This section is from the book "Money, Banking, And Finance", by Albert S. Bolles. Also available from Amazon: American Finance With Chapters On Money And Banking.
In paying checks the paying teller must think of at least three things: first, is the signature and body of the check genuine; second, is the account of the drawer good for the amount; third, is the presenter of the check entitled to the money.
When a depositor opens an account with a bank, it is understood, among other things, that the bank will not pay raised or forged checks. The bank must be careful in this regard, and, if mistakes are made, it will be responsible for the consequences. This obligation is a weighty one, for checks are often presented for payment with great rapidity, and the paying teller has hardly a moment to examine them. The wonder is that more mistakes are not made by paying tellers.
An illustration may be given showing the severity of this requirement. C left a post-dated check with his bookkeeper and told him that on the day it was due to draw the money and use it in paying the wages of C's employees. The bookkeeper altered the date, putting in another two days earlier, drew the money, and departed. The check was charged to C's account, who declined to be holden for the amount. The bank contended that if the bookkeeper had waited two days longer before drawing the money and had then drawn it and gone away, the depositor surely would have been the loser. He admitted this, but insisted that his case was different. The bank had paid an altered check, which it ought not to have done, and was therefore responsible for the consequences; and the court said he was right in his contention. This illustration shows clearly to what strict rules banks are held. The reason is, the drawers of checks do not see them before payment and trust entirely to their bank to discover alterations, forgeries and the like; this is the bank's plain duty, and it must always be alert in protecting its depositors.
Not infrequently a check passes through several hands, each indorsing it before presentation for payment. Now it may happen that one of these indorsements is a forgery, if so, the bank ought not to pay it, and if it does, will get into trouble. The reason for this may not seem altogether clear, and an explanation is needful. As the signature is genuine, the maker ought and is willing to pay to the rightful owner, but not to the wrongful possessor. A presenter, however honest, who obtains a cheek having a forged indorsement, is not the rightful possessor; it belongs to another. The bank that pays it is therefore responsible to the true owner, while it, in turn, can recover the amount of the wrongful presenter. Nor will lapse of time between the day of payment and the discovery of the forgery prevent the bank from recovering the amount, provided it is not neglectful in proceeding after discovering the forgery.
To guard more perfectly against raising the amount, the following form of a check is proposed, which is in use in Germany : -
|90 | 80 | 70 | 60 | 50 | 40 | 30 | 20 | 1500 |
1400 | |
L300 | |
1200 | |
No. Philadelphia,---- 190 | 1100 |
1000 | |
900 | |
Arctic National Bank. | 800 |
700 | |
600 | |
Pay to the order of $ | 500 |
400 | |
300 | |
200 | |
Dollars. | 100 |
00 | |
 
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