It was early declared, judicially, that where a check is crossed, bankers generally refuse to pay it to any one except a banker, and, if they do pay it to a person not a banker, they consider they do it at their peril, in the event of the party to whom the payment is made not being entitled to receive it; that the object is to secure the payment not to any particular banker, but to a banker, in order that it may be easily traced for whose use the money was received; and that it was not intended thereby to at all restrict the circulation or negotiability of the check, but merely to compel the holder to present it through a quarter of known respectability and credit." 1980 18. With the foregoing as a basis, it was later judicially declared that: “A crossing is a mere memorandum on the face of the check, and forms no part of the instrument itself, and in no way alters its effect, but by the Bills of Exchange Act, 1882, a crossing is a material part of the check."1 Furthermore, the practice of crossing was declared a usage highly beneficial to the public. Checks are in their essential character payable to bearer; they are in many respects treated as bank notes; they are liable to be mislaid, lost, or stolen, and may get into the hands of persons who are not entitled to receive payment of them; that, therefore, as a great protection and safeguard to the real owner, the means should exist of tracing and ascertaining for whose use the money paid on a check is received, and to whom the money actually goes; and the payment through a banker secures this object."" As illustrating the protection afforded by a crossed check to the owner of a check, suppose the customer of a banker draws and crosses a check, intending to pay it to a person to whom he was indebted; afterwards, and before handing it over to his creditor, he either loses it or it is stolen from him. If this check were presented otherwise than through a banker, it would not be paid; but if presented by a banker, it would." * 781 Moo. & M. (Eng.) 161 (1828). 797 Exch. (Eng.) 403 (1852). 80 Ibid. 81 Eng. B. of E. Act, Sec. 78. behalf or for his own benefit, get the check certified instead of getting it cashed, the drawer is discharged." The liability of a drawer makes the certification of a check unlike the acceptance of a bill of exchange, because the effect of certification of a check depends to some extent upon the person in whose behalf it is made.” By acceptance of a bill of exchange, the drawee who accepts becomes the primary and principal debtor as to all parties, even as to the drawer, if his acceptance be for value; whereas, the certification of a check is similar to an acceptance, in that it makes the bank the principal debtor as to the holder, but not as to the drawer of the check, when the drawer has had the check certified in his own behalf and for his own benefit. CROSSED CHECKS 16. The practice of crossing checks with the names of bankers is in very general use in England, occurring in very many instances not only in London but in other parts of the kingdom of Great Britain," where it has grown to be of such importance as to be accorded provisionary attention in the Bills of Exchange Act, 1882, and, in Canada, in the Bills of Exchange Act, 1890." 75 ORIGIN, USES, AND BENEFITS 17. The crossing of checks had its origin in a custom. that began in the clearing house and was afterwards adopted outside. The clerks of the different bankers who did business there were accustomed to writing across the checks the name of the employers, so as to enable the clearing house clerks to make up the accounts. It afterwards became a common practice to cross checks, which were not intended to go through the clearing house at all, with the name of a banker or with the words and company, and a custom or usage sprang up in regard to this also." 72 156 Mass. 460 (1892). 73 Am. & Eng. Encyc. Law (2d Ed.), Vol. 5, p. 1,056. 747 Exch. (Eng.) 398, 402 (1852). 75 Eng. B. of E. Act, Secs. 76-82. 76 Can. B. of E. Act, Sees. 75-81. 777 Exch. (Eng.) 402 (1852). It was early declared, judicially, that where a check is crossed, bankers generally refuse to pay it to any one except a banker, and, if they do pay it to a person not a banker, they consider they do it at their peril, in the event of the party to whom the payment is made not being entitled to receive it; that the object is to secure the payment not to any particular banker, but to a banker, in order that it may be easily traced for whose use the money was received; and that it was not intended thereby to at all restrict the circulation or negotiability of the check, but merely to compel the holder to present it through a quarter of known respectability and credit." 1980 18. With the foregoing as a basis, it was later judicially declared that: “A crossing is a mere memorandum on the face of the check, and forms no part of the instrument itself, and in no way alters its effect,' but by the Bills of Exchange Act, 1882, a crossing is a material part of the check." Furthermore, the practice of crossing was declared a usage highly beneficial to the public. Checks are in their essential character payable to bearer; they are in many respects treated as bank notes; they are liable to be mislaid, lost, or stolen, and may get into the hands of persons who are not entitled to receive payment of them; that, therefore, as a great protection and safeguard to the real owner, the means should exist of tracing and ascertaining for whose use the money paid on a check is received, and to whom the money actually goes; and the payment through a banker secures this object.** As illustrating the protection afforded by a crossed check to the owner of a check, suppose the customer of a banker draws and crosses a check, intending to pay it to a person to whom he was indebted; afterwards, and before handing it. over to his creditor, he either loses it or it is stolen from him. If this check were presented otherwise than through a banker, it would not be paid; but if presented by a banker, it would." 781 Moo. & M. (Eng.) 161 (1828). 797 Exch. (Eng.) 403 (1852). 80 Ibid. 81 Eng. B. of E. Act, Sec. 78. The mere circumstance of the necessity of placing the check in the hands of a banker would, of itself, oppose some impediment to a fraudulent holder in dealing with the check, and making it available; and the fact that it could at once be traced and ascertained for whose use the proceeds were received would give considerable aid in enabling the drawer to recover the money, on the event of his being entitled so to do. On the other hand, if the banker disregarded the custom and paid the check to a private individual, that circumstance would be strong evidence against him in the event of his seeking to charge his customer with the payment, if the person actually presenting it were not the lawful holder and bearer of the check. Appended are the sections of the English bills of exchange act governing crossed checks. RULES THAT GOVERN CROSSED CHECKS General and Special Crossings Defined. -(1) Where a cheque bears across its face an addition of: (a) The words and company or any abbreviation thereof between two parallel transverse lines, either with or without the words not negotiable; or (b) two parallel transverse lines simply, either with or without the words not negotiable; that addition constitutes a crossing, and the cheque is crossed generally. (2) Where a cheque bears across its face an addition of the name of a banker, either with or without the words not negotiable, that addition constitutes a crossing, and the cheque is crossed specially and to that banker.84 Crossing by Drawer or After Issue. -(1) A cheque may be crossed generally or specially by the drawer. (2) Where a cheque is uncrossed, the holder may cross it generally or specially. (3) Where a cheque is crossed generally, the holder may cross it specially. (4) Where a cheque is crossed generally or specially, the holder may add the words not negotiable. (5) Where a cheque is crossed specially, the banker to whom it is crossed may again cross it specially to another banker for collection. (6) Where an uncrossed cheque, or a cheque crossed generally, is sent to a banker for collection, he may cross it specially to himself.“ 84 Eng. B. of E. Act, Sec. 76. 85 Eng. B. of E. Act, Sec. 77. Crossing a Material Part of Cheque. - A crossing authorized by this Act is a material part of the cheque; it shall not be lawful for any person to obliterate, or, except as authorized by this Act, to add to or alter the crossing." 86 Duties of Banker as to Crossed Cheque. -(1) Where a cheque is crossed specially to more than one banker, except when crossed to an agent for collection being a banker, the banker on whom it is drawn shall refuse payment thereof. (2) Where the banker on whom a cheque is drawn which is so crossed nevertheless pays the same, or pays a cheque crossed generally otherwise than to a banker, or if crossed specially otherwise than to the banker to whom it is crossed, or his agent for collection being a banker, he is liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid. Provided that where a cheque is presented for payment which does not at the time of presentment appear to be crossed, or to have had a crossing which has been obliterated, or to have been added to or altered otherwise than as authorized by this Act, the banker paying the cheque in good faith and without negligence shall not be responsible or incur any liability, nor shall the payment be questioned by reason of the cheque having been crossed, or of the crossing having been obliterated or having been added to or altered otherwise than as authorized by this Act, and of payment having been made otherwise than to a banker, or to the banker to whom the cheque is or was crossed, or to his agent for collection being a banker, as the case may be." Protection to Banker and Drawer Where Cheque Is Crossed. - Where the banker, on whom a crossed cheque is drawn, in good faith and without negligence pays it, if crossed generally, to a banker, and if crossed specially, to the banker to whom it is crossed, or his agent for collection being a banker, the banker paying the cheque, and, if the cheque has come into the hands of the payee, the drawer, shall respectively be entitled to the same rights and be placed in the same position as if payment of the cheque had been made to the true owner thereof." Effect of "Not Negotiable" Crossing on Holder:- Where a person takes a crossed cheque which bears on it the words not negotiable, he shall not have and shall not be capable of giving a better title to the cheque than that which the person from whom he took it had."" Protection to Collecting Banker. - Where a banker in good faith and without negligence receives payment for a customer of a cheque crossed generally or specially to himself, and the customer has no 86 Ibid., Sec. 78. 87 Ibid., Sec. 79. 88 Ibid., Sec. 80. 89 Ibid., Sec. 81. |