This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 163.— A depositor notifies his banker that he has issued a cheque payable to the order of John Smith, and wishes it paid only on the personal endorsement of John Smith. Is the banker bound to respect such a request, or would he be justified in accepting said cheque, tendered by payee's clerk, and endorsed " For deposit only to credit account of John Smith " ?
Answer.—We think the bank is bound to act on the instructions of its customer in the case mentioned. He has a right to countermand payment, and the bank is bound to obey his orders. The instructions quoted do not go as far as that, but they are very much in the same line, and it would, we think, be held to be within the customer's rights to require the bank only to pay the cheque when it is endorsed as he specifies.
In any case the holder of the cheque the payment of which has been refused on the instructions of the drawer, would have no claims whatever against the bank. If the cheque were endorsed by the duly constituted attorney of the payee, and refused because of the customer's orders, the bank would still not be liable to anybody. The holder would, however, have a valid claim on the drawer, and (if notice of dishonour were given) on the endorser.