National Commercial Bank v. Miller & Co.

CLOPTON, I. There being no contention as to the check on the Mobile Savings Bank, our consideration will be confined to the relation between the garnishees and the defendant, arising from the facts in respect to the check on the People’s Savings Bank, which was certified by the bank. It is conceded, that by process of garnishment, which is a proceeding of statutory creation, no debt or demand can be condemned to the plaintiff’s claim, for the recovery of which the defendant can not maintain, in his own name, an action of debt, or indebitatus assumpsit. The question decisive of the case is, was the amount of the check, at the time of the service of the garnishment, a legal demand due by the garnishees to the defendant, which he could enforce in his own name in an action at law? 2. The check, although drawn and delivered to the payee, payable to his order, did not operate, without acceptance by the drawee, as an assignment of the sum for which it was given, though the drawer may have had funds in the possession of the drawee, of an equal or larger amount. There being no privity, [173] express or implied, the holder of a cheek, in its original form, can bring no suit on the check against the drawee; even if it be conceded that he may maintain an action for any special injury, by reason of the omission of the drawee to perform a legal duty. In case of non-payment, the reconrse of the holder is against the drawer, and the indorser, if any. The drawer alone can bring suit to recover the funds against which the check was drawn; and, ordinarily, he only can maintain an action for a failure to pay on presentment. He may revoke the cheek, and countermand its payment before acceptance; and if unaccepted, his death operates a. revocation. 3. The reception from customers of checks on other banks is of frequent and daily occurrence in the business of banking, practiced because of its convenience. In such case, an indorsement of the check, for the special purpose of collection, is not an indorsement animo indor.sandi, and does not pass the title of the payee. In the absence of a special agreement, when a check is deposited, it is taken, generally, for collection, by the bank as the agent of the depositor, and the bank does not owe the amount, until its collection is accomplished. It may be, that if it is passed to the credit of the depositor, and mingled with the general funds of the bank, it is, prima facie, a payment on deposit; but the bank may permit, as matter of favor and convenience, checks to be drawn against it before payment; the depositor, in the event of non-payment, being responsible for the sums drawn, — not by reason of his indorsement, the check not having ceased to be his property, but for money paid. If, therefore, the check had been deposited with the garnishees, for collection, and for no other special purpose, it is manifest that, so long as it remained uncollected, and in its original form, the amount could not be condemned by process of garnishment. In what respects, and to what extent, was the relation changed, by the particular indorsement of the check, and its subsequent certification ? The defendant, in the name of “A. Proskauer & Co., agents,” opened, in January, 1883, a deposit account with the garnishees, who were bankers. On this account the defendant deposited checks payable to “A. Proskauer & Co., agents,” which were entered in the pass-book, and drew checks, in the same name, “on funds so deposited.” The check in question was indorsed: For deposit, A. Proskauer & Co., Agents.” The import and effect of such indorsement must be considered in the light of the attendant circumstances, and of the previous dealings between the parties. Where a depositor has for some time previously kept a deposit account with a banker, on which he was accustomed to deposit checks payable to him, entries of [174] which were made in his pass-book, and to draw against such deposits, such an indorsement, in the absence of a different understanding, is presumptive of more than a mere agency or authority to collect. The special purposes for which an indorsement for deposit is made, under such circumstances, may be readily inferred. It was a request and direction to the garnishees to deposit the sum to the credit of the defendant, and conferred on them, not only authority to collect, but also authority to put the check in such form, and use it in such manner, as in their judgment and discretion, having reference to the condition and necessities of their business, would make it most available to their protection. The effect of the indorsement, for the consummation of this purpose, is to vest the garnishees with the title to, and control of'the check. If, in such case, the check is not paid, the banker depends for safety and indemnity on the liability of the drawer, and the security of the indorsement. ■ 4. Although a cheek does not call for acceptance, and the holder can present it only for payment, the certification of checks is a means in constant and extensive use in the business of banking, and its effects and consequences are regulated by the law-merchant. A certified check has a distinctive character, as a species of commercial paper, and performs important functions in banking and commercial business. The. certification constitutes a new and distinct contract between the holder and certifying bank, which becomes the debtor of, and only liable to the holder. The funds of the drawer have,. in legal contemplation, been withdrawn from his credit, and appropriated to the payment of the check. He and the indorser, if any, are released from all further liability; as to them, the check is paid. In Merchants' Bank v. State Bank, 10 Wall. 604, it is said : “ By the law-merchant of this country, the certificate of a bank that a check is good is equivalent to acceptance. It implies that the cheek is drawn upon sufficient funds in the hands of the drawee, that they have been set apart to its satisfaction, and that they shall be so applied whenever the check is presented for payment. It is an understanding that the check is good then, and shall continue good ; and this agreement is as binding on the bank, as its notes of circulation, a certificate of deposit payable to the order of the depositor, or any other obligation it can assume. The object of' certifying a check, as regards both parties, is to enable the holder to use it as money. The transferree takes it with the same readiness and sense of security that he would take the notes of the bank. It is available also to him for all the purposes of money. Thus it continues to perform its important functions, until in the course of [175] business it goes back to the bank for redemption, and is extinguished by payment.” In Willetts v. Phœnix Bank, 2 Dner, 121, Chief-Justice Oaklby said: “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 forever withdrawn from the control of the maker, except as a holder of the check. Such a deposit stands upon exactly the same ground as every other.” And Strong, J., said: “Checks on a bank, marked ‘good,’ are to be regarded as evidence of deposit to the credit of the holder.” — Girard Bank v. Bank of Penn Town., 39 Penn. St. 92. If the check is certified to be good, “in contemplation and by operation of law, it is the same as if the funds had been actually paid out by the bank to the holder, by him deposited to his own credit, and a certificate of deposit issued to him therefor.” — Dan. on Neg. Inst. § 1603; Morse on Bank., 307-315 ; First Nat. Bank v. Leach, 52 N. Y. 350. When the check was certified, it ceased to possess the character, or to perform the functions, of a check, and represented so much money on deposit, payable to the holder on demand. The check became a basis of credit —an easy mode of passing money from hand to hand, and answered the purposes of money. The garnishees, by accepting a certification of the check, made it their own, and the relation of debtor and creditor was created between them and the defendant. 5. The rule, that where- a defendant has the election to sue for a tort committed, or to waive the tort and to sue for the money received by the tort-feasor, the relation of debtor and creditor does not exist until the defendant elects to sue for the money, and that his creditors can not defeat his election by bringing process of garnishment, does not apply. The garnishees committed no wrong, or tort, of which tiie defendant can complain. They had a legal right to accept a certification of the check, and leave the money on deposit with the People’s Savings Bank, instead of transferring it to their own vault. Certification of the check was within the authority vested in the garnishees by its deposit and indorsement, and is a mode, authorized by the law, by which it could be made available to them.. The defendant obtained his purpose — a deposit with the garnishees to the amount of the check, against which he was entitled to draw — not by the wrongful and unauthorized act of the garnishees, but in pursuance of his request, as evidenced by his deposit and indorsement of the' check. It was not wrongfully taken from his possession, nor was it converted [176] by the garnishees to their own use, other than for the purpose contemplated and intended by the parties. The defendant has no right of action against them, as for a tort, on account of the certification of the check. Its certification was a payment as between the defendant and the garnishees, and thereafter they were bound to pay his checks in money, and were answerable to him for money had and received. The garnishment operated as alien, from the time of service, on any money or effects of the debtor in the possession of the garnishee; and by no act of the debtor, or of tlie garnishee, or of both; can the lien be defeated.— Warfield v. Campbell, 38 Ala. 527; Dore v. Dawson, 6 Ala. 712. While the check is, ordinarily, executory and revocable, and the drawer may countermand its payment; when the bank has certified the check, and thereby comes under obligation to the holder to pay it on presentment, the power to revoke ceases, as effectually as if actual payment had been made. The drawer’s authority over the fund's, on which it is drawn, terminates pro tanto. The same effect is produced when the law, by proper legal process, intervenes, and attaches or sequesters the fund. — Morse on Bank., 305. The notices, by which the drawer forbade the garnishees to collect the check, and the defendant revoked their authority to present it for payment, having been given after the certification of the check, and after the service of the garnishment, were ineffectual to change the rights of the plaintiff, or to displace any lien acquired by the legal process. By what we have said we have not intended to intimate any opinion as to the validity of the claim of Newgass & Co., or of Leinkauf. These questions have not yet arisen. All we decide is, that, on the facts set out in the answer, if no adverse claim were interposed, the plaintiff is entitled to judgment against the garnishees; but, it appearing there are adverse claimants, notices should be issued to them, under the statute, to propound their claims, and contest the plaintiff’s right to the fund. Reversed and remanded.