payment of the check is refused, may hold any or all of the preceding endorsers, or the drawer of the check at his discretion.32 An endorsement for a special purpose, however, as "for collection" or made without recourse," will not render the endorser liable.

When a check is presented for payment or for deposit, the receiving bank requires the signature of the payee to be endorsed on the back of the check. This endorsement is regarded and serves as a guarantee of the validity of the check and also as a receipt for its payment.

§ 226. Payment of Checks.

If a check presented for payment lacks any of its essential features, the bank may refuse payment absolutely until such deficiencies are supplied. Also if there are any suspicious circumstances connected with the check or its presentation, the bank has a right to delay payment until it has had proper time to investigate these circumstances.

If, however, a check is properly drawn against funds on general deposit, is in the hands of a rightful holder known to the bank and is presented for payment at the bank within banking hours, the bank must honor the check.33

If the bank refuses payment of such a check, the payee cannot himself enforce payment but may proceed against the drawer of the check for the original debt which the check was intended to satisfy. The status of this debt has not been changed in any way by the delivery to the payee of a check that proves worthless. Or if the payee prefers, he may substitute the check as his cause of action and proceed to collect its amount from the drawer.

The drawer on his part may bring suit against the bank to enforce payment of his check if he so desires and may also

32 Bank v. Bank, 29 N. Y. 619 (1864); Emery v. Hobson, 62 Me. 578 (1873). 33 Bickford v. Bank, 42 Ill. 238 (1866); State Nat. Bk. v. Reilly, 124 Ill. 464 (1888).

hold the bank for any damages resulting to him from its failure to honor his check. The whole question is, however, one that seldom arises. Banks but rarely refuse to pay checks properly drawn and properly presented by parties entitled to payment.

Payment of any particular check or payment of all checks against a particular deposit may be stopped at any time by revocation or by direct order of the drawer, by proper legal proceedings such as an attachment, by the insanity or death of the drawer, when known to the bank, or by insolvency and assignment after notice. Speaking generally, the bank will not be held liable if it pays checks under any of these conditions before it has been notified or has knowledge of the conditions. Thereafter it pays such checks at its own risk, save that in some few states payment of checks after the drawer's death may be made within a stated period.

If the payee does not wish to draw his money at once, he may have the check certified. This eliminates the drawer who no longer has any control over the check or its amount, and makes the bank a debtor to the payee for the amount of the check. 34

Checks are not due until presented for payment, hence are payable in the order of presentation regardless of their dates. If checks are presented calling for amounts in excess of the depositor's balance, the bank may refuse payment, or may pay the full amount, charging up the difference between the depositor's balance and the amount paid, to the depositor.3

35

CHAPTER XXIII.

CHECKS. (Continued.)

§ 227. Payment by Check.

In practice a check is usually regarded as payment—to its amount of the debt or other obligation against which it is given. It is, however, in itself no payment, unless the payee so elects, but is merely an order for money which, when received, is a good payment.

The drawer may, if he sees fit, revoke the check before it is paid, or withdraw his funds, or the bank may become insolvent or refuse to honor the check, or other contingencies may arise to prevent its payment. In any of these cases the payee does not receive the money called for by his order. His claim is therefore not paid, and, provided only that the failure of the check was not due to some delay on the part of the payee in presenting the check for payment,1 he may have recourse on the drawer for the original claim or, if he so elects, for payment of the check.2

As a check is not in itself payment of a debt, the creditor may decline to accept it without legal prejudice to his claim. He cannot be forced into the position of a collecting agent for his debtor against his will and may, if he sees fit, insist upon payment in legal tender-a right that is rarely exercised.

It may be noted in passing that the receipts so commonly

1 See $224.

2 Bradford v. Fox, 38 N. Y. 289 (1868); Burkhalter v. Second Nat. Bank, 42 N. Y. 538 (1870).

given when a check is received are merely prima facie evidence of payment which may, if the check fails and the payee proceeds to collect upon the original debt, be set aside by proof of the actual conditions.

§ 228. Depositing Checks.

As a rule, checks are not collected directly by the payee but are deposited by him in his own bank, either for collection or credit according to the conditions. If accepted by the bank for credit, they are entered in the depositor's pass book and the effect is the same as if cash had been deposited, i. e., the depositor is entitled to check against his credit at once without waiting for the collection of the checks. If any of the checks so credited fail when presented for payment, the bank returns the dishonored checks to the depositor and either charges them to his account, or requires him to make them good.

If, for any reason, the bank is not willing to credit the deposited checks or the depositor does not wish them to be credited to his account, they are taken by the bank for collection. In this case the bank merely accepts them upon memorandum and does not credit them to the depositor's account. until they have been actually paid. The depositor is notified of every such credit as it is made, and any checks which fail are returned to him, usually with an explanation of the reason for their non-payment.

Checks deposited for collection constitute a special deposit and in case the bank in which the checks are held should fail before the checks have been collected, they can be recovered by the depositor. If, however, checks are once credited to his account, they are taken on general deposit and if the bank fails thereafter, the depositor cannot recover them, even though they have not yet been collected.4

Checks for deposit are usually endorsed payable to the order of the bank in which they are deposited. Any endorse

3 See $224.

4 See $212.

ment used must, of course, be acceptable to the bank as it cannot be forced to receive checks against its will.5

The endorsement of a check is always placed upon its back. If placed on the face of the check, it would be unusual, inconvenient and obviously out of place.

§ 229. Return of Cancelled Checks.

A bank will not pay a check unless it is properly drawn by the maker and endorsed by the payee. After payment the check is stamped or cancelled in such way as to indicate that it has been paid. The cancelled checks therefore contain a complete record of the transaction.

Properly this record belongs to the bank as the cancelled check is the proper and unquestionable evidence of the payment made by it for account of the depositor. As a matter of practice, however, the bank returns these cancelled checks to the depositor. The custom, though it occasionally works a hardship upon the bank, is almost universal and is a matter of very great convenience to the depositor.

Cancelled checks are returned by the bank at regular or irregular intervals as the depositor's pass book is balanced,-a statement of his account being handed him with the balanced pass book and cancelled checks. The return of his vouchers and balanced pass book is not, however, in the nature of a "closed account." On the contrary, unless otherwise agreed between the bank and the depositor, mistakes discovered thereafter by either party may be rectified at any time without regard to the entries of the pass book.

Cancelled checks when returned should be examined promptly and compared with their respective stubs. In some cases the only way in which forgeries can be discovered is by this comparison, and if it is not made promptly, such forgeries may on occasion be charged to the depositor on the ground that he has been negligent.

See Chap. XXXIII.

Leather, etc. Bank v. Morgan, 117 U. S. 96 (1886); Janin v. London & S. F. Bank, 92 Cal. 14 (1891).