Kf 
 
 (JJnrnrll Haw £>tt|iral Cibcaty 
 
KF1024.B C 69 ne " UniVere " yL " ,rary 
 
 Bank collections / 
 
 3 1924 018 739 817 
 
Cornell University 
 Library 
 
 The original of this book is in 
 the Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924018739817 
 
BANK COLLECTIONS. 
 
 \ <i|ii? 
 
 BY 
 
 ALBERT S. BQliLBS, 
 
 AUTHOR OF "BANKS AND THEIB DEPOSITORS;" "BANE OFFICERS; ' " THE NATIONAL 
 
 BANK ACT AND ITS JUDICIAL MEANING;" LECTUBEB ON THE LAW AND 
 
 PBACTICB OF BANKING IN THE UNIVERSITY OF PENNSYLVANIA, 
 
 AND EDITOR OF THE "BANKERS' MAGAZINE." 
 
 NEW YORK : 
 
 HOMANS PUBLISHING COMPANY, 
 
 233 BKOADWAY 
 1893. 
 
^7?27f 
 
 Copyright, 1893, 
 By ALBERT S. BOLLE& 
 
 , HARRISBTTRO: 
 KJIYIIRS PRINTING HOUBS. 
 
TO 
 
 43. HOOD WEIGHT^ 
 
 OF NOW YORK. 
 
 WHOSE DEVOTION TO BUSINESS 
 
 AND EMINENT SUCCESS AS A BANKER 
 
 HAVE* NEVER LESSENED 
 
 HIS GENEROUS AND INTELLIGENT INTEREST 
 
 IN ORGANIZED CHARITY, 
 
 THIS WORK 
 
 IS RESPECTFULLY DEDICATED 
 BY 
 
 THE AUTHOR. 
 
 (iii) 
 
QONTENTS. 
 
 CHAPTER I. 
 
 PAGE. 
 Ownership of Paper indorsed in blank and deposited, and the proceeds 1 
 
 CHAPTER II. 
 Ownership of Paper specially indorsed and deposited 40 
 
 CHAPTER HI. 
 Mode of Making Collections, Presentment, Demand and Notice . . . 102 
 
 CHAPTER IV. 
 Presentment of Drafts for Acceptance and Surrender of Bills of Lading 167 
 
 CHAPTER V. 
 Collection of Notes and Drafts payable at the Collecting Bank .... 183 
 
 CHAPTER VI. 
 Insolvency and Death 196 
 
 CHAPTER VH. 
 Payments 204 
 
 CHAPTER VHI. 
 Mistake and Forgery 247 
 
 CHAPTER IX. 
 Usage 273 
 
 CHAPTER X. 
 Sub-Agency . . 278 
 
 CHAPTER XL 
 300 
 
 (v) 
 
INDEX OF CASES. 
 
 [The figures refer to pages.] 
 
 Abell, etc., Co. v. Hurd, 161. 
 Adams v. Hackensack Imp. Commis- 
 sion, 182, 183, 188. 
 .ffitna Ins. Co. v. Alton City Bank, 
 
 287. 
 .astna Nat. Bank v. Fourth Nat. Bank, 
 
 192. 
 Agricultural Bank v. Commercial 
 
 Bank, 136, 288. 
 Allen v. Culver, 241. 
 
 B. Fourth Nat. Bank, 14, 269, 
 
 271. 
 v. Merchants' Bank, 6, 106, 
 109, 129, 133, 134, 136, 169, 
 191, 274, 279, 283. 
 i). Suydam, 169, 171, 172, 173, 
 175. 302. 
 Allerton v. Allerton, 200. 
 Alley v. Kogers, 183, 186. 
 Allison v. Hubbell, 60. 
 American Ex. Nat. Bank v. Gregg, 
 
 13, 186, 228, 234. 
 American Express Co, u. Haire, 135, 
 
 300. 
 American Nat. Bank v. Bangs, 116. 
 Ancher v. Bank of England, 43, 162. 
 Andrews v. German Nat. Bank, 214. 
 
 v. Suffolk Bank. 251. 
 Anonymous case, 198. t 
 Armistead v. Armisteads, 190. 
 Armstrong, In re, 79. 
 Armstrong v. American Ex. Nat. 
 Bank, 35. 
 v. Nat. Bank, 17, 33, 47, 
 52, 53, 54, 89. 
 Armour Brothers Banking Co. v. 
 Biley Co. Bank, 42, 54, 59, 62, 161. 
 Arnold & Co. v. Clark, 16, 19, 24, 32, 
 
 33, 34. 43, 64. 
 Arnot v. Bingham, 43, 49, 54, 83, 95, 
 99. 
 
 (Tii) 
 
 Artisans' Bank «. Backus, 152. 
 Atkinson v. Rochester Printing Co., 
 196. 
 v. Stafford, 90, 294. 
 Audenried v. Betteley, 79. 
 Averell v. Second Nat. Bank, 244. 
 Aymaru. Beers, 112. 
 Ayraultu. Pacific Bank, 106, 129, 133, 
 
 134, 279. 
 Ayres v. Farmers & Merchants' Bank, 
 
 7, 13, 50, 55. 
 
 B. 
 
 Babcock v. Beman, 59. 
 
 Bacon v. Hanna, 142. 
 
 Balbach v. Frelinghuysen, 42, 49, 51, 
 
 62, 75, 79, 196. 
 Baldwin v. Bank, 135, 288. 
 Ballingalls v. Gloster, 172. 
 Bailey v. Bank, 153. 
 
 v. Bodenham, 227, 238. 
 b. Porter, 122. 
 Baker v. New York Nat. Ex. Bank, 
 
 95. 
 Bank v. Babcock, 138. 
 
 v. Bender, 140. 158, 164. 
 
 v. Butler. 6, 136, 281. 
 
 v. Carneal, 122, 157. 
 
 v. Chambers, 153. 
 
 v. Davidson, 142. 
 
 v. Davis, 61, 106, 144, 146. 
 
 e. Farmers & Mechanics' Bank, 
 
 266. 
 v. First Nat. Bank, 64, 66. 
 v. First Nat. Bank, 18, 42, 64. 
 v. Flagg, 130, 189. 
 v. Goddard, 131. 
 v. Haskell, 60. 
 v. Hollister, 119, 122. 
 ■o. Howlett, 156, 157. 
 v. Huggins, 108, 135, 146, 169, 
 281, 302, 
 
Vlll 
 
 TABLE OF CASES. 
 
 [The figures refer to pages. ] 
 
 Bank Hysell, 119. ■ 
 v. Jones, 200. 
 
 v. Keenan, 5, 106, 109, 124, 139, 
 166, 183, 233, 234, 301,304. 
 v. Metropolitan Nat. Bank, 176. 
 v. Millard, 7, 183. 
 v. Moore, 281. 
 v. Muskingham Branch of Bank 
 
 of Ohio, 61. 
 v. Ober, 135, 137, 288. 
 v. Smedes, 139. 
 «. Smith, 122. 
 v. Smith, 138, 140, 162. 
 v. Triplett, 44, 64, 107, 114,171, 
 
 172, 175, 274, 288. 
 v. Union Bank, 257, 258, 264. 
 v. Vaughn, 107. 
 " v. Wheeler, 60. 
 
 v. Wisconsin Marine & Fire Ins. 
 
 Co., 64, 75, 79. 
 of Columbia v. Fitzhugh, 115, 
 
 274. 
 of Columbia v. Magruder, 115, 
 
 274. 
 ofGenessee v. Patchin Bank, 
 
 60. 
 of Metropolis v. New England 
 
 Bank, 17, 44, 66, 274. 
 of Orleans v. Smith, 32, 284. 
 of Scotland v. Hamilton, 173. 
 of United States v. Goddard, 
 
 146. 
 ofUticau. Smedes, 116. 
 Barber v. Brace, 33. 
 Barker v. Prentiss, 33. 
 Barned's Banking Co., ex parte Mas- 
 
 sey, 183. 
 Barnettu Smith, 123. 
 Barret v. Evans, 153. 
 Bartlett *. Robinson, 154. 
 
 v. Isbell, 106, 139, 142. 
 Bateman v. Joseph, 164. 
 Beal v. City, 36, 49, 54. 
 Beale v. Parrish, 106, 141, 143. 
 Beauregard v. Enowlton, 123. 
 Bedford Bank v. Acoam, 192. 
 Belden v. Lamb, 140, 156, 163, 164. 
 Bell v. Hagerstown Bank, 144. 
 Bellemire v. Bank, 135, 288. 
 Bennett v. Knapp, 12. 
 Benton v. Martin, 109. 
 Berkshire Bank v. Jones, 118. 
 Bernheimer v. Marshall & Co., 254, 
 
 267, 269. 
 Berry v. Eobinson, 152. 
 Bickerdike v. Bollman, 123. 
 
 Cickford ». First Nat. Bank, 213. 
 Bird v. Louisiana State Bank, 297. 
 Bize v. Dickason, 248. 
 Blaine v. Bourne, 18, 42, 44, 58, 59, 
 
 62, 63, 64, 67, 68, 72. 
 Blair v. First Nat. Bank, 60. 
 Blakeslee v. Hewitt, 130, 183, 184. 
 Blot v. Borceau, 302. 
 Boehm*. Sterling, 108, 123. 
 Bolton v. Bichard, 236. 
 Born v. First Nat. Bank, 214. 
 Borup v. Nininger, 295, 302. • 
 Boston Bank v. Hodges, 115, 145. 
 Bowling v. Arthur, 136, 153, 288. 
 Bowling v. Harrison, 153. 
 Boyce v. Barnes, 163. 
 Boyd v. Corbitt, 160. 
 
 v. Emmerson, 237. 
 v. Nasmith, 214. 
 Bradley v. Davis, 153, 155. 
 Bradstreet v. Everson, 288, 297. 
 Brahm v. Adkins, 7. 
 Braman v. Hess, 34. 
 Branch Bank v. Knox & Co. 4, 108, 
 135, 165. 
 v. Peirce, 140, 144, 157, 
 158, 281. 
 Brenzer v. Wightman, 151. 
 Bridenbecker v. Lowell, 60. 
 Bridge Co. v. Savings Bank, 184. 
 Briggs v. Central Nat. Bank, 57, 121, 
 
 229. ' 
 
 British & American Mortgage Co. v. 
 
 Tibballs, 219, 275. 
 Britton v. Niccolls, 136. 
 Brocchus v. Morgan, 92. 
 Brockway v. Allen, 59. 
 Brown v. Clark, 161. 
 v. Jones, 117. 
 v. Leckie, 213. 
 v. Mott, 34. 
 Brown & Sons v. Ferguson, 151. 
 Browning ■v. Armstrong, 116. 
 
 v. Kinnear, 164. 
 Buell v. Ctfapin, 238. 
 Buckley v. Second Nat. Bank, 101. 
 Bullene v. Coates, 7, 50. 
 Buller v. Harrison, 32, 65, 248. 
 Bullitt v. Baira, 298. , 
 Burbank v. Beach, 117. 
 Burdett v. Willett, 92. 
 Burkhalter v. Second Nat. Bank, 109, 
 
 122, 213, 224, 226, 230. 
 Burnham v. Webster, 106, 107. 
 Bury v. Woods, 18, 25. 
 Butler v. Duval, 144. 
 
TABLE OF CASES. 
 
 IX 
 
 [The figures refer to pages. ] 
 
 Caldwell v. Cassidy, 183. 
 
 v. Evans, 182, 183. 
 Camden v. Doremus, 169, 171, 277, 
 
 292. 
 Camidge v. Allenby, 107. 
 Canal Bank v. Bank, 248, 254, 257, 
 
 258, 268. , 
 
 Capitol State Bank v. Lane, 108, 144, 
 
 169. 
 Carley v. Vance, 183. 
 Carroll v. Bank, 18, 30, 42. 
 v. Sweet, 109, 223. 
 Carter v. Burley, 146, 151. 
 
 ». Lipsey, 81. 
 Case v. Morris, 123. 
 Cavin v. Gleason, 84, 93, 97. 
 Cayuga Co. Bank v. Hunt, 118. 
 Cayuga Co. Nat. Bank v. Daniels, 
 
 200. 
 Cecil Bank v. Farmers' Bank, 18, 32, 
 42, 62, 63, 65, 66. 
 v. Heald, 22, 198. 
 Central Bank v. St. John, 6. 
 Central Georgia Bank v. Cleveland 
 
 Nat. Bank, 667. 
 Central Eailroad v. First Nat. Bank, 
 
 42, 63, 64, 67, 68, 74. 
 Chambers v. Miller, 237. 
 Chapman v. Lipscombe, 140. 
 
 v. McCrea. 136, 144, 300. 
 v. White, 7. 
 Charlotte Iron*Works v. American 
 
 Ex. Nat. Bank, 7, 58. 
 Chatham Nat. Bank v. Pratt, 166. 
 Chautaqua Co. Bank v. Davis, 162. 
 Chick v. Pillsbury, 151. 
 Chicopee Bank v. Philadelphia Bank, 
 
 118, 119. 
 Chillicothe Branch w. Fox, 59. 
 Church v. Barlow, 33, 34, 146. 
 City Bank v. Perkins, 60. 
 
 v. Weiss, 42, 63, 64, 67. 
 Citizens' Bank v. Howell, 136, 287. 
 
 v. Walker, 157. 
 City v. Beal, 6, 7, 10, 14, 35, 197, 198. 
 City of Marietta v. Slocomb, 249. 
 City Nat. Bank,u. Burns, 186, 235. 
 v, Clinton Co., 148, 
 
 160. 
 e. Martin. 245. 
 Claflin v. Wilson, 43, 64, 67. 
 Clark v. Merchants' Bank, 6, 7, 13, 
 31. 50, 58. 
 9. Thomas, 206 
 
 .Clark v. Whitaker, 62. 
 Clews v. Bank, 264. 
 Clode v. Bayley, 144, 146. 
 Coddington v. Bay, 19, 22. 
 
 v. Davis, 129, 130. 
 Cody v. City Nat. Bank, 15, 27, 47, 
 
 187. 
 Coggill v. American Ex. Bank, 269, 
 
 268. 
 Coghlan v. Dinsmore, 159. 
 Cohea v. Hunt, 131. 
 Collins v. Martin, 32. 
 Colt v. Noble, 140, 146, 148. 
 Colvin v. Holbrook, 169, 191, 288. 
 Commercial Bank v. Hughes, 123, 140. 
 v. King, 151. 
 «'. Marine Bank, 33, 
 43, 64, 293. • 
 , v. National Bank, 
 
 291. 
 ■u. Union Bank, 6, 
 106, 133, 191, 
 205, 216, 241, 
 279. 
 v. Varnum, 137. 
 Commercial Nat. Bank v. Armstrong, 
 
 42, 52, 75. 78, 81, 86, 91. 
 Commercial Nat. Bank v Hamilton 
 
 Nat. Bank, 42, 64, 72. 
 Commercial Nat. Bank v. Henninger, 
 
 192, 194. 
 Commercial Nat. Bank v. Proctor, 81. 
 Commercial & Farmers' Nat. Bank*. 
 
 First Nat. Bank, 250, 266. 
 Commercial & Railroad Bank v. Ha- 
 
 mer, 108, 144. 
 Continental Nat. Bank v. Cornhauser 
 
 & Co., 213, 214. 
 Conroy v. Warren, 123. 
 Continental Nat. Bank v. Weems, 89, 
 
 96. 
 Cook v. Tullis, 91, 92. 
 Cooper v. Curtis, 60. 
 Gooney v. Wade, 205. 
 Coors v. German Nat. Bank, 263. 
 Cope v. Daniel, 33. 
 Corn Exchange Bank v. Farmers' Nat. 
 Bank, 16, 21, 58, 69. 133, 161, 226, 
 228, 241, 279, 291. 
 Corn Exchange Bank v. Nassau Bank, 
 
 257, 258. 
 Corser v. Paul, 60. 
 Cornwell v. Kinney, 18, 28, 34. 
 Costigan v. Newland, 288. 
 Costin v. Eankin, 106. 
 Cowles v. Harts, 152. 
 
TABLE OK CASES. 
 
 [The figures refer to pages.] 
 
 Couch v. Sherill, 137. 
 
 Cox v. National Bank, 118. 
 
 Cragie v. Hadley, 79, 92, 198. 
 
 Craig v. Parkis, 166. 
 
 Crawford v. Branch Bank, 158. 
 
 Crane v. Pratt, 239. 
 
 Crawford ». West Side Bank, 254,257. 
 
 Crockett v. Young, 60. 
 
 Crouse v. First Nat. Bank, 303. 
 
 v. First Nat. Bank, 276. 
 Cruger v. Armstrong, 123, 125. 
 
 v. Lindheim, 114. 
 Culver v. Benedict, 22. 
 Cummings v. Kohn, 161. 
 Curtis v. Leavitt, 6. 
 
 D. 
 
 Dale & Co., ex parte, 84, * 
 
 Daly v. Butchers & Drovers* Bank, 
 
 135, 287. 
 Darling v. Stanwood, 283. 
 Davenport Plow Co. v. Lamp, 96. 
 Darey v. Jones, 106, 133, 134, 146, 
 
 148, 281. 
 Demmon v. Boyleston Bank, 38. 
 Denny v. Manhattan Company, 169. 
 Deposit Bank v. Fayette Nat. Bank, 
 
 267. 
 Dickerson v. Wason, 7, 19, 20, 43, 54, 
 
 121, 293. 
 Dickens v. Beal, 142. 
 Dobree v. Eastwood, 148. 
 Dodge v. Bank, 151. 
 Dod v. Fourth Nat. Bank, 20. 
 Dole v. Gold, 122. 
 Dollfus v. Frosch, 162. 
 Dorchester & Milton Bank v. New 
 
 England Bank, 38, 125, 136, 274, 
 
 283, 287. 
 Dougherty Brothers & Co. v. Central 
 • Nat. Bank, 242. 
 Down v. Hailing, 109. 
 Downer v. Eemer, 157. 
 
 v. Madison Co. Bank, 133. 
 Downs v. Planters' Bank, 151. 
 Dows v. National Exchange Bank, 
 
 176, 178, 179, 180. 
 Drovers' Nat. Bank v. Anglo-Am. 
 
 Provision Co., 227. 
 Drovers' Nat. Bank v. O'Hare, 73. 
 Drown v. Pawtucket Bank, 107. 
 Dugau v. United States, 162, 163. 
 Duncan v. Magette, 83. • 
 
 Dupre v. Richard, 118. 
 Dyas v. Hanson, 109. 
 
 E. 
 
 Eagle Bank v. Chapin, 151. 
 
 v. Hathaway, 146, 147, 
 155. 
 Eastern Bank v. Brown, 152. 
 East-Haddam Bank v. Scovil, 43, 105, 
 
 135, 139, 144, 248, 250, 287. 
 Echarte v. Clark, 19. 
 Edie v. East India Co., 43, 45. 
 Edson v. Angell, 90. ♦ 
 
 Ellicott v. Barnes, 96. 
 Elliot v. Abbot, 59. 
 Ellis v. Ohio Life Ins. & Trust Co., 
 
 255, 256. 
 Emery's Sons v. Irving Nat. Bank, 
 
 179, 180. 
 Emmerling v. Graham, 137. 
 .Englar v. Offnut, 92, 94. 
 Erwin Lane Paper Co. v. Farmers' 
 
 Nat. Bank, 61. 
 Espy v. Bank, 264. 
 Essex County Nat. Bank v. Bank, 
 
 214, 215. 
 Everett v. United States, 60. 
 Exchange Nat. Bank v. Johnson, 165, 
 
 240. 
 Exchange Nat. Bank v. Third Nat. 
 
 Bank, 6, 172, 281, 283. 
 
 F. 
 
 Fall River Nat. Ban'ku. Willard, 128. 
 Fabens v. Mercantile Bank, 43, 107, 
 
 135, 163, 283, 287. 
 Fahnestock & Co. v. Bailey, 81. 
 Fahy v. Fargo, 170. 
 Failing v. Fargo, 303. 
 Farley v. Turner, 74. 
 Farmer v. Rand, 146. 
 Farmers' Bank v. Arthur, 161. 
 v. Duvall, 151. 
 v. Owen, 289, 297. 
 v. Vail, 106, 109, 122, 
 144. 146, 149, 163. 
 Fanners' Deposit Nat. Bank v. Penn 
 
 Bank, 161. 
 Farmers & Mechanics' Nat. Bank v. 
 
 Logan, 179. 
 Farmers & Mechanics' Bank v. 
 
 Butchers & Drovers' Bank, 214. 
 Farmers & Mechanics' Nat. Bank v. 
 
 King, 91, 92, 293. 
 Farrar v. Gilman, 60. 
 Farwell v. Curtis, 238. * 
 
TABL^ OF CASES. 
 
 XI 
 
 [The figures refer to pages.] 
 
 Fay v. Strawn, 287. 
 Fifth Nat. Bank v. Ashworth, 205, 
 207, 210, 211, 
 216. 
 ■v. Armstrong, 6, 7, 
 42,49,51,62,79 
 Fisher i>. Evans, 116. 
 First Nat. Bank v. Armstrong, 42, 83, 
 91, 93. 
 v. Armstrong, 6, 14, 
 
 47, 48, 49, 50. 
 v. Armstrong, 42, 49. 
 
 79. 
 v. Armstrong, 88. 
 v. Bank of Monroe, 
 
 53, 77. 
 v. Bayley, 181. 
 v. Behon, 250. 
 v. Cadwallader, 15. 
 v. Crabtree, 179. 
 v. Crittenden, 122. 
 v. Devenish, 186, 241. 
 v. Dickson, 74. 
 v. First Nat. Bank, 
 49,126,226,296. 
 w. First Nat. Bank, 
 
 255, 263. 
 v. First Nat. Bank, 
 
 42, 64, 68, 79. 
 v. Fourth Nat. Bank, 
 110, 225, 226, 
 301, 302. 
 v. Gregg & Co., 30, 
 
 63, 64. 
 v. Hummel, 98. 
 v. Indiana Nat. Bank, 
 
 254, 256, 261. 
 v. Kelly, 181. 
 v. Leach. 214. 
 v. Leppel, 75. 
 v. Mastin Bank, 79. 
 v. Northwestern Nat. 
 
 Bank, 262. 
 v. Eeno Co. Bank, 7, 
 18, 42, 62, 64, 
 66, 79. 
 m v. Ricker, 254, 256. 
 * v. Payne & Co. 's As- 
 signees, 49, 81, 
 202. 
 First Nat. Bank of Lynn v. Smith, 26, 
 
 144,161. 
 First Nat. Bank, v. Sprague, 285, 288. 
 v. State Bank, 264. 
 v. Whitman, 214, 
 272. 
 
 First Nat. Bank v. Yost, 254, 259. i 
 Fitler v. Morris, 116. 
 
 y. Beckley, 188. 
 Fleckner v. United States Bank, 60, 
 
 165. 
 Flourney v. First Nat. Bank, 195. 
 Foaiid v. Johnson, 158. 
 Folger v. Chase, 59. 
 Forbes v. Omaha Nat. Bank, 155. 
 •Foster v. McDonald, 146, 277. 
 
 v. Paulk, 123. 
 Fourth Nat. Bank v. Mayer, 75. 
 Fox v. Davenport Nat. Bank, 126. 
 Fernald v. Bush, 207, 208. 
 Frank v. Bingham, 85, 93, 95. 
 Franklin v. Vanderpool, 123. 
 Franklin Bank, In matter of, 7. 
 Franklin Co. Nat. Bank v. Beal, 14, 
 
 56, 207, 210, 211, 219 
 Francis v. Evans, 96. 
 Frazler v. New Orleans Gas Light & 
 
 Banking Co., 135. 
 Freeholders of Middlesex v. State 
 
 Bank, 13, 202. 
 Freeholders of Middlesex v. Thomas, 
 
 223. 
 Freeman v. Boynton, 138. 
 v. Curran, 183. 
 v. Citizens' Nat. Bank, 166, 
 
 169, 170. 
 v. Savannah Banking & 
 
 TrustCo., 253, 272. 
 v. Ex. Bank, 42, 46, 62, 65, 
 74, 160. 
 Freeman's Bank v. Perkins, 106, 146, 
 
 151. 
 Freeman's Nat. Bank v. National 
 Tube Works Co., 27, 38, 44, 47, 59, 
 161,245. 
 French v. Bank, 152. 
 Fullerton v. Bank, 122, 15L 
 Furberu Stephens, 196. 
 
 G. 
 
 Graham v. Morstadt, 112. 
 
 v. U. S. Sav. Institution, 59. 
 Grand Bank v. Blanchard, 114, 146, 
 
 148, 149. 
 frranite Bank v. Ayres, 116. 
 Graydon v. Patterson. 216. 
 Greenwich Bank v. DeGroot, 142, 
 
 154. 
 Greeves v. La. State Bank, 206. 
 Griffith v. Conway, 71. 
 
Xll 
 
 TABJLE OP JJASES. 
 
 [The figures refer to pages.] 
 
 Griffith v. Reed, 125, 175. 
 
 Grissom v. Commercial Nat. Bank, 
 
 193. 
 Gnelich v. National State Bank, 135, 
 
 286, 287. 
 Gurney v: Howe, 239. 
 Games v. Manning, 190. • 
 
 Garland v. Salem Bank, 116, 160, 183. 
 Georgia Nat. Bank v. Henderson, 107. 
 Gerhardt v. Boatman's Sav. Institu* 
 
 tion, 137. 
 German American Bank ». Third 
 
 Nat. Bank, 200. 
 German Nat. Bank v. Burns, 228. 
 German Nat. Bank v. Farmers' De- 
 posit Nat. Bank, 213, 253. 
 German Nat. Bank v. Foreman, 192, 
 
 194. 
 Gilbert v. Sutliff, 81. 
 
 v. Dennis, 122, 114, 148. 
 Gilchrist v. Donrlell, 153. 
 Gillett v. Averill, 122. 
 Gillilan v. Meyers, 123. 
 Gilman v. First Nat. Bank, 252. 
 Gindrat v. Mechanics' Bank, 146, 156, 
 
 276, 277. 
 Glasgow v. Pratte, 118. 
 Gloucester Bank v. Salem Bank, 256. 
 Goddard v. Merchants' Bank, 254, 
 
 269. 
 Goodall v. Dolley, 172, 175 
 Goodell v. Buck, 92, 94. 
 Goodman v. Harvey, 22 
 
 v. Simonds, 22. 
 Gorgerat v. M'Carty, 162. 
 Gordon v. Kearney, 18. 
 Gough v. Staats, 113. 
 Gowan v. Jackson, 112. 
 
 Hackett v. Reynolds, 15, 16, 47, 30, 
 47, 63, 64, 79. 
 
 Hall v. Fuller, 257. 
 
 v. Tioga Nat. Bank, 267. 
 v. National Park Bank, 95. 
 
 Hallowell & Augusta Bank v. Ham- 
 lin, 59. 
 . Hallowell & Co. v. Curry, 123. 
 
 Halls v. Bank, 5, 160. 
 
 Haly v. Brown, 141, 144. * 
 
 Hancock v. Colyer, 75. 
 
 Hambro v. Casey, 303, 304. 
 
 Hamilton v. Cunningham, 168. 
 
 Hansard v. Robinson, 220, 221. 
 
 Hardy v. Chesapeake Bank, 255 
 
 Hare v. Hfarfcy, 227. 
 
 Harger v. TJemis, 142. 
 
 Harkera. Anderson, 109, 116, 123, 
 
 139, 223. 
 
 Harness v. DaviesCo. Sav. Ass'n, 122. 
 
 Harper v. Calhoun,' 60. 
 
 Harrison Nat. Bank v. Ellicott, 89. 
 
 Harrison v. Smith, 92, 95, 97. , 
 
 Hart v. "Windle, 161. 162. 
 
 Hartford Bank v. Barry, 33, 59, 106. 
 
 Hartford Bank v. Stedman. 118, 138, 
 
 140, 147, 148, 149, 151, 153, 156. 
 Hartwell v. Candler, 118. 
 
 v. M'Beth, 162. 
 Harvey v. GirardNat. Bank, 125, 127. 
 Haskell v. Mitchell, 62. 
 Hathaway v. Haynes, 181. 
 Haxtun v. Bishop, 183. 
 Haynes v. Birks, 133, 146, 148, 149. 
 v. Succession of Beckman, 60. 
 Hazard v. Spencer, 119. 
 
 v. "Wells, 108. 
 Hazleton v. Colburn, 109. 
 Hazlett v. Commercial Nat. Bank, 
 
 49, 108, 210, 226, 227, 288. 
 Henry & Co. v. Northern Bank, 206. 
 Herrick v. Carman, 33. 
 
 v. Gallagher, 267. 
 Heywood v. Pickering, 227. 
 Hickman v. Ryan, 151. 
 Hieskell v. Farmers & Mechanics' 
 
 Bank. 179. 
 Hills v. Place, 182, 183. 
 Hill v. Royds, 183. 
 Hoard v. Garner, 279, 302. 
 Hoffman v. First Nat. Bank, 7, 18, 
 
 32, 42, 62, 79, 98. 
 Hoffman v. Miller, 24, 35, 43. • 
 Hogan v. Cuyler, 114. 
 Holt v. Bacon, 60. 
 Home Insurance Co. v. Green, 151, 
 
 152. 
 Hook v. Pratt, 45, 63, 64, 98, 25 
 Hoover v. Wise, 298. 
 Horstman v. Henshaw, 123. 
 Housatonic Bank v. Laflin, 141, 149. 
 Howe, In matter of, 80. 
 Howard v. Ives, 106, 109, 122, 133, 
 
 146, 148, 191. 
 Howland v. Adrain, 146, 148. - 
 Hoyt v. Seeley, 123. 
 Huff v. Hatch & Langdon, 107, 136, 
 
 137. 
 Hughes v. Kellogg, 207, 211. 
 Hunt v. Maybee, 158, 164. 
 Hyde v. First Nat. Bank, 63, 281. 
 
TABLE. OF CASES. 
 
 XU1 
 
 Hyde & Goodrich v. Planters' Bank, 
 
 135, 288. 
 Hyslop v. Jones, 153, 155. 
 
 I. 
 
 Illinois Trust & Sav. Bank v. First 
 
 Nat. Bank, 197. 
 Illinois Trust & Say. Bank v. Smith, 
 
 75. 
 Importers & Traders' Nat. Bank v. 
 
 Peters, 31, 95 198, 1 9, 227. 
 Independent District v. King, 96. 
 Indig v. National nity Bank, 82, 120, 
 
 184, 192, 217, 220, 221, 224, 226, 
 
 227, 232. 
 Ireland v. Kip, 152, 153. 
 Ivory v. Bank, 106, 114. 
 Irving Bank v. Wetherald, 253. 
 
 Jacobsolin v. Belmont, 107. 
 Jackson v. Union Bank, 135, 287. 
 Janin v. London & San Francisco 
 
 Bank. 254. 
 Jenks v. Doylestown Bank, 122. 
 Jessop v. Miller, 21, 200. 
 Jockusch v. Towsey, 4, 83, 200, 201. 
 John v. City Nat. Bank, 149, 153, 159, 
 
 164, 277. 
 Johnson v. Ames, 92, 94. 
 v. Bank, 213, 224. 
 v. Brown, 154. 
 v. Harth, 146. 
 t v. Robarts, 183. 
 
 v. Commercial Bank, 254. 
 Jones v. Hawkins, 60. 
 
 v. Kilbreth, 79, 80, 83, 202. 
 Jones & Co. v. Milliken & Son, 30, 
 
 63, 64. 
 Jones v. Peppercorn, 43. 
 Julian v. Calkins, 71. 
 
 Keene ». Collier, 7. 
 
 Kelley v. Brown, 123. 
 
 Kelly v. Solan, 248. 
 
 Kelty v. Second Nat. Bank, 164, 220, 
 
 230. 
 Kenny v. Hazeltine, 205. 
 Kent v, Dawson Bank, 291. 
 
 [The figures refer to pages ] 
 
 Kern v. VonPhul, 62. 
 
 Kerrick v. Stevens, 163. 
 
 Kilpatrick *. Home B. & L. Ass'n, 
 
 223. 
 Kilsby v. Williams, 237, 244. 
 Kimball ». Cleveland, 60. 
 Kingston Bank v. Eltinge, 248. 
 Kingston v. Kincaid, 239. 
 Kinney & Co. v. Paine, 87, 231. 
 Kinsley v. Robinson, 123. 
 Kip v. Bank, 91. 
 
 Knatchbull v Hallett, 84, 92, 95. 
 Kobbe v. Clark, 113. 
 Koontz v. Central Nat. Bank. 248, 
 
 268. 
 Kunkel v. Spooner, 163. 
 Kupfer v. Bank, 165. 
 Kymer v. Laurie, 192. 
 
 La Farge v. Kneland, 267. 
 Lafayette Bank v. State Bank, 60. 
 Lafayette Nat. Bank v. Cinn. Oyster 
 
 & Fish Co., 214. 
 La. Ice Co. v. State Nat. Bank, 8. 
 Lamine v. Dorrell, 101. 
 Lancaster Nat. Bank v. Taylor, 62. 
 Lane v. Felt, 75. 
 Lanfear v. Blossman, 181. 
 Larsen v. Breene, 213. 
 Lawrance v. Fussell, 161, 163. 
 Lawrence v. Miller, 142. 
 
 v. Stonington Bank, 16, 31, 
 32, 33, 34, 44. 63, 64, 
 72, 274, 287. 
 Lawson v. Farmers' Bank, 150, 151. 
 Laue v. Lippe, 272. 
 Lazier v. Horan, 183, 188, 190. 
 Leary v. Blanchftrd, 44, 62. 
 Leather Manufacturers' Bank v. 
 
 Morgan, 255. 
 Le Blanc, In re, 80, 97. 
 Lee Banks;. Spencer, 145. 
 Lee & Co. v. Chillicothe Branch Bank, 
 
 42, 46, 67, 160. 
 Lee v. Turner, 71. 
 Lenox v. Cookg 172, 175. 
 Le Roy v. Globe Ins. Co., 80. 
 Levi v. National Bank, 42, 48, 49, 53, 
 
 62, 79, 205, 212, 214, 220. 
 Levy v. Bank, 237. 
 Libby v. Hopkins, 80, 97. 
 Lincoln & Kennebeck Bank v. Page, 
 
 156, 274. 
 
XIV 
 
 TABLE OP CASES. 
 
 fThe figures refer to pages.] 
 
 Lindauer v. Fourth Nat. Bank, 20. 
 Little v. Obrien, 138. 
 
 v. Phenix Bank, 123. 
 Locke v. Lewis, 12. 
 
 ». Merchants' Nat. Bank, 164. 
 Lockwood v. Crawford, 151. 
 Longc. Majestre, 192. 
 Lovett v. Cornwell, 108. 
 Lowery v. Scott, 158. 
 Lupton v. Cutter, 75. 
 
 M. 
 
 Mackersy v. Ramsays, 282. 
 
 Madison, In re Bank of, 38, 80, 83. 
 
 Magoun v. Walker, 119, 145. 
 
 Manchester Bank v. Fellows, 153, 155. 
 
 Mandeville v. Union Bank, 9. 
 
 Manhattan Co. v. Reynolds, 162. 
 
 Manufacturers' Nat. Bank v. Conti- 
 nental Bank, 7, 27, 43, 49, 79, 88. 
 
 Marine Bank v. Chandler, 37. 
 
 v. Fulton Bank, 9, 83, 
 
 205, 206, 216. 
 v. Wright, 180, 181. 
 
 Marr v. Sloan, 162. 
 
 Marine Nat. Bank v. National City 
 Bank, 257, 264. 
 
 Market Bank v. Hartshorn, 7. 
 
 Marriott. Hampton, 248. 
 
 Marsh v. Low, 118. 
 
 v. Maxwell, 148. 
 
 v. Oneida Central Bank, 194. 
 
 Martin v. Webb, 198. 
 
 Marvine v. Hymers, 165. 
 
 Mason v. Great Western R. Co., 179. 
 
 Maxwell's Estate, In re, 87. 
 
 Mayer v. Heidelbach, 19. 
 
 Meacher v. Fort, 269. 
 
 Mead v. Engs, 106, 433, 146, 151. 
 
 McBride v. Farmers' Bank, 19, 20, 
 43, 72. 
 
 McClain v. Lowther, 125. 
 
 McColl v. Fraser, 97. 
 
 McCulloch v. McKee, 205, 216. 
 
 McDowell v. Bank, 194. 
 
 McGhee v. Importers & Traders' 
 Bank, 61. , 
 
 Mclntyre v. Kennedy, 223. 
 
 Mcintosh v. Tyler, 229, 253. 
 
 McKee v. Judd, 72. 
 
 McKleroy v. Southern Bank, 256. 
 
 McKinster v. Bank, 6, 116, 129, 139, 
 287. 
 
 McLennan v. Bank, 246. 
 
 McLeod,D. Evans, 81, 96, 98, 199. 
 McNeil v. Wyatt, 144. 
 Meads v. Merchants' Bank, 214. 
 Mears & Son v. Waples, 181. 
 Mechanics' Banku Merchants' Bank, 
 
 4, 6, 107, 114, 148, 156, 160, 239, 
 249. 
 
 Mechanics' Bank v. Valley Packing 
 
 Co.. 62. 
 Mechanics & Traders' Bank v. Seitz, 
 
 193. 
 Merchants' Bank v.' Bank of Com- 
 merce, 252. 
 v. Central Bank, 
 
 60. 
 v. Easley, 286. 
 Mechanics' Bank v. Earp, 288, 289, 
 
 291. 
 Merchants' Bank v. Elderkin, 119. 
 v. Spicer, 108, 220, 
 
 226. 
 v. State Bank, 214, 
 246. 
 Merchants' Nat. Bank v. Goodman, 
 
 5, 205, 216, 227, 288. 
 
 Merchants' Nat. Bank v. Hanson, 42. 
 
 Merchants & Farmers' Bank v. Aus- 
 tin, 86, 197, 202, 231. 
 
 Merchants & Manufacturers' Nat. 
 
 Bank v. Stafford Nat. Bank, 116, 
 
 168, 169, 296. 
 Messick & Co. v. Eoxborough, 19. 
 Mertens v. Winnington, 254. 
 Metropolitan Nat. Banku Jones, 214. 
 v. Loyd, 7,10, 
 13, 16, 51. 
 Miller v. Farmers & Mechanics' Bank, 
 
 25, 36. » 
 
 Milliken v. Shapleigh, 18, 65. 
 Mills v. Bank, 114. 
 Milnes v. Duncan, 248, 269. 
 Minier v. Second Nat. Bank, 54, 57, 
 
 106, 120, 192. 
 Minot v. Buss, 214. 
 Minnesota Thresher Manufg. Co. v. 
 
 Heilper, 70. 
 Mobley v. Clark, 132. 
 Mohawk Bank v. Broderick, 114. 
 Montgomery Co. Bank v. Albany City 
 
 Bank, 6, 43, 54, 106. 133, 168, 191, 
 
 258, 279, 284, 291. 
 Montgomery Co. Bank v. Marsh, 156, 
 
 157. 
 Moore v. Hall, 161. 
 
 v. Hardcastle, 144. 
 
 v. Louisiana Nat. Bank, 177. 
 
TABLE OF CASES. 
 
 XV 
 
 [The figures refer to pages.] 
 
 v. Somerset, 116. 
 Moore & Co. v. Meyer, 191, 193. 
 Moors v. Goddard, 14, 48, 49, 75. 
 Morgan v. Tener, 298. 
 Morris v. Foreman, 162. 
 Mowatt v. M'Clellan, 267. 
 Mound City, etc., Co. v. Commercial 
 
 Nat. Bank, 4, 128. 
 Mount v. First Nat. Bank, 130, 135, 
 
 144, 164. 
 Munn v. Baldwin, 156. 
 v. Burch, 37. 
 v. Commission Co., 34. 
 Murray©. Judah, 108, 123. 
 Mutual Nat. New Orleans Canal & 
 
 Banking Co. v. Rotge, 214. 
 Mutual Sav. Inst. v. Enslin, 249. 
 
 N. 
 
 Naseru. First Nat. Bank, 133, 279, 288. 
 Nashville Trust Co. v. Fourth Nat. 
 
 Bank, 3. 
 National Bank v. Bangs, 255, 256, 
 263. 
 v. Burkhardt, 237. 
 v. Brooklyn City, 
 etc., E. Co., 18. 
 ■v. Insurance Co., 81, 
 
 91, 92, 95. 
 ■A Manufacturers & 
 Traders' Bank, 
 265. 
 v. Merchants' Nat. 
 Bank, 177, 180, 
 181. 
 v. National Mechan- 
 ics' Banking 
 Ass'n, 248,254, 
 264. 
 v. Pennington, 71. 
 v. Smith, 194. 
 National Butchers & Drovers' Bank 
 v. Hubbell, 6, 7, 36, 49, 51, 53, 54, 
 79, 83, 201, 257, 258, 267. 
 National Commercial Bank v. Miller 
 
 & Co., 35, 44, 62, 75, 214, 228. 
 National Ex. Bank v. Beal, 64, 65, 
 
 67, 72, 76, 79. 
 National Mahaiwe Bank v. Peck, 7, 
 
 194. 
 National Park Bank v. Levy, 7, 35, 
 
 75. 
 National Park Bank v. Ninth Nat. 
 Bank, 254. 
 
 National Park Bank v. Seaboard 
 Bank, 49, 248, 264, 267, 268. 
 
 National Pemberton Bank v. Porter, 
 71. 
 
 Nave v. Hadley, 61. 
 
 Nebraska Nat. Bank v. Logan, 126, 
 226. 
 
 Nelson v. Wellington, 39 . 
 
 Nevins v. De Grand, 162. 
 
 Newcomb v. Boston & Lowell B. Cor- 
 poration, 179. 
 
 New England Bank v. Lewis, 115. 
 
 Nichols v. Goldsmith, 122. 
 
 Nichols v. Pool, 189, 190. 
 
 Northern Bank v. Williams, 146. 
 
 Northern Insurance Co. v. Wright, 
 166. 
 
 Northwestern Nat. Bank -o. Bank of 
 Commerce, 254, 259. 
 
 Nurse v. Satterlee, 37, 64, 100, 199. 
 
 O. 
 I 
 
 Oddie v. Nat. Bank, 168, 228, 237. 
 Ogden v. Cowley, 117. 
 
 v. Dobbin, 106, 146, 188. 
 Ogilby v. Wallace, 254. 
 Olcott v. Bathbone, 220, 226. 
 Oothout v. Ballard, 114. 
 Orear v. M'Donald, 164. 
 Osborn v. Moncure, 114. 
 Overseers v. Bank, 81, 92. 
 
 v. Bank, 91. 
 Overton v. Tyler, 43, 66. 
 
 P. 
 
 Pacific Bank v. Mitchell, 71. 
 Palmer v. Whitney, 138, 142. 
 Park & Co. v. Ingersoll, 116. 
 Parke v. Eoser, 264. 
 Paterson Bank v. Butler, 133, 152. 
 Patriotic Bank v. Farmers' Bank, 
 
 275, 292. 
 Patrick v. Beazley, 153. 
 Pawson v. Donnell, 135. 
 Payne v. Albany City Nat. Bank, 70. 
 Peabody Ins. Co. v. Wilson, 119, 120, 
 
 129, 144, 150, 164. 
 Peak v. Ellicott, 92, 97. 
 Pearce v. Langfit, 154. 
 Pease, Ex parte, 43. 
 Pearson v. Pearson, 34. 
 v. Scott, 220. 
 
XVI 
 
 TABLE OF CASES 
 
 [The figures refer to pages.] 
 
 Peck v. First Nat. Bank, 197. 
 
 Peirce v. Pendar, 153. 
 
 Pennell v. Deffell, 92. 
 
 People v. Bank of Dansville, 43, 79, 
 
 97, 216. 
 People's Bank v. Brooke, 118. 
 People v. City Bank, 80, 84, 92, 97. 
 
 v. City Bank, 21, 23. 
 People's Bank v. Franklin Bank, 248, 
 
 255, 256, 260. 
 People v. Howell, 34. 
 
 v. Merchants & Mechanics' 
 Bank, 85, 184, 226. 
 Peters v. Bain, 93. 
 Philadelphia Nat. Bank v. Dowd, 83, 
 
 84. . 
 PBipps v. Millbury Bank, 130, 141, 
 146, 163. 
 v. Chase, 122, 141. 
 Phoenix Bank v. Eisley, 255, 
 Planters' Bank v. Union Bank, 83,206. 
 Pollard v. Ogden, 237. 
 Porter v. Judson, 116. 
 Portland & Harpswell Steamboat Co., 
 
 v. Locke, 92, 94. 
 Potter v. Merchants' Bank, 60. 
 Power v. First Nat. Bank, 133, 281. 
 Pratt v. Foote, 232, 238. 
 Prescottu. Leonard, 183. 
 Preston v. Cutter, 60. 
 Price v. Neal, 270. 
 Producers & Manufacturers' Bank v. 
 
 Eicketts, 63. 
 Purcell v. Allemong, 123. 
 
 Q- 
 
 Quebec Bank v. "Wyand, 240. 
 
 R. 
 
 Eaborg v. Bank, 115. 
 
 17. Peyton, 123, 125. 
 Eahm v. Philadelphia Bank, 122. , 
 Eansom v. Mack, 155. 
 Eapp v. National Security Bank, 270. 
 Eawdon v. Eedfield, 140. 
 Eeal Estate Bank v. Bizzell, 129. 
 Eedington v. "Woods, 254, 264 
 Reeves v. State Bank, 6, 65, 76, 184, 
 
 281. 
 Reid v. Payne, 140, 156, 157. 
 Remer v. Downer, 156, 157, 164. 
 Rennerv. Bank, 114, 115, 274, 275. 
 
 Rhodes v. Gent, 190. 
 
 Rice v. Stearns, 44. 
 
 Ridgely Nat. Bank v. Patton, 193. 
 
 Ringling v. Kohn, 60. 
 
 Rives ». Parmley, 277.» 
 
 Roanoke Nat. Bank. v. Hambrick, 148. 
 
 Robarts v. Tucker, 192, 257. 
 
 Robb v. Ross Co. Bank, 60, 165. 
 
 Robinson v. Ames, 112, 172. 
 
 Rochester Printing Co. v. Loofhis, 80, 
 
 196. 
 Rock Co. Nat. Bank v. Hollister, 59, 
 
 161. 
 Rosa v. Brotherson, 19. 
 Eose v. Hart, 80. 
 Rosenblatt v. Haberman, 109. 
 Rathbone v. Sanders, 18. 
 Rothschild v. Corney, 109. 
 Rounds v. Smith, 213. 
 Rouvant v. San Antonio Nat. Bank, 
 
 254, 256. 
 Rowe v. Tipper, 148. 
 Rowton, In case of, 10. 
 Russell v. Hankey, 220, 221, 227. 
 Eyall v. Rolle, 92. 
 Ryan & Sons v. Payne, 87. 
 
 S. 
 
 Sargeant, Ex parte, 10, 45, 50 
 
 Saulsbury v. Corwin, 40, 161. 
 
 Saunderson v. Judge, 118, 122. 
 
 School Trustees v. Kirwin, 92, 94. 
 
 Schoonmaker v. Roosa, 34. 
 
 Schuler v. Laclede Bank, 91. 
 
 Scott v. Betts, 253. 
 
 v. Lifford, 133, 144, 146, 149. 
 v. Ocean Bank, 7, 19, 21, 43, 49. 
 v. Surman, 92. 
 
 Seaton v. Scovill, 137, 144. 
 
 Sebag v. Abitbol, 188. 
 
 Second Nat. Bank v. Cummings, 36, 
 176, 177, 178, 179, 221, 287. 
 
 Security Bank v. Luttgen, 178, 179. 
 
 Senaca Co. Bank v. Neass, 119, 156, 
 157. 
 
 Scruggs v. Luster, 206. 
 
 Sewallu. Russell, 151. 
 
 Seymour v. Newton, 179. 
 
 v. Van Slyck, 241. 
 
 Shackamaxon Bank v. Kinsler, 195. 
 
 Shaw v. Eeed, 145. 
 
 Shed v. Brett, 117, 156. 
 
 Shelburne Falls Nat. Bank v. Towns- 
 ley, 146, 149, 153, 155, 157. 
 
TABLE OF OASES. 
 
 XV11 
 
 [The figures refer to pages.] 
 
 Shipman v. Bank, 255. 
 
 Shipsey v. Bowery Nat. Bank, 120, 
 
 226, 228. 
 Shoemaker v. Mechanics' Bank, 154. 
 Sigourney v. Lloyd, 43, 44, 45, 63, 
 
 65, 162, 258. 
 Simmonds v. Parminter, 125. 
 Simpson v. Turney, 148. 
 
 . v. Waldby, 6, 133, 281. 
 Skilbeck v. Garbett, 154. 
 Smedes v. Bank, 6, 129, 146, 152, 169, 
 
 287. 
 Smith v. Aylesworth, 114. 
 v. Bank. 60. 
 v. Essex Co. Bank, 191. 
 v. Janes, 108, 109, 110, 112, 
 
 113, 144, 223. ' 
 v. Lawson, 60. 
 v. McLean, 118. 
 v. Mercer, 257. 
 
 v. Miller, 109, 113, 158, 209, 
 221, 222, 22$ 224, 226. 
 Snee v. Prescot, 43. 
 Snorgrass v. Moore, 95. 
 Sahlien v. Bank, 122, 164, 274. 
 Spraights v. Hawley, 200. 
 Spence v. Robinson, 161. 
 Spencer v. Bank, 140, 164. 
 Spies v. Gilmore, 159. 
 Stacy v. Dane Co. Bank, 135, 184, 
 
 288. 
 Stalker v. M'Donaid, 19. 
 Star Fire Ins. Co. v. New Hampshire 
 
 Nat. Bank, 262. 
 Stark v. United States Nat. Bank, 21, 
 
 27, 63,' 200, 292. 
 State Bank v. Armstrong, 192. 
 
 ■v. Ayres, 144, 146, 148. 
 v. Bank. 106, 146. 
 v. Slaughter, 153. 
 State of La. v. Southern Bank, 87. 
 States Shupe, 190. 
 Staylor v. Ball, 141, 144. 
 Steele v. Russell, 302. 
 Steinhart v. National Bank, 185, 243, 
 
 253. 
 Stephens v. Gallagher, 153. 
 Stephenson v. Primrose, 149, 277. 
 Sterling v. Marietta & Susquehanna 
 
 Trading Co., 161. 
 Sterrett v. Rosencrantz, 123. 
 Stewart v. Eden, 152. 
 Stoller v. Coates, 92. 
 Stollenwerck v. Thacher, 179. 
 , Stout v. Benoist, 254. 
 Stowe v. Bank, 302, 305. 
 
 Streissguth v. National German Am. 
 
 Bank, 281. 
 Strong v. Foster, 194. 
 Stuyvesant Bank v. National Me- 
 chanics' Banking Association, 7. 
 St. Louis v. Johnson, 74. 
 St. Louis & San Francisco R. Co. v. 
 
 Johnston, 6, 7, 9, 47, 75, 197, 228. 
 St. Nicholas Bank v. State Nat. Bank, 
 
 217, 279, 289, 293. 
 St. Paul Nat. Bank v. Cannon, 183, 
 
 188 192 
 St. Paul Roller Mill Co. v. Great 
 
 Western Despatch Co., 177. 
 Sutherland v. First Nat. Bank, 187. 
 Swayze v. Britton, 137. 
 Sweeny v. Easter, 17, 42, 44, 57. 59, 
 
 62, 63, 65, 67, 98. 
 Sweet v. Woodin, 131. 
 Sweeting v. Pearce, 220. 
 Swift v. Tyson, 22. 
 
 T. 
 
 Taber v. Perrot, 281. 
 Talbot v. Bank, 101, 271. 
 v. Clark, 151. 
 v. National Bank, 116. 
 Tassell v. Lewis, 123. 
 Tate v. Sullivan, 131, 141, 142, 144, 
 
 164. 
 Taylor v. Plummer, 91, 92. 
 v. Wilson, 109, 113. 
 Terry v. Parker, 123. 
 Terhnne v. Bank, 7. 
 Third Nat. Bank v. Allen, 264. 
 
 v. Clark, 62, 161. 
 v. Stillwater Gas 
 
 Co., 96! 
 v. Vicksburg Bank, 
 288. 
 Thomas v. Marsh, 120, 155, 157. 
 
 ■ v. Rumsey, 271. 
 Thompson, ex parte, 43, 50. 
 Thompson's Appeal, 92, 94. 
 Thompson v. Bank, 5, 106, 135, 139, 
 144, 164. 
 v. Giles, 10. 
 v. Gloucester City Sav. 
 
 Inst., 96 97. 
 v. Morgan, 125. 
 Thomson v. Bank, 272. 
 Ticonic Bank v. Johnson, 195. 
 Tiernan v. Commercial Bank, 136, 
 288. 
 
xvm 
 
 TABLE OF CASES. 
 
 [The figures refer to pages.] 
 
 Tinkham & Co. v. Hey worth, 37. 
 Titus v. Mechanics' Nat. Bank, 6, 7, 
 
 11, 106, 133, 281. 
 Townsley v. Springer, 151. 
 
 v. Sumrall, 171, 172. 
 Trecothick v. Austin, 92, 94: 
 Treuttel v. Barandon, 44, 63, 65, 162. 
 Trinidad Nat. Bank v. Denver Nat. 
 
 Bank, 49, 126. 
 Troy City Bank v. Grant, 150 
 True v. Thomas, 123. 
 Tunno v. Lague, 146. 
 Turner v. Hayden, 188. 
 
 v. Bank, 213, 224, 226, 230, 
 253. 
 Tyler v. Smith, 249. 
 Tyson v. State Bank, 6, 126, 135, 281, 
 
 300. 
 
 U. 
 
 Union Nat. Bank v. Goetz, 92, 94. 
 Sav. Ass'n. v. Clayton, 221. 
 United States v. City Bank, 60. 
 v. Green, 60. 
 v. Inhabitants of Wa- 
 terborough, 92, 94. 
 United States Nat. Bankr. Nat. Park 
 
 Bank, 254, 267, 268. 
 United States v. National Ex. Bank, 
 254, 256. 
 
 V. 
 
 Van Alen v. American Nat. Bank, 91, 
 Van Namee v. President, etc., Bank 
 
 of Troy, 24, 34, 43. 
 Van Vechten v. Pruyn, 153. 
 Van Wart v. Woolley, 108, 169, 282, 
 Veazie Bank v. Winn, 108. 
 Vere v. Lewis, 125. 
 Vickrey v. State Sav. Ass'n., 29. 
 Vogel v. Ball, 253. 4 
 
 W. 
 
 Watte v. Liggett, 248. 
 Walker v. Bank 133, 168, 172, 175, 
 279. 
 
 v. Turner, 129. 
 Wallace v. Agry, 109. 
 
 v. Crilley, 118. 
 
 v. M'Connell, 183, 188. 
 Walters v. Brown, 144. 
 
 Ward v. Evans. 108, 223. 
 
 v. Smith,' 183, 188, 205, 216. 
 v. Tyler, 161. 
 Warner v. Lee, 21, 34, 283. 
 Warren Bank v. Suffolk Bank, 135, 
 
 136, 283, 287, 288, 289. 
 Warren v. Gilman, 106, 138, 147. 
 Watervliet Bank v. White, 59, 162, 
 
 253, 254. 
 Watkins*. Crouch & Co., 145. 
 Weakley v. Bell, 162. 
 Weaver v. Nixon, 218. 
 Webb v. Dickinson, 241 
 Welge v. Batty, 230. 
 Weinstein v. Bank, 255: 
 Wells v. Whitehead, 140. 
 West v. American Ex. Bank, 19, 43. 
 West Branch Bank v. Fulmer, 106. 
 West Eiver Bank v. Taylor, 106. 
 West St. Louis Sav. Bank v. Shaw- 
 nee Co. Bank, 60. 
 Weyerhausih v. Dun, 239. 
 Weyerhauser v. Lee, 298. 
 Wheeler v. Guild, 33. 
 Whipple v. Walker, 206. 
 White v. Continental Nat. Bank, 248, 
 
 254. 
 White v. National Bank, 42, 43, 54, 
 62, 63, 65, 67, 160, 258. 
 v. Mechanics' Nat. Bank, 271. 
 Whitecomb v. Jacob, 92. 
 Whiteford v. Burckmyer, 144, 164. 
 Whitehead v. Walker, 172. 
 Whitely v. Foy, 92. 
 Whiting v. City Bank, 122, 149, 189, 
 
 228, 230, 244, 252. 
 Whitney v. Esson, 207, 209. 
 Whitridge v. Eider, 144. 
 Whitwell v. Johnson, 122. 
 Wild v. Bank, 60, 165. 
 Wilkinson v. Bradley, 192, 206. 
 Williams v. Bank, 117, 140, 159. 
 ■u. Jones, 39, 54, 59. 
 v. Triplett, 190. 
 v. Woods,. 62. 
 Williamsport Gas Co. v. Finkerton, 
 
 183, 188. 
 Wilson v. Holmes, 44, 62. ♦ 
 
 v. Tolson, 160. 
 Wilson & Co. v. Smith, 17. 
 Wingate v. Mechanics' Bank, 288. 
 Wintermute v. Torrent, 160. 
 Winters' Bank v. Armstrong, 42, 91. 
 Wirth v. Austin, 123. 
 Wiseman v. Chiappella, 118. 
 Wood v. Boylston Nat. Bank, 12. 
 
TABLE QF CASES. 
 
 XIX 
 
 [The figures refer to pages. J 
 
 Wood & Co. v. Merchants' Sav., Loan 
 
 & Trust Co., 183, 193. 
 Woodin v. Poster, 122. 
 Woodbridge v. Brigham, 118, 145. 
 Woodruff©. Plant, 133. 
 Woodworth v. Bank, 116. 
 Woolen v. New York & Erie Bank, 
 
 172. 
 
 Wright v. Boyd, 70, 162. 
 
 v. Shawcross, 149. 
 Wynen v. Schappert, 111, 146. 
 
 Y. 
 
 * 
 
 Young ». Noble, 281. 
 Youngs v. Lee, 19. 
 
BANK COLLECTIONS. 
 
 CHAPTEE I. 
 
 OWNERSHIP OP PAPER INDORSED IN BLANK AND DEPOSITED, 
 AND THE PROCEEDS. 
 
 8a. 
 8b. 
 
 8c. 
 8d. 
 
 8/ 
 
 Importance of the subject. 
 Classification of persons for whom 
 
 collections are made. 
 Authority to collect. 
 Nature of the contract. Is the 
 collecting bank agent or owner. 
 The undertaking is often by 
 
 agreement. 
 Consideration for the undertak- 
 ing. , 
 When an agreement is made the 
 ownership of the paper must be 
 determined by it. 
 Effect of indorsing paper for col- 
 lection in blank with the right 
 to draw immediately for the 
 amount. 
 Rule in Louisiana. 
 St. Louis & San Francisco R. 
 
 Co. v. Johnston. 
 City v. Beal. 
 Titus v. Mechanics' National 
 
 Bank. 
 Wood v. Boylston National 
 
 Bank. 
 Bennett v. Enapp. 
 Freeholders of Middlesex v. 
 State Bank. 
 
 IB (1) 
 
 9. The test of a transfer is the con- 
 trol of the check. 
 
 10. The bank is responsible for the 
 amount credited. 
 
 11. Is in effect the buyer of the paper, 
 and the right to charge it back 
 does not affect the title. 
 
 12. Consequently the depositor is 
 not responsible for the conduct 
 of the purchasing or collecting 
 bank in collecting it. 
 
 13. Effect of the transfer more fully 
 described. 
 
 13a. Corn Exchange Bank v. 
 Farmers' National Bank. 
 
 14. Mutual accounts between banks. 
 Effect of general indorsements. 
 
 15. By the federal rule the title is 
 transferred. 
 
 15a. Carroll v. Bank. 
 
 16. In New York and many other 
 states the title is not trans- 
 ferred. 
 
 16a. McBride v. Farmers' Bank. 
 166. Dod v. Fourth National Bank. 
 16c. Stark i. United States Na- 
 tional Bank. 
 
2 
 
 BANK COLLECTIONS. 
 
 lGd. Criticism on Clark v. Mer- 
 chants' Bank. 
 
 17. The two rules rest on different 
 
 principles. 
 
 18. Effect of a general indorsement 
 
 when the paper has not been 
 collected. 
 
 19. Effect of a depositor's blank in- 
 
 dorsement of his paper followed 
 byhis bank's special indorse- 
 ment. Hoffman v. Miller. 
 19a. Van Namee v. Bank. 
 195. Miller v. Farmers & Me- 
 chanics' Bank. 
 19c. Freeman's National Bank «. 
 
 National Tube Works Co. 
 19d. Stark v. United States Na- 
 tional Bank. * 
 19e. Cody v. City National Bank. 
 19/. Cornwell v. Kinney. 
 lSg. Vickrey v. State Savings As- 
 sociation. 
 19ft. First National Bank v. Gregg 
 &Co. 
 
 20. The best rule deducible from 
 
 these authorities and the mod- 
 ern practice of making ad- 
 vances.. 
 
 21. When parol evidence is inadmis- 
 
 sible to explain that paper in- 
 dorsed in blank is for collec- 
 tion. 
 
 22. When it is admissible. 
 
 23. The rule is only an application 
 
 of the rule that an inquiry may 
 be made into the consideration 
 of a bill or note between the 
 original parties. 
 23a. Church v. Barlow. 
 
 24. Effect of indorsing a check in 
 
 blank accompanied with a 
 letter stating that the papei is 
 "for collection." 
 
 25. Effect of indorsing a check "for 
 
 deposit." 
 
 25a. Armstrong v. American Ex- 
 change National Bank. 
 
 256. Second National, Bank v. 
 Cummings. 
 
 26. Effect of indorsing a check " for 
 
 collection and credit." 
 
 27. Paper collected for a non-deposi- 
 
 tor is not converted into an or- 
 dinary deposit. The bank is a 
 trustee. 
 
 28. The Illinois rule is wrong. 
 
 29. But a non -depositor is supposed 
 
 to contract with reference to 
 the usage of banks in keeping 
 the money, etc. • 
 
 The ownership of notes left for 
 collection that have been dis- 
 counted. 
 
 The duty of a drawer when the 
 bank which has discounted his 
 bill has transferred it to an- 
 other for collection. 
 
 30. 
 
 31 
 
 1. In this division of banking law the questions pre- 
 sented for legal determination are hardly more note- 
 worthy than the diversity of answers. The classes of 
 cases in which the diversities are the most frequent inay 
 be briefly mentioned. In the first class are included ab- 
 stract questions ; for example, is a bank in which a check 
 is deposited for collection an agent for this purpose, or 
 only for transmitting it to another, which is to perform 
 
§ 1 OWNERSHIP OF PAPER INDOB8ED IN BLANK. 3 
 
 the service ? The same reasons exist in all cases, yet 
 judges are impressed by them in a different manner, and 
 consequently rival opinions 'are pronounced and applied. 1 
 In the second class of cases similar facts exist, but differ- 
 ent conclusions are drawn from them. The application 
 of the rule of diligence in notifying indorsers may be men- 
 tioned for an illustration. "When strictly applied they 
 have been released ; while in other cases, composed of 
 similar facts, by a liberal applftation.of the rule, the no- 
 tifier has been regarded as complying with the law. In 
 the third class of cases the divergences in the judicial 
 mind are seen in construing the omission or silence of a 
 litigant after the consequence of his mishap has been dis- 
 covered. Thus, depositors very often jndorse their paper 
 in blank, though intending to retain the ownership. 
 Strictly construed, by this act they part with their title, 
 and judges have sometimes declared that if they wish to 
 retain it they should indicate their intention by their in- 
 dorsement ; and if neglecting to do this, ought to suf- 
 fer the consequences. Other judges have sought to as- 
 certain the surrounding conditions, and if these dis- 
 closed an intention to retain ownership, have decided iu 
 their favor. And even the same judge may be a liberal 
 constructionist in one case, and a strict constructionist in 
 another, greatly increasing the confusion of the law. Con- 
 sequently, a harm&iy of legal principles' is quite impossi- 
 ble so long as judges form no rules for their guidance 
 
 1 In Nashville Trust Co. v. Fourth Nat. Bank, 18 S. W. Eep. 822, 823, 
 Pitts, X, in considering the conflict of opinions on the question of setting 
 off a debt against another which had not matured when the debtor became 
 insolvent, remarked : " There is no touchstone of reason J;hat will distin- 
 guish and harmonize them upon any general principle applicable to all of 
 them, for their antagonism is not apparent, simply, but real and funda- 
 mental. They but furnish one of the many illustrations of that diversity 
 of judgment which is inherent in the minds of men, which often, out of 
 substantially similar raw materials and general conditions, has founded 
 and built up dissimilar systems of jurisprudence, and which too often 
 proves a delusion and snare to the worshipper of mere precedent" 
 
4 BANK COLLECTION'S. * § 4 
 
 within the domain of their legitimate inquiry. Add to 
 the lack of fixed rules of this nature, their regard or dis- 
 regard for precedents ; their varying disposition • to cor- 
 rect errors and to improve the law or to walk as nearly as 
 possible in the old paths ; and the contrariety of judicial 
 opinion is explained. Since it exists, the need of inves- 
 tigations, setting forth all the rules within the field of in- 
 quiry, and seeking to show which are the most worthy of 
 adoption, is increasing, if confusion and uncertainty in 
 the law are to be lessened. 
 
 2. Those from whom collections are made may be di- 
 vided into three clases, (1) the" depositors Of the collect- 
 ing bank, and (2) sometimes other persons, and (3) other 
 banks. The same principles of law generally apply to all 
 classes, but the ownership of the checks and other instru- 
 ments collected are more generally transferred to the col- 
 lecting bank when received from depositors than when 
 they are received from other banks and non-depositors. 
 
 3. That a state or national bank can undertake to make 
 collections no one will question. In the early days of 
 corporate action this power was not' exercised without 
 questioning. Perhaps the most serious contention arose in 
 Alabama, 1 but the supreme court of that state, speaking 
 through Mr. Justice Goldthwaite, remarked that if a bank 
 was authorized to receive money on deposit the law contem- 
 plated that it should use the necessary*means to effect that 
 end. The authority, therefore, to collect all kinds of nego- 
 tiable securities could be deduced from the power to receive 
 money on deposit when no other act was necessary to be 
 performed than to forward them for demand and receive * 
 payment. This then is a part of the regular business of 
 a bank, and is among the powers implied in its creation.' 
 
 4. We shall begin by inquiring into the nature of the 
 
 1 Branch Bank v. Knox & Co., 3 Ala. 148. 
 
 2 Mound City Paint & Color Co. v. Commercial Nat. Bank, 4 Utah, 353 ; 
 Jockusch v. Towsey, 51 Texas, 129 ; see remarks by Shaw, Ch. J., in Me- 
 chanics' Bank v. Merchants' Bank, 6 Met. 13, 20. 
 
§ 6 OWNERSHIP OF PAPER INDORSED IN BLANK. 5 
 
 contract made between the collecting bank and the owner 
 of the paper which is to be collected. Is the bank the 
 agent or owner of the paper ? The importance of the in- 
 quiry is manifest, for if the bank is the owner, in the event 
 of its failure, the paper, or if it has been collected, the 
 proceeds, belong to its creditors ; but if %he bank is sim- 
 ply an agent, then the paper or the proceeds belong to the 
 depositor. 
 
 5. The undertaking usually is the outcome of some kind 
 of agreement. Between banks it generally consists of an 
 offer, expressed in writing, and which, with modifications 
 perhaps, is accepted. Of late, these offers have often been 
 sent in a printed form to banks, and their contents are 
 too well understood to require description. The agree- 
 ments between banks and ordinary depositors and non- 
 depositors are usually of a less definite character.* 
 
 6. For the undertaking, the law presumes there was a* 
 good consideration." Besides this presumption, the ad- 
 vantages arising from business associations, and the tem- 
 porary use of the money collected forms a valuable con- 
 sideration.' 
 
 1 The following offers to other banks by the Fidelity Nat. Bank of Cin- 
 cinnati, which failed in 1889, and which were accepted by many of them, 
 illustrate the nature of the arrangements which exist among banks for mak- 
 ing collections : 
 
 "No. 1. We will collect all items at par, and allow 2 J per cent, interest 
 on daily balances, calculated monthly. We will remit any balance you 
 have above $2,000 in New York draft, as you direct, or ship currency at 
 your cost for expressage. 
 
 " No. 2. Will collect at par all points west of Pennsylvania, and remit 
 the 1st, 11th and 21st of each month. 
 
 ' ' No. 3. We will collect at par Ohio, Indiana and Kentucky items, and 
 remit balances every Monday by draft on New York. We do not charge 
 for exchange on propositions No. 1, 2 and 3. 
 
 "No. 4. Will collect Cincinnati items, and remit daily at 40 cents per 
 thousand, or 20 cents for $500 or less. National banks not in a reserve city 
 can count all they have with us as reserve.'' 
 
 2 Gerhardt v. Boatman's Sav. Institution, 38 Mo. 60. 
 
 3 Bank v. Kenan, 76 N. C. 340 ; Halls v. Bank, 3 Rich. (S. C.) 366; Thomp 
 son v. Bank, 3 Hill (S. C.) 77, 80 ; Merchants' Nat. Bank v. Goodman, 109 
 
6 BANK 'COLLECTIONS. -5 7 
 
 7. Whether the parties to agreements undertake (1) to 
 transfer the ownership of the paper sent for collection to . 
 the collecting bank, or (2) to establish an agency for its 
 collection, or (3) to establish a debtor and creditor rela- 
 tion in keeping the proceeds, must be answered by study- 
 ing the contract itself ;' or, if none exists, by ascertaining 
 the practice of the parties. The question, therefore, is 
 one of fact rather than of law. 2 In other word|, if the 
 paper is deposited for collection the depositor retains the 
 ownership ; but this presumption must yield to the facts 
 pertaining to the transaction. The inquiry for these is 
 within the province of the jury, but the inference to be 
 drawn from them, whether the deposit was made for col- 
 lection or not, is for the court to determine. 1 In most 
 
 * 
 
 . Pa. 422, 426 ; Simpson v. Waldby, 63 Mich. 439, 452 ; Smedes t>. Bank, 20 
 » Johns. 372, affd. 3 Cow. 662; McKinster ,\ Bank, 9 Wend. 46, affd. 11 
 Wend. 473; Allen v. Merchants', Bank, 32 Wend. 215, 224; Montgomery 
 Co. Bank v. Albany City Bank, 7 N. Y. 459 ; Commercial Bank v. Union 
 Bank, 11 N. Y. 203 ; Curtis v. Leavitt, 15 N. Y. 9, 167 ; Tyson v. State 
 Bank, 6 Blackf. 225 ; Titns v. Mechanics' NatjBank, 35 N. J. Law, 588, 
 593 ; Exchange Nat. Bank v. Third Nat. Bank,'CI2 U. S. 276, 288 ; Reeves 
 v. State Bank, 8 Ohio St'. 465. In Bank v, Butler, 41 Ohio St. 523, the court 
 said : " The acceptance of the draft for collection was prima facie evidence 
 that the service,was not regarded as gratuitous ; and that it was one of 
 many similar transactions yielding an aggregate profit, and therefore evi- 
 dence of a valuable consideration." And likewise Shaw, Ch. J.,hasremarked 
 that " the benefits which the collecting bank derives from tHeuse of the funds, 
 whilst in its custody, and the profits on exchange, are a valuable compensa- 
 tion for the labor and expense to which the business subjects it, and consti- 
 tute such a bank, in acting for others, an agent for reward." Mechanics' 
 Bank v. Merchants' Bank, 6 Met. 20. If a bank bargain for, and receive 
 the usual rate of exchange as compensation for collecting a draft, this is 
 legal unless it he a desire to defeat the statute against usury. Central 
 Bank v. St. John, 17 Wis. 157. 
 
 1 First Nat. Bank v. Armstrong, 39 Fed. Eep. 231, 232, 233 ; Fifth Nat. 
 Bank v. Armstrong, 40 Fed. Eep. 46, 49 ; National Butchers & Drovers' Bank 
 v. Hubbell, 117 N. Y. 384. 
 
 2 St. Louis & San Francisco B. Co. v. Johnston, 133 U. S. 566 ; City v. 
 Beal, 49 Fed. Rep. 790 ; First Nat. Bank v. Armstrong, 39 Fed. Rep. 231> 
 232, 233. 
 
 3 Clark ». Merchants' Bank, 2 N. Y. 380. 
 
§ 8<Z OWNERSHIP OF PAPER INDORSED IN* BLANK. 7 
 
 cases the intention to create only an agency is clearly dis- 
 closed, in others the intention is more obscure. 
 
 8. In seeking to ascertain this intention the indorse- 
 ment made by the holder when transferring the instru- 
 ment to the collecting bank is often, though not always, 
 conclusive. When this is general, and the amount is cred- 
 ited to his account, for which he can draw if he desires, 
 the bankjbecomes the owner, unless the transfer is accom- 
 panied with other conditions which prevent the operation 
 of the rule. Judge Colt has well expressed the law which 
 governs in most cases : "If we take the simple case of a 
 customer depositing a check with a bank, which imme- 
 diately credits him with the amount, allowing him to draw 
 against it if he wishes, this being the usual course of deal- 
 ing between the, parties, it would seem that the property 
 in the check passes from the customer and vests in the 
 bank, though there is no express agreement respecting 
 the transfer of checks so deposited to the bank." The 
 transfer does not turn so much on the question, whether 
 the depositor has ckrawn against the credit given to him, 
 as on his known rignt to draw if he desired. ' 
 
 8a. A different rule has .been established in Louisiana. 
 
 1 City v. Beal, 49 Fed. Rep. 790, 792 ; St. Louis & San Francisco Railway 
 Co. v. Johnston, 27 Fed. Rep. 243, revsd. 133 U. S. 566 ; Fifth Nat. Bank 
 v. Armstrong, 40 Fed. Rep. 46, 48 ; First Nat. Bank v. Reno Co. Bank, 3 
 Fed. Rep. 257 ; Bank v. Millard, 10 Wall. 152 ; Metropolitan Nat. Bank v. 
 Loyd, 25 Hun. 101, affd. 90 N. Y. 530 ; Clark v. Merchants' Bank, 2 N. Y. 
 380 ; Chapman v. White, 6 N. Y. 412 ; Scott v. Ocean Bank, 23 N. Y. 289 ; 
 National Butchers & Drovers' Bank»: Hubbell, 117 N. Y. 384, 395 ; Dicker- 
 son v. Wason, 47 N. Y. 439 ; Market Bank *. Hartshorne, 3 Keyes, 137. In 
 matter of Franklin Bank, 1 Paige 249 ; Stuyvesant Bank v. National Me- 
 chanics' Bank'g Asj'n, 7 Lans. 97 ; Charlotte Iron Works v. American Ex. 
 Nat. Bank, 34 Hun. 26 ; Keene v. Collier, 1 Met. (Ky.) 415 ;- Armstrong v. 
 National Bank, 14 So. W. Rep. 411 (Ky.) : Brahm v. Adkins, 77 111. 263; 
 Titus v. Mechanics' Nat. Bank, 35 N. J. Law, 588 ; Hoffman v. First Nat. 
 Bank, 46 N. J. Law, 605 ; Terhune v. Bank, 34 N. J. Eq. 367 ; Bullene v. 
 Coates, 79 Mo. 426" ; Ayres v. Bank, 79 Mo. 421 ; Manufacturers' Nat. Bank 
 v. Continental Bank, 148 Mass. 553 ; National Mahaiwe Bank v. Peck, 127 
 Mass. 298 ; National Park Bank v. Levy, 24 At. Rep. 778 (R. I.); see \\ 9, 13. 
 
 • 
 
8 BAN« COLLECTION'S. § 86 
 
 The court of appeals, whose decisions, however, are not 
 final, declare that "checks, like drafts, bills, or notes, so de- 
 posited with a bank are placed for collection, and not 
 sold, exchanged or otherwise made the subject of a con- 
 tract calculated.to transfer title. It is hard to imagine 
 any advantage which could exist, calculated to induce a 
 bank to assume ownership and responsibility for such 
 paper. The fact that owing to the short course such paper 
 has to run these institutions usually permit their custom- 
 ers to draw against the amount of checks deposited, does 
 not of itself alter the relations between the parties. The 
 credit is only conditional and may be canceled and the 
 check returned should the latter be dishonored. The de- 
 positor remains owner of the paper and the bank merely 
 the agent." 1 
 
 85. Some decisions will now be reviewed. On one occa- 
 sion a customer deposited in his bank a sight draft on a 
 railway company in Boston. It was described as a check on 
 the deposit ticket, which distinguished between ' ' checks ' ' 
 and "bills." He had made similar deposits before, never 
 drawing against them, and the bank W ways reserved the 
 right to charge exchange and interest for collecting them. 
 The depositor's bank book was with the bank at the time 
 of the deposit ; no entry of the draft was made until sev- 
 eral days afterward, and this was not then done by the 
 depositor's direction. The receiving teller applied to the 
 cashier for instructions on the receipt of the deposit and 
 was directed to receive the draft as cash. The bank sent 
 the draft to Boston for collection, but before the service 
 was completed the bank in New York failed and never 
 resumed. The court decided that whether the bank had 
 become the owner of the draft, or was only acting as the 
 agent of its customer, was a question of fact rather than 
 of law, and that there was not enough evidence to prove 
 that the customer understood that the bank had become 
 
 'McGloin, J., Louisiana Ice Co. v. State Nat. Bank, 1 McGloin, 181 185. 
 
§ 8b OWNERSHIP OF PAPER INDORSED IN BLANK. 9 
 
 the owner of the draft. As the bank was hopelessly in- 
 solvent at the time of receiving the draft, the act was a 
 fraud on the depositor, and he had a right to reclaim it 
 or the proceeds. ' In delivering the opinion of the court 
 Mr. Chief Justice Fuller said: "The question was one 
 of fact rather than of law, and we think there should 
 he something more in the evidence tending to establish 
 that the San Francisco Company understood that the 
 bank had become owner *of the paper, than these mere 
 credits for convenience, before that can be held to be the 
 fact, notwithstanding it may be a recognized usage to 
 allow a customer to draw. So far from there being shown 
 an unequivocal course of dealing tending to support that 
 conclusion, it seems to us the tendency of the evidence 
 is otherwise." 2 
 
 1 St. Louis & San Francisco R. Co. v. Johnston, 133 TJ. S. 566. 
 
 2 At the circuit, 27 Fed. Rep. 243, Judge Wallace said : " Upon princi- 
 ple, there is no reason why, if the parties choose to treat the deposit of such 
 paper as a deposit of cash, the transaction should not be deemed equivalent 
 
 _ to a discount of the paper by the bank. Sight bills, drawn by one corpora- 
 tion upon another of promrnent financial standing, like the interest coupons 
 of such corporations, or like certified checks upon banks, are generally ac- 
 cepted in commercial usage as the equivalents of money. They have prac- 
 tically the same attributes as bills issued by banking corporations, which 
 are merely promises to pay at sight, and are everywhere accepted as money, 
 in the absence of special circumstances affecting the financial standing of 
 the corporation issuing them. Where bank bills are credited at their face 
 to their depositor, and are treated by the depositary as a deposit of money, 
 the bank receiving them becomes a debtor to the depositor for the face 
 amount, although the currency may at the time be depreciated. Marine 
 Bank v. Fulton Bank, 2 Wall. 252. 
 
 ' ' When a sight bill is deposited with a bank by a customer at the same time 
 with money or currency, and a credit is given him by the bank for the paper 
 just as a like credit is given for the rest of the deposit, the act evinces une- 
 quivocally the intention of the bank to treat the bill and the money or cur- 
 rency, -without discrimination, as a deposit of cash, and to assume towards 
 the depositor the relation of a debtor instead of a bailee of the paper. If 
 the customer assents to such action on the part of the bank by drawing 
 checks against the credit, or in any other way, he manifests with equal 
 clearness his intention to be treated as a depositor of money, and, as such, 
 as a creditor of the bank instead of a bailor of the paper. Under such cir- 
 
10 BANK COLLECTIONS. § 8c 
 
 8c. In the case of City v. Beal 1 the checks in contro- 
 versy were marked, ' ' for deposit, ' ' and deposited a quarter 
 of an hour bef of e the bank closed for the day, and the next 
 day it was declared insolvent. "There was no express 
 understanding that the checks should or should not be 
 credited to the city immediately on deposit, but they were 
 always so credited on the pass-book at the time of the de-' 
 posit. The treasurer did not know whether the books -of 
 the bank were balanced after thfe close of business on each . 
 day, and credit given on the books of the bank for checks 
 deposited on that day, but he did know that the amount 
 
 cumstances it should be held that the bank acquires title to the paper* just 
 as it would to a deposit of money. The intention of the parties in the par- 
 ticular transaction may be ascertained from the course of their previous 
 dealings. When it appears that it has been the uniform practice between 
 the parties in their past dealings to treat deposits' of paper as deposits of 
 cash, their intention to do so in the particular transaction should be infer- 
 red, in the absence of new and inconsistent circumstances. 
 
 " It is quite certain that bankers do not invariably credit their customers 
 for sight paper as for cash, but are generally influenced by the financial re- 
 sponsibility of the customer, or the drawee of the paper, or both. If a bank 
 does not wish to assume the relation of a debtor for the paper to the depos- 
 itor, this intention may be manifested in a very explicit manner by crediting 
 the paper as paper. This was done in Thompson i>'. Giles, 2 Barn. & Caes. 
 422. in the case of Eowton, 1 Eose, 15, and in the case of Sargeant, Id. 153. 
 Some significance must be attached to a credit entry of the bill upon the 
 books "of the bank as cash, and the natural implication would seem to be 
 that the bank, by making such an entry, assumes to receive the bill as 
 money. Correlatively, if the depositor understands that the bank proposes 
 to receive the paper as money, and assents, expressly or by acquiescence, it 
 would seem that he consents to part with the title to the paper. For these 
 reasons the conclusions reached in Metropolitan Nat. Bank v. Loyd are 
 adopted as satisfactory. * 
 
 "Although the plaintiff had never drawn against the credit for bills given 
 by the bank, it appears that its balance was so large that there was never 
 any necessity for it to do so. There is no room to doubt that its checks 
 would have been honored if they had been drawn. The case is therefore to 
 be, considered as one where the course of business between the parties- im- 
 plied the understanding of both that sight bills should be treated in their 
 account as cash. ' ' 
 
 1 49 Fed. Rep. 790. 
 
§ 8e OWNERSHIP OF PAPER INDORSED IN BLANK. 11 
 
 of such checks was at ©nee credited to him on his pass- 
 book. It was the custom of the bank, on balancing the 
 books at the close of each day's business, to credit de- 
 posits on that day at their face value and without dis- 
 count; and it was also the custom .of the bank, in case a 
 check was returned from the clearing house uncollected, 
 forthwith to charge off to such depositor any such check, 
 and thus cancel' the credit. It was the practice of the 
 Maverick Bank [in which fhe checks were deposited], and 
 . is the practice of the other banks in Boston, in some cases, 
 to allow depositors to draw against checks deposited be- 
 fore such checks are collected, and in some cases not, de- 
 pending upon the bank's opinion of the reliability of the 
 depositor and the makers of the checks.' ' "The title to the 
 checks, in the opinion of the court, had passed to the 
 bank. 
 
 8d. In Titus v. Mechanics' National Bank, ' checks were 
 received from, a depositor and credited in an account as 
 cash. The depositor had previously overdrawn his ac- 
 count, but he now had a balance in his favor which he 
 could have drawn had he desired. ' ' By such crediting 
 the bank became the owners of these bills, as they do of 
 legal tender notes or bank bills so deposited. And had the 
 defendants failed the next day the plaintiffs could not 
 have demanded these identical checks as their property, 
 left for collection, against a receiver or an assignee in 
 bankruptcy ; the plaintiffs had received the price of these 
 checks by having it credited on their overdrafts and by 
 drawing for it." 
 
 8e. In another case the owner of a negotiable promis- 
 sory note indorsed it in blank and gave it to an attorney-at- 
 law for collection, who deposited it in a bank without stat- 
 ing f ox whose account. • It was collected and applied to his 
 indebtedness, and in a subsequent settlement with the 
 bank the amount of the note was included. Afterwards, 
 
 1 35 N. J. Law 588, 592 
 
12 BANK COLLECTIONS. § 8^ 
 
 the owner learning that the bank had collected the note, 
 demanded the proceeds, but he was not entitled to them. 1 
 
 8/. In Bennett v. Knapp, 2 the plaintiff had an account 
 with a private banker which was overdrawn when a draft 
 was offered for deposit and discount. The accommodation 
 was refused, but the bank agreed to collect the draft and 
 credit Bennett with the'proceeds when they were received. 
 The collection was credited to his general account, and in 
 the meantime he had drawn checks against it, advising 
 the banker when the account would be good for their pay- 
 ment. This was regarded, not as a special deposit, but 
 for collection and credit on his general account. 
 
 8g. In another case the state treasurer of New Jersey, 
 having been informed that the State Bank at New Bruns- 
 wick was in an embarrassed condition, drew on a state de- 
 posit in the bank and deposited the draft for collection in 
 the Trenton Bank where an account also was kept The 
 amount of the draft was credited to the .treasurer, was 
 forwarded for collection the same day, received by the 
 State Bank the next day, charged to the treasurer and 
 credited to the Trenton Bank. At one o'clock that 
 day the State Bank closed its doors in consequence of in- 
 solvency. Chancellor Runyon remarked : " The amount 
 of the draft was credited by the banking company to the 
 treasurer on the credit of the latter merely. The trans- 
 action was a mere collection for the accommodation of the 
 treasurer, and the credit was given according to the cus- 
 tom of banks in such cases on the obvious understanding 
 that if the draft should not be collected the credit should 
 be canceled. No liability to pay the amount of the draft 
 to the treasurer was incurred by the banking company in 
 the premises, except in case of failure to discharge its duty 
 with respect to collection. It did not, by the credit given 
 
 1 Wood-c. Boylston Nat. Bank, 129 Mass. 358 ; see Locke v. Lewie, 124 
 Mass. 1, and cases cited. 
 
 2 9 N. Y. Supp. 766. 
 
§ 11 OWNERSHIP OF PAPER INDORSED IN BLANK. 13 
 
 to the treasurer, make the claim its own, or in any wise 
 guarantee collection." ' 
 
 9. The test of a change of ownership is the control of the 
 check. Can the depositor withdraw it without the con- 
 sent of the bank, or direct the mode of its collection, if so, 
 he must be regarded as the owner, otherwise the title has 
 passed to the bank. 3 " It would be a singular mode of 
 transacting busmess, ' ' says Mr. Justice Gardiner, ' ' to give 
 credit for securities, and allow the funds thus constituted 
 to be drawn against, and the drawer at the same time to 
 retain the entire legal or equitable interest in the securities 
 of which the fund was composed." a 
 
 10. When the title to drafts and checks is thus trans- 
 ferred, the subsequent failure of the bank to realize on 
 them will not excuse the institution from performing its 
 implied contract, to pay the checks of its depositor which 
 are drawn against the money thus placed to the credit of 
 his account. But when the consideration for the transfer 
 of the title to the paper has failed and it has been charged 
 back, the bank is justified in not paying checks presented 
 afterward unless the customer's deposit is sufficient to 
 meet them. 4 ( 
 
 11. Nor 'does the bank's right to charge the paper back 
 if not collected, or to recover the amount on the deposi- 
 tor' s indorsement, affect the title, or render the bank less 
 liable to pay checks that may be drawn against the credit 
 thus given. Every indorsee has the right to recover of 
 the indorser when the maker of the obligation fails to ful- 
 fill his duty; but the indorsee's title is not thereby im- 
 paired. In Ayers v. Farmers & Merchants' Bank, 5 the 
 owner of a check indorsed it to the Mastin Bank and was 
 
 1 Freeholders of Middlesex v. State Bank, 32 N. J. Eq. 467. 
 
 2 Metropolitan Nat. Bank v. Loyd, 25 Hun 101. 
 
 3 Clark v. Merchants' Bank, 2 N. Y. 380, 385. See g§ 7, 13. 
 
 4 American Ex. Nat. Bank v. Gregg, 37 111. App. 425, revsd. on another 
 point, 28 N. E. Rep. 839 ^Metropolitan Nat. Bank v. Loyd, 90 N. Y. 530. 
 
 5 79 Mo. 421, 425. 
 
14 , BANK COLLECTIONS. § 12 
 
 • 
 
 credited for the amount, for which, he could immediately 
 draw. This was, said the court, " in effect a purchase of 
 the paper by the Mastin Bank, and the fact that on de- 
 fault of payment by the drawee that bank had recourse 
 upon the indorser, did not prevent the title from passing. 
 Such is the right of every indorsee for value, but he is none 
 the less the owner of the paper." And in First National 
 Bank v. Armstrong, 1 in which an agreement for collection 
 contained a provision for charging back uncollected paper, 
 and by virtue of which Judge Sage held that the collect- 
 ing bank became the owner as soon as the same was re- 
 ceived and credited, he said: "The agreement that the 
 drafts should be charged back if not paid did not operate to 
 , change this result, for the indorsement and the arrange- 
 ment for credit to the Elkhart Bank must be taken to- 
 gether, and, while it is true that the indorsement ' for col- 
 lection ' did not of itself transfer the title, I am quite clear 
 that the credit to the Elkhart Bank, together with the in- 
 dorsement, did transfer the entire interest in the proceeds 
 of the drafts to the Fidelity Bank, and that the agreement 
 ,to charge back if any draft was not paid, did not affect 
 the character of the transaction. That was nothing more 
 than would have resulted without any such agreement, 
 unless the indorsements to the Fidelity were expressly 
 without recourse. If the drafts were purchased by the 
 Fidelity out and out, with a general indorsement, the case 
 would differ from the case presented to the court only in 
 the respect that, upon the failure of the drawee to meet 
 the draft, protest would have been necessary, whereas it 
 may be that, by virtue of the agreement, protest was not 
 necessary." * 
 
 12. By a correct application of this principle, after such 
 transfer to the bank, the transferrer is responsible for the 
 
 1 39 Fed. Rep. 231, 233. .* 
 
 s City v. Beal, 49 Fed. Eep. 790 ; see Franklin Co. Nat. Bank « . Beal, 
 49 Fed. Eep. 606 ; Allen v. Fourth Nat. Bank, 59 N. Y. 12, 18 ; Moore v. 
 Goddard, 147 Mass! 287, 292. 
 
§ 13 OWNERSHIP OF PAPER INDORSED IN RLANK. fd 
 
 solvency of the parties thereto only to the end of the period 
 when presentment should be made. He is not respon- 
 sible for the conduct of the bank in collecting it. Thus, 
 a man desjring some money drew a draft on another and 
 sold it to a bank. The draft was sent to a Buffalo bank 
 for collection and was duly paid by the drawer. The col- 
 lecting bank remitted in the form of a draft on a New 
 York city bank, but before this was paid the Buffalo 
 bank failed. Unable to collect the draft sent by the Buf- 
 falo bank, the purchaser of the first draft sued the drawer, 
 but failed to recover. "The paper," so the court re- 
 marked, "belonged to the plaintiff as fully as any other 
 chattel that might have been passed to it on a full consid- 
 eration paid. What, then, had the defendant to do or to 
 say as to the agent, through whom the bank might choose 
 to collect it ? He might advise, but he could do nothing 
 more. He might recommend such an agent, but the bank, 
 on the other hand, might adopt such recommendation or 
 not, as it saw fit. It follows that the First National Bank 
 of Buffalo, was alone responsible to the plaintiff, and the 
 loss resulting from its failure cannot be charged to the de- 
 fendant." 'When the draft purchased had been paid the 
 drawer's liability was ended ; had the bank, instead of 
 purchasing the draft, acted simply as a collecting agent 
 its duty in most states would not have ended in sending it 
 to the Buffalo bank for collection, but continued until the 
 draft of that bank on the New York bank had been paid. 1 
 13. In thus transferring the title to checks and other 
 instruments to a bank, by a blank or general indorsement, 
 the significance of the act is not always understood. A 
 general indorsement followed by no act on the part of the 
 bank does not transfer the title. It is undoubtedly true 
 that such an indorsement transfers the apparent title so 
 that an innocent purchaser is protected in taking it from 
 the holder for value* 2 Not only must the transfer be 
 
 1 First Nat. Bank r. Cadwallader, 14 At. Rep. 410. 
 
 2 Cody v. City Nat. Bank, 55 Mich. 379 ; Hackett v. Reynolds, 114 Pa. 328. 
 See 5 36. . 
 
1% BANK COLLECTIONS. § 13« 
 
 made by the depositor, but the amount must be credited 
 to his account, so that he can draw therefor if he desires, 
 and the control of the check must pass absolutely to the 
 bank. Consequently it has been said that a depositor 
 cannot be held for depositing a check that is not paid save 
 in his capacity of indorser. 1 Of course, we are not speak- 
 ing now of checks which are credited provisionally, or for 
 the mere convenience of business, concerning which the 
 parties well understand that they are to'be charged back 
 in the event of their non-payment. But when the. checks 
 under consideration are indorsed generally, and the title 
 is passed to the bank, it cannot be the owner and not the 
 owner at the same time. Either it must become -the 
 owner and responsible for the amount, or refrain from ac- 
 quiring ownership and thus escape responsibility. Very 
 often when checks are thus indorsed the depositor has no 
 intention of parting with the title and the bank has still 
 less of acquiring any. Consequently, if they are not paid, 
 or the proceeds after collection are withheld from him, he 
 can recover and actions of this nature are not infrequent." 
 The transaction, therefore, must be regarded in the light 
 of all the circumstances mentioned before the question 
 can be determined, whether the note or check thus in- 
 dorsed has passed from the depositor to the ownership of 
 the depository." 
 
 13a. In the Corn Exchange Bank v. Farmers' National 
 Bask,' the check was indorsed by the payee in blank and 
 deposited in Harrison's Bank, which, after indorsing it for 
 collection, sent it to the Corn Exchange Bank. Harrison' s 
 Bank having failed, the maker and original owner at- 
 tempted to stop payment of the check, though before the 
 notice was received a draft for the amount had been mailed. 
 
 1 Metropolitan Nat. Bank v. Loyd, 90 N. T. 530. 
 
 2 Hackett v. Reynolds, 114 Pa. 328 ; Lawrqpce v. Stonington Bank, 6 
 Conn. 521 ; Arnold & Co. v. Clark, 1 Sandf. 491. 
 
 3 See § 7. 
 
 * 118 N. Y. 443. 
 
§ 15 OWNERSHIP' OF. PAPEE INDORSED IK BLANK. . 17 
 
 • 
 
 This was recovered however from the postoffice and dis- 
 honored. The court held that the check had been paid 
 and therefore the Farmers' Bank must remit, though Mr. 
 Justice Bradley dissented. E\en admitting that it. had 
 been paid, why could not the depositor recover the amount 
 of the Corn Exchange Bank, since there was no proof, in 
 fact, that he had parted with his title to the check. He 
 had not drawn against it, and surely the Corn Exchange 
 Bank could not hold the proceeds, for the title thereto had 
 not been transferred to that institution, and no advance 
 had been made thereon. The only parties having any 
 field of contention for the proceeds were the depositor and 
 the representative of Harrison's Bank. H, therefore, the 
 Corn Exchange Bank could not retain them, why should 
 it have contended for them ? ' 
 
 14. A bank may request another bank to collect a draft 
 or check, just as a non-depositor does ; it is then an agent 
 to make the collection and nothing more. But very often 
 banks collect for each other and retain the prqceeds for a 
 period, by a well-understood agreement, and thus estab- 
 lish the relation of debtor and creditor in addition to the 
 agency for collection. When mutual accounts thus exist 
 between two banks, and checks and other instruments are 
 received containing a general indorsement, do the receiving 
 banks acquire title to them % The courts have divided on 
 this question. 
 
 15. In the federal courts and also in many of the states, 
 when the receiving bank has no reason for supposing that 
 the sending bank had not the title and authority to in- 
 dorse the instrument received generally in this manner, 
 it may be collected' and the proceeds be retained to 
 discharge or reduce a general balance that may be due 
 from the sending bank in making similar collections, pur- 
 suant to a usage or agreement between them. s 
 
 1 Hackett«. Reynolds, 114 Pa. 328. 
 
 2 Bank of the Metropolis v. New England Bank, 1 How. 234, S. C. 6 How. 
 212 ; Wilson & Co. v. Smith, 3 How. 763 ; Sweeny v. Easter, 1 Wall. 166 ; 
 
 2 B. 
 
18 BANK COLLECTIONS. ' § 15a 
 
 15a. One of the most important of the later cases contain- 
 ing an application of this principle is Carroll v. Bank, 1 in 
 which President Johnson thus stated the rule : "If the 
 receiving and collecting bank, at the time of the mutual 
 dealings with the bank sending paper, had notice that 
 such bank had no interest in the bills or notes transmit- 
 ted, and that it transmitted them for collection merely as 
 agent, then the collecting bank would not be entitled to 
 retain, against the bank transmitting such paper, for the 
 general balance of the account with such bank. And, if 
 the collecting bank had no notice that the bank sending 
 the remittance was merely an agent, but regarded and 
 treated it as the owner of the paper transmitted, yet the 
 collecting bank is not entitled, against the real owner, un- 
 less credit was given to the bank sending the paper, or 
 balances suffered to remain in its hands, to be met by the 
 negotiable paper transmitted, or expected to be transmit- 
 ted, in the usual course of the dealings between the two 
 banks. But if, in the mutual dealings between two banks, 
 the collecting bank regarded and treated the bank trans- 
 mitting negotiable paper as the owner of such paper which 
 is transmitted for collection, and had no notice to the con- 
 trary, and, upon the credit of such remittance made or 
 anticipated in the usual course of dealing between them, 
 balances were from time to time suffered to remain in the 
 hands of the bank sending the remittance, to be met by 
 the .proceeds of such negotiable paper, then the collecting 
 bank is entitled to retain, against the real owner of the 
 paper, for the balance of account due from the bank trans- 
 mitting such paper." 
 
 First Nat. Bank v. Reno Co. Bank, 3 Fed. Eep. 257 ; Bank •». First Nat. 
 Bank, 19 Fed. Eep. 301 ; National Bank v. Brooklyn City, etc.. E. Co., 14 
 Blatch. 242, affd. 102 TJ. S. 14, Cecil Bank v. Farmers' Bank, 22 Md. 148, 
 156 ; Carroll v. Bank, 30 W. Va. 518 ; Blaine v. Bourne, 11 E. I. 119 ; Hoff- 
 man v. First Nat. Bank, 46 N. J. Law, 604 ; Bathbone v. Sanders, 9 Ind. 
 217 ; Milliken v. Shapleigh, 36 Mo. 596 ; Bury v. Woods, 17 Mo. App. 245 ; 
 Corn well v. Kinney, 1 Handy, .496 ; Gordon v. Kearney, 17 Ohio, 572. 
 1 30 W. Va., 518, 530. 
 
§ 16 OWNERSHIP OF PAPER INDORSED IN BLANK. 19 
 
 16. In New York, Connecticut and other states the 
 courts have maintained that the title could not be trans- 
 ferred without paying a consideration therefor. The rule 
 is founded on the reasoning in Coddington v. Bay, 1 that 
 before the holder of a note can acquire a better title than 
 the sender had, he must pay a present valuable consider- 
 ation. And the mere receiving of a check for collection 
 imports no consideration ; nor does the receiving of it as 
 payment or security for an antecedent debt." In truth, a 
 bank is not the owner until it has advanced the amount, 
 • or has become responsible for the same. The ownership 
 previous to collection can only be established by a con- 
 tract expressly proved or inferred from a course of deal- 
 ing. Such an inference does not flow from the fact that 
 a customer may be a large depositor of money and bills, 
 and constantly drawing drafts against his remittances 
 under an arrangement by which he is allowed interest on 
 his average balances. 3 Says Mr. Justice Folger : "If the 
 property in the note, without purchase or advance, is to 
 vest in an agent or correspondent for collection, he must 
 become absolutely responsible to his principal for the 
 amount. An obligation to become thus responsible can 
 be established only by a contract to be expressly proven 
 or inferred from an unequivocal course of dealing. ' ' * And 
 advances on notes in anticipation of their collection, 
 
 1 20 Johns. 637. For a discussion of this noted case see Messick & Co. v, 
 Roxborough, 1 Handy 348. 
 
 3 McBride «. Farmers' Bank. 26 N. Y. 450, 454 ; Rosa v. Brotherson, 10 
 Wend. 85 ; Stalker v. M'Donald, 6 Hill 93 ; Youngs v. Lee, 12 N. Y. 551 ; 
 Mayer v. Heidelbach, 123 N. Y. 332, 337. 
 
 3 Scott v. Ocean Bank, 23 N. Y. 289. 
 
 4 Dickerson v. Wason, 47 N. Y. 439, 442. A hank does not become the 
 bona fide holder of a draft remitted by another bank for collection unless it 
 makes subsequent advances thereon or transmits the proceeds. McBride v. 
 Farmers' Bank, 26 N. Y. 450 ; Arnold & Co. v. Clark, 1 Sandf. 491 ; West 
 v. American Ex. Bank, 44 Barb. 175. A collecting bank is responsible di- 
 rectly to the owner of the paper ; it may discharge itself by an actual pay- 
 ment to its correspondent, but not by passing the amount to its credit in 
 general account. Echarte v. Clark, 2 Edm. Sel. Cases, 445. 
 
20 BANK COLLECTIONS. , § 16& 
 
 though not of any particular note, will not transfer their 
 ownership to the collecting bank. 1 
 
 16a. InMcBride«. Farmers' Bank,' Mr. Justice Balcom 
 said : ' ' The case is not altered materially by a long course 
 of dealing between the parties, by which the holder of the 
 note has been in the habit of receiving payment of bal- 
 ances due him in notes, or because he has omitted to col- 
 lect a balance due him, by reason of an expectation or 
 promise of payment of it in notes, or in consequence of 
 his omission to collect it after taking such a note in pay- 
 ment of it. He has not in either case parted with or paid 
 any present valuable consideration for the note ; and if 
 he fails to collect it or to hold it, he is in no worse situa- 
 tion legally, than he was before receiving it. He has, only 
 been disappointed by not obtaining payment of an ante- 
 cedent debt ; and that consideration is insufficient to pre- 
 vent the true owner of the note from claiming the same 
 or its avails, or the maker or indorser from setting up a 
 defense to it existing in his favor as against the payee of 
 a former holder." 
 
 16&. In Dod v. Fourth National Bank,' the plaintiff de- 
 livered to the First National Bank of New Orleans a draft 
 on a New York city bank, which was sent through its 
 correspondent in New York for acceptance and collection. 
 The New Orleans bank failed, and the receiver gave the 
 plaintiff an order for the dra^ft on the defendant, which it 
 declined to accept, claiming to hold the same under an 
 agreement with the New Orleans bank, by which it was 
 to hold all collection paper as collateral against over- 
 drafts. Furthermore, it sought to maintain that it had 
 parted with money on the faith of the draft. The evi- 
 dence did not show that any specific loan had been made 
 on the faith of the draft, and the defendant's claim there- 
 fore was not sustained." 
 
 t 
 
 1 DiCkersoo v. Wason, 47 N. Y. 439. 
 
 ' 26 N. T. 450, 454. » 59 Barb. 265 
 
 * Lindauer v. Fourth Nat. Bank, 55 Barb. 75. 
 
§ 16(2 OWNERSHIP OF PAPER INDORSED IN BLANK. 21 
 
 16c. In Stark v. United States National Bank, 1 a draft 
 was deposited in a bank for collection indorsed in blank, 
 which having been indorsed for collection was sent to 
 another bank to be collected. Said Mr. Justice Daniels : 
 ei In transmitting the paper to the defendant it was in- 
 dorsed for collection, and the letters of instructions ac- 
 companying the note and draft further apprised the de- 
 fendant of this fact. And from this information it was 
 to be inferred by the defendant that the State Bank was 
 acting in behalf of some other party in the collection of 
 the paper for that party, and the defendant undertook 
 the performance of the same duty with the knowledge of 
 the existence of that fact. The paper was not credited 
 in the defendant's account with the State Bank, neither 
 was the defendant asked to, nor did it deal with the paper 
 in any other form or manner than that of a collection 
 agent. And that was the extent of its relation to this 
 paper when the State Bank failed and it was demanded 
 by the parties who had delivered it to the State Bank to 
 be collected. And in this state of the facts the defendant 
 had no legal right to hold the paper for its security on 
 account of the general balance of its accounts against the 
 State Bank." 3 
 
 16d. It is difficult to harmonize the decision in Clark v. 
 Merchants' Bank, 3 with this rule. The firm sent a bill 
 due at sight and indorsed by them in blank to S. & Co., 
 and drew a sight draft against the anticipated collection. 
 S. & Co. received for the bill the check of the drawee, cred- 
 ited the amount to C. & Co. and deposited the check in 
 the Merchants' Bank, which was passed to the firm's 
 credit as cash and was paid. S. & Co. failed shortly af- 
 
 1 41 Hun 506. 
 
 2 Other cases, Warner v. Lee, 6 N. Y. 144 ; Scott v. Ocean Bank, 23 N. Y. 
 289 ; Dickerson v. Wason„47 N. Y. 439; Jessop v. Miller, 1 Keyes 321; Peo- 
 ple v. City Bank, 93 N. Y. 582 ; Corn Exchange Bank v. Farmers' Nat. 
 Bank, 118 N. Y 443. 
 
 3 2 N. Y. 380, revsg. 1 Sandf. 491. 
 
22 BANK COLLECTIONS. • § 17 
 
 forwards without having paid C. & Co.'s draft, and also 
 indebted to the bank for more than the amount of the 
 check deposited. It had not, however, paid anything 
 since the deposit of the check. It was decided that the 
 title to the bill vested in S. & Co., and that C. &Co. could 
 not recover the proceeds from the bank. The superior 
 court decided differently, and we are not convinced of 
 the soundness of the reasons given in reversing the de- 
 cision. Unquestionably, C. & Co. having indorsed the 
 bill in blank, S. & Co. had an apparent title, and the 
 payee could discharge it in safety. But. S. & Co. had 
 paid no consideration for the bill, and therefore they were 
 not entitled to the proceeds. C. & Co. drew against the 
 bill, as had been the practice of the two firms on many 
 occasions, but their draft was not paid. Had it been, S. 
 & Co. would have been the true owner. The court of ap- 
 peals seemed to regard the crediting of the bill to C. & Co. 
 as equivalent to payment, but this certainly does, not ac- 
 cord with the opinion of the court in other cases. Not 
 having paid it they had no more right to the proceeds 
 than though C. & Co. had never drawn at all. If this be 
 a correct view, they ought to have recovered' the proceeds 
 wherever they could be traced, which were in possession 
 of the bank. 
 
 17. The New York rule differs from the federal because 
 it rests on a different foundation. By the Supreme Court 
 of the United States it has been decided that a pre-exist- 
 ing indebtedness is a good consideration for receiving and 
 holding a negotiable note before maturity, or a check. 1 
 This doctrine has been established in many states." In 
 New York, on the other hand, a pre-existing indebted- 
 ness does not form a consideration to sustain such a 
 transfer.' 
 
 Swift v. Tyson, 16 Pet. 1 ; Goodman v. Simonds, 20 How. 343. 
 
 2 Culver v. Benedict, 13 Gray 70 ; Cecil Bank u. Heald, 25 Md. 562 ; 
 Goodman v. Harvey, 4 Ad. & Ellis 870. 
 
 3 Coddington v. Bay, 30 Johns. 637. 
 
§ 18 OWNERSHIP OP PAPER INDORSED IN BLANK. 23 
 
 18. Indeed, a bank does not become the owner of a draft 
 or check thus generally indorsed until it has advanced the 
 amount. Consequently when mutual accounts exist be- 
 tween two banks and one of them fails owing the other, 
 what lien or preference has the solvent one for the bal- 
 ance due to it, especially on notes, checks or other paper 
 received and indorsed generally, but not collected ? The 
 question was answered in a controversy arising from the 
 failure of the Utica City National Bank, whiclrhad a 
 mutual account with the City Bank of Eochester. 4 Each 
 bank had acted as collecting agents for, and had kept a 
 running account with the other, crediting the avails of 
 collections, and charging whatever was sent for that pur- 
 pose A balance was struck once a week and thje debtor 
 bank remitted the balance. The avails of collections were 
 not kept separate or distinguished in any way from the 
 other funds of the bank. One of the banks having failed 
 owing a balance on such account, it was held that the re- 
 lation between them was simply that of debtor and cred- 
 itor, that the creditor bank acquired no lien on any spe- 
 cific fund and was not entitled to .any preference over 
 other creditors. "The creditor bank failed to establish 
 any lien or impress any trust on any specific money of the 
 debtor bank which would enable it to follow any of its 
 property or funds which went into the hands of the re- 
 ceiver and obtain payment in preference to other creditors. 
 Each sum collected, as it came in, became the property of 
 the collecting bank, who simply became liable to account 
 for it to the other on the next settling day. It was under 
 no obligation to pay over each specific sum received. 
 Whether there would be anything to pay over depended 
 upon the condition in which the account should be when 
 the settling day arrived. This was the course of dealing 
 agreed upon and followed between the parties for a long 
 period, and it established between them the relation of 
 debtor and creditor in respect to these collections." 
 
 4 People v. City Bank, 93 N. Y. 582. 
 
24 BANK COLLECTIONS. § 19« 
 
 19. In many cases a depositor indorses his draft, note 
 or check in. blank, which is afterward indorsed by the 
 bank for collection. It has been maintained that, in such 
 cases, the bank acquires a good title and can part with 
 the same, and that the holder is protected. But after it 
 has been indorsed by the bank in that manner, it has been 
 declared that the proper inference to draw is that the de- 
 positor is the owner, and that it- was indorsed for collec- 
 tion by the bank for the owner. Thus in Hoffman v. 
 Miller 1 a draft was indorsed in blank by the payees and 
 sent to L. & Co., who indorsed it for collection and sent 
 it to H. & Co. In a suit by H. & Co. against the payees, 
 the court said that "the present plaintiffs had notice there- 
 fore that L. & Co.. had received it for collection, that they 
 sent it for collection for the owners, it being indorsed only 
 by them and by L. & Co." * 
 
 19a. Van Namee v. Bank of Troy a is another case of this 
 character. A note payable to Van Namee was indorsed 
 by him in blank and deposited in the Canal Bank, and by 
 that bank was sent to the defendant for collection, in- 
 dorsed payable to the order of the cashier. The Canal 
 Bank having failed owing the Troy bank, it sought to re- 
 tain the proceeds of the note to extinguish the indebted- 
 ness. But it was not permitted to do this, though the 
 Canal Bank, as we have seen, held the note by a blank 
 indorsement. Said Mr. Justice Hand*- The defendants 
 "received the note for collection merely. * • * It is to 
 be supposed from their own practice and experience, and 
 from their knowledge of business generally, that they 
 knew that a large amount of the paper they received from 
 the Canal Bank was placed there for the sole purpose of 
 collection. This was notice enough to put them upon in- 
 quiry, and at least sufficient to prevent them from relying 
 upon these notes as securities for advances or for a 
 balance." 
 
 ' 9 Bos. 334, 343. 
 
 1 Arnold & Co. u. Clark, 1 Sandf. 491. « 5 How. Pr. 161, 169. 
 
§ 196 OWNERSHIP OP PAPER INDORSED IN BLANK. 25 
 
 196. In another case ' a customer deposited a promissory- 
 note indorsed in blank, with his bankers, who sent it in- 
 dorsed ' ' for collection ' ' to the defendant bank. • The bank- 
 ers having failed, owing to the bank a considerable sum of 
 money, it sought to apply the avails of the note on their in- 
 debtedness. ' The depositor, though, brought a suit against 
 the bank and recovered. Thus, the decision is in harmony 
 with the decisions rendered by the courts of New York 
 and some of the other states. The ground, however, on 
 which the decision is put is not altogether satisfactory. 
 The court declared that as the customer had indorsed the 
 note in blank, the bank had a perfect right to treat the 
 bankers from whom they received it eCs the bona fide 
 owner, and was not bound to make inquiry concerning its 
 ownership. It was admitted that a different question ex- 
 isted between the depositor and the bankers with which 
 the note was left for collection. Having been indorsed 
 by the customer simply for collection and- receiving no 
 consideration, as between these parties, the title remained 
 in the customer. As, however, the bank had made no 
 specific advance on the note, it had no right to retain the 
 proceeds to extinguish the balance due from the bankers. 
 It was declared that if the bank had advanced on the faith 
 of the note to the bankers, it would have had a lien 
 thereon for the amount, but if no such credit was, in fact, 
 given to them, it /jould not hold the proceeds. To use 
 the language of the court : " Unless some credit was 
 . given or some risk or responsibility incurred upon the 
 upon the faith of the notes, there would be no justice in 
 allowing the defendant to retain the money simply because 
 it had passed the amount to the credit of Lee & Co. and 
 they still owe a balance on account." 
 
 1 Miller v. Farmers & Mechanics' Bank, 30 Md. 392, r 40l. 
 
 J In Bury v. Woods, 17 Mo. App. 245, it was declared that unless some 
 credit was given or some risk or responsibility was incurred on the faith of 
 the note collected by the defendant, there would be no justice in allowing 
 him to retain the money, simply because he had passed the amount to the 
 credit of the sending bank, and it still owed him a balance on account. 
 
26 BANK COLLECTIONS. § 19c 
 
 19c. In another case a company which was engaged in 
 manufacturing at McKeesport near Pittsburg, drew a draft 
 on its treasurer in Boston, and indorsed it payable to the 
 order of the cashier of the People's Bank, which was 
 located at McKeesport. By this bank it was indorsed 
 payable to Penn Bank or order, "for account of People's 
 Bank," and by similar indorsement the draft became pay- 
 able to the plaintiff bank in Boston. The Penn Bank, 
 when sending the draft to the Boston bank, stated in a 
 letter that the draft was for collection and at the same 
 time drew a check for $7,000, payable to the order of its 
 correspondent, the American Exchange National Bank of 
 New York. This was paid through the clearing house, 
 but in doing so the balance to the credit of the Penn Bank 
 was overdrawn. Shortly af tenvard the Penn Bank failed, 
 and the manager of the company notified its treasurer not 
 to pay the draft. In an action by the Boston bank against 
 the company, the court, speaking through Mr. Justice 
 Knowlton, said: " The indorsement from the defendant 
 to the People's Bank, although in terms unrestricted, was 
 without consideration, and merely for the purpose of col- 
 lection. The People's Bank became the agent of the de- 
 fendant, and the defendant, as owner of the drafts, can 
 avail itself of all that its agent did for its protection. The 
 subsequent indorsements through which the drafts came 
 to the plaintiff were both restrictive, giving notice that 
 the ownership had not passed beyond the People's Bank. 
 They purported to be made only for the purpose of col- 
 lection on account of the owner, and they merely passed 
 the legal title so far as to enable the indorsees to demand, 
 receive and sue for the money to be paid. 1 It is well set- 
 tled, that upon such an indorsement the owner may con- 
 trol his negotiable paper until it is paid, and may inter- 
 cept the proceeds of it in the hands of an intermediate 
 
 1 First Nat. Bank v. Smith, 132 Mass. 227.. 
 
§ 19e OWNERSHIP OF PAPER INDORSED IN BLANK. 27 
 
 agent. ' The indorsement of the Penn Bank, taken in con- 
 nection with the former indorsement of. the People' s Bank, 
 did not, by the words 'for account of Penn Bank,' imply 
 that the Penn Bank was the owner. It was a request to 
 pay 'for account of the Penn Bank as agent of the 
 People's Bank. An unbroken succession of such indorse- 
 ments would indicate that each indorser was acting by 
 direction of the next preceding indorser, who was himself 
 an agent of the owner, who had before indorsed, and for 
 whom the collection was to be made." * 
 
 19d. In Stark v. United States National Bank,' a draft 
 was deposited for collection indorsed in blank, and after- 
 ward indorsed for collection by the bank and sent to an- 
 other for that purpose. Had the first bank negotiated 
 the draft to the second on the faith of the general indorse- 
 ment, and money had been advanced thereon, it could 
 have held the same, but that was not done, consequently 
 as between the second bank and the indorsers "it had no 
 title whatever to the paper beyond the duty and obliga- 
 tion to collect it and return the proceeds to the parties 
 from whom it had been received." 
 
 19e. But this opinion does not prevail everywhere. 
 In Cody v. City National Bank,* a firm had been in the 
 habit of indorsing -in blank the drafts or checks which 
 were drawn to their order and depositing them in a local 
 bank as money for which they could draw. A check was 
 thus left without instructions and forwarded to the de- 
 fendant bank for collection. At the same time the local 
 bank asked the other to give credit therefor and to remit 
 in currency for a considerable amount : both things were 
 done. Indeed, after crediting* the sender and making a 
 remittance as requested, only a small balance was due to 
 
 1 Manufacturers' Nat. Bank v. Continental Bank, 148 Mass. 553, and 
 cases there cited. 
 
 2 Freeman's Nat. Bank v. National Tube Works Co., 151 Mass. 413, 417. 
 
 * 41 Hun 506, 508. 
 
 * 55 Mich. 379. 
 
28 BANK COLLECTIONS. § 19/ 
 
 the former: The second bank forwarded the check to 
 Chicago for collection, but before it had been collected 
 the local bank failed. The depositor then telegraphed 
 the Chicago bank to stop payment. The order was re- 
 garded and the check was returned to ttie defendant bank. 
 The depositor claimed to be the owner of the check, and 
 so did the defendant bank, which had remitted on_ the 
 faith of it to the failed institution. The court decided 
 against the depositor. Said Mr. Justice Campbell: 
 ' 'When the paper came into the defendant' s hands it had an 
 unqualified blank indorsement of plaintiffs which presump- 
 tively transferred title to any one who might become the ' 
 holder. The fact that [the bankers who] indorsed it for 
 collection had no tendency to show that they held it 
 themselves merely as agent for plaintiffs, or even received 
 it from them directly. ' The undisputed facts show that 
 it was not left with them . in such a way that they were 
 bound to regard it themselves as left for plaintiff's, use, 
 except as a deposit. But the defendant is not claimed to 
 have had any notice outside of the paper itself. The 
 paper came to defendant with express directions to col- 
 lect and credit, and with an order for an immediate re- 
 mittance of a large sum, which nearly exhausted it. This 
 was not an exceptional case, but was in the usual course 
 of their mutual business." 
 19/. In Cornwell v. Kinney " C. deposited drafts with 
 
 1 1 Handy ,501. In this case it was further remarked by Sperifcer, J. : 
 "Nor does it seem to us, that the fact that such paper is in the frequent 
 course of trade and business deposited in bank for collection merely, furnish 
 such evidence of a want of ownership in the banker, as to put a party deal- 
 ing with him upon inquiry into the truth of such ownership. To hold this 
 would greatly impair, if it did not entirely destroy, the peculiar value of 
 commercial paper ; whilst'at the same time, it would violate every princi- 
 ple of the law of evidence as applicable to presumptions. To secure the 
 highest beneficial use of commercial paper, every facility for its transfer 
 from hand to hand should be afforded ; and every presumption should be 
 made in favor of the title of the holder thereof, consistently with that ap- 
 pearing from the instrument itself. So the law presumes every holding to 
 
§ 19<7 OWNERSHIP OF PAPER INDORSED IN BLANK. 29 
 
 Pittsburg bankers drawn on persons in Cincinnati, in- 
 dorsing them in blank. The Pittsburg bankers indorsed 
 them specially and sent them to K. & Co. of Cincinnati, 
 for collection. The Pittsburg bankers having failed, C. 
 sought to recover* the amount of R. & Co. It appeared 
 on the trial that perhaps one-half or more of all the paper 
 transmitted through banking houses for collection was 
 not their own property, but belonged to their customers, 
 that it was usually indorsed in the same mode by whom- 
 soever owned, and when collected was placed to the credit 
 of the last indorsee in the absence of special directions. 
 K. & Co. supposing that the paper belonged to the Pitts- 
 burg bankers, made advances thereon and consequently 
 tried to hold it to secure themselves. The court decided 
 in favor of K. & Co., declaring that they were justified in 
 assuming that the depositor had transferred the title, and 
 intentionally in order to have the immediate use of the 
 proceeds. 
 
 19g. In another case a negotiable instrument was in- 
 dorsed in blank and deposited in a bank for collection, 
 which indorsed the same for collection and credit, and 
 sent it to another bank which collected the proceeds and 
 retained them to satisfy a balance, in pursuance of a usage 
 between the two banks.' It was permitted to retain them, 
 Judge Brewer saying : "So far as any hardship on the 
 plaintiff is concerned he has no one but himself to blame. 
 By a restricted indorsement he could have given notice to 
 every" one of his title. He chose to give an unrestricted 
 indorsement, and thus permitted it to pass into the chan- 
 
 be in consonance with the title exhibited, especially when it might other- 
 wise stand indifferent as to ownership. Whenever, therefore, the owner of 
 such paper gives it currency, by indorsement or otherwise, and thus pro- 
 claims the holder of it to the world as its true owner, he is hound to pre- 
 sume that credit will be given to his own declaration, and is justly charge- 
 able with all the consequences which may follow from the credit thus given; 
 he is entitled to no higher consideration than is he in whom the confidence 
 is reposed, and should be measured by the same standard of equity.'' 
 ' Vickrey v. State Sav. Association, 21 Fed. Rep. 773. 
 
30 BANK COLLECTIONS. § 20 
 
 nels of trade as apparently the property of the Indiana 
 bank. He trusted that bank, and must abide the conse- 
 quences .of his confidence. That the indorsement of the 
 defendant was for collection is immaterial, the question 
 in these cases is not whether title is apparently transfer- 
 red to the collecting bank, but whether it has a right to 
 treat the transmitting bank as the owner." 
 
 19A. The Supreme Court of Pennsylvania have declared 
 that if a collecting bank has made advances on a note or 
 check held by the sending bank under a general indorse- 
 ment, but specially indorsed by it, they are preserved. 
 "A purchaser or holder of a legally executed negotiable 
 instrument," says Mr. Justice Clark, ' ' ' can hold it against 
 all claims and defenses where he has acquired it, not only 
 in good faith, but upon a valuable consideration ; this, in 
 Pennsylvania, is a rule of general application, equally 
 binding upon banking companies in their dealings with 
 each other as upon individuals. We cannot consent to 
 the doctrine that a mere usage and course of dealing be- 
 tween banks in the transmitting of bills and notes for 
 collection, by which they mutually credit the avails in, 
 account to over-balances due, can, without more, deprive 
 a third person, the real owner of the notes or bills, of his 
 rights."" 
 
 20. It is unquestionably true that paper thus indorsed in 
 blank usually conveys a good title to the holder, but when 
 the indorsement is made by a depositor, followed by a 
 special indorsement by the bank, ought not a subsequent 
 holder to infer from this #hat the title is still retained by the 
 depositor? One fact must not be overlooked in determining 
 the rights of the parties. When paper is thus indorsed 
 and deposited, the depositor usually intends to transfer 
 the same to the bank ; for it is credited to him, and he 
 draws, or has the right to draw, against the credit. This 
 
 1 Hackettu. Reynolds, 114 Pa. 338, 334. 
 
 2 Jones & Co. v. Milliken & Son, 41 Pa. 252 ; First Nat. Bank v. Gregg & 
 Co., 79 Pa. 384 ; Carroll v. Bank, 30 W. Va. 518, 528. 
 
§ 21 OWNERSHIP OF PAPEK INDOKSED IN BLANK. 31 
 
 is well known, and a bank taking paper which, is thus in- 
 dorsed is perhaps at the present time as clearly justified 
 in assuming that the depositor intended to transfer the 
 title and draw against it, as to retain the ownership. The 
 practice is so common of doing this that a bank, to which 
 such paper may come, is fully justified in assuming that 
 a depositor has transferred the title and intentionally, in 
 order to have the immediate use of the proceeds. This 
 practice has been growing, and the force of the decisions 
 which declare that paper thus indorsed in blank, followed 
 by a special indorsement, is a circumstance that ought to 
 put the subsequent receiver of it on inquiry is greatly 
 weakened. Indeed, we think it may now be fairly as- 
 sumed that by such an indorsement the depositor intended 
 to part with the title. But this is only an assumption 
 on which no conclusion can be built with entire confidence, 
 save in those cases in which bona fide transfers have been 
 made to purchasers. They are protected, but in other 
 cases the assumption must fall before the facts whenever 
 they can be shown. 1 
 
 21. In some cases even the remitting bank has been per- 
 mitted to prove by parol evidence that the remittance, 
 though indorsed generally, was sent only for collection, 
 and to recover the same. First, let us inquire when this 
 cannot be done : The answer is not doubtful. When- 
 ever the indorser has taken such an obligation for value 
 or advanced on the same in good faith, believing that the 
 holder had authority to make such a transfer, he is pro- 
 tected in taking it, otherwise thefe would be no security 
 in dealing in such paper." As Mr. Chief Justice Hosmer 
 has remarked : 3 "To strengthen and facilitate commer- 
 cial intercourse, which is carried on through the medium 
 of this species of security, it is necessary that the fair 
 
 5 See \ 36. 
 
 2 Clark v. Merchants' Bank, 3 N. Y. 380, S. C. 1 Sandf. 491, 496; Importers 
 & Traders' Nat. Bank v. Peters, 123 N. Y. 272. 
 
 3 Lawrence v. Stonington Bank, 6 Conn. 521, 526 
 
32 , BANK COLLECTIONS. § 22 
 
 holder of a bill, for value paid, should not be affected by 
 a want of consideration between the prior parties. If, 
 however, the holder of a bill receive it without considera- 
 tion, then, as was justly said by Eyre, Ch. J., in Collins 
 v. Martin 1 ' he is privity with the first-holderj and will 
 be affected by anything which would affect him.' " 
 And in a more recent case Mr. Justice Parker has re- 
 marked :' " The holder of a check payable to order, and 
 indorsed in blank by the payee, with a general indorse- 
 ment, is presumed to be the owner, and such check 4 like 
 other commercial papqr, will pass by delivery." . Apply- 
 ing this principle to the case before him, which was an 
 action by depositors against the collecting bank, the judge 
 continued: "Had the payee indorsed the* words 'for 
 collection ' on the checks they would have saved all ques- 
 tion. 3 But they chose to neglect this precaution, and in- 
 dorsed generally, and thereby permitted another to ap- 
 pear as owner ; and if thereby any person was misled, 
 and loss occurred, it is proper that they whose careless- 
 ness gave opportunity for the other to be deceived should 
 bear the loss." 
 
 22. Second, evidence is admissible whenever the in- 
 dorsee has paid no consideration therefor and made no 
 advances thereon ; he acquires no title, and cannot with- 
 hold the proceeds from the original holder in satisfaction 
 of a claim that he may have against an intermediate party 
 through whom the collection came. 4 Thus in Lawrence 
 v. Stonington Bank, 6 the plaintiff, who lived in New York, 
 drew a bill on a person residing in Stonington payable to 
 his own order, which was indorsed in blank and deposited 
 in a New York bank for collection. That bank forwarded 
 
 ^Bos. &Pcdl. 648,651. 
 
 2 Hoffman v. First Nat. Bank, 46 N. J. Law, 604, 606, 607. 
 
 3 Cecil Bank v. Farmers' Bank, 22 Md. 148. 
 
 * Arnold & Co. v. Clark, 1 Sandf. 491 ; Bvdler v. Harrison, 2 Cowp. 565 • 
 Bank of Orleans v. Smith, 3 Hill 560 
 6 6 Conn. 521. 
 
§ 22 OWNERSHIP OP PAPEK INDORSED IN BLANK. 33 
 
 the bill to a bank in New. Haven similarly indorsed, and 
 the New Haven bank by a similar indorsement forwarded 
 it to the Stonington Bank, which collected the amount of 
 the drawee and attempted to hold the same to reduce the 
 'indebtedness due from the New Haven bank, which had 
 failed after the presentment and acceptance of the bill, 
 but before its payment. The drawer sued the Stonington 
 Bank for the amount and recovered on the ground that 
 as none of the banks had paid any consideration for the 
 bill they could not hold the proceeds. 1 To show that no 
 consideration had been given parol* evidence was admis- 
 sible. Such evidence has been admitted in other cases of 
 a similar nature. 2 Furthermore, the custom of crediting 
 to the sending banks the proceeds of bills and notes trans- 
 mitted from each to the other for collection when they 
 are collected, cannot affect the claim of the real owner of 
 the bill, who has 'deposited it with one of them for col- 
 lection.' As Mr. Justice Hosmer has remarked: "A 
 man's property cannot thus be. taken from him without 
 his consent ; and this assent cannot be implied unless an 
 usage has existed so long, and with such publicity as to 
 warrant the presumption that it was generally known.* 
 The custom of transmitting bills for collection from one 
 bank to another, and crediting in account the avails re- 
 ceived, whatever effect it may have between themselves, 
 cannot affect the claims of a third person, who has con- 
 fided the collection of a bill to one of them, without as- 
 sent either express or implied to the mode of transacting 
 their business." 8 
 
 'Arnold & Co. v. Clark, 1 Sandf. 491. 
 
 a Barker v. Prentiss, 6 Mass. 430 ; Herrick v. Carman, 10 Johns. 224 ; 
 Commercial Bank v. Marine Bank, 3 Keyes 337 ; Church v. Barlow, 9 Pick. 
 547 ; Hartford Bank v. Barry, 17 Mass. 94 ; Wheeler v. Guild, 20 Pick. 545; 
 Cope v. Darfiel 9 Dana, 415 (Ky.) ; Armstrong v. National Bank, 14 So. W. 
 Eep. 411 (Ky.). 
 
 3 Lawrence v. Stonington Bank, 6 Conn. 521. 
 
 4 Barber v. Brace, 3 Conn. 9. 
 6 See I 51. 
 
 3 B. 
 
34 BANK COLLECTIONS. § 24 
 
 23. This rule rests on solid foundations. It has long 
 been settled also that inquiry into the consideration of a 
 bill Or note may be made between the original parties.' 
 In applying this principle, when the consideration of a 
 note or bill is less than the amount expressed, the excess* 
 cannot be recovered.' And in like manner when none has 
 been paid none can be recovered. And if the several trans- 
 mitters of a note for collection, though containing a gen- 
 eral indorsement, have paid nothing therefor, no reason 
 can be given why they should be permitted to withhold 
 the amount collected €rom the real owner. 
 
 23a. In Church v. Barlow," this question was answered 
 in the same manner. The controversy related to the own- 
 ership of a note which a Connecticut bank had discounted 
 and indorsed for collection to a. bank in New York, where 
 the maker lived. The court remarked* "The indorse- 
 ment of the bill by the cashier of the Phoenix Bank to the 
 cashier of the bank in New York is not conclusive* evi- 
 dence of a transfer of the property in the bill. The in- 
 dorsement may operate as a transfer of the property, or 
 as an authority to collect ; it is therefore competent to 
 show by other evidence, where the fact becomes material, 
 whether it operated in the one way or the other." 
 
 24. If a check is indorsed in blank, but accompanied 
 with a letter stating that it is "for collection and credit," 
 an indorsee who takes the check in ignorance of the letter 
 acquires a good title.' But if a check is thus indorsed 
 and from correspondence or other facts the parties into 
 whose hands it may come have reason to believe that it is 
 
 1 People v. Howell, 4 Johns. 296, 303 ; Pearson v. Pearson, 7 Johns. 26, 
 28 ; Schoonmaker v. Roosa, 17 Johns. 301, 304. 
 
 s Braman v. Hess, 13 Johns. 52 ; Brown v. Mott, 7 Johns. 361 : Mnnn v. 
 Commission Co., 15 Johns. 44. 
 
 3 9 Pick. 547, 549. 
 
 4 Cornwell v. Kinney, 1 Handy 496. See Lawrence v. Stonington Bank, 
 6 Conn. 521 ; Van Namee v. Bank, 8 Barb. 312 ; Warner v. Lee, 6 N. Y. 
 141 ; Arnold & Co. v. Clark, 1 Sandf. 591. 
 
§ 25a OWNERSHIP OF PAPER INDORSED IN BLANK. 35 
 
 sent only for collection, and not with the view of parting 
 with the title, none can be acquired. 1 
 
 25. When checks are put in a bank by a customer and 
 indorsed ' ' for deposit," the import and effect of the words 
 must be considered in the light of surrounding circum- 
 stances and of previous dealings between the parties. 
 When a depositor has kept a deposit account with a banker 
 for some time, and has been accustomed to deposit checks 
 payable to him, entries of which are. made in his pass- 
 book, and to draw against them, such an indorsement, in 
 the absence of a different understanding, is presumptive 
 of more than a mere agency or authority to collect. It is 
 a request and direction to the bank to deposit the same to 
 the credit of the customer, and authority is conferred not 
 only to collect, but also to pay the check in such a form, 
 and to use it in such a way as will be most available for 
 the bank's protection. The effect of the indorsement is 
 to vest the bank with the title to and control of the check. 
 If not paid, the bank depends for safety and indemnity 
 on the liability of the drawer- and the security of the in- 
 dorsement. 3 
 
 25a. In Armstrong «. American Exchange National- 
 Bank," a draft was drawn by a Cincinnati bank on a bank 
 in New York payable to the order of the American Ex- 
 change National Bank, and put into the hands of W., who 
 delivered it to K. and who deposited it "for account" of 
 himself in the American bank above mentioned. The 
 bank placed it to K.'s credit and paid his checks with the 
 money thus credited to him. This bank was declared to 
 be the owner for value, and a want of consideration could 
 not be shown in a suit by the receiver of the bank which 
 drew the draft. 
 
 1 Hoffman v. Miller, 9 Bos. 334, and above authorities. 
 
 2 National Commercial Bank v. Miller & Co., 77 Ala. 168 ; City v. Beal, 49 
 Fed. Eep. 790 ; National Park Bank v. Levy, 24 At. Rep. 777 (R. I.). See 
 §37. 
 
 3 133 TJ. S. 433. 
 
36 BANK COLLECTIONS. § 27 
 
 25b. In another case C. left with a bank time drafts on 
 a person in another city, entering them on a deposit ticket 
 as a cash item and stamping on them the indorsement 
 "for deposit only to credit of C." The drafts -were not 
 discounted by the bank when credited to C, but entered 
 for collection only. There was evidence that prior to this 
 transaction the bank, to secure C.'s business, agreed to 
 receive checks and sight drafts and credit them as cash, 
 but the agreement did not extend to time paper, and there 
 was no proof that it was ever credited until collected. It 
 was decided that the drafts did not become the bank's 
 property, but were taken simply for collection. ' 
 
 26. When checks are sent "for collection and credit" 
 to the collecting bank without an intervening agency, the 
 indorsement is in effect the same as a general indorsement, 
 in establishing the debtor and creditor relation with re- 
 spect to the proceeds, and is equally effective in establishing 
 a lien for advances that may be made on the strength of it." 
 
 27. A note or check delivered to a bank for collection 
 by a non-depositor, or sent by one bank to another, can- 
 not be converted into a deposit solely by its own act, re- 
 gardless of the wish of the owner of the instrument. The 
 relationship of debtor and creditor cannot be established 
 without the concurrence of both parties. A bank cannot 
 by simply collecting money and crediting the amount to 
 the person from whom the paper was received, make Tirm 
 a creditor. 3 On one occasion a person left a letter of 
 credit for collection and took a receipt for it. "When 
 the collection was made," the court remarked, "there was 
 no change made in the relation of the parties. The entry 
 made in the bank-books did not change the transaction 
 to a deposit. Even if the officers of the bank had made 
 it appear by the bank-books that the transaction was a 
 
 1 Second Nat. Bank v. Cnmmings, 18 So. Rep. 115 (Tenn.). 
 
 2 National Butchers & Drovers' Bank d. Hubbell, 117 N. T. 384 ; Beal v. 
 City, 50 Fed. Eep. 647, 651. See \ 40c. 
 
 8 See Miller v. Farmers & Mechanics' Bank, 30 Md. 393, 401. 
 
§ 29 OWNERSHIP OP PAPER INDORSED IN BLANK. 37 
 
 deposit, it would not have affected the rights of the parties. 
 'The plaintiff could not be transformed into a depositor 
 without his consent. The only fact in the case tending in 
 the least degree to show any other relation than that%f 
 principal and agent is that the plaintiff did not call for 
 his money at once upon being notified that it had been 
 collected. But this delay does not authorize the finding 
 that the plaintiff regarded the bank as bearing any other 
 relation to him than that of a collector. The money was, 
 therefore, held by the bank in the nature of a trust fund." ' 
 
 28. But a different rule has been established in Illinois. 
 In Tinkham & Co. v. Heyworth, 3 it was declared that when 
 a bank makes a collection for a person ' ' it may place the 
 money in its vaults as its own and credit the customer 
 with the amount and thereby become the debtor of the 
 customer, the same as in case of an ordinary depositor, and 
 this whether the customer keeps an ordinary account with 
 the bank or not.' Such is the universal custom with 
 banks. ' ' It is undoubtedly true that when a bank collects 
 for an ordinary depositor it becomes his debtor for the 
 amount, and this rule applies to banks which make col- 
 lections for each other unless a different arrangement 
 exists between them. In some of the cases which we shall 
 hereafter notice, it had been specially agreed between col- 
 lecting banks that the money collected should not be re- 
 garded as establishing such a relation. In what capacity, 
 therefore, does a bank retain.it ? simply and purely as a 
 trustee. And this rule we think applies to collections 
 that are ordinarily made by a bank for an individual who 
 keeps no account with the institution. The Illinois doc- 
 trine, therefore, must be modified to this extent in order 
 to harmonize with the more general rule. 
 
 29. Though the collecting bank is not the debtor, unless 
 this relation has been established by a definite understand- 
 
 1 Nurse v. Satterlee, 81 Iowa, 491, 495. 
 
 2 31 111. 519, 522. 
 
 3 Marine Bank v. Chandler, 27 111. 525 ; Munn v. Birch, 25 HI. 372. 
 
38 BANK COLLECTIONS. § 30 
 
 ing or agreement, as Mr. Justice Knowlton has remarked: 
 "One'who collects commercial paper through the agency 
 of banks must be held impliedly to contract that the 
 business may be done according to their well known 
 usages, so far as to permit the money collected to be mingled 
 with funds of the collecting bank. 1 When a payment 
 is made to his agent and the money is put with the 
 money of the collecting bank, he has a right to receive a 
 corresponding sum, but he loses his right to the specific 
 fund. In the absence of directions to the contrary, the 
 collecting bank may pay it to the bank to which it should 
 regularly be remitted by setting it off against a debt due 
 from that bank and giving credit for it in the account. 
 Very likely authority to collect would authorize the re- 
 ceipt of the money from the payor before maturity, if he 
 saw fit then to pay, and remittances afterwards made, 
 whether by a payment of money or by a set-off and ad- 
 justment of accounts in the usual way, would be good 
 against the owner." ' 
 
 30. Lastly may be considered the effect of discounting 
 notes which have been left by a depositor for collection. 
 Of course, a note which is indorsed by the payee and dis- 
 counted at a bank becomes its property," and so does a 
 check which has been credited with the well understood ' 
 right that* the amount can be drawn. But otherwise,* or 
 unless advances have been made, a bank has no ownership 
 or authority over a depositor's checks. But if a note has 
 been deposited for collection and the bank has discounted 
 the same, its control over it is quite as complete as over 
 checks to which a title has been acquired by payment or 
 by making advances. The depositor, therefore, has no 
 right to demand such a note until he has paid it.* And 
 if be should pay such a note in part, and leave drafts to 
 
 1 Dorchester & Milton Bank v. New England Bank, 1 Cush. 177. 
 
 2 Freeman's Nat. Bank v. National Tube Works Co. 151 Mass. 413, 418. 
 ' Demmon v. Boylston Bank, 5 Cush. 194. 
 
 * In re. Bank of MadisoD, 5 Biss 515. 
 
§ 31 OWNERSHIP OP PAPEK INDORSED IN BLANK. 39 
 
 be collected and applied to the remainder, and these should 
 be paid after the failure of the bank to the assignee, he 
 could not recover them, for to do this would be, in effect, 
 to receive a full payment of. his debt." 
 
 31. If the drawer of a bill learns that the discounting 
 bank has transferred it for collection to a business corres- 
 pondent who has acquired a lien thereon by advancing 
 money on the same before maturity, he ought not to pay 
 the bill to the discounting bank. And if he does, the pay- 
 ment -is wrongfully made and wrongfully accepted, and 
 does not discharge the drawee from liability to the banker 
 or pe*son holding the lien unless the act is ratified. If 
 the payment be made in iron or other commodity, the dis- 
 counting bank would hold it in trust for its correspondent 
 if the latter should decide to ratify the payment. 2 But 
 the correspondent must either ratify or'disaffirm the pay- 
 ment as an entirety. He cannot, while suing the drawer, 
 maintain an action against the bank to which the money 
 was paid, or fasten a trust on the property received by it 
 in payment. 3 . 
 
 #1 In re Bank of Madison, 5 Biss. 515. 
 
 2 Williams v. Jones, 77 Ala. 294. 
 
 3 Williams v. Jones, 77 Ala. 294. If, however, the property was merely 
 received as collateral security for the debt, he might pursue it in equity and 
 at the same time maintain an action at law against the debtor. "A lien 
 may be created upon promissory notes and bills of exchange deposited for 
 collection, in such manner that although every note or bill may be made 
 payable, and may be paid for ' account of ' the depositor, still that lien may 
 entitle the bank to require the payment, and make the application of the 
 moneys received for account of the depositor, so as to discharge the lien." 
 Woodruff, J., Nelson v. Wellington, 5 Bos. 178, 189. 
 
40 
 
 BANK COLLECTIONS. 
 
 CHAPTEE II. 
 
 OWNERSHIP OF PAPEE SPECIALLY INDORSED AND DE- 
 POSITED. 
 
 33. 
 
 34 
 
 32. A special indorsement clearly in- 
 dicates an intention to retain 
 ownership. . 
 32a. Remarks of Clopton and 
 Knowlton, J.J. 
 There is no consideration for 
 
 such an indorsement. 
 Classification of instruments spe- 
 cially indorsed into (1) those 
 which pass through interme- 
 diate agencies, and (2) those 
 which do not. 
 35. The holder of paper acquired by 
 a general indorsement can re- 
 tain his rights by a subse- 
 quent special indorsement. 
 Are the rights of a depositor who 
 has indorsed in blank pre- 
 served by a subsequent special 
 indorsement by the depository 
 bank? 
 Effect of crediting paper specially 
 indorsed as cash. It can be 
 done only in the second class 
 of instruments, or in the first 
 class only to the first indorser 
 to whom it is credited. 
 No rule or practice affects special 
 
 36. 
 
 37. 
 
 39. The test of ownership is, can it 
 
 be recalled. 
 
 40. Effect of different kinds of spe- 
 
 cial indorsement. 
 
 40a. Indorsement " for collection 
 and remittance." • 
 
 406. Indorsement " for collection 
 and credit." 
 
 40c. Effect of this form of indorse- 
 ment. 
 
 40d\ Indorsement "for collection 
 on account." 
 
 40e. National Butchers & Drov- 
 ers' Bank v. Hubbell. 
 
 40/. Ayres v. Farmers & Mer- 
 • chants' Bank. 
 
 40^, A. Franklin Co. Nat. Bank v. 
 Beal. 
 
 40*. Sweeny v. Easter. 
 
 41. Effect of a general indorsement 
 
 accompanied with a letter 
 "for collection and credit." 
 
 42. The indorsee "for collection" 
 
 holds the paper as trustee for 
 the sender. 
 
 43. Authority of the cashier to in- 
 
 dorse. 
 
 44. A bank is not liable as indorser 
 
 on a note indorsed for collec- 
 tion. 
 
 45. But a bank is a party to paper 
 
 thus indorsed for notification 
 if not paid 
 
 46. A note indorsed to the cashier is 
 
 regarded as indorsed to the 
 bank. 
 
OWNERSHIP OF PAPER SPECIALLY INDORSED. 
 
 41 
 
 47. An indorsement for collection 
 
 destroys the negotiability of 
 the paper. 
 
 48. Nor can parol evidence be admit- 
 
 ted to explain it. 
 
 49. And no one can acquire any title 
 
 to it or proceed against the 
 party indorsing. 
 
 50. Nor can a note specially indorsed 
 
 be sold by the indorsee. 
 
 51. The real owner can sue for the 
 
 proceeds. 
 
 51a. Whether the collecting bank 
 is a sub-agent or not. 
 
 516. Central Railroad v. First Na- 
 tional Bank. 
 
 ale. Blaine v. Bourne. 
 
 Sid. Union Stock Yards National 
 Bank v. Gillespie. 
 
 51c. Corn Exchange Bank v. 
 Farmers' National Bank. 
 
 52. The right of a collecting bank to 
 
 sue. 
 52a. Griffith v. Conway. 
 
 53. Demand before suit against the 
 
 collecting bank when the claim 
 has been sold. 
 
 54. When is the collecting bank liable 
 
 to the original sender after 
 the proceeds have been trans- 
 mitted to an intermediary. 
 54a Review of the Hamilton Na- 
 tional Bank case. 
 546. Further consideration of the 
 
 subject. 
 54c. Drovers' National Bank v. 
 O'Hare. 
 
 55. When a check for collection can 
 
 be garnished. 
 
 56. Duration of the contract. The 
 
 owner can control his checks 
 until their collection is com- 
 pleted. 
 56a. Reeves v. State Bank re- 
 viewed. 
 
 566. The subject further consid- 
 ered. 
 
 57. Effect of a contract contemplat- 
 
 ing the retention of the pro- 
 ceeds by the collecting bank 
 for a short period. 
 
 58. Effect of insolvency before col- 
 
 lection, or of completing the 
 collection afterwards. 
 
 59. If an unmatured draft has been 
 
 credited to the sender, either 
 it or the proceeds can be re- 
 covered. 
 59a. Virginia case. 
 
 60. When the proceeds have been 
 
 collected their ownership de- 
 pends on whether the collect- 
 ing bank is a debtor or agent 
 of the sender. A creditor can- 
 not recover the specific or sub- 
 stituted proceeds, a benefi- 
 ciary can. 
 
 61. Review of cases deciding the ex- 
 
 istence of a trust or debtor re- 
 lation. Arnot v. Bingham. 
 
 61a. Frank v. Bingham. 
 
 616. People v. Merchants & Me- 
 chanics' Bank. 
 
 61c. Commercial National Bank 
 u. Armstrong. 
 
 61(2. Merchants & Farmers' Bank 
 . v. Austin. 
 
 61e. State v. Southern Bank. 
 
 61/. Kinney v. Paine. 
 Maxwell's case. 
 
 61g. Ryan v. Paine. 
 
 61A. First National Bank v. Arm- 
 strong. 
 
 61i. Manufacturers' National 
 Bank v. Continental Bank. 
 
 61/. Continental National Bank 
 v, Weems. 
 
 61k. Harrison National Bank v. 
 Ellicott. 
 
 612. Armstrong v. National Bank. 
 
42 
 
 BANK COLLECTIONS. 
 
 §32 
 
 61m. Atkinson v. Stafford. 
 61r>. Edsonu. Angell. 
 
 62. When the trust relation exists 
 
 how far can the owner go to 
 recover his property. Eemarks 
 by Jackson, J. 
 
 63. Rules for identifying it. 
 
 63a. Formerly only the specific 
 property could be recov- 
 ered. 
 
 636 The rule now covers substi- 
 tuted property. 
 
 63c. First National Bank v. Arm- 
 strong. 
 
 63d. Thompson's Appeal. 
 
 63e. When a confusion exists the 
 entire mass is charged with 
 the trust. 
 
 63/. When the confusion is with 
 . the trustee's private prop- 
 erty the whole is charged 
 with the trust. 
 
 63g. When the trust property has 
 
 63A. 
 
 63i. 
 
 63J. 
 
 63fc. 
 632. 
 64. 
 
 65. 
 
 been paid out or abstracted 
 different rules prevail, 
 whether the property ex- 
 isting is charged with the 
 trust fund or not. Differ- 
 ent principles that apply 
 in Texas and Wisconsin. 
 In some states the trust fund 
 still exists under these 
 conditions. 
 Thompsons). Gloucester City 
 
 Savings Institution. 
 First National Bank v. Hum- 
 mel. 
 Arnot v. Bingham. 
 Discussion of the rules. 
 When collections are made for a 
 non-depositor the bank is a 
 trustee and not a debtor in 
 keeping the deposit. 
 Ownership is retained in all cases 
 until the paper is received by 
 the indorsee. 
 
 32. When an indorsement is special, usually in the 
 words "for collection," this is regarded as a clear indica- 
 tion that the holder intends to preserve his ownership, 
 and to employ the bank as an agent for transmission or 
 collection. 1 By such an indorsement he gives notice to 
 
 1 Sweeny v. Easter, 1 Wall. 166 ; White v. Nat. Bank, 102 TJ. S. 658 ; First 
 Nat. Bank v. Beno Co. Bank, 3 Fed. Eep. 257 ; Balbach v. Frelinghuysen, 
 15 Fed. Eep. 675 ; Bank v. First Nat. Bank, 19 Fed. Eep. 301 ; First Na- 
 tional Bank of Montgomery v. Armstrong, 36 Fed. Rep. 59 ; Winters' Bank v. 
 Armstrong, 37 Fed. Eep. 508; Fifth Nat. Bank v. Armstrong, -40 Fed. Rep. 46; 
 Commercial Nat. Bank v. Armstrong, 39 Fed. Eep. 684 ; Commercial Nat. 
 Bank v. Hamilton Nat. Bank, 42 Fed. Rep. 880 ; First Nat. Bank v. Arm- 
 strong, 42 Fed. Rep. 193 ; Levi v. Bank, 5 Dill. 104, 107 ; Lee &Co. v. Chilri- 
 cothe Branch, 1 Bond 380 ; Armour Brothers Bk'g Co. v. Riley Co. Bank, 30 
 Kan. 163 ; Blaine v. Bourne, 11 R. I. 119 ; Merchants' Nat. Bank v. Han- 
 son, 33 Minn. 40; Cecil Bank v. Farmers' Bank, 22 Md. 148; Hoffman v. First 
 Nat. Bank, 46 N. J. Law, 604 ; First Nat. Bank v. First Nat. Bank, 76 Incf. 
 561 ; Freeman v. Exchange Bank, 87 Ga. 45 ; Central Railroad v. First Nat. 
 Bank, 73Ga.383 ; Carroll v. Bank, 30 W.Va. 518, 531; City Bank v. Weiss, 67 
 
§ 32« OWNERSHIP OF PAPEE SPECIALLY INDORSED. 43 
 
 all parties through, whose hands the instrument may pass, 
 that he retains ownership and control and also of the pro- 
 ceeds. Said the United States Supreme Court in inter- 
 preting these words : l " The language of the indorsement 
 is without ambiguity, and needs no explanation, either by 
 parol proof or resort to usage. The plain meaning of it is 
 that the acceptor of the draft is to pay it to the indorsee 
 for the use of the indorser. The indorsee is to receive it 
 on account of the indorser. It does not purport to trans- 
 fer the title of the paper, or the ownership of the money 
 when received. Both these remain by the reasonable and , 
 almost necessary meaning of the language in the indorser. ' ' 
 Nor is the custom of thus indorsing of recent origin ; it 
 was described as usual in Snee v. Prescot," in 1743, and for ' 
 the purpose of preventing the filling the indorsement in 
 such a manner as to transfer the interest in the bill. Never- 
 theless, banks to which checks have been specially in- 
 dorsed have often credited them, and attempted to hold 
 the proceeds to secure themselves against loss for an in- 
 debtedness due from the immediate indorser." 
 
 32a. "In such case," says Mr. Justjpe Clopton, "an 
 indorsement of the. check, for the special purpose of col- 
 lection, is not an indorsement animo indorsandi, and 
 
 Texas 331 ; Claflln v. Wilson, 51 la. 15 ; Overton v. Tyler, 3 Pa. 348 ; East- 
 Haddam Bank v. Scovil, 12 Conn. 314 ; Fabens v. Mercantile Bank, 23 Pick. 
 330 ; Manufacturers' Nat. Bank v. Continental Bank, 148 Mass. 553 ; Van 
 Namee v. Bank, 8 Barb. 312 ; West v. American Exchange Bank, 44 Barb. 
 175 ; Arnot v. Bingham, 55 Hun 553 . People v. Bank, 39 Hun 187 ; Arnold & 
 Co. v. Clark, 1 Sandf. 491 ; Hoffman v. Miller, 9 Bos. 334 ; Montgomery Co. 
 Bank v. Albany City Bank, 7 N. Y. 459 ; McBride v. Farmers' Bank, 26 N. 
 Y. 450, 455 ; Dickerson v. Wason, 47 N. Y. 439 ; Merchants' Bank v. Hall, 
 83 N. Y. 338, 345 ; Commercial Bank v. Marine Bank, 3 Keyes 337 ; Scott 
 v. Ocean Bank, 23 N. Y. 289 ; He parte Pease, 1 Rose 232 ; 'Ex parte Thomp- 
 son, 1 Mont. & Mac. 102 ; Snee v. Prescot, 1 Atk. 246 ; Ancher v. Bank, 2 
 Doug. 637 ; Edie v. East India Co., 2 Burr. 1216 ; Sigourney v. Lloyd, 8 B. 
 & Cres. 622 ; Jones v. Peppercorn, 28 L. J. Ch. 158. 
 
 « 
 
 1 White v. National Bank. 102 U. S. 658. 
 '1 Atk. 246, 249. 
 3 §23. 
 
44 BANK COLLECTIONS. § 33 
 
 does not pass the title of the payee. In the absence of a 
 special agreement, when a check is deposited, it is taken 
 generally for collection by the bank as the agent of the 
 depositor, and the bank does not owe the amount until 
 its collection is accomplished. It may be that if it passed 
 to the credit of the depositor, and mingled with the gen- 
 eral funds of the bank, it is, prima facie, a payment on 
 deposit ; but the bank may permit, as matter of favor and 
 convenience, checks to be drawn against it before payment; 
 the depositor in the event of non-payment, being respon- 
 . sible for the sums drawn — not by reason of his indorse- 
 ment, the check not having ceased to be his property, 
 but for money paid." ' And in a more recent case, in 
 which the paper in controversy was specially indorsed, 
 Mr. Justice Knowlton said : a "It has so long been" held 
 by the courts that an indorsement of this kind is restric- 
 tive, protecting the rights of the owner, that officers of 
 banks must be presumed to have well understood the law, 
 and when they have honored overdrafts drawn by other 
 banks which had sent other drafts for collection, must have 
 done it trusting in part to the financial soundness of their 
 correspondent, and in part tp the probability that the drafts 
 would be paid, and not to a supposed legal right to con- 
 trol Ae drafts against the owner." 3 
 
 33. A good reason for regarding the holder of a note or 
 check by special indorsement differently from the holder 
 by a general indorsement, is that no consideration is paid 
 therefor. The law implies none, and none in fact is paid. 
 Says Mr. Justice Potter:* "The indorsee is rather an 
 agent of the indorser with power of substitution, and the 
 
 1 National Com. Bank v. Miller, 77 Ala. 168, 173. 
 
 2 Freeman's Nat. Bank v. National Tube Works, 151 Mass. 413, 418. 
 
 3 Eice v. Stearns, 3 Mass. 225, 227 ; Wilson v. Holmes, 5 Mass. 543 
 Treuttel v. Barandon, 8 Taunt. 100 ; Sigourney v. Lloyd, 8 Barn. & Cres, 
 622 ; Leary v. Blanchard, 48 Me. 269 ; Sweeny v. Easter, 1 Wall. 166 
 Bank v. Triplett, 1 Pet. 25 ; Lawrence v. Stonington Bank, 6 Conn. 521 
 Bank of the Metropolis v. New England Bank, 1 How. 234, and 6 How. 212, 
 
 4 Blaine v. Bourne, 11 K. I. 119, 122. 
 
§ 34 OWNERSHIP OF PAPER SPECIALLY INDORSED. 45 
 
 bill is still in the possession of the indorser by his agent.' 
 The very mode of indorsement in this case shows that it 
 is not a case of ordinary indorsement, and that no consid- 
 eration has been paid for it. a The bill must be taken by 
 the holder subject to the trust; and, says Judge Story,' 
 if he voluntarily consents to or aids in any other appro- 
 priation he is responsible ; and, says Judge Byles, 4 he 
 holds the bill or money as trustee for the restraining 
 party, and is liable to the party making the restriction. 
 The words are notice that the restricted indorsee has no 
 no property in the bill ; that he is a mere trustee, and 
 that he can appoint no sub-agent except for the purpose 
 of holding the bill or money on the same'trust, and if the 
 holder pays it lo the intermediate agent, he becomes re- 
 sponsible for its misapplication. In the case of Sigourney 
 v. Lloyd, 6 it was contended that an indorsement, 'pay to 
 B. for my use,' was ^ mere direction to B. as to the ap- 
 plication of the money, but Lord Tenterden said that if it 
 meant no more the words were useless, as he would be so 
 liable without those words.' " ' 
 
 34. The instrument specially indorsed may (1) pass 
 through several agencies after the first indorsement be- 
 
 , 1 Ex parte Sargeant, 1 Rose 153. 
 
 2 Edie v. East India Co., 1 W. Black, 295. * 
 
 8 Agency, \ 211. 
 
 1 On Bills, 157. 
 
 6 8 Barn. & Ores. 622. 
 
 6 " As a general rule an indorsement of a negotiable bill which purports ' 
 to pass the title to the bill to the indorsee, imports a consideration, and the 
 burden of proving want of consideration rests upon the party alleging it. 
 The restrictive indorsements which are held to negative the presumption of 
 & consideration are such as indicate that they are not intended to pass the 
 title, but merely to enable the indorsee to collect for the benefit of the in- 
 dorser, such as indorsements .' for collection ' or others showing that the 
 indorser is. entitled to the proceeds. These create merely an agency and 
 negative the presumption of the transfer of the bill to the indorsee for a 
 valuable consideration. But where the indorsement purports to pass the 
 title to the bill therein from the indorser, and divest him of all beneficial 
 interest, a consideration for such transfer is presumed. ' ' Rappallo, J. , Hook 
 ». Pratt, 78 N. Y. 371, 374. 
 
46 BANK COLLECTIONS. § 36 
 
 fore reaching the final or collecting agency ; or (2) may be 
 collected without an intermediary. In the first class of 
 cases the rights of the owner, who has thus indorsed his 
 paper, are not affected by the indorsements of subsequent 
 agents ; in no case can his rights be impaired by their 
 conduct. Thus, in Freeman v. Exchange Bank, 1 a bill of 
 exchange was drawn at Kansas City by S. A. Brown & 
 Co., payable at sight, to their order. It was indorsed by 
 them "for deposit to the credit of S. A. Brown & Co.," 
 and deposited in a bank in that place, which indorsed the 
 bill in these terms: " Pay Exchange Bank, or order, for 
 collection account of National .Bank of Kansas City," M. 
 Andmon, cashier, and sent it to the Exchange • Bank of 
 Macon, Gra., which paid it. The court declared that the 
 legal import of the first indorsement, that of S. A. Brown 
 & Co., was to retain the ownership of the bill, which was 
 not affected by that of the cashier pf the National Bank 
 of Kansas City. The court continued : " There might be 
 other terms in which the full indorsement, which that 
 bank would be authorized to supply, could be expressed; 
 but, on the state of facts before us, that bank would have 
 no authority to insert any' terms which would vary sub- 
 stantially the legal* import of the original indorsement, or 
 render it other than a restrictive indorsement confining 
 ownership of the bill and its proceeds to S. A. Brown & 
 Co." * But in the second class of cases the owner's rights 
 may be more restricted as will be hereafter seen. 
 
 35. Though the intermediate holder of ah instrument, 
 specially indorsed to himself, cannot enlaige the authority 
 of a subsequent holder by a general indorsement ; an. in- 
 termediate holder, by virtue of a general indorsement to 
 himself, may retain his dominion over it by specially in- 
 dorsing the same.' 
 
 36. Again, if a depositor indorses in blank, and the de- 
 
 1 87 6a. 45. 
 
 * Lee & Co. v. ChUlicothe Branch, 1 Bond 387. 
 
 • See U 19, 36. 
 
§ 37 OWNERSHIP OF PAPER SPECIALLY INDORSED. 47 
 
 pository bank afterwards writes a restrictive indorsement, 
 does this preserve the -depositor's right to the proceeds? 
 While the effect of the blank indorsement is to transfer 
 to the collecting bank presumptively a title which can be 
 transferred to others, 1 this presumption is not conclusive 
 of a transfer from the depositor to the depository and 
 must yield to the facts. If it has made no transfer only 
 by a special indorsement for collection, in some cases it 
 has been maintained that this clearly discloses an agency, 
 and that the principal is entitled to the benefit of the re- 
 stricted indorsement made by the agent. 2 This subject 
 was fully considered in the previous chapter. 3 
 
 37. It has been contended that the ownership of checks 
 or other instruments specially indorsed, pass to the col- 
 lecting bank whenever they are credited as cash; that 
 such acts show an intention to t^jansfer the ownership 
 whenever they are known, and especially whenever the 
 collecting bank has made advances on them. 4 This con- 
 tention, however, applies only to the second class of in- 
 struments, or to the first indorser, for the reason already 
 given, that an intermediary agent cannot deprive the first 
 special indorser of any rights by agreements or practices 
 that are inconsistent with his indorsement. And in the 
 second class of cases such crediting need not transfer the 
 ownership because the collecting bank, even though not 
 the owner, has a lien on the instruments collected for ad- 
 vances made thereon.' Furthermore, in most of the con- 
 tracts, in which the collecting bank credits the instru- 
 ments sent as cash and permits the sender to draw against 
 them, there is a stipulation to the effect that the crediting 
 
 1 Cody o. City Nat. Bank, 55 Mich. 379; Hackett o. Reynolds, 114 Pa. 
 328. See \\ 19, 20. 
 
 2 Freeman's Nat. Bank v. National Tube Works Co., 151 Mass. 413; Arm- 
 strong v. National Bank, 14 S. W. Rep. 411, (Ky.). 
 
 3 See U 19. 20. . 
 
 4 First Nat. Bank v. Armstrong, 39 Fed. Rep. 231. 
 
 6 St. Louis & San Francisco R. Co. v. Johnston, 133 XI. S. 566. 
 
48 BANK COLLECTIONS. § 37 
 
 is "subject to payment." In other words, if they are not 
 paid, the collecting bank charges them back, and cases 
 are constantly occurring in which this is done. 1 In the 
 case of the First National Bank «. Armstrong,'' the checks 
 were indorsed for collection and sent to the Fidelity Bank 
 to be collected. They were credited as cash on their re- 
 ception, and it was proved that by agreement the sending 
 bank had the right to draw on them as cash. The judge, 
 therefore, decided that they belonged to the" Fidelity 
 Bank, and if so, of course, the proceeds could be retained 
 by the receiver. "Suppose," the judge remarked, "that 
 the Fidelity National Bank had not failed, upon the col- 
 lection of the drafts, to whom would the proceeds belong ? 
 Could a creditor of the Elkhart [or sending] Bank have 
 reached them by process in attachment in the hands of 
 the collecting bank Ijef ore they were transmitted to the 
 Fidelity Bank? Clearly not. The Fidelity National Bank 
 had given the Elkhart Bank'aredit for the amount of the 
 drafts as cash, and, if the drafts were paid, that ended the 
 transaction as between the Fidelity Bank and the Elkhart 
 Bank. No other entry would be necessary in the account 
 between the two banks, and I am not able to see that the 
 indorsement 'for collection,' under these circumstances, af- 
 fected the result, or reserved to the Elkhart any title to 
 the proceeds to the drafts." But when the crediting is 
 provisional and in anticipation of payment, with the right 
 of cancellation in the event of a failure to pay, no infer- 
 ence can be drawn from this act of the existence of the 
 
 1 " It is not unusual for bankers to credit tbeir correspondents or custom- 
 ers with the amount of paper of a certain character at the time of its receipt 
 for collection, but such credits are provisional only, being made in anticipa- 
 tion that the paper will be promptly paid, and with the right to cancel the 
 credit if the paper is dishonored. ' ' Billon, J. , Levi v. National Bank, 5 Dill. 
 104, 111. The entries of drafts and other instruments received by banks 
 for deposit, must be construed with reference to their usages, and they are 
 not liable for the amount at all events even if they are credited on their re- 
 ception. Moors v. Goddard, 147 Mass. 287, 393. 
 
 2 39 Fed. Eep. 231, 233. 
 
§ 37 OWNERSHIP OF PAPER SPECIALLY INDORSED. 49 
 
 debtor and creditor relation.' Said Mr. Chief Justice 
 Paxson, in a case involving the question:" "The mere 
 fact that the collecting bank credited the [depositor] 'with 
 the check as cash did not alter that relation. This is done 
 daily — indeed, it is the almost universal usage to credit 
 such collections as cash, unless the customer making such 
 deposit is in weak credit. If the check is unpaid it is 
 charged off again, and the unpaid check returned to the 
 depositor."' In truth, "the title passes," says Mr. 
 Justice Vann, "only by a contract to that effect, to be 
 either expressly proved or inferred from an unequivocal 
 course of dealings." * In one of the numerous cases origi- 
 nating in the failure of the Fidelity National Bank, in 
 which the nature of such a restrictive indorsement was 
 under consideration, 6 Judge Thayer remarked* : "It must 
 be assumed that that form of indorsement was adopted 
 for a well-defined purpose. It may well be doubted 
 whether the legal effect of that form jot indorsement can 
 be controlled or modified by proof of a usage existing to 
 credit such items as cash, and permit the credit so given 
 to be drawn against. ' ' And in Balbach v. Frelinghuysen, ' 
 Judge Mxon, in reply to the contention, that the indorse- 
 ment of the check to the bank, and its credit on its books 
 
 » 
 
 1 Levi v. National Bank, 5 Dill. 104, 111; First Nat. Bank of Trinidad v. 
 First Nat. Bank of Denver, 4 Dill. 290; Balbach u. Frelinghuysen, 15 Fed. 
 Bep. 675; Fifth Nat. Bank v. Armstrong, 40 Fed. Bep. 46; Manufacturers' 
 Nat. Bank v. Continental Bank, 148 Mass. 553. 
 
 2 Hazlett v. Commercial Nat. Bank, 132 Pa. 118. 
 
 3 First Nat. Bank v. Payne & Co.'s Assignees, 85 Va. 890, 891. See re- 
 marks of Putman, J., inTJeal v. City, 50 Fed. Bep. 647, 650; Moors v. God- 
 dard, 147 Mass. 287, 292. 
 
 4 National Park Bank*. Seaboard Bank, 114 N. Y. 28; Scott v. Ocean Bank,. 
 23 N. Y. 289; National Butchers & Drovers' Rink i . Hubbell, 117 N. Y. 384; 
 Arnot v. Bingham, 55 Hun 553; First Nat. Banku Armstrong, 42 Fed. Bep. 
 193; First Nat. Bank v. First Nat. Bank, 4 Dill. 290; Levi«. National Bank, 
 5 Dill. 104; Manufacturers' Nat. Bank v. Continental Bank, 148 Mass. 553. 
 
 6 Fifth Nat. Bank v. Armstrong, 40 Fed. Bep. 46, 49. 
 6 .15 Fed. Bep. 675, 683. 
 
 4 B. 
 
50 BANK COLLECTIONS. § 39 
 
 and on the pass-book of the depositor, were conclusive 
 evidence of a special contract that the check should at 
 once become the property of the bank for value, remarked: 
 (1) "That in all cases where credits are thus made, banks 
 claim and always exercise the right of charging checks 
 returned to them for non-payment to the account of the 
 depositor, which could not be done if the check had be- 
 come the property of the bank, and did not remain the 
 property of the depositor until collected! (2) The practice, 
 which has grown up among banks, to credit such deposits 
 at once to the account of the depositor, and to allow him 
 to draw against them before the collection has been made, 
 is reckoned by the ablest text writers a mere gratuitous 
 privilege, which does not grow into a binding legal usage." 
 Such is the clear inference to be derived from these in- 
 dorsements alone ; but other facts, as in the Elkhart Bank 
 case,' may not less clearly prove a transfer of the title of 
 the paper sent to the' collecting bank, and whenever this 
 proof is adduced, the inferential conclusion must yield to 
 the other. 
 
 38. But when checks are thus specially indorsed for 
 collection their title nevertheless passes to the collecting 
 bank whenever by agreement they are credited to the 
 sender on their'reception and he is entitled to draw for the 
 amount. There is no conflict between this rule and the 
 one just mentioned, for this is simply a legal sanction to 
 the agreement by the parties. 1 
 
 39. Is not the proper test to apply to determine a 
 change of ownership the right to recall them at any time 
 before collection ? If they have passed so far from the 
 control of the depositor that he cannot reclaim them, 
 either at his own request, or by repaying advances that 
 
 1 39 Fed. Rep. 231. 
 
 2 Ayres v. Farmers & Merchants' Bank, 79 Mo. 421 ; Bullene v. Coates, 79 
 Mo. 426 ; Clark v. Merchants' Bank. 2 N. Y. 380 ; Ex parte Sargeant, 1 Rose 
 153 ; Ex parte Thompson, 1 Mont. & Mac. 102 ; First Nat. Bank v. Armstrong, 
 39 Fed. Rep. 231. See ?40. 
 
§ 40 OWNERSHIP OP PAPEE SPECIALLY INDOESED. 51 
 
 may have been made to him with the expectation of reim- 
 bursement from this source, then indeed may the owner- 
 ship be regarded as changed, otherwise it has not been. 1 
 In Balbach v. Frelinghuysen,' Judge Nixon remarked 
 that he saw no reason, in principle, which should not al- 
 low depositors to recall their checks which had been de- 
 posited for collection. They were their property until 
 collected. If the bank had continued business, and the 
 check had been returned unpaid, it would have been 
 charged up to their account and handed back to them. 
 In the case of the Fifth National Bank ». Armstrong,* 
 Judge Thayer remarked: "If paper is indorsed 'For 
 collection for account of ' the depositor and then depos- 
 ited and credit given, * * the mere fact that paper 
 thus indorsed is credited by a bank to the depositor as 
 cash, and the privilege accorded to him of drawing against 
 the credit, may not, as it seems, be sufficient to vest the 
 bank with title to such paper. In some cases it appears 
 to be held that such credits are merely provisional, that is, 
 subject to revocation, until the paper is actually collected 
 by the receiving bank, or until the credit has been drawn 
 against by the depositor, and that up to such time the title 
 to the paper is in the depositor, and the bank is a mere 
 agent of the depositor for collection." 
 
 40. The indorsement "for collection" is often varied 
 by the use of additional words, and the effect of these 
 will next be considered. Before doing so, however, it 
 may be remarked that the import of the form of indorse- 
 ment just mentioned is well understood. By this the in- 
 dorser intends to retain his interest in the paper and its 
 proceeds, and only a trust relation is established thereby 
 between him and the collecting bank. Being only a 
 
 1 See Metropolitan Nat. Bank v. Loyd, 90 N. Y. 530 ; National Butchers 
 & Drovers' Bank v. Hubbell, 117 N. Y. 384, 394. 
 2 15 Fed. Eep. 675, 684. 
 3 40 Fed. Eep, 46, 49. 
 
52 BANK COLLECTIONS. § 40<? 
 
 trustee, the collecting bank must remit the proceeds when 
 they are collected. 
 
 40a. The first variation of this form of indorsement is 
 that "for collection and remittance." This simply is an 
 express statement of a duty which is as clearly implied 
 in an indorsement, "for collection." It clearly negatives 
 an intention to establish the debtor and creditor relation. 
 The court of appeals of Kentucky has well said that 
 " whatever other difference in meaning of the two phrases 
 there may be, both convey the idea that the party giving 
 is owner, and the one receiving instruction is agent."' 
 Indeed, these words are intended to convey as clearly as 
 possible that the sending bank seeks to retain the owner- 
 ship of the paper sent and the proceeds. The words are 
 intentionally used to express this purpose. 
 
 405. The next form of special indorsement is, " for col- 
 lection and credit." It generally, though not always, 
 implies that mutual accounts exist between the indorser 
 and the indorsee,, and that, instead of remitting the spe- 
 cific sum collected, credit is to be given for the amount 
 with the expectation that it will be discharged by a simi- 
 lar service performed by the other party. The object of 
 thus crediting collections is to lessen the number and 
 amount of remittances by sending the balances due be- 
 tween the collecting parties at fixed intervals. This form 
 of indorsement is, therefore, used by collecting agents be- 
 tween whom mutual accounts exist, though doubtless used 
 by others without knowing or understanding its true sig- 
 nificance, and by whom it is regarded as similar to those 
 "for collection" and "for collection and remittance." 
 It is also employed when collections are to be made and 
 credited and remitted at specific dates, weekly or other 
 periods.' 
 
 40c. The effect of this indorsement generally is quite 
 
 'Armstrong v. National Bank, 14 So. W. Eep. 411. See \ 61J for a descrip- 
 tion of the case. 
 ' Commercial Nat. Bank i>. Armstrong, 39 Fed. Eep. 684. 
 
§ 40C OWNERSHIP OF PAPER SPECIALLY INDORSED. 53 
 
 different from the words "for collection" in' several re- 
 gards. (1) The crediting is to be given only after the 
 proceeds are collected. 1 (2) Or if given or expected as 
 soon as the instrument is received, it is provisional or con- 
 ditional, and is to be charged back should the collection 
 not be made." (3) The crediting only relates to the im- 
 mediate parties thereto and to no others. An indorser 
 cannot by such indorsement divert or retain the proceeds 
 of the paper which has come into his possession for col- 
 lection. The indorsements thereon are notices to all hold- 
 ers of the titles of the respective parties ; any attempt 
 therefore to create a lien or hold the proceeds of paper 
 that has been indorsed for collection by a subsequent di- 
 rection to credit the same to a later party will not justify 
 the collector in withholding them from the original holder. 
 ' If, therefore, a collecting bank should credit paper col- 
 lected by it on the direction of the last indorser to collect 
 and credit the same, containing another form of special 
 indorsement by the first indorser, or by any indorser prior 
 to the last, it could be compelled to respond to a prior 
 party, notwithstanding such crediting to the immediate 
 indorser. No crediting can be substituted for remitting 
 without the risk of remitting afterward if the original 
 sender fails to receive his money. In other words, the 
 rights of prior parties expressed or implied by their in- 
 dorsements cannot be disregarded by the collecting bank 
 with safety. (4) But between the parties to such an in- 
 strument, when the rights , of no others are affected, an 
 indorsement " for collection and credit " maybe effective. 
 Between them the sender retains his ownership until the 
 collection is completed,' but when this has been done, the 
 indorsement as effectually establishes a right to the pro- 
 
 1 Levi v. National Bank, 5 Dill. 104 ; Armstrong v. National Bank, 14 S. 
 W. Rep. 411 ; National Butchers and Drovers' Bank v. Hubbell, 117 N. Y. 
 384, 393 ; First Nat. Bank v. Bank, 33 Fed. Rep. 408, 412.' 
 
 2 See i 26. 
 
 3 Levi v. National Bank, 5 Dill. 104 ; First Nat. Bank v. Bank, 33 Fed. 
 Rep. 408, 412. 
 
54 BANK COLLECTIONS. § 40g 
 
 ceeds as a general indorsement. Both have essentially the 
 same effect when the paper passes through no intermediaries 
 and the sending and collecting banks are the only parties. 1 
 
 40d. An indorsement " for collection on account" has 
 the same significance as an indorsement " for collection 
 and credit." 2 In Arnot v. Bingham, 3 in which the check 
 in controversy was indorsed " for collection, account of" 
 the sending bank, Mr. Justice Martin said: "Title to 
 commercial paper received for collection by a bank and 
 forwarded to its correspondent in the usual course of busi- 
 ness, without an express agreement in reference thereto, 
 does not vest in such correspondent, even if he has re- 
 mitted on general account in anticipation of collection." 
 In another case involving the construction of an indorse- 
 ment of a similar form, Mr. Justice Brewer remarked : 
 " that it operated to transfer the draft to the plaintiff only 
 as agent for purposes of collection cannot be doubted." 4 
 
 40e. In National Butchers & Drovers' Bank v. Hubbell,' 
 the checks forming the subject of controversy were in- 
 dorsed for collection and transmitted with a letter stating 
 that they were sent "for collection and credit." In de- 
 livering the opinion of the court, Mr. Justice Peckham 
 said: "The indorsement upon each piece of paper was 
 for collection simply, and by virtue of that indorsement 
 no title passed to the firm, but, on the contrary, it became 
 simply the agent of the plaintiff to present the paper, de- 
 mand payment thereof and remit to it. Under such cir- 
 cumstances the title to the paper remained in the party 
 sending it." The letter accompanying the inclosures of 
 
 1 Beal v. City, 50 Fed. Eep. 647. 
 
 z Armstrong v. National Bank, 14 So. W. Eep. 411 ; Armour Brothers 
 Banking Co. v. Eiley Co. Bank, 30 Kan. 163. 
 
 s 53 Hun 553, 556. 
 
 * Armour Brothers Banking Co. v. Eiley Co. Bank, 30 Kan. 163, 165. See 
 also Minier v. Second Nat. Bank, 13 N. Y. State Eep. 222 : Williams v. Jones, 
 77 Ala. 294. 
 
 6 117 N. Y. 384, 393. 
 
 6 Montgomery Co. Bank v. Albany City Bank, 7 N. Y. 459 ; Dickeraon v. 
 Wason, 47 Id. 439 ; White v. National Bank, 102 TJ. S. 658. 
 
§ 40/ OWNERSHIP OF PAPER SPECIALLY INDORSED. 55 
 
 paper amounted simply to a direction to credit after the 
 collection was made ; and up to the time that the funds 
 were actually received by the firm, it certainly would 
 make no alteration in the law relative to the indorsement 
 for collection only. Nor does the finding of the learned 
 justice at special term as to the custom pursued between 
 the parties alter the law in regard to the title to the paper 
 before the f unds arising from the payment thereof were 
 actually received by the firm. The finding shows that the 
 credit was a provisional one only. It was a mere matter 
 of book-keeping. It would seem to have been more in the 
 form of a memorandum of the different pieces of paper 
 received ; because if any were not paid, such as went to 
 protest were at once charged back upon the books of the 
 firm against the plaintiff, and returned to it with the ex- 
 penses of protest charged to it. The firm never became 
 absolutely responsible to the plaintiff for the amount of 
 these collections until the collections were actually made 
 and the proceeds received by them." • 
 
 40/. In Ayres v. Farmers & Merchants' Bank, 1 Ayres 
 sent to the Mastin Bank a check drawn on the Farmers 
 & Merchants' Bank which was thus indorsed: "Pay J. 
 Gr. Mastin, cashier, for collection and account of" Ayres. 
 The check was enclosed in a letter which stated that it 
 was sent "for collection and credit." An agreement ex- 
 isted between that bank and Ayres whereby credit was 
 given to him " on the day of receipt for cash items and 
 checks," and so it gave credit for this check, and Ayres 
 drew against it on the day of mailing the same. The 
 Mastin Bank sent the check to the Farmers & Merchants' 
 Bank, which were its correspondents, and which charged 
 the same to the drawer, who had sufficient funds, and 
 credited it to the Mastin Bank. In the meantime this 
 bank had failed, but the Farmers & Merchants' bank did 
 not know this. The title to the check however had vested 
 
 1 79 Mo. 421. 
 
56 BANK COLLECTIONS § 40^ 
 
 in the Mastin Bank, and .Ayres could not recover the 
 amount of the Farmers & Merchants' Bank. 
 
 40g. In Franklin County National Bank v. Beal, 1 a 
 note was sent by the plaintiff to the Maverick National 
 Bank of Boston " for collection and credit." For several 
 years the Maverick bank had received checks, drafts and 
 notes from the other, crediting the checks when received, 
 and crediting the notes and drafts when advised of their 
 payment. When, however, a check was returned unpaid 
 it was charged back to the sender. The note in contro- 
 versy was paid by a check, which was immediately cred- 
 ited by the Maverick bank to the other. Failing before 
 the check was paid, the Franklin bank sought to recover 
 the amount, on the ground that the -note had not been 
 paid. Said Judge Colt : " It is not seriously questioned 
 that, if the bank had received payment in money which 
 had been mingled with the general funds of the bank, the 
 complainant could not follow the specific fund, but could 
 only come in as a" general creditor. I do not think any 
 sound reason has been advanced for drawing a distinction 
 between a payment in money and a payment by check 
 under the facts presented in this case. When the Maver- 
 ick bank received payment of the note, and credited the 
 complainant with the amount in its general account with 
 the complainant, it assumed all responsibility with respect 
 to the payment of the note. If the check received in pay- 
 ment proved to be bad, it would not relieve the Maverick 
 bank. It might have received payment in cash, or by 
 check or draft, or even by the substitution of a new note, 
 but with this the complainant had no concern. Looking at 
 the general nature of the transactions between these 
 parties, it seems to me that, when the note was paid and 
 credit given to the complainant, the agency of the Maver- 
 ick bank to collect and credit this note ceased, because, 
 as between the complainant and the bank, the bank had 
 done that which it was required to do, and therefore the 
 
 1 49 Fed. Rep. 606. 
 
§ 40? OWNERSHIP OF PAPER SPECIALLY INDORSED. 57 
 
 relation of the parties from that time must be held to be 
 that of debtor and creditor. The form of payment is im- 
 material, because it could not affect the claim of the com- 
 plainant against the bank, such payment being at the risk 
 of the bank. ' ' If the crediting of the check was only pro- 
 visional and the Maverick bank had the right to charge 
 it back if it was not paid, then it could hardly be con- 
 tended that the note was discharged. Such was the na- 
 ture of the crediting in the cases just mentioned. There 
 was no occasion for repudiating the Levi case, for the 
 question was different. No check in payment was given, 
 and therefore no question concerning the effect of the 
 bank in crediting i15 arose. The Maverick bank clearly 
 need not have credited the check until it was paid, but 
 having done so is it not quite clear that it was responsi- 
 ble therefor, and the Franklin bank could have collected 
 the amount had the other remained solvent, and the 
 maker of the check had declined to honor it. 
 
 40h. If the sending bank had indicated an acquiescence 
 *in the crediting of*the second check as cash, it would 
 doubtless have had no further concern or interest in the 
 check thus received for the one sent. * A substitution by 
 the collecting bank of its credit for the drawer's might 
 have been made, and if it had been, his liability to the 
 sending bank would have been released, 1 but there was 
 no proof in the case above mentioned that the Franklin 
 bank acquiesced in the substitution or crediting of the 
 check as cash before its collection. 3 
 
 401 The case of Sweeny v. Easter 3 should not pass 
 without notice. It was decided on that occasion that if a 
 banker has mutual dealings with another banker, and the 
 paper is sometimes indorsed on account of the transmitting 
 banker and sometimes on account of his customer, the 
 
 1 Minier v. Second Nat. Bank, 13 N. Y. State Rep. 222. See Briggs v. 
 Central Nat. Bank, 89 N. Y. 182. 
 • 2 See? 185. 
 3 1 Wall. 106. 
 
58 BANK COLLECTIONS. § 41 
 
 corresponding banker cannot retain the balance of any 
 paper thus transmitted for collection if it really belongs to 
 third persons and he knew that it was sent for collection 
 merely. Nor can he retain it if he did not know that it 
 was sent in this manner, unless he gave credit to the trans- 
 mitting banker, or had suffered a balance to remain in his 
 hands to be met by the paper transmitted, or expected to 
 be transmitted, in the usual course of dealings between 
 them. But if the receiving banker has treated the trans- 
 mitting banker as the owner of the paper transmitted, and 
 has had no notice to the contrary, and on the credit of 
 such remittances, made or anticipated in the usual course 
 of dealings between them, has suffered balances to remain 
 in the hands of the transmitting bank, .which were to be 
 met by the proceeds of the paper transmitted, then the 
 receiving banker can retain the paper or its proceeds 
 against the banker sending it for the balance that may be 
 due to him. 
 
 41. When the indorsement is general, but the check is ac- 
 companied by a letter stating that it is Sent ' ' for collection, ' ' 
 how should the transaction be regarded? As between 
 those through whose hands the check may pass, but not 
 the letter, doubtless the answer is, they would be bound 
 only by the terms imported by the indorsement ;' but what 
 shall be said of those who receive both the check and the 
 letter? This question was raised, but not decided, in 
 Corn Exchange Bank v. Farmers' National Bank." Spe- 
 cial grants of power usually control those of a more gen- 
 eral nature, and in the absence of a better principle, why 
 should not this apply and be decisive of the rights of 
 parties in such cases ? In Blaine v. Bourne, ' Mr. Justice 
 Potter declared that even where •thgre is a general in- 
 dorsement of paper sent only for collection, it will still 
 
 1 Charlotte Iron Works v. American Nat. Bank, 34 Hun 26, 29; Clark v. 
 Merchants' Bank, 2 N. Y. 380. 
 2 118 N. Y. 443, 445, 449. 
 s 11 E. I. 119. 121. 
 
§ 43 OWNERSHIP OF PAPER SPECIALLY INDORSED. 59 
 
 remain the property of the sender as to all persons having 
 notice. 1 
 
 42. As an indorsement " for collection " is unknown to 
 the law merchant and transfers no title, authority is 
 simply conferred to collect the money on the note or other 
 instrument, and hold it as trustee for the indorser. 2 Said 
 Mr. Justice Potter : " The words are notice that the re- 
 stricted indorsee has no property in the bill ; that he is a 
 mere trustee, and that he can appoint no sub-agent except 
 for the purpose of holding the bill or money on the same 
 trust, and if the holder pays it to the intermediate agent, 
 he becomes responsible for its misapplication." " 
 
 43. A cashier has authority to indorse the negotiable 
 paper of his bank." In the earlier days of banking, when 
 the authority of corporate agents was more limited, a 
 cashier could not transfer, without special authority, a 
 negotiable note belonging to the bank to a third party." 
 But his authority has been extended from necessity. The 
 principle, is now established everywhere that prima facie 
 he has authority, by virtue of his office, to transfer nego- 
 tiable promissory notes belonging to the bank in the trans- 
 action of its usual business ; and when received in good 
 
 1 See % 24, also Freeman's Nat. Bank v. National Tube Works Co., 151 
 Mass. 413; Williams v. Jones, 77 Ala. 294. 
 
 2 Sweeny v. Easter, 1 Wall. 166, 173; Rock.Co. Nat. Bank v. Hollister, 21 
 Minn. 385; Armour Brothers Banking Co. v. Riley Co. Bank, 30 Kan. 163. 
 
 8 Blaine v. Bourne, 11 R. I. 119, 123. 
 
 * Chillicothe Branch of the State Bank of Ohio v. Fox, 3 Blatchf. 431; 
 Folger v. Chase, 18 Pick. 63; Brockway v. Allen, 17 Wend. 40; Watervliet 
 Bank v. White, 1 Denio 608; Babcock v. Beman, 11 N. Y. 200. But when 
 authority is given to a collector to receive checks in lieu of cash in payment 
 of bills held for collection, this does not extend to their indorsement and 
 collection. When they are received payable to his bank his duty ceases. 
 He must turn them over to the bank for such use as may be judged proper. 
 Graham v. U. S. Savings Institution, 46 Mo. 187. 
 
 5 Hallowell & Augusta Bank v. Hamlin, 14 Mass. 178; Hartford Bank v. 
 Barry, 17 Mass. 94. But the courts have never questioned that a cashier 
 has authority to do whatever was needful to recover a note. Hartford Bank 
 v. Barry, 17 Mass. 94; Elliot v. Abbot, 13 N. H. 549 
 
60 BANK COLLECTIONS. § 43 
 
 faith a valid title is conferred on the transferee. 1 And 
 whenever he has authority to indorse, the inducement for 
 indorsing need not appear ; the law will presume that the 
 transfer was proper." 
 
 1 Smith v. Lawson, 18 W. Va. 212, 227; Wild v. Bank, 3 Mason 505; Bank 
 v. Wheeler, 21 Ind. 90; City Bank *. Perkins, 29 N. Y. 554; Cooper v. Cur- 
 tis, 30 Me. 488; Kimball v. Cleveland, 4 Mich. 606; Crockett v. Young, 1 
 Sm. & Marsh. 241; Everett v. United States, 6 Porter 166; Bridenbecker v. 
 Lowell, 32 Barb. 9; Fleckner v. United States Bank, 8 Wheat. 338, 357 ;■ 
 Eobb v. Eoss County Bank, 41 Barb. 586; Harper v. Calhoun, 7 How., Miss., 
 203; Lafayette Bank v. State Bank, 4 McLean, 208; Singling v. KOhn, 6 
 Mo. App. p. 337. The opinion of. Story, J., in Wild v. Bank, 3 Mason 505; 
 has been often quoted. " Prima facie the cashier must be deemed to have 
 authority to transfer and indorse negotiable securities held by the bank for 
 its use and in its behalf. No special authority for this purpose need be 
 proved. If any bank chooses to depart from this general course of business, 
 it is certainly at liberty to do k so., but in such case it is incumbent on the 
 bank to show that it has interposed a restriction, and that such restriction 
 is known to those with whom it is in the habit of doing business. " A cash- 
 ier, therefore, has power to transmit a note to another bank for discount and 
 collection, and to transfer the title thereto. Potter v. Merchants' Bank, 28 
 N. Y. 641. In Farrar v. Gilman, 19 Me. 440, Chief Justice Weston said : 
 "Nothing is more common than paper of this kind, bearing the indorse- 
 ment of the cashier of a bank, in his official capacity. And it may perhaps 
 be assumed as a universal usage that when instruments of this description 
 are indorsed or transferred by a bank, he becomes their organ for this pur- 
 pose. It may not be necessary to decide that he may do this without special 
 authority; and such an assumption might well be questionable. But as he 
 is held out to the public as the confidential officer and actuary of the bank, 
 as he is under bonds for the faithful performance of his duties, and as he 
 acts as their organ in the transfer of negotiable paper, it is not, in our 
 opinion, too much to hold that when he indorses such paper belonging to 
 the bank in his official capacity, it is prima facie evidence of a legal trans- 
 fer." For other cases see United States v. Green, 4 Mason 427; Smith c. 
 Bank of the State, 18 Ind. 327; United States v. City Bank, 21 How. 356; ■ 
 Haynes v. Succession of Beckman, 6 La, Ann. 224; West St. Louis Savings 
 Bank v. Shawnee County Bank, 95 U. S. 557; Holt v. Bacon, 25 Miss. 567; 
 Corser v. Paul, 41 N. H. 24; Bank v. Haskell, 51 N. H. 116; Preston v. 
 Cutter, 64 N. H. 461; Bank of Genesee v. Patchin Bank, 19 N. Y. 312; Jones 
 v. Hawkins, 17 Ind. 550; Allison v. Hubbell, 17 Ind. 559; Merchants' Bank 
 v. Central Bank, 1 Kelly, Ga., p. 431; Hoyt v. Thompson, 5 N. Y. p. 335; 
 Blair v. First Nat. Bank, 2 Flippin 111, 117. 
 
 * Everett v. United States, 6 Porter (Ala.) 166; Eobb v. Eoss County Bank, 
 41 Barb. 586. 
 
§ 47 OWNERSHIP OF PAPER SPECIALLY INDORSED. 61 
 
 44. When he indorses a note simply for collection, he 
 does not render his bank liable as an indorser. 1 But if he 
 should indorse it regularly, and send it to an agent for 
 collection, who, instead of collecting, should negotiate it 
 for his own use, the sending bank would be liable for its 
 indorsement.' 
 
 45. But a bank which discounts paper thus indorsed, for 
 the purpose of transmission to an agent for collection, is a 
 party to the same within the New York act of 1833; ' relating 
 to notarial certificates as evidence. 4 Consequently, in an 
 action on a bill of exchange which, after several indorse- 
 ments, was discounted by a bank and then transmitted to 
 the place where it was payable for collection (having been 
 previously indorsed by the cashier for that purpose solely), 
 it was held that a notarial certificate of presentment and 
 non-payment, stating that on the next day after present- 
 ment notices of protest addressed to the drawer and in- 
 dorsers were inclosed in a wrapper and sent by mail to 
 the cashier, was evidence of protest to all parties and of 
 notice to the cashier." 
 
 46. Again, when a note is made payable at a bank and 
 indorsed, " Pay A. B., cashier," the bank is regarded the 
 real indorsee, the office of cashier and the cashier's official 
 name by the usage of banks in the making and transfer 
 of commercial paper, having become synonymous with the 
 bank itself. 8 The bank. consequently, may sue on a note 
 thus payable io its cashier.' 
 
 47. An indorsement for collection destroys the negotia- 
 bility of the note, and the party taking the same, even for 
 
 1 Bank of New York v. Bank of Ohio, 29 N. Y. 61 9. See \\ 216-216/. 
 
 ■' Id. See I 137. 
 
 3 Sess. Laws, 1833, p. 395, No. 8. 
 
 * Bank of United States v. Davis, 2 Hill 451. 
 
 6 Bank of the United States v. Davis, 2 Hill 451. 
 
 6 MeGhee v. importers & Traders' Nat. Bank, 9 S. Rep. 734 (Ala.) ; Ran- 
 dolph on Com. Paper, \\ 850, 851, 1319. 
 
 ' Erwin Lane Paper Co. v. Farmers' Nat. Bank, 30 N. E. Rep. 411 (Ind.) ; 
 Nave v. Hadley, 74 Ind. 155, and cases cited. See \\ 51, 132. 
 
62 BANK COLLECTIONS. § 49 
 
 value, holds it subject to the same defenses as though it 
 remained in the possession of the payee. 1 
 
 48. Nor is parol evidence admissible to show that such 
 an indorsement was intended as an absolute one and there- 
 by deprive the maker of his defense. 2 But such evidence 
 may be introduced to show that the indorser was not 
 the owner, and that it was not intended to give him the 
 title thereto or the proceeds when collected. 8 Such evi- 
 dence, said Mr. Justice Miller, ' ' rather explains the trans- 
 action in perfect conformity with the real meaning and 
 effect of the indorsement. The words 'for collection' 
 evidently had a meaning. That meaning was intended to 
 limit the effect which would have been given to the in- 
 dorsement without them, and warned the party that con- 
 trary to the purpose of a general or blank indorsement, 
 this was not intended to transfer the ownership of the 
 note or its proceeds. * * * No example of public 
 policy would be violated, nor any fraud upon innocent 
 holders of the paper would be perpetrated by permitting 
 the parties who made that indorsement to testify to facts 
 which are in perfect harmony with its language and its 
 intent." 
 
 49. As already remarked, other parties, sub-agents, to 
 whom paper may be sent specially indorsed for collection, 
 
 1 Wilson v. Holmes, 5 Mass. 543; Leary v. Blanchard, 48 Me. 269; Fifth 
 Nat. Bank v. Armstrong, 40 Fed. Bep. 46; First Nat. Bank v. Beno Co. 
 Bank, 3 Fed. Bep. 257, 261; Balbach v. Frelinghuysen, 15 Fed. Eep. 675; 
 Levi v. Bank, 5 Dill. 104, 107; Sweeny v. Easter, 1 Wall. 166; Mechanics' 
 Bank v. Valley Packing Co., 70 Mo. 643; White v. National Bank, 102 TJ. S. 
 658; Hoffman v. First Nat. Bank, 46 N. J. Law 604, Blaine v. Bourne, 11 
 B. I. 119. 
 
 2 Third Nat. Bank v. Clark, 23 Minn. 263; Leary v. Blanchard, 48 Me. 
 269; Lancaster Nat. Bank v. Taylor, 100 Mass. 18; Haskell v. Mitchell, 53 
 Me. 468; Southard v. Porter, 43 N. H. 379; Clark v. Whitaker, 50 N. H. 
 474; Kern v. Von Phul, 7 Minn. 426; Armour Brothers Banking Co. v. Biley 
 Co. Bank, 30 Kan. 163; Williams v. Woods, 16 Md. 220, 251; Cecil Bank v. 
 Farmers' Bank, 22 Md. 148, 155; Freeman i). Exchange Bank, 87 Ga. 45; 
 National Commercial Bank v. Miller & Co., 77 Ala. 168. 
 
 " Sweeny v. Easter, 1 Wall. 166. 
 
§ 49 OWNERSHIP OF PAPER SPECIALLY INDORSED. 63 
 
 can have no lien thereon, or on the proceeds for an in- 
 debtedness that may be due from the sender.' Ail inter- 
 mediate agents are thus notified of the retention of own- 
 ership by the special indorser, and he only is entitled to 
 them and can claim them from whoever may have them. 
 Yet a sub-agent has attempted to hold the proceeds of a 
 note or check thus indorsed, which has been sent to it for 
 collection, to discharge or diminish a balance due from 
 the sender. Thus M., who owned a note and draft, in- 
 dorsed them in blank and delivered them to the State 
 Bank of West Virginia with a letter of instruction to col- 
 lect the same. It sent them to the defendant bank with 
 an indorsement that they were for collection. Before 
 either was collected the State bank failed, owing the 
 other for overdrafts. M. demanded the note and draft of 
 the defendant bank, but it refused to give them to him, 
 and claimed that it could rightfully apply the proceeds 
 on the indebtedness of the State bank. M. having as- 
 signed the note and draft to the plaintiff, it was decided 
 that he could recover them of the latter institution." In 
 harmony with this rule, the Supreme Court of Texas have 
 remarked in a recent case concerning a draft which had 
 been specially indorsed, that the collecting agent had re- 
 ceived the owner's money, knowing by the indorsements 
 on the draft that it was his and would not be permitted 
 to withhold it from him. The authorities in support of 
 this proposition are overwhelming.' 
 
 1 Hackett v. Reynolds, 114 Pa. 328; First Nat. Bank v. Gregg & Co., 79 
 Pa. 384; Jones & Co. v. Milliken & Son, 41 Pa. 252; Lawrence?). Stonington 
 Bank, 6 Conn. 275; Central Railroad v. First Nat. Bank, 73 Ga. 383. See \ 51. 
 
 2 Stark v. United States Nat. Bank, 41 Hun 506. See § 51. 
 
 3 City Bank v. Weiss, 67 Tex. 331, 334, citing Sweeny v. Easter, 1 Wall, 
 166; Cecil Bank v. Farmers' Bank, 22 Md. 148; Sigourney v. Lloyd, 8 Barn. 
 & Cres. 622; Trenttel i«. Barandon, 8 Taunt. 100; Blaine v. Bourne, 11 R. I. 
 119; White v. Nat. Bank, 102 TJ. S. 658; Hook v. Pratt, 78N. Y. 371; contra. 
 Hyde v. First Nat. Bank, 7 Biss. 156. In City Bank v. Weiss, 67 Texas 
 331, the check in controversy was first indorsed "for collection and credit 
 for account of," etc., and afterward "for collection for account of," etc. 
 See further, Producers & Manufacturers' Bank v. Ricketts, 1 W. N. CaS. 48. 
 
64 BANK COLLECTIONS. ' § 51 
 
 .50. A note indorsed for collection cannot be sold by the 
 bank which has received it under such an indorsement to 
 another who has notice of the limitation. 1 Thus, Claflin 
 sent a note through a bank to another banking house for 
 collection, which was indorsed by him in blank and by 
 the sending bank to the other for collection. Neither of • 
 them was authorized to transfer the note, but simply to 
 collect it. The second bank received the amount from D. 
 and delivered the note to him. He understood the trans- 
 action to be a purchase and so did the bank from which 
 he received it, but the court declared that D. was charge- 
 able with notice, that the bank from which he purchased 
 it was not authorized to transfer or sell the note ; the in- 
 dorsement clearly showed that it had been transferred for 
 collection. The law will not permit a purchaser to plead 
 ignorance of the extent of the authority of a holder under 
 such circumstances. Furthermore, if the payee had re- 
 ceived the money in ignorance of the fact of the sale of 
 the note, this did not constitute a ratification of the sale. 
 51. Again, by indorsing a check for collection and pass- 
 ing the same to a second or third bank for that purpose, 
 no arrangement between them respecting the mode of col- 
 lection or application of the proceeds is binding on the 
 owner ; and he can sue the bank which has made the col- 
 lection for the proceeds if it has them, notwithstanding 
 the lack of privity between it and himself, on the ground 
 that it has property belonging to him. * As Judge Putnam 
 
 1 Claflin v. Wilson, 51 Iowa 15. 
 
 2 First Nat. Bank v. Reno Co. Bank, 3 Fed. Eep. 257; National Ex. Bank 
 v. Beal, 50 Fed. Eep. 355; Bank v. First Nat. Bank, 19 Fed. Eep. 301; Com- 
 mercial Nat. Bank v. Hamilton Nat. Bank, 42 Fed. Eep. 880; Bank v. First 
 Nat. Bank, 22 Blatch. 58; Bank.u Triplett, 1 Pet. 25; Hackettu. Eeynolds. 
 114 Pa. 328; Jones & Co. v. Milliken & Son, 41 Pa. 252; First Nat. Bank v. 
 Gregg & Co., 79 Pa. 384 ; Central Eailroad u. First Nat. Bank, 73 Ga. 383; 
 Blaine v. Bourne, 11 E. I. 119; City Bank v. Weiss, 67 Texas 331; Lawrence 
 v. Stonington Bank, 6 Conn. 521; Commercial Bank %: Marine Bank, 40 N. 
 Y. 337; Bank v. Wisconsin Marine & Fire Ins. Co. Bank, 12 N. Y. Supp. 
 952; Arnold & Co. v. Clark, 1 Sandf. 491; Hook v. Pratt, 78 N. Y. 371 ;• 
 First Nat. Bunk v First Nat. Bank, 76 Ind. 561; Nurse v. Satterlee, 81 la. 
 
§ 51 OWNEESHIP OF PAPEE SPECIALLY INDOESED. 65 
 
 has well remarked : ' " While it must be admitted that the 
 avails of goods or of ohoses in action, when they come in 
 fact into the hands of a bank or factor authorized to deal 
 with them, are thus so mingled with the mass of assets as 
 to lose their ear-marks, yet they preserve their identity 
 so long as they remain in the possession of a subordinate 
 party, whether he be technically vendee,, bailee or agent, 
 unless from a- peculiar course of dealing or state of facts 
 the proceeds have necessarily lost their identity in the 
 hands of the latter." Therefore, .while the proceeds thus 
 remain in the possession of th*e sub-agent or subordinate 
 party they can be recovered by the sender, to whom they 
 belong." Thus, a bank in New York sent checks to a 
 Newark bank for collection, which had the qualified in- 
 dorsement, "For collection, pay to the order of 0. L. 
 Baldwin, cashier," who was cashier of the Newark bank. 
 They were sent by him to a bank in Jersey Pity to be col- 
 lected, and the proceeds were credited to it by virtue of 
 
 491; Milliken v. Shapleigh, 36 Mo. 596; Cecil Bank v. Bank of Maryland, 22 
 Md. 143; Sigourney v. Lloyd, 8 Barn. & Ores. 622; Treuttel v. Barandon, 8 
 Taunt. 100; Buller v. Harrison, 2 Cowp. 565. See \\ 21, 22. The maker of 
 a restricted indorsement can follow the bill or its proceeds over any number 
 of subsequent indorsements, the terms of his indorsement being notice of 
 his title. Beckley, Ch. J., Freeman v. Exchange Bank, 87 G-a. 45. Eeeves 
 v » te Bank, 8 Ohio St. 465, does not contravene this rule, but the conclu- 
 sion concerning the payment by the sub-agent to the primary agent is not 
 satisfactory. See \ 56o. In this case the court, after describing several 
 cases, said: " These cases seem to establish the doctrine, that on the insol- 
 vency of the primary agent, and before payment to the secondary agent, and, 
 of course, before any undistinguishable commingling of assets occurs, the 
 principal may, by notice, make the secondary agent his own; and thus, ex- 
 cept as to the right of the secondary agent in certain cases to retain as afore- 
 said, to render the reieipt of the proceeds of the bills or notes by the 
 secondary agent, in any oiiher character than that of immediate agent for the 
 principal, wrongful as against the principal, and so to entitle him to recover. 
 This doctrine we have neither disposition nor occasion to controvert, for it 
 has no application to the case before us." 
 
 1 National Exchange Bank v. Beal, 50 Fed. Eep. 355, 358. 
 . » Sweeny v. Easter, 1 Wall. 166; White v. National Bank, 102 U. S. 658. 
 
 5B. 
 
66 BANK COLLECTIONS. § 51 
 
 of an agreement existing between the two to thus credit 
 collections made by them. The Newark bank having 
 failed before remitting the amount to the New York bank, 
 the latter sued the Jersey City bank to recover the amount 
 of the checks which had thus been collected and credited 
 to the Newark bank. Judge Wallace said :' "If the de- 
 fendant had been justified in assuming that such paper 
 was the property of the Newark bank, it would have been 
 entitled to a lien upon it for a balance of account, no 
 matter who was the real owner of the paper." But the 
 checks bore the indorsement of the plaintiff in a restricted 
 form, signifying that the plaintiff had never parted with 
 its title to them. In the terse statement of Gibson, C. J., 
 ' a negotiable bill or note is a courier without luggage ; 
 * * * a memorandum to control it, though indorsed on 
 it, would be incorporated with it and destroy it. ' a The in- 
 dorsement by the plaintiff, 'for collection,' was notice to 
 all parties subsequently dealing with the checks that the 
 plaintiff did not intend to transfer the title of the paper, 
 or the ownership of the proceeds to another. As was held 
 in Cecil Bank v. Farmers' Bank of Maryland, 4 the legal 
 import and effect of such indorsement was to notify the 
 defendant that the plaintiff was the owner of the checks, 
 and that the Newark bank was merely its agent for col- 
 lection. In First National Bank v. Reno County Bank,* 
 paper was indorsed, ' pay to the order of Hetherington & 
 Co., Atchison, account of First National Bank, Chicago,' 
 and it was held to be such a restrictive indorsement as to 
 charge subsequent holders with notice that the indorser 
 had not transferred title to the paper or its. proceeds. 
 Under either form of indorsement the natural and reason- 
 able implication to all persons dealing with the paper 
 
 1 Bank of the Metropolis v. First Nat. Bank, 22 Blatchf. 58. 
 
 a Bank of Metropolis v. New England Bank, 1 How. 234. 
 
 3 Overton v. Tyler, 3 Pa. 346, 347. 
 
 * 22 Md. 148. 
 
 5 3 Fed. Rep. 257. 
 
§ 51(Z OWNERSHIP OF PAPER SPECIALLY INDORSED. 67 
 
 would seem to be that the owner has authorized the in- 
 dorsee to collect it for the owner, and conferred upon him 
 a qualified title for this purpose, and for no other. 1 The" 
 defendant could not acquire any better title to the checks 
 or their proceeds than belonged to the Newark bank, except 
 by a purchase for value, and without notice of any in- 
 firmity in the title of the latter. As the indorsement of 
 the checks was notice of the limited title of the Newark 
 bank, the defendant simply succeeded to the rights of 
 that bank. * * * As against the plaintiff, the defendant 
 had no right to retain the proceeds of the checks as security 
 or payment for any balance due it to from the Mechanics' 
 National Bank of Newark after a demand by the plaintiff. ' ' * 
 51a. Nor is the liability of the .sub-agent affected by 
 the question, whether the principal bank is liable to the 
 owner or not. It is well understood that different rules 
 prevail in the states, in some of them the principal bank 
 is responsible to the owner for the negligence of sub-agents 
 through which the business of collection is conducted, in 
 other states the principal bank is responsible only for the 
 selection of proper agents. The existence of the former 
 rule does not prevent the owner from suing the sub-agent 
 for the proceeds of a check which has been collected and 
 not transmitted to the principal bank, 3 and surely wherever 
 the other rule prevails the sender is not prevented from 
 suing the sub-agent for the proceeds. In a well-consid- 
 ered case the Supreme Court of Texas declared that the 
 collecting bank could not appropriate the proceeds of a 
 collection to reimburse itself for the indebtedness of the 
 bank from which the check was received for collection.* 
 "It is not necessary," said the court, "to decide that he 
 
 1 Judge Wallace also cited the following authorities : Sweeny v. Easter, 1 
 Wall. 166; White v. National Bank, 102 U. S. 658; Lee & Co. v. Chillicothe 
 Branch, 1 Bond 387 ; Blaine v. Bourne, 11 R. I. 119 ; Claflin v. Wilson, 51 
 Iowa 15. 
 
 s Central Railroad v. First Nat. Bank, 73 Ga. 383. 
 
 3 National Exchange Bank v. Beal, 50 Fed. Rep. 355. 
 
 * City Bank «, Weiss, 67 Texas 331. 
 
68 BANK COLLECTIONS. § 51(Z 
 
 is the owner's agent in order to determine that he cannot 
 do this. - He has received the owner' s money, knowing by 
 "the indorsements upon the draft that it is his and will not 
 be permitted to withhold it from him." 
 
 515. A few ca'ses may be noticed. In Central Railroad 
 v. First National Bank, 1 a draft had been collected by a 
 bank which attempted to hold the proceeds in payment 
 of a claim against the transmitting bank. In a suit by 
 the owner to recover the same, Mr. Justice Blandford 
 said: "Where one person is in possession of money 
 which of right and in equity belongs to another, this 
 action may be maintained for its recovery. The law im- 
 plies a promise on the part of any person who has re- 
 ceived the money of another to pay that person on de- 
 mand. The reception of money by one and the demand 
 by the other makes all the privity that is necessary to 
 maintain this action." 
 
 51c. In another case" a bill of exchange was specially 
 indorsed, ' ' Pay J. C. , or order on account of B. , "to which 
 J. C. added a general indorsement and sent it to his cor- 
 respondents. The drawer paid it, but J. C. having failed 
 owing them, they applied the money toward his indebt- 
 edness. In the end, however, they were obliged to pay 
 B. So, too, a bank in Indiana which had received from 
 another bank a check indorsed "for collection" was de- 
 clared to have no title thereto, or right to the proceeds 
 when collected ; the collecting bank was merely the agent 
 of the transmitter. Likewise, when a bank receiving 
 such a check sent it to another for collection, the latter 
 was declared to be only the agent for the transmitter, and 
 had no right to apply the proceeds to the payment of an 
 indebtedness due from that bank. 8 
 
 5\d. In the case of the Union Stock Yards Bank v. Gil- 
 lespie, 4 a Kansas City cattle dealer consigned cattle to a 
 
 1 73 Ga. 383, 385. 
 
 5 Blaine v. Bourne, 11 E. I. 119. 
 
 8 First Nat. Bank v. First Nat. Bank, 76 Ind. 561. 
 
 «137 IT. S. 411, affg. 41 Fed. Bep. 231. 
 
§ 51e OWNERSHIP OF PAPER SPECIALLY INDORSED. 69 
 
 factor, or selling agent, in Chicago, and drew drafts 
 through the factor's bank in that city in payment. The 
 factor's account became overdrawn and the amount of 
 his indebtedness to the bank steadily increased. Several 
 shipments were made, the proceeds of which were appro- 
 priated by the Chicago bank and applied on the factor's 
 overdrafts. The bank knew through its Kansas City cor- 
 respondent and in other ways that the cattle belonged to 
 the consignor. In an action to refund, "justice forbids," 
 said Mr. Justice Brewer, "the upholding of such a trans- 
 action, and demands that the bank, receiving from the 
 factor, in payment of a debt from the factor to itself, 
 moneys which it must have known were the proceeds of 
 the property received from his consignor and principal, 
 account to that principal for the moneys so received and 
 appropriated." 
 
 51e. It is impossible to harmonize the case of Corn Ex- 
 change Bank of New York v. Farmers' National Bank 
 of Lancaster, ' with this principle. M. sent her check pay- 
 able to the order of C, who indorsed it in blank and de- 
 posited it in Harrison's bank, which indorsed it specially 
 to the New York bank, which indorsed it in a similar 
 manner and sent it to the Lancaster bank on which it 
 was drawn for payment. A draft on another New York 
 bank was sent for the amount, but its payment was stop- 
 ped by direction of the Lancaster bank on the request of 
 C. because the Harrisons bank had failed. The Corn 
 Exchange Bank then sued the Lancaster bank to recover 
 the amount of the draft. As the Harrison's bank did 
 not own the check nor the Corn Exchange Bank, but C. , 
 and the proceeds belonged to him, we do not understand 
 what authority the Corn Exchange Bank had to sue on 
 the draft. Nevertheless, the court decided in its favor, 
 declaring that no contract relation existed between it and 
 C, nor was there any privity between them. The court 
 
 1 118 N. Y. 443. 
 
70 BANK COLLECTIONS. § 52 
 
 admitted that " when the owner of commercial paper de- 
 livers it for collection to bank A. which forwards it for 
 collection to bank B., which, <in turn, forwards it for col- 
 lection to bank C, to which it is paid, it has been held 
 that if bank C, instead of paying the money to bank B. 
 retains and applies it on a debt due from bank B. the 
 owner (bank A. being insolvent) may recover of bank C. ; 
 but we are unebla to see that these cases justify this 
 defendant in resisting the payment of its draft, to which 
 it has no defense, for the benefit of a third person, who 
 may have a right to recover the money represented by it." 
 This is singular reasoning. The third person is the owner 
 of the draft ; it belongs to C. ; why then cannot he stop 
 payment of it ; or order the drawer of it, who has drawn 
 it for his benefit, to stop payment. This is a strange doc- 
 trine that one cannot do what he will with his own. But 
 the court said that the check had been paid. Suppose 
 this was so ; the payment was for the benefit of C. Again, 
 if payment was made to the Corn Exchange Bank what 
 could it gain, for C. could recover the payment of 
 it. In other words, the money belonged to C. and he was 
 entitled to it, as the proceeds had in no way been min- 
 gled with the property of Harrison's bank. 
 
 52. As a bank, though having an interest only as a col- 
 lecting agent can sue, 1 so can this be done when a note sent 
 for collection is purchased. 3 In like manner when a bill 
 of exchange is transferred with the understanding that, 
 if collected, the proceeds shall be credited to the bank, 
 but not otherwise, this is in effect an assignment of the 
 bill with a guarantee of collection, and the assignee can 
 maintain an action thereon in his own name. 8 So, too, 
 
 1 See \l 51, 52, 132. 
 
 2 Payne v. Albany City Nat. Bank, 28 N. E. Eep. 432 (Ind). But a statute 
 exists in that state on the subjeet. • 
 
 3 Wright v. Boyd, 3 Barb. 523. The payee of a draft is " the real party 
 in interest," and an agreement between the drawer and the payee concerning 
 the collection and application of the proceeds is no defense to the acceptor. 
 Minnesota Thresher Mannfg. Co. v. Heilper, 52 N. W. Eep. 33 (Minn.). 
 
§ 53 OWNERSHIP OF PAPER SPECIALLY INDORSED. 71 
 
 should a bill of exchange, which has been accepted for the 
 accommodation of the drawer, be sent by the holder to a 
 bank for collection, and the amount be credited at matur- 
 ity to him, the acceptor would not discharged, nor would 
 the bank be prevented from maintaining an action against 
 him. 1 Again, should a bank purchase a promissory note 
 from an indorsee, it could maintain an action in its own 
 name against a prior party, and without regard to the le- 
 gality of the purchase. 2 But if it should sue on a note 
 alleging that it had been indorsed and delivered for value 
 received, the facts must be proved. 3 
 
 52a. In Griffith v. Conway, 4 a note was executed by a 
 partnership payable to M., who sold and assigned the 
 same to a bank. Not having been paid at maturity, the 
 note was charged back to M. and given to the plaintiff with 
 instructions to sue in the name of the bank. Assuming 
 to hold the same on account of the bank and for collec- 
 tion, he brought a suit in his own name, but failed to 
 maintain the same. "If," remarked the court, "with 
 M.'s consent the bank, after the dishonor of the note, 
 charged the amount thereof to M. on his account, it is plain 
 that thereby the title to the note became reinvested in 
 M., and therefore the bank had no interest in the paper. 
 The bank then could not maintain a suit as owner, because 
 it no longer had title. There is no evidence that M. had 
 authorized the bank or this plaintiff to collect the note on 
 Ms account, hence the bank could not sue as one holding 
 the paper for collection ; and as the bank could not main- 
 tain a suit in any event, neither could its transferee Gr." s 
 
 53. As the remitting bank can require the collecting 
 bank to return the notes before maturity, or the proceeds 
 when they have been collected after making a demand 
 
 1 Pacijic Bank v. Mitchell, 9 Met. 297. 
 
 2 National Pemberton Bank v. Porter, 125 Mass. 333. 
 
 3 National Bank v. Pennington, 42 Mo. App. 355. See § 45. 
 
 4 45 Mo. App. 574. 
 
 6 Lee v. Turner, 15 Mo. App. 205 ; Julian v. Calkins, 85 Mo. 202. 
 
I BANK COLLECTIONS. § 54<Z 
 
 leref or, so if the remitting bank should assign the claim 
 > an individual, he could sue for its recovery without 
 taking a new demand of the collecting bank. 1 
 
 54. If the collecting bank in obedience to instructions 
 as collected and transmitted the proceeds to the imme- 
 iate indorser, has it not performed its whole duty 1 Does 
 s liability still continue to the real owner, until he has 
 jceived the money ? The intimation in Blaine «. Bourne, a 
 as that by thus remitting its duty was ended. In 
 nother case a bank specially indorsed a draft for collec- 
 on to a second, which by a similar indorsement trans- 
 litted it to a third bank which collected the amount, 
 astead, however, of transmitting the proceeds to the first 
 r second bank, they were sent to a banker in New York 
 y an arrangement between the second and third banks, 
 hereby all their collections for each other were thus 
 seated. As the first bank knew nothing of this arrange- 
 lent, of course it was not bound thereby in any manner.* 
 he second bank having failed before paying, the first 
 lied the third bank for the money. The third bank had 
 een charged by the second for the amount, and the first 
 ank had also been credited and notified of the collection. 
 >ut the court held that the third bank had violated the 
 arris of the contract of indorsement in not sending the 
 roceeds either to the second or to the first bank and was, 
 herefore, liable for them. 1 
 
 54a. The collecting bank must always regard the terms 
 f the special indorsement on the paper received for col- 
 3ction, for, obviously, if they are not observed it will be 
 [able for the consequences. In the Hamilton bank case 
 tie sending bank indorsed the check for collection, which 
 learly implied that the proceeds must be sent to it either 
 
 1 McBride v. Farmers' Bank, 26 N. Y. 450 ; McKee v. Judd. 12 N. Y. 622. 
 1 11 R. I. 119, 123. 
 
 'Lawrence v. Stonington Bank, 6 Conn. 521. 
 
 •Commercial Nat. Bank v. Hamilton Nat. Bank, 42 Fed. Eep. 880. See 
 rational Exchange Bank v. Beal, 50 Fed. Eep. 355. 
 
§ 54c OWNERSHIP OF PAPER SPECIALLY INDORSED. 73 
 
 directly or through the intermediary. When such a plain 
 direction is given and it is not followed, the collecting 
 bank must suffer whenever *he proceeds do not reach 
 their proper destination. H, however', a departure oc- 
 curs, as happened in this case, and credits are given for 
 the amount, and the sending bank acquiesces in this, as 
 appears from the opinion of the court, by charging the 
 second bank with the, amount after receiving the announce- 
 ment of the collection, has it any just claim on the third 
 or collecting bank ? If it desired the proceeds, instead of 
 a credit for the amount, ought not the first or sending 
 bank to have signified its wish as soon as the collection 
 was reported ? • # 
 
 545. Again, what is meant by proceeds and remittances ? 
 This question has been already considered, 1 but a word 
 may be added here. Two modes of collecting exist be- 
 tween banks, — by keeping mutual accounts and trans- 
 mitting only balances ; and by sending the proceeds col- 
 lected, either in their original or substituted form. When 
 mutual accounts exist the balances,sent may be, and often 
 are, very small, and in such cases it may be said that re- 
 mittances or proceeds are not sent. If this explanation 
 of the two methods of accounting for the proceeds of collec- 
 , tionbe correct, when an indorsement calls for a remittance, 
 it must be sent, and the crediting of the amount to the 
 bank from which it came, either because a balance is due 
 fro*m it or is likely to accrue, will not fulfil the indorser's 
 order. If, therefore, a departure from this is ventured, 
 the bank which violates the direction is responsible for 
 the consequences. The only safe course is to regard it ; 
 to remit whenever this is the direction, and to credit only 
 when authority exists for doing this. 
 
 54c. , A case well illustrating the need of observing the 
 original direction and the importance of subsequent con- 
 trary directions is Drovers' National Bank v. O'Hare." 
 
 1 See g 40a. 
 2 119 111. 646. 
 
74 BANK COLLECTIONS. § 55 
 
 B. deposited money in the D. bank for transmission to 
 the H. bank for the use of O'H. Instead of sending the 
 money directly, the D. bank sent it to N. bank, which 
 gave the H. bank credit for the amount. A mutual ac- 
 count existed between the H". and H. banks, but before 
 the report of the credit was received the H. bank had 
 failed. O'H. sued the D. bank for the amount and re- 
 covered, the court declaring that while it might have been 
 proper for the D. bank to transmit the money through the 
 N. bank, neither B. nor O'H. was bound by any arrange- 
 ments which the D. bank made with other banks. Its 
 sole duty was to transmit the money which had been en- 
 trusted to its keeping and which it had not done. 1 
 
 55. As the title to such a bill thus indorsed is retained 
 by the indorser and the proceeds belong to him, can they 
 be garnished while in the possession of the collecting 
 bank? In some states this can be done. 5 Thus, A. in- 
 dorsed certificates *of deposit to a bank and received credit 
 for them as money. While in the possession of a corres- 
 pondent for collection they were attached as A. ' s property. 
 A short time afterward the bank which had received them 
 and credited A. for the amount, learning that the bank 
 which issued them was in a precarious condition, charged 
 them back to A., though without his consent. Neverthe- 
 less, this act of the bank did not affect their title ; they 
 had passed to the bank and therefore their attachment' by 
 A.'s creditor would not hold. 8 But when the title to the 
 check has passed to the depository bank it cannot be gar- 
 nished by a creditor of the depositoi. Thus, A. deposited 
 a draft payable to his own order and indorsed, " for de- 
 posit to the credit of" the drawer, which was entered to 
 his credit and forwarded to another bank for collection. 
 
 1 See St. Louis v. Johnson, 5 Dill. 241 ; Farley v. Turner, 26 L. J. Eq. N. 
 S. 710. 
 
 2 Freeman v. Exchange Bank, 87 Ga. 45 ; Central Railroad v. First Nat. 
 Bank, 73 Ga. 383. 
 
 'First Nat. Bank v. Dickson, 50 N. W. Rep. 124 (Dak.). 
 
§ 56 OWNERSHIP OF PAPER SPECIALLY INDORSED. 75 
 
 The drawer checked against the credit and his checks 
 were duly honored. The title to the draft was clearly 
 in the depository bank, and consequently the proceeds 
 could not be garnished by the drawer's creditors. 1 In 
 other states, however, whenever a check has been de- 
 posited with a bank only for collection, and the depositor 
 has no right to draw for the proceeds before they have 
 been collected, ihey cannot be held by process of garnish- 
 ment." But if the garnishees have had the check certified 
 before service of the process then they are liable for the 
 amount.' 
 
 56. As a depositor or sending bank can therefore retain 
 ownership of the instruments sent for collection by spe- 
 cially indorsing them, we may next inquire how long can 
 this be done % Does ownership cease with the collection 
 of the proceeds and before their transmission, or is this 
 special quality also impressed on them, and if so, for what 
 period? Unquestionably the sender's control over his 
 checks or the proceeds continue until they have been 
 paid, 4 and if the collection is to be performed by a sub- 
 agent, is not deemed complete until the proceeds have 
 
 fourth Nat. Bank v. Mayer, 14 S. E. Rep. 891 (Ga.) ; National Park 
 Bank v. Levy, 24 A.t. Rep. 777 (R. I.). 
 
 2 National Com. Bank v. Miller, 77 Ala. 168, 173 ; Moors v. Goddard, 147 
 Mass. 287. In this case Devens, J., said: "It has often heen held that 
 choses in action, as notes, drafts, checks, etc., uncollected, which have been 
 deposited with another to be thereafter collected, do not render him liable 
 to be charged under the trustee process." Lnpton v. Cutter, 8 Pick. 298 ; 
 Lane v. Felt, 7 Gray 491 ; Hancock v. Colyer, 99 Mass. 187. 
 
 3 National Com. Bank v. Miller, 77 Ala. 168. To hold a bank with which 
 a note is deposited for collection as. garnishee, a special notice is necessary 
 specifying that it is the property of the person sought to be reached. First 
 Nat. Bank v. Leppel, 9 Colo. 594. See <S 37. 
 
 *St. Louis & San Francisco R. Co. v. Johnston, 37 Fed. Rep. 243, 244 ; H- 
 linois Trust & Sav. Bank v. Smith, 21 Blatchf. 275, S. C. 15 Fed. Rep. 858 ; 
 Commercial Nat. Bank v. Armstrong, 39 Fed. Rep. 684. See \ 53 for other 
 cases. Balbach v. Frelinghuysen, 15 Fed. Rep. 675 ; Bank v. Wisconsin 
 Marine & Fire Ins. Co., 12 N. Y. Supp. 952, 954. 
 
76 BANK COLLECTIONS. § 56a 
 
 been received by the principal bank. Thus, in National 
 Exchange Bank of Texas v. Beal, ' a check was sent by 
 a plaintiff to a Boston bank which was transmitted to 
 another bank in the same state for collection. Mutual 
 accounts did not exist between the Massachusetts banks, 
 the check was collected and a letter of notification was 
 sent to the Boston bank, but before it was received the 
 bank had failed. The collection was not regarded as com- 
 pleted, and the Texas bank received *the proceeds of the 
 receiver, to whom they had been sent after th, failure. 
 Nor is the recovery of the proceeds prevented wherever 
 the federal rule prevails, that the principal bank is re- 
 sponsible for the conduct of a sub-agent whenever one is 
 employed to assist in making a collection, by an applica- 
 tion of it. But when the proceeds have been collected, 
 the owner' s control over them depends on the non-exist- 
 ence of a supplementary agreement or understanding to 
 retain them for a time, though perhaps very short, giving 
 risetto the debtor and creditor relation. 
 
 56a. It is true a different rule has been declared by 
 the Supreme Court of Ohio. In Reeves •». State Bank," 
 the secondary agent had credited the proceeds to the pri- 
 mary agent, between which mutual accounts existed, but 
 the latter had not received notice of the collection and 
 crediting and had not charged the proceeds to the collect- 
 ing bank. Nevertheless, the court regarded the crediting 
 as a payment to the primary bank. The collecting bank 
 had no not? ce, indeed, that the sending bank was not the ' 
 owner ; but this fact, while affecting the right to give a 
 credit instead of sending the proceeds, does not affect the 
 question whether such a crediting, unknown to the send- 
 ing bank and not acknowledged and not sanctioned by it, 
 the sole act of the collecting bank, and a large debtor, 
 can be regarded as a transfer of the proceeds from it to 
 the other. It is true that one of the judges vigorously 
 
 1 50 Fed. Eep. 355. 
 2 8 Ohio St. 465. 
 
§ 566 OWNERSHIP OF PAPER SPECIALLY INDORSED. 77 
 
 dissented, and we think that his inference from the facts 
 is more reasonable than that of the majority of the conrt. 
 56&. To answer this question more fully the proceeds 
 may be regarded as of two kinds, remittances and credits. 
 When remittances have actually been made by the collect- 
 ing bank before receiving notice of the primary agent's 
 insolvency, it cannot be held for the amount ; and if the 
 funds have been received, or if they have been and are 
 not blended with the other funds of the primary bank be- 
 fore its failure, the owner can recover them of the receiver. 
 If they consist of credits by the secondary agent, of which 
 the primary agent has been notified, but which have not 
 been acknowledged or charged, they are not considered 
 payments, and the' collecting bank is liable for them, ex- 
 cept in those cases in which an indebtedness is due from 
 the sending bank and which the other has a right to dis- 
 " charge in this manner. In one of the Fidelity Bank cases 1 
 the plaintiff sent to the Fidelity Bank a draft indorsed 
 "for collection," accompanied with instructions "tQ col- 
 lect and credit proceeds."- The Fidelity Bank sent the 
 draft to the Bank of Monroe which collected it and cred- 
 
 ■ ited the proceeds to the Fidelity Bank in accordance with 
 the usual course of business between them, notifying the 
 Fidelity Bank of the credit. The Fidelity Bank, how- 
 ever, suspended business before crediting the owner, the 
 First National Bank, with the proceeds, but after they 
 had been collected and notices of the crediting of the same 
 
 * by the Bank of Monroe had been received, it was held 
 that the indorsement for collection was notice to the Bank 
 of Monroe of the plaintiff's ownership of the draft, and 
 that the Bank of Monroe could obtain no better title to 
 the proceeds than the Fidelity Bank. This institution 
 could not apply the proceeds to an account owing to the 
 Bank of Monroe from the Fidelity Bank, nor could the 
 Bank of Monroe defeat this action by showing that the 
 
 1 First Nat. Bank v. Bank of Monroe, 33 Fed. Rep. 408. 
 
78 • BANK COLLECTIONS. § 57 
 
 proceeds belonged to the Fidelity Bank. Furthermore, 
 it was held that the relation of principal and agent con- 
 tinued between the First National and the Fidelity banks 
 so long as the latter did not assume the relation of pri- 
 mary debtor to the First National Bank for the proceeds ; 
 that the First National Bank not having been credited 
 with them, the relation between them remained that of 
 principal and agent and not that of debtor and creditor. 
 Any crediting by the Fidelity Bank after its failure could 
 not change that relation. 
 
 57. Suppose the contract between the sending' and col- 
 lecting banks contemplates the retention of the proceeds 
 for a short period, is such a provision consistent with the 
 operation of the trust? Thus, in Commercial National 
 Bank v. Armstrong, 1 the collecting bank was to collect and 
 make remittances on the first, eleventh and twenty-first of 
 each month. In executing the agreement the collecting' 
 bank held the proceeds of the paper collected for varying 
 periods not exceeding ten days. Was the trust impressed 
 on these deposits ? The decision of the court concerning 
 the paper in controversy cannot be assailed, because the 
 collecting bank had not collected it. But suppose it had, 
 would a trust have been impressed on the proceeds? 
 Would not that depend on the use made of them ? Had 
 they been put aside as trust deposits doubtless they would 
 have retained this character. If, however, they had been 
 used, like other deposits, as we suppose they were, when- 
 ever collections were made, then their trust character was • 
 impressed on them only while their identity, either in 
 their original or some other form, was preserved. The 
 trust agreement, whatever may be its terms, does not pre- 
 serve the character of the subject of it only as long as the 
 property is employed in accordance with the rules which 
 have been established for this purpose. The risk of their 
 non-observance must be taken by the sending bank, and 
 
 1 39 Fed. Eep. 684. 
 
§ 58 OWNERSHIP OF PAPER SPECIALLY INDORSED. 79 
 
 if they are violated, the property loses its peculiar char- 
 acter, and the owner must share the fate of other creditors. 
 58. In all cases insolvency terminates the contract ' for 
 collection ; by this act the collecting bank loses its power 
 to perform its undertaking. Whenever this happens, be- 
 fore obtaining payment, the sender can resume full au- 
 thority over his checks or other instruments ;' and if the 
 indorsement was general, the indorser may obtain posses- 
 sion of the checks or other instruments in process qf col- 
 lection. Said the court, in a case in which the checks 
 were thus indorsed, and the first indorsee had failed. 
 "If the [failed] bank had held the checks until after its 
 insolvency, and they had come to the hands of a receiver, 
 a court of equity might have compelled return to the de- 
 positors." s Or if the collection is completed afterwards 
 by the assignee, receiver or other person, the sender is en- 
 titled to the proceeds.* The assignee or receiver stands in 
 the same position as the assignor, or failed bank, possesses 
 the same equities, and acts as trustee for all interests as 
 they existed at the time of the failure. 5 In People v. Bank 
 of Dansville," Judge Barker, said: "Where one person 
 
 1 Manufacturers' Nat. Bank v. Continental Bank, 148 Mass. 553 ; Cragie 
 v. Hadley, 99 N. Y. 133 ; Levi v. National Bank, 5 Dill. 109, 110 ; In re 
 Armstrong, 33 Fed. Rep. 405, and authorities cited; Jones v. Kilbreth, 31 N. 
 E. Rep. 346 (Ohio). 
 
 2 Manufacturers' Nat. Bank v. Continental Bank, 148 Mass. 553; Bank v. 
 Wisconsin Fire & Marine Ins. Co., 12 N. Y. Supp. 952. 954; First Nat. Bank 
 v. First Nat. Bank, 76 Ind. 561 ; Audenried v. Betteley, 8 Allen 302. See . 
 Levi v. National Bank, 5 Dill. 104. 
 
 3 Hoffman v. First Nat. Bank, 46 N. J. Law 604, 607, citing Balbach v. 
 Frelinghuysen, 15 Fed. Rep. 675. 
 
 4 National Butchers & Drovers' Bank v. Hubbell, 117 N. Y. 384 ; Manu- 
 facturers' Nat. Bank v. Continental Bank, 148 Mass. 553 ; Fifth Nat. Bank 
 v. Armstrong, 40 Fed. Rep. 46 ; Hackett v. Reynolds, 114 Pa. 328 ; First 
 Nat. Bank v. Reno County Bank, 3 Fed. Rep. 257, 261; First Nat. Bank v. 
 Armstrong, 42 Fed. Rep. 193. 
 
 6 National Exchange Bank v. Beal, 50 Fed. Rep. 355, 359 ; Jones v. Kil- 
 breth, 31 N. E. Rep. 346 (Ohio); First Nat. Bank v. Mastin Bank, 2McCrary 
 438. 
 
 6 39 Hun 187, 190. 
 
80 • BANK COLLECTIONS. § 59 
 
 receives into his hands the funds of another, he is deemed 
 to hold them in a fiduciary capacity, such as bailee or 
 trustee, unless they were so received with the understand- 
 ing, express or implied, that the same should be turned 
 into a debt.' The receiver of the bank, as its representa- 
 tive, received its assets subject to the same equities' and 
 impressed with the same trust under which they were held 
 by it. a If the identical moneys collected by the bank did 
 not pass into the hands of the receiver it makes no differ- 
 ence, *f or in some shape or form they went to swell the 
 assets which fell into his hands." ' 
 
 59. Again, a draft or other instrument received for col- 
 lection at the time of the collector's insolvency, cannot be 
 credited to the sender, thus compelling him to share as a 
 general creditor. On one occasion F. , the owner of a draft, 
 delivered a draft payable in thirty days to a banking com- 
 pany for collection. Before the draft matured the com- 
 pany failed, but on the day of this event it credited F. 
 
 .with the amount of the draft. It was decided that the 
 banking company could not by thus crediting him with 
 the amount before it had been collected place him on the 
 roll of general creditors.* Said Mr. Justice Dickinson : 
 "If the trust company, as an agent of the owner, received 
 from him the draft for collection only, with an obligation 
 to account for and pay over the proceeds to him, a fiduci- 
 ary relation with the owner was thereby established, and 
 if his representatives trace the proceeds into the hands of 
 
 ' the trust company, and seek to impress upon the property 
 in its substituted form a trust character, the court of com- 
 
 1 Libby v. Hopkins, 104 U. S. 303; Rose v. Hart, 8 Taunt 499; People v. 
 City Bank, 96 N. T. 32. 
 
 2 In re Howe, 1 Paige 125; Le Eoy v. Globe Ins. Co., 2 Edw. 657; in re Le 
 Blanc, 14 Hun 8, affd. 75 N. Y. 598 ; People v. City Bank, 96 N. Y. 32. 
 
 * See Rochester Printing Co. v. Loomis, 45 Hun 93 ; see In re Bank of 
 Madison, 5 Biss. 515. 
 1 Jones v. Kilbreth, 31 N. E. Rep. 346 (Ohio). See g 170a. 
 
§ 59« OWNERSHIP OF PAPER SPECIALLY INDORSED. 81 
 
 mon pleas would not be without jurisdiction to afford 
 equitable relief by declaring and enforcing the trust." * 
 
 59a. An interesting decision has been rendered by the 
 Supreme Court of Virginia." A bank sent some checks 
 to a banking firm, on which they were drawn, for collec- 
 tion. Before they were received one of the partners died, 
 nevertheless the surviving partner credited the sending 
 bank with the amount of the checks and charged them to 
 the accounts of their respective drawers. Soon afterward 
 the firm failed and the bank sought to recover the pro- 
 ceeds of the checks. The court held that the partner 
 could not thus credit the sendmg bank witb the amount 
 of the checks. ' The bank contended that the checks ought 
 to have been returned, or that the proceeds were a trust 
 fund belonging to the institution, that in no event had 
 the surviving partner authority to credit the bank with 
 the amount, and thus compel a sharing with the general 
 creditors in the assets. Unquestionably, the demand for 
 the checks was proper, but the court went further and 
 held that the checks had been paid and that the fund was 
 capable of identification and could be recovered. In thus 
 holding, the court determined (1) that the surviving part- 
 ner had authority to collect the checks, and (2) also to pay 
 them, but' (3) could not credit the sending bank with the 
 amount. In other words, he could have returned the 
 checks or remitted the proceeds, but could not collect and 
 credit them, as had formerly been done to the account of 
 the sendmg bank. While the authority of a surviving 
 partner to pay the firm's indebtedness is established, 4 the 
 
 1 Gilbert a. Sutliff, 3 Ohio St. 129 ; Carter v. Lipsey, 70 Ga. 417 ; Com- 
 mercial Nat. Bank v. Armstrong, 39 Fed. Rep. 684. 
 
 2 First Nat. Bank v. Payne & Co.'s Assignees, 85 Va. 890. > The court 
 cited Overseers v. Bank, 2 Gratt. 544, 547 ; McLeod v. Evans, 66 Wis. 
 401 ; Fahnestock & Co. v. Bailey, 3 Met. (Ky.) 48; National Bank v. Insur- 
 ance Co., 104 U. S. 54. 
 
 3 See <S 172, for a description of the case. 
 
 * Commercial Nat. Bank v. Procter, 98 111. 558; Banks and their Deposi- 
 tors, \\ 139, 140. 
 
 6B. 
 
82 BANK COLLECTIONS. § 60 
 
 collecting firm was also the agent of the sending bank to 
 make the collection, and the rule is by no means clearly 
 established that a surviving partner has authority to do 
 this. The decision assumes that he could, as the court 
 decided that he should have returned the checks or sent 
 the proceeds. But his authority to make the collection 
 is not so undoubted as may be implied from the decision. 
 In New York the drawee in paying the note or check of 
 a depositor, whether it be received through the mail or in 
 other ways, simply acts for its depositor. 1 But even this 
 rule would not cover the case under consideration, for a 
 drawee bank in remitting the proceeds would surely act 
 as agent of the sending bank or of the holder or owner of 
 the instrument sent for collection. Having decided that 
 the checks had been collected, the court proceeded to in- 
 quire whether the fund could be reclaimed : "It appears 
 to be easily and clearly traceable upon the books of the 
 late concern, placed there after there was no such firm ; 
 no checks have been drawn against it ; it has remained 
 unchanged in any respect, and there is no difficulty in 
 tracing and identifying it. It does not belong to the as- 
 signees, because it did not belong to the firm. It was not 
 in the power of the surviving partner to convey it. It 
 did not pass by the deed, and the assignees have no right 
 to it whatever, but, actually holding it, they cannot use it 
 for the purposes of the firm, but ought, in justice, to return 
 it to the owner, the First National Bank of Alexandria." 
 60. When the proceeds have been collected before the 
 failure of the collecting agent, can the sender claim them ? 
 This depends on the nature of the relation existing be- 
 tween the sender and the collector, whether it is that of 
 principal and agent, or of debtor and creditor. If, as soon 
 as the proceeds have been collected, the collecting bank 
 becomes a debtor for the amount, and afterwards fails, 
 
 1 Indig v. National City Bank, 80 N. Y. 100. 
 
§ 61 OWNERSHIP OF PAPER SPECIALLY INDORSED. 83 
 
 the sending bank must share like any other creditor. 1 In 
 Jockusch ■». Towsey," the court said : "As ageneral rule, 
 after the collection is made the bank becomes a simple 
 contract debtor for the amount, less any commissions 
 which may be charged. If the party for whom the col- 
 lection was made was a regular depositor, the sum would 
 be placed to his credit upon his regular deposit account, 
 unless some peculiar usage or special instruction should 
 demand a different course of dealing. If the*partyhas 
 no deposit account, the bank simply owes him the amount 
 on demand."" But if the debtor and creditor relation 
 does not exist, and a bank in making collections is acting 
 wholly as agent or trustee of the sender, then the proceeds 
 are impressed with a trust character and may be recov- 
 ered as far as they can be traced.* 
 
 61. We will now review some of the cases in which the 
 courts have been required to determine which of these re- 
 lations existed. In Arnot v. Bingham, 6 a note was sent 
 to the Dansville bank indorsed "for collection" on ac- 
 count of the sending bank. The note was paid by charg- 
 ing the amount to the account of the maker, and four or 
 five days afterwards the bank failed, but in the. meantime 
 it had not remitted to the sending bank. In a suit against 
 the receiver he was obliged to pay the amount of the note. 
 It may be asked, if the decision is correct, why cannot a 
 trust relation be established by thus restricting the own- 
 ership of the instruments sent for collection, and their 
 payment be assured in preference to the claims of ordi- 
 
 1 Marine Bank v. Fulton Bank, 2 Wall. 252 ; National Butchers & Dro- 
 vers' Bank v. Hubbell, 117 N. Y. 384 ; Philadelphia Nat. Bank v. Dowd, 38 
 Fed. Rep. 172. 
 
 \ 51 Texas 129. 
 
 3 Planters' Bank v. Union Bank, 16 Wall. 483, 501 : In re Bank of Mad- 
 ison, 5 Biss. 515 ; Duncan D.Magette, 25 Tex. 245. 
 
 4 First Nat. Bank v. Armstrong, 36 Fed. Rep. 59, 61 ; Philadelphia Nat. 
 Bank v. Dowd, 38 Fed. Rep. 172 ; Jones v. Kilbreth, 31 N. E. Rep. 346 
 (Ohio.) 
 
 6 55 Hun 553 
 
84 BANK COLLECTIONS. § 61 
 
 nary creditors whenever the collecting bank fails. Doubt- 
 less this advantage can be won by thus retaining the own- 
 ership of the checks and other instruments forming the 
 subjects of collection, and by not establishing the debtor 
 . and creditor relation after they have been collected. In 
 the case just mentioned, while the proceeds were retained 
 several days, this relation was not created for the reason 
 that no agreement of that kind existed. Surely the col- 
 lecting bank cannot establish such a relation without the 
 concurrence of the other. The assent of both the sending 
 bank or depositor and collecting bank is needed to create 
 it. If the collecting bank could make the sending bank 
 a creditor by its sole act, then indeed* it might be pre- 
 sumed in every case in which 'the proceeds of collections 
 were not promptly transmitted, that the collecting bank 
 had determined to retain them, for a short time at least, 
 and become a debtor. In very many of the collection 
 cases the debtor and creditor relation did exist between 
 -the banks, and consequently when collections were made 
 the collecting bank became a debtor to the other and the 
 trust relation, if previously existing, ceased. In all such 
 cases the trust character of the collection was lost by 
 mingling the proceeds with other funds." But when only 
 a trust duty is to be performed, not followed or supple- 
 mented by retaining the proceeds and thus establishing 
 the debtor and creditor relation, their trust character is 
 preserved and they can be recovered. 1 Though not ques- 
 tioning the theoretic soundness of this decision, do noj; the 
 facts clearly show there was no collection, but only a jug- 
 glery with the books ? The note had been charged to the 
 maker, but the bank was insolvent and had no funds. 
 The trust fund created by the action of the bank was a 
 fiction. Admitting that the fund really existed, we do 
 not perceive any reason why it should not have been re- 
 ceived. 
 
 1 People v. City Bank, 96 N. Y. 32 ; Cavin v. Gleason, 105 N. Y. 256 ; Ex 
 parte Dale & Co., 11 Ch. Div. 772, 778 ; Knatchhull v. Hallett, 13 Ch. Div. 
 696 ; Philadelphia Nat. Bank v. Dowd, 38 Fed. Rep. 172. 
 
§ 61S OWNERSHIP OP PAPER SPECIALLY INDORSED. 85 
 
 61a. In Frank v. Bingham, 1 however, a case springing 
 from the same failure, it was decided that no trust what- 
 ever was impressed on the funds in the possession of the 
 receiver. 2 
 
 616. In another case springing from essentially the same 
 facts, a different decision was rendered. 3 The Chemical 
 National Bank having received a check from a customer 
 on the Merchants & Mechanics' Bank, which was sent to 
 that institution for payment. The bank chargedithe check 
 to the drawer, whose account was good at that time for 
 the amount, and returned the check to the drawer. A 
 draft was sent to the Chemical National Bank on another 
 bank in the cityfor the amount of the check, but two 
 days afterward its doors were closed and the draft was not 
 paid. The Chemical Bank sought to obtain the money 
 by requiring the receiver to pay the amount of the check 
 on the ground that the assets came into his hand im- 
 pressed with a trust in favor of that bank. The bank was 
 successful. Said Mr. Justice Kapallo: "There is no 
 actual setting apart or appropriation of any specific fund 
 or property of the bank, or of the drawer, f er the pay- 
 ment of the check. It is not claimed that the identical 
 funds which had? been deposited by the drawer, and on 
 which deposits the credit on the books was founded, were 
 in the possession of the bank when the check was pre- 
 sented for payment. It is conceded that they were not, 
 and that the bank had used them in its business, and con- 
 verted them into securities or investments. The bank 
 was simply debtor to the depositor for the balance of de- 
 posits which stood to its credit. By charging the check 
 in account the bank reduced its indebtedness to the de- 
 positor by the amount of the check, and constituted itself 
 debtor to the holder of the check to a corresponding 
 amount. It did not undertake to provide for the check 
 
 1 58 Hun 580. 
 
 2 See U 63fc, 63Z. 
 
 3 People v. Merchants & Mechanics' Bank, 78 N. Y. 269, S72. 
 
86 BANK COLLECTIONS. § 61e 
 
 by setting apart or appropriating any particular property 
 or fund 'for that purpose, but by drawing a draft upon 
 the Metropolitan Bank of New York, and remitting the 
 draft to the Chemical Bank. It certainly assumed the 
 payment of the check, but there is an entire failure to 
 show that it impressed a special trust on any of its assets 
 for that purpose. ' ' 
 
 61c. The Commercial National Bank v. Armstrong, 1 is 
 another case in which the relation of principal and agent, 
 which exists between the two parties to a collection, was 
 clearly separated from the relation of debtor and creditor, 
 which is often established for the subsequent management 
 of the proceeds. This was one of the Fidelity Bank cases. 
 The paper sent for collection was to be collected and the 
 amount was to be remitted on the first, eleventh and 
 twenty-first of each month. The paper in controversy 
 had not been collected before the bank's failure. Judge 
 Jackson held, that by virtue of the agreement existing 
 between the Jjanks the relation was that of principal and 
 agent, and, therefore, the Commercial Bank was entitle 
 to the proceeds of the checks if they could be traced. 2 
 
 61d. In Merchants & Farmers' Bank v. Austin," a bank 
 was instructed to collect some drafts and to remit the pro- 
 ceeds to a third bank for the account of the first or send- 
 ing bank. Instead of remitting the proceeds, they were 
 retained and mingled with the funds of the bank. Judge 
 Bruce decided that it did not clearly appear that the pro- 
 ceeds were collected, or not all of them, as the drafts were 
 drawn on a depositor of the collecting bank ; for though 
 he gave his check on that bank for four of them, his ac- 
 count was overdrawn before doing so. Surely, if they 
 were not paid, no trust fund existed to be recovered. 4 
 
 61 e. In another case the Bank of Commerce of St. Louis 
 
 1 39 Fed. Eep. 684. 
 
 2 For another Fidelity Bank case see \ 37 
 
 3 48 Fed. Eep. 25. 
 'See 2 171. 
 
§ 61<? OWNERSHIP OF PAPEE SPECIALLY INDORSED. 87 
 
 sent to Southern Bank of New Orleans three checks for 
 collection on banks in that city. Mutual accounts ex- 
 isted between these banks, and collections were made and 
 drafts were drawn by each on the other without reference 
 to the specific amounts collected. The Southern Bank 
 collected the checks above mentioned and an hour or two 
 later on the same day failed. The St. Louis bank sought 
 to recover the amount thus collected just before the fail- 
 ure. But the court decided that as it had been credited 
 to the other and mingled with the assets of the bank, the 
 St. Louis bank had no right thereto. 1 
 
 61/. In Kinney & Co. v. Paine, 2 G. & Co. were private 
 bankers who received a check given by C; one of their 
 customers, for collection. The check was charged to his 
 account, though in so doing he overdrew it, and a draft 
 on New York was sent to the sender of the check in pay- 
 ment. The drawers having failed, the holders sought to 
 enforce a trust on the debt sue by C. It was decided that 
 the senders were the real owners of the claim on C. sent 
 for collection and were "entitled to pursue it through all 
 the devious ways disclosed." 
 
 61g. In Ryan & Sons v. Paine/ the plaintiff made a con- 
 signment to H. and sent the bill to a banker for collection. 
 Though H. had an overdue account with the banker at 
 the time, ,he gave his check for the amount, and the banker 
 sent a draft on New York in payment for the consign- 
 ment. The banker failed, however, and the drawee re- 
 fused to pay the draft. In an action by Ryan to recover 
 the amount the court decided that he was entitled to im- 
 press a trust on enough of the assets of the bank in the 
 hands of the receiver to satisfy the debt.' 
 
 1 State ot La. v. Southern Bank, 33 La. Ann. 957. 
 
 2 68 Miss. 258. 
 
 3 66 Miss. 678. 
 
 * In Maxwell's case a son sold his mother's property and deposited the 
 proceeds in a bank with Iris own money. He afterwards withdrew a por- 
 tion and invested it in her name. It was held that a trust was impressed 
 on enough of the balance to repay the remainder of the sum due the de- 
 positor's mother. In re Maxwell's Estate, 50 N. W. Rep. 56 (Iowa). 
 
88 BANK COLLECTIONS. § 61£ 
 
 61 h. In another Fidelity Bank case, 1 the checks and 
 drafts had been sent to the Fidelity Bank indorsed "for 
 collection," and had been credited " subject to payment." 
 The collecting bank performed the business under the fol- 
 lowing offer which had been accepted by the sending bank : 
 " We will credit sight items on any point in the United 
 States where there are banks at par, and make collections 
 on same points, which, when paid, will credit at par, al- 
 lowing you two and a-half per cent, on daily balances, 
 calculated when monthly statements are rendered, and 
 will remit for your credit to New York, against your bal- 
 ances, at any time you may desire, without charge, or will 
 ship you currency, express charges at your cost." The 
 Fidelity Bank failed owing the other $2,177 and having 
 uncollected checks amounting to $3,336, which were after- 
 wards paid to the receiver. The court declared that the 
 ruling ia the preceding case did not conflict with the con- 
 clusion in this, " that the relation of debtor and creditor 
 did not arise upon the receipt of the paper, but, in the 
 true construction of the arrangement as it existed, wqs 
 postponed until the receipt of the proceeds of collection." 
 As the bank had failed before the collection of the latter 
 sum, the debtor and creditor relations had not been 
 created ; the sum, therefore, remained a trust fund and 
 belonged to the sending bank. The other sum was a debt 
 on which only a dividend could be obtained like other 
 creditors. 
 
 611 Another Fidelity Bank case was the Manufac- 
 turers' National Bank v. Continental Bank, 3 in which the 
 same offer for making collections had been made and ac- 
 cepted as in the Commercial Bank case, 3 and the court 
 reached the same conclusion concerning the kind of rela- 
 tionship created by it. The Manufacturers' Bank sent 
 the checks specially indorsed to the Fidelity Bank, which 
 were ^ent indorsed in a like manner to the Continental 
 
 1 First Nat. Bank v. Armstrong, 45 Fed. Rep. 193. 
 
 2 148 Mass. 55? 
 
 3 See \ 61c. 
 
§ 611 OWNERSHIP OF PAPER SPECIALLY INDORSED. 89 
 
 Bank. This bank heard of the failure after, receiving the 
 check but before crediting it. The court declared that 
 the Manufacturers' Bank was entitled to the amount. 
 
 61/. In Continental National Bank v. Weems,' the Con- 
 tinental Bank was in the way of discounting notes for the 
 City Bank and of forwarding the same on maturityjto that 
 bank for collection and returns, with the understanding 
 that the proceeds should be preserved by the City Bank 
 as the property of the other and returned to it. The City 
 Bank having failed, the other sought to impress a trust 
 on the funds in its possession which had been received in 
 payment of such notes. The court decided in its favor, 
 saying that if the securities had been sent for collection 
 merely and the proceeds were to be credited to the Con- 
 tinental Bank, it was clear that after their collection the 
 relation of creditor and debtor would have subsisted and 
 the Continental Bank would have had no claim on the 
 funds, but by the understanding between them, and the 
 actual transaction between the parties, as shown by the 
 evidence, a special agency was created and the City Bank 
 had no authority to hold and credit the proceeds of the 
 notes, but was bound to remit them immediately to its 
 correspondent. 
 
 617c. In the case of Harrison National Bank v. Ellicott, 1 
 the bank transmitted a note to another bank for collec- 
 tion. Instead of collecting it, the second bank took a new 
 note from the maker, payable to itself, and soon after 
 failed. TheH. Bank sought to hold the assignee as a 
 trustee to the amount of the note but did not succeed. 
 It could, however, have recovered the note itself, and 
 sued the maker if he refused to pay. 
 
 61Z. In Aj-mstrong v. National Bank,' the Fidelity Na- 
 tional Bank received a draft payable at a Louisville 
 bank for collection which was indorsed in blank. The 
 
 1 69 Texas 489, 495. * 
 
 2 31 Kan. 173. 
 
 3 14 So. W. Rep. 411 (Ky.). 
 
90 BANK COLLECTIONS. § 62 
 
 Fidelity Bank sent the check forward indorsed "for col 
 lection and credit" to the Louisville bank. The draft 
 was collected and the Fidelity Bank was credited with 
 the amount, but before receiving it the bank failed. It 
 was declared that the bank which sent the draft to the 
 Fidelity Bank was the owner and entitled to the proceeds. 
 That the relation of the sending and the Fidelity banks 
 was that of principal and agent was shown, not only by 
 the letter of instruction accompanying the draft, but the 
 entry on the Fidelity Bank's collection register. 
 
 61m. In another case" a receiver sought to recover the 
 amount of two drafts that were drawn by S., of which he 
 had stopped payment. They were put into the M. Bank 
 for collection. The bank credited him with the amount 
 and charged him with the amount of another draft and 
 some money. The M. Bank was insolvent at the time, and 
 on the day of making an assignment transmitted S. ' s drafts 
 to the City Bank, of which the plaintiff became the re- 
 ceiver, for collection, but they were credited to the M. 
 Bank on prior indebtedness. It was decided that the de- 
 fendant had the right to prevent the payment of the drafts 
 either to the receiver or to the M. Bank. 
 
 61w. In another case a draft, which was deposited in a 
 bank without instructions for treating it as a separate 
 fund, was forwarded by the institution to a New York 
 bank for collection and credit, and duly entered on the 
 books of the collecting bank. The balances were daily 
 changed by drafts and receipts. The sending bank hav- 
 ing failed, the depositor sought to reclaim the entire 
 amount of his draft from funds then remaining in the New 
 York bank to the credit of the sending bank, but the 
 court declared that he could recover no mQre than his 
 pro rata." 1 
 
 62. We shall next proceed to inquire when the trust 
 relation exists, how far can the owner go in recovering his 
 
 1 Atkinson v. Stafford, 20 N. Y. Week. Dig. 49 
 
 2 Edson v. Angell, 58 Mich. 336 
 
§ 62 OWNERSHIP OP PAPER SPECIALLY INDORSED. • 91 
 
 property ? In a well-considered case ' Judge Jackson says : 
 "In seeking to follow and impress a trust character upon 
 funds which an agent has misapplied, it is incumbent 
 upon the principal to clearly trace such funds into the 
 hands of the party against whom the relief is sought ; and, 
 so long as the trust fund or property, in either its original 
 or substituted form, can be traced and identified, it may 
 be followed and recovered by the true owner, provided it 
 has not come into the possession of some bona fide holder 
 for value without notice. This right of the principal 
 'only ceases when the means of ascertainment 'fails,' or 
 when his property or fund has reached a ionafide holder 
 for value, and without notice of the trust. It is hot 
 deemed necessary to review the numerous authorities on 
 this question. The rule is now well settled by repeated 
 decisions both of the state and federal courts, which have 
 followed and applied the principle laid down by Lord 
 EUenborough in Taylor v. Plumer." The leading cases in 
 this country are here simply referred to. 3 Those author- 
 ities impose upon complainant the duty of tracing the 
 funds it seeks to have impressed with a trust character 
 into the defendant's possession, either in their original or 
 in some substituted form, and the burden of identification 
 Is imposed upon all owners seeking to follow their prop- 
 erty or its proceeds. No well-considered case has gone to 
 the extent of holding that, when an agent converts or mis- 
 appropriates his principal's property or funds, and there- 
 after fails, his general estate, will be impressed with a 
 trust for the reimbursement of such principal, on the 
 ground that such estate has been benefited, and to an 
 equal amount, by the agent's breach of duty. Every 
 
 1 Commercial Nat. Bank v. Armstrong, 39 Fed. Rep. 684, 692. 
 
 2 3 Maule & Sel. 562. 
 
 3 Overseers v. Bank, 3 Mason 232; Kipw. Bank, 10 Johns. 63 ; Van Alen v. 
 American Nat. Bank, 52 N. T. 1 ; Farmers & Mechanics' Nat. Bank v. King, 
 57 Pa. 202 ; Cook v. Tullis, 18 Wall. 332 ; Schuler v. Laclede Bank, 27 Fed. 
 Rep. 424 ; National Bank v. Insurance Co., 104 TJ. S. 54 ; Winters' Bank v. 
 
 1 Armstrong, 37 Fed. 508 ; First Nat. Bank r. Armstrong, 36 Fed. Rep. 59. 
 
92 • BANK COLLECTIONS. § 63& 
 
 creditor could rest a like claim to priority of satisfaction 
 on the same ground. The right of the owner to follow 
 and recover his property rests upon a principle altogether 
 different." ' 
 
 63. Passing from this general consideration of the sub- 
 ject we will describe more fully" the rules that may be ap- 
 plied in recovering trust property. 
 
 63a. First. "Formerly," remarks Mr. Justice Bradley, 
 
 " the equitable right of f ollc-wiiig misapplied money or 
 
 \other property into the hands of the parties receiving it 
 
 depended upon the ability of identifying it ; the equity 
 
 attaching only to the very property misapplied. " * 
 
 635. Second. This right has been extended to the pro- 
 ceeds of the property which has been procured by ex- 
 change, purchase or sale. 3 In other words, "the fruit or 
 product of the trust fund into whatsoever character of 
 goods, estate, or property it may have been transmuted, 
 
 1 Overseers v. Bank, 2 Gratt. 544; Knatchbull v. Hallett, 13 Ch. LMv. 696; 
 Whitely v. Foy, 6 Jones Eq. 34 ; Cragie v. Hadley, 99 N. Y. 131»; Long v. 
 Majestre, 1 Johns. Ch. 305. 
 
 2 Frelinghuysen v. Nugent, 36 Fed. Eep. 229, 239; Eyall v. Bolle, 1 Atk. 
 165 ; Scott v. Surman. Willes 400 ; Bnrdett v. Willett, 2 Vera. 638 ; White- 
 comb v. Jacob, 1 Salk. 160. 
 
 s Frelinghuysen v. Nugent, 36 Fed. Eep. 229, 239 ; Taylor v. Plumer, 3 
 Maule & Sel. 562 ; Pennell v. Deffell, 4 De Gex, M. & G. 372 ; Knatchbull" 
 v. Hallett, 13 Ch. Div. 696 ; National Bank v. Insurance Co., 104 TJ. S. 54 ; 
 Brocchus u. Morgan, 5 Cent. L. J. 53 (Term.) ; People v. City Bank, 96 N. 
 Y 32 ; Harrison v. Smith, 83 Mo. 210; Stoller .v. Coates, 88 Mo. 514; Peak 
 v. Ellicott, 30 Kan. 156; Fanners & Mechanics' Nat. Bank v. King, 57 Pa. 
 202 ; Trecothick v. Austin, 4 Mason 16 ; School Trustees v. Kirwin. 25 111. 
 73 ; Union Nat. Bank t>. Goetz, 27 N. W. Eep. 907 (III. ) ; Thompson's Ap- 
 peal, 22 Pa. 16; Goodell v. Buck, 67 Me. 514; Portland & Harpswell Steam- 
 boat Co. v. Locke, 73 Me. 370 ; United States v. Inhabitants of Waterborough, 
 2 Ware 158 ; Englar v. Ofmutt, 70 Md. 78 ; Johnson v. Ames, 11 Pick. 173. 
 In Cook v. Tullis, 18 Wall. 332, 341, the court said : " It is a rule of equity* 
 ) urisprudence, perfectly well settled and of universal application, that where 
 property held upon any trust to keep or use, or invest in a particular way, 
 is misapplied by the trustee and converted into different property, or is sold 
 and the proceeds are thus invested, the property may be followed wherever 
 it can be traced through its transformations, and will be subject, when found 
 in its new form, to the rights of the original owner or cestui que trust." 
 
§ 63C OWNERSHIP OF PAPER SPECIALLY INDORSED. 93 
 
 is still impressed with the trust." ' And in Cavin v. GHLea- 
 son, a Mr. Justice Andrews thus states the rule : "In order 
 to follow trust funds, and subject them to the operation 
 of the trust, they must be identified." * * "As between 
 cestui que trust and trustee, and all parties claiming un- 
 der the trustee, otherwise than by purchase for a valuable 
 consideration, without notice, all property belonging to a 
 r trust, however much it may be changed or altered in its 
 nature or character, and all the fruit of such property, 
 whether in its original or altered state, continues to be 
 subject to or affected by the trust ;" and continuing the 
 judge says: "It may be sufficient to entitle a party to 
 equitable preference in the distribution of a fund in in- 
 solvency, that it appears that the fund or property of the 
 insolvent remaining for distribution includes the proceeds 
 of the trust estate, although it may be impossible to point 
 out the precise thing in which the trust fund has been in- 
 vested or the precise time when the conversion took place. ' ' * 
 This rule rests on too firm ground to be undermined.. 
 
 63c. Thus, in a Fidelity Bank case,* a draft had been 
 sent specially indorsed "for collection" and was paid by 
 the drawee by check, which the bank collected through the 
 clearing house. A memorandum was placed with the 
 bank's cash to indicate that the draft was the property of 
 the sender. The Fidelity Bank was closed the next morn- 
 ing and the receiver credited the proceeds to the sender of 
 the draft on the books of the bank. The court held that 
 the fund could be identified and recovered by the sender. 
 In many cases, however, the proceedings to recover the 
 trust fund have failed because it could not be traced into 
 
 substituted property.' 
 
 * 
 
 1 5 Cent. Law Jour. 51, 75. 
 
 * 105 N. Y. 256, 262, 260, 262. 
 
 * See also remarks by Dwight, P. J. , on the same rule in Frank v. Bing- 
 ham, 58 Hun 580. 
 
 1 First Nat. Bank v. Armstrong, 36 Fed. Rep. 59. 
 
 5 Frelinghuysen v. Nugent, 36 Fed. Rep. 229, 239 ; Peters v. Bain, 133 
 U. S. 670. , 
 
94 BANK COLLECTIONS. § 63e 
 
 63d. In Thompson's Appeal, 1 the Supreme Court of 
 Pennsylvania said: "Whenever a trust fund has been 
 wrongfully converted into another species of property, if 
 its identity can be traced, it will be held in its new form 
 liable to the rights of the cestui que trust. No change 
 of its state and form can divest it of such trust. So long 
 as it can be identified, either as the original property of 
 the cestui que trust, or as the product of it, equity will • 
 follow it ; and the right of reclamation attaches to it until 
 detached by the superior equity of a bona fide purchaser 
 for a valuable consideration without notice. The substi- 
 tute for the original thing follows the nature of the thing 
 itself, so long as it can be ascertained to be such. But the 
 right of pursuing it fails when the means of ascertainment 
 fail. This is always the case when the subject-matter is 
 turned into money, and mixed and confounded in a gen- 
 eral mass of property of the sante description. This 
 mixture has taken place in the case under consideration. 
 It ia impossible for a chancellor to lay his hand upon a 
 single article of property, or on a single dollar of money 
 included in the assignment, and say that any particular 
 thing or sum of money is either the original property [re- 
 ceived by the assignor] or the product of it. The decree 
 was, therefore, erroneous." This doctrine is maintained 
 in Illinois, Mr. Justice Wilkin remarking in a recent 
 case, " that trust funds can only be pursued when they 
 can be clearly distinguished from other property held by 
 the trustee, or by those representing him." a . 
 
 63e. Third. Formerly, when the property became con- 
 fused or blended with other property of the same kind 
 and could not be distinguished, without any fault on the 
 
 1 22 Pa. 16. 
 
 2 Union Nat. Bank v. Goetz, 27 N. E. Eep. 907. The judge cited in sup- 
 port of his position, Goodell v. Buck, 67 Me. 514 ; Portland & Harpswell 
 Steamboat Co. v. Locke, 73 Me. 370 ; United States v. Inhabitants of Water- 
 borough, 2 Ware 158 ; Englar v. Offnut, 70 Md. 78 ; Johnson v. Ames, 11 
 Pick. 173 ; Trecothick v. Austin, 4 Mason 16; School Trustees v. Kirvrin, 25 
 111. 73. 
 
§ 63g OWNERSHIP OF PAPER SPECIALLY INDORSED. 95 
 
 part of the possessor, the equity was lost. The rule 
 though has been so changed that the blending does not 
 destroy the equity entirely, but converts it into a charge 
 on the entire mass, giving to the party injured by the un- 
 lawful diversion a priority of right over the other cred- 
 itors of the possessor. 1 
 
 63f. Fourth. When trust property has become mingled 
 with the trustee's private property, the whole is regarded 
 as trust property except so far as he may be able to dis- 
 tinguish his own. 1 
 
 63g. Fifth. When the trust property has not simply 
 become mingled, but actually or probably paid out, or 
 abstracted, and other property perhaps to some extent 
 has taken its place, not by exchange, purchase or sale, 
 but by entirely different operations, and not by the opera- 
 tion of such trust property, like the paying and receiving 
 of deposits, the question is an open one whether a trust 
 is impressed on such property or not. In New York the 
 courts hold that under these conditions a trust does not 
 exist. The court remarked if the same judgment was ren- 
 dered in Frank ». Bingham' as in Arnot v. Bingham,' the 
 entire deposit was so small that it could not pay both 
 
 1 Frelinghuysen v. Nugent, 36 Fed. Rep. 229, 239. 
 
 2 National Bank v. Insurance Co., 104 TJ. S. 54; Snorgrass v. Moore, 30 Mo. 
 App. 232 ; Harrison v. Smith, 83 Mo. 210 ; Halle v. Nat. Park Bank, 29 N. 
 E. Rep. 727 (111.). " When money held by a person in a fiduciary capacity 
 has been paid or deposited by him in his general account at a bank, the 
 party for whom the money is held can follow it and has a charge on the bal- 
 ance in the banker's hands, and if a person holding money in a fiduciary ca- 
 pacity, pays it to his account at his bankers, and mixes it with his own 
 money and afterwards draws out some by checks generally and in the ordi- 
 nary manner, the drawer of' the checks must be taken to have drawn out 
 his own in preference to the trust money. The rule attributing the first 
 drawing out to the first payment in, does not apply to such a case." O'Brien, 
 J., in Importers & Traders' Nat. Bank u . Peters, 123 N. Y. 272, 278, citing 
 Knatchbull v. Hallett, 13 Ch. Div. 696 ; Baker v. N. Y. Nat. Ex. Bank, 100 
 N. Y. 31 ; National Bank v. Insurance Co., 104 U. S. 54. 
 
 3 58 Hun 580. 
 *55Hun553. 
 
'96 BANK COLLECTIONS. § 63h 
 
 judgements ; either therefore one judgment or the other 
 would be wrong, a trust could not be impressed on the 
 same property in both cases. In Texas, however, if a 
 trust fund is collected and mingled with other moneys, 
 it may be recovered if the aggregate on deposit has not 
 fallen at any time below the trust portion. 1 Said Mr. 
 Justice G-aines : "It may be that when the entire mass is 
 once paid away, the right to claim a trust in any money or 
 property is forever lost. But if, as in the present case, 
 throughout all the trustee's dealings with the funds so 
 mingled together, he keeps on hand a sufficient sum to 
 «over the amount of the trust money, we think it'capable , 
 of demonstration that the trust should attach to the bal- 
 ance that is found to remain in his hands." 3 
 
 63h. In Wisconsin, however, it is hot necessary to trace 
 the trust fund into some specific property. If it can be 
 traced into the estate of the defaulting agent this will be 
 sufficient. This doctrine was announced by the Supreme 
 Court of Wisconsin, though two of the five judges dis- 
 sented.' 
 
 1 Continental Nat. Bank v. Weems, 69 Texas 489, 497. 
 
 8 The same judge continued : "Let us take the case before us for an 
 illustration. It is shown by the evidence that after the bank received the 
 money, amounting to about $5,000, its cash assets were never reduced below 
 the sum of $6,000, until they went into the receiver's hands! Even admit- 
 ting that in course of its transactions this identical money was paid out by 
 the bank to its uttermost farthing, yet we know that every dollar so ex- 
 pended left its representative an exact equivalent in the vault from which 
 it was taken and that, when again the money so left was expended, it left ' 
 in turn its equivalent behind it. We see, therefore, that whatever changes 
 may have taken place in the funds from the receipts and expenditures of the 
 bank, the balance left at the date of its failure, was the result of the pro- 
 ceeds of the notes to the extent to which such balance was thereby increased ; • 
 and that the cash which went into the hands of the receiver should be 
 deemed the representative of those proceeds and impressed with the trust 
 character which pertained to them. ' ' 
 
 s McLeod v. Evans, 66 Wis. 401 ; Francis v. Evans, 33 So. W. Rep. 93 ; 
 Third Nat. Bank b. Stillwater Gas Co., 36 Minn. 75; Thompson v. Glou- 
 cester City Sav. Inst., 8 At. Eep. 97 (N. J.) ; Independent District v. King, 
 80 la. 497 j Davenport Plow Co. v. Lamp, 80 la. 722 ; Ellicott v. Barnes, 31 
 
§ 63i OWNERSHIP OF PAPER SPECIALLY INDORSED. 97 
 
 63i. In Thompson©. Gloucester City Savings Institution,' 
 a bank sent to a savings bank two drafts and a note f Or col- 
 lection. The draft and one of the notes were collected, and 
 the second note was sent to another bank for that pur- 
 pose. The collections were not kept separate by the sav- 
 ings bank, or in any way distinguished from its other 
 funds. Shortly afterwards it failed and a receiver was 
 appointed to settle its affairs, who contended that the 
 sending bank could only share pro rata in the assets. 
 Vice Chancellor Bird held that the relation between the 
 two banks was that of principal and agent, and that the 
 sending bank, therefore, ought to be paid the full amount 
 collected on the note and draft with interest, and might 
 look to the other bank for the note which the savings 
 bank had transmitted to it. In reply to the contention 
 that the entry by the savings bank on its book of the 
 money collected, changed the rights to the parties, he 
 said: "It would hardly be safe to say that an agent 
 could make himself a debtor, simply as distinguished from 
 agent, by a confusion of the moneys or goods of his prin- 
 cipal, and by then giving his principal credit for their 
 value, or the amount collected. Any such doctrine would 
 be dangerous in the extreme, and would inevitably com- 
 pel the abandonment of commercial transactions by means 
 of agents. But no difficulty whatever arises for the con- 
 Kan. 170 ; In re Le Blanc, 14 Hun 8, affd. 75 N. Y. 598 ; Peoples. Dansville 
 Bank, 39 Hnn 187 ; McColl v. Fraser, 40 Hun 111 ; Libby v. Hopkins. 104 
 U. S. 303 ; Harrison v. Smith, 83 Mo. 210 ; Peak v. Ellicott, 30 Kan. 156. 
 The court relied on People v. City Bank, 96 N. Y. 32, but Andrews, J., in 
 Cavin v. Gleason, 105 N. Y. 256, 263, remarked : " The case of Peoples. 
 City Bank of Rochester, 96 N. Y. 32, seems to have been misunderstood. 
 The question conssdered in this case was not raised there, and it was not 
 , claimed in that case that the proceeds of the checks of the petitioners, had 
 not gone into the general funds of the bank, or that they had not passed in 
 some form to the receiver. The court did not decide that the petitioners 
 would have been entitled to a preference in case the proceeds of the check 
 had been used by the bank, and were not represented in its assets in the 
 hands of the receiver." 
 
 1 8 At. Rep. 97. 
 
 8 B. 
 
98 BANK COLLECTIONS. § 63; 
 
 fusion of these moneys any more than in every other case 
 where the rightful owner is in pursuit of trust funds. In 
 such case the owner need not point out the very goods, or 
 bill or coin. He does all that che law requires if he shows 
 that the goods or bills or coin came to the hands of the 
 defendant impressed with a trust to his knowledge. In 
 every such case the holder must respond either in the 
 article taken or its value." ' 
 
 63/. In First National Bank v. Hummel,' the bank sent 
 to E., a banker, a draft drawn on him and directed him 
 to remit the proceeds to another bank to the credit of the 
 drawer. Money was deposited with E. to meet the draft. 
 Before remitting E. died. Nevertheless, the fund thus 
 deposited with him to pay the draft was declared to be- 
 long to the drawer bank, although it was mingled with 
 other funds of E.'s estate. It was insisted that having 
 become mingled its identity was lost, and consequently 
 it could not be recovered. Patterson, C, speaking for 
 the court said : ' ' This proposition was predicated upon 
 the principle that money, as such, cannot be recovered, 
 because, in the language of the books, it has no 'ear 
 mark ' by which it can be distinguished. If this princi- 
 ple can be successfully invoked in this case, then a fund 
 to which decedent had no title, and in which he had no 
 beneficial interest whatever, became a part of the body of 
 his estate to be distributed among the general creditors. 
 If the estate of E. is insolvent such a result would not 
 only be inequitable and unjust, but a reproach to the law. 
 It is undoubtedly true that the principle contended for 
 was at one time so well settled as to be elementary. * * 
 At this time the owner of money which has been received 
 by another as trustee, or in any fiduciary capacity, can un- 
 
 1 Citing Hoffman v. First National Bank, 46 N. J. Law 604 ; Sweeny v. 
 Easter, 1 Wall. 166 ; Hook v. Pratt, 87 N. Y. 371 ; McLeod v. Evans, 66 
 Wis. 401. 
 
 2 14 Colo. 259, 265. This decision contains an extended discussion of the 
 subject. 
 
§ 63Z OWNERSHIP OF PAPER SPECIALLY INDORSED. 99 
 
 doubtedly recover the money or its equivalent whenever 
 the same can be followed, no matter what form it may 
 take." 
 
 63*. The decision in Arnot v. Bingham," admitting that 
 a trust existed, is quite in harmony with the two last men- 
 tioned decisions. The fund was not separated, but was 
 simply a part of the common property of the bank. It is 
 true that the fund was created in a different manner from 
 the fund in some of the other cases, but it had no iden- 
 tity. Indeed, at no time had it ever existed in a distinct 
 form,' 
 
 63Z. From this extended review of the decisions only 
 the first, second and fourth rules have been generally 
 adopted ; the others, and especially the Texas and Wis- 
 consin rules, encounter opposition. But this much would 
 seem to. follow from all the rules, that whenever trust 
 property has been spent or lost, and this is clearly proved, 
 the beneficiary ought not to be permitted to take the 
 property of others as a substitute for his own. If this be 
 a just view, when the identity of the trust property, either 
 in its original or substituted form, can be no longer traced^ 
 and all knowledge of it as a part of the existing mass is. 
 lost, and only presumptions and conjectures concerning 
 it can be formed, in such cases ought not the beneficiary 
 to share with the general creditors \ If the trust property 
 is simply blended, but actually exists, then indeed it may 
 be justly awarded to him ; but when its existence at all 
 among the bank's assets is not assured, there is no just 
 reason for creating artificial assumptions on which to form 
 a preference for trust creditors. Those who carry protec- 
 tion to trust property so far overlook, we think, the claims 
 of ordinary bank depositors. Is not their property also 
 held in trust ? It is true that the law regards a bank as a 
 creditor of the depositor, and the money thus confided to 
 
 1 55 Hun 553. 
 'See ?61. 
 
100 BANK COLLECTIONS. § 64 
 
 the institution, when consisting of a general deposit as its 
 money ; but the bank and the depositor regard the trans- 
 action quite differently. The depositor regards his money, 
 though in the bank, as his own, as much so as the money 
 in his pocket book or in his own safe. He expects that 
 the bank will use some of it, but always on condition that 
 he can get the whole on demand. This view of the mat- 
 ter is strengthened by the practice of keeping a portion 
 always on hand, voluntarily or by force of law. Why, 
 then, are not these deposits just as sacred as other trust 
 money ; is not a bank under the same imperative duty to 
 respond to the demand of an ordinary depositor as to that 
 of a beneficiary? If, therefore, the funds in the bank's 
 keeping are partly lost and identification is impossible, 
 why should not all share alike ? 
 
 64. When collections are made for a non-depositor they 
 are always trust property. In Nurse v. Satterlee, 1 the 
 owner of a foreign letter of credit deposited it in a bank 
 for collection and received a receipt for the same. The 
 letter was sent to another bank for collection and a draft 
 on a New York bank was sent in payment therefor. The 
 receiving bank, having indorsed the draft over to a third 
 bank, sent it to that bank for deposit and credit to its ac- 
 count, and entered the amount to the credit of the person 
 who left the letter for collection. Before paying him the 
 bank failed, and the owner of the letter sought to recover 
 the amount. The third bank did not claim it, as it was 
 owing the other bank several thousand dollars at the time 
 of its failure. The question, therefore, was between the 
 owner of the letter and the assignee and creditors of the 
 failed bank. It was determined that the owner of the 
 letter was not a depositor, that no creditor and debtor re- 
 lation existed between him and the collecting bank, that 
 the money collected therefore was a trust fund to which 
 he was entitled instead of the assignee and creditors of 
 the failed bank. 
 
 1 81 Iowa 491. See U 27, 28. 
 
§ 65 OWNERSHIP OP PAPER SPECIALLY INDORSED. 101 " 
 
 65. When the owner of a certificate of deposit or other 
 instrument indorses it payable to another and sends it to 
 him by mail, but without his' knowledge, his ownership 
 is retained until received by the indorsee. ' And if a check 
 is received and collected by a bank which, in truth, is the 
 property of another than the presentor or depositor, the 
 true owner, unless he has been negligent, may recover the 
 money from the bank." 
 
 1 Talbot v. Bank, 1 Hill 295. 
 
 2 Buckley v. Second Nat. Bank, 35 N. J. Law 400 ; Talbot*. Bank, 1 Hill 
 295 ; Lamine v. Doirell, 2 Ld. Ray. 1216. 
 
102 
 
 BANK COLLECTIONS. 
 
 CHAPTBE III. 
 
 MODE OP MAKING COLLECTIONS, PKESENTMENT, DEMAND AND 
 GIVING NOTICE. 
 
 66. The sending bank need not in- 
 
 dorse the paper sent for col- 
 lection. 
 
 67. General description of the pur- 
 
 pose and mode of making 
 presentment. 
 
 68. Collecting banks are holders for 
 
 making presentment and giv- 
 ing notice. 
 
 69. The collecting bank must follow 
 
 instructions. 
 
 70. When must presentment be 
 
 made ? General rule and its 
 application to collaterals. 
 
 71. When checks must be presented 
 
 drawn on a bank in the same 
 town. 
 
 72. Presentment through the clearing 
 
 house does not change the rule. 
 
 73. Nor does the employment of 
 
 banks by merchants who re- 
 • ceive bills for collection. 
 
 74. When presentment must be made 
 
 immediately. 
 
 75. When a check is not payable at 
 
 the same place as the collect- 
 ing bank, its duty in sending 
 it to another. 
 
 76. Should the collecting bank send 
 
 it to the drawee bank or to an- 
 other in the same place or 
 nearest to it. , 
 76a. Wynen v. Schappert. 
 
 77. How long can a check be kept in 
 
 circulation before discharging 
 the parties. 
 
 78. Different rules apply to drawers 
 
 than to indorsers. 
 
 79. When is the original debt dis- 
 
 charged by the delay. 
 
 80. The same rules and consequences 
 
 apply to sight drafts as to 
 checks. . 
 
 81. When a note must be presented. 
 
 Days of grace. 
 
 82. The number of days of grace. 
 
 83. The usage with respect to the 
 
 number is not inflexible. 
 
 84. The maker has the whole of the 
 
 last day. 
 
 85. Presentment must be made of a 
 • note left as collateral security 
 
 when it is due. 
 
 86. The presentment of drafts. 
 
 87. Place. Where must presentment 
 
 be made. 
 
 87a. When no place is men- 
 tioned. • 
 
 876. When a place is mentioned. 
 
 87c. If payable at a bank pre- 
 sentment must be made 
 there and not to the cash- 
 ier elsewhere. 
 
 88. The bill must be in the holder's 
 
 possession when the present- 
 ment is made. 
 
MAKING COLLECTIONS, PRESENTMENTS. 
 
 ioa 
 
 89. Presentment by mail. 
 
 90. Further discussion of the subject. 
 
 91. The force of custom on the owner 
 
 of paper in respect to present- 
 ment, etc. 
 
 92. When presentment is not neces- 
 
 sary. The lack of funds at 
 the place of payment. 
 
 93. The same rule applies to drafts. 
 
 94. This rule is not observed every- 
 
 where. Discussion of it. 
 
 95. When not presented in time in- 
 
 jury to the drawer- is pre- 
 sumed. 
 
 96. When a bank is negligent* in 
 
 making a presentment the 
 holder must not pay if he in- 
 tends to recover of the bank. 
 
 97. Cases of negligent presentments. 
 97a. Nebraska National Bank v. 
 
 Logan. 
 
 976. Chapman v. McCrea. 
 
 97c. First National Bank v. First 
 National Bank. 
 
 97(2. Harvey v.- Girard National 
 Bank. 
 
 97e. Mound City Paint & Color 
 Co. v. Commercial Na- 
 tional Bank. 
 
 97/. Fall River Union Bank v. 
 Willard. 
 
 98. Delivery of the bill on non-pay- 
 
 ment to a notary for another 
 demand and protest. What 
 instruments must be treated 
 in this manner. 
 
 99. Meaning of protest. 
 
 100. What a protest includes in » 
 
 popular sense. 
 
 101. Can an officer of a bank serve 
 
 as such a notary. Statutes, 
 etc. 
 
 102. What inquiry must be made of 
 
 the maker or at the drawer's 
 residence or place of business. 
 102a. Sweet v. Powers. 
 
 103. When the drawee has no funds 
 
 belonging to the drawer pro- 
 . test need not be made. 
 
 104. When the notary, has been neg- 
 
 ligent in making presentment 
 and protest, as well as in 
 notifying the indorsers, is the 
 bank liable ? 
 
 104a. When the primary bank is 
 liable. 
 
 1046. Nor will a direction to have 
 the paper protested if not 
 paid release the bank. 
 
 104c. His ignorance of his duty is 
 no excuse for the bank. 
 
 104rf. Where only the secondary 
 bank is liable. 
 
 104e. This liability ends with the 
 selection of a proper 
 notary. 
 
 104/. In federal practice and in 
 some states neither the 
 primary nor secondary 
 collecting bank is liable, 
 because the notary is an 
 independent officer. 
 
 Wig. When employed to perform 
 unofficial duties, or is not 
 an independent officer, 
 in some states the bank 
 is liable for his acts. 
 
 104A. But the notary is always 
 excused when observing 
 his instructions. 
 
 105. The duty of a collecting bank 
 
 to give notice. 
 
 106. A notary may be employed for 
 
 this purpose. 
 
 107. Notice should be given of checks 
 
 and notes taken as collateral. 
 
 108. Should the collecting bank, 
 
 when receiving paper for col- 
 lection, ask for the residence 
 of the indorsers ? 
 
 109. To whom the bank should ap- 
 
 ply for information. 
 
104 
 
 BANK COLLECTIONS. 
 
 109a. Belden v. Lamb. 
 
 110. It should not remain passive 
 
 and trust to the vigilance of 
 the notary. 
 
 111. What inquiry will satisfy the 
 
 law. 
 
 112. When the notary is the servant 
 
 of the owner he should make 
 inquiry of him, and the owner 
 is responsible for his servant's 
 neglect. 
 
 113. To whose benefit does a notice 
 
 enure. 
 
 114. Who should receive notice. 
 
 115. Due diligence must be used in 
 
 sending notices. 
 Two ways of sending notices: 
 (1) all by the collecting bank 
 or notary, or (2) by each in- 
 dorser to his immediate in- 
 dorser. Or, the simultaneous 
 or successive methods. 
 Remarks of Daly, J., on 
 sending a circuitous 
 notice. 
 If a notice is sent by a notary 
 to a person to complete the 
 address and mail it to a per- 
 son in the same town, this is 
 
 116. 
 
 116a. 
 
 117. 
 
 180. 
 
 121. 
 
 118. A notice cannot be given until 
 
 after dishonor. 
 
 119. Time which the collecting bank 
 
 has for giving notice to the 
 
 owner, and he to the indorser. 
 Time which an indorser has for 
 
 giving notice. 
 If personal it must be given in 
 
 business hours. 
 121a. Whiting v. City Bank. 
 
 122. Modification of the rule forgiv- 
 
 ing notice by the owner and 
 indorser. 
 
 123. What the notice need contain. 
 
 124. Where the notices must be 
 
 sent. 
 
 124a. Theindorser's request must 
 be regarded. 
 
 1246. When it must be personal. 
 
 124c, d. In some states this require- 
 ment has been changed 
 by statute or custom or 
 common law. 
 
 124c. How the rule has been mod- 
 ified in Nebraska. It 
 must be personal within 
 the P. O. district. 
 
 124e. When the use of the mail 
 though irregular will 
 suffice. 
 
 124^. Outside the city or village 
 or P. O. district the mail 
 can be used. 
 
 124ft. How the mail can be used 
 by indorsers. 
 
 124t". Remarks of Church, J., on 
 
 the subject. 
 
 124j. If there are several post- 
 offices either will suffice. 
 
 124fe. Or to his residence, or to a 
 post office outside the 
 indorser's town. 
 
 124i. Construction of the Ala- 
 bama statute. 
 
 125. When the indorser's residence 
 
 is unknown notice is excused. 
 
 126. When insolvency is an excuse. 
 
 127. Inconvenience iri sending is no 
 
 excuse. 
 
 128. When the act of an indorser will 
 
 excuse it. 
 
 129. Payment to the indorser of a 
 I part of a note before it is due 
 
 is no excuse. 
 
 130. When an indorser who has paid 
 
 can recover, supposing that 
 demand had been made and 
 notice given. 
 
 131. How far waiver of demand and 
 
 notice can be carried. 
 
 132. The collecting bank can sue 
 
 when the paper is not paid. 
 
§66 
 
 MAKING COLLECTIONS, PRESENTMENTS. 
 
 105 
 
 132a. But not the owner when 
 specially indorsed, -with- 
 out a re-indorsement. 
 
 1326. Unless this is stricken out. 
 
 132c. The federal rule is even 
 more liberal. 
 
 132a\ When it is indorsed in 
 blank the owner can sue. 
 
 133. On the trial due diligence is a 
 
 legal inference from facts 
 which are within the prov- 
 ince of the jury to ascertain. 
 
 134. The burden of proof concerning 
 
 negligence. 
 
 135. Proof of demand and notice 
 
 must also be shown. 
 
 136. Withdrawal of a bill from the 
 
 custody of the bank does not 
 prevent suing it for negli- 
 gence. 
 
 137. A bank which once owned a bill 
 
 is liable on its indorsement. 
 
 A bank is liable on paper col- 
 lected and not the maker. 
 
 The liability of a guarantor for 
 collection. 
 140. The duty of a collecting bank 
 where its interests conflict 
 with those of the sending 
 bank. 
 
 138. 
 
 139. 
 
 66. In describing the mode of collecting paper, we may 
 begin with the remark that whenever it must be sent to 
 another bank, the sending bank need not become an in- 
 dorser. Says Mr. Justice Huntington: 1 "Such a duty 
 might become extremely onerous ; for if their indorse- 
 ment was in blank, they might be subjected, at the suit 
 of a bona fide holder, for value, who should become pos- 
 sessed of the bill, before it. came to maturity." * * 
 We believe it is a general practice of the banks in this 
 state, when 'they transmit bills or notes for collection, to 
 indorse them by their cashier ; but we are ignorant of any 
 rule of law which requires it. The only benefit resulting 
 from such a practice is, that the note or bill, when so in- 
 dorsed, will itself show from whom it was received, by 
 the collecting bank. This, however, would seem to be of 
 no importance to those interested in the bill ; for it is to 
 be presumed, the bank employed to make the collection, 
 will preserve the letter of advice accompanying the bill, 
 or cause such entries to be made in their books, as will 
 show from whom it was received. This would be done, 
 as well for their own security, as on account of the cour- 
 tesy due their correspondents." 
 
 ' East-Haddam Bank i>. Scovil, 12 Conn. 303, 311. 
 
106 BANK COLLECTIONS. § 68 
 
 67. The object of sending the paper is to obtain pay- 
 ment, though occasionally a note" is sent for renewal. To 
 obtain payment, of course, it must be presented for that 
 purpose. If paid, then the duty of the collecting bank 
 is to transmit the proceeds in the usual manner, or in the 
 manner promised ; but if payment is not obtained 'when 
 it is due, then steps must be taken to fix the liability of 
 the various parties, so that recovery can be had in the 
 courts of law. If the instrument is a foreign bill, it must 
 be delivered to a notary public for the purpose of having 
 another demand made ; and if it is not then paid, he must 
 protest the bill, and notice of the protest must be sent by 
 him, or by the holder or successive indorsers to all the par- 
 ties who are liable thereon. If the instrument is an inland 
 bill, negotiable note or check, it need not be delivered to 
 a notary public for the purpose of having a second de- 
 mand made, followed by a protest in the e\ent of non 
 payment, though usually it is treated in the same manner 
 as a foreign bill.' 
 
 68. For the purpose of making a presentment, demand 
 and protest and giving notice, collecting agents are recog- 
 nized as owners or holders ; and they are required to do 
 whatever must be done by the owner himself for the pro- 
 tection of his rights, and are liable to him for* any default 
 in performing the duty.' And as the cashier is the regu- 
 
 1 West Branch'Bank v. Fulmer, 3 Barr 399 ; Ivory v. Bank, 36 Mo. 475 ; 
 Costin v. Rankin, 3 Jones Law 387 ; Bank v. Kenan, 76 N. C. 340, 343 ; 
 1 Daniel on Neg. Inst., \ 327. 
 
 2 Mead v. Engs, 5 Cow. 303 ; Howard v. Ives, 1 Hill 263 ; Montgomery Co. 
 Bank v. Albany City Bank, 7 N. Y. 459 ; Farmers' Bank v. Vail, 21 N. T. 
 485 ; Beale v. Parrish, 20 N. Y. 407 ; West River Bank v. Taylor, 7 Bos. 466; 
 Ogden v. Dobbin, 2 Hall 112 ; Allen v. Merchants' Bank, 22 Wend. 215 ; 
 Commercial Bank v. Union Bank, 11 N. Y. 203 : Ayrault v. Pacific Bank, 
 47 N. Y. 570 ; State Bank v. .Bank, 41 Barb. 343 ; Bank v. Davis, 2 Hill 
 451 ; Minier v. Second Nat. Bank, 13 N. Y. State Rep. 222 ; Davey v. Jones, 
 42 N. J. Law 28, 30 ; Titus v. Mechanics' Nat. Bank, 35 N. J. Law 588 ; 
 Thompson v. Bank, 3 Hill (S. C.) 77, 81 ; Hartford Bank v. Barry, 17 Mass. 
 94 ; Bartlett v. Isbell, 31 Conn. 296 ; Warren v. Gilman, 17 Me. 360 ; Free- 
 man's Bank v. Perkins, 18 Me. 292; Burnham v. Webster, 19 Me. 232, 234 ; 
 
§ 69 MAKING COLLECTIONS, PRESENTMENTS. 107 
 
 larly authorized organ of the bank, whatever is done by 
 him in performing this duty is regarded as the act of the 
 institution. 1 Whenever, therefore, a note is indorsed to 
 him and given by him to a notary for protest, these facts 
 show that it was either negotiated to the bank or left 
 there for collection.' Says Mr. Chief Justice Shaw in 
 Mechanics' Bank v. Merchants' Bank," "Where a bank 
 receives a note for collection,'it is bound to use reasonable 
 skill in making the collection, and for that purpose is bound 
 to make a seasonable demand on the promisor, and in case 
 of dishonor to give due notice to the indorsers, so that 
 the security of the holder shall not be lost or essentially 
 impaired by the discharge of the indorsers." As an agent, 
 such bank is bound to the use of reasonable skill and or- 
 dinary diligence. By reasonable skill is understood such 
 as is ordinarily possessed and exercised by persons of com- 
 mon capacity, engaged in the same business or employ- 
 ment ;' and by ordinary diligence is to be understood that 
 degree of diligence which persons of common prudence 
 are accustomed to use about their own affairs." 
 
 69. In making collections the first duty of a bank is to 
 follow instructions. 6 If none are given, it should present 
 the note at the time and place fixed for payment. If no 
 place is designated, it should use due diligence to make a 
 
 Bank v. Vaughn, 36 Mo. 90 ; Bank v. Triplett, 1 Pet. 25 ; Georgia Nat. 
 Bank v. Henderson, 46 Ga. 487 ; Huff v. Hatch, 2 Disney 63 , Cartridge v. 
 Allenby, 6 Barn. & Cres. 373. 
 
 1 Burnham v. Webster, 19 Me. 232, 234 ; Bank v. Vaughn, 36 Mo. 90. 
 
 2 Burnham v. Webster, 19 Me. 232. 
 
 3 6 Met. 13, 26. 
 
 4 Fabens v. Mercantile Bank, 23 Pick. 330. 
 
 6 When the owner of a note is fully advised from time to time by the col- 
 lecting bank of the measures pursued for collecting the same, and makes no 
 objection to them, he cannot afterwards disavow them and bring an action 
 founded on the bank's, negligence. Jacobsohn v. Belmont, 7 Bos. 14. If 
 the holder of a note delivers it to a bank with directions concerning the ap^ 
 propriation of the proceeds, it may realize these by discounting or by col- 
 lection of the maker at maturity. Drown v. Pawtucket Bank, 15 Pick. 88. 
 In such a case the bank would have the right to make the election. 
 
108 BANK COLLECTIONS. § 71 
 
 demand ; and if payment is refused, it should give imme- 
 diate notice to its principal, so that he may take such 
 measures as are necessary for his own security. 1 In Ala- 
 bama it is declared that in the absence of local custom or 
 specific direction from his principal, the collecting agent 
 need not notify the indorsers, nor need he protest a note, 
 unless this is necessary to fix the liability of other parties, 
 or to give his principal some advantage which Otherwise 
 the law would not accord to him.' But this is not the law 
 in most of the states. 
 
 70. In developing this subject the first inquiry is, when 
 must the instrument be presented for payment? The 
 most general principal is that due diligence must be used 
 in performing this duty, 3 and which also applies to col- 
 lateral securities. Thus, a bank accepted as collateral se- 
 curity from a debtor a note given by the president of the 
 bank itself, the collection of which was urged by the 
 debtor on many occasions, when the president was able 
 to pay it. He finally became insolvent and the note 
 proved to be worthless. The bank was regarded negli- 
 gent, and was liable to the debtor for the amount of the 
 loss he had sustained.* 
 
 71. The law has defined more strictly the meaning of 
 due diligence in its application to the presentation of dif- 
 ferent kinds of instruments. Thus, when a bank has re- 
 ceived a check to collect, drawn on a bank in the same 
 town, the presentment must be made on the day of its 
 reception, or the next one.' In one of the well known 
 
 1 Paley on Agency, fijS 6, 37 ; Beame's Lex Mer. 331 ; Van Wart v. Wool- 
 ley, 3 Barn. & Ores. 439 ; Bank v. Huggins, 3 Ala. 206, 212. 
 
 2 Bank v. Hnggins, 3 Ala. 206. 
 
 3 Hazlett v. Commercial Nat. Bank, 132 Pa. 118 ; Branch Bank v. Knox & 
 Co., 1 Ala. 148 ; Capitol State Bank v. Lane, 52 Miss. 677 ; Commercial & 
 Bail road Bank v. Hamer, 7 How. (Miss.) 448. 
 
 * Hazard v. Wells, 2 Abb. N. C. 444. See \ 79. 
 
 5 Ward v Evans, 2 Ld. Bay. 928 ; Murray v. Judah, 6 Cow. 484 ; Lovett 
 v. Comwell, 6 Wend. 369 ; Merchants' Bank v. Spicer, 6 Wend. 443 • Smith 
 v. Janes, 20 Weiid. 192 ; Veazie Bank v. Winn, 40 Me. 60 ; Boehm v. Ster- 
 
§ 74 MAKING COLLECTIONS, PRESENTMENTS. 109 
 
 cases l Mr. Justice Bronson said : ' ' When the parties all 
 reside in the same place, the holder should present the 
 check on the day it is received or on the following day ; 
 and when payable at a different place from that in which 
 it is negotiated, the check should be forwarded by mail 
 on the same or the next succeeding day for presentment." 
 To retain a check four days, therefore, before presenting 
 it, would be negligence." 
 
 72. Nor does the custom of banks to do business among 
 themselves thorough the clearing house affect the rule es- 
 tablishing the time for presenting checks. They must 
 still be presented on the day of their reception, or the 
 succeeding day. 3 . 
 
 73. And if bills are received by the merchants in a town 
 to collect, and they employ banks to do the business for 
 them, they must be collected within the same time given 
 to the merchants for this purpose. If the collection is 
 not made within the legal period, the merchants are re- 
 sponsible for the consequences.* Nor does the rule that 
 applies in many states, that an agent is not responsible 
 for the negligence of a sub-agent, protect a merchant, for 
 this only applies to the responsibility of a bank for the 
 acts of another in a'different place. 6 
 
 74. Sometimes, however, a collecting bank must make 
 presentment immediately, especially when the maker's 
 insolvency is impending and known to the collecting bank. 
 
 ling, 7 Term 423 ; Down v. Hailing, 4 Barn. & Cres. 330 ; Rothschild v. Cor- 
 ney, 9 Barn. & Cres. 388 ; Harker v. Anderson, 21 Wend. 372 ; Benton v. 
 Martin, 31 N. Y. 382, 385 ; Burkhalter v. Second Nat. Bank, 42 N. Y. 538 ; 
 Smith d. Miller, 43 N. Y. 171, 175 ; Farmers' Bank v. Vail, 21 N. Y. 485 ; 
 Howard v. Ives, 1 Hill 263 ; Carroll v. Sweet, 128 N. Y. 19, 22 ; Hazleton 
 v. Colburn, 2 Abb. N. S. 199 ; Taylor v. Wilson, 11 Met. 44, 51 ; "Wallace r. 
 Agry, 4 Mason 336. 
 
 1 Smith o. Janes, 20 Wend. 192, 194. 
 
 2 Bank v. Kenan, 76 N. C. 340. 
 
 3 Eosenblatt v. Haberman, 8 Mo. App. 486. . 
 * Dyas v. Hanson, 14 Mo. App. 363. 
 
 5 Id. 
 
110 BANK COLLECTIONS. § 76 
 
 Says Mr. Justice Earl :' "What is required to be done 
 to charge the drawer is simply a compliance with the con- 
 dition attached to the draft, as if written therein ; and 
 that condition is in all cases complied with by presentation, 
 demand and notice, on the next day after receipt of the 
 draft. But suppose the agent, on the day he receives the 
 iraft, obtains reliable information. that the drawee must 
 fail the next day, and that the draft will not be paid un- 
 less immediately presented ; what then is the duty he 
 owes his principal, whose interests for a compensation he 
 has agreed with proper diligence and skill to serve in and 
 about the collection of the draft ? Clearly, all would say, 
 to present the draft at once ; and if he^fails'to do this and 
 loss ensues, he incurs responsibility to his principal ; and 
 yet the drawer would be charged if it was not presented 
 until the next day. Where an agent receives a bill for 
 collection, payable some days or months after date, in 
 order to charge the drawer he need not present it for ac- 
 ceptance until it falls due ; and if he then presents it and 
 demands payment, and protests it, and gives the notice, 
 the drawer is held ; and yet, in such a case, he owes his 
 principal the duty to present the bill for acceptance at 
 once, and if he fails in such duty, and. loss ensues to his 
 principal, he becomes liable for such loss." 
 
 75. When a check is not payable at the place where it 
 is deposited for collection, then the bank must forward it 
 by mail on the same or the succeeding day for present- 
 ment, either to the drawee ban"k or to another. When it 
 is thus sent to a non-drawee bank, the check must be 
 presented on the day of its reception or on the following 
 day." 
 
 76. If the check is to be collected in another place, must 
 the collecting bank send the check to the drawee bank, 
 or to another in the same place or to the one that is nearest 
 to it ? By resorting to other than the most direct courses, 
 
 1 First Nat. Bank v. Fourth Nat. Bank, 77 N. Y. 320, 32 
 5 Smith v. Janes, 20 Wend. 192, 194. 
 
§ 77 MAKING COLLECTIONS, PRESENTMENTS. Ill 
 
 the holder's risk of both the drawer and drawee's solvency 
 is prolonged. Ought this to be done, especially without 
 his knowledge or expectation ? On more than one occa- 
 sion a bank has failed to collect a check by resorting to a 
 circuitous method which would have been collected had 
 the collecting bank taken a more direct course. 
 
 76a. This question was well-considered by Mr. Chief 
 Justice Daly in Wynen v Schappert :' " Such matters are 
 generally regulated by business connections* and if a note 
 in its transmission from one place to another for collection 
 is sent through a chain of banking institutions, it is proba- 
 bly because each one in the link is acquainted with the 
 financial character pi the other, and that the chain of con- 
 nection is one of reciprocal credit and confidence. In a 
 commercial matter like this it is better for judicial tribu- 
 nals to infer that banking institutions know what is the 
 best way of conducting such a business, unless the court 
 has facts before it from which it can see that the course 
 pursued was clearly an improper one." * * "In per- 
 forming such a service they necessarily do so through the 
 instrumentality of other banking institutions with whom 
 they have established business connections, and who mu- 
 tually co-operate and act for each other in forwarding the 
 paper and seeing that it is duly presented at the lime that 
 it is payable ; and where there is, as in this case, nothing 
 to question the good faith of the several banking institu- 
 tions through whose hands this note passed in its trans- 
 mission to [the drawee bank] that payment might be de- 
 manded, we are not to conclude, because the note was not 
 transmitted by the most direct route, by mail or railroad, 
 but by a circuitous one, that it was improper to do so, and 
 unreasonably caused delay." 
 
 77. How long a bill or check, payable on demand or at 
 a specified number of days after sight, can be kept in cir- 
 culation before presentment, without discharging some 
 of the parties, is not a settled question. It depends much 
 
 1 6 Daly 558, 563, 565. 
 
112 BANK COLLECTIONS. § 78 
 
 on the circumstances of each case. ' In Kobinson v. Ames, * 
 Mr. Chief Justice Spencer remarked, " that with respect 
 to such bills, and particularly where they are negotiated 
 by the payee, ther,e is much more latitude, as to the time 
 of presentment, than where the bill has a fixed period of 
 payment." * 
 
 * 78. Between the owner and the drawer of a check present- 
 ment may be made at any time, and delay in doing this 
 does not discharge him, or only to the extent of the loss. 
 Thus, if the drawer had no money in the bank on which his 
 check was drawn at the time of its failure, he would suf- 
 fer nothing by the delay to present it. In one case the 
 drawer had ten cents and was, therefore, injured to this 
 extent by the holder's delay." But a different rule ap-, 
 plies between the owner and indorser. Between them the 
 check must be presented for payment not later than the 
 
 1 Smith v. Janes, 20 Wend. 192, 195. 
 
 2 20 Johns. 146, 151. 
 
 3 In Smith v. Janes, 20 Wend. 192, 195, Bronson, J. , said : " How long a 
 bill or check, payable on demand or at a given number of days after sight, 
 may be kept in circulation before presentment, without discharging some of 
 the parties, is not a settled question. Chitty on Bill, 276, ed. of 1826. It de- 
 pends in a great degree on the circumstances of each particular case. In Eob- 
 inson v. Ames, 20 Johns. E. 146, the bill was drawn in Georgia on merchants 
 residing in New York, and, although seventy-five days elapsed before the 
 presentment, it was held that the drawers were not discharged. In Gowan 
 v. Jackson, 20 Johns. E. 176, the bill was drawn in Augusta on merchants re- 
 siding in London, and having been put in circulation, it was held that the 
 drawer was not discharged, although six months had elapsed before the pre- 
 sentment. In Aymar v. Beers, 7 Cow. 705, the bill was drawn in New York 
 on a house in Eichmond, Va., at three days sight, and it was held that the 
 drawer was not discharged-by a delay of twenty-nine days in presenting the 
 bill for acceptance. The bill had not been put in circulation, but there were 
 other special circumstances to show that the payee was not chargeable with 
 negligence. In the case at bar, three days were necessary for the transmis- 
 sion of the check from New York to Buffalo, and it could not have been in 
 circulation after it passed from the plaintiff more than four or five days be- 
 fore it was presented at the bank for payment. There is no authority for 
 imputing laches on such a state of facts, and the judge was right in over- 
 ruling the objection." 
 
 4 Graham v. Morstadt. 40 Mo. App. 333. 
 
§ 80 MAKING COLLECTIONS, PRESENTMENTS. 113 
 
 next day after receiving the same, and if payment is re- 
 fused, it must be protested and notice of non-payment be 
 given, for if this is not done the indorser will be dis- 
 charged. 1 In like manner, when the owner has delivered 
 it to a collecting agent, he must present it for payment 
 within the time prescribed, for if he does not the same 
 consequences follow. 
 
 79. Another consequence may follow. An improper 
 delay in presentment may operate to discharge the debt 
 for which the check was given. Though its acceptance 
 is not payment, if the receiver is guilty of negligence in 
 presenting it, or in giving notice of non-payment after 
 presentment, and the bank in the meantime suspends 
 payment, he thereby makes it his own, and it operates as 
 payment of the debt whenever the drawer had funds in 
 the bank at the time of drawing the check and which 
 were not withdrawn. 3 Negligence which would discharge 
 the drawer or indorser of a check or bill of exchange, will 
 as effectually extinguish the debt for the payment of 
 which a bill or other negotiable instrument was trans- 
 ferred.' If a loss occurs by the negligence of a creditor 
 who receives negotiable instruments for collection, it 
 should fall on him who is the cause of the loss, rather than 
 on the distant and innocent debtor.* 
 
 80. The same rules and consequences apply to sight 
 drafts as to checks. Says Mr. Justice Bronson : s "It has 
 been said that greater diligence is necessary in presenting 
 checks for payment than is required in relation to bills of 
 exchange." But I can see no good reason for making such 
 a distinction. The fact that one instrument is drawn upon 
 a bank, and the other upon an individual, can make no 
 
 1 Smith v. Janes, 20 Wend. 192 ; Carroll v. Sweet, 128 N. Y. 19, 22. 
 
 2 Taylor v. Wilson, 11 Met. 44, 51. 
 
 3 Kobbe v. Clark, Selden's Notes, 165. 
 
 4 Bradford v. Pox, 39 N. Y. 289 ; Smith v. Miller, 43 N. Y. 171. See 1 189. 
 6 Smith v. Janes, 20 Wend. 192, 194. 
 
 6 Gough v. Staats, 13 Wend. 549. 
 
 8B. 
 
114 BANK COLLECTIONS. § 82 
 
 difference in principle concerning the duty of the holder ; 
 what will be due diligence in the one case will, I think, 
 be due diligence in the other." 1 
 
 81. When a bank receives a negotiable note for collec- 
 tion, the time for making presentment is fixed by the note 
 itself, the last day of grace. Presentment should not be 
 made earlier, for the days of grace form a part of the con- 
 tract. 1 An immature presentment would discharge the 
 indorsers and render the bank liable. 8 It was once, if not 
 now, the usage of the banks in Boston to send notice to 
 the makers of notes on the last day, excluding the days 
 grace ; and to the makers and indorsers of notes not paid 
 on the last day of grace after bank hours. A bank which 
 sent the second notice to the maker before banking hours 
 on the last day of grace and at the same time notified the 
 indorser of its dishonor, disregarded the law in making 
 presentment to the maker and also the usage in notifying 
 the indorser. The indorser consequently was discharged. * 
 
 82. The number of days is fixed by usage, and almost 
 universally consists of three, but in a fe"w places four days 
 are given. Wherever such a usage prevails it must be 
 observed. 6 It is the usage of banks in the District of 
 Columbia to demand payment of bills on the day after the 
 last day of grace, and this usage has been sanctioned by 
 the Supreme Court of the United States, 6 This usage is 
 equally binding on parties who are not acquainted with 
 its existence, who have resorted to the bank governed by 
 the usage. 7 
 
 1 Mohawk Bank v. Broderick, 13 Wend. 133. . 
 
 2 Bank v. Triplett, 1 Pet. 25. 
 
 * Ivory v. Bank, 36 Mo. 475 ; Cruger v. Lindheim, 16 S. W. Eep. 420 
 (Texas) ; Hogan v. Cuyler, 8 Cow. 203 ; Osborn v. Moncure, 3 Wend. 170 ; 
 Smith v. Aylesworth, 40 Barb. 104; Oothout v. Ballard, 41 Barb. 33. The 
 opinion in the case last cited contains many authorities. 
 
 4 Grand Bank v. Blanchard, 23 Pick. 305 ; Gilbert v. Dennis, 3 Met. 495 ; 
 Mechanics' Bank v. Merchants' Bank, 6 Met. 13, 25. 
 
 5 Bank v. Triplett, 1 Pet. 25; Mills v. Bank, 11 Wheat. 431. 
 
 6 Renner v. Bank, 9 Wheat. 581. 
 
 7 Mills v. Bank, 11 Wheat. 431. 
 
§ 85 MAKING COLLECTIONS, PRESENTMENTS. 115 
 
 83. The usage is not inflexible. Says Mr. Justice Earle : 
 " The allowance of three days of grace in the payment of 
 negotiable paper from long .and universal usage, has be- 
 come the general law of such contracts, but it is not such 
 an inflexible rule as admits of no innovation upon it. It 
 may be altered and controlled by the agreement of the 
 parties, and what is tantamount, it may be changed by the 
 usage and custom of dealing perfectly known to the 
 parties, and to which they will be supposed to have had 
 special reference in making their contract. If it was an 
 established and unvaried usage of the Bank of Columbia to 
 exceed the three days of grace, and to demand payment 
 on the fourth day, and this was well-known to Magruder 
 at the time of indorsement, he is to be supposed to have 
 assented to it ; and this departure from the general rule 
 will be sanctioned, to give efficacy to the contract and to 
 establish his liability to pay the money." ' 
 
 84. The maker has the whole of the last day to make 
 payment. Nor is the time accelerated or otherwise 
 changed by the practice of banks to issue notices to the 
 promissors a few days before the maturity of their obliga- 
 tions of the time when they are due.' 
 
 85. A bank must make demand and notify the indorsers 
 of a note left with it as collateral security in accordance 
 
 1 Bank v. Magruder, 6 Har. & J. 172, 180, citing Renner v. Bank, 9 Wheat. 
 581 ; Raborg v. Bank, 1 Har. & Gill 231 ; Bank v. Fitzhugh, 1 Har. & Gill 
 239. 
 
 ' Said Shaw, Ch. J. : " Such previous notice to the promissor, and neglect 
 on his part to pay the note at the bank, are a conventional demand and re- 
 fusal, amounting to a dishonor of the note. But, in such case, it is not the 
 delivery of the previous notice to the promissor which constitutes the present- 
 ment, nor would an actual presentment, demand and refusal, before the last 
 day of grace, constitute such default of the promissor as to be a dishonor of 
 the note. It is the failure to pay at the bank during bank hours on the last 
 day of grace which amounts to such dishonor. New England Bank v. Lewis, 
 2 Pick. 125; Boston Bank v. Hodges, 9 Pick. 420. Such custom does not 
 accelerate nor alter the day of payment." Mechanics' Bank v. Merchants' 
 Bank, 6 Met. 13, 23. 
 
116 BANK COLLECTIONS. § 87a 
 
 with the usual manner of doing this business. 1 And an 
 action may be in the name of any person beneficially in- 
 terested in having the duty performed." Nor is this duty 
 less imperative when the note is given by one person to 
 another as collateral security.* 
 
 86. In presenting drafts due diligence must be used in 
 presenting for acceptance all except those which are pay- 
 able at a fixed day, and in presenting all for payment at 
 the proper time. 4 A check must be presented and notice 
 of non-payment given before an action against the drawer 
 can be maintained. 6 
 
 87. From a consideration of the time, we shall pass to 
 that of the place where the presentment must be made. 
 When no place of payment is designated in a promissory 
 note, the holder must demand payment of the maker per- 
 sonally, or at his residence, or at. his office in business 
 hours, for the indorser is not liable until such a demand 
 has been made followed by due notice." 
 
 87a. If no place is mentioned in the note before indorse- 
 ment, but is specified afterward in the margin by "the 
 maker, the demand should be made there.' This also 
 was the opinion of the Supreme Court of New York in 
 Wood worths. Bank," and by the chancellor and the lead- 
 ing judicial members of the court of errors, but numbers 
 
 t 
 
 1 Bank v. M'Kinster, 11 Wend. 473 ; Bank v. Smedes, 3 Cow. 662. 
 
 2 Bank v. McKinster, 11 Wend. 473. 
 3 See? 70 
 
 * Merchants & Manufacturers' Nat. Bank v. Stafford Nat. Bank, 44 Conn. 
 564, 567. See \ 144. 
 6 Harker v. Anderson; 21 Wend. 372. See § 93. 
 
 6 Wood worth v. Bank, 19 Johns. 391 ; Browning v. Armstrong, 1 W. N. 
 Cas. 347 ; Fisher v. Evans, 5 Binn. 542 ; Fitter v. Morris, 6 Whart. 406 ; 
 Park & Co. v. Iflgersoll, 2 Watts &Serg. 140 ; Moore v. Somerset, 6 Watts & 
 Serg. 262 ; Talbot v. National Bank, 129 Mass. 67 ; Garland v. Salem Bank. 
 9 Mass. 408 ; Granite Bank v. Ayres, 16 Pick. 392 ; Porter v. Judson, 1 Gray 
 175. 
 
 7 American Nat. Bank v. Bangs, 42 Mo. 450, 454 ; 2 Daniel on Neg. Inst. 
 \\ 1383, 1379. 
 
 8 19 Johns. 391,409 
 
§ 876 MAKING COLLECTIONS, PRESENTMENTS. 117 
 
 count in courts of justice as well as in politics, and the 
 majority reversed the decision of the supreme court, 
 though utterly failing to answer the reasoning of the 
 chancellor, who remarked: "A bill of exchange when 
 presented to the drawer for acceptance, is just as perfect, 
 and no more perfect, than an accommodation note in- 
 dorsed and returned to the maker. It then becomes an 
 order by the indorser on the maker of the note, to pay the 
 contents to the indorsee. And when the maker puts such 
 a note in circulation, or .hands it to a bank for discount 
 for his own use, the wit of man cannot invent a reason 
 why the maker should not have as good a right to direct 
 the indorsee where to look for payment, as the acceptor 
 of a bill to direct the payee where to call for payment." 
 Notwithstanding the conclusiveness "of this reasoning, no 
 clearly defined rule in that state have has yet been estab- 
 lished. Happily, some of the courts in other states have 
 followed after the wisdom of the chancellor, rather than 
 the will of the majority. 
 
 87b. If a place is mentioned the presentment must be 
 made there regardless of the place where the parties who 
 are liable thereon may live. In Brown v. Jones, 1 a bill of 
 exchange was accepted in these words, "accepted and 
 payable at 100 K street." It was declared that the bill 
 must be presented there in the event of its non-payment, 2 
 
 1 13 N. E. Eep. 857 (Ind.). 
 
 2 In this case Elliott, J., said : "The acceptors of the bill had the right to 
 qualify their acceptance by designating the place of payment. The desig- 
 nation of the place of payment became part of the contract, and it is an ele- 
 ment that exerts an important influence upon the case. * * 
 
 It is, however, contended by appellee's counsel that presentment at the 
 office of the acceptors was sufficient. If this be so, then the finding on this 
 point may be upheld. We are, however, constrained to differ from counsel 
 upon this proposition. Our opinion is that where a place of payment is 
 definitely fixed by the contract of acceptance, there the presentment must 
 be made, or a sufficient excuse for failing to there make it be shown, or else 
 the drawer or indorser of the bill is discharged. The cases referred to by 
 counsel do not oppose this conclusion. These cases are Shed v. Brett, 1 Pick. 
 401 ; Williams v. Bank, 2 Pet. 96 ; Ogden v. Cowley, 2 Johns. 274 ; Bur- 
 
118 BANK COLLECTIONS. § 87& 
 
 and that the notary had not performed his dnty in simply 
 presenting the bill for payment at the office of the accept- 
 ors, which was at another place. 1 
 
 bank v. Beach, 15 Barb. 326 ; Cayuga Co. Bank v. Hunt, 2 Hill 635 ; Wise- 
 man v. Chiappella, 23 How. 368 ; Wallace v. Crilley, 46 Wis. 577. In none 
 of them was the place of payment fixed by the acceptance, and they cannot 
 therefore, be regarded as at all in point. Our conclusion has a firm support 
 from the authorities. Mr. Daniel, after showing that to charge the acceptor 
 it is not necessary to present the bill for payment at the place specified, says : 
 ' In respect to the indorser of a bill or note, or the drawer of a bill, payable 
 at a particular bank or other place, the rule is different. He is not the 
 original debtor, but only a surety. His undertaking is not general, but 
 conditional upon due diligence being used against the original debtor, and 
 such diligence requires presentment at the place specified, where it is pre- 
 sumed that funds have been provided to meet the bill at maturity. ' 1 Daniel 
 on Neg. Inst, g 644. Another writer says • ' When a bill or note is drawn 
 payable at a place named, it is essential to show, against the drawer or 
 indorser, a presentment at the place appointed.' Edwards on Bills and 
 Notes, I 679. In Cox v. National Bank, 100 U. S. 704, the court said : 
 ' Cases arise where the drawer of the bill designates in the instrument the 
 place of payment, and the decisions are that in such a case both the drawer 
 and indorser will be discharged unless the bill be there presented for pay- 
 ment at maturity.' It was held in Marsh v. Low, 55 Ind. 271, that the ac- 
 ceptor is the principal debtor, and so all the cases hold ; holding also, with- 
 out exception, so far as our investigation hasgone, that, to charge the drawer 
 or indorser, presentment for payment must be made at the place specified. 
 Hartwell o. Candler, 5 Blackf. 215 ; People's Bank v. Brooke, 31 Md. 7 ; 
 Smith v. McLean, 7 Am. Dec. 693 ; Glasgow v. Pratte, 8 Mo. 336 ; Dupree v. 
 Richard, 11 Rob. 495, 43 Am. Dec. note 222. 
 
 1 Berkshire Bank v. Jones, 6 Mass. 524, 525 ; Chicopee Bank v. Philadel- 
 phia Bank, 8 Wall. 641, 648 ; Hartford Bank v. Stedman, 3 Conn. 489 ; 
 Saunderson v. Judge, 2 H. Black. 510 ; Woodbridge v. Brighani, 13 Mass. 
 556 ; 1 Daniel on Neg. Inst. \ 635. 
 
 In Berkshire Bank v. Jones, 6 Mass. 524, 525, Parsons, Ch. J., said : " The 
 note was payable on a day and at a place certain ; and the place is the 
 Berkshire Bank. A demand of payment need not be made at any other 
 place ; and if the holder of the note is at the bank on the prescribed day, 
 ready to receive the money if the maker be there, it is enough for him. And 
 if the maker does not come to the bank, or direct the payment there, he has 
 broken his promise, and no other notice to him is necessary. ' ' 
 
 The maker of a note who resided in B. and signed it there, made it paya- 
 ble "at bank," and dated it at P. where the payee lived, to whom it was 
 sent. The note was indorsed and handed to the payer, and before collection 
 
§ 88 MAKING COLLECTIONS, PRESENTMENTS. 119 
 
 87c. So, too, if a negotiable note is made payable at a 
 bank, the demand for payment must be made there ; and 
 the legal requirement is not satisfied by showing that a 
 demand was made of the cashier elsewhere. 1 This was 
 decided in Bank v. Hysell," in which the declaration stated 
 that the note was presented at the close of banking hours 
 to the cashier of the Bank of Huntingdon (where it was 
 payable) for payment, which was refused, and thereupon 
 it was duly protested for non-payment, and notice thereof 
 was given to the maker and indorser. The court regarded 
 the declaration as fatally defective because it did not state 
 when or where the note was presented for payment. 3 
 
 88. The bill must be in the holder's actual possession 
 at the time of presenting it." In Chicopee Bank«. Phila- 
 delphia Bank, 5 Mr. Justice Nelson said : "In cases where 
 the drawee accepts the bill, generally, in order to charge 
 the drawer or indorser, the holder must present the paper, 
 when due, at his place of business, if he has one, if not, 
 at his dwelling or residence, and demand payment ; and, 
 if the money is not paid, give due notice to the prior 
 parties. If he accepts the bill, payable at a particular 
 place, it must be presented at that place and payment de- 
 manded. In these instances, as a general rule, the bill 
 must be present when the demand is made, as in case of 
 payment the acceptor is entitled to it as his voucher. 
 When the bill is made payable at a bank, it has been 
 held that the presence of the bill in the bank at maturity, 
 
 was put in a bank at P. to be collected. It was beld that the note was pay- 
 able at either bank in P. which the holder might select. Hazards. Spencer, 
 23 At. Rep. 729 (R. 1.1. 
 
 1 Bank of Syracuse v. Hollister, 17 N. Y. 46 ; Seneca Co. Bank v. Neass, 
 3 N. Y. 442 ; Magoun v. Walker, 49 Me. 419 ; 1 Daniel on Neg. Inst. \ 644. 
 
 2 22 W. Va. 142. 
 
 3 Seneca Co. Bank v. Neass, 3 N. Y. 442 ; Peabody Insurance Co. v. Wilson, 
 29 W. Va. 528, 543. 
 
 * Merchants' Bank v. Elderkin. 25' N. Y. 178*; 1 Daniel on Neg. Inst. \ 
 656. 
 5 8 Wall. 641. 648. 
 
120 BANK COLLECTIONS. • § 89 
 
 with the fact that the acceplibr had no funds there, or, if 
 he had, were not to be applied to payment of the paper, 
 constitute a sufficient presentment and demand ; and if the 
 bill is the property of the bank, the presence of the paper 
 there need not be proved, as the presumption of law is, 
 that the paper was in the bank, and the burden rests upon 
 the defendant to show that the acceptor tailed to pay it." 1 
 89. It has been declared that the mail can be used for 
 making a presentment. Thus, on one occasion a note was 
 sent through the mail to the bank at which it was paya- 
 ble for payment. In this case, 2 Mr. Justice Rapallo said : 
 " 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. If it pays, it does so on behalf of the maker, and 
 no relation is created between it and one who presents it 
 by mail, different from that which would exist if pre- 
 sented through any other agency, unless accompanied by 
 a request to do some further act in behalf of the sender, 
 beyond complying with its duty to its own customer." 
 The note not having been paid the owner who deposited 
 it in the National City Bank for collection sued the insti- 
 tution, claiming that it had been negligent. Mr. Justice 
 Rapallo added : "The defendant by sending the note to 
 the Bank of Lowville requested it to pay it, not to receive 
 the proceeds. The object of sending was to extract money 
 from the bank as agent of the maker of the note, not to 
 put money in the bank as agent of the defendant, or to 
 the credit of the defendant. There is nothing in the na- 
 ture of the transaction which should render the defend- 
 ant guarantor of the solvency of the Bank of Lowville." 4 
 In Shipsey v. Bowery National Bank," "the defendant," 
 said Mr. Justice Folger, "received the check from the 
 
 1 Peabody Insurance Co. v. Wilson, 29 W. Va. 528, ; Thomas v. Marsh, 2 
 La. Ann. 353. 
 8 Indig v. National City Bank, 80 N. Y. 100, 106. 
 3 Minier v. Second Nat. Bank, 13 N. Y. State Rep. 222. 
 * 59 N. Y. 485. 
 
§ 91 MAKING COLLECTIONS,. PRESENTMENTS. 121 
 
 plaintiff, not as becoming the owner of it, 1 but as his 
 agen|;, for a compensation, to collect ft. For this com- 
 pensation, and the further consideration that he was one 
 of its customers, the defendant agreed that it would, in a 
 reasonable time, take the check to the banking house of 
 the drawee at P. and there demand the money to be paid 
 upon it, which, if paid, it would bring back to its own 
 counter in discharge of the plaintiff's liability; or, if it 
 was not then paid, that it would in a reasonable time in- 
 form him thereof. It did neither. It employed the means 
 of the public mails. It was not negligent in so doing. 
 They are the customary agency in such matters, and are 
 mostly efficient." 
 
 90. Though the mail may be, and is used for presenting 
 checks for payment instead of sending them to another 
 bank or agent for that purpose, the court did not intend 
 in the Jndig case to establish the principle that, when all 
 checks were thus received by the drawee bank through 
 the mail, it had no other duty to perform than to pay 
 them, and was never the agent of the sending bank to 
 make the collection. Indeed, in the Briggs case, decided 
 soon afterward, " it was decided that the Newark Bank, to 
 which the checks in controversy were sent for collection, 
 whether drawn thereon or on other banks, was the agent 
 of the sending bank, and that it was liable for the con- 
 duct of its sub-agent. But it may then be asked, when 
 must the second or receiving bank be regarded as the 
 agent of the other, and thereby render itself liable for 
 whatever may be done ? In the Briggs case the facts of 
 the agency were clearly established, and the answer to 
 the question must obviously depend on the facts devel- 
 oped in each case. 8 
 
 91. When a person sends paper to a bank for collection 
 without special instructions, he is bound by the custom 
 
 1 Dickerson i>. Wason, 47 N. Y. 439. 
 
 2 Briggs v. Central Nat. Bank, 89 N. Y. 182. 
 8 See <S 193a for a description of this case. 
 
122 BANK COLLECTIONS. § 93 
 
 of the bank with respect to the presentment and holding 
 of the same for ^collection, after receiving a promise of 
 payment, if such custom be not in violation of the general 
 law. 1 In general, the sender is bound by local usage in 
 such matters so long as the general law is observed.' 
 
 92. There are occasions when a presentment is not 
 necessary. When a check is received by the drawee bank, 
 or a note by the bank at which it is payable, and the 
 maker has no funds to meet his obligation, no personal 
 demand is necessary. All that need be done is to notify 
 the indorsers of the non-payment. 3 In First National 
 Bank®. Crittenden,' Pres. Justice Miller said: "There 
 was no evidence that a formal demand of the note was 
 made. Having been discounted by the bank at whose 
 counter it was payable, and belonging to the plaintiff, the 
 law adjudged that payment of the note was then and 
 there duly demanded, and as the maker had no funds at 
 the bank for its payment, that it thereby became dishon- 
 ored. No formal demand of the maker was necessary, 
 under the circumstances, for the purpose of charging the 
 indorsers." * 
 
 93. In like manner when the drawer of a bill has failed 
 to place funds in the hands of the drawee to meet it, and 
 has no reasonable expectation that it will be met, neither 
 demand of payment nor protest is necessary to hold him." 
 
 1 Sahlien v. Bank, 90 Tenn. 221. 
 
 2 Whitwell v. Johnson, 17 Mass. 449. 
 
 3 Saunderson v. Judge, 2 H. Black. 510; Bailey v. Porter, 14 Mees. & Wels. 
 44; Bank v. Smith, 11 Wheat. 177, 177; Fullerton v. Bank, 1 Pet. 604, 617 ; 
 Bank v. Carneal, 2 Pet. 543, 604 ; Howard v. Ives, 1 Hill 263 ; Farmers' 
 Bank v. Vail, 21 N. Y. 485 ; Burkhalter v. Second Nat. Bank, 42 N. V. 538; 
 Whiting v. City Bank, 77 N. Y. 363, 365 ; Phipps v. Chase, 6 Met. 491 ; 
 Bahm v. Philadelphia Bank, 1 Eawle 335; Hallowell & Co. v. Curry, 41 Pa. 
 322; Jenks v. Doylestown Bank, 4 Watts & Serg. 505. 
 
 4 2 T. & C. 118, 121. • 
 
 5 Bank v. Hollister, 17 N. Y. 46 ; Gillett v. Averill, 5 Denio 85 ; Woodin 
 v. Foster, 16 Barb. 146, 149 ; Nichols v. Goldsmith, 7 Wend. 160 ; Dole v. 
 Gold, 5 Barb. 490, 498; Gilbert v. Dennis, 3 Met. 495. 
 
 6 Harness v. Davies Co. Sav. Ass'n, 46 Mo. 357. It is presumed to be drawn 
 
§ 93 MAKING COLLECTIONS, PRESENTMENTS. 133 
 
 Thus, A., who lived in Missouri, was in the habit of draw- 
 ing on B. at New York without placing funds in his hands 
 but notifying C, his correspondent at St. Louis, who ar- 
 ranged with B. for payment. On one occasion he drew 
 on B. without notifying C. and the bill was dishonored. 
 At A.'s request the holder sent the bill again for collec- 
 tion and then it was protested. After the first protest C. 
 had deposited funds with B., who, however, withdrew 
 them prior to the second presentment, and soon after failed 
 having possession of the funds. In an action by the holder 
 against A., it was contended that on the first presentment 
 'there had' not been proper notice or demand to hold the 
 drawer, and that an unreasonable time had elapsed before 
 the second presentment. It was held (1) that A., having 
 
 on funds with the understanding between the drawer and drawee that it is an 
 appropriation of them for the payment of the bill. Raborg v. Peyton, 2 Wheat. 
 385; Horstmanu. Henshaw, 11 How. 177; Gillilan v. Meyers, 31 111. 525. In 
 Beauregard v. Kliowlton, 155 Mass. , Mr. Justice Barker, said : ' ' We as- 
 sume that under ordinary circumstances the drawer of a check is not liable to 
 a suit upon it without, presentment to the bank and dishonor. Kelley v. Brown , 
 5 Gray 108; Tassell«. Lewis, 1 Ld. Ray. 743; Crugeru. Armstrong, 3 Johns. 
 Cas. 5; Conroy v. Warren, 3 Johns. Cas. 259; Murray v. Judah, 6 Cow. 484, 
 490; Little v. Phenix Bank, 2 Hill 425; Case v. Morris, 31 Pa. 100, 104; Pur- 
 cell v. Allemong, 22 Grat. 739; Woodruff?). Plant, 41 Conn. 344, 347; Foster v. 
 Paulk, 41 Me. 425. But the cases cited, and many others, hold that a check is 
 in the nature of a bill of exchange, payable on demand, and that many of the 
 same rules apply to both. Barnett v. Smith, 30 N. H. 256, 264 ; Bickerdike 
 v. Bollman, 1 East 405; Boehm »>. Sterling, 7 East 423, 426. The drawer of 
 a bill of exchange is liable without presentment, if he has no effects in the 
 hands of the drawee, unless the drawee has something equivalent to effects, 
 or has agreed to accept and pay, or the drawer has some ground for a rea- 
 sonable expectation that the bill will be accepted and paid. Kinsley v. Rob- 
 inson, 21 Pick. 327, 328, and cases cited; Commercial Bank v. Hughes, 17 
 Wend. 94, 97. The same general principles are applied to checks, and pre- 
 sentment is excused where the making of the check was a fraud upon the 
 part of the drawer, he having no funds in the bank, and no ground for a 
 reasonable expectation that it would be paid. Byles, Bills (11th £d.) 216; 
 Chit. Bills (Amer. Ed. 1836) 423; Franklin v. Vanderpool, 1 Hall 78; Har- 
 ker v. Anderson, 21 Wend. 372, 375; Case v. Morris, 31 Pa. 100, 104; Ster- 
 rett v. Rosencrantz, 3 Phila. 54; Hoyt v. Seeley, 18 Conn. 353, 360: True v. 
 Thdmas, 16 Me. 36 ; Foster v. Paulk, 41 Me. 425, 428 ; Terry v. Parker, 6 
 Adol. & Ellis 502; Wirth v. Austin. L. R. 10 C. P. 689." 
 
124 BANK COLLECTIONS. § 94 
 
 made no provision for payment in the first instance and, 
 therefore, suffering no prejudice 'from the failure of de- 
 mand and notice, and having no reasonable expectation 
 that the bill would be paid, was liable, notwithstanding 
 the want of proper notice and demand, and that the fail- 
 ure to present it in a reasonable time afterward was im- 
 material. (2) That the request by the drawer on the ma- 
 turity of the bill to present it again for payment, and the 
 promise that it should be met, cured all informalities re- 
 specting the presentment and notice, and either admitted 
 or waived them. (3) That the consent to send the bill 
 forward did not extinguish the original bill ; it was neither 
 an extension of the bill for a consideration nor a payment 
 and satisfaction. (4) That the deposit with B. was not 
 prftper provision for meeting the bill, and that A. was 
 responsible for the withdrawal of the fund. 
 
 94. This rule, however, does not prevail everywhere. 
 Sometimes it is said that presentment and demand should 
 be made and notice given for the reason that the drawer 
 or drawee would have paid the same. InBank v. Kenan, 1 
 in which a bank was sued for negligence in not presenting 
 a check that was drawn thereon, Mr. Justice Bynum, in 
 speaking for the court said : " The agent must use such 
 skill and diligence as are necessary to the due execution 
 of his trust. This check was questionable and the bank 
 knew and acknowledged it to be so. Here, then, was sup- 
 eradded to its duty a spur to the most active vigilance in 
 . pressing the collection and giving prompt notice of its 
 dishonor. If by this neglect or delay to give notice the 
 payee was prevented from taking such immediate measures 
 against the drawer as might possibly have secured the 
 payee in some way or other, the bank must be held re- 
 sponsible, at least to the amount of the damage received. 
 Nor is*it an excuse that if the check had been presented 
 for payment it would not have been paid, or that there 
 
 1 76 N. C. 340, 343 , 
 
§ 97 MAKING COLLECTIONS, PRESENTMENTS. 125 
 
 were not sufficient funds in bank to meet it at maturity. 
 That, is not for the consideration of the agent. For it 
 might well be that, had due notice been given the deposi- 
 tor," an immediate demand on [the drawer] with such other 
 legal measures as their business relations might render 
 advisable, would have led to the payment of the check." 
 
 95. When a check is not presented in time and notice 
 of non-payment is not given, injury to the drawer will be 
 presumed. As the presumption always is that a check is 
 drawn on" actual funds, if the holder has been negligent 
 in not presenting it in due time or in failing to give notice 
 of non-payment, he must show that the drawer has not 
 been injured by his conduct. But if he can show that 
 the drawer had no funds in "the bank, the burden of prov- 
 ing actual damage is then on the drawer, and in the ab- 
 sence of such proof the holder of the check can recover. ' 
 
 96. If a bank is negligent in presenting a draft for col- 
 lection, whereby the sum deposited by the drawer in the 
 bank at which it was made payable is lost, the drawer 
 should not pay the draft whenever he expects to recover 
 the amount of the negligent bank ; its negligence is to 
 the holder and not to the drawer, consequently he has no 
 cause of action against the bank, should he pay the same; 
 the bill then ceases to be obligatory on any of the parties ; 
 it is only a piece of blank paper save as a memorial of. a 
 transaction." Furthermore, the negligence of the bank 
 in making a presentment is the negligence of the holder, 
 and, therefore, as between him and the drawer the latter 
 is discharged. 3 
 
 97. Some cases in which it was contended that the bank 
 was negligent in making presentment will now be noticed. 
 In one of these a draft, which was sent to a bank for col- 
 
 ' McClain v. Lowther, 35 W. Va. 29; 2 Daniel on Neg. Inst. g§ 1170, 1587. 
 
 2 Griffith v. Reed, 21 Wend. 502, 505; Criiger v. Armstrong, 3 Johns. Cas. 
 5; Simmon ds v. Parminter, 1 Wilson 185; Vereo. Lewis, 3 Term 182; Thomp- 
 son v. Morgan, 3 Camp. 101; Eayborg v. Pay ton, 2 Wheat. 385. 
 
 3 Haxvey v. Girard Nat. Bank, 119 Pa. 212. 
 
126 BANK COLLECTIONS. § 97t? 
 
 lection, was received and accepted and made payable five 
 days afterward, but was not paid. The bank returned 
 the same five days after it was due, and the drawee failed 
 the next day. The holder sued the bank for negligence 
 in not returning it. It was not shown that if the draft 
 had been promptly returned it could have been collected 
 at any time before the drawee's insolvency, though this 
 was essential to maintain the action. The instruction, 
 therefore, to the jury that the bank was "presumptively 
 liable" in consequence of the delay was erroneous. 1 
 
 97a. In Nebraska National Bank v. Logan, 3 A., a bank- 
 ing firm, drew a check on a bank at V., in which they had 
 funds, in favor of B., who lived at O., and transmitted the 
 same to him with a direction in the letter to ' 'rush th echeck 
 through." The check was received by B. on Saturday 
 after its date and indorsed by him and delivered to the 
 Nebraska National Bank for its face value and without 
 notice of the request in the letter. The Nebraska bank 
 transmitted the check to the V. bank on the same day it 
 was received, with instructions to remit the amount. The 
 V. bank sent a draft therefor drawn on a bank in L. The 
 Nebraska bank refused to accept the draft, having learned 
 of the failure of the V. bank and that it had no funds at 
 the L. bank, and the drawer was duly notified. It was 
 decided that the Nebraska bank had shown reasonable 
 diligence, and had acted in good faith, and that A. was 
 liable as the drawer of the check. 
 
 976. In Chapman v. McCrea," a note was deposited with 
 a bank for collection before maturity, but it remained un- 
 paid and the bank failed to protest it and to notify the 
 indorser of its non-payment. It was clearly negligent.' 
 
 97c. The First National Bank of Denver' received from 
 
 1 Fox v. Davenport Nat. Bank, 70 La. 649. 
 s 52 N. W. Rep. 808 ; S. C. 45 N. W. Bep. 439. 
 s 63 Ind. 360. 
 
 * Tyson v. State Bank, 6 Blackf. 225. 
 
 • 4 Dill. 290. 
 
§ 97e MAKING COLLECTIONS, PRESENTMENTS. 127 
 
 the First National Bank of Triadad a sight draft for col- 
 lection, which was drawn by the Triadad bank on a third 
 bank against funds belonging to the credit of the drawer. 
 The Denver bank received this draft for collection and on 
 the same day transmitted it directly to the drawee, which 
 was its correspondent. It ought to have reached the 
 drawee in two days. The drawee continued good for nine- 
 teen days afterward and then failed. The drawee did not 
 acknowledge the receipt of the draft, and in fact it mis- 
 carried and never reached that bank. The Denver bank 
 made no inquiries about the draft until thirty days after 
 sending it ; both banks supposed meanwhile that it had 
 been paid. The Denver bank gave the Triadad bank no 
 notice of any kind concerning the draft until thirty-two 
 days after sending it. The Triadad bank sued the other 
 for its negligence in omitting to give notice. The Denver 
 bank was declared liable. It was also decided that a 
 usage or custom to the effect that the Denver bank was 
 not required to make inquiries concerning such remittance 
 prior to receipt of the regular monthly statement of ac- 
 count between banks, was not established by the evidence. 
 
 §!d. In another case an agent drew on his .principal, 
 making the draft payable at S. bank. The principal de- 
 posited funds with it for payment. The draft was trans- 
 mitted for collection to the GL bank, which was in the 
 same city as the other. It would have been paid if it had 
 been presented that day or the next, but the Gr. bank 
 transmitted it by mail on the second day and not by mes- 
 senger, and before reaching the S. bank it had failed. 
 The messenger could have reached the bank in an hour, 
 and the Gr. bank was clearly negligent in presenting the 
 draft for payment. 1 
 
 97e. A bank received from the plaintiff for collection a 
 draft on B. & S. which was accepted, and the plaintiff was 
 notified. Without further notification or other steps to 
 
 1 Harvey *. Girard Nat. Bank. 119 P. 212 
 
128 ' BANK COLLECTIONS. § 98 
 
 collect the same, the bank held the draft for forty-seven 
 days and then returned it as uncollectable. During this 
 time B. & S. were known by the bank to be insolvent, but 
 had property worth more than the amount of the draft, 
 which was covered by an invalid deed of trust. Two days 
 after the return of the draft, B. & S. made an assignment 
 to the vice-president of the bank and preferred a debt due 
 to the institution. It was held that the bank was guilty 
 of such neglect of duty as to render it liable for the 
 amount of the draft. 1 
 
 97b. In presenting a note for acceptance the cashier of 
 a bank met the drawee of a bill and informed him that 
 the bank ' had a draft, and the drawee replied that he 
 should not accept or pay it. This was not a due present- 
 ment of the bill for acceptance. Mr. Justice Hubbard 
 said : ' ' The term presentment imports, not a mere notice 
 of the existence of a draft which the party has in his pos- 
 session, bul the exhibiting of it to the person on whom it 
 is drawn ; that he may see the same and examine his ac- 
 counts or correspondence, and judge what he shall do ; 
 whether he shall accept the draft or not. Here there ap- 
 pears to have been nothing more than a casual meeting 
 of the parties, and the conversation on the subject of the 
 draft ensued. If this had been communicated, it would 
 have created no obligation on the part of the indorser to 
 make present payment, and consequently such conversa- 
 tion imposed no present duty on the holders, as to the 
 other parties to the bill." 2 
 
 98. When the instrument has been presented and pay- 
 ment is refused, then it is needful, as already ex- 
 plained, to take proper steps to fix the liability of all 
 parties. When the instrument is a foreign bill it is deliv- 
 ered to a notary public to make another presentment and 
 demand, and if payment is refused to make a protest of 
 his action. The object of doing this is to secure evidence 
 
 1 Mound City Paint & Color Co. v. Commercial Nat. Bank, 4 Utah 353. 
 'Fall fiiver Union Bank v. Willard, 5 Met. 216. 322. 
 
§ 100 MAKING COLLECTION'S, PRESENTMENTS. 129 
 
 that a demand for payment was duly made. Inland bills, 
 checks and negotiable paper need not be thus presented 
 by a notary public a second time, but this is usually done 
 in the same manner as foreign bills. 1 In truth, they need 
 not be presented ; and in the event of their non-payment 
 the owner is pimply required to send notices to those who 
 are liable. 
 
 99.' By the law merchant the protest was a formal decla- 
 ration by a notary of the presentment, demand and dis- 
 honor of the bill or note, and that the holder looked to 
 all the parties for payment ; but the notice was no part 
 of the protest.' That was a fact, necessary to be proved, 
 to entitle the plaintiff to a recovery against the indorser, 
 which might be proved by the notary or other testimony 
 at the trial. 3 
 
 100. While protest, in the strict and technical sense 
 means only the formal declaration prepared #nd signed 
 
 ' Peabody Insurance Co. v. Wilson, 29 W. Va. 528. 
 
 2 " By common usage, particularly in regard to promissory notes, in com- 
 mercial dealings [a protest] has come to include taking all the steps neces- 
 sary to charge indorsers. Coddington v. Davis, 1 N. Y. 186. So also de- 
 positing a note for collection does not imply merely the receipt of the moneys 
 if paid by the maker, but includes taking all such steps before mentioned." 
 Robertson, Ch. J., Ayrault v. Pacific Bank, 6 Eob. 337, 349 ; Bank v. 
 Smedes, 3 Cow. 662, affg. 20. Johns. 372 ; McKinster v. Bank, 9 Wend. 46, 
 affd. 11 Wend. 473 ; Alien v. Merchants' Bank, 22 Wend. 215, 228. 
 
 " A protest is a solemn official process required by the law merchant to 
 properly authenticate the fact of the dishonor of negotiable paper. It is the 
 declaration, through the medium of a notary, on the part of the holder, 
 against any loss to be sustained by him in consequence of the non-accept- 
 ance or non-payment as the case may be, of a negotiable instrument. The 
 word ' protest ' signifies to bear witness before, or to publish forth, be- 
 cause the notarial act evidences to all the world the fact of dishonor ; and 
 the notary's certificate is the formal evidence, without further attestation of 
 the fact by witnesses, though formerly witnesses to a protest were not un- 
 common. In a more popular sense, protest includes all the steps necessary 
 to fix the liability of a drawer or indorser upon the dishonor of commercial 
 paper to which he is a party." Proffatt on Notaries, § 124. 
 
 3 Walker ». Turner, 2 Gratt. 534, 536 ; Real Estate Banku. Bizzell, 4 Ark. 
 189. 
 
 9B. 
 
130 BANK COLLECTIONS. § 102 
 
 by the notary, in the popular sense nsed among men of 
 business, it includes all the steps needful to charge an in- 
 dorser. Therefore, if an indorser should write to the 
 holder, "please not protest A.'s note and I will waive the 
 necessity of the protest," this would mean that payment 
 need not be»demanded of the maker nor notice given to 
 the indorser. 1 
 
 101. The question has been asked on several occasions, 
 but not clearly answered, can an officer qf a bank act as' 
 notary % ' Doubtless his acts would be legal notwithstand- 
 ing his official relation to the bank.' This has been done 
 in many cases and no objection has been raised to the 
 practice. In many states they are authorized to act in 
 this manner by statute. In Bank v. Flagg, 8 a book-keeper 
 acted also as a notary public. His protest of a note showed 
 that the maker had no funds. This was regarded as suf- 
 ficient. Said Mr. Justice Johnson : " W., as notary, was 
 the person authorized to make the inquiry ; as the clerk of 
 the bank he was the person of whom the inquiry was to 
 be' made ; the contract of the maker made him his agent 
 to give the answer, and he has certified by the protest 
 that the note was not paid, and I cannot conceive of 
 higher evidence." In Phipps v. Millbury Bank, 4 the 
 cashier of that bank protested a note that was not paid 
 and notified the indorsers. No question of his authority 
 to do this was raised. 
 
 102. Having received the note or bill what inquiry must 
 be made of the maker's residence or place of business in 
 order to make presentment, for the notary must find him 
 before'he can perform the act. On one occasion a notary 
 went to a bank on the proper day immediately after the 
 
 'Coddington v. Davis, 1 N. Y. 186. A demand of payment from the 
 maker of a note and notice to the indorser are sufficient to charge the in- 
 dorser without a technical and formal protest. Coddington v. Davis, 1 N. 
 Y.'186. 
 
 1 Blakeslee is. Hewitt, 76 Wis. 341 ; Mount v. First Nat. Bank, 37 la. 457. 
 
 s lHill(S. C.) 177, 181. 
 
 4 8 Met. 79. 
 
§ 102a MAKING COLLECTIONS, PRESENTMENTS. . 131 
 
 close of banking hours, presented a note to the cashier 
 and demanded payment, who replied "that the note 
 would not be paid, and that no funds were deposited in 
 the bank for that purpose." This was held to be a suffi- 
 cient demand. 1 On another occasion a maker of a prom- 
 issory note resided in Baltimore and the notary inquired 
 at the postoffice, exchange and court house, but did not 
 examine the city directory. This, the court declared, 
 
 ' should have been done.' In Bank v. Groddard,' Judge 
 Story said : "It appears to me that an agent is not bound 
 to give notice to the indorser of the dishonor of any note ; 
 and that his agency does not naturally include such a 
 duty. If he contracts with his principal to give such 
 notice, that is a mere private contract between the parties 
 with which the indorser has nothing to do. It neither 
 enlarges nor limits his rights. It may be inconvenient for 
 him to receive a circuitous notice ; but that is not suffi- 
 cient to change the law. I think it would be far more in- 
 convenient to establish the doctrine now contended for in 
 the defense.. All that is required by law is, that the 
 holder should give notice to the indorser in a reasonable 
 time after he has knowledge of the dishonor, and that 
 there should be no laches in getting that knowledge if an 
 
 -agent has been employed." 
 
 102a. In a well-considered case a notary to whom a note 
 had been given, inquired merely of the receiving teller of 
 the bank which held it concerning the indorser' s resi- 
 dence, who was unable to impart the desired information. 
 It was decided that he ought to have made further in- 
 quiry. Said Mr. Justice Campbell : 4 The rule requiring 
 an indorser to be promptly notified of the dishonor of a 
 note is one not of form, but of substance. It is a legal 
 condition of the contract that he shall be notified or dis- 
 
 1 Cohea v: Hunt, 2 Sm. & Marsh. 227. 
 
 3 Tate v. Sullivan, 30 Md. 464. 
 
 3 5 Mason 366, 377. 
 
 * Sweet®. Woodin, 74 Mich. 393, 395. 
 
132 BANK COLLECTIONS. § 103 
 
 charged, unless where reasonable diligence fails to find 
 him. This rule requires that the notary or other person 
 giving the notice shall use such means as are reasonably 
 calculated to find out the endorser's residence. To some 
 extent this rule is not a fixed and rigid one. But it re- 
 quires active diligence in hunting up the matter. In the 
 present case the notary, on the maturity of the note, re- 
 ceived it from the teller of the Old National Bank, and 
 presented it at the Fourth. National Bank, where payment 
 was refused. The only personal inquiry he made con- 
 cerning the residence of defendant was of the receiving 
 teller of the Old National Bank, who gave it to him to 
 protest. That gentleman did not know the address. * * * 
 It appears affirmatively that the cashier of the Fourth 
 National Bank knew all about it. * * * There is no legal 
 presumption that a receiving teller knows anything about 
 the parties on discounted papers, although he may do so. 
 The cashier, or board of discount, usually know on whose 
 credit a note is- discounted, and the address of the parties 
 through whom they claim. Where their usage requires 
 two names besides that of the principal debtor, it would 
 be rather loose banking not to know something about it. 
 Furthermore, where a note is payable at a particular bank, 
 that establishment is quite likely to have such informa- 
 tion. It is quite common where notes are payable at bank 
 to leave them there for presentment and for protest, if 
 needed. It was a plain and obvious duty of the notary 
 to apply to the officers of his own bank for information, 
 and if they could not give it to inquire where it was pay- 
 able, as well as, in default of both, to seek further. His 
 search, while not required to be unreasonably long where 
 he has no clue, should be real and not formal." 
 
 103. When the drawer of a bill has no funds in the 
 hands of the drawee which can be applied to its payment, 
 protest is not necessary to charge the drawer. 1 
 
 1 Mobley v. Clark, 28 Barb. 390 ; 2 Daniel on Neg. Inst., g 1082. See \ 92. 
 
§ 104« MAKING COLLECTIONS, PRESENTMENTS. 133 
 
 104. When the notary has been negligent' in making 
 presentment and protest, as well as in notifying indorsers, 
 is the bank that employed him liable ? This question 
 has been answered in one of three ways : (1) In those 
 states in which a bank is liable for the conduct of the sub- 
 agent, it is also liable both for the official and unofficial 
 acts of the notary employed, save in the State of New 
 York, where the bank is not liable for his acts which are 
 of an official character. 1 (2) And in those states in which 
 a bank is not liable for the conduct of the sub-agent, the 
 bank which actually made the collection is alone respon- 
 sible for the notary's conduct. (3) Wherever, though, 
 the notary is regarded as an independent officer, he alone 
 is responsible for his conduct. 
 
 104a. The first rule applies in New York, 1 New Jersey,* 
 Michigan, 4 Montana 5 and England. 8 "If," says Mr. 
 Justice Allen, " the bank employs a notary to present a 
 promissory note for payment and give the proper notices 
 to charge the parties, the notary is the agent of the bank, 
 and not of the depositor or owner of the paper. A notary 
 is not necessarily employed, as the service can be per- 
 formed by any clerk or other servant of the bank. This 
 general liability may be varied by express contract or by 
 implication arising from general usage. * * But the 
 practice and usage of the banks adopted for their own 
 convenience cannot vary the contract between them and 
 
 1 Allen v. Merchants' Bank 22 Wend. 215, 241. 
 
 2 Mead«. Engs, 5 Cow. 303; Allen v. Merchants' Bank, 22 Wend. 215, 
 xevsg. 15 Wend. 482; Montgomery Co. Bank v. Albany City Bank, 7 N. Y. 
 459;. Walker v. Bank, 9 N. Y. 582; Commercial Bank v. Union Bank, 11 N. 
 Y. 211; Naser ». First Nat. Bank, 116 N. Y. 492; Corn Exchange Bank v. 
 Farmers' Nat. Bank, 118 N. Y. 443; Ayrault v. Pacific Bank, 47 N. Y. 570; 
 Howard v. Ives, 1 Hill 263; Downer v. Madison Co. Bank, 6 Hill 648. See 
 20 Am. Law Rev. 899. 
 
 3 Titus v. Mechanics'- Nat. Bank, 35 N. J. Law 588; Davey o. Jones, 42 
 N. J. Law 28; Paterson Bank v. Butler, 7 Halst. Eq. 268. 
 
 * Simpson v. Waldby, 63 Mich.' 439. 
 
 6 Power v. First Nat. Bank, 6 Mont. 251. 
 
 6 Scott v. Lifford, 9 East 347; Haynes v. Birks, 3 Bos. & Pull. 599. 
 
134 BANK COLLECTIONS. • § 104^ 
 
 their dealers." 1 If, therefore, a notary should make such 
 a mistake in the name of the indorsee or holder as to miss 
 the notice and thus fail to notify the indorser, the bank 
 or the notary would be liable." 
 
 1045. Nor does a direction to the collecting bank to 
 protest the note if it be not paid, mean simply the hand- 
 ing of it to a notary, thereby discharging the bank in the 
 event of his failure to perform his duty. Such a direction 
 is not a special contract limiting the liability of the bank, 
 and it is required to make demand in proper form and at 
 a proper time and in case of non-payment, to give due and 
 reasonable notice to the indorsers.' 
 
 104c. When a debt is lost by the omission of a notary 
 to give notice of the non-acceptance of a bill presented be- 
 fore maturity, the collecting bank cannot be excused on 
 the ground of not knowing its legat duty in the matter. 
 Thus a bill of exchange drawn in New York on a resident 
 in Philadelphia, which was deposited for collection at a 
 New York bank, was lost to the holder in consequence of 
 the omission of the bank to give notice of the refusal to 
 accept the bill. The bank defended on the ground that 
 neither protest nor notice of non-acceptance was necessary 
 to bind drawer or indorser in Pennsylvania. But the bill 
 was drawn in New York and was therefore governed by 
 the law of that state which required the notice of non-ac- 
 ceptance to be given. Said the court: "Those who 
 undertake to collect foreign paper are as orach bound to 
 inform themselves as to what is necessary to protect the 
 holders of such paper as if it were domestic, and governed 
 wholly by their own local law." 4 , 
 
 104<2. The second rule that the bank which makes the 
 collection is solely responsible for the notary's conduct, 
 whether acting as principal or as sub-agent, is applied" in 
 
 1 Ayrault v. Pacific Bank, 47 N. Y. 570, 574. 
 
 2 Davey v. Jones, 42 N. J. Law 28. 
 
 8 Id. 570. • 
 
 * Allen v. Merchants' Bank, 22 Wend. 215, 239. 
 
§ 104e MAKING COLLECTIONS, PRESENTMENTS. 135 
 
 Massachusetts, ' Connecticut, " Iowa, 8 Missouri, 4 Maryland,' 
 Kansas," Wisconsin,' Louisiana, 8 Tennessee,' Pennsylva- 
 nia, 10 South Carolina, " Indiana " and Alabama. " Thus, in 
 Warren Bank v. Suffolk Bank, 1 * a note was placed by the 
 Suffolk Bank in the hands of a competent notary public for 
 demand and protest. For more than ten years it had been 
 the collecting agent for the other bank, and had invariably 
 placed its notes in the hands of a notary for demand and 
 protest with its knowledge. It was declared to be proper 
 to admit evidence to show that it was the invariable usage 
 of Boston banks, when notes were sent to them for collec- 
 tion, to keep them f orpayment until the close of banking 
 hours and if not then paid to put them in the hands of a 
 notary for demand and protest, and that the, Suffolk Bank 
 did so on the present occasion. Having established these 
 facts, that bank was declared to be not responsible for the 
 negligence of the notary. 
 
 104e. As the bank which actually makes the collection 
 in those states is responsible for the notary's conduct, this 
 extends to the selection of a proper person to perform the 
 duty. When, therefore, such an one has been selected, 
 
 1 Fabens v. Mercantile Bank, 23 Kick. 330; Warren Banks. Suffolk Bank, 
 10 Cush. 582; Dorchester & Milton Bank v. New England Bank, 1 Cush. 177. 
 
 2 East-Haddam Bank v. Scovil, 12 Conn. 303. 
 
 3 Mount v. First Nat. Bank, 37 la. 457; Guelich v. National State Bank, 
 56 la. 434. 
 
 4 Daly v. Butchers,* Drovers' Bank, 56 Mu 94. 
 
 6 Pawson v. Bunnell, 1 Gill & Johns. 1, 147; Jackson v. Union Bank, 6 
 Har. & Johns. 146. 
 
 6 Bank v. Ober, 31 Kan. 599, 607. 
 
 7 Stacy v. Dane Co. Bank, 12 Wis. 629. 
 
 8 Baldwin v. Bank, 1 La. Ann. 13 ; Hyde ». Planters' Bank, 17 La. 560 ; 
 Frazier v. New Orleans Gas Light & Banking Co,, 2 Bob. 294. 
 
 9 Bank v. First Nat. Bank, 8 Baxter 101. 
 
 10 Bellemire v. Bank, 4 Whart. 105. 
 
 11 Thompson »*Bank, 3 Hill 77, S. C. Eiley 81. 
 
 12 Tyson v. State Bank, .6 Blackf. 225; American Express Co. ». Haire. 21 
 Ind. 4. 
 
 13 Branch Bank v. Knox & Co., 1 Ala. 148; Bank v. Huggins, 3 Ala. 206. 
 "10 Cush. 582. 
 
136 BANK COLLECTIONS. § 104^ 
 
 the duty of the collecting bank in this regard is ended 
 and only the notary himself is responsible for the perform- 
 ance of his business.' 
 
 104/. In federal practice and in some states the collect- 
 ing bank, though responsible for the negligence of the 
 sub-agent, is not responsible for the negligence of the 
 notary, because he is an independent officer. 5 In a case 
 requiring the application of the principle, the Ohio court 
 said that "the bank in taking the paper for collection 
 agrees to collect it if paid, and if not paid to hand it to a 
 reputable notary in season . We think this may be said to 
 be the natural import of the act of delivery by the one and 
 of taking by the other, especially in a jurisdiction where 
 the notary can act only as an independent public officer. ' ' ' 
 In another case* Mr. Justice Field remarked: "It is 
 enough here that the notary was hot in this matter the 
 agent of the [collecting] bankers. He was a public officer 
 whose duties were prescribed by law, and when the notes 
 were placed in his hands, in order that such steps should be 
 taken by him as would bind the indorsers if the notes 
 were not paid, he became the agent of the holder of the 
 notes. For any failure on his part to perform his whole 
 duty he alone was liable ; the bankers were no more liable 
 than they would have been for the unskilfulness of a 
 lawyer of reputed ability and learning to whom they 
 might have handed the notes for collection in the conduct 
 of a suit brought upon them." 
 
 104<7. In Kansas as a notary public has no authority to 
 
 1 Dorchester & Milton Bank v. New England Bank, 1 Cnsh. 177; Warren 
 Banku Suffolk Bank, 10 Cosh. 582; Citizens' Bank v. Howell, < 8 Md. 530; 
 Proffatt on Notaries, $ 155. 
 
 2 Bank v. Butler, 41 Ohio St. 519; Huff v. Hatch, 2 Disney 63. 
 
 3 Bank v. Butler, 41 Ohio St. p. 525; Tiernan v. Commercial Bank, 7 How. 
 (Miss.) 648 ; Agricultural Bank v. Commercial Bank, 7 Sm. & Marsh. 592; 
 Bowling •». Arthur, 34 Miss. 41. Nor is a bank liable in New York for his 
 official acts. Allen v. Merchants' Bank, 22 Wend. 215. See 20 Am. Law 
 Rev. 899, 902. 
 
 * Britton v. Niccolls, 104 TJ. S. 757. • 
 
§ 106 MAKING COLLECTIONS, PRESENTMENTS. 137 
 
 give notice of the non-payment of a note, 1 should he at- 
 tempt to do so he would act merely as the agent of the 
 holder of the note, or as the agent of the person employ- 
 ing him to give the notice." And likewise in Missouri, 
 should a collecting bank employ a notary appointed by 
 it for a year, and require from him a bond for the 
 faithful discharge of his duties, it would be responsible 
 for his negligence in failing to give notice to an indorser 
 of a negotiable promissory note of a demand on, and a re- 
 fusal of payment by, the maker, by which the indorser was 
 discharged. The notary, when thus appointed, is not 
 an independent officer, but the agent of the bank. 8 And 
 in other cases in which a notary -is employed to do non- 
 official acts his employer or principal is responsible for 
 them. 4 
 
 104A. Lastly, if a bank should instruct a notary, and he 
 should follow the instructions, it would be responsible for 
 the loss and the notary would be excused. 
 
 105. Having considered the duty of the collecting bank 
 to make presentment, and in the event of non-payment to 
 give the instrument to a notary public for him to make 
 another presentment, we shall now proceed to consider 
 the duty of the bank to notify the indorsers and all other 
 parties who are entitled to notice. 
 
 106. At the outset it may be remarked that for the 
 purpose 6f giving notice, this need not be done by the 
 collecting agent ; a notary may be employed for the pur- 
 pose." Mr. Chief Justice Hosmer fifty years ago re- 
 
 *' Swayze v. Britton, 17 Kan. 625; Couch v. Sherill, 17 Kan. 622; Seaton 
 v. Scovill, 18 Kan. 433, 436. 
 
 2 Bank v. Ober, 31 Kan. 599, 607. 
 
 3 Gerhardt v. Boatman's Sav. Institution, 38 Mo. 60. 
 
 4 Commercial Bank v. Varnum, 49 N. Y. 269; Emmerling e. Graham, 14 
 La. Ann. 389; Proffatt on Notaries, \ 155. 
 
 * Huffc. Hatch, 2 Disney 63. 
 
 6 " It should he remembered, that by the common law, it is no part of 
 the duty of a notary to give notice, unless he is specially employed to do 
 so ;' but, usually, notaries are constituted agents of a party for this purpose, 
 
138 BANK COLLECTIONS. § 107 
 
 marked : " I consider it to be unquestionably established, 
 on the foundation of general usage, that neither the de- 
 mand nor notice need be by a party to the note or bill. 
 It is sufficient if a demand is made, and notice given, by a 
 notary. " ' la doing so, however, he does not act officially, 
 but as the agent of the holder of the bill. 2 In the case of 
 the Bank of Utica «. Smith,'' Mr. Chief Justice Spencer 
 said referring to demands made by notaries : ' ' These 
 officers are in the practice of doing so ; and being commis- 
 sioned by the government, their official acts are of a more 
 solemn nature than those .of individuals ; for the same 
 reasons, a notice of non-payment by a notary is also avail- 
 able ; and it is the constant and uniform course, sanctioned 
 by a long and continued usage." A demand of payment 
 by an agent having parol authority, or the mere possession 
 of the paper, is sufficient to validate the presentment and 
 notice. * And the notary has authority to make de- 
 mand and give notice even though the paper has only 
 been indorsed and transmitted to him for collection.'' 
 
 107. The instrument of which notice of non-payment 
 must be given include all to whom it must be presented 
 for acceptance and payment. Therefore, notice of a note 
 that has been" given by one to another as collateral secu- 
 rity and deposited by the creditor for collection must be 
 
 and are then liable for any failure to give notice. And now, by statute in 
 several of our states, it is incumbent on the notary to give notice." Prof- 
 fatt on Notaries, \ 143. In Alabama, a notary must give notice " accord- 
 ing to law." Kev. Code, I 1083. By Deering's Political Code of California, 
 ? 794, it is the duty of notaries, "when requested to demand acceptance 
 and payment of foreign, domestic and inland bills of exchange or promis- 
 sory, notes, and to protest the same for non-acceptance and non-payment." 
 
 • ' Hartford Bank v. Stedman, 3 Conn. 489, 495, citing Freeman v. Boyn- 
 ton, 7 Mass. 483, 486 ; Little v. Obrien, 9 Mass. 423, 427. 
 2 Palmer v. Whitney, 21 Ind. 58, 64. 
 » 18 Johns. 230, 240. 
 
 4 Hartford Bank v. Stedman, 5 Conn. 489. 
 
 5 Warren v. Gilman, 17 Me. 360. 
 
§ 109 MAKING COLLECTIONS, PRESENTMENTS. . 139 
 
 given if not paid., 1 and also of a check which the drawer 
 refuses to pay." 
 
 108. When an indorsed bill or note is received for col* 
 lection, should the bank make inquiry when receiving it 
 concerning the residence of the indorsers ? Opposite opin- 
 ions have been expressed. The reasons for not requiring 
 this to be done are : (1) The import of the contract of 
 the indorser is, that the maker on due presentment will 
 pay the note. (2) Due diligence in giving notice becomes 
 necessary in consequence of the dishonor of the note, and 
 is therefore to be exercised Subsequently to that event 
 and can involve no prior precautionary act. Says Mr. 
 Justice Butler, in Bartlett v. Isbell:" ""In strictness, 
 therefore, it cannot be claimed, as an element of due dili- 
 gence, that the owner, if he has knowledge of the resi- 
 dence of an indorser, shall send or give that knowledge, 
 prior to dishonor, to a distant holder for collection ; al- 
 though if the ' holder for collection ' has such knowledge 
 he must communicate it to the servants or notary whom 
 he employs after dishonor." (3) To require the owner to 
 convey his knowledge of the residence of. the indorser 
 with the note to the holder for collection, would involve 
 much painstaking on his part and which the indorser 
 has no just right to require. " If precaution is to be ex- 
 ercised before dishonor, to avoid the possibility of mis- 
 take, the indorser should be required to append his resi- 
 dence to his indorsement." (4) If the collecting agent, 
 or his servant, or a notary cannot learn the residence. of 
 an indorser by due diligence, he should send the notice to 
 the owner to be forwarded.* 
 
 109. In obtaining the desired knowledge of the resi- 
 
 'McKinster v. Bank, 9 Wend. 46,affd. 11 Wend. 473; Bank v. Smedes,' 
 3 Cow. 662. 
 
 2 Harker v. Anderson, 21 Wead. 372 ; Bank v. Kenan, 76 N. C. 340. 
 
 3 31 Conn. 296, 300. 
 
 * East "Haddam Bank v. Scovil, 12 Conn. 303, 311. A contrary rale has 
 been established in South Carolina. Thompson v. Bank, 3 Hill. 77. 
 
140 BANK COLLECTIONS. § 109« 
 
 dence of indorsers, the law prescribes no specific mode of 
 inquiry. Any mode will satisfy the law which, under 
 the circumstances of the case, is characterized by reason- 
 able diligence. 1 Thus, a notary who, instead of wasting 
 time to make inquiry at the town where the note was 
 payable concerning the residence of, the indorser, sent the 
 notice immediately to a person acquainted with the in- 
 dorser' s place of residence, with the direction to supply 
 the deficiency, satisfied the legal requirement." Nor is 
 the holder, or notary, if ignorant of the residence of the 
 indorser, required to go abroad to inquire of other parties 
 to ascertain where he lives. The law is satisfied by ex- 
 ercising reasonably diligent inquiry of different persons 
 living at the place where the paper is payable whom he 
 may suppose are most likely to impart the desired informa- 
 tion, especially by inquiring of the officer of the bank at 
 which the note is payable, or of other persons residing in 
 the town where the bank is located." " Until some one 
 is found who professes to be, able to give the required in- 
 formation, it will not do to stop short of a thorough in- 
 quiry at places of public resort, and among such persons 
 as would be most likely to know the residence of the in- 
 dorser." 4 
 
 109a. In Belden v. Lamb, 6 an indorsed note was left 
 with a bank at Hartford for collection, but the residence 
 of the indorser was unknown to the holder and cashier. 
 The holder made inquiries and directed the cashier to 
 write "Chicopee" on the note under the Endorser's name, 
 which was done. The note was not paid at maturity, and 
 
 1 Hartford Bank v. Stedman, 3 Conn. 489. 
 
 2 Id. 
 
 3 Branch Bank v. Pierce, 3 Ala. 321, 325. See Colt v. Noble, 5 Mass. 167; 
 Bank of Utica v. Smith, 18 Johns. 230 ; Chapman v. Lipscombe, 1 Johns. 
 294 ; Eeid v. Payne, 16 Johns. 218 ; Bank v. Phillips, 3 Wend. 408 ; Wells 
 v. Whitehead, 15 Wend. 527 ; Bank v. Bender, 21 Wend. 643 ; Williams 
 v. Bank, 2 Pet. 96. 
 
 * Spencer v. Bank, 3 Hill 520, 522 ; Eawdon v. Bedfield, 2 Sandf.*178. 
 5 17 Conn. 441. 
 
§ 111 MAKING COLLECTIONS, PRESENTMENTS. 141 
 
 notice was sent to the indorser'at the place mentioned. 
 He lived, however, several miles distant, which was known 
 to a considerable number of the citizens at Hartford. The 
 question was left to the jury to determine whether due 
 diligence had been used, who decided in the affirmative, 
 and the course was approved by the court of review. In 
 Phipps v. Chase, 1 the cashier of a bank inquired of a per- 
 son who was in temporary charge of a postoffice in the 
 town where the bank was established. This was deemed 
 insufficient. 
 
 110. The holder of a note must not permit himself to 
 remain in a state of passive and contented ignorance, 
 trusting to the vigilance of the notary. He must also use 
 reasonable diligence to discover the residence of the in- 
 dorser." 
 
 111. We cannot describe fully all of the cases in which 
 the duty of a bank to give notice to indorsers has been 
 considered. In general, it may be said that when a bank 
 has received a note for collection, which is not paid at 
 maturity, it performs its whole duty when it applies for 
 information to the immediate indorser and acts on the in- 
 formation thus received. 5 For a party through whose 
 hands negotiable paper has passed is presumed to know 
 the residence of the party from whom it was received and 
 the prior parties. When, therefore, a collecting bank de- 
 sires to obtain information concerning the residence of in- 
 dorsers, they are the proper sources of it, and when asked 
 and assume to know, the collecting agent 'can safely act 
 upon it. Even if the information prove to be erroneous, 
 the agent's duty has been discharged. 4 Nor need inquiry 
 be made of the holder, or of any indorser unless he is ac- 
 
 1 6 Met. 491. 
 
 8 Tate v. Sullivan, 30 Md. 464 ; Haly v. Brown, 5 Pa. 178 ; Staylor v. Ball, 
 24 Md. 183, 199, 200. 
 
 s Beale v. Parrish, 20 N. Y. 407. 
 
 * Beale v. Parrish, 20 N. Y. 407, 410 ; Phipps v. Millbury Bank, 8 Met. 
 79, 85. 
 
142 BANK COLLECTIONS. § 112 
 
 cessible. 1 In Harger v. Bemis,' the holder inquired of an 
 internal revenue assessor who declared that he knew the 
 indorser and where he lived. The notice was sent to the 
 place indicated, which, however, was five miles distant 
 from the indorser' s residence. But this was sufficient 
 diligence to satisfy the law. So, too, when a bank at the 
 time of discounting a note or bill inquires of the person 
 presenting it concerning the residence of the indorser, and 
 sends notice to the place named by him, this is due dili- 
 gence and sufficient to charge the indorser, though he had 
 never resided there, or had removed to another place.' 
 A notary should not rely wholly on a city directory. 4 If 
 a notary should make diligent inquiry at the usual place 
 of residence of the indorser, but should not make any 
 attempt whatever to ascertain at what postoffice notice of 
 protest should be addressed, he would not exercise, due 
 diligence. 6 
 
 112. Sometimes the person who is collecting a note is 
 the mere servant of the owner, and when he is, the due 
 diligence required by law in notifying the indorser is that 
 of the owner. Says Mr. Justice Butler, in Bartlett ». Is- 
 bell:' "It maybe conceded that where the owner of a 
 note has knowledge of the residence of an indorser, and 
 gives the note directly, and without the intervention of a 
 'holder for collection,' to a mere agent, as to a clerk or 
 servant to collect, or to a notary to protest, without in- 
 forming them of the residence, and by reason of their 
 ignorance there is default of notice, the indorser will be 
 discharged ; for due diligence requires in such case that 
 the notary, although a sworn officer of the law, shall make 
 
 1 Lawrence v. Miller, 16 N. Y. 235, 240. 
 
 5 1 T. & C. 460. . 
 
 3 Palmer v. Whitney, 21 Ind. 58 ; Bankti. Davidson, 5 Wend. 587 ; Dickins 
 v. Beal, 10 Pet. 572 ; Edwards on Bills, p. 609. 
 
 * Bacon v. Hanna, 17 N. Y. Supp. 430 ; Greenwich Bank v. De Groot, 7 
 Hun 210. See Tate v. Sullivan, 30 Md. 464. 
 
 6 New Orleans Canal & Banking Co. v. Bry, 2 La. Ann. 303. 
 
 6 31 Conn. 299. 
 
§ 114 MAKING COLLECTIONS, PRESENTMENTS. 143 
 
 inquiry of the owner, and the owner will be presumed to 
 direct and control his mere agent, as well after dishonor 
 as before." 
 
 113. The notice given by a bank to all the parties of the 
 note enures to the benefit of a"U. But it should be remem- 
 bered that when the collecting bank is unable to learn 
 the proper place for giving notice to an indorser, this will 
 not excuse another indorser who possesses better knowl- 
 edge of his residence from giving the necessary informa- 
 tion ' Such ignorance excuses the giving of notice only 
 so long as it continues ; the duty, therefore, to give notice 
 arises whenever the knowledge is acquired, and negligence 
 to perform the duty has the same effect that negligence 
 would have in the beginning. 2 Thus, in Beale v. Parrish,* 
 the second indorser of a note, who was chargeable with 
 the knowledge of the residence of a prior indorser, gave 
 erroneous information to a bank with which it had been 
 left for collection, whereby the prior indorser failed to re- 
 ceive notice of non-payment. The second indorser then 
 paid the note and brought an action against the prior in- 
 dorser without any further notice, though knowing where 
 he lived. It was held, that though the bank might have 
 recovered the second indorser could not, as he knew the 
 residence of the prior indorser and had been negligent in 
 notifying, and, therefore, was discharged. 
 
 114. Let us inquire .who should be notified. First of 
 all may be mentioned the indorsers. If this is not done 
 they will be discharged. Though the owner of a note or 
 bill who indorses it for collection is not strictly an in- 
 dorser, and no necessity exists to give notice to him to fix 
 his liability to any subsequent holder, yet notice must be 
 given to him in a reasonable time, not as an indorser but as 
 a holder, so that he may avail himself of any means within 
 his power to secure the eventual payment of the bill to 
 
 1 Beale o. Parrish, 20 N. Y. 407. 
 s Id. 
 , 3 Id. 
 
144 BANK COLLECTIONS. § 115 
 
 himself. 1 Again, an indorser for collection should be 
 notified like an indorser for value. ' A banking house, * or 
 other agent, 4 indorsing a bill in this manner must not be 
 omitted. Each branch of a bank, too, is considered a 
 separate establishment, and must be notified. 6 
 
 115. In sending notice to the indorsers and all who are 
 entitled to them, the collecting bank must use due dili- 
 gence, and if it neglects to do this it becomes responsible 
 for the resulting injury to the owner of the paper received 
 for collection." As demand and notice are conditions 
 precedent to the holder's right to recover of an indorser, 
 the duty of the collecting bank in doing these things must 
 be regarded.' Nevertheless, #Le strict rules which once 
 prevailed in charging a drawer or indorser have been re- 
 laxed, and instead of requiring the holder to employ all 
 possible diligence, the law is satisfied by employing rea- 
 sonable diligence. 8 
 
 1 East-Haddam Bank v. Scovil, 12 Conn. 303, 313. 
 
 2 State Bank v. Ayres, 2 Halst. Law 130 ; Bank v. Davis, 2 Hill 451 ; 
 Farmers' Bank v. Vail, 21 N. Y. 485; Chapman v. McCrea, 63 Ind. 360. 
 
 3 McNeal v. Wyatt, 3 Hump. 125; Scott v. Lifford, 9 East 347; Seaton v. 
 Scoyill, 18 Kan. 433; First Nat. Bank v. Smith, 132 Mass. 227. 
 
 4 Butler v. Dnval, 4 Yerg. 265. 
 
 6 Clode v. Bayley, 12 Mees. & Wels. 51 ; 2 Daniel on Neg. Inst. \ 995 ; 
 Randolph on Com. Paper, § 1241. 
 
 6 Capitol State Bank v. Lane, 52 Miss. 677; Commercial & Railroad Bank 
 v. Hamer, 7 How. (Miss.) 448, 451; Smith v. Janes, 20 Wend. 192, 194; 
 Thompson v. Bank, 3 Hill (S. C.) 77, 81; Mount v. First Nat. Bank, 37 la. 
 457, 460; Tate v. Sullivan, 30 Md. 464; Whiteford v. Burckinyer, 1 Gill 127, 
 142. 
 
 7 Moore v. Hardcastle, 11 Md. 48S, 490; Bell v. Hagerstown Bank, 7 Gill 
 216,' 225, 227; Whitridge v. Rider, 22 Md. 548; Staylor v. Ball, 24 Md. 183, 
 199, 200 ; Walters ■«. Brown, 15 Md. 285, 291, 294 ; Haly v. Brown, 5 Pa. 
 178, 181, 182. 
 
 8 Branch Bank v. Pierce, 3 Ala. 321. 
 
 In Peabddy Insurance Co. v. Wilson, 29 W. Va. 528, 543, Woods, X, re- 
 marked : "The indorser is not the real debtor ; he is only a surety. His under- 
 taking iscollateral, his contract is conditional, that if, upon due diligence hav- 
 ing been used against the maker, the money is not paid he will become liable 
 for it. This due diligence is a condition precedent to a right of recovery 
 against him. Being only collaterally and conditionally responsible, the in- 
 
§ 116 MAKING COLLECTIONS, PRESENTMENTS 145 
 
 116. There are two ways of sending notices." The 
 holder or the notary .may send them simultaneously to 
 all the parties who are entitled to them, or "they may be 
 sent in regular succession from the holder to his imme- 
 diate indorser, whether he be an agent for collection 
 or an indorser for value, and he may notify his immediate 
 
 dorser must be dealt by with the utmost strictness. He had the right to 
 bind himself or not, and, of course, to declare the terms on which he would 
 be bound; his creditor must comply with these terms, and he cannot alter 
 them. If he engages to pay on demand at a certain time and place, the de^ 
 mand at such time and place is essential to his liability, and is an essential 
 part of the holder's title. When such a note is made payable at a particular 
 time and place, due diligence requires that it shall be presented at that time 
 and place, and it is incumbent on the holder of the note to show a compli- 
 ance with them, on his part, by suitable averments in his declaration and 
 by proper proofs at the trial. To charge the indorser it is indispensible that 
 that the note should be presented for payment, and payment thereof de- 
 manded at the time and place designated in the note, and that due notice be 
 given him that the demand is ineffectual; and it is necessary to prove that 
 the presentment for payment was there made, otherwise the indorser will 
 be absolutely discharged. Watkins v. Crouch & Co., 5 Leigh. 522; Magoun 
 v. Walker, 49 Me. 419; Story on Prom. Notes, g 230; 1 Parsons on Notes and 
 Bills, 431 ; 1 Daniel on Neg. Inst. § 644. Where the note is in its terms 
 payable at a bank, it is sufficient if the note is in the bank at maturity 
 ready to be delivered on payment, should the maker come to pay it. But 
 if the bank, where the note is made payable, is the holder, and the maker 
 neglects to appear there when the note falls due, a formal demand by the 
 default of the maker becomes impracticable. All that can in fitness be done, 
 or ought to be required, is that the books of the bank should be examined 
 to ascertain whether the maker had any funds in their hands, and if not 
 then there was a default, which gave the holder a right to look to the in- 
 dorser for payment. If the note is by its terms payable at a particular 
 bank, and the holder thereof, or his agent, makes demand there, or leaves 
 the note at the bank, and authorizes, the bank to receive payment and give 
 up the note, and the maker neither offers payment nor has funds in the 
 bank appropriated to the payment of the note, no other presentment or de- 
 mand is necessary, and the note is dishonored. But whether there are funds 
 provided or not, the note must be at the bank at its maturity, for otherwise 
 there can be no demand, constructive or actual. Shaw v. Reed, 12 Pick. 
 132; Berkshire Bank v. Jones, 6 Mass. 524; Woodbridge v. Brigham, 13 
 Mass. 556; Lee Bank v. Spencer, 6 Met. 308; 1 Parsons on Notes and Bills 
 367. 
 
 10 B. 
 
146 BANK COLLECTIONS. § 116(2 
 
 indorser until all are notified." It is a very common 
 practice for the notary to notify all parties, and in New 
 York city this has become a usage which must be ob- 
 served." It has been contended on many occasions that 
 he must notify all parties, but the courts have declared 
 that no such duty exists. It is true that the notices 
 would often reach some of theindorsers earlier if this was 
 done. In many cases the notices cannot be sent, for the 
 residence of the indorsers are unknown to the collecting 
 bank, or to the notary employed by it. Even when they 
 are known, and reside in the same place as the collecting 
 bank, it is not required to send them ; in all cases its duty 
 is fully performed by sending them to the source from 
 which the dishonored paper came. 3 
 
 116a. In Wynen v. Schappert,* Mr. Chief Justice Daly 
 said concerning the transmission of notices through sev- 
 eral banks in a circuitous manner : ' ' The note having been 
 transmitted through these several banks, the return of the 
 notices of protest to the next immediate indorser, and so 
 on through each precedingindorser, was right. Itis claimed 
 by the defendant that each of the banks through which 
 
 1 Haynes v. Berks, 3 Bos. & Pull. 599; Gindratu Mechanics' Bank, 7 Ala. 
 324, 331; Colt v. Noble, 5 Mass. 167; Grand Bank v. Blanchard, 23 Pick. 
 305; Housatonic Bank v. Laflin, 5Cush. 546, 560; Eagle Bank v. Hathaway, 
 5 Met. 212, 215; Shelburne Palls Nat. Bank v. Townsley, 102 Mass. 177, 
 179; Tunno v. Lague, 2 Johns. Cas. 1; Mead v. Engs, 5 Cow. 303; Howard 
 v. Ives, 1 Hill 263; Bank v. Davis, 2 Hill 451, 458; State Bank v. Bank, 41 
 Barb. 343; 1 Daniel on Neg. Inst, g 995; State Bank v. Ayers, 2 Halst. Law 
 130; Howland v. Adrain, 30 N. J. Law 41; Davey v. Jones, 42 N. J. Law 28, 
 30; Johnson v. Harth, 1 Bailey 482; Carter*. Barley, 9N. H. 558; Parmer v. 
 Eand, 16 Me. 453; Freeman's Bank v. Perkins, 18 Me. 292; Northern Bank 
 v. Williams, 21 Me. 217; Story on Bills, <j 294, Story on Prom. Notes, 326; 
 Foster v. McDonald, 3 Ala. 34; Bank». Huggins, 3 Ala. 206; Church ». Bar- 
 low, 9 Pick. 547; Ogden v. Dobbin, 2 Hall 112; Farmers' Bank v. Vail, 21 
 N. Y. 485; Clode c.'Bayley, J2 Mees. & Wels. 51; Scott v. Lifford, 9 East 
 347; Wynen v. Schappert, 6 Daly 558, 563. 
 
 2 Smedes v. Bank, 20 Johns. 372, affd. 3 Cow. 662. 
 
 3 Bank v, Goddard, 5 Mason 366; Phipps v. Millbury Bank, 8 Met. 79; 
 Howard t>. Ives, 1 Hill 263; Bank v. Davis, 2 Hill 451. 
 
 4 6 Daly 558, 563, 565. 
 
§ 117 MAKING COLLECTIONS, PRESENTMENTS. 147 
 
 the note passed for collection were the agents of the 
 holder, and that he is responsible for a delay in the de- 
 livery of the notices of protest arising from the fact of the 
 unnecessary interposition of so many agents. Where a 
 note, as in this case, is indorsed to a bank for collection at 
 a distant place, that bank and the banks to which it is suc- 
 cessively indorsed in the course of its transmission to the 
 place where it is payable, are, as respects the giving and 
 receiving of notices of protest, regarded as the real holders 
 of the note ; so that, when the note is dishonored, the 
 proper course for the bank that presents it is to send the 
 notices of protest to the next immediate indorser from 
 whom they received the note, and for each indorser to do 
 the same, although it may be a more circuitous route and 
 involve more delay than to send notices directly from the 
 place of presentation to each indorser." 
 
 117. If a notice is sent by a notary to a person in an- 
 other town for the completion of the address of the person 
 to be notified who resides there, and with the request also 
 to mail the notice to him, which is done, this is a legal 
 notice. In Warren v. Gilman 1 a bill was drawn, accepted 
 and indorsed by residents of Bangor and made payable at 
 a bank in Boston. It was indorsed to a bank in Bangor, 
 which indorsed and transmitted the bill to a bank in Bos r 
 ton for collection. By direction of the cashier of the 
 Boston bank it was duly presented for payment by a no- 
 tary, and the notice of non-payment was immediately pre- 
 pared by him for all the prior parties and transmitted by 
 the first mail to the cashier of the Bangor bank. On the 
 same morning when the notices reached Bangor the cash-- 
 ier took them from the post office, directed one to the in- 
 dorser who was then a resident of that city and immedi- 
 ately replaced it in the postoffice. It was held that as the 
 notice came from the notary in Boston this mode of trans- 
 mitting it was sufficient.' 
 
 1 17 Me. 360. 
 
 ' Hartford Bank v. Stedman, 3 Conn. 489; Eagle Bank v. Hathaway, 5 
 Met. 212. 
 
148 BANK COLLECTIONS. § 119 
 
 118. A notice cannot be given until after the dishonor 
 has occurred. A notice necessarily implies this fact, and, 
 therefore, it cannot be given of a note, for example, till 
 it has become due by the expiration of the days of grace. 
 "Any notice previously to such actual dishonor could 
 
 ' only inform the indorser of the holder's intent to present 
 it perhaps of his expectation that it would not be paid, 
 and his intent to hold him responsible if the note should 
 not be paid." 1 
 
 119. When a note is deposited by the holder with a 
 collecting bank to collect, it has the same time to give 
 notice of dishonor to the owner that it would have if it 
 were the real holder for value ; and after the owner has 
 received notice from the bank he has the same time to 
 transmit notice to the antecedent parties whom he seeks 
 to charge as an indorser." When, however^ the holder 
 passes by an immediate indorser, and serves notice of 
 non-payment on one more remote, he cannot avail himself 
 of the time the immediate indorser would have had to 
 serve the remote one had the holder given notice to 
 the former ; but the holder in that case must give notice 
 to the remote indorser within the same time that he is 
 required to give it to the immediate indorser.' It is regu- 
 lar to mail notices on the next day after presentment and 
 protest. The holder is never required to mail, notice 
 to his indorser the very day on which default is made in 
 
 1 Shaw, Ch. J., Mechanics' Bank v. Merchants' Bank, 6 Met. 13, 25 ; Grand 
 Bank v. Blanchard, 23 Pick. 305 ; Gilbert v. Dennis, 3 Met. 495. And in 
 an action against a hank for negligence in failing to protest a note placed 
 with it for collection, the averment that it was placed before maturity was 
 sufficient though not specifying the date. Roanoke Nat. Bank v. Ham- 
 brick, 82 Va. 135. 
 
 2 Haynes v. Birks, 3 Bos. & Pul. 599 ; Howard v. Ives, 1 Hill 263 ; Colt 
 v. Noble, 5 Mass. 167 ; Hartford Bank v. Stedman, 3 Conn. 489 ; Howland 
 v. Adrain, 30 N. J. Law 41; State Bank v. Ayres, 2 Halst. Law 130 ; Davey 
 v. Jones, 42 N. J. Law 28, 30 ; Story on Prom. Notes, 326. 
 
 3 City Nat. Bank v. .Clinton Co. Nat. Bank, 30 N. E. Eep. 958 (Ohio) ; 
 Dobree v. Eastwood, 3 Car. & Payne 250 ; Eowe v. Tipper, 13 C. B. 249 • 
 Marsh v. Maxwell. 2 Cainn. 210: Simtison « Tnrna-o- k TTrrTv.^v, jm 
 
§ 121a MAKING COLLECTIONS, PRESENTMENTS. 149 
 
 payment. 1 But notice must be given on the day of dis- 
 honor or on the succeeding one to fix the liability of the in- 
 dorsee If not then given, and facts do not then exist 
 which excuse it, the indorser is discharged, no act of the 
 holder subsequently can fix on him a liability. A demand 
 of payment within three days, after dishonor cannot oper- 
 ate as the notice which should have been given or cure 
 the negligence of the holder.' 
 
 120. When a notice is received by an indorser he is suf- 
 ficiently diligent for the purpose of charging his imme- 
 diate indorser if a suitable notification is transmitted on 
 the day after receiving it, save as his duty has been modi- 
 fied as explained in a subsequent section.' Says Mr. 
 Justice Wright : "When an indorser intends charging 
 previous indorsers by consecutive notices, and they re- 
 side in different places, due diligence will have been used 
 when notice is sent the day following that on which it is 
 received. The rule is the same though the paper is in-« 
 dorsed from one to another agent for collection merely. 
 Each of such indorsers is to be regarded as a party for all • 
 the purposes of charging prior parties." * 
 
 121. If the notice is to be personal at the indorser' s 
 place of business, this must be done during business 
 hours, because only at such time is he likely to be found, 
 or any one with whom notice can be left. 6 
 
 121a. A noteworthy case concerning the omission of a 
 bank to notify an indorser in due time is Whiting v. City 
 Bank." The owner of a note sent it for collection to the 
 
 'Haynes v. Birks/3 Bos. & Pull. 599. 
 
 2 John v. City Nat. Bank, 57 Ala. 90, 100. 
 
 3 Hartford Bank v. Stedman, 3 Conn. 489. 
 
 * Scott v. Lifford, 9 East 347 ; Farmers Bank v. Vail, 21 N. Y. 485, 488 ; 
 Grand Bank •«. Blanchard, 23 Pick. 305 ; Housatonic Bank v. Laflin, 5 
 Cush. 546, 560; Shelburne Falls Nat. Bank v. Townsley, 102 Mass. 177, 
 1 79. By the following or next day is meant the next business day. Haynes 
 ( . Birks, 3 Bos. & Pull. 599 ; Wright v. Shawcross, 2 Barn. & Aid. 501. 
 
 6 Stephenson v. Primrose, 8 Porter (Ala.) 155 ; John v. City Nat. Bank, 57 
 Ala. 96, 99. 
 
 6 77 N. Y. 363. 
 
150 BANK COLLECTIONS. § 122 
 
 bank at which it was payable ; the maker was one of its 
 customers. . It fell due on Sunday, July 4th. On the 
 previous day the bank marked the note as paid and 
 sent a draft to the owner for the proceeds. On the 6th of 
 July the bank, having learned of the maker's failure, 
 stopped payment of the draft and requested the holder to 
 return it, claiming that it had remitted for the note by 
 mistake. The draft was returned, and the bank on the 
 6th of July also protested the note and mailed notice of 
 non-payment to the indorser, dating both on July 3d. In 
 an action against the bank to recover for negligence, it 
 was held that as the note was made payable there, and 
 funds were not on deposit to meet it when it fell due, a 
 demand for payment was not necessary, and all that was 
 required of the bank was to notify the indorser of non- 
 payment. That notice having been sent on the next busi- 
 ness day it was in time, and that if a mistake occurred, 
 
 , as the bank alleged, it was not liable, but the presump- 
 tion was that the note had not been paid by mistake, but 
 
 - voluntarily on the maker's credit, in which case the pay- 
 ment could not be retracted. Consequently the indorser 
 was. discharged, and in so doing the bank was guilty of 
 negligence, and therefore liable. 1 
 
 122. A modification of this rule in its application to the 
 holder and indorsers must now be stated. The notifier 
 does not always have the whole of the succeeding day, 
 though the law does not recognize fractions of days in these 
 matters. The modification is this, when a mail is infre- 
 quent between two places, as sometimes happens, the no- 
 tice must be sent to the indorser by the first mail which 
 leaves after the day of dishonor which does not close be- 
 fore early and convenient business "hours. 2 "If, how- 
 ever, the mail of that day be closed before reasonable 
 time after early business hours, or if there be no mail sent 
 
 1 See Troy City Bank v. Grant, Hill & Denio, Supp. 119. 
 
 2 Lawson v. Farmers' Bank, 1 Ohio St. 206 ; Peabody Ins. Co. v. Wilson, 
 29 W. Va. 538, 546. 
 
§ 123 MAKING COLLECTIONS, PRESENTMENTS. 151 
 
 out on that day, then it must be deposited in time for the 
 next possible post." In Lawson ■?>. Farmers' Bank, 1 the 
 opinion contains a thorough examination of the subject 
 and many authorities are cited." 
 
 123. In preparing a notice of protest to bind an in- 
 dorser, the essential facts are, first, that the note has not 
 been paid at maturity ; second, that it has been protested 
 for non-payment, and, third, the identification of the note. 
 No precise form for these notices is necessary, but as Mr. 
 Justice Denio has remarked, they must reasonably ap- 
 prise the party of the particular paper on which he is 
 sought to be' charged. 8 Consequently if the name of the 
 
 maker should be left blank this would not satisfy the re- 
 ft 
 
 1 1 Ohio St. 206, 215. 
 
 2 In this case Mr. Justice Bartley said : " The rule, as qualified and set- 
 tled by the late authorities, and which I take to be the correct one is, that 
 where the parties reside in the same place or city, the notice may be given 
 on the day of default ; but if given at any time before the expiration of the 
 day thereafter, it will be sufficient ; and when the parties reside in different 
 places or states, the notice may be sent by the mail of the day of the de- 
 fault ; but, if not, it must be deposited in the office in time for the mail of 
 the next day, provided the mail of that day be not made up and closed at 
 an unreasonably early hour. In the case of Downs v. Planters' Bank-, 1 Sm." 
 & Marsh. 261, and also the case of Chick v. Pillsbury, 24 Me. 458, the doc- 
 trine on this subject has been more fully examined than perhaps in any of 
 the older cases ; and the rule adopted is, that the notice, in order to chaige 
 the indorser living in another place or state, must be deposited in the post- 
 office in time to be sent by the mail of the day succeeding the day of the 
 dishonor, providing the mail of that day be not closed at an unreasonably 
 early hour, or before early and convenient business hours. And this rule is 
 well sustained by authority. Fullerton v. Bank, 1 Pet. 604, 618.; Eagle 
 Bank v. Chapin, 3 Pick. 180, 183 ; Talbot v. Clark, 8 Pick. 51 ; Carter o. 
 Burley, 9 N. H. 558, 570 ; Farmers' Bank of Maryland v. Duvall, 7 Gill & 
 Johns. 79; Freeman's Bank v. Perkins, 18 Me. 292; Meadi'. Engs, 5Cow. 303 
 Sewell v. Russell, 3 Wend. 276 ; Brown & Sons v. Ferguson, 4 Leigh 37 
 Dodge v. Bank of Kentucky, 2 Marsh. 610 ; Hickman v. Ryan, 5 Littell 24 
 Hartford Bank v. Stedman, 3 Conn. R. 489 ; Brenzer v. Wightman, 7 Watts 
 & Serg. 264 ; Townsley v. Springer, 1 La. 122 ; Commercial Bank v. King, 3 
 Rob. 243 ; Lock wood v. Crawford, 18 Conn. 361 ; Bay ley on Bills, 262; Story 
 on Prom. Notes, \ 325 ; Byles on Bills, \ 160. 
 3 Home Insurance Co. v. Green, 19 N. Y. 518. 
 
152 BANK COLLECTIONS. § 124a 
 
 quirements. 1 But the notice of the dishonor of a bill 
 need not state that the holder looks to the party notified 
 for payment. This is implied in the act of giving notice.' 
 
 124. We now have reached the question, where shall 
 the notice be sent ? This seems simple enough, but like 
 so many questions in the law disguises' many difficulties 
 which are discovered when attempting to answer it. More 
 than half a century ago Mr. Justice Woodworth re- 
 marked :" " The law has so well settled what shall con- 
 stitute legal notice as to be familiar to persons usually 
 employed to protest bills and notes. t When the party re- 
 sides in the same city or town where the demand is made, 
 a notice must be personal, or left at the dwelling house.* 
 If* the indorser resides in a different place, notice must be 
 forwarded on the day of demand or the day after, and by 
 the next mail directed to the indorser, and advising him 
 of the protest. In case of a temporary removal of an in- 
 dorser from the place where payment is to be made, notice 
 left at his last place of residence there will be sufficient. ' 
 Demand and notice, in every case, are a condition prece- 
 dent to the holder's right to recover." And in every case 
 the indorser is entitled to strict notice." ', 
 
 124a. When the indorser has instructed the collecting 
 bank to send notices to him, his 'instructions should be 
 followed, 6 and when they are the bank performs its whole 
 duty until they are countermanded." Very frequently 
 the residence of the indorser is added to his indorsement ; 
 and in all cases it is desirable to ascertain this in advance, 
 so that notice may be correctly sent* if necessary. For it 
 
 1 Home Insurance Co. v. Green, 19 N. Y. 518; Artisans' Bank v. Backus,- 
 36 N. Y. 100. 
 
 2 Cowles v. Harts, 3 Conn. 516. 
 
 8 Smedes v. Bank of Utica, 20 Wend. 372, 382. 
 
 * Ireland v. Kip, 10 Johns. 490, affd. 11 Johns. 231. 
 
 5 Stewart v. Eden, 2 Caines 121. 
 
 6 Berry iv Bobinson, 9 Johns. 121. 
 
 7 French v. Bank, 4 Cranch C. Ct. 141, 164. 
 
 8 Paterson Bank v. Butler, 7 Halst. Eq. 268. 
 
 9 Eastern Bank v. Brown, 17 Me. 356. 
 
§ 1246 MAKING COLLECTIONS, PBESENTMENTS. 153 
 
 should always be remembered that the contract of indorse- 
 ment' is usually an unwelcome one to fulfil, and indorsers 
 often seek to escape if any crevice in the law can be dis- 
 covered. The. failure to send notice to the right place 
 has enabled many an Endorser, though doubtless, not in the 
 least injured by not receiving it, or not so soon as the law 
 requires, to evade payment. The law while not imposing 
 such strict rules as formerly in giving notice, looks even 
 now with no favor on neglect or disregard to notify in- 
 dorsers, and, therefore, negligence in ascertaining the cor- 
 rect place of residency of the indorser, and which in al- 
 most all cases can be easily done, is one of those precautions 
 which should be observed. No practice could be introduced 
 in respect to commercial paper that would cost so little and 
 prevent so much annoyance and loss as to require in- 
 dorsers to append their residence after their indorsement. 
 124&. When no instruction is received the ancient rule, 
 as we have seen, is to deliver -personal notices to all 
 indorsers who live in the same village or city as the 
 holder, or to his agent. In other words, the mail can- 
 not be used when* the notifier lives in the same village 
 or city as the person notified. But this rule does not 
 prevent a holder or his agent from sending the notice 
 to the town where the indorser lives in order to obtain a 
 more complete address and to mail it from that place. 
 By this is meant notice to the indorser himself, or at 
 his residence, or at his usual place of business during 
 business hours. 1 And the city is the corporate limits, 
 rather than the more thickly inhabited portion." 
 
 1 Pierce v. Pendar, 5 Met. 352; Van Vechtenc. Pruyn, 13*N. Y. 549; John 
 v. City Nat. Bank, 57 Ala. 96 ; Hartford Bank v. Stedman, 3 Conn. 489 ; 
 Ireland v. Kip, 11 Johns. 231; Shelburne "Falls Nat. Bank v. Townsley, 102 
 Mass. 177; Hyslop v. Jones, 3 McLean 96; Manchester Bank v. Fellows, 28 
 N. H. 302 ; Bradley v. Davis, 26 Me. 45, 52 ; Bowling v. Arthur, 34 Miss. 
 
 41 J.Patrick v. Beazley,'6 How. (Miss.) 609; Bowling v. Harrison, 6 How. 
 (TJ. S.) 248; State Bank v. Slaughter, 7 Blackf. 133; Stephens v. Gallagher, 
 
 42 Mo. App. 245 ; Bailejf o. Bank, 7 Mo. 467; Barrett v. Evans, 28 Mo. 331; 
 Gilchrist v. Donnell, 53 Mo. 591, Bank v. Chamhers, 14 Mo. App. 152. 
 
 2 Ireland v. Kip, 11 Johns. 231. 
 
154 BANK COLLECTIONS. § 124g 
 
 124c. In many states, however, this requirement has 
 been changed by statute, and notice may be given through 
 the post office. In 1857, the New York legislature enacted 
 that where the residence or place of business of the in- 
 dorser is in the same city or town in which the note may 
 legally be presented for payment, notice of non-payment 
 may be served by depositing the same in the post office in 
 the city or town where the note is presented, directed to 
 the indorser at such city or town. But when an indorser 
 adds to his indorsement the designation of his street and 
 number, a notice sent by mail mus| be addressed accord- 
 ingly. Says Mr. Justice Monell: "I cannot entertain a 
 doubt that an indorser may make it a part of his contract 
 that notice of the dishonor of the note or bill shall be sent 
 to him at a particular place, and that where he does so 
 and it is known to the holder, a notice sent elsewhere 
 would be insufficient." 1 
 
 124d!. In some states the ancient rule has been so changed 
 by the courts that the mail can be used in all places where 
 letter carriers are employed. Said Mr. Justice Read, 
 speaking for the Supreme Court of Pennsylvania : " Wow 
 that free delivery of letters is established and regulated 
 by law so as to secure a certain delivery according to its 
 address, it seems proper that this rule should be adopted 
 in this state as called for by the improvements introduced 
 into the post offices by the general government."" 
 
 124e. Except in Pennsylvania and Nebraska and in 
 other states where the ancient rule concerning personal 
 notice has been changed by statute, it prevails. In Ne- 
 braska the rule has been so modified that personal notice 
 must be given to all who live within the post office district. 
 
 1 Bartlett v. Robinson, 9 Bos. 305, 308. 
 
 2 Shoemaker v. Mechanics' Bank, 59 Pa. 79, 83. Notice of protest in a 
 postal box attached to a lamp-post is sufficient compliance with the statute, 
 Ch. 416, Laws 1857. Greenwich Bank v. De Groot, 7 Hun 210. The deposit 
 of a notice in a post office box on the street is as perfect compliance with the 
 law as in the post office. Johnson v. Brown, 151 Mass. 105; Skilbeckr. Gar- 
 bett, 7 Q. B. 846; Pearce v. Langfit, 101 Pa. 507. 
 
§ 124^ MAKING COLLECTIONS, PKESENTMENTS. 155 
 
 This limit is established as a substitute for the town, city 
 or place 1 and is supposed to be an improvement. It is an 
 endeavor on the one hand to escape the difficulties of as- 
 certaining the exact limits of a place or city, for in many 
 cases these are not known, and also to carry out the idea 
 of using the mail whenever a notice is to be transmitted. 
 In many of the cases it is maintained the mail is not a 
 place for depositing notices, but for transmitting them, 
 and this idea is embodied in the Nebraska rule. 
 
 124/. Another rule has been established that if the mail 
 is used when it ought not to be, but the notice reaches the 
 indorser within the time prescribed, it is lawful and the 
 indorser cannot complain of the mode used. 2 But if the 
 mail is used when it ought not to have been, and the 
 notice is received a day later than it would have been had 
 the legal requirement been regarded, the notice will not 
 be deemed proper.' 
 
 124<7. Let us next inquire when the mail can be used. 
 In the absence of instructions or statutes, the mail can be 
 used when the indorser lives outside the village, city or 
 post office district, as above described.* In other words, 
 the mail can be used when the notice is to be transmitted. 
 Formerly, in New York a notice could not be served 
 through the post office in any case, wherever the indorser 
 might reside. 6 But this has been changed by common law 
 or by statute. Now, when a person to be served resides in . 
 a different place from the one where the note is to be pre- 
 ' sented, and a regular mail communication exists between 
 the two places, service by post is permitted, but the notice 
 must be directed to the residence of the indorser, or to 
 
 1 Forbes v. Omaha Nat. Bank, 10 Neb. 338, 346. 
 
 2 Hyslop v. Jones, 3 McLean 96; Manchester Bank v. Fellows, 28 N. H. 
 302; Bradley v. Davis, 26 Me. 52 ; Thomas v. Marsh, 2 La. Ann. 353 ; Eagle 
 Bank v. Hathaway, 5 Met. 212. 
 
 3 Shelbnrne Falls Nat. Bank v. Townsley, 102 Mass. 177. 
 
 4 Forbes v. Omaha Nat. Bank, 10 Neb. 338, 347 ; 2 Daniel on Neg. Inst. 
 3 1012. 
 
 5 Kansom v. Mack, 2 Hill 587. 
 
156 BANK COLLECTIONS. § 124z 
 
 * 
 
 the post office where he usually receives his letters. 1 And 
 when the mail may be used it is not necessary to prove 
 that it was received. 2 
 
 124h. This rule of the use of the mail has been ex- 
 tended to include the cases of indorsers who, if notified by 
 prior indorsers, might have been through the mail. Thus, 
 if a collecting bank and indorser C. lived in the same 
 town, but indorser A. lived in Charleston and B. in Rich- 
 mond, and the owner in Philadelphia, it has been decided 
 that the collecting bank could notify C. by mail, because 
 it could have sent notice to the owner by mail and he in 
 like manner to A. and A. to B. and B. to C, therefore, if 
 the collecting bank notified all, and simultaneously, it 
 could use the mail if the several parties could have clone 
 so." It is true that many decisions have established a dif- 
 ferent rule, but surely the stronger reasons are in favor of 
 the rule above given. 
 
 1241 Where the mail can be used many questions have 
 been raised concerning the particular place to which the 
 notice should be sent. The remarks of Mr. Justice Church' 
 are worth giving as an introduction to a more minute in- 
 quiry on the subject : "We certainly do not intend to 
 sanction any relaxation of the rules of law requiring dili- 
 gence on the part of the holders of negotiable paper. And 
 at the same time we are not disposed to require of them 
 any extraordinary painstaking to determine which among ' 
 the almost countless number of village postoffices in this 
 country, will best accommodate the drawers and indorsers 
 of bills and notes ; especially, when all difficulties on this 
 subject may be so easily removed, by putting the name of 
 
 1 Montgomery Co. Bank v. Marsh, 7 N. Y. 481; Hartford Bank v. Stedman, 
 3 Conn. 489; Eemer v. Downer, 23 Wend. 620, revsg. 21 Wend. 10; Eeid v. 
 Payne, 16 Johns. 218; Bank v. Howlett, 4 Wend. 328; Seneca Co. Bank v. 
 Neass, 3 N. Y. 442; Munn v. Baldwin, 6 Mass. 316. 
 
 2 Shed v. Brett, 1 Pick. 401; Lincoln & Kennebeck Bank v. Hammatt, 9 ' 
 Mass. 159; Mechanics' Banks. Merchants' Bank, 6 Met. 13, 25. 
 
 3 Gindrat v. Mechanics' Bank, 7 Ala. 324. 
 
 * Belden v. Lamb, 17 Conn. 441, 452. , 
 
§ 124Z MAKING COLLECTIONS, PRESENTMENTS. 157 
 
 the post office upon the bill or note when it is drawn or 
 indorsed." 
 
 124/. If the indorser resorts to two post offices for his 
 mails, the notice may be sent to either. Says Mr. Justice 
 Ames :' " The question as to the proper mode of notifying 
 the man by mail depends rather less on the place of his 
 exact legal domicile than upon the locality of the post- 
 office at which he usually receives his letters ; and if he is 
 in the habit of resorting, for that purpose, equally and 
 indifferently to two postoffices, a communication may 
 properly be addressed to him at either.'" 
 
 124k. And if the indorser receives his mail usually at a 
 post office outside the town in which he lives, the notice 
 may be sent by mail to the office where he usually re- 
 ceives his mail. Says Mr. Justice Jewett: "If the 
 drawer of a bill of exchange, or the indorser of a bill or 
 note, does not reside in the town or place where such bill 
 or note is payable, the notice of dishonor may be sent by 
 mail directed to him at the place of his residence, or if 
 he is in the habit of receiving his letters and papers through 
 the post office in an adjoining town, the notice may be di- 
 rected to him at either place." * Moreover, if the notice 
 is addressed to the postoffice at which the indorser habit- 
 ually receives his letters, though not nearest to his resi- 
 dence, this will satisfy the law. 4 . 
 
 1241. In Alabama a statute was enacted in 1850 which 
 authorized the transmission of notices by mail to the resi- 
 dence, or the post office nearest the residence, of the drawer, 
 maker or indorser, at the time he became a party to the 
 bill, without reference to his place of residence at the 
 
 1 Shelburne Falls Nat. Bank v. Townsley, 102 Mass. 177, 181. 
 
 2 Bank v. Carneal, 2 Pet. 543, Story on Prom. Notes, § 343; Thomas v. 
 Marsh, 2 La. Ann. 353 ; Branch Bank v. Pierce, 3 Ala. 321. 
 
 3 Montgomery Co. Bank v. Marsh, 7 N. Y. 481, 484, citing Keroer v. 
 Downer, 23 Wend. 620 ; Reid v. Payne, 16 Johns. 218 ; Bank v. Howlett, 
 4 Wend. 328 ; Downer v. Remer, 21 Wend. 10 ; Seneca Co. Bank v. Neas, 
 3 N. Y. 442. 
 
 * Citizens' Bank v. Walker, 2 La. Ann. 791. 
 
158 BANK COLLECTIONS. § 126 
 
 time of dishonor, unless he designated the place to which 
 his notice should be addressed. This statute only applied 
 to notices which could be transmitted by the law mer- 
 chant by mail. Before this was passed, when notice of 
 protest or of non-payment was transmitted by mail, the 
 holder was bound to show the notice was sent to the post 
 office which at the time of dishonor was nearest the resi- 
 dence of the party to be charged, or was then the post 
 office at which he was in the habit of receiving his letters. 1 
 
 125. When the indorsees residence cannot be ascer- 
 tained after reasonable diligence, notice need not be sent." 
 In Hunt ». Maybee, "the indorser," said Mr. Justice 
 Watson, "did not, as the drawer did, put the number of 
 his residence or place of business to his signature, so that 
 the person endeavoring to serve notice upon him might 
 know where he might be found. The person who sought 
 to give him notice first looked into the directory and could 
 not ascertain by that either his place of business or resi- 
 dence. The holders of the note directed him to make in- 
 quiries at the bank, which he did, and was equally un- 
 successful there, as was he also at [a grocers of whom he 
 had been directed to inquire] and he says he could not 
 •find any one who could inform him. Were there no other 
 facts in the case, I think this was reasonable diligence 
 and dispensed with giving regular notice to the defendant. ' ' 
 
 126. The indorser of a note or drawer of a draft is not 
 discharged by an omission to demand payment and to 
 give notice of non-payment, whenever the omission could 
 not possibly injure him, but injury is presumed until it 
 appears that no damage could have resulted. Mere proof 
 of the insolvency of the maker or drawer is not sufficient 
 and is no excuse.' 
 
 Crawford v. Branch Bank, 7 Ala. 205 ; Foard «. Johnson, 2 Ala. 565 ; 
 Branch Bank a. Pierce, 3 Ala. 321 ; John v. City Nat. Bank, 57 Ala. 98. 
 
 2 Hunt v. Maybee, 7 N. Y. 266, 272 ; Bank v. Bender, 21 Wend. 643 ; 
 Lowery v. Scott, 24 Wend. 358. 
 
 3 Smith v. Miller, 52 N. Y. 545. See ? 95. 
 
§ 130 MAKING COLLECTIONS, PRESENTMENTS. 159 
 
 127. Inconvenience is no excuse for not presenting a 
 note and demanding payment and notifying the indorser. 
 Says Mr. Justice Bronson : " It is often inconvenient to 
 present the note for payment when the maker and holder 
 both reside in the same state ; and yet when the maker 
 has a known place of residence, and there has been no 
 change of circumstances after the giving of the note, mere 
 trouble or inconvenience to the holder has never been held 
 a good excuse for omitting the demand*. And this is so, 
 however wide asunder the maker and the holder may live. 
 If the plaintiff wished to avoid the inconvenience of send- 
 ing to M., he should have made the note payable in New 
 York, or got an indorsement with a waiver of demand. 
 He has no right to change the contract which the indorser 
 made, for the purpose of promoting his own convenience." ' 
 
 128. ' ' If the holder uses due diligence to give notice of 
 dishonor to the indorser, but is prevented by the act of 
 the indorser, notice is excused." ' 
 
 129. And if the indorser of a note is informed by the 
 maker that he will be unable to pay it at maturity and 
 receives from him, without the holder's knowledge, a 
 part Of the amount, receiving in return the indorser' s 
 promise to pay the note at maturity, and also further 
 time, the indorser does not thereby waive demand and 
 notice of non-payment." And if the collecting bank should 
 neglect to make demand and to give notice to the indorser, 
 the maker's payment would not be a defense pro tanto to 
 the bank, as the payment is not for the use or benefit of 
 the holder of the note. 4 
 
 130. If an indorser pays a note supposing that a de- 
 mand has been made of the maker, and that he himself 
 has been notified, when in truth no demand has been made 
 
 1 Spies v. Gilmore. 1 N. Y. 321, 325. 
 
 2 Brickell, Ch. J., John ■>. City Nat. Bank. 57 Ala. 96, 99; Williams v. 
 Bank, 2 Pet. 296. 
 3 Coghlan v. Dinsmore, 9 Bos. 453. 
 *Id. 
 
160 BANK COLLECTIONS. § 132 
 
 and no notice given, he can recover the money, ' especially 
 if the bank has not paid it over ; * on the contrary, if he 
 knows that no demand has been made, or that it was in- 
 formal or irregular, he cannot recover the sum paid.' So, 
 if an indorser is discharged by the negligence of a bank 
 to notify him, and he, in ignorance of his discharge, grants 
 an extension to the maker, he cannot be subsequently 
 held, for it should not be presumed that he would renew 
 his liability after he has escaped from it. Nor is his re- 
 lease affected by the fact that if he had not granted the 
 extension, the bank would have secured itself by apply- 
 ing the maker's deposit in payment of the note. 4 
 
 131. The parties to negotiable notes may waive demand 
 and notice, or qualify the modes of these requirements, 
 and a compliance on the part of the holders with such 
 qualifications would bind indorsers. But no agreement 
 can be made accelerating the time of payment, or permit- 
 ting a notice to indorsers to be given before the dishonor 
 of a note. As Mr. Chief Justice Shaw says : " Any agree- 
 ment which would accelerate the time of legal payment 
 would be a change of the contract, and must be made in 
 such form, and on such consideration as would be suffi- 
 cient to constitute a substantive contract." 6 
 
 132. When paper is not duly paid and a suit becomes 
 necessary to enforce payment, the collecting bank has au- 
 thority to begin the same, 6 even when a statute provides 
 
 •Halls ii. Bank, 3 Rich. (S. C.) 366. 
 
 * Garland v. Salem Bank, 9 Mass. 408. 
 3 Halls v. Bank, 3 Rich. (S. C.) 366. 
 
 * City Nat. Bank v. Clinton Co. Nat. Bank, 30 N. E. Rep. 958 (Ohio). 
 6 Mechanics' Bank v. Merchants' Bank, 6 Met. 13, 23. See \ 84. 
 
 s Freeman v. Exchange Bank, 87 Ga. 45. In this case Bleckley, Ch. J., 
 • said: ."A suit is not maintainable by the indorsee against the indorser. 
 White v. National Bank, 102 U. S. 658 ; and see Lee & Co. v. Branch Bank, 
 1 Bond 387. To sue other parties in order to enforce payment is deemed 
 within the delegated power of the agent ; and by reason of the great favor 
 shown by the law to commercial paper, the restricted indorsee is allowed 
 in some jurisdictions to sue in his own name." Wilson v. Tolson, 79 Ga. 
 137 ; Boyd v. Corbitt, 37 Mich. 52 ; Wintermute v. Torrent, 83 Mich. 555 ; 
 
§ 132« MAKING COLLECTIONS, PRESENTMENTS. 161 
 
 that every action shall be prosecuted, by the real party in 
 interest,' and even when the indorsing bank has ceased 
 to exist. 2 Indeed, when paper is specially indorsed for 
 collection the right of action is solely in the indorsee or 
 collecting bank ; and unless the indorser can show that 
 the title has been re-transferred to him, or that the in- 
 dorsee has no interest beyond a mere agency, he cannot 
 sustain an -action.' Of course, the payor can rmake the 
 same defense in such a suit as he could if it had been 
 brought by the owners." 
 
 132a. Nor will possession of the note suffice to overcome 
 the presumption founded on the indorsement." In Law- 
 rance v. Fussell two notes, payable to F., were indorsed 
 to the "First National Bank, Media," and the cashier of 
 that bank indorsed them, "Pay First National Bank, 
 Philadelphia, for account of First National Bank, Media," 
 and afterward F. obtained possession of the notes and 
 sued the maker. The court, speaking through Mr. Justice 
 Mercur, said : "If the notes had been indorsed in blank 
 only, the possession of them would have been sufficient 
 evidence of ownership ; although the defendant in error 
 had once passed them away by indorsement and delivery, 
 
 yet if he had regained the possession again, it would be 
 
 *. 
 
 Moore «. Hall, 48 Mich. 143; Sterling v. Marietta & Susquehanna Trading 
 Co., 11 Serg. & Eawle 179 ; Ward v. Tyler, 52 Pa. 393 ; Brown v. Clark, 14 
 Pa. 469; Farmers' Deposit Nat. Bank v. Penn Bank, 123 Pa. 283, 291; First 
 Nat. Bank of lynnu. Smith, 132 Mass. 227; Freeman's Nat. Bank v. National 
 Tube Works Co., 151 Mass. 413, 417; Cummings «. Kohn, 12 Mo. App. 585. 
 See H 51, 52. 
 
 1 Abell Note, etc., Co. v. Hurd, 52 N. W. Eep. 488 (la.). 
 
 1 Farmers' Bank v. Arthur, 39 N. W. Eep. 228 (la.). 
 
 s Spence v. Eobinson, 35 W. Va. 313 ; Eock Co. Nat. Bank v. Hollister, 21 
 Minn. 385 , Third Nat. Bank v. Clark, 23 Minn. 263, 268 ; Armour Brothers 
 Banking Co. v. Eiley Co. Nat. Bank, 30 Kan. 163; 1 Daniel on Neg. Inst., \ 
 698d ; Corn Exchange Bank v. Farmers' Nat. Bank, 118 N. Y. 443 ; Sauls- 
 bury v. Corwin, 40 Mo. App. 373 ; Cummings v. Kohn, 12 Mo. App. 585. 
 
 * Saulsbury v. Corwin, 40 Mo. App. 373 ; Cummings, v. Kohn, 12 Mo. 
 App. 585. 
 
 5 Hart v. Windle, 15 La-265; Lawrance v. Fussell, 1 W. N. Cas. 464. 
 
 11 B. 
 
162 bank' collections. § 132c 
 
 prima facie evidence that he had paid and taken them 
 up. 1 Even if the indorsement subsequent to his had been 
 in full, the weight of the authority is that the presumption 
 would be the same." But if it be specially indorsed its 
 negotiability is at an end, and it becomes incapable of be- 
 ing sued upon by any one except the special indorsee.' 
 The indorsement here is further qualified. These subse- 
 quent indorsements, being made for the account of the in- 
 dorser, were restrictive. s A holder who takes a note which 
 is restricted by a restrictive indorsement, cannot sue the 
 drawer upon it." 6 
 
 1325. The special indorsement, however, map be can- 
 celed, either during the trial or on the final hearing of the 
 case, and when this is done, the owner can recover." In 
 Bank «. Smith,' the holder of a note indorsed -thereon, 
 "Pay to the order of W. F., cashier," etc., solely for the 
 purpose of collection. Had he aright to do this? "It 
 appears," said Mr. Chief Justice Spencer, "clearly that 
 F. never had any interest in the note. It was sent to him 
 merely to collect, and not being paid he sent it back. He 
 was the mere servant or agent of the plaintiff, and it is, I 
 think, clearly settled, that in such a case the plaintiffs 
 had a right to strike out the transfer and make the bill 
 payable to themselves." 8 
 
 132c. But the Supreme Court of the United States have 
 
 1 Weakly v. Bell, 9 Watts 273 ; Hartwell v. Mc Beth, 1 Harr. 363. 
 
 2 Morris v. Foreman, 1 Dall. 193; Dugan v. United States, 3 Wheat. 172 ; 
 Hartwell v. Mc Beth, 1 Harr. 363. 
 
 3 Sigourney v. Lloyd, 8 Barn & Ores. 622; Ancher v. Bank of England, 
 2 Doug. 637; Trenttel v. Barandori, 1 Taunt. 100; Gorgerat v. M'Carty, 2 
 Dall. 144. 
 
 4 Byles on Bills, 121. 
 
 6 See Marr v. Sloan, 1 W. N. Cas. 601. 
 
 6 Manhattan Co. v. Reynolds, 2 Hill 140 ; Chautauqua County Bank v. 
 Davis, 21 Wend. 584 ; Wright v. Boyd, 3 Barb. 523, Watervliet Bank v. 
 White, 1 Denio 608; Dollfus v. Frosoh, 1 Denio 367. See Hart v. Windle, 
 15 La. 265. # 
 
 7 18 Johns. 230. 
 
 8 Dugan v. United States, 3 Wheat. 172, 182; Morris v. Foreman, 1 Dall. 
 193; Gorgeratu M'Carty, 2Dall. 144, 147; NevirTsu. DeGrand, 15 Mass. 436. 
 
§ 133 MAKING COLLECTIONS, PRESENTMENTS. 163 
 
 gone even further in granting authority to the owner oi 
 such paper. In Dugan v. United States, 1 Mr. Justice Liv- 
 ingston said : "If any person who indorses a bill of ex- 
 change to another, whether for value or for the purpose of 
 collection, shall come to the possession thereof again, he 
 shall be regarded, unless the contrary appear in evidence, 
 as the bona fide holder and proprietor of such bill, and shall 
 be entitled to recover, notwithstanding there may be on, 
 it one or more indorsements in full, subsequent to the one 
 to him, without producing any receipt or indorsement 
 back from either of such indorsees, whose names he may 
 strike fupm the bill or not, as he may think proper." 
 
 lZ2d. When a note is indorsed by the owner in blank 
 and its possession is recovered, he may sue thereon with- 
 out a re-indorsement." And if the payee, of a note has 
 indorsed it in blank, this does not prevent him from bring- 
 ing suit thereon, for, in event of so doing, the indorse- 
 ment would be disregarded. 3 Nor will the protest by a 
 bank of a note thus indorsed affect the right of the owner 
 to sue thereon. 4 
 
 133. When the inquiries made by the collecting bank 
 concerning the indorser' s residence are proved or conceded, 
 then the court must determine whether they constitute 
 due diligence or not. 6 When the controversy is before a 
 
 1 3 Wheat. 172, 183. 
 
 2 Phipps v. Millbury Bank, 8 Met. 79, 83; Fabens v. Mercantile Bank, 23 
 Pick. 330; Lawrance v. Fussell, 1 W. N. Cas. 464., See Boyce v. Barnes, 11 
 Met. 276; 2 Daniel on Neg. Inst. U H92, 1192a. 
 
 3 Kerrick v. Stevens, 58 Mich. 297. 
 
 *InKunkel v. Spooner/ 9 Md. 462, 476, Eccleston, J., said: "If a note 
 indorsed in blank only is protested at the request of a bank and suit is sub- 
 sequently instituted thereon, in the name of a person then having possession 
 of it, the name of the bank at no time having been indorsed upon the note, 
 the protest is no more evidence that the actual ownership of the note, -when 
 protested, was in the bank than that the bank was merely a collecting agent 
 for the real owner; nor does it necessarily show that the party holding the 
 note after the protest was not the holder and owner who placed it in bank 
 for collection ; consequently such ■*. protest, per se, could not have effect 
 of defeating a prima facie right of action base'd upon possession. " 
 
 ? Belden v. Lamb, 17 Co^n. 441, 451 ; Farmers' Bank ,.•. Vail, 21 N. Y. 
 485, 486. 
 
164 BANK COLLECTIONS. § 135 
 
 • 
 
 jury and the inquiries touching the indorser's residence 
 are questioned or denied, they must determine what these 
 are ; and the court will instruct them what facts constitute 
 due diligence and this satisfies the law, and what facts will 
 not suffice and thus disclose the negligence of the bank. 1 
 
 134. In an action against a bank for negligence in fail- 
 ing to collect a draft sent to it for collection, the burden 
 of proof is on the plaintiff to show that the drawee was 
 solvent and that the draft could be collected." 
 
 135. The holder must also show that due demand was 
 made on the maker and and also that due notice was given 
 to the indorser of non-payment.' Compliance with these 
 conditions to make the indorser responsible is not an idle 
 ceremony, but an imperative performance of duty. This 
 rule is obligatory and the indorser has the right to the 
 strict observance of the requirement.* 
 
 136. If a bank receives a bill for collection and omits to 
 present it at the proper time and place for payment, and 
 a loss is sustained in consequence of this omission, it is 
 
 ' ' Belden v. Lamb, 17 Conn. 441, 451 ; Bateman •«. Joseph, 12 East 433; 
 Browning «. Kinnear, 1 Niel Gow. 81 ; Bank v. Bender, 21 Wend. 643; 
 Remer v. Downer, 23 Wend. 620; Spencer v. Bank, 3 Hill 520; Kelty v. 
 Second Nat. Bank, 52 Barb. 328; Hunt v. Maybee, 7 N. Y. 266; Tate v. Sul- 
 livan, 30 Md. 464. 
 
 What is reasonable diligence in ascertaining the residence of an indorser 
 in order to give notice, is a question of fact for the jury. Thompson v. Bank, 
 3 Hill (S. C.) 77, 82; Bateman v. Joseph, 12 East 433. 
 
 If the facts are insufficient in law to constitute due diligence, the question 
 should not be referred to the jury. Tate v. Sullivan, 30 Md. 464; Orear v. 
 McDonald, 9 Gill 354. 
 
 If the facts relating to notice are not found by the jury, the court is un- 
 able to pass on the question of their sufficiency. Locke v. Merchants' Nat. 
 Bank, 66 Ind. 353. 
 
 In Mount v. First Nat. Bank, 37 Iowa 457, 460, the court said that 
 '■ usually whether there was negligence or want of due care in a given case, 
 was a question for the jury." 
 
 s Sahlien v. Bank, 90 Tenn. 221. 
 
 s Tate v. Sullivan, 30 Md. 464; Whiteford v. Bnrckmyer, 1 Gill 142. 
 
 4 Tate v. Sullivan, 30 Md. 464; Whiteford v. Burckmyer, 1 Gill 127, 142; 
 John v. City Nat. Bank, 57 Ala. 96, 99; Peabody Insurance Co. v. Wilson, 
 29 W. Va. 528, 543. 
 
§ 138 MAKING COLLECTIONS, PRESENTMENTS. 165 
 
 liable for the loss. ' And if the owner of the bill on which 
 the remedy has been lost by the bank's negligence with- 
 draws the same from the custody of the bank, he does not 
 thereby waive his action against the institution, nor will 
 the pursuit of any of the parties discharge the bank from 
 liability to answer for its negligence. 2 
 
 137. If a bank indorses a bill which it owns, it may be 
 sued on the indorsement like an individual. Thus, a 
 bank in Ohio made a bill of exchange which was indorsed 
 by the Eoss County Bank, and afterwards came into the 
 possession of a New York firm, which attempted to collect 
 of the bank as an indorser. The bank was held liable, the 
 court declaring that there was no evidence tending to show 
 that the charter of the bank contained any restriction on 
 its power of negotiating or indorsing notes or bills of ex- 
 change, or on the authority of its cashier to indorse 
 negotiable paper for the bank. The presumption, there- 
 fore, was that the bank had the power, and its cashier the 
 authority to negotiate or indorse the bill in controversy.' 
 
 138. When accounts are kept in different banks, and 
 one of them fails to pay money received on paper for the 
 other, the remedy is against the defaulting bank and not 
 against the drawer or maker.* Again, if the maker pays 
 his note to the wrong person, he cannot rely on facts un- 
 known to him to work an estoppel, but if he can show 
 that he paid it to an agency for collection this is a valid 
 defense against repayment.' 
 
 1 Branch Bank v. Knox & Co., 1 Ala. 148. 
 
 a Id. 
 
 When a cashier has been sued for negligence in omitting to give dne notice 
 to an indorser of the protest of a note, deposited with the bank for collection, 
 the judgment obtained by the owner against the bank cannot be used in a 
 suit by it against the cashier as proof of his negligence. But it may be intro- 
 duced to show the amount of damage it was compelled to pay. Bank of 
 Owego v. Babcock, 5 Hill 152. 
 
 3 Eobb v. Eoss Co. Bank, 41 Barb. 586, 591; Marvine v. Hymers, 12 N. Y. 
 323; Wild v. Bank, 3 Mason 505; Fleckner v. Bank, 8 Wheat. 338, 360 ; 
 Story on Agency, 5 114 
 
 * Kupfer v. Bank, 24 111. 328. 
 
 5 Exchange Nat. Bank v. Johnson, 30 Fed. Bep. 588. 
 
166 BANK COLLECTIONS. § 14C 
 
 139. Sometimes a person guarantees the collection oi 
 the checks of a depositor in order to strengthen his credit. 
 The liability of such a guarantor, of course, depends or 
 the nature of the instrument. In one case the guarantoi 
 contended that he was discharged by the bank's delay tc 
 proceed against the principal. The president declared 
 that he assented to the delay, which the guarantor denied 
 The finding of the 'jury was deemed conclusive. 1 A dili 
 gent prosecution of the principal is essential in order t( 
 charge a guarantor with liability on such an instrument 
 unless he desires, or assents to, a delay * 
 
 140. Lastly, when the interests of a bank conflict wit! 
 other interests which it represents, these must not be sac 
 rificed to serve its own purposes. Thus, a bank received i 
 check for collection drawn on itself. It neglected eithei 
 to charge the same to the drawer, or to notify the paye< 
 of its non-payment until the failure of the drawer, fou: 
 days afterward. The bank was a large creditor of th( 
 drawer; it was aware of his embarrassments and wai 
 
 1 making exertions to save itself f*om loss, and in the mean 
 time had secured most of his funds. The court in review 
 ing the case, declared that the undertaking of. the ban! 
 to collect the check was antagonistic to its own interests 
 nevertheless, having voluntarily assumed the agency anc 
 trust to collect the check, the rule of good faith would noi 
 permit the bank to sacrifice the interest of its principal tc 
 its own.' But if instructions are received by a bank foi 
 collecting or securing paper, and these are faithfully ob 
 served, it is not responsible for the consequences, ever 
 though it should act for itself in the meantime and secure 
 its own claims against the same debtor.' 
 
 1 Chatham Nat. Bank v. Pratt, 16 N. T. Supp. 216. 
 
 2 Craig v. Parkis, 40 N. Y. 181; Northern Insurance Co. v. Wright, 76 N 
 Y. 445. 
 
 8 Bank v. Kenan, 76 N. C. 340, 344. 
 
 1 Freeman v. Citizens' Nat. Bank, 78 la. 150. See \ 142a for a descriptioi 
 of this case. 
 
§ 141 PRESENTMENT OF DRAFTS FOE ACCEPTANCE. 167 
 
 CHAPTEK IV. 
 
 PRESENTMENT OF DRAFTS FOR ACCEPTANCE AND SURRENDER 
 OF BILLS OF LADING. 
 
 141. The general rule relating to pre- 
 
 sentment. 
 
 142. Special instructions. 
 
 142a. Freeman v. Citizens' Na- 
 tional Bank. 
 
 142S. Fahy v. Fargo. 
 
 142c. Camden v. Doremus. 
 
 143.' When a draft is payable at an 
 indefinite time it must be 
 presented for acceptance. 
 
 144. But when payable at a fixed 
 
 period ^presentment is not 
 necessary. 
 
 145. Nor need a collecting bank do 
 
 this except in New York. 
 145a,6. Reasons why the New 
 York rule should not be 
 followed. 
 
 146. When a presentment has been 
 
 made and acceptance re- 
 fused, notice of the dishonor 
 must be given. 
 
 147. And a right of action accrues at 
 
 once. 
 
 148. When shall bills of ladirfg that 
 
 accompany drafts be surrend- 
 ered. 
 
 148a. First. When instructions 
 require this to be done. 
 
 I486. Second. When the draft is 
 payable at sight it should 
 not be surrendered. 
 
 148c. Third. When the draft is 
 not payable at sight au- 
 thorities differ concern- 
 ing the right to sur- 
 render it. 
 
 148o\ By the federal rule it can 
 be surrendered, and in 
 some states. 
 
 148e. In other states it ought not 
 to be. 
 
 148/. Security Bank v. Luttgen. 
 
 149. The better rule is to surrender 
 
 it unless instructed to hold it. 
 
 150. The rules set forth by Mr. Dan- 
 
 iel. 
 
 141. Having described the duties of a collecting bank 
 in presenting checks, notes and other instruments for 
 payment, and what must be done when payment is not 
 made, we shall complete this part of our inquiry by de- 
 scribing what a collecting bank must do in procuring the 
 acceptance of drafts ; and whenever they are accompanied 
 with bills of lading these should be surrendered or re- 
 tained. In the way of a general exposition of the law re- 
 
168 BANK COLLECTIONS. § 141 
 
 lating to the presentment of drafts, Judge Shipman has 
 said : ' "The general duty of an agent who receives for 
 collection a bill of exchange is to use due diligence in 
 presenting the same for acceptance, and in presenting it 
 for payment if it ha<s been accepted, and to give the holder 
 and other parties to the paper, by the next day's post, 
 the notices of dishonor required by law in case acceptance 
 or payment is refused, and to give to his principal any 
 special notice which is required by the terms of the in- 
 structions to the agent, or of the contract which the agent 
 has entered into with his principal. The agent is also re- 
 quired to protest, in case of non-acceptance or non-pay- 
 ment, if protest is not forbidden, and to send the protest 
 to the holder." 3 
 
 1 Merchants & Manufacturers' Nat. Bank v. Stafford Nat. Bank, 44 Conn. 
 564, 567. 
 
 2 Walker v. Bank of State of New York, 9 N. Y. 582 ; Hamilton v, Cun- 
 ningham, 2 Brock. 350. In Montgomery Co. Bank v. Albany City Bank, 7 
 N. Y. 456, 460, Jewitt, J., said : "I consider it a rule of law well settled 
 in this state, that when a bank receives from the owner a bill for collection, 
 payable, either at the place where such bank carries on its business, or at 
 some distant place, it thereby becomes the agent of the owner for the col- 
 
 . lection, and.in the discharge of its obligations as such, if the bill has not 
 been accepted, it is bound to present the same for acceptance without un- 
 
 ' reasonable delay, as well as to present the same for payment when it be- 
 comes payable ; and if not accepted when presented for that purpose, or not 
 paid when presented for payment, it must take such steps by protest and 
 notice as are necessary to charge the drawer and indorser, or it will be liable 
 to its principal, the owner, for the damages which the latter sustains by any 
 neglect to perform such duties, unless there be some agreement to the con- 
 trary, express or implied. And if it be necessary or convenient for the bank 
 
 ■ to employ some other bank or individual to collect the bill either at the 
 place of its location or at a distant place where the bill is payable, and it 
 does employ another bank or individual to whom it transmits the bill for 
 that purpose, the latter, on receiving the bill and entering upon the dis- 
 charge of the trust, becomes the agent of the former bank and not of the 
 owner, and in the absence of any agreement to the contrary* is answerable 
 
 ' to it for any neglect in the discharge of its duties as agent, whereby the 
 former bank sustains any loss or damage. The principle is, that when a 
 trust is confided to an agent, and he whose interest is intrusted is damnified 
 by the neglect of one whom the agent employs in the discharge of the trust, 
 
§ 142 PRESENTMENT OF DRAFTS FOR ACCEPTANCE. 169 
 
 142. The most obvious rule is, a bank must follow in- 
 structions. ' When they are disregarded the offender must 
 answer for the consequences'. Thus, a bank, having taken 
 a solvent bill for collection, before it matured, was in- 
 structed to permit a renewal for a further term of credit, 
 on condition that a solvent indorser should be given on 
 the new instrument. The bank suffered the renewal to 
 be made without such indorser, surrendering the former 
 bill to the acceptor, and reporting that a renewal had taken 
 place in conformity with instructions. The holder was in- 
 jured in consequence of the subsequent insolvency of the 
 acceptor during the extended term of credit, and the bank 
 was holden for the damage sustained. 3 In the Stafford 
 bank case" a firm in Michigan left for collection with a bank 
 in that state a sight draft for $500 on J. C, treasurer of 
 a corporation in Connecticut, which sent the same to the 
 defendant bank with directions to ' ' return at once with- 
 out protest if not paid." It presented the draft to the 
 drawee, who replied that he would look up his account 
 with the drawers and inform the cashier with regard to 
 payment. The drawers had also written to J. C. "that 
 such a draft had been forwarded, and he wrote in reply :; 
 " The $500 draft has been received and paid. Don't draw' 
 any more." On the receipt of this letter the drawers 
 
 the agent employed shall answer to the person damnified. ' ' Smedes v. Bank 
 of TJtica, 20 Johns. 372, affid. 3 Cow. 662; Allen v. Suydam, 20 Wend.- 321; 
 Allen v. Merchants' Bank, 22 Wend. 215; Denny v. Manhattan Co., 2 Denio 
 115, affid. 5 Denio 639 ; Colvin v. Holbrook, 2 N. Y. 126 ; Van Wart v. 
 Woolley, 3 Barn. & Cress. 439. 
 
 1 Bank v. Huggins, 3 Ala. 206, 212 ; Camden v. Doremus, 3 How 515 ; 
 Freeman v Citizens' Nat. Bank, 78 la. 150. 
 
 2 A bank having for collection a draft by L. on C, received money in part 
 payment and a sight draft and a ten days' sight draft on B., in settlement 
 of L.'s draft on C. B. paid one draft and accepted the other at ten days. 
 On maturity the bank presented it to B. for payment, which was refused, 
 but the bank did not protest it so as to charge the drawer. This was negli- 
 gence and the bank became liable for the amount. Capitol State Bank v. 
 Lane, 52 Miss. 677. 
 
 s 44 Conn. 564. 
 
170 BANK COLLECTIONS. § 142 
 
 showed it to the Michigan bank, which, believing that th 
 draft had been duly paid, also paid the drawers $500. J 
 C, the drawee, was also the president of the defendar 
 bank, and this fact was known to the one in Michigar 
 Several days later the cashier returned the draft unpaid 
 which was his first information to the Michigan bank wit 
 regard to the matter. It then demanded repayment c 
 the drawers, which was refused. They were solvent bn 
 had no visible property, and the. claim could not hav 
 been collected without much difficulty. It was held, firsl 
 that the defendant bank, as agent of the other for the coi 
 lection of the draft, had been guilty of negligence in nc 
 obtaining payment of the draft or returning it at once t 
 the Michigan bank. Second, that although the Michiga 
 bank paid the money to the drawers on the statement c 
 the drawee to the drawers that the draft had been paid 
 yet, as it would have been saved from loss if the defend 
 ant bank had performed its duty, the defendant was liabl 
 for the actual damages resulting from its neglect. Third 
 that these damages were to be regarded as the who] 
 amount paid by the plaintiff bank to the drawers, an 
 that it had a right to recover this sum although it had 
 cause of action for the whole amount against them. ■ 
 
 142a. In Freeman i>. Citizens' National Bank, 1 drafl 
 were sent to the bank with the instruction that if notpai 
 "to wire us and await our reply." The draft not havin 
 been paid the bank complied with the instruction, but ii 
 stead of receiving a reply by telegraph, a letter was sen 
 making inquiry concerning the acceptance of the drafts 
 The bank received no instructions to bring a suit. Aftei 
 wards the plaintiffs sought to hold the bank negligent i 
 not instituting legal proceedings against the debtors t 
 collect the drafts, but the court held that they had obeye 
 their instructions and consequently were not liable. 
 
 1425. In Fahy v. Fargo/ the plaintiff give a draft t 
 Fargo for collection, instructing him that if it was nc 
 
 '78 1a. 150. '17N. Y. Snpp. 344. 
 
§ 144 PRESENTMENT OF DRAFTS FOR ACCEPTANCE. 171 
 
 paid on presentation to hold the same one day, and if not 
 then paid to return it. The draft was presented to the 
 drawee on the third day after receiving it, and various 
 excuses were made for not paying the same. Fargo held 
 it several days at their request and then returned it, 
 which was the first notice the plaintiff had of its dishonor. 
 For several days after Fargo received it the drawee's part- 
 nership, and individual, property was not exempt from 
 execution. Just before returning the draft they assigned* 
 all their property and preferred some creditors, not, how- 
 ever, including the plaintiff. Fargo could have complied 
 with the instructions he received and returned the draft 
 much earlier than he did. The court held that the law 
 presumed that the plaintiff could have collected the claim 
 against the drawee if Fargo had followed instructions. 
 The defendant, therefore, was liable. 
 
 142c. In another case, at the time of indorsing and 
 transferring a note, it was agreed that if not paid at ma- 
 turity the holder should use reasonable and due diligence 
 to collect it from the drawer and prior indorsees before 
 resorting to the last indorser. These conditions were be- 
 yond those implied in the ordinary transfer of commercial 
 instruments, but were binding on the holder. 1 
 
 143: When a draft for collection is payable at sight or 
 at an indefinite time, it must be presented to the drawee 
 for acceptance without unreasonable delay or the drawer 
 and indorsers will be discharged, for their interest con- 
 sists in having the bill accepted immediately in order to 
 shorten the time of payment and thus limit the period of 
 their liability." 
 
 144. But when a draft is payable at a fixed date pre- 
 sentment for acceptance by the owner is not necessary. 
 Nor is the rule affected by the stating of the place in the 
 draft where it is payable. 3 
 
 1 Camden v. Doremus, 3 How. 515. 
 2 1 Daniel on Neg. \ 454. 
 
 s Bank v. Triplett, 1 Pet. 35; Townsley v. Sumrall, 2 Pet. 170; Allen v 
 Suydam, 20 Wend. 321 ; 1 Daniel on Neg. In3t. \ 454. 
 
172 • BANK COLLECTIONS. § 14 
 
 145. Again, save in the State of New York, a collectin 
 bank is no more required to present a draft payable at 
 fixed date for payment than the owner himself. It was, ir 
 deed, formally declared by the court of errors of New Yor 
 in 1838, that "an agent who receives a bill of exchang 
 for collection, which has not been accepted, is bound t 
 present the same for. acceptance without unreasonable d( 
 lay, as well as to present the same for payment when i 
 'becomes due, or he will be liable to his principal for th 
 damages which the latter sustains by his negligence.' 
 And judges on several occasions have repeated the rule 
 
 1 Allen v. Suydam, 20 Wend. 321, 338. 
 
 2 " An agent receiving for collection, before maturity, a draft payable c 
 a particular day after date, is held to due diligence in making presentmei 
 for acceptance, and, if chargeable with negligence therein, is liable to tl 
 owner for all damages he has sustained by sueh negligence. Allen v. Su; 
 
 . dam, 20 Wend. 321; Walker v. Bank of the State of New York, 9 N. T. 58! 
 The drawer orindorser of such a draft is, indeed, not discharged by thene; 
 
 .iect of the holder to present it for acceptance before it becomes due. Ban 
 ii. 'Triplett, 1 Pet. 25, 35; Townsley v. Snmrall, 2 Pet. 170, 178. But, if tl 
 draft is presented for acceptance and dishonored before it becomes due, notii 
 of such dishonor must be given to the drawer or indorser, or he will be di 
 charged. Bank v. Triplett, 1 Pet. 25, 35; Allen v. Suydam, 20 Wend. 32 
 Walker v. Bank of the State of New York, 9 N. Y. 582; Goodall v. Dolle; 
 i-East 712; Bayley on Bills, 2d Am. ed. 213; 3 Kent's Comm. 82. Mop 
 over, the owner of a draft payable on a day certain, though not bound 1 
 present it for acceptance in order to hold the drawer or indorser, has an ii 
 terest in having it presented for acceptance without delay, for it is only I 
 accepting it that the drawee becomes bound to pay it, and, on the dishorn 
 of the draft by non-acceptance, and due protest and notice, the owni 
 has a right of action at once against the drawer and indorser, without wai 
 ing for the maturity of the draft; and his agent to collect ,the draft is bouii 
 to do what a prudent principal would do. 3 Kent's Comm. 94; Robinson 
 Ames, 20 Johns. 146; Lenox v. Cook, 8 Mass. 460; Ballingalls v. Gloster, 
 East 481; Whitehead v. Walker, 10 Mees. & Wels. 696; Walker a. Bank of tl 
 State of New York, 9 N. Y. 582." These are the remarks of Mr. Justi< 
 Blatchford in Exchange Nat. Bank v. Third Nat. Bank, 112 U. S. 276, 29 
 and are a restatement of the law in New York on the subject. So are tl 
 following remarks by Judge Wallace in Woolen v. New York & Erie Ban! 
 12 Blatchf. 359, 361: "By receiving a draft for collection, the bank receivir 
 becomes the agent of the owner, and, in ihe discharge of its obligations : 
 such, is bound to present the same for acceptance without unreasonable d 
 
§ 145 PRESENTMENT OF DRAFTS FOE ACCEPTANCE. 173 
 
 But it is believed that not a single decision can be found 
 by courts in other states 1 imposing this duty on a collect- 
 ing agent. Banks very generally, however, do present 
 such drafts for acceptance, as though they were of the 
 same character as those first mentioned, and the practice 
 may well be observed. But the statements of judges and 
 text writers that this is a positive requirement is incorrect, 
 except in New York. On what reasons is the require- 
 ment founded 1 Says Senator Verplanck :" "Legal author- 
 ity as well as commercial usage, has long settled as a 
 general rule, that the holder of a bill of exchange, pay- 
 able at a specific time, is not obliged to present such bill 
 for acceptance in order to hold the drawer or prior in- 
 dorser. It is, indeed, usual as well as prudent, to do so, 
 both for the sake of the added security and better credit 
 of the paper, and because in case of refusal, recourse may 
 be had immediately to the drawer. It is, therefore, the 
 duty of an agent for collection, to exert the customary 
 prudence, and present such paper for acceptance without 
 delay, since, by neglect, his principal may either lose the . 
 drawee's security and the credit it gives, or else be. pre-', 
 vented from making such inquiries and demands, or using . 
 such legal or precautionary measures towards the drawer 
 or other parties as might tend to secure his debt." 
 
 lay, and to present the same for payment at its maturity; and, if npt ac- 
 cepted, or not paid when presented, it must take such steps, by protest and 
 notice, as are necessary to charge the drawer and indorser. While, ordi- 
 narily, it is not necessary to present a draft for acceptance, presentment and 
 demand of payment at maturity, with due notice and protest, if not paid, 
 being sufficient to hold the drawer and indorser. This rule does not obtain 
 as to a collecting agent, but prompt presentment for acceptance is required, 
 so that, in case of non-acceptance, the owner can resort immediately, and be- 
 fore maturity, to the drawer. Allen v. Suydam, 17 Wend. 368, revsd. 20 
 Wend. 321. Upon failure to discharge this duty, the receiving bank be- 
 comes liable as for negligence for any damages resulting from the default." 
 
 1 Except, perhaps, Bank of Scotland v. Hamilton, 1 Bell's Com. on the 
 Laws of Scotland, 409. 
 * Allen v. Suydam, 20 Wend. 321, 331. 
 
174 BANK COLLECTIONS. § 1456 
 
 145a. The strongest reasons exist why the New York 
 rule should not be followed. No principle of law is better 
 established, or rests on stronger foundations than this, 
 that an agent is not generally required to exercise more 
 ability, prudence and diligence than his principal. In no 
 cas3 have the courts held that the owner of a draft pay- 
 able at a fixed date must present it for acceptance ; what 
 reason then exists for imposing a larger duty on the agent 
 than the principal himself must exercise ? The necessity 
 for presentation is no greater when the draft is held by the 
 agent than when it is held by the principal ; the agent 
 stands in his place, acts for him, and no reason is seen 
 why he should present it if his principal need not do so. 
 The situation of the drawee and indorser are not in the 
 least changed by the transference of the draft for collec- 
 tion from the principal to the agent. Finally, is not the 
 more rational way of looking at this question to require 
 the principal to give instructions to present it for accept- 
 ance if he wishes this to be done, and in the absence of 
 these to assume that the principal expected the agent 
 would do no more than he would himself if retaining pos- 
 session of the instrument and presenting it ? 
 
 1456. But there is a good reason for not presenting such 
 a draft for acceptance. If presented as soon as received 
 by the collecting bank there may be no funds in the pos- 
 session of the drawee, and he may be unwilling to accept 
 it ; but if presentment is delayed until it is due, there may 
 be funds in his hands for paying it. When a bill is thus 
 drawn, payable at a fixed date, no promise is implied that 
 funds will be in the possession of the drawee from the 
 time of drawing it until payment any more than is implied 
 in a note payable at a fixed date at a bank. No one ever 
 thinks of presenting such a note before it is due and in- 
 quiring if the maker has funds there for paying it ; why 
 should the holder of a draft or his agent expect that the 
 drawer will provide funds for paying it before it is due, 
 and if he has not done this ought the holder to expect 
 
§ 148« PRESENTMENT OF DRAFTS FOR ACCEPTANCE. 175 
 
 that the drawee will agree to pay it ? He would hardly 
 agree to pay a note : why should the drawee of a draft be 
 any more willing to incur such an obligation ? It is true 
 that a bill of exchange imparts that a debt is due from 
 the drawee to the drawer, which is to be used to pay the 
 bill, 1 but this is one of those venerable presumptions 
 which formerly rested on fact, but whose basis was long 
 ago swept away by commerce. In the days of slow loco- 
 motion the drawee did have funds in his possession on 
 which the drawer founded his bill, but this is no longer 
 so. The true import of a bill drawn on time, like a note 
 given on time, is that it . will be paid when due, and the 
 drawer probably has not the smallest intention of provid- 
 ing the drawee with funds until very near the time of 
 payment. For this reason such a bill ought not to be 
 presented for acceptance. 
 
 146. 'When, however, a draft payable at a fixed date is 
 presented for acceptance, as is often done, and dishonored, 
 notice of the dishonor must be given to the drawer and 
 indorser or they will be discharged. 3 
 
 147. Furthermore, when a bill of exchange is protested 
 for non-acceptance, a right of action accrues immediately 
 to the holder ; he is not bound to present it for non- 
 payment. 8 
 
 148. Very often drafts, accompanied with bills of lad- 
 ing, are sent to banks for collection, on which some im- 
 portant questions have arisen, which relate especially to 
 the surrender of the bill of lading. Shall this be done 
 when the drafts are accepted, or shall they be retained 
 until they are paid % Several rules may be given which 
 cover most of the cases that arise in banking business. 
 
 148a. First. Whenever instructions are received, relat- 
 ing to the collection of the draft and surrender of the ac- 
 
 1 Griffith v. Reed, 21 Wend. 502. 
 
 2 Bank v. Triplett, 1 Pet. 25; Allen v. Suydam, 20 Wend. 321; Walker «. 
 Bank, 9 N. Y. 582; Goodall v. Dolley, 1 East 712. 
 
 3 Lenox v. Bank, 8 Mass. 460. 
 
176 BANK COLLECTIONS. § 148c 
 
 companying bill of lading, of course, these must be fol- 
 lowed ; if the bank violates them it is clearly liable. 1 One 
 of the most important cases of this character is Dows v. 
 National Exchange Bank. 1 McL. &Co.', Milwaukee, Wis., 
 bought and paid for wheat on account of S. & Co., of 
 Oswego, IN". Y., and took bills of lading in which they 
 were described as shippers of wheat which was to be de- 
 livered t»F., cashier of Merchants' Bank, Watertown, N. 
 Y. ' McL. & Co. presented drafts drawn on S. & Co., 
 with the bills of lading described attached thereto, to the 
 National Exchange Bank of Milwaukee, which discounted 
 the drafts, and by indorsement on the bills of lading di- 
 rected the wheat to be delivered to S. & Co. on payment 
 of them, and sent invoices of them to S. & Co. It was 
 decided that McL. & Co. remained owners of the wheat, 
 notwithstanding their transmission of the invoices to S. 
 &Co. In delivering the opinion of the court Mr. Justice 
 Strong said: "It follows that McLaren & Co. remained 
 the owners of the wheat, notwithstanding their trans- 
 mission of the invoices to Smith & Co. As owners, then, 
 they had a right to transfer it to the plaintiff as a security 
 for the acceptance and payment of their drafts drawn 
 against it. This they did by taking bills of lading deliv- 
 erable to the cashier of the plaintiff, and handing them 
 over with the drafts when the latter were discounted. 
 These bills of lading* unexplained are almost conclusive 
 proof of an intention to reserve to the shipper the jus 
 disponendi, and prevent the property in the wheat from 
 passing to the drawees of the drafts." 
 
 148&. Second. When the bill of lading is attached to a 
 sight draft it must not be delivered until the draft is 
 paid." 
 
 148c. Third. When a draft is sent to a bank accompa- 
 nied with a bill of lading for the purpose of procuring 
 
 1 Bank v. Metropolitan Nat. Bank, 97 N. Y. 639. 
 
 8 91 U. S. 618, 630. 
 
 3 Second Nat. Bank v. Cummings, 18 So. W. Rep. 115 (Tenn.) 
 
§ 148$ PRESENTMENT OF DRAFTS FOR ACCEPTANCE. 177 
 
 acceptance and ultimate payment, the bill of lading must 
 be surrendered when the draft is accepted. Speaking for 
 the Supreme Court of Louisiana, Mr, Justice Breaux has 
 remarked, in a recent case : J " It is the duty of the col- 
 lecting agent immediately after receiving a bill for col- 
 lection, to take the steps necessary to its prompt accept- 
 ance, and if the instrument be not accepted, he must take 
 the necessary step to fix the liability of the drawee. If 
 he fails he becomes liable. In order to obtain the accept- 
 ance of the drawee, should he decline, unless there are 
 conditions to the contrary of which he is advised, he must 
 deliver the warehouse receipts attached. If he retains 
 them he fails to make the delivery of the property the 
 seller is bound to make. He retains the property without 
 any instructions from the seller. Without delivery of the 
 property the drawee's acceptance would be without con- 
 sideration, and his draft would be placed in commerce 
 without his having received anything." 2 The owner of 
 the draft in controversy tried to prove a usage that the 
 bill of lading was not detached in such cases, but failed. 
 The analysis of the testimony, showed that it was not cus- 
 tomary to retain warehouse receipts and bills of lading 
 attached to time drafts when they had been accepted. . 
 148$. In St. Paul Roller Mill Co. v. Great Western Dis- 
 patch Co.," the roller mill shipped a car load of flour by 
 the defendant's line to Boston, taking a bill of lading 
 which showed a consignment to itself. At the same time 
 it made a draft on W. of Boston, which was forwarded 
 with the bill of lading attached unindorsed to the Tre- 
 mont National Bank of Boston "for acceptance and 
 collection." W., on presentation, accepted the draft 
 and received the bill of lading from the bank with- 
 
 1 Moore v. Louisiana Nat. Bank, 10 So. Rep. 407. 
 
 2 National Bank v.- Merchants' Bank, 91 TJ. S. 92 ; Second Nat. Bank v. 
 Cnmmings, 18 So. W. Rep. 115 (Tenn.) ; St. Paul Roller Mill Co. v. Great 
 Western Dispatch Co., 27 Fed. Rep. 434. 
 
 3 27 Fed. Rep. 434. 
 
 12 
 
178 BANK COLLECTIONS. § 148tf 
 
 out indorsement. He afterward indorsed and trans- 
 ferred the bill of lading to the National Bank of Re- 
 demption for a debt. Before the flour arrived at Bos- 
 ton the roller mill company notified the defendant 
 not to deliver the flour to W. or his assigns. On its ar- 
 rival the National Bank of Redemption claimed to be 
 the owner, and having demanded the same, it was de- 
 livered to the bank. * It was contended that the bill of 
 lading, which ran to the order of the shipper and was de- 
 livered to W. without indorsement, carried on its face 
 notice that he held it subject to equities between prior 
 parties, but Judge Nelson said : "The Tremont bank was 
 the agent of plaintiff, and, in the absence of any instruc- 
 tions further than appeared by the indorsement on the 
 draft, -had no right to hold the bill of lading after the 
 draft was accepted. It is of no importance that it was 
 delivered unindorsed. It was the intention of the ship- 
 per that its agent should deliver the bill of lading on the 
 acceptance of the draft. Such is the legal inference from 
 the facts, and it is not qualified by the additional words 
 'for collection.' " 
 
 148e. In some state courts it has been held that when 
 the bill of lading is made deliverable to the order of the 
 vendor and drawer instead of the drawee and vendee, the 
 collecting agent is not authorized to deliver it until the 
 draft attached thereto is paid. And if the collecting bank 
 should deliver the bill of lading unindorsed and in viola- 
 tion of this well-established rule, the property can be re- 
 covered by the consignors if it can be traced. 1 Says Mr. 
 Justice Lurton : "A special agent authorized to deliver 
 a bill of lading only upon payment of the bill of exchange 
 drawn against the goods and attached to the bill of lad- 
 ing, cannot bind his principal by a delivery without such 
 payment. * * And third persons dealing with prop- 
 erty thus shipped, though acting in good faith in the reg- 
 
 1 Second Nat. Bank v. Cummings, So. Eep. 115 ; Dows v. National Bank, 
 91 U. S. 618, 631 ; Security Bank v. Luttgen, 29 Minn. 363. 
 
§ 149 PRESENTMENT OF DRAFTS FOE ACCEPTANCE. 179 
 
 ular course of business, and paying value, are chargeable 
 with, constructive notice, and acquire no better title than 
 the drawee." ' The taking of bills of lading making the 
 goods deliverable to the order of the shipper, rather than 
 to the person for whom they are ultimately intended, 
 has been considered almost conclusive proof of the inten- 
 tion on the part of the consignor to retain the jus dispo- 
 nendi, although subject to be rebutted. 
 
 148/: In Security Bank v. Luttgen, 2 a merchant shipped 
 goods by a common carrier, taking bills of lading whereby 
 the goods were to be delivered at their destination to the 
 shipper or his order. The merchant then drew bills of 
 exchange for the price of the goods on the person who or- 
 dered them payable to the seller's order thirty days after 
 sight, to which was attached the bills of lading indorsed 
 in blank. The draft also was indorsed in blank, dis- 
 counted at a bank, the seller agreejng verbally with the 
 institution that the bills of lading should not be delivered 
 to the drawee until the drafts were paid. The court de- 
 cided that independently of this agreement the transaction 
 did not import a sale of goods or credit, and that the 
 drawee was not entitled to the bills of lading on his ac- 
 ceptance of the drafts and before payment. 5 
 
 149. There is an evident conflict between the two last 
 rules. The state courts are more inclined to retain the 
 ownership of the merchandise in the interest of the ship- 
 per. The indorsement seems to be important in indicat- 
 ing a transfer of ownership, while in the federal cases the 
 
 1 Second Nat. Bank v. Cummings, 18 So. W. Eep. 115, 117, citing Farmers 
 & Mechanics' Nat. Bank v. Logan, 74 N. Y. 568,; Hieskell v. Bank, 89 Pa. 
 155 ; Dows v. Bank, 91 U. S. 631. , 
 
 2 29 Minn. 363. 
 
 3 Dows v. National Exchange Bank, 91 IT. S. 618 ; Farmers & Mechanics' 
 Nat. Bank v. Logan, 74 N. Y. 568 ; Seymour v. Newton, 105 Mass. 272 ; 
 Stollenwerck v. Thacher, 115 Mass. 224 ; Newcomb v. Boston & Lowell E. 
 Corp., 115 Mass. 230 ; Jenkyns v. Brown, 14 Q. B. 496 ; Mason v. Great West- 
 ern By. Co., 31 TJ. C. Q. B. 73 ; First Nat. Bank v. Crabtree, 52 N. W. Eep. 
 559 (la.) ; Emery's Sons v. Irving Nat. Bank, 25 Ohio St. 360. 
 
180 BANK COLLECTIONS. § 150 
 
 transmission of the draft with authority to collect the 
 same seems to imply authority . to indorse the same if 
 necessary, and thus gives the transferee a good title to 
 the merchandise. The state eourts, on the other hand, 
 seem to hold that when a draft is sent for collection, to 
 which a bill of lading is attached, taken to the order of 
 the shipper, the collecting agent has no authority to in- 
 dorse the same, and therefore the title remains in the con- 
 signor, and consequently he can hold the merchandise 
 wherever it can be traced. The conflict, therefore, between 
 the two rules is irreconcilable. The federal rule is more 
 generally applied, and doubtless the interests of com- 
 merce require that it should be observed rather than the 
 other. 
 
 150. 'We shall close this chapter by embodying the rules 
 set forth by the eminent author of Negotiable Instruments, 
 Mr. Daniel:' "First. That the indorsee of a bill of 
 lading attached to a draft which he acquires upon the 
 faith and credit of the bill of lading, takes it subject to 
 the agreement between the consignor and consignee of the 
 goods ; and that if the consignor has the right to with- 
 hold the bill of lading until the draft is paid, the bona 
 fide holder of the draft has the same right." Second. 
 That in the absence of a special agreement, a time draft 
 with a bill of lading for the goods, for or on account of 
 which it is drawn, indicates that the bill of lading is to be 
 surrendered to the drawee of the draft upon its accept- 
 ance ; and that the holder of the draft cannot withhold 
 its delivery when the acceptance is given, unless the ship- 
 per of the goods had a right' to do so. 3 Third. That where 
 a bill of exchange is drawn upon a shipment, on time, 
 with the bill of lading attached, the holder cannot (at 
 
 1 Vol. 2, § 1734c. 
 
 * Heiskell v. Farmers & Mechanics' Nat. Bank, 89 Pa. 155 ; Dows v. Na- 
 tional Exchange Bank, 91 U. S. 618 ; Emery's Sons v. Irving Nat. Bank, 35 
 Ohio St., 360 ; Marine Bank v. Wright, 48 N. Y. 1. 
 
 ' National Bank v. Merchants' Bank, 91 U. S. 92; Marine Bank v. Wrigh.t, 
 48 N. Y. 1. 
 
§ 150 PRESENTMENT OP DRAFTS FOB ACCEPTANCE. 181 
 
 least in the absence of proof of a local usage to the con- 
 trary, or of the imminent insolvency of the drawee) re- 
 quire the drawee to accept the bill of exchange, except 
 on the delivery of the bill of lading ; and when in conse- 
 quence of the refusal of the holder to deliver the bill of 
 lading, acceptance is refused, and the bill of exchange is 
 protested, the protest will be without cause, and the 
 drawer will be discharged. 1 Fourth. That the drawee of 
 the bill of exchange attached to the bill of lading is not 
 entitled to the bill of lading or the property therein des- 
 cribed except upon acceptance, or payment of the bill of 
 exchange according to the nature of the case, and the 
 agreement with the shipper of the goods, whc^ drew the 
 draft. '' Fifth. That a party discounting a bill of exchange 
 on the faith of the indorsement of a bill of lading for 
 goods deliverable to order, acquires the same lien on the 
 goods as security for the draft as he would acquire if the 
 goods themselves were delivered to him instead of the 
 bill of lading." ' 
 
 1 Lanfear v. Blossman, 1 La. Ann. 148 ; National Bank v. Merchants' 
 Bank, 91 U. S. 92. 
 
 2 First Nat. Bank v. Bayley, 115 Mass. 228 ; National Bank v. Merchants' 
 Bank, 91 U. S. 92 ; Marine Bank v. Wright, 48 N. Y. 1. 
 
 3 First Nat. Bank v. Kelly, 57 N. Y. 34 ; Hathaway v. Haynes, 124 Mass. 
 311 ; Heiskell v. Farmers & Mechanics' Nat. Bank, 89 Pa. 155. But see on 
 this subject Mears & Son v. Waples 4 Houston 62. 
 
182 
 
 BANK COLLECTIONS. 
 
 § 151 
 
 CHAPTEK Y. 
 
 COLLECTION OF NOTES AND DRAFTS PAYABLE AT THE COL- 
 LECTING BANK. 
 
 151. No authority is conferred on a 
 
 bank by making a note pay- 
 able there. 
 
 152. When a note is thus made and 
 
 received the' bank is agent for 
 the holder. 
 152a. Bridge Co. v. Savings Fund. 
 
 153. Cases in which this rule should 
 
 have been applied. 
 153a. Steinhart v. National Gold 
 Bank. 
 
 154. A bank has authority to receive 
 
 money at any time. 
 
 155. When both note and money are 
 
 Teceived, what are the rela- 
 tions of the bank to both 
 parties ? 
 
 Cody v. City Nat. Bank. 
 155a. Sutherland v. First Nat. 
 Bank. 
 
 156. If the money is duly received 
 
 but not the note, on whom 
 shall the loss fall if the money 
 is lost. 
 
 157. A suit against the bank to re- 
 
 cover the money would not 
 bar a suit against the maker. 
 
 158. In 'most states it is the duty of 
 
 a bank to apply the deposits 
 of a customer in payment of 
 his note. 
 
 159. If it is indorsed they must be 
 
 applied for the benefit of the 
 indorser. 
 
 160. Nor can a bank and customer 
 
 make a valid agreement to do 
 otherwise to an indorser's 
 detriment. 
 
 161. Application of a deposit made 
 
 after the maturity of the note. 
 
 162. A bank is not required to apply 
 
 an indorser's deposit in pay- 
 ment of a note payable there. 
 
 163. When a bank is the payee of an 
 
 accepted bill it is not re- 
 quired to apply the drawer's 
 funds for the acceptor's bene- 
 fit. 
 
 The notes and bills of exchange which banks receive for 
 collection are collected of their depositors and non-depos- 
 itors. Different principles apply to the two classes, as 
 will appear dnring the inquiry. 
 
 151. No authority is conferred on a bank by drawing a 
 note payable there, 1 but whenever it is left for collection 
 
 1 Hills v. Place, 48 N. Y. 520; Caldwell v. Evans, 5 Bush 380; Adams v. 
 Hackensack Imp. Commission, 44 N. J. Law 638; 1 Daniel on Neg. Inst. \ 
 326. 
 
§ 152 COLLECTION OF NOTES AND DRAFTS. 183 
 
 the bank becomes the agent for the payee to receive pay- 
 ment.' 
 
 152. When a note is made payable at a bank, and which 
 receives the same for collection, it is regarded as the agent 
 of the holder, and not the sub-agent of the bank through 
 which it came. 8 All reasons for holding the second bank 
 as the agent of the first in such a case vanish, because all 
 parties to a note know at all times when making or nego- 
 tiating it that the payee bank is to collect it. The agency 
 is neither unknown nor selected by the bank with which 
 it may at first be deposited. It should be regarded simply 
 as a transmitter to the bank at which it is payable. In 
 Blakslee v. Hewitt this was done, but it was contended 
 that the cashier of the first bank had no authority from 
 
 1 Ward v. Smith, 7 Wall. 447; Caldwell v. Evans, 5 Bush 380; Lazier v. 
 Horan, 55 la. 75, 80; Adams v. Hackensack Imp. Commission, 44 N. J. 
 Law 638; Wallace v. M'Connell, 13 Pet. 136; Garland v. Salem Bank, 9 
 Mass. 408, 414; Alley v. Rogers, 19 Gratt. 366, 383; Bank v. Kenan, 76 N. U. 
 340. Where money is received from the maker to be applied on a note the 
 bank becomes his agent. This principle is so clearly settled that a statement 
 of the authorities will suffice. Caldwell v. Cassidy, 8 Cow. 371 ; Williams- 
 port Gas Co. v. Pinkerton, 95 Pa. 62; Wood & Co. v. Merchants' Sav., L. & T. 
 Co., 41 111. 267; Ward v. Smith, 7 Wall. 447; Hills v. Place, 48 N. Y. 520; 
 Freeman v. Curran, 1 Minn. 169; St. Paul Nat. Bank v. Canon, 46 Minn. 95; 
 Caldwell v. Evans, 5 Bush 380. In Adams?). Hackensack Imp. Commission! 
 44 N. J. Law 638, 647, Depue, J., said: "Such a deposit, without some act 
 of appropriation by the banker, does not create any privity of contract as 
 between the banker and the holder of the paper. Hill v. Royds, L. R. 8 Eq. 
 290; Johnson v. Robarts, L. R. 10 C!h. App. 505; Barned's Banking Co., ex 
 parte Massey, 22 L. T. (N. S.) 853; Bank of Republic v. Millard, 10 Wall. 
 152. The only effect of the payor having the money at the bank where the 
 paper is payable is, that it will enable him to plead a tender in exoneration 
 of interest and costs of suit, provided he makes his tender good by payment of 
 the principal into court. Caldwell v. Cassidy, 8 Cow. 271 ; Haxtun v. Bishop, 
 3 Wend. 13 ; Carley v. Vance, 17 Mass. 389 ; Ward v. Smith, 7 Wall. 447 ; 
 Wood & Co. v. Merchants' Sav., L. & T. Co. , 41 111. 267. When the real owner 
 of a note delivers it to a bank and authorizes it to collect the proceeds and 
 to apply the same toward payment of his indebtedness to the bank, and it 
 does not receive or credit the note as collateral security, it is merely the 
 agent of such owner. Prescott v. Leonard, 32 Kansas 142. 
 * Blakslee v. Hewitt, 76 Wis. 341. 
 
184 BANK COLLECTIONS. § 153 
 
 the payee to present the note to the other bank for pay- 
 ment, but the court declared that the facts showed there 
 was an implied authority for the first bank to send the 
 note to the other for collection. The second bank was un- 
 questionably the agent of the first to collect the note for 
 the owner. ' ' Where a bank is designated for the payment 
 of a note," said Mr. Chief Justice Cole, "the common 
 usage is for the holder to send it to such bank for collec- 
 tion, and the party .bound f oii its payment can call and 
 take it up. Under such circumstances the bank becomes 
 the agent of the payee to receive payment." 1 
 
 152a. In Bridge Co. •». Savings Bank,' the bank sent a 
 note which it held as collateral security (which was proper) 
 to the El Paso Bank, at which it was payable, for pay- 
 ment. At that time the Texas bank was in good stand- 
 ing. The savings bank in due time received a letter from 
 the other the day of the maturity of the note, stating 
 "that it had not been paid." This information was 
 promptly conveyed to the bridge company. Very soon 
 afterward the El Paso Bank did receive the money, but 
 failed before sending it to the savings bank. The bridge 
 company sought to recover of the savings bank, on the 
 ground that it was liable for the conduct of the other bank, 
 thus treating it as a sub-agent for whose acts in Ohio, 
 where the controversy occurred, the agent is liable. s But 
 the court decided that the El Paso Bank was the appointee 
 of the bridge company, mentioned in the note, and there- 
 fore the savings bank was not responsible for its conduct. 
 
 153. Had the decisions in the Indig and Merchants & 
 Mechanics' Bank cases been put on the same ground, the 
 continuity in the application of this principle would have 
 been preserved. In Indig' s caso a note' was deposited in 
 
 1 Blakeslee v. Hewitt, 76 Wis. 341, 343. See Stacy v. Dane Co. Bank, 12 
 Wis. 629. 
 
 2 46 Ohio St. 224. 
 
 3 Eeeves v. State Bank, 8 Ohio St. 465. 
 1 80 N. Y. 100. 
 
§ 153a coLLEcnoisr of notes and drafts. 185 
 
 a Brooklyn bank which was payable at a bank in Low- 
 ville. The note was sent to the Lowville bank through 
 the mail for payment. Not having been paid, the holder 
 sued the Brooklyn bank, contending that the Lowville 
 bank was negligent, for which the Brooklyn bank was 
 •responsible, because it was a sub-agent to make the col- 
 lection. But the court decided that the LOwville bank 
 was not the sub-agent of the other, and, therefore, was 
 not responsible for its conduct. The facts in People t. 
 Merchants & Mechanics' Bank 1 were similar. No agency 
 had been created in either case, so the court declared, for 
 the reason that the note had • simply been presented 
 through the mail for payment and not for collection. 
 The bank's sole duty was to pay the note as though it had 
 been presented by the holder or another bank. In estab- 
 lishing this principle serious difficulties must arise, as we 
 have already shown, and which would be escaped by ap- 
 plying the practical principle that when an agency for 
 collecting a note is indicated in the instrument itself, it 
 must be regarded as the agent of the holder, to which he 
 should look in the event of negligence or failure to per- 
 form its duty.' 
 
 153a. In Steinhart v. National Bank " the owner of a 
 note left it with a bank in San Francisco, which sent the 
 same to the defendant bank in Sacramento, at which it was 
 payable. The maker was a depositor of the bank. The 
 note was charged to him and a check on a San Francisco 
 bank was drawn for the amount and inclosed in a letter, 
 directed to the sending bank and deposited in the post 
 office. By thus charging the note to the depositor, his 
 account was overdrawn, but this was known by the bank. 
 There was no mistake or error, therefore, in paying the 
 note and in charging the same to the depositor's account. 
 Later in the day the depositor failed, and the bank im- 
 mediately recovered the letter, canceled the check and re- 
 turned the note to the sending bank. The owner sued the 
 
 1 78 N. Y. 269. 2 See \\ 195, 196a. 3 94 Cal. 362. 
 
186 BANK COLLECTIONS. § 154 
 
 Sacramento bank, bnt failed to recover. The court seemed 
 to be of the opinion that the bank had made a mistake in 
 paying the note, and, therefore, it had a right to cancel 
 the check. When the note was presented for payment by 
 a clerk of the bank, the maker wrote a request thereon to 
 charge the same to his account. This was done. " The 
 request," said the court, "was, therefore, in effect, that 
 the defendant advance or- loan to him the money to make 
 the payment, and trust him till he could pay it back." 
 If we may. judge by what the maker wrote, he requested 
 the bank to pay his note and charge it to his account. 
 And this is precisely what the bank did. The fact that 
 the maker was a customer of the bank did not, in the least, 
 ■affect its relation to the sender of the note. The bank, 
 strictly speaking, was acting as a double agent — f or the 
 sending bank in collecting the note and also for the maker 
 in paying it. There was no impropriety in thus acting 
 and in many cases this relation is sustained by the col- 
 lecting bank. The bank, therefore, having received the 
 note, charged the amount to its depositor and inclosed its 
 own draft in payment to the sending bank. The fact that 
 by thus charging the note to the customer his account was 
 overdrawn was immaterial to the sending bank. Banks 
 not infrequently do this, and it has been held again and 
 again by the courts that a bank is bound by its action in 
 making such payments. If any authority is needed, the 
 following cases may be cited. 1 
 
 154. If the money is not received when it is payable, a 
 bank has authority to receive it any time while the note 
 remains in its possession. In one of the well-known 
 cases," President Moncure said : "A bank at which a ne- 
 gotiable note is payable, and at which it is deposited for 
 
 1 Whiting m. City Bank, 89 N. Y. 604; American Exchange Nat. Bank v. 
 Gregg, 28 N. E. Rep. 339 (111.); Oddie»;. National Bank, 45 N. Y. 735; City 
 Nat. Bank v. Burns, 68 Ala. 267; First Nat. Banku Devenish, 15 Colo. 229. 
 See \ 202<J and review of the decision in 47 Bankers' Magazine, p. 4. 
 
 2 Alley v. Eogers, 19 Gratt. 366, 383. 
 
§ 155ffl COLLECTION OF NOTES AND DRAFTS. 187 
 
 collection, is, of course, the agent of the holder or de 
 positor to receive the money if paid at such bank at the 
 maturity of the note, and though not then paid has, no 
 doubt, implied authority to receive the money at any time 
 thereafter and while the note remains at the bank." 
 
 155. Suppose both note and money are received by the 
 bank, what is the nature of the agency ? The bank is a 
 double agent and may act for both parties, for the duties 
 to be performed are not conflicting. If, however, they 
 are neglected, then some difficulty may arise redetermin- 
 ing the rights of the parties. Thus, in Cody's case 1 a firm 
 had been in the habit of indorsing in blank the drafts or 
 checks which were drawn to their order and depositing 
 them in a local bank as money for which they could draw. 
 A check was thus left without instructions and forwarded 
 to the defendant bank for collection. At the same time 
 the local bank asked the other to give credit therefor and 
 to remit in currency for a considerable amount; both 
 things were done. Indeed, after crediting the sender and 
 making a remittance as requested, only a small balance 
 was due to the former. The second bank forwarded the 
 check to Chicago for collection, but before it had been 
 collected the local bank failed. The depositor then tele r 
 graphed the Chicago bank to stop payment. The order 
 was regarded and the check was returned to the defend- 
 ant bank. The depositor claimed to be the owner of the 
 check, and so did the defendant bank which had remitted 
 on the faith of it to the failed institution. The court de- 
 cided against the depositor. The decision was clearly 
 right, for, as the bank had not performed its duties,, the 
 note was not paid. 
 
 155a. In Sutherland?). First National Bank, 2 the maker 
 of a note left money with his bankers, directing them to 
 pay it, and by so doing made them his agents for that 
 purpose. They gave him credit for the money on their 
 books, and sent for, and received the note from the 
 
 1 Cody v. City Nat. Bank, 55 Mich. 379. 2 31 Mich. 230. 
 
188 • BANK COLLECTIONS. § 156 
 
 holder, which was indorsed to their order for collection. 
 •They did not remit the money, the note remained uncan- 
 celed among their collection papers, and after a time they 
 failed. The note was held to be not paid. It had been 
 sent to them for a specific purpose, and no title to it had 
 even passed to them on their own account. They did 
 nothing as agents of the holder. 1 
 
 156. Suppose the money for the payment of a note, 
 which is payable at a bank, is left with it previous to, or 
 on, the da^y of its maturity, and some time afterward the 
 bank fails, who shall lose i ' The payor was ready at the 
 time specified, but the payee was not. The courts gen- • 
 erally have declared that the payor's liability continued, < 
 for the reason that the holder was not bound to present 
 the note at the place where it was payable. '' In one of 
 the cases, by the holder of a coupon, 3 the court declared 
 that he was under no obligation to present it within a 
 reasonable time, and. that the bankers at whose place it 
 was payable, were the agents of the obligors, and, conse- 
 quently, notwithstanding their failure before the presen- 
 tation of the coupon, though after its maturity, the obli- 
 gor's liability continued. 4 It is true that the same court, 
 speaking through Mr. Justice Huston, remarked on the 
 authority of Wallace v. M'Connell, 6 "that if the maker, 
 or acceptor, where the money is 'payable at a bank, pays 
 the money into the bank to the credit of the payee on 
 such note or bill, and leaves it there, it will be a complete 
 discharge, though the money should be lost by robbery 
 of the bank or otherwise." ° The same doctrine has been 
 maintained in Iowa. 7 In that state if the payor's money 
 
 1 Ogden v. Dobbin, 2 Hall 112. See ? 158. 
 
 2 Adams v. Hackensack Imp. Commission, 44 N. J. Law 638 ; St. Paul 
 Nat. Bank v. Cannon, 46 Minn. 95. • ■ 
 
 3 Williamsport Gas Co. v. Pinkerton, 95 Pa. 62. 
 
 * Other cases, Sebag v. Abitbol, 4 Maule & Sel. 462 ; Turner v. Hayden 
 4 Barn. & Cres. 1 ; Ward v. Smith, 9 Wall. 447. 
 5 13 Pet. 136. 6 Fitler v. Beckley, 2 Watts & Serg. 458. 
 
 ' Lazier v. Horan, 55 la. 75. 
 
§ 156 COLLECTION OF NOTES AND DRAFTS. 189 
 
 is really at the place specified for payment, and the note 
 or other obligation is not presented, the loss of the money 
 falls on the payee. A similar opinion has been expressed 
 by the Supreme Court of North Carolina. 1 In one of the 
 older cases, Mr. Justice Johnson said, concerning a note 
 which was made payable at a bank: "The obligation 
 imposed on the maker was that he would be at the bank 
 o,n the day on which it fell due, and pay the contents to 
 the payee, raising by implication an obligation on the 
 part of the payee that he would be there to receive it." * 
 And is not this rule just ? The maker of the instrument 
 selects a place for payment, an appointee to receive the 
 money, and also fixes the time for receiving it. These 
 conditions are understood and accepted by the holder of 
 the note. If, therefore, the payor is ready at that time, 
 and delivers the money to the appointee, who it is agreed 
 is to receive it, ought not the payor to be released from 
 further obligation ? The courts maintain that the bank 
 is the agent of the payor when the money is delivered to 
 it, but is not the agent of the payee until the note is de- 
 livered for collection. In truth, is not the agency created, 
 so far as the payor and payee are concerned, at the time 
 of the delivery of the note ? And why, we repeat, if the 
 payor fulfils his part, should his liability continue 1 In 
 states maintaining the rule that a collecting bank is liable 
 for the acts of its sub-agent, it is nevertheless not liable 
 for the neglect of a bank at which a note is made paya- 
 ble, to which it is sent, on the ground that the selection 
 was the act of the original parties to the instrument, and 
 not when it was sent for collection. Should not then, a 
 bank, which is thus designated as the agency at which an 
 instrument is payable, be regarded as the agent of the 
 holder as well as of the maker ; and when the latter has 
 performed his promise and paid the money to the agent, 
 and at the time prescribed, should not his obligation cease ? 
 
 1 Nichols v. Pool, 2 Jones Law 23, 26. 
 
 2 Bank j). Flagg, 1 Hill (S. C.) 177, 178. 
 
190 BANK COLLECTIONS. § 156 
 
 As the Supreme Court of Iowa has so well said : "While 
 it is a general rule that payment of a note or bill should 
 be made to the actual holder, yet when the parties have 
 contracted that payment may be made at a bank, it means 
 that payment is to be made to the bank." And applying 
 this principle to the note in controversy the court con- 
 tinued: "The parties to the note did not contemplate 
 that the payee should make a journey from Indianapolis, 
 and meet the maker at Allen's bank, and there receive his 
 money from the hands of the maker, and deliver him the 
 note." If the holder of a check neglects to present it 
 within the period declared by law after receiving it, he 
 assumes the risk of loss. Why should not the same prin- 
 ciple apply to the holder of a note ? Is the bank any 
 more of an agent to pay the check than to pay the note ? 
 If the maker of the check has no money on deposit the 
 bank is under no obligation to pay ; but if he has, it must 
 pay ; and the'risk from non-presentation within a proper 
 time is the holders. The bank does not know that a 
 check has been given until it is presented ; its ignorance is 
 quite as great concerning the existence of checks drawn on 
 itself as of notes made payable at the same place. In both 
 cases when money is deposited the bank knows and expects 
 that it will be withdrawn, and the function which it per- 
 forms for the maker of the note and the check is the same.' 
 
 1 In Lazier v. Horan, 55 la. 75. 80, the court said : " We think that upon 
 principle the defendant in this case should be wholly disregarded, and we 
 will briefly state our reasons therefor : The note was made payable at a 
 bank ; these institutions are depositories of money ; they are also collection 
 agencies through which by much the larger part of that branch of the busi- 
 ness of this country is transacted. When a note is made payable at a bank, 
 the parties expect the collection to be made through the bank. It is true, 
 when the defendant deposited the money, the bank while holding it was 
 technically the agent of the depositor. But the money was deposited for 
 the holder of the note, and it required no act of the depositor to authorize 
 the bank to pay the note.'' See also Story on Prom. Notes, \\ 228, 356 ; 
 Rhodes v. Gent, 5 Barn. & Aid. 244 ; Armistead v. Armisteads, 10 Leigh 512, 
 525 ; Games v. Manning, 2 G. Greene 251, 255; Williams v. Triplett, 3 la. 
 518 ; State v. Shtipe, 16 la. 36. 
 
 In Nichols v. Pool, 2 Jones Law, (N. C.) 23, 26, in discussing the question 
 
§ 156 COLLECTION OF NOTES AND DRAFTS. 191 
 
 Says Mr. Justice Brickell: 1 "A bank or banker re- 
 ceiving paper for collection is the agent of the creditor 
 and not of the. debtor. The loss resulting from the omis- 
 sions or defalcations of the agent must be borne by his 
 principal, who trusted him, and not by those dealing with 
 him while in the line of his duty and authority." Thus, 
 M. & Co. drew a bill of exchange payable to their own 
 order on M., who accepted the same, and sent it to the 
 bankers with whom he kept his account for collection. It 
 was their custom to pay all claims if his deposit was suf- 
 ficient, and charge them to his account. The drawee de- 
 posited money to pay the bill in question, but the bank- 
 ers failed before it was applied. The bill was declared to 
 be not paid, and the drawee was liable for the amount. 
 This decision is quite in harmony with the Michigan one, 
 for in fact the bill was not paid. But if the bankers were 
 the drawer's agent, why should they not suffer for the 
 consequences of their agent's neglect % Why should the .. 
 drawee suffer? He left the money on deposit, it is true, 
 in his own name, but he directed that it should be ap- 
 plied. The court say that the drawee could have with-, 
 
 whether a demand at the pi ace of payment is necessary to maintain the action, 
 it is said : ' ' The more reasonable construction is that they [the words paya- 
 ble at, etc.,] were used to convey the idea that the parties had made an ar- 
 rangement suggested by considerations of convenience on both sides, accord- 
 ing to which the money is to be paid at a particular place on a given day, or, in 
 other words, it is an assurance given by the debtor and accepted by the cred- 
 itor, that the money will be then and there paid. * * Considered in this 
 sense, the effect is that the creditor does not lose his debt by failing to ap- 
 ply for it at the precise time and place, but may afterwards recover it ; 
 while, on the other hand, the debtor may, if in fact he had the money at 
 the time and place, use that fact as a defense and defeat the action by bring- 
 ing the money into court, or if he deposited it and it was lost by the failure 
 of the bank, he can put the loss on the creditor, because of his laches in not 
 calling to get it." 
 
 Smith v. Essex Co. Bank, 22 Barb. 627 ; Howard v. Ives, 1 Hill 263 . 
 Montgomery Co. Bank v. . Albany City Bank, 7 N. Y. 459 ; Colvin v. Hol- 
 brook, 2 N. Y. 126 ; Commercial Bank v. Union Bank, 11 N. Y. 203 ; Allen 
 v. Merchants' Bank, 22 Wend. 215, 225. 
 
 1 Moore & Co. v. Meyer, 57 Ala. 20, 21. 
 
192 BANK COLLECTIONS. § 158 
 
 drawn the money before it was applied. Very true, he 
 could have countermanded his order ; but if they had ap- 
 plied it they certainly would have been protected in their 
 application. 1 The bank was agent for both parties, and 
 neglected to serve both, and neither applied the money, 
 nor paid the note. Perhaps the law should leave the parties 
 as though it had acted for neither. As the collecting bank 
 is the agent of the payee, the misapplication of the money 
 collected by it cannot prejudice the maker, for he has ab- 
 solutely discharged the debt. 
 
 157. If the holder of a note should sue the bank to re- 
 cover the money deposited by the maker to pay it, he 
 would not be precluded by the action from afterward 
 suing the maker himself. 2 The remedies would not be 
 inconsistent, for the prior suit would contain no allega- 
 tion or admission of the payment of the note or a dis- 
 charge of the maker's obligation. 
 
 158. The authority of a bank to apply the funds of de- 
 positors to the payment of their notes will next be con- 
 sidered. When they- are received and properly indorsed, 
 a bank has authority to pay them and to charge the 
 amount to their depositor's account/ A bank is a 
 debtor to him as well as an agent for discharging his ob- 
 ligations ; but the agency is in abeyance until the author- 
 ity is exercised, in the meantime the debtor and creditor 
 relation exists. The reason for thus regarding the 
 agency in abeyance is to preserve to the depositor his 
 control over his deposit, for if the bank' s authority as 
 agent was continuous, the depositor's authority over his 
 
 1 See Wilkinson v. Bradley, 54 Ala. 677, and authorities there cited. 
 
 8 St. Paul Nat. Bank v. Cannon, 46 Minn. 95. 
 
 ' ftobarts v. Tucker, 16 Ad. & Ellis N. S. 560 ; Kymer v. Laurie, 18 L. J. 
 Q. B. 218 ; State Bank v. Armstrong, 4 Dev. 519 ; Bedford Bank v. Acoam, 
 125 Ind. 584 ; Mandeville v. Union Bank, 9 Crauch 9 ; Commercial National 
 Bank v. Henninger, 105 Pa. 496 ; German Nat. Bank v. Foreman, 138 Pa. 
 474 ; Indig v. National City Bank, 80 N. Y. 100 ; Mtna, Nat. Bank v. Fourth 
 Nat. Bank, 46 N. Y. 82 ; Minier ». Second Nat. Bank, 13 N. Y. State Bep. 
 222. See Banks and their Depositors for other authorities, g 403. 
 
§ 159 COLLECTION' OP NOTES AND DBAFTS. 193 
 
 deposits might be terminated by the action of the bank 
 as agent at any time.' The banks in Tennessee and Illi- 
 nois, however, have no authority to pay the notes of their 
 depositors that are made payable at them. 2 In a recent 
 case Mr. Justice Williams remarked :' "The general rule 
 is well settled that while the bank may appropriate funds 
 in its hands, belonging to any previous party to the note, 
 to the payment of it when payment is not made at the 
 time and place named, yet it is not bound to do so. * * 
 ' Even as between the bank and the maker, the bank is not 
 bound to make the application, but may take the risk of 
 its ability to collect from him, and allow him to withdraw 
 his deposit." 
 
 159. If the note is indorsed, the bank must apply its 
 customer's deposit for the benefit of the indorser. In the 
 case just mentioned Mr! Justice Williams said : "Where 
 the bank holds funds of the maker when the note matures, 
 it is bound to consider the interests of the indorsers or 
 sureties ; and if it allows the maker to withdraw his funds 
 after protest, and the indorsers are losers thereby, the 
 bank is liable to them. The reason of this rule is, that 
 the maker is the principal debtor, and liable to all the in- 
 rlorsers whose undertaking is to pay if he does not." 4 A 
 
 1 Moore & Co. v. Meyer, 57 Ala. 20. 
 
 2 Grissom v. Commercial Nat. Bank, 87 Term. 350; Eidgely Nat. Bank v. 
 Patton, 109 111. 479. In Wood &Co. v. Merchants Sav., L. & T. Co., 41 111. 
 267, 270, Breese, J., said. " No one taking such paper [payable at a bank] has 
 ever supposed the bank, at which it was made payable, was bound to pay the 
 note on presentation, or that any obligation was imposed upon it so to do. 
 It is not according to the usage of banks to pay out money except upon 
 checks or drafts drawn by its creditors having funds in the bank. No case 
 can be found where, in such case, a bank has been considered as authorized 
 to pay a note made payable at its banking house, without the express direc- ' 
 tion of the maker, or in the absence of any check or draft, by him appropri- 
 ating bis money deposited there to such purpose. Nor is there any obliga- 
 tion resting on the bank to pay, for the bank may have claims against the 
 deposit superior to those of the holder of the note." 
 
 3 Mechanics & Traders' Bank v. Seitz, 24 At. Rep. 356. 
 
 4 Justice Williams added: " If the holder surrenders the money or secu- 
 
 13 B. 
 
194 BANK COLLECTIONS. § 162 
 
 different view though, is taken of the bank's duty in 
 Massachusetts. It is not required to make an application 
 of the depositor's deposit for the benefit of the surety. 
 Says Mr. Chief Justice Gray : " The bank, being the ab- 
 solute owner of the money deposited, and being a mere 
 debtor to the depositor for his balance of account, holds 
 no property in which the depositor has any title or right 
 of which a surety, on an independent debt from him to 
 the bank, can avail himself." 1 
 
 160. But the Massachusetts rule is not so well supported 
 by reason and authority. In Pennsylvania, the court have 
 even declared that a notice from the maker, forbidding 
 such an application of his deposit, will not justify the 
 bank in neglecting to charge the note in this manner at 
 maturity. 2 Nor will an agreement between the bank and 
 the depositor, not to charge it against the depositor and 
 to look to the indorser for payment, stand ; therefore, if 
 a bank should not thus apply the deposit, the indorser 
 would be discharged.' 
 
 161. When a depositor makes a deposit after the ma- 
 turity of a note, the bank can apply it or not, as it chooses, 
 on his obligation. It is not positively required to do so, 
 whether the note is indorsed or not. * But whether a bank- 
 can apply a depositor's deposit in payment of a note that 
 is presented overdue is another question. 6 
 
 162. A bank is not bound to apply the deposits of an 
 
 rities of the» maker, he parts with that in which all who have a right to look 
 to the maker for indemnity have a definite interest; and if his act inflicts 
 loss on them he must stand, as to the money or securities surrendered, in 
 the place of the maker." 
 
 1 National Mahwaiwe Bank v. Peck, 127 Mass. 298, 301, 302 ; Strong v. 
 Foster, 17 C. B. 202, 217. 
 
 2 Commercial Nat. Bank v. Henninger, 105 Pa. 496; German Nat. Bank v. 
 Foreman, 138 Pa. 474. 
 
 8 Id. McDowell v. Bank, 1 Harr. 369. 
 
 * National Bank v. Smith, 66 N. Y. 271, affg. 5 Hun 183; Marsh v. Oneida 
 Central Bank, 34 Barb. 298. 
 6 See National Bank v. Smith, 5 Hun 183. 
 
§ 163 COLLECTION OF NOTES AND DRAFTS. 195 
 
 indorser in this manner, nor can the maker require this to' 
 be done. In the case from which we have just quoted, 
 Mr. Justice Williams said : "As the maker is liable to the 
 indorser, it is. very plain that he cannot require the bank 
 to appropriate the indorser' s funds to the- payment of his 
 own note, nor complain if the bank refuses to do so. He 
 has no business with the state # of accounts between the 
 indorser and the bank, but it is his duty to relieve the 
 indorser by the payment of the note in accordance with 
 its terms." But if a note is discounted for the benefit of 
 the indorser, his deposit may be applied by the bank in 
 payment. ' 
 
 163. When a bank is the payee of an accepted bill, it 
 has no duty to perform for the acceptor in applying funds 
 which the drawer may have on original deposit in pay- 
 ment of the bill." In Flournoy's case it was contended 
 that if the bank had funds of the drawer on general de- 
 posit it was bound to apply them to the payment of the 
 bill, but the court declared that there was no such duty 
 devolving on the payee of dishonored paper. The 
 drawer is surety for the acceptor, not the acceptor for the 
 drawer. 
 
 1 Shackamaxon Bank v. Kinsler, 16 Week. N. Cas. 509; Ticonic Bank v. 
 Johnson, 21 Me. 426; Banks and their Depositors, § 389, c. 416. 
 
 2 Flournoy v. First Nat. Bank, 79 Ga. 810, 817. 
 
196 
 
 BANK COLLECTIONS. 
 
 § 164 
 
 CHAPTER VI. 
 
 INSOLVENCY AND DEATH. 
 
 164, A bank ought not to receive a 
 check for collection when it is 
 insolvent 
 City v. Beal. 
 
 Illinois Trust and Savings 
 Bank v. First National 
 Bank. 
 The receiving of paper for col- 
 lection when in this condition 
 is a fraud, and it, or the pro- 
 ceeds, can be recovered. 
 But if an insolvent bank re- 
 ceives a check indorsed in 
 blank a subsequent holder 
 ,' . may acquire a good title. 
 .167. Nor can the right of the depos- 
 itor to recover his paper or 
 . . . the proceeds be defeated by 
 showing that others have 
 ■ done the same thing. 
 
 164a. 
 
 164ft. 
 
 165. 
 
 166. 
 
 168. The filing of a claim for an al- 
 
 lowance does not prevent a 
 recovery of the paper depos- 
 ited or the proceeds. 
 
 169. If a bank has such paper and 
 
 fails, it should return the 
 same. 
 
 170. If collections are afterwards 
 
 made the proceeds are held 
 in trust for the owner. 
 170a. Remarks of Supreme Court 
 of Ohio. 
 
 171. The crediting of a check by an 
 
 insolvent bank drawn thereon 
 is not payment. 
 
 172. Effect of death before complet- 
 
 ing a collection by a partner- 
 ship. 
 
 164. When in an insolvent condition, a bank ought not 
 to receive a check for collection, ' and if it does, no title 
 is acquired, consequently, none can be transferred to any 
 bank to which the same may be sent. Thus, P. sent a 
 check to a bank indorsed for collection. Though insolvent, 
 the cheick was received and sent to another bank for col- 
 lection, which collected it and credited the other bank 
 with the amount, which was a debtor. But as the first 
 
 1 For authorities see Banks and their Depositors, \ 28; Furber v. Ste- 
 phens, 35 Fed. Rep. 17; Balbach v. Frelinghuysen, 15 Fed. Rep. 675, 684; 
 Atkinson v. Rochester Printing Co., 114 N. Y. 168, affg. 43 Hun 167; Ro- 
 chester Printing Co, v. Loomis, 45 Hun 93. 
 
§ 165 INSOLVENCY AND DEATH. 197 
 
 bank acquired no title, in consequence of its insolvent 
 condition at the time of receiving the check, the other , 
 bank's title thereto was no better. Besides, the indorse- 
 ment clearly showed to whom the proceeds belonged.' 
 
 164a. In the case of City v. BeaP checks were marked 
 "for deposit," and were deposited with a bank a quarter 
 of an hour before it closed for the day. The checks were 
 immediately credited on the pass book of the depositor. 
 Though the crediting of the checks in this manner would 
 ordinarily establish the debtor and creditor relation, so 
 the court declared,- yet as the bank was*irret^evably in- 
 solvent at the time of receiving the deposit, and never 
 opened again for business, its act in thus taking the checks 
 was a fraud and the depositor obtained the proceeds. 
 
 1645. In another case a bank sent a draft, indorsed for 
 collection, to another with instructions to collect the same 
 and to remit the proceeds to a third bank for credit to 
 the first. The second bank was insolvent when it received 
 the draft, but made the collection and retained the pro- 
 ceeds. The sending bank then sued the receiver for the ' 
 amount. The conversion was declared to be fraudulent, 
 nevertheless, it failed to recover because it could hot. trace 
 the fund which the collecting bank had misappropriated. 
 It was, therefore, obliged to share as a general creditor.' 
 
 165. As a bank has no right to receive deposits* or checks ' 
 or drafts for collection when insolvent, 5 paper deposited in 
 a bank in this condition can be reclaimed, or the proceeds, 
 on the discovery of the fraud which has been practiced on 
 the depositor, from any one into whose hands the same 
 may have come who has not acquired a bona fide title 
 
 1 Peck v. First Nat. Bank, 43 Fed. Eep. 357; St. Louis & San Francisco 
 E. Co. v. Johnston, 133 V. S. 566. 
 
 2 49 Fed. Eep. 790. 
 
 3 Illinois Trust & Sav. Bank v. First Nat. Bank, 15 Fed. Eep. 858; Mer- 
 chants & Farmers' Bank v. Austin, 48 Fed. Eep. 25. 
 
 4 Banks and their Depositors, § 28. 
 
 6 St. Louis & San Francisco E. Co. v. Johnston, 133 TJ. S. 566; National 
 Bank Act Supp. \ 82. 
 
198 BANK COLLECTIONS. § 166 
 
 thereto. 1 Thus, in the case of the Importers & Traders' 
 National Bank of New York v. Peters,' some bankers de- 
 posited their draft for collection in the Exchange Bank, 
 an insolvent institution, and which forwarded it to the New 
 York bank for that purpose and shortly afterward failed. 
 The collection was made, and the proceeds were mingled 
 with a previous credit of over $5,000 to the Exchange 
 Bank, and also thirty other drafts, the whole mass aggre- 
 gating more than $26,000. The credit of the Exchange 
 Bank, however, was reduced to about $5, 000 by payments 
 made on i|s order before suspension. This fund, so the 
 court declared, belonged to the ^drawers of the draft in 
 controversy. Mr. Justice O' Brien, speaking for the court, 
 said : "As the Exchange Bank did not acquire any title 
 to the draft by reason of its fraud, it became the trustee 
 of the drawers, as to its proceeds." 
 
 166. If, however, an insolvent bank receives a check for 
 collection indorsed in blank, and which is sent to other 
 banks, and value is given in good faith therefor, a perfect 
 title can be obtained. The following case shows that the 
 courts have gone further even than this in protecting 
 property thus indorsed. A check was indorsed 3 for collec- 
 tion and sent to bankers in Baltimore to be collected. The 
 bankers indorsed the check in; a similar manner and sent 
 it to a bank in Jersey City, where the payee resided, for 
 collection. After collecting the check and deducting a 
 portion to cover the indebtedness of J. L. & Co., the Jersey 
 City bank remitted the balance by a draft on a New York 
 bank, payable to the order of the Baltimore bankers. 
 Shortly afterward they failed, and on the day after their 
 failure indorsed the check in blank and sent it to S. & E. 
 in part payment of a debt due to them. The Cecil Bank 
 
 1 Cragie v. Hadley, 99 N. Y. 131; Anonymous Case, 67 N. Y. 598; Martin 
 v. Webb, 110 U. S. 7, 15; Importers & Traders Nat. Bank*. Peters, 123 N. 
 Y. 272; City v. Beal, 49 Fed. Eep. 790. 
 
 2 123 N. Y. 272, 278. 
 
 8 Cecil Bank v. Heald, 25 Md. 562. 
 
§ 168 INSOLVENCY AND DEATH. 199 
 
 t 
 
 then sued S. & E. to recover the proceeds of the check, 
 but failed to recover, the court declaring that as the draft 
 was a -negotiable instrument, and was received in good 
 faith and without any notice of the claim of the Cecil 
 Bank, S. & E. had a good title thereto. 
 
 167. Nor can the right of the drawer to recover the 
 checks or their proceeds be defeated by showing that other 
 persons have deposited similar drafts for collection, so 
 long as they make no claim to the fund on the ground of 
 having deposited, their drafts through the fraudulent 
 conduct of the failed bank. They can waive the fund and 
 seek to collect their claims as creditors ; and if they do 
 this they cannot prevent another depositor, who contends 
 that he was fraudulently induced to deposit his draft, 
 from proving the fraud and recovering his draft or its 
 proceeds. 1 
 
 168. If the owner of a draft or check files his claim for 
 an allowance as a creditor of an insolvent bank, this does 
 not prevent him from attempting to recover the whole 
 amount as a trust fund. Of course, if he was successful 
 in this he could not retain the fund and dividend also that 
 might be declared ; he must abandon his claim to a divi- 
 dend, or return it if it has been declared and paid." Thus, 
 in the Peters' case' the drapers of a draft deposited it for 
 collection in a bank which afterward failed, and the claim 
 was presented for a dividend. Afterward the drawers, 
 discovering that the bank was insolvent when it received 
 the draft for collection, sought to recover the amount on 
 that ground. Their right to recover the draft or the pro- 
 ceeds was clearly established. They refused to receive a 
 second dividend and returned the first to the receiver. 
 Having done this they were clearly entitled to the pro- 
 ceeds of the draft. In reviewing the case Mr. Justice 
 
 1 Importers & Traders' Nat. Bank v. Peters, 123 N. Y. 272. 
 
 2 Nurse v. Satterlee, 81 la. 491 ; Importers & Traders' Nat. Bank v. 
 Peters, 123 N. Y. 272; McLeod v. Evans, 66 Wis, 401. 
 
 s 123 N. Y. 272, 279. 
 
200 BANK COLLECTIONS. § 170 
 
 * 
 
 O'Brien remarked: "In the course of administration of 
 •the assets of the bank by the receiver, the respondents 
 presented and proved a claim as creditors, which included 
 the draft in question, and received a dividend thereon. 
 The trial court .has found that when they presented the 
 claim and received the dividend, they were in ignorance 
 of the facts which constituted the fraud on the part of the 
 bank. It is also found that a second dividend was ordered 
 upon the claim filed by the respondents, which embraced 
 the draft as well as other claims resting wholly in con- 
 tract. The respondents refused to receive this dividend, 
 so far as it included the draft, and they allowed to the 
 receiver out of the second dividend upon their claim, ex- 
 clusive of the draft, the full amount they had received in 
 the first dividend upon the claim involved, in this action. 
 This was a sufficient rescission of what had been done 
 under a mistake as to the facts. They were not bound 
 to return the identical money received. The equitable 
 rule, requiring the party rescinding to restore what he 
 has received, was satisfied when the receiver was permitted 
 to retain an equivalent sum, which belonged to the re- 
 spondents in any event as general creditor under another 
 claim." 1 
 
 169. The correct thing for a bank to do which fails hav- 
 ing uncollected paper is to return the same, but if instead 
 of doing this, should collect, it would be chargeable with 
 a conversion of the paper" and the owner could sue for 
 the proceeds thus collected. 
 
 170. When a collecting bank has become insolvent its 
 authority to collect paper ceases. If collections are after- 
 wards made, or those previously undertaken are com- . 
 pleted, the proceeds are held in trust for the owners.' In 
 
 1 Allerton v. Allerton, 50 N. Y. 670. 
 
 2 Stark v. United States Nat. Bank. 41 Hun 506; Spraights v. Hawley, 
 39 N. Y. 441; Bank v. Jones, 4 N. Y. 497; CayangaCo. Nat. Banku. Daniels, 
 47 N. Y. 631 ; Jessop v. Miller, 1 Keyes 321. 
 
 3 Jockusch v. Towsey, 51 Texas 129 ; German Am. Bank v. Third Nat. 
 Bank, 2 Texas Law Jonrn. 160. • 
 
§ 170« INSOLVENCY AND DEATH. 201 
 
 one case M. deposited drafts with Galveston bankers for 
 collection, which were sent by them to other bankers in 
 New York, with instructions to collect and place the pro- 
 ceeds to the senders. The money was collected and thus 
 applied, and the Galveston bankers failed before paying 
 over the same. to M. They afterward paid to him a por- 
 tion of the amount, and he gave a receipt agreeing ' ' to 
 accept their promise to pay the balance from their settle- 
 ment with preferred creditors." The claim was proved 
 against the estate but afterwards disallowed by the court. 
 M.'s assignee then sued to» recover the balance. It was 
 held that their discharge in bankruptcy did not release 
 them from liability. 1 
 
 170a. In a recent case, the Supreme Court of Ohio, 
 speaking through Mr. Justice Dickman, remarked : 
 "When paper is deposited for collection, the relation be- 
 tween the depositor and bank is that of principal and 
 agent. If an agent for 'that special purpose collects or 
 sells the paper of his principal, he becomes a fiduciary 
 and will hold the proceeds in trust for the principal ; and 
 if the agent fails, there will be no reason why his general 
 
 1 Jockusch v. Towsey, 51 Texas 129. In National Butchers & Drovers' _ 
 Bank v. Hubbell, 117 N. Y. 384, 396, in which the assignee sought to re- 
 tain the proceeds of checks sent "for collection and credit," which -were 
 collected after the failure of the collecting agent, Peckham, J., said : li In 
 the first place the money received by the assignee, as proceeds of the paper 
 sent by the plaintiff to the firm for collection, and not collected by. the firm 
 before the assignment, never became the property of that firm, and, there- 
 fore, the legal title never passed to the assignee of the firm. It was not 
 transferred by the firni to the assignee, because, at the time when the as- 
 signment was made, the money had not been collected and had not come • 
 into the hands of the assignors. It never came into the hands of the as- 
 signee by virtue of the assignment in any legal sense of the term. The 
 moneys came to him from the various collecting agents to whom the drafts 
 and checks had been sent by the firm. The assignee could get no better 
 title to the moneys than his assignor, and neither had any right to apply 
 such moneys collected, after the failure, to the payment of firm debts. 
 If it be said that he received and applied them in good faith, it may be an- 
 swered that good faith did not change the title of the plaintiff to the pro- 
 ceeds of its property." 
 
202 BANK COLLECTIONS. § 172 
 
 creditors should evade such proceeds to satisfy their 
 claims if the principal can trace or ascertain his property 
 in the substituted form. Whether, in a given case, the 
 proceeds have been sufficiently traced and identified must 
 rest in the judgment of the chancellor, who is called upon 
 to declare the proceeds subject to a distinct trust." ' 
 
 171. When a bank receives a draft drawn thereon for 
 payment and is insolvent, the crediting of the amount is 
 not payment. 3 
 
 '172. As insolvency terminates the contract for collec- 
 tion, so does the death of a partner when the collection is 
 undertaken by a partnership.' Thus checks were sent to 
 a banking house for collection which were drawn on the 
 house, and paid by the surviving partner by crediting 
 them to the sending bank on the partnership books and 
 charging them to the drawers. The parties had mutual 
 accounts and this was their usual mode of dealing with 
 collections. Said Mr. Justice Lacy, in delivering the 
 opinion of the court: "The surviving partner received 
 the sum of money destined for Payne & Co., and he was 
 unable to apply it as directed. It was then a sum of 
 money or a«lot of evidences of debt in his hands belonging 
 to the First National Bank of Alexandria^ with whose in- 
 structions he could not comply. He was bound to obtain 
 further instructions from his principal, or return the re- 
 mittance. He had no authority to apply it otherwise than 
 as directed. It was not the property of the late firm. It 
 was not a debt due the late firm. It could not be received 
 or paid out on account of the partnership. It was in no 
 wise connected with the late firm. It never came into- 
 their hands at all. He could not undertake to deal with 
 it as partnership property, and, if he received it and dis- 
 posed of it, it would in no wise concern the affairs of the 
 
 1 Jones v. Kilbreth, 31 N. E.'Eep. 348. 
 
 2 Freeholders of Middlesex Co. v. State Bank, 32 N. J. Eq. 467, 469 ; Mer- 
 chants & Farmers' Bank v. Austin, 48 Fed. Eep. 25. See g 59a. 
 
 8 First Nat. Bank v. Payne & Co.'s Assignees, 85 Va. 890, 896, 
 
§ 172* INSOLVENCY AND DEATH.. 203 
 
 late firm, and the deceased partner's estate could not be 
 held bound for it. He did not return it, however, as has 
 been said, but conveyed in trust to secure the debts of the 
 dissolved partnership. This he could not do, because, as 
 we have said, it was not the property of the late firm, and 
 could not be bound for the debts of the deceased partner 
 any more than his estate could be held liable for it." It 
 was decided that the death of a partner, before receiving 
 the checks dissolved the partnership, and that the sur- 
 viving partner should have returned IJie checks or remit- 
 ted the proceeds. • • ■ 
 
204 
 
 BANK COLLECTIONS. 
 
 CHAPTEK VII. 
 
 PAYMENTS. 
 
 173. A collecting bank can receive 
 
 only money in payment. 
 173a. Marine Bank v. Fulton 
 Bank. • 
 
 174. In some states a check may be 
 
 received as conditional pay- 
 ment. In others only money 
 can be received. 
 
 174a. "Whitney v. Esson. 
 
 1746. Fernald v. Bush. 
 
 175. Distinction in collecting 'a draft 
 
 drawn on a bank and one not 
 drawn on a bank or banker. 
 
 176. When only money should be 
 
 taken the collecting bank is 
 responsible for accepting a 
 check unless the owner ac- 
 quiesces. 
 .177. But if the first check is held 
 until the second is paid, the 
 collecting bank is not liable. 
 
 178. The consequences of taking 
 
 checks as payment where 
 they ought not to be thus 
 taken. 
 ,178a. Franklin County Bank v. 
 Beal. 
 
 179. In other states a check may be 
 
 received as a conditional pay- 
 ment of a check or draft left 
 for collection, whether the 
 drawee is a bank or not. 
 
 180. A certified check taken by a 
 
 collecting bank is not money. 
 
 181. A collecting bank receiving a 
 . check cannot get it certified 
 
 instead of taking money with- 
 out becoming responsible. 
 
 181a. Essex County National 
 Bank v. Bank. 
 
 182. If the money is paid to a col- 
 
 lecting bank it is responsible 
 therefor. 
 182a. People v. Bank of Dans- 
 ville. 
 
 183. The proper thing is to collect 
 
 the money and procure a draft 
 on a solvent bank for remit- , 
 tance. 
 
 184. A debtor would not fulfil his 
 
 duty by sending the draft of 
 the collecting bank on an- 
 other. 
 
 185. Though a foreign bank must 
 
 send money, can it not collect 
 
 as it and the debtor may 
 
 agree? 
 
 185a. Unless the delivery of 
 
 something else is a fraud. 
 
 1855. Further discussion of the 
 
 subject. 
 
 186. In most states a collecting bank 
 
 can take another check from 
 the debtor as conditional pay 
 ment. 
 
 187. The practice is old and general. 
 
 188. When the second check is taken 
 
 it is proper to deliver the first 
 to the maker. 
 
 189. The course that must be pur- 
 
 sued in collecting the second 
 check. 
 
 190. How presentation of the second 
 
 check has been modified by 
 custom. 
 190a. Smith v. Miller. 
 
§173 
 
 PAYMENTS. 
 
 205 
 
 1906. First National Bank v. 
 Fourth National Bank. 
 
 191. When the second check is not 
 
 paid, what must the collect- 
 ing bank do ? 
 
 192. A check may be sent to a foreign 
 
 bank drawn thereon. 
 192a. German National Bank v. 
 Burns. 
 
 193. When is payment of a check 
 
 sent to a foreign bank drawn 
 thereon completed. Whiting 
 v. City Bank. 
 193a. Briggs v. Central Bank. 
 1935. Mcintosh B.Tyler. 
 193c. When the drawer's account 
 
 is overdrawn. 
 193d. When the drawee bank 
 
 fails. 
 193e. When the drawer's account 
 is overdrawn and the 
 drawee bank fails. 
 
 194. Distinction between acceptance 
 
 by a creditor and a collecting 
 bank of a second check. 
 
 195. When the check is presented 
 
 through the mail for pay- 
 ment by another bank, how 
 is the collection to be re- 
 garded? 
 
 196. Review of Indig's Case. 
 196a. Same subject. 
 
 197. A bank is an agent to collect a 
 
 check drawn thereon by one 
 customer in favor of another. 
 
 198. What acts constitute payment 
 
 of such a check ? American 
 National Bank v. Gregg. 
 198a. City National Bank v. 
 Burns. 
 
 199. Presentation through the mail 
 
 by the payee to the drawee 
 for payment. 
 
 200. Authority for sending the pro- 
 
 ceeds by mail. 
 
 201. The taking of notes instead of 
 
 money in renewal. 
 201a. Quebec Bank v. Wyand. 
 
 202. When a check has been paid it 
 
 cannot be recalled. 
 
 202a. 
 
 Bank v. 
 
 First National 
 
 Devenish. 
 
 Corn Exchange Bank • v. 
 
 Farmers' National Bank. 
 
 Discussion of the subject, 
 
 Steinhart v. National Bank. 
 
 Liability for not observing a 
 
 promise to pay a check before 
 
 others presented afterwards. 
 
 A bank can receive payment ot 
 
 a note before its maturity. 
 When is a bank liable for a col- 
 lection made by atelier ? 
 206. And when not ? 
 
 2026. 
 
 202c. 
 202d. 
 203. 
 
 204. 
 
 205. 
 
 173. Without special authority, or shielded by usage, 
 a collecting bank can receive only money in payment. ' 
 Consequently, a bank would not be relieved from paying 
 a note in lawful money by showing that Confederate notes, 
 for example, were in circulation at the time of collecting 
 it, and which were received and paid indifferently with 
 
 1 McCulloch v. McKee, 16 Pa. 289 ; Fifth Nat. Bank v. Ashworth, 123 Pa. 
 212 ; Merchants' Nat. Bank v. Goodman, 109 Pa. 422 ; Cooney v. Wade, 4 
 Hump. 445 ; Henry v. Hazeltine, 6 Humph. 62 ; Ward v. Smith, 7 Wall. 
 447 ; Marine Bank v. Fulton Bank, 2 Wall. 252 ; Commercial Bank v. Union 
 B # ank, 11 N. Y. 203 ; Levi v. National Bank, 5 Dill. 104. See Usage, § 230. 
 
206 BANK COLLECTIONS. § 173a 
 
 other currency. But a bank would be protected by show- 
 ing that the owner knew that such notes were received 
 in payment and assented to the taking of 'them. 1 In Ala- 
 bama, a depositor left notes and drafts for collection be- 
 tween November, 1861, and April of the following year, 
 without giving instructions concerning the kind of funds 
 to be received, and making no demand for them until 
 after the close of the war. In this case it was decided 
 that he could recover no more than the value of the Con- 
 federate currency at the time of making the demand. 2 In 
 another case a note was left with a bank for collection 
 which was not paid at maturity. The maker' s agent after- 
 ward left a draft and directed that the avails when col- 
 lected should be applied on the note. Instead of doing 
 this they were credited to the agent and the note was re- 
 turned to the holder unpaid. In a suit by him against 
 the maker it was held that he could not have the amount 
 of the draft deducted, as the bank had no authority from 
 the holder to receive anything but money in payment.' 
 
 173a. In a noteworthy case, 4 the Marine Bank of New 
 York addressed^, circular to its correspondents, inform- 
 ing them that, in consequence of the derangement then 
 existing in the currency of Illinois, it would be compelled 
 to place all funds received in payment of collections to 
 their credit in such currency as was received in that city — 
 bills of the Illinois stock banks — to be drawn only in sim- 
 ilar bills. The Fulton Bank, for which a collection was 
 made, received the notice. At the time of making it the 
 bills were from five to ten per cent, below par, but when 
 the Fulton Bank demanded payment of the collection, a 
 
 1 Greeves v. Louisiana State Bank, 22 La. Ann. 228. An agent without 
 special authority could not take Confederate treasury notes in payment of 
 notes left with him for collection. Clark v. Thomas, 4 Heisk. 419 ; Scruggs 
 v. Luster, 1 Heisk. 150. 
 
 2 Henry & Co. v. Northern Bank, 63 Ala. 537 ; Planters' Bank v. Union 
 Bank, 16 Wall. 483. See Wilkinson v. Bradley, 54 Ala. 677 
 
 3 Whipple v. Walker. 2 T. & C. 456. 
 
 4 Marine Bank v. Fulton Bank, 2 Wall. 252. 
 
 « 
 
§ 174<Z PAYMENTS. 207 
 
 year afterward, the bills had declined fifty per cent, in • 
 value. It insisted that it was entitled to the value of the 
 bills at the time they were received by the Chicago Bank, 
 while the bank claimed it was not obliged to pay only 
 their value in 'coin at the time payment was demanded, 
 with interest. Justice Miller, who delivered the opinion • 
 of the court, said that ''if the Marine Bank had received 
 the" depreciated money, and kept it without using it until 
 called for, or had sent it by express to plaintiff, it would 
 have been relieved from further liability. In other words, 
 so long as the defendant retained strictly the character of 
 agent, and acted within the principle laid down in the 
 circular, it was protected." But instead of doing this the 
 Marine Bank changed the relation of principal and agent 
 into the ordinary one of debtor, and creditor, by using the 
 money as a general deposit. Hence the bank was de- 
 clared liable for the depreciation in the bank bills received 
 during the period it kept the deposit. 
 
 174. In some states a collecting bank may take another 
 check in discharge of the original one, but only as condi- 
 tional payment. The obligation is regarded as alive until 
 the second check is paid, unless this is expressly taken 
 as an extinguishing of the debt. 1 In other states only 
 money can be received." And the same rule applies to 
 any other holder or collector. If he should present a draft 
 drawn on a" bank or banker to the drawee, and accept a 
 check on another bank, instead of money, the risk of ob- 
 taining payment of. the check would be the holder's.' 
 
 174a. In Whitney v. Esson," the purchaser of goods in 
 Nova Scotia sent a draft drawn by bankers in Halifax on 
 Boston bankers to the vendors, who lived there, in pay- 
 
 1 § 179. 
 
 2 Fifth Nat. Bank v. Ashworth, 123 Pa. 212 ; Pernald v. Bush, 131 Mass. 
 591. 
 
 3 Hughes v. Kellogg. 3 Neb. 186 ; Franklin County Bank v. Beal, 49 Fed. 
 Rep. 606. 
 
 4 99 Mass. 308. 
 
208 BANK COLLECTIONS. § 1745 
 
 ment. At maturity, they surrendered the draft to the 
 drawee, taking in exchange their check on a Boston bank. 
 The drawee having failed before the collection of the 
 check in the ordinary course of business, the vendors at- 
 tempted to collect the amount of the purchaser, but failed 
 to maintain their action. In reviewing the case, Mr. Chief 
 Justice Chapman said : "In this case it is agreed by the 
 parties that it is a common practice for holders of drafts 
 to accept the check of the drawee in exchange for the 
 draft, though it is not claimed to be a general established 
 usage. It is undoubtedly true that men who keep bank 
 accounts are accustomed to give checks for their debts, 
 and in most cases their standing is such that these checks 
 are taken by their neighbors as -readily as cash. This 
 may make a common practice among men who are deal- 
 ing on their own account, in respect to such dealings ; 
 but such a practice falls short of a usage applying to the 
 collection of drafts for absent parties." And it is not a 
 reasonable usage that one who collects a dr'aft for an ab- 
 sent party should be allowed to give it up to the drawee, 
 and sacrifice the claim which the owner may have on prior 
 parties, upon the mere receipt of a check which may turn 
 out to be worthless. By taking the check and giving up 
 the draft, the plaintiffs made the check their own as be- 
 tween them and the defendants, and were bound to ap- 
 ply it to the payment of the debt now in suit, in conform- 
 ity with their agreement." Of course, if the drawee was 
 not able to pay the draft, or gave a check therefor which 
 the holder was willing to accept when presenting the other, 
 the holder's rights would not be impaired ; but in no case 
 should the sender, from whom a bank receives paper for 
 collection drawn on a bank or banker in the same place, 
 be subjected to the further risk of payment of another 
 check accepted for the original. 
 
 174&. In Fernald v. Bush, 1 B., the payee of a sight 
 draft, who had accepted it from F., after bank hours for 
 
 1 131 Mass. 591. 
 
§ 175 PAYMENTS. 209 
 
 * 
 
 a note, presented it to C. & D., the bankers on whom it 
 was drawn, the next day within an hour after the open- 
 ing of their banking-house. For this they gave their 
 check on the First National Bank, which B. deposited 
 within an hour after receiving it in the Bank of C. The 
 next day the Bank of C. presented the check to the First 
 National Bank, and payment was refused in consequence 
 of C. & D.'s failure. It was declared that if C. & D.'s 
 check had been dishonored on the day of receiving it, and 
 B. had given notice of the, dishonor to F. on the next day, 
 he would have been liable on the draft. ' ' But neither he, 
 nor his agent, the Bank of C. , could, By accepting from 
 the drawees their check in lieu of money, prolong the 
 plaintiff's liability as drawer ; and by holding that check 
 without presenting it for payment until [the next day re] 
 discharged him from such liability." ' 
 
 175. We think a distinction may be justly observed be- 
 tween a draft or check drawn on a bank or banker, and a 
 draft drawn on a different kind of corporation or person. 
 Whenever a check is deposited with a bank or banker, 
 the depositor presumes that payment will be demanded 
 in the usual course of business and that the money will be 
 'obtained ; for a bank is supposed to have funds. But 
 when the drawee of a draft is not a bank, the contrary 
 presumption exists; it maybe fairly supposed that he 
 does not always have money in his possession, and that he 
 will give a check on a bank or banker therefor. When, 
 therefore, a check is taken for the draft as conditional 
 payment, and proper diligence is used in collecting it, we 
 think that the collecting bank has performed its duty. 
 Whether a check thus taken should be immediately pre- 
 sented for payment to the drawee, or whether it can be 
 collected through the clearing house, wherever one exists, 
 depends on the usage of the banks in that place. What- 
 
 1 The court citing Whitney 'v. Eason, 99 Mass. 308 ; Smiths Miller, 43 N. 
 Y. 171. 
 
 14 B. 
 
210 BANK COLLECTIONS. § 177 
 
 ever the usage may be, a bank, doubtless, would be safe 
 in observing it. 
 
 176. Wherever the rule prevails that a bank must re- 
 ceive only money, if another check is taken and the bank 
 on which it is drawn fails before completing the collection 
 and the check is dishonored, the loss falls on the collect- 
 ing bank, and not on the owner, 1 unless he has ordered 
 the bank to hold the same. This act would be regarded 
 as condoning the bank's fault, and the loss if any should 
 thereafter occur, would fall on the owner." 
 
 177. Again, whenever a bank can receive only money 
 in making collections, if another check or draft is taken, 
 no liability would be incurred should the original note or 
 check be held until the payment jaf the other check or 
 draft. Thus, drafts were drawn by C, on a commission 
 company and deposited with the Columbia bank for col- 
 lection, but which were not paid at maturity. The com- 
 pany afterward returned the drafts to the Columbia bank 
 with their check in blank, authorizing it to fill the check 
 for the amount of the returned drafts. This was done; 
 the drafts were stamped as paid and transmitted to an 
 Atlanta bank with the check of the company, which was 
 drawn thereon, with directions to deliver the drafts to the 
 company on payment of its check. This, however, was 
 dishonored and returned with the drafts to the Columbia 
 bank. When the Columbia bank first received the check 
 it was regarded as good, and was at once credited to C.'s 
 account, and notice was given to him of what had been 
 done. When it was dishonored, however, it was charged 
 back to C.'s account. The drafts were considered as 
 never having been paid, and the bank was justified in 
 charging back the check, "it having been 'by mistake 
 passed to C.'s credit." It should be remarked that the 
 drafts were not surrendered to the company. On the 
 
 "' •Hazlett v. Commercial Nat. Bank, 25 W. N. Cas. 282 ; Fifth Nat. Bank 
 v. Ashworth, 123 Pa. 212; Franklin Co. Nat. Banku Beal, 49 Fed. Rep. 606. 
 " Hazlett v. Commercial Nat. Bank, 25 W. N. Cas. 282. 
 
§ 178 PAYMENTS. . 211 
 
 other hand, a definite instruction was given to the Atlanta 
 bank to hold the same until the company's check was 
 paid. The crediting, therefore, of the check to C.'s ac- 
 count did not operate to discharge the drafts. 1 
 
 178. Suppose a collecting bank should accept a second 
 check for the first, when only money ought to be received, 
 what would be the consequence ? Of course, the maker's 
 responsibility would continue until the second check was 
 paid i and the collecting bank would also be responsible. 2 
 But suppose the collecting bank should fail before the 
 check was collected, would the owner of the original 
 check be entitled to the proceeds of the second check, or 
 could he look only to the representative of the failed bank ? 
 This question has been decided in different ways by the 
 Federal courts. In the case of the Franklin County Na- 
 tional Bank v. Beal, 8 a note was sent to the Maverick 
 National Bank of Boston, "for collection and credit," 
 for which a check was accepted and credited as cash to 
 the sending bank. Before the check was collected the 
 •Maverick bank failed, and the sending bank sought to 
 recover the proceeds of the check which were paid to the. 
 receiver. But the court declared that " when the Maver- 
 ick bank received payment of the note, and credited the 
 complainant with the amount in its general account with 
 the complainant, it assumed all responsibility with respect 
 to the payment of the note. If the check received in pay- 
 ment proved to be bad, it would not relieve the Maverick 
 bank. It might have received payment in cash, or by 
 check or draft, or even by the substitution of a new note, 
 but with this the complainant had no concern. Looking - 
 at the general nature of the transactions between these 
 parties, it seems to me that when the note was paid and 
 credit given to the complainant, the agency of the Mav- 
 
 1 Second Nat. Bank v. Cumrfiings, 18 So. W. Rep. 115 (Tenn.). 
 
 2 Hughes v. Kellogg, 3 Neb. 186; Franklin County Nat. Bank v. Beal, 49 
 Fed. Eep. 606; Fifth Nat. Bank v. Ashworth, 123 Pa. 212. 
 
 3 49 Fed. Eep. 606. 
 
212 BANK COLLECTIONS. § 178a 
 
 erick bank to collect and credit this note ceased, because, 
 as between the complainant and the bank, the bank had 
 done that which it was required to do, and, therefore, the re- 
 lation of the parties from that time must be held to be that 
 of debtor and creditor. The form of payment is immaterial, 
 because it could not affect the claim of the complainant 
 against the bank, such payment being at the risk of the 
 bank." In Levi v. National Bank 1 the plaintiff trans- 
 mitted a draft for collection and credit to the National 
 Bank, which was located in St. Louis. The draft was 
 duly presented by the bank to the drawers, who gave 
 their check on another bank for the amount. Before it 
 was collected the National Bank failed, and the proceeds, 
 which were collected afterward by the receiver, were 
 ordered to be given to Levi. 
 
 178a. It is true, in the Franklin bank case, the Maverick 
 bank credited the second draft to the sending bank ; does 
 this unauthorized act, though, possess any significance ? 
 Judge Colt maintained that the bank rendered itself re- 
 sponsible for the amount, but how did the Maverick bank 
 thus regard the crediting ? Suppose the second check had 
 not been paid, was the right gone either of the Maverick, 
 or of the sending, bank, to collect the original? Moreover, 
 until the first check was paid by the payment of the second 
 the debt was not in truth discharged, and the entry, there- 
 fore, to the credit of the sending bank had no significance. 
 In other words, if a bank has no right to accept a check 
 in absolute payment, it cannot, by assuming the respon- 
 , sibility therefor, do this. Surely a collecting agent can- 
 not transform its unlawful act into allawf ul one by accept- 
 ing the responsibility of the consequences. The consent 
 of the sending bank, either expressly granted or implied, 
 is needful. On the other hand, if the collecting bank had 
 a right to take the check instead of money, it could do 
 so only conditionally, and the check belonged to the send- 
 ing bank until the proceeds were collected, for in no case 
 
 > 5 Dill. 104. 
 
§ 180 PAYMENTS. 213 
 
 had the bank the right to take the check in absolute 
 payment. 1 
 
 179. In other states a bank can take another check from 
 a bank, banker, other corporation or person indifferently 
 as conditional payment. 1 And wherever clearing-houses 
 exist, checks are usually sent through them for collection 
 which are drawn on the members. If they are drawn on 
 individuals, who are not engaged in the banking business, 
 or private bankers, or non-clearing-house banks, they are 
 presented for payment, and either they are paid or a 
 check is taken which is drawn on a bank that is a member 
 of the clearing-house, or which clears through a member. 
 Very frequently the check is certified, or certification is 
 procured afterward. This is the "usual course of busi- 
 ness" in New York city as well as in other places. 8 And 
 if a rule exists among clearing-house banks that checks 
 received through the institution for payment may be ex- 
 amined and returned to it by a specified time, entries of 
 them made by the drawee or receiving bank previously to 
 that time, or cuts or other marks on the checks, will not 
 prevent their return or work an acceptance or payment of 
 them.* 
 
 180. If the check has been certified in payment of the 
 note or check before delivery, the relations of the payee 
 or holder and drawer are not affected by the certification." 
 In a recent case Mr. Chief Justice Field said : "If the 
 drawer in his own behalf, or for his own benefit, gets his 
 
 1 See g 12. 
 
 2 Burkhalter v. Second Nat. Bank, 42 N. Y. 538; Turner u. Bank, 3 Keyes 
 425 ; Johnson v. Bank, 5 I«bt. 554; Smith v. Miller, 43 N. Y. 171. 
 
 3 Burkhalter v. Second Nat. Bank, 42 N. Y. 538. 
 
 4 German Nat. Bank v. Farmers' Deposit Nat. Bank, 118 Pa. 294. 
 
 6 Bickford v. First Nat. Bank, 42 111. 238; Bounds v. Smith, 42 111. 245; 
 Brown v. Leckie, 43 111. 497; Continental Nat. Banku. Cornhauser & Co., 37 
 111. App. 475, 480. A certified check given in discharge of a debt is no more 
 effective than an uncertified one. Such a check is not to he regarded as cash 
 taken in absolute payment. It is " a mere evidence of the debt due from 
 the drawer and a conditional payment of the same." Larsen v. Breene, 12 
 Colo. 480, 484. 
 
214 BANK COLLECTIONS. § 181 
 
 check certified, and then delivers it to the* payee, the 
 drawer is not discharged ; but if the payee or holder in his 
 own behalf, or for his own benefit, gets his check certified 
 instead of getting it paid, then the drawer is discharged. ' ' ' 
 A check certified before presentation is not payment, but 
 simply additional security. 11 
 
 181. If a collecting bank should receive an uncertified 
 check, and, instead of demanding payment, should have 
 the same certified by. the payee bank, the drawer would 
 be discharged, and the collecting bank would become lia- 
 ble to the owner. The effect of the certification, by the 
 request of the collecting bank, would be to transfer the 
 fund in the drawee bank for its payment from the control 
 of the drawer to the payee, and therefore the collecting 
 bank would be responsible. This is the law everywhere. 3 
 In the Leech case, Mr. Justice Peckham said : " The law 
 will not permit a check when due to be thus presented 
 and the money to be left with the bank for the accommo- 
 dation of the holder without discharging the drawer. 
 The money being due and the check presented, it is his 
 own fault if the holder declines to receive the pay, and 
 for his own convenience has the money appropriated to 
 that check subject to its future presentment at any time 
 within the statute of limitations." 
 • 
 
 1 Minot v. Russ, 31 N. E. Rep. 489 (Mass.), citing Born v. First Nat. Bank, 
 123 Ind. 78; Andrews v. German Nat. Bank, 9 Heisk. 211; First Nat. Bank 
 v. Leach, 52 N. Y. 350; Boyd v. Nasmith, 17 Ont. 40; Essex Co. Nat. Bank 
 
 , v. Bank, 7 Biss. 193; First Nat. Bank v. Whitman, 94 U. S. 343, 345: Metro- 
 politan Nat. Bank v. Jones, 27 N. E. Rep. 533 (111.); National Commercial 
 Bank v. Miller & Co., 77 Ala. 168; Mutual Nat^Bank v. Rotge, 28 La. Ann. 
 933. 
 
 2 Lafayette Nat. Bank v. Cincinnati Oyster & Fish Co., 20 Bull. 419. 
 
 3 First Nat. Bank v. Leech, 52 N. Y. 350 ; Born v. First Nat. Bank, 123 
 Ind. 78, and cases cited ; Smith v. Miller, 43 N. Y. 171 ; Meads v. Mer- 
 chants' Bank, 25 N. Y. 143 ; Farmers & Mechanics' Bank v. Butchers & 
 Drovers' Bank, 16 N. Y. 125 ; Merchants' Banks. State Bank, 10 Wall. 604, 
 647; Levi v. National Bank, 5 Dill. 104 ; Continental Nat. Bank v. Corn- 
 hauser & Co., 37 111. App. 475, 48.0 ; Metropolitan Nat. Bank v. Jones, 27 
 N. E. Rep. 533 (111.). 
 
§ 182 PAYMENTS. 215 
 
 181a. In another case of the same character Judge Hop- 
 kins said that the duty of the defendant bank '*' upon re- 
 ceipt of the check for collection was plain. It was to pre- 
 sent it for payment, and only for payment. This it did 
 at first, and if it had stopped then there would have been 
 no liability upon it. But it did not, it went further ; it 
 asked for and received the certification of the bank upon 
 the check. By this act a new relation was created be- 
 tween the parties. The amount the check called for was 
 withdrawn from the drawer's account and control, and 
 thereafter they had no right of action for it against the 
 bank. The technical operation of the transaction was a 
 transfer to the holder of the check of the drawer's funds 
 and right of action against the bank. It superseded 
 the previous rights and obligations of the parties, particu- 
 larly of the drawers. Before that, the drawers could have 
 stopped payment of the check or withdrawn the funds by 
 other checks. After the certification they had no control 
 over the fund or action of the bank in reference to it, 
 nor any right to sue the bank for it. Nor did the bank 
 owe them any duty in relation to it. It no longer pos- 
 sessed the character of a check. If the drawers had taken 
 it up before its certification it would have been useless, but 
 after that they could only get the money by surrendering 
 it. It resembled, after certification, more the certificate 
 of deposit than a check. Now, what was the effect upon 
 the legal rights and liability of the drawers ? Did it not 
 discharge them from all further liability upon the check V ' 
 And the court held that it did. And further, that the der 
 fendant should make*good the loss.' 
 
 182. Of course, if money is received and the collecting 
 bank fails to respond for the amount, it is liable. Or, if 
 it surrenders a check to the drawee bank on receiving the 
 cashier's check therefor, the collecting bank is liable for 
 the amount. By so doing the liability of the collecting 
 bank becomes fixed, "as much so as if it had received the 
 
 1 Essex Co. Nat. Bank v. Bank of Montreal, 7 Biss. 193, 195. 
 
216 BANK COLLECTIONS. § 182a 
 
 cash," ) Nor would the payment of a portion or all of 
 the original check by the maker to the holder who de- 
 posited it for collection, relieve the collecting bank of its 
 liability for the amount, nor could the sum thus paid be 
 set off in an action by the depositor against the collecting 
 bank. This seems a hard doctrine, but the reason is the 
 collecting bank could demand no less than the face of the 
 check, and the drawee bank must honor it for the full 
 amount, if having enough funds. The collecting bank 
 could not have the benefit of such a payment, but the 
 amount could be recovered by the payor, of the depos- 
 itor." 
 
 182a. In the case of the People v. Bank of Dansville,' 
 a person drew a sight draft on H. and sent it to the de- 
 fendant bank, which was located in the same town as H.,' 
 to collect the same. H. paid the draft, and the bank re- 
 mitted its own draft on a bank in New York city to the 
 drawer. Before it was collected the defendant bank 
 failed, and the drawee then sought to collect the amount 
 of the receiver, and succeeded, for the collecting bank 
 was clearly an agent in transacting the business,, and 
 though receiving the money from the drawee had not paid 
 it over. "The particular mode of making the remit- 
 tance," said the court, "was not mentioned, so the bank, 
 under the general authorization contained in the letter of 
 instructions, could adopt any of the usual and customary 
 modes of remittance in use by banks or business men at 
 that place. It could have purchased a draft of some third 
 party on some bank or banker, in the usual course of 
 business, and if it had used the money for that purpose, 
 and in good faith, it would have been an act within the 
 
 1 Fifth Nat. Bank v. Ashworth, 123 Pa. 212 ; Merchants' Nat. Bank v. 
 Goodman, 109 Pa. 422 ; Ward v. Smith, 7 Wall. 447 ; McCulloch v. McKee, 
 16 Pa. 289 ; Marine Bank v. Fulton Bank, 2 Wall. 252 ; Commercial Bank v. 
 Union Bank, 11 N. Y.' 203 ; Graydon v. Patterson, 13 la. 256. 
 
 1 Fifth Nat. Bank v. Ashworth, 123 Pa. 212. 
 
 3 39 Hun 187, 189. 
 
§ 184 PAYMENTS. 217 
 
 limits of its agency. But it was not authorized to use the 
 funds and send its own draft on its own correspondent as 
 a means of payment.* It could not in that way discharge 
 the duties it owed to its principal. Until its own draft 
 was paid the transaction would not amount to a remit- 
 tance. * * When a bank consents to act as a collect- 
 ing agent, it assumes precisely the same duties and obli- 
 gations towards its principal as an individual does when 
 he acts in the same capacity." 
 
 183. If a check or other instrument is presented for 
 payment and paid, and a draft is purchased on a solvent 
 bank for remittance instead of money, this is proper, and 
 the collecting bank is not responsible for the continued 
 solvency of the institution. Nor does a different rule apply 
 whenever a sub-agent is employed. If the collection 
 is made and remitted in the form of a draft obtained for 
 that purpose, the responsibility of the collector is dis- 
 charged, whether the draft is sent to the bank in which 
 the check was first deposited, or to the bank from which 
 the check was received. 1 
 
 184. But if a debtor should request the bank with which 
 he does business to draw its own draft on another bank 
 
 1 and to send it to his creditor, and the drawer bank sh*uld 
 fail before it was collected, the debtor would remain liable. 
 Thus, a New York creditor sent a bill to his debtor, who 
 requested his bank, as his agent, to transmit its draft on 
 a New York bank to the creditor for the amount of his 
 bill. This was done, and the creditor, without delay, 
 sought to collect the draft, but the drawer bank failed 
 and the draft was never paid. It was held that the draft 
 did not extinguish the debt, although on its receipt the 
 creditor forwarded to the debtor the account marked 
 ' ' paid, ' ' and dated and signed by him. Mr. Justice Speer 
 remarked that if, by reason of the insolvency of the agent 
 whom the debtor had selected to pay his account, it was 
 
 1 St. Nicholas Bank v. State Nat. Bank, 128 N. Y. 26, 32. See Indig v. 
 National City Bank, 80 N. Y. 100. 
 
218 BANK COLLECTIONS. § 185 
 
 not paid, the principal must bear the consequences "in 
 the absence of any express agreement to the contrary, 
 provided due diligence is shown in presenting the bill for 
 payment. One simple contract does not necessarily merge 
 or extinguishanother, the circumstance of the note or bill 
 being given by an agent of the principal debtor cannot 
 vary the question." ' . 
 
 185. Is not the spirit of this rule observed by sending 
 money in payment to the owner of the paper, without re- 
 gard to the thing received from the debtor in discharge of 
 his obligation ? Thus, the owner of a note sent it to a 
 bank for collection, which received a certificate of deposit 
 that had been previously issued to the maker in payment. 
 In the owner's letter accompanying the note was a release 
 of the mortgage given to secure the note, which the bank 
 was directed to deliver "in exchange f or a New York 
 draft." As the bank failed before sending the, draft, the 
 owner sued the maker of the note but failed to recover, 
 the court declaring that the bank was justified in receiv- 
 ing the certificate of deposit in payment. Mr. Justice 
 Eeed dissented, but is hot the opinion of the majority 
 based on a solid foundation ? The owner desired payment 
 of the note ; what the bank received, whether a certificate 
 of deposit, money, wheat or other commodity, in discharge 
 of the obligation, was of no concern to the owner. Had 
 the New York draft been sent as requested and duly 
 honored, the owner would never have made any inquiry 
 into the nature of the payment made by the maker. The 
 essence of the transaction was the sending of a good draft 
 on a New York bank, or, in other words, the payment of 
 money to the owner. It so happened, however, that the 
 maker did not pay money, but a certificate of deposit, and 
 so the contention arose that no payment at all had been 
 made. Undoubtedly, if money, or its equivalent, is re- 
 ceived by the collecting bank, it is responsible for the 
 amount. The mishap in this case was the failure of the 
 
 1 Weaver v. Nixon, 69 Ga. 699, 702. 
 
§ 1855 PAYMENTS. . 219 
 
 bank, not in receiving money from the maker, but in not 
 paying it over to the owner. This it omitted to do, and 
 was clearly liable for the omission. Had the maker dis- 
 charged his note in money, doubtless the' bank would have 
 been as delinquent in transmitting it to the owner. 
 
 185a. When, however, the collecting bank does not re- 
 ceive money in -payment, but accepts a certificate of de- 
 posit or something else as an equivalent, this, surely, is 
 not always to be regarded as a payment. If the maker 
 has delivered a certificate of deposit, or some other com- 
 modity, for example, in good faith as an equivalent, and 
 the note or bill or other instrument has been delivered to 
 him, and the owner has been fully paid, the obligation is 
 discharged ; but if there is collusion between the debtor 
 and the bank, if it is in a failing condition and a certificate 
 of deposit that has been issued by it is delivered in pay- 
 ment in order to save the maker from loss, this would be 
 a fraud ctti the owner of the note collected, and the maker 
 would remain liable. Of course, the collecting bank can- 
 not discharge its duty to the party from whom it received 
 the instrument for collection except by returning money, 
 unless it has received instructions to take and send some- 
 thing else in payment. The essence of the transaction's 
 to send money to the transmitter, and nothing else will 
 satisfy the legal requirement of the collecting agent. 1 
 
 1855. It may be inquired, does not this principle run 
 against that stated early in the chapter, that a collecting 
 agent can receive only money in payment? Undoubtedly. 
 But it does not clash against the principle of receiving 
 checks as conditional payment, which is so often done. 
 Therefore, the rule does not conflict with the decision in 
 the Franklin County National Bank v. Beal, 3 for the 
 second check was not payment until it was paid, whatever 
 were the consequences of receiving it to the sending and 
 collecting banks. There is a weighty reason against per- 
 
 1 British & American Mortgage Co. t>. Tibballs, 63 la. 468. 
 
 2 49 Fed. Eep. 606. 
 
220 . BANK COLLECTIONS. § 187 
 
 mitting a collecting bank from receiving anything in lieu 
 of money as payment, which has been thus stated by Mr. 
 Justice Byles :' " It is not disputed that the general rule 
 of law is that an authority to an agent to receive, money 
 implies that he is to receive it in cash. If the agent re- 
 ceives the money in cash, the probability is that he will 
 hand it over to his principal ; but if he is to be allowed to 
 receive it by means of a settlement of accounts between 
 himself and the debtor, he might not be able to pay it 
 over '; t all events, it would very much diminish the chance 
 of the principal ever receiving it ; and upon that principle 
 it has been held that the agent, as a general rule, cannot 
 receive payment in anything else but cash." 3 
 
 186. In most states when a check is sent to another bank 
 for collection it may accept the debtor's check as condi- 
 tional payment, and the acceptor becomes the debtor's 
 agent to collect the money ; and until it is collected his 
 payment is not complete.' . • 
 
 187. In thus receiving a substituted check or other in- 
 strument, instead of demanding and receiving money, is 
 the bank responsible therefor, or negligent if not collecting 
 the same ? In Smith v. Miller,* a draft was taken by a col- 
 lecting bank for a check, and the. court of appeals re- 
 marked that there was no impropriety in taking a draft 
 for the check presented ; the practice is as ancient as it is 
 universal. 5 Asa collecting bank when receiving money 
 in payment can properly remit by purchasing a draft for 
 the amount, it is justified in taking a draft in the begin- 
 ning, and thus escape the useless formality of demanding 
 money of the debtor, or of the bank on which his check 
 
 1 Sweeting v. Pearce, 7 C. B. (N. S.) 485, affd. 9 C. B. (N. S.) 534. 
 
 2 See Pearson v. Scott, 9 Ch. Div. 198; Levi i>. National Bank, 5 Dill. 104, 
 110. 
 
 3 Merchants' Bank o. Spicer, 6 Wend. 443; Olcott v. Eathbone, 5 Wend. 
 490; Kelty v. Second Nat. Bank, 52 Barb. 328. 
 
 • 43 N. Y. 171, 175. 
 
 5 Enssell v. Hankey, 6 Term 12; Hansard v. Robinson, 7 Barn. & Cres. 90; 
 Indig v. National City Bank, 80 N. Y. 100, 104. 
 
§ 189 . PAYMENTS. 221 
 
 is drawn, and paying it back to a bank for a draft. 1 But 
 it may be inquired, does not this practice overthrow the 
 rule first announced, that a bank must receive only money 
 in payment ? It does not ; for payment is not made until 
 the second check is paid, when, of course, money is 
 received. 
 
 188. When another check or draft is taken for the first, 
 it is* proper to deliver the original to the maker, drawer or 
 drawee ; and no negligence or impropriety can be imputed 
 to a bank in doing so on receiving the substitute. 5 Some- 
 times the first is retained until the second is presented for 
 payment, especially when the collecting agent fears that 
 the second may not be paid ; * when this is done, the col- 
 lecting bank cannot decline to surrender the other on pay- 
 ment of the second. If it be a note, for example, which 
 has not matured, this is no ground for refusing to deliver it.* 
 
 189. The duties of the foreign bank or sub-agent in col- 
 lecting the substituted check or draft may now be de- 
 scribed. As we have seen, if money is paid to discharge 
 the original check, or it is drawn on the sub-agent, either 
 its draft will be sent, or one purchased for that purpose. 
 If a draft is purchased on a solvent institution, then its 
 liability ceases ; if its own is sent, then it is liable there- 
 for. If it is paid, the transaction is at an end ; otherwise 
 the collecting bank is liable, and if adequate satisfaction 
 is not -obtained, recourse, perhaps, can be had of the orig- 
 inal debtor. The cases in which this can be done have 
 already been described. The second or substituted draft 
 
 1 Indig's Case, 80 N. Y. 100, 104. 
 
 2 Smith v. Miller, 43 N. Y. 171, 175 ; Russell v. Hankey, 6 Term 12 ; 
 Hansard v. Robinson, 7 Barja. & Cres. 90; Byles on Bills, \ 16 ; Story on 
 Bills, I 419: Chitty on Bills, \ 433. 
 
 3 Second Nat. Bank v. Cummings, 18 So. W. Rep. 115 (Tenn.). 
 
 4 Union Sav. Association v. Clayton, 6'Mo. App. 587. When a note is 
 deposited with a bank for collection, it cannot refuse to return the same, or 
 its proceeds, to. the depositor on the ground that it was given to defraud 
 creditors, unless the bank was one of them. First Nat. Bank v. Leppel, 9 
 Colo. 594. 
 
222 BANK COLLECTIONS. . § 189 
 
 given by the debtor, of course, is not drawn on the sub- 
 agent, but on another bank. Thus, if the original check 
 has been sent by a bank in New York to a bank in Buf- 
 falo which is drawn by a resident there on a bank in his 
 city, the substituted check on a bank in New York would 
 be ordinarily a check or draft procured by the debtor on 
 a bank in New York. This, then, is sent to the collect- 
 ing bank in New York which first received the original 
 check for collection. When it has received the substi- 
 tuted draft, what are its duties ; are they the same as in 
 the collection of any other draft 1 They are not quite the 
 same, for the reason that ihe law imposes more expedi- 
 tion in collecting such a draft than the original. By tak- 
 ing it the time for making the collection is extended, and 
 this means a greater peril to the owner of the original 
 check, and consequently the law imposes a more strenu- 
 ous service in performing the collection of the substituted 
 draft. The courts have very generally declared that the 
 ordinary rule for presenting checks by the holder does 
 not 'prevail, and that presentation must be made at once. 
 There is some reason for establishing a stricter rule. AH 
 the time given by law for collecting the money is usually 
 spent in presenting the first check, and the time therefore 
 spent in collecting the second is an extension which would 
 not be necessary if the money had been obtained and re- 
 mitted in the beginning. Besides, the delay involves a 
 loss of the use of the money, while the risk of obtaining 
 payment is increased by delay, and therefore the law 
 should require the collector to exercise more promptitude 
 in demanding payment of the second check. In Smith v. 
 Miller, 1 Mr. Justice Allen remarked : " When a check is 
 taken instead of money, by one acting for others, * * a 
 delay .of presentment for a day, or for any time beyond 
 that within which with proper and reasonable diligence 
 it can be presented, is at the peril of the party thus re- 
 taining the check and postponing presentment, as between 
 
 1 43 N. Y. 171, 176. 
 
§ 190 PAYMENTS. 223 
 
 him and the persons in interest whom he represents." ' 
 They must therefore be presented* the same day they are 
 accepted, if possible, unless the time for doing this has 
 been extended by custom. 2 Again, "the acceptance of 
 another check or note implies an undertaking of due dili- 
 gence in presenting the same for payment ; and if the 
 party who has given it sustains a loss from the non-exer- 
 cise of such diligence, his obligation to pay will be dis- 
 charged. 8 
 
 190. We may next inquire how far, if at all, the re- 
 quirement concerning presentation of the second check 
 has been modified by custom, especially in presenting it 
 for payment through the clearing house. Of course, if 
 presentation in that manner did not delay their collection, 
 no objection would be likely to arise from pursuing this 
 method ; but as such a method is usually somewhat slower 
 than a direct presentment, the question arises, is a bank 
 justified in following the custom if it exists, and would it 
 be protected in doing so should the drawee fail before the 
 
 1 In this case the justice had previously said that " a check is payable in- 
 stantly ; and as between the drawer and drawee, the latter has, in analogy 
 to the rules applicable to inland bills of exchange, until the day after the 
 receipt of a check to present it for payment when drawn on a bank in the 
 same place where given and received. Smith u. Janes, 20 Wend. 192 ; 
 Harker v. Anderson, 21 Wend. 372 : Ward v. Evans, 2 Ld. Bay. 928. But 
 the duty of the plaintiffs to the defendants is not determined by that rule 
 of commercial law. That rule has respect only to the contract and liability 
 of the parties to the instrument." 
 
 2 Smith v. Miller, 43 N: Y. 171 ; Carroll v. Sweet, 128 N. Y. 19. In Smith 
 v. Miller, 43 N. Y. 171, 177, Allen, J., said : " It was the duty of the plain- 
 tiffs to present the check at the bank, at least during the day on which they 
 received it [they had two hours for doing this], and obtain either the money 
 or a certificate, or cause the same to be protested for non-payment ; and not 
 having done so they were chargeable with negligence and the consequent 
 loss. By their delay and neglect, unless some evidence in explanation or 
 excuse can be given, they made the check their own, and the defendants 
 were discharged." 
 
 3 Freeholders of Middlesex v. Thomas, 20 N. J. Eq. 39 ; Mclntyre r. Ken- 
 nedy, 29 Pa. 448, 455 ; Kilpatrick v. Home B. & L. Association, 119 Pa. 30, 
 36 ; 2 Parsons on Bills, 154. See \ 79. 
 
224 BANK COLLECTIONS. § 190a 
 
 collection was completed ? This question has arisen on 
 several occasions. . In Turner v. Bank, 1 the second check 
 was presented the next day after it was drawn through 
 the clearing house* but before making presentation the 
 drawee failed. It was decided ' ' that this was the regular 
 course of business for presenting checks drawn upon banks 
 in New York. There was no laches in thus presenting it. ' ' 
 In like manner in Burkhalter v. Second National Bank," 
 the second check was presented for payment in the ordi- 
 nary course of business through the clearing house, and 
 refused. The court declare^, that this transaction did not 
 show the absence of any diligence. 3 In Indig v. National 
 City Bank,* the second check was received after business 
 hours on Saturday, and presented through the clearing 
 house on Monday morning, and returned to the bank in 
 the usual course of business on the next day as not good. 
 Mr. Justice Rapallo remarked "that "sending the draft 
 through the clearing house for collection was the usual 
 and proper mode." 
 
 190a. On the other hand, in Smith v. Miller, ' it was de- 
 clared that the custom could not be presumed to exist 
 without evidence, and in that case such evidence was not 
 shown. On the second trial " before the jury, " evidence 
 was introduced for the purpose of showing that it was the 
 universal custom in New York to deposit such checks in 
 banks for collection through the clearing house without 
 first presenting them for certification at the bank upon 
 which they were drawn.".' 
 
 #1 3 Keyes 425. This case is badly reported,, drawers are substituted for 
 drawees. See criticism of Robertson, Ch. J., in Smith o. Miller, 6 Bobt. 
 417. 
 
 2 42 N. Y. 538. 
 
 8 Johnson v. Bank of North America, 5 Eobt. 554, 590 ; Smith v. Miller, 6 
 Kobt. 157, 413. 
 
 4 80 N. Y. 100. ■ ° 43 N. Y. 171. 
 
 « 52 N. Y. 545, 549. 
 
 7 Rapallo, J., said : " The whole current of evidence was to the effect 
 
§ 1905 PAYMENTS. ' 225 
 
 1,905. In First National Bank v. Fourth National Bank, ' , 
 it was again declared that the custom % of presenting such 
 checks through the clearing house for payment was not 
 proved. .On the last trial, Mr. Justice Andrews remarked : 
 "The evidence shows that the practice varies with the 
 credit of the drawee,, the condition of the money market, 
 and other circumstances, and among different banks, and 
 the plaintiff had no knowledge of any such custom or prac- 
 tice. So, also, as to the alleged custom of collecting checks 
 through the clearing house, by which they are not pre- 
 sented to the bank on which they are drawn until the 
 next day after they are received. This practice prevailed 
 only among banks making exchanges through the clear- 
 ing house. It did not prevail among other banks, or with 
 savings banks, or trust companies, or« with respect to 
 checks on pAvate bankers. The evidence failed to estab- 
 lish a certain, uniform, or general custom, in respect 
 either to accepting checks for drafts or collecting them 
 through the clearing house. It is unnecessary, therefore, 
 
 that a large proportion of the checks deposited in |bank for collection was 
 certified before being deposited, and that each depositor exercised his own 
 judgment as 'to whether or not to have checks certified before depositing. 
 That if there was any doubt as to the responsibility of the maker of 'a check, 
 it was customary to have it certified ; and tfiat, when checks were deposited 
 without being certified, this was done oh the ground that the holder had 
 such entire confidence in the responsibility of the maker, that he was will- 
 ing to take the risk of the check remaining good on the next day, and that 
 the question whether or not the check should be presented for certification > 
 before being deposited was determined by the amount of confidence the 
 holder had in the drawer of the check. There was some slight conflict in 
 the evidence on this subject, but not sufficient, we think, to require the 
 submission of the question to the jury, or to have justified them in finding 
 the universal custom claimed by the plaintiffs to exist. There was positive 
 and uncontradicted evidence of a contrary usage on the part of many deal- 
 ers, and this showed that the custom testified to by one or of the two wit- 
 nesses was not general. It is not necessary to decide whether, in case the 
 custom had been proved, it would have governed the question of defend- 
 ant's liability." 
 
 1 77 K. Y. 320, and second trial 89 N. Y. 412, 417. 
 
 15 B. 
 
226 BANK COLLECTIONS. § 192 
 
 to consider whether the alleged custom to receive uncerti- 
 fied checks in payment of bills, and to defer presentation 
 ' until the next day after their receipt, if established, would 
 regulate and define the rule of diligence, as between a col- 
 lecting agent and his foreign principal." If we under- 
 stand the decisions, they do not deny that such a custom, 
 clearly proved, wouldhave the effect of changing the rule 
 of law requiring immediate presentment ; but whether 
 such a custom exists or not in New York for the presen- 
 tation of checks through the clearing house has not been 
 clearly proved. The question is of most practical import- 
 ance, and it is singular that a definite rule of some kind 
 has not been long ago established. 
 
 191. When the second check is not paid, the ordinary 
 course is to reclaim the first and protest it for non-pay- 
 ment and notify the indorsers. When this is ' done, the 
 owner is remitted to all his rights for the recovery of his 
 original claim. 1 Or, action may betaken to recover on 
 the second check. What course should be taken depends 
 on the ability of the defaulting parties. Of course, the 
 failure to collect the check is usually, though not always, 
 caused by the failure of the parties to the first* or second 
 check. In pursuing them, the holder will consider from 
 whom he is most likely to recover, and act accordingly. 
 
 192. A bank may send checks that are deposited with 
 it for collection to the drawee bank for payment, "though 
 
 * the contrary rule prevails in Illinois, Pennsylvania and 
 Colorado.' In one of the Pennsylvania cases a check was 
 
 1 Burkhalter v. Second Nat. Bank, 42 N. Y. 538 ; Turners. Bank, 3 Keyes 
 425 ; Smith v. Miller, 43 N. Y. 171, 175 ; Indig v. National City Bank, 80 
 N. Y. 100 ; First Nat. Bank v. Fourth Nat. Bank, 77 N. Y. 320 ; Olcott v. 
 Kathbone, 5 Wend. 490 ; Merchants' Bank v. Spicer, 6 Wend. 443. 
 
 4 Shipsey v. Bowery Nat. Bank, 59 N. Y. 485, 490; Indig v. National City 
 Bank, 80 N. Y. 100; People v. Merchants & Mechanics' Bank, 78 N. Y. 269; 
 First Nat. Bank of Trinidad v. First Nat. Bank of Denver, 4 Dill. 290; Corn 
 Exchange Bank v. Farmers' Nat. Bank, 118 N. Y. 443; Nebraska Nat. Bank 
 v. Logan, 52 N. W. Rep. 808. 
 
 3 Hazlett v. Commercial Nat. Bank, 25 W. N. Cas. 282, 1890. 
 
§ 192 PAYMENTS. 227 
 
 deposited in a bank in Philadelphia which was sent to the 
 drawee bank for payment in Mississippi. That bank sent a 
 draft on a New York bank in payment. Before it could be 
 collected the Mississippi bank failed, and the New York 
 bank refused to honor the draft. ,The Philadelphia bank 
 was regarded as negligent in sending the draft to the drawee 
 bank, and was held responsible to the depositor for the 
 amount. 1 This rule is opposed to the practice of bankers 
 everywhere. And it is a very unreasonable one." Inlndig's 
 cask a bank sent a note deposited by a customer to the 
 drawee bank, and Mr. Justice Rapallo remarked that this 
 appeared " to be an ordinary method of transacting such 
 business." 3 And the same practice has long prevailed in 
 England. 4 Nor is there any good reason why this should 
 not be done. The analogy maintained by Mr. Justice 
 Scholfield, of sending a note to the maker, is not correct, 
 for a bank is not a debtor to the holder of a check. A 
 bank has money belonging to the maker, and it has no 
 greater interest to withhold payment of it to the holder 
 of the note than to the maker. The money is not the 
 bank's, and the only concern it has in paying is, proper 
 authority for doing so. Besides, when a note or check is. 
 sent to it for collection, it is the agent of the sender to 
 collect the amount due, and, therefore, it is as much in- 
 terested in serving the holder or payee as the maker or 
 payor.' 
 
 1 Merchants' Nat. Bank v. Goodman, 109 Pa. 422; Hazlett v. Commercial 
 Nat. Bank, 25 W. N. Cas. 282. 
 
 2 Indigc. National City Bank, 80 N. Y. 103. 
 
 3 gjhipsey v. Bowery Nat. Bank, 59 N. Y. 485. 
 
 * Heywood v. Pickering, 9 L. E. Q. B. 428; Prideauxu. Criddle, 4 Id. 455; 
 Bailey v. Bodenham, 16 C. B. N. S. 288; Hare v. Henty, 10 Id. 65; Russell 
 v. Hankey, 6 East 12. 
 
 6 Perhaps a different rule ought to be applied to certificates of deposit and 
 other obligations that are incurred directly by a bank. It is true there is 
 more fo^ce in the objection to sending such instruments than checks. As 
 Mr. Chief Justice Scholfield remarked in a case relating to a certificate of 
 deposit, the holder of a note would not send it to the maker for payment. 
 These cases, therefore, rest on a somewhat different foundation. Drovers' 
 Nat. Bank v. Anglo-Am. Provision Co., 117 111. 100. 
 
228 BANK COLLECTIONS. § 193 
 
 192a. In German National Bank v. Burns, 1 it was de- 
 cided that a collecting bank ought not to send a certificate 
 of deposit to the bank giving the same for payment, but 
 should present the same through a suitable agent. This 
 may be the law in Cokjrado, but certainly is not the prac- 
 tice of most of the states in the Union. Such a rule would 
 not only be a great inconvenience to the banks, but add 
 greatly to the expense of making collections. It is true, 
 as we have seen, that the same rule has been established 
 in Illinois and Pennsylvania, but the banks in both of 
 ' these states have disregarded the legal requirement, and, 
 "doubtless, will continue to do* so. They will run the risk 
 of loss rather than incur the additional expense of trying 
 to observe it. Besides, in sending to another bank there 
 would be no more safety than in sending directly to the 
 drawee bank. In short, there is not a single good reason 
 in favor of the rule. 
 
 193. When a check is received by a foreign collecting 
 bank which is drawn thereon, what acts constitute pay- 
 ment of the same ? " First. When the check is charged 
 to the maker's account, and the amount is remitted or 
 credited to the sending bank, the original check is re- 
 garded as paid, and the drawee bank becomes responsible 
 therefor. 8 In Whiting v. City Bank, 4 a note was sent to 
 the drawee bank which fell due on Sunday, July 4th; 
 On Saturday the defendant marked the note as paid, and 
 sent a draft for the proceeds to the Temitter. The maker 
 at that time had a small balance to his credit, but not 
 enough to pay the note. On July 6th, the bank having 
 learned that the maker had failed, stopped payment of 
 
 1 12 Colo. 539. 
 
 1 See I 202. ' 
 
 s National Commercial Bank v. Miller & Co., 77 Ala. 168; Corn Exchange 
 Bank v. Farmers' Nat. Bank, 118 N. Y. 443; Whiting v. City Bank, 89 N. 
 Y. 604; Oddie v. National Bank, 45 N. Y. 735; American Exchange Nat. 
 Bank v. Gregg, 28 N. E. Eep. 839; St. Louis & San Francisco K. Co. v. 
 Johnston, 133 U. S. 566. 
 
 * 77 N. Y. 363. 367. 
 
§ 1936 PAYMENTS. 229 
 
 the draft, and requested the remitter to return it, claim- 
 ing that it had been sent by mistake. The court declared 
 that the mistake was not proved. "There is no legal 
 presumption," said Mr. Justice Rapallo, " that payments 
 made by a bank are. made by mistake, even when the ac- 
 count of the party for whom they are made is not good." 
 It is contended that even if t the payment was voluntary 
 and intentional, and credit was given to the maker of the 
 note, the owner could not recover in that action, but must 
 sue for the proceeds. The #ourt declared that this posi- 
 was not tenable. If the facts disclosed a good cause of. 
 action the owner could recover, even though assigning in 
 his complaint an insufficient ground for recovery. 
 
 193a. In Briggs v. Central National Bank, 1 a New York 
 bank received from Briggs, for collection, a check drawn 
 on a bank in New. Jersey, which was sent by mail to the 
 drawee, the bank having been for a long period its collect- 
 ing agent -in that state. The drawee on receiving the 
 check charged it * to the drawer, and credited the New 
 York bank with the amount. The next day the New 
 Jersey bank failed, and Briggs then brought an action 
 against the New York bank to recover the amount. The 
 court decided that the drawee had a right, under an 
 agreement existing between the two institutions, to dis- 
 charge the drawer and substitute itself as debtor, which 
 it did, and that the New York bank ' ' must be regarded 
 as having accepted the responsibility of the drawee upon 
 its credit in the collection aacount as payment of the 
 check," and was consequently liable for the amount. 
 
 193S. In another case" a check was deposited in a bank 
 fof collection, which was sent by mail to the bank on 
 which it was drawn. Having been received, it was charged 
 to the account of the drawer, stamped "paid" and can- 
 celed by putting it on a spindle. A draft on a New York 
 bank in payment was filled out by the book-keeper, but 
 
 1 89 N. Y. 182. 
 
 2 Mcintosh v. Tyler, 47 Hun 99. 
 
230 BANK COLLECTION'S. § 193(2 
 
 was not signed, and subsequently destroyed. The payee 
 bank stopped payment on that day. It was held that the 
 check was not paid by the bank, and consequently the 
 drawer was not discharged. In this case, Mr. Justice 
 Pollett remarked that, construed by the custom of bankers, 
 the transaction between the sending bank and the 
 collecting bankers "amounted to a direction by the 
 former to the latter to this effect : ' For ihe enclosed check 
 mail your draft on New York, or return the check.' " 
 The drawee failed to send the draft, or to pay the check 
 in any other way, and before doing so it was authorized 
 to mark the check paid, or to charge it to the drawer's 
 account. The fact that the check was delivered to the 
 drawee, and by it charged to the drawer's account and 
 marked paid, did not discharge the drawer. 1 
 
 193c. Second. When the check is thus sent, collected 
 and credited, and in doing so the drawer 1 s account is over- 
 drawn, the check is nevertheless paid, and the bank is 
 responsible." 
 
 193$. Third. When the check sent for collection is 
 drawn on the collecting bank and charged to the custom- 
 er' s account, and the sending bank is credited with the 
 amount, the original debt is discharged, notwithstanding 
 the failure of the hank. This principle has been recently 
 applied in Welge v. Batty. 3 A vendor drew at sight for 
 the amount of his bill on the vendee, and the draft was 
 indorsed for collection to the vendee's bankers who re- 
 ceived the same. ,By direction of the vendee the amount 
 was charged to his account, who had sufficient funds in 
 the bank for that purpose. The banker then drew his 
 check for the amount payable to the vendor, which was 
 transmitted to him. It was declared that the original 
 
 1 Turner v. Bank of Fox Lake, 4 Abb. Ct. App. Dec. 434, S. C.*3 Keyes 
 425; Burkhalter v. Second Nat. Bank, 42 N. Y. 538; Kelty v. Second Nat. 
 Bank, 52 Barb. 328. 
 
 2 Whiting v. City Bank, 89 N. Y. 604. 
 
 3 11 111. App. 461. 
 
§ 194 PAYMENTS. 231 
 
 debt was discharged, notwithstanding the failure of the 
 banker, which, rendered his check of no value. Judge 
 Higbee, in applying the law to this case, said : " The draft 
 had been assigned to the bank for collection, and it had 
 the undoubted right to demand and receive payment. * * 
 The law did not require the useless act of first counting 
 the money out of the bank to [the vendees]and then pay- 
 ing it back to'them. The draft was in the possession of 
 the officers of the bank, who, as assignees, had a legal 
 right to receive the money which was also in their cus- 
 tody ; and when by direction of [the vendees] it was ap- 
 propriated to that purpose and charged up to their ac- 
 count, the control of the bank over the money was com- 
 plete, and all right of [the vendees] to it ceased, and from 
 that instant the indebtedness of [the vendees] was extin- 
 guished. The fact that the bank failed two days after- 
 ward, and that the draft drawn by it to the Waverly bank 
 on account of the collection was dishonored, cannot ren- 
 der [the vendees] liable." 
 
 193e. .Fourth. When the check is thus sent, collected, 
 and credited, and the drawer's account is overdrawn, 
 and the collecting bank fails, the check is not paid, and 
 the holder can pursue the drawer. ' 
 
 194. A distinction must be made between the accept- 
 ance by a creditor from his debtor of a new security or 
 obligation for an old debt, and the acceptance by a bank 
 of a check drasvn on itself in payment of a note or other 
 instrument. The former is a mere substitution of one ex- 
 ecutory agreement or obligation for another, and in such 
 a case the precedent debt is not extinguished unless there 
 is an express agreement to accept the new obligation as a 
 satisfaction of the old. "But when a bank," says Mr. 
 Justice Selden, ' ' receives upon a debt a check drawn upon 
 itself by one of its customers, and charges it in account, 
 it thereby admits that it has funds of the drawer sufficient 
 
 1 Kinney & Co. v. Payne, 68 Miss. 258. See Merchants & Farmers' Bank 
 v. Austin, 48 Fed. Rep. 25. 
 
232 BANK COLLECTIONS. § 196 
 
 to meet the cheqk ; and the acceptance is per se an appro- 
 priation of those funds to the payment of the check." ' 
 
 195. The mail is chiefly used for the transmission of 
 checks, but it has also been held that it can be used for 
 presenting them for payment. In Indig's case "a note 
 was presented by a Brooklyn bank to a bank injjowville, 
 at which it was payable in the same manner. Indig con- 
 tended that the Brooklyn bank constituted the Lowville 
 bank its agent to receive payment of the note, and was 
 therefore liable for the amount which was paid by charg- 
 ing the same to the account of the maker, who was also a 
 depositor. So he sued the Brooklyn bank, the other 
 having failed, fpr the amount of the note. The court, 
 however, did not think that an agency had been created. 
 
 196. The judges were quite equally divided, and those 
 who dissented, though delivering no opinion, certainly 
 were well-grounded in their position. In the first place, 
 when a note or check is presented for payment, all. that 
 the paying bank does is merely to pay, but when a note • 
 or check is presented through the mail for payment, the 
 payee must do much more than this— the money must be 
 sent. Even if the note-is paid by the maker and no pro- 
 test is required, and no notices need be given, the money 
 must be sent, and the mail is quite incompetent to do 
 this. Narrow the functions of the payee bank to the ut- 
 most, and a clear difference remains in the nature of the 
 service which it must perform in completing the payment 
 to the sender, and the service performed by a bank which 
 demands payment over the counter in the usual manner. 
 In short, while a check or note may be sent through the 
 mail to the payee bank for payment, it is a straining of 
 language to say that presentment and demand are made by 
 this agency. The mail is a transmitter and nothing more. 
 Is it not wholly outside the functions of the mail to render 
 such a service, and can it, in fact, do such a thing ? Of 
 
 1 Pratt v. Foote,.9 N. Y.463, 466. 
 * 80 K. Y. 100. 
 
§ 197 PAYMENTS. 233 
 
 course, a check, draft or other instrument can be trans- 
 mitted in this way, but whenever tffis is done, the payee 
 bank performs a larger service than that of mere payment. 
 It certainly performs the usual service of an agent in get- 
 ting the money and in sending it ; and we perceive no 
 reason, therefore, why it should not be regarded as the 
 agent of the sender to do these things. "We are impressed 
 that this is one of those cases in which the court shrank 
 from applying their severe rule of the liability of a bank 
 
 • for the misconduct of another, and evaded its application 
 by declaring that the Lowvilkj bank was not a sub-agent, 
 but that the note was simply presented to it through the 
 mail for payment. 
 
 106a. Again, if the principle in this case be correct, when 
 is a bank to be regarded as a collecting agent that re r 
 ceives a check or draft drawn on itself, or a note payable 
 there, which is received through the mail ? A bank may 
 thus act, as was clearly decided in the Briggs case, which 
 
 'has already been described. The maintenance of the rule 
 will cause no small difficulty. When arrangements exist 
 between two banks for making collections, these may be 
 decisive of .their relations and liabilities, but cases are 
 constantly happening where no fixed arrangements exist ; 
 and what then is the duty of a bank when a check or note 
 payable at its counter is not paid ? Shall it protest the 
 same ? If it is presented through the mail simply for 
 payment, the blnk surely has no duty of this nature to 
 perform. If a check is presented for payment by another 
 bank, surely the bank at which it is payable would never 
 do anything with such a note if it was not paid ; while 
 the mail can neither demand payment and give notices, 
 and is without authority to return the same.' 
 
 197. When a check is deposited with a bank by a cus- 
 tomer, drawn on another customer, the law regards the 
 institution as an agent to collect the amount." This prin- 
 
 1 See \ 89. 
 
 * Bank v. Kenan, 76 N. C. 340, 345. 
 
234 BANK COLLECTIONS. § 198 
 
 ciple has been declared on several occasions. In one case 
 K. deposited in a barfk a check drawn by M. & Co. on the 
 same bank. The check was received for collection, and 
 was thus regarded by the depositor and the bank. The 
 court declared that it was the agent of the depositor to 
 collect it, and was held liable for not performing its duty. 
 ' ' The undertaking of the bank was to collect a check on 
 itself. Of necessity it must be assumed that it was pre- 
 sented for payment. * *. If it was then accepted by the 
 bank, the amount of the check became a cash deposit to 
 the credit of the [depositor^ paid out of the funds of [the 
 maker], or charged to his account with the bank." If it 
 was not accepted it was the duty of the agent to give 
 notice to the holder and return the check. The bank did 
 neither, and was therefore liable. ' ' The bank was here 
 both drawee and collecting agent," it knew the condition 
 of the drawer's account, yet kept the payee in ignorance 
 of the non-payment of the check until after the failure of 
 the drawer became known, four days after it was payable. 
 The court declared "upon the plainest principles of justice 
 these peculiar circumstances of wilful neglect of a known 
 duty constitute a case of constructive acceptance of the 
 check, and fix the bank for the full amount of it." ' 
 
 198. What acts constitute payment of such a check 
 may next be considered. We have just shown how the 
 dealings of a bank with checks received from other banks 
 drawn on itself are regarded. Do any different princi- 
 ples apply to «hecks deposited by customers ? The Ameri- 
 can Exchange National Bank«. Gregg, 2 is one of the most 
 recent and instructive cases on the subject. A check for 
 a very large amount had been presented by a customer of 
 the bank drawn on another customer. It was credited to 
 the holder's account, but was not charged to the account 
 of the other. The check was regarded as paid, nor could 
 the bank afterward deduct the amount from the owner's 
 
 1 Bank v. Kenan, 76 N. C. 340, 345. 
 
 » 2R N. E. Ret). 839. . 
 
§ 198a payments. . 235 
 
 account. The fact that the bank had not charged the 
 check against the account of the drawer did not affect the 
 validity of the payment. " This," said Mr. Justice Craig, 
 "was a matter of book-keeping, and the rights of the par- 
 ties are not to be determined merely from the manner in 
 which books are kept. When the check in question was 
 presented, the question was whether [the makers] at the 
 time had funds in the bank sufficient to pay. If they 
 had, the bank was bound to pay the check; otherwise 
 not. In determining this question, the bank had the 
 right to take into consideration a check drawn by [them, J 
 which had in good faith been previously paid, although 
 such check remained on a spindle in the bank, and had 
 not been entered up by the book-keeper. In other words, 
 when a check is presented to a bank for payment, the 
 bank will take into consideration all the funds which it 
 has received from the drawer subject to check to that 
 time, and the total amount of all sums up to that 1fme 
 which it has paid out on his account. A balance thus 
 ascertained will determine the obligation of the bank to 
 pay or its right to refuse payment, regardless of the fact 
 whether the amounts deposited or the checks paid may 
 have reached the bank ledger or not." 
 
 198a. The City National Bank v. Burns' is a noteworthy 
 case. Hudson & Co. gave a check to Burns on the bank 
 which was presented with the latter' s indorsement for de- 
 posit. The cashier entered it as a deposit on the deposi- 
 tor' s bank-book and placed it on the file of checks to be 
 charged on the books of the bank to the drawers. Sub- 
 sequently, Burns was credited on the books, and the 
 drawers were charged with it. It was not the bank's 
 course of business to receive for collection checks drawn 
 on itself ; nor were checks received by it for collection 
 placed on the same file as this. In the afternoon of the 
 day when the. deposit in question was made Hudson & Co. 
 failed, and on examining their account the check proved 
 
 * 68 Ala. 267. 
 
236 BANK COLLECTIONS. § 198a 
 
 to be an overdraft. The bank immediately gave Burns 
 notice, and offered to return it on the next day, but Burns 
 declined to receive it and claimed that it was paid, and 
 that the bank was liable to him for the amount, as it would 
 be for a similar deposit in money. Mr. Chief Justice 
 Brickell said there was some contrariety of decision con- 
 cerning the liability of a bank when a check drawn thereon 
 was presented, and there was simply an entry of it to the 
 credit of the holder on his bank-book as a deposit, whether 
 it was to be regarded as paid or as received for collection. 
 After saying that the check was not treated by the bank 
 as it would have treated a check of which some other bank 
 was the drawee, and in reference to which it would assume 
 no other duty than that of collection, transferring to the 
 credit of the holder only what might be derived from it, 
 the mode of dealing with this check was just that which 
 would have been adopted if it had not been an overdraft — 
 if There had been funds in the possession of the bank, 
 which were applicable to its payment. ' ' Contracts, agree- 
 ments, transactions between parties should have operation 
 and effect according to their intention, and it seems im- 
 possible from these facts to attribute any other intention 
 to the parties than that the check should be received by 
 the bank and placed to the credit of the' depositor as cash, 
 as money deposited by him. There can be no doubt that 
 he was at liberty to draw for the amount of the check as 
 money on deposit with the bank at any time before' he was 
 notified that liability for it was disavowed, and that his 
 drafts in consequence would not be honored. Nor is there 
 any room for doubt that at any time during business hours 
 of the day of the deposit his check would have been hon- 
 ored by the bank upon the faith of the deposit as money 
 to his credit. The case more nearly resembles and falls 
 directly within the principle stated in Bolton v. Richard, 1 
 that when a bank credits a depositor with the amount of a 
 check drawn upon it by another customer, and there is no 
 
 ' fi Tprm 139. 
 
§ 198a payments. 237 
 
 want of good faith upon the part of the depositor, the act 
 of crediting is equivalent to a payment in money." Noi 
 can the bank recall or repudiate the payment, because, 
 upon an examination of the accounts of the drawer, it is 
 ascertained that he was without funds to meet the check, 
 though, whenthe payment was made, the officer making 
 it labored under the mistake that there were funds suffi- 
 cient." In the case last cited it was said : ' When a check 
 on itself is offered to a bank as a deposit, the bank has 
 the option to accept or reject it, or to receive it upon such 
 conditions' as may be agreed upon. If it be rejected, there 
 is no room for any doubt or question between the parties. 
 If,* on the other hand, the check is offered as a deposit 
 and received as a deposit, there being no fraud and the 
 check genuine, the parties are no less bound and concluded 
 than in the former case. Neither can disavow or repudi- 
 ate what has been done. The case is simply one of an 
 executed contract. There are the requisite parties)">the 
 requisite consideration, and the requisite concurrence and 
 assent of the minds of . those concerned.' And in Oddie 
 
 1 The cases of Boyd v. Emmerson, 2 Ad. & E. 184, and Kilsby v. Williams, 
 5 Barn. & Aid. 815, were referred to in the argument and by the court in the 
 above case. In the first, Boyd, who was a customer of a banking house, carried 
 a check to it payable to "himself, drawn by another customer, and left instruc- 
 tions to place the same to his credit in his account. The check was not 
 canceled or debited to the drawer or credited to Boyd. The bankers having 
 made inquiries about the drawer, who had already overdrawn his account, 
 gave notice to the plaintiff on the next day that the check would not be 
 paid. It was held that a promise to pay the check could not be implied from 
 these facts. Lord Denman said that the holder ought to have given distinct 
 notice whether he presented it as a check to be paid or to be merely placed 
 to his account like other securities. In the absence of such statement the 
 inference was that the check was received in the latter character. This case 
 was founded on the other in which a banker, receiving a check of which he 
 was the drawee from a customer who did not expressly demand payment, was 
 regarded as the agent of the customer for collecting it and bound only to the 
 duties of such an agent. Pollard v. Ogden, 2 E. & B. 459. 
 
 2 Chambers t>. Miller, 13 C. B. N. S. 125; Levy v. United States Bank, 4 
 Dall. 234 ; Oddie v. National Bank, 45 N. Y. 735 ; National Bank v. Burk- 
 hardt, 100 U. S. 686. 
 
238 BANK COLLECTIONS. § 200 
 
 v. National Bank, it was said by Mr. Chief Justice Church : 
 ' When a check is presented to a bank for deposit, drawn 
 directly upon itself, it is the same as though payment in 
 any other form was demanded. It is the right of the bank 
 to reject it, or to refuse to pay it, or to receive it condi- 
 tionally, as in Pratt v. Foote/ but if it accepts such a 
 check and pays it, either by delivering the currency, or 
 giving the party credit for it, the transaction is closed be- 
 tween the bank and such party, provided the paper is 
 genuine.' And further it was said: <*The bank always 
 has the means of knowing the state of the account of the 
 drawer, and if it elects to pay the paper, it voluntarily 
 takes upon itself the risk of securing it out of the drawer's 
 account or otherwise. If there has ever been any doubt 
 upon this point, there should be none hereafter.' " 
 
 199. If the payee sends a check by mail to the drawee for 
 collection and the return of the proceeds, the drawee be- 
 comes his agent and he must bear any loss arising after the 
 time when the check could have been presented by express 
 or other usual method. * In Farwell v. Curtis, Judge 'Hop- 
 kins said: " In these days when such facilities are fur- 
 nished by express companies for presentation at distant 
 palaces, there is no reason for adopting a less direct or ef- 
 fective mode to accomplish the object. * * Now, as 
 the plaintiff adopted another course than the one which 
 the exercise of ordinary care and diligence would have 
 dictated, and loss has resulted by reason of it, they must 
 stand it." 
 
 200. What is adequate authority for collecting a note 
 and sending the proceeds by mail has been considered in 
 Buell v. Chapin. 3 A. sent a note by mail to B. for collec- 
 tion, who afterward sent it in the same manner to C: with 
 a request to collect the same. B. then wrote to A. stating 
 
 1 9 N. Y. 463. 
 
 2 Farwell v. Curtis, 7 Biss. 160. See Bailey v. Bodenltmn, 10 Law Times 
 N. S. 422. 
 
 ' 3 99 Mass. 594. 
 
§ 201 PAYMENTS. 239 
 
 what he had done, who in turn wrote to C. that he had 
 received B.'s letter saying, "he had' forwarded the note 
 to you for collection," and "directed C. to forward the 
 proceeds when collected." It was held that this letter 
 warranted C. in believing that he was authorized to for- 
 ward the proceeds of the note to A. by mail. Mr. Justice 
 Gray, in speaking for the court, remarked : "In regard 
 to the transmission of money by mail^ there is a distinc- 
 tion between the relation of creditor and debtor, and that 
 of principal and agent. A debtor is bound to pay his 
 creditor in person or his authorized agent, and does not 
 fulfil his obligation by making all reasonable efforts to 
 transmit to the creditor the amount of the debt ; and, 
 therefore, depositing in the post office a letter containing 
 the money and addressed to the creditor does not dis- 
 charge the debt, unless, by the creditor's express direction 
 os assent, the usual course of dealing between the parties, 
 or other facts from which such direction or assent may 
 be inferred, the creditor has authorized the money to be 
 thus delivered to him. 1 But an agent employed to col- 
 lect a debt and remit the proceeds is bound only to use 
 ordinary and reasonable skill and diligence, either in col- 
 lecting the amount or in sending it to his principal, ex- 
 cept so far as his discretion is limited by positive instruc- 
 tions. 3 If, indeed, the principal directs his agent to send 
 the money in a certain way or by a particular channel, 
 transmitting it in a different mode is evidence of negli- 
 gence. But there was no such direction in this case." 
 
 201. Sometimes instead of collecting a note the agency 
 is employed to obtain a renewal. When this is done the 
 new note must be free from unusual stipulations. In 
 Weyerhouser v. Dun, s a note was indorsed for the accom- 
 modation of the maker and blanks were left of the date, 
 
 1 Gurney «. Howe, 9 Gray 404 , Crane v. Pratt, 12 Gray 348. 
 
 2 Kingston v. Kincaid, 1 Wash. C. C. 454, 457; Mechanics' Bank v. Mer- 
 chants' Bank. 6 Met. 13, 26, 27. 
 
 3 100 N. Y. 150. 
 
240 BANK COLLECTIONS. ■ § 20 
 
 time, payee and amount. The maker, however, when fill 
 ing them added a special rate of- interest. This note wa 
 taken by a collection agency in renewal of another in gooi 
 faith, supposing that the maker had authority to act i: 
 this manner. The agency was declared to be not liabl 
 unless the object might have been discovered by the dili 
 gent exercise of that professional skill which he was re 
 quired to possess. Whether such skill was exercised wa 
 a question of fact. 1 If a bank should take a note fror 
 an indorser in discharge of his liability, the title to th 
 first would revert to him, even though he should leave i 
 on deposit with the bank. But when a new note is takei 
 it is, a question of fact whether this was done in discharg 
 of the drawer's liability, or as a mere memorandum not 
 which was not intended to affect the title of the other." 
 202. When a check is transmitted or presented to th 
 drawee bank and charged to its customer, and the own» 
 or sender is credited with the amount, or another draft o 
 check js given therefor, the check • is paid ; and the pay 
 ment is not affected by the condition of the drawer's ac 
 count. 3 In one of the cases a draft was sent by a bank ti 
 a bank in Troy. The drawee, W., gave his check to th 
 bank for. the amount, which was charged to his *accoun 
 and the draft was surrendered to him. He did not havi 
 enough money in the bank at the time to pay his check 
 but he made his account good before the close of the day 
 The court held that the draft was paid. "By the receip 
 of the check of W., and charging it to him in account anc 
 
 ! On one occasion a bank received a draft for collection for which it took 
 note from A., the acceptor. When this was about to mature, he obtainei 
 the accommodation note of W. for the purpose of discharging the othei 
 The collecting bank refused to discount this, or to apply it in payment o 
 the other note, but only to use the same as collateral security. As the ac 
 commodation note was taken without any consideration, the maker was per 
 mitted to make any defense thereto in a suit by the bank which he coul< 
 have made had A. sued him. Quebec Bank v. Wyand, 2 Cin. 538. 
 
 2 Exchange Nat. Bank v. Johnson, 30 Fed. Eep. 588. * 
 
 3 See § 193. 
 
§ 2026 . PAYMENTS. 241 
 
 surrendering to him the draft, the same was paid and sat- 
 isfied. And if not paid by that transaction, after the ac- 
 count of the drawer of the check was made good as against 
 the check. by subsequent deposits, which the law applied 
 to the first debit against the depositor, and which in this 
 case was the check given, in fact, in payment of the bill 
 in question, the draft was in no sense a valid or subsisting 
 bill, but was paid and satisfied and could not be revived 
 by any subsequent negotiation or dealings of the parties. ' ' ' 
 
 202a. In another case a bank at Denver received a check 
 for collection drawn by C. on his banker, D. The D. bank 
 sent the check to another bank doing business at the same 
 place as D., who presented it for payment, and D. gave 
 a draft for the amount. He then tried to stop payment 
 of the draft, was sued and obliged to pay it. He con- 
 tended that he paid the check by mistake. In truth, his 
 customer had not the necessary funds, but left drafts for 
 more than enough to cover the amount, but which could 
 not be collected. It was simply a case of misplaced con- 
 fidence, but the banker made no mistake in paying and, 
 therefore, could not escape paying the draft." In. this 
 case Reed, C, said: "Banks are required, and for their 
 own safety are compelled, to know at all times the bal- 
 ance to the credit of each individual customer, and they 
 accept and pay checks at their own risk and peril. If, 
 from negligence or inattention to their own affairs, banks 
 improvidently pay when the account of the customer is 
 not in a condition to warrant it, and if by mistake a check 
 is paid when the drawer has no funds, the bank must 
 look to the customer for rectification, not to the party to 
 whom the check was paid." 
 
 2026. In Corn Exchange Bank v. Farmers' National 
 
 1 Commercial Bank v. Union Bank, 11 N. Y. 203, 214, the court citing 
 Allen v. Culver, 3Denio 284; Webb v. Dickinson, 11 Wend. 62; Seymour v. 
 VanSlyck, 8 Id. 403; Kelty v. Second Nat. Bank, 52 Barb. 328. 
 
 2 First Nat. Bank v. Devenish, 15 Colo. 229, 232. 
 
 16 B. 
 
 i 
 
242 BANK COLLECTIONS. § 202c 
 
 Bank, 1 which has been already described, a check in- 
 dorsed for collection was sent to the payee bank for pay- 
 ment. It was paid by remitting a draft for the amount 
 on another bank in New York, the place of business also 
 of the Corn Exchange Bank. The check had been paid 
 and canceled, and the New York draft had been deposited 
 in the post office. The payee bank then received a joint 
 notice from the maker and original payee of the check not 
 to pay it. The draft was obtained from {he post office and 
 dishonored. Nevertheless, in a suit by the Corn Exchange 
 Bank to recover the amount, the court declared that, the 
 payee bank was liable. "The check was, no longer a 
 valid contract. The liability of the drawer and indorsers 
 thereon was ended, and could never be restored. The 
 Lancaster bank had legally, and in good faith, discharged 
 its duty to the drawer, the indorsers and the holder of the 
 check, and the Corn Exchange Bank had accepted of the 
 draft of the Lancaster' bank in discharge of the liability' 
 of the drawer and indorsers. The Lancaster bank accepted 
 of the agency tendered by the Corn Exchange Bank, per- 
 formed the services and received payment therefor. The 
 relation of principal and agent was established, and in dis- 
 charge of its liability thus assumed the Lancaster bank 
 mailed the draft. ' ' 
 
 202c. If the decision can rest on any foundation it may 
 perhaps on an application of the right of stoppage in 
 transit which is applied to merchandise. The Supreme 
 Court of Pennsylvania have decided that when a bank 
 that has discounted a note discovers before paying it over 
 that the borrower is insolvent, it may return the note and 
 decline to pay the borrower." Says Mr. Justice Trunkey : 
 "Justice and equity forbid that one man's money shall 
 be applied to the payment of another man's debts. On 
 this is based the right of a vendor to stoppage in transitu, 
 which arises solely upon the insolvency of the buyer. 
 
 1 118 N. Y. 443, 446. 
 
 % Dougherty Brothers & Co. v. Central Nat. Bank, 93 Pa. 227, 233. 
 
§ 202d t PAYMENTS. 243 
 
 Where a vendor has delivered, goods out of his possession 
 into the hands of a carrier for delivery to the buyer, if he 
 discovers that the buyer is insolvent, he may retake the 
 goods, if he can, before they reach the buyer's possession, 
 and thus avoid having his property applied to paying 
 debts due by the buyer toother people." * * "Al- 
 though this remedy of a vendor which exists only before 
 actual delivery of the goods into the buyer's possession, 
 cannot be exercised in precisely the same mode by. a lender 
 of money or credit, yet, for similar cause, the lender ought 
 to have as efficient remedy until the money is paid to, or 
 the credit is used by, the borrpwer. ' ' The difficulty in the 
 way of applying even this principle to secure a recovery 
 in the case now under consideration is, that the payment 
 was already completed by the bank for the maker of the 
 note or other obligation to the bank as agent for the 
 owner, and having thus secured the money it must for- 
 ward the same ; it had no right, as agent for the owner, 
 to return it to the bank which paid the same. 
 
 202d. A contrary decision has been rendered by the Su- 
 preme Court of California. 1 A note was transmitted to a 
 San Francisco bank for collection, and by that bank to 
 the defendant. The maker was one of its customers. The 
 note was duly received, charged to the maker's account, 
 though it was already overdrawn, and a letter enclosing 
 a check in payment was deposited in the post office di- 
 rected to the bank from which the note' was received. 
 Later in the day the maker failed, the letter was obtained 
 and the check was canceled. The owner of the note 
 claimed that the note had* been paid and sought to re- 
 cover the amount. The bank contended that the note had 
 been erroneously paid, and the court sustained the con- 
 tention. But wherein did the error consist ? The note 
 was paid, well knowing the condition of the depositor' s 
 account, and if the bank had paid it, supposing that he 
 had an ample deposit, it could not have recovered of the 
 
 1 Steinhart v. National Bank, 94 Cal. 362. 
 
244 BANK COLLECTIONS. § 203 
 
 owner of the note if his condition would be made worse 
 by the re-payment. This has been decided on many oc- 
 casions. But the bank made no mistake in paying the 
 note ; the subsequent discovery of the depositor's condi- 
 tion cannot be referred back to the time of paying his ob- 
 ligation. 1 It is a misuse of language to affirm that the 
 bank made a mistake. In the light of the depositor' s fail- 
 ure, it is correct to say that if the bank had known of his 
 condition at the time of paying the note it would not have 
 done so. But at the time of paying it the bank did just 
 what it intended to do. The money therefore was re- 
 ceive"d by the bank as the agent of the sending bank, and 
 in this capacity it should have fulfilled its duty. Its con- 
 trol of it, save as such agent was gone. 
 
 203. When a check has been received for collection, 
 which the bank promises to pay, and other checks are re- 
 ceived afterwards, but which are paid either by mistake 
 or otherwise, so that nothing remains for the owner of the 
 check first received, the bank is liable for the amount. 
 Thus in Averell v. Second National Bank," the holder of 
 a check obtained entrance to a bank after banking hours, 
 and found the paying teller, who promised the holder to 
 attend to the collection of the check and to carry the 
 amount to his credit on the books of the bank. The check 
 was post-dated, but on the day of its date there was suffi- 
 cient money to the credit of the drawer to pay it. By 
 oversight other, checks of his were presented and paid, 
 including two drafts held by the bank itself, and there 
 was nothing left to pay the check in question. The court 
 regarded the bank as having* ratified the action of the 
 paying teller in thus receiving the check for collection, 
 and became responsible for collecting the same. Nor had 
 it any right to apply the drawer's money to the payment 
 of the drafts until Averell' s check was first paid.' The 
 
 1 Whiting v. City Bank, 77 N. Y. 363. 
 
 » 6 Mackey 358. 
 
 3 Kilsby v. Williams, 5 Bam. & Aid. 815. 
 
§ 205 PAYMENTS. 245 
 
 bank contended that the paying teller was not authorized 
 by his office to receive and give credit for the check, but 
 the court declared that "the bank treated the check as 
 being in its possession." It follows that the bank treated 
 the check as being in its possession for the collection, and 
 thus recognized and ratified the paying teller's act of re- 
 ceiving it. For all the purposes of the transaction it 
 adopted him as a receiving teller, and the check must be 
 held to have been originally received by the bank for col- 
 lection. The bank was bound, therefore, by the paying 
 teller undertaking to place the check to plaintiff's credit." 
 
 204. A collecting bank may receive payment of a note 
 before maturity. In Freeman's National Bank v. Na- 
 tional Tube Works Co., 1 Mr. Justice Knowlton said: 
 " Very likely authority to collect would authorize the re- 
 ceipt of the money from the payor before maturity, if he 
 saw fit then to pay, and remittances afterwards made, 
 whether by a payment of money or by a set off and ad- 
 justment of accounts in the usual way would be good 
 against the owner." 
 
 205. When a note is left with the teller of a bank for 
 collection, and which receives the money, even though 
 the teller deposits the same in his own name, the bank is 
 regarded as having notice of the ownership and is liable 
 to the owner therefor. Nor would this liability be changed 
 if the note was payable to the order of the teller. 2 In a 
 case of this nature Mr. Justice Maltbie said : "But, if it 
 had not been shown, it is a well-acknowledged fact that 
 the collection of money for others is a part of the regular 
 business of all banks ; and when a bank opens its doors 
 for business with the public, and places officers in charge, 
 persons dealing with them in good faith, and without any 
 notice of any want of authority in . such officer, and the 
 act done is in the apparent scope of the officer's authority, 
 
 1 151 Mass. 413, 419. 
 
 2 City Nat. Bank v. Martin, 70 Texas 643. 648. 
 
246 BANK COLLECTIONS. § 206 
 
 whether the officer was actually clothed with such au- 
 thority or not, the party so dealing would be protected.' 
 If a bank does not wish the public to deal with any par- 
 ticular one of its officers at the regular place of business 
 in a particular line of that business, it would be its duty 
 to so notify the public in some effectual way. The public 
 certainly could not be expected to know, without being in- 
 formed, that a person that was in the habit of daily re- 
 ceiving and paying out money in sums great and small, 
 had no authority to receive a note for collection, or re- 
 ceive the money for it when offered at the counter. It 
 may be that no one except the bill collector was author- 
 ized to make collections in this bank, or to» receive notes 
 for collection. Still, it would be most unreasonable that 
 an ignorant third party, who had acted in good faith, 
 should suffer in consequence of this rule." 
 
 206. But a bank is not liable to the payee of a note left 
 with the cashier for collection in his individual capacity, 
 and which is collected at his private request and placed 
 to his individual credit and paid out to him on his checks 
 drawn against his account.' 
 
 1 Merchants' Bank v. State Bank, 10 Wall. 604, 650. 
 ' M'Lennan v. Bank, 87 Cal. 569. 
 
MISTAKE AND FORGERY. 
 
 247 
 
 CHAPTER VIII. 
 
 MISTAKE AND FORGERY. 
 
 207. Money paid under a mistake of 
 
 fact can generally be recov- 
 ered. ■ 
 
 208. If the facts are known, but not 
 
 the law, it cannot be recov- 
 ered. 
 
 209. Recovery of money paid pre- 
 
 suming from lapse of time 
 that it could be safely paid. 
 209a. East-Haddam Bank v. Sco- 
 vil. 
 
 210. Mistakes in paying notes. An- 
 
 drews v. Suffolk Bank. 
 210a. Merchants' Bank v. Bank. 
 2l06. Gilman v. First National 
 
 Bank. 
 210c. Whiting v. City Bant 
 
 211. Mistakes in entries in books 
 
 and in cancellations. 
 211a. Irving Bank v. Wetherald. 
 2116. "Watervliet Bank v. White. 
 
 212. Forged paper is an exception. 
 
 The amount cannot be recov- 
 ered. 
 
 213. This rule is only applicable 
 
 when the holder is without 
 fault. 
 
 214. This rule applies (1) to signa- 
 
 tures, and (2) to terms of the 
 instrument, but (3) not to the 
 signatures of indorsers. 
 
 215. In applying the rule when the 
 
 drawee can recover on paper 
 indorsed lor value. 
 
 216. Does the same rule apply to in- 
 dorsements for collection. Na- 
 tional City Bank v. Westcott. 
 First National Bank v. 
 
 Yost. 
 Northwestern National 
 Bank v. Bank of Com- 
 merce. 
 People's Bank v. Franklin 
 
 Bank. 
 First National Bank v. In- 
 diana National Bank. 
 First National Bank v. 
 . Northwestern National 
 Bank. 
 Review of the cases. 
 The drawee can recover when 
 the instrument is unnecessa- 
 rily indorsed. 
 Effect of indorsing in blank. 
 The excess of a raised check can 
 be recovered. • 
 National Banku. Manufac- 
 turers & Traders' Bank. 
 220. In applying this rule the drawee 
 cannot recover when the in- 
 strument is unindorsed and 
 the forged signatures of the 
 maker were not discovered. 
 Commercial & Farmers' 
 Bank v. First National 
 Bank. 
 Bank v. Farmers & Mer- 
 chants' Bank. 
 
 216a. 
 
 2165. 
 
 216c. 
 
 216a\ 
 
 216e. 
 
 216/. 
 217. 
 
 218. 
 219. 
 
 219a. 
 
 220a. 
 
 2206. 
 
248 
 
 BANK COLLECTIONS. 
 
 § 207 
 
 220c. Deposit Bank v. Fayette 
 
 National Bank. 
 220a". Hall v. Tioga National 
 
 Bank. 
 
 221. When the money has been paid 
 
 to an agent and has reached 
 the principal. 
 
 222. When the instrument has been 
 
 forged before it was put into 
 circulation, it is regarded as 
 payable to bearer and the 
 drawee cannot recover. 
 
 223. This rule does not apply to pa- 
 
 per paid before, or which is 
 subject to, a later examina- 
 tion. 
 
 224. When a forged check is received 
 
 from a depositor and credited, 
 the amount can be charged 
 back on discovery of the for- 
 gery. 
 
 225. When a bank has collected 
 
 money on a forged indorse- 
 ment it must return the same 
 to the true owner. 
 225a. Or to the payor. 
 
 226. And when the instrument is 
 
 returned to the sender, it is 
 regarded as not having been 
 paid or accepted. 
 226a. Laue v. Lippe. 
 
 207. Money paid by a mistake and under a misappre- 
 hension of facts, when no neglect can be imputed to the 
 payor in using the means of knowledge within his power, 
 and when after payment the receiver's condition will be 
 no worse than it was before receiving the money, in equity 
 and good conscience ought not to be retained by him, and 
 must be repaid. This principle of law is just and has 
 been often approved. 1 " Care and diligence are not con- 
 trolling elements. * * It is a question of fact merely. 
 The inquiry is, are the parties mutually in error, and did 
 they act upon such mutual mistake." 2 In Kelly v. So- 
 larid, the court said : "If the money is paid under the 
 impression of the truth of a fact which is untrue, it may, 
 generally speaking, be recovered back, however careless 
 the party paying may have been in omitting to use due 
 diligence to inquire into the fact." 3 
 
 1 Bize v. Dickason, 1 East 285 ; Buller v. Harrison, 2 Cowp. 565 ; Milnes 
 v. Duncan, 6 Barn. & Cres. 671 ; East-Haddam Bank v. Scovil, 12 Conn. 303, 
 310 ; Waite v. Leggett, 8 Cow. 195 ; Canal Bank v. Bank of Albany, 1 Hill 
 287 ; White v. Continental Nat. Bank, 64 N. Y. 316 ; National Bank v. Na- 
 tional Mechanics' Banking Association, 55 N. Y. 211 ; National Park Bank 
 v. Seaboard Bank, 114 N. Y. 28 ; People's Bank v. Franklin Bank, 88 Tenn. 
 299, 301 ; Koontz v. Central Nat. Bank, 51 Mo. 275. 
 
 2 Hunt, Ch. J., in Kingston Bank v. Eltinge, 40 N. Y. 391. 
 
 3 9 Mees. & Wels. 54, 59 ; Marriott v. Hampton, 7 East 269. 
 
§ 209 MISTAKE AND KOKGERY. 249 
 
 208. When, however, money is paid with a full know- 
 ledge of the facts, but under a mistake of law, it cannot 
 be recovered. 1 But if the law is doubtful, a collecting 
 bank is not responsible for a loss caused by its lack of 
 knowledge. This principle was applied in the following 
 case : The holder of a post note, which had been issued 
 by a bank that failed before its maturity, sent the same 
 to another bank for collection. This bank demanded pay- 
 ment, and gave notice of non-payment to the indorsers on 
 the day the note was due without grace, whereby they 
 were discharged, on the ground that the promisors were 
 entitled to grace on the note, although when solvent they 
 had paid such notes without grace. The holder then 
 brought an action against the collecting bank to recover 
 damages for negligence in not making such demand and 
 giving such notice as would hold the indorsers. At the 
 time the note fell due it was shown that the question 
 whether banks were entitled to grace on their post notes 
 had never been decided, and that there was no uniform 
 practice in demanding payment of these notes and of no- 
 tifying the indorsers after the promisors failed. As the 
 duty of the bank, therefore, in demanding payment and 
 giving notice had not been clearly established, the action 
 against it could not be maintained. 3 
 
 209. Sometimes banks, with which drafts, checks, etc., 
 are left for collection, presuming, after a due lapse of time, 
 
 1 Mutual Savings Institution v. Enslin, 46 Mo. 200 ; Tyler v. Smith, 18 
 B. Mon. 793 ; City of Marietta v. Slocomb, 6 Ohio St. 471 ; 2 Greenl. on Ev., 
 ?123. 
 
 2 Mechanics' Bank v. Merchants' Bank, 6 Met. 13, 27. Said Shaw, Ch. J. ; 
 "It is undoubtedly a salutary maxim, that every man is bound to know 
 the law, and that ignorance of the law excuses no one, yet these maxims 
 must be confined to the cases for which they were adopted. * * The 
 maxim has no application to the duty of an agent, of whom ordinary skill 
 only is required. Beasonable skill and knowledge only are demanded in 
 every other branch of science ; why should absolute knowledge and consum- 
 mate skill be required in a department where it is often impossible to know 
 the law in its application to a particular state of facts, until it has been au- 
 thoritatively declared?" 
 
250 BANK COLLECTIONS. '§ 209a 
 
 that they have been paid, pay the amounts to the persons 
 depositing them. When this is done, however, and they 
 are not paid, has a bank the right to recover ? This ques- 
 tion is answered affirmatively whenever the depositor's 
 •situation is not rendered worse than it would have been 
 had payment not been made. "It is well settled," says 
 Mr. Justice Bennett, 1 "that money paid under a material 
 mistake of fact may be recovered back, although there » 
 was negligence on the part of the person making the pay- 
 ment. 5 If a negligent failure to ascertain the true state 
 of the case before payment constituted a bar to the right 
 to recover back the payment, ' it would be but rare that 
 money paid by mistake could ever be recovered back.' 
 The rule rests upon the principle that one person shall 
 not be enriched by another's payment to him of money 
 under, a mistake as to his legal or moral obligation to pay 
 it. But this rule is subject to the qualification that the ' 
 payment cannot be recalled when the position of the per- 
 son to whom the payment has been made has been changed 
 to his prejudice towards his debtor, in consequence of the 
 payment. In that case the person making the payment 
 must bear the loss." * 
 
 209a. In another case a bank which had forwarded a 
 bill for collection to another bank, supposing that it had 
 been paid, credited the depositor with the amount and 
 afterwards paid it to him. The bill, however, had not 
 been collected, and on discovering the mistake, the bank 
 sought to recover back the money and succeeded. 4 In 
 thus paying the money to the owner of the bill before re- 
 ceiving positive intelligence from the collecting bank, the 
 first bank followed a usage which prevailed among the 
 
 1 First National Bank v. Behon, 16 So. W. Eep. 368 (Ky.). 
 1 Mayer v. Mayor of New York, 63 N. Y. 457. 
 
 3 See Commercial & Farmers' Nat. Bank v. First Nat. Bank, 30 Md. 11, 
 16. See "Banks and their Depositors. " Ch. XX, Payments through the 
 Clearing House. 
 
 4 East-Haddam Bank v. Seovil. 12 Conn. 303. 
 
§ 210« MISTAKE AND FORGEBY. 251 
 
 banks in the state, and which was pronounced reasonable. 
 Whenever bills are transmitted for collection to another 
 bank and nothing is heard from it within a few days after 
 their maturity, they are regarded as paid, and charged to 
 it and credited to the owner. Whenever this is done and 
 they are not collected,, equity and good conscience require 
 that the amount should be refunded. 
 
 210. Some illustrations of mistakes in paying notes and 
 other instruments may now be described. In Andrews v. 
 Suffolk Bank, ' a bank which had received a note for col- 
 lection received the amount for the agent of A., the maker. 
 The teller, by mistake, gave the agent a similar note of 
 D., and sent the other note to the owner, who collected 
 the amount of A. He then returned D.'s note to the 
 bank, and demanded the money which he had paid to 
 discharge his own note, but which, as above explained, 
 the teller had misapplied. The bank was required to pay, 
 Justice Merrick declaring that the appropriation "was 
 wholly without authority from the plaintiff, although at 
 the time when it was made they believed that the money 
 was paid and delivered to them for that purpose. It was 
 undoubtedly an unintentional injury to the plaintiff, and 
 resulted from a mistake of one of the officers of the de- 
 fendants, acting in the regular course and discharge 'of 
 his duty. But the consequences of the mistake must fall 
 upon the party by whom or by whose agent it was made. 
 It affords no justification or legal excuse for the misap- 
 propriation of the plaintiff's money, and has no tendency 
 to relieve them from a just accountability for it." 
 
 210a. H. & Co., of New York, drew a draft on bankers 
 in Baltimore, and sold it to a bank in New York. By 
 the negligence of a bank in Baltimore, to which it was 
 sent for collection, the draft Was not collected. The 
 drawees having failed, it was protested and returned to 
 the bank in New York, which notified the drawer of the 
 dishonor, and who, ignorant of the negligence of the Bal- 
 
 9 
 
 1 12 Gray 461. 
 
252 BANK COLLECTIONS. • § 210c 
 
 timore.bank, paid the draft. They sued the Baltimore 
 bank in the. name of the New York bank and recovered; 
 their payment could not operate in any manner to dis- 
 charge or suspendits anterior liability. 1 
 
 2105. In Gilman v. First National Bank,' C. deposited 
 with an Ohio bank a Kansas bond for collection which 
 was sent to a Kansas bank and collected, and a sight draft 
 for the amount on the plaintiff was transmitted to the 
 Ohio bank. The Kansas bank, however, did not have a 
 sufficient deposit to pay the draft in full, and the Ohio 
 bank having learned this, requested the plaintiff to apply 
 whatever he had in that manner. He did pay the entire 
 draft, and then sought to recover the difference on the 
 ground of mistake, but the court said : "In the absence 
 of any other testimony, it is quite clear this draft was 
 paid in the usual course of business, and notwithstanding 
 the plaintiffs knew it was not good in full on the day 
 preceding its payment. We do not think a case of mis- 
 take was made out, such as would entitle the plaintiffs to . 
 recover, and more especially as it is clear that by reason 
 of the payment a protest of the paper was prevented. It 
 was a foreign bill." 
 
 210c. In Whiting v. City Bank/ a bank paid a note, 
 charging the same to its customer's account, though he 
 had not enough deposit at that time to pay the whole 
 amount. This was done on the third day of July ; on the 
 sixth he failed. The bank had sent a draft in payment 
 which it requested the payee to return, saying that it had 
 remitted for the note by mistake. The only evidence to sus- 
 tain this assertion was a telegram from the assistant cashier 
 to the payee stating that the bank had remitted for the 
 note by mistake, and a letter of a similar character with 
 a statement that the note had been protested and the in- 
 dorser notified. Evidence was given by the payee show- 
 
 1 Merchants' Bank v. Bank, 24 Md. 12. 
 
 2 63 Hun 480. 
 
 3 77 N. Y. 363. * 
 
§ 211« MISTAKE AND FORGERY. 253 
 
 ing that the note had not been protested or notice of non- 
 payment mailed until after the bank had learned of the 
 failure of its customer. The court decided that no mis- 
 take had been proved, which justified the trial court in 
 refusing to submit the question to the jury. 
 
 211. The effect of mistakes in entries in books and can- 
 cellations may now be considered. In Vogel v. Ball, 1 a 
 draft was drawn on V. & R. in favor of H., and which was 
 indorsed to B. for collection. B. stamped on the draft, 
 "paid," and in this condition it was presented to V. and 
 paid. It proved to be a forgery. V. & R. sued B. as an 
 indorser, claiming that it was paid by mistake and in ig- 
 norance of the forgery. The court declared that the legal 
 effect of the indorsement stamped on the draft, " paid," 
 was a cancellation of the obligation, and a receipt for the 
 money. ' ' They were not indorsers of the paper, and could 
 not be held liable as such, and hence it could not be said 
 that the money was paid to them upon the faith of their 
 indorsement. But would they be liable for money had and 
 received upon the ground that the payment was made to 
 them under mistake ? We answer that they would not. ' ' ' 
 
 211a. In Irving Bank v. Wetherald, 3 a bank purchased 
 a note of another bank, which marked the same "paid" 
 on receiving the money and delivering the instrument. 
 The purchasing bank afterwards sought to. recover the 
 amount of the maker, who defended on the ground that 
 it had been paid, and that the indorsement above men- 
 tioned was evidence. But the court declared that by thus 
 stamping the note, or marking it with the cancellation 
 hammer, did not constitute payment. The mark only de- 
 noted that the note was charged.* 
 
 1 69 Texas 604. 
 
 2 Freeman v. Savannah Loan & Trust Co., 14 So. E. Rep. 577. 
 
 3 36 N. Y. 335. 
 
 * Scott v. Betts, Lalor Supp. 363, and note; Watervliet Bank v. White, 1 
 Denio 608. For other cases see Banks and their Depositors, \ 356; Turner v. 
 Bank, 3 Keyes 425 ; Mcintosh v. Tyler, 47 Hun 99 ; German Nat. Bank v. 
 Farmers' Deposit Nat. Bank, 118 Pa. 294 ; Steinhart v. National Bank, 94 
 Cal. 362, and criticism on this case, \ 202 c. 
 
254 BANK COLLECTIONS. § 212 
 
 2115. In another case a bank at which a note was payable 
 received the same from the holder for collection, and though 
 the maker's account was not good for the amount, the note 
 was charged to him and paid to the holder. It was placed 
 on a canceling fork which, however, only denoted that it 
 was charged. The maker contended that the note had 
 been extinguished, and consequently that no suit could 
 be maintained thereon, but the court declared that the 
 bank was a stranger to the making and negotiation of the 
 note and to the parties, and having paid it to the holder 
 took it as a purchaser and acquired the rights and rem- 
 edies of the holder to sue for and collect the same. 1 
 
 212. Though money paid by mistake can generally be 
 recovered, the payment of forged paper has long formed 
 an exception to the rule. In other words, whenever pay- 
 ment is made by the drawee of a forged bill or check to a 
 holder without his fault, and his situation would be made 
 worse if compelled to refund, the money cannot be re- 
 covered from him. ! "The foundations of the rule," said 
 
 1 Watervliet Bank v. White, 1 Denio 608; Mertens v. Winnington, 1 Esp. 
 N. P. 112 ; Ogilby v. Wallace, 2 Hall 553 ; Canal Bank v. Bank, 1 Hill 287, 
 292. 
 
 2 Add to eases cited in Banks and their Depositors, \ 193, the following : 
 Bernheimer v. Marshall & Co., 2 Minn. 78; Goddard v. Merchants' Bank, 4 
 N. Y. 147; Northwestern Nat. Bank v. Bank of Commerce, 17 S. W. Rep. 
 982 (Mo.): United States Nat. Banku. National Park Bank, 13 N. Y. Snpp. 
 411; Stout v. Benoist, 39 Mo. 277; Bank v. Yost, 11 N. Y. Snpp. 866 ; 4 
 Harv. Law Rev. 297; National Park Bank v. Ninth Nat. Bank, 46 N. Y. 77; 
 National Bank v. National Mechanics' Banking Assn., 55 N. Y. 211 ; White 
 v. Continental Nat. Bank, 64 N. Y. 316; Redington u. Woods, 45 Cal. 406; 
 Johnston v. Commercial Bank, 27 W. Va. 343; Rouvant v. San Antonio Nat. 
 Bank, 63 Texas 610 ; First Nat. Bank v. Ricker, 71 111. 439 ; First Nat. Bank 
 v. Indiana Nat. Bank, 30 N. E. Rep. 808; United States v. National Exchange 
 Bank, 45 Fed. Rep. 163. 
 
 In Janin v. London & San Francisco Bank, Com. De Haven said : " It is 
 well settled that a hank in receiving ordinary deposits, becomes the debtor 
 of the depositor, and its implied contract with him is to discharge this in- 
 debtedness by honoring such checks as he may draw upon it, and it is not 
 entitled to debit his account with any payments except such as are made by 
 his order or direction. Crawford v. West Side Bank, 100 N, Y. 50; Phoenix 
 
§ 213 MISTAKE AND FORGERY. 255 
 
 Mr. Justice Ranney, ' ' are sufficiently obvious. ' The party- 
 is supposed to know his own handwriting in the one case, 
 or thatof his customer or correspondent in the other, much 
 better than the holder can ; and the law, therefore, allows 
 the holder to cast upon him the entire responsibility of 
 determining as to the genuineness of the instrument, and 
 if he fails to discover the forgery, imputes to him negli- 
 gence, and, as between him and the innocent holder, 
 compels him to suffer the loss." ! 
 
 213. This rule can be applied only when the holder is 
 wholly free from any act contributing to the mistaken 
 payment. If both the paying or drawee bank and the re- 
 ceiver of the money are without fault, or the receiver has 
 misled the bank, it can be recovered.' Says Mr. Justice 
 Devens :* "In the absence of actual fault on the part of 
 
 Bank v. Risley, 111 TJ. S. 125. All unauthorized payments, such as upon 
 forged checks, are, therefore, made at the peril of the bank, and it is not 
 justified in charging them against the depositor's account unless some neg- 
 ligent act of his in some way contributed .to induce such-payment in the first 
 instance, or unless by "his subsequent conduct in relation to the matter he is 
 upon equitable principles estopped to deny the correctness of such payments. 
 This view of the law cannot be well questioned, and finds abundant support 
 in the decisions of courts." 92 Cal. 14, 22. Shipman v. Bank, 126 N. Y. 
 318 ; Hardy v. Chesapeake Bank, 51 Md. 562 ; Weinstein v. Bank, 69 Tex. 
 >38; Leather Manuf. Bank v. Morgan, 117 XT. S. 96. 
 
 1 Ellis v. Ohio Life Ins. & Trust Co., 4 Ohio St. 628, 652. 
 
 2 Mr. Justice Devens has more recently repeated the rule in the following 
 manner: " In the usual course of business, if a check purporting to be signed 
 by one of its depositors is paid by a bank' to one who, finding it in circula- 
 tion or receiving it from the payee by indorsement, took it in good faith for 
 value, the money cannot be recovered back on the discovery that the check 
 is a forgery. It is presumed that the bank knows the signature of its own 
 customers, and, therefore, is not entitled to the benefit of the rule which, in 
 cases of forgery, permits a party to recover back money paid under a mis- 
 take of fact as to the character of the instrument by which the fraud has 
 been effected." First Nat. Bank v. First Nat. Bank, 151 Mass. 280, 282. 
 
 3 National Bank v. Bangs, 106 Mass. 441, 445;'First Nat. Bank v. First 
 Nat. Bank, 151 Mass. 280, 282; People's Bank v. Franklin Bank, 88 Tenn. 
 299, 301. 
 
 * First Nat Bank v. First Nat. Baiik, 151 Mass. 280, 283. 
 
256 BANK COLLECTIONS. § 214 
 
 the drawee, his constructive fault in not knowing the 
 signature of the drawer and detecting the forgery will not 
 preclude his recovery from one who took the check under 
 circumstances of suspicion without proper precaution, or 
 whose conduct has been such as to mislead the drawee or 
 induce him to pay the check without the usual security 
 against fraud. * Where a loss which must be borne by one 
 of two parties alike innocent of the forgery can be traced 
 to the neglect or fault of either, it is reasonable that it 
 should be borne by him, even if innocent of any inten- 
 tional fraud, through whose means it has succeeded.'" 
 To entitle the holder to retain money obtained by a 
 forgery, he should be able to maintain that the whole 
 responsibility of determining the validity of the signature 
 was placed upon the drawee, and that the vigilance of the 
 drawee was not lessened, and that he was not lulled into 
 a false security by any disregard of duty on his own part 
 or by the failure of any precautions which, from his im- 
 plied assertion in presenting the check as a sufficient 
 voucher, the drawee had a right to believe he had taken. 3 
 214. This rule with its qualification applies (1) to the 
 signatures of the makers and drawers of notes, bills and 
 checks, 4 and (2) also to the terms of the instruments ; but 
 (3) not to the indorsements made on them. The drawee 
 is supposed to be more familiar with the signatures of the 
 
 1 National Bank of North America v. Bangs, 106 Mass. 441, 445. 
 
 2 Gloucester Bank v. Salem Bank, 17 Mass. 33. 
 
 s Ellis v. Ohio Life Ins. & Trust Co., 4 Ohio St. 628; Kouvantn. San Antonio 
 Nat. Bank, 63 Texas 610; First Nat. Bank v. Bicker, 71 111. 439; First Nat. 
 Bank u. Indiana Nat. Bank, 30 N. E. Eep. 808 (Ind.) ; People's Bank v. 
 Franklin Bank, 88Tenn. 29.9; McKleroy v. Southern Bank, 14 La. Ann. 458. 
 
 4 " Banks and their Depositors," Chaps. V and VI. While the payment 
 by a bank of its customers' checks and drafts by mistake, unless they also 
 have been guilty of negligence, cannot be charged to their account, a bank 
 ■which has paid a check on a forged indorsement is not responsible to the 
 drawer if the forger was identified to the bank by one who believed him to 
 be the payee, and was in truth the person to whom the drawer delivered the 
 check, believing him to be the payee. United States v. Nat. Exchange 
 Bank, 45 Fed. Eep. 163. 
 
§ 216 MISTAKE AND FORGERY. 257 
 
 makers than the presentors of those instruments, and con- 
 sequently must suffer if he pays them unless he has been 
 misled. He is also responsible for the original terms of 
 the instruments, unless the makers were careless in leav- 
 ing blanks, or in so writing them that alterations or 
 forgeries were easy ;' but he is not responsible for forged 
 indorsements, for the obvious reason that he is not sup- 
 posed to know the signatures of indorsers ; indeed, must 
 be necessarily less familiar with them generally than prior 
 parties. 
 
 215. With this rule and its qualification before us, we 
 will first describe when money paid by the drawee can be 
 recovered. As an indorsement of negotiable paper is a 
 warranty by the indorser to every subsequent holder in 
 good faith that the instrument itself and all signatures 
 antecedent to his indorsement are genuine, consequently, 
 when forgeries have been perpetrated the indorser is liable 
 on his warranty to the subsequent holder, without pre- 
 sentation for payment or notice of non-payment.' 
 
 216. Does the same rule apply to a special indorsement, 
 for collection or for some other similar purpose, and not 
 for the purpose of transferring the property in the instru- 
 ment thus indorsed, and render the indorser liable for the 
 genuineness of the signatures, or for the amount ? The 
 special indorsement clearly shows that the indorser retains 
 his property in the instrument, and, therefore, as we have 
 already shown, no subsequent holder can become the 
 owner unless by making specific advances or by agreement, 
 nor can'hebe made liable on his own indorsement. This, 
 however, has been attempted on several occasions. Thus, 
 a check was drawn on the National City Bank, payable 
 
 1 Crawford v. West Side Bank, 100 N. Y. 50; Hallu. Fuller, 5 Barn. & Ores. 
 750; Rotaarts v. Tucker, 16 Q. B. 560; Smith v. Mercer, 6 Taunt. 76. 
 
 2 Canal Bank v. Bank, 1 Hill 287; Marine Nat. Bank o. National City 
 Bank, 59 N. Y. 67, 77; Bank v. Union Bank, 3 N. Y. 230; Corn Exchange 
 Bank v. Nassau Bank, 91 N. Y. 74; National City Bank v. Westcott, 118 N. 
 Y. 468, 473. 
 
 17 B. 
 
258 BANK COLLECTIONS. § 
 
 to A., or order, and afterward transferred by a genera! 
 dorsement to the New York and Boston Express C 
 pany, which, indorsed it "for collection," and delivi 
 it to the Westcott Express Company to be collected, 
 agent of this company indorsed it in his own name 
 presented it to the National City Bank, which paid 
 money, and which in due time was delivered to the ov 
 of the check. It was subsequently discovered that 
 check had been raised before it came into the posses: 
 of the New York & Boston Express Company. 1 " If 
 Westcott Express Company," said the court, "hadt 
 or had assumed to be the apparent owner of the ci 
 when it was presented to, and paid by, the plaintiff, 
 defendant would have been liable to reimburse the pi 
 tiff." a But * * the check was in fact sent to the 
 fendant company for collection, of which the plaintiff 
 advised by the indorsement upon it to that effect mad 
 the New York & Boston Dispatch Express Comps 
 The defendant, therefore, apparently and in fact re; 
 sented that company, and in the relation of such age 
 received the money from the plaintiff. 3 * * The 
 strictiveindorsement denied to the defendant the appai 
 title, and rendered the check non-negotiable, of wl 
 the plaintiff was advised by the restriction appearing 
 the terms of the indorsement. The defendant comp 
 took no title to it, and could transfer none. The righ 
 the defendant, as the correspondent or agent of the o1 
 company, was to present the chftck to the plaintiff 
 receive the money. This was the import of the 'indo 
 ment of that company.* There was, therefore, no imp 
 authority in * * the agent of the defendant comp 
 
 1 National City Bank v. Westcott, 118 N. Y. 468. 
 
 2 Canal Bank v. Bank, 1 Hill 287; Bank v. Union Bank, 3 N. Y. -230; 
 Exchange Bank v. Nassau Bank, 91 N. Y. 74. 
 
 8 Montgomery Co. Bank v. Albany City Bank, 7 N. Y. 459. 
 * Sigourney v. Lloyd, 8 Barn. & Cres. 622; Hook v. Pratt, 78 N. Y. 
 White v. National Bar' 102 U. S. 658. 
 
§ 2166 MISTAKE AND FORGERY. 259 
 
 to represent it in the transaction beyond what was re- 
 quisite to the performance of the agency assumed by it, or 
 was legitimately within its purpose. This imposed upon 
 the defendant neither the duty to indorse the check or to 
 guarantee its genuineness." 
 
 216a. Another case may be described, in which the same 
 principle was applied. 1 In the usual course of his busi- 
 ness as a private banker, Yost cashed checks drawn on 
 the plaintiff's bank. These were immediately indorsed 
 ' ' for collection, ' ' and sent to it for payment. The checks 
 were charged to the account of the drawers, who had suf- 
 ficient funds on deposit with the bank to pay them, and 
 the proceeds were remitted to Yost in accordance with the 
 usual course of dealing between him and the bank. The 
 drawers did not receive their vouchers from the bank 
 until two months afterward, when the forgeries in their 
 checks were discovered. It was decided that Yost by in- 
 dorsing the checks did not guarantee the signatures of 
 the drawers, and he was.not compelled, therefore, to re- 
 fund the money. » 
 
 2165. In Northwestern National Bank v. Bank of Com- 
 merce, 2 a person having an account with the defendant 
 bank at Kansas City deposited a draft drawn by an 
 Omaha bank on the Northwestern Bank of Chicago. The 
 defendant bank indorsed the draft for collection, and sent 
 it to the Metropolitan Bank of Chicago, to be collected. 
 This was done through the clearing house, and the forgery 
 was not discovered until it reached the drawer. The 
 drawee sought to recover of the Kansas City bank. It 
 failed, however, the court declaring "that the defendant 
 by its indorsement warned the plaintiff that it was not in- 
 tended to transfer the ownership of the draft or its pro- 
 ceeds, and hence the defendant did not guarantee the gen- 
 uineness of the signature of the drawer, but it did guar- 
 antee that the payee's signature was genuine. * * The 
 
 1 First Nat. Bank v. Yost, 11 N. Y. Supp. 862. 
 
 2 17 S. W. Eep. 982, 984. 
 
260 BANK COLLECTIONS. § 216c 
 
 defendant owed plaintiff no duty. It simply presented 
 for payment a draft purporting to be drawn by the Omaha 
 bank> and it was the duty of plaintiff to know, before 
 paying it, that it was in fact made by the party who ap- 
 peared to be the drawer, and having failed to perform 
 this duty, it cannot be heard to complain." The plaintiff 
 attempted to show that the Kansas City bank was negli- 
 gent in its dealings with its customer, but also failed in 
 this regard. 
 
 216c. This view of the law has been recently challenged 
 in several well-considered cases. One of them was' de- 
 cided by the Supreme Court of Tennessee. 1 A bank paid 
 a check to an unknown person without requiring his iden- 
 tification, and sent it to the drawee bank for payment. 
 The report does not show what kind of indorsement was 
 made. The check was paid, and afterward discovering 
 that it was a forgery, the drawee bank sued the other and 
 recovered. In delivering the opinion of the court, Mr. 
 Justice Folkes said : "Notwithstanding some conflict of 
 authority upon the subject, a careful investigation of the 
 adjudged cases and of the text-books leads us to the con- 
 clusion that the bank can recover of a party to whom pay- 
 ment is made on a forged check, indorsed by the party to 
 whom paid, where the party to whom paid has been guilty 
 of negligence in receiving and indorsing the check ; for, 
 notwithstanding the negligence to some degree that the 
 paying bank has been guilty of in paying the forged 
 check without detecting* the forgery of its depositor's 
 signature, it often happens, or may happen, that the 
 party to whom payment is made has been guilty of the 
 first negligence in purchasing and indorsing the forged 
 paper. The bank upon whom the check is drawn, in the 
 practical administration of. banking business, may well be 
 lulled to a less careful scrutiny of its depositor's signature 
 of a check, where the same is indorsed by another bank 
 
 1 People's Bank v. Franklin Bank, 88 Tenn. 299, 302. See notes to this 
 case in 17 Am. State Eep. 889. 
 
§ 216^ MISTAKE AND F0EGEEY. 261 
 
 with which it is in correspondence or interchange of busi- 
 ness, than it would exercise in accepting and paying the 
 same check, not so indorsed, to a stranger. The indorse- 
 ment of the check by the payee may be said ordinarily to 
 be a guarantee of the genuineness 'of the indorsements 
 theretofore on the paper, and also of the genuineness 
 of the drawer's signature; subject, perhaps, to some 
 exception in particular cases, as, for instance where the 
 indorsement is made after the the genuineness of the pre- 
 ceding signatures has been approved by the paying bank. 
 Applying these principles to the case at bar, we are of 
 opinion, and so adjudge, that the first fault was with 
 the defendant bank. This bank accepted and cashed a 
 check drawn on a bank in another county, to which the name 
 of the drawer and the payee had both been forged, and, 
 so far as this record discloses, without requiring any iden- 
 tification of the parties to whom such payment was made ; 
 certainly without reserving any evidence of the identity 
 of such parties for the benefit of itself or of others who 
 might be injured by such forgery. The complainant bank, 
 upon receiving such check in due course of mail for de- 
 posit to credit of defendant, might well rely upon the 
 exercise of due prudence and diligence on the part of its 
 depositor, the defendant bank, and might well regard the 
 latter' s indorsement of the check as significant of the fact 
 that such prudence had been exercised, and, if not, that 
 the* indorsement would stand as a guarantee to the paying 
 bank from loss* that might otherwise fall upon it by reason 
 of its passing the amount of the check to the credit of 
 such indorser." 
 
 216c?. In First National Bank v. Indiana National 
 Bank,' a forged order for the payment of money drawn 
 on the plaintiff was indorsed in blank by the forger and 
 discounted by the other bank, which also indorsed it to 
 its correspondent "for collection." The defendant's cor- 
 respondent presented the order to the plaintiff, which 
 
 1 30 N. E. Eep. 808, 810. 
 
262 BANK COLLECTIONS. § 216/ 
 
 paid the same. It was decided that the defendant by 
 thus indorsing the forged instrument gave the transaction 
 the appearance of a genuine one, and consequently the 
 plaintiff was entitled ip recover the amount it had paid, 
 the court declaring that it could not be said that the ap- 
 pellee's indorsement of the forged instrument did not in 
 some degree induce the payment of the money. ' ' We do 
 not," continued the court, "think that the allegation in 
 the answer, that the paper was indorsed by the appellee 
 for collection, can materially affect the question of laches. ' ' * 
 
 216e. In First National Bank v Northwestern National 
 Bank," several checks, purporting to be indorsed by the 
 payees, passed into the possession of C. & G-., who indorsed 
 them, ' ' For deposit in the First National Bank to the credit 
 of C. & Gr.," and which was subsequently indorsed, "Pay 
 through Chicago clearing house only to First National 
 Bank," and which were presented in this manner and 
 paid by the Northwestern Bank on which they were 
 drawn. Their true character having been discovered, the 
 Northwestern sued the other and recovered, the court 
 holding that the First National by its indorsement had 
 guaranteed the genuineness of all preceding indorsements. 
 
 216/. These cases, therefore, run counter to most of the 
 authorities on that subject. Nor are we wholly satisfied 
 with the reasoning. No distinction was drawn between 
 an ordinary indorsement, and one for collection. And 
 yet there is no obvious reason for one. An indorser for 
 t value is presumed to have inquired into the title to the 
 " check or other instrument he purchases ; surely he will 
 not part with his money before doing this. But an agent 
 for collection has no interest in the instrument except ' 
 to collect it. He is not the owner, but represents him. 
 The owner ought to be held if the instrument proves to 
 
 1 See, also, Star Fire Insurance Co. v. New Hampshire Nat. Bank, 60 N. 
 H. 442. 
 
 2 29 N. E. Eep. 884 (111.). 
 
§ 218 MISTAKE AND F0EGEBY. 263 
 
 be worthless, but there is no sound reason for holding his 
 agent. 
 
 217. Again, the drawee can recover when the instru- 
 ment is indorsed in blank, 1 or is unnecessarily indorsed 
 and thereby is lulled into greater security of its genuine- 
 ness. On one occasion a forged check was presented to 
 a bank, which was made payable to a payee named therein, 
 or bearer. It was cashed by a bank to which it was pre- 
 sented by an unknown person who was not identified on 
 his indorsement, and was then sent to the drawee bank 
 for payment. It credited the other bank with the amount, 
 but after the discovery of the forgery sued to recover the 
 amount thus paid. In rendering judgment against the 
 defendant the court said : "The indorsement which was 
 not necessary to the transfer of the check, was a guaran- 
 tee of the signature of the drawer, and the plaintiff had a 
 right to believe that the indorser was known to the de- 
 fendant by proper inquiry." * 
 
 218. So, too, an instrument for collection which is in- 
 dorsed in blank by the owner, thereby rendering its di- 
 version easier, is deemed negligence on his part, and if it 
 be wrongfully transferred the transferee acquires a good 
 title and can collect and retain the proceeds. Thus, in 
 Coors v. German National Bank,* A. indorsed a draft in 
 blank to B. for collection, who, wrongfully assuming to 
 be the owner, sold it to C, who had no knowledge of B.'s 
 lack of title. It was held that C. had acquired a good 
 tit! e and could retain the proceeds. Nor was the fact that 
 in B.'s letter, sending the draft to C, it was described as 
 A.'s acceptance, an indication of A?s ownership. It was 
 merely a description of the paper. The court said Coors 
 by a word could have limited his indorsement so as to 
 protect himself and others ; that he failed to do so was 
 
 1 National Bank v. Bangs, 106 Mass. 441, 444. 
 
 * First Nat. Bank v. First Nat. Bank, 151 Mass. 280, 284. 
 
 8 14 Colo. 202. 
 
264 BANK COLLECTIONS. § 219 
 
 not the fault of the appellee, but his own, and he must 
 suffer the loss. 
 
 219. When the drawee has paid a raised check the ex- 
 cess can be recovered. 1 Thus, a bank in New Orleans 
 drew a bill at sight on the Bank of Commerce of New 
 York for $105, payable to "J. Durand." After issuing 
 the bill the amount was fraudulently altered to $1,005, 
 payable to "J. Bonnet," and indorsed with that name. 
 The Bank of Commerce paid the bill at sight to the Union 
 Bank, which received it for collection from a bank in 
 Charleston. The Bank of Commerce recovered the amount, 
 the jury having found that it was not negligent in not 
 discovering the forgery before paying the bill. 2 But if 
 either party has been negligent, whereby the other has 
 been injured, the injury must be borne by the negligent 
 party. 3 And if the check has been raised and afterward 
 certified the excess can be recovered if the drawee has not 
 been negligent. 4 And likewise the excess if the alteration 
 was done afterwards. 6 But if the drawee can recover the 
 excess, why should he be held liable to the drawee for 
 paying the excess whenever there has been no negligence.' 
 In many cases checks are so carefully altered that it is 
 exceedingly difficult to detect the alteration. Now, the 
 bank can recover from the receiver of the money on the 
 ground that it was not negligent in paying it ; and it can- 
 
 1 Marine Nat. Bank v. National City Bank, 59 N. Y. 67, 77. 
 
 2 Bank v. Union Bank, 3 N. Y. 230. This case is imperfectly reported. 
 See criticism of Bradley, J., in National Park Bank v. Seaboard Bank, 44 
 Hun 53. 
 
 3 Bank «. Union Bank, 3 N. Y. 230 ; National Bank v. National Mechan- 
 ics' Banking Ass'n, 55 N. Y. 211 ; National Park Bank v. Ninth Nat. Bank, 
 46 N. Y. 77 ; Espy v. Bank, 18 Wall. 614 ; Eedington *. Woods, 45 Cal. 406; 
 Third Nat. Bank v. Allen, 59 Mo. 310; Parker v. Eoser, 67 Ind. 500 ; First 
 Nat. Bank v. State Bank, 22 Neb. 767 ; Marine Nat. Bank v. National City 
 Bank, 59 N. Y. 67. 
 
 4 Clews v. Bank, 89 N. Y. 418, 421 ; Banks and their Depositors, <S 225. 
 
 6 National Bank ». National Mechanics' Banking Ass'n, 55 N. Y. 211; Banks 
 and their Depositors, 2 226. 
 6 See I 9. 
 
§ 219a MISTAKE AND EOBGEEY. 265 
 
 not charge the amount to the drawer on the ground that 
 it was negligent in paying the same. Would not a more 
 reasonable rule absolve a bank from liability in such 
 cases, giving the drawer a right of action against the re- 
 ceiver for the excess, or the bank such a right for the re- 
 ceiver' s benefit? 
 
 219a. A draft was drawn by the National Bank of Com- 
 merce on its New York correspondent, which was raised 
 by the payee, and deposited with the Manufacturers & 
 Traders' Bank, which gave him credit for the full amount. 
 This bank then forwarded the draft to the New York cor- 
 respondent of the National Bank of Commerce, which 
 paid the full amount of the draft, and charged the amount 
 to that bank. Subsequently, the Manufacturers & Tra- 
 ders' Bank, ascertaining that the draft had been raised, 
 directed the National Bank of Commerce to procure the 
 draft from its New York correspondent, make an affidavit 
 to the correct amount, and .promised to remit the differ- 
 ence. The National Bank having accepted this proposi- 
 tion, the Manufacturers & Traders' Bank became liable 
 for the amount of the raised draft, less, of course, the 
 amount for which it was originally drawn. This bank, 
 however, afterward declined to execute the proposition, 
 and then the National Bank of Commerce directed the 
 Manufacturers & Traders' Bank to return the draft and 
 affidavit, and notified its correspondent that it would not 
 recognize the payment of the draft for more than the 
 original amount. It was decided that by such conduct 
 the National Bank of Commerce had rescinded its con- 
 tract with the Manufacturers & Traders' Bank, under 
 which it had become liable for the difference between the 
 original, and raised, amount of the draft. Nor could the 
 National Bank of Commerce recover the difference be- 
 tween the two amounts in an action for money had and 
 received, because the Manufacturers & Traders' Bank 
 had not obtained the money of the National Bank of Com- 
 merce, but that of its New York correspondent. 1 
 
 1 National Bank v. Manufacturers & Traders' Bank, 123 N. Y. 367. 
 
266 BANK COLLECTIONS. § 2205 
 
 220. Let us next consider when the money paid cannot 
 be recovered in cases of a failure to discover the forged 
 signatures of the makers of the instruments presented and 
 not indorsed by the holders. 
 
 220a. One of the cases that may be mentioned is that of 
 the Commercial & Farmers' National Bank v. First Na- 
 tional Bank. 1 A person presented himself at the first 
 mentioned bank and deposited a check purporting to have 
 been drawn by A. on the other bank for $4,600, and pay- 
 able to the presenter' s order. It was entered to his credit, 
 but the teller was directed by the cashier not to pay any 
 check that might be drawn by the depositor until the de- 
 posited check had been paid. Having been passed through 
 the clearing house in the regular manner, and paid, the 
 depositor's check was afterwards honored. Two days 
 after paying his check the forgery was discovered by the- 
 action of A. in overdrawing his account, which was re- 
 duced by charging the forged, check to it. The First Na- 
 tional Bank gave notice of the forgery to the other and 
 demanded the amount, but the other denied its liability 
 save for the small balance still remaining. The court de- 
 clared that the law imposed on the First National Bank 
 the duty of knowing A.'s signature, and it could not, 
 therefore, recover the $4,500 paid by the other bank to A. 
 For, said the court, ' ' there is nothing unconscientious in 
 the defendants retaining the money, and no reason why 
 the loss as between parties thus equally innocent and 
 equally deceived, but where one is bound to know and 
 act upon his knowledge and the other has no means of 
 knowledge, should be thrown upon the latter in exonera- 
 tion of the former. The safest rule for the commercial 
 public, as well as that most consistent with justice, is to 
 allow the loss to remain where by the course of business 
 it has been placed." 
 
 2206. Another case may be noticed. 2 In this case a 
 
 1 30 Md. 11, 22. 
 
 2 Bank v. Farmers & Mechanics' Bank, 10 Vt. 141. 
 
§ 221 MISTAKE AND FORGERY. 267 
 
 check on the Bank of St. Albans, in favor of W. or bearer, 
 was purchased by another bank from the alleged payee, 
 an entire stranger, but indorsed in the name of W., and 
 it was paid on presentment by the drawee bank. It was 
 subsequently discovered that the name of the maker, who 
 was the president and a customer of the bank, was a forg- 
 ery. The bank failed in a suit to recover back the 
 money 
 
 220c. In Deposit Bank v. Fayette National Bank, 1 the 
 checks of one of its principal depositors were forged and 
 paid for several months before the forgery was discov- 
 ered. They had been cashed by other banks in good faith 
 after inquiry of the drawee bank concerning the deposi- 
 tor 5 s aecount. The drawee bank was compelled to bear 
 the loss, and could not recover from the banks which had 
 received the money.' 
 
 220$. Two banks had an arrangement for collecting 
 checks and remitting the balances. One of them collected 
 a check on the First National Bank of Owego, and for 
 which it accounted. Several weeks afterwards it was 
 proved that the payee's name had been forged, and the 
 collecting bank refunded the amount t© the Owego bank. 
 In the next settlement with the other collecting bank it 
 deducted the amount thus refunded. It was decided that 
 this could not be done. 3 
 
 221. Again, when the money has been paid to an agent 
 and he has paid it over to his principal before notice of 
 the mistake, it cannot be recalled. 1 Thus, a draft which 
 was drawn on the National Park Bank, which had been 
 
 1 13 So. W. Rep. 339 (Ky.). 
 
 2 For other signature cases of a similar character see Bernheimer v. Mar- 
 shall & Co., 2 Minn. 78. 
 
 3 Hall v. Tioga Nat. Bank, 21 N. Y. Dig. 416. 
 
 * National City Bank v. Westcott Express Co., 118 N. Y. 468 ; La Farge v. 
 
 Kneland, 7 Cow. 456, 460 ; Mowatt v. McClelan, 1 Wend. 173 ; Herrick v. 
 
 Gallagher, 60 Barb. 566 ; National Park Bank v. Seaboard Bank. 114 N. Y. 
 
 "28 ; United State's Nat. Bank v. National Park Bank, 13 N. Y. Snpp. 411, 
 
 affd. 129 N. Y. 647 
 
268 BANK COLLECTIONS. § 222 
 
 fraudulently altered, was received by the E. bank for col- 
 lection, and was indorsed and sent by it to the Seaboard 
 Bank for collection for its account. The amount was 
 credited to the E. bank, and was subsequently paid by 
 the National Park Bank to the Seaboard Bank, and be- 
 fore the discovery of the fraud the amount was paid by 
 this bank to the sender. It was declared that the Sea- 
 board Bank wasmot liable to the National Park Bank for 
 •the amount. 1 But this rule does not prevail in Missouri.* 
 In that state the agent's responsibility continues, not- 
 withstanding the payment of the money to his principal. 
 But the court was wrong in supposing that the case of 
 Canal Bank v. Bank of Albany, 3 sustained their rule, for 
 the defendant was the owner of the check in controversy.* 
 But the money must have actually been paid to the prin- 
 cipal, and not a credit given merely for the amount. 6 
 
 222. Finally, when a bill has been forged before circu- 
 lating, for example, by forging the name of the payee by 
 the drawer, the instrument is regarded as payable to 
 bearer ; and if the amount should be collected by a bank 
 of the drawee and paid to the holder, the drawee could 
 not compel the bank to refund on the discovery of 
 of the forgery. Thus, a bill was drawn by a partnership 
 on A., payable to the order of B., a fictitious person, and 
 B.'s indorsement was forged by one of the partners, and 
 the bill was presented to a bank and discounted in the 
 regular course of business, and afterwards was transmitted 
 to another bank for collection. The bill was accepted and 
 paid by the drawee, but he failed to recover the money 
 thus paid on discovery of the forgery o$ B.'s indorsement. 
 
 1 National Park Bank v. Seaboard Bank, 114 N. Y. 28. 
 
 2 Koontz v. Central Nat. Bank, 51 Mo. 275. 
 3 1 Hill 287. 
 
 4 Although this does not clearly appear from report, Bronson, J., declared 
 in a later case that on further inquiry he had learned that the defendant 
 bank was the owner. Coggill v. American Exchange Bank, 1 N. Y. 113. 
 
 6 United States Nat. Bank «. National Park Bank, 13 N. Y. Supp. 411, 
 affd. 129 N. Y. 647. 
 
§ 223 MISTAKE AND F0BGEBY. 269 
 
 By thus indorsing B.'s name, the partnership plainly af- 
 firmed that the indorsement was genuine, and the bill, 
 therefore, could be negotiated by delivery. By this repre- 
 sentation the bank was induced to discount the bill, and 
 if it had brought an action thereon against the drawers, 
 they would have been estopped from controverting the 
 genuineness of the indorsement. 1 Again, a bill payable 
 to a fictitious person is regarded as payable to bearer, and, 
 therefore, he could be regarded as a nonentity. "The 
 bank had a good title to the bill as against the drawers 
 and the payee, and that was a good title against the 
 world." As the first bank, therefore, had a good title, 
 so'had the second, and, therefore, the drawee could not 
 recover from it." 
 
 223. This rule denying a recovery to the drawee from 
 those to whom he may have paid paper by mistake does 
 not apply in cases of payment before the paper is seen," 
 or in those in which the payment is subject to future ex- 
 amination. Said Mr. Justice Rapallo :* "In case of com- 
 mercial paper being paid without previous inspection, it 
 is, no doubt, the duty of the party paying to use due dili- 
 gence in making the inspection as soon as he has the op- 
 
 1 Meacher v. Fort, 3 Hill (S. C.) 227. 
 
 2 Coggill v. American Exchange Bank, 1 N. Y. 113. 
 
 3 Goddard v. Merchants' Bank, 4 N. Y. 147. But this rule is repudiated 
 in Minnesota, Bernheimer v. Mashall & Co., 2 Minn. 78, 84, Atwater, J., 
 saying that "if the drawee is allowed to recover on payment of a forged 
 draft because he has not seen it, he would probably never care to see a draft 
 before payment, but even when presented at his counter, and he present, 
 would direct his clerk to pay it, and afterwards take advantage of his own 
 laches to enforce a recovery. To admit this would be to overthrow the long- 
 settled principles of law, and require the holder, instead of the drawee, to 
 guarantee the signature of the drawer, which manifestly would be most 
 unjust and inequitable, and destructive of commercial business. The rule, 
 as laid down by Justice Bailey in Milnes v. Duncan, 6 Barn. & Ores. 671, is 
 undoubtedly correct, that 'if a party pay money under a mistake of the 
 real facts, and no laches are imputable to him (in respect of his omitting to 
 avail himself of the means of knowledge within his power), he may recover 
 back such money. ' " , 
 
 4 Allen v. Fourth Nat. Bank, 59 N. Y. 12, 19. 
 
270 BANK COLLECTIONS. § 225 
 
 portunity, and in giving notice of the forgery if one be 
 discovered ; and if by his failure to do so the party receiv- 
 ing is prejudiced, such negligence would be a good answer 
 to the claim for restitution. The doctrine of Price v. BTeal* 
 is exceptional, and in strictness applies only where the 
 paper is actually presented to the party, and accepted or 
 paid on or after such presentation. Where the payment 
 is made without presentation, and accepted subject to 
 future examination of the paper, the case is not within 
 the exception in Price v. Neal, and the ordinary rules 
 respecting money paid by mistake and negligence, and 
 its consequences should be applied." 
 
 224. When a bank receives a check for collection and 
 credits the. amount to the depositor, it can be charged 
 back as soon as the discovery has been made, in the ordi- 
 nary course of collection, that the check is a forgery. In 
 Eapp v. National Security Bank, 2 a customer, deposited a 
 check for collection drawn on a bank in New York which 
 was credited as cash. It was sent to another bank in New 
 York for collection. It proved to be a raised check, and 
 was charged back by the drawee bank to the other New 
 York bank, by that bank to the defendant bank, which, 
 in turn, charged the amount to the account of the de- 
 positor. He sought to recover, on the ground that he was 
 misled by the crediting of the check as cash in his ac- 
 count. This was declared to be not negligence ; indeed, 
 the only negligence in the case was in taking the check 
 especially against the advice of the cashier of the defend- 
 ant bank. "The defendant bank assumed no duty, and 
 was chargeable with no duty, except that of forwarding 
 the check for collection in the usual manner." 
 
 225. When a bank has collected checks on a forged in- 
 dorsement, it has been declared that the money must be 
 refunded to the true owner. Thus, W. was the owner 
 and payee of some checks. His name was forged, and 
 the checks thus indorsed passed to A. for value, who de r 
 
 ' 3 Burr. 1354. 2 136 Pa. 426, 436. 
 
§ 226 MISTAKE AND FOBGEBY. 271 
 
 posited them for collection in his bank. The checks were 
 collected,' and the proceeds were credited to A. Both he 
 and the collecting bank were declared to be liable for the 
 amount. "Although the bank," said the court, "does 
 not appear to have acted in any other capacity or under 
 any other claim than as collecting agent for the railroad 
 company, it is equally liable for its acts on behalf of a 
 principal who could confer no such authority. Both de- 
 fendants have contributed to the same injury, and are to 
 render buta single satisfaction." 1 The plaintiffs had their 
 election either to sue in trover, as though the proceeds 
 had been converted, or to recover the amount in an action 
 for money had and received.' 
 
 225a. Of course, the collecting bank cannpt keep the 
 money ; but we apprehend that it may be returned to the 
 source" whence it came. And when this is done, the 
 sender of the instrument collected can sustain no action 
 against the bank." 
 
 226. In like manner, if a drawee bank pays a check to 
 a collecting bank and charges the amount to the drawer, 
 and afterwards, discovering the original payee's indorse- 
 ment thereon to be a forgery, charges the amount to the 
 bank from which it was received and credits the drawer, 
 the check has been neither paid nor accepted. Thus, a 
 company drew a check on the Savannah Bank & Trust 
 Co. in favor of F.> It was indorsed with F.'s name, and 
 also " for collection for account of the Darien Bank," and 
 sent to the drawee bank, which credited the amdunt to 
 the sending bank and charged the drawee for the same. 
 Afterward, the drawee bank was notified by P. not to pay 
 the check, and that his indorsement was forged. The 
 bank then charged the amount to the Darien Bank, and 
 credited the account of the drawer, and returned the check 
 
 1 White v. Mechanics' Nat. Bank, 4 Daly 225, 228, citing Thomas v. 
 Bumsey, 6 Johns. 26. 
 
 2 Talbot v. Bank, 1 Hill 295. 
 
 3 Allen v. Fourth Nat. Bank, 59 N. Y. 12. 
 
272 BANK COLLECTIONS. § 226< 
 
 to the sending bank. In an action by F. against thi 
 drawee, he failed to recover.' - 
 
 226a. In Laue v. Lippe," a check was given by lipp 
 to Lane drawn on the G-ermania Bank, and which wa 
 paid on the forged indorsement of the payee to the Im 
 porters & Traders' Bank, and the amount was charged ti 
 the drawer. On discovery of the forgery, the amount wa 
 charged back, and the rightful holder, Laue, sued th 
 nfaker for it. He failed, the court declaring that he ha< 
 no cause of action against him, but ought to have pro 
 ceeded either against the Importers & Traders' Bank fo 
 conversion, or against the Germania Bank for the amoun 
 of the check. 3 
 
 "' Freeman v. Savannah Banking & Trust Co., 14 So. E. Rep. 579 (Ga.J 
 See First Nat. Bank v. Whitman, 94 XJ. S. 343. 
 
 2 25 N. Y. State Eep. 82% 
 
 3 Thomson v. Bank, 82 N. Y. 1, 6. 
 
§228 
 
 USAGE. 
 
 273 
 
 CHAPTEE IX. 
 
 USAGE. 
 
 22,7 When is a usage sanctioned? 
 '228. Usageis are general and special, 
 
 and binding whether known 
 
 or not. 
 
 229. The owner of a bill sent for col- 
 
 lection is bound by usage in 
 holding it «after promise of 
 payment. 
 
 230. The owner of a bill is bound by 
 
 usage concerning the kind of 
 money or instrument taken 
 for payment. 
 
 231. Usage relating to days of grace. 
 
 232. A drawee of a sight draft can 
 
 be notified by mail of its 
 receipt. 
 
 233. A bank may establish a differ- 
 
 ent mode of giving notice 
 than the regular one. 
 
 234. The depositing of notices in the 
 
 ^post office. 
 
 235. The giving notice of the time 
 
 when notes are due. 
 
 227. *A usage which is contrary to public policy is not 
 sanctioned. This is familiar law. But the fact is equally 
 well known that a usage is repugnant to established prin- 
 ciples'; indeed, the very nature of usage implies this. If 
 in harmony with them, it would not exists 
 
 .228. Usages are general and special, and both are equally 
 binding and are regarded as forming a part of contracts, 
 as much so as the law itself. A special usage cqptrols a 
 general one j but there is this important .difference, the 
 existence of a special usage must be proved. When it 
 does exist, all parties who do business within its opera- 
 tion are bound by it, whether they know of it or not. 
 Thus, when a bank with which a man does business, or 
 at which a note is payable, has a usage relating to* its 
 mode of doing that business, he will be bound by it 
 
 1 Throughout this work many questions of usage have been considered, 
 which may be found by examining the index. 
 18 
 
Tilt ±SAJNJi. UUiiiiJfiCTlOJSB. g 2 
 
 • • 
 
 whether he actually knew of it or not, and will be cc 
 sidered as transacting business with the bank, supjfbsi 
 that the custom would be regarded. 1 • • 
 
 229. When a person sends paper to a bank for coll 
 tion without special instructions, he is bound by t 
 usages prevailing among banks in that vicinity in maki 
 collections, nnless they are illegal ; and if there is oi 
 one bank in the place, its usages are as binding as th( 
 of «several banks which are doing business in anotl 
 locality. He is none the less affected by these usaj 
 through ignorance of them. 2 This principle has*been i 
 plied on several occasions. For example, in the Sanl 
 case a person sent a draft to i1? for collection without 
 structions. It was presented for payment and the drav 
 promised to pay the same. It was #cco»iingly held 
 ten days without notice to the drawer. During this tir 
 however, the drawee iriade an assignment. He endeavoi 
 to show that the bank was negligent in collecting 1 
 paper, especially in not giving -the drawer notice of w] 
 
 . had been done. It was clearly proved that the bank 1 
 followed its custom in making presentation of the dr 
 and holding it ten days for payment, and, therefore, \ 
 not liable. 
 
 230. So, too, it has. been decided that if the custom 
 receive bank<|ertificates of deposit as payment exists, 1 
 principal is bound thereby, even though ignorant of 
 existence. Thus, the owner of a note and mortgage liv: 
 in New»York sent it to the Monroe County Bank of Ioi 
 for collection, as the debtor, Massey, lived jiear that 
 stitution. Massey paid the note in a certificate of depc 
 issued by that bank. Becoming insolvent before r&mitt: 
 
 1 Bank v. Fitzhugh, 1 Har. & Gill 239 ; Bank v. Magruder, 6 Har. & Jo! 
 172; Lawrence v. Stonington Bank, 6 Conn. 521 ; Allen v. Merchants' Bi 
 15 Wend. 482, 486 ; Bank of the Metropolis v. New England Bank, 1 H 
 U. S. 234 ; Eenner v. Bank, 9 Wheat. 581 ; Bank v. Triplett, 1 Pet. 
 Lincoln & Kennebeck Bank v. Page, 9 Mass. 155; Dorchester & Milton B 
 v. New England Bank, 1 Cush. 177, 188. 
 
 2 Sahlieu v. Bank, 90 Tenn. 221. 
 
§ 231 usage. 275 
 
 the amount to New York, the owner of the note sought 
 to collect again of Massey. The court said that "it was 
 shown in evidence that it was customary for the Monroe 
 County Bank,' and, indeed, for all other banks, to receive 
 their certificates of deposit in payment of claims in the 
 hands of the bank for collection. But it is not shown by 
 the evidence that the plaintiff had notice of such custom. 
 We do not think it necessary either to prove the custom 
 or bring notice of it home to plaintiff. Courts take judi- 
 cial notice of the general customs and usages of merchants, 
 and of whatever ought to be generally known within the 
 limits of their jurisdiction, such as matters of public his- 
 tory affecting the whole people ; and we think that the 
 system by which nearly all the banks in this country 
 transact monetary affairs by the use of checks, drafts and 
 certificates of deposit, and without the actual handling of 
 bank-notes or coin, is so well known and understood that 
 no business man, much less a company, whose sole occupa- 
 tion is loaning money [which was the business of the 
 plaintiff], should' be allowed to profit by pleading igno- 
 rance of it. The plaintiff, in effect, claimed that Massey 
 should have presented his certificates of deposit at the bank 
 counter, and had the money counted out him, and then 
 counted it back to the cashier. The law does not require 
 any such, vain and unnecessary formality «in the transac- 
 tion of business." ' 
 
 231. There are important usages pertaining to days of 
 grace. Thus, if the last day be on Sunday payment may 
 be demanded on Monday wherever such a usage prevails. 2 
 So, too, the usage may be shown to demand payment on- 
 the fourth, instead of the third day, after the time fixed 
 for payment. 3 
 
 1 British & Am. Mortgage Co. v. Tibbals, 63 Iowa 468, 470. See \ 185. 
 
 2 Patriotic Bank v. Farmers' Bank, 2 Cianch Cir. Ct. 560. 1 Daniel on 
 Neg. Inst. § 627. 
 
 3 Renner v. "Bank, 9 Wheat. 581. 
 
276 BAKTK COLLECTIONS. § 21 
 
 232. A drawee of a draft can "be notified by mail of i 
 receipt whenever this is the mode established by the usa^ 
 or custom in that vicinity. In Cronse v. First Natiom 
 Bank, 1 the- plaintiff drew a draft without protest on h 
 debtor, payable at sight, and enclosed it to the First Ni 
 tional Bank for collection, without any instructions co] 
 cerning payment. The drawee lived seven miles from tl 
 bank and was notified by mail of the receipt of the draf 
 in doing so the bank followed the custom of bankers i 
 that vicinity. About two weeks afterward the draw* 
 came to the banli and accepted the draft. He was insolvei 
 when the draft was drawn and' executed an assignmei 
 two weeks after accepting it. The officers of the bank ha 
 ao knowledge of the drawee's financial condition. It ws 
 decided that the bank was not negligent in not making a 
 immediate presentment of the" draft. 
 
 233. A bank may establish a mode for giving notice t 
 charge the parties to a bill which differs from the genera 
 commercial law ; for example, it may send the notice b 
 post when all the parties reside in the "same place, an 
 such a custom is binding on the parties to a bill made paj 
 able at a particular bank. This subject has been well 
 considered by the Supreme Court of Alabama. In Gindra 
 v. Mechanics' Bank," proof was given of the usage of th 
 bank to give notice through the post office, and |he ques 
 tion was whether a bank could establish a rule that woul< 
 bind the parties to a bill payable at a particular bank 
 Said Mr. Justice Goldthwaite : "It must be borne in mind 
 that the question is not whether the bank could dispens 
 with notice altogether, but is merely as to the mode b; 
 which it shall be given. Notice to the indorsers, an< 
 drawer, is unquestionably a pre-requisite,' in general, t 
 charge them, and it is highly probable that no rule dig 
 pensing with it would affect a party, unless expressly as 
 Bented to. But the mode of notice is a matter which is i 
 
 1 15 N. Y. Supp. 408. 2 7'Aia. 324, 333. 
 
§ 235 usage. 277 
 
 • 
 its nature -subject to modification and change. Although 
 the post is now generally recognized as a legal mode, there 
 must have been a period in the history of commercial 
 paper when that was unknown. So, too, the introduction 
 of steam navigation between the old world and this, may 
 have the tendency to* introduce changes in the transmission 
 of notices with respect to foreign bills - % the same results 
 may flow from the electro-magnetic telegraph. Is then 
 the mode of giving notice a fixed and unchangeable rule, 
 incapable of modification, without the consent of parties ? 
 We think this question must be answered in the negative, 
 and other courts have come to the same and similar con- 
 clusions, after the fullest consideration. * * We, there- 
 fore, conclude, that it was competent for the bank at 
 Montgomery to establish a rule, that notice may be given 
 to parties through the post office although resident in 
 the same place, and that such rule was obligatory upon 
 the parties to all bills expressing upon their .face to be 
 payable at that bank." 
 
 234. But the depositing of a note in the post office is 
 insufficient, unless the, bill is payable at a bank which by 
 usage has adopted that mode of giving notice. 1 
 
 235. Likewise, evidence of the general custom to give 
 ' previous notice to the payer of the time when notes fall 
 
 due must be rejected, unless the practice of the particular 
 bank at which the note in question is payable can also 
 be shown. 3 
 
 1 Stephenson v. Primrose, 8 Porter 155 ; Foster v. McDonald. 3 Ala. 434; 
 Gindrat i. Mechanics' Bank, 7 Ala. 324 ; Rives v. Parmley, 18 Ala. 256 ; 
 John v. City Nat. Bank, 57 Ala. 96, 98. • 
 
 2 Camden v. Doremns, 3 How. 515. 
 
278 
 
 BANK COLLECTIONS. 
 
 23 
 
 CHAPTER X. 
 
 SUB-AGENCY. 
 
 236. Is the bank •with which paper 
 
 is deposited a transmitter or 
 collector. 
 
 237. New York rule. 
 
 238. Eeasons for the rale. 
 
 239. Where this rule prevails. 
 
 240. Massachusetts rule. 
 
 241. Reasons for this rule. 
 
 242. Discussion of both rules. 
 
 243. Where the older rule prevails. 
 
 244. But even where the first rule 
 
 prevails a bank may be em- 
 ployed simply as a transmitter. 
 
 245. And in all cases an express con- 
 
 tract must govern. 
 
 246. By the law of what state is the 
 
 contract to be governed. 
 246a. Kent v. Dawson Bank. 
 
 247. Wherever the first rule prevails 
 
 the owner of paper must look 
 to the principal or depository 
 bank to recover for any neg- 
 lect of duty. 
 
 248. The instructions to the first 
 
 bank do not affect only those 
 sub-agents that know of them. 
 
 249. But he can recover the proceeds 
 
 from whoever may have them 
 and also the paper. 
 
 250. But if a sub-agent collects the 
 
 paper and sends a draft on a 
 
 good bank for the amount, : 
 is not responsible for its fai 
 ure. 
 
 251. Nor does the first bank divef 
 
 itself of the title by sendin 
 the paper to a sub-agent. 
 
 252. When paper is sent to anothc 
 
 bank for payment and not fc 
 collection, a sub-agency is n( 
 created. 
 
 253. A bank should cjonvey prope 
 
 information* to the sub-ager 
 to make the collection in a 
 effective manner. 
 
 254. And if negligent is liable to th 
 
 primary bank. 
 
 255. Whenever the second rule pr< 
 
 vafls the first bank is not r< 
 sponsible for the negligenc 
 of the second. The owm 
 must look to the sub-agent. 
 
 256. But it may be liable by agree 
 
 ment. 
 
 257. Only the owner can sue the sul 
 
 agent. The primary ban 
 cannot acquire the right b 
 paying the debt. 
 
 258. Liability of a bank for a branc 
 
 bank. 
 
 259. Liability of a collection agenc 
 
 for its sub-agencies. 
 
 236. A long controversy has been waged by the stat 
 courts whether a second or sub-collecting bank, appoints 
 by the first, shall be held responsible for its negligence t 
 
§238 sub-agency. m . - 879 
 
 the owner of the note sent for collection, or whether the 
 first collecting bank shall be held responsible also for the 
 negligence of the second or sub-agent. 
 
 237. In New York, the first bank is responsible for the 
 negligence of the second. Judge Allen thus broadly de- 
 clares the law: "A bank receiving a bill or promissory- 
 note for collection, whether payable at its counter or else- 
 where, is liable for any neglect of duty occurring in its 
 collection, by which any of the parties are discharged, 
 whether of the officers and immediate servants or other 
 agents of the bank, or its correspondents or agents em- 
 ployed by such correspondents." ' In 1839, the highest 
 court in the state a rendered this formal determination : 
 "Resolv&d, that when a bank or broker, or other money 
 dealer, receives upon a good consideration a note or bill 
 for collection in the place where such bank, broker or 
 dealer carries on business, 6r at a distant place, the party 
 receiving the same for collection is liable for the neglect, 
 omission, or other misconduct of the bank or agent to 
 whom the note or bill is sent either in the negotiation, 
 collection, or paying over the money, by which the money 
 is lost or other injury sustained by the owner of the note 
 or bill, unless there be some agreement to the contrary 
 express or implied." 
 
 238. Thereasons for the rule, which were given by Sen- 
 ator Verplanck, thirteen senators concurring, have not 
 been since stated perhaps with greater force : ' ' Tv*Lat, 
 then," inquired the distinguished senator, "is the ordi- 
 nary undertaking, contract or agreement of a bank with 
 one of its dealers, in the case of an ordinary deposit of a 
 domestic note or bill, payable in the«same town received 
 
 1 Ayrault v. Pacific Bank, 47 N. Y. 570, 573, affg. 6 Robt. 337 ; Walker 
 v. Bank, 9 N. Y. 582; Commercial Bank v. Union Bank, 11 ST. Y. 203 ; Mont- 
 gomery Co. Bank v. Albany City Bank, 7 N. Y. 459 ; Naser v. First Nat. 
 Bank, 116 N. Y. 492 ; Corn Exchange Bank b. Farmers' Nat. Bank, 118 N. 
 Y. 443, 447 ; St. Nicholas Bank v. State Nat. Bank, 128 N. Y. 26 ; Hoard 
 v. Garner, 3 Sandf. 179. 
 
 2 Allen v. Merchants' Bank, 2:2 Wend. 244. 
 
280 • BANK COLLECTIONS. § 21 
 
 for collection % It is- a contract made with a corpora 
 body having only a legal existence, and governed by dire 
 tors who can act only by officers and agents ; or if it 1 
 with a private banker, he, too, is known to carry on h 
 business by clerks and agents. The contract itself is 1 
 perform certain duties necessary for the collection of tl 
 'paper and the security of the holder. But neither leg 
 construction nor the common' understanding* of men < 
 business can regard this contract (unless there be son 
 express understanding to that effect), as an appointmei 
 of «the bank, as an attorney or personal representative < 
 the owner of the paper, authorized to select other agen 
 for the purpose of collecting the note and nothing mon 
 There is a wide difference made as well by positive la? 
 as by the reason of the thing itself, between a contrai 
 or undertaking to do a thing, and the delegation of a 
 agent or attorney, to procure the doing the same thing- 
 between a contract for building a house (for example 
 and the appointment of* an overseer or superjntenden 
 authorized and undertaking to* act for the principal i 
 having a house built. The contractor is bound to answe 
 for any negligence or default in the performance of h 
 contract, although such negligence or default be not h 
 own, but that of some sub-contractor or under-workmai 
 Not so the mere representative agent, who discharges h 
 whole duty if he acts with good faith and .ordinary dil 
 gence in the selection of his materials, the forming his coi 
 tracts and the choice of his workmen. Now, in the case ( 
 a deposit for collection of a domestic note or bill payabl 
 in the same town, no one. can imagine that this, instead c 
 being a contract witJa the bank to use the proper meai 
 for collecting the paper, is a mere delegation of power t 
 act as an attorney for that purpose. If this wero so, an 
 it should happen that by the fraud, the carelessness, < 
 the ignorance of a clerk or teller, the only responsibl 
 parties were discharged, or the note itself lost or di 
 strbyed, it would be a sufficient defense for the bank 
 
§ 239 SU.B-AGENCY. • 281 
 
 it could show that the directors had employed ordinary- 
 care and caution in selecting their officers ; or any similar 
 defense which would be good in the mouth of an attorney- 
 in-fact, or a steward acting in good faith for his principal, 
 who had been defrauded in any transaction. If such 
 were the understanding of this business, and the merchant 
 had to trust to the responsibility of the teller or clerk 
 through whose hands his. paper may pass, and not to that 
 of the bank which employs them, few deposits for col- 
 lection would be made, and it would soon be f oimd expe- 
 _ dient to deal only with banks or bankers who would guar- 
 anty their officers. But the natural and general under- 
 standing of men of business is surely not this ; it is that 
 of an implied agreement with the bank itself, of whose 
 officers and agents they have no knowledge, and with 
 whom they have no privity of contract." 
 
 239. The same rule has been adopted «in New Jersey, 1 
 Ohio, 2 'Indiana, 8 Michigan, 1 Montana; 6 Minnesota," Ala- 
 bama, 7 and by the Supreme Cour^ of the United States * 
 and in England. In the case before the highest federal 
 court a Pittsburg bank sent to one in New York for collec- 
 tion, drafts drawn on a company in Newark, New Jersey. 
 The New York bank accordingly sent them to a bank jn 
 Newark for collection, and which was negligent in per- 
 forming the service. The Pittsburg bank having sued 
 its New York correspondent to recover the loss, Judge 
 Blatchf ord said, in delivering the opinion of the court : 
 
 1 Titus v. Mechanics' Nat. Bank, 35 N. J. Law 588 ; Davey v. Jones, 42 
 N. J. Law 28, 31. ' . 
 
 2 Eeeves v. State Bank, 8 Ohio St. 465 ; Bahk v. Butter, 41 Ohio St. 519 ; 
 Young v. Noble, 2 Disney 485 ; Bank v. Moore, Hamilton Co. Dis. Ct. 4 
 Bull. 291. 
 
 3 Tyson v. State Bank, 6 Blackf. 225. 
 
 4 Simpson v. Waldby, 63 Mich. 439. 
 
 5 Power v. First Nat. Bank, 6 Mont. 251. 
 
 6 .Streissguth v. National German American Bank, 43 Minn. 50. 
 ' Branch Bank a.Knox & Co., 1 Ala. 148 ; Bank v. Huggins, 3 Ala. 206. 
 8 Exchange Nat. Bank v. Third Nat. Bank, 112 U. S. 276, 290 ; Taber U 
 Perrot, 2 Gall. 565 ; contra Hyde v. First Nat. Bank, 7 Biss. 156. 
 
282 * BANK COLLECTIONS. § 240 
 
 " We regard as the proper rule of law applicable to this 
 case that declared in Van Wart v. Woolley, 1 where the 
 defendants, at Birmingham, received from the plaintiff a 
 bill on London, to procure its acceptance. They for- 
 warded it to their London banker, and acceptance was re- 
 fused, but he did not protest it for non-acceptance or give 
 notice of the refusal to accept. Chief Justice Abbott said : 
 ' Upon this state of facts it is evident that the defendants 
 (who cannot be distinguished from, but are answerable 
 for their^London correspondent) have been guilty of a neg- 
 lect of the duty which they owed to the plaintiff, their 
 employer, and from whom they received *a pecuniary re- 
 ward for their services. The plaintiff is, therefore, enti- 
 tled to maintain his action against them, to the extent of 
 any damage he may have sustained by their neglect.' In 
 that case there was a special peouniary reward for the 
 service. But upon the principles we have stated, we are 
 of opinion that by the receipt by the defendant of the 
 drafts in the present case for collection, it became, upon 
 general principles of law, and independently of any evi- 
 dence of usage, or of any express agreement to that effect, 
 liable for a neglect of duty occurring in that collection, 
 from the default of its correspondent, in Newark." 
 
 240. On the other hand, in Massachusetts "when a note 
 is deposited with a bank for collection, which is payable 
 at another place, the whole duty of the bank so receiving 
 the note in the first instance is seasonably to transmit the 
 same to a suitable bank or other agent at the place of pay- 
 ment. And as a part of the same doctrine it is well set- 
 tled that if the .acceptor of a bill or promisor of a note has 
 his residence in another place, it shall be presumed to 
 have been intended and understood between the depositor 
 for collection and the bank, that it was to be transmitted 
 to the place of the residence of the promisor, and the 
 same rule shall then apply as if on the face of the note it 
 
 1 3 Barn. & Ores. 439 ; Mackersy v. Eamsays, 9 Clark & Fin. 818. 
 
§ 241 SUB-AGENCY. 283 
 
 was payable at' that place." In Fabens' Case 1 "it was 
 known at the time of the indorsement of the npte that the 
 promisor lived in Philadelphia, and, of course, that the 
 note must be sent there for collection. We are therefore 
 of opinion that the defendants had performed their duty 
 when they transmitted the note to a solvent bank in good 
 standing and were not responsible for the misfeasance or 
 negligence of that bank." 2 
 
 241. The reasons for this rule have perhaps never been 
 better stated than by Chancellor Walworth, with whom 
 nine senators concurred, in the case of Allen v. Merchants' 
 Bank." " It is a; general rule of law, that banks and other 
 corporations, as well as individuals, are liable for the acts 
 or omissions of their general officers and servants, in re- 
 lation*fco any business intrusted to the corporation or in- 
 dividual to be transacted. But this rule does not apply 
 to a case where, from the nature of the business to be per- 
 formed, it cannot be done by any of the ordinary officers 
 or servants of the ®orporation or individual, but must be 
 intrusted to a sub-agent employed for that special pur- 
 pose ; or where by the usages of trade it is customary to 
 employ a special agent for the purpose of transacting the 
 business. Here, from the very nature of the business to 
 be transacted, and from the general usage in such cases, 
 
 1 Fabens v. Mercantile Bank, 23 Pick. 330 ; Dorchester & Milton Bank v. 
 New England Bank, 1 Cush. 177. See, also. Darling v. Stanwood, 14 Allen 
 504, 507. 
 
 2 -Shaw, C. J., adding that "we cannot perceive that it makes any differ- 
 ence in respect to the defendant's liability that this note was received as 
 collateral security. The general property was still in the plaintiff. It was 
 to be collected for him." Warren Bank v. Suffolk Bank, 10 Cush. 582. The 
 case of Bank of Washington v. Triplett, 1 Pet. 25, was cited to sustain the 
 position of the court, but the United States Supreme Court in the latest case 
 on the subject, declared that "the question under consideration was not 
 presented, for, although the defendant bank in that case was held to have 
 contracted directly wjth the holder of the bill to collect it, the negligence 
 alleged was the negligence of its own officers in the place where the bank 
 was situated." Exchange Nat. Bank v. Third Nat. Bank, 112 TJ. S. 282. 
 
 3 22 Wend. 215, 224. 
 
284 BANK COLLECTIONS. § 
 
 * 
 
 it was necessary to employ a bank or other agent in I 
 a&elphia for the special* purpose of negotiating this 
 of exchange, and of receiving the payment thereof, 
 should be duly honored. Prima facie, the risk of 
 neglect of such foreign bank or other special agen 
 negotiate the bill properly should be upon the owne 
 the bill who has impliedly, authorized the employmei 
 such special sub-agent. I admit that if it had been 
 custom of the banks to receive a commission or com; 
 sation for the collection of such bills and notes, bey 
 the difference of exchange between the two places and 
 actual expenses of negotiation, it might very prop 
 have been considered as in the nature of a del era 
 
 to 
 
 commission, so as to render such banks legally liable 
 the loss which might be* occasioned by the negligtnc 
 misconduct of their corresponding banks or agents, 
 incidental benefit which the bank in New York m 
 receive, in having the money collected through that ii 
 tution, from the chance of its remaining there as a dep 
 for a short time after it was collected, was undoubted 
 sufficient consideration for an implied agreement on 
 part of the bank, that the bill should not be lost to 
 plaintiffs by reason of any negligence on the part of 
 bank, or of its officers or servants. * * But it 
 tainly would be going very far to say that this mere chs 
 of benefit to the bank was in fact a del credere commiss 
 from which an agreement to warrant the plaintiffs aga 
 loss from the mistakes and negligence of the correspc 
 ing bank or agent could be legally inferred." 
 
 242. The reasoning of Senator Verplanck, adopted 
 the majority of the senators, who composed the hig 
 tribunal at that time, did not convince the supreme co 
 for in the case of the Bank of Orleans v. Smith, 1 deci 
 three years afterward, the members clung to the cl 
 cellor's view. In the Montgomery Cotmty Bank ci 
 however, a quietus was put on the.question, and since 
 
 ' 3 Hill 560. ■ 2 7N. Y. 459. 
 
§ 242 SUB-AGENCY. 285 
 
 day no Nelson has disturbed his judicial brethren by his 
 strong, though ineffectual, reasoning. But which of these 
 rules has found most favor with the judges of other states % 
 It is true thafr the Supreme Court of the United States 
 have adopted the New York rule ; the judges of the state 
 courts, however, have far more generally favored the rival 
 rule, and this is especially true of thejnore recent course 
 of judicial decision. In one of the latest cases, Mr. Justice 
 Post, speaking for the Supreme Court of Nebraska, 1 has 
 remarked : ' ' Whatever may have been the reasons arising 
 out of the business methods existing at the time Allen v. 
 Bank was decided for the rule adopted therein, the rea- 
 son for such a rUle is wanting «in view of the present 
 changed conditions. Banks, as a genergfl. rule, have now 
 no facilities for making collections at distant points, not 
 enjoyed by the business public at large. Formerly they 
 may have enjoyed a monopoly of information relative to 
 location, names and credit of banks at distant or remote 
 points. To-day, however, business men, by means of the 
 information derived from the press and the numerous direc- 
 tories at their command, may collect their bills through 
 the medium of banks at the place of payment as cheaply, 
 safely and_ expeditiously as their local bank. It is.more 
 convenient, and, therefore,' more frequent, for customers 
 to deposit drafts and acceptance with their home banks 
 for collection, paying therefor the cost of exchange only. 
 In this case, for instance, the bank not only made the col- 
 lections for defendant in error .without charge, but al- 
 lowed him to overdraw on account thereof, thus realizing 
 on his paper at once. As said by Chancellor Walworth 
 in Allen v. Bank, there is, in cases like this, no considera- 
 tion sufficient to support an undertaking by a bank to 
 answer for the default of, a correspondent where it has, 
 without fraud or negligence, in proper time, forwarded 
 the paper to a Reputable correspondent, with proper in- 
 structions, and when the loss is not occasioned by the act 
 
 1 First Nat. Bank v. Sprague, 51 N. W. Eep. 846. 
 
286 BANK COLLECTIONS. § 242 
 
 or omission of any of its immediate agents or servants. 
 The theory of those cases which hold the remitting bank 
 liable in such cases is that the advantage of exchange be- 
 tween different points is a sufficient inducement for banks 
 to assume the liability sought to be imposed. This may 
 be conceded, so far as the inconvenience and costs of col- 
 lection is concerned, but to us it seems wholly inadequate 
 as a consideration for an implied undertaking to insure 
 against loss on account of the fraud or insolvency of a 
 correspondent. The Supreme Court of Tennessee, in 
 Louisville Bank«. First National Bank, 1 after a thorough 
 examination of the cases on the subject, summarizes as 
 follows : ' The more reasonable and just construction of < 
 the undertaking*of the bank in which the bill is deposited 
 for collection is that, when the bill is payable at another 
 and distant place, the bank so receiving the bill discharges 
 itself of liability by transmitting the same, in due time, 
 to a suitable and reputable bank or other agent at the 
 place of payment ; and in such case it is manifest that a 
 sub-agent must be employed ; and the assent of the prin- 
 cipal is implied, as it cannot be said that the reviving 
 bank was expected or bound to send one of its own officers 
 to the distant point of payment for the purpose of per- 
 sonally attending to the collection for the very inadequate 
 compensation usually paid to banks for such service." 
 To the views thus expressed we give our unqualified as- 
 sent."' The imperfect character of the New York rule is 
 seen in the tendency of the courts to narrow its applica- 
 tion, though in their endeavors to dp this are making some 
 of the ways dark which would be luminous under the 
 
 1 8 Baxter 101. 
 
 2 And Beck, J., in Guelich v. National State Bank, 56 la. 434, 435, has 
 said that " a sub-agent is accountable ordinarily only to his superior agent 
 when employed without the assent or direction of the principal. But if he 
 be employed with the express or implied assent of the principal, the supe- 
 rior agent will not be responsible for his acts. There is, in such a case, a 
 privity between the sub-agent and the principal, who must, therefore, seek 
 a remedy directly against the sub-agent for his negligence or misconduct." 
 
§ 243 - SUB-AGENCY. 287 
 
 • 
 
 operation of the other rule. Thus, in sending checks or 
 other instruments to the bank at which they are payable 
 for payment, which may be legally done in .that state, in 
 what capacity does the bank act ? In some cases the courts 
 have said that it was the agent of the sending bank ; in 
 others of the payor, the mails acting as the presentor. In 
 some of these cases the capacity in which the bank acted 
 as agent of the sending bank was clearly manifest; in 
 other cases it was difficult to perceive that they were not 
 acting in the same manner, except that the courts said 
 they were not. The difficulties in the way of establishing 
 the doctrine that the mail can thus be used as a presentor, 
 doing the work of a bank or other agent, has been already 
 described, and we do not believe that the courts would have 
 ever tried to establish it except as a limitation to the prin- 
 ciple of a collecting bank's liability for the conduct of a 
 sub-agent. Admit that the second bank is acting asa sub- 
 agent in such cases, and that the first is not responsible for 
 its conduct if due care has been exercised in selecting it, 
 and the courts would have no need to resort to this peculiar 
 subterfuge of the mails to find a mode of just escape for 
 the principal collecting bank for the conduct of the other. 1 
 243. In what^states, then, does this prevail ? First es- 
 tablished, and afterward overthrown in New York,' the 
 rule has been adopted in Massachusetts, 3 Connecticut, 4 
 Maryland,' Missouri, 6 Illinois, ' Tennessee, 8 Iowa, 8 Wis- 
 
 1 See l 194-196a. 
 
 2 Smedes v. Bank, 20 Johns. 372, affd. 3 Cow! 663; McKinster v. Bank, 9 
 9 Wend. 46, affd. 11 Wend. 473. 
 
 3 Fabens v. Mercantile Bank, 23 Pick. 330 ; Dorchester & Milton Bank v. 
 New England Bank, 1 Cush. 177; Warren Bank v. Suffolk Bank, 10 Cush. 582. 
 
 1 Lawrence v. Stonington Bank, 6 Conn. 521; East-Haddam Bank v. Scovil, 
 12 Conn. 303. 
 
 5 Jackson v. Union Bank, 6 Har. & Johns. 146; Citizens' Bank a. Howell, 
 8 Md. 530. 
 
 6 Daly v. Butchers & Drovers' Bank, 56 Mo. 94. 
 
 ' ./Etna Ins. Co. v. Alton City Bank, 25 111. 243; Fay v. Strawn, 32 111. 295. 
 
 8 Bank of Louisville v. First Nat. Bank, 8 Baxter 101 ; Second Nat. Bank 
 v. Cummings, 18 So. W. Rep. 115, (Tenn.). 
 * » Guelich v. National State Bank, 56 la. 434. 
 
288 BANK COLLECTIONS. § 244 
 
 consul, 1 Kansas,' Mississippi,' Louisiana,* Nebraska, 8 
 Pennsylvania.* 
 
 244. Though in New York a collecting bank is liable 
 for the conduct of its sub-agent, a bank with which a 
 check or other instrument is left for the purpose, of hav- 
 ing it collected may act simply as a transmitting agent to 
 another bank. For example, in Naser v. First National 
 Bank,' the drawers of a bill in London employed an agent, 
 M. & Co., to transmit it to the First National Bank of 
 New York — the place where the drawee lived — wjth in- 
 structions to collect the same on account of. the drawers. 
 The collection having been made, the amount was attached 
 when in the possession of the bank in a suit against the 
 drawers. The validity of the attachment turned on the 
 question whether the bank was a sub-agent of M. & Co. 
 or not, and the c<5urt held that M. & Co. were not em- 
 ployed to collect the draft, but rather to transmit it to the 
 bank which was, therefore, the principal agent to make 
 the collection and liable for the amount." Had M. & Co. 
 been employed to make the collection then they would 
 have been the bank's principal and responsible therefor.' 
 In that event the payment to the bank would have been 
 treated as payment to M. & Co., andthejj would have be- 
 come the debtors of their principal on that account." 
 
 1 Stacy v. Dane Co. Bank, 12 Wis. 629. 
 
 2 Bank v. Ober, 31 Kansas 599. 
 
 3 Third Nat. Bank v. Vicksburg Bank, 61 Miss. 112; Tiernan t*. Commer- 
 cial Bank, 7 How. 648; Agricultural Bank v. Commercial Bank, 7 Sm. & 
 Marsh 592; Bowling v. Arthur, 34 Miss. 41. 
 
 4 Hyde v. Planters' Bank, 17 La. 560 ; Baldwin v. Bank, 1 La. Ann. 13 ; 
 
 17 La. Ann. 560. 
 
 6 First Nat. Bank v. Sprague, 51 N. W. Eep. 846. 
 
 6 Merchants' Nat. Bank v. Goodman, 109 Pa. 422, 427 ; Wingate v. Me- 
 chanics' Bank, 10 Pa. 104; Mechanics' Bank v. Earp, 4 Eawle 384; Belle- 
 mire v. Bank, 4 Whart. 105. See Bradstreet v. Everson, 72 Pa. 124; Hazlett 
 ■v. Commercial Nat. Bank, 132 Pa. 118. 
 
 7 116 N. Y. 492. 8 Bank v. Tviplett, 1 Pet. 25. 
 
 9 Colvin.w. Holbrook, 2 N. Y. 126; Costigan v. Newland, 12 Barb. 456. 
 
 10 Warren Bank v. Suffolk Bank ,*10 Cush. 582, 586. If the payee of a bill 
 
§ 246 SUB- AGENCY. 289 
 
 245. And in all cases an express contract mnst govern. 1 
 
 246. As rival rules exist in the various states concern- 
 ing the liability of a bank when a second bank or sub- 
 agent is employed in making a collection, one rule holding 
 that the first bank is only a transmitter to the other, the 
 other rule holding that the first bank is primarily the 
 agent and solely responsible for the conduct of the other — 
 the place of performance of the contract sometimes is im- 
 portant in determining the liability of a bank. Thus, if 
 the place of performance is in New York, "the New York 
 rule must apply, and the collecting bank in that place is 
 liable for any negligence of its sub-agent, while in Massa- 
 chusetts the transmitting bank would not be liable for the 
 negligence of the bank which actually made the collection. 
 This question arose in the case of the St. Nicholas Bank 
 of New York v. State National Bank of Tennessee. 2 The 
 New York bank sent to the Memphis bank a check for 
 collection drawn on a bank in Texas. The Memphis bank 
 sent it to bankers in Texas who were in good standing, 
 and who collected the check and remitted the amount by 
 sight draft on a firm in New York city. The Memphis 
 bank received the draft and sent it to the New York bank 
 for collection. Before presentment the payors had failed. 
 The New York bank then sued the Memphis bank for the 
 amount which, however, claimed that it was a Tennessee 
 contract, and that under the law of that state it was not 
 liable. Had the question been determined by the Ten- 
 nessee law, the bank would clearly have escaped payment, 
 but it was held that this contention could not be sustained, 
 for, in the absence of proof, it could not be assumed that 
 
 indorse and deliver it to a bank to be transmitted to another bank for col- 
 lection, and this is done, the second bank is the agent of the payee and 
 answerable to him for any breach of duty in relation to the bill. Farmers' 
 Bank v. Owen, 5 Cranch C. Ct. 504. 
 
 1 Bank v. First Nat. Bank, 8 Bax. 101, 104; Warren Bankv. Suffolk Bank, 
 10 Cush. 583, 586. See Mechanics' B^ank v. Earp, 4 Eawle 384. 
 2 128 N. Y. 26, 34. 
 
 19 B. 
 
290 BANK COLLECTIONS. § 246a 
 
 the contract was made in Tennessee, nor was it to be per- 
 formed there, but rather the performance was to be made 
 in Texas and New York. The New York rule, therefore, 
 was applied and the Memphis bank was held liable. The 
 remarks of the court by Mr. Justice Earl are worth add- 
 ing : "But it cannot be maintained that the contract be- 
 tween these parties was a Tennessee contract. It is by no 
 means clear even that it can be held that the contract was 
 made there. It does not certainly appear where it was 
 made. It cannot be said that a new contract was made 
 every time a piece of paper was sent by the plaintiff to 
 the defendant for collection. There was a general con- 
 tract between the parties which was either created by 
 some negotiation or which grew out of the course of busi- 
 ness between them, that the defendant should collect the 
 papers sent to it for the compensation to be allowed. If 
 that contract was made, by correspondence, the plaintiff 
 making a proposition by mail and the defendant accepting 
 it by mail, then, when the acceptance was put in the mail 
 at Memphis, the contract was complete and had its incep- 
 tion there. If the proposition came from the defendant 
 and was accepted in the same way in New York, then it 
 would have to be treated as made in New York. In the 
 absence of more proof than we have here, it cannot be as- 
 sumed that this contract was made in Tennessee. Nor is 
 this to be regarded as a Tennessee contract, for the rea- 
 son that it was to be performed there, so that the defend- 
 ant can claim that its obligations and interpretation is to 
 be governed by Tennessee law. We cannot perceive how 
 any substantial part of the contract was to be performed 
 in Tennessee. The defendant was to collect this draft in 
 Texas, and pay its proceeds, less its compensation, to the 
 plaintiff in New York, and so the contract was to be per- 
 formed in Texas and New York." 
 
 246a. In another case, a bank in Illinois, owning a draft 
 on a person in North Carolina, transmitted it by mail to 
 a bank in Wilmington in that state with directions to col- 
 
§ 248 SUB-AGENCY. 291 
 
 lect and remit the proceeds. As this contract was to be 
 wholly executed in that state it was governed by the law 
 of North Carolina. . Judge Wallace said : " The place of 
 performance of a contract is generally a controlling con- 
 sideration by which to determine the lex loci contractus, 
 and where as here the contract was* both made in !North 
 Carolina and was to be performed there, it is clear that 
 the case must be controlled py the law of that state." ' 
 
 247. Wherever the first rule prevails the owner can look 
 only to the bank with which he has deposited his paper 
 for redaess in the event that it does not fulfil its duty. 
 There is no privity of contract between him and sub-agents 
 that may be employed in making the collection. They 
 are answerable to the bank that employed them for every 
 default of duty, but not to the depositor. Says Mr. 
 Justice Allen :' "As agent under an obligation to collect 
 the bill for the owner, the plaintiff was authorized to con- 
 tract with another to perform that duty, and from the 
 right to contract results the right to enforce the contract 
 by action ; and as the indorsee of the bill under the busi- 
 ness arrangement existing within it, and its immediate 
 indorser, the plaintiff, had the 1 possession of the bill 
 coupled with an interest ^hich entitled, it to make and 
 enforce the contract with the defendants, which is the 
 foundation of this action, or any other legal contract, 
 either for the transfer or collection of the bill, so that in 
 either capacity the action is properly brought by the 
 plaintiff.'" 
 
 248. In like manner if a draft is deposited with a bank 
 and instructions are given concerning its collection, which 
 are disregarded, the depositor cannot hold the sub-agent 
 liable unless they are known by him. Quite frequently 
 letters are written to the depository bank, or by the prin- 
 
 ! Kent v. Dawson Bank, 13 Blatch. 237, 238. 
 
 2 Commercial Bank v. National Bank, 11 N. Y. 203, 213. 
 
 3 Corn Exchange Bank v. Farmers' Nat. Bank, 118 N. Y. 443, 448; Mont- 
 gomery Co. Bank v. Albany City Bank, 7 N. Y. 459. • 
 
292 BANK COLLECTIONS. § 249 
 
 oipal bank, perhaps, to another, which are not transmitted 
 to the final agency with the draft itself. Of course, what- 
 ever directions may have been given in the way of indorse- 
 ments are known to all the indorsees, who must act ac- 
 cordingly, but letters or verbal instructions surely have 
 no force only among those who know of them. 
 
 249. Though there be no privity of contract between the 
 depositor and sub-agent, but only with the bank which 
 has received the paper for collection, the depositor can 
 recover the proceeds of any sub-agent who may happen to 
 have them. No contract relation need exist to <tio this. 
 As the money belongs to the depositor he has a right to 
 it," and also to the paper itself. Thus, M., who owned a 
 note and draft, indorsed them in blank and delivered them 
 to the State Bank of West Virginia with a letter of in- 
 structions to collect the same. It sent them to the de- 
 fendant bank with an indorsement that they were for col- 
 lection. Before either was collected the State bank failed, 
 owing the other for overdrafts. M. demanded the note 
 and draft of the defendant bank,, but it refused to give 
 them to him, and claimed that it could rightfully apply 
 the proceeds on the indebtedness of the State bank. 
 M. having assigned the note and draft to the plaintiff, it 
 was decided that he could recover them of the latter in- 
 stitution." " It does not follow," says Mr. Justice Brad- 
 ley, 3 "that the correspondent of the collecting agent, 
 unless he has made advances to the latter in good faith 
 upon the paper, can, as against the owner, retain the pro- 
 ceeds of it. The latter may revoke the agency he has con- 
 ferred, and seek the paper or its proceeds in the hands of 
 such correspondent, or he may follow it and rteach them 
 until it or they have found their way into the hands of a 
 
 See l\ 51, 52. 
 
 2 Stark v. United States Nat. Bank, 41 Hun 506 ; Patriotic Bank v. 
 Farmers' Bank,' 2 Cranch C. Ct. 560 ; Camden v. Doremus, 3 How. 515. 
 See g 58. 
 
 3 Naser v. First Nat. Bank, 116 N. Y. 492, 499. 
 
§ 251 SUB- AGENCY. 293 
 
 bona fide holder, for value, who has taken it from the 
 party clothed with the apparent title. This is an equit- 
 able right not necessarily resting in privity of contract 
 with the party from whom such relief is sought. The oc- 
 casion for it usually arises from the insolvency of his col- 
 lecting agent, or some other cause rendering such remedy 
 desirable for his protection." • , 
 
 250. But if a sub-agent collects the paper and sends a 
 draft for the amount, drawn by a bank in good standing 
 on another doing business in or near the same place, as 
 the bank from which the paper started, the sub-agent has 
 fulfilled its duty and is not responsible should the prin- 
 cipal collecting bank not obtain payment of the draft in 
 consequence of the failure of the parties to the same. In 
 St. Nicholas Bank of New York v. State National Bank 
 of Memphis, 2 the plaintiff sent a check for collection to 
 the defendant, which was drawn by a resident in Dallas, 
 Texas, on a bank there and payable to a person in New 
 York. The Memphis bank sent it to bankers in Texas 
 who collected it, but before the proceeds were received 
 by the Memphis bank the Dallas bank had failed. "If 
 they had purchased a draft," said Mr. Justice Earl, "of 
 a Dallas bank and sent that to the plaintiff, or if it had 
 sent the draft to the defendant and the latter had sent it 
 to the plaintiff, the defendant would not have been re- 
 sponsible for the continued solvency of the*Dallas bank." 
 Instead of doing this the Dallas bankers drew their own 
 draft on bankers in New York, and sent this in discharge 
 of the collection. This was not paid, and by the New 
 York rule the Memphis bank was responsible for the re- 
 sult. 
 
 251. As a bank that receives drafts merely for collec- 
 tion is the agent of the holder for that purpose, its title 
 
 1 Warner v. Lee, 6 N. Y. 144 ; Commercial Bank v. Marine Bank, 1 Abb. 
 Ct. of App. Dee. 405; Dickerson v. Wason, 47 N. Y. 439 ; Farmers & Me- 
 chanics' Nat. Bank v. King, 57 Penn. 202. 
 
 s 128 N. Y. 26, 32. 
 
294 BANK COLLECTIONS. § 252 
 
 is not divested by sending them to another bank to be col- 
 lected. Consequently the first bank has the right to pre- 
 sent them for payment whenever the other becomes insol- 
 vent without subjecting itself to liability»as the drawer 
 in a suit by the receiver of the insolvent institution. 1 
 
 252. When a note or other, instrument is presented or 
 sent through the mail to another bank for payment, and 
 not for collection, a sub-agency is not created. Indig con- 
 tended that the Brooklyn bank constituted the Lowville 
 bank its agent to receive payment of the note, and was 
 therefore liable for the amount which was paid by charg- 
 ing the same to the account of the maker who was also a 
 depositor. So 'he sued the Brooklyn bank, the other 
 having failed, for the amount of the note. The court, 
 however, did not think that an agency had been created. 
 Of course, if a note was presented to a bank for payment 
 the payor would not be regarded as the collector. But if 
 the bank besides paying transmitted the amount, it would 
 be something more than a payor. Again, 'the doctrine 
 that the mail can be. used for purpose of presentation is 
 questionable. Xetters and notices can be transmitted 
 through it, but not presented, and surely if the post office 
 delivered or presented a letter containing a check or note, 
 it would have no authority to open the same, much, less 
 to demand payment. Now, when this note was sent, un- 
 doubtedly the*Brooklyn bank expected the Lowville bank 
 to make proper presentment and demand, and if the note 
 had not been paid expected that it would protest the same 
 and give notice thereof, and would have held the bank 
 liable had it not done these things. This, surely, is the 
 ordinary course of business between banks in such cases. 
 The more thoroughly this case is examined the more 
 clearly does it appear that the decision was a subterfuge 
 to escape the application of the rule whereby a bank is 
 liable for the negligence of a sub-agent." 
 
 1 Atkinson v. Stafford, N. Y. Supreme Ct. 20 Week. Dig. 49. 
 " See a 242. 
 
§ 253 SUB- AGENCY. 295 
 
 253. The principal, or first bank, should convey proper 
 information to the sub-agent to enable it to act in an in- 
 telligent- manner in making the collection. If a banker 
 of St. Paul, Minnesota, for example, should receive a note 
 for collection payable at St. Anthony, and was informed 
 that there were two persons of the same name as the in- 
 dorser, one of them residing at St. Paul and the other at 
 Mninger. not far away, and that the one residing at the 
 latter place was the indorser, the banker should convey 
 this information to the agent employed at St. Anthony 
 to collect the note. "No custom," said the court in a 
 case of this kind, "could absolve the banker from this 
 duty, as it was the very essence of his undertaking the 
 fixing of the liability of the indorser." ' A firm in Mich- 
 igan left for collection with a bank in that state a sight 
 draft for $500 on J. C, treasurer of a corporation in Con- 
 necticut, which sent the same to the defendant bank with 
 directions to "return at once without protest if not paid." 
 • It presented the draft to the drawee, who replied that he 
 would look up his account with the drawers and inform 
 the cashier with regard to payment. The drawers had 
 also written to J. C. that such a draft had been forwarded, 
 and he wrote in reply: "The $500 draft has been re- 
 ceived and paid. Don't draw any more." On the re- 
 ceipt of this letter the drawers showed it to the Michigan 
 bank, which, believing that the draft had been duly paid, 
 also paid the drawers $500. J. C, the drawee, was also 
 the president of the defendant bank, and this fact was 
 known to the one in Michigan. Several days later the 
 cashier returned the draft unpaid, which was, his first in- 
 formation to the Michigan bank with regard to the matter. 
 It then demanded repayment of the drawers which was 
 refused. They were solvent, but had no visible property, 
 and the claim could not have been collected without much 
 difficulty. It was held, first, that the defendant bank, as 
 
 1 Borup v. Nininger, 5 Minn. 523, 552 
 
296 BANK COLLECTIONS. § 257 
 
 agent of the other for the collection of the draft, had been 
 guilty of negligence in not obtaining payment of the draft 
 or returning it at once to the Mic^rigan bank. Second, * 
 that payment by the Michigan bank to the drawers on 
 the statement of the drawee to the drawers that the draft 
 had been paid, would not have been made if the defend- 
 ant bank had performed its duty, consequently it was 
 liable for the actual damages resulting from its neglect. 
 Third, that these damages were to be regarded as the 
 whole amount paid by the plaintiff bank to the drawers, 
 and that it had a right to recover this sum, although it 
 had a right of action for the whole amount against them. 
 
 254. When paper is thus received accompanied with 
 proper instructions, the sub-agent must follow them, and 
 is liable for neglect to execute them. 1 A single case may 
 be described in which this principle was applied." 
 
 255. Turning to the second rule, the first bank fulfils 
 its duty in selecting a proper agent and transmitting the 
 paper promptly to it. If its duty is not performed, the 
 owner has a re^nedy against it and not against the trans- 
 mitting bank.' 
 
 256. But the transmitting bank may become liable to 
 the depositor for the conduct of the sub-agent by agree- 
 ment. This was declared in the case of the Mechanics' 
 Bank, 4 for, by the law of Pennsylvania, where the bank 
 existed, it was not ordinarily liable for the conduct of a 
 sub-agent. 
 
 257. Wherever the second rule prevails, and the bank 
 which has received paper for collection is regarded only 
 as a' transmitter and' has properly performed its duty in 
 this regard, it cannot, should the collecting agent be neg- 
 ligent by voluntarily discharging the claim of the de- 
 
 1 First Nat. Bank of Trinidad v. First Nat. Bank of Denver, 4 Dill. 290. 
 
 2 Merchants & Manufacturers' Nat. Bank o. Stafford Nat. Bank, TJ. S. 
 Dist. Ct. 44 Conn. 564. See § 142 for description. 
 
 s See U 240, 241. 
 • 4 Eawle 384. 
 
§ 259 SUB- AGENCY. 397 
 
 • « 
 
 positor, maintain an action against the agent. The right 
 of action accrues only to the holder or owner of the paper 
 to be collected. 1 ■ 
 
 258. Lastly, a bank is liable for the conduct of a branch 
 bank in making collections. A promissory note payable 
 twelve months after date at the Citizens' Bank in New Or- 
 leans, and indorsed by A., the payee, and by B., the 
 owner, who resided in Missouri, was sent for collection to 
 a branch of the Louisiana State Bank at Baton Bouge. 
 The cashier indorsed the note and forwarded it to the 
 mother bank at New Orleans. It was duly protested for 
 non-payment by the notary of the mother bank, and no- 
 tices of protest for the indorsers were mailed to the cashier 
 'of the branch bank. A., on whom reliance was princi- 
 pally placed for payment, died, and his executor was 
 duly qualified before the maturity of the note, but neither 
 he nor B. was served by the branch bank with notice of 
 piotest. The bank therefore was declared liable for any 
 loss sustained by the holder of the note*. 2 
 
 259. Though the courts have parted ways on the lia- 
 bility of banks for the conduct of their sub-agents, they 
 have united in holding a collecting agency, like Brad- 
 street, responsible for the conduct of its agents. This 
 question was thoroughly considered by Mr. Justice Ag- 
 new. 3 Collection agencies "have their selected agents in 
 every part of the country. From the nature of such rami- 
 fied institutions we must conclude that the public impres- 
 sion will be that the agency invited customers on the 
 very ground of its facilities for making distant collections. 
 It must be presumed from its business connections at re- 
 mote points, and its knowledge of the agents chosen, the 
 agency intends to undertake the performance of the ser- 
 vice which the individual customer is unable to perform 
 
 1 Bank v. First Nat. Bank, 8 Bax. 101 ; Farmers' Bank v. Owen, 5 Oanch 
 C. Ct. 504 ; Story on Bills No. 450. 
 
 2 Bird v. Louisiana State Bank, 93 U. S. 96. 
 s Bradstreet v. Everson, 72 Pa. 124, 134. 
 
298 BANK COLLECTIONS. § 259 
 
 for himself. There is good reason, therefore, to hold that 
 such an agency is liable for collections made by its own 
 agents when it undertakes the collection by the express 
 terms of the receipt. If it does not so intend, it has it in 
 its power to limit responsibility by the terms of the re- 
 ceipt." 1 
 
 ■ 
 
 1 Morgan v. Tener, 83 Penn. 305 ; Hoovers. Wise, 91 U. S. 308, 315 ; Cobb 
 v. Beeke, 6 Q. B. 930 ; Weyerhauser v. Lee, 83 Pa. 416. In Bullitt ». Baird, 
 27 Leg. Int. 171, the receipt restricted the liability of the collector. 
 
§ 260 DAMAGES. 299 
 
 Chapter xi. 
 
 DAMAGES. 
 
 260. Only actual damages can be 
 
 recovered. 
 
 261. Evidence may be introduced to 
 
 show the actual loss. 
 
 262. In many cases the loss is only 
 
 nominal. 
 
 263. The insolvency of the parties to 
 
 the paper may be shown. 
 
 264. Damages collectible on a draft. 
 264a. Hambro v. Casey. 
 
 265. The loss must be proved. 
 
 260. The damage that may be recovered of the collect- 
 ing bank when in the wrong is the amount actually sus- 
 tained by the sender. If the instrument left for collec- 
 tion be a bill of exchange, for example, and the bank 
 should omit to take proper steps to charge the drawer and 
 indorsers, the damage would be the face of the bill with 
 interest.' One of the ancient authorities has remarked 
 that "when any person has bills sent to him to procure 
 their acceptance, with directions to return them, or hold 
 them at the order of the seconds, etc., and the person to 
 whom they are sent, either forgets or neglects to demand 
 acceptance, or he suffers the party on whom they are 
 drawn to delay their acceptance, and the drawers, in the 
 interim, fail, he is certainly very blameworthy for his 
 carelessness and disregard of complying with his obliga- 
 tion ; though this will not subject him to the payment of 
 their value ; but if he should be urged to procure ac- 
 ceptance and payment to a bill sent him, and should 
 protract or defer the getting it done, and the acceptant, 
 
 1 American Express Co. v. fiaire, 21 Ind. 4 ; Chapman v. McCrea, 63 Ind. 
 360; Tyson v. State Bank, 6 Blackf. 225. 
 
3UU BANK COLLECTIONS § ZtKJ 
 
 being ignorant of the drawer's circumstances, declares he 
 would have accepted it had it been timely presented, the 
 person guilty of this neglect will be obliged to make good 
 the loss that has happened to his correspondent, purely 
 through his omission and carelessness." 1 
 
 261. In applying this rule evidencejnay be admitted to 
 show what is the actual loss.' In the Meadville bank 
 case, the damage recoverable was.»declared to be the 
 amount actually sustained by the sender, which on that 
 occasion was the Meadville Bank. But as the drawer or 
 Crawford County Bank was bound, the necessary steps 
 for that purpose having been taken, the law presumed 
 that it was solvent and responsible for the amount of the 
 draft, and consequently only nominal damage was re- 
 covered against the collecting agent. This presumption, ■ 
 however, does not stand in the way of proving and recov- 
 ering the actual loss incurred by the negligence of the 
 collecting bank. Accordingly, on a second trial of the 
 case, for the purpose of showing damage to the full amount 
 of the draft, the Meadville Bank offered in evidence the 
 judgment record of a Pennsylvania court in an action on 
 the draft whereby it was adjudged that the acceptance of 
 the check and omission to make due presentment consti- 
 tuted as between the Crawford County, Meadville and 
 Fourth National Banks a payment, and. discharged the 
 drawer' s liability. This record was regarded competent 
 evidence and conclusively established the damage of the 
 Meadville Bank to the full amount of the draft. It may 
 also be added that it was declared to be not necessary to 
 tender the draft to the Fourth National Bank before be- 
 ginning the suit thereon.' 
 
 262. In many cases the loss is only nominal, as a collec- 
 
 1 Beawe's Lex. Mer., p. 566. 
 
 2 Bank v. Kenan, 76 N. C. 340, 345 ; Stowe v. Bank, 3 Dev. 408 ; 1 Dan. 
 on Neg. Inst. Nos. 328, 330. 
 
 3 First Nat. Bank of Meadville v. Fourth Nat. Bank of New York, 89 N. 
 Y. 412. 
 
§ 263 DAMAGES. 301 
 
 tion may be made of some other party to the note, for ex- 
 ample, if the maker of the note is solvent it cannot be said 
 that the owners have sustained actual damage to the 
 amount of the note, although the indorser has been dis- 
 charged. 1 
 
 263. The insolvency of the parties to the the paper re- 
 ceived for collection may be shown. In a well-reasoned 
 Minnesota case for negligence in collecting a note the 
 court said : "The defendants may mitigate the damages 
 by showing either the solvency of the maker, the insolv- 
 ency of the indorser, or that^he paper was partially or 
 wholly secured, or any other fact that will lessen the 
 actual loss to the plaintiff ; the real loss occasioned by the 
 improper conduct of the defendant being the fact for the 
 jury to arrive at in measuring the plaintiff's damages." 2 
 But the mere fact that the indorser was in embarrased 
 circumstances is immaterial and forms no defense. 3 "In 
 an action for neglecting to protest a note whereby the 
 liability of an indorser has been lost, the parties sued have 
 a right to show on the question of damages any such 
 state of facts as will tend to show that the loss of the 
 plaintiff has been less than the face of the obligation of 
 the maker. The* general rule is that in an action for neg- 
 ligence the plaintiff can recover no more than the amount 
 which will fully compensate. him for the injury sustained 
 by the negligence in question. And in an action of this 
 particular character, the defendant may show that the 
 creditor holds collateral securities for the payment of the 
 debt to which he may resort in diminution of the damages 
 which would prima facie appear to have been sustained 
 by the negligent omission to charge the indorser." 4 
 
 1 Bank v. Huggins, 3 Ala. 206, 214. 
 
 2 Borup v. Nininger, 5 Minn. 523, 549, citing among other cases, Hoard 
 v. Garner, 3 Sand. 179; Blot v. Boiceau, 3 N. Y. 78; Steele v. Eussell, 5 Neb. 
 211; Stowe v. Bank of Cape Fear, 3 Dev. 408. 
 
 s Steele v. Eussell, 5 Neb. 211. 
 
 4 Taloott, J., Mott v. Havana Nat. Bank, 22 Hun 354, 358, citing First 
 Nat. Bank v. Fourth Nat. Bank, 77 N. Y. 320 ; Allen v. Suydam, 20 Wend. 321. 
 
302 BANK COLLECTIONS. § 26 
 
 264. When a bank has failed to collect a draft "damag 
 to the whole amount of the draft are recoverable only wh 
 it is reasonably probable from the circumstances of t 
 case that the draft would have been accepted and paid 1 
 the drawee if the defendant agent had done his duty 
 regard to its collection." 1 
 
 264a. In HambrO v. Casey," it was declared that whei 
 bank is the owner and holder of a bill of exchange on 
 foreign country, which is remitted for collection to i 
 foreign correspondent and the bill is not paid at maturit 
 and is protested, the correspondent is not entitled to dai 
 ages on the protest as against the owner, even though ] 
 had failed before the maturity of the bill and was largei 
 indebted to the correspondent. Thus, a banking fir 
 in London maintained a correspondence with a bank : 
 New Orleans, which kept a running account with tl 
 firm, drawing on them from time to time as occasion r 
 quired, and remitting bills to cover the drafts. In tl 
 course of business the bank became the owner of bil 
 drawn by a New Orleans firm on their correspondent i 
 Prance, which were endorsed by the bank and remitted f < 
 collection and credited to their correspondent in Londoi 
 Before the bills matured, the bank failed and so did tl 
 drawers and the drawees. The bills were protested i 
 maturity and the expense was paid by the London fira 
 Under the laws of Louisana damage on protest of foreig 
 bills of exchange is ten per cent, on the principal sum spec 
 fled therein. The London firm brought a suit against th 
 receiver of the bank to recover the charges for protes 
 and the ten per cent, damages, and judgment was give 
 against him for the expenses of the protest, but in h: 
 favor on the claim for damages. In reviewing the cas 
 Mr. Chief Justice Waite said: "All moneys collecte 
 by Hambro & Son on the bills, whether it be for princ 
 
 1 Marvin, J., in Crouse v. First Nat. Bank, 15 N. Y. Supp. 408 ; Failii 
 v. Fargo, 12 N. Y. Week. Dig. 121. 
 2 J10U. S. 216. 
 
§ 265 DAMAGES. 303 
 
 pal, interest, or damages, must be passed as soon as col- 
 lected to the credit of the bank. Hambro & Son are the 
 holders of the*bills, but in no legal sense the owners, 
 though it may be their lien is for more than can be col- 
 lected from the drawers or drawees. Clearly the law does 
 not require the bank to pay the damages, when the pay- 
 ment, if made, must be passed to its own credit on the 
 books of its collecting agents."' 
 
 265. In order to recover of a collecting agent the party 
 suing must prove that he has sustained loss. Indig de- 
 posited with a Brooklyn bank for collection a note to 
 which there was no indorser save the maker. It was pay- 
 able at a bank in Lowville, of which the maker was also 
 a customer. The Brooklyn bank sent the note by mail 
 to the other, which was the ordinary way of doing such 
 business. It reached the bank on the day of maturity, a 
 draft for the amount was sent to the Brooklyn bank the 
 next day, before the end of which, however, the Lowville 
 bank failed. The maker did not have a deposit at that 
 time in the bank sufficient to pay the note, but he paid 
 the balance after the failure. The Brooklyn bank re- 
 ceived the draft the next day, Saturday, after business 
 hours, and forwarded it on Monday morning in the usual 
 course of business to the clearing house in New York, 
 which returned it "not good." The Brooklyn bank im- 
 mediately gave Indig notice of the non-payment of the 
 note. He tried to recover the amount of the note of the 
 Brooklyn bank on the ground of negligence, but the court 
 held that it did not appear he had suffered any damage, 
 for the receipt of the draft was not payment, and conse- 
 quently the maker was not discharged from liability. In 
 the Bank of New Hanover v. Kenan/ Moffitdrew a check 
 on that bank (of which he was a depositor) on the 6th of 
 September, and which it received three days afterward. 
 The bank having neglected to collect it, Judge Bynam, 
 
 1 Hambro v. Casey, 110 U. S. 216. 
 1 76 N. Car. 340, 345. 
 
304 BANK COLLECTIONS. § 265 
 
 speaking for the court, said that "the measure of dam- 
 ages which the holder is entitled to recover of the bank 
 or collecting agent who has been guilty ef negligence is 
 the actual loss which has been suffered. That loss, j>i%ma 
 facie, is the full amount of the bill or note ; but evidence 
 is admissible to reduce it to the actual loss. 1 But this is. 
 the rule of general application only, and is modified in 
 its adaptation to a particular class of cases of which the 
 present is an example. Here the bank was the creditor 
 and the check was drawn on and was payable by the 
 bank — the agent. The undertaking of the bank was to 
 collect a check on itself. Of necessity it must be assumed 
 that it was presented for payment, that is acted upon, at 
 the time it was payable by the bank. If it was then ac- 
 cepted by the bank, the amount of the check became a 
 cash deposit to the credit of the defendant, paid out of 
 the funds of Moffit or charged to his account with the 
 bank. If it was not accepted it was the duty of the agent 
 to give notice to the holder and return the check. The 
 bank did neither. There can be no doubt that a bank can 
 so deal with a check that the law will imply an accept- 
 ance on its part. When the holder of a check presents it 
 for payment the drawee has only a reasonable time to in- 
 spect his accounts and ascertain whether he is in funds to 
 meet the demand ; and such reasonable time is held not 
 to exceed twenty-four hours ; after this lapse of time the 
 holder has the right to know whether the check is accepted 
 or dishonored.. If the holder himself presents or sends 
 the check to the bank he must apply at the end of this 
 reasonable time, to know whether it is accepted ; but if 
 it is in the hands of the bank as a collecting agent, it 
 must give the notice of acceptance or dishonor. The bank 
 was here both drawee and collecting agent ; it was fully 
 cognizant of the state of its accounts with Moffit on the 
 9th of September ; it both received and paid out large de- • 
 
 1 Stowe v. Bank of Cape Pear, 3 Dev. 408. 
 
§ 265 DAMAGES. . 305 
 
 posits made by Mm up to the 13th of September. , * • * 
 Why was this check not provided for ? • MofBt says he 
 thought it had been, and had been paid* out of his de- 
 posits, and had he known that it had not been paid he 
 would have paid it or have failed sooner. Why was pay- 
 ment of the check not demanded, and why was the de- 
 fendant kept in ignorance of its non-payment until after 
 the failure of Moffit became known to the world four days 
 after it was payable ? Upon the plainest principles of 
 justice these peculiar circumstances of wilful neglect of a 
 known duty constitute a case of constructive acceptance 
 of the check and fix the bank for the full amount of it. 
 The negligence of the bank has made the check its own, 
 and the case is taken out of the general rule as to the 
 measure of damages." 
 
 20 B. 
 
INDEX. 
 
 [The figures refer to sections.] 
 
 ACCEPTANCE. See Presentment. 
 
 ACCOUNT. See Overdrawn Account ; Mutual Accounts. 
 
 AGENCY. 
 
 Is a bank an agent to collect paper, or the owner, 7. See Collec- 
 tions, 4 ; Sub-Agents ; Paper Payable at the Collect- 
 ing Bank. 
 
 AGENCY FOR COLLECTION. 
 
 4 
 
 Payment to it is a defense against repayment, 138. 
 
 AGREEMENT. 
 
 Effect on title by agreement, 38. 
 
 BANKS. See Collections. 
 
 BEARER. See Mistake and Forgery, 20. 
 
 BILLS OF LADING. See Presentment. 
 
 BRANCH BANK. 
 
 Liability of a bank for a branch bank in making collections, 258. 
 
 CANCELLATIONS. See Mistake and Forgery. 
 
 CASHIER. See Indorsement Specially, '24, 26 ; Collections, 25. 
 
 CERTIFICATE OF DEPOSIT. See Usage ; Payment. 
 
 CLAIM. See INSOLVENCY. 
 
 CLEARING HOUSE. See Payments, 10 ; Presentment, 19. 
 
 CHECK. 
 
 1. Deposit and crediting of a check with the depositor's right to draw, 
 ' 8, 8d. 
 
 2. "When paid it cannot be recalled, 202-202d. See Payments. 
 
 CHECK FOR DEPOSIT. 
 
 Effect of indorsing it in this manner, 8c. 
 (307) 
 
bU8 INDEX. 
 
 * * 
 
 [The figures refer to sections.] 
 
 COLLECTING AGENCY. See Agency foe Collection. 
 
 COLLATERALS. 
 
 Presentment of, 70-85. 
 
 COLLECTIONS. 
 
 1. Classes into which they are divided, 2. 
 
 2. May be made by a state or national bank, 3. 
 
 3. Nature of the contract, 4-5. 
 
 4. Is the bank agent or owner of the paper, 4. 
 
 5. A consideration for the agreement is presumed, 6. 
 
 6. Ownership of paper is determined by the agreement, 7. , 
 
 7. The question is one of fact, 7-86. 
 
 8. Presumption respecting the depositor's ownership, 7. 
 
 9. Effect of indorsement in determining the ownership of paper, 8-8a. 
 
 10. A bank may request another bank to collect a draft or check just 
 
 as is done by a non-depositor, 14. 
 
 11. When mutual accounts exist between banks and checks are sent 
 
 indorsed generally, what title do they acquire, 14. ■, 
 
 12. By the federal rule the title passes to the receiving bank, 15-15a. 
 
 13. In New York and many other states no • title is transferred with- 
 
 out paying a consideration, 16, 16a, 16c. 
 
 14. Effect of a draft deposited for collection indorsed in blank, 16o. 
 
 15. Criticism on Clark v. Merchants' Bank, 16d. 
 
 16. Reasons for the different rules, 17. 
 
 17. A hank does not become the owner of a check generally indorsed 
 
 until it has advanced the amount, 18. 
 
 18. The lien of a solvent bank for a balance due from an insolvent one 
 
 on paper indorsed generally but not collected, 18. 
 
 19. Effect of indorsement by depositor in blank followed by indorse- 
 
 ment for collection, 19-19A. 
 
 20. Discussion of the practice whether indorsement in blank followed 
 
 by & special indorsement should always transfer the title from 
 the depositor, 20. 
 
 21. Duty of a bank in making collections, 67. 
 
 22. Duty of a collecting bank where its interests conflict with those of 
 
 the sending bank, 140. 
 
 23. Misapplication by a collecting agent of a note indorsed in blank, 8c. 
 34. Banks are holden for making presentment and giving notice, 68. 
 25. Act of. cashier in making collections is the act of the bank, 68. 
 36. Collecting bank must follow instructions, 69. 
 
 27. A collecting bank is not responsible for a collection whenever it 
 has made the same a\id returned the amount in the form of a 
 draft on another reputable bank, 250. See Credit ; Insol- 
 vency. 
 
• INDEX. 309 
 
 • rThe figures refer to sections. ] 
 
 CONDITIONAL PAYMENTS. See Payments, 2, 9, 18. 
 
 CONTRACT.- See Collections, 3, 5 ; Indorsement Specially, 38, 40. 
 
 COURT. 
 
 Province of the court in determining the ownership of paper, 7. See 
 Suit. 
 
 CREDIT. 
 
 1. Deposit of draft for collection, 8^. 
 
 2. Collection for accommodation, 8g. 
 
 . 3. The test of a change of ownership is the control of the check, 9. 
 I 4. A failure of a bank to collect does not effect the title, 10. 
 
 5. Paper may he charged back when it is not collected, 10. 
 
 6. A bank's right to charge the paper back if not collected does not 
 
 affect the title, 11. 
 
 7. Every indorsee has the right to recover of the indorser when the 
 
 maker fails to pay, 11. 
 
 8. A depositor is not responsible for the conduct of the purchasing 
 
 bank or collecting bank in collecting a check, 12. 
 
 9. Effect of crediting checks to depositor's account, 8-8<J. See IN- 
 
 SOLVENCY, 7; Mistake and Pobgeky, 22. 
 
 DAMAGES. 
 
 1. Only actual damages can be recovered, 260. 
 
 2. Evidence may be introduced to show the actual loss, 261-265. 
 
 3. In many cases the loss is only nominal, 262. 
 
 3. Insolvency of the parties to the paper received for collection may 
 
 be shown, 263. 
 
 4. Damages collectible on a foreign bill of exchange, 264-264o. 
 
 5. The loss must be proved, 265. 
 
 DATS OF GRACE. 
 
 Usage relating to, 231. 
 DEATH. 
 
 Effect of death before a collection by a partnership, 172. See Insol- 
 vency. 
 
 DEBTOR. See Payment. 
 
 DEMAND. See Notice ; Peesentment. 
 
 DEPOSIT. See Paper Payable at the Collecting Bank. 
 
 DISCOUNT. 
 
 1. Ownership of notes left for collection that have been discounted, 30. 
 
 2. Duty of a drawer when the bank which has discounted his' bill has 
 
 transferred it to another for collection, 31. 
 
310 INDEX. 
 
 [The figures refer to sections. 
 
 DISHONOR. See Pbesentment. 
 
 DRAFT. 
 
 A collecting bank is not responsible for a collection whenever it has 
 made the same and returned the amount in the form of a draft 
 on another reputable bank, 250. See Payment ; Collections, 
 10, 14, 15; Ceedit, 1. 
 
 DUE DILIGENCE. See Suit; Indoesement Specially, 4SI; Payments, 
 14; Presentment. 
 
 ENTRIES. See Mistake and Fobgeby, 5. 
 
 EVIDENCE. See Indoesement Specially, 3, 4, 28; Damages, 3. 
 
 EXCUSE. See Peesentment; Notice. 
 
 GARNISHEE. See Indoesement Specially, 37. 
 
 GENERAL INDORSEMENT. See Indoesement ; Indoesement in 
 Blank; Indorsement Specially. 
 
 GRACE, DAYS OF. See Usage, 6. 
 
 GUARANTOR. 
 
 The liability of a guarantor for collection, 139. 
 IDENTIFICATION OF PROCEEDS. See Indoesement Specially, 43-53. 
 INDORSEE. 
 
 Ownership of paper is retained in all cases until received by the in- 
 dorsee, 65. See Ceedit, 7. 
 
 INDORSEE. See Paper Payable at the Collecting Bank; Indoese- 
 ment; Indoesement in Blank; Indoesement Specially. 
 
 INDORSEMENT. 
 
 1. The sending bank need not indorse the paper, 66. 
 
 2. Effect of indorsing checks for deposit 8c. 
 
 3. A bank which once owned a bill is liable on its indorsement, 137. 
 
 4. Effect of indorsing checks in blank, 8e. 
 
 INDORSEMENT IN BLANK. 
 
 1. If an insolvent bank receives a check indorsed in blank a subse- 
 
 quent holder may acquire a good title, 166. 
 
 2. Nor can the right of the depositor to recover his paper or the pro- 
 
 ceeds be defeated by showing that others have done the same 
 thing, 167. 
 
 3. The filing of a claim for an allowance does not prevent a recovery 
 
 of the paper deposited or the proceeds, 168. See Mistake and 
 Forgeey; Collections, 20, 23 ; Mistake and Foegeey, 16. 
 
# INDEX. 311 
 
 [The figures refer to sections.] 
 INDORSEMENT SPECIALLY. 
 
 1. Effect of indorsing a check in blank and afterward indorsing it for 
 
 collection, 13-13o, 19, 20. 
 
 2. Effect of indorsement "for account of," 19c. 
 
 3. When parol evidence may be introduced to explain indorsement, 
 
 21-23a. 
 
 4. Eeasons for introduction of evidence, 23-23a. 
 
 5. Effect of indorsement in blank accompanied with a statement in 
 
 letter for collection and credit, 24. 
 
 6. Effect of indorsement " for deposit, " 25-25&, 
 
 7. Indorsement for deposit is only presumption of a mere agency to 
 
 collect, 25. 
 
 8. Effect of indorsement "for account," 25a. 
 
 9. Effect of checks " for collection and credit," 26. 
 
 , 10. A special indorsement clearly indicates an intention to retain 
 ownership, 32-32a. 
 
 11. There is no consideration for such an indorsement, 33. 
 
 12. Classification of instruments specially indorsed, 34. 
 
 13. Eights of depositor to instrument indorsed in blank anJ after- 
 
 ward specially indorsed, 36. 
 
 14. The holder of paper acquired by general indorsement can retain 
 
 his rights by a subsequent special indorsement, 35. 
 
 15. Effect of crediting paper specially indorsed as cash, 37. 
 
 16. Effect on title by agreement, 38, 
 
 17. The test of ownership is, can the paper be recalled, 39. 
 
 18. Effect of different kinds of special indorsement, 40-40J. 
 
 19. Effect of indorsement "for collection and remittance," 40a. 
 
 20. Effect of indorsement "for collection and credit," 406-40^ 
 
 21. Effect of indorsement "for collection on account," 40<J-40i. 
 
 22. Effect of indorsement in general with a statement by letter for 
 
 collection, 41. 
 
 23. The indorsee for collection holds the paper as trustee for the 
 
 sender, 42. 
 
 24. A cashier has authority to indorse the negotiable paper of his 
 
 bank, 43. 
 
 25. When a note is indorsed simply for collection the bank is not 
 
 liable as an indorser, 44. 
 
 26. A bank is a party to a paper thus indorsed for notification when 
 
 it is not paid, 45. 
 
 26. A note indorsed to the cashier is regarded as indorsed to the 
 
 bank, 47. 
 
 27. An indorsement for collection destroys the negotiability of paper, 47. 
 
 28. Parol evidence cannot be admitted to explain such indorsement 
 
 and deprive the maker of his advance, 48. 
 
312 INDEX.' # « 
 
 ' [The figures refer to sections.] 
 INDOESEMENT SPECIALLY— Cmdinued, 
 
 29. No one can acquire any title to paper or proceed against the party 
 
 indorsing, 49. . 
 
 30. A note specially indorsed cannot be sold by the indorsee, 50. 
 
 31. The real owner can sue for the proceeds whether the collecting 
 
 bank is a sub-agent or not, ,51-51e. 
 
 32. The right of a collecting bank to sue, 52-52o. 
 
 33. When a demand is not necessary before bringing a suit, 53. 
 
 34. Nor is the collecting bank liable to the original sender after the 
 
 proceeds have been transmitted to a intermediary, 54-54c. 
 
 35. Review of the Hamilton bank case, 54a. 
 
 36. "What is meant by proceeds and remittance, 54-546. 
 
 37. When a check for collection can be garnished, 55. 
 
 38. Duration of the contract, 56. 
 
 39. The owner can control his checks until their collection is completed, 
 
 56-566. 
 
 40. Effect of a contract contemplating the retaining of the proceeds 
 
 for a short period by the collecting bank, 57. 
 
 41. Effect of insolvency before collection or on completing the collec- 
 
 tion afterwards, 58. 
 
 42. If an unmatured draft has been credited to the sender, either it or 
 * the proceeds can be recovered, 59-59o. 
 
 43. When the proceeds have been collected their ownership depends on 
 
 whether the collecting bank is a debtor or agent of the sender, 60. 
 
 44. Review of cases relating to the subject, 61-61m. 
 
 45. When the trust relation exists how far can the owner go to recover 
 
 his property, 62. 
 
 46. Rules for identifying it, 63. 
 
 47. Formerly until the specific property could be recovered, 63a. 
 
 48. The rule now covers substituted property, 63&-63a\ 
 
 49. When a confusion exists the entire mass is charged with the 
 
 trust, 63e. 
 
 50. When the confusion is with the trustee's private property the 
 
 whole is charged with the trust, 63/. 
 
 51. When the trust property has been paid out or abstracted different 
 
 rules prevail whether the property existing is charged with the 
 trust fund or not, 63<7. 
 
 52. In some states the trust fund still exists under these conditions, 
 
 63A-63*;. ir 
 
 53. Discussion of the rules on this subject, 631. See Mistake and 
 
 Fobgeby; Collections, 9-20. 
 
 INFORMATION. See Sub-Aqent, 16. 
 
* * INDEX. 313 
 
 [The figures refer to sections ] 
 INSOLVENCY. 
 
 1. When a bank is insolvent it ought not to receive a check for col- 
 
 lection, 164-1646. 
 
 2. The receiving of paper for collection by an insolvent bank is a 
 
 fraud and it, or the proceeds! can be recovered, 165. 
 
 3. Effect of receiving a check when a bank is insolvent, 85, 8c. , 
 
 4. If an insolvent bank receives a check indorsed in blank a subse- 
 
 quent holder may acquire a good title, 166. 
 
 5. If a bank has paper for collection and fails it should return the 
 
 same, 169. • 
 
 6. If collections are madet by a bank after acknowledged insolvency, 
 
 the proceeds are held in trust for the owner, 170-170a. 
 
 7. The crediting of a check by an insolvent bank drawn thereon, is 
 
 not payment, 171. See Damages, 3 ; Death ; Indobsement 
 Specially, 41 ; Notice. 
 
 INSTRUCTIONS. See Sub-Agent, 11, 16-18; Presentment. 2, 12; 
 Collections, 27. 
 
 INTENTION. 
 
 What intention can be derived of ownership of paper from the in- 
 dorsement, 8-8a. 
 
 JURY. 
 
 Their province in determining the ownership of paper, 7. See Suit. 
 
 LETTER. See Indorsement. . 
 
 LOUISIANA. 
 
 Effect of indorsing checks, etc., in that state, 8a. 
 
 MAIL. See Payments, 31, 34, 36 ; Usage, 9 ; Presentment, 36 ; No- 
 tice, 13-16. 
 
 k 
 MISAPPLICATION. • 
 
 Of proceeds by a collecting agent, 8e. 
 
 MISTAKE. 
 
 Indorser can recover back money paid supposing he was liable, 130. 
 
 MISTAKE AND FORGERY. 
 
 1. Money paid under a raistiBke of fact can generally be recovered, 
 207. * 
 
 * 2. If the facts are known but not the law it cannot be recovered, 208. 
 
 3. Recovery of money paid presuming from lapse of time that it 
 could be safely paid, 209-209a. 
 
314 INDEX. 
 
 [The figures refer to sections.] 
 MISTAKE AND FORGERY— Continued. 
 
 4. Illustrations of mistakes in paying notes and other instruments, 
 
 210-210C. 
 
 5. Mistakes in entries in books and cancellations, 211-2116. * 
 
 6. Forged paper is an exception to the rule that money paid under a 
 
 mistake can generally be recovered, 212. 
 
 7. Reasons for his exception to the rule, 212. 
 
 8. This rule concerning forged paper is only applicable when the 
 
 holder is without fault, 213. 
 
 9. When both parties are alike innocent it can be recovered, 213. 
 
 10. This rule applies to the signatures of makers, etc., to the terras of 
 
 the instruments, but not to the indorsements on them, 214. 
 
 11. The drawee is supposed to be more familiar with the signatures 
 
 of the makers than presenter of these instruments, and conse- 
 quently must suffer if he pays them, unless he has been misled,, 
 214. 
 
 12. He is also responsible for the original terms of the instruments un- 
 
 less the makers were careless in leaving blanks whereby forge- 
 ries were easy, 214. 
 
 13. In applying the rule when can the drawee recover on paper in- 
 
 dorsed for value, 215. 
 
 14. Does the same rule apply to indorsements for collection, 216-216/. 
 16. The drawee can recover when the instrument is indorsed in blank 
 
 or is unnecessarily indorsed, 217. 
 
 16. Effect of indorsing in bhjnk, 218. 
 
 17. When the drawee has paid a raised check the excess can be recov- 
 
 ered, 219-219a. 
 
 18. In applying this rule the drawee cannot recover when the instru- 
 
 ment is unindorsed and the forged signatures of the maker were 
 not discovered, 220-220O - . 
 
 19. When that money has been paid to an agent and has reached the 
 
 principal beibre notice of the mistako, it cannot be recalled, 221. 
 
 20. When the instrument has been forged before it has been put into 
 
 circulation, it is regarded as payable to bearer and the drawee 
 cannot recover, 222. 
 
 21. This rule does not apply to paper paid before the paper is seen, or 
 
 which is subject to -a latter examination, 223. 
 22 When a forged check is received from a depositor and credited, 
 the amount can be charged back on discovery of the forgery, 224. 
 
 23. A bank in which a check is deposited by a customer is not re- 
 
 sponsible if on its collection it proves to be%, raised check, 224. 
 
 24. When a bank has collected money on a forged instrument it must* 
 
 return the same to the true owner, 225. 
 
 25. Or to the payor, 225a. 
 
INDEX S15 
 
 [The figures refer to sections.] 
 MISTAKE AND FORGERY— Continued 
 
 26. And when the instrument is returned to the sender it is regarded 
 
 as not having been paid or accepted' 226-226a. 
 
 27. If a drawee bank pays a check to a collecting bank and charge s the 
 
 amount to the drawer, and afterwards discovering the original 
 payee's indorsement to be a forgery, charges the amount to the 
 bank from which it was received and -credits the drawer, the 
 check is not paid or accepted, 226. 
 
 MON^Y. 
 
 Recovery of money paid under a mistake. See Mistake and Fob- 
 geby. 
 
 MUTUAL ACCOUNT. See Collections, 11-17. 
 
 NEGLIGENCE. See Presentment. 
 
 NEGOTIABILITY OF PAPER. See Indorsement Specially, 27. 
 
 NON-DEPOSITOR. 
 
 1. Paper collected for a non-depositor is not converted into an ordi- 
 
 nary deposit, 27-28. 
 
 2. A non-depositor contracts with reference to the usage of a bank in 
 
 keeping the money, 30. 
 
 3. When collections are made for a non-depositor the bank is a trus- 
 
 tee and not a debtor, 64. 
 
 4. Ownership is retained in all cases until the paper is received by 
 
 the indorsee, 65. * 
 
 NOTARY. 
 
 1. Can the officer of a bank act as a notary, 101. 
 
 2. "What inquiry he must make, 102-102a. 
 
 3. When the notary has been negligent is the bank that employed 
 
 him liable, 104-104*. 
 
 4. When the primary bank is liable, 104a. 
 
 5. Nor will a direction to have the paper protested if not paid release 
 
 the bank, 1046. 
 
 6. The notary's ignorance of his duty is no excuse for the bank, 104c. 
 
 7. When only the secondary bank is liable, lOid. 
 
 8. When liability ends with the proper selection of a notary, 104e. 
 
 9. When the notary is an independent officer he only is liable, 104/. 
 
 10. When employed to perform unofficial duties the bank is liable for 
 
 his acts, 104jr. 
 
 11. Delivery of foreign bills for purpose of demand and protest, 67. 
 
 12. A second demand need not be made on inland bills, 67. 
 
 13. A notary is always excused when obeying instructions, 104ft. See 
 
 Notice ; Presentment. 
 
316 INDEX. 
 
 [The flguresrefer to sections. } 
 
 NOTICE. 
 
 1. The duty of a bank to give notice, 1D5. 
 
 2. A notary may be employed for this purpose, 106. 
 
 3. Notice must be given to all to whom it must be presented for ac- 
 
 ceptance and payment, 107-1 14. 
 
 4. Notice must be given of all collaterals, 107. 
 
 5. Should a bank.when receiving paper for collection afek for indorsers' 
 
 residence, 108. 
 
 6. To whom should the bank apply for information, 109. 
 
 7. The diligence that should be exercised by the notary in making 
 
 the inquiry, "109-1 09a. 
 
 8. Diligence which the Solder should exercise, 110. 
 
 9. What inquiry will satisfy the law, 111. 
 
 10. Where notices must be sent, 124. ' 
 
 11. The indorsees request must be regarded, 124a. 
 
 12. When it must be personal, 1245. 
 
 13. When the use of the mail though irregular will suffice, 124/. 
 
 14. When the mail can be regularly used, 124j-1247. . 
 
 15. When the indorsers can use the mail, 124A-124i. 
 
 16. If there are several post offices either will suffice, 124j'-124fc. 
 
 17. When the indorser's residence is unknown notice is excused, 125. 
 
 18. When insolvency is an excuse, 126. 
 
 19. Inconvenience is no excuse, 127. 
 
 20. When the indorser's act will excuse it, 128. 
 
 21. Payment of a part to the indorser is no excuse, 129. 
 
 22. Recovery of payment by indorser supposing demand had been made 
 
 and notice given, 130. ' ♦ 
 
 23. When the notary is the servant's owner the latter is responsible 
 
 for the servant's neglect to make inquiry pf him, 112. 
 
 _ 24. To whose benefit does a notice enure, 113. 
 
 " 25. Who should be notified, -107, 114. 
 
 26. Due diligence must be used in sending notices, 115. 
 
 27. Different ways of sending notices, 116. 
 
 28. Legality of circuitous notices, 116a-76-76a. 
 
 29. A notice may be sent to a person in another town to complete and 
 
 and mail, 117. 
 
 30. A notice cannot be given until after dishonor, 118. 
 
 31. Time for giving notice to an indorser, 119-121a-124. 
 
 32. Time which an indorser has for giving notice, 120-122. 
 
 33. If personal it must be given in business hours, 121. 
 
 34. Essential facts of a notice, 123. 
 
 35. Indorser is not presumed to have paid unless he was liable, 130. 
 
 36. Demand and notice may be waived, 131. 
 
 37. Proof of demand and notice must be shown in the suit, 135. 
 
 38. When notice need not be given, 93-'94-98. See Presentment ; 
 
 Usage ; Notary ; Presentment. 
 
, INDEX. • 317 
 
 [The figures refer to sections. J 
 OVERDRAWN ACCOUNT. 
 
 Effect of crediting a" check when depositor's account is overdrawn, 
 
 8d, 8/. See Payments, 29. 
 
 OWNERSHIP OF PAPER. 
 
 Effect of indorsement, 8,%a. See Collections, 6-9, 17, 18; Cbedit, 
 3, 4; Indorsement Specially, 10, 43, 45. 
 
 PAPER PAYABLE AT THE COLLECTING BANK. 
 
 1 . No authority is conferred on a hank hy making a note payable 
 . there, 151. 
 
 2. When a note is made payable at a bank and received by it for col- 
 
 lection the bank is agent for the holder, 152-153<j. 
 
 3. A bank is regarded as the agent of the holder of paper made pay- 
 
 able to it and left there for collection, 152. 
 
 4. Criticism of the decision in Steinhart's case, 153a. 
 
 5. A bank has authority to receive money at any time, 154. 
 
 6. When both paper and money are received what are the relations of 
 
 the bank to the parties leaving both, 155-155a. 
 
 7. If money is duly received but not the note, on whom shall the loss 
 
 fall if the money is lost, 156. • 
 
 8. A suit against a bank to recover the money would not bar a suit 
 
 against the maker, 157. 
 
 9. In most states it is the duty of the bank to apply a customer's de- 
 
 posits in payment of his note, 158. 
 
 10. If a note is indorsed the customer's deposits must be applied for 
 
 the benefit of the indorser, 159. 
 
 11. Neither a bank nor customer can make a valid agreement to do 
 
 otherwise to an indorser' s detriment, 160. 
 
 12. A maker cannot give a notice to a bank forbidding it to make an 
 
 application' of his deposit to the injury of an indorser, 160. 
 
 13. Application of a deposit made after the maturity of the note, 161. 
 
 14. When a depositor makes a deposit after the maturity of a note the 
 
 bank can apply it or not as it pleases, 161. 
 
 15. Can a bank apply a depositor's deposit in payment of a note which 
 
 is presented over due, 161. 
 
 16. A bank is not required to apply a depositor's deposit in payment of 
 
 a note payable there, 162. 
 
 17. When a bank is the payee of an accepted bill it is not required to 
 
 apply the drawer's funds for the acceptor's benefit, 163. 
 
 PARTNERSHIP. See Death. 
 
 PAYMENTS. 
 
 1. A collecting bank can receive only money in payment, 173-173a. 
 
 2. In some states a check may be received as conditional payment, 
 
 174-1745. , 
 
318 INDEX. 
 
 [The figures refer to sections.] 
 PAYMENTS— Continued. 
 
 3. When a second check is taken in payment of the first the latter is ' 
 
 regarded as alive until the second check is paid, 174. 
 
 4. Distinction in collecting a draft drawn on a hank or hanker and 
 
 one not drawn on a hank pr hanker, 175. 
 
 5. When only money should he taken the collecting bank is respon- 
 
 sible for accepting a check unless the owner acquiesces, 176. 
 
 6. If the first check is held until the second is paid the collecting 
 
 bank is not liable, 177. 
 
 7. The consequences of taking checks as payment where they ought 
 
 not to be thus taken, 178»178a. 
 
 8. The maker's responsibility continues until the second check is 
 
 paid, 178. _ 
 
 9. In other states a check may be received as conditional payment 
 
 whether the drawee is a bank or not, 179. . 
 
 10. Presentation of checks through the clearing house for payment, 179. 
 
 11. A certified check taken by a collecting bank is not money, hut 
 
 simply additional security, 180. 
 
 12. A collecting bank receiving a check cannot get it certified instead 
 
 of takirjg money without becoming responsible, 181-181a. 
 
 13. If the money is paid to a collecting bank it is responsible therefor, 
 
 182-182a. 
 
 14. The right thing is to collect the money and procure a draft on a 
 
 solvent bank for remittance, 183. 
 
 15. A debtor would not fulfil his duty by sending the draft of a col- 
 
 lecting bank on another, 184. 
 
 16. Though a foreign bank must send money can it not collect as it 
 
 and the debtor may agree, 185-1856. 
 
 17. Unless the delivery of something besides money is a fraud, 185a— 
 
 1856. 
 
 18. In many states a collecting bank can take another check from the 
 
 debtor as conditional payment, 186-187. 
 
 19. When the second check is taken it is proper to deliver the first to 
 
 the maker, 188. 
 
 20. But sometimes the first check is held until the second is paid, 188. 
 
 21. The course that must be pursued in collecting the second check, 
 
 189. 
 
 22. How presentation of second check has been modified by custom, 
 
 190-190O.-1906. 
 
 23. Especially in presenting it for payment through the clearing house, 
 
 190-190a-1906. 
 
 24. When the second check is not paid the first must be reclaimed and 
 
 protested and the indorsers notified, 191. 
 
 25. A check may be sent to a foreign bank drawn thereon for pay- 
 ' ment, 192-192a. 
 
INDEX. 319 
 
 ["The figures refer to Bectlona.] 
 
 PAYMENTS— Continued. 
 
 26. "When is payment of a check sent to a foreign bank completed, 
 
 193-1936. 
 
 27. When the drawer's account is overdrawn and the check is paid 
 
 the bank is responsible, 193c. 
 
 28. When the check sent for collection is drawn on a collecting bank 
 
 and charged to the customer's account, the original debt is dis- 
 charged notwithstanding the failure of the bank, 193d. 
 
 29. When the drawer's account is overdrawn and the collecting bank 
 
 fails, the check is not paid and the holder can pursue the drawer, 
 193e. ' # 
 
 30. Distinction between acceptance by a creditor and a collecting bank 
 
 of a second check, 194. 
 
 31. When the check is presented through the mail for payment by an- 
 
 other bank how is the collection to be regarded, 195-1 96a. 
 3?. A bank is an agent to collect a check drawn thereon by one cus- 
 tomer in favor of another, 197. 
 
 33. What acts constitute payment of such a check, 198-198<z. 
 
 34. Presentation through the mail by the payee to the drawee for pay- 
 
 ment, 199. 
 
 35. If the payee sends a check by mail to the drawee for collection 
 
 and return of the proceeds, the drawee must bear any loss arising 
 after a time when the check could have been presented by ex- 
 press or other usual method, 199. 
 * 36. Authority for sending the proceeds of paper by mail, 200. 
 
 37. Authority for taking notes instead of money for renewal, 201-201o. 
 
 38. When a check has been paid it cannot be recalled, 202-202d. 
 
 39. Liability of a bank for not observing a promise to pay a check be- 
 
 fore others presented afterwards, 203. 
 
 40. A bank can receive payment of a note before its maturity, 204. 
 
 41. When is a bank liable for a collection made by a teller, 205-206. 
 
 42. To a wrong person is no defense against repayment, 138. 
 
 POST OFFICE. ,See Usage; Notice. 
 
 PRESENTMENT. 
 
 1. General rule relating to presentment, 141. 
 
 2. Special instructions must be followed, 142-142c. 
 
 3. When a draft is payable at a definite time it must be presented 
 
 for acceptance, 143. 
 
 4. When a draft is payable at sight or at a definite time, if not pre- 
 
 sented for acceptance within a reasonable period, the drawer and 
 indorsers will be discharged, 143. 
 
 5. When a draft is payable at a fixed period is presentment neces- 
 
 sary, 144-1456. 
 
320 INDEX. * 
 
 , [The figures refer to sections. ] 
 
 PRESENTMENT— Continued. 
 
 6. In New York this must''!)© done, 145. 
 
 7. Reasons why the New York rule should not prevail, 145a-1456. 
 
 8. When presentment has been made and acceptance refused notice 
 
 of the dishonor must be given, 146. 
 
 9. When a bill of exchange is protested for non-acceptance, a right 
 
 of action accrues immediately, 147. 
 
 10. In case of non-acceptance presentment for non-payment is not nec- 
 
 essary, 147. 
 
 11. Nor should bills of lading accompanying drafts be surrendered, 
 
 148-150. • 
 
 12. Instructions with respect to delivery of bills of lading accompany- 
 
 ing drafts should be followed, 148a. 
 
 13. When a draft is payable at sight the bill of lading should not be 
 
 surrendered, 1486. . 
 
 14. When a draft is not payable at sight authorities differ concerning 
 
 the right to surrender the bill of lading, 148e^l49. 
 
 15. The better rule is to surrender the draft unless instructed to hold 
 
 it, 149. 
 
 16. Mr. Daniel's rule concerning the surrender of bills of lading ac- 
 
 companying drafts, 150. 
 
 17. When must it be made, 70. 
 
 18. Presentment of check drawn on a bank in the same town as the 
 , collecting bank, 71. 
 
 19. Presentment through the clearing house, 72. 
 
 20. ' Employment of banks by merchants who receive bills for collec- 
 tion, 73. 
 
 21. When presentment must be made immediately, 74 
 
 22. Duty to send check payable at another place, 75. 
 
 23. Must a collecting bank send the check directly to the drawee bank 
 
 or to another in or nearest to the same place, 76-76a-116a. 
 
 24. How long can a bill be kept in circulation before discharging the 
 
 parties, 77. 
 
 25. Different rules apply to drawers than to indorsers, 78. 
 
 26. When is the original debt discharged by the delay, 79. 
 
 27. The same rules and consequences apply to sight drafts as to checks, 
 
 80. 
 ' 28. When a note must be presented, 81-82. 
 
 29. Maker has the whole of the first day to pay, 84. 
 
 30. Due diligence must be used in presenting drafts for acceptance 
 
 and payment, 86. 
 
 31. Where presentment must be made when no place is designated, 
 
 87-87o. 
 31. Specifying of place on the margin of the instrument, 87a. 
 33. Presentment when the place is mentioned, 87J. 
 
INDEX. ' 821 
 
 [The figures refer to sections . ] 
 PRESENTMENT— Continued. 
 
 34. If a bill is made payable at a, bank the presentment should be 
 
 made there. 87c-88. / ' »•• * 
 
 35. The bill must be in the holder's possession when presenting it, 88. 
 
 36. The mail can be used for making presentment, 89-90. 
 
 37. The force of custom on the owner of paper in presenting it, 91. 
 
 38. When presentment is not necessary, 93-93-94. 
 
 39. When not presented in time injury is presumed, 95. 
 
 40. What the holder must do when a bank is negligent in making 
 
 presentment, 96. 
 
 41. What instrument must be presented to a notary for presentment, 
 • demand and protest, 98. 
 
 i ' 42. Banks are holden for making presentment and giving notice, 68. 
 
 See Payments ; Notice. 
 
 PRESUMPTION. 
 
 1. When paper is not presented in time injury to the drawer is pre- 
 sumed, 95. 
 
 3. Presumption concerning letters and entries in making collections,* 
 66. See Indobsement Specially, 7 ; Mistake and Foegeey, 
 3 : Notice, 35 ; Collections, 5, 8 ; Suit. 
 
 RAISED CHECK. See Mistake and Foegeey, 17, 23. 
 
 REMITTANCE. See Payments. 
 
 SPECIAL INDORSEMENT. See Indoesement Specially. 
 
 PROTEST. 
 
 1. When protest is not necessary, 93. 
 
 2. What is a protest, 99, 100. 
 
 3. When protest is not necessary, 103. See Notice. 
 
 SUB-AGENT. 
 
 1. Is a bank with which paper is deposited a transmitter or' col- 
 
 lector, 236. 
 
 2. In New York the first bank is responsible for the negligence of the 
 
 second, 237-238. 
 
 3. Where this rule prevails, 239, 
 
 4. In Massachusetts the collecting bank is only responsible for trans- 
 
 mitting the paper to a suitable bank or other agent within a 
 proper time, 240-241. 
 
 5. Discussion of both rules, 242. 
 
 6. Where the other rule prevails, 243. 
 
 7. Where the New York rule prevails a bank may be liable simply 
 
 as a transmitter, 244. 
 
 21 B. 
 
322 INDEX. 
 
 [The figures refer to sections. ] 
 SUB-AGENT— Continued. 
 
 8. In all cases an express ebritractf must govern, 245. 
 
 9. By the law of what state is tne' contract to be governed, 246-246a. 
 
 10. Wherever the New York rule prevails the owner of paper must 
 
 look to the principal Qr depository bank to recover for any neg- 
 lect of duty, 247. 
 
 11. Instructions to the first bank do not'affect only those sub-agents 
 
 who know of them, 248. 
 
 12. The owner can recover the proceeds from whoever may have them 
 
 and also the paper, 249. 
 
 13. If a sub-agent collects the paper and sends a draft on a good bank 
 
 for the amount,' it is not responsible for the failure, 250. 
 
 14. Nor does the first bank divest itself of the title by sending the 
 
 paper to a sub-agent, 251. 
 
 15. When a paper is sent to another bank for payment and not for col- 
 
 lection, a sub-agency is not created, 252. 
 
 16. A bank should convey proper information to the sub-agent to 
 
 make the collection in an effective manner, 253. 
 
 17. When paper is received accompanied with instructions, the sub- 
 
 agent must follow them, 254. 
 
 18. A sub-agent is negligent if not executing instructions received 
 
 concerning the collection of paper, 254, 
 
 19. Whenever the second rule prevails the owner must look to the 
 
 sub-agent in the event of negligence concerning the collection, 
 255. * 
 
 20. But a bank may become liable by agreement, 256. 
 
 21. Only the owner can sue the sub-agent where the second rule pre- 
 
 vails, 257. 
 
 22. The primary bank cannot acquire the right of paying the debt, 
 
 257. 
 
 23. Liability of a bank for a branch bank in making collections, 258. 
 
 24. Liability of a collecting agency for the conduct of its sub-agen- 
 
 cies, 259. See Indoesbment Specially, 31. 
 
 SUIT. 
 
 1. Collecting bank can sue when the paper is not paid, 132. 
 
 2. But not the owner when specially indorsed without a re-indorse- 
 
 ment, 132a. 
 
 3. Unless the special indorsement is stricken out, 1326-132c. 
 
 4. Indorsee is presumed to be the owner and must sue, 132a. 
 
 5. When indorsed in blank the owner can sue, 132a-132<Z. 
 
 6. On the trial due diligence is a legal inference from facts which the 
 
 jury may find, 133. 
 
 7. The burden of proof concerning negligence, 134. 
 
 8. Proof of demand and notice must be shown in the suit, 135. 
 
INDEX. 323 
 
 [The figures refer to sections. 
 SUIT — Continued. 
 
 9. Withdrawal of a bill from the custody of a bank does not prevent 
 suing it for negligence, 136. 
 
 10. A bank which once owned a bill is liable on its indorsement, 137. 
 
 11. A bank is liable on paper collected and not the maker, 138. See 
 
 Paper Payable at the Collecting Bank ; Indorsement 
 Specially, 31-36. 
 
 TELLER. See Payments, 41. 
 
 TRUSTEE. See Non-Depositor, 3 ; Indorsement Specially, 45-53. 
 
 TRUST PROPERTY. See Indorsement Specially, 45-53. 
 
 TRUSTEE. 
 
 An endorsee for collection holds the paper as trustee for the sender, 
 
 42. 
 
 USAGE. 
 
 1. Of banks in keeping money of non-depositors, 29. 
 
 2. When is a usage sanctioned, 227. 
 
 3 Usages are general and special and binding, although known or 
 not, 228. 
 
 4. The owner of a bill sent for collection is bound by usage in hold- 
 i ing it after promise of payment, 229. 
 
 5. The owner^f a bill is bound, by usage concerning the kind of 
 , money or instrument taken for payment, 230. 
 
 6. Usage relating to days of grace, 231. 
 
 s 7. A drawee of a sight draft can be notified by mail of its receipt, 
 232. 
 
 8. A bank may establish a different mode of giving notice than the 
 
 regular one, 233. 
 
 9. Usage concerning the depositing of notice in the post office, 234. 
 
 10. Usage concerning notice of the time when notes are due, 235. 
 
 11. Unless shielded by usage a collecting bank can receive only money 
 
 in payment, 173. See PRESENTMENT, 37 ; DAYS OF Gbace ; 
 Non-Depositob, 2. 
 
KF 1021*. B69 
 
 Author 
 
 Title 
 
 Bolles, Albert Sideny 
 
 Vol. 
 
 Bank Collections 
 
 Copy 
 
 Date 
 
 Borrower's Name