Story Case

The Bentham Printing Company sent out Harry Murray to collect bills from its customers. From Al Cohn he took a check payable to the Bentham Printing Company for $75 drawn on the LaSalle Bank. Instead of turning in the check, Murray forged the signature of the cashier of the Bentham Printing Company and cashed the check at the LaSalle Bank. After his disappearance and the discovery of the forgery, the Bentham Printing Company, not desiring to cause its customer to. pay twice, sued the LaSalle Bank on the check, on the theory that the forged indorsement had been insufficient to pass away its title, as payee, and that the payment to Murray was not a payment of the check. The bank admitted this, but urged further that the check imposed no liability upon the bank in the first place, so that even if it had never been validly paid, the payee had no action against the bank. For whom should judgment be given !

Ruling Court Case. Carr Vs. National Security Bank, Volume 107 Massachusetts Reports, Page 45; Volume 9 American State Reports, Page 6

Lincoln and Company drew a check upon the National Security Bank for $600, to the order of Carr, the plaintiff in this action. Carr presented the check to the bank, and the bank refused to pay the same, though it had on deposit to the credit of Lincoln and Company an amount sufficient to pay the check. Because of this refusal, Carr brings this action for damages.

The bank contended that it was under no obligation to pay to a holder; that it owed an obligation to the depositor alone.

Mr. Justice Gray said: "The relation between the defendant and the drawer, was simply the ordinary one of bankers and customer, which is a relation of debtor and creditor, not of agent and principal, or trustee and cestui ques trust. The bankers agree with their customer to receive his deposits; to account with him for them; to repay them on demand, and to honor his checks to the amount for which they are accountable to him when the checks are presented; and for any breach of that agreement, they are liable to an action by him. But the money deposited becomes the absolute property of the bankers, impressed with no trust, and which they may dispose of at their pleasure, subject only to their personal obligation to the depositor to pay an equivalent sum upon his demand or order. They make no agreement with the holder of his checks." Judgment was given for the National Security Bank.

Ruling Law. Story Case Answer

When money is deposited in a bank, unless a contrary relation is agreed upon, the relation of debtor and creditor between the bank and depositor results. The bank, by accepting the deposit, promises the depositor that he will pay out this sum of money upon order. But the bank does not promise the holder of checks drawn by the depositor that it will pay them. Consequently, if the bank refuses to pay a check presented by a holder, the bank is not liable to damages at the suit of the holder. The bank does not become bound, to the holder until it accepts or promises to pay the check. Nor is it the effect of a check to assign to the payee the right of action which the depositor would have had against the bank. It does not purport to be an assignment, nor was it so intended by the parties.

In the Story Case, the Bentham Printing Company cannot recover on the check, although it might perhaps sue the bank in a tort action for the conversion of an instrument which was the property of the printing company. It has no recourse upon Cohn, since Murray was authorized to receive the check from him. In the present action, judgment should he given for the bank.