Page 177 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes 2. Scrutinizing the instruments: Name of the holder, Branch name, amount in world and
figure, date, material alteration of any to be checked carefully.
3. Checking the endorsement: Bankers have to check the instrument whether it has been
endorsed properly.
4. Presenting the instrument in due time: It is the responsibility of the collecting bank to
present the instrument in due time to the paying bank.
5. Collecting the proceeds in the payee’s account: It is the duty of collecting banks to collect
and credit the proceeds of the instruments to the proper/correct account.

6. Notice of dishonour and returning the instruments: If any instrument is dishonoured by
the paying bank it should be informed to the customer on the day following the receipt of
the unpaid instruments.

Self Assessment

Fill in the blanks:
16. Acting as agent is a ............................ of a collecting Banker.
17. Bankers have to check the instrument whether it has been …………….. properly.
18. Liability of Paying Banker is to check that no ............................ is issued by court.

Case Study Enforceability of Lost or Destroyed Negotiable

Instruments/Commercial Paper

t is an interesting case that shows the how lost or destroyed Negotiable Instruments/
Commercial Paper can remain enforceable is Atlantic National Trust, LLC v. Mcnamee,
I2007. The High Court in Alabama held that a destroyed promissory note is still
enforceable both the maker of the note, or an assignee could enforce it so long as its
existence could be proven.
In this case a bank (Wachovia) made a loan in 2003 to the debtor, McNamee, in the amount
of US $150,000. For this he signed a promissory note. At some point, Wachovia inadvertently
misplaced, lost or destroyed the original note. The note matured in 2005 and after the loan
matured Wachovia assigned its rights in and to the note to the plaintiff Atlantic National
Trust., which then sued for recovery. Atlantic demanded McNamee repay the remaining
principal balance of US $138,620 plus interest.

The plaintiff moved for summary judgment based on an affidavit affirming that the
instrument had been lost by the assignor. Now Atlantic could not produce the original
note, but had a copy, so the debtor defended on the grounds that the plaintiff assignee had
no right to enforce the note since it was never in possession of the original document, and
that the assignee of a lost note has no standing to sue the maker. Thus McNamee contended
that because the original note was destroyed, the note could not be enforced. The federal
court certified a question to the Alabama High Court to clarify Alabama common law on
that issue.
It was concluded that an assignee has all of the same rights, benefits, and remedies that the
assignor has to enforce contracts to the extent the assignor was able to do so, hence the
Contd...

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