DIGEST of LEGAL OPINIONS of THOMAS B. PATON, General Counsel of the American Bankers Association, Second Edition With an Index and Legal Citations Digested by THOMAS B. PATON, Jr. of the New York Bar, Assistant to the General Counsel STANFORD LIBRARY Published by the AMERICAN BANKERS ASSOCIATION 5 Nassau Street New York F PREFACE ROM July, 1908, to June, 1919, there have been published in the Journal of the American Bankers Association the legal opinions of its General Counsel. Inasmuch as there have accumulated during the past eleven years as many as 1,350 of these opinions, it was thought advisable by the Executive Council in the interests of all the members that a digest of them be made and published. Accordingly this Digest has been prepared and an attempt has been made in each case to write, in concise form, a statement of the facts, followed by the opinion. It seemed best from the busy banker's point of view, not to deal too much in detail in a book of this kind but rather to state in a terse way the conclusions which a banker or other business man may wish to know, without taking the time to read through the citations of legal decisions or the discussion of underlying principles or reasons upon which the opinions are based. A fuller treatment of the subject quoting the basic legal authorities or discussion can always be had by referring to the full text from which the digest was made. For the variety of subjects treated and their practical bearing upon banking operations, the bankers are solely responsible as it is they who have voluntarily submitted questions on the problems confronting them in every day business. It would then seem to follow that the book has the advantage of containing a selection of subjects confined to those matters only which have been troubling bankers most and which have already proved of sufficient interest to cause them to request legal advice. It is, of course, understood that the opinion of a lawyer, even though based on decisions of the courts of last resort or, in the absence of legal precedent, reasoned out upon sound legal principles, still remains an opinion. At most the reader can choose to use it and to depend upon it as a possible guide and source of information, and for these objects this book is published. All of the legal authorities quoted, cited or referred to in the full text of the opinions are herewith collected and grouped under the proper headings. Where an opinion was rendered on a subject upon which no case had ever been decided, the writer has cited legal authorities that are analogous to and in support of the principle involved. It is important, therefore, for the reader to note that those citations which are not directly in point are useful as supporting authority and collateral reading. THOMAS B. PATON, Jr. New York, N. Y., January 12, 1920. EXPLANATORY NOTE. The name of the state which precedes each digest indicates the state from which the inquiry came. The volume referred to at the end of each digest indicates the volume of the JOURNAL of the AMERICAN BANKERS ASSOCIATION ACCEPTANCE AND CERTIFICATION Certification after banking hours 1. (Ala.) A bank certifies or pays a customer's check after banking hours and the customer, before banking hours of the next day seeks to stop payment. The question was raised whether the payment or certification was binding on the customer. Opinion: Such payment or certification is probably valid, although the point has never been directly passed upon by the courts in a case between the customer and the bank. Vol. 5, p. 19, July, 1912. Acceptance must be written 2. (Ark.) A livestock company instructed its bank to honor a draft drawn in its name by C and D, who were buying stock for it, and the bank agreed to such instruction, telephoning a prospective seller of live stock that the check for $4,000 was good. Relying on this oral promise to pay the amount, the cattle are turned over to C and D. Later, the live stock company stopped payment on the check, claiming that C and D had no authority to draw it or to buy so large an amount of stock. The holder seeks to hold the bank liable on its statement. Opinion: While a bank which promises over the telephone to pay a check cannot be held on such promise, the acceptance not being in writing, the bank may be held liable to the holder where, by agreement between the bank and depositor, the deposit is appropriated for the payment of such check. If there are special circumstances from which it would appear that the depositor assigned a certain amount of his deposit with the consent of the bank, the latter, although it could not be held liable as acceptor of the check, might be held as trustee of a specific deposit or as a debtor to the assignee for the amount so assigned. Vol. 9, p. 827, April, 1917. 3. (Ill.) A bank was requested to certify check by wire. It refused on the alleged ground that the check did not transfer the funds until it reached the bank and that the depositor could revoke the payment after it was certified. Opinion: A bank can certify by wire and after such certification the drawer has no right to stop payment. While an acceptance, to be valid, must be in writing, there is no requirement that the acceptance in all cases must be written on the bill. Vol. 10, p. 466, Dec, 1917. 4. (Ind.) In all states where the Negotiable Instruments Law is in force and in other states where the statutes require acceptance to be in writing, a promise over the telephone to pay a check, not being in writing, does not bind the drawee; but in Indiana where the common law rule prevails that Yerbal acceptances are valid, such telephone promise would probably bind the drawee in favor of one who in reliance thereon cashed the check. Where, however, the drawee simply answers that the check is "good" or "all right" without coupling with such answer any specific promise to pay, such answer is insufficient to bind the bank as an acceptor. Vol. 3, p. 337, December, 1910. NOTE: The Negotiable Instruments Law requiring acceptances to be in writing was passed in Indiana in April, 1913. 5. (Ohio) The indorser of a check attempted to cash it at Bank A, which bank as a precaution telephoned Bank P, the drawee. In reply to the question whether or not the check was good, Bank P said "yes," and when asked if it would protect Bank A on the check, it replied over the telephone, "We will." Bank A cashed the check on these representations and upon dishonor wishes to hold the drawee liable, because the indorser proved wothless. Opinion: Bank A cannot hold Bank P on the latter's oral promise to pay the check, because the Nego. tiable Instruments Act requires acceptance to be in writing; nor is Bank P bound to Bank A, the holder, who has cashed the check on faith of such promise, on the principle of estoppel, as this principle is inapplicable in the face of positive statutory requirement of written acceptance. Bank A, however, would have a right of recovery against the drawer of the check. Vol. 7, p. 165, Sept., 1914. 6. (Okla.) A bank purchased a check from the payee after receiving a statement over the telephone by the drawee that the check was good. Payment was stopped. Opinion: Under the leading case construing the Negotiable Instruments Law of Colorado, the bank had no recourse upon non-payment against the drawee, as certification over the telephone is invalid, not being in writing. The bank's sole recourse is against the drawer and payee. Vol. 5, p. 104, Aug., 1912. |