National Produce Bank v. Dodds

Mr. Presiding Justice Barnes delivered the opinion of the court. The question is whether under the foregoing state of facts there was an acceptance or payment of the check in question by the bank. Except as otherwise therein provided, the provisions of the Negotiable Instruments Act applicable to a bill of exchange payable on demand apply to a check (section 184, J. & A. ft 7824), and the acceptance of the bill must be in writing and signed by the drawee (section 131, J. & A. ft 7771). The act also provides that the certification of a check is made equivalent to an acceptance (section 186, J. & A. ft 7826), and that the bank is not liable to the holder of the check “unless and until it accepts or certifies the check” (section 188, J. So A. ff 7828). In view of these several provisions, we are of the opinion that neither the entry of the check in defendants’ pass book, nor the stamping ofzit as paid, nor the subsequent bookkeeping methods for tracing the check until the status of the account on which it was drawn might at the close of day be determined, constituted an acceptance of the check within the meaning of the act. These several steps taken after the check was presented for deposit were the usual, if not necessary, methods em.ploved by the bank before it could conveniently determine whether the check could be paid. They were in accordance with the custom of all the Chicago banks, and the depositors having printed notice thereof 'presumably contracted as such with reference thereto. The very fact that the bank thus gave notice of its method of doing business negatives the interntion of an unqualified acceptance on its part. The Negotiable Instruments Act imposes no impediment to the adoption of such methods or to a conditional acceptance of checks. It would greatly impede the conduct of its business if a bank were obliged in effect to strike a ledger balance as checks are presented before it could safely take another for deposit. It would practically involve an immediate transfer on the bank’s books from one account to another, an impracticable, if not an impossible, method of conducting business in large banks with numerous depositors. While our attention is directed to the case of American Exch. Nat. Bank v. Gregg, 138 Ill. 596, as authority on the question as to what constitutes payment of a check, yet that decision was rendered before the enactment of the Negotiable Instruments Act of 1907, and, where inconsistent therewith, is, of course, not controlling. There are features here, too, that were not present in that case. No question arose there relative to a custom or to an implied agreement between the bank and its depositors for a conditional credit of checks given by one depositor to another. On the contrary, the decision recognized the bank’s right to reject a check or receive it conditionally. It was also there said that when the check involved was presented the question was whether the drawer had funds in the bank sufficient to pay it. When the check here in question was presented for deposit there were no funds to the credit of the Humes Co., the bank having already applied its credit balance to a debt due from Humes Co. to itself, which it unquestionably had a right to do. (Morse on Banks and Banking, 3rd Ed., secs. 324, 328; Sachs v. Sachs, 181 Ill. App. 342.) At that time the Boston check had been credited to such account only conditionally, and it could not then be determined whether it would be paid. Until that could be determined in the regular course, the bank was not obliged to accept checks against it. Hence, when the check in question was presented for deposit, not only did the bank refuse to certify it, thereby indicating its intention not to accept it otherwise than conditionally, according to notice contained in the pass hook and the custom of the Chicago banks, but there were no funds to the Humes Co.’s credit out of which it could be paid. With knowledge of such conditions it would be strange indeed if the bank should be held to have accepted and paid the check it expressly refused to certify simply because it employed the convenient methods of mere bookkeeping as above referred to. Even defendants in error recognized the bank’s right to hold the check until the close of day, for, when notified that the check was not good, they left it with the bank for collection and do not seem to have assumed a different attitude until the time came for the payment of their note subsequently given for borrowed money. As was stated in a very similar case, Ocean Park Bank v. Rogers, 6 Cal. App. 678, 92 Pac. 879: “The fact that the amount of the check * * * was entered upon a deposit slip, that the check was stamped ‘Paid’ and impaled upon a check file, are mere memoranda adopted in aid of the convenient dispatch of business.” It was there said that such methods did not raise the presumption that the check was received as cash or otherwise than for collection, and that “the bank has until the close of banking hours on the day of deposit to ascertain whether the account of the drawer will permit of a transfer of the amount of the check to the depositor’s account.” We concur in that expression of the law, especially as it seems to comport with the provisions of our present Negotiable Instruments Act. Accordingly we think the bank was not liable for the amount of the check and that the judgment of the court should have been for the amount sued for, $165.99, with interest at seven per cent, from January 27,1915, and a judgment therefor amounting to $190.12 will be entered here. Reversed until judgment here and finding of fact. Finding of fact. We find that the plaintiff in error, the National Produce Bank of Chicago, did not accept or pay the check drawn on it by the Tomlinson-Humes, Incorporated, to the order of Paddock & Dodds for $166.10.