenix Bank in the spring and summer of eighteen hundred and fifty, and as such kept A. B. Tripler’s account; the books now produced and shown me, are the books of original entry of that account; the other book here produced, is the bank ledger, containing that account; between the twentieth day of April, one thousand eight hundred and fifty (the date of the last check now in question), and the seventh day of Jnne following, the bank paid out on Tripler’s checks, seventy-one thousand nine hundred and eight dollars and sixty-one cents, and there were deposited by him in that period seventy-one thousand seven hundred and sixty-eight dollars and twenty-two cents.
    The counsel for the defendants then asked the witness what amount was paid out on Tripler’s checks, and what amount deposited to his credit between the ninth day of April (the date of the first of the four checks), and the twentieth of same month (the date of the last).
    The counsel for the plaintiffs objected to this question as irrelevant.
    The court sustained the objection, and the counsel for the defendants excepted to the decision thereon.
    The witness further proved that the seventh day of June, one thousand eight hundred and fifty, the date of the last item in said Tripler’s account, there was to said Tripler’s credit, a balance of seventeen dollars and five cents.
    The counsel for the defendants then called
    
      Stephen Willets, one of the plaintiffs, who, being duly affirmed, said :—I am one of the plaintiffs ; we received the four checks in question from Jeremiah Hotchkiss on the 6th day of June, one thousand eight hundred and fifty; the money, I understood, was for Tripler; I advanced him four thousand dollars on these checks, and took them for security therefor; when we advanced the money we did not expect to use the checks any more than we would Phoenix Bank stock, had we loaned on that; the next day we went to Hotchkiss to get the money on another loan, not connected with this which he had from me; Hotchkiss then told us to draw these checks; we sent to deposit them, but the teller said we had better draw them; we presented them to the bank on the seventh day of June, but the bank would not pay them on that evening, and we went the next morning, and they put us off until they got out an injunction against us. The plaintiffs are crockery merchants in Water street. Mr. Hotchkiss is a money broker in Wall street; I think it was just near by three o’clock when Hotchkiss came after the money; there was no agreement as to interest; we should have returned him all over the four thousand dollars, after deducting the interest, if we had drawn the amount of the checks ; Ave have no other securities for this loan besides these checks.
    On examination by the plaintiff’s counsel, being shown* a check, the witness says :—This is the check we gave Hotchkiss for the money we loaned on the checks.
    The same is produced and read, and’ is in the words and figures following, to wit:
    “ New York, 6 Mo. 6,1850.
    “ Cashier of the Mechanics Bank,
    “Pay to J. Hotchkiss, or bearer, four thousand dollars.
    “ Dolls. 4,000.
    “ Stephen & Enmuro Willets.”
    The defendants’ counsel then called
    
      Nicholas G. Ogden, who, being duly sworn, testified:—I was the cashier of the Phoenix Bank in the spring and summer of one thousand eight hundred and fifty.
    Question.—Had yon any knowledge of these checks being certified by the teller ?
    The counsel for the plaintiffs objected to the question.
    The court decided the question to be irrelevant.
    The counsel for the defendants excepted to such decision.
    And hereupon the parties rested.
    
      The counsel for the defendants then renewed Ms motion for dismissal of the complaint on the former grounds, and also on the following.
    That the circumstances under wMch the plaintiffs took the checks, were sufficient to put them on inquiry, and that the facts proved, showed laches on 'their part, which in law prevented their recovery from the defendants.
    That as Tripler could not recover from the bank, the plaintiffs could not, for they claimed title through Tripler at a period when he had none to transmit.
    But the Chief Justice denied said motion.
    And the defendants’ counsel excepted to such decision.
    The respective counsel then summed up. the case to the jury.
    The court charged the jury, that if they should find that the plaintiffs had taken the checks under circumstances which ought to have put them on inquiry, as prudent men, they could not recover; otherwise they would be entitled to their verdict.
    The jury found for the plaintiffs, and their verdict was taken, subject to the opinion of the court on the points of law raised in the case, with liberty to the court to order a nonsuit to be entered. The case to be heard at the General Term.
    
      E. S. Van Winkle, for the defendants,
    argued the case upon the following points and authorities.
    I. A check, certified by a teller only, is not binding on a bank, such an act not being within the scope of the teller’s authority. The cashier is the proper officer to perform such duties. (Massey v. Eagle Bank, 9 Metcalf Rep. 306; Manhattan Co. v. Lydig. 4 Johns. 377.) And usage to the contrary cannot control. (Woodruff v. Merchants' Bank, 23 Wend. 673.)
    II. The checks not being payable to any person, or his order, or to bearer, but to the order of bills payable, are not negotiable. (Brown v. Gilman, 13 Mass. R. 158; Douglas v. Wilkeson, 6 Wend. 637.) They did not pass by delivery, but by assignment only, and no assignment has been proved; and even if the court holds that the purchase and delivery on 6th June is evidence of an assignment, which may have been by . parol, yet it was an assignment of a mere chose in action, and subject to all equities. (Covill v. The Tradesmen's Bank, 1 Paige, 131; Gay v. Gay, 10 Paige, 369; DeMott v. Starkey, 3 Barb. Ch. 403; O'Callaghan v. Sawyer, 5 Johns. R. 118.) The checks, then, being at that day void in the hands of Tripler, the assignor, were void also in those of the plaintiffs, the assignees, although they may have paid full value therefor bond fide. (Ellis v. Messervie, 11 Paige, 467; Aff’d Evans v. Ellis, 5 Denio, 640.)
    HI. In this case there was no dispute about the facts attending the purchase of the checks. It was, therefore, a pure question of law whether the plaintiffs were guilty of laches, and the court erred in submitting it to the jury. (Hall v. Suydam, 6 Barb. Sup. Ct. R. 83; Pangburn v. Bull, 1 Wend. 345; Masten v. Deyo, 2 Wend. 424.)
    IY. The plaintiff’s conduct in buying the checks, constituted laches.
    Y. The court' erred in excluding the testimony offered by the defendants. 1. As to the mode of business pursued by the defendants in regard to certified checks, and to show how the mistake occurred in regard to those in question. (3 Term R. 307.) 2. As to ignorance of the cashier of the bank of any such checks having been certified by the teller. 3. To show the amount paid out on Tripler’s checks and deposited to his credit, between the ninth of April, the date of the first of the four checks, and the 20th of the same month, the date of the last.
    YI. If either the first or second, or the third and fourth points of defendants are sustained, then there should be a nonsuit or dismissal of the complaint. If the fifth point only is sustained, in either branch, then there should be a new trial.
    
      E. W. Stoughton, for plaintiffs,
    argued the points, and cited the authorities that follow.
    I. The first ground taken, that it was not within the scope of a teller’s authority to certify checks, is unsound. It is a part of that officer’s duty so to do. But if it were not, the pleadings admit that the defendants certified the checks mentioned in the complaint, and consequently the question as to the authority of the teller was not within the issue.
    H. The checks were negotiable without endorsement. One was payable to the order of 1658, the other three to the order of bills payable. The effect of so drawing them, was the same as if they had been drawn payable to bearer. (Story on Bills, § 56, and cases’ cited.)
    HI. The offers to show how the mistake, in paying out the money by the defendants on Tripler’s checks, arose, and to show the amount deposited by him between the 9th and 20th days of April, were properly overruled.
    IT. Whether the circumstances under which the-plaintiffs took the checks ought to have put them on inquiry, and whether they had been guilty of laches, were questions of fact, properly submitted to, and correctly found by, the jury. (Rothschild v. Corny, 9 Barn. & Cress. 388; Chitty on Bills, 321, 322, 512; Goodman v. Harvy, 4 Adol. & Ellis, 870, 7 Term Reports, 430; Hendricks v. Judah, 1 John. Rep. 319; Forman v. Haskins, 2 Caine’s Rep. 369.)
   By the Court. Oakley, Ch. J.

Whether the teller had any authority from the bank to certify the checks in suit, is not a question that we are called upon to consider under the pleadings, since the complaint avers, and the answer in terms admits, that the certifying of the checks was the act of the defendants.

The case, therefore, of Massey v. The Eagle Bank (9 Metc. 309) is not applicable, nor is it necessary now to say whether we should have followed that decision, had the question, as to the authority of the teller, been properly raised.

The objection that the checks were not negotiable, and, consequently, that the plaintiff being merely an assignee, took them subject to every defence to which they were liable when transferred to him, was much insisted upon in the argument; but we are satisfied that it is untenable.

One of the checks was payable to the order of 1658, the other three to the order of bills payable; and as the required order could not, in either case, possibly be given, the checks, unless transferable by delivery, were payable to no one, and were void upon their face. The law is well settled, that a draft payable to the order of a fictitious person, inasmuch as a title cannot be given by an endorsement, is, in judgment of law, payable to bearer. (Vin. v. Lewis, 3 Term R. 183; Minot v. Gibson, id. 281, S. C. 1 H. Black. 569, affirmed in the House of Lords.) And it seems to us quite manifest that in principle these decisions embrace the present case. At any rate, the bank, by certifying the checks as good, is estopped from denying that they were valid as drafts upon the funds of the maker, and, consequently, were. payable to bearer. The giving of such a certificate^ if otherwise construed, would be a positive fraud.

The only question, therefore, that remains to be considered, is, whether the facts that payment of the checks was not demanded until nearly two months after they were certified, and that in the meantime the maker had drawn all his funds from the bank, including those represented by the checks, constitute a valid defence ?—for, if not, the plaintiffs are clearly entitled to our judgment.

The answer to the question evidently depends upon the construction to be given to the act of the proper officer of a bank in certifying a check. Is it a mere declaration of an existing fact? or does it create a new and binding obligation on the part of the bank? Is it simply a declaration that the maker had then funds in the bank corresponding with the amount of the check? or is it an appropriation of those funds to the credit of the check, and a promise that, upon demand, they shall be applied to its payment ? If the former, the defendants-are not liable. If the latter, they have no defence.

That the latter is the true legal interpretation of a certified check, we cannot doubt, since, upon any other construction, the act of certifying would be nugatory, or would operate as a fraud. It would be nugatory, if understood by all, as creating no obligation, on the part of the bank, to retain funds to meet the payment of the check. It would operate as a fraud, if generally understood as creating an obligation which the law would hold not to exist.

The sole and manifest object of the maker dr holder of a check, in requiring it to he certified, is to enable him to use it as money; that is, to pass it to others with the same certainty of its acceptance, as affording the same security to a holder; and the bank, in complying with the request, must know that such is its object.

It is, therefore, certain, that a bank, by certifying a check, means to give it a currency and value that would not otherwise belong to it; and this additional value, it seems to us, can only be given by interpreting the certificate as an unconditional promise of payment, whenever payment shall be demanded; otherwise, a certified check would be of no more use or value than an ordinary check, and would afford no greater security to a holder. The certificate is a useless form, unless it means, not merely that the check was good when certified, but that it will be good when presented for payment. This construction is, therefore, necessary to give effect to the apparent intention of the parties, and, at any rate, is necessary to prevent the check from being subsequently used as a means of deception and fraud.

We did not'1 understand the counsel for the defendant as denying that a certified check imports an obligation on the part of the bank to retain sufficient funds of the maker to meet.its payment, but this obligation, he contended, exists only for a limited period, and may, therefore, be wholly discharged by the laches of the holder in demanding payment.

When this demand is delayed, even for a few days, the counsel insistéd, that the holder of the check takes upon himself the risk of a withdrawal of the' funds which, had he acted with due diligence, would have been applied to its payment. Such is, indeed, the nature of the defence set up in the answer, in the distinction which it avers to exist between a certified check and a certificate of deposit; but no evidence of the general usage and custom which the answer alleges as establishing this distinction, was given upon the trial, and, in the absence of such • evidence, there is no ground of principle, it seems to us, upon which it can be maintained. We can perceive no reasons for restricting the obligation of the bank within the limits suggested, or any other, and, consequently, none for the imputation of laches to a holder.

The obligation of the bank is simple and unconditional to pay upon demand, and in all such cases the demand may be made whenever it suits the convenience of the party entitled to the stipulated payment.

When the business of a bank is properly conducted, it is not possible that it can sustain any loss or prejudice from this interpretation of its contract—the contract which it makes in certifying a cheek, and it is only where delay may be prejudicial that the want of due diligence may be legally imputed, and operate as a bar to a claim otherwise valid. When the business of the bank is properly conducted, it is the duty of the officer certifying the check to cause it to be immediately charged, as paid, in the account of the drawer, and when this is done, the sum thus charged will remain as a deposit in the bank to the credit of the check, and be for ever withdrawn from the control of the maker, except as a holder of the check. Such a deposit stands exactly upon the same ground as every other. The bank, instead of being prejudiced, is benefited by the delay of its owner in calling for its payment, and can with no more propriety impute laches to the unknown holder of the check than to a known holder of an ordinary deposit. The loss which the bank, in this case, by resisting the demand of the plaintiff, seeks to avoid, has resulted from the laches of the teller, in suffering Tripler, the maker of the checks, to withdraw the funds that were appropriated to their payment, but assuredly neither the laches of its own officer, nor the fraud of Tripler, can excuse the bank from a compliance with its own engagement. As we intimated upon the argument, there is, in reality, in good sense, no distinction, in the nature of the liability created, between a certified check and a note of the bank payable on demand. Each is intended to circulate as money —each is an absolute promise to pay a specific sum upon demand, and laches in making the demand is no more imputable in the one case than in the other. The only difference between them is, that the promise which in the note is expressed, in the check is implied.

The Supreme Court of Massachusetts, in the case of Massey v. The Eagle Bank, which was cited and much relied on by the counsel for the defendants, although they denied the authority of the teller to bind the bank, gave the same construction to a certified check as that which we now have explained and adopted. The learned judge who then delivered the opinion of the court said, that “unless the word ‘good’ carries with it a binding evidence of the fact that the money is in the bank to meet that particular check, and that it will be paid to the bearer at any time when presented, it is of no practical utility. It will amount to no more than this, viz. that at the moment of its first presentment the check was ‘ good,’ but not that it will continue so two horns after, if not being offered -other checks of the same drawer are presented to the amount of his deposit in the bank.” (9 Metc. 311.)

We shall notice briefly the last ground upon which it was argued that the plaintiffs were not entitled to recover, namely, that the circumstances under which the checks were transferred to them, ought to have excited then* suspicions, and led them to inquire, and were, therefore, sufficient to charge them with a knowledge of the facts, which, upon inquiry, they would have ascertained. Had they inquired, they would have ascertained that Tripler had withdrawn all his funds from the bank, and was guilty of a fraud in attempting to transfer checks which he ought to have returned or destroyed.

Assuming that the doctrine of constructive notice is applicable at all to the present case, and if applicable, that the question properly arose upon the evidence, it was in effect, and we think rightly, submitted to the jury, and was settled by their verdict. We cannot say that their verdict was against evidence.

The plaintiffs are entitled to judgment upon the verdict for the sum of §4,000, which they advanced upon the checks, with interest and costs.  