21. Payment When Maker Is Dead

When the maker of a check is dead, the paying teller should not pay it, though if he does so ignorantly, the bank is not responsible. The usual rule, except where it is modified by statute, is that the administrator or executor must pay, either indorsing the old check or giving a new one, for the reason that the funds in the bank belong to him in his official capacity.

22. Payment Of Stale Checks

Very often stale checks are presented for payment. A person may carry one around in his pocket several weeks or months before presentation. It is nevertheless a valid obligation and must be paid. Yet as checks are generally presented promptly for payment, the paying teller should always satisfy himself when a stale check is presented about the reason of the delay.

23. Drawer Can Stop Payment

The drawer of a check can direct the drawee not to pay it; if his order was not heeded, the act of payment would be solely that of the bank. The paying teller, therefore, should constantly have before him a record of all stopped checks. The direction to stop payment should be in writing, and the check should be carefully described, so that no mistake may be made in identifying it when presentation is made for payment.

24. Payment Through A Clearing House

Where clearing houses exist, many checks are presented and paid through this agency. Their payment is a part of the duty of the paying teller. As they are brought into the bank in most places after the banking day has begun, the paying teller can not leave his work to examine them, consequently tin's must be done by others. There is ample time for examining them, - the signatures, the indorsements, the balances of depositors, - and thus the danger is minimized of making mistakes in paying them. Happy, indeed, would the banks be if they could pay all their checks in this manner.

This work is usually done by the assistant bookkeepers, who post the amount checked out in their ledgers and bring the total of their postings to the paying teller who compares the record with the amount brought from the clearing house, which must agree.

Where a rule exists among clearing-house banks that checks received through the institution for payment may be examined and returned by a specified time, entries of them made by the drawer of the receiving bank previously to that time, or cuts or other marks on the checks, will not prevent their return, or operate as an acceptance or payment of them.

25. Certification Of Checks

Another duty of the pay ing teller is to certify checks. This consists in writing across the face, "Good," "O. K.," or some other word or sign that the check will be paid on presentation, to which he adds his signature or initials. The duty of certifying is not confined to the paying teller; it maybe done by the president or cashier. But no officer can certify his own check. The reason for thus limiting his authority is apparent. Yet if a cashier or other officer should do this, and the practice was long continued, his bank might be bound by his action. The highest court of New York has remarked that the authority of a cashier or other officer may be implied from the conduct or acquiescence of the corporation as represented by the board of directors. "When, during a series of years, or in numerous business transactions, he has been permitted without objection, and in his official capacity, to pursue a particular course of conduct, it may be presumed, as between the bank and those who in good faith deal with it upon the basis of his authority to represent the corporation, that he has acted in conformity with instructions received from those who have the right to control its operations." This principle has a very wide application and covers probably all cases of the exercise of authority by all officials not contrary to positive law. Nevertheless, the practice of permitting an official to certify his own check is not a good one and should not be permitted. Banks should seek to establish proper safeguards around the conduct of their officials, and the denial of such authority is one of them.

When a depositor has money enough in the bank to pay his check that is presented for certification, the paying teller does not hesitate to certify it, and when he has done so the amount is charged at once to the depositor's account. Some banks have a book in which such checks are recorded.

Here and there a bank certifies checks knowing that the depositor has nothing like the amount certified on deposit. The reader may think this is a very peculiar business, and it truly is. It is forbidden by the national bank act; is indeed a criminal offense, yet the law has been more than once disregarded, for which banks have been punished. Why, then, is overcertifying done? Because it pays. Every depositor who asks for a favor of this kind is expected to keep a large steady balance in the bank for its use - an average of at least one fifth of the amount certified, sometimes more. Some banks also demand security for certifying, which is furnished in the form of stocks or bonds. When a bank is fully protected for certifying, the practice is not in any way reprehensible; it is simply another form of lending the bank's credit. In many cases, however, no additional security is furnished, and the credit is given to a large extent in exchange for that of the depositor, and the compensation therefor is the profit reaped on the deposit kept in the bank by the person requesting the favor.

Another peculiarity of this business is, the certification is for a short period. It lasts only for the day. The depositor is expected to bring in checks given to him from the sales of stocks, etc., by a fixed time (one o'clock in New York), to make the certification good, so that when the bank closes business for the day the obligation has been discharged.

Even under favorable conditions it is a hazardous business. The stock broker who is thus favored is always running a narrow chance. If the checks presented to him are not good, he can not redeem his obligation. Several banks have failed through these operations.

Let us inquire a little further into the nature and effect of such checks. In the first place, why is the paying teller ever asked to certify? A man intends to make a purchase, and gives his check therefor. Buyer and seller are strangers, and the latter may be unwilling to part with his property merely for the check of the buyer. Suppose a seller is to part with his farm, the buyer can hardly expect, that his check will be taken in exchange for the seller's deed, unless he is well known to the other as a man of wealth and reputation. To obviate all hesitation the seller may have to part with his property; it has become a common practice for the buyer to ask the paying teller to certify his check. The obligation then becomes that of the bank; it is liable for the amount, and the seller will not hesitate to make the exchange.