Born v. The First National Bank of Indianapolis

• Decision Date: 02 April 1890
• Docket Number: 14,102
• Citation: 24 N.E. 173,123 Ind. 78
• Parties: Born v. The First National Bank of Indianapolis
• Court: Indiana Supreme Court

24 N.E. 173

123 Ind. 78

Born v. The First National Bank of Indianapolis

No. 14,102

Supreme Court of Indiana

April 2, 1890

From the Marion Superior Court.

Judgment affirmed.

J. E McDonald, J. M. Butler, A. H. Snow, J. M. Butler, Jr., J. A Pritchard and H. T. Tincher, for appellant.

R Hill, for appellee.

OPINION

Elliott, J.

On the 30th day of January, 1886, the appellant was indebted to the appellee, and, after twelve o'clock, noon, of that day, he delivered to it a certified check drawn by him on Ritzinger's bank, in which bank he then had money on deposit.The banks of the city of Indianapolis had a long established rule requiring all checks presented after twelve o'clock, noon, to be certified by the bank upon which they were drawn, and it was the well-known custom of such banks to immediately charge the checks certified by them against the depositor.This was done in this instance, and the amount of the check was set aside for the purpose of paying it.Ritzinger's Bank suspended payment, and made a voluntary assignment for the benefit of creditors prior to the business hours of the first day after the check was delivered to the appellee.

We agree with the appellant's counsel that the drawer of a check is released if the holder, instead of presenting it for payment himself, procures it to be certified by the bank upon which it is drawn.If the holder elects to procure the certification of the check, it becomes, in his hands, substantially a certificate of deposit.By his own act he makes the bank his debtor, and releases the drawer of the check.The reason for this rule is, that the moment the check is certified the funds cease to be under the control of the original depositor and pass under the control of the person who procures the certification of the check drawn in his favor.First Nat'l Bank v. Leach,52 N.Y. 350;Thomson v. Bank, etc.,82 N.Y. 1;Girard Bank v. Bank of Penn Tp.,39 Pa. 92;Freund v. Importers, etc., Bank,76 N.Y. 352.It is true that the bank by which the check is certified becomes bound for its payment, and that it can not defeat the right of the holder upon the ground that the drawer has no funds on deposit.Espy v. Bank of Cincinnati,85 U.S. 604, 18 Wall. 604, 21 L.Ed. 947.But it is very clear that the authorities to which we have referred do not directly rule this case, for here the holder did not procure the certification of the check; all that it did was to accept the check in the ordinary course of business.Nor do we regard this case as within the sweep of the reasoning of the courts in the cases to which reference has been made.Here the holder accepted the check as it was offered, and did nothing to make the drawee its debtor.The principle which gives force and strength to the decisions referred to, fails entirely where there is no act done by the holder of the check save that of receiving it in the form in which it is presented, for the element which sustains those decisions is, that the holder by procuring the certification of the check after he becomes the owner, voluntarily makes the bank upon which it is drawn his debtor, thus releasing the drawer.It is, in such a case, the holder's own act that changes the relation and situation of the parties.

The certification of a check does not completely change its character; on the contrary, it changes it only in one particular, although the change, it is true, does produce a difference in the relation of the original parties, inasmuch as the drawee ceases to be the debtor of the drawer for the amount represented by the check.But this is the extent of the change in the situation of the respective parties in all cases where the certification is not procured by the holder of the check after it passes into his hands.It remains an order for the payment of money, and the certification, when made before delivery, operates in favor of third parties simply as an assurance that it is genuine, and will be paid.The bank that certifies it becomes bound, but, beyond this, nothing is added to the legal force or effect of the instrument, except, as we have said, in cases where the holder himself procures its certification.

The party who accepts a certified check in the usual course of business is not bound to take the risk of the solvency of the bank upon which it is drawn.He is bound only to do what the law requires, and that is to promptly and seasonably present the check for payment.A party to whom a debt is owing has a right to demand payment of his claim in money, for, in the absence of an express agreement, payment can only be made in money.Hancock v. Yaden,121 Ind. 366, 23 N.E. 253.In accepting a check instead of money, the creditor dispenses with the necessity of payment in the legal mode, and the reasonable implication is that the check shall be a payment only in the event that it is honored on presentation.To hold otherwise would, as the Supreme Court of the United States has suggested, seriously interfere with commercial and financial transactions, and break down an established system.Merchants' Bank v. State Bank,77 U.S. 604, 10 Wall. 604, 19 L.Ed. 1008.Nor is there any rule of law which requires it to be so held; the analogies are, indeed, the other way, for, as only money is payment where there is no express agreement, there is no sufficient reason for inferring that an order for money, although accepted, is money, or has the same effect as money.

A bank upon which a check is drawn is not liable upon the check unless it is certified as good.Harrison v Wright,100 Ind. 515.The certification fixes the liability of the...