National Bank of Commerce v. Baltimore Commercial Bank

Stocicbridge, J., delivered the opinion of the Court. This case arises out of a trade acceptance drawn on May 13th, 1920, by the United Iron & Metal Company on the Hess Steel Corporation for the sum of $5,184.36, payable sixty days after date, which was accepted by the drawee on May 13th, 1920, and made payable at the Rational Bank of Commerce, and on the same day was. discounted with the appellee. On the day of maturity this trade acceptance was presented at the office of the appellant and certified by it. At the time of such certification the Hess Steel Corporation had two checking accounts with the appellant. In one of these, the balance on the morning of July 12th was $1,818.01, but during the morning the appellant received, through the clearing house, cheeks against this account which brought the balance down to $4,189.40. The second account, designated on the ledgers of the appellant as Ro. 2, had a balance on the morning* of July 12th amounting to $2,161.96, and at the close of business that day, due to current checks, this balance was reduced to $2,125.96. The method of drawing checks against these two accounts differed -in that they were *556 subject -to cheek by different officers, but, in the view we take of the case, that fact becomes of no importance. On the date after such certification and refusal to pay by the appellant, it applied the balances in b-otli of these accounts to certain notes due to it and, on the day following, namely, July 14th, receivers were appointed for the Hess Steel Corporation. It also appears, from the record that the president of the appellant was also the treasurer of the Eless Steel Corporation, and the cashier of the bank was the assistant treasurer of the corporation at the time of this transaction. After the certification of the trade acceptance, but before the close of banking’ hours on that day, the appellant notified the appellee that it had made an error, and accordingly desired to cancel its certification, and when the trade acceptance Avas presented for payment, payment was refused. Subsequently, on tbe same day, the acceptance was duly protested for non-payment, and this suit was brought by the appellee against the appellant to recover on its certification, and-resulted in -a verdict in favor of the appellee, from Avhich this appeal was taken. At the outset it is important' to note that Ave are not concerned in this case Avith the obligation, if any, of a bank to certify an order from one of its customers, but only with the right to cancel such certification under the circumstances set out in the testimony. The general rule is conceded by the appellant.to be that, hy certification, a hank enters into an absolute undertaking to pay the check br draft when presented (7 C. J. 707), but attention is called to tbe well established exception that where such certification is made by mistake, such mistake may be corrected so- long as the rights of third persons have not intervened. 7 C. J. 709; Second National Bank v. Western National Bank, 51 Md. 128. There is no suggestion in the record that the Hess Steel Corporation had notified the appellant, prior to the certification, not to pay or certify the acceptance when it Avas pre *557 sented. On the contrary, the testimony of Mr. Oster, who was assistant treasurer of the Hess Corporation and cashier of the hank, is that the hank had not received any instructions from the Hess Steel Corporation to stop payment on the acceptance when presented, so that it necessarily follows that the only error that, can he urged, as a basis for the cancellation of the certification, was that there were not sufficient funds in the hands of the bank at the time such certification was ’made. By its certification >a bank becomes directly liable to the holder; such act is an acceptance by the bank. (Code, art. 13, sec. 200.) To reimburse itself, the bank may appropriate the funds of its depositor to an equal amount. Scheffenacker v. Hoopes, 113 Md. 117. But the appropriation is by the bank to reimburse itself for the liability undertaken by it, and so long as there are sufficient funds of the depositor for this purpose, no claim of error in certification by reason of insufficient funds can be successfully made. There is no question but that the total of the two accounts carried by the Hess Steel Corporation in the appellant bank was a sum amply sufficient to meet this acceptance, and that,, so far as the hank was concerned, it had the absolute right to protect itself by reason of such certification from either or both of said accounts'. The very best indication of this is the action of the bank on tbe following day, when it applied both of these accounts to the indebtedness due it by the Hess Corporation. Tinder these circumstances, we are unable to find any such error, on the part of the bank, in certifying the acceptance, as would justify it in thereafter attempting to cancel it. Although the certification of checks, drafts., etc;, by banks has come to be a familiar every day act in our financial transactions, its importance and its far reaching legal effects must not be lost sight of, and while, in a proper ease, we regard the exception to the general rule before referred to as fully established (Second Nat. Bank case, supra), yet to entitle the bank to free itself from tbe obligar tions imposed by its own voluntary act of certification, there must be a clear showing that such act was done in error. ■ *558 The question embraced by the first exception was> proper cross-examination, as it was material in this case to ascertain whether, as a result of the alleged error, the appellant would, in the first instance, have suffered a loss through lack of sufficient funds of the depositor to make good its certification. The legal principles thus 'stated have 'been laid down by the courts of last resort in a number of the states. See opinion of Fuller, C. J., Reynes v. Dumont, 130 U. S. 354; In re Northrup, 159 Fed. 686; Times Square Automobile Co. v. Rutherford Nat. Bank, 77 N. J. L. 649; and especially a very complete and learned opinion by Justice Cardozo in Carneige Trust Co. v. First Nat. Bank, 213 N. Y. 301. For the reasons stated no reversible error appears in the action of the court below and the judgment appealed from is therefore affirmed. Judgment affirmed, with costs.