114. Collection Of Notes When Due

The method of collecting the notes when due depends very largely upon the nature of the business. If the customers are commercial houses borrowing on bills receivable, the notes will be payable all over the country. It will then be necessary for the discount clerk to send the notes out some time ahead for collection, or better still, for him to charge them to the collection clerk and let him send them to the proper banks for collection. When the returns are received, the proper entries may be set up by the collection clerk crediting discounts, or he may turn the proceeds over to the discount clerk to make the proper entries. If the business is done largely on local paper, the discount clerk should charge the notes to the note teller, who will send them out for collection by his messengers. Credits may be made by the note teller or discount clerk as in the case on foreign items. If the loans are made largely to makers of the notes, the borrowers will come to the bank and tender payment. The discount clerk will then receive the money and make the credits.

There is the usual objection to allowing a clerk who handles the records to handle cash as well, and the objection is worthy of careful consideration. This may be overcome by having the discount clerk's cage adjoin the note teller's, with a little window between. When a borrower comes to the discount clerk and offers to pay a note, the clerk gets the note out and checks it off his tickler. He then makes out a ticket showing the number of the note, the name of maker and amount, and passes both to the note teller. The customer then goes to the note teller's window, pays the amount and receives the note. The discount clerk charges the note teller and credits discounts. The note teller charges cash and credits himself. The total of the tickets must agree with the total amount of notes checked on the tickler.

115. Endorsees

The question of endorsement of commercial paper is an important one in every department of the bank, but it is most important in the discount cage. The discussion following will apply to all commercial paper.

First, what is an endorsement? Tompkins defines it as follows:

Indorsement is the writing of the name of the indorser on the instrument with the intent on his part either to transfer, or pass the title to the instrument; or to add strength to the security of the holder by assuming a contigent liability for its future payment. This latter is called accommodation indorsement.

The endorsement must be written on the instrument itself, or upon a paper attached to it. A piece of paper so attached to an instrument to give room for new endorsers is called an "allonge" and is frequently met with on foreign bills.

Endorsement may be made in one of four ways: (1) special; (2) blank; (3) restrictive; (4) conditional.

A special endorsement is one that specifies the person to whom, or to whose order, the instrument is payable.

A blank endorsement is one that is endorsed by the simple signing of the name without words of qualification.

A restrictive endorsement is one that makes the endorsee the holder of the instrument but not the beneficial owner of it. It gives the endorsee the authority to deal with the instrument as specified in the endorsement but does not transfer to him the ownership of the instrument. The usual form of restrictive endorsement is "pay X or order for collection," or "pay X or order for my use." In the above forms X is merely the agent of the endorser. The New York Clearing House has prohibited the use of this endorsement unless the paper is guaranteed by the bank presenting it. Another form of restrictive endorsement gives the endorsee only the right to negotiate the instrument for the benefit of the party named in its endorsement. The forms are "pay X or order for account of A," or "pay X or order for credit of A."

A qualified endorsement is one which limits the ordinary liability of the indorser. He becomes the mere assignor of the title. It relates only to his liability, and does not affect the negotiable character of the instrument. Such an indorsement is the addition of the words "without recourse" to the regular indorsement, and it means that when a man signs or indorses "without recourse" he incurs no liability as an indorser, but simply indorses in order to transfer the title properly.