This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 383.— A purchases from a bank at Toronto a draft on its Montreal office, which is lost in the mails. A asks the bank for a duplicate draft, offering to give them a bond of indemnity, signed by himself and the payee, for twice the amount of the draft, but the bank insists upon having another substantial name. Are they legally entitled to demand this?
Answer.—We think that they are entirely within their rights. A mere release of the rights of the purchaser of the draft and of the payee does not help the matter, nor justify the acceptance of a bond of indemnity from them, which the bank does not regard as financially sufficient. The point is that if the draft in question has been received by the payee and endorsed by him, a holder in due course has an unquestionable right to collect the amount from the bank; and besides, if the payee were not honest, he could, even after giving the indemnity and procuring a duplicate, endorse the original if it afterwards reached his hands, and it might become a valid claim in the hands of a third party. In the view of the responsibility of the bank on the draft itself their request is quite reasonable.