Court Opinion

ID: 6561973
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:16:20.976184+00
Date Added: 2024-06-11T15:56:34.454202
License: Public Domain

Elliott, J.
(dissenting). Upon the second trial of this cause at nisi prius I endeavored to follow the opinion of this court reversing the first judgment, as reported in 5 Colo. 185. It is a familiar rule that on this appeal such former opinion is to be regarded as the law governing the case, so far as the matters involved in the litigation remain unchanged. Lee v. Stahl, 13 Colo. 174. If on this appeal the court had affirmed the last judgment of the district •court simply upon the ground of following “ the law of the case,” I should have refrained altogether from participating in the decision; but I feel constrained to dissent from a general re-affirmance of the doctrine announced (Bank v. Boettcher, 5 Colo. supra), because the same appears to be manifestly at variance with the decision of this court in Lehow v. Simonton, 3 Colo. 346, and contrary to sound principles and the better authorities relating to the obligation of banks to pay the checks of their depositors. The opinion in Lehow v. Simonton declares, in effect, that, where two parties enter into a simple contract for the benefit of a third, the third party, though a stranger to the consideration, may maintain an action for a breach of such contract, ■notwithstanding there may be a want of privity between .himself and the promisor. As the arrangement between a bank and its depositor is a matter of simple contract, the Lehow-Sim.onton Case would seem to be a complete answer to the objection that there is a want of privity between the check-holder and the bank, as stated in Bank v. Millard, 10 Wall. 152. But I must not be understood as conceding that there is a Avant of privity between the bank .and Iona *24fide check-holders upon presentation of their checks for payment in the usual course of business. According to the system of modern banking, when a general deposit is made, the implied, if not the express, promise by the bank to the depositor is that the bank will pay the depositor’s checks, in sums to suit his convenience, in the order of their presentation, to the extent of the deposit; and this promise is held out to the community as an inducement to patronage and public confidence, for the benefit of all who have occasion to receive the checks of the depositor in the usual course of business. Hence when a bank, having sufficient funds of a depositor to pay his checks, refuses to make such payment upon proper presentation, it would seem that the check-holder must have a right of action directly against the bank for the violation of the promise made for his benefit. The reasons in support of this view are numerous and most convincing. I shall not undertake to elaborate them, preferring, under the circumstances in which this opinion is prepared, to quote from standard authorities and cite leading judicial decisions in support of the view announced in this opinion.
In Daniel on Negotiable Instruments (vol. 2, p. 653 et seq.) we find the following: “ The objection to the check-holder’s suing the bank, on the ground that there is no privity between him and the bank, seems to us utterly untenable. It is true there is no privity before the present-' ment of the check, but by that very act they are brought in privity, and the check-holder’s right to sue the bank completed. The sole motive often, if not generally, inducing the depositor to place his funds in bank, is the desire to have them in safety, where they may be checked on at convenience. The bank receives its reward in the use of the money, and in the business attracted in checking it out; and it is the- universal understanding between banks and depositors, arising from the customs of trade, that the check of the latter is to be paid upon presentment. The Hnited States supreme court so declares in a recent opinion, though *25as yet it has nót followed that declaration to its logical sequence. The drawer of the check makes the deposit, and draws the check with this understanding. The bank receives the money with the like understanding, and so the holder receives the check; and the mutual understanding of the parties, although they have not individually concerted together, creates an implied privity, and completes the contract between them. * * * As ah acceptance of a bill may be implied, so may the acceptance of a check; and, as a promise to accept will operate as an acceptance to the holder who takes a bill on the faith thereof, so should it be as to a check. Now, by the very act of drawing a check, the drawer communicates to the payee the fact that the bank holds that amount to his credit which it has agreed to pay on his check. By receiving the deposit, the bank has impliedly so agreed; and the holder receiving the check in reliance on this condition of things should be sustained, provided the drawer has not deceived him by drawing without funds to meet the check. * * * It is no answer to these views to say that the holder of a bill cannot sue the drawee unless it be accepted. The drawee of a bill does not receive money to be paid out on checks. And the distinction between the bank or banker on whom the check is drawn and the ordinary drawee of a bill is the very gist of the distinction between the rights of the holders of the different instruments.”
In Morse on Banks and Banking (3d ed. §493 et seq.) the learned author says: • “ The most numerous body of decisions sustains the view that a check is neither a legal or an equitable assignment as between drawer and payee, nor a sufficient foundation for any action by the holder against the bank. * * * Another class of cases affirm that a check is an assignment as between drawer and payee, * * * and that, upon presentment, the bank is brought into privity with the holder, and is liable to him for improper refusal to pay. * * * Upon this side we find a goodly array of authorities, and all the advanced, clear, in*26dependent thought and reasoning. * "x' * . The plain common sense of the holder’s rights would seem to be * * * that, as between the bank and the holder, presentment for payment works a transfer of the fund. If the unincumbered funds in its possession are sufficient, and this fact is within the knowledge attainable by the bank with reasonable diligence, it is the duty of the bank to pay the check. It is bad faith on its part, or negligence, not to do it, and the check-holder is directly injured by its wrongful conduct. What more does the law require as the basis for a right of action? * * * Legal analogies are plenty and forcible. B. writes: ‘I promise to pay D. or order $100 on demand.’ D. orders the money paid to IL It is perfectly clear that IL can sue B. if he refuses to pay according to his promise. B. has in fact promised to pay IL, for he engaged to pay to whomsoever D. should order, and IT. is D.’s order. Now, a bank receiving '$100 on general deposit impliedly promises (by the universal understanding of trade, as ascertained in innumerable and unbroken decisions) to pay that money to the depositor, or such persons, and in such amounts, as he may order. Where, then, is the difference between the position of the holder of a check and the indorsee of a note? The amount is fixed in the note from the start. In the check, however, B. only says you must not go beyond your deposit, but you may fill in the check for a less amount if you wish, and I will pay it. That is a promise to pay the amount of a properly drawn check, just as truly as a -note is a promise to pay the amount named in it. As soon as the check is drawn and presented, the promise takes effect on the definite amount. The only other difference is that one promise is in writing, and the other verbal or tacit; but this can make no substantial difference, except as opening the door to the fraud of a depositor who draws more than one check against the same money; and this can never affect the bank, as its promise and duty are only to pay checks as they are presented. It is a general rule of law that, if a *27promise is made by B. to D. for the benefit of BL, the latter can sue B. for the breach. Prom this principle also results, as a corollary, the right of a check-holder to sue the bank. Suppose the drawer fails after the bank’s refusal to pay the holder, and he loses half the amount of it, or suppose, after refusal, the drawer checks out the money himself, and absconds, or is found to be utterly worthless; the holder loses the whole value of the check by reason of conduct on the part of the bank which all the cases agree in condemning as wrongful and contrary to its duty. What must we think of a system of law that claims as one of its fundamental maxims, ‘Wherever there is a right there is a remedy,’ and proclaims that for every injury the law will give redress, and yet denies the right of the check-holder to sue the drawee? We hope that it will not be many years before it will cease to be possible to find this blot on the common law. No amount of deciding in the United States supreme court, nor in any other chamber of wisdom, can make the unjust just; and as surely as the Dred Scott decision is dead, so surely will the decision in National Bank of the Republic v. Millard die with the judges who rendered it.” See notes and cases cited by the author in connection with the foregoing.
In Story on Promissory Notes (section 189) the eminent author says: “ Checks have many resemblances to bills of exchange, and are, in many respects, governed by the same rules and principles as the latter. But nullum simile est idem; and their nature, obligation and character are in some respects different from those of common bills of exchange. The circumstances in which they principally differ from bills of exchange, or at least from bills of exchange in ordinary use and circulation, are: (1) They are always drawn on a bank or on bankers, and are payable immediately on presentment, without any days of grace. (2) They require no acceptance, as distinct from prompt payment. (3) They are always supposed to be drawn upon a previous deposit of funds, and are an absolute appropriation of so *28much money in the hands of the bank or bankers to the holder of the check.”
Mr. Justice Sharswood of the supreme court of Pennsylvania, in his notes to Byles on Bills (pages 21, 22), says: “ A bill of exchange is not an equitable assignment or appropriation, but the cases treat a check on a banker as such; and if the holder is a holder for value, as to whom the drawer cannot revoke rightfully the power which he holds, coupled with an interest, why should not the banker, upon distinct claim and notice, be held bound by the equity? ”
The views of the text-writers as above stated are based upon strong and well-reasoned opinions from the highest .courts of several states, squarely and emphatically declaring the liability of banks and bankers to the bona fide check-holders of their depositors. Munn v. Burch, 25 Ill. 35; Roberts v. Austin, 26 Iowa, 323; Lester v. Given, 8 Bush, 357; and Fogarties v. Bank, 12 Rich. Law, 518,— are leading cases upon the question. Other decisions, tending in the same direction, are referred to in the notes to Daniel’s and Morse’s works, supra. It is not my purpose on this occasion to attempt a citation and analysis of the many authorities bearing upon this question. Prom the weight and strength of the authorities already quoted, it will readily be perceived why I cannot approve the doctrine that banks and bankers may wrongfully refuse to pay their depositors’ checks without incurring any liability to bona fide checkholders. Hence I regret that certain portions of the opinion prepared by Mr. Commissioner Reed should have been promulgated without a thorough re-examination of the question. It seems to me exceedingly unfortunate that the opinions of this court should be arrayed on the wrong side of such an important question of commercial law. It is most desirable that upon this question, as upon others, our decisions should be ranked with those of “ advanced, clear, independent thought and reasoning.”