Second National Bank v. Western National Bank

Brent, J., delivered the opinion of the Court. There is really but a single question presented in this case, and that is, whether a bank, which by mistake has certified a promissory note, made payable at its banking house, to be “ good,” can afterwards correct such mistake. It appears that the Second National Bank held by the endorsement of the payees a promissory note of Tilghman & Drakely, drawn at four months to the order of Carmine & Co., and payable at the Western National Bank, at which bank the drawers kept their deposit account. On the morning of the day on which the note was due, about half past eleven o’clock, the runner of the bank, holding the note, presented it at the banking house of the Western Bank, when it was certified by the paying teller as good, by writing upon it in blue pencil mark the initial letter of his name.

The runner after leaving the Western Bank, proceeded on his rounds, and reached the Second ¹³⁴ National Bank about one o’clock, when he told the president, Mr. Gilman, that the note had been paid, “meaning thereby that it had been certified.” About one o’clock the same day the teller of the Western Bank, in putting another memorandum on his file, noticed the order' of Tilghman & Drakely received that day, and which he had placed upon his file, directing him not to certify their “note to E. H. Carmine & Co., for $1200.00, due to-day.” He immediately enclosed the order to the-Second National Bank, with a note calling the attention of the bank to it, and requesting that his name might be-erased. The messenger left a few minutes after one, and upon his return reported that the president said “all right.” About the same time a message was sent from the Second National Bank to Messrs. Carmine & Co., the-endorsers, requesting them to call at its banking house, and accordingly one of the firm came. The president, Mr. Gilman, stated to him the facts of the certification of the note, and the demand for its erasure.

Mr. Carmine expressed his surprise that the note was not paid, and after some conversation with the president consented to waive protest, and at his suggestion wrote on the note, above the endorsement of the firm, “protest waived.” All this appears to have transpired not later than two-o’clock. Afterwards, at about three, it became known to the banks and the endorsers that Messrs. Tilghman & Drakely had failed. Mr. Carmine after leaving the bank went to see Messrs.

Tilghman & Drakely, and asked them for security, but they refused. On the next day the Second National Bank, without erasing the certification, sent the note through the clearing house, debited to the Western Bank, and received the money for it. ¹³⁵ The teller of the Western Bank, upon receiving its clearing house list of that day, found the note enclosed and debited to the bank. He immediately erased his certification, which was in pencil mark, and went with the note to the Second National Bank, where he demanded and received the money for it, and where he left the note. These are the important facts in this case, and upon them the appellant must rest its right to recover from the appellee the amount of the note.

The presentation and certification of this note were in the regular course. The balances between the banks were to be settled daily through the clearing house, of which association they were members. To accomplish this, the bank holding a note presents it for payment, on the day of its maturity, at the bank where payable. If the drawer has the funds in bank to meet it, it is so certified by the teller, generally by memorandum on the note, and charged to the account of the drawer.

It is then returned to the creditor bank, and retained until the following day, when it is used in the clearing house in the settlement of exchanges as an item of credit in favor of the one, and as a charge against the other. As said in the case of the Irving Bank vs. Wetherald, 36 N. Y., 337 , “The correctness of this certificate is a matter which the certifying bank has the means of knowing, and is bound to state correctly. If the presenting bank relies upon its accuracy, and fails to charge the endorsers as upon nonpayment on presentation, the certifying bank is estopped from