Hoge, James F.

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University of Kentucky

Kentucky Law JournalVolume 40 | Issue 2 Article 131951Gift by Check--Hale v. HaleJames F. HogeUniversity of KentuckyFollow this and additional works at: https://uknowledge.uky.edu/kljPart of the Banking and Finance Law Commons, and the Property Law and Real EstateCommonsRight click to open a feedback form in a new tab to let us know how this document benefitsyou.This Note is brought to you for free and open access by the Law Journals at UKnowledge. It has been accepted for inclusion in Kentucky Law Journal byan authorized editor of UKnowledge. For more information, please contact UKnowledge@lsv.uky.edu.Recommended CitationHoge, James F. (1951) "Gift by Check--Hale v. Hale," Kentucky Law Journal: Vol. 40 : Iss. 2 , Article 13.Available at: https://uknowledge.uky.edu/klj/vol40/iss2/13KENTUcKY LAW JOuRNALGIFT BY CHECK - HALE v HALEIn the recent case of Hale v Hale,1 a deposit was made by Halein a savings account- to his own credit in the amount of $3,500. Onthe day before his death, he drew a check payable to his daughter for$1,000 against this deposit in the bank and handed it to her. Thiswas for the stated purpose of paying his funeral expenses, hospitaland doctors bills and, according to the testimony of his daughter,the donee, the remainder was to go to her. She deposited this checkto her credit after the death of her father. The bank, upon ascer-taming that Hale had died before the presentation of the check,promptly credited the amount to the account of Hale, thus restoringthe deposit to the original sum of $3,500. Evidence in the case showedthat the donee had actually paid out $726 for the above expenses asher father had directed, in reliance on the check he had given forthat purpose. The court allowed a recovery by the daughter for theentire amount of the check, holding that the amount in excess of thebills and expenses paid was a valid gift.3The Hale case involves two interesting legal problems: the first isthe application of the tentative trust doctrine for the first time in Ken-tucky and the second pertains to the validity of the gift to the daugh-ter. The former question has been recently discussed in the KENTUCKyLAW JOURNAL, 4 and it is the purpose of this comment to examine thegift problem.It is generally accepted that where one intends to make a gift ofa sum of money and gives the donee a check drawn against the donor sbank account, the gift will be upheld if the check is paid by the bankbefore the death of the donor.5 However, if the check is not paidduring the lifetime of the donor, it does not constitute a valid gifteven though it may have been presented for payment prior to hisdeath.6 Most jurisdictions hold that mere delivery of a check to thedonee does not constitute a delivery of the sum represented by thecheck so as to place the gift beyond the donor s power of revocation,and that a check as such is not the subject of a valid gift either inter313 Ky. 344, 231 S.W 2d 2 (1950).Ordinarily a savings account cannot be checked upon without presentationof the pass book. However, the court recognized this fact and the bank honoredthe check when presented."'What these expenses would be was uncertain when he gave the check andthere is proof to sustain her contention that he gave her the remainder of the$1,000 for her to keep as her own." Hale v. Hale, 313 Ky. 344, 353, 231 S.W 2d2,7 (1950).'Note, 39 Ky. L.J. 233 (1951).'24 Am. Jim. 780.'Ibid.RECENT CASESvivos or causa mortis.7 It is said that a check of this nature is simplyevidence of the donor s promise to make a gift which, being withoutconsideration," cannot be enforced against the donor nor agamst hispersonal representative."A negotiable instrument, like any other contract, requires a con-sideration in order to make the promise to pay binding on thepromisor and enforceable against his estate.10There is some authority however that where the donee of a promisemakes expenditures or changes his position in reliance upon thatpromise, the donor is estopped from denying a consideration whereinjustice can be avoided only by enforcement of the promise." Undersuch authority the maker of a check or is estate might be estoppedfrom setting up want of consideration where the payee has incurredother obligations or suffered some loss or disadvantage in relianceupon the promise to pay 12Some jurisdictions have held that a check presented after thedonor s death is enforceable on the theory that it operates as an as-signment of the sum. They qualify this view by stating that a checkof itself does not operate as an assignment unless there are other cor-roborating circumstances manifesting an intention to assign. Thisintention must be gathered from the language used in the instrumentand from the surrounding circumstances.1 3 The surrounding circum-stances in such case could be an oral agreement made between theparties that the check at the time of delivery was evidence of an as-signment of the complete sum.In the light of previous Kentucky decisions it is very difficult tosee how the amount of the check in excess of the expenses could beupheld as a valid gift. In the case of Throgmorton v GrigsbysSBITTON, BILLS AND NOTES, 840 (1943).Ky. REv. STAT. sec. 356.024 provides that every negotiable instrument isdeemed pnma facie to have been issued for a valuable consideration, and everyperson whose signature appears thereon to have become a party thereto for value.However, the rule followed is that "ordinarily, in the absence of proof to thecontrary, the presumption wvill be indulged that a paid check was executed insatisfaction of a debt of the payor." Hatfield's Admr v. Hatfield, 166 Ky. 761,179 S.W 832 (1915); NEGOTIABLE INSTRT\MENTS LAW, sec. 24."Note, 12 Wis. L. REv. 409 (1937).7 Amr. Jun. 943." BnoWN, PERSONAL PROPERTY 172 (1936)."Cox s Ex r. v. Walker, 140 Ky. 172, 130 S.W 984 (1910). RESTATEMENT,CONTRACTS, see. 90, provides: "A promise which the promisor should reasonablyexpect to induce action or forbearance of a definite and substantial character onthe part of the promisee and which does induce such action or forbearance isbinding if injustice can be avoided only by enforcement of the promise."INote, 12 Wis. L. REv. 412 (1937); sec. 189 of NEGOTIABLE INSTRUMENTSLAW provides that a check does not constitute an assignment of funds; 20 A.L.R.174, 182 (1922).KENTTuKY LAw JouRNAL.Adm r,14 the court stated the basic rule saying, "'It seems clear to usthat until the check was either paid or accepted the gift was incom-plete; and that, in the absence of such payment or acceptance, thedeath of the drawer operated as a revocation of the check. ,1 Whenthe court in the Hale case said, "We think the proof establishes herright to this balance as a gift .,'16 it simply overlooked the wellrecognized rule described above. In the case of Pikeville NationalBank and Trust Company v Shirley,' 7 a cashiers check for $2,000was upheld as a valid gift inter vivos even though presented forpayment after the donor had committed suicide. The court in thatcase recognized that generally an ordinary check is merely a promiseto pay and must be paid or accepted before there is a gift of themoney, but a cashiers check is like money and a delivery of it hasthe same effect as a delivery of the money itself.It is submitted that the court had a rational basis for allowing arecovery to the amount of $726, since the donee actually furishedconsideration for this part of the check. However, the balance couldnot have been supported by any consideration since Hale s expensesamounted to only $726 and he stated that whatever remained washis daughter s. His intention must have been that consideration wouldbe furnished for a part of the check and the remainder would be a gift.In the application of the estoppel theory, if it could apply to thiscase, it would be necessary to show that the daughter made expendi-tures and changed her position m reliance upon the check given to herbefore Hale s death and that m order to avoid injustice she must beallowed to enforce payment of the check. The evidence does notshow that the daughter incurred any obligations or made any ex-penditures m excess of the $726, therefore estoppel should not applyto the amount of the check m excess of the expenses actually paid.From the evidence presented m the instant case, there is nothingto suggest an intention on the part of Hale to assign the complete sumto his daughter rather than to make a gift of the balance to her. Infact, the daughter s testimony (that her father told her she was tohave what remained after paying the expenses) supports the con-tention that there was no assignment. Therefore, it would seem ratherclear that Hale did not intend to assign the entire sum at that instant,otherwise he would have told her to take the whole amount and keepit from that instant on. An assignment of the fund by check could,124 Ky. 512, 99 S.W 650 (1907)."Id. at $15, 99 S.W at- 651.'Supra note 1, at 353,231 S.W 2d at 7."281 Ky. 150, 135 S.W 2d 426 (1940).RECENT CASESnot have been contemplated by Hale at the time because he onlysigned a check with no manifestation that this check represented anassignment of a specific fund or sum of money There was nothing onthe check which marked it as an assignment. Undoubtedly Hale hadthe intention to give the balance, but had he lived he would havebeen able at any time to revoke the gift until it was accepted by thebank. Of course any assignment explanation of this transfer is largelyacademic in view of the Negotiable Instruments Law and previousKentucky decisions.'-In conclusion, it is submitted that the balance of the check in thiscase should not have been upheld as a valid gift. If Hale had actuallywithdrawn the money from the account and delivered it to the daugh-ter or had given a certified check to her with the instruction to keepwhat was left over, there would have been a complete surrenderingof control of the money, resulting in a valid gift. This was not done.All Hale did was draw a check on a savings account of which he wastrustee. Although his check may have operated as a revocation ofthe tentative trust created by the savings deposit to the amount of thecheck, the balance of the check was properly a part of ins estate uponhis death and should have gone to his next of kin.JAmES F HOGE" Ky. STAT. sec. 356.127; 209 Ky. 212, 272 S.W 384 (1925).

Gift by Check--Hale v. Hale

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Gift by Check--Hale v. Hale

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