Part 5

When certification is necessary, the maker of the check should be the one to have it certified. If you take Brown's check to his bank and have it certified, you release Brown entirely and can only hold the bank. For example,--a man sold a piece of land, and, on delivering the deed, took the purchaser's uncertified check. After the purchaser had left with the deed, the seller, thinking the check might not be good, had it certified. The bank failed that afternoon. The purchaser proved that he had more than the amount of the check to his credit on the bank's books. On consultation with his lawyers, the seller found that he had no claim on the drawer of that check and could only file his claim against the bank with its other depositors. And he only received about fifty cents on the dollar when the bank's affairs were finally wound up. All because he did not insist on the purchaser of the land having his own check certified. If he had done this he could have held both the purchaser and the bank.

By having your check certified, you practically exchange your check for one guaranteed by the bank. For example, the bank certifies your check for $100.00. It immediately charges your account with the $100.00, and credits its "certified check account" with $100.00. Then when your certified check comes back to the bank, through the person to whom you delivered it, the bank charges its "certified check account" with $100.00, and the transaction is closed.

Therefore, if, for any reason, you decide not to use a check after you have had it certified, do not destroy it as you would an uncertified check. Be sure to bring it back to the bank so that the amount may be credited your account, and be charged to the bank's "certified check account."

Otherwise your account will remain charged with the amount and your balance will show that much less.

PROTESTING NOTES, DRAFTS, ETC. WHY NECESSARY AND HOW IT IS EXECUTED

Protesting notes, drafts, checks, or other commercial paper is simply warning or giving notice to people, secondarily liable on that paper, that it has not been paid when due. The person who ought to pay the paper is primarily liable. All other persons who have endorsed the paper or drawn it on another person, firm or bank are secondarily liable.

You have endorsed Brown's note. Brown does not pay it when due. If you do not receive a prompt notice of this, you might endorse another note for Brown under the false impression that he had paid the first one.

Likewise, if you have endorsed Jones' draft on his firm, or his check, and his firm, or his bank refuses to pay such draft or check, both you and Jones should receive prompt notice that payment was refused. With such notice you would not endorse for Jones a second time unless he made good to you, and explained matters satisfactorily. If Jones was honest in drawing his draft or check he is entitled to prompt notice of non-payment so that he can take immediate steps to get his money. Possibly his firm is embarrassed financially, or his bank has failed.

Say Smith & Co. have drawn a draft on a customer and have taken it to a bank and secured the money on it. If the customer refuses to pay the draft, the bank wants prompt notice so it can collect from Smith & Co. And Smith & Co. want prompt notice so they can take legal steps at once to protect themselves, and probably stop further shipments to this customer. Various other instances might be given where endorsers or drawers of paper might suffer loss or damage from lack of notice of its non-payment.

The law holds that this giving of notice is of such grave importance, that, if the bank receiving paper for collection does not promptly notify all persons, secondarily liable, of non-payment, all such persons are released from obligation, and the collecting bank must take its chances on making the amount from the payer. This statement must be qualified to this extent. If a check is not protested, the maker of the check must prove that he has suffered loss by not receiving notice of non-payment. But the drawer of a draft, or the endorsers on any check, draft, or note are released, whether they suffer damage or not. Generally speaking, a check is a written request of a depositor to his bank to pay a certain sum to a certain party; whereas a draft is a written request of any one to a firm or individual, to pay a certain sum to a certain party.

Of course, if the bank receives orders from the parties sending them, not to protest certain notes, checks, or drafts, it must obey these orders. But if no such instructions accompany the paper, the bank must protest or make itself liable.

Every bank of any size has one of its employes appointed a Notary, or it can employ a Notary on the outside. He is an officer appointed by the State, and is under bond to the State to perform all his duties according to law.

When the bank hands protestable paper to a Notary, it is his duty to make a formal demand at the proper place on the person who should pay it. If payment is refused, the Notary makes an exact copy of the note, draft or check at the top of a printed form used for this purpose. Then, over his signature as a Notary, accompanied by his official seal, he states that he has made a demand in person for payment of the paper described by him; and, on payment being refused, he has "protested" the non-payment. Also that he has mailed or delivered notices of this non-payment to all the parties secondarily liable on this paper and states their names. The Notary's official statement is called the "Instrument of Protest." The notices he mails are called the "Notices of Protest." Certain fees are allowed the Notary by law for protesting. These are called "Protest Fees," and become a part of the debt.

Of course, the person who ought to have paid the paper gets no "Notice of Protest." He certainly knows if he has not paid. The Notary must keep a copy of all his "Instruments of Protest." This is a public record, just as any court record is, and as accessible to the public. It is rarely examined, however.

So, from the language prescribed by law, that the Notary uses in his "Instrument of Protest," comes the common use of the terms "protest" and "no protest" paper.

To bind the parties secondarily liable a Notary can protest paper only on the exact day it is due. Otherwise he might put it off several days, or demand payment before it was due, and damage might result in either case. So, if the protesting is not done on the exact date when the paper is due, it is of no avail.

The maturity of a draft reading so many days, or months, after date must be calculated from the date of the draft itself. But the maturity of a draft reading so many days, or months, after sight must be calculated from the date it was presented to the sight of the payer and accepted. It is very necessary to date acceptances of time drafts reading "after sight."

Demand for payment must be made at the proper place during business hours. A check of course is payable at the bank on which it is drawn, during banking hours. A draft on a firm is payable at its office; likewise a draft on an individual is payable at his office, or if he has none, then at his residence. Notes or accepted drafts are payable at the place stated on their face. But, when no place of payment is stated, demand for payment must be made at the office of the maker of the note, or the acceptor of the draft; or if he has no office, then at his residence. When you draw up a note it is the proper thing to state on its face "payable at ---- bank" (giving the name of your bank); or "payable at my office"; or "payable at my residence."

Likewise, when accepting a draft, write the date, then "accepted, payable at ----" (stating your bank, or residence) across the face of the draft over your signature. Therefore when a note, or an accepted draft is made payable at a certain bank, demand for payment must be made at that bank, and not on the maker of the note, or the acceptor of the draft. Most notes and accepted drafts are made payable at the bank of the payer. All of them should be. In this way, if you keep money enough in your bank to meet your notes and acceptances, just as you keep money there to meet your checks, the bank will save you all worry about their payment in case you or your bookkeeper overlook them. Under such circumstances your paper would never be protested.

In accepting a note from a customer, do not have it made payable at your bank. Have the drawer make it payable in his own town and at his own bank. Demand for payment must be made at the exact place stated in the note. As every business man is particular about protecting his credit in his own town, and especially at his own bank, it is obvious that he will be most diligent about providing for the payment of paper made payable at the bank with which he is doing business.

Notes and accepted drafts should be sent, a week or two in advance of their maturity, to the town in which they are made payable. If paper, made payable at New Orleans, for instance, is not in New Orleans when due, proper demand for payment can not be made and the drawers or endorsers might be released.

There is absolutely no law requiring a bank to send you a notice that it holds your note, or draft accepted by you, for collection and due at some future date. It is customary for banks to send such notices, but it is only a courtesy. It is your duty to keep account of when your paper is due, and to have funds at the place of payment when it is due. The banks that do so are very careful about sending out these notices, but the public should regard it as a favor shown them and not as their lawful right. Many people do not know or appreciate this fact. You should always put your street address just below your signature on a note so that notice can be addressed properly. Also, in drawing a draft, always put the name of the person or firm, on which it is drawn, in the lower left hand corner, and invariably state the street address.

THE LOCAL COLLECTION DEPARTMENT

A bank has a perfect right to refuse to accept and to return any checks, notes, drafts, etc., sent it for collection. But if it does accept them, it must obey the instructions of the sender, literally and exactly. The bank has absolutely no right to disregard these instructions, no matter how obnoxious or disagreeable they may seem to the payer of the paper.

Many people regard all collectors as offensive and unwelcome. They wish to take their own time about paying their debts. Please mark this difference between the collector of your grocer's or druggist's bill, and the city bank as a collector of your note, or of a draft on you. The monthly collector must turn in cash for the majority of the bills given him or lose his position. But it really makes little difference to the bank whether you refuse or pay the note or draft that some other bank has sent it.

When collections are sent to a bank direct by firms, or by banks in another city, that do not keep an account with it; the collecting bank makes small fees, but these fees are very insignificant.

So, by prompt payment of notes and drafts, you are conferring more of a favor on yourself than on the bank. It is wise to protect your credit with strange banks as well as your own. Every bank receives many confidential inquiries concerning the financial standing of firms and persons in its city. If not personally known to the officer in charge of this correspondence, he invariably inquires of the collection department as to the promptness with which the parties in question meet their notes and drafts. And even though you are not a patron, a bank in your own city would rather give you a good financial reputation than a poor one.

The collecting bank must regard most carefully the instructions of the sender, especially about protesting or not protesting. Also about telegraphing payment or non-payment, and whether to hold the paper after it is due or not. In no case must it surrender any documents attached to a draft until the draft is paid, or accepted; and, in case of acceptance, documents attached must not be surrendered unless the sender so directs.