Harrison v. Wright

Decision Date17 March 1885
Docket Number11,456
Citation100 Ind. 515
PartiesHarrison, Receiver, v. Wright et al
CourtIndiana Supreme Court

From the Marion Superior Court.

So far as it was adjudged below that the check-holders are not entitled to preference the judgment is affirmed; so far as it was adjudged that any check shall be preferred and paid in full as against the other creditors of the Indiana Banking Company the judgment is reversed, with instructions to the court below to proceed in accordance with this opinion.

S Claypool, W. A. Ketcham, B. Harrison, C. C. Hines, W. H. H Miller and J. B. Elam, for appellant.

T. A Hendricks, C. Baker, O. B. Hord, A. W. Hendricks, A. Baker E. Daniels, T. L. Sullivan, A. Q. Jones, C. A. Dryer, L. Howland, C. Byfield and M. Moores, for appellees.

Zollars, C. J. Elliott, J., did not participate in the decision of this cause.


Zollars, C. J.

The Indiana Banking Company, a partnership engaged in the business of banking, suspended payment on the morning of August 10th, 1883.

At the time of the suspension, there were outstanding checks or drafts drawn by the banking company in favor of various parties, and upon different banks in different cities. These drafts had been drawn at different dates, ranging from the preceding April, up to and on the day preceding the suspension. Some of these check-holders were depositors with the Indiana Banking Company, and purchased the checks, by checks upon their deposits in the bank. Others, who were not depositors, paid the cash for their checks. Some of the checks, too, were given for collections made by the banking company for the payees named therein.

At the time of the suspension, the Indiana Banking Company had sufficient funds in each of the banks to meet all checks drawn upon it, except the United States National Bank of New York. To supply this bank with funds to meet the checks upon it, the Indiana Banking Company made checks in its favor upon banks in Baltimore and Philadelphia, and forwarded them to it for credit, on the evening before the suspension. These banks held sufficient funds of the Indiana Banking Company, and if they had paid the checks, sufficient funds would have gone in the usual course of mail to the New York bank to have met all checks drawn upon it.

Upon hearing of the failure of the Indiana Banking Company, the Baltimore and Philadelphia banks declined to pay these checks, and yet hold the funds, subject to the order of the Indiana Banking Company, or its receiver.

At the time of the suspension, the New York bank had some funds of the Indiana Banking Company, and paid them out upon its checks. After these funds were thus exhausted and the Baltimore and Philadelphia banks refused to pay, the New York bank returned the checks in its favor to the receiver of the Indiana Banking Company. All of the checks were duly presented to the banks upon which they were drawn within a reasonable time after the failure of the Indiana Banking Company. This company issued the several checks in the usual course of business, the managers hoping and believing until the morning of the 10th of August, that they would be able to maintain its credit, and go on with the business of the bank.

The assets of the Indiana Banking Company have passed to the receiver herein, appointed by the court, and he is charged with the duty of settling its affairs. The assets are not sufficient to pay the depositors and other debts in full.

The check-holders claim that they should be preferred, and paid in full, and thus they make an issue with the general creditors. The receiver commenced this action to have an adjudication of the rights of these several parties. Differing only as to amounts, the number and date, the names of payees, and the names of the drawees (banks), the checks were as follows:

"No. . Indianapolis, Ind., , 1883.

"Pay to the order of ----- -----, ----- Dollars.

"----- -----, Cashier.

"To the United States National Bank, New York."

The contention of the check-holders is: First. That the checks are ordinary bankers' checks, and that the drawing and delivery of them operated as an equitable assignment to them, pro tanto, of the funds of the Indiana Banking Company in the hands of the drawees; and, Second. That whether this is so or not, to the extent of making the drawees liable to the payees, they operated as an equitable assignment as between the Indiana Banking Company and the payees of the checks, and, as the receiver takes the place of the bank in this regard, that equity should be enforced against him, and they be paid in full.

Some of the cases hold to this distinction, while others disregard it. For convenience, we group the cases into three classes:

First. A class which holds that the drawing and delivering of a check do not operate as an assignment, in any sense, of the drawer's rights against the drawee, nor of the funds upon which it is drawn, nor give the payee or holder any rights as against the drawee, unless, in some way, the check is accepted by such drawee; and that hence, as between the drawer and payee or holder, the check does not operate as an assignment of the fund drawn upon, or of the drawer's rights as against the drawee.

Second. Another class of cases holds that the drawing and delivery of a check operate as an equitable assignment, pro tanto, of the fund in the hands of the drawees, and give the holder the right to collect from the drawee by suit. These cases, of course, hold, also, that a check operates as an assignment as between the drawer and payee.

Third. Another class seems to hold that whether a check has this effect or not, it operates as an equitable assignment as between the drawer and payee.

On account of the diversity of rulings by the different courts, and the diverse reasons upon which they are founded, the importance of the questions involved, and the fact that a decision of this court is assailed, it seems necessary that we should examine the theories advanced by either side in this case, and the rulings by other courts. Thus far we have used the term "check" in speaking of the papers issued by the Indiana Banking Company. It is contended, however, by the appellant, that they are not checks, but ordinary bills of exchange. Here, again, the cases and the law-writers are in sharp conflict. We think that upon the weight of authority, and the better reason, the papers issued by the Indiana Banking Company should be considered and held to be banker's checks, drawn by one bank upon another bank. In the case of Griffin v. Kemp, 46 Ind. 172, in speaking of checks, this court said: "A check is defined to be a written order, or request, addressed to a bank, or to persons carrying on the business of bankers, by a party having money in their hands, requesting them to pay, on presentment, to another person * * * a certain sum of money specified in the instrument. It has been said that checks have many resemblances to bills of exchange, and are, in many respects, governed by the same rules and principles as the latter. But nullum simile est idem, and their nature, obligation, and character are in some respects different from those of common bills of exchange. The circumstances in which they principally differ from bills of exchange, or at least from bills of exchange in ordinary use and circulation, are: 1st. They are always drawn on a bank, or on bankers, and are payable on presentment without any days of grace. 2d. They require no acceptance as distinct from prompt payment. 3d. They are always supposed to be drawn upon a previous deposit of funds. * * * A check so far differs from a bill of exchange or note, that its payment may be countermanded by the drawer before it is accepted or paid by the bank."

In the case of Henshaw v. Root, 60 Ind. 220, it was said that delay in giving notice of non-payment does not discharge the drawer of a check from liability, unless damage results from such delay, and then only to the extent of the damages sustained. This of course is not true of a bill of exchange. Purcell v. Allemong, 22 Gratt. 739.

In the case of First Nat'l Bank of Cincinnati v. Coates, 3 McCrary 9, it was held that a draft by one bank upon another bank is a check, though it is apparent on its face that the drawer and drawee are residents of different States.

In the case of Rosenthal v. Mastin Bank, 17 Blatchf. 318, a draft by a bank in Missouri on a bank in New York was treated as a banker's check. See, also, Moses v. Franklin Bank of Baltimore, 34 Md. 574; Planters' Bank v. Keesee, 7 Heisk. (Tenn.) 200; Planters' Bank v. Merritt, 7 Heisk. 177; Lester & Co. v. Given, Jones & Co., 8 Bush (Ky.) 357.

First Class.

Treating these checks, as such, did the simple issuing and delivery of them, under the circumstances, without further agreement operate as an equitable assignment of the funds drawn upon, as between the payees and drawees, or give the payees any right of action against the drawees? It was held by this court, in the case of Nat'l Bank of Rockville v. Second Nat'l Bank of Lafayette, 69 Ind. 479 (35 Am. R. 236), that the payee of a bank check can not maintain an action against the drawee, unless the check has been accepted by the drawee. This is the case assailed by appellees, the holders and payees of the checks. The conclusion reached in the case is sustained by the earlier case of Griffin v. Kemp, 46 Ind. 172, where it was said: "Although there are cases to the contrary, it seems clear upon principle and by the great weight of authority, that the holder of a check can not sue the bank for refusing payment, in the absence of proof that the check was accepted by the bank, or the amount thereof charged against the drawer." It is also in accordance with the rulings of the English courts...

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