3716a. Waiver of benefit of statute of limitations on note.-A bank submits a note containing a provision by which "each signer and each indorser waives the statute of limitations" and asks whether such provision should be included?

Opinion: Of course the provision for an indefinite waiver in the note of the statute of limitations will be of no avail unless the courts will give it force and effect. As to this there is a decided conflict of authority. According to 17 R. C. L. 886 "although there is authority to the contrary, it is held in several jurisdictions that" the benefit of the statute "may be waived by an express agreement made contemporaneously with, and as a part of, the principal agreement out of which the cause of action arises. And it has been decided that an agreement not to plead the statute of limitations is not void as against public policy, and that the forbearance to bring suit on a claim is a sufficient consideration for such an agreement." Again on p. 887: "in accordance with the prevailing views as to the right by agreement to waive the protection of the statute, it has been held that the makers of a promissory note may stipulate therein that they will waive it," citing Lyndon Sav. Bank v. International Co. 78 Vt. 169, 62 Atl. 50, 112 A. S. R. 900.

The subject is discussed in an annotation in Ann. Cas. 1916A, 686, where it appears that some courts at least make use of the principle of estoppel as evidenced by the following quotation from State Trust Co. v. Sheldon, 68 Vt. 259, 35 Atl. 177: "Relying on this agreement the plaintiff did not bring its action until more than six years from the time it accrued. The question presented by the pleadings is whether the defendants are estopped by the agreement from pleading the statute of limitations in bar of plaintiff's action. . We ... hold that they are estopped."

The contrary view is that "an agreement made at the inception of a liability to the effect that the statute of limitations will never be interposed as a defense would be flying in the face of the statute. A consideration of public policy is embodied in the statute of limitations and while its provisions may be waived at a trial by not pleading the statute its provisions cannot be waived in advance for an unlimited time." N. Y. Mut. Life Ins. Co. v. U. S. Hotel Co., 82 Misc. 632, 144 N. Y. Supp. 476. To same effect as above is 7 C. J. 722, et seq. The above sources cite in favor of the validity of the provision: Parchen v. Chessman, 49 Mont. 326, 142 Pac. 631, 146 Pac. 469, Ann. Cas. 1916A, 681: Quick v. Corlies, 39 N. J. L. 11; Hoffman v. Fisher, 2 W. N. C. (Pa.) 17 (waiver extends time only for the statutory period); Lyndon Sav. Bank v. International Co., 78 Vt. 169, 62 Atl. 50, 112 Am. St. Rep. 900; State Trust Co. v. Sheldon, 68 Vt. 259, 35 Atl. 177.

Contra: First Nat. Bank v. Mock, 70 Colo. 517, 203 Pac. 273, 21 A.L.R. 770 and note; Wright v. Gardner, 98 Ky. 454, 33 S. W. 622; petition for rehearing overruled in 98 Ky. 463, 35 S. W. 116, 17 Ky. L. Rep. 1345; New York Mut. L. Ins. Co. v. U. S. Hotel Co. 82 Misc. 632, 114 N. Y. S. 476; Young v. Sorenson, 154 S. W (Tex. Civ. App.) 676; Nunn v. Edmiston, 9 Tex. Civ. App. 562, 29 S. W. 1115.

Such sources above cite many other authorities with more or less bearing on the question.

The validity of such a provision is then of considerable doubt. Even if valid, many banks would hesitate to include such a provision in a note. A bank as a rule has little difficulty with outlawed paper. It is comparatively easy to reduce a note to judgment and prevent the bar of the statute. In any event, a bank usually enforces its paper about as soon as due or secures a renewal. (1925.)

See title "Acceptances, Trade" and also "Forwarding direct" statute 1483 et seq.

AUTHORITY OF BANK TO PAY NOTES AND
ACCEPTANCES PAYABLE AT BANK

3719a. Section 87 of the Negotiable Instruments Act with list of statutory variations-Bank's duty to pay note payable at bank-Exceptions.-A note made payable at the First State Bank is sent to the same bank for collection. The maker has a credit balance equal to the note. What should the bank do?

Opinion: Section 87 of the Negotiable Instruments Act is as follows:

"Section 87.-Where the instrument is made payable at a bank it is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon."

In view of this provision, I should say, in answer to the question presented, that at maturity, having sufficient funds, it would be the duty of the First State Bank to pay the note and charge it up to the maker's account.

There seems to be considerable misunderstanding of the legal effect of the above quoted section of the Negotiable Instruments Act, and it may be pertinent to make a brief explanation. Before the enactment of the Negotiable Instruments Act in the various states, three conflicting rules prevailed in different jurisdictions concerning the duty of the bank with reference to depositors' notes made payable at bank. It was held (1) in New York and other states that it was the duty of the bank to pay at maturity if in funds; (2) in Indiana and other states the bank was held authorized but not obliged to pay, and (3) in Tennessee and other states it was held that the bank had no au

thority to pay without express instructions from the depositor.

To illustrate this I will cite one case from each of these states.

Indig v. National City Bank, 80 N. Y. (1880) 100. A note was made payable at the Bank of Lowville, at which bank the maker was a customer. The defendant bank, which held the note for collection, sent it by mail direct to the Bank of Lowville and the note reached that bank on the day it fell due. Upon the next day the Lowville Bank sent its draft on New York in payment and on the same day failed. The question involved in the case was whether there was negligence on the part of the collecting bank in forwarding the note direct to the payor. I quote from the language of the court in the course of its opinion to illustrate the New York rule upon the point we are considering: "The note, in so far as relates to its presentment at the bank, and the duties of the bank in respect to it, was equivalent to a check drawn by the maker upon the bank where the note was made payable. (Aetna National Bank v. Fourth National Bank, 46 N. Y. 88.) The bank owed a duty to its customer to pay it on presentation, if in funds. The bank on which the note is drawn has nothing to do but to pay the note if in funds, and if not, to refuse to pay."

2. Bedford Bank v. Acoam, 125 Ind. 584, 25 N. E. 713, 9 L.R.A. 560 and note, a note made payable by a depositor at the Bedford Bank was received by the bank for collection and the bank remitted the amount due and charged it against the depositor's account. This was done without notice to the depositor, who repudiated the act of the bank and sued it to recover a balance which, it was conceded, he was entitled to recover unless the bank had the right to charge the account with the amount of the note. The court held that the

bank was authorized to pay the same without notice to or special instruction from its depositor. The court said: "Many well-considered cases go to the full extent of holding that a note payable at a banking house is in effect the equivalent of a check or a draft on the bank in favor of the holder of the note; and that the bank is in default if it allows the paper to go to protest in case the maker has money due him from the bank on account generally applicable to the payment of drafts or checks. Bank v. Henninger, 105 Pa. St. 496, 20 Cent. Law J. 144; Indig v. Bank, 80 N. Y. 100; Aetna Nat. Bank v. Fourth Nat. Bank, 46 N. Y. 82. See also Rand. Com. Paper, § 1441; I Daniel Neg. Inst., § 326a; 2 Morse, Banks, § 557; Bolles, Banks, § 403. A contrary view has, however, been vigorously maintained. Grissom v. Commercial Nat. Bank, 87 Tenn. (1889) 350, 10 S. W. 774, 3 L.R.A. 273; Ridgely Nat. Bank v. Patton, 109 Ill. 479. While we are not inclined to the view that a promissory note negotiable and payable at a bank in this state is in all respects the equivalent of a check drawn by the maker against a fund on deposit in the bank, so as to require the banker to pay the note on presentation out of funds applicable to that purpose, we can conceive of no valid reason why a note or bill thus drawn shall not be held to authorize the banker to pay, and thereby become subrogated to all the rights of the holder to the same extent as if it had purchased the paper after maturity. One who has drawn a note or bill payable at a bank must have done so for some purpose, and he cannot be heard to say, after his banker has paid a just debt for which he had given a note, to which the maker claims no defense, that the payment was wholly voluntary and unauthorized. In such a case the banker who has paid the note is entitled to hold it as the equitable owner or purchaser, and is entitled to set it off in a suit to recover a balance due the depositor on a general account."

A

3. Grissom v. Commercial National Bank, supra. depositor made his note for $1,000 payable 60 days after date at the Commercial National Bank. On the day of maturity the note was presented for payment at the bank by another bank and marked "good," and on the following business day was paid and the amount charged to the depositor in the same manner as though it had been a check. The depositor sued the bank for the balance represented by the note. The court held that the note was not the equivalent of a check and that the bank had no authority to pay it in the absence of a well-established custom or instructions from the

depositor to that effect. It appeared that the depositor, without knowing that his note had been paid, had made a settlement in which he had credited the amount of the note. The court held the bank could not charge the payment. After exhaustively discussing the question and citing opposing authorities, the court said: "We hold, therefore, that there is no implied authority for a bank to pay to a third party a note made payable at its place of business simply because of the fact that the maker has funds sufficient for that purpose, in the absence of any course of dealing or previous instructions to so apply the deposits." And with reference to the cases which held that the bank was not bound, but merely had the authority or privilege, to pay its depositor's note, the court further said: "Surely, this will not do, to leave the action of the bank, upon which so many important, not to say intricate, rights of other parties depend, open to the uncertainty that must follow its optional exercise by the bank. We argue with Mr. Daniel, in his work on Negotiable Instruments (volume 1, § 326), that the question should be settled definitely, and not left to the option of the bank.

But we think it much sounder and safer to hold that, in the absence of instruction, either expressed or to be implied from previous course of dealings between the maker and his banker, the bank has no authority to apply the funds of its depositor to the payment to third parties of notes payable at its bank."

The above quotations are, I think, sufficient to illus trate the conflict of law which formerly existed upon the question of the duty or the authority of a bank to pay the note of a depositor made payable at the bank, without express instructions from him, and it was to remove this conflict and provide a uniform rule that the provision was inserted in the Negotiable Instruments Act that "where the instrument is made payble at a bank it is equivalent to an order to the bank to pay same for the account of the principal debtor thereon." This must be construed, as I take it, to make it the duty of the bank to pay the note at maturity, provided the funds to the credit of the maker are sufficient.

There are certain states, however, which have intentionally eliminated from the N. I. Act the above seetion. See 3719 for statutory variations.

Upon the merits of the rul; which makes an instrument payable at a bank equivalent to an order to pay, there is much which can be said on both sides, and I will not prolong this by attempting any discussion of this branch of the subject. The Grissom case in Tennessee contains a very full and exhaustive presentation of about everything that can be said against the policy of the rule. Aside from its merits or demerits, it appears, however, that, in many sections of the country. makers of notes, especially in country districts, do not understand when they sign their names to a form of note with a printed clause making it payable at their bank, that in so doing they are giving an order on the bank to make payment at maturity. They rest under the belief that the note will not be paid unless they expressly instruct the bank to pay it. But the rule now established would seem to clearly provide the contrary, and when it comes to be more full understood it will operate, doubtless, without hardship to the depositor as well as for the convenience of the bank. The maker of a note made payable at his bank will understand that he has given an order on his banker to pay the amount at maturity, and if any good reason arises in the interim why the note should not be paid, he has the right to revoke the order by notifying the bank not to pay. See "Stopping payment." (1914.)

3720a. Bank has right to pay note payable at bank in absence of express instruction from maker.-Of late several notes have been sent us for collection, all made payable at this bank with the request to protest if not paid at maturity. As the maker of all of these notes carries an account with us we would like to inquire, in case there are sufficient funds in the account, when any one of the notes in question becomes due, whether we must charge the note to the maker's account. Upon receipt of these notes for collection we immediately notify the maker by mail and telephone of the same, but in the absence of any instructions from the maker. where a maker has sufficient funds in his account, are we safe in simply protesting the note and returning it to the bank from which we received it, or is the only safe course for us to pay the note and charge to maker's account?

Opinion: Notes made payable at a California bank. where the maker has sufficient funds, are forwarded to the bank for collection. The bank inquires of the maker by mail or telephone whether it shall pay or refuse payment and where he replies giving instructions in the premises the bank will of course follow his instruction. But in those cases where the bank receives no instructions from the maker the question arises whether (1) the note of itself operates as an order or an authority to the bank to pay and charge to the maker's account without express instruction, or (2) whether the note constitutes no order or authority to pay and the bank is without right to do so in the absence of express instruction from the maker.

Before the passage of the Negotiable Instruments Act in the different states there were three lines of deisions on this qustion. First, the courts in New York, Pennsylvania and other states held that a note made pay

the section, holds that thereunder the bank should pay the customer's notes made payable at its banking room but says that the obligation "should not include notes made long before, payable at another bank." See 215a. (1911.)

WHERE BANK CANNOT PAY NOTE PAYABLE AT BANK WITHOUT EXPRESS INSTRUCTIONS 3725a. Illinois bank without authority to pay customer's note payable at bank unless expressly instructed.-We note in the November number an opinion as to the course banks should pursue as to payment of a negotiable instrument, making the bank the place of payment.

The inquiry replied to came to you from Missouri, and we judge that in that state there is a clause in their Negotiable Instruments Law, making it definitely obligatory on the banks, to pay and charge to its customers, notes presented reading: "Payable at Bank."

.....

We do not find a section in the Illinois Negotiable Instruments Law making this matter definite as above, and would like your opinion as to how such matters should be handled in this state.

Opinion: The Uniform Negotiable Instruments Act, with exceptions noted in 3719, contains a section as follows: "Where the instrument is made payable at a bank it is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon."

The legislature of Illinois which, in 1907, enacted in the main the uniform law, changed certain of its provisions and among other things, omitted entirely the section above quoted. This left the subject to be governed by the rules as declared by the courts of the state.

In 1866 the Supreme Court of Illinois in Wood v. Merchants Savings, Loan and Trust Co., 41 Ill. (1866) 267, cited in 2533, 3720a, held that the fact that a note is made payable at a bank does not authorize the bank to pay the note without being so ordered by the maker, verbally, or by check or draft or other writing and in 1884 the same court in Ridgely Bank v. Patton, 109 Ill. 479, said: "Clearly a bank has no right to apply money on deposit to the payment of a note of the depositor payable at the bank, without the order of the depositor" (citing Wood v. Bank, supra).

To the contrary, in the year 1881, the Appellate Court of Illinois in Home Nat. Bank v. Newton, 8 Ill. App. 563, used this language: "As it is the duty of the bank to pay a customer's checks, when in funds, so at least it has authority, if it is not under actual obligation to pay his notes and acceptances made payable at the bank. It is a presumption of law that if a customer does so make payable or negotiable at a bank, any of his paper, it is his intent to have the same discharged from his deposit. The act of thus making his paper payable at a bank is considered as much his order to pay as would be his check, and if the bank pay without express orders to the contrary, it is a defense to a suit by the depositor for the money so paid."

Notwithstanding this seeming conflict between the Appellate Court and the higher or Supreme Court the view of the law as expressed by the latter must be taken as the guide and according to such view, as it is declared in the Wood and in the Ridgely bank cases, a bank in Illinois would have no right or authority to pay the note of its depositor, made payable thereat, in the absence of his express order, and it would not be safe in so doing. (1920.)

STOPPING PAYMENT OF NOTE PAYABLE AT BANK

3726a. Maker has right to stop payment-Liability for wrongful dishonor.-Would you kindly advise us how If we should fail to pay a note at maturity, when the maker has sufficient funds at maturity to pay the

note, but he wishes not to have the note paid? Sometimes depositors wish to put off payment in order to use their funds for other purposes. In such cases, if the depositor does not want the note paid, should we require an order from him not to pay at maturity? If we should fail to pay a note at maturity, when there are sufficient funds, could the bank be held for the amount?

We ask these questions because many of our depositors are not accustomed to having their notes charged to their account.

Opinion: By force of the Negotiable Instruments Act, § 87 (see statutory variations, 3719), a note of your customer made payable at your bank is "equivalent to an

order to pay the same" for his account at maturity, provided, of course, the funds are sufficient. If the maker does not want the note to have this effect it would be necessary for him, I think, to give you an order not to pay at maturity; for, in the absence of such an express instruction not to pay, the rule of the Negotiable Instruments Law which au thorizes and makes it your duty to pay, is your guide. You ask: "If we should fail to pay the note at maturity when there are sufficient funds, can the bank be held for the amount?" As the note does not of itself constitute an assignment of the fund in bank to the payee or holder, the latter would have no recourse upon you in case of your refusal to pay, but would have to look to the maker or any prior indorsers; and where your refusal was pursuant to stop order of your customer, you, of course, would not be responsible to him for obeying his instructions. But if you refused to pay such a note at maturity without an express order from your customer not to pay and he afterwards made the claim that it was your duty to pay, pursuant to law, and that your refusal damaged his credit, the question would arise whether you were responsible to him in damages because of such refusal. Where a bank refuses to pay a check, when in funds, the courts in an action by the depositor have in many cases awarded him damages for injury to his credit. It would seem that the same principle would apply to wrongful refusal to pay a customer's note, made payable at the bank, which by the law is made equivalent to an order to pay. At the same time this question has never come up for decision, so far as I am aware, since this Section of the Negotiable Instruments Law has been in force in any state. (1911.)

NOTE. For stopping payment of note payable at bank, see title, Stopping Payment.

WHAT INSTRUMENTS COVERED BY THE N. I. ACT

3729a. Notes, drafts and acceptances payable at bank must be paid at maturity, the funds being sufficient.The question of "Notes payable at a Bank” has Leen a very live issue with us for the last few weeks.

In your 1921 Edition of Digest of Legal Opinions. Nos 2524-2540, there are a few citations from other states on this subject. I have talked with a number of atterneys on this question and there is a great differenes among them as to how it might be decided in this state. I am wondering if you have any more cases in port since the 1921 edition of your book or if anything new has developed. I have not been able to find any dis tinction, under $ 87 of the Negotiable Instruments Act. between the payment of checks, trade acceptances and notes (granting that these are in strictly negotiable form).

There is an article in the May number of the Bank Director by the counsel of the California Bankers Asseciation dealing with trade acceptances. In discussing the matter with a banker from a neighboring county he said that the question of charging notes to a cas tomer's account had never been raised with them, t that there had been some argument as to whether a trade acceptance should be charged up when receive! or at maturity and they did rot question at all

duty of the bank to so charge acceptances. It seems to me that they are inconsistent to take this view in regard to checks and trade acceptances and not include

notes.

Opinion: Section 87 of the Negotiable Instruments Act provides: "Where the instrument is made payable at a bank, it is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon." (Comp. Code Iowa, 1919, Ch. 6, § 6002.)

Under this section it is plainly the duty of a bank [except in states as indicated in 3719] whose depositor has made his note, draft or trade acceptance payable at the bank, to pay the same at maturity, the funds being sufficient, even in the absence of other express instructions from the depositor to pay.

The only case in point I have been able to find since the publication of "Digest of Legal Opinions" (1921) is A. Sidney Davison Coal Co. v. National Park Bank, 194 N. Y. Supp. (1922) 220, where it was held that a depositor's acceptance of a draft made payable at a bank is equivalent to a direction by the depositor to the Lank to pay the draft for the depositor's account (following Heinrich v. First Nat. Bank, 219 N. Y. 1, 113 N. E. 531, L.R.A.1917A, 655 and note).

Of course, a bank is not authorized to charge a note or trade acceptance against a depositor's account before the maturity of the instrument; and it is indeed difficult to surmise on what grounds such contention is sought to be upheld. See statutory variations of § 87 N. I. Act, 3719. (1924.)

WHAT CONSTITUTES NOTE PAYABLE AT BANK 3731a. Note payable "at any bank."-A note is made "payable at any bank" in the city in which it is drawn. If presented for payment at a bank in which there are funds sufficient to meet it, should it be charged to the account without further instructions from the maker of the note, or in the absence of such instructions should payment be refused and the note protested? We realize, of course, that a note made payable at some particular bank acts as an order to charge to the account maintained at that particular bank upon its maturity.

Opinion: The Negotiable Instruments Act, § 87, provides that: "Where the instrument is made payable at a bank, it is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon."

I am of the opinion that a note made "payable at any bank” would, under the above provision, be interpreted to mean payable at a bank where the principal debtor keeps his account, and would be equivalent to an order to any bank in which such account was kept to pay the note without further instructions from the maker. However, in the case of Stansbury v. Embrey, 128 Tenn. (1913) 103, 158 S. W. 991, 47 L.R.A. (Ñ.S.) 980, it was held that the making of notes payable "at any bank" in a city authorized the maker to require the holder of the notes to make his election at what bank he would receive payment, and on failure to elect, the maker could elect to make payment at a certain bank and give notice of his election to the holder. (1923.)

3732a. Note payable to and at Bank A or Bank B.I am enclosing a copy of a note presented at this (the R State) bank for collection. In the first place, the note was made out wrong. In this case the note should have been made out to Sam Roe as payee instead of to the banks, but somehow he got one of our notes and used it, as this copy shows, indorsing it on the back, or rather assigning it to us. The question that puzzles me most is, "Can a note be drawn payable to either of two banks at either of two places?" I feel pretty certain that M National Bank was written on the face of the note some time after it was signed, whether with or without the consent of the maker, I do not know.

Opinion: This is a form of note signed by John Doe made payable to order of R State Bank at the R. State

Bank, the printed form of the bank being used, and after the name of the printed payee there is inserted in writing, "Or the M National Bank," those words also being inserted after the printed name of the R State Bank to which the note is made payable. The R. State Bank and the M National Bank are located in the same place and the result is that the note is made payable to the R State Bank or the M National Bank at the R State Bank or the M National Bank. On the back of the note is a printed assignment of the note to the R State Bank, signed by Sam Roe.

The R State Bank, as I understand, has received this note from Sam Roe for collection and desires to know the legal effect of such an instrument and its duty in the premises.

Assuming for the moment that the note was thus made out by or with the consent of the maker, I think it is valid and probably negotiable, although made payable to and at either of two banks in the same place which are specified as payees.

The Negotiable Instruments Act, § 8, expressly provides that an instrument payable to order may be drawn payable to the order of "one or some of several payees." It has been held that where a note is made payable "to the order of A or B" the indorsement of either is sufficient to pass title. Voris v. Schoonover, 91 Kan. 530, 138 Pac. 607, 50 L.R.A. (N.S.) 1097 and note, cited in 1091, 1822a, 1830a, 2609, 2610a, 2611. A note payable to the order of "R. M. Life Ins. Co. or H. B." is payable to either and negotiable by indorsement of either. Union Bank v. Spies, 151 Iowa, 928, 130 N. W. 928, cited in 1091, 1822a, 1830a, 2610a, 2611. An indorsement "Pay to the order of A or B" does not render a note non-negotiable and indorsement by either A or B will pass title. Page v. Ford, 65 Or. 450, 131 Pac. 1013, 45 L.R.A. (N.S.) 247 and note, cited in 1822a, 2609, 2610a.

The Negotiable Instruments Act, § 87 further provides that where the instrument is made payable at a bank it is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon. There is nothing in the act which specifically refers to a note made payable at either of two banks in the alternative. But decisions under the law merchant indicate that this is permissible. In Hazard v. Spencer, 17 R, I. 561 a note dated at "Providence" was made payable "at bank," but before maturity it was placed in a bank at Providence for collection and the maker duly notified. It was held that the note was payable at Providence and at either bank in Providence which the maker saw fit to select. In Boston at one time it was customary to make notes payable at "any bank in Boston." It was held that such a note was not properly presented to a trust company (Nash v. Brown, 165 Mass. 284), nor was the office of a private banker within the terms of such a note. Way v. Butterworth, 108 Mass. 509. But the validity or negotiability of such an instrument was not questioned.

The Negotiable Instruments Act, § 128, does, however, provide that "a bill may be addressed to two or more drawees jointly, whether they are partners or not; but not to two or more drawees in the alternative or in succession"; and if the making a note payable at a bank should be held equivalent to the drawing of a bill upon a bank, it is possible that the making of a note payable at either of two banks would be held to destroy its negotiability. No question of this kind has ever come before the courts, and it is doubtful if the rule of the law merchant, which recognizes the validity and negotiability of notes payable at more than one bank in the alternative, would be held to be abrogated by this provision of the Negotiable Instruments Act, which relates specifically to bills of exchange.

It would seem to follow, therefore, that a note made by the maker payable to the order of the R State Bank or the M National Bank at either of said banks would be valid and probably negotiable; and where presented by a holder who indorsed an assignment of said