I ftcwi^' IRREGULAR «i» CHECKS ^ PROBLEMS ARISING IN THE DAILY ROUTINE OF THE AVERAGE BANK ILLUSTRATED AND EXPLAINED. ^ ^ New York AmcMcan InstHiite of Bank Cletks X904 Charts of Bank Organization and Administration^ THE DAILY WORK OP REPRESENTATIVE BANKS CLEARLY SHOWN IN CHART FORM. Different departments are indexed in such a manner that the course of any item may be followed from its receipt to final disposition. The divisions of the work and responsibility of the employees are graphically set forth. Price, fifty cents; postpaid to any address. The Negotiable Instruments* Law* Pocket edition, fifty-two pages, flexible cover, containing the provisions of the law as enacted in twenty-one States, one Territory and the District of Columbia. Arranged by Thomas B. Paton, of the New York Bar. Price, fifty cents; postpaid to any address. Irregular Checks* A series of checks, irregular as to face or indorsement, arranged by the Seaboard National Bank and used in the examinations conducted by that institution. Involving questions of judgment as well as law and fact, illus- trated in facsimile, with explanation of the irregularities and proper treat- ment approved by the Seaboard National Bank. Price, fifty cents; postpaid to any address. Bank Catechism* THINGS WHICH EVERY BANKER OUGHT TO KNOW ARRANGED IN THE FORM OP QUESTIONS AND ANSWERS. Forty pages, 7x10, substantial binding — Regulations of National Banks — Coin and currency — Problems in bank arithmetic — Letters of credit — Ac- counts of strangers — How to figure profits or losses on accounts — Washing stocks — Studies in credits — Bank employees. By William Post. Price, fifty cents; postpaid to any address. Business Organization and Administration* An address to the classes in Theoretical and Practical Accounting, School of Commerce Accounts and Finance, New York University. Describing and discussing the various essentials of successful business conduct, the opportunities for young men, management, methods, responsibilities, etc. By A. O. Kittredge, C. P. A, Price, fifty cents; postpaid to any address. AMERICAN INSTITUTE OF BANK CLERKS, Twenty-five Pine Street, New York. PROBLEMS ARISING IN THE DAILY ROUTINE OF THE AVERAGE BANK ILLUSTRATED AND EXPLAINED. ^ ^ New York American Institute of Bank Cletks ^904 <\\ SPRECKEIS Account Audit Co., New York. I IRREGULAR CHECKS. I N response to the request of the American Institute of Bank Clerks, the Sea- board National Bank of New York has furnished for publication a series of irregular checks used in the examinations which have been a feature of this bank for several years. The problems involved in these checks are matters of judgment quite as much as matters of law and fact. The development of judgment is one of the features of the discipline for which the Seaboard Bank has be- come noted. With the checks the officers of the bank have supplied answers to their own prob- lems. The examinations have, up to the present time, been purely a matter of disci- pline within the bank. The officers of the Seaboard, however, are willing to furnish such facilities as they may have to further the work of education among bank em- ployees, and at the request of the Institute submit the answers following as their per- sonal interpretation of the problems involved in the checks under consideration. It is not assumed that the judgment of the Seaboard officials is any better than the judg- ment of the average of experienced and conservative bankers. The solutions of the various problems contained therein are given from what the Seaboard Bank considers the standpoint of safe and conservative banking, coupled with the desire to serve the interest of customers as far as possible, but, of course, for obvious reasons, cannot in- dicate the particular discretion that would be used in each individual case. Under the Negotiable Instrument law of New York, which governs also in many other States, the paying bank has recourse to the Clearing House Bank to which it pays the money, and to all other indorsers, excepting only as to the drawer's signature, for which the paying bank is alone responsible. In the absence of restrictive indorse- ments, the collecting bank is absolutely liable for forgeries and all irregularities, even though its ordinary Clearing House stamp should not appear on the check, as it has been held that the fact of the demand and acceptance of payment by a bank carries with it an applied warranty of the genuineness of the instrument in all respects, excepting, as above stated, as to the signature of the drawer. From this condition of the law, re- garding the liability of indorsers, it may be seen that wide discretion may be used by the paying bank in regard to irregular indorsements. Many of these irregularities will be found upon examination to be perfectly innocent and would not in any way invali- date the instrument in which they appear. For example, in check No. 5, Mary Sharp and Mrs. J. O. Sharp are in all prob- ability identical; at any rate, the Second National Bank, with whom she negotiates the check, should be in a position to know whether or not she is Mrs. J. O. Sharp, and it would be reasonably safe to presume that they knew Mary Sharp to be the person for whom the money was intended. The paying bank has to consider here the annoyance and probable inconvenience to which the wife of its customer will be subjected by a re- turn of the check for this apparent irregularity of indorsement; and, as regards the amount, they will consider that the sum involved is only $3, and may deem it best, perhaps, if the larger sum were demanded to pay it subject to adjustment through the indorsers, or through the maker. And so on through the list, as each problem is reached, thoughtful discretion is required to answer properly the question, "Should this check be paid," this matter of discretion, of course, being something apart from and far broader in its scope than the question of the irregularities of the various checks under examination, which irregularities it is a part of the bank clerk's education to know how to detect and weigh. SPRECKEIS [4] CH:eCK No. I. Face. — First National Bank, McGregor, Texas: Pay to the order of Steamer Starboard (,$2,000) Two Thousand Dol- lars. James Goat, Cashier. To Seaboard National Bank, New York City. Indorsement. — Pay to Jenkins & Co., Steamer Starboard, Jno. McMaster, Captain; Pay to Hooker, Fur & Co., Jenkins & Co., Hooker, Kerr & Co., i8th National Bank, New York. "Pay to" does not forbid the further negotiation of the instrument, and, according to the New York Ne- gotiable Instrument law, it is a proper indorsement. As regards the indorsement, "Steamer Starbuck, John McMaster, Captain," the question arises as to the authority of the captain to indorse for the steamer. My understanding of the law is that the captain of a vessel in a foreign port has full authority to act for the owners. It is customary to make all payments of freight to the master or captain of the vessel when in a foreign port ; if he were in his home port it would be different, as the agent would be the only one au- thorized to indorse for the steamer. As regards the indorsement "Hooker, Kerr & Co.," for "Hooker, Fur & Co.," the same is irregular on its face, and should either be corrected by Jenkins & Co. to read "Hooker, Fur & Co.," or a guarantee of the indorse- ment should be requested of the Eighteenth National Bank. As a matter of law, this check can be paid, and recourse can be had to the Eighteenth National Bank for all irregularities, as there are no restrictive indorsements upon it. As a matter of custom, how- ever, and to enable previous indorsers to protect themselves, it is better to draw attention to any irregularities and ask for guarantee or correction. J ^-^^;i>^6Z^i^<^^c /^Ui^t^^^^A ^^^^U^( J(/?l^^ wf^^mi^m^mmi^ *:p' Check No. 3. [lO] CHECK No. 4. Face. — The Seaboard National Bank, New York: Pay to the order of Jos. Hoskins Five Hundred Dollars ($500). J. F. Thomas. Indorsement. — Pay to Seaboard National Bank, J. F. Thomas. This indorsement is perfectly reg^ular. J. F. Thomas, being the maker of the check, cancels his order upon the face of the check, and as the Seaboard National Bank, in the absence of acceptance or certi- fication, is not liable to the payee, the bank may, without anv risk, act on the maker's indorsement. I [II] Check No. 4. [12] CHECK No. 5. Face. — The Seaboard National Bank of the City of New York, New York: Pay to the order of Mrs. J. O. Sharp ($98) Ninety-five Dollars. J. O. Sharp. Indorsement. — Pay to 2d National Bank, Mary Sharp; 6th National Bank, New York. As regards the amount : The writing upon the check governs. As regards the indorsement "Mary Sharp," instead of Mrs. J. O. Sharp: If Mary Sharp is known to the paying bank to be the wife of J. O. Sharp, the indorsement should be accepted. If such fact is not known, the check may be returned for irregularity, or the same may be overlooked and the paying bank may rely upon the right of recourse against the Sixth National Bank. As before stated, as a matter of cus- tom, however, and to enable previous indorsers to protect themselves, it is better to draw attention to any irregularities and ask for guarantee or correction. [13] Check No. 5. [14] CHECK No. 6. Face. — The Seaboard National Bank. i8 Broadway. New York: Pay to the order of John Doe ($5) Five Dollars. John F. Jones. Indorsement. — Pay to John Smith, John Doe; Pay to 1st National Bank. New York, for account John Smith, by Jones; ist National Bank, New York. This check is regular, with the exception of the in- dorsement, "for the account of John Smith, by- Jones," which is a dangerous indorsement to handle without special guarantee from the collecting bank, as it forbids recourse to the First National Bank, it being under this indorsement merely an agent, and, after having paid the money over to John Smith, it could not be held for irregularities of indorsement, raising o^ amount, etc. [15] %. -^^ ^^^^^, Ou,^ >%:^^^^^~ ^^^ y>^>7^^ ^a^ct^i ) Check No. 6. UNlVSiriSITY « Of - [i6] CHECK No. 7. Face. — The Seaboard National Bank, of the City of New York: Pay to the order of James Smith ($80) Eighty Dol- lars. Harris & Jones. Indorsement. — Pay -to Rogers' Ex- press, Jas. Harris; Rogers' Express, Jas. Rogers, Manager; James Smith. Indorsement "James Smth," instead of "James Smith," we assume to be an error, and a safe indorse- ment to pay. As regards the indorsement of "James Rogers, manager for Rogers' Express," evidence of authority of James Rogers should be required, or a guarantee of the indorsement by a responsible party. [17] ^;p/fe^^^^^^^;^^^:> Check No. 7- [i8] CHECK No. 8. Face. — The Seaboard National Bank, of the City of New York: Pay to the order of John H. Friday and W. E. Fri- day ($i,ooo) One Thousand Dollars. Wm. Russel. Indorsement. — Jno. H. & W. E. Friday; Pay to John Block or order, Jas. Knight; J. Block, National City Bank, New York. This check is not payable to John H. & W. E. Friday jointly, but to each individually, and should be so indorsed. The indorsement of "J. Block" is not technically correct. J. Block might be John, Joseph or James Block. To be in good form it should have been indorsed "John Block." The check being for $i,ooo, it should, as a matter of courtesy to the col- lecting bank, be returned to them for guarantee. [19] Check No. 8. [20] CHECK No. 9. Face. — The Seaboard National Bank, of the City of New York: Pay to the order of John Doe Eight Dollars ($8). Jas. Hoskins. Indorsement. — Pay to James Frank for collec- tion account of John Doe; Frank James. In the first place the indorsement of James Frank is missing^ and should be supplied before paying the check. The indorsement of John Doe being restrict- ive, the check should not be paid unless guaranteed by the Clearing House Bank. Oy^^dyOU<) Check No. 9. [22] CH^CK No. 10. Face. — The Seaboard National Bank, of the City of New York: Pay to the order of Trinity Church Seventy (?) Dollars ($70?). Wilbur Loomis. Indorsement. — Pay to Walter Thompkins; Frank Taylor, Trustee; Walter Thompkins, Frank Jones, S. It is impossible to ascertain, either from the fig-ures or the writing what is the correct amount of this check, and in the absence of any certification of the amount by the maker it should not be paid in the present form, although it may be paid without risk for $20. As to the indorsement of "Frank Taylor, Trustee," there is nothing to indicate that he indorses on behalf of Trinity Church. But should it be known that he was a trustee of Trinity Church, it would be necessary to know that he had authority to trans- fer moneys. The indorsement of Walter Thompkins is correct, and, being in blank, would make the check payable to bearer in case the previous indorsement had been correct. The indorsement "Frank Jones, per S.," is immaterial. [23] (Zt^^ Check No. 10. [24] CHBCK No. II. Face. — The Seaboard National Bank, of the City of New York: Pay to the order of United Wire Works ($io) Ten Dollars. Jas. Smith. Indorsement. — Pay to the ist Na- tional Bank, Brooklyn, N. Y. ; United Wire Works, John Smith, part owner; ist National Bank, New York. The indorsement, United Wire Works, by John Smith, part owner, does not indicate anything defin- ite as to the character of the United Wire Works. It may be a partnership, joint stock company or cor- poration for aught that appears by such indorsement. The indorsement is, therefore, irregular, and accord- ing to custom it should be returned to the indorsers for guarantee. As regards the indorsement of the First National Bank, which is missing, the same should be called to the attention of the bank present- ing the same, for guarantee, so that it may protect itself. Of course, the bank on which the paper is drawn may rely upon its right of recourse against the First National Bank, which is the last indorser upon the paper without any guarantee, but it is cus- tomary to return a paper of this kind so as to call the irregularity to the attention of the last indorser, and give it an opportunity to take such measures for its protection as it may see fit. [25] Check No. ii. [26] CH:^CK No. 13. Face. — The Seaboard National Bank: Pay to the order of Geo. H. Glen Twenty Dollars ($40). Jas. H. Shaw. Indorsement. — Pay to the ist National Bank for Credit, Glen Shoe Company, by Geo. H. Glen; for deposit, Peter Du Bois; ist National Bank. This check should not be paid for more than $20, which is the amount given in the body. These in- dorsements are contradictory. It could not have been for the credit of both the Glen Shoe Company and Peter Du Bois. It should be returned for rectification and the guarantee of the collecting bank. [27] (Zc^ .^ /^;f^^(^/^ (j^€^ie^ //:U^^(^i^^^^ ^<:>^>Zi^ /^/^^ ^e^;^ r Check No. 12. [28] CHECK No. 13. Face. — The Seaboard National Bank, of the City of New York: Pay to the order of General U. S. Freed Three Thousand Five Hundred Dollars ($3,500). H. E. Hamilton. Indorsement. — Pay to Fred Dent, U. S. Freed; Harrison Blunt, Frederick Dent; ist National Bank, New York. The indorsement "U. S. Freed" is perfectly correct, as the title is not necessary, althoug^h the check should not be paid on account of the missing indorsement of Harrison Blunt. [29] Check No. 13. [30] CH^CK No. 14. Face. — Pay to the order of Bearer Three Hundred Thirty- five Dollars ($335). Acme Soap Company. John Gleason, Pt.. to the Seaboard National Bank, New York, N. Y. Indorsement. — William Hitt; Pay to the order of Sam Slick, F. Meyer; West Side Bank, New York. This check is converted into an order check by F. Meyer, and a cautious banker would require the indorsement from Sam SHck. [31] r 0^^^ -^^^C^d^Z^tk^^