Anderson v. Gill

McSheeev, J., delivered the opinion of the Court. On the thirteenth of January, 1892, Anderson, the appellant, drew his check in favor of Mary A. Dodge on J. J. Nicholson & Sons, bankers in the city of Baltimore,, for $692.03 and delivered it to the payee the same day. She forthwith deposited it to her credit in her account with the Old Town Bank of the same city, duly endorsed for collection. On the following day, the fourteenth, the Old Town Bank sent the check by its runner to the banking house of Nicholson & Sons where it was presented for payment shortly before eleven o’clock a. m., during the usual hours of business.

Anderson had to his credit on deposit with Nicholson & Sons at that time five thousand dollars available for the payment of the check. Instead of getting cash for the check the runner accepted in lieu thereof a check drawn by Nicholson & Sons on the Western National Bank for the precise amount of Anderson’s check, and delivered up the latter to Nicholson ³¹⁵ & Sons. The banking house of Nicholson & Sons was situated about three blocks distant from the Western National Bank, and it would not have required more than from five to ten minutes for the runner to have walked from the one to the other. But in place of doing this, and presenting Nicholson .& Sons’ check to the Western National Bank, and getting it cashed or certified, he took it to the Old Town Bank where it remained in the possession of the latter until after Nicholson & Sons failed and closed their doors, at one-thirty p. m. the same day.

By this failure Anderson lost the five thousand dollars on deposit to his credit with them. Up to that hour the Western National Bank had ample funds belonging to Nicholson & Sons with which to cash the check given to the Old Town Bank. Shortly before three o’clock, and after the failure of Nicholson & Sons, the Old Town Bank sent the check it had received from Nicholson & Sons in lieu of Anderson’s check, to the Western National Bank and presented it for payment, but it was dishonored; whereupon the runner went with it to the banking house of Nicholson & Sons to surrender it, and to demand a return of Anderson’s check, but he was unable to gain admittance. About five p. m. of the same day, the cashier of the Old Town Bank was allowed to enter, and at his instance a notary took a copy of Anderson’s check and protested the check, of which notice was mailed the same evening to Anderson, and received by him the next day.

Subsequently the Old Town Bank replevied the check from the trustees of Nicholson & Sons and still- has it— that case not having been disposed of yet. After the Anderson check had been presented to Nicholson & Sons, on the morning of January the fourteenth, and after the runner of the Old Town Bank had surrendered it and accepted in lieu of it the check on the Western National Bank, two other checks were given by Nicholson & Sons upon the Western National Bank — one for $1,900.00 to the ³¹⁶ runner of the Merchants National Bank, and one for $1,800.00 to the runner of the National Bank of Baltimore —and each of these was presented to the Western, National Bank before one-thirty p. m. of the same day, and paid or certified by it. With this state of facts existing, the executor of Mary A. Dodge sued Anderson to recover the $692.03 due by him to her when the check was given on January the thirteenth, 1892; and the inquiry presented by the record is whether, under the circumstances, Anderson is still liable for that debt. It was held by the Court below that he was, and from the judgment against him he has appealed.

As between the parties to a check, the drawer remains liable upon it to the holder until the bar of the statute of limitations supervenes and releases him, if availed of, unless the omission or neglect of the holder to present it within a reasonable time after, its receipt has resulted in injury or loss to the drawer. A failure of the bank which is the drawee of the check, and which held on deposit a fund to meet it, by which failure that fund is lost, presents the usual, if not the only, case in which delay of the holder in malting presentment, or giving notice of dishonor, devolves loss upon him. Dan. Neg.

Ins., sec. 1590. Speaking generally, what is! a reasonable time depends on the facts of each particular case; but it is thoroughly settled that the reasonable time allowed the holder for presenting a check when he receives it in the same place where the bank on which it is drawn is located, is till the close of banking horns on the next secular day; and if in the mean time the bank fails, the loss will fall on the drawer. Dan. Neg.

Ins., sec. 1591; Byles on Bills, side page 14; Moule vs. Brown, 4 Bing., N. C., 266; Boddington & Davis vs. Schlencker, 4 Barn. & Adol. 752. Every drawer of a check assumes the risk of the drawee’s solvency during that period of time. It is consequently ³¹⁷ obvious that Anderson would have continued liable had the check been presented on the fourteenth during business hours, though after the failure of Nicholson & Sons. But it was presented to the drawees before their failure, and would have been paid when presented had the cash been then demanded; or, had the check on the Western National Bank been presented for payment or certification at any time that day before Nicholson & Sons actually suspended and closed their doors, the money would have been obtained.

Whilst, therefore, it is apparent that the mere passivity of the holder — her mere failure to present the check on the fourteenth, prior to the suspension of the drawees — would not of itself have discharged the drawer, yet, another element has entered into the case, and the holder having chosen to present the check before there .was any obligation on her part to do so, and having furthermore chosen, through her agent, to surrender it and to accept the drawee’s check instead of money, what then, became the degree of diligence which she owed to Anderson in order still to hold him liable? This is the crucial question in the case. Now, a check on a bank or banker is payable in money, and in nothing else. Morse, Banks & Banking (2d edition), p. 268.

The drawer having funds to his credit with the drawee has a right to assume that the payee will, upon presentation, exact in payment precisely what' the check was given for, and that he will not accept, in lieu thereof, something for which it had not been drawn. It is certainly not within his contemplation that the payee should upon presentation, instead of requiring the cash to be paid, accept at the drawer’s risk a check of the drawee upon some other bank or banker. The holder had a right to make immediate demand for payment upon receipt of Anderson’s check, though she was not bound to do so. When her agent, the Old Town Bank — the collecting bank being the agent of the holder— (Dodge vs. Freedman’s Sav. & ³¹⁸ Tru.

Co., 93 U.S., 379 ) did make demand it was only authorized to receive money ( Ward vs. Smith, 74 U. S., 451 ); and the acceptance by the collecting agent of anything else rendered it as liable to the holder as though it had collected the cash. Fifth Nat. Bank of Pittsburgh vs. Ashworth, 2 L. R. A., 491. (123 Penna.

St., 212.) The acceptance of Nicholson & Sons’ check on the Western National Bank was either payment of Anderson’s check, or it was not. If it was, as it would be according to the Massachusetts’ doctrine (Duncan vs. Kimball, 3 Wall., 37 ), then his liability was extinguished. If it was not a payment, then the holder’s collecting agent is responsible to her for having given up the check without payment; and if injury resulted to Anderson by reason of that agent’s failure to use due diligence in converting Nicholson & Sons’ check into money, then also is Anderson discharged; because the agent’s failure to use due diligence is the failure of that agent’s principal. But, whilst a check drawn bona fide on a banker having funds of the drawer is prima facie payment if accepted as cash (Woodville et al. vs. Reed et al., 26 Md., 190 ) still, in the absence of an express agreement, the acceptance of a check of either the debtor or a third party is, in fact, merely conditional payment, that is, satisfaction of the debt if and when paid (Haines & Eppley vs. Pearce, 41 Md., 221 ); but the acceptance of such check implies an undertaking of due diligence in presenting it for payment, and, if the party from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment.

Kilpatrick vs. Home B. & L. Association, 119 Pa. St., 30; Freeholders of Middlesex vs. Thomas & Martin, 20 N. J. Eq., 39. What then is the degree of diligence required under such conditions? The rule fixing the close of business hours of the next secular day as a reasonable time within which a check may be presented, so as to hold the drawer when drawn on a ³¹⁹ bank in the same place where it is delivered, has relation only to the contract and liability of the parties to the instrument, and does not apply to a check given by the drawee to the payee, or to the agent of the payee, of the original check, upon its surrender.

There is no unbending or inflexible rule governing this latter condition of facts, and in the nature of things there could not well be. What would be due diligence under one condition of facts might be negligence under different circumstances; and all that can be definitely laid down is that each case must in this particular be decided upon its own peculiar facts, though in no instance can the liability of the drawer be extended beyond the period which would ordinarily limit it. The holder of a substituted check taken upon the surrender of the original check to the drawee thereof must use such diligence in presenting it for payment as a prudent man would under like conditions use. This imposes no hardship upon the person who voluntarily accepts the drawee’s check instead of cash.

If he has had ample and abundant time to convert the drawee’s check into money, and still omits to do so, he obviously has not used due diligence, and the results of such negligence should not be visited upon the original drawer who was in no. way responsible therefor. Whether a delay to present the drawee’s check till the close of business hours is due diligence cannot be asserted as an invariable rule. In some instances it might be, whilst in others it would manifestly not be. We have said that what is due diligence or a reasonable time within which to make presentment, depends upon the circumstances of each case; and so the authorities hold.

This, too, is by 45 and 46 Vic., ch. 61, sec. 45, — the Bills of Exchange Act — the statutory law of England. Where the facts are undisputed it is a question of law for the Court. Bell vs. Hagerstown Bank, 7 Gill 223 ; Sasscer vs. The Farmers Bank. 4 Md., 409 ; Staylor vs. Ball & Williams 24 Md. 184 ; Woodruff vs. Plant, 41 Conn., 344 . That a higher degree of diligence ³²⁰ is demanded under facts like those before us than that which obtains between the parties to the instrument is obvious, because, as we have said, the drawer of the original check must be held to have contemplated that when presented it would be paid in money only, and the payee and drawee have no right, except at their own peril, to substitute some other mode of settlement which results in injury to the drawer.

People &c. vs. Cromwell, 3 Cent. Rep., 431; S. C. 102 N. Y., 477 . Had the holder through her agent caused Anderson’s check to be certified by Nicholson & Sons, the drawer would have been discharged at once. First Nat.

Bank of Jersey City vs. Leach, 52 N. Y., 350 ; Girard Bank vs. Bank of Penn Township, 39 Pa. St., 92; First Nat. Bank of Washington vs. Whitman, 94 U. 8., 343. The reason for this is, that as soon as the check is certified the funds cease to be under the control of the depositor, and pass under the control of the person who procures the certification of the check drawn in his