delay in presentment, 135 or for failure to give 186 or delay. in giving 187 notice of dishonor, are substantially the same as those which excuse like delay or failure in respect to a bill of exchange.138

Holder in Due Course

As in the case of other negotiable instruments, one to whom a check is negotiated for value and in good faith before it is overdue takes it free from personal defenses available to prior parties of which he was without notice.139 The transfer must be for value.140 Of course, one who receives a check from one who was himself a holder in due course has all the rights of such former holder, although the circumstances under which he receives the check are not such as would otherwise constitute the receiver a holder in due course.141

135 See Negotiable Instruments Law, § 81.

136 See Negotiable Instruments Law, §§ 109-112, 115.

137 See Negotiable Instruments Law, § 113.

138 See, ante, p. 116.

139 Bill v. Stewart, 156 Mass. 508, 31 N. E. 386; Symonds v. Riley, 188 Mass. 470, 74 N. E. 926; Buzzell v. Tobin, 201 Mass. 1, 86 N. E. 923; Gate City Building & Loan Ass'n v. National Bank of Commerce, 126 Mo. 82, 28 S. W. 633, 27 L. R. A. 401, 47 Am. St. Rep. 633; Jacks v. Darrin, 3 E. D. Smith (N. Y.) 557; Matlock v. Scheuerman, 51 Or. 49, 93 Pac. 823, 17 L. R. A. (N. S.) 747; Capital Savings Bank & Trust Co. v. Montpeller Savings Bank & Trust Co., 77 Vt. 189, 59 Atl. 827.

A holder in due course of a lost or stolen check acquires good title. Unaka Nat. Bank v. Butler, 113 Tenn. 574, 83 S. W. 655. See, also, Poess v. Twelfth Ward Bank of City of New York, 43 Misc. Rep. 45, 86 N. Y. Supp. 857; Negotiable Instruments Law, §§ 52-59; cases post, notes 143-146. See "Bills and Notes," Dec. Dig. (Key No.) § 365; Cent. Dig. §§ 944-959.

140 Shawmut Nat. Bank v. Manson, 168 Mass. 425, 47 N. E. 196; Citizens' State Bank v. Cowles, 180 N. Y. 346, 73 N. E. 33, 105 Am. St. Rep. 765. See Negotiable Instruments Law, § 54; ante, p. 41. See "Bills and Notes," Dec. Dig. (Key No.) § 358; Cent. Dig. §§ 898908.

141 Symonds v. Riley, 188 Mass. 470, 74 N. E. 926. See Negotiable Instruments Law, § 58. See "Bills and Notes," Dec. Dig. (Key No.) § 362; Cent. Dig. §§ 937-943.

Stale Check

When a check is to be deemed overdue or "stale," so as to let in defenses against the transferee, is a question in respect to which the courts have not generally laid down any very definite rule, other than that a check will be deemed "stale" after the expiration of a reasonable time. Logically, perhaps, this would mean such time as is reasonably necessary for the check to reach the drawee bank. This would practically mean, however, that checks should not circulate at all. Checks, "although payable on demand, are not treated as being dishonored or overdue on the day, or immediately after the day, of their date. A holder, who takes a check in good faith and for value several days after it is drawn, receives it without being subject to defenses of which he has no notice before or at the time his title accrues. This is the rule as settled by uniform practice and the current decisions in the courts of the United States." 142 Thus checks have been held not stale when only a few days old,143 and stale when a year or more or a few months old,1 145 or even less.146 On the whole, the rule appears to be that a check is stale after the lapse of a reasonable time from its issue, and that what is a reasonable

144

142 Ames v. Meriam, 98 Mass. 294. See "Bills and Notes," Dec. Dig. (Key No.) § 348; Cent. Dig. §§ 870-8772.

143 Rothschild v. Corney, 9 B. & C. 388 (6 days); Himmelmann v. Hotaling, 40 Cal. 111, 6 Am. Rep. 600; Lester v. Given, 8 Bush (Ky.) 357; First Nat. Bank of Rochester v. Harris, 108 Mass. 514; Estes v. Lovering Shoe Co., 59 Minn. 504, 61 N. W. 674, 50 Am. St. Rep. 424 (6 days); Fealey v. Bull, 163 N. Y. 397, 57 N. E. 631 (5 days); Davis v. Dayton, 7 Misc. Rep. 488, 27 N. Y. Supp. 969. See "Bills and Notes," Dec. Dig. (Key No.) § 348; Cent. Dig. §§ 870-8772.

144 Walden v. Webber, 15 Ky. Law Rep. 846; Skillman v. Titus, 32 N. J. Law, 96; Lancaster Bank v. Woodward, 18 Pa. 361, 57 Am. Dec. 618. See "Bills and Notes," Dec. Dig. (Key No.) § 348; Cent. Dig. §§ 870-8772.

145 First Nat. Bank of Newton v. Needham, 29 Iowa, 249. See "Bills and Notes," Dec. Dig. (Key No.) § 348; Cent. Dig. §§ 870-8772.

148 Vairin v. Hobson, 8 La. 50, 28 Am. Dec. 125. See "Bills and Notes," Dec. Dig. (Key No.) § 348; Cent. Dig. §§ 870-8772.

time depends upon the special circumstances of each case. Such appears to be the rule as declared by the Negotiable Instruments Law: "Where an instrument payable on demand is negotiated an unreasonable time after its issue, the holder is not deemed a holder in due course." 147 Since regard is to be had to the nature of the instrument, in determining what is a reasonable time, it seems clear that a bank check drawn on a bank at a distant point may reasonably be outstanding for a longer period than a mere local check without being deemed overdue paper.148

LIABILITY OF DRAWEE TO HOLDER

1

37. In accordance with the rule which has prevailed in most jurisdictions, and which is now established in all states which have adopted the Negotiable Instruments Law, a check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts or certifies the check. But in some jurisdictions the rule has prevailed that if the bank, being in funds, refuses on presentment to pay a check, it is liable thereon to the holder.

By weight of authority, the holder of a check has no right of action against the bank on which it is drawn for refusal to pay it, unless the bank has assumed an obligation to him to pay it by certifying it or accepting it; his only remedy in

147 Negotiable Instruments Law, § 54. See Singer Mfg. Co. v. Summers, 143 N. C. 102, 55 S. E. 522; Matlock v. Scheuerman, 31 Or. 49, 93 Pac. 823, 17 L. R. A. (N. S.) 747. See "Bills and Notes," Dec. Dig. (Key No.) § 348; Cent. Dig. §§ 870-8772.

148 See Bull v. First Nat. Bank, 123 U. S. 105, 8 Sup. Ct. 62, 31 L. Ed. 97 (cf. La Due v. First Nat. Bank of Kasson, 31 Minn. 33, 16 N. W. 426). Ante, p. 111. See "Bills and Notes," Dec. Dig. (Key No.) § 348; Cent. Dig. §§ 870-8772.

such case being against the drawer, and against the indorsers, if there are any.149 This results strictly from the nature of the instrument as a bill of exchange; the obligations of all parties to the instrument being based upon a general personal credit, so that, unless the drawee has assented to the order by certifying the check or accepting it, he is not liable on the instrument.150 It is true that by the implied contract between a bank and its depositor the bank undertakes to pay checks drawn by him to the amount of the deposit, and that for a failure to honor his check, when there are sufficient funds to his credit, the bank is liable to the depositor; 151 but this

149 Hopkinson v. Forster, L. R. 19 Eq. 74; Schroeder v. Central Bank, 34 Law T. (N. S.) 735; National Bank of the Republic v. Millard, 10 Wall. 152, 19 L. Ed. 897; First Nat. Bank v. Whitman, 91 U. S. 343, 24 L. Ed. 229; Florence Mining Co. v. Brown, 124 U. s. 385, 8 Sup. Ct. 331, 31 L. Ed. 424; National Commercial Bank v. Miller, 77 Ala. 168, 54 Am. Rep. 50; Boettcher v. Colorado Nat. Bank, 15 Colo. 16, 24 Pac. 582; Georgia Seed Co. v. Talmadge & Co., 96 Ga. 254, 22 S. E. 1001; Harrison v. Wright, 100 Ind. 515, 58 Am. Rep. 805; Case v. Henderson, 23 La. Ann. 49, 8 Am. Rep. 590; Carr v. National Security Bank, 107 Mass. 45, 9 Am. Rep. 6; Moses v. President, etc., of Franklin Bank of Baltimore, 34 Md. 574; Lonier v. State Savings Bank, 149 Mich. 483, 112 N. W. 1119; Merchants' Nat. Bank v. Coates, 79 Mo. 168; Dickinson v. Coates, 79 Mo. 250, 49 Am. Rep. 228; Creveling v. Bloomsbury Nat. Bank, 46 N. J. Law, 255, 50 Am. Rep. 417; Etna Nat. Bank v. Fourth Nat. Bank of City of New York, 46 N. Y. 82, 7 Am. Rep. 314; Attorney General v. Continental Life Ins. Co., 71 N. Y. 325, 27 Am. Rep. 55; First Nat. Bank of Union Mills v. Clark, 134 N. Y. 368, 32 N. E. 38, 17 L. R. A. 580; Commercial Nat. Bank of Charlotte v. First Nat. Bank, 118 N. C. 783, 24 S. E. 524, 32 L. R. A. 712, 54 Am. St. Rep. 753; Cincinnati, H. & D. R. Co. v. Metropolitan Nat. Bank, 54 Ohio St. 60, 42 N. E. 701, 31 L. R. A. 653, 56 Am. St. Rep. 700; Tibby Bros. Glass Co. v. Farmers' & Mechanics' Bank of Sharpsburg, 220 Pa. 1, 69 Atl. 280, 15 L. R. A. (N. S.) 519; Aikin v. Jones, 93 Tenn. 353, 27 S. W. 669, 25 L. R. A. 523, 42 Am. St. Rep. 921; House v. Kountze, 17 Tex. Civ. App. 402, 43 S. W. 561; Commercial Bank of Tacoma v. Chilberg, 14 Wash. 247, 44 Pac. 264, 53 Am. St. Rep. 873. See "Banks and Banking," Dec. Dig. (Key No.) § 140; Cent. Dig. §§ 389–397.

150 Post, p. 131.

151 Post, p. 143.

contract is between the bank and the depositor, and between the bank and the holder there is no privity of contract.

In some jurisdictions, however, it has been held that if the bank, being in funds, refuses on presentment to honor a check, it is liable thereon to the holder. 152 Generally the doctrine is based on the view that a check operates as an assignment of the funds of the drawer to the amount of the check, an assignment which becomes complete upon presentment, so that if the bank improperly refuses payment the holder may maintain an action against the bank on the check. Since the relation between the bank and its depositor is that of debtor and creditor, the depositor may, of course, assign his claim; but to construe a check as an assignment is to lose sight of its essential nature as a negotiable instrument. A check, like an ordinary bill of exchange, is an unconditional order to pay a sum certain in money, and an order to pay out of a particular fund is not unconditional. An instrument otherwise in the form of a check, which purported to be drawn on funds deposited by the drawer, would, indeed, operate as an assignment. It is sometimes loosely said that a check is distinguisha

152 Munn v. Burch. 25 Ill. 35; Fourth Nat. Bank of Chicago v. City Nat. Bank of Grand Rapids, 68 Ill. 398; Union Nat. Bank v. Oceana County Bank, 80 III. 212, 22 Am. Rep. 185; Gage Hotel Co. v. Union Nat. Bank, 171 Ill. 531, 49 N. E. 420, 39 L. R. A. 479, 63 Am. St. Rep. 270; Roberts v. Corbin, 26 Iowa, 315, 96 Am. Dec. 146; Bloom v. Winthrop State Bank, 121 Iowa, 101, 96 N. W. 733; Commonwealth v. Kentucky Distilleries & Warehouse Co.. 132 Ky. 521, 116 S. W. 766, 21 L. R. A. (N. S.) 30, 136 Am. St. Rep. 186; Wasgatt v. First Nat. Bank (Minn.) 134 N. W. 228; Columbia Nat. Bank of Lincoln v. German Nat. Bank, 56 Neb. 803, 77 N. W. 346; Guthrie Nat. Bank v. Gill, 6 Okl. 560, 54 Pac. 434; Fogarties v. President, etc., of State Bank, 12 Rich. (S. C.) 518, 78 Am. Dec. 468; Simmons Hardware Co. v. Bank of Greenwood, 41 S. C. 177, 19 S. E. 502, 44 Am. St. Rep. 700; Pease v. Landauer, 63 Wis. 20, 22 N. W. 847, 53 Am. Rep. 247.

In most of these states, the rule has been changed by the enactment of the Negotiable Instruments Law. Post, p. 130. See "Banks and Banking," Dec. Dig. (Key No.) § 140; Cent. Dig. §§ 380-397.

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