Forrest v. Safety Banking & Trust Co.

• Decision Date: 01 December 1909
• Docket Number: 636.
• Citation: 174 F. 345
• Court: U.S. District Court — Eastern District of Pennsylvania
• Parties: FORREST v. SAFETY BANKING & TRUST CO.

174 F. 345

FORREST v. SAFETY BANKING & TRUST CO.

No. 636.

United States Circuit Court, E.D. Pennsylvania.

December 1, 1909

Joseph W. Moses and Samuel K. Louchheim, for plaintiff.

John C Gilpin, for defendant.

J. B McPHERSON, District Judge.

This suit is brought upon a certificate of deposit issued by the defendant in the following words:

No 1853.

Philadelphia January. 2nd, 1909. $3,000.00.

Peter F. Fallon has deposited in the Safety Banking & Trust Company three thousand dollars to the credit of himself payable in current funds on return of this certificate properly indorsed on July 1, 1909. Interest 3 1/2 per cent. per annum.

H. J. Colver, Cashier.

H. L. Rock, Secty.

This certificate of deposit is not subject to check and is only payable at maturity.'

The certificate was properly indorsed in blank by Fallon, and passed into the possession and apparent ownership of J. J. West not long after its date. In March, 1909, West transferred it by delivery to the plaintiff, William S. Forrest, for a valuable consideration and (as the jury has specifically found) in payment of his own debt. Payment having been refused at maturity, Forrest sued in his own name, and the principal question for decision is whether the action is properly brought in that form.

The answer must be in the affirmative if the certificate is a negotiable instrument, and to this point, therefore, the inquiry should be directed. It is undoubtedly true that, if the decisions in Pennsylvania are to govern, this court must hold that the plaintiff cannot sue in his own name. In Patterson v. Poindexter, 6 Watts & S. (Pa.) 227, 40 Am.Dec. 554, it was decided (as the syllabus states), that

'An instrument in writing issued by a bank, signed by the assistant cashier, ' I hereby certify that C.T. has deposited in this bank, payable twelve months from 1st May, 1839, with five per cent. interest till due, per ann., $3,691.63, for the use of R.P. & Co., and payable only to their order upon the return of this certificate,' is not a promissory note within the statute of Anne, but a certificate of deposit on special terms.'

This instrument was held to be negotiable for the purpose of transfer only, but not so far negotiable as to charge R.P. & Co. on their indorsement to the holder. This case was cited with approval in Charnley v. Dulles, 8 Watts & S. (Pa.) 353, and in Gillespie v. Mather, 10 Pa. 31. In Lebanon Bank v. Mangan, 28 Pa. 452, an instrument declaring, that

'Mr. Jacob Miller has deposited in this bank $440, subject to his order and payable only on the turn of this certificate'

-- was held to be non-negotiable; and in Loudon, etc., Society v. Hagerstown Bank, 36 Pa. 498, 78 Am.Dec. 390, it was said of a similar certificate that it was not a negotiable instrument, and that a transferee thereof could only sue on it in the name of the depositor to the use of the transferee. If, therefore, I am bound by the Pennsylvania decisions, it must be decided that Forrest cannot maintain this suit in his own name and that he is not entitled to judgment upon the record as it now stands.

The question, however, may for the moment be considered as one of general commercial law, and in that region, as is well known, a federal court is not bound by the decisions of a particular state, but may follow its own opinion, or an adverse current of authority elsewhere. Swift v. Tyson, 41 U.S. 1, 10 L.Ed. 865. Such a current may be discovered without difficulty. In the American & English Encyclopedia of Law (2d Ed.) vol. 5, at page 803, the following statement in the text is fully borne out by the citations in the accompanying notes:

'A certificate of deposit drawn in the usual form seems to fulfill in every particular the definition of a promissory note, viz., an unconditional promise in writing for the payment of a certain sum of money absolutely and at all events. It is therefore held in all of the states of the Union, except Pennsylvania, that the instrument is in substance and in legal effect a promissory note and governed in most respects by the same general rules.'

And in 5 Cyc., at page 520, the result of the authorities (note 79) is summarized as follows:

'Whether a certificate of deposit is a note or merely a receipt for money has long puzzled the courts. Such certificate, however, if containing proper words to express that intention, is negotiable in the usual manner by indorsement, and although not negotiable in fact, if negotiable in form, it may be assigned. Moreover, where they are negotiable, their transfer is governed by the rules that apply to promissory notes, as is also the liability of the parties thereon.'

Among these authorities is Miller v. Austen, 54 U.S. 218, 14 L.Ed. 119, where the precise question now under consideration was decided by the Supreme Court. The instrument sued upon in that case was in the following language:

'I hereby certify that Hugh Short has deposited in this bank, payable twelve months from the 1st of May, 1839, with 5% interest till due, fifteen hundred dollars, for the use of Henry Miller, and payable only to his order upon the return of this certificate.'

This was held to be a promissory note within the statute of Ohio which made such a note, drawn for a sum certain and payable to any person or his assigns, negotiable by indorsement. The certificate was indorsed...