8/10/2019 Sutter v Security Trust

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SUTTER v. SECURITY TRUST CO.

27 October 1924; 96 N.J. Eq. 644, 126 A. 435; Campbell, J.

FACTS

SUBJECT: Checks

DRAWER: Mr. Sutter

DRAWEE: Security Trust Co.

PAYEE: Mrs. Sutter

INDORSEE: Mr. Mack

Mr. Sutter drew a check in favor of his wife on March 25 1922 in the amount of $1000 for which

he procured the certification of drawee Security Trust Co. The check was delivered to his wife in

consideration of a certain agreement between them concerning their separation. The wife

violated said agreement after the delivery of the check to her.

On March 27, 1922 Mr. Sutter requested that payment be stopped upon the check because of

Mrs. Sutters violation of their agreement. Mrs Sutter on the same day went t o her brother Mr.

Mack and indorsed the check to him and he deposited it in his bank in Philadelphia.

March 30, through the Federal Reserve Bank of Philadelphia, the check was presented to

Security Trust Co for payment which was refused on ground of payment stopped. Respondent

told Mr. Sutter that the check was in the hands of an innocent third person for value and that

unless he indemnified respondent the check would be paid. He refused to indemnify

respondent, thus respondent paid the check upon subsequent presentment. Mr. Sutter

demanded the payment to him of his alleged balance of $1034.41 w/c includes the $1000 drawn

w/c was refused except as to balance of $34.

ISSUE

W/N Security Trust Co. was justified in paying the indorsee Mr. Mack the $1000 value of the check? YES

RATIO

The Bank was justified and legally called upon to make payment to Mrs. Sutter upon presentation anddemand as against the notice of the maker of the check to stop payment, its obligation under the facts

was likewise to make the payment to the indorsee holder Mr. Mack

A check may be certified by the bank at the request of the payee or the holder, when the check is

certified at the request of the drawer or maker before it reaches the hands f the payee therein named.

When such a certification is made and there is delivery to the payee, under the circumstances and

conditions making him a bona fide holder for value, without notice of defects therein then the

instrument is beyond recall by the maker as against the payee. He may only do so (recall) if the payee is

not a bona fide holder for value but has obtained the check by fraud perpetrated by him upon the

maker.

In this case since Mr. Mack is not a holder in due course, it is necessary to inquire whether the bank by

reason of its certification would have been justified in making payment to Mrs. Sutter the payee upon

proper presentation of the check by her notwithstanding the service of notice to stop payment by her

husband the maker and the disclosure by him to the bank of the conditions upon which the check was

obtained by Mrs. Sutter. There is nothing in the case that indicate that Mrs Sutter procured the check by

any fraud perpetrated by her to her husband.