Adverse Claim Doctrine Its Relation To Stop Payment Protection

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ADVERSE CLAIM DOCTRINE: ITS RELATION TO STOP..., 71 Banking L.J. 389
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\u169\'3f 2014 Thomson Reuters. No claim to original U.S. Government Works.
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71 Banking L.J. 389
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Banking Law Journal
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June, 1954
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ADVERSE CLAIM DOCTRINE: ITS RELATION TO STOP PAYMENT PROTECTION
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Copyright \u169\'3f 1954 by A.S. Pratt & Sons
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Stopping payment on his check is the most common source of comfort to a depositor
who finds or fears that he has been cheated in a business deal.
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However, should he lose in the \u8220\'3frace of diligence\u8221\'3f through
failure to get a proper stop order to the drawee bank before it has paid or
certified the check, he may find little help in the stop payment remedy.
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This comment will discuss the circumstances under which additional protection may
be available to the drawer when the drawee bank retains possession of funds, after
payment or after certification, which might be available to secure his claim.
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\u160\'3f
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The basic common law rules as to stop payment by the drawer of an ordinary check
are (1) that the right is absolute\u8212\'3fthe drawer may protect his status quo
ante by revoking his order to his bank for any reason he chooses;
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(2) that the stop order destroys any authority in the bank to make payment on the
check when it is presented; thus, that if the bank mistakenly pays over a stop
order it may not charge the drawer\rquote s account,
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defenses of due care or good faith not being relevant; (3) that the stop order is
a permanent revocation of authority as to the check in question;
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and (4) that to have effect the stop order
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*390
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must be received before the bank has paid or certified the check.
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The stop payment right is considered to be created by an implied term in the
contract of deposit.
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Payment or certification is said to terminate the protection it affords because
each individual transaction under the deposit contract is irrevocably performed
when the bank, acting under the authority of a drawer\rquote s order of which it
has no notice of revocation, makes payment or assumes the new liabilities of a
contract of certification.
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However, the basic policy reasons underlying the stop payment right do not cease to
have force on either of these two occurrences. It has been suggested that the
policy supporting the stop payment duty is that, once the check is given, the
drawee bank is the only agency whose diligence can prevent possible loss to the
drawer, and reduce the probability of incurring the social costs of resort to
litigation.
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But a bank may be able to forestall such injuries and costs as long as it retains
physical control of the funds, which it may be said to do after certification and
after payment in those cases where the payee deposits the proceeds or uses them to
purchase an obligation of the bank as yet undischarged. In these circumstances
funds could be held back sufficient to secure the drawer from possible loss pending
some steps toward settlement of his claim, although perhaps not without risk of
liability. But how far have the courts gone in requiring or permitting such
protection to be extended?
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The \u8220\'3fadverse claim\u8221\'3f cases in some respects take up where the stop
payment cases leave off. These cases are based upon the common law rule that a bank
having \u8220\'3freasonable notice of a bona fide claim that money deposited with
it is the property of another than the depositor\u8221\'3f
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is under some duty to the
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*391
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claimant not to permit withdrawals which deplete the deposit to below the amount
to which claim is made.
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This principle of duty to a proper adverse claimant is extended to a great variety
of situations. An important group are those cases where funds (including, of
course, a check) are wrongfully deposited-where the money has been misappropriated
or obtained in an illegal or voidable transaction,
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or where the deposit itself is a misappropriation.
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Another type of case involves money deposited lawfully by a fiduciary where the
adverse claimant asserts himself to be the beneficial owner and that the fiduciary
relationship has been revoked or limited,
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perhaps by action of law,
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or that the deposit is not properly subject to garnishment or attachment,
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general assignment,
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*392
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or distribution after death
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as property of the nominal depositor.
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\u160\'3f
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The common element in so varied an array of fact situations is that in each the
claimant alleges that the depositor is without proper \u8220\'3ftitle\u8221\'3f to
the funds, or that his title is subject to a superior equitable interest.
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It seems to be the essence of a proper adverse claim that it is a claim to the
specific sum on deposit, and that the monies to which original ownership is
asserted, therefore, be traceable to the deposit.
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Thus, no adverse claim will be allowed for purposes of securing payment of an
unrelated debt owed by the depositor.
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In all cases which qualify, the principles applied in defining the duties of the
depository bank and the claimant are the same.
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\u160\'3f
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In the earliest American adverse claim case involving a stop payment type of
situation,
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Peter Adams Company v. National Shoe & Leather Bank
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,
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the plaintiff-claimant had given its check in partial performance of a fraudulent
contract into which it had entered relying upon misrepresentations of the payee as
to his authority to close a deal, and upon a forged note. The check was deposited
to the defrauder\rquote s account in defendant bank, and the ruse was not
discovered until the check had been paid by the drawee, too late for an ordinary
stop order. The plaintiff-claimant at once served notice on the depositor
\u8220\'3fdisaffirming and rescinding the agreements with him,\u8221\'3f
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and notice of the claim was given to the depository bank, which,
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*393
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}
however, subsequently allowed further payments from the account. The hank\rquote s
defense, that an attachment had been made of the funds in favor of the person to
whom the payment was made, was held invalid, \u8220\'3ffor, as [the attachment was
issued against [the depositor] alone, no more could he seized under it than his
right or interest in the money in controversy, and that was subordinate to the
legal right of the plaintiff to reclaim it upon the discovery of the fraud and
forgery, and the election to rescind their agreement .... [I]t had the right to
disaffirm its transactions ... and follow the money and reclaim it, so far as its
identity could be traced ....\u8221\'3f
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F24337585751_ID0E1B}{\*\bkmkend
co_footnoteReference_F24337585751_ID0E1B}
24
}}}
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EBCAE_1}{\*\bkmkend co_g_ID0EBCAE_1}
The importance of plaintiff\rquote s acts of rescision was made clear in
}
{\f2 \b0 \fs20 \cf1 \i1
Barnard v. First National Bank of Newpoint
}
}
,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F25337585751_ID0EQC}{\*\bkmkend
co_footnoteReference_F25337585751_ID0EQC}
25
}}}
}
where the defrauder deposited the proceeds of a phony stock sale in defendant bank
and later withdrew the sum partly in cash and partly in the form of a certified
check. Plaintiff notified the bank of his claim and the fraudulent acts, requesting
that the certified check not be honored. The court rejected the defense that
certification of the check immunized the deposit from the adverse claim, but found
for defendant bank because plaintiff had not, \u8220\'3fbefore or at the time of
the notice relied upon,\u8221\'3f
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F26337585751_ID0ECD}{\*\bkmkend
co_footnoteReference_F26337585751_ID0ECD}
26
}}}
}
undertaken to rescind the transaction and return the worthless share certificates.
The deal was not \u8220\'3fvoid\u8221\'3f but \u8220\'3fvoidable.\u8221\'3f The
court implied that a \u8220\'3fvoid\u8221\'3f transaction would not require the
notice to include a recital of acts of rescision.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0ERDAE_1}{\*\bkmkend co_g_ID0ERDAE_1}
One of the cases there distinguished as involving a \u8220\'3fvoid\u8221\'3f
transaction was
}
{\f2 \b0 \fs20 \cf1 \i1
Drumm-Flato Commission Company v. Gerlack Bank
}
}
,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F27337585751_ID0EAE}{\*\bkmkend
co_footnoteReference_F27337585751_ID0EAE}
27
}}}
}
in which the money in question was given in return for livestock subject to a
mortgage owned by plaintiff, and had been deposited to the credit of the
vendor\rquote s account in defendant bank. When the existence of the mortgage was
discovered, a third party\u8212\'3fanother commission agent who had carried out the
sale\u8212\'3fnotified the bank of the adverse claim. Nonetheless, ten days later,
no legal process having been instituted, the
}
{\f2 \b1 \fs20 \cf1 \i0
*394
}
}
funds were allowed to be withdrawn. The court reversed the judgment for defendant,
finding that notice of an adverse claim by one other than the claimant may be
adequate. Commenting upon this case, the
}
{\f2 \b0 \fs20 \cf1 \i1
Barnard
}
}
court noted that \u8220\'3fthe party who sold the cattle had no title either to
the cattle or the proceeds. It was therefore a void sale.\u8221\'3f
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F28337585751_ID0EJF}{\*\bkmkend
co_footnoteReference_F28337585751_ID0EJF}
28
}}}
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EQFAE_1}{\*\bkmkend co_g_ID0EQFAE_1}
The most recent important case, surprisingly unnoticed, is
}
{\f2 \b0 \fs20 \cf1 \i1
Gendler v. Sibley State Bank
}
}
.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F29337585751_ID0E1F}{\*\bkmkend
co_footnoteReference_F29337585751_ID0E1F}
29
}}}
}
In a legitimate business transaction, the buyer-plaintiff had by mistake made a
$7,106 overpayment to the defendant bank\rquote s depositor. The check was indorsed
and deposited, and in the three weeks intervening before the plaintiff discovered
the error and notified the bank of his adverse claim, all but $1,155.04 of the
depositor\rquote s account had been paid out. On receiving the notice the bank
requested that the depositor draw a check for $1,100, which he did, and for which
the bank issued, but held, a cashier\rquote s check in that amount payable to the
depositor. Six days after receiving the adverse claim notice, the bank, after a
demand by the depositor and on the advice of its lawyer that it could not legally
withhold the $1,100, released the check to the depositor. Nearly eleven months
later the buyer brought action against the bank and the depositor for the $7,106
overpayment. The court found the bank not liable even for the $1,100, discussing in
detail the theory of an adverse claim case.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0ESGAE_1}{\*\bkmkend co_g_ID0ESGAE_1}
The liability of the bank, it held, must be in tort\u8212\'3fbased on a violation
of the duty of the bank after notice \u8220\'3fto withhold payment until the third
party claimant can institute the necessary court proceedings to stop payment to the
depositor by court order or process.\u8221\'3f
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F30337585751_ID0EDH}{\*\bkmkend
co_footnoteReference_F30337585751_ID0EDH}
30
}}}
}
The duty is only \u8220\'3fnot to release the deposit unreasonably early after
such third party makes known his adverse claim.\u8221\'3f
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F31337585751_ID0ERH}{\*\bkmkend
co_footnoteReference_F31337585751_ID0ERH}
31
}}}
}
Thus to sustain a successful cause of action the adverse claimant will have the
burden of proving: (1) that after giving notice he \u8220\'3fdiligently and
promptly\u8221\'3f instituted legal proceedings to the up the account \u8220\'3fby
court process or
}
{\f2 \b1 \fs20 \cf1 \i0
*395
}
}
order\u8221\'3f;
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F32337585751_ID0EZH}{\*\bkmkend
co_footnoteReference_F32337585751_ID0EZH}
32
}}}
}
(2) that the depository bank had made an unreasonably early release of the
deposit; and (3) that this breach of duty was the proximate cause of the loss.
Plaintiff failed because he had not shown diligent and prompt proceeding. Thus, the
case must be read to hold that six days may be an adequate period to respect the
adverse claim.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F33337585751_ID0EDI}{\*\bkmkend
co_footnoteReference_F33337585751_ID0EDI}
33
}}}
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EKIAE_1}{\*\bkmkend co_g_ID0EKIAE_1}
The reason for the strictness of diligence to which the claimant is held is clear.
Time may be of essential importance in commercial transactions handled by check.
Great damage may be done to a depositor in having his account at least partially
\u8220\'3ffrozen\u8221\'3f for even a short period. And because of considerable
imperfection in legal treatment of the problem of slander of credit, it is also
important to banks that the \u8220\'3freasonable\u8221\'3f period be a short one.
The right of the nominal depositor to withdraw the funds in an account in his name
at any time is an explicit or implied term of the contract of deposit. Thus,
failure by the bank to honor checks properly presented may subject it to liability
for slander of credit or breach of contract.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F34337585751_ID0EBJ}{\*\bkmkend
co_footnoteReference_F34337585751_ID0EBJ}
34
}}}
}
On the other hand, permitting funds to be withdrawn in the face of an adverse
claim later shown to be valid may also result in liability. So in self-protection
the bank must assume the risk of determining or guessing whether the claim will be
held valid,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F35337585751_ID0EHJ}{\*\bkmkend
co_footnoteReference_F35337585751_ID0EHJ}
35
}}}
}
or at least in good faith.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F36337585751_ID0EMJ}{\*\bkmkend
co_footnoteReference_F36337585751_ID0EMJ}
36
}}}
}
If its guess is correct, it is safe;
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F37337585751_ID0EPJ}{\*\bkmkend
co_footnoteReference_F37337585751_ID0EPJ}
37
}}}
}
but the duty to an adverse claimant does not immunize it from risk of liability to
its depositor for breach of contract or slander of
}
{\f2 \b1 \fs20 \cf1 \i0
*396
}
}
credit. On the contrary, the few cases which deal with the problem indicate that
it may be liable if the claim should subsequently be held invalid.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F38337585751_ID0E3J}{\*\bkmkend
co_footnoteReference_F38337585751_ID0E3J}
38
}}}
}
In thus being forced into its own determination of validity in self-defense, the
bank is forced into a highly perilous position involving risk of double payment, or
an even greater liability if damage to business reputation can be shown by the
depositor.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F39337585751_ID0EAK}{\*\bkmkend
co_footnoteReference_F39337585751_ID0EAK}
39
}}}
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EHKAE_1}{\*\bkmkend co_g_ID0EHKAE_1}
These cases show that the bank\rquote s major protection under the common law,
other than a correct guess as to the validity of the claim, was freedom from
liability to the adverse claimant after withholding the funds for a
\u8220\'3freasonable\u8221\'3f period. But what is a reasonable time in any
situation is a question for a jury determination,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F40337585751_ID0EQK}{\*\bkmkend
co_footnoteReference_F40337585751_ID0EQK}
40
}}}
}
not a satisfying standard when risk of heavy liability attends an error in
judgment in either direction.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F41337585751_ID0EUK}{\*\bkmkend
co_footnoteReference_F41337585751_ID0EUK}
41
}}}
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0E2KAE_1}{\*\bkmkend co_g_ID0E2KAE_1}
The other protection accorded the bank is provided by narrow judicial definition of
a proper notice or a proper subject of an adverse claim. The cases are clear that
the bank will owe the drawer-claimant no duty after payment of the check unless his
situation falls within certain categories. If the underlying transaction is such
that a court might be persuaded to call it \u8220\'3fvoid\u8221\'3f on its face,
his position is strongest. But if the transaction is \u8220\'3fvoidable,\u8221\'3f
as for fraud or some kinds of illegality, the courts appear to require steps for
rescision before the bank is obliged to honor his adverse claim.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F42337585751_ID0EML}{\*\bkmkend
co_footnoteReference_F42337585751_ID0EML}
42
}}}
}
If there is overpayment
}
{\f2 \b1 \fs20 \cf1 \i0
*397
}
}
by mistake, however, no rescision seems to be required.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F43337585751_ID0EWL}{\*\bkmkend
co_footnoteReference_F43337585751_ID0EWL}
43
}}}
}
Lesser business reasons for stop orders, including failure of consideration in the
underlying obligation, appear to provide no bases for an adverse claim duty.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0E6LAE_1}{\*\bkmkend co_g_ID0E6LAE_1}
Nor will a duty arise unless the notice is \u8220\'3fadequate.\u8221\'3f Some
cases, like
}
{\f2 \b0 \fs20 \cf1 \i1
Peter Adams Co.
}
}
,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F44337585751_ID0ERM}{\*\bkmkend
co_footnoteReference_F44337585751_ID0ERM}
44
}}}
}
appear to require inclusion in the notice of a full statement of the basis of the
claim, including recital of the acts of rescision, and formal tracing of the funds.
Others indicate that notice may be effective though informal and incomplete, or
will infer notice from the bank\rquote s supposed omniscience about a
depositor\rquote s account.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F45337585751_ID0EZM}{\*\bkmkend
co_footnoteReference_F45337585751_ID0EZM}
45
}}}
}
In no cases have the courts decided whether a typical stop order, received too
late, might still serve as notice of an adverse claim.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F46337585751_ID0E5M}{\*\bkmkend
co_footnoteReference_F46337585751_ID0E5M}
46
}}}
}
But with the banks\rquote growing insistence on detailed information in a stop
order form, it may be that they are inviting adverse claim duties in seeking to
discourage stop orders.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EHNAE_1}{\*\bkmkend co_g_ID0EHNAE_1}
The bank\rquote s slander of credit dilemma has doubtless placed great pressures on
courts to reduce the period of protection the bank must extend, increase the
standards of adequacy of notice, and limit the circumstances under which adverse
claims may be valid. These limitations may have been pushed to the point where the
protection seemingly provided the troubled drawer by the adverse claim duty is
almost illusory.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EWNAE_1}{\*\bkmkend co_g_ID0EWNAE_1}
}
{\f2 \b1 \fs20 \cf1 \i0
*398
}
}
After a check has been paid, the protection accorded the drawer, of course, cannot
be of the absolute nature of that provided by the stop payment right, for the
policy supporting protection to drawers then conflicts with other
values\u8212\'3fthe importance of assurance to the depositor that his account will
not be frivolously \u8220\'3ffrozen,\u8221\'3f and to the bank that it will not
face double liability.
}
The courts have in some degree succeeded in achieving a balancing of values in the
more limited protection extended drawers in the adverse claim cases. But the
balance has been got by defining narrowly the fact situations which give rise to
the adverse claim duty in commercial situations, rather than by reducing the degree
of conflict of interests, and attendant risks to banks and depositors, by making
the rules clear and their applications predictable.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \b1 \ri0 \fs20 \cf1 \qc \i0
{\*\bkmkstart co_g_ID0EMOAE_1}{\*\bkmkend co_g_ID0EMOAE_1}
III
\par
}
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EWOAE_1}{\*\bkmkend co_g_ID0EWOAE_1}
The second branch of the problem concerns the protection afforded the drawer after
his check has been certified.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F47337585751_ID0E4O}{\*\bkmkend
co_footnoteReference_F47337585751_ID0E4O}
47
}}}
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EEPAE_1}{\*\bkmkend co_g_ID0EEPAE_1}
The policy considerations favoring protection are much the same as with uncertified
checks.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F48337585751_ID0EMP}{\*\bkmkend
co_footnoteReference_F48337585751_ID0EMP}
48
}}}
}
There is no a priori reason to assume that certified checks are obtained through
fraudulent efforts or in some way go astray less often than the ordinary variety.
However, the special nature of certified checks raises problems not encountered
with regard to ordinary checks. Although certification is often equated to payment
in its effect in terminating the drawer\rquote s stop payment right, the two acts
are quite different in every other respect. The certified check remains in
circulation, primary responsibility for its payment having been shifted from the
drawer to the certifying bank.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F49337585751_ID0E1P}{\*\bkmkend
co_footnoteReference_F49337585751_ID0E1P}
49
}}}
}
Upon certification the bank does debit the drawer\rquote s account, just as upon
payment. The credit balancing this debit, however, is not to the account of another
depositor, as it may be
}
{\f2 \b1 \fs20 \cf1 \i0
*399
}
}
when the check is paid, but to \u8220\'3fcertified checks outstanding,\u8221\'3f a
different type of liability account. Thus, honoring a drawer\rquote s stop order
after certification while the certified check remains outstanding does not present
the risk of slander of another depositor\rquote s credit which may be involved in
similarly treating a stop order after payment.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F50337585751_ID0EJQ}{\*\bkmkend
co_footnoteReference_F50337585751_ID0EJQ}
50
}}}
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EQQAE_1}{\*\bkmkend co_g_ID0EQQAE_1}
On the other hand, certification is obtained to increase the commercial
acceptability and liquidity of paper, and these attributes are impaired in some
degree by the stop payment or adverse claim risk.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F51337585751_ID0EXQ}{\*\bkmkend
co_footnoteReference_F51337585751_ID0EXQ}
51
}}}
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0E5QAE_1}{\*\bkmkend co_g_ID0E5QAE_1}
Perhaps because of the absence of slander of credit difficulties, some courts and
legal writers have come to refer to the possibility of \u8220\'3fstopping payment
of a certified check\u8221\'3f in certain circumstances,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F52337585751_ID0ENR}{\*\bkmkend
co_footnoteReference_F52337585751_ID0ENR}
52
}}}
}
although never referring to the possibility of \u8220\'3fstopping payment of a
paid check.\u8221\'3f In fact the cases more nearly indicate that after
certification, just as after payment, the protection afforded the drawer is limited
to that arising from the adverse claim rules. To speak of a right of
\u8220\'3fstopping payment\u8221\'3f of certified checks is clearly a confusion.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EFSAE_1}{\*\bkmkend co_g_ID0EFSAE_1}
The typical certified check case arises in a suit brought by the holder against the
certifying bank which, because of notice of the drawer\rquote s adverse claim, or
stop order, has refused payment. The question, exactly as in the adverse claim
cases, is whether the existence of the claim or stop order provides the bank a good
defense. The bank would clearly be happy to pay the fund to the holder and be done
with it, but dares not for fear of liability to its claimant-depositor. The defense
is found good, or interpleader is granted, in those cases where the underlying
transaction is \u8220\'3fvoid\u8221\'3f or \u8220\'3fvoidable,\u8221\'3f most often
because of fraud.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F53337585751_ID0EWS}{\*\bkmkend
co_footnoteReference_F53337585751_ID0EWS}
53
}}}
}
In the leading case of
}
{\f2 \b0 \fs20 \cf1 \i1
Sutter v. Security Trust
}
}
}
{\f2 \b1 \fs20 \cf1 \i0
*400
}
}
}
{\f2 \b0 \fs20 \cf1 \i1
Company
}
}
,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F54337585751_ID0EBT}{\*\bkmkend
co_footnoteReference_F54337585751_ID0EBT}
54
}}}
}
a widely cited dictum approved as adequate bases for interpleader, adverse claims
based on \u8220\'3ffraud, duress, or force and fear, or other unlawful means, or
for an illegal consideration.\u8221\'3f
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F55337585751_ID0EPT}{\*\bkmkend
co_footnoteReference_F55337585751_ID0EPT}
55
}}}
}
In
}
{\f2 \b0 \fs20 \cf1 \i1
Bathgate v. Exchange Bank
}
}
,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F56337585751_ID0E2T}{\*\bkmkend
co_footnoteReference_F56337585751_ID0E2T}
56
}}}
}
a suit by the payee against the bank after refusal of payment, the Missouri court
allowed the bank to interplead the drawer in a case where fraud was the basis for
his adverse claim, and where
}
\u8220\'3fit does not know and cannot ascertain, except at its peril, whether said
check has been legally delivered, and whether plaintiff is the lawful holder
thereof, or not.\u8221\'3f
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F57337585751_ID0EJU}{\*\bkmkend
co_footnoteReference_F57337585751_ID0EJU}
57
}}}
}
The court further pointed out: \u8220\'3fIn the case of an uncertified check, the
bank, after receiving notice of a dispute as to the holder\rquote s right to its
possession, cannot pay it except at its peril; and the certification thereof at the
drawer\rquote s request does not lessen, in any degree, its obligation to pay it
}
{\f2 \b0 \fs20 \cf1 \i1
only
}
}
in case the check was in fact rightfully delivered; nor does such certification
add an unconditional duty to pay said check to plaintiff regardless of whether it
had been rightfully delivered to him.\u8221\'3f
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F58337585751_ID0EZU}{\*\bkmkend
co_footnoteReference_F58337585751_ID0EZU}
58
}}}
}
But where only failure of consideration appeared to be present, the highest Kansas
court, in a suit by the holder,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F59337585751_ID0E3U}{\*\bkmkend
co_footnoteReference_F59337585751_ID0E3U}
59
}}}
}
denied a request for interpleader, and the bank was ordered to pay the fund to the
holder. Neither is it enough as a defense that the \u8220\'3fstop order\u8221\'3f
was given because the drawer, a bank, having discovered that the payee bank has
become insolvent would have the right of set-off against the payee except for the
certification.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F60337585751_ID0EDV}{\*\bkmkend
co_footnoteReference_F60337585751_ID0EDV}
60
}}}
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EKVAE_1}{\*\bkmkend co_g_ID0EKVAE_1}
Thus, whether the drawer succeeds is made to depend on the nature of the
transaction underlying the issue of the check,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F61337585751_ID0EQV}{\*\bkmkend
co_footnoteReference_F61337585751_ID0EQV}
61
}}}
}
}
{\f2 \b1 \fs20 \cf1 \i0
*401
}
}
the acceptable defenses being identical with those which give rise to a valid
adverse claim in the \u8220\'3fpayment\u8221\'3f cases;
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F62337585751_ID0EYV}{\*\bkmkend
co_footnoteReference_F62337585751_ID0EYV}
62
}}}
}
such determinations are never in issue in ordinary stop payment cases, the
drawer\rquote s right of revocation being absolute. Particularly informative is the
}
{\f2 \b0 \fs20 \cf1 \i1
Barnard
}
}
case,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F63337585751_ID0EGW}{\*\bkmkend
co_footnoteReference_F63337585751_ID0EGW}
63
}}}
}
discussed in part earlier,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F64337585751_ID0EJW}{\*\bkmkend
co_footnoteReference_F64337585751_ID0EJW}
64
}}}
}
in which the court indicated that a certified check drawn by a depositor payable
to himself should be subject to adverse claim treatment in the same manner as funds
in the depositor\rquote s account.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0ESWAE_1}{\*\bkmkend co_g_ID0ESWAE_1}
Another demonstration that so-called \u8220\'3fstop payment\u8221\'3f after
certification is more properly considered as an adverse claim than as ordinary stop
payment, is the differing treatment of the instrument in the hands of a holder in
due course. The rule as to ordinary checks is that a bank has no more authority, a
stop order, to pay a bona fide purchaser for value than the payee or any other
holder.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F65337585751_ID0E4W}{\*\bkmkend
co_footnoteReference_F65337585751_ID0E4W}
65
}}}
}
Yet a holder in due course of a certified check
}
{\f2 \b0 \fs20 \cf1 \i1
cannot
}
}
successfully be refused payment,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F66337585751_ID0ECX}{\*\bkmkend
co_footnoteReference_F66337585751_ID0ECX}
66
}}}
}
just as no adverse claim can be effective as against a bona fide purchaser, but
only against the proceeds of the sale.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0ELXAE_1}{\*\bkmkend co_g_ID0ELXAE_1}
Thus the recent certified check \u8220\'3fstop payment\u8221\'3f doctrine is
similar in little more than name to the traditional stop payment rules; the
protection afforded a drawer after his check has been certified is more properly
found in ordinary applications of adverse claim principles. Confusion on this
matter by a few courts is responsible for the current unsatisfactory state of case
law on the certified check problem.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0E1XAE_1}{\*\bkmkend co_g_ID0E1XAE_1}
The New Jersey courts are most responsible for the present
}
{\f2 \b1 \fs20 \cf1 \i0
*402
}
}
difficulties.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F67337585751_ID0EHY}{\*\bkmkend
co_footnoteReference_F67337585751_ID0EHY}
67
}}}
}
In the
}
{\f2 \b0 \fs20 \cf1 \i1
Sutter
}
}
case
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F68337585751_ID0ESY}{\*\bkmkend
co_footnoteReference_F68337585751_ID0ESY}
68
}}}
}
the court held as controlling a distinction between checks certified at the
instance of the drawer and those certified for the payee or other holder.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F69337585751_ID0EXY}{\*\bkmkend
co_footnoteReference_F69337585751_ID0EXY}
69
}}}
}
Where the hank had withheld payment to the payee after notice from the drawer, the
defenses discussed above, it was said, would be sufficient in cases where the check
was certified at the instance of the drawer. \u8220\'3fStop payment\u8221\'3f would
not, however, be available where certification was procured by the holder. The
justification for the distinction was found in Section 188 of the NIL:
\u8220\'3fWhere the holder of a check procures it to be accepted or certified the
drawer and all indorsers are discharged from liability thereon.\u8221\'3f
}
The corollary is that where the drawer secures the certification, he remains
secondarily liable. Thus, relying on a premise which is not made explicit,
\u8220\'3fstop payment\u8221\'3f is said to be available when the drawer procures
the certification, otherwise not.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EVZAE_1}{\*\bkmkend co_g_ID0EVZAE_1}
But Section 188 codified a common law rule in a line of cases in which the question
was whether certification operates to discharge the drawer from liability on his
instrument in case the certifying bank fails before the check is paid.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F70337585751_ID0E4Z}{\*\bkmkend
co_footnoteReference_F70337585751_ID0E4Z}
70
}}}
}
So the hidden premise must link bank failures to a right to stop payment, and is
indeed tenuous.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EG1AE_1}{\*\bkmkend co_g_ID0EG1AE_1}
It has been further argued that the holder of a check is entitled to present it
only for payment and if, instead of demanding a payment, the holder secures the
bank\rquote s certification, he enters into a new contract with the drawee bank
which was not within the contemplation of the drawer.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F71337585751_ID0EO1}{\*\bkmkend
co_footnoteReference_F71337585751_ID0EO1}
71
}}}
}
But this is logic, too, which makes sense only as to whether or not the drawer is
discharged, not as to whether he can \u8220\'3fstop payment\u8221\'3f by entering
an adverse claim. On the contrary, it is more reasonable to argue, in the adverse
claim-stop payment situation, that a defrauding
}
{\f2 \b1 \fs20 \cf1 \i0
*403
}
}
payee who secures certification without the drawer\rquote s knowledge should he
more vulnerable, not less, than one for whom the drawer takes the initiative.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0E61AE_1}{\*\bkmkend co_g_ID0E61AE_1}
Even more persuasive, however, is the fact that the distinction is misleading. The
typical businessman faced with a certified check is unlikely to examine the check
or to inquire to find, as a guide to whether its payment is certain, who had it
certified. Under these circumstances, Section 188 should he read in a restrictive
way\u8212\'3flimited to its original bank failure context\u8212\'3frather than
expanded in effect. It is probable that only because the real nature of so-
called \u8220\'3fstop payment\u8221\'3f of certified checks has been lost sight of
by some courts, that this confusing and inutile statutory misinterpretation has
gained some currency.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F72337585751_ID0EQ2}{\*\bkmkend
co_footnoteReference_F72337585751_ID0EQ2}
72
}}}
}
It is clear that the limited protection to the drawer given by the adverse claim
principles does not depend on who secured certification, so long as the ownership
of the funds in the certifying bank is in real dispute.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EZ2AE_1}{\*\bkmkend co_g_ID0EZ2AE_1}
A case in which the true nature of the adverse claim-stop payment situation as to
certification is clearly stated is
}
{\f2 \b0 \fs20 \cf1 \i1
Greenberg v. World Exchange Bank
}
}
,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F73337585751_ID0EB3}{\*\bkmkend
co_footnoteReference_F73337585751_ID0EB3}
73
}}}
}
involving a certified note. There the court pointed out that a certifying bank
paying out money on an instrument after notice that the funds did not, in fact,
belong to the holder, would be making a wrongful payment, because such an act, if
the reason asserted for stopping payment were sufficient, would be
\u8220\'3fpayment to a constructive trustee after notice of the trust.\u8221\'3f
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F74337585751_ID0ES3}{\*\bkmkend
co_footnoteReference_F74337585751_ID0ES3}
74
}}}
}
The
}
{\f2 \b0 \fs20 \cf1 \i1
Greenberg
}
}
rule properly allows the defense of fraud regardless of who obtained
}
{\f2 \b1 \fs20 \cf1 \i0
*404
}
}
certification, if proper notice is given that the drawer had taken steps to
rescind the voidable sale in which the instrument had been given. Because this was
not shown in the case, however, the bank was directed to make payment to the
holder.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EF4AE_1}{\*\bkmkend co_g_ID0EF4AE_1}
But for a growing number of state statutes
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F75337585751_ID0EL4}{\*\bkmkend
co_footnoteReference_F75337585751_ID0EL4}
75
}}}
}
which prohibit
}
{\f2 \b0 \fs20 \cf1 \i1
stop payment
}
}
of certified checks, and a similar provision in the proposed Uniform Commercial
Code,
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F76337585751_ID0EQ4}{\*\bkmkend
co_footnoteReference_F76337585751_ID0EQ4}
76
}}}
}
this confusion as to the distinction between stop payment and adverse claim might
be left respectfully to lie as a minor episode in the archives of banking law.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EZ4AE_1}{\*\bkmkend co_g_ID0EZ4AE_1}
But in the foregoing analysis, the proper interpretation of these statutes is not
that they withdraw the ancient privilege of adverse claim against funds represented
by certified checks, but that their effect is rather to destroy the comparatively
recent \u8220\'3fstop payment\u8221\'3f doctrine, including the distinction of the
}
{\f2 \b0 \fs20 \cf1 \i1
Sutter
}
}
case between treatment given when certification is obtained by a drawer and when
obtained by a holder. The rights and duties following from notice to a bank of an
adverse claim, which are not stop payment rights and duties at all, should not be
regarded as destroyed, but as available, in those most difficult situations in
which they are appropriate, to the distressed or defrauded drawer. This should mean
that the drawer of a certified check should be entitled to the protection, in those
cases where a valid adverse claim can be shown, of having the bank preserve the
funds intact by withholding payment until the drawer can reasonably undertake legal
action against the payee. This should be the result without regard to which party
procured the certification.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \b1 \ri0 \fs20 \cf1 \qc \i0
{\*\bkmkstart co_g_ID0EW5AE_1}{\*\bkmkend co_g_ID0EW5AE_1}
IV
\par
}
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EA6AE_1}{\*\bkmkend co_g_ID0EA6AE_1}
It has been seen that the applicability of the. adverse claim rules to fact
situations involving checks after payment or certification has been narrowly
limited by the courts-in states following the
}
{\f2 \b0 \fs20 \cf1 \i1
Sutter
}
}
distinction, more narrowly after certification than after payment.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EU6AE_1}{\*\bkmkend co_g_ID0EU6AE_1}
}
{\f2 \b1 \fs20 \cf1 \i0
*405
}
}
It is not at all clear, however, that the best way in which to take care of the
conflict with other values which arises after a check is paid or
certified\u8212\'3fand which is not present in ordinary stop payment\u8212\'3fis by
arbitrarily refusing protection, case by case, by such technical devices as finding
\u8220\'3fnotice\u8221\'3f formally inadequate or by overlooking fraud because the
mechanics of recision have not been undertaken. It would seem more desirable to
extend the protection to include all cases of real difficulty of which the bank is
properly informed, while minimizing the real risks and conflicts of interest among
the parties by statutory provisions making more precise the extent of the
bank\rquote s duty, and providing\u8221\'3f the bank with protection against loss
while carrying out its obligations.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EIAAG_1}{\*\bkmkend co_g_ID0EIAAG_1}
The final draft of the Uniform Commercial Code takes no major steps in this
direction.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F77337585751_ID0EQA}{\*\bkmkend
co_footnoteReference_F77337585751_ID0EQA}
77
}}}
}
As recently as the May, 1949 Draft, its Reporters had included a section which
would have eliminated the adverse claim duty altogether except after specified
legal process.
}
{\f2 \b0 \fs16 \cf1 \i0
{\*\bkmkstart co_footnoteReference_F78337585751_ID0EVA}{\*\bkmkend
co_footnoteReference_F78337585751_ID0EVA}
78
}}}
}
This proposal, which would have eliminated the technical difficulties by ignoring
the fundamental problem, fortunately no longer appears. Still, Article 3 of the
Code would be considerably stronger if its drafters had succeeded in the not too
difficult task of defining rules which would offer needed protection, in the form
of certainty, both to the bank and to legitimate adverse claimants.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs20 \cf1 \i0
{\*\bkmkstart co_g_ID0EBBAG_1}{\*\bkmkend co_g_ID0EBBAG_1}
EDITOR\rquote S NOTE: This article is reprinted from 21
}
{\f2 \b0 \fs20 \cf1 \i1
The University of Chicago Law Review
}
}
185, published by the University of Chicago Law School Copyright 1953 by the
University of Chicago.]
\par
}
}
}
\u160\'3f
\par
}
}
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Footnotes
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{\li0 \ri0
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{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
A recent comment in the University of Chicago Law Review discussed the traditional
rules of stop payment and current attempts to change them, concluding that stop
payment is a sufficiently important service to bank depositors that the
banks\rquote absolute common law duty to honor stop orders should not be watered
down by statutory authorization of exculpatory clauses. Stop Payment: An Ailing
Service to the Business Community, 20 Univ. Chi. L. Rev. 667 (1953).
}
{\field {\*\fldinst HYPERLINK "http://www.westlaw.com/Link/Document/FullText?
findType=Y&serNum=0337585684&pubNum=3264&originationContext=document&vr=3.0&rs=cblt
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71 B.L.J. 1. (1954)
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.
\par
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}
}
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20 University of Chicago Law Review, at 670-71 n. 14.
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See note 9 infra.
\par
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{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
See, e.g., Florence Mining Co. v. Brown, 124 U.S. 885, 391 (1888). Cases stating
the rule representing twenty-four states are collected in 5A Michie, Banks and
Banking \u167\'3f 193 n. 45 (rev. ed., 1950).]
\par
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}
}
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{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
findType=Y&serNum=1926119477&pubNum=660&originationContext=document&vr=3.0&rs=cblt1
.0&transitionType=DocumentItem&contextData=(sc.Search)" }{\fldrslt
Hiroshima v. Bank of Italy, 78 Cal. App. 862, 248 Pac. 947 (1926)
. See also
}
Universal Supply Co. v. Hildreth, 287 Mass. 538, 192 N.E. 23 (1934)
;
}
Thompson v. Killheffer, 99 N.J.L. 439, 125 Atl. 11 (Ct. of E. and A., 1924)
, revg
}
98 N.J.L. 359, 119 Atl. 770 (S. Ct., 1923)
;
}
Young v. Hembree, 181 Okla. 202, 73 Pac. 2d 393 (1937)
;
}
Bluefield Nat. Bank v. Picklesimer, 102 W. Va. 128, 135 S.E. 257 (1926)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F6337585751_ID0ERKA" }
{\fldrslt
6
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
See note 4 supra.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F7337585751_ID0EALA" }
{\fldrslt
7
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
For detailed analy is of this logic, see Moore et al.,
}
Legal and Institutional Methods Applied to Orders to Stop Payment of
Checks\u8212\'3fI. Legal Method, 42 Yale L.J. 817 (1983)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F8337585751_ID0EELA" }
{\fldrslt
8
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
See cases cited in Brannan, Negotiable Instruments Law \u167\'3f 189, at 1316-19
(7th ed., Beutel, 1948).
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F9337585751_ID0EWLA" }
{\fldrslt
9
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
20 Univ. Chi. L. Rev., op. cit. supra note 1, at 668.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F10337585751_ID0EBN" }
{\fldrslt
10
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Miller v. Bank of Washington, 178 N.C. 152, 96 S.E. 977 (1918)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F11337585751_ID0EKN" }
{\fldrslt
11
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
The general rule is discussed and cases cited in 2 Baton, Dig. Leg. Ops. 1, 656-59
(1942); 5A Michie, Banks and Banking 82 (1950); 5 Zollman, Banks and Banking
\u167\'3f 3198 (1936); 1 Morse, Banks and Banking \u167\'3f\u167\'3f 342-46 (6th
ed., 1928); Tiffany, Banks and Banking 49-50 (1912); 1 Bolles, Modern Law of
Banking 481 (1907); Hart, The Law of Banking 231-32 (2d ed., 1906); Zane, Banks and
Banking \u167\'3f 134 (1900). See also
}
Conflicting Bights, Duties and Liabilities of Interested Parties Upon Assertion of
Adverse Claims to Bank Deposits, 51 Yale L. J. 986 (1942)
.
\par
}
}
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
The rule has been modified by statute in twenty-two states, largely as a result of
activities of the American Bankers\rquote Association in promoting a uniform
Adverse Claim to Bank Deposit Statute. Under the American Bankers\rquote
Association statute notice of an adverse claim creates no duty in the bank until
and unless the claimant obtains a court order restraining payment of the deposit,
or furnishes an indemnity bond. Although the statutes as enacted vary in form, the
central objectives are the same as that of the Association\rquote s recommendation.
For citation to the state acts, see 2 Paton, Dig. Leg. Ops. 1, 657 (1942), and
Supplement, \u8220\'3fDeposits\u8221\'3f \u167\'3f 6 (1950).
\par
}
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F12337585751_ID0E1N" }
{\fldrslt
12
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
It is this group which includes the cases most like those in which stop payment
orders are typically given; these will be discussed below. In addition, it includes
embezzlement, stolen money, and forged check cases:
}
Emigrant Industrial Savings Bank v. Foye, 117 N.Y. Misc. 706, 192 N.Y. Supp. 898
(S. Ct, 1922)
(stolen goods sold and money deposited to account opened by thief under an
\u8220\'3falias\u8221\'3f; adverse claimant succeeds in tracing); First State Bank
& Trust Co. v. First Nat Bank of Canton, 314 Ill. 269, 145 N.B. 382 (1924) (notice
of a forgery of a check operates to invoke adverse claim rules as between claimant,
depositor-forger, and depository bank); cases in which cash is obtained in
fraudulent or illegal transactions:
}
First Nat. Bank of Wellsborough v. Bache, 71 Pa. 213 (1872)
(funds acquired by wrongful sale of another\rquote s property);
}
Phillips v. Suffolk Savings Bank, 219 Mass. 597, 107 N.E. 401 (1914)
(wife deposited husband\rquote s funds, without his consent, to her account); and
cases involving deposits of funds obtained in any breach of a fiduciary duty where
a constructive trust might be imposed upon the funds. Consult 3 Bogert, Trusts and
Trustees, c. 24 (1946).
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F13337585751_ID0E6N" }
{\fldrslt
13
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
These are usually cases where statute prohibits deposit of public funds except in
designated depositories or specifies the conditions under which such deposits may
be made.
}
Brogan v. Ereipe, 116 Kan. 506, 227 Pac. 261 (1924)
;
}
Marquette Fire & Water Commissioners v. Wilkinson, 119 Mich. 655, 78 N.W. 893
(1899)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F14337585751_ID0ECO" }
{\fldrslt
14
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
France Milling Co. v. First Nat. Bank of Cobleskill, 138 App. Div. 645, 122 N.Y.
Supp. 736 (3d Dep\rquote t, 1910)
(agency of nominal depositor revoked);
}
Arnold v. Sedalia Nat. Bank, 100 Mo. App. 474, 74 S.W. 1038 (1903)
(scope of agency limited to require principal\rquote s consent in each
transaction).
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F15337585751_ID0EFO" }
{\fldrslt
15
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
In re Interborough Consolidated Corp., 267 Fed. 914 (S.D. N. Y., 1920)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F16337585751_ID0EIO" }
{\fldrslt
16
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Levin v. Lerner, 290 Mass. 294, 195 N.E. 387 (1935)
(true owner enters adverse claim to protect funds from attachment by creditor of
nominal depositor); Cantonzaro
}
& Sons v. Hellman Commercial Trust & Savings Bank, 281 Pa. 468, 126 Atl. 812
(1924 (holder of checks drawn on fund, endorsed by equitable owner, enters adverse
claim as against attachment by creditor of nominal depositor).
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F17337585751_ID0ELO" }
{\fldrslt
17
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Webb v. Newhall, 274 Pa. 135, 117 Atl. 703 (1922)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F18337585751_ID0ETO" }
{\fldrslt
18
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
First Nat. Bank of Portland v. Reynolds, 127 Me. 340, 143 Atl. 266 (1928)
;
}
Bruff v. Rochester Trust & Safe Deposit Co., 118 Misc. 394, 193 N.Y. Supp. 321 (S.
Ct., 1922)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F19337585751_ID0EEP" }
{\fldrslt
19
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
The general rule, of course, is that a bank impliedly contracts to return any
general deposit on demand, and is prohibited from asserting for its own benefit any
adverse title to defeat the nominal depositor\rquote s right to withdraw or draw
checks. Thus, when it has no notice from an adverse claimant, it cannot refuse a
depositor\rquote s order.
}
Gibralter Realty Corp. v. Mount Vernon Trust Co., 276 N.Y. 353, 12 N.E. 2d 438
(1938)
. And see 5A Michie, Banks and Banking 99 (rev. ed., 1950). But, it is said that
\u8220\'3fthe presumption of ownership in the depositor is rebuttable and yields to
competent evidence of ownership in another.\u8221\'3f 5 Zollman, Banks and
Banking \u167\'3f 3198, at 224 (1936).
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F20337585751_ID0EJP" }
{\fldrslt
20
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
See
}
Emigrant Industrial Savings Bank v. Foye, 117 N.Y. Misc. 706, 192 N.Y. Supp. 898
(S. Ct., 1922)
;
}
Peter Adams Co. v. Nat. Shoe & Leather Bank, 9 N.Y. Supp. 75 (S. Ct., 1887)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F21337585751_ID0EOP" }
{\fldrslt
21
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
See
}
Hastings v. First Nat. Bank of Corning, 170 Ark. 939, 281 S.W. 905 (1926)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F22337585751_ID0EHA" }
{\fldrslt
22
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
9 N.Y. Supp. 75 (S. Ct., 1887)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F23337585751_ID0EZA" }
{\fldrslt
23
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
findType=Y&serNum=1887167594&originationContext=document&vr=3.0&rs=cblt1.0&transiti
onType=DocumentItem&contextData=(sc.Search)" }{\fldrslt
Ibid., at 76.
\par
}
}
}
}\f2 \li0 \b0 \qj \fs18 \ri0 \cf1 \i0 \intbl \cell \row }
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F24337585751_ID0E1B" }
{\fldrslt
24
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Ibid., at 77.
\par
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F25337585751_ID0EQC" }
{\fldrslt
25
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
61 Ind. App. 634, 111 N.E. 451 (1916)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F26337585751_ID0ECD" }
{\fldrslt
26
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Ibid., at 635 and 452.
\par
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F27337585751_ID0EAE" }
{\fldrslt
27
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
107 Mo. App. 426, 81 S.W. 503 (1904)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F28337585751_ID0EJF" }
{\fldrslt
28
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
findType=Y&serNum=1916026003&pubNum=577&fi=co_pp_sp_577_452&originationContext=docu
ment&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp
_577_452" }{\fldrslt
61 Ind. App. 634, 638, 111 N.E. 451, 452 (1916)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F29337585751_ID0E1F" }
{\fldrslt
29
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
62 F. Supp. 805 (N.D. Iowa, 1945)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F30337585751_ID0EDH" }
{\fldrslt
30
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Ibid., at 813.
\par
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F31337585751_ID0ERH" }
{\fldrslt
31
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Ibid.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F32337585751_ID0EZH" }
{\fldrslt
32
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Ibid., at 814.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F33337585751_ID0EDI" }
{\fldrslt
33
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
In an earlier case involving the claim of a wife to funds deposited to his account
by her husband, it was similarly held that the bank, which released the funds nine
days after receipt of the notice, had allowed \u8220\'3freasonable time\u8221\'3f
for legal process to be instituted; the restraining order was secured on the tenth
day, after payment had been made on the day preceding.
}
Huff v. Oklahoma State Bank, 87 Okla. 7, 207 Pac. 963 (1922)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F34337585751_ID0EBJ" }
{\fldrslt
34
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Thomas v. American Trust Co., 208 N.C. 653, 182 S.E. 136 (1935)
(damages allowed on breach of contract theory);
}
Schaffner v. Ehrman, 139 Dl. 109, 28 N.E. 917 (1891)
(\u8220\'3flegal malice\u8221\'3f found and tort damages available);
}
McFall v. First Nat. Bank of Forrest City, 138 Ark. 370, 211 S.W. 919 (1919)
(presumption of substantial damages arises where depositor is engaged in
commercial transactions). See also
}
Nealis v. Industrial Bank of Commerce, 107 N.Y.S. 2d 264 (S. Ct., 1951)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F35337585751_ID0EHJ" }
{\fldrslt
35
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
See, e.g.,
}
Miller v. Bank of Washington, 176 N.C. 152, 96 S.E. 977 (1918)
; 1 Morse, Banks and Banking \u167\'3f 342 (6th ed., 1926).
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F36337585751_ID0EMJ" }
{\fldrslt
36
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Ford v. Ames Nat. Bank, 196 Iowa 958, 195 N.W. 742 (1923)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F37337585751_ID0EPJ" }
{\fldrslt
37
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
If the claim is in fact good, the bank cannot be held liable by the depositor.
}
First State Bank & Trust Co. v. First Nat. Bank of Canton, 314 Ill. 209, 145 N.E.
382 (1924)
. See
}
France Milling Co. v. First Nat. Bank of Cobleskill, 138 App. Div. 645, 122 N.Y.S.
736 (3d Dep\rquote t, 1910)
; 5 Zollman, Banks and Banking \u167\'3f 3198, at 227 (1936).
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F38337585751_ID0E3J" }
{\fldrslt
38
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Pascagoula Nat. Bank v. Eberlein, 161 Miss. 337, 131 So. 812 (1931)
.
}
Wildenberger v. Ridgewood Nat. Bank, 230 N.Y. 425, 130 N.E. 600 (1021)
arose upon suit by a merchant depositor for injury to his credit resulting from
the dishonoring of several checks during a period when his wife was advancing an
adverse claim to one-half the account. Later the claim was withdrawn. In an opinion
by Judge Cardozo the court reversed a ruling for the defendant, finding the
bank\rquote s dishonor to be \u8220\'3fwith full knowledge of the state of the
account, setting one risk against another, the risk of adverse claims against the
risk of broken contracts.\u8221\'3f
}
This decision seems clearly to place the bank in the position of being forced to
judge the substantiality of the claim, with liability for a wrong guess.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F39337585751_ID0EAK" }
{\fldrslt
39
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Depositor is aided by the presumption that substantial damage results if he is a
businessman. Nealis v. Industrial Bank of Commerce, 107 N.Y.S. 2d 265 (S. Ct.,
1951);
}
Wildenberger v. Ridgewood Nat. Bank, 230 N.Y. 425, 130 N.E. 600 (1921)
;
}
McFall v. First Nat. Bank of Forrest City, 138 Ark. 370, 211 S.W. 919 (1919)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F40337585751_ID0EQK" }
{\fldrslt
40
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
_712_505" }{\fldrslt
Drumm-Flato Comm\rquote n Co. v. Gerlach Bank, 107 Mo. App. 426, 432, 81 S.W. 503,
505 (1904)
;
}
_660_964" }{\fldrslt
Huff v. Oklahoma State Bank, 87 Okla. 7, 8, 207 Pac. 963, 964 (1923)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F41337585751_ID0EUK" }
{\fldrslt
41
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
This state of the case law is a reason for the active American Bankers\rquote
Association sponsorship of state legislation discussed note 11 supra. Consult 2
Paton, Dig. Leg. Ops. 1,657 (1942).
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F42337585751_ID0EML" }
{\fldrslt
42
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Consult discussion, page 138 supra. See also
}
Wainwright v. Marine Nat. Bank, 72 Pa. Super. 221 (1019)
, which seems to indicate that not only notice, but \u8220\'3fdemand\u8221\'3f for
return of the funds, is required. But of.
}
Gibralter Realty Corp. v. Mount Vernon Trust Co., 276 N.Y. 353, 12 N.E. 2d 438
(1038)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F43337585751_ID0EWL" }
{\fldrslt
43
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Consult discussion, page 394 supra.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F44337585751_ID0ERM" }
{\fldrslt
44
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Consult discussion at note 22 supra.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F45337585751_ID0EZM" }
{\fldrslt
45
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
If the bank knows of the wrong directly or through other sources, a defect in the
content of the notice of adverse claim may be cured.
}
Peter Adams Co. v. Nat. Shoe & Leather Bank, 9 N.Y. Supp. 75 (S. Ct., 1887)
(bank secured further information through conversation with the drawer);
}
Mcintosh v. Detroit Savings Bank, 247 Mich. 10, 225 N.W. 628 (1929)
(notice by implication where the bank knew of deposit of partnership funds to a
personal account).
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F46337585751_ID0E5M" }
{\fldrslt
46
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
It is possible that in entering his late stop order the drawer might provide the
bank with such detailed information that the attempted stop order might be treated
as adequate notice of an adverse claim. However, a stop order, to be sufficient in
form, need only describe the check with \u8220\'3freasonable accuracy.\u8221\'3f
}
_601_471" }{\fldrslt
Mitchell v. Security Bank, 85 N.Y. Misc. 360, 363, 147 N.Y. Supp. 470, 471 (S. Ct.,
1914)
. There is no requirement that the reason for the stop order be given. The check
number, if given, must be accurate.
}
John H. Mahon Co. y. Huntington Nat. Bank of Columbus, 62 Ohio App. 261, 23 N.E.
2d.638 (1930)
. The dale must be specified accurately. Mitchell v. Security Bank, supra. And
probably also the face amount and payee must be shown.
}
A. Sidney Davison Coal Co. v. Nat. Park Bank, 201 App. Div. 309, 194 N.Y. Supp. 220
(1st Dep\rquote t, 1922)
;
}
Levine v. Bank of United States, 132 N.Y. Misc. 130, 229 N.Y. Supp. 108 (N.Y.
Munic. Ct., 1928)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F47337585751_ID0E4O" }
{\fldrslt
47
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
\u8220\'3f[A]fter the bank has paid, or placed itself under an obligation, or has
incurred a liability, to comply with the order, the drawer\rquote s power to revoke
is at an end.\u8221\'3f 5A Michie, Banks and Banking \u167\'3f 193 (rev. ed.,
1050). The rule is repeated in virtually all stop payment cases, despite its
logical circularity: the drawer\rquote s power to revoke depends on the bank\rquote
s obligation to pay\u8212\'3fwhether the bank is obligated to pay depends on
whether the courts recognize the drawer\rquote s power to revoke.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F48337585751_ID0EMP" }
{\fldrslt
48
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
20 Univ. Chi. L. Rev., op. cit. supra note 1, at 668.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F49337585751_ID0E1P" }
{\fldrslt
49
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
NIL \u167\'3f\u167\'3f 188-80.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F50337585751_ID0EJQ" }
{\fldrslt
50
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
See page 396 supra.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F51337585751_ID0EXQ" }
{\fldrslt
51
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
On the nature and history of the certified check, consult Steffen and Starr, A Blue
Print for the Certified Check, 13 N.C.L. Rev. 450 (1935).
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F52337585751_ID0ENR" }
{\fldrslt
52
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Consult, e.g., the discussion and review of cases in Roberts and Morris, Effect of
a Stop Payment Order on a Certified Check, 5 Wyo. L.J. 170 (1951). See also Brady,
The Law of Bank Checks \u167\'3f 247 (2d ed., 1926): \u8220\'3fIt is generally held
that payment of a check cannot be stopped after the check has been
certified.\u8221\'3f
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F53337585751_ID0EWS" }
{\fldrslt
53
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
This is not inconsistent with the general rule that stop payment is not available
as to a certified check, if the stop payment rules applicable to ordinary checks
are the subject of the reference. The adequate defenses are those which would be
available in any adverse claim situation. The argument will be further developed
that \u8220\'3fstop payment\u8221\'3f as to certified checks is a misnomer
referring to the adverse claim protection available after certification as after
payment.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F54337585751_ID0EBT" }
{\fldrslt
54
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
96 N.J. Eq. 644, 126 Atl. 435 (Ct. of E. & A., 1924)
, aff\rquote g
}
95 N.J. Eq. 44, 122 Atl. 381 (Chancery, 1923)
, noted in
}
35 A.L.R. 942 (1925)
; 25 Mich. L. Rev. 367 (1924); 72 U.Pa. L. Rev. 318 (1924).
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F55337585751_ID0EPT" }
{\fldrslt
55
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F56337585751_ID0E2T" }
{\fldrslt
56
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
199 Mo. App. 583, 205 S.W. 875 (1918)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F57337585751_ID0EJU" }
{\fldrslt
57
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
\par
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F58337585751_ID0EZU" }
{\fldrslt
58
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Ibid.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F59337585751_ID0E3U" }
{\fldrslt
59
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
McAdoo, Director General of Railroads v. Farmers\rquote State Bank of Zenda
(Smith, Intervenor), 106 Kan. 662, 189 Pac. 155 (1920)
.
\par
}
}
}
}
\intbl
{\li0 \ri0
{\li0 \f2 \b0 \ql \ri0 \fs20 \cf1 \i0
{\f2 \b0 \fs20 \cf1 \i0
{\field {\*\fldinst HYPERLINK "#co_footnoteReference_F60337585751_ID0EDV" }
{\fldrslt
60
\par
}
}
{\li0 \ri0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Carnegie Trust Co. v. First Nat. Bank, 213 N.Y. 301, 107 N.E. 693 (1915)
.
\par
}
}
}
}
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See, further,
}
Welch v. Bank of the Manhattan Co., 264 App. Div. 906, 35 N.Y.S. 2d 894 (2d
Dep\rquote t, 1942)
, where interpleader was allowed on what appears no more than failure of
consideration; however, the court designates it as \u8220\'3ffraud and
waste.\u8221\'3f
}
The rule of
}
Blake v. Hamilton Dime Savings Bank, 79 Ohio St. 189, 87 N.E. 73 (1908)
, would clearly refuse to permit stop payment after certification, and the case may
even be read to go so far as to prohibit adverse claims. But, in a dictum, the
court says, \u8220\'3f[E]ven if the certified check were not treated as money but
as property ... Blake could neither recover it nor defend against payment of a suit
upon it, in the absence of a showing that he had repudiated the trade and had
tendered the horse to Werbel, which was not done in this case ....\u8221\'3f
}
The notice of adverse claim was not valid, there being no recital of acts of
recision, so the adverse claim issue was not presented.
\par
}
}
}
}
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See above.
\par
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{\li0 \f2 \qj \b0 \ri0 \fs18 \cf1 \i0
Barnard v. First Nat. Bank of Newpoint, 61 Ind. App. 634, 111 N.E. 451 (1916)
.
\par
}
}
}
}
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See page 393 supra.
\par
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20 Univ. Chi. L. Rev., op. cit supra note 1, at 672 n. 21.
\par
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}
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See, e.g.,
}
_161_437" }{\fldrslt
Sutter v. Security Trust Co., 96 N.J. Eq. 644, 647, 126 Atl. 435, 437 (Ct. of E. &
A., 1924)
: \u8220\'3fUpon this all the authorities are in agreement\u8221\'3f
\par
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}
}
}
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Consult Brady, The Law of Bank Checks \u167\'3f 247, at 404 (2d ed., 1926).
\par
}
}
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_161_637" }{\fldrslt
Sutter v. Security Trust Co., 96 N.J. Eq. 644, 647, 126 Atl. 435, 637 (Ct. of E. &
A., 1924)
.
\par
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}
}
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The existence of a distinction was first asserted in
}
Times Square Automobile Co. v. Rutherford Nat. Bank, 77 N.J.L. 649, 73 Atl. 479
(1909)
, a case involving a check certified at the request of the holder, but was not
there decided, being immaterial to the holding.
\par
}
}
}
}
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Consult Brady, The Law of Bank Checks \u167\'3f 237, at 388 (2d ed., 1926), and
cases there cited.
\par
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}
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}
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1 Paton, Dig. Leg. Ops. 821 (1940).
\par
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}
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The currency is not wide. Since the Sutter decision, the New Jersey courts have
been controlled by a statutory provision that \u8220\'3fNo banking institution
shall stop payment of any check certified by it\u8221\'3f
}
findType=L&pubNum=1000045&cite=NJST17%3a9A-
225&originatingDoc=I9f33e1d30fce11dd86d5f687b7443f19&refType=LQ&originationContext=
document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)" }
{\fldrslt
N.J. Stat. Ann. (perm, ed.) 17:9A-225
(A). A similar statute is now in effect in New York. N.Y. Negotiable Instruments
Law (McKinney, 1943) \u167\'3f 825, amended by N.Y.L. (1944) c. 537. But the
distinction appears to be operative in Indiana,
}
Nardine v. Kraft Cheese Co., 114 Ind. App. 399, 52 N.E. 2d 634 (1944)
; and Missouri,
}
Bathgate v. Exchange Bank, 199 Mo. App. 583, 205. S.W. 875 (1914)
. But cf.
}
Kellogg v. Citizens\rquote Bank of Ava, 176 Mo. App. 288, 162 S.W. 643 (1914)
. The distinction has not been made determining as to \u8220\'3fstop
payment,\u8221\'3f or adverse claims, cases arising in Arkansas,
}
Merchants\rquote & Planters\rquote Bank v. New First Nat. Bank, 116 Ark. 1, 170
S.W. 852 (1914)
; Florida,
}
Florida Light & Power Co. v. Tomasello, 103 Fla. 1076, 139 So. 140 (1932)
; Kansas,
}
McAdoo v. Farmers\rquote State Bank, 106 Kan. 662, 189 Pac. 155 (1920)
; or Ohio,
}
Blake v. Hamilton Dime Savings Bank, 79 Ohio St. 189, 87 N.E. 73 (1908)
. The majority of jurisdictions appear not to have been called upon to decide the
question.
\par
}
}
}
}
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237 N.Y. Supp. 200 (S. Ct., 1929)
.
\par
}
}
}
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Ibid., at 203.
\par
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See note 72 supra.
\par
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American Law Institute, National Conference of Commissioners on Uniform State Law,
Uniform Commercial Code: Official Draft (text and comments ed., 1952) 3-410, 4-303.
And see \u167\'3f 4-403, comment 5.
\par
}
}
}
}
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The Official (final) draft does take one step toward reducing the painfulness of
the bank\rquote s dilemma\u8212\'3fit removes the common law presumption that the
dishonor of the check of a merchant reflects on his credit and thus entitles him to
\u8220\'3fsubstantial\u8221\'3f damages without proof of actual injury. See note 34
supra, and op. cit. supra note 76, at \u167\'3f 4-402. But it will throw no light
on the major questions of adequacy of notice, \u8220\'3freasonable\u8221\'3f time,
or what constitutes sufficient basis for a valid adverse claim.
\par
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}
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}
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\u8220\'3fWhere a person other than the customer makes a claim or serves legal
process upon a bank with respect to the customer\rquote s account therein, neither
the claim nor the process affects the bank or constitutes notice to it unless (a)
the process issues in an action in which the customer is designated as a party by
the name in which the account stands; or (b) the claimant is appointed by a court
of competent jurisdiction to succeed to the customer\rquote s rights in the
account.\u8221\'3f American Law Institute, National Conference of Commissioners on
Uniform State Law, May 1949 Draft Uniform Commercial Code \u167\'3f 3-640 (May,
1949).
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71 BLJ 389
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Adverse Claim Doctrine Its Relation To Stop Payment Protection

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