Story Case

Dennis McCarty was the manager of one of a chain of restaurants owned by the Condon Commissary Company. In accordance with his authority to make small purchases for the restaurant, he bought from Samuel Crossley, a peddling truck farmer, an assortment of fresh vegetables. He signed one of the printed blanks which Crossley furnished for this purpose, reading, "The Condon Commissary Company. Pay to the order of Samuel Crossley, four and 65-100 dollars. Dennis McCarty." Crossley took this home, and not until several weeks later, when he was next downtown, did he present it to the office of the Condon Commissary Company and request payment. He was then told that McCarty had been discharged by the company for misappropriating the money of his restaurant, and that orders drawn by him would not be honored by the company without proof of the delivery of the goods, or other evidence that the order represented a debt of the company. Crossley had a friend who did some business in the justice courts, and at his advice a suit was started against McCarty upon the order. McCarty answered that he had assumed no liability in writing the order, but that it was, on its face, nothing more than a direction to the company. Crossley maintained that it was a check, ordering money paid on demand, and that the general rule applied, holding the maker of a check liable if it was not paid. Is Crossley entitled to recover, or should the justice dismiss the suit?

Ruling Court Case. Industrial Bank Vs. Bowes, Volume 165 Illinois Reports, Page 70; Volume 56 American State Reports, Page 228

Bowes was engaged in the construction of a building.

The architect sent to Bowes his certificate that the Empire Building Company had satisfactorily carried out its contract up to date and was entitled to a payment of $500. Bowes, on the back of this certificate, wrote the following: Peabody, Houghteling & Company. Pay to the order of Empire Building Company. John B. Bowes." The Empire Building Company then indorsed it to the Industrial Bank. The Industrial Bank, on several occasions, presented it to Peabody, Houghteling & Company, and payment was finally refused. No notice was then given to Bowes that the instrument was dishonored by Peabody, Houghteling & Company, until suit was brought by the Industrial Bank.

Bowes contended that the instrument was a bill of exchange, and that since he, as drawer, was not notified of the dishonor, by Peabody, Houghteling & Company, as drawee, he was discharged. It was contended by the Industrial Bank that the instrument was a check, and that this failure to notify Bowes did not relieve him of liability unless the failure caused him damages. And it was admitted in the case that no damages had been caused to Bowes by the failure to notify him of the instrument's dishonor.

Mr. Justice Craig said: "On the other hand, it has all the elements of a check, and we think it clearly falls within the definition given in the textbooks of a check. In Daniel, on negotiable instruments, the author says: 'A check is a draft or order upon a bank or banking house, purporting to be drawn upon a deposit of funds, for the payment, at all events, of a certain sum of money to a person or his order, or to bearer, and payable instantly on demand.' Here, Peabody, Houghteling & Company was not a regular bank, but the firm was the banker of Bowes, and was so treated and recognized, and so far as the check in question is concerned, the firm will be regarded as a bank. The instrument in question was, then, a draft or order upon a banking house, directing it to pay a certain sum of money, and, therefore, a check." Judgment was given for the Industrial Bank.

Ruling Law. Story Case Answer

A check is an instrument in writing, by which a bank is directed to pay a definite sum of money on demand, to the order of a definite person, or to bearer. In general, it resembles a bill of exchange. It is, in fact, a bill of exchange, to which the law has attached certain peculiar attributes or qualities. Particularly, it is to be noted that it must be drawn upon a bank or banker. If drawn upon some person or corporation other than a bank or banker, it then becomes an ordinary bill of exchange.

In the Story Case, the instrument sued upon is not a check. There was no pretense that the Commissary Company was doing a banking business, and unless the drawee is a bank, a bill cannot be a check. In this case, it is not even a bill of exchange, because it would appear from the nature of the transaction that McCarty was not drawing against his credit with the drawee, but instead, that he was giving to Crossley a mere approval of his bill, or a warrant or voucher upon which the cashier of the company would make a payment. It is, therefore, obvious that the justice should give judgment for McCarty.