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to a bank as a deposit, the bank has the option to accept or reject it, or to receive it upon such conditions as may be agreed upon. If it be rejected, there is no room for any doubt or question between the parties. If, on the other hand, the check is offered as a deposit and received as a deposit, there being no fraud and the check genuine, the parties are no less bound and concluded than in the former case. Neither can disavow or repudiate what has been done. The case is simply one of an executed contract. There are the requisite parties, the requisite consideration, and the requisite concurrence and assent of the minds of those concerned. It was well said by an eminent chief justice: If there has ever been a doubt on this point, there should be none hereafter.' Oddie v. National City Bank, 45 N. Y. 735, 6 Am. Rep. 160."

The syllabus of the case of Nineteenth Ward Bank v. First Nat. Bank, 184 Mass. 49, 67 N. E. 670, reads: "Plaintiff sent to defendant bank for collection and remittance a properly indorsed note of a depositor of defendant, who had directed it to pay his notes. On the day for payment, defendant's cashier, as such, drew his check to plaintiff's order for the amount of the proceeds, made a memorandum thereof on a block, wrote on the face of the note, in defendant's name, that it was paid, and perforated it and put it in the files. He was then notified of the depositor's insolvency. Held, that the note was already paid, nothing remaining, besides entries of records on the books, but to remit the proceeds."

See also American Nat. Bank v. Miller, 229 U. S. 517, 57 L. ed. 1310, 33 Sup. Ct. Rep. 883, Broad & M. Nat. Bank v. New York & E. Realty Co. 102 Misc. 82, 168 N. Y. Supp. 149, and Charnock v. Jones, 22 S. D. 132, 16 L.R.A. (N.S.) 233, 115 N. W. 1072.

As soon as the bank had taken the check, marked it "Paid," and charged the depositor's account with

-effect.

the amount of it, it thereby assented to the order of the maker of the check, and became liable to the holder of the check for its amount, and by such action the Checks-acceptmaker of the check ance by bank and all indorsers were relieved from liability. Carnegie Trust Co. v. First Nat. Bank, 213 N. Y. 301, L.R.A.1916C, 186, 107 N. E. 693; National Bank v. First Nat. Bank, 141 Mo. App. 719, 125 S. W. 513.

The check had ceased to exist as a check, and there had been substituted for it the obligation and liability of the bank. See § 3579, Rem. Comp. Stat.

Banks-accept

effect of overdraft.

It is claimed, however, that, because the court found that the acceptance of the check created an overdraft in the Stewart account, the bank is not, therefore, liable. The rule laid down by the authorities, however, is that the liability of the bank does not depend upon the ance of checkcondition of the account of the drawer of the check, upon the theory that by accepting a check against an account in which there is not sufficient funds to meet the check, the bank thereby makes a loan to the drawer of the check, and that the duty is upon the bank, in the first instance, to determine whether the account was sufficient to meet the check, and that there is no such duty upon the holder of a check, and the bank is estopped in any event, after having accepted, to then say that by its acceptance the drawer's account was overdrawn.

This court, in Spokane & E. Trust Co. v. Huff, 63 Wash. 225, 33 L.R.A. (N.S.) 1023, 115 Pac. 80, Ann. Cas. 1912D, 491, had the matter under consideration, and the syllabus states the conclusion of the court to this effect: "Where a bank paid a check drawn upon it, under the mistaken belief that the drawer had funds there subject to check, it cannot recover the payment from the payee, since that would destroy the certainty pertaining to such trans

(129 Wash. 109, 224 Pac. 569.)

actions; and it is immaterial that the mistake was due to the confusion incident to paying the check after banking hours, as an accommodation, when the drawer's deposits had been withdrawn the same day."

In First Nat. Bank v. Devenish, 15 Colo. 229, 22 Am. St. Rep. 394, 25 Pac. 177, it was said: "They [the bank] were supposed to be informed of his financial standing, and certainly were supposed to know the condition of his account with them at the time of the presentation of the checks for payment. Banks are required, and for their own safety are compelled, to know at all times the balance to the credit of each individual customer, and they accept and pay checks at their own risk and peril. If, from negligence or inattention to their own affairs, banks improvidently pay when the account of the customer is not in a condition to warrant it, and if by mistake a check is paid when the drawer has no funds, the bank must look to the customer for rectification, not to the party to whom the check was paid. The supposed mistake relied upon in argument is stated in the pleadings as follows: "That such bill of exchange was so executed and delivered as aforesaid, by defendant, under a mistake of fact, and that the said Caldwell did not then have, at the time of the making and delivery of the said bill of exchange, in the hands of the defendant, funds to pay the checks for which said bill of exchange was given, and that defendant discovered said mistake at, to wit, the hour of 1 o'clock on the afternoon of the 28th day of December, 1883.' The character of the supposed mistake, as stated in the pleading and shown in evidence, was such as to preclude appellee from availing himself of it as a defense. It being the direct It being the direct result of carelessness and inattention to his own affairs, there can be no relief at law, and, even in equity, courts will seldom, if ever, relieve a man from the result of a mistake

attributable to negligence or want of diligence in his own affairs."

See also Manufacturers' Nat. Bank v. Swift, 70 Md. 515, 14 Am. St. Rep. 381, 17 Atl. 336; Citizens Bank v. Schwarzschild & S. Co. 109 Va. 539, 23 L.R.A. (N.S.) 1092, 64 S. E. 954; Boylston Nat. Bank v. Richardson, 101 Mass. 287; National Bank v. Berrall, 70 N. J. L. 757, 66 L.R.A. 599, 103 Am. St. Rep. 821, 58 Atl. 189, 1 Ann. Cas. 630.

Courts have even gone to the extent of holding that the mere making by the bank of an entry giving credit to the payee of the check closes the transaction. The check is in law paid, and thereafter there can be no alteration or change in the rights of the parties, without their mutual agreement. Bryan v. First Nat. Bank, 205 Pa. 7, 54 Atl. 480; Bartley v. State, 53 Neb. 310, 73 N. W. 744.

The Supreme Court of the United States, in American Nat. Bank v. Miller, supra, observed: "There are some disadvantages of sending a check for collection directly to the bank on which it is drawn, but, when such bank performs the dual function of collecting and crediting, the transaction is closed, and, in the absence of fraud or mutual mistake, is equivalent to payment in usual course."

The circuit court of appeals for the eighth circuit, in Security Nat. Bank v. Old Nat. Bank, 154 C. C. A. 1, 241 Fed. 1, remarked: "A bank which honors and pays a note, draft, or check of one of its customers upon his order, in the mistaken belief that the credit balance of that customer is larger than it in fact is, or in the futile hope or mistaken belief that checks or notes which the bank has credited to the account of that customer will be paid in the regular course of business, is estopped, as against the owner of such paid note, check, or draft, from revoking or avoiding such payment on account of such mistake or futile hope: (1) Because of the intolerable delay, uncertainty, and confusion that would result in commercial transactions, if

the validity of such payments were to remain in doubt until such possible mistakes should be discovered and corrected; (2) because such a bank may know the state of its own accounts, and it can make such mistakes only through its own laxity or negligence, or its own assumption of the risk of future payments; and (3) because the owner of the note, check, or draft has no means of knowing the state of the customer's account. The acceptance of the check of the implement company on and to the Security Bank for $20,818.15, the charge of that amount by the bank to the implement company's account, its stamping of the four notes owned by the plaintiff 'Paid,' its surrender of those notes to their maker, the implement company, and the making and mailing of its draft to the order of the plaintiff, to the plaintiff for the proceeds of the notes, less the bank's commission for their collection, by the bank on August 1, 1913, constituted an absolute payment of the four notes, which, as against the plaintiff, it could not revoke, and made it legally liable to pay its draft."

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In Farmers' Guaranty State Bank v. Burrus Mill & Elevator Co. Tex. Civ. App. -, 207 S. W. 400, the syllabus is to the following effect: "Where the drawer of bill of exchange presents it to his bank, which transmits it to defendant bank, which pays it by its cashier's check under an agreement with the drawee, incloses the remittance in an addressed and stamped envelop, and mails it, such action makes defendant's acceptance a finality, depriving both it and the drawee of the right to withdraw the acceptance given."

From these authorities it would plainly appear that, after the bank had received the check, charged the depositor's account, canceled the check, retained its possession, and attempted to make payment by make payment by draft, the check had been completely and irretrievably accepted, and that the duty was on the bank to make payment in cash to the drawee of

the check upon his demand, and that the drawer was not obligated to accept the draft in payment.

The only argument advanced against this position is that the acceptance never became complete, for the reason that the drawee attempted to make payment by draft, which was not accepted, and, to quote from respondent's brief: "The appellant is not now in a position to say that the bank should be bound by its action in recognizing the check and issuing a draft thereon, for the appellant refused to approve the bank's action in regard thereto, refused to accept the draft in place of the check, and refused to ratify or to confirm the action of the bank in recognizing the check or in issuing the draft. The minds of the parties never met or concurred or united, either by conduct or otherwise, so as to complete the transaction and make it binding upon either party."

The answer to this is that the law lays down the obligation of a bank to which a check is presented, and that attempt to pay obligation is to pay

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by draft.

in cash. If the drawer desires to have payment made in any other manner, of course that is a matter which he and the bank might agree upon; but the bank could not relieve itself of the obligation to pay in cash by forwarding a draft. As a matter of fact, the findings of fact do not justify the respondent's argument that the appellant repudiated the acceptance, which is the act which bound the respondent.

Some claim is also made that by accepting a check which resulted in an overdraft of the Stewart account, an illegal transaction was entered into; but there is nothing in the findings of fact to justify this, and, if the matter is material, we must assume that proper arrangements had been made between the bank and Stewart in relation to his account. In any event, as already pointed out in the citation of authorities above, the appellant is not charged with the violation of a law,

(129 Wash. 109, 224 Pac. 569.)

nor with participating in an illegal transaction, as it knew nothing in regard to the Stewart account.

An interesting discussion of a subject very like the one involved in this case can be found in the recent decision of the United States Supreme Court in the case of Federal Reserve Bank v. Malloy, 264 U. S.

160, 68 L. ed. 617, 31 A.L.R. 1201, 44 Sup. Ct. Rep. 296, decided February 18, 1924.

For the reasons stated, the judgment of the lower court is reversed, with directions to allow and recognize the claim of the appellant.

Main, Ch. J., and Holcomb, Tolman, and Mitchell, JJ., concur.

ANNOTATION.

Bank's acceptance of check as effected by attempt to pay it otherwise than in cash.

Various questions closely related to the question under annotation herein have already been discussed in this series of reports.

Clearing-house transactions as payment or acceptance of checks is discussed in the annotation in 12 A.L.R. 998.

The right of the drawee bank to charge back a credit given on a forged check is discussed in the annotation in 5 A.L.R. 1566.

The right of a bank to charge back a check drawn upon itself which it had credited to a depositor under the mistaken belief that the drawer's account is good is discussed in the annotation in 15 A.L.R. 709.

What amounts to acceptance extrinsic to check is discussed in the annotation in 26 A.L.R. 312.

That acceptance of a check is effected by marking it "Paid," charging it to the account of the maker, issuing a draft on a correspondent for the amount, and retaining the check, is held in the reported case (OREGON IRON & STEEL Co. v. KELSO STATE BANK, ante, 178).

Making out and signing a cashier's check, by the cashier of a bank, upon the presentation to him for payment of a check drawn by one who had funds in the bank, without delivering the cashier's check to the holders of the check presented, does not amount to an acceptance of the latter. Hanna v. McCrory (1914) 19 N. M. 183, 141 Pac. 996.

Whether a bank which, upon presentation of a check drawn upon it, issued

a deposit slip to the holder for the amount of the check, thereby accepted the check, was held to be a question of intention in Arkansas Trust & Bkg. Co. v. Bishop (1915) 119 Ark. 373, 178 S. W. 422. The bank having issued the slip, the burden was held to rest upon it to show that it was not issued in payment of the check.

Charging the drawer of a check with the amount thereof, and placing the proceeds to the credit of the payee, is held to constitute an acceptance of the check, in Second Nat. Bank v. Gibboney (1909) 43 Ind. App. 492, 87 N. E. 1064.

In Bull v. Novice State Bank (1923) Tex. Civ. App., 250 S. W. 232, a check which was apparently paid through the clearing house, stamped "Paid," charged to the account of the drawer, and mailed to the drawer, who several days later returned it to the drawee bank and secured the same to be marked "Paid in error," or "Canceled in error," was held to have been accepted by the drawee bank because retained for more than twenty-four hours after presentment.

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within twenty-four hours after such delivery to return the bill accepted or nonaccepted to the holder, will be deemed to have accepted the same. State Bank v. Weiss (1904) 46 Misc. 93, 91 N. Y. Supp. 276.

A bank which issued its draft to the holder of checks, upon the presentation of the same for payment, was held liable on the draft in First Nat. Bank v. Devenish (1890) 15 Colo. 229, 22

Am. St. Rep. 394, 25 Pac. 177, although the account of the drawer of the check was not sufficient to meet them, and the draft was issued without ascertaining this fact. According to the court, a bank which improvidently pays a check of a customer when his account is not in a condition to warrant it must look to the customer for rectification, not to the party to whom the check is paid. W. A. E.

VIRGINIA FIRE & MARINE INSURANCE COMPANY, Plff. in Err.,

V.

W. J. LENNON et ux.

Virginia Special Court of Appeals — December 18, 1924.

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. 1. One holding chattels under a conditional sales contract is not the unconditional and sole owner within the meaning of an insurance policy on the property making it void in the absence of such ownership. [See note on this question beginning on page 200.]

Insurance, § 271-effect of conditional title to part of insured property. 2. Under a provision in a policy of fire insurance on furniture that it shall be void unless insured is the unconditional and sole owner, if a portion of the property covered by the policy is not so held, no recovery can be had for loss of what was owned unconditionally.

[See 3 R. C. L. Supp. 334. See also note in 5 A.L.R. 814.]

Insurance, 276 conditional sale as chattel mortgage.

3. A conditional sales contract is not a mere chattel mortgage within the rule that a provision avoiding an insurance policy in the absence of unconditional and sole ownership of the property does not apply in case of a chattel mortgage.

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5. The mere fact that an insurance agent who was also a real estate broker at the time of negotiating a lease of real estate assisted the lessee to secure a small loan of money does not charge him with notice, when writing insurance on the furniture in the building two months later, that insured was not an unconditional and sole owner of the property so as to estop the insurer from contesting the validity of the policy on that ground.

[See 14 R. C. L. 1173; 3 R. C. L. Supp. 351.]

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