Story Case

The following instrument was offered to the Home Deposit Bank by one of its depositors:

"The Illinois Midland Railway. Allen S. Griswold is hereby entitled to receive $30.00 Thirty and 00/100............Dollars.

You are directed to pay the above sum, to the holder of this voucher check, provided the payee has endorsed his name below, as a receipt in full of the account with this company there set out.

To The Illinois Midland Railway.

Commercial Bank by James S. Jackson, Pres. Westburn, 111.

DO NOT DETACH THIS STATEMENT. The Illinois Midland Railway.

To Allen S. Griswold, Dr. Special services rendered during May, 1914,......•......................$30.00

Received payment in full of account." The instrument had been indorsed on the blank line by Griswold, and on the back of the upper part it also bore his indorsement, as well as several others. It was folded so that the statement part was separate from the order part, and the whole was about the size of a check.

It was accepted as a deposit by the Home Deposit Bank, but payment was refused by the Commercial Bank, on the ground that it had been instructed that the check should not be honored, because Griswold had lost it and had already been paid by the company. Suit was brought against the Illinois Midland Railway by the Home Deposit Bank, claiming that, as a purchaser for value of a negotiable instrument, it was not affected by a payment made without a surrender of the instrument. Should the bank have a judgment?

Ruling Court Case. Mcintosh Vs. Lytle, Volume 23 Minnesota Reports, Page 278; Volume 37 American State Reports, Page 410

Lytle, the defendant in this case, wrote out the following instrument: "Dawson and Company, Bankers: Pay to the order of, on sight, two hundred dollars in current funds. - E. Lytic." This instrument was presented to Dawson and Company by Mcintosh, the holder, but Dawson and Company refused to pay it. Suit was then brought against Lytle by Mcintosh.

Lytle contended that he was not liable upon it, because it was an incomplete check, having no payee designated.

Mr. Justice Gilfillon said: "In this case there is neither a blank space for the name of the payee, indicating authority to insert the payee's name, nor is the instrument made payable to an impersonal payee, indicating a fully completed instrument. It is clearly the case of an inadvertent failure to complete the instrument intended by the parties. The drawer undoubtedly meant to draw a check, but having left out the payee's name, without inserting in lieu thereof, words indicating the bearer as payee, it is as fatally defective as it would be if the drawee's name were omitted." Judgment was given for Lytle.

Ruling Law. Story Case Answer

A check must be drawn upon a bank or banker. It must contain an unconditional order to pay, and must be payable on demand. The payee must be named therein, or it must be made payable to bearer. However, it frequently happens that a check may be made payable to the order of "cash" or to the order of "bills payable." In either case, the instrument is payable to bearer. Or the space for the payee's name may be left blank, in which case it is payable to bearer, or any holder has implied authority to insert his own name. A check must be payable in money; signed by the maker, and delivered.

The instrument, set out in the Story Case, is not a check, nor even a negotiable instrument, because it is not an unconditional order to pay. It says to the bank, pay, "provided" a certain thing is done. The commonly used voucher check is a positive order, but bears some such statement as this on the back, above the place for indorsement: "Indorsement by the payee is a receipt in full of the account stated below." There is no objection to this, but where the direction to pay is made conditional, the nature as a check is destroyed. Therefore, the loss of the paper by Griswold does not deprive him of title to it, nor has the Home Deposit Bank acquired any title by its purchase. It is not protected, as a bona fide purchaser, against the prior payment by the Illinois Midland Railway. The defendant should, therefore, have judgment, and the Home Deposit Bank must look to its depositor for satisfaction.