This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 250.— Referring to my enquiry as to the negotiability of deposit receipts (Question 249), subjoined is a copy of the wording of the receipt which I had in mind :
Received from J. Smith on deposit, for a period of not less than three months from this date, and subject thereafter to ten days' notice of repayment or withdrawal, the sum of one hundred dollars, to be accounted for upon surrender of this certificate to J. Smith with interest (until date of notice only) at the rate of three per cent.
Answer.—With regard to the receipt in the form submitted, we should not suppose that such a receipt would be negotiable. It would only have that quality if it could be held to be a promissory note, and we think that under the rulings in the cases referred to in the reply to Question 249, the promise to " account" for the amount to J. Smith cannot be held to be an unconditional promise to pay to the holder of the receipt. For the same reason it is not transferable by endorsement, in the sense in which that word is used in the Bills of Exchange Act, but the claim which it represents may be transferred by a simple assignment endorsed on the document by the depositor.
The practical questions arising out of these points are as to the obligation of the bank holding the money to account for the same to an endorsee, or its rights if it should make payment to an endorsee.
A mere signature in blank is not in itself authority to the bank to pay the party holding the document, and it would probably not protect the paying bank if, as a matter of fact, the party receiving the money had no right to receive it. An endorsement in blank might, however, be a very important link in the chain of proof adanced by the party holding a deposit receipt so endorsed, in support of a claim that the money had been duly assigned to him. This does not affect the bank's right to refuse to recognize the assignment without further proof.
If the receipt is endorsed by the depositor " pay to C D or order," payment to C D would probably be good, as such an endorsement would doubtless be held to constitute C D the agent of the depositor to collect the money, and the depositor could not dispute what was done in consequence of his own act; but, for the reason mentioned below, it would be well to take the endorsee's receipt for the money as " on behalf of " the depositor.
If the receipt is presented for payment by another bank, bearing the endorsement of the depositor either in blank or with an order to pay to such bank, payment might, no doubt, be safely made to the bank presenting the receipt, but it would be well to require a receipt for the money in which it is declared that the receiving hank is acting as an gent for the depositor, e.g., "Received from------on behalf of A B (the depositor) the amount of the within deposit receipt and interest." The object of this is to ensure that if there is any mistake in the matter the bank receiving the money will be liable either to the depositor, as for money received on his account, or to return the amount as paid under a mistake. It is to bo noted that a guarantee of the endorsement does not cover this point; that merely protects against forgery, and does not guarantee that the bank has authority to collect the amount.