CERTIFICATE OF DEPOSIT

23. DEFINITION AND EFFECT-A certificate of deposit is a writing issued by a bank or banker, acknowledging the deposit of money and promising to pay the amount thereof to the depositor, or to him or order, or to bearer, as the case may be. Such a writing is in effect a promissory note, and, if payable to order or bearer, is a negotiable instrument. The certificate may be made payable at a future day certain, and if no time of payment be expressed is payable upon demand.

24. NECESSITY OF DEMAND-By the weight of authority a certificate of deposit must be presented for payment in order to charge the bank, and until presentment the statute of limitations does not begin to run; but in some states (now including those which have enacted the Negotiable Instruments Law) the rule prevails that such presentment is not necessary, and the statute begins to run upon the issue of the certificate.

In General

Ordinarily a depositor receives from the bank no evidence of his deposit, except the entry of the amount in his pass book.213 In such case the bank undertakes to honor his checks or other orders to the extent of the deposit.214 Sometimes, however, when a checking account as to a deposit is not contemplated, the bank issues a certificate of deposit. A deposit so made has the character of a general deposit, in so far as it creates simply the relation of debtor and creditor between the bank and the depositor.215

213 Ante, p. 25.

214 Ante, p. 14.

215 Woodhouse v. Crandall, 99 Ill. App. 552, affirmed 197 Ill. 104, 64 N. E. 292, 58 L. R. A. 385; Leaphart v. Commercial Bank of

A writing which merely acknowledges the deposit of money does not properly fall within the meaning of a certificate of deposit, but is a mere receipt, furnishing evidence between the bank and the depositor.216 To be a certificate of deposit, the writing must contain also the bank's promise to pay the amount deposited. Such a certificate is in effect a promissory note,217 and, if it be payable to order or to bearer, it is a negotiable instrument.218 Certificates of deposit do not or

Columbia, 45 S. C. 563, 23 S. E. 939, 33 L. R. A. 700, 55 Am. St. Rep. 800. See "Banks and Banking," Dec. Dig. (Key No.) §§ 119, 152; Cent. Dig. §§ 289-292, 465-482.

216 Modern Woodmen of America v. Union Nat. Bank, 108 Fed. 753, 47 C. C. A. 667 (Sanborn, J., dissenting); First Nat. Bank of Union Mills v. Clark, 134 N. Y. 368, 32 N. E. 38, 17 L. R. A. 580. See, also, Young v. American Bank, 44 Misc. Rep. 305, 89 N. Y. Supp. 913. Contra: Long v. Straus, 107 Ind. 94, 6 N. E. 123, 7 N. E. 763, 57 Am. Rep. 87. See "Banks and Banking.” (Key No.) § 152; Cent. Dig. §§ 336, 465–482.

Dec. Dig.

217 In re Brown's Estate, 113 Iowa, 351, 85 N. W. 617. Where a certificate was payable to the order of a minor or guardian, payment to one supposed to be, but not, such guardian was not a discharge. McMahon v. German-American Nat. Bank of Little Falls, 111 Minn. 313, 127 N. W. 7, 29 L. R. A. (N. S.) 67. See "Banks and Bankings," Dec. Dig. (Key No.) § 152; Cent. Dig. §§ 465-482; "Bills and Notes," Dec. Dig. (Key No.) § 42; Cent. Dig.

$62.

218 First Nat. Bank of Mishawaka v. Stapf, 165 Ind. 162, 74 N. E. 987, 112 Am. St. Rep. 214; Fells Point Sav. Inst. of Baltimore v. Weedon, 18 Md. 320, 81 Am. Dec. 603; Cassidy v. First Nat. Bank, 30 Minn. 86, 14 N. W. 363; Dickey v. Adler, 143 Mo. App. 326, 127 S. W. 593; Citizens' Nat. Bank v. Brown, 45 Ohio St. 39, 11 N. E. 799, 4 Am. St. Rep. 526; Read v. Marine Bank of Buffalo, 136 N. Y. 454, 32 N. E. 1083, 32 Am. St. Rep. 758; In re Baldwin's Estate. 170 N. Y. 156, 63 N. E. 62, 58 L. R. A. 122; Hanna v. Manufacturers' Trust Co., 104 App. Div. 90, 93 N. Y. Supp. 304; Miller v. Austen,. 13 How. 218, 14 L. Ed. 119; Forrest v. Safety Banking & Trust Co. (C. C.) 174 Fed. 345 (under Negotiable Instruments Law). Cf. Dollar v. International Banking Corp., 10 Cal. App. 83, 101 Pac. 34, affirmed 13 Cal. App. 331, 109 Pac. 499.

A certificate issued by a trust company, payable to the person named

dinarily contain the word "promise"; but the promise to pay is sufficiently expressed by the word "payable." Negotiable certificates of deposit are commonly in substantially the following form: "This certifies that A. B. has deposited in this bank $1,000, payable to himself, or order, on the return of this certificate properly indorsed." The words "on the return of this certificate properly indorsed" create no such contingency as to payment as affects the negotiability of the instrument, since they simply express, it has been said, what the law implies as to the duty of the holder of a promissory note in common form, in the absence of any such stipulation,219 except so far as by implication they call for presentment at a particular place; that is, at the bank. It follows that the indorser of a negotiable certificate incurs the usual liability of an indorser, 220 and that an innocent purchaser takes it free from equities or personal defenses, such as payment by the bank to the original holder, to the same extent as such purchasers of other negotiable instruments.221

or his assigns, on return of the certificate, which is assignable only on the books of the company, is not a negotiable instrument. Zander v. New York Security & Trust Co., 178 N. Y. 208, 70 N. E. 449, 102 Am. St. Rep. 492. See, also, In re Fearing, 138 App. Div. 881, 123 N. Y. Supp. 396. See "Bills and Notes," Dec. Dig. (Key No.) §§ 42, 147, 151; Cent. Dig. §§ 62, 363, 380.

219 Hatch v. First Nat. Bank, 94 Me. 348, 47 Atl. 908, 80 Am. St. Rep. 401; Cassidy v. First Nat. Bank, 30 Minn. 86, 14 N. W. 363; Kirkwood v. First Nat. Bank of Hastings, 40 Neb. 484, 58 N. W. 1016, 24 L. R. A. 444, 42 Am. St. Rep. 683. See "Banks and Banking," Dec. Dig. (Key No.) § 152; Cent. Dig. §§ 465-482; “Bills and Notes," Dec. Dig. (Key No.) §§ 147, 151; Cent. Dig. §§ 380, 390.

220 Cate v. Patterson, 25 Mich. 191; Beckwith v. Webber, 78 Mich. 390, 44 N. W. 330. See "Banks and Banking," Dec. Dig. (Key No. 152; Cent. Dig. 88 465-482.

221 Kavanagh v. Bank of America, 239 Ill. 404, 88 N. E. 171; Kirkwood v. First Nat. Bank of Hastings, 40 Neb. 484. 58 N. W. 1016, 24 L. R. A. 444, 42 Am. St. Rep. 683. See, also, Armstrong v. American Exch. Nat. Bank, 133 U. S. 433, 10 Sup. Ct. 450, 33 L. Ed. 747; In re Ellard, 62 Misc. Rep. 374, 114 N. Y. Supp. 827; Currey v. Joplin Savings Bank, 100 Mo. App. 532, 74 S. W. 1036; McGorray

Whether a certificate which is payable "in current funds" is negotiable depends, as in the case of other instruments, upon whether these words are to be construed as signifying money that is, legal tender-or as including other current means of payment. It is forcibly argued that unless these words have the broader meaning they add nothing, and that unless they be disregarded they must be construed as including other means of payment, and upon this construction some courts hold certificates payable in "current funds," or in "currency," as not negotiable; 222 but by the prevailing rule the words are construed to signify money, and the negotiability of the certificates is sustained. 22:

Power of Bank to Issue

The issue of certificates of deposit is an ordinary incident of the business of banking, and is within the power of the bank or banker, unless there be some statute forbidding it.224

v. Stockton Savings & Loan Soc., 131 Cal. 321, 63 Pac. 479. Contra: Lebanon Bank v. Mangan, 28 Pa. 452. Cf. Shute v. Pacific Nat. Bank, 136 Mass. 487.

A bank is liable on an accommodation certificate to a purchaser thereof for value, though he knew it was accommodation paper. Holland Trust Co. v. Waddell, 75 Hun, 104, 26 N. Y. Supp. 980. See "Banks and Banking," Dec. Dig. (Key No.) § 152; Cent. Dig. §§ 465-482.

222 National State Bank of Lafayette v. Ringel, 51 Ind. 393. See Norton, Bills and Notes (3d Ed.) p. 105. See "Bills and Notes," Dec. Dig. (Key No.) §§ 147, 151; Cent. Dig. §§ 380, 390.

223 Hatch v. First Nat. Bank, 94 Me. 348, 47 Atl. 908, 80 Am. St. Rep. 401; Kirkwood v. First Nat. Bank of Hastings, 40 Neb. 484, 58 N. W. 1016, 24 L. R. A. 444, 42 Am. St. Rep. 683; Citizens' Nat. Bank v. Brown, 45 Ohio St. 39, 11 N. E. 799, 4 Am. St. Rep. 526; Klauber v. Biggerstaff, 47 Wis. 551, 3 N. W. 357, 32 Am. Rep. 773 (currency). See, also, Bull v. First Nat. Bank, 123 U. S. 105, 8 Sup. Ct. 62, 31 L. Ed. 97. See "Bills and Notes," Dec. Dig. (Key No.) §§ 147, 151, 162; Cent. Dig. §§ 380, 390-398.

224 Abbott v. Jack, 136 Cal. 510, 69 Pac. 257; Bank of Peru v. Farnsworth, 18 Ill. 563. See "Banks and Banking," Dec. Dig. (Key No.) 152; Cent. Dig. §§ 465-482.

Their issue is therefore within the power of a banking corporation authorized to receive deposits and to exercise the usual powers incidental to the business.225 Banking corporations are sometimes forbidden to put in circulation notes not payable on demand and without interest, and a time certificate of deposit has been held within this prohibition.226 But under Rev. St. U. S. § 5183 (U. S. Comp. St. 1901, p. 3482), providing that no national banking association shall issue post notes or any other notes to circulate as money than such as are authorized by the act—that is, other than bank notes-the issue of certificates of deposits in ordinary form is not forbidden.227 Necessity for Demand

Certificates of deposit are sometimes by their terms made payable at a future day; but often the time of payment is not expressed, except by the words making them payable on the return of the certificate. If a certificate is payable at a future day certain, it must be presented for payment on the day of the maturity in order to charge an indorser,228 and it is overdue after that date, so far as concerns the rights of subsequent purchasers, who will take it subject to defenses.229

Ordinarily presentment is not necessary to charge a per

225 Francois v. Lewis, 68 Minn. 409, 71 N. W. 621; Bank of Saginaw v. Title & Trust Co. of Western Pennsylvania (C. C.) 105 Fed. 491. See "Banks and Banking," Dec. Dig. (Key No.) § 152; Cent. Dig. §§ 465–482.

226 Bank of Orleans v. Merrill, 2 Hill (N. Y.) 295; Leavitt v. Palmer, 3 N. Y. 19, 51 Am. Dec. 333. See "Banks and Banking," Dec. Dig. (Key No.) § 152; Cent. Dig. §§ 465–482.

227 Riddle v. First Nat. Bank (C. C.) 27 Fed. 503; Hunt, Appellant, 141 Mass. 515, 6 N. E. 554; Logan Nat. Bank of West Liberty, Ohio, v. Williamson, 2 Ohio Cir. Ct. R. 118. See "Banks and Banking," Dec. Dig. (Key No.) § 152; Cent. Dig. §§ 465–482. 228 Towle v. Starz, 67 Minn. 370, 69 N. W. 1098, 36 L. R. A. 463. See "Banks and Banking," Dec. Dig. (Key No.) § 152; Cent. Dig. §§ 465-482.

229 First Nat. Bank of Rapid City v. Security Nat. Bank of Sioux City, 34 Neb. 71, 51 N. W. 305, 15 L. R. A. 386, 33 Am. St. Rep. 618; Kirkwood v. First Nat. Bank of Hastings, 40 Neb. 484, 58 N.