A certificate of deposit may be defined as "a written acknowledgment by a bank or banker of the receipt of a sum of money on deposit, which the bank or banker promises to pay to the depositor, to the order of the depositor, or to some other person or to his order, and its form must determine its negotiability." This, instead of a pass-book, is given to a person who wishes to make a single deposit of money. The certificate may be payable on demand; more usually it is payable on time. Their issue, once restricted or forbidden in some states,2 is now everywhere lawful.

I Bank v. Farnsworth, 18 Ill. 563. See Bank v. Merrill, 2 Hill (N. Y.) 295; Leavitt v. Palmer, 3 N. Y. 19; Hazleton Coal Co. v. Megargel, 4 Pa. 324; Darden v. Banks, 21 Ga. 297. An agreement between the cashier and holder of a certificate that he can check against the amount is not within the statute of frauds. Hamlin v. Simpson, 105 Iowa 125. A bank having a nominal capital of $25,000, an indebtedness of $15,000 and $21,000 of assets, issued certificates of deposit to its stockholders for $12,500 and $12,500 of new capital to take up the other. The certificates were held to be without consideration as against the receiver. State v. Bank, 65 Neb. 20. 2 Abbott v. Jack, 136 Cal. 510; Murphy v. Pacific Bank, 119 Cal. 334,

2. Is it a Note or Receipt?

4

5

In three states, perhaps more, a certificate is merely a receipt,3 therefore is non-negotiable, and transferable only by the rules that apply to non-negotiable paper. An action thereon must be brought in the same manner, to which the same defences can be made, as on other non-negotiable paper. In far more states a certificate, except that of a clearing-house, is like a promissory note, negotiable, and can be transferred like other negotiable paper. Often it is negotiable by delivery;8 or by endorsement and delivery, like other negotiable paper. The holder of a certificate endorsed in blank can fill in his own name as

341; Hargroves v. Chambers, 30 Ga. 580; Hunt v. Divine, 37 Ill. 137; Pelham v. Adams, 17 Barb. (N. Y.) 384; Curtis v. Leavitt, 15 N. Y. 9; Logan Nat. Bank v. Williamson, 2 Ohio C. Ct. 118; State v. Shove, 96 Wis. 1, 6. 3 Shute v. Pacific Nat. Bank, 136 Mass. 487; Dempsey v. Harm, 7 Sad. (Pa.) 426; First Nat. Bank v. Greenville Nat. Bank, 84 Tex. 40.

4 Loudon Sav. Fund Society v. Hagerstown Sav. Bank, 36 Pa. 498. 5 First Nat. Bank v. Greenville Nat. Bank, 84 Tex. 40. See also Renfro v. Merchants' & Mech. Bank, 83 Ala. 425.

6 This clearly falls within the category of a receipt. Dutton v. Merchants' Nat. Bank, 16 Phila. 94.

7 Renfro v. Merchants' & Mech. Bank, 83 Ala. 425; Kirkwood v. First Nat. Bank, 40 Neb. 484; Poorman v. Mills, 35 Cal. 118; Brummagim v. Tallant, 29 Cal. 503; Lynch v. Goldsmith, 64 Ga. 42; Bickley v. Commercial Bank, 43 S. C. 528, 533; Gregg v. Union Co. Nat. Bank, 87 Ind. 238; Long v. Strauss, 107 Ind. 94; First Nat. Bank v. Stapf, 74 N. E. (Ind.) 987; Bean v. Briggs, 1 Iowa 488; Munger v. Albany City Nat. Bank, 85 N. Y. 580; Pardee v. Fish, 60 N. Y. 265; Smiley v. Fry, 100 N. Y. 262; Bank v. Merrill, 2 Hill (N. Y.) 295; Hanna v. Manufacturers' Trust Co., 104 N. Y. App. Div. 90; Bellows Falls Bank v. Rutland Co. Bank, 40 Vt. 377; Klauber v. Biggerstaff, 47 Wis. 551, 555; Miller v. Austen, 13 How. (U. S.) 218; Citizens Nat. Bank v. Brown, 45 Ohio St. 39; Hatch v. First Nat. Bank, 94 Me. 348; Dietrich v. Rothenburger, 75 S. W. (Ky.) 271; Mitchell v. Easton, 37 Minn. 335; Re Central Bank, 17 Ont. (Can.) 574. See 42 Am. Dec. 576. Nor is its negotiability destroyed by stipulations that it is payable on its return properly endorsed, or in current funds, or that it shall bear interest if left six months. Kirkwood v. First Nat. Bank, 40 Neb. 484. But a certificate issued by a trust company payable to the depositor and "her assigns, on return of this certificate," is not negotiable. Zander v. N. Y. Security & Trust Co., 178 N. Y. 208, affg. 81 App. Div. 635. 8 Shanklin v. Board of Com. of Madison Co., 21 Ohio St. 575.

9 Citizens' Nat. Bank v. Brown, 45 Ohio St. 39; Kirkwood v. First Nat. Bank, 40 Neb. 484.

payee;10 and a certificate made payable to the depositor or order on its return properly endorsed is negotiable without the depositor's endorsement.11 A person, therefore, to whom it has been delivered can demand the money after endorsing the certificate. 12 Again, the negotiability of a certificate is not affected by making it payable in current funds instead of money,13 nor by the endorsement of an individual at the time of issuing it for the purpose of giving it greater credit.14 Lastly, the holder can sue in his own name to recover the amount.15 Wherever this rule prevails, certificates are governed by essentially the same principles as other negotiable paper, and are protected against the same defences.16 As these instruments are often endorsed, a surety or an endorser may be held as he is on other negotiable paper.17

3. Contract is Governed by Ordinary Rules of Evidence.

The certificate is a contract to which the same rules of evidence should be applied as to any other written contract. The agreement is merged in the writing. Its legal effect, therefore, cannot be varied by parol evidence,18 for example, by showing that interest was to be paid though the certificate was

10 Weirick v. Mahoning Co. Bank, 16 Ohio St. 296.

II Cassidy v. First Nat. Bank, 30 Minn. 86. See Foster v. Berkey, 8 Minn. 351.

Contra-First Nat. Bank v. Greenville Nat. Bank, 84 Tex. 40. 12 Ibid.

13 Hatch v. First Nat. Bank, 94 Me. 348, citing many cases; Bull v. Bank, 123 U. S. 105; National State Bank v. Ringel, 51 Ind. 393; Kirkwood v. First Nat. Bank, 40 Neb. 484.

Contra.-Huse v. Hamblin, 29 Iowa 501.

14 In re Baldwin's Estate, 170 N. Y. 156.

15 Citizens' Nat. Bank v. Brown, 45 Ohio St. 39.

16 Huse v. Hamblin, 29 Iowa 501; Rindskoff v. Barrett, II Iowa 172; Piner v. Clarey, 17 B. Mon. (Ky.) 645; Shankland v. Madison Co. Comrs., 21 Ohio St. 575; Citizens' Nat. Bank v. Brown, 45 Ohio St. 39; Howe v. Hartness, 11 Ohio St. 449; Dietrich v. Rothenberger, 75 S. W. (Ky.) 271. 17 In re Baldwin's Estate, 170 N. Y. 156.

18 Long v. Strauss, 107 Ind. 94; Citizens' Bank v. Jones, 121 Cal. 30.

silent on the matter;19 but may be used to establish a subsequent agreement.20

4. Construction of Them.

A frequent form of contract is one payable on demand or after a fixed date to the depositor, or to his order, "on the return of the certificate properly endorsed." This is generally regarded as negotiable,21 and payable on the endorsement of the holder or presentor, without that of the depositor;22 but in some states it is not commercial paper in the fullest sense, lacking some of the elements of certainty, and may be subject to set off subsequent to its transfer.23

It has been said that such a certificate does not require the holder to present it at the issuing bank for payment, as it contains no promise to pay there; that it is the maker's duty to find the holder and pay him.24 This is not a reasonable interpretation. The phrase, "on return of" the certificate evidently means that the holder must return it to the bank, and this doubtless has been the uniform practice from the beginning.25

19 Read v. Bank, 124 N. Y. 671, affg. 55 Hun 154.

20 Woods v. Russell, 1 Sad. (Pa.) 41.

21 Cassidy v. First Nat. Bank, 30 Minn. 86; Hatch v. First Nat. Bank, 94 Me. 348, 353; Auten v. Crahan, 81 Ill. App. 502. See Springfield Marine Ins. Co. v. Peck, 102 Ill. 265.

Contra. First Nat. Bank v. Greenville Nat. Bank, 84 Tex. 40. 22 Ibid.

23 Renfro v. Merchants' & Mech. Bank, 83 Ala. 425. Other cases of certificates similarly written are Washington Bank v. Wash. Co. Nat. Bank, 5 Hun (N. Y.) 605; Tripp v. Curtenius, 36 Mich. 494; National State Bank v. Ringel, 51 Ind. 393.

24 Hunt v. Divine, 37 Ill. 137. See Bank v. Harrison, 66 Pac. 460.

25 Sanbourn v. Smith, 44 Iowa 152; Lynch v. Goldsmith, 64 Ga. 42, 50. Said Bleckley, J., in this case: "What is a certificate of general deposit issued by a bank? Is it not an acknowledgment of the bank that it has received a loan of money from the depositor coupled with a promise implied, if none be expressed, that it will repay the loan at the bank upon actual demand or call, if no particular time or place be specified. Does not the known course of business require this construction, and does not the nature of the transaction suggest it?" A certificate of deposit is more than a deposit. Talcott v. First Nat. Bank, 53 Kan. 480, 484; Long v. Strauss, 107 Ind. 94.

5. Other Forms of Certificate Payable to Trustee.

A certificate made payable at the depositor's request to another person still remains his property until it is delivered.26 And a certificate payable to order within twelve months from date, or six months if desired, does not mature until the end of the year.27 Again, a certificate stating that on a prior date a party had a specified sum on deposit to his credit, without any words of negotiability or promise to pay, is not an obligation on which an action can be maintained; "it is merely evidentiary in its character."28 Lastly, the holder of a certificate issued on a condition is not entitled to the deposit without complying with the condition. When, therefore, the condition after due time is not fulfilled, the depositor can recover the deposit, although he is not in possession of the certificate by reason of the holder's failure or unwillingness to re-endorse it to him.29

Sometimes a certificate is made payable to one as trustee. This is an express notice to a purchaser that there is a beneficiary, and that his rights cannot be sacrificed by the trustee in the sale or pledge of the certificate for his own benefit. In other words, whoever takes a security from a trustee with the fiduciary character displayed upon its face is bound to inquire into his right to dispose of it.30 Nor is an innocent purchaser protected by any provision of the Negotiable Instruments Law.31

6. Endorsement.

The endorsement will next be considered. The bank must pay to any endorsee to whom the certificate is properly en

26 Farmers' & Merch. State Bank v. Gleason, 75 Ill. App. 251; Telford v. Patton, 144 Ill. 611. See Williams v. Chamberlain, 165 Ill. 210.

27 Citizens' Bank v. Jones, 121 Cal. 30. The alternative is for the benefit of the payee, who is not required to present it for payment at the end of the shorter period in order to hold the endorser. Ibid.

28 Modern Woodmen v. Union Nat. Bank, 47 C. C. A. 667.

29 McGorray v. Stockton Sav. Society, 131 Cal. 321.

30 Ford v. Brown, 88 S. W. (Tenn.) 1036; Bank v. Looney, 99 Tenn. 278, 290; Third Nat. Bank v. Lange, 51 Md. 138. See Fox v. Citizens' Bank & Trust Co., 37 S. W. (Tenn. Ch. App.) 1102.

31 Ford v. Brown, 88 S. W. (Tenn.) 1036.