fit, and the holder of the check was willing to accept a part; and having made a payment on the check, the bank is not only entitled to hold these funds in its possession for its own reimbursement so far as they will go, but it ought to do so for its own protection, and if it neglects to do so, its claim against the party to whom the mistaken payment has been made will be less by this amount than the total amount paid to him on the face of the check.2 So far as the depositor had a right to draw, the defendant has now a right to hold.

Bank cannot pay except accord with

in exact

depositor's

Held that order.

§ 456. Wrong Payments. C. drew a check post-dated the 22d, gave it to K., instructing him to get it cashed on the day of its date and give the money to C.'s foreman if C. did not return by noon of that day. K. changed the date to the 21st, got the money, and absconded. C. did not return till afternoon on the 22d. the bank could not charge C. with the amount. A bank can only pay in accordance with the directions of the drawer, and no fraudulent alteration can give it power to do otherwise. It can debit the deposit only with payments made at the time when, to the person whom, and for the amount authorized by him, unless his neglect has opened the door to and invited the fraud.

Payment before date of a check will not discharge the bank, unless made to the true owner. So where a payee lost his check, and the bank paid before its date, it was held to repay the amount to the loser of the check.3

§ 457. Payment to Wrong Person. If a bank pays to the wrong person, relying on false representations for which neither the drawer nor true payee were responsible, it pays at its peril.1

A. drew a check payable to B. to pay for a note and mortgage represented by a broker D. to be a genuine incumbrance. on B.'s land. The note and mortgage were forged, and D. took a party to the bank identifying him as B., and the bank

1 § 456. Crawford v. West Side Bank, 100 N. Y. 50.

2 Wheeler v. Gould, 20 Pick. 545.

3 Ibid.

1 § 457. Dodge v. National Exchange Bank, 30 Ohio St. 1 (1876).

paid the check. The drawer recovered of the bank, on discovering that the mortgage, note, &c. was a fraud.2

(a) If A. is identified by a man of good character as the Telegraph payee named in a telegraph order presented by A. order. to the bank, the bank is not negligent in paying him the money, though he should prove not to be the person named in said order.3

(b) If the drawer of a check on bank C., payable to the order of bank B., delivers it to A. to deposit in B. to the credit of the drawer, and A. deposits it in his own name as trustee of the drawer, and afterward draws the money, the bank is liable to the drawer.4

gent in not

making

(c) The plaintiffs received a check payable to their own order. They indorsed it, making it payable to the order of the cashier of the bank with which they were accustomed to do business; put it in an envelope with a deposit ticket; gave the envelope to a messenger, and directed him to carry it to Bank negli- the bank, have it credited to plaintiffs on their bankbook, and bring back the bank-book. The messeninquiry. ger on the way to the bank broke open the envelope, abstracted the check, presented it at the bank, and said that the firm wished to have cash for it. The cash was delivered to him, and he defaulted with it. The court held, but with two judges dissenting, that the bank must make good the amount to the plaintiffs; the circumstances of the presentment and demand were so peculiar as to put the bank upon its inquiry. The bank did not know the messenger; the indorsement did not indicate an intention to have the check collected in money; nor was it in the ordinary course of business to use the check of a third person, drawn upon another bank, as a substitute for the check of the plaintiffs drawn upon their own bank, against a deposit, in the usual manner.5 § 458. Customer's Right of Action for Refusal to Honor his Check. We have already stated that a bank is under obli

2 Kuhn v. Frank, Hamilton County District Court, Ohio, 10 Rec. 622. 8 Bank v. Western Union Telegraph Co., 52 Cal. 280.

4 Sims v. United States Trust Co., 9 N. E. 605 (N. Y., January, 1887).

5 Bristol Knife Co. v. First National Bank of Hartford, 41 Conn. 421.

Measure of damages.

gation to pay the checks, drafts, and orders of a depositor so long as it has in its possession funds of his sufficient to do so, and which are not incumbered by the attaching of any earlier lien in favor of the bank. The duty of the bank to make such payments, and the reciprocal right of the depositor to have them made, arise from the contract to that effect which, though probably never definitely expressed, will always be considered to be implied from the usual course of the banking business.1 This duty and this right are so far substantial, that, if the bank refuses, without sufficient justification, to pay the check of the customer, the customer has his action for damages against the bank.2 It has been said that if in such action the customer does not show that he has suffered a tangible or measurable loss or injury from the refusal, he shall recover only nominal damages. But the better authority seems to be, that, even if such actual loss or injury is not shown, yet more than nominal damages shall be given. It can hardly be possible that a customer's check can be wrongfully refused payment without some impeachment of his credit, which must in fact be an actual injury, though he cannot from the nature of the case furnish independent distinct proof thereof. It is as in cases of libel and slander, which description of suit, indeed, it closely resembles, inasmuch as it is a practical slur upon the plaintiff's credit and repute in the business world. Special damage may be shown, if the plaintiff be able; but, if he be not able, the jury may nevertheless give such temperate damages as they conceive to be a reasonable compensation for that indefinite mischief which such an act must be assumed to

1

1 § 458. Byles on Bills, Sharswood's ed., p. *18; Downes v. Phoenix Bank, 6 Hill, N. Y. 297.

* Grant on Bankers and Banking, p. 45; Whitaker v. Bank of England, 6 Car. & P. 700; 1 C. M. & R. 744; Marzetti v. Williams, 1 Barn. & Ad. 415; Watts v. Christie, 11 Beav. 546; Rollin v. Steward, 14 C. B. 591; Birchall v. Third National Bank, 15 Weekly Notes of Cases, 174 (Phila. Com. Pleas, $600 recovered).

3 Watts v. Christie, 11 Beav. 546; Marzetti v. Williams, 1 Barn. & Ad. 415.

have inflicted, according to the ordinary course of human events.4

The precedents from which an idea of the due and proper amount of damages which may be awarded where no special damage has been shown, are rare. In the case last cited the check drawn was only for £87 78. 6d., but the court seemed to regard the very smallness of the check as rather constituting grounds for greater damages than otherwise. For Lord Tenterden remarked, that it was a discredit to any person, and peculiarly to one in trade, to have a "draft for so small a sum refused." The jury had at first found for the plaintiff with only nominal damages; but the case having been given to them again, under the instructions to find substantial damages, coupled with the remark above quoted, they next returned a verdict for £500 damages. This seemed an error in the opposite direction. The court intimated that it was a very large sum, and the case was finally disposed of by arrangement of the parties between themselves that £200 should be paid as damages.

Insufficient

§ 459. Bank's Defences. To the customer's suit for damages the bank may answer in defence, that it had not unpledged funds enough belonging to the customer to funds. pay the check or draft in full at the time of presentment and demand. For a bank is never held to make a partial payment upon a check.1 So if the bank has accepted, or in any manner pledged itself or made itself liable to pay checks, drafts, or orders of the same drawer to such an extent that, after reserving enough to meet their obligations, the balance to his credit would not suffice to meet the check in full, the bank need not, indeed must not, make any payment at all upon the same.2 But if the bank itself at the time holds the promissory note or other business paper of the customer, which has not yet matured, it has no right to set aside funds enough to secure the payment of this when it shall mature, and then to refuse payment because the balance

Funds so recently ar

rived as to be unavailable.

after such appropriation does not equal the sum drawn for. It is only under authority of a court of equity that a bank can claim any lien on funds of its depositor to secure paper of his held by it, and still undue. Further, it is a good defence if the bank shows that funds of the drawer sufficient to make his credit good to meet the amount of the check had been paid into the bank so immediately before the presentment of the check, that the bank had not had a reasonable time to avail itself of the deposit. What is such reasonable time will depend upon the circumstances of each individual case. The general magnitude of the business of the bank, and especially the amount of business which happened to be transacting in the bank in the interval between the deposit and the presentment, also doubtless the organization and system of the bank in relation to such matters, the numerical strength and arrangement of its clerical force, and other similar matters, may be put in evidence by either side to sustain its position. Ordinarily, reasonable time would seem to be only till the bank could have a fair opportunity to "avail itself" of the funds; that is to say, get them into a condition such that it can mingle them with its general funds, and use them as money, and to communicate the fact of the deposit to the proper clerks.3 In Rollin v. Steward a deposit was made. at one o'clock, the check was presented at three o'clock on the same day, and the interval was held to be such a reasonable time that the banker was obliged to pay damages for refusing to cash it, though he remarked at the time that it might very probably go through the clearing-house the next day, and though in fact he did pay it on the next day.

Precisely what is the signification of the requisition that the bank should have time "to avail itself of" the funds deposited, is clearly indicated by no judicial decisions. If the funds be current money, native gold or silver coin, for example, simple receipt thereof and time to notify the paying clerks is sufficient. So doubtless if they be bank bills or

8 Grant on Bankers and Banking, p. 45; Whitaker v. Bank of England, 6 Car. & P. 700; 1 C. M. & R. 744; Marzetti v. Williams, 1 Barn. & Ad. 415; Rollin v. Steward, 14 C. B. 595.