Opinion ID: 1965433
Heading Depth: 1
Heading Rank: 2

Heading: Applicability of Negotiable Instruments Law.

Text: We think the rights of the parties are to be determined under the law of negotiable instruments, for such these checks undoubtedly were. Each of them was in the following form: U. S. Dollar Travelers Cheque When countersigned below with this signature ............................... Before cashing write city, and date 19... AMERICAN EXPRESS COMPANY at its paying agencies Pay this Cheque from our Balance to the Order of ............................................$100.00 In United States In All Other Countries One Hundred Dollars At current buying rate for Bankers' Cheques on New York Countersign here in presence of person cashing ........................................ ........................... Treasurer. This cheque is redeemable only at the company's offices and bankers in United States We have not been cited to any reported case involving this exact situation (where travelers checks have been lost or stolen after being countersigned) nor has our own search disclosed any. We turn first to a consideration of how instruments of this kind may be defined or classified. Williston states that such checks are a development from letters of credit and serve the dual purpose of a letter of credit and a draft on the issuing agency. Williston, Negotiable Instruments, 287-293 (1933). In Ogden, Negotiable Instruments, § 254 (3d ed. 1931), such checks are referred to as negotiable instruments. In 7 Am.Jur. 909, we find the statement that such checks are foreign bills of exchange and are negotiable instruments, citing Paulink v. American Express Co., 265 Mass. 182, 163 N.E. 740, 62 A.L.R. 506. In a comparatively recent Federal case the function and status of these checks were well-stated thus: The essential value and purpose of a traveler's cheque is that it is a cashier's cheque payable by a bank or other corporation of unquestioned financial standing and integrity which is placed by the issuing bank in the hands of agent banks for delivery to any person who will pay the face value plus a small premium. It is payable to such individuals without identification and merely upon corresponding signatures. They are freely accepted not only by banks but in remote rural communities. That they are cheques which are intended to be and are freely negotiable cannot be gainsaid. Refusal of payment by the issuing bank or trust company because of defenses ordinarily available would be practically destructive of the entire business of placing such cheques in circulation. The special attributes and functions of these cheques have long been recognized. Peoples Sav. Bank v. American Surety Co., D.C., W.D.Mich.1936, 15 F.Supp. 911, 913. The United States Circuit Court of Appeals for the 8th Circuit held that such instruments are essentially cashier's checks in the nature of bills of exchange drawn by the issuing bank on itself and accepted by the act of issuance. Mellon Nat. Bank v. Citizens Bank & Trust Co., 8 Cir., 1937, 88 F.2d 128; certiorari denied, 302 U.S. 702, 58 S.Ct. 21, 82 L.Ed. 542. This ruling was repeated in another Federal case five years later and the court reiterated that `It is a bill of exchange drawn by the issuing bank upon itself and is accepted by the act of issuance, and the right of countermand as applied to ordinary cheques does not exist as to it.' Pines v. United States, 8 Cir., 123 F.2d 825, 828. Since the Express Company defended on the ground that it had redeemed the checks in the hands of holders in due course we must consider the status of the checks when they left appellant's possession. At the risk of seeming to oversimplify the matter we think it is correct to say that appellant by adding his countersignature to the checks made them fully negotiable within the meaning of §§ 1 and 9 of the Uniform Negotiable Instruments Law, [2] and that in the absence of a showing of fraud or deceit on the part of the Express Company it was bound to honor them when presented by a holder in due course. Transcontinental & W. Air v. Bank of America, Etc., 46 Cal.App.2d 708, 116 P. 2d 791; Farmer's State Bank of Dickinson v. Koffler, 60 N.D. 11, 232 N.W. 307, 70 A.L.R. 1223; Gruntal v. United States Fidelity & Guaranty Co., 254 N.Y. 468, 173 N.E. 682, 73 A.L.R. 1337; 37 McKinney's Consolidated Laws of New York Annotated, c. 38, Negotiable Instruments Law, § 96; D.C.Code 1940, § 28-407; Uniform Negotiable Instruments Law, § 57. And appellant's attempt to countermand the checks after they were already in circulation was ineffectual as to holders in due course. Pines v. United States, supra. In New York [3] it has been held that the original purchaser of a travelers check was the payee and that his countersignature would constitute an endorsement in blank. Sullivan v. Knauth, 161 App.Div. 148, 146 N.Y.S. 583, affirmed 220 N.Y. 216, 115 N.E. 460, L.R.A.1917F, 554, in an opinion which did not decide this particular point. [4] Perhaps it may be questioned (though appellant has not done so) whether the checks were complete and regular on their face because no name was inserted in the Pay to the Order of blank. [5] This question has been answered in Sullivan v. Knauth, supra. It has also been answered in City National Bank of Galveston v. American Express Co., Tex.Com.App., 16 S.W.2d 278, affirming American Express Co. v. City National Bank, Tex.Civ.App., 7 S.W.2d 886. There the court said that the fact that the date and name were left blank did not prevent the purchaser from becoming a holder in due course, since from the unique nature of travelers checks such unfilled blank spaces do not render them incomplete under the Negotiable Instruments Act. As we have already indicated, the act of countersigning made them in effect bearer instruments. An Oklahoma case, American Express Co. v. Anadarko Bank & Trust Co., 179 Okl. 606, 67 P.2d 55, 57, 110 A.L.R. 972, goes still further and holds that the countersignature in the lower lefthand corner of a travelers check shall constitute the countersign whereby all doubts are dispelled and any payee of said instrument is assured that he can accept the same with the same freedom that he would the tender of actual money or currency. [6] We conclude that whatever may be its effect in the case of ordinary bank checks the lack of a named payee in the body of a travelers check does not render the instrument incomplete as to a subsequent holder for value. On the contrary we think that the very nature of a travelers check is such that, having been signed and countersigned by the purchaser, it may be regarded as having been endorsed in blank and rendered subject to negotiation by delivery; and that a party cashing such a check containing identical signature and countersignature is entitled to collect from the issuer. Peoples Sav. Bank v. American Surety Co., D.C.W.D.Mich., 15 F.Supp. 911. It follows from what we have said that the Express Company was bound to honor the checks when presented for payment, that such payment in the regular course of business discharged the instruments and extinguished any claim of appellant thereunder. [7] In addition to the cases already cited we think the following authorities generally support the views we have expressed. Poess v. N. Y. Twelfth Ward Bank, 43 Misc. 45, 86 N.Y.S. 857; Hibbs v. Brown, 190 N.Y. 167, 82 N.E. 1108; Greeser v. Sugarman, 37 Misc. 799, 76 N.Y.S. 922; Venable v. American Express Co., 217 N.C. 548, 8 S.E.2d 804; Samberg v. American Express Co., 136 Mich. 639, 99 N.W. 879; 7 C.J. 702; 9 C.J.S., Banks and Banking, § 344. Affirmed.