i/F- 
 
 CJnrnfll Earn Srlfnol fCibrarg 
 
The law relating to banks and their depo 
 
 3 1924''oT8'849'723'' 
 
© » Cornell University 
 VB Library 
 
 The original of tiiis book is in 
 tine Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924018849723 
 
BY THE SAME AUTHOR. 
 
 Practical Banking. Fourth Edition. $3.00. 
 
 The Financial History of the United States 
 from 1774 to 1789. Seeoad Edition. |2.50. 
 
 The Financial History of the United States 
 from 1789 to 1860. Second Edition. $3.50. 
 
 The Financial History of the United States 
 from 1860 to 1885. $3.50. 
 
THE 
 
 LAW RELATING 
 
 TO 
 
 BANKS AND THEIR DEPOSITORS 
 
 BANK COLLECTIONS. 
 
 "RY 
 
 ALBERT S. BOLLES, 
 
 PROFESSOR OF MERCANTILE LAW AND PRACTICE IN THE WHARTON SCHOOL 
 
 OP FINANCE AND ECONOMY, UNIVERSITY OF PENNSYLVANIA; 
 
 AND EDITOR OF "THE BANKER'S MAGAZINE." 
 
 NEW YORK: 
 HOMANS PIJBLISHING COMPANY, 251 BROADWAY. 
 
 1887. 
 
Copyright, 1887, 
 By HOMANS publishing COMPANY. 
 
 6^t 
 
 PHILADELPHIA: 
 COLLINS PBIlfTING HOUSE. 
 
TO 
 
 GBN.^'WAGER SWAYNE 
 
 •■ AS A MARK 
 
 OF THE AUTHOE'S REGARD 
 
 FOB 
 
 HIS FRIENDSHIP 
 
 AND 
 
 LEGAL ATTAINMENTS. 
 
PREFACE.. 
 
 The aim of this work is to present in language which can 
 be easily and fully understood the law of banking contained 
 in the reported decisions of the American and English courts. 
 1^0 American work of the kind exists. The works of 
 Messrs. Morse and Grant are especially for the lawyer ; while 
 those of Messrs. Walker and Hutchison, if less technical, 
 are for the English reader. 
 
 I have endeavored to state the principles relating to the 
 subject as simply as possible ; but I have added many illus- 
 trations, drawn from cases that were before the courts, for 
 the purpose of rendering the principles plain should I have 
 happened to state them obscurely in the text, and also of 
 showing some of the conditions under which they have been 
 applied. 
 
 While thus having the banking class at shorter range than 
 the members of the legal profession, I have tried to make a 
 work that would also be helpful to lawyers. It is eight years 
 since the second , edition of the work of Mr. Morse was pub- 
 lished ; and during that period a large number of important 
 cases have been decided. These are given here, besides 
 many others of an earlier period which are not included 
 in his work. 
 
 Much time has been spent in verifying the cases and 
 
 (vii) 
 
viil PREFACE. 
 
 quotations. If, therefore, the spelling of some of the names 
 is somewhat unusual, I am quite confident that the reader 
 will find on examination of the authority where the names 
 occur that the spelling here given is correct. In some 
 instances, too, the same bank or personal name is reported 
 differentlj'- on different occasions ; for example, McDowell 
 is sometimes reported M'Dowell on a second trial of the 
 same case, or in another controversy. I have used only one 
 name in the index for these eases. 
 
 In order to render the work more authoritative the lan- 
 guage of the courts has been used whenever this could be 
 done with due regard to a fitting treatment of the subject, 
 especially in those cases in which I thought that the prin- 
 ciples of law did not perfectly square with the popular 
 knowledge of them. It may be added that the quotations 
 are rendered with exactness, save in a few instances in which 
 the name of a person or association has been substituted for 
 plaintiff, or plaintiff in error, or other technical term. In 
 almost every instance the change has been indicated by 
 appropriate marks in the text. 
 
CONTENTS. 
 
 BOOK I. 
 
 THE REGEIVING AND KEEPING OF DEPOSITS. 
 
 CHAPTER I. 
 
 PAGE 
 
 Kinds op Deposits and Liability fok theik Loss ... 3 
 
 CHAPTER IL 
 
 Nature op Items of Deposits — When Checks ake consid- 
 ered Cash 25 
 
 CHAPTER IIL 
 
 Authority op Banks to receive Deposits .... 41 
 
 CHAPTER IV. 
 Deposits after Banking Hours 46 
 
 CHAPTER V. 
 To what Officer Deposits should be Paid .... 47 
 
 CHAPTER VL 
 
 Nature op a Depositor's Contract — When is a Bank Debtor 
 AND when Agent of x Depositor 49 
 
 CHAPTER VII. 
 
 Pass-books 61 
 
 (ix) 
 
X CONTENTS. 
 
 BOOK IT. 
 
 TEH PAYING OF DEPOSITS. 
 
 CHAPTER I. 
 
 PAGE 
 
 Nature or a Check 69 
 
 CHAPTER 11. 
 Oedek of Payments 91 
 
 CHAPTER III. 
 
 Payment of Deposits 93 
 
 Corporation Deposits 107 
 
 Payments to Executors and Trustees 109 
 
 Attaching Creditors of Depositor 117 
 
 Principal and Agent 126 
 
 Partnership Deposits 132 
 
 Payment of Joint Deposits 136 
 
 Payment of Wife's Deposits . . ■ 137 
 
 Payments to Donees 141 
 
 CHAPTER IV. 
 Payments by Special Agreement— Savings Bank Deposits . 162 
 
 CHAPTER V. 
 Payment of Forged Checks 184 
 
 CHAPTER VI. 
 
 Payment on Legal and Forged Indorsements . . . 206 
 
 CHAPTER VII. 
 Payment of Certified Checks 221 
 
 CHAPTER VIII. 
 Payment of Certificates of Deposit 245 
 
 CHAPTER IX. 
 Payments impending and after Insolvency .... 268 
 
CONTENTS. XI 
 
 CHAPTER X. 
 
 PAGE 
 
 Presentation of Checks for Payment 286 
 
 CHAPTER XI. 
 In what Money shall Deposits be Paid 305 
 
 CHAPTER XII. 
 When can a Depositor Sue a Bank 317 
 
 CHAPTER XIII. 
 
 When can the Holder of a Check Sue the Drawer and In- 
 dorseb 324 
 
 CHAPTER XIV. ■ 
 
 When can the Check Holder Sue the Drawee . _. . 329 
 
 CHAPTER XV. 
 When a Bank can Recover Money Paid by Mistake . . 344 
 
 CHAPTER XVI. 
 The Statute of Limitations 351 
 
 CHAPTER XVII. 
 Overdrafts 356 
 
 CHAPTER XVIII. 
 
 When oan a Deposit be Retained to Pay the Depositor's 
 Indebtedness 360 
 
 CHAPTER XIX. 
 Payment of the Depositor's Notes 393 
 
 CHAPTER XX. 
 Payment through the Clearing House 412 
 
 CHAPTER XXI. 
 Public Deposits 423 
 
Xli CONTENTS. 
 
 BOOK III. 
 
 COLLECTIONS. 
 
 CHAPTER I. 
 
 PAGE 
 
 Collection of Notes and Checks 431 
 
 CHAPTER II. 
 
 Liability of the Collecting Bank and Sub-Collecting Bank 
 TO THE Owner 472 
 
 CHAPTER III. 
 Proceeds of Collections 483 
 
 CHAPTER IV. 
 Damages 490 
 
TABLE OF CASES. 
 
 ERRATA. 
 
 Page 9, llth line from top, insert quotation marks after "negligence." 
 " 146, 8tli line from top, insert quotation marks after " declaration." 
 " 159, last line of text, insert quotation marks after " assignment." 
 " 242, 2d line from bottom,/or Schofield, read " Soholfleld." 
 " 278, 9th line from top,/or detain read " retain." 
 " 322, 12tli line from top, ybr grantor read "guarantor." 
 " 341, 7th line from bottom of text, insert quotation marks after " fund." 
 " " 13th line from bottom of text, omit quotation marks after " order." 
 " 399, 8th line from top, insert " of " after " note." 
 " 401, 2d line from top, insert quotation marks after " revocable." 
 " 466, 10th line line from top, /or Schofield, read Scholfield." 
 
 HTnerreaTi Tix.-BanKT^r unyTsaiiK, -zi a. 
 American Express Co. v. Haire, 478, 
 
 490. 
 American Nat. Bank v. Bushey, 296. 
 Ames V. Meriam, 299. 
 
 V. York Nat. Bank, 321. 
 Anderson w. Busteed, 220. 
 V. Ewing, 254. 
 V. State, 251. 
 V. Thompson, 149, 183. 
 Andertou v. Shoup, 327. 
 Andrew „. Blachly, 72. 
 Andrews v. Artisans' Bank, 321. 
 
 V. German Nat. Bank, 231, 
 
 232. 
 V. Pond, 81. 
 Anglo-California Bank v. Ames, 220. 
 Appeal of Bank of Commerce, 404. 
 
 B. 
 
 Babcock v. Benham, 444. 
 
 Backhouse v. Charlton, 133, 135. 
 
 Badeau v. Tylee, 425. 
 
 Bailey v. Bodenham, 422, 480. 
 
 Baker ». Moody, 125. 
 
 V. New York Nat. Ex. Bank, 
 165. 
 Balbaoh v. Frelinghuysen, 25, 43. 
 Balchen v. Crawford, 425. 
 Ball V. Allen, 75. 
 Ballard v. Cheney, 410. 
 Ballingalls v. Gloster, 438. 
 Ballou V. Boland, 340, 341. 
 Bank v. Alexander, 288. 
 V. Baxter, 241. 
 
 ( xiii ) 
 
XU CONTENTS. 
 
 BOOK III. 
 
 COLLECTIONS. 
 CHAPTER I. 
 
TABLE OF CASES. 
 
 A. 
 
 Abrams v. Union Nat. Bank, 244. 
 Adams v. Darby, 297. 
 
 V. Orange Co. Bank, 317, 354. 
 ^tna Ins. Co. v. Alton City Bank, 475. 
 .ffltna Nat. Bank v. Fourth. Nat. Bank, 
 
 332, 393, 394, 479. 
 Agricultural Bank v. Commercial 
 
 Bank, 477, 478. 
 Albers v. Commercial Bank, 93, 94. 
 Aldrioh v. Dunham, 321. 
 V. Jackson, 209. 
 Alexander v. Burchfield, 286, 290, 
 
 296. 
 Allegheny Bank's Appeal, 112. 
 Allen V. Duudas, 110. 
 
 V. Fourth Nat. Bank, 194. 
 V. Kramer, 287. 
 o. Merchants' Bank, 472, 475. 
 V. Suydam, 437, 456, 492. 
 V. Williamsburgh Sav. Bank, 
 176. 
 Alley V. Rogers, 490. 
 Alliance Bank v. Kearsley, 132. 
 American Bank v. Wall, 387. 
 American Ex. Bank v. City Bank, 215. 
 American Express Co. v. Haire, 478, 
 
 490. 
 American Nat. Bank v. Bushey, 296. 
 Ames V, Meriam, 299. 
 
 V. York Nat. Bank, 321. 
 Anderson v. Busteed, 220. 
 V. Ewing, 254. 
 V. State, 251. 
 V. Thompson, 149, 183. 
 Anderton v. Shoup, 327. 
 Andrew v. Blachly, 72. 
 Andrews v. Artisans' Bank, 321. 
 
 V. German Nat. Bank, 231, 
 
 232. 
 V. Pond, 81. 
 Anglo-California Bank v. Ames, 220. 
 Appeal of Bank of Commerce, 404. 
 
 Appeal of Farmers and Mechanics' 
 Bank, 404. 
 
 of Liggett, Spring and Axle 
 Co. 361. 
 
 of Waynesburg College, 142. 
 Appleby v. Erie Co. Sav. Bank, 175. 
 Armstrong v. Temperon, 155. 
 Arnold v. Cheque Bank, 187. 
 
 V. Clark, 433. 
 
 V. Macungie Sav. Bank, 113. 
 
 V. Niess, 380. 
 
 V. Suflblk Bank, 389. 
 Ash V. Putnam, 43. 
 Ashbrook v. Reyon, 144. 
 Aslier V. National {"ark Bank, 61, 62. 
 Atkin V. Barswick, 43. 
 Atkinson v. Stafford, 373, 481. 
 Atlantic Bank v. Merchants' Bank, 
 
 100. 
 Atwood V. Cornwall, 306, 309. 
 Austin V. Miller, 254. 
 Aymar v. Beers, 303. 
 Ayraultt!. Pacific Bank, 472, 475, 476. 
 Ayres v. Farmers and Merchants' 
 Bank, 25, 32, 432. 
 
 Babcock v. Benham, 444. 
 Backhouse v. Charlton, 133, 135. 
 Badeau v. Tylee, 425. 
 Bailey v. Bodenham, 422, 480. 
 Baker v. Moody, 125. 
 
 V. New York Nat. Ex. Bank, 
 165. 
 Balbach v. Frelinghuysen, 25, 43. 
 Balchen v. Crawford, 425. 
 Ball V. Allen, 75. 
 Ballard v. Cheney, 410. 
 Ballingalls v. Gloster, 438. 
 Ballon V. Boland, 340, 341. 
 Bank v, Alexander, 288. 
 V. Baxter, 241. 
 
 ( xiii ) 
 
XIV 
 
 TABLE OF CASES. 
 
 Bank v. Broomliall, 451. 
 V. Burton, 21. 
 V. Butler, 467, 477. 
 V. Calder, 356. 
 V. Clapp, 115. 
 V. Dodge, 255. 
 17. Farmers & Mechanics' Bank, 
 
 189, 205. 
 17. Farnsworth, 248, 255. 
 17. Flagg, 440. 
 V. Hooper, 77. 
 V. Indiana Banking Co., 81. 
 V. Jones, 118. 
 V, Kain, 41. 
 V. Kenan, 465, 492. 
 17. Knox, 478. 
 V. Lanier, 388. 
 V. Macalester, 117, 162, 397. 
 17. McNeil, 390. 
 V. Marshall, 281. 
 V. Merchants' Nat. Bank, 318, 
 
 351. 
 a. Merrill, 248, 249, 255. 
 V. Millard, 50, 329. 
 17. Moore, 473. 
 V. Muskingum Branch of Bank 
 
 of Ohio, 322. 
 17. Ober, 475, 477. 
 V. Patchiu Bank, 322. 
 «. Pinson, 391. 
 17. Russell, 276. 
 V. Schuylkill Bank, 41. 
 V, Sewing Society, 252. 
 V. Smalley, 389. 
 V. Triplett, 437, 474. 
 17. Western Union Tel. Co., 98. 
 of Attica V. Manuf. & Traders' 
 
 Bank, 389. 
 of Attica V. Metropolitan Nat. 
 
 Bank, 487. 
 of Bengal v. Radakissen Mitter, 
 
 406. 
 of Columbia v. Fitzburgh, 450. 
 of Columbia v. Magruder, 450. 
 of Commerce, Appeal of, 404. 
 of Commerce v. Union Bank, 
 
 189, 190, 215, 346. 
 of Kentucky v. Wister, 307. 
 of Louisville v. First Nat. Bank, 
 
 475. 
 of Louisville v. Gray, 391. 
 of Madison, In re, 25, 43, 484. 
 of Metropolis v. First Nat. Bank, 
 
 374. 
 of Metropolis ». New England 
 Bank, 362, 370, 371, 372, 
 375. 
 
 Bank of Missouri v. Benoist, 318, 320. 
 of Mobile, 74. 
 of Mobile v. Brown, 301. 
 of Mobile v. Huggiiis, 478. 
 of Pennsylvania, Estate of, 271. 
 of Utioa V. Smith, 469. 
 Bargett v. Orient Mutual Ins. Co., 229. 
 Barker v. Frye, 149; 
 Barnes v. Ontario Bank, 231, 249, 252. 
 Barnet v. Ringgold, 434. 
 Barnett v. Smith, 222, 229. 
 Barnstable Sav. Bank v. Snow, 360, 
 
 382. 
 Bartlett u. Hamilton, 116. 
 V. Isbell, 470. 
 !7. Remington, 157, 159. 
 Bates V. First Nat. Bank, 140. 
 Beale v. Parrish, 470. 
 Bean v. Briggs, 248. 
 Beardsley v. Warner, 402. 
 Beatty v. McCleod, 130. 
 Beckwith v. Union Bank, 377. 
 Bedell v. Hoffman, 425. 
 Beeching v. Gower, 291, 302. 
 Beers v. Maynard, 387. 
 Belcher v. Wilcox, 282. 
 Belden v. Lamb, 470. 
 
 V. Meeker, 268. 
 Belknap v. National Bank, 193. 
 Bell V. Alexander, 292, 297. 
 V. Gardiner, 344. 
 V. Hunt, 425. 
 17. Viscount Ingestre, 82. 
 Bellamy v. Marjoribanks, 334. 
 Bellemire v. Bank, 478. 
 Bellows Falls Bank v. Rutland Co. 
 
 Bank, 247, 257, 318. 
 Beltzhoover i7. Darragh, 110. 
 Bentinck v. Dorrien, 99. 
 Benton v, Martin, 461. 
 Berkshire Bank v. Jones, 440. 
 Bernheimer v. Marshall, 192. 
 Bertles v. Nunan, 137. 
 Bickerdike v. Bollman, 303, "324. 
 Biokford v. First Nat. Bank, 222, 
 
 287. ■ 
 Bigelow, In re, 388. 
 Birch 17. Fisher, 258, 260. 
 Birohall v. Third Nat. Bank, 96. 
 Bird 17. La. State Bank, 482. 
 Black V. Zacharie, 389. 
 Blaffer v. Bank, 414. 
 Blagden, Ex parte, 386. 
 Blaine v. Bourne, 38, 375, 376. 
 Blair v. Wilson, 85, 86, 87, .287. 
 Blanc, Le, Matter of, 342. 
 Blasdel v. Locke, 146, 156, 159. 
 
TABLE OF CASES. 
 
 XV 
 
 Bleeker v. Graham, 425. 
 
 Blot V. Bolceau, 491. 
 
 Board of Supervisors v, Bank of 
 
 Havana, 426. 
 Boardman v. Gore, 328. 
 Boddington v. Sohlenoker, 286, 422. 
 Bodenham v. Hoskyns, 111, 114. 
 
 V. Purchas, 91. 
 Boehem v. Sterling, 74. 
 Bolland v. Bygrave, 366. 
 Bolton V. Richard, 27. 
 Bond, Ex parte, 21, 
 
 V. Farnham, 325. 
 • V. Warden, 287. 
 
 Boone v. Citizens' Sav. Bank, 182, 
 
 354. 
 Borneman v. Sidlinger, 148. , 
 Borup V. Nininger, 451, 479, 491. 
 Boston Bank v. Hodges, 452. 
 Boughton V. Flint, 257. 
 Bowden v. National Bank, 216. 
 Bowen v. Newell, 72. 
 Bowes, Ee, 366. 
 Bowling V. Arthur, 477, 478. 
 Bowman v. Bank, 250. 
 Boyce v. Brockway, 465. 
 Boyd V. Emmerson, 27, 94. 
 
 V. Mexico Southern Bank, 305, 
 306. 
 Boyden v. Bank of Cape Fear, 315. 
 Boylstou Nat. Bank v. Eichardson, 
 
 344. 
 Brabrook v. Boston Five-Cents Sav. 
 
 Bank, 144, 154, 157, 159. 
 Bradford v. Fox, 85, 326. 
 Bradley v. Delaplalne, 324. 
 Bradstreet v. Everson, 471. 
 Brahm v. Adkins, 6, 18, 351. 
 Branch of Bank of State of Alabama 
 
 V. Knox, 478. 
 Brandao v. Barnett, 360, 362, 367, 368, 
 
 369. 
 Braudywine Bank's Assigned Estate, 
 
 271. 
 Braun v. Kimberlin, 304. 
 Brent v. Bank, 391. 
 Brewer v. Knapp, 406. 
 Brewster v. MoCardel, 98. 
 Bridgman v. Gill, 114. 
 Briggs V. Block, 125. 
 
 V. Central Nat. Bank, 437 
 Bristol Knife Co. v. First Nat. Bank, 
 
 102. 
 British & Am. Mortgage Co. v. Tibballs, 
 
 262,, 263. 
 Broder'ick v. Waltham Sav. Bank, 
 
 154. 
 
 Bromley v. Commercial Nat. Bank, 
 
 96. 
 Brooks V. Bigelow, 34. 
 Broun v. Hull, 434. 
 Brouwer v. Harbeck, 268, 387. 
 Brown, In re, 21, 96, 299. 
 
 V. Brown, 145. 
 
 V. Citizens' Nat. Bank, 266. 
 
 V. Foster, 125. 
 
 V. Leokie, 363. 
 
 ». Lusk, 317. 
 
 V. McElroy, 248, 257, 318. 
 
 J/. New Bedford Institution, 
 369, 404. 
 
 V. Rickets, 117. 
 Browning v. Andrews, 440, 469. 
 Bruen «. Hone, 62. 
 Brummagim v. Tallant, 258. 
 Brust V. Barrett, 352, 355. 
 Bruyn v. Receiver, 269. 
 Buchlin v. Chapin, 62. 
 Buoklei^ v. Buttivaut, 76. 
 Bnckner v. Sayre, 332. 
 BuUard v. Bank, 388. 
 
 V. Central Bank, 266. 
 
 V. Randall, 69, 123. 
 Bullene v. Coates, 432. 
 Bullock V. Boyd, 62. 
 Bundy v. Town of Monticello, 426. 
 Bunn V. Winthrop, 149. 
 Bunnell v. CoUinsville Sav. Society, 
 
 282, 284. 
 Burdon v. Benton, 76. 
 Burdsall & Co. v. Chrisfield, 81. 
 Burford v. Crandell, 389, 
 Burkbridge v. Manners, 398. 
 Burke v. Bishop, 144. 
 
 V. State, 251. 
 Burkhalter v. Second Nat. Bank, 84, 
 
 287, 447, 459, 460. 
 Burn V. Carvalho, 341, 
 Burnham v. Allen, 247. 
 
 " V. Webster, 434. 
 Burr V. Sickles, 106. 
 Burress v. Blair, 50. 
 Burrill v. Dollar Sav. Bank, 178, 179j 
 284. 
 
 V. Watertown Bank, 306. 
 Burrows v. Bangs, 261, 
 Burtnett v. First Nat. Bank, 131, 
 Burton a, Bridgeport Sav, Bank, 153. 
 Bury V. Woods, 373. 
 Buschian v. Hughart, 143. 
 Bush I'. Foote, 333. 
 Bushnell v. Chatauqua Co. Nat. Bank, 
 
 44, 
 Butterworth v. Peck, 333. 
 
XVI 
 
 TABLE OF CASES. 
 
 C. 
 
 Cabot Bank v. Morton, 209. 
 
 Camidge v. AUenby, 309. 
 
 Camp's Appeal, 144, 145, 147. 
 
 Can V. Read, 110. 
 
 Canal Bank v. Bank of Albany, 190, 
 
 207, 209, 210, 215, 346. 
 Canonsburg Iron Co. v. Union Nat. 
 
 Bank, 378. 
 Capitol State Bank v. Lane, 438. 
 Cardwell v. Martin, 76. 
 Carey a. MeDougald, 248. 
 Carlisle v. Davis, 74. 
 Carman v. Franklin Bank, 425. 
 Carnoross v. Lorimer, 202. 
 Carr v. Carr, 49. 
 
 V. National Security Bank, 330. 
 Carradiue v. Carradine, 146. 
 Carrier v. Sears, 328. 
 Carpenter v. Farnsworth, 77. 
 Carson's Adm'r v. Phelps, 149. 
 Case V. Beauregard, 116. 
 V. Dennison, 160. 
 V. Henderson, 333. 
 V. Mechanics' Bank. Ass'n, 127. 
 V. Morris, 324, 325. 
 Cassidy v. First Nat. Bank, 265. 
 Cate V. Patterson, 248. 
 Catlin V. Savings' Bank, 20. 
 Cawein v. Browinski, 286, 288, 291. 
 Cecil Bank v. Farmers' Bank, 38, 372, 
 
 375. 
 Central Ga. Bank v. Cleveland Nat. 
 
 Bank, 438. 
 Central Railroad v. First Nat. Bank, 
 
 376. 
 Chaffee v. Bank, 338, 339. 
 
 V. Fort, 43. 
 Chambers v. Miller, 28. 
 Champion v, Gordon, 72. 
 Chapman u.'MoCrea, 490. 
 
 17. Union Bank, 452. 
 V. White, 271, 329, 332. 
 Charlotte Iron Works v. American Ex. 
 
 Nat. Bank, 484. 
 Charnley v. Dulles, 247. 
 Chase v. Petroleum Bauk, 397. ' 
 Chattahoochee Nat. Bank v. Schley, 
 
 16. 
 Chesapeake Bank v. Swain, 21, 23. 
 Chesnut v. Chesnut, 86. 
 Chicago Marine and Fire Ins. Co. v. 
 
 Carpenter, 310. 
 Chicago Marine and Fire Ins. Co. v. 
 
 Stanford, 55. 
 Chicopee Bank v. Eager, 445. 
 
 Chicopee Bank v. Philadelphia Bank, 
 
 453. 
 Chiles V. Garrison, 17. 
 Christmas v. Russell, 337> 
 Church V. Clark, 401. 
 
 V. Farnham, 291. 
 Citizens' Bank v. Carson, 396. 
 B. Grafflin, 349. 
 V. Howell, 478. 
 V. Lay, 398. 
 Citizens' Sav. Bank v. Blakesley, 107. 
 City Bank v. Cutter, 453. 
 
 V. First Nat. Bank, '212, 
 
 346. 
 V. Kent, 127. 
 City Nat. Bank v. Burns, 26. 
 u. stout, 345. 
 Claflin V. Fisher, 328. 
 V. Wilson, 373. 
 Clark V. Clark, 154, 156. 
 V. Eldridge, 401. 
 V. Merchants' Bank, 432. 
 Clarke v. Hawkins, 380, 387. 
 Clarke Nat. Bank v, Bauk of Albion, 
 
 234. 
 Clapp V. Rodgers, 135. 
 Clews V. Bank, 225, 226. 
 Clough V. Bond, 110. 
 
 V. Clough, 161. 
 Glutton, Ex parte, 45. 
 Coates V. Doran, 332, 333. 
 
 V. Preston, 96. 
 Coats V. Donnell, 279. 
 Cobb V, Becke, 59. 
 Cooker v. Franklin Hemp, etc., Co., 
 
 306. 
 Cocks V. Westerman, 99, 189. 
 Coddington v. Bay, 373. 
 Cody V. City Nat. Bauk, 432. 
 Coffin V. Anderson, 205. 
 
 V. Henshaw, 58. 
 Coggill a. American Ex. Bank, 207, 
 
 210. 
 Cogswell V. Rockingham Ten-Cents 
 
 Sav. Bank, 282, 284, 291, 301. 
 Cohea v. Hunt, 452. 
 Coite V. Society for Savings, 282, 284. 
 Coleman v. First Nat. Bank, 250. 
 Colling v. Central Bank, 282. 
 Colorado Nat. Bank v. Boettcher, 333. 
 Colt V. Lasnier, 111. 
 Combes v. Chandler, 260. 
 Commercial Bank v. Hughes, 5, 50, 
 290, 291, 360, 
 393. 
 V. Jones, 128. 
 V. Kortright, 389. 
 
TABLE OF CASES. 
 
 XVU 
 
 Commercial and Farmers' Nat. Bank 
 
 V. First Nat. Bank, 189, 415. 
 Commercial Bank v. Marine Bank, 
 373, 432. 
 V. Rhind, 63. 
 i;. Union Bank, 
 448, 472. 
 Commercial Nat. Bank v. Henninger, 4, 
 393. 
 V. Prootor, 133, 
 403. 
 Commercial Press v. Cresson City Nat. 
 
 Bank, 218 
 Commonwealth k. Fisher, 251. 
 
 V. McAllister, 117. 
 V. Scituate Sav. Bank, 
 285. 
 Compton V. Gilman, 290. 
 Conant v. Seneca County Bank, 389. 
 Concord v. Concord Bank, 5. 
 Conklin v. Second Nat. Bank, 389. 
 Conroy v. Warren, 75, 79, 303, 435. 
 Conwell V. Pumphrey, 253. 
 Cook V. Doggett, 405. 
 
 ^. Tullis, 131. 
 Cooke V. Seeley, 132. 
 
 v. State Nat. Bank, 221, 233. 
 V. United States, 215. 
 Cooper V. Mowry, 320. 
 Coote V. Bank, 133. 
 Coots V. McConnell, 269. 
 Corbit V. Bank of Smyrna, 40. 
 Cordell v. First Nat. Bank, 261. 
 Cork V, Bacon, 83. 
 Corn Ex. Bank, In re, 272. 
 
 V. Blye, 278. 
 Corn Ex. Nat. Bank v. National Bank, 
 
 204. 
 Coruwell v. Kinney, 370. 
 County of Des Moines v. Hinkley, 341. 
 Cowing V. Altman, 79, 80. 
 Cowley V. Dunlop, 76. 
 Cowperthwaite v. Sheffield, 271. 
 Cox «. Boone, 288, 290. 
 V. Hill, 143. 
 V. Prentice, 163. 
 V. Troy, 134. 
 Coykendall v. Constahle, 457, 458. 
 Cragie v. Hadley, 32, 34. 
 
 V. Smith, 42. 
 Craig V. Sibbett, 436. 
 
 V. State, 255. 
 Crandall v. Schroeppel, 465. 
 Crawford v. West Side Bank, 193. 
 Crenshaw v. M'Kiernan, 410. 
 Creveling v. Bloomsbury Nat. Bank, 
 331. 
 
 B 
 
 Crews V. Farmers' Bank, 469. 
 Cromwell v. Lovett, 84, 291, 302, 383. 
 Cruger v. Armstrong, 74, 79, 303. 
 Crumb v. Treiber, 123. 
 Gulter V. Reynolds, 72. 
 Cumnock v. Institution, 405. 
 Currier v. Davis, 301. 
 Curry v. Powers, 143. 
 Curtis V. Leavitt, 255. 
 
 u. Portland Sav. Bank, 160. 
 Cushman v. Carver & Co., 311. 
 
 V. Illinois Starch Co., 267. 
 Cutting V. Gilman, 146. 
 
 V. Marlor, 24. 
 Cuyahoga Steam Furnace Co. v. Lewis, 
 254. 
 
 D. 
 
 Dacy V. N. Y. Chemical Manufg. Co., 
 
 138. 
 Dagget V. Whitney, 76. 
 Daintree v. Hntchinson, 63. 
 Dale V. SoUet, 363. 
 Daly V. Butchers & Drovers' Bank, 
 
 475. 
 Dana v. National Bank, 197. 
 
 V. Third Nat. Bank, 96. 
 
 V. Underwood, 328. 
 Daniels v. Kyle, 287. 
 Da Silva v. Fuller, 97. 
 Davey v. .Jones, 470, 475. 
 Davies, Ex parte, 58. 
 Davis V. Adae, 82. 
 
 </. Benton, 296. 
 
 V. Bowsher, 163, 366. 
 
 V. Lenawee Co. Sav. Bank, 172. 
 
 V. McAlpine, 403. 
 
 a. Ney, 159, 161. 
 Dawson o. Real Estate Bank, 19, 397. 
 
 V. Wilson, 377. 
 Dearborn v. Union Nat. Bank, 24. " 
 Decatur Nat. Bank v. Murphy, 458. 
 Deener v. Brown, 292. 
 De Feriet v. Bank of America, 199. 
 De Haven v. Williams, 109. 
 Delano v. Case, 6. 
 Delaware, L. & W. R. Co. v. Oxford 
 
 Iron Co., 388. 
 Demmon v. Boylston Bank, 381. 
 De Nayer v. State Nat. Bank, 348. 
 De Roebeck v. Lord Cloncurry, 50. 
 Detroit Sav. Bank v. Burrows, 51. , 
 Devendorf v. West Va. Oil & Oil Laud 
 
 Co., 290. 
 Dewar v. Bank, 105. 
 
XVlll 
 
 TABLE OF CASES. 
 
 Diokerson v. Watson, 433. 
 Dickinson v. Coates, 93, 332, 333. 
 Dimes Sav. Institution v. Allentown 
 
 Bank, 84. 
 Dingwall v. Dunster, 239. 
 Diven v. Phelps, 281, 387. 
 Dod V. Fourth Nat. Bank, 373. 
 Dodge V. National Ex. Bank, 98, 212. 
 
 0. Perkins, 60. 
 Dole V. Lincoln, 148. 
 Dolph V. Rice, 324. 
 Donlou V. Provident Institution, 177, 
 
 179. 
 Dooley v. Va. Fire & Marine Ins. Co., 
 
 398. 
 Dorchester Bank o. New England 
 
 Bank, 474. 
 Dorman v. Jenkins, 13. 
 Dorsey v. Abrams, 233. 
 Dougherty v. Hughes, 256. 
 Dowe V. Sohutt, 7B. 
 Down I'. Hailing, 217. 
 Downer ». Madison Co. Bank, 490. 
 
 V. Phcenix Bank, 4, 317. 
 Drake v. Markle, 248, 253. 
 Dreyfuss v. Adae, 81. 
 Drovers' Nat. Bank v. Anglo -Am. 
 Pack. & Prov. 
 Co., 242, 243, 
 466. 
 V. O'Hare, 131. 
 Drown v. Pawtucket Bank, 397. . 
 Duffy V, Byrne, 6. 
 Duncan v. Berlin, 123. 
 
 V. Brennan, 366. 
 v. Jaudon, 111. 
 u. Magette, 484. 
 Dunkerson, In re, 388. 
 Dustin V. Hodgen, 280. 
 Dutoher v. Importers & Traders' Nat. 
 
 Bank, 268, 269. 
 Dutton V. Merchants' Nat. Bank, 413. 
 Dykers v. Leather Mauuf. Bank, 80, 
 92. 
 
 Eagle Bank v. Hathaway, 444. 
 Eans V. Exchange Bank, 107. 
 Earl of Strathmore v. Vane, 366. 
 East Haddam Bank v. Scovil, 475, 478. 
 East Hartford, Town of, v. American 
 
 Nat. Bank, 426. 
 East River Bank v. Gedney, 298. 
 East River Nat. Bank v. Gove, 48, 399. 
 Eastern Bank v, Capron, 387. 
 
 Eastman v. Plumer, 398. 
 
 V. Woronoco Sav. Bank, 149. 
 
 Easton v. Hyde, 254. 
 
 Eaton V. Carey, 76. 
 
 Eaves v. People's Sav. Bank, 175, 178. 
 
 Echarte v. Clark, 433, 471. 
 
 Edson V. Angell, 481. 
 
 Egbert v. Payne, 56. 
 
 EgertOD a. Fulton Nat. Bank, 397. 
 
 Eichelberger v. Finley, 303, 357. 
 
 Ellicott V. Barnes, 404. 
 
 Ellis V. Ohio Life Ins. & Trust Co., 
 187, 189, 190, 191, 205. 
 V. Thompson, 306. 
 
 Elting V. Brinkerhoff, 71, 291. 
 
 Emery v. Hobson, 220, 291, 293. 
 
 Emly V. Lye, 133. 
 
 Ernst V. Nicholls, 108. 
 
 Esley V. People, 252. 
 
 Espy V. Bank, 227, 229, 231, 346. 
 V. Bank of America, 486. 
 
 Essex Co. Nat. Bank v. Bank, 243. 
 
 Estate of Bank of Pennsylvania, 271. 
 
 Estes V. Tower, 401. 
 
 Evansville Nat. Bank v. Metropolitan. 
 Nat. Bank, 388. 
 
 Everett v. Collins, 84. 
 
 Exchange Bank v. Bank of North 
 America, 394, 
 401. ^ 
 
 V. Farmers' Bank, 
 281. 
 
 Exchange Nat. Bank v. Third Nat. 
 Bank, 437, 473, 474, 475. 
 
 Exton V. Scott, 149. 
 
 Eyermau v. Second Nat. Bank, 423. 
 
 P. 
 
 Fabens v. Mercantile Bank, 437, 474. 
 
 Falkland v. St. Nicholas Bank, 364. 
 
 Farley v. Turner, 276. 
 
 Farmers' Bank v. Duvall, 445, 446. 
 V. Gettinger, 387. 
 «. Vail, 447, 461. 
 
 Farmers & Mechanics' Bank, Appeal 
 of, 404. 
 
 Farmers & Mechanics' Bank v. Butch- 
 ers & Drovers' Bank, 221, 231, 238. 
 
 Farmers & Mechanics' Bank v. Plant- 
 ers' Bank, 319. 
 
 Farmers & Mechanics' Nat. Bank v. 
 King, 112, 114, 118, 119, 128. 
 
 Farmers & Merchants' Bank v. Frank- 
 lin Bank, 125. 
 
 Farnsworth, In re, 377. 
 
TABLE OF CASES. 
 
 XIX 
 
 Farquhar v. Southey, 239. 
 Farwell v. Curtis, 298. 
 Featherston v. Norris, 63. 
 Fells Point Sav. Institution v. Weldou, 
 
 264. 
 Ferguson v. Bank, 123. 
 Field V. Holland, 406. 
 
 V. Nickerson, 247. 
 Fields V. Stunston, 76. 
 Finkbone's Appeal, 257, 351. 
 First Nat. Bank v. Baohe, 114. 
 • V. Burkham, 350. 
 
 V. Coates, 338. 
 V. Coleman, 321, 353. 
 V. Continental Nat. 
 
 Bank, 195, 347. 
 V. Crawford, 25. 
 V. Dunbar, 16. 
 V. D. & S. W. E. 
 
 Co., 341. 
 V. First Nat. Bank, 
 
 219, 376, 462. 
 V. Fourth Nat. Bank, 
 
 458, 491, 492. 
 V. Gish, 333, 339. 
 1-. Graham, 18,41,42. 
 V. Gregg & Co., 373, 
 
 484. 
 V. Hall, 322. 
 , ■/. Harris, 299. 
 
 u. Hartman, 410. 
 V. Higbee & Co., 401. 
 V. Jaggers, 125. 
 V. Leach, 240, 242, 
 
 486. 
 t). Mason, 56. 
 a. McMauigle, 106. 
 V. Myers, 267. 
 V. Ocean Nat. Bank, 
 
 7, 9, 41. 
 V. Petit, 103. 
 V. Reno County Bank, 
 
 375. 
 V. Ricker, 188. 
 V. Whitman, 62, 240. 
 V. Williams, 252. 
 V. Zahm, 406, 409. 
 V. Zent, 10, 41. 
 Firth V. Brooks, 287. 
 Pish V. Jacobsohn, 326. 
 
 V. Marine Bank, 322. 
 Fisse V. Dietrich, 42. 
 Fitch V. Redding, 76, 292. 
 Fitzhugh V. Bank, 390. 
 Flanuery v. Coates, 432. 
 Fleig V. Sleet, 87. 
 
 Flemming v. Denny, 304. 
 Fletcher v. Fletcher, 149. 
 V. Pierson, 325. 
 V. Schaumburg, 424. 
 V. Sharpe, 271. 
 Flint, Ex parte, 386. 
 Flour City Nat. Bank v. Traders' Nat. 
 
 Bank, 241. 
 Fogarties v. Stillman, 332. 
 Foley V. Hill, 50. 
 FoUansbee v. Parker, 62. 
 Forbes v. Omaha Nat. Bank, 444. 
 Ford V. Mitchell, 248, 253, 254. 
 
 V. Thornton, 385. 
 Forster v. Mackreth, 133. 
 Fort V. Bank of Cape Fear, 263, 306. 
 Foss V. Lowell Five-Cents Sav. Bank, 
 
 142, 159, 182. 
 Foster v. Bank, 314. 
 
 V. Essex Bank, 11, 41. 
 I.. Paulk, 70, 75, 79 220, 292. 
 V. Shattuck, 328. 
 Foulker v. Union Banking Co., 37. 
 Fountaine v. Carmarthen Railway Co., 
 
 108. 
 Fourth Nat. Bank v. City Nat. Bank, 
 
 361. 
 Fox's Appeal, 270. 
 Foxton V. Kucking, 113. 
 Francestown Bank Case, 285. 
 Frank v. Chemical Bank, 200. 
 Franklin Bank, v. Bryam, 358. 
 !). Freeman, 80. 
 In re, 5, 55. 
 Matter of, 269. 
 Franklin v. Vanderpool, 70, 290, 292, 
 
 325. 
 Frazier v. Erie Bank, 117. 
 
 V. Trow's Printing & Book- 
 binding Co., 97, 327. 
 Freeholders of Middlesex v. State Bank, 
 467. 
 U.Thomas, 86. 
 Freeman's Bank ii. Perkins, 434. 
 Freiberg v. Cody, 289. 
 Frenc];i v. Irwin, 233. 
 
 V. Raymond, 146, 160. 
 Freun,d v. Importers & Traders' Nat. 
 
 Bank, 216, 240. 
 Fryer v. Ranken, 49. 
 Fuller V. Bennett, 457. 
 V. Hooper, 77. 
 0. Randall, 126. 
 Fulton Bank u. N. Y. Sharon Canal 
 
 Co., 109. 
 Furman v. Nichol, 309. 
 
XX 
 
 TABLE OF CASES. 
 
 G, 
 
 Galena Ins. Co. v. Kupfer, 312, 313. 
 Ganley v. Troy City Nat. Bank, 3.54. 
 Gardner v. City Nat. Bank, 333, 335. 
 V. Maynard, 398. 
 V. Merritt, 149, 151, 159. 
 Garland v. Salem Bank, 457. 
 Garmire v. State, 251. 
 Geary v. Page, 153. 
 Geist's Appeal, 401. 
 Gelster v. Syracuse Sav. Bank, 56. 
 Georgia Nat. Bank v. Henderson, 450. 
 Gerhardt v. Boatman's Sav. Institu- 
 tion, 478. 
 German American Bank v. Third Nat. 
 
 Bank, 277, 484. 
 German Bank v. Himstedt, 56, 139. 
 German Ex. Bank v. Commissioners, 
 
 425. 
 German Sar. Institution v. Adae & 
 
 Co., 336. 
 Gerrish v. Bedford Institution, 147, 
 
 149, 158. 
 Getohell v. Chase, 90. 
 Gettysburg Bank v. Kuhns, 37. 
 Giblen v. MoMuUen, 13, 14, 58. 
 Gibson v. Minet, 51, 401. 
 
 u. National Park Bank, 122. 
 Gilbert v. Manchester Iron Manuf. Co., 
 
 389. 
 Giles V. Perkins, 37. 
 Gillespie v. Mather, 247. 
 Gindrat v. Mechanics' Bank, 445. 
 Girard Bank v. Bank, 240, 351, 352. 
 Glazier v. Douglass, 406, 408. 
 Glenn v. Noble, 72, 319, 320. 
 Gloucester Bank v. Salem Bank, 189, 
 
 192, 205. 
 Goblet V. Beechey, 63. 
 Goddard v. Merchants' Bank, 189, 205. 
 Godin V. Bank, 97. 
 Goetz V. Bank, 436. 
 Goldricku. Bristol Co. Sav. Bank, 177. 
 Goodall V. Dolley, 437. 
 Goodwin v. American Nat. Bank, 111. 
 Gordon v. Kearney, 370. 
 V. Muohler, 394. 
 V. Parmelee, 401. 
 Gough V. Staats, 291, 301, 303, 324. 
 Graham v. Williams, 56. 
 Grammel v. Carmer, 332, 333, 334. 
 Grand Trunk R. v. Edwards, 130. 
 Grangiao v. Arden, 144. 
 Grant v. Taylor, 362. 
 
 V. Vaughn, 75, 216. 
 Graves v. American Ex. Bank, 207. 
 
 Gray v. Johnston, 57. 
 Gregg V. George, 88. 
 
 V. Union Co. Nat. Bank,248, 258. 
 Green v. Farmer, 363. 
 
 V. Odd Fellows' Sav. & Com. 
 . Bank, 355. 
 
 V. Sizer, 21, 23. 
 Greenleaf w. Mumford, 123. 
 Greeves v. La. State Bank, 315, 483. 
 Griffin i'. Kemp, 287, 304, 324. 
 V. Riblet, 298. 
 V. Rice, 393. 
 Griffith V. Zipperwick, 11. 
 Griswold r. Chandler, 60. 
 Grivot V. La. State Bank, 99. 
 Guelich v. National State Bank, 475. 
 Gumbel v. Abrams, 308. 
 Gurney v. Howe, 106. 
 
 Hackett v. Reynolds, 373. 
 
 Haddock v. Citizens' Nat. Bank, 261. 
 
 Haines v. McFerren, 394. 
 
 Hagar w. Union Nat. Bank, 388, 389. 
 
 Hakman v. Schaaf, 377. 
 
 Hale V. Rawllie, 17. 
 
 Hall 0. City of Buffalo, 341. 
 
 V. Fuller, 193. 
 
 V. Harris, 283. ' 
 
 V. Otis, 137. 
 
 V. Tioga Nat. Bank, 383. | 
 Hallowell v. Curry, 452. 
 Halls V. Bank, 457. 
 Hamilton v. EUer, 306. 
 Hampton v. Levy, 408. 
 Hancock v. Citizens' Bank, 99. 
 Hannon v. Williams, 382. 
 Hanson, £j: parte, 133. 
 Harbeok v. Craft, 291, 326. 
 Harbison v. Bailey, 104. 
 Hardy v. Chesapeake Bank, 184, 185, 
 
 195, 196. 
 Hare v. Henty, 287, 422. 
 Harford, Ex j/arte, 38. 
 Harker v. Anderson, 70, 324, 461. 
 Harley v. Eleventh Ward Bank, 347. 
 Harris v. Clark, 70, 271. 
 Harrisburg Bank v. Tyler, 117. 
 Harrison v. Wright, 333. 
 Harmanson v. Bain, 74. 
 Harpending v. Daniel, 326. 
 Harry v. Wood, 122. 
 Hartford Bank v. Stedman, 444, 445. 
 Hathaway v. Fall River Nat. Bank, 
 404. 
 
TABLE OF CASES, 
 
 XXI 
 
 Haven's Petition, 278. 
 
 Hawley v. Jette, 70. 
 
 Hayden v. Brooklyn Sav. Bank, 174. 
 
 V. Hayden, 149. 
 Hays V. Birks, 443. 
 Haxtnn v. Bishop, 281. 
 Hazleton v. Colburn, 288, 461. 
 Headley v. Reed, 86. 
 Heane v. Rogers, 63. 
 Heath v. Portsmouth Sav. Bank, 175, 
 
 180. 
 Hebb's Case, 382. 
 Heiderioh v. Heiderioh, 379. 
 Helwege v. Hibernia Nat. Bank, 221. 
 Henniker v. Wigg, 378. 
 Henry & Co. u. Northern Bank, 483. 
 Henry v. Oves, 86. 
 Henshaw v. Root, 304. 
 Herriok v. Whitney, 209. 
 Hewitt V. Kaye, 141. 
 Heylyn v. Adamson, 220. 
 Hidden v. Bishop, 322. 
 Higgins V. Moore, 229. 
 Higginson v. Gray, 76. 
 Hill V. Nation Trust Co., 233. 
 
 w. Stevenson, 148, 158, 161. 
 Hillier v. Allegheny Co. Mut. Ins. Co., 
 
 382. 
 Hills V. Daniels, 11. 
 c. Place, 433. 
 Himmelmann v. Hotaling, 286, 287. 
 Hoard v. Grarner, 491. 
 Hodgson V. Clieever, 257. 
 Hoffman v. First Nat. Bank, 34, 38, 43. 
 Hogue V. Edwards, 312, 335. 
 Holmes v. Roe, 290, 296. 
 Home Nat. Bank v. Newton, 401. 
 Hooker v. Franklin, 3\ 296. 
 Hoover v. Wise, 210, 471. 
 Hopkins v. Adams, 217. 
 Hopkinson v. Forster, 333. 
 Hopper V. Moore, 107. 
 Hornby, Ex parte, 365. 
 Horstman v. Henshaw, 210. 
 Hotohkiss V. Artisans' Bank, 47. 
 
 V. Mosher, 37, 249. 
 Hough V. First Nat. Bank, 272, 377. 
 Housuin V. Rogers, 281. 
 Howard v. Deposit Bank, 97. 
 
 V. Ives, 447, 461. 
 
 u. Roeben, 17. 
 
 V. Savings Bank, 154. 
 Howard Nat. Bank, Ex parte, 365, 382. 
 Howe V. Huntington, 306. 
 Howell V. Adams, 257, 264, 317, 318, 
 
 351, 352. 
 Hoyt V. Seeley, 79, 291, 292. 
 
 Huff V. Langdon, 437. 
 Hughes V. First Nat. Bank, 17. 
 V. School District, 107. 
 Hull u. Bank, 99. 
 Hume V. Bolland, 63. 
 Humphrey v. County Nat. Bank, 351. 
 Humphries v. Bicknell, 303. 
 Hunt, Appellant, 256. 
 Hunt V. Poole, 140, 145. 
 Hunter, Ex parte, 110. 
 Hunter v. Wilson, 436. 
 Huntington v. Savings Bank, 284. 
 Huntzinger v. Jones, 86. 
 Hutton V. Warren, 23. 
 Hyde f. First Nat. Bank, 473. 
 V. Planters' Bank, 478. 
 
 I. 
 
 Ide V. Pierce, 149, 154. 
 
 Ilgenfritz v. Pettis County Bank, 385. 
 
 Illinois Trust & Sav. Bank u. Smith, 
 
 34. 
 Indiana Nat. Bank v. Holtsclaw, 106, 
 
 207. 
 Indig V. National City Bank, 393, 479, 
 
 486, 492. 
 Ingraham v. Maine Bank, 100. 
 Innes v. Stephenson, 110. 
 International Bank v. German Bank, 
 260. 
 V, Jones, 293. 
 Ireland v. Kip, 444. 
 Irving Bank v. Wetherald, 231. 
 Israel v. Bowery Sav. Bank, 173, 175. 
 
 J. 
 
 Jacks V. Darrin, 74, 297. 
 Jackson v. Bank, 116, 118. 
 
 V, Union Bank, 475. 
 Jackson Ins. Co. v. Cross, 64. 
 
 V. Sturges, 324. 
 Jacob V. First Nat. Bank, 336. 
 Jamison v. Collins, 167. 
 Jarvis v, Rogers, 163. 
 Jassoy V. Horn, 321. 
 Jenkins v. National Village Bank, 24. 
 
 . V. Walter, 116. 
 Joohumsen v. Suffolk Sav. Bank, 183. 
 Johns V. Mason, 217. 
 Johnson v. Bank, 288, 461. 
 
 i;. Barney, 260. 
 
 <,-. First Nat. Bank, 464. 
 
 V. Harth, 443, 
 
XXll 
 
 TABLE OF CASES. 
 
 Johnson v. Henderson, 254. 
 
 Johnston's Claim, 14. 
 
 Johnston v. Parker Sav. Bank, 167. 
 
 Jones, Ex parte, 343. 
 
 Jones V. Fales, 410. 
 
 V. Heiliger, 292. 
 
 1^. Lock, 143. 
 
 V. Manufacturers' Bank, 381. 
 
 u. Milliken, 373. 
 Jordan v. National Shoe & Leather 
 Bank, 385, 403. 
 V. Sharlook, 380. 
 Jourdaine v. Lefevre, 397. 
 Judah V. Harris, 253. 
 Judd V. Smith, 324. 
 Judy V. Farmers & Traders' Bank, 162. 
 Jung V. Second Ward Sav. Bank, 106. 
 Justh V. National Bank, 343, 465, 486. 
 
 K. 
 
 Kansas Lumher Co. v. Central Bank, 
 
 349. 
 Keane v. Robarts, 58. 
 Keen v. Davis, 78. 
 Keene v. Collier, 5, 349. 
 Kekewich v. Manning, 144, 159. 
 Keith V. Jones, 253. 
 Kelly V. Lane, 125. 
 
 V. Manhattan Institution, 150. 
 
 V. Roberts, 125. 
 
 V. Solari, 344. 
 Kelly & Co. v. Phelan, 365. 
 Kelty V. Second Nat. Bank, 85, 288. 
 Kenistons v. Soeva, 141. 
 Kermeyer v. Newby, 88. 
 Ketchum v. Stevens, 333, 385. 
 Kilgore v. Bulkley, 248. 
 Kilpin V Kilpin, 159. 
 Kilsby V. Williams, 27, 94. 
 Kimball «. Leland, 142, 159. 
 K. Norton, 152, 176. 
 Kimins v. Boston Five -Cents Sav. 
 
 Bank, 179. 
 King V. Elliot, 281. 
 
 V. Zimmerman, 217. 
 Kingman v. Perkins, 142, 159. 
 Kingston, £x parte, 114. 
 Kinyon v. Stanton, 90. 
 Kip V. Bank, 382. 
 Kirk V. Blurton, 133, 135. 
 Kirkpatriok v. McCnllough, 254. 
 Kirtland v. Moore, 340. 
 Klauber v. Biggerstatf, 248, 253. 
 Kleekamp h. Meyer, 296. 
 KnatchbuU v. Hallett, 132. 
 
 Knecht v. V. S. Sav. Institution, 385. 
 
 Knight V. Old Nat. Bank, 388. 
 
 Kobbi V. Underbill, 84. 
 
 Koehler v. Adler, 90. 
 
 Kortright v. Buffalo Com. Bank, 260. 
 
 Kuhn V. Frank, 195. 
 
 Kupfer V. Bank, 310, 490. 
 
 Kymer v. Lawrie, 393, 402. 
 
 L. 
 
 Labor v. Steppacher, 299. 
 Lackey v. Miller, 306. 
 Ladd V. Sears, 62. 
 Lake v. Brutton, 322. 
 V. Munford, 252. 
 Lamson v, Monroe, 161. 
 Lancaster Bank v. Woodward, 299, 
 
 356. 
 Lancaster Co. Nat. Bank w.^Smith, 16. 
 Lancey v. Clark, 398. 
 Lane v. Bailey, 366. 
 Lanfear ». Blossman, 441. 
 Lang V. Brevard, 408. 
 Law V. East India Co., 322, 408. 
 Lawrence v. Bank, 125. 
 
 V. Bank of the Republic, 369. 
 
 V. Maxwell, 229. 
 
 V. Nelson, 382. 
 
 V. Schmidt, 312, 313. 
 
 V. Stouington Bank, 373, 
 475. 
 Lawson v. Richards, 72. 
 Lazarus v. Shearer, 78. 
 Lazier v. Horan, 398. 
 Lauback v. Leibert, 365. 
 Lauraan's Appeal, 359. 
 Leach v. Perkins, 296. 
 Leather Manuf. Bank v. Morgan, 187, 
 
 201. 
 Leather v. Simpson, 436. 
 Leavitt v. Palmer, 255. 
 V. Stanton, 184. 
 Lebanon Bank v. Morgan, 247. 
 Le Blanc, Matter of, 342. 
 Lee V. Chillioothe Bank, 375. 
 
 V. Smead, 481. 
 Leeds v. Trenton Bank, 9. 
 Leggett V. Bank, 389. 
 Lehman Brothers v. Tallassee Manuf. 
 
 Co., 360. 
 Lenox v. Cook, 438. 
 Le Roy v. Globe Ins. Co., 342. 
 Lester v. Georgia R. and Bank. Co., 
 308. 
 V. Given, 71, 80. 
 
TABLE OF CASES. 
 
 XXIU 
 
 Lester v. Jones, 332. 
 V. Paine, 218. 
 Lett V. Morris, 341. 
 LeTi V. National Bank, 275, 313, 483. 
 Levy V. Bank of America, 213. 
 
 V. Bank of United States, 189. 
 ». Cavanagh, 130. 
 V. Franklin Sav. Bank, 177. 
 ». Peters, 317, 326. 
 V. Pike, 11. 
 V. U. S. Bank, 28, 30. 
 Lewis V. International Bank, 104. 
 
 V. Park Bank, 425. 
 Litby V. Hopkins, 275. 
 Lieber v. Goodrich, 74, 253. 
 Liggett Spring and Axle Co., Appeal 
 
 of, 361. 
 Lincoln and Kennebeok Bank v. Page, 
 
 452. 
 Lindauer v. Fourth Nat. Bank, 373. 
 Lindsey v. McClelland, 253. 
 Lilly u. Hays, 51. 
 Linville v. Welch, 297. 
 Little V. Phenix Bank, 74, 288, 291, 
 
 298, 324, 352. 
 Lloyd V. West Branch Bank, 18. 
 Lobdell V. Baker, 209. 
 Locke V. Merchants' Nat. Bank, 468. 
 Long V. Straus, 246, 251. 
 London Chartered Bank v. White, 360. 
 Loughlin v. Marshall, 248. 
 Louisiana Ice Co. v. State Nat. Bank, 
 
 37, 221. 
 Louisiana State Bank o. Hibernia 
 
 Bank, 244. 
 V. Eowell, 444. 
 Lovell V. Evertson, 435. 
 Loving V. Brodie, 115.' 
 Lowe V, Harwood, 173. 
 u. Murphy, 248. 
 Lowene u. American Fire Ins. Co., 
 
 342. 
 Lucas V. Dorrien, 367. 
 Lund V. Seamen's Bank, 57. 
 Lunt V. Bank, 339. 
 
 M. 
 
 Mabie v. Bailey, 149, 171, 183, 353. 
 Maodonnell v. Harding, 116, 117. 
 Mackersy v. Ramsays, 473. 
 Macungie Sav. Bank v. Bastian, 383. 
 Madison, In re, Bank of, 25, 43, 357. 
 Magee v. Carmack, 215. 
 Mahony o. East Holyford Mining Co., 
 108. 
 
 Makin v. Institution, 319. 
 
 V. Savings Institution, 183. 
 Malcolm v. Scott, 51. 
 Manchester Bank v. Fellows, 444. 
 Mandeville v. Bank, 99, 315. 
 
 V. Union Bank, 393. 
 Manhattan Co. v. Lydig, 61. 
 Manuel v. Mississippi R. Co., 266. 
 Manuf. & Mechanics' Bank v. Gore, 
 
 87. 
 Manufacturers' Nat. Bank v. Thomp- 
 son, 415, 419. 
 Marine Bank v. Birney, 306. 
 
 V. Chandler, 306, 312, 
 
 316. 
 V. Fulton Bank, 4, 51, 
 
 316. 
 0. Kushmore, 312, 484. 
 Marine Nat. Bank v. National City 
 
 Bank, 222, 223, 231. 
 Market Bank v. Hartshorne, 30. 
 Markle v. Hatfield, 189, 305. 
 Marr v. Bank, 269. 
 Marrett v. Brackett, 85, 295. 
 Marsh v. Oneida Central Bank, 402. 
 Marshall v. American Express Co., 46. 
 Marston v. Allen, 82. 
 
 0. Marston, 148. 
 Marten v. Roche, 130. 
 Martin v. Funk, 144, 147, 149, 170. 
 u. KunzmuUer, 386. 
 V. Mechanics' Bank, 406, 408. 
 Marvin v. Ellwood, 425. 
 Maryland Sav. Institution v. Schroe- 
 
 der, 280. 
 Mason v. Hunt, 441. 
 
 V. Whitthorne, 116. 
 Massey v. Banner, 117. 
 
 V. Eagle Bank, 238. 
 Mather ;;. Lord Maidstone, 344. 
 Matter of Receiver of New Amsterdam 
 
 Sav. Bank v. Tartter, 382. 
 Matthews v. Brise, 117. 
 Mauran v. Lamb, 326. 
 Maury v. Coyle, 17. 
 Mayer v. Mode, 98, 327. 
 Mayhew v. Crickett, 322. 
 McAllister v. Commonwealth, 116. 
 MoBride v. Farmers' Bank, 372, 433. 
 McCagg V. Woodman, 403. 
 McCann v. State, 48. 
 McCormick v. Trotter, 254, 309. 
 McDougald v. Rntherford, 410. 
 McDowell V. Bank, 389, 407, 408. 
 McEwen v. Davis, 54, 94, 396. 
 McFadden v. Jenkyns, 159. 
 McGough V. Jamison, 257, 266. 
 
XXIV 
 
 TABLE OF CASES. 
 
 McGrade v, Grerman Sav. Institution, 
 
 333. 
 McGregor v. Loomis, 93, 104, 333. 
 Mcintosh. K. Greensdale, 1J7. 
 McKinster v. Bank, 452. 
 McKleroy v. Southern Bank, 211. 
 McLain v. Wallace, 17, IS. 
 McLaren v. Pennington, 80, 387. 
 McLeod V. Drummond, 112. 
 
 w. Evans, 274. 
 McNeil V. Tenth Nat. Bank, 260. 
 
 V. Wyatt, 469. 
 McWilliams v. Webb, 341. 
 Mead v. Bugs, 434, 443. 
 Meade v. Young, 207. 
 Meador v. Dollar Sav. Bank, 258. 
 Meads v. Merchants' Bank, 231, 241. 
 Mechanics' Bank v. Earp, 62, 478, 480. 
 Mechanics and Farmers' Bank ». 
 
 Smith, 61. 
 Mechanics' Bank v. Levy, 395. 
 
 V. Merchants' Bank, 
 
 452. 
 V. Straiton, 79. 
 Mechanics & Traders' Bank v. Dakin, 
 
 124, 125. 
 Mendle v. Guedalla, 110. 
 Merchants' Bank u. Bank, 415. 
 
 V. Spicer, 74, 220, 
 288, 301, 302, 
 461. 
 V. State Bank, 70, 
 
 221, 231, 247. 
 V. Strouse, 388. 
 V. Woodruff, 72. 
 Merchants & Manuf. Nat. Bank v. 
 
 Stafford Nat. Bank, 438. 
 
 Merchants' Nat. Bauk v. Coates, 333. 
 
 V, Goodman, 
 
 466, 483, 488. 
 
 V. Nat'l Bank, 
 
 415,416, 418. 
 
 V. Nat'l Eagle 
 
 Bank, 210. 
 ». Procter, 85, 
 
 296, 417. 
 V. Ritzinger, 70. 
 Meredith v. Haines, 344. 
 Merket v. Smith, 116. 
 Merriam v. Wolcott, 209. 
 Merritt v. Todd, 259. 
 Metoalf V. Williams, 78. 
 Metropolitan Nat. Bank v. Loyd, 31, 43. 
 Middle Dist. Bank, Matter of, 281, 
 
 380, 387. 
 Middlesex v. Thomas, 86. 
 Middletown Bank v. Morris, 303 
 
 Middletown and Harrisburg Turnpike 
 
 Road Co. V. Watson, 163. 
 Miller v. Austin, 248, 256. 
 
 V. Farmers & Mechanics' Bank, 
 
 372. 
 V. Receiver of Franklin Bank, 
 380, 385. 
 Milliken v. Shapleigh, 374. 
 Millikeu & Co. i'. Gardner, 378. 
 Milroy v. Lord, 149, 159. 
 Mills V. Bank, 445. 
 Millspaugh v. Putnam, 150. 
 Mims V. Central Bank, 410. 
 Minor v. Mechanics' Bank, 356. 
 
 V. Rogers, 141, 148, 158, 159. 
 Minturn v. Fisher, 72. 
 Mitchell V. Home Sav. Bank, 173, 180. 
 Mohawk Bank v. Broderick, 288, 302, 
 
 327. 
 Montelius v. Charles, 287. 
 Montgomery Co. Bank ». Albany City 
 
 Bank, 472. 
 Moody V. Mack, 293, 297. 
 Moore v. Lowrey, 341. 
 
 V. Metropolitan Nat. Bank, 260. 
 V. Meyer, 59, 431. 
 Mordis v. Kennedy, 88. 
 Morgan v. Bank, 206. 
 
 V. Malleson, 159. 
 v. Tener, 471. 
 Morrill v. Raymond, 128. 
 Morris v. Wall, 116. 
 Morrison v. McCartney, 294, 297, 313. 
 Morrisons v. Bailey, 72, 333. 
 Morse v. City of Lowell, 320. 
 
 V. Mass. Nat. Bank, 70, 173, 
 231, 233. 
 Morton v. Rogefs, 435. 
 Moseby v. Williamson, 270, 284, 380, 
 Moses V. Franklin Bank, 333. 
 Mott V. Havana Nat. Bank, 455, 492. 
 Moule V. Brown, 286. 
 Mount V. First Nat. Bank, 438, 451. 
 Muencb v. Valley Nat. Bank, 397. 
 Mulcahey v. Emigrant Industrial Sav. 
 
 Bank, 137. 
 MuUins V. Brown, 86. 
 Mumford v. American Life Ins. & 
 
 Trust Co., 256. 
 Hunger v. Albany City Nat. Bank, 
 
 247, 249, 257, 318. 
 Munn V. Burch, 55, 332. 
 Murray v. Bull's Head Bank, 102. 
 V. Cannon, 149, 152. 
 V. Earl of Stair, 82. 
 V. Judah, 74, 209, 291, 303, 
 324, 326. 
 
TABLE OF CASES. 
 
 XXV 
 
 Murray v. Lardner, 139. 
 
 Mutual Building Fund Society, In re, 
 
 20. 
 Mutual Say. Institution v. Enslin, 349. 
 
 N. 
 
 Naltner v. Dolan, 116. 
 Naser v. First Nat. Bank, 118. 
 Nassau Bank v. Broadway Bank, 238. 
 National Bank u. Bangs, 190, 192. 
 V. Burkhardt, 28. 
 V. City Bank, 442. 
 V. Ellioott, 488. 
 V. Graham, 18. 
 V. Indiana Banking 
 
 Co., 122, 332. 
 V. Insurance Comp'y, 
 
 131. 
 V. NationalMeohanics' 
 Bank. Ass'n, 225, 
 344, 345. 
 K. Norton, 135. 
 V. Second Nat. Bank, 
 
 333, 334. 
 V. Smith, 402, 406,407, 
 V. Speight, 6, 19. 
 V. Tappan, 192, 205. 
 V. WashingtonCo.Nat. 
 Bank,' 245, 257, 
 317. 
 v. Watsontown Bank, 
 390. 
 National Citizens' Bank v. Howard, 36, 
 
 42. 
 National City Bank v. N. Y. Gold Ex. 
 
 Bank, 420. 
 National Com. Bank v. Miller, 36, 122, 
 
 218, 240, 242, 331. 
 National Ex. Bank v. National Bank, 
 
 418. 
 National Gold Bank v. McDonald, 28, 
 
 64. 
 National Mahaiwe Bank v. Peck, 406. 
 National Park Bank «. Ninth Nat. 
 
 Bank, 184, 344. 
 National State Bank v. Kingel, 248, 
 
 253, 254. 
 Neale v. Janney, 390. 
 Neely v. Rood, 18, 131. 
 Neff V. Greene County Nat. Bank, 59. 
 Nelligan v. Citizens' Bank, 314. 
 Nelson v. First Nat. Bank, 103. 
 Neponset Bank v. Leland, 366. 
 New Amsterdam Sav. Bank, Matter of 
 Keoeiver of, v. Tartter, 382. 
 
 Newark India Eubher Manuf. Co. v. 
 
 Bishop, 403. 
 Newark Sav. Institution Case, 284. 
 Newman v. Kettelle, 247. 
 Newton v.. Snyder, 161. 
 New York Life Ins. and Trust Co. v. 
 
 Beebe, 255. 
 Nicholson v. Crook, 125. 
 
 «. Rioketts, 133. \ 
 
 Nolan V. Bank, 238, 239. 
 Norman v. Rioketts, 106. 
 Norris v. Hero, 116. 
 Northampton Bank v, Balliet, 281. 
 Northumberland Bank v. MoMiohael, 
 
 94. 
 Northup V. Hale, 153, 158. 
 Northwestern Coal Co. v. Bowman, 
 
 304. 
 Norwich Yarn Co., In re, 83. 
 Nutt V. Morse, 154. 
 
 0. 
 
 O'Brien v. Smith, 288. 
 Oddle V. National Bank, 28. 
 Oloott V. Rathbone, 85. 
 Ogden V. Dobbin, 434, 443. 
 O'Neil V. Bradford, 248, 254. 
 Ontario Bank v. Lightbody, 40. 
 
 V. Schermerhorn, 255. 
 Osborn v. Byrne, 282, 283, 382. 
 Other V. Ireson, 110. 
 Otis V. Gross, 18, 425. 
 Overman v. Hoboken City Bank, 334, 
 
 415. 
 Overton v. Tyler, 375. 
 Oxuard v. Varnum, 411. 
 
 P. 
 
 Pace V. Trustees, 60. 
 
 Pahquioque Bank v. Bethel Bank, 457. 
 
 Palm V. Watt, 328. 
 
 Palmer v. Providence Institution, 180. 
 
 Pancoast v. Ruffin, 281. 
 
 Parcher v. Saoo & Biddeford Sav. Bank, 
 
 161. 
 Pardee v. Fish, 249, 252, 257,259, 318. 
 Parke v. Roser, 228. 
 Parker v. Hartley, 6, 167. 
 
 V. Marohant, 49. 
 Parkersburg Nat. Bank ». Als, 60. 
 Parkesburg Bank's Appeal, 37, 271. 
 Parkist v. Alexander, 163. 
 Parsons v. Treadwell, 60. 
 
XXVI 
 
 TABLE OF CASES. 
 
 Patterson, Matter of, 4, 270. 
 V. Polndexter, 247. 
 V. Syracuse Nat. Bank, 7, 
 42. 
 Patterson Bank v. Butler, 475. 
 Patton V. Ash, 86. 
 
 Payne v. Gardiner, 257, 317, 351, 353. 
 Peak V. Ellicott, 404. 
 Pease, -Ej; parte, 38, 397. 
 V. Hirst, 408. 
 V. Landauer, 336. 
 V. Warren, 403. 
 Peaslee v. Robbins, 328. 
 Peavy v. Hovey, 86. 
 Pedder v. Preston, 379. 
 Peete v. State, 251. 
 Peiroe v. Rowe, 60. 
 Pelham v. Adams, 257. 
 Pendleton v. Bank, 453. 
 Penfield v. Thayer, 146. 
 Penfold u. Mould, 159. 
 Penn Bank v. Prankish, 128. 
 Pennell v. Defifell, 382. 
 Pennington v. Sitting's Ex., 141. 
 Pennsylvania Bank Assignees' Ac- 
 count, 271. 
 People V. Bank of Dansville, 487. 
 V. City Bank, 272, 274. 
 V. Continental Life Ins. Co., 
 
 339, 342. 
 V. Howell, 84. 
 V. Johnson, 125. 
 </. Meolianios & Traders' Sav. 
 
 Institution, 282. 
 V. Merchants & Mechanics' 
 
 Bank, 273, 480. 
 V. Shaw, 251. 
 u. State Bank, 145. 
 V. Third Ave. Sav. Bank, 177. 
 People's Bank v. Legrand, 406. 
 People's Sav. Bank v. Cupps, 181. 
 Peoria & Pekin Union R. Co. v. Buck- 
 ley, 87. 
 Peterson v. Union Nat. Bank, 31. 
 Petrie v. Myers, 366. 
 Phelau V. Iron Mountain Bank, 276. 
 Phelps V. Riley, 254. 
 V. Town, 309. 
 Phenix Ins. Co. v. Allen, 309. 
 Philbrooks v. McEwen, 408. 
 Phillips V. Bnllard, 84. 
 V. Lamar, 117. 
 V. Monges, 87. 
 Phoenix Bank v. Bank of America, 231. 
 
 V, Risley, 53. 
 Pierce v. Boston Five-Cents Sav. Bank, 
 154, 159, 160, 161. 
 
 Pierce v. Gate, 401. 
 Pierson v. Bank, 391. 
 Piner v. Clary, 252, 291. 
 Pitts V. Congdon, 402. 
 Planters' Bank v. Farmers & Mechan- 
 ics' Bank, 351, 
 354. 
 !). Keesee, 324. 
 V. Merritt, 324. 
 V. Union Bank, 311, 
 483, 484. 
 Piatt V. Bentlev, 380. 
 V. Grubb, 137. 
 V. Sauk Co. Bank, 253. 
 Pollard V. Bank of England, 422. 
 V. Bowen, 324. 
 V. Ogden, 27. 
 Pollock v. Okolona Sav. Institution, 
 
 122. 
 Pond V. Underwood, 110. 
 Poor V. National Union Bank, 63. 
 Pope ('. Bank, 234. 
 
 V. Savings Bank, 149. 
 Porter v. Talcot, 84. 
 Potter V. Burd, 378. 
 
 V. Merchants' Bank, 235. 
 Powell, In re 49. 
 
 V. Morrison, 423. 
 Power V. First Nat. Bank, 481. 
 Prather v, Kean, 24. 
 Pratt V. Foote, 95, 449. 
 Prescott V. Leonard, 433. 
 Preston v. Canadian Bank, 416. 
 Price V. Neal, 189, 344. 
 Prideaux v. Criddle, 287, 422. 
 Prosser v. Wagner, 110. 
 Providence Institution v. Taft, 145. 
 Purcell V. AUemong, 297, 324. 
 Purchase v. Mattison, 297. 
 Pye, Ex parte 159. 
 Pym V. Campbell, 82. 
 
 Q. 
 
 Quiner v. Marblehead Ins. Co., 389. 
 
 Railroad Company v. Howard, 283. 
 Randolph v. Canby, 340. 
 Rankin v. Knight, 76. 
 Ransom v. Mack, 444, 470. 
 Eathbone ». Sanders, 370. 
 Ray V. Bank, 17. 
 
 V. Simmons, 149, 150, 158, 159. 
 
TABLE OF OASES. 
 
 XXVU 
 
 Receivers v. Paterson Gas Light Co., 
 
 380. 
 Redington v. Woods, 346. 
 Eeese v. Bank, 390. 
 Keeve v. Smith, 122. 
 Reeves v. State Bank, 473, 478. 
 Renner v. Bank, 450. 
 Resh V. First Nat. Bank, 5. 
 Reynolds v. Chettle, 422. 
 Rhodes v. Morse, 217. 
 Richardson v. International Bank, 
 134, 293. 
 V. Richardson, 159. 
 Rickford v. Ridge, 291, 302. 
 Riddle v. First Nat. Bank, 256. 
 Rigby, Ex parte, 110. 
 Riley v. Albany Sav. Bank, 169. 
 Ringo V. Field, 424. 
 Risley v. Phenix Bank, 321. 
 Roberts v. Corbin, 332. 
 V. Roberts, 146. 
 Robertson v. Coleman, 328. 
 Robeson v. Burnett, 415. 
 Robinson v. Ames, 438. 
 
 V. Bank, 268. 
 
 V. Bland, 320. 
 
 V. Cheney, 410. 
 
 a. Frost, 366. 
 
 V. Gardiner, 51. 
 
 V. Howes, 385. 
 
 V. Noble, 254, 309. 
 
 V. Ring, 144. 
 
 V. Ward, 116, 117. 
 Eobson V. Bennett, 291, 302, 422. 
 Rock Co. Bank v. Holiister, 435. 
 Rodick V. Gandell, 341. 
 Rogers v. Ware, 328. 
 Rogerson v. Ladbroke, 363. 
 Rooker v. Morris, 410. 
 Rolls V. Pearce, 143. 
 Rosa V. Brotherson, 373. 
 Rose V. Coffleld, 135. 
 
 V. Hart, 381. 
 Rosenback v. Salt Spring Nat. Bank, 
 
 388. 
 Rosenblatt v. Haberman, 296. 
 Rothschild v. Corney, 217. 
 Rouvant v. San Antonio Nat. Bank, 
 
 192. 
 Rowe V. Putnam, 328. 
 Rowton, Ex parte, 32. 
 Royal British Bank v. Turquand, 
 
 108. 
 Ruifin V. Commissioners, 18. 
 Rupert V. Roney, 23. 
 Eushton V. Aspinall, 220. 
 Russell V. Hadduck, 361. 
 
 Sadler «. Belcher, 45. 
 Safford v. Wyckoff, 255. 
 Salt Springs Bank v. Syracuse Sav. In- 
 stitution, 189. 
 Salter v. Burt, 303. 
 Sanbonrn v. Smith, 266. 
 Sanford v. Sanford, 137. 
 Sargeant, Ex parte, 32, 38. 
 Sargent v. Franklin Ins. Co., 389. 
 Saunders v. White, 281. 
 Saunderson v. Judge, 440. 
 Savings Bank v. Bates, 387. 
 Sawyer ». Hoag, 283. 
 Saylor v. Bushong, 95, 96, 104, 333. 
 Schermerhorn v. Talman, 255. 
 Schneider v. Irving Bank, 62, 94. 
 Schoenwald v. Metropolitan Sav. Bank, 
 
 175. 
 School District v. First Nat. Bank, 116, 
 
 370 377. 
 Sohooiiield v. Moon, 231, 286, 288, 302. 
 Schroeder v. Harvey, 215. 
 Schnler v. Laclede Bank, 338, 342. 
 Scott <). Berkshire Co. Sav. Bank, 147, 
 149, 157. 
 
 V. Franklin, 397. 
 
 V. Fritz, 378. 
 
 V. Meeker, 291. 
 
 V. National Bank, 13. 
 
 V. Ocean Bank, 38, 433. 
 
 V. Shirk, 394. 
 Scott, Williams & Co. v. Crews, 24. 
 Seamon v. Bank, 387. 
 Second Nat. Bank v. Hill, 408. 
 
 B. Ocean Nat . Bank, 
 
 24. 
 V. Western Nat. 
 
 Bank, 242. 
 V. Williams, 141. 
 Security Bank v. National Bank, 228, 
 
 229. 
 Senter ». Continental Bank, 333. 
 Serrell v. Derbyshire Railway Co., 79. 
 Seventh Nat. Bank v. Cook, 240, 333. 
 Sewall V. Lancaster Bank, 390. 
 Shackamaxon Bank v. Kinsler, 380. 
 Shaffer v. Maddox, 292. 
 Shaffner v. Edgerton, 332. 
 Shauklin v. Commissioners, 255, 
 Shaw V. Bauman, 117, 424. 
 
 V. Branch Bank, 89. , 
 
 V. Dartnall, 63. 
 
 V. Picton, 63. 
 
 V. Spenser, 112. 
 Sheedy v. Roach, 159. 
 
XXVlll 
 
 TABLE OF CASES, 
 
 Shelburne Falls Nat. Bank v. Towns 
 
 ley, 444. 
 Sherman w: Comstook, 324. 
 
 V. New Bedford Five-Cents 
 Sav. Bank, 149. 
 Shipsey v. Bowery Nat. Bank, 462. 
 ShoUenberger v. Brinton, 308. 
 Shower v. Pilok, 146. 
 Shrieve v. Duokham, 303. 
 Shute V. Pacific Nat. Bank, 247, 256. 
 Simms v. Clark, 216, 306. 
 Simpson v. Moulden, 254. 
 
 V. Pacific Mut. Life Ins. Co., 
 
 286, 301. 
 V. Sayings Bank, 282. 
 V. Waldby, 473. 
 Sims V. Bond, 130. 
 
 V. National Com. Bank, 410. 
 V. United States Trust Co., 35. 
 Simsou V. Ingliam, 134, 378. 
 Skinner v. Merchants' Bank, 101. 
 Skyring v. Greenwood, 63. 
 Slawsou V. Loring, 77. 
 Small V. Franklin Mining Co., 69. 
 Smiley v. Fry, 245, 266, 353. 
 Smith V. Ayer, 112. 
 
 u. Brooklyn Sav. Bank, 181. 
 
 V. Bntler, 50. 
 
 V. Dunlap, 254. 
 
 V. Essex County Bank, 398. 
 
 V. First Nat. Bank, 15. 
 
 V. Janes, 461. 
 
 In re, 271, 333. 
 V. Jones, 71, 80, 291. 
 u. Lee, 150. 
 
 V. Mechanics' Bank, 213. 
 V. Mercer, 189. 
 V. Miller, 86, 459, 461. 
 V. Smith, 83. 
 V. Speer, 153. 
 i;. Strong, 255. 
 V. Whiting, 451. 
 SmuUer v. Union Canal Co., 117. 
 Snead v. Williams, 377. 
 Southerland v. Southerland, 146. 
 Soutliern Development Co. «. Houston 
 
 & Co., 18. ' 
 Southern Loan Co. u. Morris, 255. 
 Souverbye v. Arden, 149. 
 Springfield v. Green, 87. 
 Springfield Marine and Fire Ins. Co. 
 
 V. Peck, 265. 
 Stacy V. Dane County Bank, 440, 
 
 475. 
 Stafiford, In the Matter of, 117. 
 Stair V. York Nat. Bank, 63, 117. 
 Stalker v. M'Donald, 373. 
 
 Star Fire Ins. Co. v. New Hampshire 
 
 Nat. Bank, 209. 
 St. Louis V. Johnson, 53. 
 St. Louis & Co. V. Johnson, 25, 32, 
 
 43. 
 St. Louis Perpet. Ins. Co. u. Cohen, 
 
 260. 
 Staples V. Franklin Bank, 401. 
 Stark V. Gamble, 60. 
 
 V. United States Nat. Bank, 
 373, 481. 
 State V. Clark, 4. 
 
 u. Ferguson, 251. 
 V. Gates, 298. 
 V. Keeter, 251. 
 V. Morgan, 251. 
 State, Ex rd. Van Wyck ». Norris, 63, 
 
 428. 
 State Bank v. Armstrong, 362. 
 ». Fearing, 209. 
 V. Napier, 440. 
 State Nat. Bank v. Freedmen's Sav. 
 
 and Trust Co., 213. 
 State Sav. Association ». Boatmen's 
 
 Sav. Bank, 403. 
 Steamship Dock Co. v. Heron, 388. 
 Stearns v. Brown, 60. 
 Steckel v. First Nat. Bank, 5. 
 Stedman v. Carstairs, 327. 
 Steele v. Russell, 491. 
 Steflfe V. Bank, 18. 
 Sterling v. Marietta and Susquehanna 
 
 Trad. Co., 436. 
 Sterrett v. Rosencrantz, 292. 
 Stephens v. Board of Education, 486. 
 Ex parte, "386. 
 V. McNeill, 297. 
 Stephenson v. Mount, 350. 
 Stetson V. Exchange Bank, 381. 
 Stevens v. Park, 71, 87, 287, 298. 
 
 c. Stevens, 146. 
 Stewart v. Lee, 162. 
 
 V. Smith, 79, 291, 299. 
 Stewart's Assignee v. National Se- 
 curity Bank, 380. 
 Stimson u. Vroman, 90. 
 St. John V. Romans, 293. 
 Stockton V. Mechanics and Lab. Sav. 
 
 Bank, 164, 283, 284, 382. 
 StoUer V. Coates, 277. 
 Stone V. Bishop, 155. 
 V. Haokett, 159. 
 V. King, 159. 
 V. Marsh, 110. 
 Stowe V. Bank, 493. 
 Strain v. Gourdin, 333. 
 Strathmore, Earl of, v. Vane, 366. 
 
TABLE OF CASES. 
 
 XXIX 
 
 Strauss v. Tradesmen's Nat. Bank,166. 
 
 Strong V. King, 287. 
 
 Stuart V. Earl of Bute, 49. 
 
 Sturgis V. Preston! 347. 
 
 Stuyvesant Bank v. National Mech. 
 
 Bank. Ass'n, 422. 
 Sullivan v. Lewiston Institution, 175. 
 Surtees v. Hubbard, 59. 
 Sutcliff V. McDowell, 325. 
 Sutherland t'. First Nat. Bank, 434. 
 Swartwout v. Mechanics' Bank, 423. 
 Sweeney v. Boston Five-Cents Sav. 
 
 Bank, 144. 
 Sweeny v. Easter, 38, 219, 375. 
 Sweet I'. Barney, 47. 
 u. Stevens, 82. 
 Syracuse, Bing. and N. T. R. Co. v. 
 
 Collins, 288, 291, 294. 
 
 T. 
 
 Taber v. Perrot, 473, 478. 
 
 Talbot w. Bank, 207, 209, 259, 464. 
 
 Talladega Ins. Co. v. Woodward, 248. 
 
 Tallassee & Co., In re, 360. 
 
 Tarver v. Boykin, 410. 
 
 Tassell v. Cooper, 56. 
 
 Tate V. Gilbert, 104. 
 
 Tay V. Concord Sav. Bank, 427. 
 
 Tayloe v. Dugger, 316. 
 
 Taylor v. Bank, 172. 
 
 V. Fire Department, 144. 
 V. Newman, 298. 
 V. Plumer, 162. 
 V. Scrivens, 217. 
 ('. Wilson, 85, 458. 
 Tenbrook v. Brown, 146. 
 Terhune v. Bank, 31, 43. 
 Terry v. Ragsdale, 86. 
 Thatcher v. Bank, 49, 393, 403. 
 Thiedemann v. Goldschmidt, 436. 
 Third Nat. Bank v. Allen, 346. 
 o. Boyd, 24. 
 V. Clark, 434. 
 V, Vicksbarg Bank, 
 475. 
 Thompson v. Abbott, 107. 
 V. Bank, 476. 
 
 Ex parte, 37, 38. 
 V. Giles, 32. 
 u. Riggs, 21, 307. 
 V. Sloan, 74. 
 V. Toland, 260. 
 Thomon v. Bank, 90, 240, 351. 
 Thorton v. Rankin, 425. 
 Thorpe v. Owen, 159. 
 
 Thrall v. Newell, 209. 
 Ticonic Bank v. Johnson, 405. 
 Tiernanu. Commercial Bank, 475, 477, 
 
 478. 
 Tillinghast v. Wheaton, 160, 161. 
 Tinkham & Co. v. Heyworth, 484. 
 Titus V. Mechanics' Nat. Bank, 30, 
 
 470 473 475. 
 Tobey v. Manuf. Nat. Bank, 379. 
 Tompkins v. Saltmarsh, 10. 
 Towle V. Wood, 161. 
 Town of East Hartford v. American 
 
 Nat. Bank, 426. 
 Townsend v. Billinge, 326. 
 
 u. Webster Five-Cents Sav. 
 Bank, 140, 173. 
 Townsley v. Sumrall, 437. 
 Tradesman's Bank v. Merritt, 359. 
 Tradesman's Nat. Bank v. Third Nat. 
 
 Bank, 204. 
 Treffitz V. Canelli, 58. 
 Trinidad Nat. Bank v. Denver Nat. 
 
 Bank, 431. 
 Trip V. Curtenius, 248, 258. 
 
 V. Swanzey Paper Co., 77. 
 Trough's Estate, 142. 
 Troy City Bank v. Grant, 448. 
 True V. Thomas, 292, 306. 
 Tuuno !i. Lague, 443. 
 TurnbuU v. Bowyer, 212. 
 Turner v. Bank, 86. 
 
 V. Bank of Fox Lake, 459, 461, 
 486. 
 Turnpike v. Watson, 163. 
 Tyler v. Gould, 332. 
 Tyson v. State Bank, 473, 490. 
 
 U. 
 
 Ulster Bank v. Synnott, 205. 
 Union Bank v. EUicott, 281. 
 / u. Heyward, 385. 
 V. Knapp, 63. 
 17. Laird, 389, 392. 
 V. Mackall, 39. 
 V. Mott, 357. 
 V. Planters' Bank, 354. 
 V. Tutt, 360. 
 Union Nat. Bank v. Baldenwick, 215, 
 306. 
 o. Canonsburg Iron 
 
 Co. 378. ,, 
 V. Chambers, 205. 
 V. Oceana County 
 Bank, 81, 94, 
 332. 
 
XXX 
 
 TABLE OF CASES. 
 
 Union Nat. Bank ». Sixth Nat. Bank, 
 
 347. 
 Union Sav. Association v. Clayton, 396. 
 United Service Company, In re, 14. 
 United Society v. Underwood, 17. 
 United States v. Book, 251. 
 V. Brown, 251. 
 V. Central Nat. Bank, 
 
 215. 
 V. Clinton Nat. Bank, 
 
 215. 
 V. Cutts, 389. 
 V. Eckford, 283. 
 V. State Bank, 116, 371. 
 United States Bank v. Bank of Gra.,189, 
 345, 346. 
 V. Carneal, 401. 
 V. Macalester, 117, 
 162. 
 United States Nat. Bank v. Burton, 
 
 444, 468, 469. 
 Upliam V. Lefavour, 406. 
 Utioa Ins. Co. v. Bloodgood, 321. 
 V. Cadwell, 320. 
 V. Lynch, 116. 
 u. Scott, 320. 
 Utley V. Tolfree, 321. 
 
 V. 
 
 Vail V. Newark Sav. Institution, 165. 
 
 Vaisey v. Reynolds, 49. 
 
 Van Alstyne v. National Com. Bank, 
 
 465. 
 Vanbibber v. Bank, 214. 
 Vanderberg v. Palmer, 155. 
 Vanderzee v. Willis, 366. 
 Van Dyok v. McQuads, 358. 
 Van Namee v. President of Bank of 
 . Troy, 373. 
 
 Van Wart v. WooUey, 473, 478. 
 Veazie Bank v. Winn, 303. 
 Venango Nat. Bank v. Taylor, 380. 
 Vernon ». Mahattan Co., 135. 
 Viets V. Union Nat. Bank, 168, 319, 
 
 355. 
 Vo^s V. German American Bank, 406, 
 
 408. 
 
 W. 
 
 Waite V. Leggett, 344. 
 
 Walker v. Bank, 437, 438, 440, 472. 
 
 V. Geiase, 299. 
 
 V. Manhattan Bank, 57. 
 
 Walker v. Siegel, 337. 
 
 Wall V. Provident Institution, 180. 
 
 Wallace v. Lowell Institution, 180. 
 
 ?). State Bank, 307. 
 Wallis V. Littell, 82. 
 
 0. Manhattan Co., 129. 
 Walsh V. Meyer, 130. 
 Walter i-. Ford, 143. 
 Ward V. Johnson, 267. 
 
 V. School District, 117. 
 V. Smith, 313, 433, 483. 
 Wardwell v. Haight, 135. 
 Warhus v. Bowery Sav. Bank, 174, 
 
 179. 
 Waring's Adm'r v. Edmonds, 146. 
 Warner v. Sauk County Bank, 21 
 Warren Bank v. Suffolk Bank, 478. 
 Warren v. Gilman, 434. 
 Warrensburg Co-operative Build. 
 
 Ass'n V. ZoU, 294, 298. 
 Warwick v. Rogers, 334. 
 Warwicke v. Noakes, 106. 
 Washington Bank v. Lewis, 357. 
 Watson V. Phoenix Bank, 63, 317, 319, 
 
 320. 
 Watts V. Christie, 54, 377. 
 Waynesburg College, Appeal of, 142. 
 Wear v. Lee, 286. 
 Weaver v. Anfoux, 315. 
 
 V. Nixon, 88. 
 Webber v. Webber, 170. 
 Wookler v. First Nat. Bank, 41. 
 Weedsport Bank v. Park Bank, 89, 
 
 398. 
 Weinstock v. Bellwood, 332, 336. 
 Weiriok v. Mahoning Co. Bank, 260, 
 
 409. 
 Weisinger v. Bank, 83. 
 Weisser v. Denison, 189, 196, 199. 
 Wells w. Tucker, 148. 
 Welsh V. German American Bank, 
 
 196, 207. 
 Welton V. Adams & Co., 248. 
 Wendell v. French, 60. 
 Werk V. Mad River Valley Br. Bank, 
 
 289. 
 West V. American Ex. Bank, 433. 
 
 !'. First Nat. Bank, 250. 
 West Branch Bank v. Fulmer, 452. 
 Westminster Bank v. Wheaton, 73 
 Wetherill v. Bank, 348. 
 Weyerhausen v. Dun, 471. 
 Wharton v. Morris, 254. 
 ... Walker, 59. 
 Wh.eatley v. Purr, 148, 159. 
 Whelan v. Childress, 254. 
 Wheeler v. Guild, 97. 
 
TABLE OF CASES. 
 
 XXXI 
 
 Wheeler v. Newbould, 229. 
 White V. Ambler, 71. 
 
 V. Franklin Bank, 320. 
 V. National Bank, 375. 
 V. Springfield Institution, 103. 
 Whitehead v. Walker, 438. 
 Whiting V. City Bank, 446. 
 
 V. Sullivan, 395. 
 Whitlook V. Bowery Sav. Bank, 136. 
 Whitney v. Esson, 487. 
 
 u. First Nat. Bank, 14, 41. 
 Whittier v. Eager, 76. 
 Whittington v. Farmers' Bank, 407. 
 Wilcox V. Onondago Co. Sav. Bank, 
 
 177. 
 Wild V. Bank, 235. 
 Wilderman v. Rogers, 140. 
 Wiley V. First Nat. Bank, 41. 
 Wilkinson v. Johnson, 190. 
 Willetts V. Paine, 313. 
 Williams, In re, Joseph, 370. 
 V. Gilman, 296. 
 V. Hood, 303. 
 V. Jones, 376, 377. 
 V. Rogers, 51. 
 V. Williams, 116, 117. 
 Willitts V. Phoenix Bank, 231, 239. 
 
 V. Payne, 298. 
 Wilmerding v. Hart, 366. 
 Wilson V. Dawson, 173, 397. 
 o. Goodin, 93. 
 
 V. Smith, 370, 371, 372, 374. 
 Wing V. Merchant, 146. 
 Wingate v. Mechanics' Bank, 63, 454, 
 
 473. 
 Winslow V. Bliss, 272. 
 Winter v. Bank, 56. 
 
 Winter v. Belmont Mining Co., 260. 
 
 V. Winter, 146. 
 Winthrop Sav. Bank v. Jackson, 379. 
 Wiroback v. First Nat. Bank, 220. 
 Witte V. Vincenot, 65. 
 Witzel's Case, 150. 
 WooUey v. Louisville Bank. Co., 390. 
 Wolstenholm v. Sheffield Ui ion Bank. 
 
 Co., 369. 
 Wood V. Boylston Nat. Bank, 370, 486. 
 V. Merchants' Sav. Loan & Trust 
 Co., 241, 394. 
 Woodburn v. Woodburn, 86. 
 Woodin V. Frazee, 291, 297. 
 Woodman u. Thurston, 220. 
 Woodruff I). Plant, 287, 289. 
 Woods V. Russell, 251. 
 
 V. Thiedemann, 205. 
 Woodsworth v. Anderson, 264. 
 Wray v. Tuskagee Ins. Co., 5, 51. 
 Wren v. Kirton, 117. 
 Wyckofif B. Anthony, 366. 
 Wylie V. Northampton Nat. Bank, 14. 
 
 Young V. Adams, 189. 
 
 V. Scott, 74. 
 Youngs V. Lee, 373. 
 
 Zelle V. German Sav. Institution, 333. 
 Ziegler v. First Nat. Bank, 5. 
 
BOOK I 
 
 THE 
 
 RECEIYmG AND KEEPING OF DEPOSITS. 
 
THE 
 
 LAW RELATING 
 
 TO 
 
 Banks and Their Depositors. 
 
 CHAPTER I. 
 
 KINDS OP DEPOSITS AND LIABILITY FOR THEIR LOSS. 
 
 § 1. Nature of a deposit, (a) What it is. A very impor- 
 tant part of the business of banking consists in receiving, 
 keeping, and refunding the money of persons who are called 
 depositors. Originally, a deposit, says Judge Learned, " was 
 a thing delivered to a person for gratuitous safe-keeping ; 
 and it remained the property of the owner. The word, how- 
 ever, is now used to designate a certain kind of loan. For 
 money, deposited in the ordinary way, becomes the property 
 of the bank or banker ; and the deposit is a debt." 
 
 (b) The present affected by former meaning. "When we 
 attempt to state what kind of loans are properly called deposits, 
 we find that, to some extent, the original meaning of the word 
 colors its present meaning. For there is an idea in the mind 
 that money on deposit is lying in the bank on hand, ready to 
 meet the demand of the owner, and that it is kept there for 
 convenience." 
 
 (c) Deposit is a loan to a bank or banker. '• While it is diffi- 
 cult to make an accurate definition of a deposit, which shall 
 distinguish it from every other loan, yet there are many par- 
 ticulars by which it may be described. And generally we 
 
 (3) 
 
4 BANKS AND THEIK DEPOSITORS. § 2 
 
 may say that it is a loan to a bank or banker ; that it is made 
 for the convenience of the lender (or depositor), in his business ; 
 that it is variable in amount from time to time ; that it is 
 subject to be demanded at any time and in any amount ; that 
 it is evidenced only by entries on a pass-book, and on the 
 books of the bank ; that it is paid out upon checks of the 
 depositor, to be paid at once, on presentation, without notice."' 
 This description of a deposit may be completed by adding 
 Judge Paxson's remark that " there is no doubt as to the right 
 of a depositor to control his deposit up to the point where the 
 rights of others attach. He may apply it to a particular pur- 
 pose by making it a special deposit, or by specific directions 
 communicated to the bank."* 
 
 § 2. The distinction between special and general deposits. 
 Deposits are special or general. The former, says Judge 
 Miller, " are those in which the bank becomes bailee of the 
 depositor, the title to the thing deposited remaining with the 
 latter ; and that other kind of deposit of money peculiar to 
 banking business, in which the depositor, for his own conve- 
 nience, parts with the title to his money, and loans it to the 
 banker, and the latter, in consideration of the loan of the 
 money and the right to use it for his own profit, agrees to 
 refund the same amount or any part thereof, on demand." 
 Most deposits are of this class. A bank may act as agent for 
 another, or for an individual, in collecting a note, but when 
 the money is collected and duly credited, it becomes a general 
 deposit like any other.* 
 
 ' Matter of Patterson, 18 Hun, 221. 
 
 2 Com. Nat. Bank v. Henninger, 105 Pa. p. 500. " It is not strictly a deposit, 
 nor a, bailment of any kind ; for the same thing is not to be returned, but 
 another thing of the same kind and of equal value. In the civil law it is 
 called a muiiium, or loan for consumption," Bronson, J., in Downes v. Phenix 
 Bank, 6 Hill, p. 299. 
 
 ' Marine Bank v. Fulton Bank, 2 Wall. p. 256. In the words of Judge 
 Stuart, in State v. Clark, 4 Ind. p. 316, " Where the very silver or gold 
 deposited is to be restored, the transaction is a special or pure deposit. But 
 where the party is to restore, not the identical coin, but only an equivalent, 
 on demand, the books call it a loan or mutuum, or irregular deposit." In 
 
§ 4 DEPOSITS AND LIABILITY FOR THEIR LOSS. S 
 
 § 3. Liability for the loss of general and special deposits. 
 
 Whenever a general deposit is lost, the depository, though 
 faultless, is liable.' Whenever money is specially deposited 
 in a bank for safe-keeping, the risk is the depositor's. If 
 stolen, lost, or destroyed, through no fault of the bank, the 
 depositor sustains the loss. Under the same circumstances 
 a general depositor would not lose. As his money, checks, 
 or bills become the property of the bank, he is a creditor, a.nd 
 has no claim on them.' 
 
 § 4. When directors are liable for their loss. Not only the 
 officers of a bank, but the directors also may become liable to 
 depositors for grossly neglecting to protect their deposits. 
 " Ordinarily the character of the directory for integrity and 
 business capacity measures the degree of confidence reposed 
 in the corporation by the public. Were depositors, when 
 entrusting to a bank their entire fortune, to be informed that 
 the directors, upon whose honor and careful watchfulness they 
 were relying, owed them no duty, were under no obligations 
 to take at least reasonable precautions to guard their money 
 from the itching fingers of dishonorable officials, they would 
 certainly hesitate long before surrendering it upon such terms. 
 There are many risks and uncertainties against which a 
 prudent business man never expects the directors or managers 
 of banks to insure him. He knows that for the usual hazards 
 of business he must look to the bank alone, that for the ordi- 
 nary negligence of directors they are responsible alone to their 
 
 Keene v. Collier, 1 Met., Ky., p. 417, Judge Duvall said : "Deposits of money 
 with banking corporations, or with bankers, are either general or special. A 
 special deposit is where the specific money, the very silver or gold coin, or 
 bills deposited, are to be restored, and not an equivalent. A general deposit 
 is said to amount to a mere loan, and the bank is to restore, not the same 
 money, but an equivalent sum, whenever it is demanded." 
 
 ' Commercial Bank v. Hughes, 17 Wend. 94; Concord f. Concord Bank, 16 
 N. H. 26; Wray v. Tuska,gee Ins. Co., 34 Ala. 68. A bank is responsible 
 for the safe-keeping of tlie money of a depositor, and it cannot set up tlie 
 fraud of its own officers as an answer to a demand for repayment, Steokel v. 
 First Nat. Bank, 93 Pa. 376 ; Ziegler v. Same, Id. 393 ; Resh v. Same, Id. 397. 
 
 * Franklin Bank, 1 Paige, 249. 
 
6 BANKS AND THEIR DEPOSITOKS. § 5 
 
 principal ; but for such gross negligence or incompetency as 
 shows a reckless disregard of their duty to care for and pro- 
 tect the funds committed to their charge, we think they are 
 directly responsible to the depositor." In. Delano v. Case,* 
 from which we have been quoting, the " directors were notified 
 ten months before the failure by the president, of his sus- 
 picions that Compton* was stealing from the bank, when the 
 slightest examination would have exposed the true state of 
 aft'airs and protected subsequent depositors, l^o examination 
 whatever was made. Under such circumstances there was 
 clearly another duty which the directors owed to the com- 
 munity. If they knew that the bank was insolvent, or if 
 their suspicions were aroused, and they recklessly closed their 
 eyes and made no efltbrt to discover the truth, it was their 
 duty not to receive the money of depositors ignorant of the 
 true state of aft'airs. To do so when they had but a suspicion 
 of the danger would be a great wrong, and if with full knowl- 
 edge, would now be a felony. If we are correct in these 
 views, it follows that appellants owed a duty to appellee 
 which they have not performed, in consequence of which he 
 has been injured, and for which he ought to have a remedy ; 
 for it is a maxim of the common law that a man specially 
 injured by breach of duty in another should have his remedy 
 by action."^ 
 
 § 5. Kinds of special deposits. Special deposits are of 
 two kinds: those which are to be kept gratuitously and de- 
 livered by request of their owner ; and those which are to be 
 applied in a specified manner, like money deposited for dis- 
 charging an obligation payable at the depository.* The 
 second kind of special deposits include all which are held by 
 a bank as agent, trustee, or in other fiduciary relation ;" in 
 
 1 17 Brad. 531. « The assistant cashier. 
 
 " But the mere fact of depositing money in an insolvent bank supposing it 
 to be solvent, and losing it will not suffice to sustain a cause of action against 
 the directors, Dufly v. Byrne, 7 Mo. App. 417. 
 
 * National Bank v. Speight, 47 N. Y. 668 ; Parker v. Hartley, 91 Pa. 465. 
 
 « Brahm i>. Adkins, 77 111. 263. 
 
§ b DEPOSITS AND LIABILITY FOR THEIR LOSS. 7 
 
 short, all except those held by a bank as debtor of the de- 
 positor. 
 § 6. Rule of liability for loss of special deposit of first kind. 
 
 (a) Gross negligence defined. Special deposits of the former 
 kind have been kept for a long period by banks to accommo- 
 date their customers. They consist chiefly of bonds, stocks, 
 and. other securities. ' When gratuitously received, the bank 
 is liable for their loss, if this be occasioned by gross negligence. 
 This has been defined, says Judge Allen,* "in various ways. 
 . . It is incapable of precise definition, and its application 
 and use may lead, in some cases, to results unsatisfactory ; but 
 that comes as directly from the nature and extent of the duty 
 in the particular case, as from the phrase by which a breach 
 of the duty is expressed. . . What constitutes gross negli- 
 gence, that is, such want of care as would charge a bailee for 
 loss, must depend very much upon the circumstances to which 
 the term is to be applied. It has been defined to be the want 
 of that ordinary diligence and care which a usually prudent 
 man takes of his own property of the like description. This 
 definition is given by a reference to the degree of care, rather 
 than the degree of negligence, which may be the easier and 
 more intelligible mode of defining the extent of the obliga- 
 tion, and the measure of duty assumed. Ordinary care as 
 well as gross negligence, the one being in contrast with the 
 other, must be graded by the nature and value of the property 
 and the risks to which it is exposed. A depositor of goods 
 or securities for safe-keeping with a gratuitous bailee, can only 
 claim that diligence whioh a person of common sense, not a 
 specialist or expert in a particular department, should exercise 
 in such department." 
 
 (6) In Patterson v. Syrac^ise National Bank^ the institution 
 had been accustomed to receive packages, which were sup- 
 posed to contain securities, from persons for safe-keeping. 
 Among those who left a package was the plaintift'. It con- 
 
 1 First Nat. Bank v. Ocean Nat. Bank, 60 N. Y. p. 295. 
 i 80 N. Y. 82. 
 
S' BANKS AND THEIR DEPOSITORS. § 6 
 
 tained bonds, and was delivered to the teller. The bank 
 was managed by the cashier, the teller thus acting in the 
 cashier's absence. The teller testified that he told the plaintiif 
 when leaving the deposit that it would be at his own risk, 
 but this the plaintiff denied. The teller also testified that 
 the cashier sometimes told persons when depositing packages 
 that these would be at their own risk, but that on other occar 
 sions packages were received without such notice. The 
 plaintiff's package remained at the bank two years during 
 which he took it out occasionally to cut off the coupons. 
 Then it was lost. The court submitted to the jury the ques- 
 tion whether the teller had been authorized to receive such 
 deposits, whether he did so in his individual capacity, or in 
 behalf of the bank, and whether he told the plaintiff that the 
 package would be at his own risk, and whether the teller had 
 been directed to discontinue receiving deposits of securities, 
 and instructed the jury that if the deposit was with the teller 
 as an individual, the plaintiff could not recover, "We 
 think," said the court, "the evidence was sufficient to justify 
 the submission to the jury of the questions of the authority of 
 the teller, and whether the deposit was with the bank, in this 
 manner, and that their verdict establishes such authority, and 
 that the deposit was with the bank, and' not with the teller 
 iu his individual capacity. The entire management and con- 
 trol of the affairs of the bank having been left with the 
 cashier, his acts and the authority conferred by him upon the 
 tellei', must be deemed binding on the corporation." 
 
 (c) Was the bank negligent ? " The verdict," continued the 
 court, " thus establishing that the plaintitt''s securities were 
 received on deposit by the bank, it was bound either to return 
 them or show some sufficient ground for not doing so. It 
 claims that they were stolen from the safe by some person 
 other than the employes of the bank, and the remaining ques- 
 tion in the case is whether the theft was suffered through the 
 the gross negligence of the bank in the care of the bonds. . . 
 There was no burglary, and no direct explanation of the cir- 
 cumstances of the loss of the bonds, but there is evidence iu 
 
§ 6 DEPOSITS AND LIABILITY FOR THEIR LOSS. 9 
 
 the ease tending to show that, if stolen, the theft was com- 
 mitted in the day time while the bank was open ; that the 
 bonds were in a safe so situated as to be accessible to a person 
 entering from the street ; that the persons in the bank were 
 so placed that at times the safe was not in their view, and 
 that sometimes the door of the safe was left open. The jury 
 could from the evidence have found that the theft was com- 
 mitted by some person entering from the street and finding 
 the safe open, who abstracted the p]aintift''s package without 
 being observed by any one in the room, and that leaving the 
 property thus exposed was gross negligence. That property 
 of the bank was stolen at the same time and from the same 
 place was I'egarded conclusive evidence of gross negligence." 
 
 {d) First National Bank v. Ocean National Bank? This 
 case was to recover the value of bonds lost, as was alleged, 
 through the latter's negligence. Judge Allen, in giving the 
 opinion to the court, said that "the bank, as depository, 
 taking no pay and taking no risks, was not bound to resort 
 to any special or extraordinary measures to protect the pro- 
 perty of the depositor, and the negligence for which it could 
 be charged, or which was the proper subject of evidence upon 
 the trial, was only that which was connected with and 
 directly contributed to the loss. Independent acts of negli- 
 gence, disconnected with the loss, were not properly admis- 
 sible in evidence. The defendant was not chargeable with 
 negligence or want of care for not acting upon facts or 
 circumstances not coming to the knowledge of its directors 
 or ofiicers. Facts not brought home to them, tending to 
 show that the property was exposed to loss from some unusual 
 cause, to some peril growing out of peculiar circumstances, 
 were not admissible in evidence against the defendant. The 
 
 1 When valuable things are deposited in the vault of a bank and no com- 
 pensation is paid for keeping them there, and the effects of tlie bank are 
 kept in an inner safe in the same vault, the bank is not liable for their 
 loss, Beasley, C. J., Leeds v. Trenton Bank, Oct. 1874, N. J. Law & Eq., 
 Dig., page 78. 
 
 « 60 N. Y. 278. 
 
10 BANKS AND THEIK DEPOSITORS. § 6 
 
 bailee was only called upon to take such care as became neces- 
 sary to protect it against risks known to it, or of which it 
 had notice. There was great latitude in the evidence on the 
 part of the plaintiffs . . the purpose and end was to show 
 that the place of deposit was peculiarly and extraordinarily 
 exposed to perils from robbers at that time, calling for more 
 than the usual cautions from the bailee. This was competent, 
 so far as facts and circumstances proved to exist were commu- 
 nicated to the officers of the bank, but no farther."' 
 
 (e) Cases in Ohio, Nev) Jersey, and Louisiana. In an Ohio 
 case^ Judge Upson remarked that " the degree of care required 
 of the bank depends upon the nature of the bailment . . 
 It is usually stated that a bailee who is to receive no reward 
 is liable only for gross negligence, and some of the cases hold 
 that such a bailee is responsible only for the want of that care 
 which is taken by the most inattentive. But that rule can- 
 not be applied to all cases of bailment without reward, for 
 when securities are deposited with persons accustomed to 
 receive such deposits, they are liable for any loss occurring 
 through the want of that care which good business men 
 would exercise in regard to property of such value. This 
 was the degree of care required of the bank in this case. 
 Were the bonds lost for the want of such care ? They were 
 demanded. . . and the only excuse given for not deliver- 
 
 1 In Tompkins v. Saltmarsh, 14 Serg. & Raw. 275, Duncan, J., in deliver- 
 ing the opinion of the court said : When one undertakes to do a gratuitous 
 act, from which he is to receive no benefit, and the benefit is to accrue solely 
 to the bailor, the bailee is liable only for gross negligence, dolo proximus, a 
 practice equal to a fraud. " It is that omission of care which even the most 
 inattentive and thoughtless men never fail to take of their own concerns. 
 There is this marked difference in oases where ordinary diligence is required, 
 and where a party is only accountable for gross neglect. Ordinary neglect is 
 the want of that diligence which the generality of mankind use in their own 
 concerns, and that diligence is necessarily required where the contract is 
 reciprocally beneficial. The bailee is not bound to ordinary diligence, is not 
 responsible for the omission of that care which every attentive and diligent 
 person takes of his own goods, but only for the omission of that care which 
 the most inattentive take." 
 
 ' First Nat. Bank v. Zent, 39 Ohio St. 106. 
 
§ 6 DEPOSITS AND LIABILITY FOR THEIR LOSS. 11 
 
 ing them, as stated in the answer of the bank, was that 
 ' the said bank not having any such bonds in its possession, 
 did not deliver any to the plaintiffs.' No explanation was 
 offered and no reason given for the bonds not being in the 
 possession of the bank. We hold that under these circum- 
 stances the proof of demand, and the refusal to deliver, was 
 sufficient evidence that the bonds had been lost by the gross 
 negligence of the bank."' 
 
 (/) Essex Bank case? In this widely known ease the court 
 said : " It will not be disputed that if [the contract for keep- 
 ing special deposits] amounts only to a naked bailment, 
 without reward and without any special undertaking . . the 
 bailee will be answerable only for gross negligence, which 
 is considered equivalent to a breach of faith ; as every one 
 who receives the goods of another in deposit impliedly 
 stipulates that he will take some degree of care of it. The 
 degree of care which is necessary to avoid the imputation 
 of bad faith is measured by the carefulness which the depo- 
 sitary uses towards his own pi'operty of a similar kind. For 
 although that may be so slight as to amount even to care- 
 lesstiess in another, yet the depositor has no reason to expect 
 a change of character in favor of his particular interest ; 
 and it is his own folly to trust one who is not able or will- 
 ing to superintend with diligence his own concerns." In 
 this case the special deposit was a cask containing gold coin 
 which was fraudulently taken by the cashier and clerk of the 
 bank. The bank was declared not liable, because the theft 
 was a private act. " If the cashier had any official duty to 
 perform relating to the subject," said the court, "it was 
 merely to close the doors of the vault when banking hours 
 were over, that this, together with other property there, 
 
 I See also the case of Griffith v. Zipperwiok, 28 Ohio St. 388, which was an 
 action to recover the value of bonds stolen from a bank. If the thing de- 
 posited is preserved at the request of the owner, without reward, the 
 depositary is not required to use more than ordinary prudence, Hills v. 
 Daniels, 15 La. Ann. 280 ; see also Levy v. Pike, 25 La. Ann. 630. 
 
 " 17 Mass. 479. 
 
12 BANKS AND THEIR DEPOSITORS. § 6 
 
 should be secure from theft. He cannot, therefore, be consid- 
 ered in any view as acting within the scope of his employ- 
 ment when he committed the villiany ; and the bank is no 
 more answerable for this act of his than they would be if he 
 had stolen the pocket-book of any person who might have 
 laid it upon the desk while he was transacting some business 
 at the bank." 
 
 {g) Rule in England. A ease nearly similar has been de- 
 cided in England. A depositor left a box of securities with 
 a bank, which were kept in a strong-room made for that pur- 
 pose. Access to this room was only obtained by passing 
 through another where the cashier sat in the daytime and a 
 messenger slept at night. The strong-room had two doors, 
 opened with separate keys, both of which were kept by the 
 cashier in the daytime, and one of them at night. The owner 
 of the box had free access to the room where his box was de- 
 posited during banking hours in the presence of one of the 
 bank clerks, when he had occasion to take out coupons for 
 collection. While the box was in the custody of the cashier 
 he abstracted the debentures ; nevertheless the bank was not 
 liable for the loss. " It is clear," said the court, " that the 
 bank in this case were not bound to more than ordinary care 
 of the deposit intrusted to them, and that the negligence for 
 which alone they could be made liable would have been the 
 want of that ordinary diligence which men of conmion pru? 
 dence generally exercise about their own affairs. . . There 
 was an entire failure of evidence of the want of that ordi» 
 nary care which the bank was bound to bestow on the 
 plaintiff's deposit. . . The defendant's evidence added to 
 the plaintiff's case the important fact that in the strong- 
 room in which the plaintiff's debentures were kept, there 
 were, beside the boxes of other customers, bills, securities, 
 and specie, the property of the bank, to a very considerable 
 amount. It may be admitted not to be sufficient to exempt 
 a gratuitous bailee from liability that he keeps goods depos- 
 ited with him in the same manner as he keeps his own, 
 though this degree of care will ordinarily repel the presump- 
 
§ 6 DEPOSITS AND LIABILITY FOR THEIR LOSS. 13 
 
 tion of gross negligence. But there is no case which puts 
 the duty of a bailee of this kind higher than this, that he is 
 bound to take the same care of the property intrusted to him 
 as a reasonably prudent and careful man may fairly be ex- 
 pected to take of his own property of the like description. 
 This was in effect the question left to the jury in Dorman v. 
 Jenkins,* where Lord Denman told them that 'it did not fol- 
 low from the defendant's having lost his own money at the 
 same time as the plaintiff's that he had taken such care of 
 the plaintiff's money as a reasonable man would ordinarily 
 take of his own, and he added that the fact relied upon was 
 no answer to the action, if they believed that the loss occurred 
 from gross negligence.' "' 
 
 (A) A Pennsylvania ease. Scott v. National Bank'was another 
 case of a loss of bonds by the theft of the teller. " The taking of 
 the bonds," said the court, " was not an act pertaining to his 
 business as either clerk or teller. The bonds were left at the risk 
 of the plaintiff", and never entered into the business of the bank. 
 Being a bailment merely for safe-keeping for the benefit of the 
 bailor, and without compensation, it is evident the dishonest 
 act of the teller was in no way connected with his employ- 
 ment. Under these circumstances the only ground of liabil- 
 ity must arise in a knowledge of the bank that the teller was 
 an unfit person to be appointed or to be retained in its em- 
 ployment. So long as the bank was ignorant of the dishon- 
 esty of the teller, and trusted him with its own funds, confid- 
 ing in his character for integrity, it would be a harsh rule 
 that would hold it liable for an act not in the course of busi- 
 ness of the bank, or of the employment of the oflicer. There 
 was no undertaking to the bailor that the officers should not 
 steal. Of course there was a confidence that they would not, 
 but not a promise that they should not. . . Ifothing short of 
 a knowledge of the true character of the teller, or of reason- 
 
 1 2 Ad. & E. 256. 
 
 n Giblen V. McMuUen, L. R., 2 P. C. 317 ; S. C, 38 L. J., P. C. 25. 
 
 » 72 Pa. 471. 
 
14 BANKS AND THEIR DEPOSITORS. § 8 
 
 able grounds to suspect his integrity, followed by a neglect 
 to remove him, can be said to be gross negligence, without 
 raising a contract for care higher than a gratuitous bailment 
 can create." 
 
 (i) A Vermont ease. An important case has been decided 
 in Vermont. Whitney delivered bonds to a bank and i-eceived 
 a writing from the cashier stating that they were " for safe- 
 keeping as a special deposit." Having been stolen, Whitney 
 tried to recover their value of the bank. Its duty was "to 
 have kept the bonds in good faith, within its safe, under all 
 the safeguards afforded to like property of its own." Whit- 
 ney claimed that the bank was negligent in not protecting a 
 passage-way from the rear of the banking-room, behind the 
 counter, by a gate; that the safe was left open during business 
 hours for convenient access of the bank officers in the trans- 
 action of business ; that a short time about noon each day the 
 bank was left in charge of one person while his associate was 
 absent to dinner. " But," said the court, " there would seem 
 nothing so unusual in these facts, if proved, that they could 
 be accounted negligence, much less gross negligence, such 
 as would charge the defendant."' When, therefore, bonds 
 are left with a bank for safe-keeping and no reward is paid 
 for the service, unless more proof is offered than the mere fact 
 that they were stolen, the owner cannot recover.* 
 
 § 7. When is the keeping gratuitous. ITor is the profit 
 gained by keeping the account of a depositor enough to make 
 a banker a bailee for hire, who is required to exercise more 
 care than when performing the service gratuitously.^ But 
 the receiving of a commission on the dividends accruing from 
 bonds kept by a banker would be a sufficient reward to render 
 him liable as a bailee for hire.* 
 
 § 8. Negligence is a question of fact. What negligence 
 renders a bank liable for the loss of a special deposit is a ques- 
 
 ' Whitney v. First Nat. Bank, 55 Vt. 154. 
 " Wylie V. Northampton Nat. Bank, 15 Fed. Kep. 428. 
 3 Giblen v. McMullen, L. R., 2 P. C. 317. 
 ' In re United Service Company. Johnston's Claim, L. R., 6 Ch. 212. 
 
§ 9 DEPOSITS AND LIABILITY FOE THEIR LOSS. 15 
 
 tion of fact to be ascertained in each case. In Smith v. First 
 Ifat. Bank,' which was an action to recover for the Joss of 
 bonds, the court said that the evidence furnished no proof of 
 negligence except that which resulted by inference from the 
 fact of loss. But theft by either of the several persons who 
 had access to the vault and to the packages was equally open 
 to inference from the same facts. For a loss in that mode, it 
 is settled that the bank would not be responsible. "The 
 evidence went far to show that the bank did use due care in 
 all its arrangements for the safety of the securities deposited. 
 They were kept in the same vault and safe with the securities 
 of the bank, and the same persons had access to both. There 
 was no evidence of negligence in the selection of cashier or 
 his clerks, or in permitting them to be retained after notice 
 of unfitness. On the other hand, the plaintiif's evidence 
 entirely failed to exclude the possibility of loss by other 
 means than negligence of the defendants. It left the case, 
 therefore, to be decided by mere inference, without any facts 
 to determine which of several inferences was correct. The 
 presumption of innocence would be sufficient to protect the 
 cashier and his clerks from the charge of theft ; but that pre- 
 sumption will not avail to sustain the burden of proof in an 
 action against a bank for negligence." 
 
 § 9. Distinction between loss within and without the official 
 sphere, (a) Illustrations. The cases in which the loss has 
 occurred through the wrongful conduct of a bank official 
 wholly outside his official duty must be distinguished from 
 the cases in which the loss has occurred through his negligent 
 conduct within his official sphere. The following case illus- 
 trates the distinction : A stranger, Smith, left bonds with 
 the cashier of a bank for gratuitous safe-keeping, retaining a 
 minute list of them. The bonds were inclosed in an envelope 
 indorsed with the depositor's name and residence, and put 
 into a vault where were other valuable securities. Some time 
 passed and then Smith's personator demanded the bonds, de- 
 
 1 99 Mass. 605. 
 
16 BANKS AND THEIR DEPOSITORS. § 9 
 
 scribing them and giving Smith's name and address accurately, 
 but furnishing no other proof of identity. The bonds were de- 
 livered, but not long after the true owner appeared. The court 
 held that the jury were justified in deciding that the teller had 
 not taken the pains which the law required to identify the 
 depositor, and consequently that the bank was liable for the 
 amount.' But if a person withdraw a special deposit by au- 
 thority of the depositor, the bank is discharged, though the 
 authority be unknown at the time to the officers.* A written 
 authority, however, signed by the depositor on the certificate 
 of deposit in these words: ""Will pay above dividends or 
 coupons" (naming a particular person) "for my account," will 
 not justify a bank in parting with the bonds and the certifi- 
 cates of stock described in the certificate of deposit.' 
 
 (6) Stated by Kentucky court. The distinction above noted, 
 defining more perfectly the liability of a bank for the loss of 
 special deposits has been well stated by the Kentucky Court 
 of Appeals. After remarking that the bank in the case be- 
 fore the court " was required to do nothing more than to per- 
 mit the special deposits to remain in its vault until called for 
 by the depositor," it was added that the " whole duty" of the 
 cashier " consisted in using proper care and diligence in clos- 
 ing and fastening securely the doors of the vault and banking- 
 ing-house when business hours were over. If he turned aside 
 from the discharge of this negative or passive duty, and 
 assumed to act for himself clearly outside of the scope of his 
 employment, and opened the package and bag and appro- 
 priated the contents to his own use, then, unless the bank 
 
 1 Lancaster Co. Nat. Bank v. Smith, 62 Pa. 47. In the case of the First Nat. 
 Bank v. Dunbar, 118 III. 625, the cashier when purchasing bonds for a depo- 
 sitor acted as his agent, but not after they were specially deposited in the 
 bank. Subsequently in transferring them to the bank to conceal his own 
 embezzlement, he acted as its agent, thereby rendering it liable for the 
 amount, aff. 19 Brad. 558. His knowledge was its knowledge, and it could 
 not in this way acquire a legal title without the owner's consent. 
 
 ' Chattahoochee Nat. Bank v. Schley, 58 Ga. 369. 3 Id. 
 
§ 11 DEPOSITS AND LIABILITY FOR THEIR LOSS. 17 
 
 prior to sucli action had reasonable ground to suspect his in- 
 tegrity, it cannot be made to answer for his fraud or felony."' 
 
 (c) Previous application of distinction in Kentucky. This 
 principle had previously been applied by the same court, and 
 the directors of a bank were declared liable for the loss of a 
 special deposit of bonds, abstracted and sold by the officers of 
 the institution, and who had used the proceeds in its busi- 
 ness. They could not escape because they knew of these 
 wrongful sales, or could have known, by using the most ordi- 
 nary diligence, by looking at the ledgers and other bank 
 books, and also its correspondence, and statements.^ 
 
 § 10. Special contract of deposit. " Parties to a deposit may 
 unquestionably make a special contract as to the place and 
 manner of keeping the deposit, a breach of which will render 
 the depositary liable. Eepresentatious may be made to in- 
 duce strangers to commence or depositors to continue deposit- 
 ing which will call for increased care on the part of the bai- 
 lee. But a mere showing to a depositor of the facilities and 
 security of a bank, does not amount to any such representa- 
 tion as will enhance the obligations of the banker in regard 
 to deposits by such depositors."' In Maryland, gold-interest 
 bearing bonds were deposited with bankers on their written 
 promise to return them on demand, or pay their full value 
 including gold interest. Having been lost, the liability of 
 the bankers was determined by the agreement.* It hardly 
 need be added that by agreement, a special can be changed 
 into a general deposit.* 
 
 § 11. How second kind of special deposit must be kept. The 
 second kind of special deposits become so from their intended 
 application. What is the liability of a bank for their safe- 
 keeping? In McLain v. "Wallace* the court remarked of a 
 
 ' Ray V. Bank, 10 Bush, 344. 
 
 2 United Society v. Underwood, 9 Bush, 609 ; Hughes v. First Nat. Bank, 
 Sup. Ct. Pa., 17 Week. No. Cas. 178. 
 
 3 Hale V. Rawllie, 8 Kansas, p. 142. * Maury v. Coyle, 34 Md. 235. 
 s Howard w. Roeben, 33 Cal. 399 ; Chiles v. G^rison, 32 Mo. 478. 
 
 6 103 Ind. p. 6B3. 
 
 2 
 
18 BANKS AND THEIR DEPOSITORS. § 13 
 
 special deposit that the bank is merely a bailee, and is bound 
 by the terms of the deposit. But, generally, a bank when 
 receiving a deposit of money for a special purpose mingles it 
 with the general deposits of the institution, loans it like 
 other money, and derives a profit therefrom. In such cases, 
 which comprise by far the greater number of special money 
 deposits, we see no reason why a bank should not be held 
 liable for their loss as though they were general deposits. 
 
 § 12. Bank is not liable for keeping special deposits without 
 knowing it. When the cashier or other official of a bank 
 receives special deposits voluntarily, it is not responsible for 
 their loss unless the directors, know they have been received. 
 If they do know, the bank is responsible, whether specially 
 authorized to receive them or not. And the usage in receiv- 
 ing them is regarded as known by the directors.' 
 
 § 13. What are general and what are special deposits, (a) 
 Illustrations. A deposit is not special unless made so by the 
 depositor, or made in a particular capacity.* The adding of 
 the word " clerk" to the name of the depositor does not make 
 the deposit special, nor change the liability of the bank.' 
 Nor is money deposited by an officer appointed by the court, 
 like a railway receiver, a special deposit.* If or is a public 
 deposit special which is blended with the general funds of 
 the depository and entered like other deposits.* Under the 
 national banking law the phrase " special deposits" embraces 
 the public securities of the government.* And if before the 
 
 1 National Bank v. Graham, 100 U. S. 699, and cases cited ; First Nat. 
 Bank v. Graham, 79 Pa. 106 ; Lloyd o. West Branch Bank, 15 Pa! 172 ; 
 Steffe V. Bank, 22 Pitts. L. J. 157. 
 
 s Brahm v. Adkina, 77 111. 263 ; Neely v. Rood, 54 Mich. 134 ; Ruffin v. 
 Commissi9ners, 69 N. Car. 498. 
 
 3 McLain v. Wallace, 103 Ind. 562. • 
 
 * Southern Development Co. v. Houston & Co., 27 Fed. Rep. 344. In 
 Tennesee, State bonds purchased with school land funds, and deposited in 
 the Bank of Tennesee by the counties interested, if capable of identification 
 were declared to be special deposits, otherwise general deposits. State v. 
 Bank, 5 Baxter, 1. 
 
 6 Otis V. Gross, 96 111. 612. « National Bank c. Graham, 100 U. S. 699. 
 
§ 13 DEPOSITS AND LIABILITY FOE THEIR LOSS. 19 
 
 maturity of paper held by a bank against a depositor an 
 * arrangement is made by which it agrees to hold the deposit 
 for a specific purpose, the bank may be regarded as a trustee 
 and the deposit as special.' 
 
 (6) Sealed and unsealed deposits. When " money, not in a 
 , sealed packet or closed box, bag, or chest, is deposited with 
 a bank or banking corporation, the law presumes it to be a 
 general deposit, until the contrary appears ; because such 
 deposit is esteemed the most advantageous to the depository, 
 and most consistent with the general objects, usages, and 
 course of business of such companies or corporations. But if 
 the deposit be made of anything sealed or locked up, or other- 
 wise covered or secured in a package, cask, box, bag, or chest, 
 or anything of the like kind of or belonging to the depositor, 
 the law regards it as a pure or special deposit, and the deposi- 
 tory as having the custody thereof only for safe-keeping and 
 the accommodation of the depositor."* 
 
 (c) Deposit of bank bills for redemption. On the 13th of 
 January, 1824, A., of New York, offered at the Eagle Bauk 
 in ITew Haven some of its bills, and demanded their payment 
 in specie. The officers offered to redeem them by giving a 
 draft for the amount on a bank in the city of I^Tew York. 
 This was refused. The bills were then left with the officers 
 to be counted and for payment. Two days afterward the 
 president of the bank sent a draft to an agent in New York 
 with the direction to tender the amount of the bills in specie 
 to A. the next morning. This was done, but the money was 
 refused because two days' interest had accrued. Again A. 
 demanded payment of the bills at the Eagle Bank, which was 
 refused on the ground of payment in New York. He then 
 demanded the bills, which were also refused. In the mean 
 time they had been mingled with the redeemed circulation of 
 the bank. In March, 1824, A. sued the bank, and after three 
 years recovered judgment for the amount and interest. On 
 
 1 National Bank v. Speight, 47 N. Y. 668. See § 171. 
 ' Dawson v. Real Estate Bank, 5 Ark. p. 297. 
 
20 BANKS AND THEIR DEPOSITORS. § 14 
 
 the 31st of August, 1825, the affairs of the bank having 
 become desperate, the funds provided in New York for the 
 payment of the bills were withdrawn. Within a month the 
 bank failed. On the 21st of September the president assigned 
 a quantity of iron to trustees, first, to secure a certain amount 
 to an indorser of the post-notes of the bank, and then, after 
 paying a savings bank the amount of its deposits, to pay all 
 other persons who had ordinary or special deposits with the 
 Eagle Bank the full amount of such deposits respectively. 
 A. sought to obtain the benefit of the assignment as a special 
 depositor, but the court held that he did not sustain that 
 character.' 
 
 (d) A deposit is not special by advertising it so. I^or does a 
 deposit become special simply by the depository advertising 
 that it shall be thus regarded. This principle was applied by 
 the judge of a federal court in Virginia. A bank which had 
 suspended payment advertised that on a certain day it would 
 " resume business by receiving special separate deposits in 
 trust to new account, pledging the bank to use these deposits 
 only in payment of checks against that new account, and as 
 fast as the bank can collect and realize from the loans and 
 securities to pay pro rata instalments on its present indebted- 
 ness." E"ew deposits were accordingly received, but soon 
 afterward the bank failed again and was adjudicated a bank- 
 rupt. A new depositor petitioned the court to be paid in full 
 as a preferred creditor, basing his petition on the claim that 
 the new deposits belonged to the new depositors. But the 
 court held that the new deposits were not special, that no lien 
 was secured on them when they were paid into the bank, that 
 no preference was secured by the advertisement, and conse- 
 quently that the petitioner was only a general creditor.* 
 
 § 14. Recovery may be had of the thing itself or its value, 
 and profit while keeping it. (a) Cases of gold coin. When a 
 special deposit is not returned, the depositor may bring an 
 
 1 Catlin V. Savings Bank, 7 Conn. 487. 
 
 2 In re Mutual Building Fund Society, 15 N. Bank. Reg. 44. 
 
§ 14 DEPOSITS AND LIABILITY FOR THEIR LOSS. 21 
 
 action to recover the thing itself, or the value, of the depositary 
 or of his assignee.' If a profit has been made on the deposit, 
 that also may be recovered.^ If gold coins are specially 
 deposited and not returned when demanded, the depository 
 must pay their value at the time of converting them to its 
 own use.' It has been often held, said the court in an 
 Indiana case, that when the amount of a debt has been ascer- 
 tained-, in view of the national legal tender act, no difference 
 will be recognized between the gold dollar and the legal ten- 
 der note of the denomination of one dollar as a means of 
 tender or payment. But it did not follow that when the 
 bailee of specific gold coins which were to be redelivered in 
 specie, sold the coins for a premium and failed to redeliver 
 them on demand, he should not answer in damages to the 
 amount which he had realized by the conversion. " That he 
 should have the right to make a profit for himself bj' his own 
 wrongful act is a proposition having no foundation in justice, 
 and not sanctioned by any principle of law." liTotwithstanding 
 the evident soundness of the reasoning in this case, the 
 Supreme Court of Wisconsin has decided the same question 
 the other way.* Several eases were cited to sustain the posi- 
 tion of the "Wisconsin court, but all related to the legality of 
 paying general deposits, notesj and other obligations ; not 
 one of them touched the question of liability for a special 
 deposit. Nor did the United States Supreme Court in 
 Thompson v. Riggs* establish a different rule from the Indi- 
 ana court, for though the deposit was partly in coin and 
 partly in notes and checks, the evidence clearly showed that 
 the deposit was general and not special, and this view was 
 unequivocally maintained by the court. 
 
 (6) Maryland case of gold coin. An interesting case per- 
 
 > Ex parte Bond, 1 Mont. D. & D. 10 ; Ex parte Brown, 3 Deao. 91. 
 » Story on Bailments, §§ 122, 123, 269. See Green v. Sizer, 40 Miss. 530, 
 concerning the depositor's right to recover. 
 ' Bank v. Burton, 27 Ind. 426. See Chesapeake Bank v. Swain, 29 Md. 483. 
 ' Warner v. Sauk County Bank, 20 Wis. 492. « 5 Wall. 663. 
 
22 BANKS AND THEIR DEPOSITORS. § 14 
 
 taining to a special gold deposit was tried in Maryland in 
 1864. Abell deposited with the Chesapeake Bank $3000 in 
 gold coin, which was entered on Abell's bank-book, "1861, 
 Dec. 30th, cash (coin) $3000." The banks of the State had 
 then suspended specie payments, and gold was at a small 
 premium. Abell drew two checks on the bank for the 
 amount— one dated the 27th May, 1864, for $3000 " in gold 
 coin," and the other, the next day, for the same amount " in 
 coin." When presented for payment the bank refused to pay 
 in gold in both cases, but offered to pay in notes, which were 
 declined. Abell's bank-book was balanced at different times 
 between the date of the deposit and the time of making the 
 checks in question, and the balance in his favor was never 
 below $3000. In a suit brought to recover the gold, Abell 
 sought to prove that the deposit was special, first, by an ex- 
 press agreement with the bank, and, secondly, that the entry 
 above mentioned explained in the light of the usage then 
 existing among the banks in Baltimore, that deposits in gold 
 coin should be regarded special, imported an agreement to 
 return the specific deposit. The Supreme Court — after re- 
 marking on the testimony of a witness of the plaintiff, that it 
 seemed it was not designed that the gold should be placed in 
 the defendant's bank as an ordinary deposit, and that the 
 design was to make some special arrangement in regard to it 
 of which the defendant's ofiicers were made aware, and 
 acceded thereto, and heiice the designation of the deposit as 
 coin in the plaintiff's bank-book — held that evidence might 
 be introduced to prove the usage then existing concerning the 
 significance of such entries. "If," said the court, "there be 
 a general and well-established usage or custom upon the sub- 
 ject prevailing with the banks of the city of Baltimore, it 
 may be presumed that the parties acted in reference to such 
 usage, and that terms and conditions not contained in the 
 written entry, and which were not by express words agreed 
 upon at the time, were nevertheless, in the minds of the 
 parties, and formed part of the contract. For," quoting 
 
§ 15 DEPOSITS AND LIABILITY FOR THEIR LOSS. 23 
 
 approvingly the opinion of Baron Parke in an English case,* 
 "it has long been settled that, in commercial transactions, 
 extensive evidence of custom and usage is admissible to annex 
 incidents to written contracts in matters with respect to 
 which they are silent. The same rule has also been applied 
 to contracts in other transactions of life, in which known 
 usages have been established and prevailed, and this has 
 been done upon the principle of presumption that, in such 
 transactions, the parties did not mean to express in writing 
 the whole of the contract by which they intended to be bound, 
 but a contract with reference to those usages. But," added 
 the court in the case under consideration, "such usages, to 
 be admissible, must be shown to be well established, uni- 
 form, general, and notorious ; for it is from those attributes 
 of the particular usage that the presumption arises that the 
 contract was made with reference to it." Such a usage, how- 
 ever, was not proved in this case, nor was the question 
 whether a special agreement had been made determined.' 
 
 (c) Recovery of special deposit of uncurrent hills. "Whenever 
 a special deposit consists of uncurrent bills which are returned 
 to the depositor, he cannot recover for them on the ground 
 that the bank has used similar bills in its business.' When 
 a special deposit consisted of " cotton money," " confederate 
 money," and " Mississippi treasury notes," which the banker 
 refused to deliver, it was declared in Mississippi that these 
 deposits were money and that an action could be sustained to 
 recover their value. Moreover, the amount which a depositor 
 could ordinarily recover would be the value of the notes. 
 Under some circumstances, however, the depositor could 
 recover for the loss occasioned by the refusal or delay of the 
 banker to return them.* 
 
 § 15. Liability for loss of collateral securities. It may be 
 added in closing the chapter that when bonds and other pro- 
 
 1 Hntton V. Warren, 1 Mees. & Wels. 466. 
 
 » Chesapeake Bank v. Swain & Abell, 29 Md. 483. 
 
 3 Rupert V. Eoney, 22 111. 325. * Green v. Sizer, 40 Miss. 630. 
 
24 BANKS x\ND THEIR DEPOSITORS. § 15 
 
 perty are left with a bank as a pledge for securing a loan, or 
 as partly performing some other agreement in which the 
 bank is interested, more diligence is required in keeping 
 them than in keeping deposits for which no compensation is 
 received. Ordinary care at least must be exercised in keeping 
 collateral securities. In Cutting v. Marlor' the defendant de- 
 livered to a bank collateral securitiesfor a loan, and declining 
 to pay unless it would return them, the receiver sued .him 
 for the amount. It was shown,that the trustees of the bank 
 left the entire management to the president and to the manager, 
 that they took the president's statement without question or 
 examination, and that the security was taken from the bank 
 without objection or resistance of any one. " The president 
 had been in the habit of abstracting securities and using 
 them in his private business for six months prior to the 
 failure of the bank." The manager knew of this, and though 
 a trustee, took no measure to prevent it, nor did he notify the 
 other trustees. The trial judge found expressly that the 
 bank " did not exercise reasonable diligence in respect to the 
 care and custody of these securities," and this judgment was 
 sustained by the Court of Appeals. How long the liability 
 of the bank continues after the loan or other agreement for 
 which they are pledged has been discharged is an unsettled 
 question.'' 
 
 ' 78 N. Y. 454. 
 
 " Third Nat. Bank v. Boyd, 44 Md. 47 ; Second Nat. Bank v. Ocean Nat. 
 Bank, 11 Blatch. 362 ; Jenkins u. National Village Bank, 58 Me. 275 ; Dear- 
 born V. Union Nat. Bank, Id. 273; Scott, Williams & Co. v. Crews, 2 S..Car. 
 522 ; Prather v. Kean, 19 Chicago L. N. 135 ; Colebrooke on Collateral Secu- 
 rities, § 63. 
 
§ 18 NATURE OF ITEMS OF DEPOSITS. 25 
 
 CHAPTER n. 
 
 NATURE OP ITEMS OF DEPOSITS— rWHEN CHECKS ARE CONSIDERED 
 
 CASH. 
 
 § 16. Of what deposits consist. The general deposits of a 
 bank consist of cash, checks, notes, bills of exchange, and 
 other instruments, but the first two items form by far the 
 larger portion. Are checks and similar instruments payable 
 without restriction considered as cash ? A uniform rule has 
 not prevailed. 
 
 § 17. Ownership of deposits when account is overdrawn. 
 It is certain that when the depositor's account is overdrawn 
 any deposit that he may make, whether checks, notes, or the 
 like, belong absolutely to the bank. So do they whenever 
 the depositor draws cash On the strength of them.* 
 
 § 18. Ownership of check drawn on the depository. Let 
 us next inquire how the deposit of a check is regarded which 
 is drawn on the depository. We think the more general rule 
 is, when a check is given to and presented by another depositor 
 of the same bank who is credited for the amount, it cannot 
 
 . ' Balbaeh v. Frelinghuysen, 15 Fed. Rep. 675. This principle is unqnes- 
 tionaWy sound, but another principle stated in that case concerning paper 
 deposited and not drawn against, has been questioned and can hardly be 
 sustained. See Judge Wallace's opinion in St. Louis & Co. v. Johnson, 27 
 Fed. Rep. p. 243. Even a note which is deposited for collection, if passed 
 to the credit of the depositor in his general account and overdrawn, is the 
 property of the bank, and if it should become bankrupt this would be 
 regarded as an asset for the general creditors. In re Bank of Madison, 5 
 Biss. 515 ; Ayres v. Farmers and Merchants' Bank, 79 Mo. 421, and cases 
 cited. If a draft is discounted by a bank and passed to the credit of the 
 drawer and he checks against the amount, the bank is the holder for a 
 valuable consideration. And if the drawer's account be overdrawn at 
 the time of discounting the draft and at its maturity, a court will not inquire 
 into the amount checked out, but regard the consideration as good for the 
 entire draft, First Nat. Bank v. Crawford, 2 Gin. S. C. Rep. 125. 
 
26 BANKS AND THEIB DEPOSITORS. § 18 
 
 be withheld on discovering that the maker does not have so 
 much on deposit. 
 
 (a) The City National Bank v. JBvrns^ 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 depositor's 
 bank-book and placed it on the file of checks to be charged 
 on the books of the bank to the drawers. Subsequently, 
 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 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. Chief Justice 
 Briekell said there was some contrariety of decision concern- 
 ing 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 deal- 
 ing 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, agreements, transactions between 
 parties should have operation and effect according to their 
 intention, and it seems impossible from these facts to attribute 
 
 > 68 Ala. 267. 
 
§ 18 NATURE OF ITEMS OF DEPOSITS. 27 
 
 any other intention to the parties than that the check should 
 he received by the bank and placed to the credit of the de- 
 positor, as cash, as monej- 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. 2^or is 
 there any room for doubt that at anytime during business of 
 the day of deposit his check would have been honored by the 
 bank upon the faith of the deposit as money to his credit. 
 
 (b) Cases reviewed. " The case more nearly resembles and 
 falls directly within the principle stated in Bolton v. Richard' 
 that when a bank credits a depositor with the amount of a 
 check drawn upon it by another customer, and there is no 
 want of. good faith upon the part of the depositor, the act of 
 crediting is equivalent to a payment in money.* Nor can the 
 bank recall or repudiate the payment, because, upon an ex- 
 amination of the accounts of the drawer, it is ascertained 
 that he was without funds to meet the check, though, when 
 the payment was made, the officer making it labored under 
 
 > G Term, 139. 
 
 * The cases of Boyd v. Emmerson, 2 Ad. & E. 184, and Kilsby v. Williams, 
 6 Barn. & Aid. 816, 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 
 cancelled 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. 
 
28 BANKS AND THEIR DEPOSITORS. § 18 
 
 the mistake that there were funds sufficient.' In the case last 
 cited it was said: '"When a check on itself is otfered 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 beiiig no 
 fraud and the check genuine, the parties are no less bound 
 and concluded than in the former case. Neither can disavow 
 or repudiate 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 v, 
 National Bank, it was said by 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 conditionally, 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 between the bank and such party, pro- 
 vided 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.' " 
 
 (e) Oddie's case. The Supreme Court of California^ dis- 
 sented from the conclusions of Church, C. J., in Oddie v. 
 National City Bank, and declared that when a check on the 
 same bank was presented by a depositor with his pass-book 
 to the receiving teller, who merely received the check aud 
 
 > Chambers v. Miller, 13 Com. B. N. S. 125 ; Levy v. United States Bank, 
 4 Ball. 234 ; Oddie v. National Bank, 45 N. Y. 735 ; National Bank v. Burk- 
 hardt, 100 U. S. 686. 
 
 s 9 N. Y. 463. 
 
 » National Gold Bank ». McDonald, 51 Cal. 64. See § 51 for fuller statement. 
 
I I 
 
 § 18 NATURE OF ITEMS OF DEPOSITS. 29 
 
 noted it in the pass-book, this did not of itself raise a pre- 
 sumption that the check was received as cash, but only for 
 collection. The counsel for the depositor assumed that the 
 mere fact of the receipt of the check by the receiving teller, 
 and the entry of it in the depositor's pass-book, implied an 
 agreement by the bank to accept it as cash, and was to be 
 deemed in law as equivalent to the payment of the check. 
 The proof showed that nothing more was done in that case. 
 No entries were made on the bank books as was done in the 
 Alabama case. The cheek was handed by the defendant's 
 clerk to the receivingteller, together with the pass-book, with- 
 out any remark, who, having made the entry, returned the book 
 to the depositor. Does this transaction, inquired the court, 
 of itself import an agreement by the hank to accept the 
 check as cash. A negative answer was given. But in 
 Oddie's case, previously mentioned, in which the facts were 
 quite the same, the court decided otherwise. In that case the 
 plaintiffs delivered to the receiving teller for deposit a check 
 which was drawn by another depositor of the same bank. 
 The receiving teller entered the check on the deposit ticket 
 of the plaintiffs. " These facts," said Chief Justice Church, 
 "are sufficient to sustain the conclusion of the I'eferee that the 
 defendants paid the check by receiving it as a deposit of 
 money from the plaintiffs, and it is not material whether this 
 is to be regarded as a conclusion of fact or of law." . . " The 
 plaintiffs clearly put in the check as a deposit, and the defen 
 dants as clearly received it as such, and credited the plaintiffs 
 with it. The credit on the deposit ticket was as significant an 
 act, evincing the consent of the defendants to the payment of 
 it, as if made upon the pass-book of the plaintiffs, and entered 
 upon the books of the bank. Financial business is trans- 
 acted at banks, with great rapidity, but according to definite 
 and certain rules, which are well understood and acted upon 
 by those engaged in that business. Very little is said, but 
 very much is understood, and there is an absence of all form- 
 alities which tend to embarrass the facility of doing the busi- 
 ness. In determining the legal effect of such transactions, we 
 
30 BANKS AND THEIR DKPOSITORS. • § 18 
 
 must apply the same rules applicable to all contracts and 
 business affaire, and effectuate and cany out the intention of 
 the parties to be gathered from their acts and declarations, 
 and the accustomed and understood course of the particular 
 business. Applying these rules, there can be no doubt but 
 there was an express demand on one side, and consent on the 
 other, that this check should be placed to the credit of the 
 plaintiffs as a deposit. The legal effect of the transaction 
 was preciselj'^ the same as though the money had been first 
 paid to the plaintiffs, and then deposited."' 
 
 (d) Usage in California. The remark is in order concerning 
 the California case that the usage existed among the banks in 
 San Francisco to return checks drawn on the depository 
 banks, and to cancel the credits in depositors' pass-books 
 if the fact was ascertained within banking hours on the day 
 of making deposits that the makers did not have enough 
 funds to pay their checks. The rule of law, therefore, estab- 
 lished by the court was in harmony with the well-known 
 usage existing there, and is evidently just. 
 
 (e) Buk in New Jersey. The rule thus established in New 
 York and Alabama prevails in New Jersey. In Titus & 
 Scudder v. Mechanics' Nat. Bank,^ which Avas a suit to 
 recover the value of two checks, the court said, " They were 
 received and credited in a cash account as cash, in part as 
 payment of an overdraft, and in part to be drawn against. 
 They were received and credited in the same way as bills or 
 notes of other banks. 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 iden- 
 tical checks as their property, left for collection, against a 
 receiver or an assignee in bankruptcy ; the plaintiffs had re- 
 ceived the price of these checks by having it credited on their 
 overdraft, and by drawing for it. Any balance due to them 
 
 ' Market Bank v. Hartshorne, 3 Keyes, 137 ; Levy v. Bank, 4 Dall. 234. 
 ' 35 N. J. Law, p. 592. 
 
§ 20 NATURE OP ITEMS OP DEPOSITS. 31 
 
 from defendants would be paid like other creditors' demands, 
 pro rata, out of the assets of the insolvent." And in more 
 recent cases the same doctrine has been affirmed.^ 
 
 § 19. The rule when the check is not drawn against fiinds. 
 Before passing to another question a distinction must be 
 noted. When the drawer of a check has no funds in the 
 drawee bank, and this is known to the holder, who, never- 
 theless, deposits it, and is credited for the amount, the trans- 
 action is not regarded as payment by the bank to the 
 depositor, and no recovery can be had thereon. This distinc- 
 tion in no way weakens the rule that a. check is cash which 
 is credited to the depositor and charged to the maker, because 
 it is a fraud on the part of the holder to present knowingly 
 for deposit a check not drawn against funds.* 
 
 § 20. Ownership of check not drawn on the depository, {a) 
 Metropolitan National Bank v. Loyd.^ The next question to 
 be considered is, when the check or other instrument is not 
 drawn on the depository, but on another bank. In the 
 above case, which is often cited, it was decided that when 
 a check is due and indorsed in blank, and deposited by the 
 payee on general account and which is credited to him as 
 cash,, the bank has the title thereto, and in the event of non- 
 payment can recover of the depositor only as an indorser. 
 The decision was affirmed by the Ifew York Court of Ap- 
 peals, and the opinion of Judge Daniels, delivered in the 
 court below, was regarded as very satisfactory.* 
 
 (6) Opinion of New York Court of Appeals. In a later case, 
 Judge Andrews, in delivering an opinion for the same Court 
 of Appeals, said, " The general doctrine, that upon a deposit 
 being made by a customer in a bank, in the ordinary course 
 of business, of money, or of drafts or checks received and 
 credited as money, the title to the money, or to the drafts or 
 checks is immediately vested in and becomes the property of 
 
 > Terhune v. Bank, 34 N. J. Eq. 367 ; HoflFman v. First Nat. Bank, 46 N. 
 J. Law, 604. 
 2 Peterson v. Union Nat. Bank, 52 Pa. 206. 
 s 25 Hun, 101. » 90 N. Y. 530. 
 
32 BANKS AND THEIR DEPOSITORS. § 20 
 
 the bank, is not open to question. The transaction, in legal 
 effect, is a transfer of the money, or drafts or checks, as the 
 case may be, by the customer to the bank, upon an implied 
 contract on the part of the latter to repay the amount of the 
 deposit upon the checks of the depositor. The bank acquires 
 title to the money, drafts or checks, on an implied agreement 
 to pay an equivalent consideration when called upon by the 
 depositor in the usual course of business."* 
 
 (c) Opinion of Wallace, J., United States Circuit Court. This 
 question arose after the failure of the Marine Nat. Bank, of 
 New York, in 1884,^ in an action against the receiver by a 
 railroad company to recover a draft which had been deposited, 
 with the bank on the 5th of May and was collected two days 
 afterward. The bank was insolvent at the time of receiving 
 it, and failed before completing the collection. " Upon prin- 
 ciple," said Judge Wallace, " there is no reason why, if the par- 
 ties choose to treat the deposit of such a paper as a deposit of 
 cash, the transaction should not be deemed equivalent toadis* 
 count of the paper by the bank. Sight bills, drawn by one 
 corporation upon another of prominent financial standing, like 
 the interest coupons of such corporations, or like certified 
 cheeks upon banks, are generally accepted in commercial usage 
 as the equivalents of money. They have practically 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 
 
 ' Cragle ». Hadley, 99 N. Y. p. 133 ; Ajrrea v. Farmers and Merchants' 
 Bank, 79 Mo; 421. A bank which receives an indorsed check and credits 
 the amount to the depositor may recover the same it the check be dishonored 
 when presented tlie next day, though the drawee has sufScieut funds in the 
 hank, but has stopped payment of them, Hooker v. Franklin, 2 Bosw. 500. 
 If, as Judge Wallace remarked in St. Louis & Co. v. Johnson, 27 Fed. Rep. 
 p. 243, " a bank does not wish to assume the relation of a debtor for the 
 paper to the depositor, this intention may be manifested in a very explicit 
 manner by crediting the paper as paper. This was done in Thompson t'. 
 Giles, 2 Barn. & Cr. 422, in the case of Rowtou, 1 Rose, 15, and in the case 
 of Sargeant, Id. 153." 
 
 2 27 Fed. Rep. 243. 
 
§ 20 NATURE OF ITEMS OF DEPOSITS. 3S 
 
 the financial standing of the corporation issuing them. . . 
 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 unequivocally 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 circumstances 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 particular 
 transaction may be ascertained from the course of their pre- 
 vious 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 inferred, 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 
 responsibility of the customer, or the drawee of the paper, or 
 both. . . 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 tlie bank by 
 making such an entry, assumes to receive the bill as money. 
 Correlatively, if the depositor understands that the bank pro- 
 poses 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 conclusion 
 reached in Metropolitan N'ational Bank v. Loyd are adopted 
 as satisfactory. The authorities bearing upon the general 
 questions are so fully cited and discussed in the opinions in 
 3 
 
34 BANKS AND THEIR DEPOSITORS. § 20 
 
 that case that it is deemed unnecessary for present purposes 
 to refer to them."* 
 
 {d) In Brooks v. Bigelow.^ a check was made in Massachu- 
 setts, which was payable to a resident of New York city, 
 
 1 The judge further remarked that inasmuch as the proceeds of the draft 
 had not become commingled with the other moneys of the bank when the defen- 
 dant took possession of Its assets, but were capable of identification, tlie 
 plaintiff was entitled, if they were its property, to follow them into the hands 
 of the receiver, and regain them, Illinois Trust and Sav. Bank v. Smith, 21 
 Blatchf. 275 ; S. C, 16 Fed. Rep. 858. The question, therefore, was whether 
 the draft belonged to the plaintiff at the time it was paid by the drawee. If 
 it did, the defendant did not acquire title to the money. If the transaction 
 in controversy was equivalent to a discount of the draft, the bank acquired 
 title to the paper ; if it was not, the bank merely became the agent of the 
 plaintiff to collect the proceeds. The facts in the case, as stated by Judge 
 Wallace were : "For several years prior to the fifth day of May, 1884, the 
 plaintiff kept an account with the Marine National Bank, of the city of New 
 York, making deposits with and drawing checks upon the bank from time to 
 time. On the fifth day of May, 1884, the plaintiff deposited with the bank 
 a sight draft for $17,835, dated that day, and drawn by the plaintiff upon the 
 treasurer of the Atchison, Topeka & Sante Fe Railroad Company, of Boston, 
 Massachusetts, which company was indebted to the plaintiff in the amount of 
 the draft. The bank was insolvent at the time, but forwarded the draft to 
 its collecting agent at Boston, and the amount was paid to such agent by the 
 drawee on the seventh day of May, after the bank had failed and closed its 
 doors. On several occasions during the time the plaintiff kept an account 
 with the bank the plaintiff deposited similar paper at the same time with money, 
 and the bank credited the plaintiff upon its books, and also upon the pass- 
 book of the plaintiff, with the amount of such paper as a cash item. The 
 plaintiff also entered the amount of such drafts in a memorandum of deposits 
 kept in its check-book among cash items. The plaintiff has never drawn 
 against the credits given for sight drafts, but never had occasion to do so. 
 There was no express arrangement or understanding between the plaintiff 
 and the bank that such deposits should be treated as cash. When the draft 
 in suit was deposited, it was sent to the bank by a messenger boy, but the 
 plaintiff's pass-book was not sent, having previously been left with the bank 
 for the purpose of being written up. The amount of the draft was credited 
 by the bank on its own books to the plaintiff as a cash item, but it was not 
 entered in the pass-book of the plaintiff until after the failure of the bank, 
 and then without the plaintiff's knowledge. The defendant, who is the 
 receiver of the bank, had notice of the plaintiff's rights before the proceeds 
 of the draft were paid over to him by the collecting agent at Boston." See 
 §§ 384, 436. 
 
 ' 142 Mass. 6. 
 
§ 20 NATURE OF ITEMS OF DEPOSITS. 86 
 
 and deposited in a bank there, where he had a general ac- 
 count. By agreement, all his checks drawn on banks in other 
 places were passed to his credit on the day of deposit, but, if 
 returned unpaid, were charged to his account. The bank was 
 not his agent by the law of ISew York to collect the cheek,' 
 but became the owner, though having the right to charge it 
 back to his account in the event of non-payment by the bank 
 on which it was drawn. It was therefore held that the re- 
 ceiver of the bank could maintain an action to recover the 
 check of the maker notwithstanding its suspension on the very 
 day the check was deposited. 
 
 (e) Sims v. United States Trust Co? Another interesting 
 case is worth describing: Dr. Sims drew a check on the 
 People's Bank directing it to " pay to the order of the United 
 States Trust Company five thousand dollars" and gave it to 
 his agent Crowell for deposit. After depositing the che.^k 
 with the trust company, Crowell received a certificate of de- 
 posit stating that it had received the money from him in trust 
 for Sims, and would repay the same to Crowell, in trust or 
 his assigns on the return of the certificate. Crowell having 
 drawn the money on presentation and surrender of the certi- 
 ficate, and kept or spent the same, Dr. Sims's executor brought 
 a suit against the trust company to recover the amount. The 
 court said that " it would seem to be beyond cavil that the 
 plaintiff should succeed for the reason that the check drawn 
 by Dr. Sims was payable to it and not to any one else, and 
 not to or for the credit of anybody else. It was a transfer in 
 effect of the sum of $5000 from the People's Bank of the city 
 of New York, upon which the check was drawn, to the United 
 States Trust Company and to the credit of the drawee. Dr. 
 Sims, and no other person." iN'evertheless the plaintiff could 
 not recover and why ? Because of " a well established com- 
 mercial usage existing for many years throughout the United 
 States, whereby banks and trust companies and other finan- 
 cial institutions, in the absence of a restrictive indorsement, 
 
 I 35 Hun, 533, Aflf. by Ct. of Appeals, 8 Eastern Rep. 333. 
 
36 BANKS AND THEIR DEPOSITORS. § 21 
 
 accept as checks drawn to their order and deposit or apply 
 the same as directed by the person presenting them. It is 
 quite apparent," continued the court, " that the application 
 of such a usage authorized the certificate in the form in which 
 it was issued ; Mr, Growell having presented the check and 
 being entitled, therefore, to the direction contained in it that 
 it should be paid to him in trust or to his assignees." 
 
 § 21. The role when the distinction between the two kinds 
 of checks has not been observed, (a) In Alabama. The dis- 
 tinction previously mentioned between deposits consisting of 
 checks drawn on the depository and checks drawn on other 
 banks has not always been judicially observed.' In the fol- 
 lowing cases the distinction was not mentioned ; the checks, 
 however, which formed the subject of controversy were not 
 drawn on the depository. In the first of these the court de- 
 clared that " 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 is passed, to the credit of the depositor and mingled 
 with the general funds of the bank it is, prima facie, a pay- 
 ment on deposit ; but the bank may permit, as a matter of 
 favor and convenience, checks to be drawn against it before 
 payment, the depositor in the event of non-payment being re- 
 sponsible for the sums drawn — not by reason of his indorse- 
 ment, the check not having ceased to be his property, but for 
 money paid."* 
 
 (b) In Pennsylvania. In Pennsylvania notes, checks, and 
 <lrafts received by one bank from another for collection are 
 not considered as cash within the meaning of the banking 
 law of 1850, whereby depositors become preferred creditors 
 
 ' "A deposit being made by a depositor in a bank in the ordinary course of 
 business, of money, or drafts or checks received and credited as money, the 
 title to the money or drafts or checks is immediately vested in and becomes 
 the property of the bank," Ingraham,.!., National Citizens' Bank v. Howard, 
 3 How. Pr. N. S. p. 512. 
 
 2 National Com. Bank i-. Miller, 77 Ala. p. 173. 
 
§ 21 NATURE OF ITEMS OF DEPOSITS. 37 
 
 whenever sueh institations pass into insolvency.' But when 
 they are credited to a depositor as cash, and interest is paid 
 on his balances, of which these form a part, they are regarded 
 as deposits and the depositor is within the meaning of the 
 law.* Moreover, they are prestimed to be a cash deposit, and 
 if received for the benefit of another this must be affirmatively 
 proved.^ 
 
 (e) In Louisiana. In Louisiana the Court of Appeals, 
 whose decisions, however, are not final, declare that " checks, 
 like drafts, bills, or notes, so deposited with a bank are placed 
 for collection, and not sold, exchanged, or otherwise made 
 the subject of a contract 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 sueh 
 paper has to run these institutions usually permit their cus- 
 tomers to draw against the amount of cheeks deposited, does 
 not of itself alter the relations between the parties. The credit 
 is only conditional and may be cancelled and the check returned 
 should the latter be dishonored. The depositor remains owner 
 of the paper and the bank merely the agent."* 
 
 ' Parkesburg Bank's Appeal, Sup. Ct., 35 Leg. Int. 203 ; S. C, 6 Week. 
 No. Cas. 394. 
 
 2 Foulker v. Union Banking Co., Phil. Com. Pleas, 6 Week. No. Cas. 1C9. 
 
 ' Gettysburg Bank v. Kuhns, 62 Pa. 88. Notes were left with a banker for 
 collection ; the guarantor paid them, and as a voucher for the transaction 
 delivered to H. a certificate of deposit for the amount thus paid. In an ac- 
 tion against the banker for taking the notes, the referee in the case was jus- 
 tified in finding that the certificate was a voucher ; that H. had paid the 
 money for the notes, and that the^ money paid was not a deposit, Hotchkiss 
 ... Mosher, 48N. y. 478. See § 247, d. 
 
 * McGloin, J., Louisiana Ice Co. v. State Nat. Bank, 1 McGloin, p. 185. 
 " It would seem that in London it was a custom (Giles et al v. Perkins et 
 al., 9 East. 12, and counsel arguendo in Ex parte Thompson, 1 Mont. & MacA. 
 102, 110) for bankers to receive bills for collection and to enter them immedi- 
 ately in their customers' accounts, but never to carry out the proceeds in the 
 column to their credit until actually collected ; and this was called a ' short 
 entry,' or 'entering short.' And such bills always continued the property of 
 the customer, unless the contrary was to be inferred from some course of deal- 
 ing. Whereas country bankers in England generally credited to their cub- 
 
38 BANKS AND THEIK DEPOSITORS. § 23 
 
 § 22. Ownership retained by a restrictive indorsement. K 
 
 a depositor desire to retain the ownerehip and control of liis 
 check until payment, he can do so by indorsing thereon " for 
 collection" or words of similar purport.* 
 
 § 23. Depositor is the owner unless credited for the amount. 
 On the other hand the depository cannot be required to as- 
 sert ownership of the check or other instrument deposited in 
 any case. The election to treat such a deposit as cash or for 
 collection when received without instructions from the depos- 
 itor, is purely voluntary. The bank, therefore, is not the, 
 owner before making the election. This may be done by ex- 
 press agreement, or by a course of dealing constituting a 
 usage. Such a usage cannot be established by showing that 
 the depositor constantly drew drafts against his remittances 
 under an agreement by which he was allowed interest on his 
 average balances.* 
 
 tomers at once all bills considered good, and generally allowed drafts upon 
 the proceeds. And even in tlie latter cases Lord Ellenborough held such 
 bills did not pass to the assignees in bankruptcy, if there was a balance in 
 favor of the customer over and above the bills, Giles et al. u, Perkins el al., 
 9 East. 12 ; Ex parte Harford, 2 Rose, 163. But Lord Eldon held that where 
 they were with the knowledge of the customer entered as cash, and the cus- 
 tomer was entitled to draw against them, he could not claim the specific bills, 
 Ex parte Sargeant, 1 Rose, 153 ; Ex parte Thompson, 1 Mont. & MacA. 102. 
 But even where the custom was to enter short and it was not done, this would 
 not change the property, unless some act of the customer concurred, .&; 
 parte Sargeant, 1 Rose, 153 ; Ex parte Pease, Id. 232 ; and the Vice-Chancel- 
 lor's opinion in Ex parte Thompson, 1 Mont. & MacA. 102, 112," Potter, J., 
 Blaine a. Bourne, 11 R. I. 119, p. 121. See Walker's Treatise on Banking 
 Law, p. 196, and Grant, p. 144 and §§ 384, 436. 
 
 ' Hoffmann v. First Nat. Bank, 46 N. J. Law, 604; Cecil Bank ». Farmers' 
 Bank, 22 Md. 148 ; Sweeny v. ^Easter, 1 Wall. 166, § 278. 
 
 » See § 436. In Scott v. Ocean Bank, 23 N. Y. 289, Lyell (who afterward 
 assigned to Scott) deposited a draft with the Ohio Life Ins. and Trust Com- 
 pany, which transferred the same as security for a precedent dfebt to the 
 Ocean Bank. Lyell was a large depositor with the company and the debtor 
 and creditor relation existed between them. Assuming this to be their true 
 relation the judge at the first trial dismissed Scott's complaint, which was 
 brought to recover the amount of the draft which had thus been transferred. 
 But the Court of Appeals maintained a different view. It was not shown, so 
 held the court, that the bill had been treated as cash by the company. " It 
 
§ 25 ' NATURE OF ITEMS OF DEPOSITS. 39 
 
 § 24. Deposit of an invalid check. If the teller receive as 
 cash an invalid check on another bank, an4 consent to take 
 it as his own and look to the drawer for payment, he cannot 
 return the check to the bank and make it responsible without 
 its consent.' 
 
 § 25. Deposit of insolvent bank notes. If at the time of 
 receiving a deposit of bank notes the issuer of them is insol- 
 vent, or becomes so, and a loss is sustained, shall it be borne 
 by the depositor or by the depository. A deposit of bank 
 notes was made in a Delaware bank, and the next day it 
 received notice of the failure of the issuer. In obedience to 
 the action of the directors, the depositor was notified that the 
 notes deposited by him would remain subject to his order, 
 thus seeking to change the deposit from a general into a 
 special one. The court, in a very elaborate opinion, declared 
 that the risk of solvency was on the bank, and, consequently, 
 that it must bear the loss if any were sustained. More form- 
 ally expressed, the court declared that "when a bank note is 
 given bona fide and received without objection, in exchange 
 for goods, money, notes, or bills ; or on general deposit by a 
 
 is more reasonable to assume that it would at least reserve the right to elect 
 whether to give credit absolutely or not before the proceeds were realized ; 
 and until such election was made and credit was in fact given therefor, the 
 bill would be held by it as the property of Lyell, and not its own. When, 
 therefore, it appears that the bill in question was retained in the possession 
 of the company after its acceptance, and that no credit had been given for it 
 at the time it was passed to the defendants, and when nothing is declared in 
 the whole course of dealings between the parties to show that any bill was 
 ever credited or agreed to bo credited in account before its collection or that 
 Lyell ever drew or was entitled to draw upon the company or that it was 
 bound to accept drafts otherwise than upon and for funds actually received 
 in cash, it must be considered that the company at the time of the transfer 
 stood in the relation of agents for its collection merely. There is no ground 
 based on' those dealings (and no other is claimed) for the conclusion that the 
 ordinary relation of debtor and creditor between the company and Lyell in 
 relation to the bill in question existed or that it had become as between them 
 the property of the company. Lyell consequently continued to be the owner 
 of it at the time of its transfer, and the defendants never acquired any right 
 to it as against him or the plaintiff who had succeeded in his title." 
 1 Union Bank v. Mackall, 2 Cr. C. C. 695. 
 
40 BANKS AND THEIR DEPOSITORS. § 25 
 
 bank, and there is no agreement or understanding, express 
 or implied, between the parties as to which of them shall 
 stand the risk of the then or future solvency of the bank 
 issuing such note; the party thus receiving such note assumes 
 all the risk of its solvency, and is without remedy against the 
 person from whom he thus received it, although it may after- 
 wards appear that the bank issuing such note had at the time 
 of the transaction failed."' In Ifew York a different rule had 
 been previously established concerning the effect of paying 
 the notes of an insolvent bank. Even if the parties were 
 ignorant of the insolvency the payment would not be valid. 
 Accordingly, a bank which had paid one-fourth of a two 
 thousand dollar check in the notes of such a bank was required 
 to repay that amount.* Both courts maintained the same 
 rule on one point, and were opposed on another. When banks 
 are solvent at the time of making use of their notes in pay- 
 ment, a loss from their subsequent insolvency must be borne 
 by the payee ; if insolvent at the time of making payment the 
 courts disagreed. 
 
 1 Corbit V. Bank of Smyrna, 2 Hairing. 235. 
 
 2 " The law is well settled, that where the note 6f a third person is received 
 in payment of an antecedent debt, the risk of his insolvency is upon the party 
 from whom the note is received, unless there is an agreement or understand- 
 ing between the parties, either express or implied, that the party who 
 receives the note is to take it at his own risk. The same principle is appli- 
 cable to the notes of an incorporated bank, except that as to the latter there 
 is always an implied understanding between the parties that if the bill at the 
 time it is received, is in fact what the party receiving it supposes it to be, 
 he is to tnn the risk of any future failure of the bank," Chancellor Wal- 
 worth, Ontario Bank v. Lightbody, 13 Wend. 101, p. 104. 
 
§ 27 AUTHORITY OF BANKS TO RECEIVE DEPOSITS. 41 
 
 CHAPTER ni. 
 
 AUTHORITY OF BANKS TO RECEIVE DEPOSITS. 
 
 § 26. Authority to receive special deposits. As the receiv- 
 ing of general deposits is an essential feature of the banking 
 business, no one has ever questioned the authority of these 
 institutions to receive them.' But their authority to receive 
 special deposits has been questioned on many occasions. It 
 was in the well-known Essex Bank case.* Although its 
 charter did not confer this power, and no regulation or by- 
 law existed, the bank had a right to receive them. And " it 
 is now well settled," says the Supreme Court of the United 
 States " that if a bank be accustomed to take such deposits, 
 and this is known and acquiesced in by the directors, and the 
 property is lost by the gross carelessness of the bailee a 
 liability ensues in like manner as if the deposit had been 
 authorized by the terms of the charter."* 
 
 § 27. National banks can receive special deposits. At one 
 time, however, the Court of Appeals of New York* questioned 
 the authority of the national banks to receive such deposits, 
 and so did the Supreme Courts of Vermont" and Maryland.* 
 These decisions, said Judge Upson, of the Supreme Court of 
 Ohio' rested on the assumption that the Act under which 
 
 1 The receipt of the cashier of the State Bank of Illinois for money re- 
 ceived of an individual was held to be evidence of a deposit, and also that he 
 had a right to receive it, Bank v. Kain, 1 Breese, 111., 45. 
 
 s 17 Mass. 479. 
 
 " First ■ Nat. Bank v. Graham, 100 U. S. p. 702, referring to many authori- 
 ties ; Bank of Kentucky ». Schuylkill Bank, 1 Pars. Eq. p. 235. 
 
 * First Nat. Bank v. Ocean Nat. Bank, 60 N. Y. 278. 
 
 ' Wiley V. First Nat. Bank, 47 Vt. 546 ; Whitney v. First Nat. Bank, 60 
 Vt. 388. 
 
 6 Weckler v. First Nat. Bank, 42 Md. 581. 
 
 ' First Nat. Bank v. Zent, 39 Ohio St. 105. 
 
42 BANKS AND THEIR DEPOSITORS. § 28 
 
 national banks are organized expressly set forth their powers 
 and did not include among them power to receive special 
 deposits, and that this was not given by the grant of all such 
 incidental powers as should be necessary to carry on the 
 business of banking. The proper construction of the Bank- 
 ing Act has been conclusively determined by the Supreme 
 Court of the United States," which has decided that the au- 
 thority of a bank after its failure " to deliver special deposits," 
 clearly implies that it may as a part of its legitimate business 
 receive special deposits. The same view was expressed by 
 the New York Court of Appeals in Patterson v. Syracuse Nsd,. 
 Bank,'' in which case Judge Rapallo reviewed all the decisions 
 bearing on the subject.* 
 
 § 28. Receipt of deposits by an insolvent bank, (a) Can be 
 recovered if made through fraud. A bank ought not to re- 
 ceive deposits when in an insolvent condition. And when a 
 deposit is taken under circumstances constituting a fraud on 
 the depositor, he can recover the check or other instrument 
 deposited, or the proceeds.* For the rule is, that one who 
 has been induced to part with his property by the fraud of 
 another under guise of a contract, on discovering the fraud 
 may rescind the contract and reclaim the property, unless it 
 has come to the possession of a bona fide holder. And this 
 rule applies to all wrongdoers, whether corporations or natural 
 persons." 
 
 (6) Or on a condition not fulfilled. When money is received 
 by an insolvent banker with the intention of returning it, if 
 not succeeding in restoring himself to solvency, the depositor 
 can recover it from the banker's assignee. On one occasion 
 
 J First Nat. Bank v. Graham, 100 U. S. 699. ' « 80 N. Y. 82. 
 
 ' See note in Abbott's National Digest, vol. 1, p. 330, for the names of all 
 the oases. 
 
 * Cragie ». Hadley, 99 N. Y. 131. " A bank which is insolvent and con- 
 templating suspension, and whose assets are far less than its liabilities ac- 
 q^uires no title to a check deposited by one to whom its condition is nn- 
 unkown," Fisse v. Dietrich, Appendix, 3 Mo. App. 584. 
 
 6 Cragie v. Hadley, 99 N. Y. 131 ; Cragie «. Smith, 14 Abb. N. Cas. 409 ; 
 National Citizens' Bank v. Howard, 3 How. Fr. N. S. 511. 
 
§ 28 AUTHORITY OF BANKS TO RECEIVE DEPOSITS. 43 
 
 an insolvent banker who intended to make an assignment on 
 a particular day unless assisted before its close did receive 
 money from a depositor who was ignorant of his condition, 
 which was entered in his book, and labelled with . the deposi- 
 tor's name, and kept separately with the view of returning it 
 in the event of assigning, and not entered in any other except 
 a memorandum cash-book beneath which was written the 
 depositor's name. Before the day closed, he did make an 
 assignment for the benefit of his creditors, and delivered the 
 deposit in question to the assignee with the request that he 
 would, if he legally could, return it to the depositor. The 
 request, with the sanction of the court, was executed.* 
 
 (c) Or, perhaps, if the bank is ignorant of its insolvency. 
 Whether if a bank be insolvent, though ignorant of the fact 
 at the time of receiving a check for deposit, the depositor can 
 recover it, is an unsettled question. In New York he cannot.^ 
 In a recent case in a federal court, in which a depositor's 
 check that had been credited to him was in possession of the 
 depository at the time of its failure, the depositor was de- 
 clared to be the owner instead of the receiver.* And the 
 Supreme Court of New Jersey has favorably regarded this 
 decision.* When, however, the check of a depositor has been 
 credited to him, forwarded for collection, and also credited 
 by the collecting bank, the depositor in the event of the fail- 
 ure of his depository, is not entitled to a preference over 
 other creditors.* 
 
 {d) Marine National Bank case. This question was raised 
 in the case against the receiver of the Marine National Bank, 
 of New York, which has been previously reviewed. In reply 
 to the question, Judge Wallace said that the case could not 
 
 ' Chaffee ». Fort, 2 Lans. 81, the conrt citing Ash v. Putnam, 1 Hill, 302 ; 
 Atkin V. Barswick, 1 Strange, 165. 
 
 2 Metropolitan Nat. Bank v. Loyd, 25 Hun, 101 ; In re Bank of Madison, 5 
 Biss. 515. 
 
 3 Balbach v. Frelinghnysen, 15 Fed. Rep. 675. 
 
 •■ Hoffman v. First Nat. Bank, 46 N. J. Law, p. 607. 
 6 Terhune i>. Bank, 34 N. J. Eq. 367. 
 
M BANKS AND THEIR DEPOSITORS. § 29 
 
 be considered on that theory because the bill contained no 
 allegation " that the officers of the bank entertained any- 
 fraudulent intention towards the pla,intiff in receiving the 
 paper, and the bill does not proceed upon such a theory. If 
 the officers of the bank supposed the institution would be 
 able to maintain its credit and thus surmount its difficulties, 
 they were under no legal duty to the plaintiff to disclose the 
 state of its affairs."' 
 
 § 29. Autbority to receive contingent deposits. Concerning, 
 these, if a deposit be made not for the sole benefit of the 
 depositor, but also in a certain contingency for the benefit of 
 a third person, it can be received. Moreover, a bank which is 
 authorized to receive deposits has a right to receive the 
 deposit of a fund in controversy to abide the event of a liti- 
 gation or award, or to become payable on a contingency to 
 some other person than the depositor. So long as a bank 
 undertakes nothing more than to pay over mon^ deposited 
 with it to the person who may by the conditioofron which 
 the deposit is made become the owner, it does not transcend 
 its powers. Nor can it make any difference that the portion 
 of the sum deposited which may become payable to a third 
 person is at the time of the deposit uncertain and subject to 
 liquidation. Until ascertained, the bank can hold the fund, 
 and can also require before payment to have the amount 
 liquidated in such a manner as to bind all parties.* 
 
 » 27 Fed. Rep. p. 246. 
 
 « Bushnell v. Chatauqaa Co. Mat. Bank, 74 N. Y. 290. 
 
30 DEPOSITS AFTER BANKING HOURS. 45 
 
 CHAPTER IV. 
 
 DEPOSITS AFTER BANKING HOURS. 
 
 § 30. The rale must be reasonable about receiving them. 
 
 "When a deposit is made after banking hours, and it is 
 entered like other deposits, the relations between bank and 
 depositor are not changed. But these relations may be 
 changed by treating the deposit in a different manner. Thus 
 in Sadler v. Belcher' it was shown that the custom of the 
 London banks was to put the money paid after banking hours 
 into a separate place of deposit, and enter it in a different 
 book called a counter-book, and to carry it to the customer's 
 account the next day. Accordingly, the depositor in this 
 case having paid in a bank of England note after banking 
 hours, which was put in a separate place of deposit and was 
 not carried to the account of the depositor, he was declared 
 to be the rightful owner of the same in a suit against the 
 assignee of the banker. But in another case of a deposit 
 after banking hours in which the bankruptcy did not occur 
 till the next day, the court, assuming that the deposit was cash 
 and payable on demand, declared that it would pass to the 
 assignees.' It may be added that while a bank may fix hours 
 for receiving deposits " this power," said the court in Wis- 
 consin, " is not an absolute or arbitrary one. The rules pre- 
 scribed and the hours of business designated must be 
 reasonable, and adapted to the exigencies of the particular 
 kind of business, in reference to which they are established, 
 as well for the safety and convenience of the public as for that 
 of the bank. While it is proper and necessary for the general 
 convenience of all parties that certain hours shall be named 
 
 « 2 Moo. & Rob. 489. ' Ex parte Glutton, 1 Fonbl. 167. 
 
46 BANKS AND THEIR DEPOSITORS. § 30 
 
 within which the bank will receive deposits, pay bills and 
 drafts, discount notes, etc., it is neither reasonable nor proper 
 that the same hours shall be designated for the transaction of 
 its other business." Hence, as the receiving or delivery of 
 packages is not a matter peculiar to the banking business, a 
 bank has no more right to declare or insist that it will receive 
 no packages from an express company " after what it pleases 
 to call ' banking hours,' than has any merchant, warehouse- 
 man, or wharfinger a right to decline the reception of a 
 valuable package of goods after a certain hour, and in that 
 manner thrust upon the carrier a further continuance of his 
 extraordinary responsibility. "' 
 
 • Marshall v. American Express Co., 7 Wis. 1, p. 24. 
 
§ 31 TO WHAT OFFICER DEPOSITS SHOULD BE MADE. 47 
 
 CHAPTER V. 
 
 TO WHAT OFFICER DEPOSITS SHOULD BE MADE. 
 
 § 31. Delivery of money, (a) Delivery to cashier, teller, or 
 ■porter is delivery to bank. A package of money directed to 
 the cashier of a bank is in law directed to the bank itself, and 
 a delivery of the same to the assistant teller during banking 
 hours, at his place behind the counter of a bank is a legal 
 delivery.* So the delivery of a package of money to the 
 porter of a bank either there or at the express office, or clears 
 ing-house — places where he is accustomed to receive it — is a 
 good delivery.^ 
 
 (6) In Sweet v. Barney,^ the money package was delivered to 
 the porter of the People's Bank at the express office. It was 
 addressed, "People's Bank, 173 Canal Street, ISTew York." 
 It was proved that for many years the porter had been in the 
 service of the bank, that he was accustomed to receive money 
 brought by the express company at the bank, at the clearing- 
 house, and at the express office. He was also accustomed to 
 act for the bank in making exchanges and collections, and as 
 its representative in the clearing house, at a desk labelled 
 " People's Bank," and had often received packages of money 
 from the defendants addressed to the People's Bank. Other 
 packages for the bank had been delivered to the porter within 
 a few days previously without objection from any official. 
 The package was stolen from the porter after its delivery 
 to him. This was a complete delivery to the bank. 
 
 (e) To what officer a note can be paid. Though going be- 
 yond the province of our work, it may be added that if one 
 
 1 Hotohkiss V. Artisans' Bank, 2 Keyes, 564 ; S. C, 2 Abb. App. Deo. 403. 
 s Sweet V. Barney, 23 N. Y. 335. ' Id. 
 
48 BANKS AND THEIK DEPOSITOES. § 31 
 
 were indebted to a bank and should pay the debt to an officer 
 over its counter without knowing he was not authorized to 
 receive the money, the payment would bind the institution. 
 " It would be a very inconvenient and unreasonable rule to 
 hold that a bank was not bound by such a payment. . , Banks 
 must be held responsible for the conduct of their officers 
 within the scope of their apparent authority. When one 
 goes into a bank and finds behind the counter one of its 
 officers employed in its business, and upon his demand pays 
 a debt due the bank in good faith, without any knowledge 
 that the officer's authority is so limited that he has no right 
 to receive it, he must be protected, and the bank must be 
 bound by the payment."* In Gove's case the controversy 
 related to an alleged payment by him to the bank in discharge 
 of an over-payment. Beside other officials, the bank had a 
 paying teller and a receiving teller, and Gove paid his money 
 to the former. There was no proof that the receiving 
 teller was in the bank at the time he made payment, 
 " There was no proof that the paying teller was not, in fact, 
 authorized to receive this money." He was, indeed, not 
 accustomed to receive money from depositors. But this 
 payment was not a deposit ; it was a debt due to the bank. 
 Under these circumstances the court held that the payment 
 to the paying teller was a good payment to the bank. 
 
 • Earl, C, East River Nat. Bank v. Gove, 57 N. Y. 597, p. 601. See Mo- 
 Cann v. State, 4 Neb. 324, p. 335. 
 
33 NATURE OF A DEPOSITOR'S CONTRACT. 49 
 
 CHAPTER VI. 
 
 NATURE OF A DEPOSITOR'S CONTRACT — WHEN IS A BANK DEBTOR 
 AND WHEN AGENT OF A DEPOSITOR. 
 
 § 82. Weed not be received. A bank is not required, like 
 a common carrier, to receive deposits regardless of its wish. 
 Said Judge Sanford: "A bank is not bound to receive on 
 deposit, or to keep, the funds of every man who offers money 
 for that purpose. It may select its dealers and refuse such 
 as it pleases. For the purposes of this selection the cashier 
 appears to be the proper officer."' 
 
 § 83. A deposit is generally regarded as money. Although 
 the money deposited with a bank ceases to belong to the 
 depositor and the obligation is, not to return the identical 
 money, but the equivalent, in popular phrase persons speak 
 of their money at the bank, and this is sufficient to transfer 
 it by will to another. Thus the phrases, " all my ready 
 money;"* and in another will, "ready money;"' and in 
 another " to my wife all my ready money at my banker's, in 
 my dwelling house or elsewhere;"* transferred the cash 
 balances in the possession of the bankers of the different 
 testators to the legatees mentioned in their wills. So, too, 
 money at a bank belonging to the trade account of a trader 
 passed under a will by the words, " all my stock in trade ;"^ 
 also the balance in favor of a testator from a banker by the 
 words " all the debts due to me ;"* and in another case by the 
 words "moneys in hand;"^ and in another "all my moneys."* 
 
 But money in the possession of a testator's salesmaster did 
 
 • Thatcher v. Bank, 5 Sand. p. 130. 
 
 2 Parker v. Marohant, 1 Phil. (N. C.) 356. 
 
 3 In re Powell, Johns. 49 ; S. C, 5 Jur. N. S. 331. 
 
 * Fryer v. Ranken, 11 Sim. 55. 
 
 ' Stuart V. Earl of Bute, 3 Ves. Jr. 212. e Carr v. Carr, 1 Mer. 541. 
 ' Vaisey v. Reynolds, 5 Russ. 12. s Jenkins v. Fowler, BS N. H. 244. 
 
 4 
 
50 BANKS AND THEIR DEPOSITORS. § 34 
 
 not pass by will by' the phrase "all his ready money and 
 securities for money," because there was no evidence that the 
 salesmaster acted as the testator's banker.' But in a con- 
 tract dissolving a partnership, the phrase " accounts due" the 
 firm, included a balance due from a bank.* 
 
 § 34. Debtor and creditor relation exists between bank and 
 depositor. Having received a deposit the relation of debtor 
 and creditor is created. Perhaps no one has better stated the 
 law than Mr. Justice Davis, in the case of the Bank of the 
 Republic v. Millard.' "The relation of banker and customer, 
 in their pecuniary dealings, is that of debtor and creditor. 
 It is an important part of the business of banking to receive 
 deposits, but when they are received, unless there are stipula- 
 tions to the contrary, they belong to the bank, become part 
 of its general funds, and can be loaned by it as other moneys. 
 The banker is accountable for the deposits which he receives 
 as a debtor, and he agrees to discharge these debts by honoring 
 the checks which the depositors shall from time to time draw 
 on him. The contract between the parties is purely a legal 
 one, and has nothing of the nature of a trust in it. This 
 subject was fully discussed by Lords Cottenham, Brougham, 
 Lyndhurst, and Campbell in the House of Lords, in the case 
 of Foley v. Hill,* and they all concurred in the opinion that 
 the relation between a banker and customer, who pays money 
 into the bank, or to whose credit money is placed there, is 
 the ordinary relation of debtor and creditor, and does not 
 partake of a fiduciary character, and the great weight of 
 American authority is to the same eficct." More than thirty 
 years before Judge Cowen had said that "the bank takes 
 money in the nature of a gratuitous loan, and charges itself 
 with a debt absolutely due to the depositor."' 
 
 1 Smith V. Butler, 3 J. & L. 565 ; De Roebeok v. Lord Clonourry, 5 Ir. Eq. 
 588. 
 
 2 Burress i'. Blair, 61 Mo. 133. 3 10 Wall. 152. 
 * 2 H. L. Cas. 28. 
 
 6 Commercial Bank v, Hughes, 17 Wend. p. 100. " Whenever a deposit 
 is made in bank the relation of debtor and creditor is established between the 
 
§ 35 NATURE OF A DEPOSITOR'S CONTRACT. 51 
 
 (a) Deposit payable to non-depositor. If money is deposited 
 with the uridei-standirlg that all checks shall be drawn to the 
 order of a non-depositor, does the debtor relation between 
 bank and depositor exist ? Thus the action of both husband 
 and wife was requisite to draw a deposit under the directions 
 given to the bank when the deposit was made, and the court 
 said " it was a question of fact under all the circumstances 
 whether the money was understood to be deposited for [the 
 use of the wife of the depositor or for his use, or for] the 
 joint use of the two who were to act in drawing it out."' 
 
 § 35. Sometimes the relation is fiduciary, (a) When is a 
 bank debtor and when agent. Whether the relation between 
 bank and depositor be that of debtor and creditor, or a fidu- 
 ciary one, is sometimes diflicult to determine, and very im- 
 portant to the parties to the controversy. This was the 
 principal question in the litigation between the Marine Bank 
 of Chicago and the Fulton Bank of ISe.^ York.^ The Marine 
 Bank addressed a circular to its correspondents, informing 
 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 similar 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 
 
 Tjank and the depositor. The identity of the particular money deposited is 
 lost and the relation between the parties continues the same, whether it is an 
 ordinary or time deposit," Williams v. Rogers, 14 Bush, p. 788. A deposit is 
 a loan and not a bailment, Robinson v. Gardiner, 18 Gratt. 509. A deposit 
 with a bank of bank bills by a person constitutes "the former the debtor 
 of the latter to the amount of the deposit, creating an obligation to pay upon 
 the demand, or upon the check of the latter without interest. Such a deposit 
 is a gratuitous loan, and it makes the depositor a creditor and the depository 
 a debtor," Wray v. Tuskegee Ins. Co., 34 Ala. p. 63. 
 
 ' Detroit Sav. Bank o. Burrows, 34 Mich. 153; the court citing Lilly v. 
 Hays, 5 Ad. & E. 548 ; Malcolm v. Scott, 6 Hare, 570 ; Gibson v. Minet, Ry. 
 & M. 68 ; S. C, 1 Car. & P. 247, § 146. 
 
 8 2 Wall. 252. 
 
52 BANKS AND THEIR DEPOSITORS. § 35 
 
 cent, below par, but when the Fulton Bank demanded pay- 
 ment of the collection, a 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 de- 
 manded, with interest. Judge Miller, who delivered the 
 opinion of the court, said that, " if the Marine Bank had re- 
 ceived the depreciated money, and kept it without using it 
 until called for, or had sent it by express to the plaintift" 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 declared liable for 
 the depreciation in the bank bills received during the period 
 it kept the deposit. 
 
 (6) Change of relation in the same transaction. As the Marine 
 Bank was the agent of the other in collecting the note, the 
 question was raised, could it act in any other way than as 
 agent in keeping, using, and delivering the money ? Could 
 it, without the consent of the Fulton Bank, change its relation 
 of agent after making the collection to that of debtor, thus 
 treating the Falton Bank like a genei'al depositor? In reply 
 to this question, the court said that both parties understood 
 that when the money was collected the Fulton Bank was to 
 have credit with the Marine Bank for the amount of the 
 collection, and that the latter would use the money in its 
 business. Consequently, the Marine Bank was guilty of no 
 wrong in using the money, because it had become its own. 
 It was used by the bank in the sanie manner that it used the 
 money deposited with it that day by city customers ; and the 
 relation between the two banks was the same as that between 
 the Chicago bank and its city depositors. As a bank, there- 
 fore, in some cases can change its agency-relation to that of a 
 
§ 35 NATURE OF A DEPOSITOR'S CONTRACT. 53 
 
 debtor, it may be an important question sometimes which 
 relation shall be assumed. In the foregoing case, as we have 
 seen, had the Chicago bank continued its agency-relation 
 after making the collection, its liability would have been 
 greatly lessened. Had it kept the money received, its liability 
 would have been discharged whenever it delivered the same 
 to the New York bank.' 
 
 (c) St. Louis V. Johnson? Another case is worth describ- 
 ing. The city of St. Louis and the receiver of the ITational 
 Bank of the State of Missouri respectively claimed a balance 
 in the possession of the Bank of the Republic of New York, 
 which had been deposited there by the Missouri bank, at the 
 request of the city of St. Louis, a depositor, to pay coupons 
 and bonds owing by the city. More fully stated, the practice 
 was for the city treasurer to draw a check on the Missouri 
 bank for the amount necessary to be placed in New York to 
 meet the indebtedness of the city there, and indorse the check 
 and deliver it to the bank with written instructions to remit 
 the amount to the New York bank for the purpose men- 
 tioned. The Missouri bank would then remit the amount 
 specified to the New York bank with written instructions to 
 pay such indebtedness, and to charge the same to the general 
 account of the Missouri bank, and to cancel and forward the 
 coupons and bonds paid. It should also be added that the 
 Missouri bank was the depository of the city, and no ques- 
 tion was raised concerning the general relation of the bank 
 to the city, which was that of debtor and creditor. But in 
 remitting to New York for the purpose explained. Judge 
 Dillon said, that " the bank charged the city with exchange 
 on the amount it thus received, the same as it would have 
 charged if the draft had been for any other customer. It be- 
 came the agent of the city to transmit the money. The 
 money, when placed in the Bank of the Republic, was, as be- 
 tween the Missouri bank and the city, the money of the 
 latter. When the agent presented coupons cancelled, this 
 
 1 Phoenix Bank v. Risley, 111 U. S. 125. « 5 Dill. 241. 
 
54 BANKS AND THEIR DEPOSITORS. § 36 
 
 showed that the agent had discharged the duty it had under- 
 taken. It is my judgment that the relation between the 
 Missouri bank and the city, as respects the money deposited 
 with the Bank of the Republic, was not that of debtor and 
 creditor strictly, but that of principal and agent, with the 
 duties and liabilities of the latter, and not those of the former 
 relation. The moneys deposited by the Missouri bank in its 
 name with the Bank of the Republic, were, as between the 
 former bank and the city, trust-moneys, and in equity they 
 belong to the city." 
 
 § 36. Must the order to pay be in writing. The depositor 
 may order his money " to be paid to himself or anybody else, 
 or he may order it to be carried over or transferred from his 
 own account to the account of another person as he pleases." 
 " He may do so by a written instrument, and I know nothing," 
 said the Master of the Rolls, in "Watts v. Christie,' " to pre- 
 vent his doing so by a verbal direction, except this, that the 
 bank may require some written evidence ot this order to 
 transfer ; and I believe there is no necessity for giving a writ- 
 ten instrument, except for the purpose of evidence." In 
 McEwen v. Davis,^ Judge Downey said that " when money is 
 deposited with a banker it is payable on demand, at the bank, 
 unless some other agreement has been made with reference to 
 its payment. The banker is not required to hunt up the 
 depositor and pay him the money as an ordinary debtor is 
 bound to do with his creditor. The banker may pay the 
 money upon an oral order, or transfer it from one account to 
 another, and such oral order will he a sufficient authoritj' and 
 justification for so doing. But though the banker may, if he 
 choose, act upon such oral direction, he is under no obligation 
 to do so. By the usages of the banking business he is 
 entitled to demand some written evidence of the order and 
 the payment. A receipt would, of course, be evidence of 
 such payment, and so the check of the depositor will, when 
 
 1 11 Beav. p. 551. a 39 jnd. p. 111. 
 
§ 39 KATURE OF A DEPOSITOR'S CONTRACT. 55 
 
 paid and in the hands of the banker, be evidence of the 
 order to pay and also of the fact of payment." 
 
 § 37. How depositor's account is kept. "Every regular 
 dealer with a bank," says Chancellor Walworth, "has an 
 open running account upon the books of the institution. In 
 this account he is credited with all sums paid by him into 
 the bank, whether the same are in specie, in checks, or in 
 bills, on the same or other banks. In that account he is also 
 credited with the proceeds of bills or notes discounted or 
 collected for him ; and in the same account he is charged with 
 all checks drawn by him on the institution, in favor of him- 
 self or others, and with all other claims which are properly 
 chargeable against him by the bank. If there is a balance 
 due to the bank on this account, it is called an overdrawing, 
 and the aggregate of balances due from the bank on these 
 several accounts is entered in the statement-book as the 
 amount of deposits."* 
 
 § 38. Closing bank account. " If the banker finds the de- 
 positor a troublesome customer, so that the account is not 
 a desirable one, he may tender the full amount of the deposit 
 and refuse to receive more and thus close the account; and 
 after that, if the depositor should receive the money, his 
 right to draw out the deposit in parcels would be terminated, 
 unless, perhaps, there might be an exception in favor of a 
 bona fide holder of his check."* 
 
 § 39. Bank should credit the right person. The deposit 
 should not be credited to the wrong person. This is some- 
 times done. Thus two persons entered a bank at the same 
 time, the one with and the other without money. The 
 latter informed the cashier that the deposit was to be made 
 on his account. The other said nothing for he was deaf and 
 did not hear the remark. It was held that the bank ought 
 not to have credited the deposit to him without further 
 
 ' In re Franklin Bank, 1 Paige, p. 254. 
 
 * Chicago Marine and Fire Ins. Co. v. Stanford, 28 111. 168 ; Munn v. Burch, 
 25 Id. 3S. 
 
56 BANKS AND THEIR DEPOSITOES. | 40 
 
 inquiry, and though innocent in intention must suffer for the 
 loss to the deaf depositor, through the application of the 
 familiar and just principle that "where one of two innocent 
 persons must suffer by the act of a third, he who has enabled 
 such third person to occasion the loss must sustain it,"* 
 
 § 40. Deposit is presumed to belong to depositor, (a) Ac- 
 count in name of husband and wife. The law presumes 
 that a deposit belongs to the person in whose name it 
 is entered ; and if a deposit be claimed by another, the burden 
 of proof is on him to establish his ownership.^ And if a 
 bank account be in the names of husband and wife, each 
 drawing and depositing money in the absence of the other, 
 the law presumes that each is the owner of one-half of the 
 deposit.' 
 
 (6) Bank cannot question its ownership. A bank cannot 
 question the ownerahip of deposit.^ An attaching creditor 
 or the true owner can, but not the bank." Accordingly, in a 
 suit by a depositor against a bank for the balance to his 
 credit, it was not permitted to prove that the depositor was 
 the clerk of a firm, that the money was deposited by him and 
 in his name for its convenience, and that he declared so when 
 he made deposits. ISov could the bank prove the indebted- 
 ness of the firm to it in order to lay the foundation for a set- 
 off against the deposit." Likewise, in an action against a 
 savings bank by the assignee of a depositor to recover a de- 
 posit, it cannot defend on the ground that the deposit is 
 derived from the sale of securities belonging to third parties, 
 and which is claimed by them as their property. "It can 
 never be permitted," said the Court in another case, "that 
 a debtor may volunteer the protection of the claims of those 
 
 ' winter v. Bank of New York, 2 Cai. 337. See § 50. 
 2 Egbert v. Payne, 99 Pa. 289. 
 
 ' Gelster v. Syracuse Sav. Bank, 17 Week. Dig. 137. 
 
 * Tassell r. Cooper, 9 Man. Gr. & S. 510 ; Graham v. Williams, 21 La. Ann. 
 594. See § 129. 
 6 German Bank v. Himstedt, 42 Ark. 62 ; S. C, second trial, 46 Id. 537. 
 6 First Nat. Bank v. Mason, 95 Pa. 113. 
 
§ 40 NATURE OF A DEPOSITOE'S CONTRACT. 57 
 
 with whom he has had no dealings to defeat his liability for 
 the performance of his contracts."' " A banker is bound to 
 honor an order of his customer with respect to the money 
 belonging to that customer which is in the hands of the 
 banker, and it is impossible for the banker to set up a jus 
 tertii against the order of the customer, or to refuse to honor 
 his draft, on any other ground than some sufficient one result- 
 ing from an act of the customer himself. Supposing, there- 
 fore, that the hanker becomes incidentally aware that the 
 customer, being in a fiduciary or a representative capacity, 
 meditates a breach of trust, and draws a check for that pur- 
 pose, the banker, not being interested in the transaction, has 
 no right to refuse the payment of the check, for if he did so 
 he would be making himself a party to an inquiry as between 
 his customer and third pei'sons."^ 
 
 (e) Duty of a hank when a fiduciary depositor meditates a 
 breach of trust. The duty of a bank whenever a fiduciary 
 depositor meditates a breach of trust was further considered 
 by Judge Hammond in an important federal case.^ " A 
 bailee without hire, as by a special deposit, is unquestionably 
 in some degree less bound to look after the conduct of a fidu- 
 ciary bailor than a banker having a general deposit for a like 
 trustee. The circumstances under which a liability like that 
 claimed here will arise against the latter is stated in Gray v. 
 Johnston ; and attention is there called to an important ele- 
 ment in the consideration of such cases, which_ is: that a 
 banker cannot question the right of his customer by re- 
 fusing to honor his demands by check or otherwise, upon 
 any theory that it is the banker's duty to look after the appro- 
 priation of the trust funds when withdrawn from the bank, and 
 to protect the trust by setting up &jus tertii against the demand. 
 This case goes further than any I have found, in some of its 
 expressions, to justify the contention that mere knowledge of 
 
 1 Lund V. Seamen's Bank, 37 Barb. 129. 
 
 2 Lord Westbury, Gray v. Johnston, L. R., 3 H. L. Cas. p. 14. 
 
 » Walker v. Manhattan Bank, 25 Fed. Rep. 247, p. 255. See § 107. 
 
58 BANKS AND THEIR DEPOSITORS. § 42 
 
 the banker that a breach of trust is iutended, makes him 
 privy to it and liable. But, on scrutinizing the cases cited, 
 it will be found that participation in the profits of the fraud 
 is, generally speaking, an elemeut in the case ; and a ' mere 
 reason to believe that the trustees were misapplying the as- 
 sets' will not make the banker liable ; for ' this would be to 
 make every trustee accountable for his conduct in the trust 
 to every agent whom he happened to employ, and would carry 
 the principle of constructive trust to an inconvenient, and, in- 
 deed, to an impracticable length.' "' These reasons apply with 
 greater force to a mere special deposit.* 
 
 § 41. Deposit' should not be transferred without authority. 
 Money should not be transferred from one account to an- 
 other without ample authority. Nevertheless, on many occa- 
 sions has a third person attempted to subject a bank on an 
 agreement supposed to exist between it and the depositor. 
 The attempt of checkholders to sue the drawee bank is a good 
 illustration. The above proposition would seem to be too 
 plain for statement, yet the following case occurred : A. sent 
 money to a bank in the form of a draft to be placed to his 
 credit. Afterward A. agreed with B. to transfer the amount 
 to the latter's credit, but did not notify the bank of the agree- 
 ment. B., however, without authority from A., wrote to the 
 bank ordering it to make the transfer, which was done. At 
 a later date A. demanded his money, and of course the bank 
 was obliged to pay.' 
 
 (a) What is sufficient authority. Whatauthority willjustifya 
 transfer is a question of fact to be answered whenever it shall 
 arise. When a person deposited money in a bank, and soon 
 afterward, before the deposit was credited to him on its books, 
 directed the cashier to credit another person with the deposit, 
 wliieh was done, and who subsequently drew the money, the 
 authority for making the transfer was deemed ample.* 
 
 1 Keane v. Eobarts, 4 Madd. 332, 357. 
 
 2 Treffitz V. Caimelll, L. R., 4 P. C. 277 ; Giblen v. McMuUen, L. R., 2 P. 
 C. 317 ; Ex parte Davies, L. R., 19 Ch. Div. 86. 
 
 3 Coffin V. Henshaw, 10 Ind. 277. 
 
 * Neff V. GreeiiB County Nat. Bank, Mo. Sup. Ct., 6 Western Rep. 455. 
 
§ 44 NATURE OF A DEPOSITOK's CONTRACT. 59 
 
 § 42. Relation of bank to depositor is a question of fact. Al- 
 though the usual relation existing between bank and depositor 
 is that of debtor and creditor, it may become, as we have 
 seen, a trustee, factor, or other agent of the depositor. The 
 existence of this relation, instead of the ordinary one of 
 debtor and creditor, is a question of fact to be determined 
 by the conduct of the parties in each case. The question has 
 arisen most frequently in making collections, or in cases of 
 bankruptcy. The answers, therefore, may ,be more appropri- 
 ately reserved for the chapters on those subjects. 
 
 § 43. Agency relation does not affect depositor's liability to 
 others. It may be added here, though, that in using a bank 
 as an agent to pay bills, or to perform similar services, the 
 depositor does not change his liability to his debtors. Thus 
 it was a usual Hiiug for a particular bank to pay all of the 
 claims of a depositor sent for collection from his deposits, if 
 he had any, charging the payments in the account. A spe- 
 cial claim having been sent for collection, the customer de- 
 posited money for this purpose. The bank failed before thus 
 applying the money, and the customer having being sued, 
 he defended on the ground that he had already paid it. 
 But the court decided that it was the depositor's duty to. 
 make payment, and the default of his agent, the bank, was 
 no protection to himself.* 
 
 § 44. Ownership of money deposited for a special purpose. 
 "When money is deposited for a special purpose, for example, 
 the payment of a particular check, the question has arisen, 
 to whom does the deposit belong, to the depositor or to the 
 person who is to receive the money. In Mayer v. Chattar 
 hooche Nat. Bank,' the court remarked that the only ques- 
 tion there could be in that case was " whether these deposits, 
 made as each was for a special purpose, and undtr an express 
 
 ' Moore v. Meyer, 57 Ala. 20. 
 
 » 51 Ga. 325, the court citing Owen v. Bowen, 5 Car. & P. 93, 96 ; Cobb v. 
 Becke, 6 Q. B. 930 ; Surtees v. Hubbard, 4 Esp. 203 ; Wharton v. Walker, 4 
 Barn. & Cr. 163. 
 
60 BANKS AND THEIR DEPOSITORS. § 46 
 
 agreement between the debtor and the bank that they were 
 made and received to pay certain specified checks which the 
 debtor had drawn or would draw, continued the property of 
 the debtor. The case in Pace v The Trustees of Howard 
 College,' it seems to us, settles this question. It was there 
 held that the deposit continued the property of the depositor 
 until the bailee paid or promised the person for whose use it 
 was deposited to pay it. And this is undoubtedly the general 
 rule." 
 
 § 45. Interest on deposits. Save by special agreement, 
 banks do not pay interest on deposits But if a bank receive 
 money, agreeing to pay the same " forthwith" to the owner, 
 and instead of doing so mingles the money with its common 
 fund and derives a profit from its use, it must pay like trustees, 
 administrators, guardians, and other agents,' the usual rate of 
 interest accruing and received.* After a deposit has been 
 demanded interest accrues so long as it is unpaid.* 
 
 > 15 Ga. 486. 
 
 ' Parsons v. Tread well, 50 N. H. 356. the court citing Dodge v. Perkins, 9 
 Pick. 368 ; Griswold v. Chandler, 5 N. H. 497 ; Stearns v. Brown, 1 Pick. 531 ; 
 Wendell v. French, 19 N. H. 213 ; Stark o. Gamble, 43 Id. 468 ; Peiroe v. 
 ■ Rowe, 1 Id. 182 See§§ 133, 329. 
 
 > Parkersburg Nat. Bank v. Als, 5 W. Va. 50. 
 
§ 47 PASS-BOOKS. 61 
 
 CHAPTER YII. 
 
 PASS-BOOKS. 
 
 § 46. How far are pass-book entries binding. After deposit- 
 ing his money the depositor receives a book which is called 
 a pass-book, bank-book, or deposit-book. This contains a 
 record of the receipt and payment of his deposits. The legal 
 principle concerning these books converge around two points: 
 iirst, how far are the entries in them binding and conclusive 
 on both parties and when should errors be reported ; and, sec- 
 ond, how effectually does the presentation of such a book 
 by a savings bank depositor authorize the payment of deposits 
 to the presenter under the regulations established by those 
 institutions. The principles that relate to the first point will 
 be considered here, the others will be found in another 
 chapter.* 
 
 § 47. Original entry. Formerly, if a bank officer entered 
 a deposit on the pass-book at the time it was made, the entry 
 was original, and binding on the bank, but if the entry was 
 by copying from the ledger or from other bank-books it could 
 be examined.* Such an entry,however, was not binding on the 
 depositor, because the person making it was not his agent. 
 Accordingly, if the depositor proved that an entry was incor- 
 rect, he could recover for the amount not credited to him.' 
 And if a bank disputed the amount, it must show what the 
 true amount was.* Ifor would a by-law or rule of a bank, de- 
 claring that all payments must be examined at the time, pre- 
 vent a depositor from showing afterward that there was a 
 mistake in his account of deposits and receipts.* Though a 
 
 ' Chapter V. §§ 199-203. ' Manhattan Company v. Lydig, 4 Johns. 377. 
 
 ■'' Mechanics and Farmers' Bank v. Smith, 19 Johns. 115. 
 
 « Asher v. National Park Bank, 7 Alb. L. J. 43. « Id. 
 
62 BANKS AND THEIR DEPOSITORS. § 48 
 
 bank possessed power by an act of incorporation to direct 
 and prescribe the management and disposition of its money, 
 stock, and other property, this did not confer the right to 
 make by-laws or other regulations to defeat the rights of third 
 parties.* 
 
 (a) What books contain original entries. A cash-book and 
 a depositor's balance book belonging to a bank which have 
 been fairly and correctly kept, in which after banking hours 
 the various items of money deposited and drawn out during 
 the day are copied from tags and checks containing the 
 proper date of each transaction, are admissible in evidence as 
 books of original entry .^ 
 
 § 48. Accounts are open to examination if pass-book has been 
 settled. The rule now is, the rights of neither party are 
 changed by settling a pass-book. The accounts are " open to 
 examination and correction."^ On one occasion a depositor 
 called on a bank as soon as his book was returned and com- 
 plained because it had paid a check contrary to his direction, 
 and brought a "suit at no very considerable period after- 
 wards" to recover the amount. The court did not think he 
 had "acquiesced in the account as claimed by the bank."* So, 
 if an account is rendered and received by a depositor without 
 knowing its contents, his acquiescence will not prevent him 
 from disputing it." 
 
 (a) Opinion of the United States Supreme Court. " Mistakes 
 in bank accounts," remarked Judge Hunt, in the case of the 
 First E'at. Bank v. Whitman,^ "are not uncommon. They 
 occur both by unauthorized or pretended payments, as well as 
 by the omission to give qredit for sums deposited. "When 
 discovered, the mistake must be rectified, and an ordinary 
 
 » Asher v. National Park Bank, 7 Alb. L. J. 43. 
 ' Ladd V. Sears,. 9 Oregon, 244 
 ' Mechanics' Bank v. Earp, 4 Raw. 384. 
 * Schneider v. Irving Bank, 1 Daly, 600. 
 " FoUausbee v. Parker, 70111. 11. 
 
 ^ 94 U. S. p. 346, citing Buchlin v. Chaplin, 1 Lans. 443 ; Bruen v. Hone, 
 2 Barb. .^86 ; Bullock v. Boyd, 2 Edw. Ch. 293. 
 
§ 49 PASS-BOOKS. 63 
 
 writing up of a bank-book with a return of vouchers or a 
 statement of accounts, precludes no one from ascertaining the 
 truth and claiming its benefit." 
 
 (6) Oral evidence is admissible to explain technical terms. 
 Moreover, oral evidence is admissible to explain the meaning 
 of terms, for example, a short entry, "seven per cent," "If a 
 contract is in cipher, or a part of it, or if technical terms are 
 used, or words of art, unintelligible to the court and jury, 
 but which have a well-known meaning among mechanics and 
 merchants, parol evidence is admissible to explain the mean- 
 ing and give the words their known signification."' 
 
 (c) Duty of bank to notify depositor on discovery of error. A 
 bank is under no legal duty to notify depositors of an error 
 in entering a deposit in a pass-book ; how its silence in the 
 matter shall be regarded is a question of fact.^ 
 
 § 49. How far a pass-book is conclusive evidence. Bute in 
 England. A bank book \s prima facie evidence of the matters 
 therein contained, but not conclusive.' Hence it may be 
 shown by other evidence that a deposit was made for the use 
 of a third person.^ So, too, the bank-book of a deceased 
 commissioner in equity, regular in form, credited with de- 
 posits more than sufiicient to cover a balance against him in 
 his office, was held to show a due discharge of official duty 
 until the contrary appeared.* But, in England, if a depositor, 
 supposing the entries on his pass-book to be correct, changes 
 his position, by drawing on his deposit, for example, the 
 bank is bound by its action. Nor can it set ofl:" money sub- 
 sequently received against such erroneous entries.' 
 
 1 Wingate v. Mechanics' Bink, 10 Pa. 104, p. 107 ; Daiiitree v. HatcliJnsou, 
 10 Mees. & Wels. 85 ; Goblet v. Beechey, 3 Sim. 24. 
 
 2 Poor V. National Union Banlc, 17 Week. Dig 320. 
 
 3 Union Bank v. Knapp, 3 Pick. 96. See Watson v. Phoenix Bank, 8 Met. 
 217 ; Commercial Bank «. Rhind, 3 Macq. H. L. Cas. 643. 
 
 * Stair V. York Nat. Bank, 55 Pa. 364. 
 
 s State ex rel. Van Wyck i'. Norris, 15 S. Car. 241 j Featherston v. Norris, 
 7 Id. 472 ; S. C, 14 Id. 624. 
 
 5 Skyring u. Greenwood, 4 Barn. & Cr. 281 ; Shaw v. Picton, Id. 715 ; 
 Shaw r. Dartnall, 6 Id. 56 ; Heane v. Rogers, 9 Id. 677 ; Huiiie v. Holland, 
 1 C. & M. 130. 
 
64 BANKS AND THEIR DEPOSITORS. § 52 
 
 § 50. Bank is liable for receiving money without a pass-book 
 and giving a wrong credit. If a teller receive money without 
 a deposit ticket, or pass-book, required by custom or rule of 
 the bank, and, by mistake, credit the wrong person, the insti- 
 tution is liable. It cannot escape liability by violating its 
 rules and customs.' 
 
 § 51. California usage in entering checks. In San Francisco, 
 California, the usage exists among the banks when a check is 
 presented for deposit, to receive it whether drawn on the de- 
 pository or another bank and enter a credit for the amount in 
 the pass-book. When the check is paid the depositor is 
 properly credited with it on the books of the bank ; but if a 
 check drawn on another bank is not paid on due presentation, 
 or if it is ascertained within banking hours on the same day 
 of depositing a check — which is drawn on the depository 
 — that it is not good for want of funds to the drawer's 
 credit, the check is returned to the depositor and the credit 
 in his pass-book is cancelled. This usage has a legal sanction 
 and determined the rights of a bank and depositor in that 
 State.' It must be remembered that the usage does not pre- 
 vail beyond the State however strongly intrenched it may be 
 in reason and local practice. 
 
 § 52. A pass-book is not negotiable. A pass-book is not 
 negotiable nor can it be made so by a by-law with the deposi- 
 tor's assent. "The character of a security," said Chief Jus- 
 tice Wallace, of California, in the principal case on this sub- 
 ject, " as being negotiable or otherwise, must appear not by 
 force of the mere stipulation of the parties that it shall be 
 such, but must be implied by law as the result of the form 
 and effect of the security itself. The pass-book of the bank 
 here is an account kept between the bank and the depositor 
 — an account acknowledged and certified from time to time 
 showing the business transactions of the parties with each 
 other at those periods and carrying upon its face a fluctu- 
 
 ' Jackson Ins. Co. v. Cross, 9 Heisk. 283. 
 
 2 National Gold Bank v McDonald, 51 Cal. 64. 
 
§ 52 PASS-BOOKS. 65 
 
 ating balance. As being such an account it is not of itself 
 a negotiable instrument, nor could any mere agreement of 
 the parties to it have the eflect to invest it with that charac- 
 ter in a commercial sense. In this respect the account shown 
 in the pass-book is not to be distinguished from the account 
 of a merchant or tradesman kept with his customer in the 
 same way, not would the agreement of the parties to such an 
 account that the account itself might be transferred ' to order,' 
 have any more effect upon the rights and remedies of any 
 third party in the one case than in the other."' One applica- 
 tion of this principle is that a savings bank cannot avoid or 
 circumvent the legal requirement to pay over the money of 
 a depositor on a garnishee process by his creditor.* 
 
 ' Witte V. Vinoenot, 43 Cal. 325 ; Stewart v. State, 42 Texas, 242. 
 » Witte V. Vincenot, 43 Cal. 325. 
 
BOOK II. 
 
 THE 
 
 Payog of Deposits. 
 
CHAPTER I. 
 
 NATURE OF A CHECK. 
 
 Having stated the principles whicli relate to the deposit- 
 ing of money, those which relate to the paying of it naturally 
 follow. 
 
 § 53. Is a cieok a bill of exchange ? (a) Why question is 
 important. The usual mode of getting money is to present a 
 written order or check and demand payment. The question 
 has heen much considered whether such an instrument is a 
 bill of exchange or simply an order for money. The question 
 is important, because if a check is a bill, days of grace should 
 be added to the ordinary time for payment. 
 
 (6) Opinion of Shaw, C. J. "A check," says Chief Justice 
 Shaw,' " is an order to pay the holder a sum of money at the 
 bank on presentment of the check and demand of the money ; 
 no previous notice is necessary ; no acceptance is required or 
 expected ; it has no days of grace. It is payable on present- 
 ment and not before. Mere notice to the bank that a party 
 holds a check without presentment and demand will not bind 
 the bank, and if there be funds, when notice is thus given, 
 without presentment for payment by the holder, and in the 
 mean time other checks of the same drawer are presented and 
 the fund paid out upon them, the bank is not liable. 
 Checks are not payable in the order of the priority in which 
 they are given, but in that in which they are presented." 
 
 (c) Opinion of United States Supreme Court. 'No opinion is 
 more worthy of consideration than the opinion of the Supreme 
 
 • Ballard v. Randall, 1 Gray, p. 606. 
 
 (69) 
 
70 BANKS AND THEIR DEPOSITORS. § 53 
 
 Court of the United States,' Speaking through Judge S wayne, 
 "bank checks" are declared to be "not inland bills of exchange,'' 
 but have many of the properties of such commercial paper ; 
 and many of the rules of the law merchant are alike applicable 
 to both. Each is for a specific sum payable in money. In 
 both cases there is drawer, a drawee, and a payee.' Without 
 acceptance no action can be maintained by the holder upon 
 either against the drawer. The chief points of difiierence are 
 that a check is always drawn on a bank or banker.* Ifo days 
 
 > Merchants' Bank v. State Bank, 10 Wall. 604, p. 647. 
 
 s A cheek is a bill of exchange payable on demand, Barker v. Anderson, 
 21 Wend. 372, and cases cited ; Franklin v. Vanderpool, 1 Hall, 78 ; Bill- 
 gerry v. Branch, 19Grratt. 393. "Bank checks are in form and effect bills of 
 exchange. They are not direct promises by the drawers to pay, but they are 
 undertakings on their part that the drawees shall accept and pay, and the 
 drawers are answerable only in the event of the failure of the drawees to 
 pay," C. J. Tenney, Foster v. Paulk, 41 Me. p. 428. 
 
 ' A writing like the following — 
 $200. St. Paul, Minn., January 22, 1879. 
 
 D. & Co. Bankers, Pay to the order of 
 on sight. Two hundred dollars in current funds. 
 
 E. L. 
 is not a check, because no payee is indicated therein, and consequently no 
 action can be maintained against the drawer if it be not paid, Mcintosh v. 
 Lytle, 26 Minn. 336. 
 
 A check may be made in duplicate like a foreign bill of exchange. This 
 will not render the payment conditional. Merchants' Nat. Bank v. Ritzinger, 
 111. Sup. Ct., 6 Western Rep. 340. 
 
 The following written instrument was declared by the Supreme Court of 
 Oregon, Hawley v. Jette, 10 Oregon, 31, to be a bill of exchange : " Portland, 
 Or. December 10, 1879. $300. On January 5, 1880, without grace, pay to 
 the order of H. D. & Co. three hundred dollars, value received, and charge 
 the same to the account of J. & C. To J. D. M., Oregon City." 
 
 * " The distinguishing characteristics of checks as contra-distinguished 
 from bills of exchange are, that they are always drawn upon a. bank or a 
 banker ; that they are payable immediately upon presentment without the 
 allowance of any days of grace ; and that they are never presentable for 
 acceptance, but only for payment," Judge Shepley, Morse w. Mass. Nat. Bank, 
 Holm. 209, p. 214 ; in the matter of Brown, 2 Story, 602 ; Harris v. Clark, 
 3 N. Y. 93, p. 114. In the case last cited the instrument read thus : Messrs. 
 R. Clark & Co. Please pay to Nancy Harris or order $30,000, and place the 
 same to my account. New York, 9th July, 1844, Sidney Smith." This was 
 
§■ 53 NATDRE OF A CHECK. 71 
 
 of grace are allowed. The drawer is not discharged by the 
 laches of the holder in presentment for payment unless he can 
 show that he has sustained some injury by the default. It is 
 not due until payment is demanded, and the Statute of Limita- 
 tions runs only from that time. It is by its face the appropria- 
 tion of so much money of the drawer in the hands of the 
 drawee to the payment of an admitted liability of the drawer. 
 It is not necessary that the draM^er of a bill should have funds 
 in the hands of the drawee. A check in such case would be 
 fraud.i All the authorities, both English and American, hold 
 that a check may be accepted, though acceptance is not 
 usual." 
 
 {d) Opinion of Sharswood, J. In Pennsylvania an instru- 
 ment in the form of a bill of exchange drawn on a bank and 
 payable at a future day is a check. " If," says Judge Shars- 
 wood, " such an order drawn upon a bank payable at a future 
 day named in it niust be considered as an inland bill of ex- 
 change, and not a check, then the payee or holder has the right 
 to present it at once for acceptance, protest it at once for non- 
 acceptance, and sue the drawer iramediatety. Should it be 
 accepted, however, the funds of the drawer in the bank 
 would necessarily be thereby tied up until the day of pay- 
 ment. All the objects of directing payment at a future day 
 would thus be frustrated. What the drawer undertakes is 
 
 not a check but an inland bill of exobange. The following instrument was 
 declared to be a banker's check : " Capt. Ring, Please to pay to Messrs. Elting 
 and Shook one hundred dollars and oblige Stephen J. Brinkerhoff, June 3, 
 1822," Elting v. Brinkerhoff, 2 Hall, 459. 
 
 1 A bank check is presumptively drawn on a previous deposit of funds, and 
 is an absolute appropriation of so much in the hands of the bank to remain 
 there till called for, Stevens v. Park, 73 111. 387. The presumption is, that 
 a check is drawn against funds in a bank, White v. Ambler, 8 N. Y. 170. 
 
 In Kentucky the difference between a check and bill is declared to be that 
 the former if drawn on a bank is payable on presentment without days of 
 grace and no acceptance as distinct from payment is required. Furthermore, 
 it is supposed to be drawn on a person's deposit of funds, and is an absolute 
 appropriation of the amount mentioned in this check to the holder. Smith v. 
 Jones, 2 Bush, 103 ; Lester v. Given, 8 Id. 357. 
 
72 BANKS AND THEIR DEPOSITORS. § 53 
 
 that on a day named he will have the amount of the check 
 to his credit in the bank. In the mean time he wants the full 
 and free use of his entire deposit. It is not denied that a 
 post-dated check cannot be presented for acceptance. That 
 is by implication payable on a future day. Why then is a 
 check expressly so made payable to stand on different 
 ground ? In the case before us an ordinarily printed form of 
 a bank check was evidently used, and the day of presentment 
 written in one of the blanks. This is the most convenient 
 form, for it calls the attention of the cashier or paying-teller 
 to the fact which he would be likely to overlook if it were 
 expressed only by the date. . . If we determine that an order 
 like that before us is not presentable for acceptance before 
 maturity we settle the question. It is a check and not a bill 
 of exchange."' 
 
 (e) Rule in New York and other States. On the other hand 
 in E"ew York^ and other States,' the law as clearly calls such 
 an instrument a bill; nor can evidence of local usage be 
 received to change its legal character in this regard. In 
 these States, therefore, a check drawn by a person on a bank 
 and payable to another after date is entitled to days of grace. 
 The court in Illinois has said that this would be so indepen- 
 dently of the statute of 1861, providing for uniformity in 
 calculating them.* 
 
 (/) Rhode Island case. In a Rhode Island case the check 
 read : " Providence, Oct. 6, 1854. Westminster Bank. 
 Ninety days after date, pay to the order of James Wheaton 
 four hundred and fifty dollars cents. $450. Sinope 
 
 ' Champion v. Gordon, 70 Pa. 474 ; Lawson v. Richards, 6 Phila. 179. 
 
 2 Bowen v. Newell, 13 N. Y. 290. This case was tried three times beside 
 that just mentioned, 5 Sand. 326 ; 8 N. Y. 190 ; 2 Duer, 584 ; Merchants' 
 Bank v. WoodrufiF, 6 Hill, 174 ; Rev. 25 Wend. 673. 
 
 ' In California, Minturn v. Fisher, 4 Cal. 35. In Ohio, Morrisons v. Bailey, 
 5 Ohio St. 13. In a subsequent case the nature of the instrument was de- 
 termined by the intention of the parties, Andrew v. Blachly, 11 Ohio St. 89 ; 
 Aff. 1 Disney, 78. In Indiana, Glenn v. Noble, 1 Blackf. 104. 
 
 * Culter V. Reynolds, 64 111. 321. 
 
S 54 NATURE OF A CHECK. 73 
 
 Mills. Indorsed in blank, James "Wheaton, per B. Cozzens, 
 agent." 
 
 " Was this a check ?" asked Judge Bray ton. " We are of the 
 opinion that it was. A check is an order drawn upon a 
 hanker, or a person acting as a banker in England, or in this 
 country upon such a person or upon a bank. It was origi- 
 nally part of the definition of a check that it was payable on 
 demand. It was afterwards held that it might be post-dated 
 and still be a check. In such case it was payable immedi- 
 ately after date, though days had elapsed since it came to 
 the payee's hands. Still later, it was held to be a check 
 though payable on a day certain after date, if drawn upon 
 a bank or banker. The instrument in suit differs from the 
 last in this only, that the day when it is payable is not named, 
 but it is payable a certain number of days after date, and 
 that the precise day of payment is to be ascertained by cal- 
 culation ; all the elements of such calculation being contained in 
 the paper itself. Substantially and for all practical purposes 
 it is the same, since the day may be made certain from the 
 paper itself. At this day the only distinguishing difference 
 between a general bill of exchange and a check is that a 
 check must be drawn upon a bank or upon a banker or one 
 acting as a banker."^ 
 
 § 54. Question should be settled. Whether the instrument 
 be a check or bill of exchange is not so important as to re- 
 move the doubt. The several States which have made decis- 
 ions on the subject will doubtless adhere to them, and in the 
 others the doubt should be removed. So long as no rule ex- 
 ists the holders of these ambiguous instruments may suffer 
 from having none, just as the holder did in the Rhode Island 
 case. Regarding the instrument as a bill of exchange, he 
 gave notice to the indorser of its non-payment by the drawer 
 three days after the time mentionedj but as it was declared 
 to be a check the notice was too late and the indorser was 
 released. 
 
 ' Westminster Bank v. Wheaton, 4 R. I. 30. 
 
74 BANKS AND THEIE DEPOSITORS. § 58 
 
 § 55. When a check is a bill by particular statute. A 
 
 check is a bill of exchange within the meaning of the statute 
 in l^ew York which authorizes a recovery on a negotiable 
 bill of exchange which has been lost, on giving parol evi- 
 dence of its contents and tendering to the drawer at the time 
 a bond of indemnity.* 
 
 § 56. Is not a check if drawn on a closed bank. An instru- 
 ment, though in the form of a check, cannot be thus consid- 
 ered unless drawn on a bank engaged in business. If it has 
 been closed several years, and is in liquidation, and its indebt- 
 edness to depositors is bought and sold like a stock, a check 
 drawn thereon would be mere evidence of an assignment of a 
 deposit.* 
 
 § 57. Must be payable in money. A check must be pay- 
 able in money. A check, therefore, drawn by a bank in 
 Mobile on a bank in New Orleans in April, 1862 (during the 
 civil war), payable in currency, was not an instrument payar 
 ble in money, and therefore was not negotiable." 
 
 § 58. Consideration of a check to bearer need not be proved. 
 {a) Remarks of Thompson, J. The holder of a check payable 
 to bearer need not prove a consideration unless there is reason 
 for supposing that he has obtained possession of it by fraud. 
 " This principle," said Judge Thompson more than eighty 
 years ago, " seems necessary for the purpose of strengthening 
 and facilitating that commercial intercourse which is carried 
 on through [bills of exchange and promissory notes]. The 
 reason of the rule is equally applicable whether the bill or 
 
 1 Jacks B. Darrin, 3 E. D. Smith, 548, the court citing Boehem v. Sterling, 
 7 Term R. 419, p. 426 ; Cruger v. Armstrong, 3 Johns. Cas. 5 ; Merchants' Bank 
 ». Spioer, 6 Wend. 443 ; Murray v. Judah, 6 Cow. 484. 
 
 2 Harmanson v. Bain, 1 Haghes, 188. 
 
 3 Banic of Mobile, 42 Ala. 108 ; see Little v. Phenix Bank, 2 Hill, 425 ; 
 Lieber v, Goodrich, 5 Cow. 186 ; Thompson ». Sloan, 22 Wend. 73, and cases 
 cited in Young v. Scott, 5 Ala. 475 ; Carlisle v. Davis, 7 Id. 42. Protest in 
 the above case of the Bank v. Brown was not necessary to fix the liability of 
 the drawer, but the check should have been presented for payment within a 
 reasonable time after it was drawn and delivered, and prompt notice of its 
 non-payment should have been given to the drawer. 
 
§ 58 NATURE OF A CHECK, 75 
 
 note be made payable to bearer or order ; and I can see no 
 good reason why it should not apply to bank checks. "Where, 
 however, the instrument is made payable to bearer, so that 
 no indorsement is necessary in making a transfer, and there 
 are any circumstances of suspicion attending the manner in 
 Avhich the holder became possessed of it, it is necessary he 
 should show that he paid a valuable consideration, or that he 
 came fairly by it. As, if it had appeared that the check had 
 been lost, it would have been such a circumstance of suspicion 
 as to impose on the holder the necessity of proving that he 
 came to the possession, bonafide."^ 
 
 (6) When want of consideration may he shown. As want of 
 consideration for negotiable paper may be shown in a suit 
 between the original parties, and also in a suit by a third 
 party who has taken it knowing the fact, so may the refusal 
 to pay a check be defended on the same ground. The follow- 
 ing illustration of this principle may be given : A., for the 
 accommodation of B., and without consideration, executed and 
 delivered to him checks drawn on a bank and payable to 
 bearer, B. agreeing to take care of them. The checks were 
 afterward delivered for a valuable consideration by B. to C, 
 who at the time of receiving them had full knowledge of the 
 circumstances under which they were given. Furthermore, 
 C. agreed not to present the checks at the bank, but to look 
 to B. only for payment. C. having died, his administrator 
 brought a suit against A. to recover the amount of the checks. 
 The court held that parol testimony was admissible to prove 
 
 • CoDroy V. Warren, 3 Johns, Cas. 259 ; Grant v. Vaughn, 3 Burr. 1516. 
 One possessed of an order for the payment of money to bearer, addressed to 
 no particular person as drawee can maintain no action thereon against the 
 person subscribing it, without showing that he came fairly by it for a valu- 
 able consideration. Ball v. Allen, 15 Mass. 433. 
 
 " The law is now understood to be that the bearer of a bill of exchange, or 
 a promissory note, payable to bearer, need not prove a consideration, unless 
 he possesses it under suspicious circumstances, and that such paper stands 
 on the same footing with specialties, and prima fade imports a consideration ; 
 and the rule is equally applicable to checks," Foster v. Paulk, 41 Me. p. 
 428. An exchange of checks constitutes a good consideration, Id. 425. 
 
76 BANKS AND THEIR DKPOSITORS. § 59 
 
 the agreement between B. and C, and also that the adminis- 
 trator could not recover.* 
 
 (e) Judge Duer's opinion. Nevertheless, said Judge Duer,' 
 " we cannot think that a defence which is rested upon the 
 single ground of the absence of a valuable consideration, de- 
 serves much favor in a court of justice. Where the promise 
 is deliberate and is reduced to writing, the rule of law which 
 permits the defence is almost peculiar to our own jurispru- 
 dence, and is condemned by the general sense of legislators and 
 jurists as well of merchants. Still, as the rule undoubtedly 
 exists it must be obeyed, and the defence, when clearly estab- 
 lished, be admitted to prevail ; but it is not inconsistent to 
 say that, considering the nature of the defence, the party who 
 relies upon it should be held to the strictest proof and every 
 doubt that he suffers to remain be decided against him." 
 
 § 59. Must be properly signed, (a) Different modes of 
 signing. The check must be properly signed. Most ques- 
 tions which relate to signing are whether the signature is 
 personal or representative. A check having the words "-^tna 
 Mills" printed in the margin, and signed " J. D. Farnsworth, 
 Treasurer," was declared to be not the individual check of 
 Farnsworth, but the company's. " The case," said Judge 
 Gray, in giving the opinion of the court, " is not distinguish- 
 able from those in which similar instruments have been held 
 . . to be the contracts of the principal only. The court has 
 always laid hold of any indication on the face of the paper, 
 
 1 Dagget 0. Whitney, 35 Conn. 366. H. and K. were lu the habit of ac- 
 commodating each other by exchanging checks. H. transferred K.'s check 
 to a creditor as collateral to a debt, who afterward sued the maker and re- 
 covered. Although K. had not transferred H.'s check or collected the money 
 thereon, the creditor could recover the amount, Rankin v. Knight, 1 Cin. S. 
 C. Rep. 515. It contains a notice or review of several cases relating to the con- 
 sideration for exchanged checks, Cowley v. Dunlop, 7 Term, 565 ; Cardwell v. 
 Martin, 9 East, 190 ; Buckler v. Buttivant, 3 East, 72 ; Eaton t-. Carey, 10 
 Pick. 211 ; Dowe v. Schutt, 2 Denio, 621 ; Whittier v. Eager, 1 Allen, 499 ; 
 Higginson v. Gray, 6 Met. 212 ; Fields v. Stanston, 1 Cold. 40 ; Burdon v. Ben- 
 ton, 9 Q. B. 843. 
 
 e Fitch V. Redding, 4 Sand. 130, p. 136. 
 
§ 59 NATURE OF A CHECK. 77 
 
 however informally expressed, to enable it to carry out the 
 intention of the parties." * The illustrations given by the court 
 are worth adding. " In Tripp v; Swanzey Paper Co.,^ a draft 
 not naming the principal otherwise than by concluding ' and 
 charge the same to the Swanzey Paper Company, yours re- 
 spectfully, Joseph Hooper, Agent,' was held to be the draft 
 of the company. In Fuller v. Hooper,* a draft with the words 
 ' Pompton Iron Works' printed in th5 margin, and concluding 
 'which place to account of Pompton Iron Works, W. Burt, 
 Agent,' was held to bind the proprietor of the Pompton Iron 
 Works ; and in Bank of British if orth America v. Hooper,* 
 in which a draft concluding 'and charge the same to account 
 .of proprietors Pembroke Iron Works, your humble servant, 
 Joseph Barrell,' without otherwise naming a principal or 
 disclosing the signer's agency, was held to bind him only, it 
 was said by the court that in Fuller v. Hooper, the words 
 ' Pompton Iron Works' in the margin of the draft fully dis- 
 closed the principal, and that the draft was drawn on his 
 behalf. So in Slawson v. Loring,' in which a draft, having 
 the words ' Office of Portage Lake Manufacturing Company, 
 Hancock, Michigan,' printed at th6 top, was signed ' I. E. 
 Jackson, Agent,' Chief Justice Bigelow said, '■'So one can 
 doubt that on bills thus drawn the agent fully discloses his 
 principal, and that the drawer could not be personally charge- 
 able thereon.' " 
 
 (6) Remarks of Bradley, J. " The ordinary rule is," said 
 Judge Bradley, speaking for the Supreme Court of the United 
 States, " that if a person merely adds to the signature of his 
 name the word 'Agent,' ' Trustee,' ' Treasurer,' etc., without 
 disclosing his principal, he is personally bound. The appen- 
 dix is regarded as a mere descriptio personce. It does not of 
 itself make third persons chargeable with notice of any rep- 
 resentative relation of the signer. But if he be in fact a mere 
 
 1 Carpenter v. Farnsworth, 106 Mass. 561. 
 
 ' 13 Pick. 291. ' 3 Gray, 334. 
 
 * 5 Id. 567. « 5 Allen, 343. 
 
78 BANKS AND THEIR DEPOSITORS. § 59 
 
 agent, trustee, or officer of some principal and is in the habit 
 of expressing in that way, his representative character in his 
 dealings with a particular party who recognizes him in that 
 character, it would be contrary to justice and truth to con- 
 strue the document thus made and used as his personal obli- 
 gations, contrary to the intent of the parties."' The check 
 on which a personal recovery was sought was signed by " E. 
 P. Aistrop, Sec't'y," and " W. S. Williams, Vice-Prest.," but 
 did not disclose either's official relation. Judge Bradley said 
 that it was unnecessary to determine whether the form of the 
 document was sufficient to charge innocent holders of the 
 check with notice of its character. The fact that it bore two 
 official signatures, that of the complainant as vice-president, 
 and of Aistrop, as secretary, was so unusual on the hypoth- 
 esis of its being an individual transaction, and pointed so 
 distinctly to an official origin that it might very well be 
 doubted whether any holder could claim to be ignorant of its 
 true character. " But in the present case the party claiming 
 to have the beneficial interest in the check was a fellow agent 
 of the company on whose account it was drawn, actually knew 
 its origin, and cannot pretend that he took it for anything 
 else than a check of the corporation. The plea that the 
 name of the principal was not disclosed on the face of the 
 paper cannot be made by him, for he knew all about it." 
 
 (c) Rule in Alabama and New Jersey. A bill of exchange, 
 for example, signed " John. Kean, President Elizabethtown & 
 Somerville R. R. Co.," is ambiguous on the face of it, whether 
 he or the company is the drawer. Without explanation he 
 would be considered the drawer of the bill. In such a case 
 parol proof is admissible to show who was to be bound by 
 the instrument.^ In Lazarus v. Shearer,' the Chief Justice, 
 Collier, says: "Where it is doubtful from the face of the 
 contract whether it is intended to operate as the personal en- 
 gagement of the party signing it, or to impose an obligation 
 
 1 Metoalf V. Williams, 104 U. S. 93, p. 98. 
 
 « Keen v. Davis, 21 N. J. Law, 683. » 2 Ala. 718. 
 
§ 61 , NATURE OF A CHECK. 79 
 
 upon some third person as his principal, parol evidence is 
 admissible to show the true character of the transaction." 
 This was declared to be sound rule by C. J. Green in the 
 above case. 
 
 (d) English case. Three directors of a railway company 
 signed a document which was intended as an order on the 
 company's bankers to pay company money to a third party. 
 The document was signed by them individually and counter- 
 signed by the secretary of the company with the word " Sec- 
 retary" added to his signature. Nor was the official charac- 
 ter of the directors disclosed in any part of the document. 
 It did contain a stamp on which was impressed the name of 
 the company, but a similar stamp was used on all its docu- 
 ments. It was held that this document was not the company's 
 check, and, consequently, that it was not bound therefor.' 
 
 § 60. Check must be delivered. A check has no validity 
 
 until actually delivered to the payee.' But a bill or check 
 
 , payable to a person or bearer is transferable by mere delivery ; 
 
 and a check payable to " bills payable or order" is negotiable 
 
 like a check payable to bearer.' 
 
 § 61. Rights of a bona fide holder. The holder of a check 
 is regarded as the rightful holder.* And if a check is in the 
 possession of a bona fide holder, the law presumes that the 
 drawer put it into circulation, unless he can show otherwise." 
 Nor is a bona fide holder affected by secret equities existing 
 between antecedent parties.* And if a check be given by an 
 agreement which is not sanctioned by the Bankrupt Law of 
 New York, it is nevertheless valid if owned by a bona fide 
 holder for value.' But in New York a bank that receives a 
 check for a consideration which is more than a year old ia 
 
 ' Serrell f. Derbyshire Railway Co., 19 L. J., C. P. 371. 
 ' Cowing V. Altman, 71 N. Y. 435 ; Rev. 5 Hun, 556. 
 » Mechanics' Bank v. Straiten, 3 Keyes, 365. 
 
 ' Foster v. Paulk, 41 Me., p. 428 ; Cruger v. Armstrong, 3 Johns. Cas. 5 ; 
 Conroy v. Warren, 3 Id. 259. 
 6 Hoyt V. Seeley, 18 Conn. 353. « Stewart v. Smith, 17 Ohio St. 82. 
 
 ' Cowing V. Altman, 71 N. Y. 435 ; second trial, 79 Id. 107. 
 
80 BANKS AND THEIR DEPOSITORS. • § 62 
 
 not regarded a bona fide holder without notice of imperfec- 
 tion.' In Kentucky, on the other hand, a check taken some 
 days after date is free from all equities. There, a check is 
 never over-due because it is payable on presentation or 
 demand.^ 
 
 § 62. Memorandum check, {a) Described by Judge Putnam. 
 Before presenting the principles that are applied to determine 
 the meaning of checks, a memorandum check may be defined. 
 This, in the words of Judge Putnam,* is a contract by which 
 the maker engages to pay the bona fide holder absolutely, and 
 not upon a condition to pay if the bank upon which it be 
 drawn should not pay upon presentation at maturity, and if 
 due notice of the presentation and non-payment should be 
 given. " The word ' memorandum' written or printed upon 
 the check describes the nature of the contract with precision. 
 It is an express waiver on the part of the maker of the check 
 of any objection against the claim of a bona fide holder that 
 it had not been presented for payment, or if it were presented 
 and not paid, and that he had had no notice of the non-pay- 
 ment by the bank therein named." 
 
 (b) Franklin Bank v. Freeman.* A printed blank check, 
 therefore, on the Iforth Bank, for example, altered by sub- 
 stituting " Market" for " North" and by inserting the word 
 " Memo.," and filled up in the usual way is a memorandum 
 check, and it has been held that there is no necessity for pre- 
 senting such a check to the Market Bank for payment, even 
 though the drawer did business there, and even though a 
 common check drawn by him for the same amount would 
 have been paid if presented. 
 
 (c) Nev) York view on the subject. The New York legal 
 tribunals maintain a somewhat difierent view of the function 
 of a memorandum check. Said Chancellor "Walworth in the 
 leading case on the subject :" " The alleged custom of Wall 
 
 ' Cowing «. Altman, 1 Th. & C. 494. 
 
 2 Smith V. Jones, 2 Bush, 103 ; Lester v. Given, 8 Id. 357. See § 297. 
 » Franklin Bank v. Freeman, 16 Pick., p. 539. * 16 Pick. 535. 
 
 * Dykers v. Leather Manufacturers' Bank, 11 Paige, 612. 
 
§ 63 , NATURE OF A CHECK. 81 
 
 Street that an ordinary check upon a bank is to be converted 
 into something contrary to its legal effect by writing mem. 
 in one corner thereof, certainly amounts to nothing. Indeed 
 the weight of the testimony is that this memorandum 
 amounts to nothing more than an indication of an under- 
 standing that the check is not to be presented immediately 
 for payment, so as to destroy the drawer's credit with the 
 bank when he has not provided funds to meet the draft." 
 
 {d) Exchange of memorandum checks. Whenever persons 
 exchange their memorandum checks for mutual accommoda- 
 tion, no right of action accrues in behalf of one against the 
 other until the plaintiff has paid the check given by him ; 
 while it is outstanding and unpaid the relation between them 
 is merely that of principal and surety.' 
 
 § 63. Construction of foreign check, (a) Law of flace of 
 payment applies. Returning to the general topic, the princi- 
 ples which relate to the construing of checks may be prefaced 
 with the inquiry : By what law shall a check be construed 
 which is made in one State and payable in another ? This 
 question has been answered in Illinois. A check drawn by a 
 depositor in Indiana on his bank in Illinois is construed 
 by the law of the latter State. Hence a drawer in Indiana 
 transferred by operation of law his deposit to the holder of 
 his check as soon as he gave it to him ; but if he had drawn 
 his check on a bank in Indiana, where a different rule pre- 
 vails, the deposit would not have been transferred till the 
 check was accepted by the drawee bank.^ In briefer language 
 the law of the place of performance is applied.' 
 
 {b) Limitation of 'principle. In those States in which the 
 effect of a check is to assign the drawer's deposit, or when- 
 ever the check operates as an equitable assignment of the 
 drawer's " claim against the bank," the transaction is regarded 
 
 1 Burdaall & Co. b. Chrisfield, 1 Disney, 51. 
 
 2 Bank of America v. Indiana Banking Company, 114 111. 483 ; Union Nat. 
 Bank v. Oceana County Bank, 80 Id. 212 ; Dreyfuss v. Adae, Hamilton Co. 
 Dis. Ct., Ohio, 4 BuU. 671. 
 
 3 Andrews v. Pond, 13 Peters, 65. 
 
 6 
 
82 BANKS AND THEIR DEPOSITORS. § 64 
 
 as local and fully executed ; no application, therefore, of the 
 law of the place where the check is payable is required, for 
 the transaction is considered as completed where the drawer 
 and check holder reside. Thus, an Ohio banker drew his 
 check, the day before assigning for the benefit of his creditors, 
 on his funds in a foreign bank. It was not paid though in 
 consequence of his insolvency. The funds were afterward paid 
 by the bank to the assignee. In a suit against him by the 
 holder of the check it was held that the law applicable to the 
 instrument was the law of Ohio and not that of the foreign 
 State where the drawee bank existed.' 
 
 § 64. Cannot be contradicted by oral evidence, {a) May be 
 used to show non-delivery. As a check is a written contract 
 oral declarations or agreements cannot be admitted to contra- 
 dict or vary it. Moreover, the law presumes, nothing appear- 
 ing to the contrary, that the check is to operate from delivery. 
 "But," says Judge Bullock,' "this presumption may be re- 
 butted by testimony, oral or written, which goes to show 
 that the contract was yet in embryo, or that no complete 
 delivery was intended, and that no interest passed.' The 
 true distinction seems to be that while you cannot, by parol, 
 show that a note, check, or bill, absolute upon its face and 
 once fully executed and delivered is, in a certain event, to 
 become void, or is not to be paid or performed in the mode 
 its terms import, j'ou may, as between the original parties, 
 show that such note, bill, or check was not to operate as such 
 but in a certain event thereafter to happen — the obligatory 
 nature of the instrument being made to depend upon the 
 happening of this event, the obligation itself meanwhile 
 remaining suspended. In such a case the delivery of the 
 written instrument is in the nature of a delivery in escrow."* 
 
 ' Davis V. Adae, Sup. Ct. of Cine, Special T., 4 Bull. 295. 
 
 2 Sweet V. Stevens, 7 R. I. 375, p. 382. 
 
 « Murray v. Earl of Stair, 2 Barn. & Cr. 82 ; S. C, 9 Eng. C. L. 33 ; Marston 
 V. Allen, 8 Mees & Wels. 494 ; Bell v. Viscount Ingestre, 12 Ad. & E. 317 ; S. 
 C, 64 Eng. C. L. 317. 
 
 * Wallis V. Littell, 5 Law T. Rep., N. S. 489 ; Pym v. Campbell, 25 L. J., 
 N. S. 277. 
 
§ 65 NATURE OF A CHECK. 83 
 
 (6) Also who loere the intended parties. Parol evidence can 
 also be admitted to show who were the intended parties to a 
 check. Thus a check was dated at Milwaukee and drawn on 
 "A. B., Bank of Milwaukee," payable to bearer, but was 
 drawn and delivered at Waukesha. A. B. was a banker at 
 Waukesha and there was no such bank or person as A. B., 
 Bank of Milwaukee. Both the maker and the payer of the 
 check lived at Waukesha, and also the plaintiff who pur- 
 chased the check from the payee. The check was never pre- 
 sented to A. B. for payment and soon afterward he failed. 
 It was held that the check showed on its face that it was 
 drawn on A. B. personally, that the words " Bank of Mil- 
 waukee" should be rejected, and that if any doubt existed 
 concerning the true construction of the check, parol evidence 
 could be admitted to show who the parties intended were.' 
 
 (c) Written sum controls figures. If the written sum in a 
 check which the depositor has ordered the bank to pay does 
 not correspond with the sum expressed in the marginal fig- 
 ures, the former will be regarded as correct.^ 
 
 {d) Explanation of deposit ticket. A deposit ticket is not a 
 contract and may be explained by parol evidence. In Weis- 
 inger v. Bank* this question was decided, the court saying 
 that the ticket " is not an engagement in writing nor on its 
 face does it contain a contract of the parties deliberately 
 agreed to. It is not a contract in terms, nor was it intended 
 to be. It more nearly corresponds to the meaning of the 
 word memorandum, 'a record of something which it is 
 desired to remember ; a note to help the memory.' " 
 
 § 65. Construction of corporation checks. Courts have inter- 
 preted pretty liberally the charters or other instruments 
 prescribing modes for making checks and getting money on 
 them. Thus, in the deed regulating the affairs of the Nor- 
 wich Yarn Co.,^ which prescribed that all the checks beyond 
 a fixed amount should be signed by three directors, the 
 
 • Cork V. Bacon, 45 Wis. 192. « Smith v. Smith, 1 R. I. 398. 
 
 " 10 Lea, 330. ' 22 Beav. 143. 
 
84 BANKS AND THEIR DEPOSITORS. § 66 
 
 language was declared to be directory and not imperative, 
 and, therefore, that they should be allowed any sums drawn 
 from the bankers by checks which were not properly signed, 
 if bona fide applied for the benefit of the company. 
 
 § 66. Check is not payment until paid, (a) Eights of holder. 
 A check given in the ordinary course of business for a debt 
 is not payment, even if the drawer has money on deposit,' 
 until ■paid.'' If payment be refused without fault or negli- 
 gence of the holder, he may resort to the original indebted- 
 ness.* He is, therefore, merely the agent of the drawer in 
 getting money from the bank for the purpose of applying it 
 to satisfy his debt.^ Hence, a person who received a check 
 for timber at five o'clock in the afternoon, and before eleven 
 o'clock the next day the bank had teen prohibited by the 
 court from making more payments, and before presentation 
 of the check in question, had the right to waive the check 
 and recover in an action for the value of the timber." 
 
 (6) Agent's payment by Ms check instead of money. The 
 agents- of a savings institution were directed to sell coin 
 belonging to it, and to deposit the proceeds in B. bank to the 
 credit of A. bank. Instead of depositing the proceeds, they 
 deposited their own cheek and gave notice to A. bank of the 
 deposit in money in B. bank from the sale of the coin. The 
 check was not good. It was held that neither A. nor B. 
 bank was bound by the credit. The check was not money, 
 and the agents had no right to substitute it therefor. 
 Nothing but an actual and bona /(^e. deposit of money to the 
 credit of the B. bank could • render it responsible. The 
 savings institution therefore was as clearly liable for the 
 misconduct of its agents as though it had deposited the 
 worthless check.® 
 
 1 Porter v. Taloott, 1 Cow. 359 ; Everett v. Collins, 2 Camp. 515. 
 
 2 Burkhalter v. Second Nat. Bank, 42 N. Y. 638. The receipt of a bank 
 check is not payment of an antecedent debt until the check itself is paid, 
 Phillips V. BuUard, 58 Ga. 256. 
 
 » Cromwell v. Lovett, 1 Hall, 56 ; People v. Howell, 4 Johns. 296. 
 
 * Kobbi V. Underbill, 3 Sand. Ch. 277. » Cromwell v. Lovett, supra. 
 
 « Dimes Sav, Institution v. Allentown Bank, 65 Pa. 116. 
 
§ 67 NATURE OP A CHECK. 85 
 
 (c) Summary of the law. " It is well settled," says Judge 
 Dickerson,' " that taking a check for an existing debt is not 
 ipso facto payment of the debt f not even if it be given for a 
 note which is surrendered ;^ nor where a receipt is given for 
 the old debt upon delivery of the check ;* nor if on present- 
 ment of one check the holder receives from the drawer a 
 check for the amount of his check."' 
 
 § 67. Acceptor must be diligent in collecting. But the ac- 
 ceptance of a check implies an undertaking on the part of 
 the holder to use due diligence in presenting it for payment, 
 and if he does not, and the drawer sustains a loss in conse- 
 quence, the debt will be regarded as paid. Thus the payee 
 of a draft — which was given for a bill of goods — on the day 
 of receiving it presented the same to the drawee and was 
 given his cheek in return. Had this been presented to the 
 bank on that day, it would have been paid. On the next 
 day it was presented, but payment was refused, and the 
 drawers of the draft were at once informed by letter of the 
 fact. Though the check could be received as payment only 
 by express agreement ; and though the payee was not bound 
 as between himself and the drawee to present the check until 
 the day after its receipt, yet as between himself and the 
 drawers of the draft it was his duty to present the check at 
 once ; he was, therefore, negligent in not doing so, and con- 
 sequently chargeable with the loss. In other words, the 
 
 > Marrett i-. Braokett, 60 Me. p. 527. * Taylor v. Wilson, 11 Met. 44. 
 
 3 Olcott 0. Eathbone, 6 Wend. 490. * Bradford v. Fox, 38 N. Y. 289. 
 
 5 Kelty !). Second Nat. Bank, 52 Barb. 328. " The giving of a check for an 
 antecedent debt is not an absolute payment and extinguishment of the debt 
 in the absence of an agreement giving it that effect. Ordinarily, it is only a 
 means of payment, and the debt will not be extinguished unless and until 
 the eheck be paid, or unless loss be sustained by the drawer in consequence 
 of the laches of the holder, in which case the debt will be discharged in pro- 
 portion to the loss sustained," Burks, J., Blair v. Wilson, 28 Gratt. p. 
 171. A clearing-house manager's warrant, which is taken for the surrender 
 of a check, is not payment if the check be afterwards dishonored, unless it 
 was thus taken by special agreement or the holder is negligent, Merchants' 
 Nat. Bank o. Procter, 1 Cin. S. C. Rep. 1. 
 
86 BANKS AND THEIR DEPOSITORS. § 69 
 
 seller was precluded from recovering the price of his goods 
 of the buyer, on the ground of negligence in presenting the 
 check.* 
 
 § 68. Check as evidence of debt and payment. A check is 
 prima fade evidence of a debt,'' but this may be disproved.* 
 l^or is a check payable to A. or bearer evidence of payment 
 to A.,* unless credited by the bank to him.' And surely a 
 check is not payment which is drawn in favor of a debtor's 
 agent, though intended for the creditor and drawn so with his 
 assent. 
 
 § 69. When check is payment, (a) By agreement. To be 
 payment of his original debt, it must be agreed that the check 
 shall be taken by the creditor as payment.' But if such an 
 agreement be made, the debtor is discharged as soon as his 
 check is accepted.^ 
 
 1 Smith V. Miller, 43 N. Y. 171, 52 N. Y. 545. See Chapter X. 
 
 s Terry v. Ragsdale, 33 Gratt. 342 ; Headley v. Beed, 2 Cal. 322 ; Chesnnt 
 V. Chesnut, 15 Brad. 390. 
 
 3 Huutzinger v. Jones, 60 Pa. 170 ; S. C, 6 Phila. 576 ; Phillips v. Monges, 
 4 Wharton, Pa. 226. 
 
 * Patton V. Ash, 7 Serg. & Raw. 116. 
 
 * Henry v. Oves, 4 Watts, 46. The possession of a concealed check hy the 
 drawer who testified that on the day of its date he made and delivered it to 
 the drawee in payment of a deht is sufficient prima facie proof of the payment 
 of the amount named therein, Peavy v. Hovey, 16 Neb. 416. 
 
 * MuUins V. Brown, 32 Kansas, 312. "A check or promissory note either 
 of the debtor or third person, received for a debt, is not payment if not itself 
 paid, except in cases where it is positively agreed to be received in payment," 
 Chancellor Zabriskie in Freeholders of Middlesex v. Thomas, 20 N. J. Eq. p. 
 41. 
 
 " While, however, the giving of a check by a debtor to his creditor is gen- 
 erally presumed to be only a provisional or conditional payment of the debt 
 for which it is given, yet such check, by agreement between the parties, may 
 be given and received In full payment and absolute discharge in satisfaction 
 of the debt," Burks, J., Blair v. Wilson, 28 Gratt. 165, p. 172. 
 
 When a debtor gives liis creditor a check, though having no funds at the 
 bank, under an agreement that it is not to be paid, and gives a new note for the 
 sum due at a less rate of interest, no money passing between them, the check 
 is not payment of the original debt, Woodbnrn v. Woodburn, 115 111. 427. 
 
 ' Turner v. Bank, 3 Keyes, 425 ; S. C, 4 Abb. App. Deo 434 ; Aff, 23 How. 
 Pr. 399, 
 
§ 71 NATUKB 0¥ A CHECK. 87 
 
 (b) Presumptively check is not payment. The presumption is, 
 ■when taking the checlc of a debtor, that it is not an absolute 
 payment.' Whether it is thus accepted or not is a question 
 of fact to be determined whenever it shall arise.^ 
 
 § 70. Acceptance an appropriation of deposit. If a creditor 
 accept a check for the amount due, it is an appropriation by 
 the debtor of his deposit to that amount to his creditor. Yet, 
 before the latter can hold the debtor responsible as drawer 
 he must show that payment of the check was demanded in a 
 reasonable time and refused ; or, he must show a valid excuse 
 for not thus presenting it. For, if the creditor should not 
 present the check within a reasonable time, and the bank 
 within that time should become insolvent, the di'awer would 
 be relieved of liability, and the loss would fall on the cred- 
 itor or holder of the check.^ 
 
 § 71. Acceptance of third party's check is not pa3^ent. (a) 
 Illustrations. When the check of a third party is given in 
 good faith in payment, the receiver can look to the person 
 who gave it to him if it be not paid. Thus, a buyer of goods 
 sent to the seller a check drawn by one bank on another, which 
 was indorsed by the buyer to whose order the check was pay- 
 able. The seller on receiving the check sent a receipt to the 
 buyer acknowledging payment of the bill. At the time of 
 sending the check it was supposed by both parties that it was 
 good, but in truth there were no funds to pay it. The buyer 
 was obliged to lose it and pay the seller in a different manner.* 
 Likewise a debtor who had a bank as his agent transmit its 
 
 1 The acceptance of a bank check by a creditor is not an absolute payment 
 of the drawer's debt, but is a conditional payment. Stevens 'w. Park, 73 III. 
 387 ; Peoria & Pekin Union R. Co. v. Buckley, 114 111. 337. 
 
 2 Springfield v. Green, 7 Baxter, 301 ; Blair v. Wilson, 28 Gratt. 165. 
 ' Springfield v. Green, supra. 
 
 * Fleig V. Sleet, 43 Ohio St. 53. " When goods are purchased upon credit, or 
 money borrowed, and the security agreed upon by the parties turns out to be of 
 no value and different from what it was represented by the debtor, it may be 
 treated as a. nullity, and an action will lie immediately for the sum it was 
 intended to secure," Parker, C. J., Manufacturers and Mechanics' Bank v. 
 Gore, 15 Mass. 75, p. 79. 
 
88 BANKS AND THEIR DEPOSITORS. § 71 
 
 draft on a New York bank to his creditor, but which was 
 protested in consequence of the failure of the drawing bank, 
 did not extinguish the original debt, although the creditors 
 when receiving the draft forwapded to the debtor the account 
 marked paid and signed by them.' 
 
 (b) A Kansas case. The check of a third person, H., was 
 taken in payment for merchandise. He retained it more than 
 three weeks, though living within fifteen miles of the bank 
 on which it was drawn. "When going to present it he learned 
 that the bank had suspended payment the day before. At 
 the time the check was drawn H. had no funds in the bank, 
 and his account was overdrawn at the time of its suspension. 
 " Still, according to the testimony of the president of the 
 bank, this check would have been paid if presented. The 
 check was not received as payment, and there was no settle- 
 ment of the matter after the return of tbe check." The court 
 decided that the debt had not been paid, and that an action 
 could be maintained thereon.* 
 
 (c) A Massachusetts case. To pay an assessment, the payee 
 of two cheeks drawn on banks by third persons payable to 
 his order, indorsed the same to the treasurer of the corpora- 
 tion to which the assessment was to be paid, saying they 
 were " all right" and receiving the treasurer's receipt and the 
 balance in money. One of the checks was good when the 
 payee took it, ten days before, but on the day of indorsing it 
 
 » Weaver v. Nixon, 69 Ga. 699. 
 
 2 Mordis v. Kennedy, 23 Kansas, 408. " It is settled," said Judge Brewer, 
 " that the mere taking of a bank clieck is not a payment of the debt (Ker- 
 meyer v. Newby, 14 Kansas, 164), and if the check be not paid the party may 
 return it and sue on the original debt. It is also clear that the same strict 
 rule of presentment and notice does not obtain as between the drawer and 
 drawee. The former is not discharged unless he suffers some loss through 
 the delay of the holder in presenting the check (Gregg v. George, 16 Kansas, 
 646). Therefore, H., the drawer, was clearly not discharged from his obli- 
 gation to the party to whom he gave his check, for he has lost nothing. If the 
 check had been presented and paid, he would simply have owed the bank so 
 mucli more — the only difference would liave been in the person of the cred- 
 itor." 
 
§ 73 NATURE OF A CHECK. 89 
 
 the maker failed. The payee, though, did not know this till 
 two days afterward. The treasurer deposited the checks in 
 a bank for collection, and the unpaid one was returned in 
 usual time in consequence of non-payment. It was not pro- 
 tested, nor was any formal notice given to charge the payee 
 as indorser. The treasurer four days after its return sent.it 
 to the payee with the request to make the amount good. This 
 he was compelled to do.' 
 
 § 72. Payment of draft by check. When a draft on a bank 
 has been presented and paid by transferring the same to the 
 general credit of the payee, and the bank pays the amount on 
 his check, the draft is regarded as paid.^ Ifotice from the 
 drawer to the bank not to pay the same served after the 
 draft has been presented and paid, will not charge the institu- 
 tion, though it has in its possession at the time a sufficient 
 deposit of the payee to pay the draft.* 
 
 § 73. Check is not payment if deposit be withdrawn. If a 
 person should pay a creditor with his check, and soon after- 
 ward, before the presenting of the same for payment, should 
 withdraw his deposit, he would be liable, although the bank 
 should fail. "While the drawer would not be liable if he 
 should keep his funds there in consequence of the failure of 
 the bank, yet he would be liable by withdrawing theni 
 
 • Small u. Franklin Mining Co., 99 Mass. 277. Chapman, C. J., said : 
 " The plaintiflF [who was the payee and stockholder assessed] was not entitled 
 to such notice as must be given upon the dishonor of a bill of exchange. He 
 was at most entitled to such reasonable notice as would save him from loss. 
 It does not appear that the delay to give him notice, which was of a few days 
 only, occasioned any damage to him, or that the value of the check was less- 
 ened." 
 
 2 S., the indorser on a protested bill of exchange held by a bank, procured 
 a discount of his note for the purpose of paying the bill with the proceeds, 
 but giving no directions to do this. Accordingly, they were placed to his 
 credit, and afterward were applied by the cashier to the payment of the note 
 which was cancelled and delivered to S. It was held that in the absence of 
 other proof the note must be considered as extinguished, and no action could 
 be maintained thereon by the bank, Shaw v. Branch Bank, 16 Ala. 708. 
 
 3 Weedsport Bank v. Park Bank, 2 Keyes, 561. 
 
90 BANKS AND THEIK DEPOSITOKS. § 76 
 
 before its failure.* Nor is his liability changed by the 
 assignee's recovery of the deposits thus withdrawn by him 
 before the failure of the bank. 
 
 § 74. Acceptance discliarges drawer from garnishment. A 
 bank-check given and accej)ted as payment of the balance of 
 an account is a sufficient payment to discharge the drawer if 
 summoned as trustee of the payee in an action begun against 
 the latter the day of giving the check, but before presentation 
 and payment of the same.* The Court said that the check 
 operated as payment, " at least until presentment and refusal 
 which in this case did not happen." 
 
 § 75. When check is a loan and not payment. The legal 
 presumption in giving a check is, to pay a debt, but some- 
 times the purpose is to make a loan. The question occasion- 
 ally ^arises in suits on checks, for which of these purposes was 
 it given? This is a question of fact. In one case a person, 
 shortly before his death, gave his check for one hundred 
 dollars to S., who drew the money. It was shown that the 
 maker was a good business man, free from debt, not a 
 borrower of money, and that S. had rendered no service to 
 him. These facts were regarded sufficient to prove that the 
 check was given as a loan.* 
 
 § 76. Lost check. If a party pay his own debt by a check 
 to the order of his creditor, can he be required to pay again, 
 in the event of its loss by the creditor through accident or 
 fraud, and its payment to the finder or a fraudulent holder on 
 a forged indorsement ? " "We think this question should be 
 answered in the affirmative unless in some very special case, 
 if such a case can be supposed, where the check was taken in 
 absolute payment and extinguishment of the debt."* 
 
 ' Kinyon v. Stanton, 44 Wis. 479. 
 2 Getchell v. Chase, 124 Mass. 366. 
 
 ' Stimsou V. Vroman, 99 N! Y. 74. A check is prima facie a payment, not 
 a loan. Koehler v. Adler, 91 N. Y. 657 ; Aff. 15 Jones & Sp. 518. 
 i Thomson v. Bank, 82 N. Y. 1, p. 8. 
 
§ 77 OEDEK OF PAYMENTS. 91 
 
 CHAPTER II. 
 
 ORDER OF PAYMENTS. 
 
 The paying of deposits may be fitly introduced by describ- 
 ing the order in which they are paid. The principle which 
 is most frequently applied to determine this order was an- 
 nounced in Clayton's case.' 
 
 § 77. Priority observed, (a) Clayton's case. When an account 
 consists of continuous dealings, like the ordinary bank account, 
 the money is applied on the presumption arising from the 
 priority of receipts and payments. If any other appropria- 
 tion is to be made, the creditor must declare his intention 
 at the time of payment. "Neither banker nor customer 
 ever thinks of saying this draft is to be placed to the account 
 of the £ paid in on Monday, and this other to the account of 
 the £ paid in on Tuesday. There is a fund of £1000 to draw 
 upon, and that is enough. In such a case there is no room 
 for any other appropriation than that which arises from the 
 order in which the receipts and paj'ments take place, and are 
 carried into the account. Presumably, it is the sum first paid 
 in that is first drawn out. It is the first item on the debit 
 side of the account that is discharged or reduced by the first 
 item on the credit side. The appropriation is made by the 
 very act of setting the two items against each other. Upon 
 that principle all accounts current are settled, and particularly 
 cash accounts. When there has been a continuation of deal- 
 ings, in what way can it be ascertained whether the specific 
 balance due on a given day has, or has not, been discharged, 
 but by examining whether payments to the amount of that 
 balance appear by the account to have been made ? You are 
 not to take the account backwards, and strike the balance at 
 the bead instead of the foot of it." 
 
 ■ 1 Mer. 572, p. 608 ; Bodenham r. Purchaa, 2 Barn. & Aid. 39. 
 
92 BANKS AND THKIR DEPOSITORS. § 79 
 
 (6) No preference from priority in date. Mere priority in the 
 drawing of a check will not give the holder a preference in 
 payment over the holders of other checks subsequently 
 drawn.' 
 
 § 78. When checks esceed deposit who shall be paid. When 
 checks are presented at the same time for more than is owing 
 to the depositor, what shall the bank do ? It was said by 
 the Chancellor of New York, in such a case, that its officers 
 are not required to settle the conflicting claims of the 
 check holders.* And, if the depositor directs the officers not to 
 pay any of his checks, and he draws his entire deposit for the 
 purpose of dividing it ratably among the several holders, the 
 owner of a check who may have demanded payment after the 
 direction of the drawer to the bank, but before the fund is 
 drawn out, has no claim on the . bank.'' " If the drawer," 
 said the Chancellor, " intended to distribute the remaining 
 funds in the bank ratably among the several holders of the 
 ch ecks, instead of letting some be paid to the exclusion of others, 
 he did right to forbid the payment of any of them, until such 
 an arrangement could be made. . . It would have been con- 
 trary to the usages of banks to have accepted and paid any 
 of the checks after the drawer had directed the teller not pay 
 them."* 
 
 § 79. Memorandum checks. The insertion of the word 
 " mem." in a check on a bank in New York, does not affect 
 its negotiability, or alter the right of the holder to present 
 it to the bank and demand payment immediately. If a 
 bank pays such a check, whereby the funds of the drawer of 
 the bank are exhausted, the holders of the checks, not so in- 
 dorsed, and which are presented for payment during banking 
 hours on the same day have no legal claim against the bank." 
 
 1 Dykers v. Leather Manufacturers' Bank, 11 Paige, 612. 
 
 2 Id. 
 
 » '■ It would be utterly impossible for banks in New York to do business if 
 they were obliged at their peril to settle the conflicting claims of the holders 
 of checks as to rights of priority, arising from the time of drawing such 
 checks." Id. 
 
 * Sec § 348. ' Dykers v. Leather Manufacturers' Bant, 11 Paige, 612. 
 
§ 81 PAYMENT OF DEPOSITS. 93 
 
 CHAPTER III. 
 
 PAYMENT OF DEPOSITS. 
 
 General Principles. 
 
 § 80. Duty of bank to pay checks. "A banker transacting 
 publicly tbe ordinary business of his calling, receiving daily 
 deposits, and bound to meet with promptness the drafts of his 
 customers, gives the community to understand that those who 
 have funds in his hands have not only the right to draw upon 
 the deposit, but that all drafts will be paid on presentation ; 
 he opens virtually a letter of credit to his depositor, which is 
 a guaranty to him, as well as to all who make advances upon 
 the faith of it. For all practical purposes it assimilates 
 itself to a parol promise to accept any check that the owner 
 of the deposit may draw ; and thus the rule which binds the 
 drawee of a bill of exchange as an acceptor, when he has 
 promised in advance to honor it furnishes a strong analogy."' 
 While this may be regarded as a correct statement of the 
 engagement between bank and depositor, on better authority it 
 is maintained that the liability of a bank to pay his checks 
 does not become fixed on their mere presentation.^ But when 
 they are received, and the money is paid to the holder, and 
 they are cancelled and charged to the maker, the payment is 
 complete. Of course, a check can be rescinded by agreement 
 of the bank with the payee.* Its possession by the drawee 
 bank is prima facie evidence of payment.^ 
 
 §81. When justified in not paying. A bank is always justi- 
 fied in paying on the order of a depositor, or on the order of 
 
 ' Storer, J., McGregor v. Loomis, 1 Disney, 247, p. 251. 
 
 2 Dickinson v. Coates, 79 Mo. 250 ; Albers v. Commercial Bank, 85 Id. 173. 
 
 ' Id. 
 
 * Wilson V. Goodin, Wright, Ohio, 219. 
 
94 BANKS AND THEIR DEPOSITORS. § 82 
 
 any person whom be designates to control the deposit,. iinti] its 
 ownership is claimed by another.' And if a depositor notifies 
 the bank not to pay his check, and the paying teller promises 
 to regard the notice, but does not, the drawer can recover the 
 amount from the bank.* 
 
 (a) Drawer's liability to holder. When the payment of a 
 check is countermanded, of course the drawer is liable for 
 the consequences of his conduct to the holder." But wherever 
 a check is an assignment of the amount therein specified, the 
 maker cannot countermand payment. In such a case the 
 control of his money passes from him when he issues his 
 check.* 
 
 § 82. Must pay within a reasonable time, {a) Remarks of 
 Green, J. A bank is bound by law to pay a check drawn by 
 a depositor within a reasonable time after receiving it ; or, if 
 then having inadequate funds for the purpose, within a 
 reasonable time after receiving them. Says Mr. Justice 
 Green:* "A bank is not bound by a legal obligation to the 
 holder to pay or accept a check drawn by a depositor, 
 although there may be funds of the drawer suiBcient for the 
 purpose to his credit at the time of presentment. But if 
 it does not pay or accept, it is bound to refuse. It has no 
 right to receive and keep the check indefinitely, thereby 
 leaving the holder to suppose that it has accepted the check 
 and assumed' its payment." 
 
 (6) English cases. " In the cases of Kilsby v. "Williams,* 
 and Boyd v. Emmerson,' it was held that where the check 
 was drawn upon the persons who were bankers both for the 
 drawer and the payee, the bankers were entitled to one day's 
 time to determine whether they were in funds with which to 
 pay the check, and that by giving notice of refusal on the 
 
 ' MoEwin V. Davis, 39 Ind. 109. 
 
 * Schneider v. Irving Bank, 1 Daly, 500. 
 
 » Albers v. Commercial Bank, 85 Mo, 173 ; Aff. 3 Mo. App. 59. 
 
 ' Union Nat. Bank v. Oceana County Bank, 80 III. 212. 
 
 B Northumberland Bank v, McMichael, 106 Pa. p. 464. 
 
 6 5 Barn. & Aid. 815. ' Ad. & E. 184. 
 
§ 84 PAYMENT OF DEPOSITS. 95 
 
 following day, they were relieved from liability merely on 
 the ground that they had retained the check for the one day. 
 These rulings were put expressly upon the ground that the 
 bankers were the agents of the payee to receive payment as 
 soon as the money could be collected, and were therefore 
 entitled to the usual time allowed to collecting agents. In 
 the first of the cases cited the check was paid in without any- 
 thing being said, or any entry made, but there was a recovery 
 notwithstanding a notice of refusal given the next day, 
 because, during the day sufficient funds were paid in by the 
 drawer to make the check good, and it was held to be the 
 duty of the bankers, as the payee's agents, having retained the 
 check, to apply the first moneys coming in to its payment. 
 In the second case there was no recovery, because the bankers 
 were not placed in funds by the end of the day, and they 
 gave notice of refusal the next day, and this was held to be 
 in sufficient time to relieve them from liability on the mere 
 ground of delay in giving the notice. But in neither of these 
 cases was it intimated that a delay of more than one day 
 would have been tolerated, whether the bankers were in funds 
 or not." In the recent case of Saylor v. Bushong,' it was 
 held that an acceptance of the check might be implied from 
 the circumstance that in settling the drawer's account the 
 drawee retained an amount sufficient to meet the outstanding 
 check drawn in Saylor's favor. 
 
 § 83. Efiiect of crediting depositor with check on depository. 
 Whenever a bank receives a check drawn on itself' by a 
 customer in payment of his debt, and which is charged to 
 his account, " it thereby admits that it has funds of the 
 drawer sufficient to meet the check, and the acceptance is per 
 se an appropriation of those funds to the payment of the 
 check. "2 
 
 § 84. Bank must pay if deposit be sufficient. If a bank 
 refuse to pay the check of a depositor drawn on a sufficient 
 deposit he can maintain an action against it for the wrong 
 
 1 100 Pa. 23. s Pratt v. Foote, 9 N. Y. 463, p. 466. See § 18. 
 
96 BANKS AND THEIR DEPOSITORS. § 85 
 
 done, altliough no actual damage may have been sustained,' 
 Says Judge Trunkey.* " If the check has not been revoked, 
 by common usage, the holder expects it will be paid on pre- 
 sentment. He may suffer a real injury by refusal, for which 
 he may be without redress, as in case of the drawer becom- 
 ing insolvent before recourse to him could be effectual. It 
 would seem that the holder ought to have a remedy against 
 the bank for a wrongful refusal of payment arising from an 
 implied promise from the usages of business, or the course of 
 dealing between the parties. . . If the bank, in violation 
 of its duty, dishonors a check, the holder may be injured 
 quite as much as the drawer, and the bank ought to be 
 answerable to each party injured by breach of the contract." 
 
 § 85. Part payment of check, (a) In Illinois. If the de- 
 positor have an insufficient deposit to pay a check, and the 
 payee is willing to receive whatever is due from the bank, it 
 should honor the check to this extent, crediting the amount 
 thereon.' In Illinois, however, a different rule prevails. 
 There, a bank is not required to pay a check unless the 
 drawer's deposit is sufficient to pay the whole amount. The 
 banker is " under no obligation to make a partial payment," 
 for if it did, the check could not be taken and held as a 
 voucher.* 
 
 {p) In Massachusetts. The rule in Massachusetts* is : "A 
 check drawn upon a bank for more than the amount of the 
 drawer's funds on deposit creates no lien upon and gives the 
 payee no right to the actual balance until the bank has 
 agreed to pay it pro tanto." Hence, if the drawer of such a 
 check should become insolvent before the bank had agreed to 
 pay to the holder whatever balance there might be to the 
 
 ' Marzetti v. Williams, 1 Barn. & Ad. 415. In Bircliall v. Third Nat. 
 Bank, Phil. Com. Pleas, 15 Week. No. Cas. 174, $600 were given. 
 2 Say lor v. Bushong, 100 Pa. 23. 
 ' Bromley v. Commercial Nat. Bank, 9 Phila. 522. 
 < Coates V. Preston, 105 111. 470, citing In re Brown, 2 Story, 602. 
 6 Dana r. Third Nat. Bank, 13 Allen, 445. 
 
§ 88 PAYMENT OF DEPOSITS. 97 
 
 drawer's credit, the bank would be obliged to pay the same 
 to his assignee. 
 
 § 86. Payment of special deposit. When funds are depos- 
 ited for a special purpose, of which the depository is notified, 
 it should not apply them in a difterent manner. This subject 
 will be fully considered in a subsequent chapter. 
 
 § 87. Application of deposit to illegal purpose. A bank 
 cannot apply a deposit to a known illegal purpose, for exam- 
 ple, to paying bonds issued by the depositor which have been 
 declared invalid. Thus the court said of a bank in Kentucky 
 that " it could not become the depository of the collected 
 taxes of the people for a valid and legal purpose and, with 
 full knowledge of the illegal and void character of the bonds 
 which had been over-issued, permit the money in its posses- 
 sion to be misappi'opriated to the discharge of those bonds. 
 To sanction such a principle would allow every trustee of 
 moneys to account for them by the known misconduct of 
 others, and release him from his duty to see that the trust 
 fund under his control is not diverted from the trust with his 
 knowledge and consent."* 
 
 § 88. Payment of post-dated check. A post-dated check is 
 valid,^ but a bank should not pay it before the date mentioned ; 
 and if it does, the money can be recovered.* If transferred 
 by the holder to another for a good consideration before it 
 is due, he may recover of the maker though there was no 
 consideration for the check in the beginning. Thus A. lent 
 his post-dated check to B., the latter agreeing to pay it, and 
 if he did not furnish the money needful, A. was to notify the 
 
 1 Howard v. Deposit Bank, 80 Ky. 496. 
 
 s Frazier v. Trow's Printing and Bookbinding Co., 90 N. Y. 678; Aff. 24 
 Hun, 281. 
 
 ' Godin V. Bank, 6 Duer, 76. "Payment of a bill 'or check before it is 
 due will not be a discharge unless made to the rdal proprietor of it, and 
 therefore where a banker contrary to usage paid a check the day before it 
 bore date which had been lost by the payee it was held that he was liable to 
 repay the amount to the person losing it." Statement of decision in Da Silva 
 V. Fuller, Sel. Cas. 238, by Shaw, Ch. J., in Wheeler i'. Guild, 20 Pick. p. 
 552. 
 
 7 
 
98 BANKS AND THEIR DEPOSITORS. § 90 
 
 bank on which it was drawn not to pay the same. Before 
 the check was payable, B. transferred it to C. in payment of 
 an existing indebtedness. C. knew nothing of the agreement. 
 In an action thereon, he recovered against A., the court de- 
 claring that its trasfer before maturity "aftbrded no cause 
 of suspicion," while the " consideration of the transfer was 
 sufficient."* 
 
 § 89. Must pay only on indorsement of payee, (a) Effect of 
 custom. The duty of a bank when accepting a check is to 
 pay the same only on the genuine indorsement of the payee. 
 This duty is not affected by a custom among bankers con- 
 cerning the mode of ascertaining the identity of the person 
 indorsing the name of the payee and receiving payment. If 
 the drawee rely on false representations of identity for which 
 neither the drawer nor payee are responsible, he pays the 
 wrong person at his peril.* 
 
 (b) Execution oj drawer's intention no excuse for wrong pay- 
 ment. Nor can a banker justify the paying of a check to a 
 person not bearing the name of the payee on his unauthorized 
 indorsement by showing that he was the person to whom the 
 drawer intended to make payment though ignorant of his 
 intention at the time of paying the check. Nor can the banker 
 prove some facts occurring at the time of drawing the check 
 and exclude others tending to disprove such intention.^ 
 
 § 90. Payment of telegraph order. But if a person should 
 present a telegraph order for money to a bank and represent 
 himself to be the payee, and a man of good character and 
 standing should identify him as the person named therein, 
 and he indorsed his signature to a receipt for the money as 
 correct, the bank would not be negligent in paying him the 
 money although it should be proved that he was not the 
 person named in the order.^ 
 
 1 Mayer i>. Mode, 14 Hun, 155, citing Brewster v. MoCardel, 8 Wend. 478 ; 
 Schepp V. Carpenter, 51 N. Y. 602. 
 ' Dodge V. National Ex. Bank, 30 Ohio St. 1 ; S. C, 20 Id. 234. 
 a Id. See Chap. VI. 
 * Bank v. Western Union Tel. Co., 52 Cal. 280. 
 
§ 93 PAYMENT OF DEPOSITS. 99 
 
 § 91. Bank excused if publicly forced to pay. A bank is 
 excused from paying a deposit when it can show that the 
 same has been paid by an authority which it had no right to 
 question nor power to resist.* This rule was applied in the 
 following case : M. deposited money in the Bank of Louisi- 
 ana. The bank and assets were seized by the commanding 
 general of the United States army. In a suit brought by 
 M. to recover his deposit, it was held that as the assets of 
 the bank were delivered to the government in obedience to 
 the order of the commanding general its liability to its depos- 
 itors ceased.^ 
 
 § 92. No recovery of payment to checkholder through mistake 
 of amount of deposit. If a bank pay a check to an innocent 
 payee supposing that it has funds of the drawer, when in 
 truth it has none, the money cannot be recovered.* No prin- 
 ciple of law is better known. " It seems to be clearly laid 
 down and settled that a check once credited in the books of 
 a bank is an acceptance, and subjects the acceptor to pay- 
 ment ; and that when the check has been actually paid that 
 the bank must look to the drawer for redress, and not to the 
 payee."* 
 
 § 93. No recovery of overpayment to depositor by mistake 
 in final settlement. If a bank, through mistake, overpay a 
 depositor in settling the account, and the error is discovered, 
 but no effort is soon made to recover the overpayment, it can- 
 not when a subsequent account is opened, two years afterward, 
 charge the overpayment to the depositor." Applying the 
 principle established in Louisiana that a depository is not 
 authorized to apply a deposit to the payment of the depos- 
 itor's indebtedness without his special mandate, the court 
 
 1 Grivot V. La. State Bank, 24 La. Ann. 265. 
 
 2 Mandeville v. Bank, 19 La. Ann. 392. 
 
 3 Hull V. Bank, Dudley, 259. 
 
 * Butler, J., Hull v. Bank, supra, citing Bentinck v. Dorrien, 6 East, 199 ; 
 Cocks V. Masterman, 9 Barn. & Cr. 902. 
 
 ^ Hancock v. Citizens' Bank, 32 La. Ann. 590 ; the court citing several 
 Louisiana cases. 
 
100 BANKS AND THEIR DEPOSITORS. § 94 
 
 remarked that " the conduct of the bank in concealing from 
 the plaintiff its discovery of the error alleged, and permitting 
 him, in ignorance of any claim against him, to open a new 
 deposit-account and continue it until he had got hold of enough 
 money to satisfy its claims did not come up to the standard 
 of candor and good faith required in dealings of this nature. 
 It involved a deception, and justified the plaintiff in the 
 expectation and confidence, that his deposits in 1871 would 
 be subject to his order, without which we cannot believe he 
 would have made them. The bank had no right to disap- 
 point this just expectation and confidence by suddenly spring- 
 ing upon its depositor this claim of which he had been kept 
 in ignorance. It was the plain duty of the bank to have 
 notified the plaintiff of the error in its former settlement as 
 soon as discovered, or at the first possible opportunity." 
 
 § 94. Payment of check through fraud of pa3ring teller, (a) 
 Atlantic Sank v. Mercharits' Bank. Sometimes checks are 
 fraudulently paid by a paying teller or other ofBcer. The 
 .paying tellers of M. and A. banks conspired with a broker 
 whereby the latter drew his check on the M. bank, where he 
 had no funds, which the paying teller mai'ked " good," and 
 which the broker took to the teller of the other bank, who 
 gave him bank notes therefor. These he took to the M. bank 
 and gave th»m to the paying teller who put them in his cash 
 to cover a deficit. IS'o other persons knew of the transaction. 
 His cash was counted that afternoon by the directors, approved 
 and returned to him. The next morning he committed sui- 
 cide ; the check was presented to the M. bank by the other 
 and payment was refused. In the end it was obliged to pay.' 
 
 (b) IVineiple more formally stated. Subsequently, a case 
 very similar was tried by the same court and with the same 
 result. More formally stated the principle is this, if money 
 be fraudulently taken from the owner by his clerk and paid 
 into a bank to its defaulting teller at his request for the 
 
 1 Atlantic Bank v. Merchants' Bank, 10 Gray, 532. See Ingraliam v. Maine 
 Bank, 13 Mass. 208. 
 
§ 95 PAYMENT OF DEPOSITS. 101 
 
 purpose of enabling him to exhibit to the bank officers as 
 money of the bank, and thus to conceal his embezzlement, it 
 does not become the money of the bank, although in examin- 
 ing and settling the accounts of the defaulting teller before 
 the discovery of the embezzlement, it was received and 
 counted by the different officers of the bank as the money of 
 the bank and treated as such and put to his credit on the 
 books and afterwards returned to his custody. And the 
 owner may maintain an action to recover the same.' 
 
 § 95. Pa3rment to messenger or agent, {a) Bristol Knife 
 Company ease. "When a check is presented by a messenger or 
 agent of the owner or drawer for payment, what prudence shall 
 the depository exercise in paying it? The treasurer of a manu- 
 facturing company sent a check by a messenger to a bank in 
 a neighboring city where it kept an account. The check was 
 indorsed to the order of the cashier. The treasurer, knowing 
 that the messenger was not trustworthy, inclosed the check 
 in a sealed envelope with a deposit ticket. The messenger, 
 however, broke open the envelope and presented the check to 
 the teller of the bank, saying that the treasurer wished him 
 to get the amount in currency to pay the company's hands. 
 The teller called the cashier, showed him the check, and told 
 him that the messenger wanted the money therefor. The 
 cashier asked him who he was, and having replied that he 
 was the brother of the treasurer, whose strong personal 
 resemblance was recognized, the cashier directed the teller to 
 give him the money. The messenger after receiving it dis- 
 appeared. The company sued the bank for the amount of 
 the check and recovered. One reason why the court decided 
 ao-ainst the bank was because the check was drawn on another 
 bank. It was found by the court, said Judge Loomis, "that 
 the payment of the money on a check indorsed like this was 
 not the ordinary way of using such checks as between banks 
 and persons having deposit accounts with them, but that the 
 regular course was for the banks to credit the checks to the 
 
 1 Skinner v. Meroliants' Bank, 4 Allen, 290. 
 
102 BANKS AND THEIR DEPOSITORS. § 95 
 
 account of the other party, who obtained the avails by draw- 
 ing their own cheeks on the bank."' And it was further 
 found that such was the uniform practice and course of deal- 
 ing between the parties to this suit prior to the transaction 
 in question.^ 
 
 {b) Bristol Knife Company case. The case was a very close 
 one, and two of the five judges comprising the court dissented. 
 The remarks of the court on the principal question are worth 
 giving. " Had the messenger who delivered the check at the 
 bank authority from the plaintiffs to receive the money 
 thereon ? It is conceded that there was no authority in fact. 
 The only authority of the messenger, in fact, was to deliver 
 to the bank the sealed envelope containing the check and 
 deposit ticket, have the check credited to the plaintiffs, and 
 get the bank-book. He was not in any sense a general agent; 
 he had never done any business for the plaintiffs of any kind, 
 and was an entire stranger to the officers of the bank. He 
 was only a special agent, and that, too, of exceedingly limited 
 authority. And here the familiar and elementary rule of law 
 applies, ' that an agent constituted for a particular purpose, 
 and under a limited power, cannot bind his principal if he 
 exceeds that power. Whoever deals with an agent constituted 
 for a special purpose, deals at his peril when the agent passes 
 the precise limits of his power.' We would not, however, 
 adhere so closely to the literal terms of this rule as to do injus- 
 tice to innocent third parties, who have acted on the con- 
 fidence of an apparent authority, for which the principal is 
 justly responsible. But, in order to bind the principal, he 
 must, by his words or acts, have fully authorized the third 
 party to believe that the agent had authority, and^ in apply- 
 ing this rule to business transactions, care must be used to 
 distinguish clearly between the act of the principal and the 
 mere act of the agent. If the agent by this act assumes an 
 
 ' But the Court of Common Pleas in New York has declared that the pay- 
 ment by a bank of checks drawn on other banks is legitimate banking busi- 
 ness, Murray v. Bull's Head Bank, 3 Daly, 364. 
 
 " Bristol Knife Co. v. First Nat. Bank, 41 Conn. 421. 
 
§ 97 PAYMENT OF DEPOSITS. 103 
 
 appearance of authority which induces a third party to 
 believe he has, in fact, authority, it is not sufficient. It is 
 the principal's own act only that gives to the agent an appear- 
 ance of which become binding on hira." 
 
 § 96. Payment of checks when money is loaned for specific 
 purpose. "When a person gets a credit from a bank for a 
 specified amount and purpose, it is under no obligation to 
 pay a larger amount by reason of the using by the borrower 
 of a portion of his money for a purpose foreign to that men- 
 tioned. In a case involving this principle it was declared 
 that no privity existed between a bank and the person for 
 whom the money was intended when the credit was given 
 whereby he could recover on checks given by the borrower 
 in excess of the amount loaned.* But when a bank promised 
 to pay A.'s checks for a cargo of corn, and this fact was told 
 to the seller, and he, relying on the fulfilment of the promise, 
 sold the corn and took A.'s check therefor, the bank was re- 
 quired to pay it.^ The difference, said the court, between 
 this and the former case was that the promise of the bank to 
 pay the check drawn by the purchaser of the cargo of corn, 
 Allen, was communicated to Nelson, the seller, both by Allen 
 and one of the bank directors ; and E^elson's partner, who 
 sold the corn, testified that he knew Allen was not pecuniarily 
 responsible, and that he took his check solely on the credit 
 given by the promise of the bank to pay. If If elson " had 
 sold his corn merely on Allen's credit, and without any 
 knowledge that the bank had undertaken to pay his checks, 
 there would be no ground for holding it liable on its promise." 
 § 97. Liability for mistaking depositor. If a bank negli- 
 gently pay to the wrong person supposing him to be the 
 depositor, it is liable. But whether a bank is negligent in 
 paying a deposit to a person whose name is pronounced like 
 that of another depositor, but spelled difterently, is a question 
 of fact to be determined by the circumstances in each case.' 
 
 ' First Nat. Bank v. Pettit, 41 111. 492. 
 2 Nelson v. First Nat. Bank, 48 111. 36. 
 a White v. Springfield Institution, 134 Mass. 232. See §§ 179, 180. 
 
104 BANKS AND THEIR DKPOSITOES. § 99 
 
 § 98. Liability for illegal deposit. If a bank illegally re- 
 ceive money belonging to the State, it must refund the same. 
 Thus, a State treasurer deposited with a bank a portion of 
 the State revenue, the bank, with sureties, agreeing to return 
 the money on demand. The bank having become insolvent, 
 the treasurer sued the sureties, who defended on the ground 
 that the deposit was illegal. But it was decided that whether 
 the bank received the money honestly or through fraud it 
 was liable for the amount, and so were the sureties.* 
 
 §99. Drawer's death revokes Ms check, (a) Payment with- 
 out knowledge. A bank should not pay a check after learning 
 of the death of the drawer; but if paid in ignorance of this 
 event it is not liable." The rule is nearly a hundred yeare 
 old, and though, as has been maintained, the drawer's obliga- 
 tion to pay is not in truth lessened by his death, nevertheless, 
 the event operates as a revocation , of his check. Judge 
 Trunkey remarked in the case of Say lor v. Bushong,' that 
 " a check may be revoked before presentment by the drawer's 
 death, or by his order not to honor it, but if not revoked it 
 is the duty of the bank to pay on demand. For breach of 
 this duty the drawer has a right of action." 
 
 (6) Where rule does not apply. But wherever the issuing of 
 a check works an assignment of the maker's deposit, his death 
 does not aflect the check. " If the check creates an absolute 
 appropriation of the funds, such appropriation, unless it be a 
 delusion and a sham, must vest some right in the party for 
 whose benefit the appropriation is made. Was it ever before 
 heard, in our jurisprudence, that a right once vested, whether 
 with or without consideration, could be divested by the death 
 of the party from whom it was acquired.' 
 
 ' Harbison v. Bailey, 114 Pa.- — . 
 
 2 Tate 11. Hilbert, 2 Ves., Jr., 118. s 100 Pa. 23. 
 
 ' Lewis V. International Bank, 13 Mo. App. 202, p. 207. The reader may 
 be reminded, however, that the higher court in Missouri does not sanction the 
 doctrine tliat the issuing of a check works an assignment of the maker's deposit. 
 In McGregor ». Loomis, 1 Disney, 247, the court first deciding tliat the check- 
 holder after notifying the bank held, " the specific fund appropriated by the 
 
§ 101 PAYMENT or DEPOSITS. 105 
 
 § 100. Legal payment of check to non-owner. Is a bank 
 ever justified in paying a deposit to any person than the law- 
 ful owner ? The following interesting case has been recently 
 decided : Dewar, the owner of money, gave it to his employer, 
 Warrack, for depositing in a bank. "Warrack deposited it in 
 his own name, but the bank knew who was the true owner. 
 Warrack indorsed the certificate of deposit to the owner who 
 in turn deposited the same in a safe to which Warrack had 
 access. Afterward, Warrack took the certificate from the 
 ^afe, struck out the indorsement and drew the money. A few 
 days later, Dewar, learning what had been done, expressed 
 his disapproval both to Warrack and to the bank. Warrack 
 proposed to secure him by a mortgage on land that he owned, 
 which proposition was accepted. But the mortgage was not 
 executed, Warrack delaying the matter by various false pre- 
 tences for more than three years. During this period, "the 
 indebtedness in question was treated by both Dewar and 
 Warrack as a loan from the former to the latter." The evi- 
 dence clearly showed this. Consequently, when Dewar finally 
 sued the bank for the money he could not recover.^ 
 
 § 101. Payment by draft at depositor's request, (a) Eisk is 
 depositor's. Deposits are usually paid in money over the 
 counter of the bank, or through the clearing house, but some- 
 times a depositor desires to get his deposit by a bank draft. 
 In such a case the risk of transmission is assumed by the de- 
 positor. If the bank send it in the usual way by mail, and 
 the letter containing it is properly addressed, the bank is not 
 responsible in the event of loss. In transmitting a draft the 
 bank may adopt the address contained in the letter requesting 
 
 terms of the check," also remarked that "the authority to recover the amount 
 represented by the check, cannot be lost to the holder by the death of the 
 drawer before it is presented, or even his insolvency ; and should the neglect 
 of the holder have discharged the drawer from his liability, the right to the 
 fund still remains, else the depository would only be freed from all obligation 
 to pay his check, but would retain also the deposit upon which it was 
 drawn." 
 
 1 Dewar v. Bank, 115 111. 22. 
 
106 BANKS AND THEIK DEPOSITORS. § 102 
 
 the remittance, and is not bound to use a more particular de- 
 signation or mode of address for the purpose of insuring 
 delivery to the proper person.' 
 
 (6) English case. The trustee of a deceased London dress- 
 maker wrote to a creditor in Suftblk asking to be "favored with 
 a check in the course of a week." The check was accordingly 
 sent, but was stolen in transit, the indorsement forged and the 
 amount paid by the bankers on whom it was drawn, A suit 
 was brought on behalf of the creditor's estate, and the question 
 was whether the creditor or the debtor should stand the loss. 
 Baron Huddleston remarked that the post-office was ordi- 
 narily considered to be the agent of the sender of the letter, 
 and not of the receiver, and when this was the case the remit- . 
 tance must, of course, be at the sender's risk. The case then 
 proceeds on a familiar principle in the law of carriera, 
 where, if a consignee of goods direct shipments to him in a 
 particular way, the shipment, according to his direction, 
 completes the seller's duty and responsible duty, and places 
 the merchandise at the consignee's risk. As the distance was 
 too great to justify an expectation that the check would be 
 sent by messenger. Baron Huddleston held the debtor was 
 entitled to interpret the request as one to send a check by post. 
 This implied request having been followed, the post-office 
 department was held to be no longer the exclusive agent of 
 the sender, but the common agent of both parties. He there- 
 fore entered judgment for the defendant.* 
 
 § 102. Duty of successor to pay predecessor's deposits. If 
 the business and funds of a bank pass to another the successor 
 is liable to the depositors of the former. " Any other doctrine 
 
 1 Jung V. Second Ward Savings Bank, 55 Wis. 364 ; see Burr v. Sickles, 
 17 Ark. 428 ; Gurney v. Howe, 9 Gray, 404. " Ordinarily, when one person 
 directs another to send him by mail a check for money, and the same is in- 
 closed in a letter properly directed and deposited in the post-office, such a 
 check at once becomes the property of the former, and is thereafter at his 
 risk," Indiana Nat. Bank «. Holtsclaw, 98 Ind. p. 87. 
 
 2 Norman v. Ricketts, Lond. Bank. Mag. June, 1886, p. 497. For liability 
 for loss of a note or money sent by mail, see First Nat. Bank u. McManigle, 
 69 Ca. 156 ; Warwicke v. Noakes, Peake, N. P. 98. 
 
§ 103 PAYMENT OF DEPOSITS. 107 
 
 it seems to us would be monstrous. As well as contend that 
 because one has his name changed by legislative enactment 
 he thereby avoids all obligations incurred in his former 
 name."' So, too, a savings bank, the successor to the business 
 of private bankers who had given a certificate of deposit to 
 A., was held liable for another certificate given by it in lieu 
 of the former.* !N"or was the bank in the least relieved by 
 proof of the bad faith of its officers in redeeming the 
 certificate of the private bankers mentioned, or relieved from 
 paying other certificates which they had not issued and for 
 which others had been subsequently given. 
 
 We shall next consider the principles which apply especi- 
 ally to the payment of deposits to corporations, or to persons 
 in a fiduciary or representative capacity. 
 
 Corporation Deposits. 
 
 % 103. Payment of corporation deposits. " It is a point of 
 very great importance," said Lord Hatherly, in an English 
 case, " that those who are concerned in joint-stock companies 
 and those who deal with them should be aware of what is 
 essential to the due performance of their duties, both as 
 customers or dealers with the company, and as persons form- 
 ing the company, and dealing with the outside world respec- 
 tively. . . A banker dealing with a company must be taken 
 to be acquainted with the manner in which, under the articles 
 of association, the moneys of the company may be drawn out 
 of his bank for the purposes of the company. . . In this case 
 the bankers were informed that checks might be drawn upon 
 the bank by three of the directors of the company. And the 
 bankers must also be taken to have had knowledge, from the 
 articles, of the duties of the directors, and the mode in which 
 the directors were to be appointed. But, after that, where 
 
 ' Henry, J., Bans v. Exchange Bank, 79 Mo. 182, citing Hopper v. Moore, 
 42 Iowa, 563 ; Hughes v. School District, 72 Mo. 643 ; Thompson ». Abhott, 
 61 Id. 176. 
 
 « Citizens' Sav. Bank v. Blakesley, 42 Ohio St. 645. 
 
108 BANKS AND THEIR DEPOSITORS. § 104 
 
 there are persons conducting the affairs of the company in a 
 manner which appears to be perfectly consonant with the 
 articles of association, -then those so dealing with them, ex- 
 ternally, are not to be affected by any irregularities which 
 may take place in the internal management of the company. 
 They are entitled to presume that that of which only they 
 can have knowledge, namely, the external acts, are rightly 
 done, when those acts purport to be performed in the mode 
 in which they ought to be performed. For instance, when a 
 check is signed by three directors, they are entitled to assume 
 that those directors are persons properly appointed for the 
 purpose of performing that function. Of course the case is 
 open to any observation arising from gross negligence or fraud. 
 . . Outside persons when they find that there is an act done 
 by a company, will, of course, be bound, in the exercise of 
 ordinary care and precaution, to know whether or not that 
 company is actually carrying on business, or whether it is a 
 company which has been stopped and wound up, and which 
 has parted with its assets and the like. All those ordinary 
 inquiries which mercantile men would, in the course of their 
 business, make, I apprehend would have to be made on the 
 part of the persons dealing with the company." These remarks, 
 we suppose, will apply with as much force to American banks 
 and bankers in dealing with corporations and other companies. 
 In applying them to the foregoing case, it was decide<i that 
 a bank which had the funds of a company could lawfully 
 honor the checks of its directors which were signed similar 
 to a form sent by them to the bank without inquiring whether 
 they had been duly appointed to office in conformity v/ith 
 the memorandum and articles of association.' 
 
 § 104. President cannot draw checks. The president of a 
 corporation is not authorized by virtue of his office to draw 
 checks. This authority, however, may be granted by charter, 
 
 1 Mahony v. East Holyford Mining Co., 33 Law T. 383, p. 386 ; Ernst v. 
 NiohoUs, 6 H. L. Cas. 401 ; Royal British Bank v. Tnrquand, 6 E. & B. 327 ; 
 Fountaine v. Carmarthen Railway Co., L. R., 5 Eq. 316. 
 
§ 105 PAYMENT OF DEPOSITS. 109 
 
 by law, or by the usage of the place where the corporation is 
 doing business. The directors of the !N"ew York and Sharon 
 Canal Company were so negligent in depositing its funds that 
 the bank officers supposed the deposit belonged to the presi- 
 dent of the company. At the time of making it he left his 
 signature, as is the custom in opening a new account, by 
 which it was to be drawn out. The bank paid moneys on 
 his check, supposing that he had authority to draw them, 
 but was protected by law from paying again on the applica- 
 tion of the company to the court to compel a second payment,' 
 
 Payments to Executors avd Trustees. 
 
 § 105. All co-executors must sign, (a) De Haven v. Wil- 
 Uams." The principles relating to the drawing of deposits by 
 trustees and executors will now be stated. As a co-executor 
 should deposit the money received in that capacity to the 
 joint account of all of the executors, so must they unite in 
 drawing it from the depository. Said Judge Hare, in a well- 
 considered opinion, which was approved by the Supreme 
 Court of Pennsylvania, " It were futile to open a joint account 
 if one of the depositors could withdraw the money. All 
 must, therefore, unite in the receipt or check, in order to dis- 
 charge the banker ; and it follows that he cannot rely on a 
 compromise or release by one as a defence. This is not so 
 much an exception to the rule that a payment to a co-execu- 
 tor discharges the debt, as a return to the general rule, to 
 which that is an exception. The right of each executor to 
 act without the concurrence of the rest, seems to have been 
 the growth of circumstances." After showing why executors 
 had been permitted to divide their duties, he continued : "It 
 results from what has been said that the right of executors 
 to sever in the execution of the trust is a concession to expe- 
 diency, which should not be made when the case is one for 
 
 ' Wnlton Bank v. N. Y. Sharon Canal Co., 4 Paige, 127. 
 s 80 Pa. 48 
 
110 BANKS AND THEIR DEPOSITORS, §106 
 
 care and judgment, and it is possible for all to unite without 
 inconvenience. It does not, therefore, exist where a fund 
 arising from the collection or sale of the assets comes to the 
 hands of two or more executors or administrators, or has 
 been deposited to their joint account. Under these circum- 
 stances, there is nothing to exclude the principle that persons 
 acting in a fiduciary capacity must concur in every measure 
 affecting the interests which they represent." * 
 
 (b) In England one can sign. The English rule, however, 
 is different, and a check signed by one co-executor will pro- 
 tect a banker in paying it.* So will the check of one of sev- 
 eral administrators;' or even the check of a co-executor act- 
 ing under a forged will.* 
 
 § 106. Trustees must all sign. With regard to trustees, 
 the English law requires all to sign a check for drawing de- 
 posits." And if money is paid into a bank on the joint ac- 
 count of persons who are not partners in trade, payment must 
 be made on the authority of all to discharge the bank.* If 
 one of them absconds, so that his signature cannot be ob- 
 tained, a court of equity can order the bank to pay the trust 
 deposit on the check of the remaining trustees.'^ 
 
 ' See Beltzhoover v. Darragh, 16 Serg. & Raw. 329 ; Mendle v. Guedalla, 2 
 J. & H. 259. 
 
 2 Ex parte Rigby, 19 Ves., Jr. 462 ; Can v. Read, 3 Atk. 695. 
 
 3 Pond f. Underwood, 2 Ld. Raym. 1210 ; Prosser v. Wagner, 1 C. B., N. S., 
 289 ; Clough v. Bond, 3 M. & C. 490. 
 
 * Allen «. Dundas, 3 Term, 125. 
 
 » Stone V. Marsh, Ry. & M. 364. 
 
 s Innes v. Stephenson, 1 Moo. & Rob. 145. In England, sometimes, before 
 opening an account with a customer, bankers require him to consent to their 
 retaining his checks, and sometimes a check is drawn to be kept by a banker 
 after he has paid the money, as a kind of security for repayment. On one 
 occasion, when three persons signed their respective names to such a check, 
 the liability was declared to be joint, and not a joint and several liability, 
 and that an action could not be sustained against the estate of one of them 
 who, though signing like the others, was in truth a surety, the drawee refus- 
 ing to pay the money unless this particular person would sign the check, 
 Other 1). Ireson, 24 L. J., Ch. 654; S. C, 3 Drewry, 177. 
 
 ' Ex parte Hunter, 2 Rose, 363; S. C, 1 Met. 408. 
 
§ 107 PAYMENT OF DEPOSITS. Ill 
 
 § 107. When depositor has private and fidnciary accounts. 
 
 What is the duty of the bank to pay the check of a depositor 
 who has a private and a public account, and who is an exec- 
 utor and also a public officer, has been declared by Judge 
 Pardee in an interesting case.' The depositor's "money 
 thereby became to such a degree his own, and was to such an 
 extent at his sole disposal, subject to his uncontrolled decision 
 as to the place and manner of temporary keeping, that he 
 could retain both in his personal possession without mark 
 upon either, mingle them in one deposit, transfer the deposit 
 from one account to the other for his convenience in keeping, 
 investing, or paying, without imposing upon the respond- 
 ent an obligation because of these acts to know or suspect a 
 fraud. Neither by such holding, or deposit, or transfer, is 
 money lost to its own fund. It is not lost nor has a fraud 
 been perpetrated so long as it remains in his possession or at 
 his command, with an intent to answer all demands both of 
 the estate and town ; and so long as possession and ability to 
 answer continue in him the intent will be presumed to be 
 united with them. And a check drawn either individually 
 or officially, payable to order or bearer, is so nearly the equal 
 of currency in case of transfer, and performs so many offices 
 of paj'ment, between individuals and executors, between the 
 latter and trustees, and between these again and individuals, 
 without giving any evidence when presented either of the 
 number or character of the transactions of which it has been 
 made a part or of the payments which it has effected, that 
 the law will not charge the officers of a bank with knowl- 
 edge that a depositor has committed a fraud, nor impose 
 upon them the duty of inquiry, because he has drawn upon 
 a treasurer's account checks paj'able to himself or to bearer, 
 or has transferred money from it to his own and from his 
 own to it. They are not required to assume the hazard 
 of correctly reading in each check the purpose of the drawer."^ 
 
 • Goodwin v. American Nat. Bank, 48 Conn. 550. See § 40. 
 
 * In each of the following cases — Bodenham v. Hoskyns, 2 De G., M., & G., 
 903 ; Colt V. Lasnier, 9 Cow. 320 ; Duncan v. Jaudou, 15 Wall. 165 ; Smith v. 
 
112 BANKS AND THEIR DEPOSITOKS. § 109 
 
 § 108. Slieriff '8 deposit, (a) Payment of money into court. 
 If a bank receive a deposit from a sheriff", arising from 
 the sale of land on a legal process, and he dies, it cannot be 
 required to pay the funds into court for distribution. His 
 successor is the proper person to demand and receive the 
 money, and he can be ruled into court for the purpose of dis- 
 tributing it. But if a bank pays the money into court, 
 though not required to do so, and a decree of distribution is 
 made, the bank cannot appeal therefrom, because it has no 
 interest in the matter.^ 
 
 (6) When sheriff is executor. If a sheriff be also an execu- 
 tor a deposit to the credit of his official account does not im- 
 port ownership by a particular person ; consequently when 
 conflicting demands are made on such a deposit the bank 
 stands as a mere stakeholder, and has a right to demand in- 
 demnity before paying it." 
 
 § 109. Payment of a trust deposit for a fixed period. If 
 money is deposited for the benefit of another payable at a 
 fixed period, the bank is bound to pay the same on the arrival 
 
 Ayer, lOlU. S. 320; MoLeodr. Drummond, 17 Ves., Jr.,153 — said Judge Pardee 
 in Goodman v. American National Banlc, 48 Conn. p. 665, " the person com- 
 pelled to surrender money paid, or assets pledged to or purchased by him, 
 acquired from one known to him to be an executor or trustee? that which he 
 knew to be an asset of the estate or of the trust, with actual knowledge de- 
 rived from the executor or trustee himself that he intended to use the pro- 
 ceeds of the sale or pledge for the relief of his private necessities ; and, as a 
 rule, in cases where the pledgee or purchaser had not knowledge from the 
 declaration of the executor or trustee, we think the courts have not de- 
 creed a forfeiture of title unless he had actual knowledge of facta which of 
 themselves afford as convincing evidence of the fraudulent intent as if the 
 executor or trustee had made such declarations to him ; as when a trustee, 
 confessedly borrowing for his own use, offers in pledge a certificate of stock 
 in his name as trustee, without any accompanying oral declaration that he 
 had only the title of trustee to the shares ; as was presumably the case of 
 Shaw V. Spenser, 100 Mass. p. 382. The court compelled the pledgee in such 
 case to accept the declaration of the certificate as the equivalent of a declar- 
 ation by the person." 
 
 1 Allegheny Bank's Appeal, 48 Pa. 328. 
 
 ' Farmers and Mechanics' Nat. Bank i'. King, 57 Penn. 202. 
 
§ 111 PATMKNT OF DEPOSITS. 113 
 
 of that period, nor can it be taken sooner by any legal pro- 
 cess against the person for whose benefit the deposit is 
 made.* 
 
 § 110. Title of deposit evidence of ownership. H. deposited 
 in a bank the proceeds of an excursion to the credit of himself 
 and two others as "trustees of Post 13, G. A. R." The bank 
 paid the deposit to him after notice by the Post not to do so. 
 In a suit by the Post against the bank, the evidence of owner- 
 ship of the deposit was conflicting. Prima facie it belonged to 
 the Post, and the burden of proof was on the bank to show 
 that the money belonged to H. When on the stand he was 
 asked: "Did you receive one-half of the profits of the excur- 
 sion, a portion of which is the amount in dispute and had 
 you proposed before to the Grand Army of the Republic, 
 that they should have one-half of the profits ?" It was decided 
 that this was a pertinent question touching the ownership of 
 the fund.* 
 
 § 111. Bank pa]^ at its own risk after proMbition. £. em- 
 plpj'ed S. to take timber from his land and to have a lien 
 thereon for his work until payment was made. S. rafted the 
 timber from B.'s land, sold it and took a note in his own 
 name in payment, which was collected by a bank. B. gave 
 the bank notice that the money was his, and not to pay the 
 same to S. and indemnified the bank against harm if refusing 
 to pay the money to S. The bank did nevertheless pay S. 
 but was afterward obliged to pay B. the amount with in- 
 terest. The court said that as " the property itself was a 
 trust for the benefit of its owner so necessarily became the 
 fund, and it could be followed through any number of trans- 
 mutations by the owner while ever it could be identified. 
 The bank would of course be entirely justified in paying to 
 a depositor money standing to his credit, if not notified that it 
 belonged to another, and with notice not to pay it on his 
 
 I Foxton V. Kueking, 55 Me. 346. 
 
 i Arnold et al., Post No. 13 v. Maoungie Sav. Bank, 71 Pa. 287. 
 
 8 
 
114 BANKS AND THEIR DEPOSITORS. § 112 
 
 check. But where such notice is given, the bank will pay to 
 the depositor at its own risk." ' 
 § 112. Bank cannot divert trust fund to reimburse itself, 
 
 (a) Bridgman v. Gill? A bank has no right to apply a trust 
 deposit to make itself whole for the trustee's personal indebt- 
 edness. In an English case, two trustees deposited a fund 
 with a banking house, and at the same time gave notice that 
 the deposit was a trust fund. The court declared that, from 
 the heading of the account, as well as from the evidence in 
 the case, the bankers had notice of the true nature of the de- 
 posit. The person for whom the trustees acted was indebted 
 to the banking house, and, without authority from the trus- 
 tees, gave a check on the fund to pay his debt. The banking 
 house having appropriated the money, a bill was brought 
 against the concern by the trustees to recover the money. 
 The Master of the Rolls said that the most remarkable thing 
 was that the defendants should have resisted the relief sought. 
 It was " totally immaterial that the defendants had not notice 
 of what the precise trusts were; all that was necessary for 
 them to know was, that this was a trust account, and that the 
 fund vr&s held by the plaintiffs as trustees." 
 
 (i) Bodenham v. Hoskyns.^ In another case a depositor kept 
 , two accounts, one in his own name, the other in the name of 
 an estate as agent. Having overdrawn his own, he transferred 
 enough from the other account to make up the deficiency. 
 The court declared that the depositary must refund the amount 
 thus transferred to the owner of the estate. 
 
 (c) In ex parte Kingston.^ Gross, a county treasurer, used 
 to pay public moneys into the B. Bank, but kept his private 
 account at the !N". and P. Bank, and carried over the police 
 rates to the latter account by checks drawn on the other bank. 
 Afterward he opened a superannuation and also a special ac- 
 
 1 First Nat. Bank v. Bache, 71 Pa. 213. The bank took indemnity in this 
 case from both, parties. Farmers and Meolianios' Nat. Bank v. King, 57 Pa. 
 202. 
 
 2 24 Beav. 302. » 2 De G. M. & G. 903. 
 * L. 11., 6 Ch. App. 632. 
 
§ 113 PAYMENT OF DEPOSITS. 115 
 
 count with the 'S. and P. Bank. Finally, he opened another 
 account with it, headed Police Account. Some of the items 
 to his credit in this account were ascertained to be county 
 funds, and some were not. The checks which he drew on 
 this account appeared to be drawn only for county purposes. 
 The bank treated all the accounts as one in granting interest, 
 which was credited to G.'s private account. It was also 
 proved that the bank knew of his official position. Like 
 more than one official he absconded, having overdrawn his 
 private and special account and leaving a favorable balance 
 to the other two, the police and superannuation. The bank 
 endeavored to regard all the accounts as one, and to retain 
 enough from the two last to balance the amount due on the 
 private and special account, but the court would not permit 
 this to be done. 
 
 § 113. Liability of bank for misapplying trust fund. When 
 a bank participates with the trustee in misapplying a trust 
 fund, it is liable to the beneficiary for the loss.' In Loving 
 V. Brodie^ advances were made to the trustee. They wei'e 
 demand loans to the payment of which the trust funds, de- 
 rived from the sale of real estate and in other ways, were 
 applied. These demand loans, remarked the court, were in 
 efiect permissions to the depositor to overdraw, and if the 
 trust funds when paid in were absorbed by these overdrafts, 
 the demand loan was thus paid. "We are not prepared to 
 say," continued Judge Devens, " that permitting a trustee to 
 overdraw, and then to pay the overdraft by the proceeds of 
 trust property which he has a right to sell, necessarily makes 
 the bank responsible for the money thus overdrawn, if it be 
 misused by the trustee. Had the trustee sold the real estate, 
 which he had authority to do, and deposited the proceeds 
 with the bank, there being no balance against him, and had 
 he then drawn out the money and devoted it to his own use, 
 the bank would certainly liot be responsible. It is not shown, 
 in regard to the bank account, that any advances were made 
 
 1 Bank v. Clapp, 76 N. Car. 482. ' 134 Mass. 453, p. 469. 
 
116 BANKS AND THEIR DEPOSITORS. § 114 
 
 to Brodie, trustee, under such circumstauces that the bank 
 was fairly put upon inquiry whether they were or were not 
 to be used for other purposes than those of the trust, and thus 
 that it should be made responsible for the fraud committed 
 by him on the estate." 
 
 § 114. How far beneficiary can follow trust fund, (a) When 
 rule does not apply. Whenever a trust fund has been per- 
 verted, the cestui que trust, or person for whose benefit the 
 fund was created, can follow it as far as it can be traced.* 
 But if an officer of a bank, without due security, should lend 
 its money to a partnership of which he was a member, and 
 it should become mingled with the other property of the 
 concern, this rule could not be invoked for its recovery.^ 
 
 (6) How beneficiary can treat trustee. It may be added that 
 " whenever a trustee, unless properly authorized to do so, 
 puts the fund in such shape as to invest himself with a legal 
 title to it, the cestui que trust has his election either to treat 
 the fund, according to the appearance of things, as the pro- 
 perty of the trustee, and regard the latter as his debtor, or he 
 may demand that the title be transferred to him. If a deposit 
 is made in such manner as, on the face of the books of the 
 bank in which the deposit is made, to authorize the trustee, 
 his assignee, or legal representative, to claim it as the fund of 
 the depositor, the cestui que trust has the option to do likewise.* 
 
 1 United States v. State Bank,.96 U. S. 30. 
 
 2 Case u. Beauregard, 1 Woods, 126. 
 
 '■> Mitchell, J., Naltner v. Dolan, Ind. Sup. Ct., 26 Am. Law Reg., N. S. 25, 
 citing Merket v. Smith, 33 Kansas, 66 ; McAllister v. Commonwealth, 30 Pa. 
 536 ; Morris v. Wall, 3 Id. 319 ; Jackson v. Bank, 10 Id. 61 ; School District v. 
 First Nat. Bank, 102 Mass. 174 ; Utica Ins. Co. v. Lynch, 11 Paige, 520 ; Bart- 
 lett I). Hamilton, 46 Me. 435. Judge Mitchell further added in the ahove 
 case that ' ' in case it becomes the duty of an agent or trustee to deposit 
 money belonging to his principal, he can escape tlie risk only by making the 
 deposit in his principal's name, or by so distinguishing it on the books of the 
 bank as to indicate in some way that it is the principal's money. If he 
 deposit in his own name, he will not, in case of loss, be permitted to throw 
 such loss on his principal, Williams v. Williams, 55 Wis. 300 ; Norris v. Hero, 
 22 La. Ann. 605 ; Mason v. Whitthorne, 2 Cold. 242 : Jenkins v. Walter, 8 Gill & 
 J. 218 ; Robinson v. Ward, 2 Car. & P. 59 ; Maodonnell v. Harding, 7 Sim. 178 ; 
 
§ 115 PAYMENT OV DEPOSITS. 117 
 
 Attaching Creditors of Depositor. 
 
 % 115. Bank cannot pay attached deposit. As a deposit is a 
 debt due from the bank to the depositor, it may be attached 
 by his creditor like any, other property belonging to him.' 
 
 Mcintosh V. Greensdale, 6 Northeast Rep. 926. In such a case *be good faith 
 or intention of the trustee is in no way involved. Having, for his personal 
 convenience, or from whatever motive, deposited the money in liis own name, 
 thereby vesting liimself with a legal title, it follows, as a necessary conse- 
 quence, when loss occurs, he will not be permitted to say, as against his cestui 
 que trust, that the fact is not as he voluntarily made it appear." 
 
 "The rule in equity is well settled," said Judge Boynton, in the case of 
 Shaw V. Bauman, 34 Ohio St. 25, p. 32, "that if a trustee deposits tlie funds 
 of a trust estate in bank in his own name, individually, with his own private 
 funds, he thereby becomes debtor to the trust estate and a creditor of the 
 bank ; and in case the trust funds are lost through the insolvency of the bank, 
 tlie trustee becomes individually liable for the loss. Wren v. Kirton, 11 Ves., 
 Jr., 377 ; Maodonnell v. Harding, 8 Eng. Ch. 177 ; In the matter of Stafford, 
 11 Barb. 353 ; Brown v. Rickets, 4 Johns. Ch. 303. Where a sheriff collected 
 money under an execution, and of his own accord deposited the same in a 
 bank which failed, he was held liable to the plaintiff in execution, Phillips 
 II. Lamar, 27 Ga. 228. In Robinson v. Ward, 2 Car. & P. 59, it was held that 
 where an attorney, having in his hands the money of his client, places the 
 same to his private credit at his banker's, he will be liable to the client for 
 the amount, if the bank fail, although he does so bona fide, and has a large 
 sum of money of his own at the bankers. Abbott, C. J., said: 'If the per- 
 son having the money mixes it with his own, he thereby makes himself, per- 
 sonally, debtor to the estate. Here the defendant has mixed this money 
 with his own by paying it to the credit of his private account at his bankers, 
 and he is, therefore, liable in this action. This is a very hard case, and all 
 suspicion against the defendant is quite out of the question ; but one of two 
 innocent parties must lose the money, and, under the circumstances of the 
 case, I think the plaintiff is entitled to a verdict.' " And in Wisconsin if 
 an administrator deposit in his own individual name funds of the estate in a 
 bank which afterwards fails, the loss is his own and not that of the estate, 
 even though he had no other funds there and informed its officers at the 
 time of making the deposit that the funds were held by him in trust, Wil- 
 liams u. Williams, 55 Wis. 300 ; Matthews t. Brise, 6 Beav. 239 ; Massey v. 
 Banner, 1 J. & W. 241 ; Commonwealth ,,■. McAllister, 28 Pa. 480 ; S. C, 30 
 Id. 536. Many other cases are reviewed or cited in Williams v. Williams, 
 supra. See also Ward v. School District, 10 Neb. 293. 
 
 1 Frazier v. Erie Bank, 8 Watts k Serg. 18 ; Stair v. York Nat. Bank, 55 
 Pa. 364 ; Harrisburg Bank v. Tyler, 3 Watts & Serg. 373 ; Bank v. Maoalester, 
 9 Pa. 475; Smaller v. Union Canal Co., 37 Id. 68. 
 
118 BANKS AND THEIE DEPOSITORS. § 116 
 
 But an attaching creditor gains no right over the depositor's 
 Kioney not possessed by the depositor himself.' 
 
 (a) Cases on the subject. A foreign attachment against Jack- 
 son was served on tlie Bank of the United States as garnishee. 
 Afterward Jackson, acting as agent for third persons, depos- 
 ited cash in his own name with the bank, and at his request 
 it purchased and discounted drafts drawn by him in his own 
 name, though in fact as agent, which were paid by his prin- 
 cipal. Jackson drew out the funds by his cheek and applied 
 them in the business of his principal. The bank was declared 
 to be liable to the attaching creditor, although the jury found 
 that all the funds were deposited and drawn out by Jackson 
 as agent for others.* In another case an English firm drew a 
 draft on Naser, payable at his place of business in I^ew York, 
 and gave it to McCulloch & Co., who transmitted it to the 
 First IlTational Bank of New York, for collection. Before 
 the draft became due Naser began an action against the Eng- 
 lish firm, and immediately after paying the draft attached the 
 proceeds as a debt due from the bank to the English firm. The 
 bank disputed the validity of the attachment on the ground 
 that it was the debtor of McCulloch & Co. and not of the 
 firm. The court, however, did not sustain this claim, but 
 decided that Naser acquired a valid lien on the proceeds of 
 his draft by his attachment.' 
 
 § 116. Attachment of principal's deposit for agent's debt. 
 (a) Bank of Northern Liberties v. Jones.* "Whenever a deposit 
 is made by one as " agent," it is, in the absence of contrary 
 evidence, the property of his principal, and can be attached 
 only for his debt. The case of the Bank of Northern Liber- 
 ties V. Jones, which illustrates this point, is also quite impor- 
 tant, for the banking practice described by the court. For 
 a long time Thomas C. Jones had deposited there in the 
 name of "Thomas C. Jones, agent." A firm, J. & C, sued 
 
 • Farmers & Mechanics' Nat. Bank v. King, 57 Id. 202. 
 
 s Jackson v. Bank, 10 Pa. 61. 
 
 » Naser v. First Nat. Bank, 36 Hun, 343. * 42 Pa. 536. 
 
§ 116 PAYMEXT or DEPOSITS. 119 
 
 Jones and garnished the hank, hy which process it was re- 
 quired to state whether it had any money belonging to hira. 
 The bank as garnishees, and the parties whose money, de- 
 posited by Jones as agent, had been attached, offered to prove 
 that the deposit consisted of various sums, belonging partly 
 to persons for whom Jones was acting as agent, and partly to 
 an estate of which he was the executoi-. The court which 
 first tried the case refused to admit the testimony, but the 
 Supreme Court held otherwise, thus deciding that a deposit 
 made by one as "agent" belongs to his principal, and cannot 
 be taken for an agent's debt. "If there had been separate 
 accounts," said the court, " each headed as the agency account 
 of such an estate or person, which is certainly the safer mode 
 for all parties, and is perhaps the only really correct one, 
 there could have been no doubt that no creditor of the agent 
 could have attached a farthing of either .of any of the funds 
 so ear-marked." After maintaining that the evidence should 
 have been admitted, the court add, " the case, however, illus- 
 trates the propriety of opening separate accounts appropriately 
 designated, so that each fund may be distinctly ear-marked, 
 and thus prevent all dilBculty in case of death, failure, or any 
 accident destroying the evidence of identity under a general 
 agency account. It is proper to say that such an accomit as 
 the present, not designating the individuals who are the real 
 owners of the money deposited, should be avoided, both by 
 the bank and its customer, and I am informed by the cashier 
 of one of the oldest banks of large capital in this city, that his 
 institution invariably refuses to open an account with the ad- 
 dition of an ' agent,' or ' attorney,' to the proper name of the 
 depositor." 
 
 (6) Judge Strong's opinion. In another Pennsylvania case,' 
 a collector of rents deposited the money of his principal in a 
 bank in his own name, which was attached by a creditor of 
 the depositor. Immediately afterward notice of ownership 
 was given to the bank. "It is undeniable," said Judge 
 
 1 Farmeis & Mechanics' Nat. Bank v. King, 57 Pa. 202. 
 
120 BANES AND THEIR DEPOSITORS. § 117 
 
 Strong, " that equity will follow a fund through any number 
 of transmutations, and preserve it for the owner so long as it 
 can be identified. And it does not matter in whose name the 
 legal right stands. If money has been converted by a trustee 
 or agent into a chose in action, the legal right to it may have 
 been changed, but equity regards the beneficial ownership. 
 It is conceded, for the cases abundantly show it, that when 
 the bank received the deposits it thereby became a debtor to 
 the depositor. The debt might have been paid in answer to 
 his cheeks, and thus the liability have been extinguished, in 
 the absence of interference by his principals, to whom the 
 money belonged. But surely it cannot be maintained that 
 when the principals asserted their right to the money before 
 its re-payment, and gave notice to the bank of their owner- 
 ship, and of their unwillingness that the money should be 
 paid to the agent, his right to reclaim it had not ceased." 
 
 § 117. Effect of certified check before attachment. The 
 making of a check which is afterward certified, and is outstand- 
 ing in the possession of the drawer, does not so change the 
 ownership of the deposit as to exempt it from attachment. 
 The liability of a bank in such a case to hold the deposit sub- 
 ject to the attachment lien can be removed only by showing 
 that the check was made in good faith and that the deposit 
 was paid to a bona fide holder, or that the check is in the 
 possession of such holder. "When the funds of a depositor have 
 been attached the bank has an active duty to perform in the 
 matter and cannot escape liability when, by inaction, it allows 
 the attached fund to be removed from its possession. 
 
 (a) The case of Gibson v. National Park Bank, in which the 
 foregoing principles were stated, is worth describing. Prior 
 to April, 1875, a railroad comfumy had a deposit account 
 with the bank. The deposits were made byan officer^ 
 Rodney, whose official position was known by the bank. On 
 the day above mentioned, the company, through this official, 
 drew a check for the amount of its balance, which was certified 
 by the bank, charged to the company, and the check was 
 delivered to Rodney. On the 30th of April, an attachment 
 
§ 117 PAYMENT OF DEPOSITS. 121 
 
 against the company was served on the bank by delivery of a 
 dopy of the document and proper notice. The check was 
 then in Rodney's possession and was owned by the company. 
 Shortly after the attachment was made, Rodney opened an 
 account with the bank in his own name and deposited the 
 check described and other securities belonging to the com- 
 pany. The bank had reason for believing that the securities 
 belonged to the company, that they were to be applied in 
 payment of its debts, and they were, in truth, applied in this 
 manner. The bank was declared liable to the person who 
 attached them. The court said : " When the officers of this bank 
 had notice of the service of the attachment, it was their duty 
 to take immediate steps to impound the funds in their hands, 
 and prevent their payment by any of its agents, except to a 
 bona fide holder of its obligations. It cannot shield itself 
 from liability by alleging the ignorance of the agent making 
 the payment while other agents having authorit}' and owing 
 a duty to act in the premises had knowledge of the facts 
 which made such payment a violation of duty on the part of 
 the corporation. The circumstances certainly raised a pre- 
 sumption of knowledge in the bank which required explana- 
 tion on their behalf. It was, therefore, quite significant that 
 no officer of the bank was produced to testify his ignorance 
 of the fact that these securities belonged to the railroad com- 
 pany, or that the bank supposed it was paying them in good 
 faith to a bo7ia fide holder when they gave Eodney an indi- 
 vidual credit for them. The facts relating to the point in 
 dispute being peculiarly within the knowledge of the defend- 
 ant, the presumption arising from their omission to furnish 
 such goes strongly to support the finding of the referee, [which 
 was ' that the bank had reason to and did believe when the 
 deposit was made, that the funds composing it were the 
 property of the railroad corporation.'] That the defendant 
 had notice of the purpose for which this deposit was trans- 
 ferred was properlj' found by the referee as a natural infer- 
 ence from the knowledge which it had of the embarrassment 
 of the railroad company, their acknowledged desire to avoid 
 
122 BANKS AND THEIR DKPOSITOKS. § 120 
 
 the service of an attachment upon their funds and the pre- 
 vious efforts of the creditors to reach them by legal process,"* 
 
 § 118. When a check can be paid after attachment. When 
 the balance due a depositor is attached, the bank cannot 
 deduct his outstanding check which has not been presented 
 and accepted prior to the a,ttachment proceeding.^ But when- 
 ever a cheek drawn on a bank is an assignment of the amount 
 specilied, it follows that a check drawn by an attachment 
 debtor before the service of such process, though not pre- 
 sented for payment until afterward, should be paid by the 
 drawee bank.* A note, though, on which an attachment debtor 
 is liable, which is discounted by a bank before tlie service of 
 attachment process, and matures afterward, cannot be paid 
 from the debtor's funds at his request without presenting 
 the same to the maker for payment.* 
 
 § 119. Deposit of certified check can be garnished. If a 
 bank receive from a depositor a check on another bank 
 indorsed " for deposit," and which is afterward certified, it 
 becomes liable to the depositor as though it had received the 
 money, and is liable to garnishment in a suit by a creditor of 
 the depositor." But if a check be deposited for collection, 
 the bank is not liable to garnishment while it remains un- 
 collected.' 
 
 § 120. Duration of lien. Garnishment operates as a lien 
 from the time of service on any money or effects of the 
 debtor in the possession of the garnishee, and by no act of the 
 debtor, or of the garnishee, or of both, can the lien be defeated.^ 
 If an assignment be declared void, money deposited before 
 the depository or assignee was garnished can be applied to 
 the debt which the assignor owed the depository.* 
 
 1 Gibson v. National Park Bank, 98 N. Y. 87, p. 95 ; first trial, 89 N. Y. 343; 
 and 49 N. Y. Sup. Ct. 429. 
 
 » Harry v. Wood, 2 Miles, 327. 
 
 » National Bank v. Indiana Banking Co., 114 111. 483 ; Reeve t>. Smith, 
 113 Id. 47. 
 
 * National Bank v. Indiana Banking Co., supra, 
 
 « National Com. Bank v. Miller, 77 Ala. 168. s jd. i 14, 
 
 ' Pollock V. Okolona Sav. Institution, 61 Miss. 293. 
 
§ 123 PAYMENT OF DEPOSITS. 123 
 
 § 121. Attachment not defeated by outside acceptance. A 
 verbal acceptance of a check by the cashier away from the 
 bank is not effective. A garnishee process, therefore, served 
 on the bank by the depositor's creditor after such an accept- 
 ance and before the amount has been transferred on the books 
 of the bank will hold the money.' ISor will the statement of 
 the bank clerk prior to an attachment levy to the holder of a 
 check that it shall be paid, avail anything, for such a promise 
 cannot bind a bank.* 
 
 § 122. How long should bank hold disputed deposits. When- 
 ever deposits are garnished standing in the name of a depositor, 
 the bank is justified in holding them until the determination 
 of the suit even though they should be claimed by the wife 
 of the depositor as her property.' If not holding them un- 
 til the question of title is settled, the bank may be obliged 
 to pay a second time. Thus, the plaintiff', a wife, deposited 
 money with a banker, and afterward, in a suit against 
 her husband, he and the banker were garnished. The court 
 found -that the deposit was the property of the husband, 
 whereupon the banker without further action by way of 
 interpleader or otherwise paid the amount into court. Sub- 
 sequently, it having been proved that the deposit belonged 
 to her, the banker was obliged to pay again.^ 
 
 §123. Deposit in non-owner's name to avoid creditors, (a) 
 Greenleaf V. Mumford.^ When money is deposited by A. in 
 his own name belonging to B. in order to prevent B.'s credi- 
 tors from getting it, what is the duty of the bank if they 
 attempt to recover the deposit? In New York a person 
 named Greenleaf obtained an attachment against the property 
 of Mumford, which the sheriff attempted to satisfy by levying 
 on money deposited in the iN'assau Bank. It had been de- 
 posited in the name of Oakey, who had drawn checks against 
 
 1 Bullard v. Eandall, 1 Gray, 605. « Duncan v. Berlin, 60 N. Y. 151. 
 " Ferguson n. Bank, 25 Kansas, 333. 
 
 • Crumb o. Treiber, Cayahoga Uis. Ct., Ohio, 4 Bull. 616 ; S. C, 2Clev. Rep. 
 25. See § 150. 
 6 50 Barb. 543. 
 
124 BANKS AND THEIR DEPOSITORS. § 123 
 
 it to his own order, which had been certified and left unin- 
 dorsed in the bank. Both Oakey and the bank at first denied 
 that the money was Mumford's property, or subject to the 
 attachment. The justice before whom the case was first tried 
 held that the money was deposited for Mumford and belonged 
 to him, and that the drawing and certifying of the checks 
 was a device for screening the money from Mumford's credi- 
 tors, and to defeat the levy of the sheriff. The Supreme 
 Court at general term reversed the decision, declaring that, 
 however fraudulent the transaction between Mumford and 
 Oakey might be, Greenleaf could only attach the fund as a 
 debt of the bank to Mumford, while the facts showed that 
 " the debt arising from the deposit in the bank by Oakey and 
 the credit given by the bank to Oakey was a debt of the 
 bank's to Oakey, and not a debt of the bank's to Mumford." 
 (6) Review of the case. It should be noted that the court 
 did not assert that the money was beyond the reach of any 
 process by Mumford's creditors. The court simply decided 
 that the sherifl" could not maintain his action. It may be 
 added that the opinion expressed the minds of two judges, 
 while the third judge dissented. The previous year, in 
 another case the same court, though composed of other judges, 
 had said that " it appears to be wholly unnecessary and with 
 out authority that an action to collect, protect, or remove 
 obstructions to the collection of intangible assets, should be 
 prosecuted in the name of the creditor. The sherift", or the 
 creditor in his name, can maintain every necessary action to 
 collect the debts due to the defendant in the atta,chraent, and 
 for that purpose can make fraudulent assignees and claimants 
 of such debts parties to the action, and thus overcome fraudu- 
 lent transfers and obstructions."' Clearly justice is more 
 likely to be satisfied by endowing the officers of the law who 
 collect judgments with the broader authority which they are 
 declared to have by the court in the latter case. In any 
 event, as the controversy is not over the rights of creditors 
 
 ' Mechanics & Traders' Bank v. Dakiu, SO Barb. p. 593. 
 
§ 124 PAYMENT OF DEPOSITS. 125 
 
 to reach money fraudulently deposited in order to keep it 
 from them, but only over the way or remedy for reaching it, 
 the prudent course for a bank is not to pay until the question 
 of ownership is authoritatively settled.* 
 
 § 124: Deposits held subsequent to attaoliment. In a case 
 in Maryland, Nicholson was in the habit of purchasing and 
 advancing money on drafts drawn by Delcher. Sometimes 
 the money was paid to Delcher, at other times he left it with 
 Nicholson, the latter agreeing to hold it for the use of per- 
 sons named by Delcher, and to be paid to them on the pre- 
 sentation of his checks. Delcher having been sued, an at- 
 tachment was served on Nicholson by Delcher's creditor. 
 After the service of the attachment, Delcher continued to 
 leave money with Nicholson as before, and which was paid 
 by him to the persons named by Delcher in his checks. The 
 question was, whether the money deposited by Delcher with 
 Nicholson was liable to attachment at the instance of Del- 
 cher's creditors; and the court held that in Maryland the 
 attachment secured not only the property of Delcher in the 
 hands of Nicholson at the time it was laid, but also such 
 other property belonging to Delcher as came into Nicholson's 
 hands at any time before trial and judgment.^ "We take 
 the law to be well settled," said the court, " that where 
 money is deposited by A. with B. for the use of C, the right 
 of C. to the money is not complete until C. has in some 
 manner recognized or assented to the deposit, or unless there 
 is a privity of contract of some kind between B. and C. 
 Until such assent or privity of contract the money is subject 
 to the control of A., and therefore liable to attachment at the 
 instance of his creditors."' The money, therefore, deposited 
 
 1 See also Kelly v. Lane, 42 Barb. 594 ; Lawrence v. Bank of the EepuWio, 
 35 N. Y. 320 ; Mechanics & Traders' Bank v. Dakln, 28 How. Pr. 502. 
 
 2 Nicholson v. Crook, 56 Md. 65 ; First Nat. Bank v. Jaggers, 31 Id. 38 ; 
 Farmers and Merchants' Bank v. Franklin Bank, 31 Id. 404. 
 
 Kelly V. Roberts, 40 N. Y. 432 : Brown v. Foster, 4 Cnsh. 214; Baker r. 
 Moody, 1 Ala. 315 ; Briggs «. Block, 18 Mo. 281 ; People v. Johnson, 14 111. 
 342. 
 
126 BANKS AND THEIR DEPOSITORS. § 126 
 
 b}' Delcher with I^icholsou after the attachment belonged to 
 him ; it was in his power, at any time before the assent of 
 the parties to the deposit, to revoke the terms on which it 
 was made, and Nicholson was obliged to pay over the same 
 on the attachment process. 
 
 § 125. Attachment of borrowed money. Borrowed money 
 which has been deposited can be attached like any other 
 deposit. A person in Massachusetts obtained money of S. 
 and deposited it in a bank in his own name. On the same 
 day, however, he drew out his deposit in bills of the bank, 
 and subsequently deposited them or other bills of the same 
 bank in his own name as before. S. sought to recover the 
 money, but the court held that it belonged to a person who 
 had attached it after the borrower had made the second de- 
 posit.* 
 
 Principal and Agent. 
 
 Under this head two questions have arisen : First, when 
 can a bank retain the deposits made by an agent to extinguish 
 his indebtedness to itself; and, secondly, when should it pay 
 them to the principal instead of the agent. We shall consider 
 the last question first. 
 
 § 126. When principal can claim deposit made by agent. 
 When an agent deposits to his own account the proceeds of 
 property sold by him for his principal, under instructions to 
 keep it in this manner, a trust is impressed thereon in favor 
 of the principal, and his right is not affected by the fact that 
 the agent at the same time deposits other money belonging 
 to himself, nor hy the fact that the agent, instead of deposit- 
 ing the identical money received by him on account of his 
 principal, substitutes other money. In Van Alen v. Ameri- 
 can IS&t. Bank* it was suggested on the argument that notice 
 to the bank by the depositor was necessary to protect the 
 rights of the plaintiff', but, said Church, C. J., " this is not 
 
 » Fuller r. Randall, 1 Gray, 608. « 52 N. Y. 1, p. 10. 
 
§ 128 PAYMENT OF DEPOSITS. 127 
 
 BO. The title of the plaintiff does not depend upon whether 
 the bank knew he had a title or not. That rested upon 
 other facts. A notice to the bank might have prevented any 
 transfer or the creation of a lien by the depositor, or prevented 
 the bank from taking or acquiring such lien in good faith, 
 but could not otherwise be necessary or important." 
 
 § 127. Bank is protected in paying deposit through ignorance. 
 But if the bank does not know that the deposit is fiduciary, 
 it cannot be held liable to the principal in the event of a 
 subsequent misapplication of the deposit by his agent. C. 
 was in the habit of indorsing and sending checks to his agent 
 in New York for payment. The latter indorsed them prop- 
 erly and deposited them in a bank, but without disclosing 
 his agency. They were credited to his account, and he drew 
 checks for the amount which were certified and paid. After 
 the failure of the agent his principal sued the bank, but did 
 not recover.' 
 
 § 128. When bank is protected in knowingly paying agent. 
 {a) City Bank v. Kent? If an agent have a general power of 
 attorney to collect money for his principal, which is deposited 
 in a bank to the principal's credit, and he then draws the 
 deposit on checks purporting to be signed by the principal 
 and believed by the officer of the bank to be genuine, the 
 bank is discharged, whether the checks are genuine or not ; 
 they are, in eft'ect, receipts and acquittances in the name of 
 the principal. Moreover, the agency continues so long as the 
 power is not revoked and the business is not withdrawn from 
 the agent's control. Said Judge Bleckley: "We think the 
 officers of the bank were well justified in treating checks as 
 genuine which were presented by the agent, bearing the name 
 of his principal. Such cheeks vpere sufficient receipts and 
 acquittances for the money paid out by the bank upon them. 
 Besides, the element of ratification is in the case ; and while 
 it does not go directly to the checks, it does go to the general 
 
 1 Case B. Mechanics' Bank. Association, 4 N. Y. 166. 
 * 57 Ga. 283, p. 303. 
 
128 BANKS AND THEIR DEPOSITORS. § 129 
 
 fact of use and control of the money by the agent. It is not 
 improbable that the agent deceived his principal and abused 
 his powers. But did he transcend the powers apparently 
 conferred upon him? We think not. The bank did not 
 select the agent. The principal selected him, and held him 
 forth as his representative. If the agent's infidelity is to 
 injure either, the bank, we think, should not be the victim." 
 
 (6) When liable. In the following case, though, the bank 
 was justly held liable for the wrong-doing of the agent. A. 
 had a large amount of sppcie consigned to him, which he took 
 to a bank for the purpose of depositing until he received in- 
 structions from his principal. The oflacers advised him to 
 deposit the specie in his own name during the interval for 
 the sake of greater convenience in drawing it out. After- 
 ward, he applied a portion to pay his indebtedness to the 
 bank ; but this it was obliged to refund to the principal.* 
 
 (c) Notice of principal to the bank. If a bank pay the 
 checks of an agent without interference of the principal, of 
 course, it is protected. But when he asserts his right to the 
 deposit and gives notice of his ownership and of his unwilling- 
 ness to have payment made to his agent, the latter's right to 
 draw the deposit ceases.' 
 
 § 129. Principal's deposit cannot be taken for agent's debt. 
 So, too, when a bank has notice of the ownership of the de- 
 posit from the principal it cannot be taken by the agent's 
 creditor, or by any other person intending to make a wrong- 
 ful use of the same.^ A case arose in Pennsylvania, involv- 
 ing the principle.^ A bank issued its own check at the request 
 of Gray, and it was charged to Gray's account. He was the 
 agent of Erankish, and had on deposit at the time more than 
 the amount of the check. Frankish afterward informed the 
 cashier of the bank of Gray's unfaithfulness and desired that 
 he would not pay the check mentioned if presented by one of 
 
 ' Commercial Bank v. .Tones, 18 Texas, 811. 
 2 Farmers, etc.. Bank ». King, 57 Pa. 202. 
 ' Morrill v. Raymond, 28 Kansas, 415. 
 < Penn Bank v. Prankish^. 91 Fa. 339. 
 
§ 130 PAYMENT OF DEPOSITS. ' 129 
 
 three persons, naming them. The cashier, while willing to 
 do anything he could to protect Frankish, nevertheless paid 
 the check to one of the three persons on his affidavit that he 
 was the holder for a consideration. Frankish sued the bank 
 to recover, and the jury returned a verdict in his favor, which, 
 except "for a single error," said the higher court, "might 
 have stood." The judge who charged the jury had said : " If 
 you believe the testimony in regard to Gray's transactions then 
 the burden of proof is on the bank to show that they did pay 
 the money over to a bona fide holder for value." " This," said 
 the Supreme Court, when reviewing the case, "was laying 
 a burden on the bank it was not entitled to bear. The 
 check in question was the bank's own check, that is, it was 
 issued by the cashier at the request of Mr. Gray, against whose 
 account it was charged. The check was strictly commercial 
 paper and every holder is presumed to be a holder for value. 
 . . Does the mere fact that the bank had been informed by 
 Frankish of Gray's fraud, and of his suspicions that Howells 
 was in collusion with him, accompanied with a request not 
 to pay the money to Howells, change the burden of proof? . . 
 If is sufficient to say there was not enough in the case to 
 throw upon the bank the burden of showing the bona fides of 
 Howells's holding. It had a right to rely upon the presump- 
 tion in bis favor. The burden of showing that Howells was 
 not a bona fide holder rests upon those who assert it." 
 
 § 130. Duty of bank when principal becomes a lunatic. A 
 bank cannot refuse to pay an agent on the ground that his 
 principal has become a lunatic until this fact has been estab- 
 lished by a competent tribunal. " Although the authority of 
 an agent may be revoked by the lunacy of his principal yet 
 the existence of the lunacy, before it can have that effect, 
 must be established by inquisition. There would be no 
 safety in admitting any other evidence of a fact which is to 
 have an operation so extensive ; and sound policy requires us 
 to adopt this rule."' 
 
 1 Per cnriam, Wallis v, Manhattau Company, 2 Hall, 495, p. 499. 
 
 9 
 
130 BANKS AND THEIR DEPOSITORS. § 134 
 
 § 131. Proof must be clear to recover. When the principal 
 seeks to recover a deposit made by an agent and in his own 
 name, the proof must be clear in order to maintain the case. 
 Hence, when A., the managing owner of a vessel, was per- 
 mitted by the other owners to have the possession of, two 
 orders of a company payable to the bearer which A. deposited 
 with his bankers and received the money thereon, it was 
 held that the other partners could not recover the deposit in 
 a suit brought after A.'s death, because it was not shown 
 that the deposit had been made on their account.* 
 
 § 182. Recovery of identical money. Even the identical 
 money deposited by an agent may be recovered if the bank 
 knew that it belonged to the principal f for example, money 
 kept labelled in the principal's name.* And if the deposit be 
 thus made in the name of the principal the law presumes that 
 it is the identical money received by the agent on account of 
 his principal.* 
 
 § 133, Auctioneer's deposits. If an auctioneer deposit the 
 proceeds of goods sold by him to his own credit, their owners 
 have no special claim on the funds ; they are merely creditors 
 of the depositor." And if a sale be not conjipleted the pur- 
 chaser cannot recover interest on his deposit with the auc- 
 tioneer until after making demand.* 
 
 § 134. Liability of bank when acting as agent. Whenever 
 a bank is the agent for keeping or sending the funds of a 
 principal, it is liable for abusing the trust. Thus, O'Hare 
 deposited money with the defendant bank for transmission to 
 the Henry Bank, this fact appearing on the ticket which 
 accompanied the deposit. The defendant 'bank transferred 
 the money to the Northwestern Bank for the purpose of 
 further transmission to the Henry Bank, but withholding all 
 knowledge of its trust character. The Henry Bank having 
 
 1 Sims V. Bond, 5 Barn. & Ad. 389. 
 
 2 Grand Trunk R. v. Edwards, 56 Barb. 408. 
 
 ' Beatty v. MoCleod, 11 La. Ann. 76. * Beatty v. McCleod, supra. 
 
 ^ Levy V. Cavanagh, 2 Bosw. 100 ; Marten v. Rocke, 53 Law T. Rep., N. S. 
 946. 
 6 Walsh ». Meyer, 3 N. Y. State Rep. 679. 
 
§ 135 PAYMENT OF DEPOSITS. 131 
 
 failed, the Northwestern Bank applied the money in question 
 to its indebtedness against it, O'Hare then sued the defen- 
 dant bank for the amount and recovered.* 
 
 § 135. Bank cannot retain principal's money for agent's debt. 
 (a) National Bank v. Insurance Company.'' In answering 
 the second question relating to agency deposits, when a 
 bank seeks to assert its lien against a fiduciary account 
 for a personal obligation of the depositor and contracted 
 for his private benefit, it must be held as having notice that 
 the fund represented by the account is Tiot the individual 
 property of the depositor, if it really consists in whole or in 
 part, of funds held by him in a trust relation.' Although tiie 
 relation between bank and depositor is that merely of debtor 
 and creditor, and the balance due on the account is only a 
 debt, yet the question is always open, to whom in equity does 
 it belong ? If the money deposited belongs to a third person, 
 and is held by the depositor in a fiduciary capacity, its char- 
 acter is not changed by placing it to his credit in his bank 
 account. Therefore, the third person can recover the money 
 if he can identify it. This applies to all trust property. A 
 court will follow money even if put into a bag or an undis- 
 tinguishable mass by taking out the same quantity. Accord- 
 ingly, when a bank account was opened in the name of a 
 depositor as " general agent," the bank knowing that he was 
 the general agent of an insurance company, and that the 
 money deposited was principally for premiums on policies col- 
 lected by him for the company, the bank was declared to be 
 chargeable with notice of the equitable rights of the com- 
 pany, although he deposited other money in the same account 
 and drew checks on it for his private use.* 
 
 (6) Sir George JesseUs opinion. In the above-mentioned 
 
 1 Drovers' Nat. Bank v. O'Hare, 18 Brad. 182 ; Aff. by 111. Sup. Ct., 19 Chic. 
 Leg. N. 180. 
 
 2 104 U. S. U. 
 
 » Cook </. TuUis, 18 Wall. 332; Neely v. Rood, 54 Mich. 134, p. 136. 
 * In Burtnett v. First Nat. Bank, 88 Mich. 630, the court cited a large num- 
 ber of authorities on the subject. 
 
132 BANKS AND THEIR DEPOSITORS. § 136 
 
 insurance case the court referred' to Knatchbull v. Hallett,* 
 in which the subject was fully cousidered. Sir George Jes- 
 sel, the Master of the Rolls, showed, said Judge Mathews, 
 that the modern doctrine of equity as regards property dis- 
 posed of by persons in a fiduciary position, is that, whether 
 the disposition of it be rightful or wrongful, the beneficial 
 owner is entitled to the proceeds, whatever be their form, 
 provided only he can identify them. If they cannot be iden- 
 tified by reason of the trust money being mingled with that 
 of the trustee, then the person for whom the trustee is acting 
 is entitled to a charge upon the new investment to the extent 
 money is traceable into it ; that there is no distinction between 
 an express agent and an agent, or bailee, or collector of rents, 
 or anybody else in a fiduciary position ; and that there is no 
 difference between investments in the purchase of lands, or 
 chattels, or bonds, or loans, or moneys deposited in a bank 
 account.* 
 
 Partnership Deposits. 
 
 % 136. How partnership account must be entered. A part- 
 ner has no implied authority to open a banking account on 
 behalf of the firm in his own name.* And if the partnership 
 business is carried on in the name of one partner, the other 
 may insist that the deposits shall be kept in the name of the 
 partnership. This rule is needful for their individual protec- 
 tion. And if an account is opened with a bank by one of 
 two partners in his own name, this is not conclusive to show 
 that the account was opened in his own behalf. The bank 
 can prove that it was acting as the agent of the partnership, 
 and that the account was theirs. The mere circumstance, 
 however, that the money deposited belonged to the partner- 
 ship is not sufficient for the purpose.^ 
 
 1 L. R., 13 Ch. Div. 696. « See § 171, e,/. 
 
 » Alliance Bank v. Kearsley, L. R., 6 C. P. 433 ; S. C, 40, L. J., C. P. 249. 
 
 * Cooke V. Seeley, 2 Ex. 745. 
 
§ 140 PAYMENT OF DEPOSITS, 133 
 
 § 137. Deposit cannot be drawn on individual partner's check. 
 
 A partnership deposit cannot be drawn out on the check of 
 an individual partner. If a bank should pay such a check 
 from the firm's deposit, it could justify itself only by showing 
 that the money was applied to the use of the firm. A partner 
 did once draw from a bank on his individual check partner- 
 ship money, saying at the time that the form of the check 
 was a mistake, that the money was drawn on joint account, 
 and directing the bank to pay it and similar checks which he 
 might draw thereafter. The bank was declared to be without 
 excuse in paying it.' itfor can a new partner transfer a deposit 
 of the old firm to his individual account without their author- 
 ity.^ 
 
 § 138. English rule. Mr. Grant has thus stated the English 
 rule : In the absence of a special agreement fixing the mode 
 of drawing checks on the partnership fund, the depository 
 must honor checks not post-dated drawn in the partnership 
 name, but not otherwise.' 
 
 § 139. Power of surviving partner. On the death of a 
 partner the survivor can draw a check for the partnership 
 deposit either in the partnership name or in his own as sur- 
 viving partner.* 
 
 § 140. Application of deposits after partner's death. If 
 " the partnership is in debt, and the surviving partners con- 
 tinue their dealings with a particular creditor, and the latter 
 joins the transactions of the old and the new firm in one en- 
 tire account, then the payments made from time to time by 
 the surviving partners must be applied to the old debt. In 
 that case, it is to be presumed that all the parties have con- 
 sented that it should be considered as one entire account, and 
 
 ' Coote V. Bank, 3 Cranoh C. C. 50. 
 
 2 Ex parte Hanson, 18 Ves., Jr., 232. 
 
 » P. 30 ; Forster v. Mackreth, L. R., 2 Ex. 163 ; Kirk v. Blurton, 9 Mees. & 
 Wels. 284 ; Emly v. Lye, 15 East, 7 ; Nicholson v. Rioketts, 29 L. J., Q. B. 55. 
 
 * Commercial Nat. Bank v. Proctor, 98 ill. 558 ; Backhouse v. Charlton, L. 
 R., 8 Ch. Div. 444. 
 
134 BANKS AND THEIR DEPOSITORS. § 142 
 
 that the death of one of the partners has produced no altera- 
 tion whatever." This rule was applied in Simson v. Ingham." 
 At the time of the death of a partner in a country bank, it 
 owed a considerable balance to a London banking house. 
 The course of business was for the latter house to send to 
 the other a monthly account of receipts and payments. 
 During the month succeeding the death of the deceased 
 partner the London house received more than enough to 
 pay the balance due from the other ; on the other hand, it 
 advanced on account of the country bank as much as it 
 received. At first, the London bank entered in its books all 
 receipts and payments after the death of the partner to the 
 account of the old firm, but did not transmit any account to 
 the country bankers until two months after that event. Then 
 two accounts were sent, one of them containing the dealings 
 of the old firm to the death of the partner, and the oth^r all 
 subsequent payments and receipts. It was held that the 
 entries in the books of the London _house did not efiect a 
 complete appropriation by it of the several payments to the 
 old account, nor could they have this effect until knowledge 
 of them had been communicated to the country house. The 
 London house, therefore, notwithstanding the entries it had 
 made, could apply the payments received subsequently to the 
 death of the partner to the new firm.^ 
 
 § 141. Application of deposits of new partnership. If a 
 new partnership be formed, the depository cannot apply 
 their deposits to pay an overdraft of the old one whenever 
 notice of the change has been given. They must be used in 
 paying the checks of the new partnership.' 
 
 § 142. Inquiry into transfers and signatures of checks. 
 Concerning the right of a bank to make inquiry into a part- 
 nership account and the mode of signing checks, it may be 
 
 1 2 Barn. & Cr. p. 72. 
 
 « See Cox v. Troy, 5 Barn. & Aid. 474. 
 
 " Richardson v. International Bank, 11 Brad. 582. 
 
§ 143 PAYMENT OF DEPOSITS. 135 
 
 said that if each partner has a right to draw on the account 
 and also has an individual account at the . same place, the 
 depository has no right to inquire into the propriety of the 
 transfer of money from one account to another.' But if the 
 name of the partnership be inaccurately stated in their check 
 the depository ought not to cash it without inquiry, unless 
 the inaccuracy is habitual, or an agreement exists to honor 
 checks thus drawn.' 
 
 § 143. Liability on check given after dissolution, {a) Eule 
 stated by Miller, J. A retiring partner may be liabje on a 
 partnership check given after the dissolution to one who had 
 no notice of his retirement. The rule, as stated by Judge 
 Miller,' is, " That credit already raised on the face of the 
 partnership is presumed to be continued on the same footing, 
 unless special notice of a change be given ; and as every 
 partner knows, or has the means of knowing, who are the 
 persons with whom his firm has transacted business and from, 
 whom it has received credit, public policy and natural justice 
 alike demand that he should give to every such party personal 
 and special notice of the withdrawal of his responsibility." 
 
 (b) Facts in Hose v. Coffield.* What will be regarded aa 
 notice to a person dealing with a partnership is a question of 
 fact to be decided in each case. In Rose v. Coffield, a notice 
 of dissolution of the firm was published in the newspapers on 
 the sixteenth of the month, and several days afterward. A 
 person who held a note against the firm on the twenty-ninth 
 of the same month renewed it to the second of December on 
 receiving a check payable that day. The check was not paid, 
 and he sued thereon and recovered against all the partnera 
 after proving that he had not learned of the dissolution of 
 the partnership. 
 
 1 Backhouse v. Charlton, L. E., 8 Ch. Div. 444. 
 
 8 Kirk V. Blurton, 9 Mees. & Wels. 284. 
 
 " Rose V. Coffield, 53 Md. 18, p. 26, citing Vernon i^. Manhattan Co., 22 
 Wend. 183 ; National Bank v. Norton, 1 Hill, 572. See also Wardwell v. Haight, 
 2 Barb. 549 ; Clapp v. Eodgers, 12 N. Y. 283. 
 
 * 53 Md. 18. 
 
186 BANKS AND THEIR DEPOSITORS. § 144 
 
 Payment of Joint Deposits.^ 
 
 % 144. Pa3rment of joint deposit to survivor, (a) Whitlock 
 case. When a deposit is made in tlie name of two persons, 
 and one of them dies, can it be safely paid to the survivor? 
 In Newr York, such a deposit was made by a husband and 
 wife, and paid to the latter on the death of her husband. It 
 may be assumed, said the court, that the widow was not en- 
 titled to receive the debt created by the money which her 
 husband had deposited with the bank, and that the sole fact 
 of payment to her would not have protected it from further 
 liability. But after she drew the money she was appointed 
 administratrix on his estate, and that appointment related 
 back to the time of his decease and confirmed and legalized 
 her act in demanding and receiving payment of the debt,^ 
 
 (6) O'Keefe case. In another case the plaintiff and her 
 nephew O'K. opened a deposit account with a savings bank. 
 When the first deposit was made, the plaintiff stated to the 
 officers of the bank in O'K.'s presence, that "either of them 
 or both could draw the money." The usual savings bank 
 pass-book was issued, in which the deposit was entered to the 
 plaintiff's credit "or" of O'K., and the account on the books 
 of the bank was kept in the same manner. One of the rules 
 printed in the pass-book provided that all payments to persons 
 producing the pass-book should be valid to discharge the 
 bank. Subsequently, deposits were made by both depositors, 
 and in their mutual presence. On the death of O'K., the 
 plaintiff informed the officers of the bank of the event, and 
 that O'K.'s wife had the pass-book, and notified them not to 
 pay the money to her. ^Nevertheless, the bank, on presentar 
 tion of the book and letters of administration issued to Mrs. 
 O'K. on the estate of her husband, did pay to her the whole 
 deposit. The court decided first, that the right of the bank 
 to pay on the separate order of either of the depositors, and 
 of each to demand payment, did not terminate by the death 
 
 1 See § 40. 
 
 2 Whitlock I'. Bowery Savings Bank, 36 Hun, 460. 
 
§ 146 PAYMENT OF DEPOSITS. 137 
 
 of O'K. ; secondly, that as his authority was coupled with an 
 interest, it vested, on his death, in his personal representative ; 
 but, thirdly, that the plaintiff having given notice of her 
 right to the fund, and prohibited the payment of it to 0'K.'s 
 representative, the bank had no right to pay to Mrs. O'K. 
 only so much of the deposit as had been contributed by her 
 husband.' 
 
 {c) In Piatt Y. Grubb^ the court said: "By reason of the 
 unity of husband and wife in the view of the law an obliga- 
 tion taken in the name of both enures to the benefit of both, 
 and the whole goes to the survivor."^ 
 
 § 146. Whose money is drawn on single depositor's check. 
 If one draws against a fund composed partly of his own money 
 and partly of the money of another, the presumption is that 
 the check is for his own money, whatever may be the relative 
 dates of the deposit. " Of course, the presumption can be over- 
 turned by evidence, but where there is no evidence, we think 
 such is the presumption."* 
 
 Payment of Wife's Deposits. 
 
 § 146. Bank can pay wife's check if not knowing that she is 
 married. If a wife deposit money in her own name and the 
 bank does not know that she is a married woman, it can 
 safely pay her on her check. Nearly sixty years ago a ease 
 arose in New York in which the plaintiff's wife was entrusted 
 with moneys and directed to deposit them in a bank. Ac- 
 cordingly she opened an account with the defendant bank in 
 her own name, and from time to time made deposits. She 
 also informed the bank in what manner she desired to have 
 the deposits drawn, and it complied with the direction. The 
 bank had no knowledge that she was a married woman until 
 
 1 Muloahey v. Emigrant Industrial Savings Bank, 89 N. Y. 435. 
 ' 48 Hun, 447. 
 
 3 Bertles v. Nunan, 92 N. Y. 152 ; Sanford v. Sanford, 45 N. Y. 723 ; second 
 trial, 58 Id. 69. 
 
 * Hall V. Otis, 77 Me. 122. 
 
138 BANKS AND THEIR DEPOSITORS. § 147 
 
 after it had paid all the checks and closed her account. The 
 husband then attempted to recover on the ground that pay- 
 ment to his wife was unauthorized. The judge submitted 
 the fact to the jury whether the wife was authorized as the 
 agent of her husband to do what she had done, or whether 
 he had subsequently ratified her acts, and they found a 
 verdict for the bank. The Superior Court reviewed the case, 
 speaking through Judge Oakley, who said : " The plaintiff 
 entrusted the wife with the money for the purpose of deposit- 
 ing it. He knew that she was in the habit of making de- 
 posits, and though he might not have known that she had 
 opened an account in her own name, as he was unable to read 
 the entries made in her bank-book, it is fairly to be presumed 
 that he must have known that she was also in the habit of 
 drawing checks for the money deposited. She was entrusted 
 with the bank-book, and the husband never made any inquiry 
 as to the state of the account in the bank, and the jury were 
 well justified in drawing the inference that he must have 
 known the true state of the case. But if the jury were 
 incorrect in finding the fact of an authority by the husband, 
 on the evidence in the case, it is still clear that the plaintiff 
 has no right to recover. If the wife abused the trust reposed 
 in her by her husband, the [bank] ought not to suffer by her 
 fraudulent act, in depositing the money in her own name. 
 By entrusting her with the money he enabled her to commit 
 the fraud, and the loss, if he has sustained any, must fall 
 upon him. In the absence of any circumstance to charge 
 the bank with notice that she was a married woman, they 
 had a right to open an account with her as a/eme sole, and to 
 pay the checks drawn upon the deposits made by herself."' 
 
 § 147. By modern law bank can knowingly pay. Even 
 though a bank does know that a female depositor in her own 
 name is married, it can lawfully pay her. A deposit was 
 made by a wife in an Arkansas bank, and though her hus- 
 band never claimed it, the lower court in that State pre- 
 
 ' Dacy V. N. Y. Chemical Manufg. Co., 2 Hall, 550. 
 
§ 148 PAYMENT OF DEPOSITS, 139 
 
 sumed as matter of law that it belonged to him. But the 
 Supreme Court said that "there is no such legal presumption, 
 at least with regard to money and securities that are transfera- 
 ble by delivery. There, for the benefit of trade, a property is 
 created in the bearer. A bank note or a coin may have been 
 stolen, yet one who takes it in good faith for value may hold 
 it against the loser. Possession is evidence of ownership, and 
 the burden of proof is on the party who assails the possession.' 
 . . If the law were otherwise than we have declared it, no 
 bank could with safety receive the deposits and pay the 
 checks of a married woman."' 
 
 § 148. Payment of wife's deposit to husband. In another 
 suit brought by a married woman to recover the amount of 
 a deposit, she proved the indorsement and delivery to her 
 husband of two checks (belonging to her and payable to her 
 order) for the purpose of having them deposited in her name 
 with the defendant bank. She then produced a bank-book 
 in which the amount of the checks was credited to her. The 
 bank tried to prove that at the time of the first deposit it 
 was orally agreed between the plaintiff's husband and the 
 bank that the deposit should be made to the plaintiff's credit 
 on condition that it might be withdrawn by her husband on 
 check in her name, that the second deposit was similarly 
 made, and that the deposits were subsequently withdrawn in 
 this manner. The court excluded this evidence, holding that 
 the request of the husband to have the deposit made in her 
 name and to her credit, and the issuing of the pass-book to 
 her, taken in connection with the checks which were made 
 payable to her, disclosed clearly the^ husband's agency ; that 
 authority to sign his wife's name to future checks could not 
 be inferred from the fact of his making the deposits ; and that 
 the bank could not prove an arrangement with him hostile to 
 
 > Murray v. Lardner, 2 Wall. 110. 
 
 2 German Bank v. Himstedt, 42 Ark. p. 64 ; second trial, 46 Id. 537. See 
 § 40, a. 
 
140 BANKS AND THEIR DEPOSITORS. § 150 
 
 her interests and beyond the apparent scope of the agency 
 without proof of actual authority from her.' 
 
 § 149. When husband is not wife's agent. A delivery hy a 
 wife to her husband of a check payable to the order of a 
 third person does not necessarily constitute the husband the 
 wife's agent to receive the money. The delivery may be 
 made for other reasons, or with an express direction not to col- 
 lect the same. Accordingly, when a husband had such a 
 cheek in his possession and he said to the payee that his wife 
 had given it to him and that he wished to get it cashed, and 
 the payee did so, and collected the money of the drawee bank, 
 in an action by the wife against the payee, her husband's 
 statement to him could not be introduced as evidence against 
 her. She therefore recovered the amount.* 
 
 § 150. Bank should not pay her deposit on trustee process 
 against him. In an action by a married woman against a 
 savings bank for her deposit, the bank admitted that it was 
 in her name, but that a part had been paid under a trustee 
 process against her husband. She " testified that the money 
 was her own, and her husband, who seems to have been sup- 
 posed by the bank to have been her principal and the then 
 depositor, disclaimed the funds. This evidence," continued 
 the court from whose opinion we are quoting, " fully war- 
 ranted a finding that the plaintiff was the creditor of the 
 bank," and therefore entitled to the deposit.' 
 
 • Bates V. First Nat. Bank, 89 N. Y. 286 ; Aff., 23 Hun, 420. See § 156 (c). 
 In Maryland, in an action on u. check signed by a married woman, per her 
 husband, the plaintiff closed his case without showing any authority by the 
 husband to sign the check. By reason of the statutory rights of a married 
 woman in that State, the check holder could not recover. Wilderman 'i>. 
 Rogers, 7 Eastern Rep. 786. 
 
 2 Hunt V. Poole, 139 Mass. 224. 
 
 * Townsend v. Webster Five-Cents Sav. Bank, Mass. Sup. Ct., 9 Northeast. 
 Kep. 521. 
 
§ 152 PAYMENT OF DEPOSITS. 141 
 
 Paymevts to Donees. 
 
 § 151. Two kinds of gifts, (a) Both described. When the 
 depositor has given his deposit, or a check therefor to another, 
 the bank must pay the same to the recipient of the gift. The 
 law recognizes two kinds of gifts: inter vivos and donatio 
 causa mortis. An inter vivos gift contains two elements : the 
 intention to give and delivery of the thing in question. " To 
 constitute a donatio mortis causa," says Judge Foster,' " there 
 must be three attributes : (1) the gift must be with a view to 
 the donor's death ; (2) it must be subject to the condition 
 that it shall take effect only on the donor's death by his ex- 
 isting illness ; and (3) there must be a delivery of the subject 
 of the donation." The same principles it is said apply to 
 both kinds ;^ nevertheless their application has not been uni- 
 form as will appear in the review of some of the cases in the 
 following pages. 
 
 {b) Grift of checks first considered. With respect to the sub- 
 ject of the gift we are concerned only with two things, cheeks 
 and deposits. The legal principles relating to the gift of 
 checks will be first considered. 
 
 § 152. Payment essential, (a) Simmons v. Cincinnati 
 Savings Society.^ On one occasion the drawee of a check 
 delivered it to the payee intending to make a gift of the fund 
 on which the check was drawn. Was the gift complete ? "It 
 seems clear to us," said White, C. J., in Simmons's case, "that 
 until the check was either paid or accepted the gift was in- 
 complete ; and that in the absence of such payment or accept- 
 ance, the death of the drawer operated as a revocation of the 
 check. It is well settled that, in order to constitute a valid 
 gift, there must be a complete delivery of the subject of the 
 
 • Kenistons v. Sceva, 54 N. H. p. 37. 
 
 2 Pennington v. Gitting's Executor, 2 Gill & J. 208 ; Minor v. Rogers, 40 
 Conn. 512. 
 
 3 31 Ohio St. 457 ; Aff. 2 Bull. 278 ; Hewitt v. Kaye, L. R., 6 Eq. 198 ; 
 Second Nat. Bank v. Williams, 13 Mich. 282. 
 
142 BANKS AND THEIR DEPOSITORS. § 152 
 
 gift, either actual or constructive. The check in the present 
 instance was a mere order or authority to the payee to draw 
 the money." So, too, the making and delivering of a check, 
 for safe-keeping, to the payee, payable six months after the 
 maker's death, is not an inter vivos gift, nor a trust which 
 equity will enforce.* 
 
 {b) Gift of bank-book and order. A depositor in a savings 
 bank gave the bank-book and an order for payment of the 
 deposit to her daughter; who notified the bank of the trans- 
 action. The depositor died and the bank paid the deposit to 
 the administrator on her estate. This was subsequently de- 
 clared to be a gift, and the bank was obliged to pay the same 
 to the donee. " The delivery of the book and order by the 
 mother to the daughter constituted a valid gift inter vivos; 
 and this gift, being notifijed to the bank, was a complete assign- 
 ment of her right to the fund."* 
 
 (c) Check given and taken back. A father put a check into 
 the hands of his son nine months old, saying, " I give this to 
 baby for himself," and then took back the check and put it 
 away. He also expressed his intention of giving the amount 
 of the check to his son. Shortly afterward the father died, 
 and the check was found among his effects. It was held that 
 there had been no gift to or valid declaration of trust for the 
 son. Lord Cranworth, L. C, said : " When there has been 
 a declaration of trust, then it will be enforced whether there 
 has been consideration or not. Therefore the question in 
 each case is one of fact ; has there been a gift or not, or has 
 there been a declaration of trust or not ? I should have every 
 inclination to sustain this gift, but unfortunately I am unable 
 to do so ; the case turns on the very short question whether 
 Jones intended to make a declaration that he held the pro- 
 perty in trust for the child ; and I cannot come to any other 
 conclusion than that he did not. I think it would be of very 
 
 ' Appeal of Waynesburg College, 111 Pa. 130 ; Trough's Estate, 75 Id. 115. 
 ^ Gray, J., Foss v. Lowell Five-Cents Sav. Bank, 111 Mass. 285 ; Kingman 
 V. Perkins, 105 Id. Ill ; Kimball v. Leland, 110 Id. 326. 
 
§ Xo4 PAYMENT OF DEPOSITS. 143 
 
 dangerous example if loose conversations of this sort, in im- 
 portant transactions of this kind, should have the eftect of 
 declarations of trust." * 
 
 {d) Check deposited and drawn against. A hushand drew a 
 check payable to his wife, or her order, and gave it to her 
 shortly before his death. She indorsed it and paid it into a 
 foreign bank and afterward drew against the amount. This 
 was held to be a good donatio causa mortis, although the check 
 was not presented for payment at the bank on which it was 
 drawn until after the death of the donor.' In a Missouri 
 case, however,^ it was questioned whether a donatio causa 
 mortis could be made of a check on a bank. If it could, cer- 
 tainly delivery was essential. 
 
 § 153. Law in New York. In ITew York this subject was 
 considered in Curry v. Powers.* It was declared that "a 
 check payable at a future day, does not have the eftect to 
 transfer the money of the bank on which it is drawn before it 
 becomes due, and is not a valid gift." In that case C. gave 
 each of his sons a check on a savings bank payable four days 
 after his death, and also his bank-books. But the gift was 
 not sustained, because neither the delivery of the checks nor 
 the books operated to transfer his deposits. " The drawer," 
 said the court, " had a right to make other checks, and thus 
 he retained control of the fund until his death, in accordance 
 with his expressed intention, that he might draw the interest." 
 Moreover, as the amount deposited exceeded that specified in 
 the checks, the delivery of the books was for safe-keeping, 
 inasmuch as the balance belonged to his estate.' 
 
 § 154. Law in Louisiana. In Louisiana the plaintiff's tes- 
 tator, the day before his death, delivered a check to the 
 defendant with the intention of giving it to her. It was 
 
 1 Jones V. Lock, L. R., 1 Ch. App. 25. " A. promised to give a bank cer- 
 tificate to B., afterward B. found the certificate in a room usually occupied 
 by both of them ; this was not regarded a delivery." Busohian i-. Hughart, 
 28 Ind. 449. 
 
 = Rolls f. Pearoe, L. R., 5 Ch. Div. 730. ■" Walter ». Ford, 74 Mo. 195. 
 
 4 70 N. Y. 212. ' See Cox v. Hill, 6 Md. 274. 
 
144 BANKS AND THEIE DEPOSITORS. § 156 
 
 drawn by another to the testator's order and indorsed by him 
 in blank. The check was not presented for payment until 
 after the testator's death. This was declared to be a valid 
 gift. But if the check had been drawn by the testator, and 
 he had died before its presentation, 'it would have been worth- 
 less, because by his death his mandate to his agent, the bank, 
 was revoked.* 
 
 § 155. What is an inter vivos gift of deposit. A person act- 
 ing freely and with full knowledge has the power to make a 
 voluntary gift of his property. This no one will question, 
 ^nor will the assertion be questioned that a mere intention, 
 whether expressed or not, is insufficient to make a gift, while 
 a voluntary promise to make one is nudum pactum, and of no 
 binding force.^ To make a gift, said Church, C. J., in Martin 
 V. Eunk,^ " the act constituting the transfer must be consum- 
 mated and not remain incomplete, or rest in mere intention." 
 Delivery of possession is essential.* 
 
 § 156. First rule, i/" the donee be present ichen the deposit is 
 made and the bank-book is given to him and accepted, this is con- 
 clusive evidence of an intention to give and an acceptance of the 
 
 gift.' 
 
 (a) Campus appeal.* In a Connecticut case the donor gave 
 his bank-book to the donee saying, " Keep this book until I 
 call for it, and if I never call for it it is yours." This was 
 declared to be a gift. Judge Carpenter said that, "A gift 
 inter vivos is complete when there is an intention to give, 
 accompanied by a delivery of the thing given and acceptance 
 
 1 Burke v. Bishop, 27 La. Ann. 465. 
 
 ' Kekewich v. Manning, 1 De Qt. M. & 6. 176, and cases cited. 
 
 3 75 N. Y. p. 137. 
 
 * Grangiao v. Arden, 10 Johns. 293. Money in a bank does not pass by 
 delivery of pass-book. Ashbrook v. Ryon, 2 Bush, 228. In Maine the court, 
 in Robinson ». Ring, 72 Me. 140, p. 144, said, " There must be an intention to 
 give and this must be carried into effect by an actual delivery," citing Taylor 
 V. Fire Department, 1 Edw. Ch. 294 ; and Brabrook v. Boston Five-Cents Sar. 
 Bank, 104 Mass. 228. 
 
 5 Sweeney v. Boston Five-Cents Sav. Bank, 116 Mass. 384. 
 
 8 Camp's Appeal, 36 Conn. 88. 
 
§ 157 PAYMENT OF DEPOSITS. 145 
 
 by the donee. There cai;i be no doubt as to the intention to 
 give and the acceptance. The only question is was there a 
 legal delivery." And the judges were unanimous in thinking 
 there was.' 
 
 (6) People V. State Bank? 0. made a deposit to the credit 
 of his wife, notifying the cashier that the money was his, and 
 that he would let the amount rest in that way for a short 
 time. Subsequently she drew checks on this account which 
 were paid. After her death and before an administrator had 
 been appointed, by agreement with the cashier 0. overdrew 
 his account and the checks were paid from the deposit men- 
 tioned. Not long afterward a receiver of the bank was 
 appointed, and 0. then applied to have the overdraft set off 
 against the deposit and the balance transferred to his credit. 
 His application was denied on the ground that the deposit to 
 his wife's credit and acceptance by her, which was signified 
 by drawing checks against it, operated as a gift, and conse- 
 quently he could not reclaim it, nor could the bank deny its 
 liability to her estate.* 
 
 (c) Jlunt v. Poole.* A wife made a cheek payable to a 
 third person and delivered it to her husband expecting that 
 he would deliver it to the person specified by her as payee. 
 The wife's object was to get money from the bank through 
 the agency of another person than her husband. When 
 delivering it, however, the husband told the third person that 
 his wife had given him the money and desired him to cash 
 the check, which he did. The third person afterward pre- 
 sented the check to the bank and received the' money. She 
 then sued him for the amount and recovered. He attempted 
 to introduce her husband's statement above mentioned to 
 prove a gift to him but this was not permitted.* 
 
 § 157. Second rule. Delivery of the hook need not be formally 
 made if the donee has possession of it. Chief Justice Durfee 
 remarked in Providence Institution v. Taft,* that while " there 
 
 1 Camp's Appeal, 38 Conn. 88. See also Brown v. Brown, 18 Id. 430. 
 
 2 People V. State Bank, 38 Hun, 617. 3 People v. State Bank, Id. 
 * 139 Mass. 224. = See § 149. « 14 R. I. 502. 
 
 10 
 
146 BANKS AND THEIR DEPOSITORS. § 158 
 
 are cases which hold that a delivery is so essential to a gift 
 that it cannot he dispensed with even when the donee, is 
 already in possession/ there are other cases, however, more 
 numerous, and in our opinion more authoritative, which hold 
 that a delivery is not necessary when the intended donee is 
 already in possession, but that in such a case the gift, if com- 
 pleted and unambiguous, may be effected by a simple oral 
 declaration.* In Penfield v. Thayer* the donee and donor 
 boarded at a house ; the latter was a woman, and dependent 
 on the donor's bounty, and he paid her board and manifested 
 a disposition to befriend and protect her. On one occasion, 
 when going not far away, to J^Tew York City, he said to her, 
 " My trunk and what is in it I give to you ; there is enough 
 in it to take care of you for life," or " for a spell," adding that 
 he wished her sou to have his tool chest, It appeared that 
 he had no expectation of returning, but he did return, took 
 possession of his room and used his tools. His death oc- 
 curred soon afterward ; she then took possession of his trunk 
 which contained a bank-book. This was decided to be hers. 
 § 158. Third rule. A gift can be made without delivering the 
 hook to the donee and consequently payment may be demanded 
 ■ without producing it* To make a gift in such a case the 
 deposit must he put in the name of the donee with the intention 
 of giving it to Mm, and must be accepted In a case of this 
 kind the court said : "If the donor made the deposit and kept 
 the book for the plaintiff, intending it as a gift to her, the 
 gift would not be perfected until accepted by the donee ; 
 and acceptance implies a mutual act of the parties, or an 
 
 1 Shower v. Pilok, 4 Ex. 477 ; Cutting v. Gllman, 41 N. H. 147 ; French 
 V. Raymond, 39 Vt. 623 
 
 2 Tenbrook v. Brown, 17 Ind 410 ; Wing v. Merchant, 57 Me. 383 ; Car- 
 radine v. Carradine, 58 Miss 286 ; Southerland v. Southerland, 5 Bush, 691 ; 
 Waring's Adm'r v. Edmonds, 11 Md. 424 ; Stevens v. Stevens, 2 Hun, 470; 
 and see Winter v. Winter, 9 W. R. 747 ; S. C, 101 Eng. C. L. 997 ; Roberts «. 
 Roberts, 15 W. E. 117. 
 
 3 2 E. D. Smith, 305 . 
 
 * Blasdel v. Locke, 52 N. H. 238. 
 
§ 160 PAYMENT OF DEPOSITS. 147 
 
 act by one assented to by the other, equivalent to an accep- 
 tance of a chattel upon delivery. An act would perfect the 
 gift of the legal interest which, had the deposit been in 
 the donor's name in trust, would have been sufficient to 
 perfect the gift of the equitable interest.^ An acceptance 
 and a completed gift might be inferred from the fact that 
 the donor informed the donee of the gift with the express 
 or implied assent of the donee. Any act or speech between 
 the parties which should show mutual understanding that 
 the gift was made would be sufficient evidence."^ 
 
 § 159. Fourth rule. The acceptance need not be at the time of 
 making the deposit. This can be done afterward. In the 
 Scott case, previously mentioned, "the deposit was made 
 without the knowledge of the donee, and the deposit-book 
 was retained by the donor." The intention of the donor to 
 make a gift was declared to be open to inquiry, the accept- 
 ance of it by the donee completed a contract between her and 
 the bank, but this could not be presumed, it must be shown. 
 ^'If," said the court, "the evidence shows that the donor 
 intended that the deposit should belong to the donee, and re- 
 ceived and held the book for her until acceptance by her, it 
 shows a completed gift, even though it might have been 
 revoked before acceptance." 
 
 § 160. Fifth rule. Before acceptance, the depositor may 
 act as trustee in keeping the book for the donee and without his 
 knowledge ; or, the depositor may regard the book as delivered to 
 and accepted by himself as trustee from the time of receiving it 
 from the bank? Indeed, the depositor can act as well in the 
 
 1 Gerrisli v. Bedford Institution, 128 Mass. 159. 
 
 " Scott V. Berkshire Co. Sav. Bank, 140 Mass. 157, p. 166. 
 
 3 Id. 157 ; Martin v. Funk, 75 N. Y. 134. " A delivery to a donee of a sav- 
 ings bank-book, containing entries of deposits to the credit of the donor, with 
 the intent to give the donee the deposits represented by the book, is a good 
 delivery to constitute a, complete gift of such deposits (Camp's Appeal, 36 
 Conn. 88). Such delivery vests the equitable title in the donee without 
 assignment. The delivery may be to the donee or to some other person for 
 
148 BANKS AND THEIR DEPOSITORS. § 160 
 
 capacity of trustee to accept the deposit for the donee as any 
 other person. 
 
 (a) Thus in Minor v. Rogers,^ the depositor put money in a 
 savings bank and received a deposit-book in which she was 
 described as " Mary Daniels, trustee of William A. Minor." 
 At the time of making the deposit she informed Minor's 
 father of what she had done, but before her death she drew 
 the deposit. In a successful action by Minor against her 
 administrator to recover it, Judge Park, who delivered the 
 opinion of the court, said: "It is evident that she did all that 
 she thought uecessary to be done to perfect the gift, and sup- 
 posed that she had accomplished the object. . . If she had 
 made the deposit in the name of the plaintiff alone, or had made 
 some other person than herself trustee for the plaintiff', no ques- 
 tion could have arisen regarding the completeness of the gift. 
 But the beneficial interest is as much given as it would have 
 been if either of these modes had been adopted. The deposit 
 is made in the bank for the plaintiff, and the bank is informed 
 of the fact. Here is a delivery of the beneficial interest. No 
 more would have been done if the deposit had been made in 
 the name of a third party for the plaintiff'." 
 
 (b) Wheatley v. Purr? The settlor instructed her bankers, 
 with whom she had a deposit of three thousand pounds, to 
 place £2000 in the joint names of the plaintiff's and her own, 
 as trustee for the plaintiffs. They entered the sum in their 
 books to the account of the settlor as trustee for the plaintiffs, 
 or order, fourteen days after sight. A receipt for the amount 
 was signed by the settlor and given to the bankers. The 
 trust was held to be effectually created, although no notice of 
 it was communicated to the donee. 
 
 (c) Opinion of Rhode Island Supreme Court. " The creation 
 of the trust, if otherwise unequivocal, is not affected by the 
 
 the donee," Hill v. Stevenson, 63 Me. 364, citing Dole v. Lincoln, 31 Id. 
 422 ; Marston v. Marston, 21 N. H. 491 ; Borneman v. Sidlinger, 15 Me. 429 ; 
 Wella V. Tucker, 3 Binn. 366. 
 » 40 Conn. 512. « 1 Keen, 551. 
 
§ 161 PAYMENT OF DEPOSITS. 149 
 
 settlor's retention of the instrumeut of trust, especially where 
 he is himself the trustee." * 
 
 § 161. Sixth rule. Whether, while holding the hook, the 
 depositor is acting as trustee, or for himself, is a question of fact 
 to be determined by proper evidence in each case? 
 
 (a) Leading New York case? Some of these cases we shall 
 now review. lu the leading ~SQVf York case, Mrs. B. deposited 
 in a savings bank declaring at the time of so doing that 
 she wanted the account to be in trust with the plaintiff. 
 The account was so entered and a pass-book was delivered to 
 the intestate, Mrs. B. A second deposit was also made in 
 trust for another person, sister of the other. Mrs. B. kept the 
 pass-books, and the interest, except for one year, remained in 
 the bank, until her death. Neither of the sisters knew of the 
 deposits which Mrs. B. had made in trust for them. Chief 
 Justice Church, who delivered the opinion of the court, 
 quoted with approval Lord Chief Justice Turner's opinion in 
 Milroy v. Lord.* " In order to render a voluntary settlement 
 valid and effectual the settlor must have done everything 
 which according to the nature of the property comprised in 
 the settlement was necessary to be done in order to transfer 
 the property and render the settlement binding upon him. 
 He may of course do this by actually tj-ansferring the property 
 to the persons for whom he intended to provide, and the pro- 
 vision will then be effectual, and it will be equally effectual 
 if he transfer the property to a trustee for the purposes of 
 the settlement, or declare that he himself holds it in trust for 
 
 1 The court in Ray v. Simmons, 11 R. I. 266, citing Extou v. Scott, 6 Sim. 
 31 ; Fletcher v. Fletcher, 4 Hare, 67 ; Carson's Adm'r v. Phelps, 40 Md. 73 ; 
 Souverbye v. Arden, 1 Johns. Ch. 240 ; Bunn v. Winthrop, 1 Id. 329. 
 
 2 Scott V. Berkshire Co. Sav. Bank, 140 Mass. 157 ; Eastman v, Woronooo 
 Sav. Bank, 136 Id. 208 ; Gerrish <,-. New Bedford Institution, 128 Id. 159 ; 
 Murray u. Cannon, 41 Md. 466 ; Gardner o. Mierritt, 32 Id. 78 ; Martin v. 
 Funk, 75 N. Y. 134; Barker v. Frye, 75 Me. 29 ; Pope c;. Savings Bank, 56 
 Vt. 284 ; Ide t'. Pierce, 134 Mass. 260 ; Sherman v. New Bedford Five-Cents 
 Sav. Bank, 138 Id. 581 ; Hayden v. Hayden, 142 Mass. 448. 
 
 » Martin ». Funk, 75 N. Y. 134 ; Anderson v. Thompson, 38 Hun, 394 ; 
 Mabie v. Bailey, 95 N. Y. 206. • 
 « 4 De G. F. & J. 2B4. 
 
150 BANKS AND THEIR DEPOSITOES. § 161 
 
 those purposes, and if the property he personal the trust may, 
 I apprehend, be declared either in writing or hy parol." 
 
 (b) Review of Martin v. Funk contimied. Funk, the ad- 
 ministrator on the estate of the depositor, contended that the 
 transaction did not transfer the property, that there was no 
 sufficient declaration of trust, and that by retaining the pass- 
 books the intestate never parted with the control of the pro- 
 perty. The question involving substantially the same facts, 
 remarked the Chief Justice, had been several times before 
 different courts of the State, and in every instance the trans- 
 action had been sustained as a good gift. The decisions were 
 then briefly reviewed. " The case of "Witzel,' before Surro- 
 gate Bradford, and Millspaugh v. Putnam,^ were deposits in 
 the same form, and in the former the cestui que trust had no 
 notice of the deposit, and in both cases the gift was held 
 effectual. In Smith v. Lee,' money was deposited with the 
 defendant, and a note taken payable to the depositor for 
 another person, and it was held that the depositor constituted 
 himself a trustee. The case of Kelly v. Manhattan Institu- 
 tion* was a special term decision of the New York Common 
 Pleas, before Eobinson, J., where precisely such a deposit was 
 made as in this, and it was upheld as an absolute gift. 
 These decisions, although not controlling upon this court, are 
 entitled to respect, and they show the tendency of the judicial 
 mind to give these transactions the effect which on their face 
 they import." 
 
 (c) Rhode Island case. An instructive case occurred in 
 Rhode Island.* B. deposited money in a savings bank in his 
 own name as trustee for R. his stepdaughter. He gave the 
 book to her, who, however, returned it to him. He was 
 childless and treated her as his daughter. After his death 
 his administrator claimed the deposit. But the court thought 
 that the trust was corapletely!constituted. " B. deposited the 
 money, in the bank to himself as trustee. The bank receiv- 
 
 1 3 Bradf. 386. 2 16 Abb. Pr. 380. 
 
 8 2 Th. & C. 591. * Bay v. Simmons, 11 R. I. 266. 
 
§ 161 PAYMENT OF DEPOSITS. 151 
 
 ing it credited it to him as trustee, and from time to time 
 credited to him as trustee the dividends accruing thereon. 
 It gave him a bank-book in which these credits were entered. 
 B. moreover communicated to the plaintiff" the fact that he 
 •had made the deposit to himself as her trustee by letting her 
 have the book. It is urged that the book was returned to 
 him by her and retained by him. But the book was given 
 by the bank to him as trustee, and as trustee he would prop- 
 erly retain it. All was done which the plaintiff could ask, 
 unless she desired to have the money paid or transferred to 
 her, which would be not constituting the trust, but carrying 
 into effect and discharging it. B. might have declared him- 
 self more explicitly, but, supposing his object was to create a 
 trust and make himself the trustee, we can think of no act 
 necessary to effect his purpose which he has' left undone." 
 
 (d) Maryland case. In Maryland a good grandmother oc- 
 casionally deposited money for five years to the credit of 
 five grandchildren. The accounts were kept in the name of 
 each as a minor, and the deposits were subject to her or her 
 daughter. At the time of making the first deposits she* 
 said that " she was going to put the money in bank for the 
 children." By the by-laws of the bank guardians could de- 
 posit for the benefit of their wards, and parents for their 
 children ; and if desired at the time of the deposit they could 
 subject the same to the control of the guardian or parent. 
 The grandmother died, and her daughter as executrix ob- 
 tained from the bank all the money that had been deposited 
 to the credit of the grandchildren. The court declared that 
 the several gifts were perfected, and that the grandchildren 
 were entitled to the same with interest from the time the ex- 
 ecutrix had withdrawn the money.' 
 
 (e) Hurray v. Cannon. In another case an account was 
 opened in a savings bank to the credit of " James Cannon, 
 subject to his order, or to the order of Mary E. Cannon," his 
 daughter ; and from time to time money was thus deposited. 
 
 1 Gardner v. Merritt, 32 Md. 78. 
 
152 BANKS AND THEIR DEPOSITORS. § 161 
 
 After the father's death the daughter claimed that he had 
 given her the book of deposit with the money credited therein 
 to he held by her in trust for herself and her brothers and 
 sisters. " The only mode in which money could be changed 
 from one person's account to another's in the bank was by a . 
 payment of the one account and a new deposit in another 
 account." It was decided that the depositor did not part 
 with his money M'hile living, because it was subject to his 
 order, or the order of his daughter ; a delivery of the book 
 was not a delivery of the money itself.' 
 
 (/) New Hampshire case. A father deposited for his wife 
 $300 in the name of her daughter. The deposit book was 
 put in a trunk, the key to which was put in another trunk, 
 that was not locked. When making the deposit he signed a 
 certificate which stated among other things that " the deposit 
 might be withdrawn by the person who may present the 
 book entering the same and receipting therefor." Mr. Norton 
 afterward took the deposit-book and pledged it to the bank 
 as security for his notes held by the institution. The 
 daughter did not know that he had pledged the book, nor 
 did she know of the deposit while her father lived. Chief 
 Justice Doe said : " It is to be inferred that the mother in- 
 tended an absolute gift of the money deposited in the 
 daughter's name ; that there has been no attempt to revoke 
 it; and that the daughter has accepted it. This is a gift."* 
 
 (g) Connecticut case. Two savings bank deposit-books were 
 left by A. B. at his death in 1879, one of which stood in his 
 own name and the other in the name of " J. B. order of A. 
 B." J. B. was the son of A. B. On the last page of the first 
 book was the following order: " May 12, 1878. Treasurer of 
 B. Savings Bank: Pay J. B. what may be due on my deposit- 
 book 'So. — , A. B." On the last page of the other was the fol- 
 lowing : "August 12, 1871. Treasurer of B. Savings Bank : 
 At my decease pay J. B. what may be due on my deposit- 
 book No. — , A. B." Other deposits were made and money 
 
 » Murray v. Cannon, 41 Md. 466. « Kimball v. Norton, 59 N. H. 1. 
 
§ 161 PAYMENT OF DEPOSITS. 153 
 
 was drawn on both books after the date of the orders. The 
 books were kept by the treasurer of the savings bank, A. B. 
 having excess to them whenever he pleased as long as he 
 lived. J. B. never had possession of the books, nor any 
 knowledge of them during the life of his father. These facts 
 did not establish a gift.' 
 
 (h) New Jersey case. In 1874 a depositor in a savings 
 bank, Rachel Speer, ordered the following entry to be made in 
 her account: " Frank B. Smith, hatter, Danbury, Conn., son 
 of Joseph Smith and Cornelia, to be drawn by Rachel ; after 
 death, by Frank." In 1870, she directed the following entry 
 to be made in her pass-book in another savings bank : " This 
 account is in trust for Frank B. Smith," to which she signed 
 her name. She kept both pass-books in her possession, and 
 drew the dividends and part of the deposits until 1878, 
 when she became insane. The court declared that "her 
 design in making the entries evidently was to make a dis- 
 position of a merely testamentary character." Hence there 
 was no gift.^ 
 
 (?) Maine case. In another case the entry was in the name 
 of the depositor, but above it was written " Sub. to E. M. 
 Robinson." The depositor kept the book, drew the dividends 
 and used them and a small portion of the principal, and E. 
 M. Robinson never knew that the deposit was made. This 
 was not a gift. "A declaration of an intention to give is not 
 a gift. The donor must be divested of, and the donee invested 
 with the right of property. The indispensable essentials 
 of a gift, delivery to the donee, and loss of dominion over it 
 by the donor, are wanting."' 
 
 (J) Massachusetts case. A. deposited several sums of money 
 in a savings bank "in trust" for some relatives, and informed 
 them of what he had done, saying that he could control the 
 money while he lived, but tha,t it was theirs after his death. 
 
 > Burton v. Bridgeport Sav. Bank, 52 Conn. 398. 
 
 2 Smith V. Speer, 34 N. J. Eq. 336. 
 
 3 Northrop u. Hale, 73 Me. 66, citing Geary v. Page, 9 Bosw. 290. 
 
154 BANKS AND THEIR DEPOSITORS. § 162 
 
 He gave the deposit-book into the possession of one of them, 
 but drew the interest himself. About a year before his death 
 he said that he should not make a will, and that he had pro- 
 vided for his relations by depositing money in the savings 
 bank. The night before he died he said to them : " "When I am 
 gone you take these books and transfer the money to your 
 names, and say .nothing to nobody about it." This was 
 declared to be not a perfected gift, and A.'s administrator 
 therefore was entitled to the money.' 
 
 {k) Vermont ease. A. deposited her own money in a sav- 
 ings bank in the name of B., and took a deposit-book in 
 which the treasurer had entered beside the date and num- 
 ber, " Adaline F. Brown deposited $220." A corresponding 
 entry was made in the bank-book. A. kept the book in 
 her possession until her death, and B., who died before A., did 
 not know of the gift during her life. Nevertheless, this was 
 declared to be a perfected gift, and the money belonged to 
 B.'s estate.^ 
 
 § 162. Is the keeping of bank-book consistent with intention 
 to give deposit. As one of the rules of a savings bank requires 
 the producing of the book by the claimant of the deposit, if 
 the donor retains possession of it, " and never communicates 
 to the person in whose name the deposit is made the fact 
 that he has made the deposit, this is evidence upon the ques- 
 tion whether, even if the depositor intended to make a gift 
 he has fully executed his intention so as to make the gift 
 complete; and any evidence that the deposit was made in 
 this form for any other purpose than to transfer the title to 
 the person to whom it is credited, so that he may draw it for 
 his own use and benefit, would of course be competent evi- 
 dence upon the question whether a gift was ever intended."* 
 
 1 Nutt V. Morse, 142 Mass. 1. 
 
 2 Howard v. Savings Bank, 40 Vt. 597. 
 
 ■ Field, J., Ide «. Pierce, 134 Mass. p. 262, citing BrodericK t>. Waltham 
 Sav. Bank, 109 Id. 149 ; Clark v. Clark, 108 Id. 522 ; Brabrook v. Boston 
 Fire-Cents Sav. Bank, 104 Id. 228 ; Fierce v. Boston Five-Cents Sav. Bank, 
 129 Id. 425. 
 
§ 162 PAYMENT OF DEPOSITS. 155 
 
 (a) Opinion of Judge Clifford. In some cases this rule has 
 proved a strong barrier to the establishing of the gift. The 
 courts have thought that, as the rule is well known, the de- 
 positor would have delivered the book if he intended to 
 make a gift of his deposit. In a case tried before Judge 
 Clifford of the United States Circuit Court, Jackson deposited 
 money in trust for George Carpenter "in a savings bank, 
 keeping the pass-book, and saying nothing to Carpenter about 
 the transaction." Judge Clifford said : " Beyond all doubt 
 the money deposited belonged to the depositor at the time it 
 was deposited in the savings bank. It was deposited in the 
 name of the depositor, in trust for George Carpenter, but the 
 depositor retained the pass-book and never gave the person 
 named as cestui que trust any notice of what he had done, 
 nor did he have any knowledge of the deposit until after 
 the death of the depositor. Money deposited, the by-laws 
 provided, shall not be withdrawn except by the depositor, or 
 by some person by him or her authorized by a written order 
 signed by the depositor and witnessed, or otherwise legally 
 authorized, and on producing the original book of deposit 
 that such payment may be made thereon, and in all cases of 
 withdrawal, one week's notice may be required. Cases arise 
 where it is held that a person may constitute himself a trustee 
 of a fund for another when the fiand remains in his control ; 
 but the difficulty with the respondent (Carpenter) in this case 
 is that the depositor kept the pass-book, and never notified 
 the supposed cestui que trust that any such disposition of the 
 deposit had been made in his favor.' "Without more it is 
 clea;r that the mere entry in the pass-book, in the form there 
 exhibited, is not sufficient to show that the money deposited 
 passed to the supposed cestui que trust. Authorities to sup- 
 port that proposition are full, to the point, and decisive."^ 
 
 (6) Massachusetts Supreme Court. In another case the 
 
 > Vanderberg v. Palmer, 4 Kay & Jolina. 204 ; Armstrong v. Temperon, 24 
 Law T., N. S. 275. 
 
 2 Stone V. Bishop, 4 Clif. 593. 
 
156 BANKS AND THEIR DEPOSITORS. § 163 
 
 money was deposited by " Betsy Abbott, trustee of Ann 
 Clark," but the depositor retained the pass-book and never 
 told Ann Clark what she had done " By one of the by-laws 
 of the bank," said the court, " no one could draw any part of 
 the money without producing the bank-book. Even if the 
 plaintiff could prove that she intended to create a trust, she 
 did not do what was necessary to carry the intent into effect. 
 Ann Clark was not a party to the transaction, and never ac- 
 quired any title to the money, and upon the death of Betsy 
 Abbott it passed to her administrator."* 
 
 (c) New Hampshire Supreme Court. In ]!^ew Hampshire 
 this bank regulation is not regarded so serious an obstruction 
 to the perfecting of a gift. In Blasdell v. Locke* the donor 
 during her last sickness informed her niece, the donee, for the 
 first time of the gift. In a suit by her administrator against 
 the donee and the bank to recover the deposit the court de- 
 cided that the deposit created a trust in the bank in favor of 
 the donee, and that when information was conveyed to her 
 by A. of the deposit and the same was accepted, her title to 
 the money became absolute although there was no delivery 
 of the deposit-book. This case differs from the others in 
 one regard,, the donor had conveyed notice to the donee of 
 what she had done. 
 
 (d) Summary of cases. In these cases the bank rule requir- 
 ing the producing of the book by the claimant played a more 
 or less important part in determining them. In no case has it 
 been held that the retaining of the book alone was conclusive 
 of the depositor's intention not to make a gift. His failure 
 to do so has not been a fatal bar to establishing the gift by 
 other evidence. It has simply been a fact of varying weight 
 with the courts of his intention. 
 
 § 163. Deposit in trust to evade the law limiting amount. 
 Again, in whatever States or places the amount which may 
 be deposited by law is limited a legal inference is, from en- 
 tering a deposit as trustee for another and saying nothing to 
 
 1 Clark V. Clark, 108 Mass. 522. » 52 N. H. 238. 
 
§ 164 PAYMENT OF DEPOSITS. 157 
 
 the person thus mentioned, that the depositor's intention is 
 to evade the law, and not to give away his deposit.' Said 
 Judge Wells in the Brabrook case: " it would appear that it 
 was the intention of Knowles [the depositor] to deposit the 
 whole money as his own ; and that the form of deposit was 
 adopted for the sole purpose of evading a by-law of the bank 
 and a provision of the statutes limiting the amount that 
 could be received from any one depositor to one thousand 
 dollars." 
 
 § 164. Evidence to show intention, (a) Scott v. Berkshire 
 County Savivgs Bank.' Last, what evidence can be intro- 
 duced to show whether he is holding it as trustee or for himself. 
 In the case just mentioned Judge Colt remarked that on 
 the question of the donor's intention in holding the book 
 before the gift was perfected — whether she held it as owner 
 or as the agent or depositary for the plaintift" — her declara- 
 tions and acts while holding it, showing the character of the 
 act, were competent. In .Bartlett v. Remington^ the court 
 remarked that " in cases of this kind the questions are 
 whether the depositor intended to establish a trust and make 
 himself a trustee, what is competent evidence of his inten- 
 tion and what inference of fact is to be drawn from the evi- 
 dence." In the case in question R. deposited money in her 
 own name " in trust for Sarah." The by-laws provided that 
 no money should be paid without producing the pass-book, 
 and that any depositor might designate at the time of mak- 
 ing the deposit the person for whose benefit it was made, and 
 that the depositor and his legal representatives should be 
 bound by such condition. It was found that the depositor 
 did not intend to part with the title or power of disposing of 
 the property so long as she lived, but simply that whatever 
 might be left at her death should go to Sarah. The court 
 remarked that " the depositor did not constitute herself a 
 trustee. The nominal trust was a testamentary disposition 
 
 1 Brabrook v. Boston Five-C«nt3 Sav. Bank, 104 Mass. 228 ; Scott v. Berk- 
 shire Co. Sav. Bank, 140 Id. 157. See § 173. 
 s Supra. " 59 N. H. 364. 
 
158 BANKS AND THEIR BEPOSITORS. § 166 
 
 of property," and as it was not made as the law required the 
 fund belonged to her estate. 
 
 (6) Gerrish v. New Bedford Institution and other cases. In 
 another case R. deposited a sum of money to the credit of her 
 nephew E"., keeping the deposit-book herself and having 
 noted thereon that the money could be paid to her. After 
 her death the question was whether the deposit belonged to 
 her tiephew IST. or to her administrator. Could evidence be 
 introduced "to vary the effect of the entries"? "We think," 
 said the court " the evidence is admissible." Such evidence 
 was admitted in four cases of a quite similar nature.' In the 
 last of these " a father made three deposits as trustee, one in 
 trust for his only son, and the others in trust for two grand- 
 children, taking separate deposit-books and keeping them in 
 his own possession. In all of these cases the gifts were sus- 
 tained ; but, to enable the court to do so, resort was had to 
 extraneous evidence to ascertain the intent of the donors. 
 And in the case last cited the competency of such evidence 
 was one of the questions submitted to the court, and the 
 court held it was admissible."* 
 
 § 165. Absence of parol evidence to explain intention. But 
 what shall be done when the depositor's intention is not clear, 
 and no parol evidence can be produced to show what he 
 intended to do? It is certain that the declaration of the 
 depositor contained in his pass-book " in trust" in many, 
 probably most, of the cases, is designed to evade the by-law 
 regulating the amount of his deposit. But would not the 
 public good be better served by regarding such a declaration 
 as evidence of intent to make a gift in the absence of clear 
 evidence to the contrary ? 
 
 § 166. Enforcement of trust, (a) Must be complete. "When 
 the trust is voluntary, courts of equity do not enforce it so 
 long as it remains inchoate or incomplete; but when once the 
 
 1 Minor v. Eogers, 40 Conn. 512 ; Ray v. Simmons, 11 E. K 266 ; Hill v. 
 Stevenson, 63 Me. 364 ; Gerrish v. New Bedford Institution, 128 Mass. 159. 
 
 ' Judge Walton's review of the Gerrish case in Northrop v. Hale, 72 Maine, 
 p. 277. 
 
§ 167 PAYMENT OF DEPOSITS. 159 
 
 trust has been constituted, they do not refuse relief because it 
 is voluntary.' A person need use no particular form of words 
 to create a trust, or to make himself a trustee. It is enough 
 if, having the property, he conveys it to another in trust, or, 
 the property being personal, if he unequivocally declare either 
 orally, or in veriting, that he holds it in prcesenii in trust, or 
 as a trustee for another."* 
 
 (6) Usual mode of creating trust is insufficient. In N'ew 
 Hampshire, though, it is maintained that an executory trust 
 without consideration cannot be enforced, that the trust must 
 be executed, and that the equitable title and beneficial interest 
 be vested in the donee,^ and further, that a deposit in a sav- 
 ings bank in trust for another, who is neither party nor privy 
 to the transaction, is an executory trust, if the depositor retains 
 the title and power of disposing of the property.* 
 
 § 167. A deposit may be a valid donatio causa mortis gift. 
 Finally, there remains for consideration the other kind of 
 deposit gift. "It has been repeatedly held," says Judge 
 Endicott, " that a deposit in a savings bank may be the sub- 
 ject of a valid donatio causa mortis, as well as of a gift inter 
 ■vivos, and that such a gift may be proved by the delivery of 
 the bank-book to the donee, or to a third person for the 
 donee, accompanied by an assignment.* 
 
 » stone V. King, 7 K. I. 358. 
 
 2 The court in Ray v. Simmons, 11 R. I. 266, citing Ex parte Pye, 18 Ves., 
 Jr., 140 ; Milroy v. Lord, 4 De G. P. & J. 264; Richardson v. Richardson, L. 
 R., 3 Eq. 686 ; Kekewich v. Manning, 1 De G. M. & G. 176 ; Morgan v. 
 Malleson, L. R., 10 Eq. 475 ; Penfold v. Mould, L. R., 4 Eq. 562 ; Wheatley v. 
 Purr, 1 Keen, 551 and note ; McFadden v. Jenkyns, 1 Hare, 458 ; affirmed on 
 appeal, 1 Phillip, 153; Thorpe v. Owen, 5 Beav. 224. 
 
 » Bartlett v. Remington, 59 N. H. 364 ; ^tone v. Hackett, 12 Gray, 227. 
 
 * Bartlett v. Remington, 59 N. H. 364, following Gardner v. Merritt, 32 Md. 
 78 ; Kilpin v. Kilpin, 1 My. & K. 520 ; Minor v. Rogers, 40 Conn. 512 ; Bra- 
 brook V. Boston Five-Cents Sav. Bank, 104 Mass. 228 : Blasdel v. Locke, 52 
 N. H. 238. 
 
 " Pierce v. Boston Five-Cents Sav. Bank, 129 Mass. 425, p. 430, citing King- 
 man c. Perkins, 105 Id. Ill; Foas u. Lowell Five-Cents Sav. Bank, 111 
 Id. 285 ; Kimball v. Leland, 110 Id. 325 ; Sheedy u. Roach, 124 Id. 472 ; 
 Davis f. Ney, 126 Id. 590. The delivery of a savings bant pass-book 
 
160 BANKS AND THEIR DEPOSITORS. § 169 
 
 § 168. Delivery of book essential. " As there can be no 
 manual delivery of the credit which the donor has in the 
 bank, the delivery of the book, which represents the deposit, 
 and is the only evidence in the possession of the donor of his 
 contract with the bank, together with an order or assignment, 
 operates as a complete transfer of the existing fund, and is all 
 the delivery of which the subject is capable."' And even the 
 delivery of the book without a written assignment will suf- 
 fice.* 
 
 § 169. No explanation for non-delivery permissible. But 
 there must be a delivery of the book says the Supreme Court 
 of Vermont.' And if it be beyond the reach of the would- 
 be donor so that no delivery can be made this furnishes no 
 excuse and the gift fails.^ 
 
 (a) Curtis v. Portland Savings Bank.^ A lady made a 
 deposit in a bank and by her direction the receiving official 
 wrote in the pass-book that was given to her: " Sub. also to 
 Catharine E. Curtis." Afterward, Catharine, by direction of 
 the depositor, who was her aunt, unlocked the trunk contain- 
 ing the book and took it therefrom', her aunt saying: " E"ow 
 keep this, and if anything happens to me, bury me decently 
 and put a headstone over me, and anything that is left is 
 yours." "This, in our opinion," said the court, "constituted a 
 gift causa mortis. The former entry of ' subject also to Cath- 
 arine E. Curtis' showed that she then had in contemplation a 
 gift to the plaintiff, but it was not completed by delivery. 
 But only four days before her death the declaration above 
 quoted, accompanied by the manual delivery of the deposit- 
 book, rendered unmistakable her intention. The delivery 
 
 containing the entries of the moneys deposited hy a deceased wife witli 
 a parol gift of the same by the surviving husband when m extremis is a valid 
 donatio causa mortis, Tillinghast v. Wheaton, 8 R. I. 536. 
 
 1 Pierce «. Boston Five-Cents Sav. Bank, 129 Mass. 425. 
 
 2 Id., the court citing many authorities. 
 
 " French v. Raymond, 39 Vt. 623. * Case v. Dennison, 9 E. I. 88. 
 
 ■■ 77 Me. 151. 
 
§ 170 PAYMENT OF DEPOSITS. 161 
 
 ■was sufficient,* Nor did the special qualification annexed 
 to the gift defeat it. This was only coupling the gift with 
 the trust that the donee should provide for the funeral of the 
 donor. Hills v. Hills^ is precisely in point, and has been 
 approved by the court in Clough v. Clough."' 
 
 (b) Delivery to third person. The delivery may be made to 
 a third person for the donee ; such a delivery would be as ef- 
 fective as to the donee himself. But delivery to another as 
 agent for performing the further act of delivering the thing 
 after the donor's death would not be efteetive.* 
 
 § 170. Gift to survivor of two depositors. An agreement 
 of two savings bank depositors that the survivor should have 
 the other's deposit, each retaining the absolute title and con- 
 trol of his deposit during life, is a testamentary disposition 
 of property and invalid because it is not made in the way re- 
 quired by statute.* 
 
 1 Hill 0. Stevenson, 63 Me. 364; Pierce «. Boston Five-Cents Sav. Bank, 
 129 Mass. 425 : Tillinghast v. Wheaton, 8 E. I. 536. 
 
 " 8 Mees. & Wels. 401. 
 
 3 117 Mass. 83. See also Davis v. Ney, 125 Id. 590. 
 
 * Newton v. Snyder, 4-1 Ark. 42. In this case it was held that to establish 
 a donatio causa mortis gift tlie evidence must show not only that the person in 
 extremis designated with proper distinctness the thing given and the donee, 
 but also that the property was to pass presently, and that the intention was 
 effected by actual delivery. See also Lamson v. Monroe, Me. Sup. Ct., 6 
 Eastern Rep. 160 ; Farcher v. Saco & Biddeford Sav. Bank, Me. Sup. Ct., 8 
 Id. 637. 
 
 « Towle V. Wood, 60 N. H. 434. 
 
 11 
 
162 BANKS AND THEIK DEPOSITORS. § 171 
 
 CHAPTER lY. 
 
 PAYMENTS BY SPECIAL AGREEMENT — SAVINGS BANK DEPOSITS. 
 
 § 171. Deposit must be applied as depositor intended, (a) 
 
 Bank of the United States v. Maealester.^ Whenever mouey is 
 deposited for a special purpose it must be applied in accord- 
 ance with the depositor's direction.* Plain as this rule is, 
 on many occasions it has been ignorantly or knowingly 
 violated. The State of Illinois created two separate funds 
 for internal improvements; one was under the control of 
 canal commissioners, and the other of a fund commissioner. 
 Each party opened an account with the United States 
 Bank. The bank agreed to pay coupons and bonds issued 
 by the canal commissioners, and they left money with the 
 bank for that purpose. The fund commissioner having 
 overdrawn his account with the bank, it sought to apply the 
 deposit of the canal commissioners towards the payment of 
 the deficit, instead of the bonds and coupons as promised. 
 This, the court held, the bank could not do. Said the court: 
 " As long as the deposit is permitted to remain in their hands, 
 they are the agents of the holders of the coupons to the 
 amount of the fund set apart for their payment. It would be 
 a culpable breach of trust to appropriate the fund to any other 
 purpose, and especially to apply it to their own use."' 
 
 (6) Review of English cases, " Thus, in Taylor v. Plumer,* 
 Lord Ellenborough held that the interests of the cestui que 
 trust [or the person for whose benefit a trust is created] shall 
 
 1 9 Pa. 475. 2 Judy v. Farmers and Traders' Bank, 81 Mo. 404. 
 
 3 Lord Tenterden, C. J., in Stewart v. Lee, 1 Moo. & Mai. p. 161, said: 
 " Any person who knowingly assists another in applying money to a different 
 purpose from that to which he was bound to apply it cannot treat that as a 
 proper application of the money." 
 
 * 3 Man. & Sel. 562. 
 
§ 171 PAYMENTS BY SPECIAL AGREEMENT. 163 
 
 not suffer by a change in the form of the fund, whether it 
 was made in the performance of the trustee's duty, or viola- 
 tion of it; because an abuse of the trust can neither give nor 
 take away a right. In Davis v. Bowsher,' it is ruled that 
 bankers have a lien on securities in their hands, for a general 
 balance of account ; but Lord Kenyon takes care to except 
 such securities as were delivered to him under a particular 
 agreement. In Cox v. Prentice,^ the principle is asserted by 
 Lord Ellenborough as clear and unquestionable, that an 
 agent who received money from his principal, is liable, as 
 long as he stands in his original situation, and until there has 
 been a change of circumstances b}' his having paid the money 
 to his principal, or done something equivalent to it. Although 
 the principles contained in the cases have a strong bearing on 
 the question, yet I agree they are not so directly in point as 
 Jarvis v. Rogers,' in which the doctrine is asserted that an 
 agreement to hold a security for a specific purpose, deprives 
 the holder of the right to apply it to a different one. Mr. 
 Justice Wilde says : If a debtor obtains of his creditors a 
 loan of money on pledge, on the express agreement that the 
 pledge shall be returned on repayment of the loan, the creditor 
 cannot retain the pledge as a security for a prior debt with- 
 out violating the principle of good faith. Parties having a 
 legal capacity to contract have a right to make such stipula- 
 tions as they see fit, provided they do not contravene the law ; 
 and such stipulations are to be faithfully observed by the 
 contracting parties. So in Parkist v. Alexander,^ it is ruled 
 that an agent cannot avail himself of the advantage given by 
 his agency to apply it to his own benefit to the injury of 
 others. So in the Turnpike v. Watson,' it is held that the 
 agent of a corporation who has received money for its use 
 cannot in an action for money had and received brought 
 against him by the corporation, prove by way of set-off that 
 
 1 5 Term, 488. ^ 3 Man. & Sel. 344. 
 
 3 15 Mass. 389, p. 397. * 1 Johns. Ch. 394. 
 
 6 1 Raw. 330. 
 
164 BANKS AND THEIR DEPOSITORS. § 171 
 
 he has paid the debts of the corporation without showing a 
 special authority. The principle clearly asserted is that an 
 agent cannot pay off any debt with a fund intrusted to him 
 for another purpose. The legitimate inference to be drawn 
 from the cases cited is that the bank having received the 
 money from the State for the special purpose of paying the 
 principal and interest of the debt contracted, or money loaned 
 for constructing the Illinois and Michigan Canal cannot 
 divert it from its legitimate object to the prejudice of the 
 holders of the coupons issued on the credit of the fund by ap- 
 plying it to a general balance against the State. From this 
 it follows, that by a refusal to pay, on the pretext of a set-off 
 a wrong was done to the defendant, for which an action lies 
 to recover the value of the coupons." ' 
 
 (c) Special deposits in a savings bank. An instructive case 
 occurred in I^ew Jersey, A savings bank was authorized to 
 receive and invest deposits, and to divide the income among 
 the depositors. The principal was to be repaid with interest 
 under such regulations as the board of managers should pre- 
 scribe. Two kinds of deposits were received under the reg- 
 ulations established. One kind participated in the profits, 
 but were not payable until after thirty days' notice ; and the 
 other kind, which were called special deposits, were not to 
 participate in the profits, but were to be repaid on demand. 
 Both kinds, however, were intermingled by the bank. Never- 
 theless, the so-called special deposits were not entitled to pri- 
 ority in payment over the others. The court said that these 
 deposits " were delivered to the bank in the same manner as 
 the other deposits, and the obligation of the bank in regard 
 to them was answered by the return to the owner of an equal 
 amount of money on demand."* 
 
 (rf) Case of a single special deposit in a savings bank. In a 
 controversy with the Newark Savings Institution over a 
 $25,000 deposit, which was made on the condition that the 
 
 ' Rogers, J., 9 Pa. 475, p. 482. 
 
 ' Stockton II, Mechanics and Lal)oreTs' Sar. Bank, 32 N. J. Eq. 163. 
 
§ 171 PAYMENTS BY SPECIAL AGREEMENT. 165 
 
 bank would pay $1460 annually to a widow during her life, 
 and the surplus of the income, if there should be any, to her 
 children, the question was whether the deposit was special. 
 The bank was authorized by charter to accept and execute 
 trusts created by will or by order of any court, and therefore 
 had authority to receive the deposit mentioned on the condi- 
 tion stated. The court decided that it was not taken as a 
 special trust nor differed materially from the ordinary deposits 
 of the bank.' 
 
 (e) Retention of fiduciary deposit to discharge agent's debt. In 
 another interesting case an action was brought by Baker & 
 Wilson against a bank to recover the amount of a check drawn 
 thereon by " C. A. Wilson & Bro., agents." The bank account 
 against which the check was drawn represented trust moneys 
 belonging to Baker & Wilson, for whom Wilson & Brother 
 were agents. The deposits to the credit of this account were 
 made in the name of the firm with the word " agents" added. 
 They were the proceeds of commission sales. Wilson & 
 Brother became insolvent in October, 1878, and they opened 
 the account in this form for the purpose of protecting their 
 principals, which was known by the bank at the time. The 
 check in question was drawn in settlement for a balance due 
 to Baker & Wilson on cash sales made by the di-awers as their 
 agents. " It is clear," said Judge Andrews, who delivered 
 the opinion of the court, " upon the facts that the fund rep- 
 resented by the deposit account was a trust fund, and that 
 the bank had no right to charge against it the individual 
 debt of Wilson & Brother. The bank having notice of the 
 character of the fund could not appropriate it to the debt of 
 Wilson & Brother, even with their consent, to the prejudice 
 of Baker & Wilson."'' 
 
 (/) Misapplication by bank of a deposit of certified check. Dixon, 
 
 of Ifew York City, delivered to Strauss his accommodation 
 
 " check, which was drawn on the Tradesmen's National Bank. 
 
 1 Vail V. Newark Sav. Institution, 32 N. J. Eq. 627. 
 
 2 Baker v. New York N%t. Ex. Bank, 16 Abb. N. Cas. 458. 
 
166 BANKS AND THEIR DEPOSITORS. § 171 
 
 Afterward Dixon informed Strauss that he had not the funds 
 to meet his cheek. Accordingly, Strauss made his own check 
 on another bank, by which it was certified, and delivered it to 
 the Tradesmen's National Bank to pay the borrowed check 
 of Dixon. The bank, however, did not apply the check as 
 Strauss directed, but applied it so far as necessary to pay 
 Dixon's indebtedness to the bank. Judge Daniels said that 
 the fact clearly appeared that Strauss's check was deposited 
 with the Tradesmen's National Bank to the credit of Dixon 
 " solely for the purpose of paying the check received from 
 him. . . And the bank having so received it, understanding 
 that to be the intent and object of its deposit, legally accepted 
 the trust created by the transaction, and became obligated to 
 appropriate so much of the plaintiff's check as should be re- 
 quired for that purpose to the payment of the check loaned 
 to them by Dixon. It was not necessary for the creation of 
 this obligation that the officers of the bank should expressly 
 agree so to use and apply Strauss's check. The obligation to 
 do that very clearly arose out of the delivery of the check to 
 the bank with notice that such was the object of its delivery, 
 without any concurrent promise on the part of the officera of 
 the bank to carry that object into effect. Their conduct was 
 such as to disclose their acquiescence in the purpose for which 
 the check was delivered and received, and out of that the 
 obligation plainly arose to apply its proceeds solely and spe- 
 cially as the plaintiff's intended they should be applied. A 
 trust to this extent was created in the plaintiff's favor, and 
 the bank had no right or authority to use any part of the 
 proceeds of the check for a different object."' 
 
 {g) Misapplication by a Pennsylvania hank. A very plain 
 misapplication of a special deposit was made by a bank in 
 Pennsylvania. A. made two contracts for the delivery of oil 
 at his own option within a stated time. He gave the cashier of 
 a bank counterparts and also the check of H., a depositor, for 
 $6250 as a security or margin in the event of not fulfilling 
 
 1 Strauss v. Tradesmen's National Bank, 36 Hun, 451. 
 
§ 171 PAYMENTS BY SPKCIAL AGREEMENT. 167 
 
 them. A. indorsed the counterparts to the effect that the mai*- 
 gin was the 'guarantee for the fulfilling of the contracts, and 
 if more margin was needed, demand should be made on him, 
 and if the contracts were not met they should be sold. The 
 cashier indorsed on the counterparts the receipt for the margin 
 on the conditions mentioned. Before the maturity of the con- 
 tracts they were settled at a small loss to A., and the balance 
 of the checks given by H. were credited to A. who drew out 
 the money. H. sued the bank to recover the balance of his 
 check which was not used in liquidating the loss on the con- 
 tracts, and the court held that he ought to have it. The 
 court said that " doubtless to the extent of the amount re- 
 quired to settle the contracts and pay the losses incurred by 
 A. the bank had a right to use the funds placed at its dis- 
 posal by H. for that purpose. . . In other words, the checks 
 operated as a specific appropriation to the extent named 
 therein, of the drawer's funds to be applied by the bank solely 
 to the payment of such sum or sums as A. might become 
 liable to pay in the event of his failure to comply with the 
 terms of the contracts, and the bank as custodian of the money 
 for that specific purpose had no right to appropriate it in any 
 other way." ^ 
 
 (k) Johnston v. Parker Savings Bank.^ In another case an 
 oil dealer left at his bank a check for $1500 drawn in his 
 favor by B., another depositor. The latter had no funds 
 in the bank at that time, yet the check was left, so the dealer 
 claimed, under an agreement witli the cashier that it should 
 be paid from the first deposit of B. that was unappropriated. 
 Subsequently, he deposited large sums, but no appropriation 
 of them was made to pay the check in question. The holder 
 then brought a suit against the bank for not executing the 
 agreement, but failed because he did not prove it. Beside 
 his own evidence the depositor offered to show that such a 
 
 1 Parker v. Hartley, 91 Pa. 465. The case of Jamison v. Collins, 11 Phila. 
 258, is another application of the rule concerning the application of special 
 deposits. The facts are too numerous to be given. 
 
 2 101 Pa. 597. 
 
168 BANKS AND THEIR DEPOSITOES. § 172 
 
 transaction often happened between the bank and its deposi- 
 tors, but the evidence was excluded for the reason that it was 
 neither an offer to prove a special custom, nor a special course 
 of dealing between the bank and the plaintiff. 
 
 § 172. Bank not bound by unknown agreement among joint 
 depositors, (a) Viets v. Union National Bank} A bank is 
 not bound in any way by the agreement of depositors con- 
 cerning the use or payment of a deposit of which it has no 
 notice. Whatever rights such parties may have against the 
 depositor, the bank is protected in paying to the one who 
 apparently has the right to receive it. Thus A., at the re- 
 quest of B., deposited money belonging to the latter with the 
 National Union Bank of Troy. He made the deposit, how- 
 ever, in his own name to the credit of a deposit account he 
 had with the bank, but gave B. two checks for the amount 
 which the latter indorsed and delivered to L. as part con- 
 sideration for her promise to marry him. Lunacy proceed- 
 ings were subsequently instituted against him, and while they 
 were pending, the bank was enjoined from paying the deposit 
 to any one. Having been adjudged a lunatic an order was 
 made directing the bank to pay the deposit to a committee, 
 with which order it complied. One of the checks was pre- 
 sented during the pending of the lunacy proceedings, and the 
 other afterward. In an action by A. to recover the deposit 
 it was held that as the money belonged to B. when deposited, 
 although it was in A.'s name, it remained the property of B., 
 and the payment to the coiamittee was therefore legal. The 
 court remarked that even if it be assumed that there was an 
 equitable right in E., the person whom B. married, " to the 
 money arising out of the ante-nuptial contract with her hus- 
 band, such equity cannot be invoked as against the bank that 
 had no notice of the same and in good faith paid the money 
 to the legal representative of the owner thereof. The bank 
 is entitled to protection for the reason that it paid the money 
 to one who apparently had the right to receive it. If any 
 
 » 101 N. Y. 563. 
 
§ 172 PAYMENTS BY SPECIAL AGREEMENT. 169 
 
 equitable claim existed in favor of any third party, it could 
 only be prosecuted and enforced in an action against the 
 committee, who had received the money and not against the 
 bank in contravention and repudiation of its right to pay 
 which it had exercised in good faith to one ostensibly vested 
 with lawful authority to receive the same. "With this appa- 
 rent lawful authority presented by the committee to the bank, 
 it was not required to examine and determine the equities of 
 other parties, of which it had no knowledge, to the fund, and 
 it had right to assume that the committee appointed by 
 the court had full power to act. It must be conceded that if 
 the adjudication of lunacy was in force at the time the pay- 
 ment was made, it was a valid and legal payment and an 
 eftectual bar to any claim by the plaintiff or any other person 
 to recover the money of the defendant." 
 
 (6) Riley v, Albany Savings Bank} In another case, F. in 
 the presence of two others, made a deposit for R. and in her 
 name, and which was not to be withdrawn unless the three 
 were present. The money was afterward paid to F. during 
 R.'s life on the producing of her check and pass-book. Sub- 
 sequently, her administrator sued the bank to recover the 
 amount, on the ground that it was culpably negligent in pay- 
 ing the deposit, as the three persons were not present when 
 this was done. This understanding or agreement between F. 
 and his companions was never known by the bank, and if the 
 bank clerk, with whom it was claimed the arrangement was 
 made, had known of it, his authority was restricted to the re- 
 ceiving of money on the terms and conditions printed in the 
 pass-book ; only the president could make such an agreement. 
 The court therefore decided on this part of the case that 
 the money belonged to R., that "it was deposited in the 
 bank without her knowledge or consent," that " she was 
 therefore not a party to any agreement as to the manner of 
 'drawing it out." Consequently, " she had a right to draw out 
 
 1 36 Hun, 513. 
 
170 BANKS AND THEIR DEPOSITORS. § 173 
 
 the money, and the bank had a right to pay it as the bank 
 and E. might choose." 
 
 (c) Payment to insane person. The next question in the case 
 was whether R. did draw out the money. She was insane at 
 the time of giving the check, which was procured by F., by 
 the overseer's advice of the poor of Albany, who refused to 
 assist her after learning that she had money in the bank. 
 The bank, however, did not know that she was insane, and 
 paid the check in good faith, and therefore it was held that 
 the payment could not be set aside on the application of her 
 administrator. 
 
 § 173. Deposit in trust in form but not in fact, {a) Weber 
 V. Weber.^ If a deposit be in trust in form, but really for the 
 depositor, how should a bank regard it ? Webber deposited 
 money in a savings bank, " in trust for" his son. He made the 
 deposit in this form for the purpose of obtaining the highest 
 rate of interest which the bank allowed, and did not intend 
 to part with the ownership or right of receiving back the 
 money from the bank, nor to make a gift or transfer of the 
 same, and further he agreed with the bank not to withdraw 
 the money without producing the book which he kept him- 
 self. It was held that the circumstances under which the 
 deposit was made were admissible to vary or explain its ap- 
 parent character as a trust, that there was no intent on the 
 part of Webber to create a trust in the money, and that he 
 had not done so. Chief Justice Daly remarked that " it was 
 left an open question in the qase of Martin v. Funk,'' whether 
 surrounding circumstances may not be shown to vary or ex- 
 plain the apparent character of such a deposit, and the intent 
 with which it was made. I entertain no doubt in my mind 
 that this can be done in any case of such a deposit ; and, in 
 my opinion the circumstances of this case clearly established 
 that there was no intent upon the part of the defendant to 
 create any trust in this fund for the plaintiff and that he 
 created none." The higher court of New York entertain the 
 
 1 9 Daly, 211. s 75 N. Y. 134. 
 
§ 173 PAYMENTS BY SPECIAL AGREEMENT. 171 
 
 same opinion. Says Judge Andrews : " If it was now neces- 
 sary to decide that point, I should incline to the opinion that 
 the character of such a transaction, as creating a trust, is not 
 conclusively established by the mere fact of the deposit, so as 
 to preclude evidence of contemporaneous facts and circum- 
 stances constituting res gestce, to show that the real motive of 
 the depositor was not to create a trust, but to accomplish 
 some independent and diiFerent purpose inconsistent with an 
 intention to divest himself of the beneficial ownership of the 
 fund."' 
 
 {b) Michigan case. A case quite similar occurred in Michi- 
 gan. Davis desired to open an account with the defendant bank. 
 As he had one account there, and could not by usage have 
 a second, it was suggested that he might deposit his money 
 on an account in his wife's name, subject to his own draft. 
 The account was opened in this manner and existed for ten 
 years when his wife died. The bank then refused to recog- 
 nize his right to the deposit. " If it was proper," said Judge 
 Campbell, speaking for the court, " for plaintiff to show title 
 in himself to the money in question, we can see no reason why 
 he could not show all of the circumstances connected with 
 the origin and history of the deposit, and his wife's state- 
 ments in derogation of her interest. . . The contract of a de- 
 positor with his banker does not differ in any material way 
 from any other contract whereby one person becomes bound 
 to take charge of and repay another's funds. As between 
 banker and depositor there can be no doubt that the bank 
 will be protected in paying out money in such way and on 
 such terms as the depositor has authorized. And, on the 
 other hand, where the contract is not in writing it is equally 
 clear that its real character and terms may be made out by 
 testimony, and that the contracting party can lawfully control 
 his own funds until he has disposed of them, and that it can 
 make no difference in what name the account is kept, if it is 
 understood to be his account, and has not been put beyond 
 
 1 Mabie v. Bailey, 95 N. Y. 206, p. 210. 
 
172 BANKS AND THEIR DEPOSITORS. § 175 
 
 his control by some act which he cannot revoke. In the 
 present case the testimony does not tend to show that the bank 
 ever contracted with anybody but plaintiff, or received funds 
 on this account which were not his funds. The case he made 
 out, and which the jury must have found true, was that while 
 deposited in the wife's name, it was not intended to be for her 
 benefit, or to be beyond the husband's right to withdraw. . . 
 The bank-book is no contract, and is only one of the means of 
 indicating the state of the funds. Whatever presumptions muy 
 arise from it and whatever protection may be given to acts 
 innocently done on that presumption, it cannot exclude ex- 
 planatory evidence. The contract was made with plaintiff, 
 and with no one else, and the bank is answerable to him to 
 fulfil that contract."* 
 
 § 174. Action against assorting bank for deficiency. If a 
 bank deposit foreign money with another by agreement that 
 it shall be sent to a third to be assorted at the risk of the de- 
 positor the first one cannot maintain an action against the 
 assorting bank to recover a deficiency. It may be added that 
 in the case in which this question arose the assorting bank 
 received the money from the second bank by agreement that 
 the latter should make good to the former all deficiencies 
 which might be found in counting it.' 
 
 § 175. Rights of surety. The rights of a surety on a note 
 do not prevent the principal from making a special agreement 
 with the depository concerning the application of deposits 
 which are not charged with any trust or lien. Thus, after 
 the maturity of a note at a bank where it was payable, the 
 principal made an agreement with the corporation whereby 
 he was to give persons who sold cattle to him checks payable 
 at the bank after he should sell them and receive and deposit the 
 money therefor. This was to be applied in paying his checks. 
 In executing this agreement more than enough money was 
 deposited and checked out to pay the note mentioned, if it 
 
 ' Davis V. Lenawee Co. Savings Bank, 53 MicU. 163. 
 « Taylor v. Bank, 3 Allen, 189. 
 
§ 178 PAYMENTS BY SPECIAL AaREEMENT. 173 
 
 had been applied in that manner. The surety claimed that 
 it ought to have been thus applied, but the court declared 
 that the bank did right in paying the depositor's checks in 
 accordance with the agreement.' 
 
 § 176. An agreement to pay check contrary to statute. If a 
 bank, having no funds of the drawer at the time his check is 
 presented, verbally agrees to pay it provided the holder will 
 deposit it in another bank so that presentation for payment 
 can be made through the clearing house, the agreement is 
 within the Statute of Frauds and cannot be enforced.* 
 
 § 177. Savings bank regulations. The savings banks have 
 regulations for the withdrawal of deposits, and which are 
 usually printed in the books given to depositors. These 
 rules are, " when properly made known to the depositor, a 
 part of the contract between him and the institution."* Says 
 Judge Learned : " They are made for the protection of the 
 depositors and of the bank. They protect depositors against 
 forged orders and orders obtained by fraud." * 
 
 (a) When waived. But if a bank violate its duties to a de- 
 positor it cannot shield itself behind these regulations. Thus, 
 one of the rules that have been quite generally adopted re- 
 quires the depositor to give a notice of several days or longer 
 period of his intention to withdraw his deposit. But whea 
 a person applied for his deposit and was told that he had 
 none the bank waived its right to the notice, for by denying 
 that the plaintiff was a depositor in the bank, it repudiated 
 the relation on which its right to the notice was founded.* 
 
 § 178. Production of book a reasonable regulation. One of 
 thes0 rules requires the production of the book before the 
 depositor can receive payment. The question was long ago 
 asked, is such a regulation reasonable, and can it be enforced, 
 
 ' Wilson V. Dawson. 52 Ind. 513. 
 2 Morse v. Massachusetts Nat. Bank, 1 Holm. 209. 
 ■" Israel v. Bowery Sav. Bank, 9 Daly, 507. 
 ' Mitchell V. Home Sav. Bank, 38 Hun, p. 257. 
 
 5 Townsend v. Webster Five-Cents Sav. Bank, 8 Eastern Kep. 869 ; see 
 Lowe V. Harwood, 139 Mass. 133. 
 
174 BANKS AND THEIK DEPOSITOES. § 179 
 
 to which the court gave an affirmative answer. If, however, 
 the book is lost and cannot be found after proper search, the 
 depositor is excused from complying with the regulation and 
 may draw his money. " We see nothing unreasonable in this 
 regulation," said Judge Davies,* " and we fail to come to the 
 conclusion that it was intended or does in fact work any for- 
 feiture of the depositor's money. It is to receive a reasonable 
 construction, and not to be perverted to consummate fraud or 
 work injustice. If the depositor, when he wishes to. with- 
 draw his money, cannot do what the regulations of the defen- 
 dants require and what he has agreed and stipulated to do, he 
 must certainly do the next best thing — account for the non- 
 production, and show its loss or destruction. There would be 
 no safety either to the bank or to the depositor if the former 
 was bound to pay on demand, without the production of the 
 pass-book as the evidence of authority to receive the money 
 by the person demanding it; or, if it is not pi'oduced, the 
 same security to both requires some excuse for its non-pro- 
 duction to be given." The rule was applied to a German 
 whose knowledge of English was meagre, and who had notice 
 of the regulations only from his pass-book and from the first 
 page of the signature-book which he had signed, and also 
 from a copy of them posted in the banking room. 
 
 § 179. May pay without producing book. But if a bank on 
 the receipt of a deposit enters it and delivers a pass-book to 
 the depositor containing the regulations for receiving and 
 paying deposits, and among which, that no depositor shall be 
 paid without producing the book and that all payments made 
 to the person producing the same shall be deemed valid, the 
 bank is authorized to pay the presentor without an order from 
 the depositor, and if not negligent, the payment is binding 
 on hini.^ Consequently, when a pass-book containing these 
 conditions was presented by a person who was wrongfully in 
 possession of it with a forged order purporting to have been 
 
 ' Warhus v. Bowery Sav. Bank, 21 N. Y. p. 546. 
 
 2 Hayden v. Brooklyn Sav, Bank, 15 Abb. Pr. N. S. 297. 
 
§ 180 PAYMENTS BY SPECIAL AGREEMENT. 175 
 
 signed by the depositor, and the amount was paid to him 
 through no want of proper care and diligence on the part of 
 the hank, the payment was declared to be valid.^ But " if 
 the signature of the receiving person should present a marked 
 and noticeable dissimilarity- to that of the depositor upon the 
 bank's book, the failure to discover it would evidence negli- 
 gence to be passed upon by a jury."" 
 
 § 180. Degree of diligence required in paying, (a) Remarks 
 of Church, C. J. "What degree of diligence shall be exercised? 
 " The officers of these institutions," said Chief Justice Church, 
 " are held to the exercise of reasonable care and diligence.^ 
 If, by a regulation designed to prevent fraud upon de- 
 positors which by the rules the bank promised to endeavor 
 to do, a fact or circumstance is brought to the knowledge of 
 the officers which is calculated to and ought to excite the 
 suspicion and inquiry of an ordinarily careful person, it is 
 clearly the duty of the officers to institute such inquiry, and 
 a failure to do so is negligence for which the bank would be 
 liable."* 
 
 (6) A Neio York ease. This question whether proper care 
 had been shown by the officers in paying a deposit arose in a 
 case against the Erie County Savings Bank." The usual rule 
 existed concerning the payment of deposits to persons pro- 
 ducing the books containing the entry of them, but another 
 rule stated that the bank would endeavor to prevent fraud 
 on its depositors. The bank required each depositor to sign 
 his name in a book kept for that purpose when opening an 
 account with him. A depositor's book was stolen and pre- 
 sented, and the person who received the money signed the 
 depositor's name to the receipt for the amount. The depositor 
 in an action to recover the amount, introduced evidence to 
 
 1 Sclioenwald v. Metropolitan Sav. Bank, 57 N. Y. 418. 
 
 2 Israel v. Bowery Sav. Bank, 9 Daly, 507. See § 97. 
 
 3 Appleby v. Erie County Sav. Bank, 62 N. Y. p. 18, citing Heath «. Ports- 
 mouth Sav. Bank, 46 N. H. 78 ; Bares v. People's Sav. Bank, 27 Conn. 229 ; 
 Sullivan v. Lewistou Institution, 56 Me. 507. 
 
 ' Id. See § 179. 5 Appleby v. Erie County Sav. Bank, 62 N. Y. 12. 
 
176 BANKS AND THEIR DEPOSITORS. § 180 
 
 show that the signatures were unlike and requested the court 
 to go to the jury on the question whether the failure to dis- 
 cover the discrepancy was not negligence, which was refused. 
 "If the two signatures," said Chief Justice Church in re- 
 viewing the case, " were so dissimilar as when compared the 
 discrepancy would he easily and readily discovered by a per- 
 son competent for the position, then the failure to discover 
 it would be evidence of negligence which should have been 
 •passed upon by the jury. It would not be evidence of negli- 
 gence if the difference was not marked and apparent, or if it 
 would require a critical examination to detect it, and, espe- 
 cially, if the discrepancy was one as to which competent per- 
 sons might honestly differ in opinion." 
 
 (c) Opinion of Doe, C. J. Chief Justice Doe has thus ex- 
 plained the regulation. " The stipulation that a deposit may 
 be withdrawn by any one presenting the book does not re- 
 lieve the bank from the duty of acting in good faith and 
 with reasonable care. As it does not mean that the bank may 
 pay the money fraudulently to a person producing the book, 
 but known not to be entitled to the money, so it does not mean 
 that the bank is absolved from all obligation of caution. A 
 depositor is a beneficiary of a fund held by the bank as trus- 
 tee. The trustee is incorporated for the purpose of exercis- 
 ing care in the management and preservation of deposits. 
 This object would not be accomplished by care in the invest- 
 ment of the fund, and recklessness in paying a deposit to a 
 wrongful possessor of a book."' 
 
 (d) When it agrees to use " its best efforts." If the presentor 
 of the book be of a different sex from the depositor this fact 
 should excite suspicion and inquiry.^ And if the by-law 
 printed in the depositor's book states that "the bank will 
 use its best efforts to prevent fraud ; but that payments made 
 to the presentor of it shall be valid, the bank is not fully pro- 
 tected in paying simply on the production of the book. The 
 
 > Kimball v. Norton, 59 N. H. 1. 
 
 s Allen V. Williamsburgh Sav. Bank, 69 N. Y. 314. 
 
§ 181 PAYMENTS BY SPECIAL AGREEMENT. 177 
 
 bank must use its " best efforts" to prevent fraud, and is not 
 excused from making a wrong payment by showing that it 
 paid the money in good faith and while exercising ordinary 
 care and diligence.' 
 
 § 181. Rule of diligence in Massachusetts, {a) By-laws there 
 on the subject. In Massachusetts the same rule of diligence has 
 been declared applicable in cases where the following by-laws 
 are printed in the books of depositors: "As the officers 
 of the institution may be unable to identify every depositor, 
 the corporation will not be responsible for loss sustained, when 
 a depositor has not given notice of his book being stolen 
 or lost, if such book be paid in whole or in part on present- 
 ment. In all cases a payment upon presentment of a deposit- 
 book shall be a discharge to the corporation for the amount 
 so paid." Therefore, a depositor who had subscribed to these 
 by-laws could not maintain an action to recover the amount 
 of a forged order which the bank had paid to another on 
 presenting the depositor's book, while exercising good faith 
 and reasonable care in so doing.^ 
 
 {h) Donlon v. Provident Institution.^ Another case has oc- 
 curred in that State over a deposit which was entered in a 
 book containing the same by-law. After the death of a 
 depositor, which was unknown to the bank, the deposit was 
 paid to another vi'ho presented the book and •fraudulently 
 personated the depositor. The bank did not know that the 
 book had been stolen. After the depositor's death and before 
 payment to the fraudulent presentor, the depositor's executor 
 published the usual probate citation addressed to the heirs^at- 
 law to appear and show cause against the probate of the will. 
 This, however, was no notice to the bank of the death of the 
 depositor. " The fact that such a notice was published," said 
 
 1 Id. Other oases in which the claimant sought to show that the hank 
 was negligent in paying deposits are Wilcox v. Onondaga Co. Sav. Bank, 40 
 Hun, 297 ; People v. Third Avenue Sav. Bank, 98 N. Y. 661. 
 
 2 Levy V. Franklin Savings Bank, 117 Mass. 448 ; Goldrick v. Bristol Co. 
 Sav. Bank, 123 Mass. 320. 
 
 3 127 Mass. 183. 
 
 12 
 
178 BANKS AND THEIR DEPOSITORS. § 183 
 
 the court, " and miglit have been seen by the bank, bears 
 upon the question of actual negligence on the part of the 
 bank in making the payment. But the jury have found that 
 the defendant was guilty of no negligence, and therefore must 
 have found that it paid without notice of the depositor's 
 death. There is no rule by which the bank can be held 
 conclusively bound to know of the death." The executor 
 therefore failed in his suit to recover the deposit. 
 
 § 182. Pennsylvania rule. In Pennsylvania the liability of 
 a bank turned on the following by-law printed in the deposi- 
 tor's book: "If any person shall present a deposit^book at the 
 office of this corporation, and allege himself or herself untruly 
 to be the depositor named therein, and shall thereby obtain 
 from the officers of this corporation the amount deposited, or 
 any part thereof, and the actual depositor shall not have given 
 previous notice at the office of his or her book having been 
 lost or taken from him or her, this corporation will not be 
 responsible for the loss so sustained by any depositor, neither 
 will this institution be liable to make good the same. Pro- 
 vided, that such payment has been entered in the book of 
 the depositor at the time when made." The rule was 
 declared to be reasonable, and that the bank was not liable 
 for money drawn on presentation of the book by another who 
 temporarily abstracted it from the depositor's trunk without 
 his knowledge.* 
 
 § 183. Will presentation of the book protect a bank ? In 
 Connecticut it has been maintained that somethifig more than 
 the existence of a by-law, requiring presentation of the de- 
 positor's book, is needful to protect a bank in making pay- 
 ments. The rule " must be inserted in the book and assented 
 to by the depositor."' But this view is not countenanced 
 elsewhere. The failure of the depositor through ignorance 
 to ascertain the conditions under which his deposit has been 
 received, will not avail him in the event of loss without neg- 
 
 > Burrill v. Dollar Savings Bank, 92 Pa. 134. 
 2 Eaves v. People's Sav. Bank, 27 Conn. p. 234. 
 
§ 185 * PAYMENTS BY SPECIAL AGREEMENT. 179 
 
 ligence on the part of the depository.' " It would be pecu- 
 liarly hazardous," said Judge Colt,* " to the rights of savings 
 banks if evidence of ignorance on the part of the depositor 
 merely were permitted to control the presumptions which 
 fairly arise from the transaction between them, and which 
 the bank may well rely on." 
 
 § 184. By-laws govern existing at time of contract. It 
 may be remarked that the by-laws existing at the time of 
 making a deposit form the contract between both parties and 
 determine their rights and not subsequent by-laws or other 
 regulations. If or are their rights changed by a by-law exist- 
 ing at the time of making a deposit which clothes the trustees 
 of the bank with power to alter or amend the by-laws.^ In 
 the case wherein this obviously just principle was stated, the 
 by-law in question was similar to that in the Levy case pre- 
 viously mentioned.* The amendment consisted in adding the 
 second sentence. " No notice," said the court, " was given to 
 the plaintiff of the amendnient, and she had no knowledge 
 of it and the deposits made after it was passed must be taken 
 to have been made under the original contract. . . The by- 
 law in question is not one which merely concerns the regula- 
 tions of the institution as to the time and manner of paying 
 deposits to depositors. It materially affects the contract of 
 deposit in the interest of the bank and not of the depositor ; 
 and if it applies to contracts made before it was passed, it 
 authorizes the bank to pay the money of depositors to those 
 not authorized by the contract to receive it and to relieve the 
 bank from its obligation to pay it to the depositors. Author- 
 ity to make such a material change in the contract without 
 the knowledge of the plaintiff cannot be inferred from her 
 agreement to abide by the regulations of the institution."' 
 
 § 185. When book is lost what should bank do. Whenever 
 the pass-book is lost the depositor, or if dead, the adminis- 
 
 1 Burrill v. Dollar Savings Bank, 92 Pa. 134 ; Donlon v. Provident Institu- 
 tion, 127 Mass. 183 ; Warhus v. Bowery Savings Bank, 21 N. Y. 543. 
 
 2 Donlon v. Provident Institution, supra. 
 
 ' Kimins v. Boston Five-Cents Sav. Bank, 141 Mass. 33. 
 
 * § 181 a. " Kimins v. Boston Five-Cents Sav. Bank, supra. 
 
180 BANKS AITD THEIR DEPOSITOES. '- § 186 
 
 trator on his estate, must tender a satisfactory bond of in- 
 demnity before demanding payment.* For, as the by-laws are 
 a part of the contract between the depositor and the bank, it 
 is " as much entitled to the production and offer of the book 
 upon a demand for the deposit, as the maker of a note, pay- 
 able to bearer, to an offer of the note upon payment when 
 payment is demanded."* And if the depositor fraudulently 
 disposes of his book and dies, his administrator may maintain 
 an action against the bank for the deposit on tendering a 
 satisfactory bond of indemnity should the money be needed 
 to pay the depositor's debt.^ But if money is deposited by 
 an agent who signs on the signature book the name of the 
 principal only and to whom the deposit-book is given, the 
 principal can maintain an action to recover the money after 
 a demand of and refusal by the bank, and the giving to it 
 of an affidavit touching his ownership and circumstances 
 which attended the deposit without tendering a bond of in- 
 demnity. The custom of requiring depositors to sign their 
 names when making their first deposit in a signature-book 
 and of not receiving deposits from one person for the benefit 
 of another will not defeat his recovery.^ And if the admin- 
 istrator on the estate of a depositor is unable to get the book 
 from the family of the deceased, he can recover the money 
 notwithstanding the rule requiring the presentation of the 
 book before payment, should no third party claim it, without 
 giving a bond of indettinity.^ 
 
 § 186. Payment on written order without book. Savings 
 banks have sometimes made regulations for the withdrawal 
 of deposits on the check or other order of the depositor with- 
 out requiring presentation of the book. Thus in a Pennsyl- 
 
 1 Wall V. Provident Institution, 3 Allen, 96 ; Heath v. Portsmouth Sav. 
 Bank, 46 N. H. 78. 
 
 * Bartlett, J., Heath v. Portsmouth Sav. Bank, supra; Mitchell v. Home 
 Sav. Bank, 38 Hun, 255. 
 
 » Wall o. Provident Institution, 6 Allen, 320. 
 
 * Wallace v. Lowell Institution, 7 Gray, 134. 
 
 ' Palmer v. Providence Institution, 14 R. I. .68. 
 
§ 186 PAYMENTS BY SPECIAL AGREEMENT. 181 
 
 vania bank the by-law provided that deposits might be 
 withdrawn on the check of the depositor properly witnessed. 
 The bank was declared liable to a depositor for money paid 
 on a forged check not witnessed but to a person who had the 
 book. " It was not a question of negligence, and contribu- 
 tory negligence in the depositor was of no consequence. It 
 was a case of mis-payment, contrary to the published rules."* 
 So, also, a by-law which provided that money might " be 
 drawn upon the written order of the depositor or his attorney 
 when accompanied by the pass-book," did not protect a bank 
 in paying a deposit to a stranger whose only evidence of 
 authority to receive it was possession of the book.* The by- 
 law in this instance also provided that " all payments made 
 by the bank, upon the presehtation of the pass-book, and 
 duly entered therein, will be regarded as binding upon the 
 depositor." It was contended that the phrase " all payments" 
 meant any suni of money, delivered by the bank to any per- 
 son who might for the time being have in his possession the 
 pass-book. " This," said the court " may have been the un- 
 derstanding and intention of the bank in framing the by-law, 
 but in order to make that understanding obligatory upon the 
 customer, it was also necessary that he should have a similar 
 understanding, or that the law should have been expressed 
 in language incapable of any other fair construction. "We do 
 not think that the word 'payments,' as used in it, can, 
 according to the legal or common acceptation or meaning of 
 the word, be construed to mean any sums which the bank 
 might choose to disburse, regardless of the person to whom 
 they were made. Payment by a debtor can be legally made 
 only to the creditor or his authorized representative, and in 
 order to constitute any other transaction a payment, it is 
 essential to its validity that it should be authorized by the 
 person entitled to demand it. . . The by-law seems to contem- 
 plate but two modes of payment, both of which require the 
 
 1 People's Sav. Bank v. Cupps, 91 Pa. 315. 
 
 2 Smith V. Brooklyn Sav. Bank, 101 N. Y. 58. 
 
182 BANKS AND THEIK DEPOSITORS. § 187 
 
 presentatiou of the pass-book as the condition thereof, one 
 apparently authorizing a payment to the depositor personally, 
 and the other, one which may be made in his absence. The 
 one provides for the conclusive effect of payments made in 
 his absence to a third person, having possession of the pass- 
 book. This provision requires the depositor's written order 
 to accompany the pass-book." 
 
 § 187. Payment to administrator. "When the depositor 
 dies and his executor or administrator demands the deposit, 
 and shows his authority to act in this capacity, it is usually 
 safe for a bank to pay the deposit. But sometimes, after 
 paying, other parties have demanded it. Most books have a 
 by-law stating that the amount standing to the credit of a 
 depositor on his decease may be paid, when legally demanded, 
 to his representatives. S. made a deposit with a savings 
 bank and received a pass-book which stated that the account 
 was with her "in trust for Christopher Boone." After S.'s 
 death the bank paid the amount to her administrator after 
 producing the pass-book and proper evidence of his authority 
 to administer on her estate. Afterward the beneficiary of 
 the trust sought to recover the deposit of the bank. The 
 court held that in the absence of any notice from the bene- 
 ficiary the payment to the administrator was valid. The 
 depositor constituted S. trustee and transferred the title to the 
 fund from her individually to her as trustee, and on her 
 death her right as trustee to demand and receive the fund 
 passed to her administrator, and on his demand the bank was 
 required to pay it over, nor wait to inquire into the nature 
 of the trust before doing so.* But when a depositor gave 
 his bank-book and an order for the payment of the deposit 
 to his daughter who notified the bank, which after his death 
 paid the amount to his administrator it acted wrongfully, 
 and the daughter recovered the amount.^ 
 
 (a) Becovery of administrator. The administrator or execu- 
 
 ' Boone v. Citizens' Sav. Bank, 84 N. Y. 83 ; Rev. 21 Hun, 235. 
 » Foss V. Lowell Five-Cents Sav. Bank, 111 Mass. 285. 
 
§ 188 PAYMENTS BY SPECIAL AGREEMENT. 183 
 
 tor can also be sued to recover a deposit improperly paid to 
 him,' and the action may be against him individually. In a 
 case of this kind the court said that " the fund now claimed 
 being no part of the testator's estate, defendant was properly 
 sued in his individual capacity."^ 
 
 (b) Should not pay on presumption of death. A bank is not 
 protected in paying a deposit to an administrator on the es- 
 tate of a depositor on producing the book if administration 
 be founded on the presumption of death from seven years' 
 unheard absence.^ 
 
 § 188. When depositor may recover though bank has lost 
 heavily. The laws and regulations of a bank, to which all 
 the depositors assented, declai-ed that twice every year a pay- 
 ment of two per cent, interest should be made; "that 
 although four per cent, is promised, yet every fifth year all 
 the extra income which has not before been paid out and 
 divided will then be divided in just proportion to the length 
 of time the money has been in, according to the by-laws," 
 and that as "people may become sick or otherwise want 
 their money after they have put it in, it is provided that 
 they may take it out when they please." The bank having 
 lost half its funds, though without any fault of the officers, 
 a depositor after due demand of payment and refusal brought 
 his action to recover the amount of his deposit. He recov- 
 ered, notwithstanding, too, the existence of another by-law 
 whereby the trustees could, " at any time divide the whole 
 of the property among the depositors in proportion to their 
 respective interests therein."^ 
 
 1 Mabie v. Bailey, 95 N. Y. 206. 
 
 2 Anderson v. Thompson, 38 Hun, 394. 
 
 3 Jochumsen v. Suffolk Sav. Bank, 3 Allen, 87. 
 * Makin v. Savings Institution, 23 Maine, 350. 
 
184 BANKS AND THEIR DEPOSITORS. § 190 
 
 CHAPTER V. 
 
 PAYMENT OF FORGED CHECKS. 
 
 § 189. Banks must know signatures of depositors. " The 
 
 principle is universally maintained that banks and bankers 
 are bound to know the signatures of their customers, and that 
 they pay checks purporting to be drawn by them at their 
 peril. B'o right or title can be legally claimed through a 
 forgery ; and the possession by the bank of a forged check 
 upon which money has been paid afibrds of itself no ground 
 for claim of credit in account as against the party whose 
 name is forged."' In the language of Judge Allen, "for 
 more than a century it has been held and decided, without 
 question, that it is incumbent upon the drawee of a bill, to be 
 satisfied that the signature of the drawer is genuine, that he 
 is presumed to know the handwriting of his correspondent; 
 and if he accepts or pays a bill to which the drawer's name 
 has been forged, he is bound by the act, and can neither 
 repudiate the acceptance nor recover the money paid."^ 
 
 § 190. Parties may change the rule. "While these are the 
 strict and necessary rules as against banks and bankers, their 
 operation may be varied by the acts and conduct of the parties 
 for whose benefit and protection they are intended to be en- 
 forced. If, for instance, a customer of a bank, having a 
 deposit account and who is in the habit of drawing checks 
 upon that account, should, by words or acts, cause the bank, 
 the latter acting upon such reasonable grounds as prudent 
 business men generally act, to make payment on a forged 
 
 ' Alvey, J., Hardy i'. Chesapeake Bank, 51 Md. p. 585. 
 
 " National Park Bank «. Ninth Nat. Bank, 46 N. Y. 77, p. 80. It a hank 
 pay the forged check of a depositor it cannot charge the same to his account. 
 Payment of a forged check is no payment, Leavitt v. Stanton, Hill & 
 Denio, Snpp..413. 
 
§ 191 PAYMENT OF FORGED CHECKS. 185 
 
 check, such customer would not be allowed, as against the 
 bank to set up the forgery that he, by his conduct, had 
 induced the bank to act as on a genuine check."' 
 
 § 191. Hardy's case. In the case of Hardy v. Chesapeake 
 Bank, the action was begun to recover a balance due on bank 
 account. The bank having notified Hardy that his account 
 was" overdrawn, he discovered that a considerable amount had 
 been paid out on forged checks which were charged to his 
 ^count. At the trial fourteen forged checks were produced 
 which had been entered in Hardy's bank-book. Five were 
 included among the checks entered and balanced on the 13th 
 of July, 1873, and the others were dated, paid, and charged 
 prior to October 6th of that year, when his bank-book was 
 again balanced. On each occasion of balancing the bank- 
 book the cancelled checks were returned to Hardy, and the 
 balance was carried forward to his credit. Holmes, the for- 
 ger, was Hardy's confidential clerk and book-keeper, and all 
 the checks in question were taken from Hardy's check-book 
 and filled in Holmes's handwriting. He was entrusted with 
 Hardy's bank-book, check-book, and with the checks returned 
 by the bank, and he entered in the bank-book all the checks 
 paid by the bank except the four last. " It was his business 
 to enter the checks in the bank-book and to superintend the 
 writing up and balancing the account with the bank, and to 
 keep himself informed of the true state of the account." The 
 forgery was discovered by Hardy on the 10th of October, four 
 days after the balancing of his account which included the 
 sums of the later forged checks. 
 
 (a) What the jury should have determined. The bank de- 
 fended on several grounds, one of which was that " it had 
 been misled and induced to honor and pay the checks drawn 
 by Holmes by the negligent conduct and apparent acquies- 
 cence" of Hardy. The jury having rendered a verdict for 
 Hardy only for the amount of the first five checks and inter- 
 est, he appealed claiming that the court ought to have 
 
 1 Alvey, J:, Hardy v. Chesapeake Bank, 51 Md. p. 585. 
 
186 BANKS AND THEIK DEPOSITOKS. § 192 
 
 submitted to the jury the question whether he was guilty of 
 negligence with respect to the hank account, and whether, if 
 there was negligence at all, it was of a character to mislead 
 and did actually mislead the bank, and induced it to act on 
 the belief that as all the checks paid to him on the 13th of 
 July, 1873, and which had remained without objection, all 
 checks similarly drawn and presented for payment after that 
 date were unobjectionable. The Court of Appeals in review- 
 ing the case said that the jury should have been required fo 
 find either that Hardy had knowledge in fact that the 
 forgeries had been committed, or that from carelessness and 
 indifference to the rights of others, he failed to inform himself 
 from sources of information readily accessible to him, and 
 which, by the exercise of ordinary diligence as a business man 
 would have declared to him the fact that the forgeries had 
 been committed. If such facts existed then it must be also 
 found that the bank in honoring and paying the nine checks 
 in question was misled into paying them by Hardy's conduct 
 in failing to make known his objection to the account as 
 stated and balanced in the bank-book on the 13th of July, 
 1873, in order to be entitled to a verdict. In other language, 
 if Hardy knew of the forgeries or misled the bank by his 
 conduct after the balancing of his bank-book in July, he was 
 estopped from questioning the genuineness of the checks or 
 the authority of Holmes to draw them. 
 
 § 192. Law of estoppel. The court remarked in Hardy's 
 case that " this doctrine of estoppel is applied in a great 
 variety of circumstances, but its great object is to prevent 
 injustice being done where one party has been led into error 
 by the fault or fraud of the other. It is a most valuable doc- 
 trine for the promotion of justice, but it can have no appli- 
 cation except the party invoking it can show that he has been 
 induced to act or refrain from acting by the acts or conduct 
 of the adverse party under circumstances that would nat- 
 urally and rationally influence ordinary men. It can, there- 
 fore, only be set up and relied on by a party who has been 
 actually misled to his injury ; for if not so misled, he can 
 
§ 192 PAYMENT OF FORGED CHECKS. 187 
 
 have no ground for the protection that the principle affords. 
 . . In the recent case of Arnold v. The Cheque Bank,^ where 
 the principle was extensively discussed as to its application 
 to tlie negligent conduct of the partj suing, it was held, fol- 
 lowing the previous cases, that negligence to create an estop- 
 pel must be in the transaction itself and be the proximate 
 cause of leading the third party into mistake, and also must 
 be the neglect of some duty which is owing to such third 
 party, or to the general public. What is such duty may not 
 in all cases be easy to determine, but we think it not too 
 much to say that in a case like the present, there is a duty 
 owing from the customer to the bank to act M'ith that ordi- 
 nary diligence and care that prudent business men generally 
 bestow in such cases, in the examination and comparison of 
 the debts and credits contained in his bank- or pass-book in 
 order to detect any errors or mistakes therein. More than 
 this, under ordinary circumstances, could not be required." 
 
 {a) Applied by United States Supreme Court. So, too, the 
 Supreme Court of the United States, speaking through Judge 
 Harlan, in a recent case,^ remarked that " where a duty is cast 
 upon a person, by the usages of business or otherwise, to dis- 
 close the truth, which he has the means, by ordinary diligence, 
 of ascertaining, and he neglects or omits to discharge that 
 duty, whereby another is misled in the very transaction to 
 which the duty relates, he will not be permitted, to the injury 
 of the one misled, to question the construction rationally 
 placed by the latter upon his conduct. This principle com- 
 mends itself to our judgment as both just and beneficent ; for, 
 as observed by the Supreme Court of Ohio,* while in the forum 
 of conscience there may be a wide difference between inten- 
 tional injuries and those arising from negligence, yet no man 
 conducts himself ' quite as absolutely in this world as though 
 he was the only man in it ; and the very existence of society 
 
 1 L. R., 1 C. P. Di7. 578. 
 
 2 Leather Mannfacturers' Bank v. Morgan, 117 U. S. 96, p. 112. The doc- 
 trine of estoppel is discussed at considerable length, and many cases are cited. 
 
 3 Ellis V. Ohio Life Ins. & Trust Co., 4 Ohio St. 628, p. 667. 
 
188 BANKS AND THEIR DEPOSITORS. § 193 
 
 depends upon compelling every one to pay a proper I'egard to 
 the i-ights and interests of others. The law, therefore, pro^ 
 ceeding upon the soundest principles of morality and public 
 policy, has adapted a large number of its rules and remedies 
 to the enforcement of this duty. In almost every department 
 of active life rights are in this manner daily lost and acquired, 
 and we know of no reason for making the commercial classes 
 an exception.' " 
 
 (b) In Illinois. Another application of this principle was 
 sought in a case in Illinois which is worth giving. The 
 holder of a forged check, which he received innocently, but 
 afterward learned was a forgery, presented it to the drawee 
 bank and demanded payment without saying anything about 
 its character. The teller remarked that as he questioned 
 the genuineness of the check he would pay only on condi- 
 tion that the hcjlder would indorse it. Having done so the 
 holder received his money. A few hours afterward the bank 
 discovered the forgery. In an action to recover the money 
 the holder maintained that the bank was estopped froni say- 
 ing that it was mistaken in the drawer's signature. But the 
 court decided that the principle of estoppel could not- be ap- 
 plied to such a case. " The doctrine of estoppel . . concerns 
 conscience and equity, and the party who would avail of it 
 must himself have acted in good faith toward the party on 
 whose conduct he relied, or it will constitute no bar to the 
 assertion of the truth."' 
 
 § 193. Money paid on forged check not recoverable, (a) 
 Reason for the rule. Though money paid bj' mistake can 
 generally be recovered back, yet the payment of forged paper 
 has long formed an exception to this rule. In other words,' 
 whenever payment 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 
 
 1 First Nat. Bank v. Ricker, 71 111. 4.39, p. 446, citing Hefner v. Vandolah, 
 57 Id. 520. 
 
§ 194 PAYMENT OF FORGED CHECKS. 189 
 
 recovered from him.' " The foundations of the rule," said 
 Judge Eanney , " are sufficiently obvious. The party is sup- 
 posed to know his own handwriting in the one case, or that 
 of 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 dis- 
 cover the forgery, imputes to him negligence, and, as between 
 him and the innocent holder, compels him to suffer the loss."^ 
 
 (6) Should find out v)hether check is genuine. " The foundation 
 upon which the drawee is made to suffer the loss is the im- 
 puted negligence in accepting or paying until he has ascer- 
 tained the bill [or check] to be genuine ; and, in case of pay- 
 ment, notwithstanding he has done it in mistake, and parts 
 with his money without receiving the supposed equivalent, 
 and notwithstanding the holder has obtained the money 
 without consideration, the former cannot be relieved from 
 the consequences of his negligence at the expense of the 
 latter, and the latter may in equity and good conscience 
 retain what he has got."* 
 
 § 194. If holder be negligent he cannot retain money, {a) 
 Illustration. The above rule can be invoked only " in favor 
 of a holder without fault and for a valuable consideration." 
 Therefore the holder may " by his own negligent conduct 
 place himself in such an inequitable position in reference to 
 
 • If forged checks are paid to an innocent holder tlie money cannot he re- 
 covered back, Weisser v. Denison, 10 N. Y. p. 75 ; Price ;;. Neal, 3 Burr. 
 1364 ; Goddard o. Merchants' Bank, 4 N. Y. 147 ; Bank of Commerce v. 
 Union Bank, 3 Id. 230. 
 
 2 Ellis V. Ohio Life Ins. & Trust Co., 4 Ohio St., p. 652 ; Price v. Neal, 3 Burr. 
 1354 ; Young v. Adams, 6 Mass. 182 ; Markle v. Hatfield, 2 Johns. 455 ; Smith 
 V. Mercer, 6 Taunt. 80 ; Cocks r. Masterman, 9 Barn. & Cr. 902 ; Gloucester 
 Bank w. Salem Bank, 17 Mass. 33 ; United States Bank u. Bank of Georgia, 
 10 Wheat. 333 ; Levy v. Bank of United States, 4 Dall. 234 ; Bank v. Farm- 
 ers and Mechanics' Bank, 10 Vt. 141 ; Levy v. Bank of United States, 1 Binn. 
 27 ; National Bank v. Grocers' Nat. Bank, 35 How. Pr. 412 ; Commercial and 
 Farmers' Nat. Bank u. First Nat. Bauk, 30 Md. 11 ; Salt Springs Bank d. 
 Syracuse Sav. institution, 62 Barb. 101. 
 
 3 Judge Ranuey. 
 
190 BANKS AND THEIR DEPOSITORS. § 194 
 
 the drawee as to deprive himself of the benefit of this rule, 
 and make it unjust and inequitable that he should keep what 
 he has obtained by a mistake, and for which he has given no 
 equivalent." Thus " where the negligence reaches beyond 
 the holder and necessarily affects the drawee, and consists of 
 an omission to exercise some precaution, either by the agree- 
 ment of the parties or the course of business devolved upon 
 the holder in relation to the genuineness of the paper, he can- 
 not in negligent disregard of this duty retain the money 
 received upon a forged instrument."^ 
 
 (b) Paying before seeing bill. In Goddard v. Merchants' 
 Bank,^ the signature of the drawer was forged, and the bill 
 was paid the day after it was protested by the plaintiff for 
 the honor of the drawer. The bill purported to have been 
 drawn by a bank in Ohio upon the American Exchange Bank 
 in 'New York, and was indorsed by the person who forged it 
 to the bank of Rutland, Vt., by which it was transmitted to 
 the defendant for collection. In consequence of the absence, 
 from his office, of the notary, in whose hands it was placed, 
 the plaintiff' did not see the bill at the time of paying it, but 
 he left word to have it sent to his place of business. On 
 seeing the bill the next day he pronounced it a forgery and 
 demanded back the money. The court decided that he could 
 recover, admitting " that he occupied the same position as 
 the drawee would ; but as he paid the bill without an oppor- 
 tunity of judging whether it was signed by his correspondents 
 or not, and upon the representation of the holders that they 
 had such a bill, that he could not be held to have admitted 
 the genuineness of the signature. And although the forgery 
 was discovered too late to give notice of protest, they held 
 that no such notice was necessary, as the defendants had the 
 
 ' Ellis V. Ohio Life Ins. & Trust Co., 4 Ohio, p. 652, citing National Bank 
 V. Bangs, 106 Mass. 441 ; Wilkinson u. Johnson, 3 Barn. & Cr. 428 ; Canal 
 Bank v. Bank of Albany, 1 Hill, 287 ; Bank of Commerce v. Union Bank, 3 
 N. Y. 230. 
 
 » 4 N. Y. 147. 
 
§ 196 . PAYMENT OP FORGED CHECKS. 191 
 
 bill only for collection and needed no recourse, and the payee 
 who forged it was liable to the owners without notice."' 
 
 § 195. To retain the money bank alone must be wrong. 
 " To entitle the holder to retain money obtained by mistake 
 upon a forged instrument, he must occupy the vantage ground 
 by putting the drawee alone in the wrong; and he must be 
 able truthfully to assert that he put the whole responsibility 
 upon the drawee, and relied upon him to decide, and that the 
 mistake arising from his negligence cannot now be corrected 
 without placing the holder in a worse position than though 
 payment had been refused. If the holder cannot say this, 
 and, especially, if the failure to detect the forgery and conse- 
 quent loss can be traced to his own disregard of duty in neg- 
 ligently omitting to exercise some precaution which he had 
 undertaken to perform, he fails to establish a superior equity 
 to the money, and cannot with a good conscience retain it. 
 To allow him to do so, would be to permit him to take ad- 
 vantage of his own wrong, and to pervert a rule, designed for 
 his protection against the negligence of the drawee, into one 
 from doing injustice to him."* 
 
 § 196. If both parties innocent money can be recovered. 
 (a) Remarks on Ohio case. But if both parties are equally 
 innocent, or equally in fault, and a check is paid on a mutual 
 mistake of facts, " in respect to which both were equally bound 
 to inquii'e," it may be recovered back. In the Ohio case there 
 was every reason to believe, so the court remarked, that if 
 the banking company had required the person presenting the 
 check to identify himself, he would have declined the ordeal 
 and it would not have been bought or paid. The loss, there- 
 fore, might be traced directly to its negligence. But whether 
 this would have prevented the fraud or not it was enough that 
 both parties were bound to inquire, and allowing both to be 
 at fault, the money could be recovered. 
 
 1 2 Judge Ranney's statement of the case in Ellis f. Ohio Life Ins. & Trust 
 Co , 4 Ohio St., p. 658. 
 
 2 Ellis V. Ohio Life Ins. & Trust Co., supra, p. 662. 
 
192 BANKS AND THEIR DEPOSITORS. § 196 
 
 (b) In an early Massachusetts case^ the rule is thus stated: 
 "If the loss can he traced to the fault or negligence of either 
 party, it shall be fixed upon him. Generally, where no fault 
 or negligence is imputable it has bgen suflfered to remain where 
 the course of business has placed it." And Kingman, C. J., 
 in a Kansas case, has added : "This seems to us a just and fair 
 exposition of the law. It is a principle of natural justice that 
 where a loss has happened, he, through whose means it hap- 
 pened, should sustain it, although iimocent, rather than he 
 who is not only innocent but wholly without the imputation of 
 negligence."* In Minnesota,^ if both parties are negligent in 
 the payment of a forged draft, the loss must fall on the drawee, 
 
 (c) Loss through hoMer's negligence. A forged check payable 
 to the order of a merchant in Texas was presented by him for 
 payment to a bank. He was in good standing, and having 
 indorsed the check it was paid. On another occasion he had 
 received a check signed by the same party but with a dif- 
 ferent name ; this fact, however, he did not communicate to 
 the bank. As soon as the party in whose name the forged 
 check was drawn received and examined his bank statement 
 (which was more than a month afterward) he notified the 
 merchant of the fact. The latter was obliged to repay the 
 bank because he was regarded negligent in not mentioning 
 before receiving his money the suspicious circumstances re- 
 lating to the check.^ 
 
 (d) Third party's check taken without inquiry. In applying 
 the rule in Massachusetts it has been decided that if the payee 
 take a check drawn payable to his order from a stranger or 
 third person without inquiry, though in good faith and for 
 value, and give it currency and credit by indorsement before 
 receiving the money thereon, the drawee may recover the 
 
 1 Gloucester Bank v. Salem Bank, 11 Mass. p. 42. 
 
 2 National Bank v. Tappan, 6 Kansas, p. 466. 
 ' Bernheimer v. Marshall, 2 Minn. 78. 
 
 * Eouvant v. San Antonio Nat. Bank, 63 Texas, 610. 
 ° National Bank r. Bangs, 106 Mass. 441. 
 
§ 197 PAYMENT OF FORGED CHECKS. 193 
 
 (e) Sending letter with cheek by clerk to post-office. A merchant 
 sent by his clerk to the post-office a sealed letter containing a 
 bank-check drawn by himself payable . to A. B. or order. 
 The clerk opened the letter and passed the check by forging 
 the words "or bearer," after "A. B.," and before "or order," 
 and by obliterating the latter words. In a suit to recover 
 the amount of the check, which was withheld by the bank 
 because it had paid the same, the merchant was declared 
 not negligent in giving the check to his clerk to be mailed.' 
 
 § 197. Alteration of check after delivery by drawer. If a 
 check be altered after delivery by the drawer, what is the 
 drawee's duty when it is presented for payment ?* In Craw- 
 ford V. West-Side Bank* this question was answered. "In 
 disbursing the customer's funds, it can pay them onlj' in the 
 usual course of business, and in conformity to his directions. 
 In debiting his account it is not entitled to charge any pay- 
 ment except those made at the time when, to the person 
 whom, and for the amount authorized by him.^ . . The bank 
 is from necessity responsible for any omission to discover the 
 original terms and conditions of a cheek, once properly drawn 
 upon it, because at the time of payment, it is the only party 
 interested in protecting its integrity, who has the opportunity 
 of inspection, and it therefore owes the duty to its depositors 
 of guarding the fund intrusted to it from spoliation. . . The 
 liability of the banker, however, for a loss occasioned by 
 neglect to exercise such vigilance, is confined to the maker 
 alone." 
 
 1 Belknap v. National Bank, 100 Mass. 376. 
 
 ' In Hall u. Fuller, 5 Barn. & Cr. TiJO, a check was drawn by a customer 
 on his banker for a sum of money described in the body of the check in words 
 and figures which were altered by the holder who substituted a larger sum 
 for that mentioned in the check, but in such a manner that no person in the 
 ordinary course of business could detect the alteration, and the banker paid 
 the amount. Nevertheless, he could not charge the customer for anything 
 beyond the sum for which the check was originally drawn. 
 
 ' 100 N. Y. iiO. For recovery of money paid on a raised check, see § 353. 
 
 1 Wheeler v. Gould, 20 Pick. 546. 
 
 13 
 
194 BANKS AND THEIR DEPOSITORS. § 198 
 
 § 198. Liability of collecting bank for forged check. If a 
 
 forged check be sent for collection and collected, but the 
 forgery is discovered and the money is returned to the source 
 ■whence it came, the sender can sustain no action against the 
 collecting bank. Thus, the defendant bank agreed with 0. & 
 Co. to take up each day at the clearing house all of its com- 
 mercial paper presented there by other banks. When notified 
 hy the bank of the amount, 0. & Co. were to send their check 
 therefor and to receive the paper, and if, on inspection, any 
 portion should prove not to be good, 0. & Co. on sending it 
 back before the close of banking hours, were to be credited 
 for the amount. On a certain dayO. & Co. received the usual 
 statement and sent a check for the amount, receiving in return 
 the checks and other documents contained in the statement. 
 Among them was a forged certificate of deposit, purporting 
 to be signed by 0. & Co. which had not been presented at the 
 clearing house, but by the plaintiff to the defendant bank for 
 collection. The certificate was examined by 0. & Co.'s cashier 
 after receiving it, who passed the same to the book-keeper. 
 After the close of banking hours the forgery was discovered, 
 and 0. & Co. immediately notified the plaintiff and others 
 -interested in the check. On the next day 0. & Co. returned 
 the certificate to the defendant bank and were credited with 
 the amount. In an action to recover the amount of the bank 
 by the person who had sent it there for collection, the court 
 held that the payment by 0. & Co. did not preclude them from 
 claiming a restitution of the money ; that the action of the 
 cashier was not a binding recognition of the genuineness of the 
 certificate, nor did the failure to discover and give notice of 
 the forgery during business hours render the previous condi- 
 tional payment absolute, and, therefore, the defendant bank 
 was justified in refunding the money.' 
 
 1 Allen V. Fourth Nat. Bank, 59 N. Y. 12. A person gave his check for 
 the purchase of a note and mortgage which were represented to be genuine, 
 payable to the order of the owner of the land, and delivered it to the broker 
 who negotiated the sale. In fact, he had forged the note and mortgage, but, 
 identifying to the drawee bank a person whom he represented to be the 
 
§ 200 PAYMENT OF FORGED CHECKS. 195 
 
 § 199. Bank-book presumed to be correct unless disputed. 
 
 (a) Remarks of Alvey, J. "We shall close the chapter with an 
 inquiry into the depositor's duty to examine his bank-book 
 after the balancing of his account and the return of his can- 
 celled checks. If no objection be made after a reasonable 
 time, the presumption arises that the account is correct. 
 " Such presumption arises from the natural and usual habits 
 of careful business men to examine and scrutinize such 
 accounts when rendered ; but the presumption is liable to be 
 repelled by showing that the error or fraud complained of was 
 not discoverable by the exercise of reasonable care and dili- 
 gence, or that there was no such appearance of things as to 
 excite the suspicion of a reasonable man, or that, for any 
 reason, the party had not had an opportunity to examine the 
 account."' 
 
 (6) Presumption may be disproved. But this presumption 
 will not keep out the truth. Thus a bank in 'New York 
 drew three drafts on another bank in the same State on the 
 first of June, which were duly paid and charged to it, but 
 which it was discovered on the 18th of July had been raised. 
 In an action to recover the difference between the amount paid 
 and which ought to have been paid, it was held that the 
 delay in examining the accounts did not operate to the preju- 
 dice of the defendant, and that the plaintiff could show what 
 the real transaction was.^ 
 
 § 200. Agent's wrongful action will not bind principal, (a) 
 Remarks of Allen, J. When a depositor's account with a 
 bank is settled by his agent, a book-keeper or confidential clerk 
 for example, and forged checks are charged therein of which 
 the clerk has knowledge and in which he has participated, 
 the settlement will not bind his principal and prevent him 
 
 payee, the money was paid to him. When the mortgage hecame due the 
 maker of the check discovered the fraud and notified the hank and suhse- 
 quently recovered the amount of his check, Kuhn v. Frank, Hamilton Co. Dis. 
 Ct. Ohio, 10 Rec. G22. 
 
 1 Alvey, J., Hardy v. Chesapeake Bank, 51 Md. p. 587. 
 
 8 First Nat. Bank v. Continental Nat. Bank, 17 Week. Dig. 42. 
 
196 BANKS AND THEIR DEPOSITORS. § 200 
 
 from recovering the amount of forged checks thus charged 
 to his account. "The principle that notice to an agent is 
 notice to the principal is quite familiar, but is only applicable 
 to cases in which, the agent is acting in the course of his 
 employment. "Were it otherwise, and did it extend to acts 
 unauthorized and outside of the employment, whether tres- 
 passes or even felonies, the master might be made responsible 
 for all acts, whether tortious or otherwise, done by his servant 
 while in his employ or acting professedly in his behalf, if he 
 did not act at once by disclaiming the authority."' 
 
 (b) Hardy's case. Likewise Judge Alvey in the Hardy 
 case, previously reviewed, remarks that " the fraudulent 
 knowledge of the agent in regard to acts and transactions 
 outside of and beyond his employment cannot be imputed to 
 his principal. To do so would work the grossest injustice 
 and lead to the most anomalous consequences."^ 
 
 (c) Welsh V. German American Bank.^ "Welsh, a commission 
 merchant, had a book-keeper who had charge of his produce 
 and bank-books. The book-keeper presented fictitious ac- 
 counts of sales of the property of a customer to his employer, 
 and also checks for him to sign. These were payable to the 
 order of the customer, and were delivered to the book-keeper. 
 He forged the customer's indorsement and put them in circu- 
 lation. They were paid by the bank, charged in "Welsh's 
 pass-book, and returned with the other vouchers to the book- 
 keeper on balancing the account, which was done monthly. 
 "Welsh did not discover the fraud or the forgeries for several 
 months, but as soon as he did the bank was notified. In an 
 action to recover the balance of his deposit it was held that 
 the deceiving of him whereby he gave the checks to his book- 
 keeper did not make him responsible for the subsequent fraud 
 on the bank, as his acts in a legal sense did not contribute to 
 that event, that he was not precluded from disputing the 
 
 1 Allen, J., Weisser v. Denison, 10 N. Y. p. 77 ; Welsh v. German Ameri- 
 can Bank, 73 N. Y. 424. 
 s 51 Md. p. 588. » 73 N. Y. 424; Aff. 42 N. Y. Sup. Ct. 462.. 
 
§ 200 PAYMENT OF FOKGED CHECKS, 19"? 
 
 right of the hank to charge the checks to his account because 
 of the entry in the pass-hooks, their return with the vouchers, 
 and the retaining of them without objection, and that he 
 could recover. 
 
 (d) Dana v. National Banh^ A depositor drew his check; 
 on a bank for a sura payable to the order of a person named, 
 therein. The depositor's clerk, Piper, erased the name of the 
 payee and obtained the money on the check from the bank. 
 Statements were sent by the bank to the depositor which 
 included, among other payments, the check in question, and 
 no objection was made thereto until twenty-three months 
 after the paying of it. He had then closed his account with 
 the bank. In an action by the depositor to recover the 
 amount, it was held first, that the bank could not legally 
 claim that if, after a reasonable opportunity to examine the 
 checks returned he did not object to the payment of this 
 particular one, he would be presumed to ratify it ; second, 
 that the question of ratification was one for the jury; third, 
 that the depositor was bound to use diligence in discovering 
 the forgery, and was afliected by the knowledge which the 
 clerk had who committed the forgery, and whose duty it was 
 to examine the cheeks returned by the bank. On this latter 
 point the court remarked that " the plaintifls owed to the de- 
 fendant the duty of exercising due diligence to give it infor- 
 mation that the payment was unauthorized ; and this included 
 not only due diligence in giving notice after knowledge of 
 the forgery, but also due diligence in discovering it. If the 
 plaintiffs knew of the mistake, or if they had that notice of 
 it which consists in the knowledge of facts which, by the ex- 
 ercise of due care and diligence will disclose it, they failed in 
 their duty ; and adoption of the check and ratification of the 
 payment will be implied. They cannot now require the de- 
 fendant to correct a mistake to its injury from which it might 
 have protected itself but for the negligence of the plaintiffs. 
 Whether the plaintiffs were required in the exercise of due dili- 
 gence to read the monthly statements or to examine the checks, 
 
 1 132 Mass. 156, p. 158. 
 
198 BANKS AND THBIK DEPOSITORS. § 200 
 
 and how careful an examination they were hound to make and 
 what inferences are to be drawn, depend upon the nature and 
 course of dealing between the parties and the particular 
 circumstances under which the statements and checks were 
 delivered to them. . . There was evidence that the plaintiffs 
 did examine the statements and checks so far as to see that 
 the checks returned corresponded with the amounts in the 
 stub of the check-book. Whether this was all the examina- 
 tion required we need not consider. The plaintiffs made 
 that examination, and are affected with the knowledge it 
 would give, though it was made by Piper. He was their 
 agent for that purpose. The check in question was dated 
 November 20, and was drawn to the order of Eevere Sugar 
 Refinery, to pay a bill due to the payee, payable either Novem- 
 ber 20 or December 10, at the option of the plaintiffs, who 
 rarely allowed such bills to run over ten days. On December 
 10 a duplicate of the same bill was presented to the plain- 
 tiffs, and paid by a check on another bank. Whatever 
 inference as to knowledge of this double payment and misuse 
 of the check of November 20 may be drawn from the 
 knowledge the plaintiffs may have had of their own ac- 
 counts with the Revere Sugar Refinery, and from the ex- 
 amination of the check-book, is not to be affected by the fact 
 that the examination was made by Piper. . . If the examina- 
 tion made by Piper as agent for the plaintiffs, and the 
 information which came to him within the scope of his 
 agency, were sufficient to have given him notice of the 
 forgery of the check of November 20, it does not lie in the 
 mouth of the plaintiffs to say that he did not acquire that 
 knowledge as their agent, so as to affect them with it. If 
 such examination would have given them notice if made by 
 an honest agent, they cannot affect ignorance because they 
 were made by a dishonest agent, who had fraudulent knowl- 
 edge of the fact."' 
 
 1 The court also said : " Tlie evidence offered by the defendant would show 
 that the plaintiffs received the monthly statements in December and January, 
 
§ 201 PAYMENT OF FORGED CHECKS. 199 
 
 (e) Louisiava case} An interesting case was tried in 
 Louisiana, in which the bank was exonerated from paying 
 to a depositor in consequence of his conduct in ratifying 
 the wrongful acts of his agent in drawing and procuring 
 payment of a check. F., the plaintiff, had a book-keeper 
 who kept his cash account and made the deposits with a 
 bank which well understood the relations between the two. 
 The book-keeper drew a check on the bank for $2500 to 
 which he forged F.'s signature. As the amount exceeded 
 F.'s deposit the bank notified him of the fact. "When he 
 appeared there he was shown the check, which he said he 
 had not signed, but did not say that it was forgery. On seeing 
 his book-keeper he reported to the bank that it was all right. 
 Subsequently, the book-keeper drew another check for $1700, 
 forging F.'s signature, and which the bank paid on presenta- 
 tion. Discovering the second forgery by the book-keeper, F. 
 denounced the act, and brought a suit to recover the balance of 
 his deposit including these checks. The court held that his 
 act in ratifying the first act of forgery exonerated the bank 
 from liability to pay it, and that by afterward keeping the 
 book-keeper in his confidential employ he misled the bank 
 and threw it off its guard, and excused it for paying the 
 second check which was similarly drawn ; in other words 
 that F. had caused his own injury and therefore must bear 
 the loss. 
 
 § 201. Is depositor required to examine book to detect for- 
 gery, (a) Weisser v. Denison.^ A depositor is not required 
 
 and closed their account In January with such knowledge as would be inferred 
 from the facts proved. Whether that was notice of the forgery, or would 
 have called for further examination, and led to the discovery of it was a 
 proper question for the jury. This evidence should have been admitted and 
 submitted to the jury upon the question whether the mistake would have 
 been discovered, but for the negligence of the plaintiffs or their agents, or the 
 fraudulent conduct of Piper in regard to acts within the scope of his agency ; 
 and whether the examinations made by the plaintiffs or their agents were 
 such as to lead to a discovery of the forgery and affect the plaintiffs with the 
 notice of it." 
 
 1 De Feriet v. Bank of America, 23 La. Ann. 310. 2 lo N. Y. 68. 
 
200 BANKS AND THKIB DEPOSITORS. § 201 
 
 to examine his book or vouchers for the purpose of detecting 
 the forgery of his name. This principle was announced in 
 a case of checks forged by the confidential clerk of the de- 
 positor who at the request of his principal on a particular 
 occasion examined the book and checks after they had been 
 returned from the bank and reported them all right and thus 
 delayed the detection of the forgery which he had committed. 
 Indeed, the forgery was not discovered for several months, 
 but immediately after the discovery the depositor informed 
 the bank, and on its refusal to credit him for the amount of 
 the forged check he sued the institution and recovered the 
 amount. 
 
 (6) Frank v. Chemical National Bank} The principle 
 above stated was reaffirmed by the same court nearly thirty 
 years afterward. Judge Andrews in speaking for the court 
 said : " It does not seem to be unreasonable, in view of the 
 course of business and the custom of banks to surrender its 
 vouchers on the periodical writing up of the accounts of dcr 
 positors to exact from the latter some attention to the account 
 when it is made up, or to hold that the negligent omission of 
 all examination may, when injury has resulted to the bank 
 which it would not have suffered if such examination had 
 been made and the bank had received timely notice of ob- 
 jections, preclude the depositor from afterward questioning 
 its correctness. But where forged checks have been paid and 
 charged in the account and returned to the depositor, he is 
 under no duty to the bank so to conduct the examination that 
 it will necessarily lead to the discovery of the fraud. If he 
 examines the vouchers personally and is himself deceived by 
 the skilful character of the forgery, his omission to discover 
 it will not shift upon hira the loss which in the first instance 
 is the loss of the bank. Banks are bound to know the sig- 
 natures of their customers, and they pay checks purporting 
 to be drawn by them at their peril. If the bank pays forged 
 checks it commits the first fault. It cannot visit the conse- 
 
 1 84 N. Y. 209. 
 
§ 201 PAYMENT OP FORGED CHECKS. 201 
 
 quences upon the innocent depositor who, after the fact, is 
 also deceived by the simulated paper. So, if the depositor in 
 the ordinary course of business commits the examination of 
 the bank account and vouchers to clerks or agents, and they 
 fail to discover checks which are forged, the duty of the de- 
 positor to the bank is discharged, although the principal, if 
 he had made the examination personally, would have de- 
 tected them. The alleged duty at mogt only requires the 
 depositor to use ordinary care; and if this is exercised, 
 whether by himself or his agents, the bank cannot justly com- 
 plain, although the forgeries are not discovered until it is too 
 late to retrieve its position or make reclamation from the 
 forger."' 
 
 (e) Leather Manufacturers' Bank v. Morgan.'' We shall fit- 
 tingly close this lengthy review of the cases by adding the 
 opinion of the supreme federal tribunal in Morgan's case. 
 The suit was brought by him to recover the balance alleged 
 to be due on a deposit account opened at that bank in the 
 name of " Wra. B. Cooper, Junior, agent for Ashburner & 
 Co." Cooper's book-keeper, Berlin, who had charge of the 
 account, filled up all the checks drawn thereon and entered 
 them in a book kept for that purpose. Some of these were 
 altered by Berlin " with great care," in the language of the 
 finding in the ease, and could not be detected without very 
 careful scrutiny, or a very close examination. The bank 
 paid the " full raised amount" of the checks. Berlin paid 
 Cooper the original amount and kept and applied the balance 
 for gambling. In delivering the opinion of the court. Judge 
 Harlan said* " there was evidence tending to show — we do not 
 say beyond controversy — that Cooper failed to exercise that 
 degree of care which, under all the circumstances, it was his 
 duty to do ; he knew of the custom of the defendant to bal- 
 ance the pass-books of its depositors and return their checks 
 ' as vouchers' for payments ; yet he did not examine his 
 
 ' Frank v. Chemical Nat. Bank, 84 N. Y. 209, p. 213. 
 2 117 U. S. 96. > P. 112. 
 
202 BANKS AND THEIR DEPOSITORS. § 201 
 
 pass-book and vouchei-s to see whether there were any errors 
 in the account to his prejudice, and, therefore, he could give 
 no notice of any. Of course, if the defendant's officers, before 
 paying the altered checks, could by proper care and skill 
 have detected the forgeries, then it cannot receive a credit 
 for the amount of those checks, even if the depositor omitted 
 all examination of his account. But if by such care and 
 skill they could not have discovered the forgeries, then the 
 only person unconnected with the forgeries who had the 
 means of detecting them was Cooper himself. He admits 
 that by such an examination as that of March, 1881 [when 
 Berlin, having stayed away from the office for a day, he com- 
 pared his pass-book with the stubs of the check-book, and 
 ascertained that a certain number of checks, appearing on the 
 stubs, were not charged against him in his pass-book, and 
 did not appear to have been returned by the bank, while 
 others, which appeared on the pass-book to have been charged 
 against and returned to him, did not appear, by the stub of 
 the check-book, to have ever been drawn],^ he could easily 
 have discovered them on the balancings of October 7, 1880, 
 Ifovember 19, 1880, and January 18, 1881. If he had dis- 
 covered that altered checks were embraced in the account, 
 and failed to give due notice thereof to the bank, it could not 
 be doubted that he would have been estopped to dispute the 
 genuineness of the checks in the form in which they were 
 paid." . . This, however, could not be, if, as claimed, the de- 
 positor was under no obligation whatever to the bank to ex- 
 amine the account rendered at his instance, and notify it of 
 errors therein in order that it might correct them, and, if 
 
 1 From the statement of facts, p. 100. 
 
 " " Upon the principle stated by Lord Campbell in Carncross v. Lorimer, 3 
 Macq. 827, 830, that ' if a party having an interest to prevent an act being done, 
 has full notice of its having been done, and acquiesces in it, so as to induce 
 a reasonable belief that he consents to it, and the position of others is altered 
 by their giving credit to his sincerity, he has no more right to challenge the 
 act to their prejudice than he would have had if it had been done by his 
 previous license.' " 
 
§ 201 PAYMENT OF FORGED CHECKS. 203 
 
 necessary, take steps for its protection by compelling restitu- 
 tion by the forger. But if the evidence showed that the 
 depositor intentionally remained silent, after discovering the 
 forgeries in question, would the law conclusively presume 
 that he had acquiesced in the account as rendered, and infer 
 previous authority in the clerk to make the checks, and yet 
 forbid the application of the same principle where the de- 
 positor was guilty of neglect of duty in failing to do that, in 
 reference to the account, which he admits would have readily 
 disclosed the same fraud ? It seems to the court that the 
 simple statement of this proposition suggests a negative 
 answer to it. 
 
 " It seems to us that if the case had been submitted to the 
 jury, and they had found such negligence upon the part of 
 the depositor as precluded him from disputing the correctness 
 of the account rendered by the bank, the verdict could not 
 have been set aside as wholly unsupported by the evidence. 
 In their relations with depositors, banks are held, as they 
 ought to be, to rigid responsibility. But the principles gov- 
 erning those relations ought not to be so extended as to invite 
 or encourage such negligence by depositors in the exami- 
 nation of their bank accounts as is inconsistent with the rela- 
 tions of the parties or with those established rules and usages 
 sanctioned by business men of ordinary prudence and sagacity, 
 which are or ought to be known to depositors.' 
 
 " We must not be understood as holding that the examina- 
 tion by the depositor of his account must be so close and 
 thorough as to exclude the possibility of any error whatever 
 being overlooked by him. K'or do we mean to hold that the 
 depositor is wanting in proper care when he imposes upon 
 some competent person the duty of making that examination 
 and of giving timely notice to the bank of objections to the 
 account. If the examination is made by such an agent or 
 clerk in good faith and with ordinary diligence, and due notice 
 given of any error in the account, the depositor discharges 
 
 1 P. 115. 
 
204 BANKS AND THEIR DEPOSITORS. § 202 
 
 his duty to the bank. But when, as in this case, the agent 
 commits the forgeries which misled the bank and injured the 
 depositor, and, therefore, has an interest in concealing the 
 facts, the principal occupies no better, position than he would 
 have done had no one been designated by him to make the 
 required examination — without, at least, showing that he ex- 
 ercised reasonable diligence in supervising the conduct of the 
 agent while the latter was discharging the trust committed to 
 him. In the absence of such supervision, the mere designa- 
 tion of an agent to discharge a duty resting primarily upon 
 the principal cannot be deemed the equivalent of performance 
 by the latter. While no rule can be laid down that will 
 cover every transaction between a bank and its depositor, it 
 is sufficient to say that the latter's duty is discharged when 
 he exercises such diligence as is required by the circumstances 
 of the particular case, including the relations of the parties, 
 and the established or known usages of banking business." 
 
 § 202. Bank not liable for loss in Pennsylvania. In Penn- 
 sylvania, however, the rule that the drawee is responsible for 
 payments to the wrong person, even though done through 
 forgery, was changed in 1849 by statute ; the drawee, there- 
 fore, in that State can recover from the holder the money thus 
 erroneously paid. In applying that statute, it has been de- 
 cided that the amount of a draft on a Pittsburgh bank pay- 
 able to the order of the drawer, which passed to a Philadelphia 
 bank and was paid through the clearing house, could be 
 recovered of the latter bank.' And when a forged check was 
 presented on Saturday to the defendant bank, and on Mon- 
 day it was presented to the plaintift" bank through the clearing 
 house, and the next day the forgery was discovered and the 
 defendant bank was notified and payment demanded, there 
 was no negligence in giving notice and making demand." 
 Indeed, " want of care or negligence in paying a forged bill 
 
 1 Tradesmen's Nat. Bank v. Third Nat. Bank, 66 Pa., 435. 
 
 2 Corn Ex. Nat. Bank v. National Bank, 78 Pa. 233 ; Rev. 9 Phila. 133. 
 
§ 205 PAYMENT OP FOBGBD CHECKS. 205 
 
 will not alone, since the Act of 1849, preclude the payer 
 from recovering back the money."' 
 
 § 203. Notice of forgery must be given. When the forgery 
 is discovered notice must be given to the bank.* If the 
 notice be delayed for two months or even fifteen days the 
 drawee cannot recover.^ In one case for the recovery of 
 forged bank notes, the court said " that the party receiving 
 such notes must examine them as soon as he has opportunity 
 and return them immediately."* 
 
 § 204. Recovery of forged bank notes. When can a bank 
 recover its forged notes in the possession of individuals ? In 
 Coffin V. Anderson* A. obtained bank notes from a bank by 
 forgery and exchanged them with another bank and with 
 individuals for other bank notes. It was decided that the 
 bank whose notes had thus been forged was entitled to the 
 notes which A. had received in exchange for the forged ones. 
 
 § 205. Drafts drawn against forged bills of lading. If a 
 banker receive instructions from his customer to accept bills 
 of exchange which a correspondent shall draw against bills of 
 lading, he is not bound to ascertain their genuineness before 
 accepting or paying the bills of exchange which are drawn 
 against them. Moreover, if the bills of lading should prove 
 to be forgeries, the banker could recover the amount paid on 
 the bills of exchange." 
 
 1 Thayer, J., Union National Bank ». Chambers, 9 Phila. p. 131. 
 
 2 Ellis V. Ohio Life Ins. & Trust Co., 4 Ohio St. 628 ; Goddard v. Merchants' 
 Bank, 4 N. Y. 147 ; National Bank v. Tappan, 6 Kansas, 456. 
 
 " Bank of St. Albans v. Farmers & Mechanics' Bank, 10 Vt. 141. 
 * Gloucester Bank v. Salem Bank, 17 Mass. 33, p. 45. 
 « 4 Blackf. 395. 
 
 6 Woods «. Thiedemann, 1 H. & C. 478. See Ulster Bank v. Synnott, 5 Ir. 
 £q. 593. 
 
206 BANKS AN1> IHEIK DEPOSITOKS. § 206 
 
 CHAPTER VI. 
 
 , PAYMENT ON LEGAL AND FOKGED INDOESEMENTS. 
 
 Checks are made payable to order or bearer, and in many 
 cases change ownership several times before reaching the 
 payee bank. Various questions have arisen concerning them. 
 As the former chapter was devoted to checks having forged 
 signatures, or those which, having correct signatures, are al- 
 tered by raising the amount or in other ways, the continuity 
 of our work will be best preserved by stating in the first 
 part of the present chapter the law relating to forged indorse- 
 ments. 
 
 § 206. Must pay on genuine indorsement of payee, " "When 
 a bill or check is payable to order to justify the application 
 to its payment of the funds of the drawer it must be proved 
 that the required order was in fact given — in other words, it 
 must be proved that the indorsement was genuine — and the 
 burden of this proof rests upon the person or bank upon 
 whom the bill or check is drawn. Where the indorsement 
 of the payee is shown to be forged, the payment of a check 
 by the bank is in its own wrong and can never be set up as a 
 defence against the person whose rights it violated or whose 
 funds are misapplied. In all such cases the bank must be 
 liable to some person to the extent of such wrongful payment. 
 If the check at the time was the property of the payee it is 
 to him that the bank is liable ; but if it had never passed 
 into his hands, and he had no interest whatever, they are the 
 funds of the drawer that have been misapplied, and which 
 the bank is bound to replace."' 
 
 ' Paine, J., Morgan w. Bank, 1 Duer, p. 438 ; Afif. by 11 N. Y. 404. " It is 
 ■well settled that a forged indorsement does not pass a title to commercial 
 paper negotiable only by indorsement, and does not justify the payment of 
 
§ 208 PAYMENT. ON LEGAL AND FORGED INDORSEMENTS, 207 
 
 § 207. Payment to person of same name as real payee. 
 
 Moreover, if a person bearing the same name as the payee of 
 a check indorse and transfer it knowing that he is not the 
 person intended as the payee, this is a forgery.' Judge 
 Ashurst in Meade v. Young* said : " In order to derive a legal 
 title to a bill of exchange it is necessary to prove the hand- 
 writing of the payee, and therefore though the bill may 
 come by mistake into the hands of another person though of 
 the same name with the payee yet his indorsement will not 
 confer a title." In Indiana a pension agent sent a check on 
 a bank to a pensioner by mail, but addressed it by mistake 
 to the wrong post-office. The check, consequently, was re- 
 ceived by another person of the same name who forged an 
 indorsement thereon, sold the check, and received the money. 
 The pensioner sued the bank and recovered.^ 
 
 § 208. Canal Bank v. Bank of Albany.* Of all the cases 
 decided none has been so often approved as this. The Bank 
 of Albany received a draft payable to B.'s order through 
 several successive indorsements, B.'s name appearing first. 
 As agents of the immediate indorser, but without disclosing 
 its agency, the bank presented it to the Canal Bank which 
 paid the same. Subsequently, it ascertained that B.'s name 
 was a forgery, and having notified the Bank of Albany of 
 this fact sued to recover the money paid. The court decided 
 
 such paper." Comstook, J., Graves v. American Ex. Bank, 17 N. Y. p. 208 ; 
 Talbot 1/. Bank of Rochester, 1 HiU, 295 ; Canal Bank v. Bank of Albany, 
 Id. 287 ; Welsh v. German American Bank, 73 N. Y. 424 ; Coggill v. Ameri- 
 can Ex. Bank, 1 Id. 113. 
 
 1 Graves v. American Ex. Bank, 17 N. Y. 205. " 4 Term, 28. 
 
 3 Indiana Nat. Bank v. Holtsdaw, 98 Ind. 85. In this case the bank con- 
 tended that the plaintiff had no title and could not maintain his suit ; in 
 other words, in consequence of the mistake in the address that no title vested 
 in the plaintiff. But the court said : " This by no means follows. The title 
 vested upon the acceptance of the check. If deposited as directed the ac- 
 ceptance was then made and the title vested ; if not deposited as directed 
 still the check notwithstanding such misdirection might be accepted, and 
 when accepted the title vested." 
 
 * 1 Hill, 287. 
 
208 BANKS AND THEIK DEPOSITOES. § 208 
 
 that though it had been innocent of intended wrong, yet hav- 
 ing obtained money of the Canal Bank on an instrument 
 with an imperfect title, must refund the amount. Moreover, 
 it was required to do this notwithstanding the delay of more 
 than two months in giving notice of the forgery, after the 
 Bank of Albany had received the money and transmitted 
 the same to its principal. In the way of further elucidation 
 of the subject the following principles were announced in 
 that case. 
 
 (a) Only payee has tide. Only the payee can assert a title 
 to a bill or note payable to order, without his indorsement. 
 
 (h) Acceptor cannot dispute drawer'' s signature. If one accept 
 a draft in the hands of a bona fide holder, he will not be 
 allowed afterward to dispute the genuineness of the drawer's 
 signature, though he may that of the indorsers, and payment 
 operates in this respect the same as on acceptance. 
 
 (e) Lapse of time does not affect drawee's remedy. When a 
 drawee of a draft has paid it to» an innocent holder on the 
 faith of a forged indorsement mere lapse of time, however 
 long, between the payment and notice of the forgery will not 
 deprive him of his remedy, provided he has incurred no un- 
 reasonable delay after discovering the forgery. 
 
 {d) Rights of successive indorsers. "When several successive 
 indorsers have advanced money on a draft payable to order 
 and it turns out that neither had a title_ because the first 
 indorsement was a forgery, each may recover from his imme- 
 diate indorser. 
 
 (e) Bank acting as agent when liable as principal. A bank 
 to which a draft is indorsed and which transacts the business 
 without disclosing its agency, may be regarded and charged 
 as principal by those with whom it thug deals. And it will 
 be no answer that it is the uniform custom of banks to trans- 
 act such business without disclosing their agency.^ 
 
 1 In another often-quoted case T. was the owner of a certificate of deposit 
 issued hy the bank of L. payable to order which he indorsed witli the direc- 
 tion that it should be paid to W. & Co., and then transmitted it to them by 
 
§ 208 PAYMENT ON LEGAL AND FORGED INDORSEMENTS. 209 
 
 (/) Star Fire Insurance Company's ease. An interesting 
 case has been determined in ITew Hampshire.' An insurance 
 company drew a draft on its manager payable to M. and G. 
 to settle a claim occasioned by a loss from fire. The draft 
 was sent to the company's local agent, Craig, with the direc- 
 tion to deliver it to the claimants. Instead of doing so he 
 indorsed it ia his own name, forged theirs, and presented it 
 to a bank for payment, which paid him the amount. The bank 
 sent the draft in the usual course of business to the insurance 
 company which paid it ; but, afterward, learning what its 
 local agent had done, it paid M. and G. the amount of their 
 claim and then sued the bank to recover the amount of the 
 draft. Judge Allen said : " The defendants received the 
 draft on a forged indorsement of the payees' names and took 
 no title to it. By indorsing it they warranted the genuine- 
 ness of all prior signatures.^ The defendants' indorsement 
 was a representation that they had paid or accounted, or 
 would pay and account, to the payees for what they might 
 receive upon it. Relying upon their indorsement and the 
 representations which it legally carried, the plaintiffs paid 
 the draft, and the defendants received the money or an equiv- 
 alent credit, through their correspondents who collected it. 
 With knowledge or notice of the forgery the plaintiffs might 
 have resisted payment. They had no knowledge or notice or 
 
 mail though without their knowledge or request. It never reached them, 
 but was stolen on the way, their names were forged thereon, after which it 
 came into the possession of the Bank of Rochester in the ordinary course of 
 business. The bank collected the money supposing it was the owner, but 
 was obliged to repay it to T. The bank of L. was negligent in not apprising 
 the other bank of the forgery after the payment of the certificate, nevertheless 
 this was no defence to T.'s claim against the Bank of Rochester. Talbot v. 
 Bank of Rochester, 1 Hill, 295. A recovery in such a case by T. and satis- 
 faction of the judgment would transfer the property in the certificate to the 
 Bank of Rochester. 
 
 1 Star Fire Insurance Co. v. New Hampshire Nat. Bank, 60 N. H. 442. 
 
 2 State Bank v. Fearing, 16 Pick. 533 ; Lobdell v. Baker, 1 Met. 193 ; Cabot 
 Bank o. Morton, 4 Gray, 156 ; Merriam v. Wolcott, 3 Allen, 25'6 ; Herrick v. 
 Whitney, 15 Johns. 240 ; Murray v. Judah, 6 Cow. 284 ; Canal Bank v. Bank, 
 1 Hill, 287 ; Aldrioh v. Jackson, 5 R. I. 218 ; Thyall v. Newell, 19 Vt. 202. 
 
 14 
 
210 BANKS AND THEIR DEPOSITORS. § 208 
 
 even suspicion of the character of the first indorsement, and 
 were in no fault for not knowing it. They had a right to 
 rely on the defendants' indorsement ; and with that reliance 
 they paid the draft, and the defendants received the money 
 paid through an innocent mistake. By reason of the forgery 
 the payees failed to receive the money due them, and the 
 plaintiffs were compelled to pay again the amount of the 
 draft, and might then rely on the promise of the defendants 
 arising from their indorsement for repayment. 
 
 " The defendants having credited the amount of the draft to 
 Craig and indorsed it for collection must he understood to 
 have received the draft as cash, and were holders for value. 
 If they received it as agents for collection, they did not dis- 
 close the agency ; and as between them and the plaintiffs, 
 they must be taken to have acted as principals.* The banks 
 at Boston and Hartford subsequently indorsing the draft for 
 collection were agents of the defendants,* and the defendants 
 were the proper parties to be sued. Craig was not an agent 
 of the plaintiffs for any purpose connected with the draft, 
 except to deliver it to the payees. . . His acts not being 
 within the duties of his agency, and being unauthorized, 
 did not bind the plaintiffs, and his knowledge of the 
 forgery was not the knowledge of the plaintiffs. The 
 plaintiffs notified the defendants of the mistake in pay- 
 ment as soon as the forgery was discovered, and being in no 
 fault for not knowing it sooner, there was no unreasonable 
 delay in the notice to the defendants.* This is not the case 
 of a drawee paying a draft on which the name of a drawer is 
 forged, or which was put into circulation by the drawer with 
 a forged indorsement upon it. In such a case the drawee 
 having ordinarily the best means of knowledge of the drawer's 
 signature, cannot recover from an innocent holder to whom 
 he has paid the draft.* An acceptance of the draft warrants 
 
 1 Canal Bank v. Bank, 1 Hill, 287. * Hoover v. Wise, 91 U. S. 308. 
 
 ^ Canal Bank v. Bank, supra; Merchants' Nat. Bank v. National Eagle 
 Bank, 101 Mass. 281. 
 
 * Hortsman v. Henshaw. 11 How. 177 ; Coggill v. American Exchange 
 Bank, 1 N. Y. 113. 
 
§ 209 PAYMENT ON LEGAL AND FORGED INDORSEMENTS. 211 
 
 the genuineness of the drawer's signature, but not of an in- 
 dorser's made subsequent to the issuing of the draft and be- 
 fore acceptance or paj^raent ; and the payment by the drawee 
 to one who holds by a forged indorsement of the payee's 
 name entitles him to recover the sum paid, if seasonable 
 notice of the forgery is given. 
 
 " The defendants and plaintiffs both paid the draft by mis- 
 take, neither knowing nor suspecting the forgery. If there 
 were any question of negligence, the defendants preceded the 
 plaintiff's, who relied on the former's indorsement, which 
 carried with it assurance of the genuineness of the pre- 
 ceding indorsements. The equities between the parties are 
 not equal.' The defendants have received the plaintiffs' 
 money, which in equity and good conscience they cannot 
 retain, and the plaintiff's made a reasonable demand for it 
 before suit." 
 
 § 209. Indorsement a warranty of genuineness. An indorse- 
 ment of negotiable paper is a warranty by the indorser to 
 every subsequent holder in good faith, that the instrument 
 itself and all the signatures antecedent to his indorsement are 
 genuine ; and when these are forgeries the indorser is liable 
 on his warrant to his subsequent holder without presentation 
 for payment or notice of non-payment. Thus A. obtained a 
 check drawn by B. paj^able to C. & D. Having made a pur- 
 chase of S. & Co. they took the check from A. in payment 
 giving him their check for the balance which they intended 
 to make payable to C. & D., the payees of the other, but by 
 mistake wrote the names of C. & E. This firm had no exist- 
 ence. A. had this check certified, and forging the indorse- 
 ment of C. & E. offered it to D. for clothes. D. on learning 
 from S. & Co. that the check was genuine indorsed his own 
 name on the back and took it to his bank for deposit. The 
 bank would not receive it because no satisfactory information 
 was given about the payees C. & E. and advised D. not to 
 take it. Following the bank's advice D. declined to take the 
 
 1 McKleroy v. Southern Bank, 14 La. Ann. 458. 
 
212 BANKS AND THEIR DEPOSITORS. § 210 
 
 check, though having indorsed his name thereon, and A. after- 
 ward passed it to L. for value. In an action against D., to 
 recover the amount he was declared liable without presenting 
 the check for payment or notice of non-payment to him.* 
 
 § 210. Identification, {a) Drawee liable for mistake. "Sov 
 is the duty of the draM'ee when accepting a check to pay the 
 same only on the genuine indorsement of the payee affected 
 by the custom among bankers of ascertaining the identity of 
 the person indorsing the name of the payee and receiving 
 payment. If the drawee relies on false representations of 
 identity for which neither the drawer nor the payee is 
 responsible he pays to the wrong person at his peril.^ 
 
 (6) Proof in ease of wrong payment to intended person. More- 
 over, when the drawee attempts to justify payment to a 
 person not bearing the name of the payee on his unauthorized 
 indorsement of the payee's name, by showing that he was the 
 person whom the drawer intended to pay, though described 
 by a false name, he cannot be permitted to prove some of the 
 facts pertaining to the drawing the check and to exclude 
 others which tended to disprove such intention.' 
 
 1 Turubnll v. Bowyer, 40 N. Y. 456. The indorsement of a raised check is 
 in effect a representation and warranty to the drawee that it is genuine on 
 which he may rely in making payment. City Bank v. First Nat. Bank, 45 
 Texas, 203. And tlie difference between tlie amount ot the original check 
 and the raised amount, paid to an iudorser through mistake, may be recov- 
 ered by the paying bank. Id. 
 
 « Dodge V. National Ex. Bank, 30 Ohio St. 1. 
 
 » Dodge u. National Ex. Bank, 30 Id. 1 ; S. C, 20 Id. 234, tried a second 
 time. In this well-known case the drawer of a check payable to the order of 
 Dodge delivered it to a third person in exchange for property, supposing 
 that he was Dodge himself. The receiver claimed to be Dodge, and said that 
 he could identify himself at the bank. In ignorance of the circumstances 
 tinder which the check was given, the bank without inquiry paid the check 
 to the bearer on the forged indorsement of the plaintiff 's name. In a suit by 
 Dodge against the bank it was held, (1) That he could ratify the act of the 
 drawer in giving the check, and by such ratification the check would become 
 his property, for the amount of which he could maintain an action against 
 the bank. (2) The fact that the drawer, with notice of Dodge's claim against 
 
§ 211 PAYMENT ON LEGAL AND FORGED INDORSEMENTS. 213 
 
 (e) Reliance for identification by final payee on prior payee. 
 A certificate of deposit payable to the order of C. the deposi- 
 tor, on return of the same, was issued by bank A. The bank 
 took the mark of the depositor, who could not write, on its 
 signature book and wrote a description of him opposite. 
 Shortly afterward the certificate was stolen from C, and pre- 
 sented to bank B. by a stranger, who gave C.'s name and 
 said that he could not write. The cashier of bank B. accord- 
 ingly indorsed the certificate to his own order with C.'s name 
 to which the stranger made his mark, and an employe of 
 the bank added his signature as " witness to mark." The 
 cashier then indorsed the certificate and sent it through a 
 correspondent to bank A. which paid it, and in due time the 
 money was given to the stranger. Not long afterward the 
 real depositor, C, appeared at the bank where he deposited 
 his money, and demanded payment. The bank, acknowledg- 
 ing the forgery, paid him, and then brought a suit against 
 bank B., to recover payment on the forged indorsement. It 
 was held that bank A. had a right to rely on the identifi- 
 cation of the real depositor by the other bank and could 
 therefore recover.* 
 
 § 211. Bank not required to know intermediate indorsers. 
 Although a bank cannot charge a forged check to the account 
 of the drawer, it is not required to know the persons who 
 indorse a check drawn thereon except the presentor for pay- 
 ment. Nor is it authorized to withhold payment until 
 furnished with direct proof that the signatures of the in- 
 dorsers preceding the presenter's are genuine. In cases of 
 this kind the bank must know that the signatures of the 
 drawer and of the presentor are genuine, but if an intermedi- 
 ate signature is a forgery, the bank cannot be required to pay 
 again." 
 
 the bank was subsequently charged with the amount of the check in settling 
 with the bank, did not affect Dodge's rights against the institution. 
 
 1 State Nat. Bank v. Freedmen's Sav. & Trust Co., 2 Dill. 11. 
 
 2 Levy V. Bank of America, 24 La. Ann. 220 ; Smith v. Mechanics' Bank, 6 
 Id. 610. 
 
214 BANKS AND THEIR DEPOSITOKS. § 213 
 
 § 212. Liability in Louisiana on forged indorsement. A 
 
 bank is liable to the payee of a check made payable to his 
 order, if the same should be paid on the forged indorsement 
 of the payee's collector. Judge Cole, speaking for the court, 
 said, "A depositor in a bank has the right to suppose that the 
 bank will only pay out his money upon his own signature or 
 that of his agent, and upon the conditions specified in the 
 check. The party receiving a check drawn by a depositor is 
 actuated by this confidence and belief, and takes a check with 
 the understanding that it shall be paid only to his order or 
 as specified in the check. . . The banks having consented to 
 pay the deposits of their depositors on their checks have thus 
 tacitly agreed to pay them to the payees, and they are bound 
 to know that the cheeks are paid to the real payees or their 
 agents, as long as they permit their depositors thus to draw 
 checks and thus to make payments to their creditors. Other- 
 wise creditors would be liable to be defrauded. . . The bank 
 holds the money of its depositors, subject to be checked for, 
 as their agent. "When, then, the bank receives a check 
 instructing them to pay a certain part of the deposit of the 
 drawer to a third party, and the bank agrees so to do by its 
 general custom, and by undertaking to pay it upon the sup- 
 posed indorsement of the third party, the amount of the 
 money represented by the cheek, and on deposit as that of 
 the drawer, becomes eo instanU the property of the paj'ee, and 
 the bank, from the moment it undertakes so to pay the check, 
 holds the amount of the check as the agent of the payee, and 
 is responsible to the payee, as his agent, if he pays it upon a 
 forged indorsement."' 
 
 § 213. Payment of check obtained by forging indorsement on 
 draft. If a check be obtained from the drawee of a draft by 
 forging an indorsement thereon and which is payable to the 
 forger, though this be not his correct name, and he indorses 
 the check in the name written therein and passes it to a third 
 person for a consideration, who receives the money from the 
 
 1 Vanblbber v. Bank, 14 La. Ann. 481. 
 
§ 216 PAYMENT ON LEGAL AND FORGED INDORSEMENTS. 215 
 
 drawee bank, it cannot be recovered of the payee. Nor 
 would he be negligent in such a case if he did not inquire 
 concerning the indorsement since it would be made by the 
 very person to whom the check was given and to whom the 
 maker intended the bank should pay. The maker would be 
 mistaken in the name of the person, but not in the person 
 himself to whom he desired to make payment.^ 
 
 § 214. Recovery by government on forged indorsement. The 
 right of the national government to recover money paid on a 
 treasury check under a forged indorsement is conditioned on 
 promptness in giving notice to the person to whom the check 
 was paid. The government is subject to the same rules that 
 control individuals in negotiating and paying commercial 
 paper, and, as Daniel says, between them it "is undoubtedly 
 necessary that the maker, acceptor, or other party who de- 
 mands restitution of money paid under a forged indorsement 
 or under a forged signature of the drawer of a bill should 
 make the demand without unreasonable delay."* 
 
 § 215. Diligence in giving notice of forgery, In giving 
 notice to indorsers of forgery after its discovery, only reason- 
 able diligence need be exercised to hold them liable. The 
 Supreme Court of Illinois' in declaring this rule quotes from 
 the case more frequently cited in this country than any other, 
 " where each party enjoys only the same chance of knowledge 
 (of the handwriting forged) no case demands anything more 
 than reasonable diligence in giving notice after a discovery of 
 the forgery."* 
 
 § 216. Transfers without indorsement. Passing to indorse- 
 ments which are legal it may be remarked that a cheek pay- 
 
 1 American Ex. Bank v. City Bank, N. Y. Ct. Com. Pleas, 5 Legal Obs. 18. 
 
 2 Daniel, Neg. Inst. § 1371 ; Cooke v. United States, 91 U. S. 389 ; United 
 States V. Clinton Nat. Bank, 28 Fed. Rep. 357. See United States v. Central 
 Nat. Bank, 6 Id. 134. 
 
 ' Schroeder v. Harvey, 75 111. 638 ; Bank of Commerce v. Union Bank, 3 
 N. Y. 230. See also Simms v. Clark, 11 111. 137 ; Magee v. Carmaok, 13 Id. 
 289 ; Union Nat. Bank v. Baldeuwick, 45 Id. 375. 
 
 * Canal Bank v. Bank of Albany, 1 Hill, 287. 
 
216 BANKS AND THEIR DEPOSITORS. § 217 
 
 able to order may be transferred by the payee orally with 
 manual delivery without indorsement. The transferree, how- 
 ever, acquires only the rights he would have had if the check 
 had been originally non-negotiable, in other words, the right 
 which the payee had at. the time of the transfer.' 
 
 § 217. Title to stolen and lost checks, (a) When holder 
 gets a good title. A bona fide holder of commercial paper, 
 transferable by delivery, acquires a good title even from a 
 thief or finder." This was decided long ago in Grant v. 
 Vaughn.' The defendant, a London merchant, gave a cash-note 
 on his banker to Bicknell, who lost it. Lord Mansfield said: 
 "In this case Bicknell himself might undoubtedly have 
 brought this action. He lost it, and it came bona fide and in 
 the course of trade into the hands of the present plaintiff 
 who paid a full and fair consideration for it. Bicknell and 
 the plaintiff are both innocent." The loss therefore fell on 
 Bicknell, and the bearer recovered. 
 
 (6) Sow affected if check be overdue. But if a lost check be 
 taken when overdue the maker can attack the holder's title. 
 This exception was made by the Court of King's Bench, 
 Bayley, J., saying: " If a bill, note or check be taken after it 
 is due the party taking it can have no better title to it than 
 the party from whom he takes it, and, therefore, cannot re- 
 cover upon it if it turns out that it has been previously lost 
 or stolen. Now a check is intended for immediate payment, 
 and not for circulation. It is the duty of the person who 
 receives it to present it for payment on the same or the fol- 
 lowing day, and if he neglects to do so and the parties upon 
 whom it is drawn should become bankrupts in the mean time 
 he must bear the loss. Here the check was drawn on the 16th 
 of Ifovember, it ought, therefore, in due course to have been 
 
 » Freund v. Importers & Traders' Nat. Bank, 76 N. Y. 352. See § 61. 
 
 * If a check is made payable to Ihe drawer without the words order or 
 hearer and indorsed in blank and stolen and on presentation to the bank is 
 paid it is protected, Bowden v. National Bank, Hamilton Co. Dis. Ct. Ohio, 
 7 Bull. 283. 
 
 » 3 Burr. 1516. 
 
§ 218 PAYMENT ON LEGAL AND FORGED INDORSEMENTS. 217 
 
 presented for payment on the 17th, and the defendant took it 
 on the 22d. This is, therefore, just like the case of a bill 
 taken after it is due and the party taking it has no better 
 title than the person from whom he took it, and cannot re- 
 cover upon it."* ■ 
 
 (e) This is a questionable circumstance. The same court, 
 though, in a later case receded somewhat from this doctrine, 
 Littledale, J., saying: "It has been urged as matter of 
 law that a party taking a check overdue has it with the same 
 title and no other, as the person from whom he receives it. 
 But although the rule of law certainly is so with respect to 
 bills of exchange and promissory notes, I think it cannot be 
 applied to checks.". Hence in this case the real question was 
 declared to be whether the defendant had acted bona fide and 
 with due caution in taking checks six days after their date. 
 Lord Tenterden, C. J., remarked that the taking of them 
 " six days after they bore date from a person who had not 
 given value for them . . was indeed a circumstance to be 
 taken into consideration by the jury in determining whether 
 the defendants had taken the checks under circumstances 
 which ought to have excited the suspicions of prudent men."^ 
 
 {d) Can loser demand tiew check. The non-payment and 
 probable loss of a check delivered by the maker to B. are not 
 a consideration to support a promise to give a new check for 
 the amount to C, to whom it was alleged that B. had sent 
 the lost check.' 
 
 § 218. Indorsement to identify holder. Sometimes the sole 
 object of indorsing a check is to identify the holder. When 
 this is proved he cannot be held as an indorser. Thus in 
 
 ' Down V. Hailing, 4 Barn. & Cr. 330. 
 
 2 Rothschild v. Corney, 9 Barn. & Cr. 388. 
 
 3 Johns V. Mason, 9 Hare, 29 ; S. C, 20 L. J. Ch. 305. If the check of a 
 public ofaoer be more than a year old, and would not be paid if presented, 
 the Court of Chancery will order the issue of a new one. Taylor v. Scrjvens, 
 1 Beav. 571. See practice for procuring a check when one is lost, Rhodes v. 
 Morse, 14 Jnr. 800 ; and the giving of a bond of indemnity for a new one, 
 King V. Zimmerman, L. R. 6, C. P. 466 ; Hopkins v. Adams, 20 Vt. 407. 
 
218 BANKS AND THEIR DEPOSITORS. § 220 
 
 Louisiana the indorser of a check indorsed it for no other 
 purpose than to identify the person who presented it to the 
 bank and who was in the habit of collecting for the parties 
 to whose order the cheek was drawn ; the responsibility of 
 the ibdorser, it was declared, related to the identity of the 
 collector, but not to his authority to sign the check for the 
 parties to whose order it was given. The question in such a 
 case is for what purpose did the indorser bind himself. " For 
 as he bound himself, so will he be bound."* 
 
 § 219. Legal intendment of second indorser. A check was 
 drawn by "W"., payable to the order of L., the plaintiff, and 
 indorsed by P., the defendant. L. afterward indorsed the 
 check and passed it, but in the end paid it in consequence of 
 the failure of the maker to do so. The defendant did not 
 indorse the check to give the maker credit with the plaintiff, 
 and did not intend or agree to become liable to him on the 
 check except as second indorser, and consequently was not 
 liable thereon. Said the court : " Under such circumstances 
 the legal intendment is that the indorser only intended to 
 become liable as a second indorser and subsequent to the 
 payee ; and that he indorsed the paper with the understand- 
 ing that the payee was to be the first indorser. Aside from 
 the paper itself there must be extrinsic evidence that the 
 indorsement was given with the intent of the indorser to give 
 the maker of the note credit with the payee, so that the payee 
 would have a right to indorse his name without recourse."* 
 
 § 220. Indorsement for collection. " The reception from 
 customers of checks on other banks is of frequent and daily 
 occurrence in the business of banking, practiced because of its 
 convenience. In such case an indorsement of the check for 
 the special purpose of collection is not an indorsement animo 
 indorsandi, and does not pass the title of the payee."' Usually 
 the words "for collection" are used. These are a warning 
 
 ' .Commercial Press v. Cresson City Nat. Bank, 26 La. Ann. 744. 
 
 2 Lester v. Paine, 39 Barb. 616, p. 620. 
 
 3 National Com. Bank v. Miller, 77 Ala. 168. 
 
§ 221 PAYMENT ON LEGAL AND FORGED INDORSEMENTS. 219 
 
 to those who receive the check that its ownership has not 
 been transferred." 
 
 § 221. Indorsement of a lunatic. The indorsement of a 
 certificate of deposit by an insane peron in whose favor it is 
 di'awn, obtained by fraud, carries no title, even to an inno- 
 cent purchaser. " How far the contract of a lunatic," said 
 Judge Brewer, " not as yet under guardianship can be enforced 
 may not be clearly settled. When full consideration has 
 been given, and the contract made in good faith, the mental 
 infirmity has often been disregarded, and the contract en- 
 forced. Yet obviously, on principle, any promise of such a 
 person lacks the essential element of a contract, to wit, assent." 
 In the case which called for the application of this principle, 
 the bank which purchased the certificate was innocent, but 
 the seller was not ; he obtained the indorsement of the original 
 payee by fraud and deception, who received no consideration 
 therefor. " Does the bank," continued Judge Brewer, " as a 
 bona jide purchaser, occupy any better position than the 
 wrong-doer from whom it purchased? Doubtless it is entitled 
 to all the protection given to such a purchaser of negotiable 
 paper ; but such protection does not extend to an indorse- 
 ment like this. There was no valid contract of indorsement 
 created by defendant's signature on the back of the paper. 
 It was no better than a signature written in a state of som- 
 nambulism, or even than a forgery. No negligence is imput- 
 able, for one who is incapable of prudence cannot be guilty 
 of negligence; nor can there be an estoppel. He who is 
 legally disabled to act cannot be estopped from denying that 
 he has acted. An estoppel creates no power ; and while in 
 favor of a bona fide purchaser inquiry is denied as to equities 
 between prior parties, yet such protection does not cut oft" 
 inquiry into the contractual capacity of those parties. Such 
 at least is the better doctrine, although it must be conceded 
 
 1 Sweeny v. Easter, 1 Wall. 166 ; First Nat. Bank v. First Nat. Bank, 76 
 Ind. p. 567. This point has been frequently decided, see § 384. 
 
220 BANKS AND THEIR DEPOSITORS. § 223 
 
 that there are authorities to the contrary, especially in the 
 English courts."* 
 
 § 222. Indorser's liability after notice. " The indorser of a 
 check may be holden on proper notice after payment has been 
 refused by the drawee, upon a legal demand or any state of 
 tacts which amounts to a dishonor of the same."* E. made a 
 loan to J. H. receiving therefor the latter's check which was 
 made payable to the order of F. H. Before getting the 
 money, J. H. requested his son Frank to indorse the check, 
 which he did, putting over the same at E.'s request, the 
 words " waiving demand and notice." E. retained the check 
 more than a year before presenting it to the bank, in the 
 mean time the maker had withdrawn his funds and failed. 
 To sustain a suit on this check against the indorser notice to 
 the former and also to the maker that the check had been 
 presented to the bank and refused, was declared to be unneces- 
 sary, nor could demand before bringing suit be required by 
 either.* An indorser who waives demand and notice is not 
 entitled to any demand on the maker and notice of non-pay- 
 ment.* 
 
 § 223. Dishonored check taken by indorser. A dishonored 
 cheek, which is taken by the indorser with notice of the dis- 
 honor, is subject to every defence legal or equitable that 
 could have been set up against himself.* 
 
 ' Anglo-California Bank v. Ames, 27 Fed. Rep. 727 ; see Wirebach v. First 
 Nat. Bank, 97 Pa. 543. 
 
 2 Foster v. Faulk. 41 Me. p. 428 ; Heylyn v. Adamson, 2 Burr. 669 ; Rushton 
 u. Aspinall, Doug. 679. The initials of the name of the holder of a bank 
 check, indorsed thereon, are enough to charge him as an indorser, Merchauts' 
 Bank ». Spicer, 6 Wend. 443. 
 
 3 Emery v. Hobson, 62 Me. 578. 
 
 • Id. ; Woodman v. Thurston, 8 Cush. 157. 
 B Anderson v. Basteed, 5 Duer, 485. 
 
§ 224 PAYMENT OF CERTIFIED CHECKS. 221 
 
 CHAPTEE VII. 
 
 PAYMENT OF CERTIFIED CHECKS. 
 
 § 224. Certifying equivalent to acceptance. In an impor- 
 tant case before the United States Supreme Court, Judge 
 Swayne remarked that, " the certificate of the bank that a 
 check is good -is equivalent to acceptance. It implies that 
 the check is drawn upon sufficient funds in the hands of the 
 drawee, that they have been set apart for its satisfaction, and 
 that they shall be so applied whenever the check is presented 
 for payment. It is an undertaking that the check is good 
 and shall continue good and this agreement is as binding on 
 the bank as its notes of circulation, a certificate of deposit 
 payable to the order of the depositor, or any other obligation 
 it can assume. The object of certifying a check, as regards 
 both parties, is to enable the holder to use it as money. The 
 transferree takes it with the same readiness and sense of se- 
 curity* that he would take the notes of the bank. It is availa- 
 ble also to him for all the purposes of money. Thus it con- 
 tinues to perform its important functions, until in the course 
 of business it goes back to the bank for the redemption and 
 is extinguished by payment." ' 
 
 (a) Supreme Court of Illinois. If the United States 
 
 • Merchants' Bank v. State Bank, 10 Wall. 604, p. 648. For good descrip- 
 tion of the purposes served by a certified check, see opinion of Denio, C. J., 
 in Farmers & Mech. Bank v. Butchers & Drovers' Bank, 14 N. Y. p. 624. The 
 liability of a bank on a certified check results from the nature of the contract 
 and not from usage or custom, Cooke v. State Nat. Bank, 52 N. Y. 96. " It is 
 now well settled that certification is equivalent to acceptance and that a check 
 certified stands upon the same footing as an accepted bill of exchange," Mo- 
 Gloin, J., Louisiana Ice Co. u. State Nat. Bank, 1 McGloin, p. 180. " By 
 the law merchant of this country the certificate of the bank that a check is 
 good is equivalent to acceptance," Merchants' Bank v. State Bank, supra; 
 Uelwege v. Hibernia Nat. Bank, 28 La. Ann. 520. 
 
222 BANKS AND THEIR DEPOSITORS. § 224 
 
 Supreme Court have declared the object of certifying a check 
 in broad language so have the courts in many States on 
 numerous occasions. Says Judge Breese of the Supreme 
 Court of Illinois: "There is really no distinction in the 
 nature of the liability created between a certified check and 
 a note of the bank payable on demand, as each is intended to 
 circulate as money, each is an absolute promise to pay a spe- 
 cific sura on demand. The only difterence between them is 
 that the promise which is expressed in the bank note is im- 
 plied in the check. They hold that the act of the bank offi- 
 cers in certifying a check is to appropriate the funds of the 
 drawer in the bank to the credit of the check and a promise 
 that upon demand they shall be applied to its payment. 
 The object of getting a check certified is to enable the holder 
 to use it as money ; that is to pass it to others with the same 
 certainty of its acceptance as affording the same security to 
 a holder, and, by certifying, the bank meant to give the 
 check a currency and value that would not otherwise belong 
 to it, and this additional value can only be given to it by 
 holding the certificate to be an unconditional promise of pay- 
 ment whenever payment shall be demanded."' 
 
 {b) New York Court of Appeals. 'In a case betwewi two 
 banks in New York^ the Court of Appeals said that " when 
 a check is presented for certification to a bank on which it is 
 drawn the purpose is to ascertain with certainty what the 
 bank alone can know, and that is whether the drawers of the 
 check have funds sufficient to meet it ; and, further, to ob- 
 tain the engagement of the bank that those funds shall not 
 be withdrawn from the bank by the drawees of the check. 
 To this extent the knowledge of the bank must of necessity 
 enable it safely to go in the way of assertion, and its own 
 power over its own funds will suffice it to protect it as to its 
 obligation." ' 
 
 1 Biokford v. First Nat. Bank, 42 111. 238, p. 243 ; Barnett v. Smith, 30 N. 
 H. 256. 
 s Marine Nat Bank v. National City Bank, 59 N. Y. 71. 
 
§ 224 PAYMENT OP CERTIFIED CHECKS. 223 
 
 (c) Marine National Bank v. National City Bank} One of 
 the banks, however, in that ease contended that the certify- 
 ing bank was bound to warrant not only the genuineness of 
 the drawer's signature and the sufficiency of his credit, but 
 also the genuineness of the check in all its parts including 
 the specification of the amount to be paid and the names and 
 identity of the payees. But the court answered that if this 
 were so " then obviously there must occur an immediate and 
 complete change in the modes of doing business, which would 
 defeat and practically put an end to the use of certified 
 checks. For no bank, under such a rule, could safely certify 
 a check without, in the first instance, investigating its origin 
 and history by inquiry of its makers and payees. The burden 
 of such inquiries could not be borne without interfering with, 
 or interrupting the other necessary business of the bank, and 
 the practice of certifying checks would have to be abandoned, 
 or a stafli'of inquirers instituted in every bank specially charged 
 with these duties. It is plain that banks, in self-protection, 
 would be compelled to refuse altogether to certify checks, and 
 that this convenient and useful invention of modern business 
 would come to an end. The mischief would arise from charg- 
 ing the banks with a knowledge that in the nature of things 
 they cannot possess. With their responsibility limited to the 
 fact withi^i their knowledge, the practice imposes no burden 
 upon banks, and subserves the convenience of commerce. 
 'So construction ought to be put on acts in the usual course 
 of business which will impose upon the parties interested the 
 necessity of immediately altering it. For, as the question is 
 necessarily what did the parties mean, we cannot, without 
 violent construction, attribute to them a meaning so burden- 
 some that it will necessitate a change of the usual way of 
 doing business." 
 
 (rf) Remarks on second trial.^ "When the case was again be- 
 fore the court. Judge Allen said : " It is believed that banks 
 
 I 50 N. y. 71. 2 Id. p. 75. 
 
224 BANKS AND THEIR DEPOSITORS. § 225 
 
 do not always demand identification or proof of title in the 
 person presenting a check for certification; and if they 
 merely certify to the genuineness of the signature of the 
 drawer and the sufficiency of the fund, the other mattei's can 
 safely be left until payment is demanded. [The counsel for 
 the defendant bank argued that] a bank must ascertain to a 
 certainty before certifying that the check has not been altered 
 or tampered with, and that the indorsements are genuine, 
 that is, that the check is genuine in all its parts and that the 
 apparent holder has a valid title. It is evident that to east 
 all this responsibility upon the certifying bank would put a 
 stop to the certifying of checks except when presented by the 
 drawer or under very peculiar circumstances." 
 
 § 225. Payment of check raised before certifying. If a 
 check be raised before certification the bank is not liable for 
 the raised amount, and it can recover the same whenever pay- 
 ment has been made without negligence. Judge Earl, speaking 
 for the highest court of New York, in a case of this kind, said 
 that the bank in certifying "assumed a liability like that 
 of an acceptor of a draft. By the certification it guaranteed 
 the genuineness of the drawer's signature, and represented that 
 it had funds of the drawer in its possession sufficient to meet 
 the check, and it engaged that those funds should not be 
 withdrawn from it by the drawer to the prejudice of any 
 bona fide holder of the check ; and the certification did not 
 impose upon the defendant any further or greater responsi- 
 bility. It did not import that the body of the check was 
 genuine, or that the funds on deposit with it were absolutely 
 applicable to the payment of the precise check certified. 
 When, therefore, a check has been raised by some person 
 without authority before certification, the certifying bank 
 cannot be called upon in consequence of its certification to 
 pay the amount of the raised check ; and when a bank has 
 thus certifi.ed & raised check by mistake and subsequently 
 pays the money thereon without any culpable negligence on 
 its part, it can recover the amount thus paid as money paid 
 
§ 226 PAYMENT OF CERTIFIED CHECKS. 225 
 
 by mistake. . . And whether the forgery and alteration were 
 made before or after acceptance will make no difterence."' 
 
 § 226. Pajrment of clieck raised after certif3ring. ITor is the 
 drawee bank responsible for a larger amount inserted after 
 certification. And if by mistake it pays the bona fide holder 
 of a certified check which has been raised after certifica- 
 tion, it can recover the money unless the holder has suffered 
 in consequence of the mistake. In a case between two New 
 York banks it was contended that when the check, originally 
 for fifty-six dollars, was certified by the drawee bank, the 
 certification " made it aa obligation of that bank ; that when 
 subsequently presented to the bank in its altered condition as 
 a check for $15,006 the bank was bound to know its own 
 obligation, and to detect the forgery, and that the bank by 
 recognizing it as genuine and acquiescing in the payment 
 through the clearing house, precluded itself from afterward 
 setting up its own mistake."^ 
 
 (a) Opinion hy Mapallo, J. In reply to this Judge Rapallo 
 said : " On general principles, mere negligence in making the 
 mistake is not, as has been already shown, sufliieient to pre- 
 clude the party making it from demanding its correction. 
 Such negligence does not give to the parties receiving the 
 payment the right to retain what was not his due unless he 
 has been misled and prejudiced by the mistake. If his loss 
 had been incurred and become complete before the payment, 
 he should not in justice be permitted to avail himself of the 
 mistake of the other party to shift the loss upon the latter. 
 To render it compulsory upon the courts to refuse a correc- 
 tion of the mistake the facts of the case must bring it within 
 the accepted [rules above stated]. This, the facts of the 
 present case fail to do. The essential element is wanting, 
 that the body of the instrument as well as the certification 
 was the work of the bank, and that, therefore, it was con- 
 clusively presumed to know, by a mere inspection of the 
 
 1 Clews V. Bank, 89 N. Y. p. 421. 
 
 2 National Bank v. National Mech. Bank. Ass'n, 55 N. Y. 211. 
 
 15 
 
226 BANKS AND THEIR DEPOSITORS. § 227 
 
 instrument, whether or not it had been altered, The bank 
 was not bound to know the handwriting or genuineness of 
 the filling up of the check. It was legally concluded only as 
 to the signature of the drawer and its own certification; The 
 rules of law in relation to the correction of mistakes of fact 
 have been gradually growing more liberal and are moulded 
 so as to do equity between the parties. The exceptions 
 which have been established by authority and have been 
 engrafted upon the commercial law it is not our purpose to 
 disturb ; but they should not be extended ; unless a case is 
 clearly brought within them the general principles should 
 govern. Ifo case has been cited, nor do I think any can be 
 found, which holds that a payment by mistake, such as is 
 shown in the present case, cannot be recovered back." 
 
 § 227. Effect of subsequent inquiry about certification, (a) 
 Clews v. Bank} If the certifying officer be asked after a check 
 has been certified whether the certification is good and he 
 returns an affirmative answer, the bank is not responsible for 
 more than the amount certified. A check was drawn in 
 Chicago on a ifew York bank, payable to the order of D., 
 who indorsed it over to G. In due time it was presented to 
 the drawee bank and certified. Afterward, it was altered by 
 raising the amount and changing the date and the paj'ee, and 
 was offered to C. in payment for bonds. He sent it by a 
 messenger to the bank to find out if the certification was 
 good. The teller replied " yes," and C. accepted the draft. 
 Prior to this the bank had been notified that the draft had 
 not reached the indorser G., and had been requested to stop 
 payment. In an action by C. to recover the amount on the 
 raised draft it was held that the bank was not estopped by 
 the statement of the teller from denying its liability, that at 
 the time the draft was presented to him the bank owed C. no 
 duty of active diligence to protect him from the fraud which 
 the holder of the check was trying to perpetrate on him. It 
 was bound to act in good faith and not to do anything or say 
 
 1 89 N. Y. 418. 
 
§ 227 PAYMENT OF CERTIFIED CHECKS. 227 
 
 anything intentionally or carelessly which would mislead him 
 or upon which he could properly rely in taking the check. 
 " The inquiry was not," said the court, " whether the body of 
 the check was good or whether that cheek was certified and 
 was then in the same condition in which it was at the time 
 of the certification ; nor was the inquiry whether the check 
 was good for the amount thereof, or whether the amount 
 thereof would be paid. The attention of the teller was called 
 to nothing biit the certification. . . The simple inquiry was, 
 whether the certification was good, and it went no further. 
 Suppose the check had never been certified and the inquiry 
 had then been whether the check was good and the teller had 
 replied that it was, such an answer would in law only have 
 implied that the name of the drawer was genuine, and that 
 there were funds in the bank to meet the check ; and the 
 bank would not have been responsible for any alteration or 
 forgery of the body of the check." 
 
 (6) In the Es-py case^ a check had been raised from $26.50 
 to $3920 and the name of the payee changed from H. to E. 
 H. & Co., and was ofl^ered to them in paj'ment for bonds and 
 gold purchased by a stranger. They sent the check for 
 information to the bank whose teller replied " it is good," 
 or " it is all right ." Having received the check and delivered 
 the bonds and gold, they passed the check through the clear- 
 ing house. The bank paid the check, but, on discovering 
 the forgery, brought an action and recovered of E. H. & Co. 
 the money paid. The court maintained the following among 
 other propositions : First. When money is paid by mistake 
 on a raised check, and neither party is in fault, it may be 
 recovered on the ground of lack of consideration. Second. 
 When a party to whom such check is offered sends it to the 
 drawee bank for information, the law presumes that it has 
 knowledge of the drawer's signature, and of the state of his 
 account, and is responsible for its answer on these points. 
 Third. Unless there is something in the terms in which in- 
 
 1 Espy V. Bank, 18 Wall. 604. 
 
228 BANKS AND THEIR DEPOSITORS. § 228 
 
 formation is asked that points the attention of the bank- 
 officer beyond these two matters, his response that the check 
 is good will be limited to them and will not extend to the 
 genuineness of the payee written therein or the amount. 
 
 (c) Parke v. Roser.^ A depositor drew his cheek for an 
 amount in favor of A. or bearer. A. presented the check to 
 B. after the amount had been wrongfully raised to get it 
 cashed. The latter presented it to the cashier after banking 
 hours, who told him that it was good and would be paid 
 when presented at the proper time. B. took the check, pay- 
 ing the money thereon, presented it the next day, and was 
 paid. It proved to be a forgery, though neither B. nor the 
 bank knew this. The bank sued B. and recovered. " If the 
 plaintiffs," said the court, " had certified the check and after- 
 wards paid it, before discovering it to be a raised and altered 
 check, they could have recovered the money from the parties 
 to whom it had been paid." 
 
 § 228. Bank not estopped from sbowing alteration. When 
 a certifying bank endeavors to recover the money paid on a 
 raised check it is not estopped from showing the body of the 
 check to be a forgery by the verbal assurance of the teller 
 to the payee of the check that it is correct in every particular.^ 
 In a case requiring the. application of this principle the court 
 said : " It was no part of the teller's duty to give an assur- 
 ance as to the genuineness of the check, except in respect to 
 the signature of the drawers. If he went beyond this his 
 representation did not bind the bank. Moreover, if the re- 
 ply made to the question put to him [by the messenger who 
 presented the check] was intended as an affirmation pf the 
 genuineness of the body of the check, it was simply an ex- 
 
 1 67 Ind. 500, p. 503. 
 
 2 Proof cannot be offered to show that the word " certified" when used in 
 certifying checks, by the custom and common, understanding of banks and 
 merchants is construed to Import an obligation on the part of the certifying 
 banks to pay the amount stated in the check notwitlistanding tlie body of 
 the check may be forged, Security Bank v. National Bank, 67 N. Y. 458. 
 
§ 229 PAYMENT OF CERTIFIED CHECKS. 229 
 
 pression of his opinion, and must Lave been so understood by 
 the person who made the inquiry."' 
 
 § 229. Verbal acceptance, (a) In New Hampshire. Can a 
 check be verbally accepted ? The Supreme Court of New- 
 Hampshire, having in mind the verbal acceptance of drafts, 
 and regarding checks as similar, had no hesitation in apply- 
 ing the law relating to the verbal acceptance of the former 
 kind of instruments also to checks.' 
 
 (6) Dangerous method. But if the court had considered 
 the dangers which were likely to arise from sanctioning such 
 a loose method of doing business, the judges might have hes- 
 itated to add this to the long list of principles which have 
 been applied to new kinds of business with the confident 
 expectation of promoting the material and moral interests of 
 society. The history of our jurisprudence clearly shows that 
 it would have been better in many cases if new principles 
 of law had been applied instead of stretching old ones to cover 
 new conditions. 
 
 (e) Opinion of United States Supreme Court. The United 
 States Supreme Court, on the other hand, regard with less 
 favor a verbal acceptance or certification. The question arose 
 in the Espy case.^ The check, which was the occasion of that 
 controversj', was taken by a messenger of Espy, Heidelbach 
 & Co., to the teller of the defendant bank, who said, " It is 
 all right," or "it is good." The court first remarked that 
 where the object of certifying was " to use the indorsement 
 to put the check in circulation, or raise money on it, or use it 
 as money, and this object is known to the certifying bank, it 
 may be argued with some force that the bank should, as in 
 the case of an acceptance of a bill of exchange, be held re- 
 sponsible for the validity of the check as it came fi'om the 
 hands of the certifying bank. Such a rule would seem to be 
 just when checks are certified, as we know they often are, 
 
 1 Security Bank v. National Bank, 67 N. Y. 458, the court citing Bargett 
 V. Orient Mutual Ins. Co., 3 Bosw. 385 ; Higgins v. Moore, 34 N. Y. 417 ; Law- 
 rence V. Maxwell, 53 Id. 19 ; Wheeler v. Newbould, 16 Id. 392. 
 
 2 Barnett v. Smith, 30 N. H. 256. ' 18 Wall. 604. 
 
230 , BANKS AND THEIR DEPOSITOES. § 229 
 
 without reference to the presence of funds by the drawer and 
 when the well-known purpose is to give the drawer a credit 
 by enabling him to use the check as money by putting it in 
 circulation." 
 
 {d) Espy case. But the verbal statement made in the Espy 
 case did not come within that principle, "There was no 
 design or intent on the part of the bank to assume a re- 
 sponsibility beyond the funds of the drawer in their hands, 
 nor to enable the payee of the check to put it into circulation, 
 Ifothing was said or done by the bank-officer which could 
 be transferred with the check, as part of it when innocent 
 taker of it from the payee. Such subsequent taker would 
 have no right to rely on what was said by the bank-officers, 
 any further than the payee would. We are of opinion that 
 the court was entirely right in treating the case as one iu 
 which information was sought and obtained by Espy, Heidel- 
 bach & Co. for their own use, and to govern their own action, 
 For such information as the bank was willing to give, and 
 did give, it was, no doubt, responsible, because it had reason 
 to believe that the other party would act upon it. But only 
 to this extent and only on this principle is it liable. It is 
 not liable as for accepting or indorsing a draft or check 
 with intent that it might go upon the market for general 
 use and negotiation with the credit of its name attached to 
 the paper, just as it was placed on the market," 
 
 (e) Opinion of Shepley, J. The doctrine of the verbal 
 acceptance of a check found favor in the mind of Judge 
 Shepley of the United States Circuit Court, When the 
 acceptor has funds of the drawer in his hands a verbal accept- 
 ance of a check, or a verbal promise to accept a check is not 
 contrary to the Statute of Frauds, for the I'eason that the 
 drawee's engagement is in fact to pay his own debt to the 
 drawer, the owner of the funds. But he drew a sharp dis- 
 tinction between verbally accepting when the drawee had 
 funds of the drawer, and when the drawee had none, A 
 parol accommodation acceptance of a bank-check is invalid. 
 "It is not perceived how any sound reason can be given why 
 
§ 230 PAYMENT OF CERTIFIED CHECKS. 231 
 
 verbal acceptance, or promise to accept, for the mere accom- 
 modation of the drawer without funds or value received, 
 should not be treated as within the statute."' 
 
 (/) Law in Illinois. In Illinois, however, the highest court 
 has announced that even a parol promise to accept an existing, 
 though not present, check is binding, nor does the Statute of 
 Frauds stand in the way of enforcing it.* 
 
 {g) Not forbidden by national statute. The Act of Congress* 
 forbidding a national bank from certifying a check unless the 
 drawer has a deposit equal to the amount specified in the 
 check does not invalidate an oral acceptance of a check, or an 
 oral promise to pay one, if the deposit be sufficient for that 
 purpose. Nor does the act invalidate a conditional accept- 
 ance that a bank will pay a check whenever the drawer shall 
 have sufficient funds to pay it.^ 
 
 § 230. Import of " good" in certifying. If the certifying 
 consist in using the word " good," its legal import and effect 
 are well understood. " Such a certificate has been held to be 
 equivalent to an acceptance of a bill of exchange, and to be 
 an admission simply of the genuineness of the signature of 
 the drawer and that there are funds for its payment."^ 
 
 (a) Tennessee view. Duty of holder. In Tennessee rather 
 different views are held on the subject of certifying. In 
 Andrews v. German Ifat. Bank' it was decided that to render 
 liable the drawer of a check which has been certified by a 
 
 1 Shepley, J., Morse u. Massachusetts Nat. Bank, Holm. 209, p. 214. 
 
 2 Nelson v. First Nat. Bank, 48 111. 36, p. 40. » March 3, 1869. 
 * National Bank v. Natipnal Bank, 7 W. Va. 544. 
 
 5 Marine Nat. Bank v. National City Bank, 69 N. Y. p. 77 ; Farmers & 
 Mechanics' Bank «. Butchers & Drovers' Bank, 16 Id. 125 ; Barnes v. On- 
 tario Bank, 19 Id. 152 ; Meads a. Merchants' Bank, 25 Id. 143 ; Irving Bank 
 V. Wetherald, 86 Id. 335 ; Merchants' Bank v. State Bank, 10 Wall. 604 ; Espy 
 1^. Bank, 18 Id. 604. Marking a check " good" renders the hank liable to the 
 holder. Phoenix Bank«. Bank of America, 1 N. Y. Leg. Ohs. 26. "The cer- 
 tificate is a useless form unless it means, not merely that the check was good 
 when certified, but that it will be good when presented for payment," Oakley, 
 C. J., Willitts V. Phoenix Bank, 2 Duer, 121, p. 129. 
 
 6 9 Heisk, 211 ; Sohoolfield v. Moon, 9 Id. 171. 
 
232 BANKS AND THEIR DEPOSITORS. § 231 
 
 bank as "good," the holder must present it for payment 
 within the business hours of the next day after it is received. 
 (6) Certified check as payment. It is a question for the 
 jury whether a check certified as " good" by the bank and 
 taken in payment of a note or draft is an absolute or only a 
 conditional discharge of the debt. 
 
 (c) Liability of bank to holder. As between the holder of 
 a check certified " good" and the bank which certified it, the 
 bank becomes liable as on acceptance, and it is as binding as 
 its certifi.cate of deposit or notes of circulation. 
 
 (d) Application of t/ie law of demand and notice. The law of 
 demand and notice has no application and the bank becomes 
 BO far the primary debtor that no delay in presenting at 
 least not for a year or more, will affect its obligation, Nichol- 
 son, C. J., saying: "We have been referred to no authority, 
 nor are we aware of any, in which it is held that the fact of . 
 certification of a check either discharges the drawer absolutely 
 from liability to the holder, or changes the law of demand 
 and notice which governs the relation between the holder and 
 drawer. . . It is no doubt true that the credit of the check 
 may rest maiply on the fact that the bank is primarily liable, 
 but it is made stronger by the fact that the drawer stands as 
 Buret}' for the bank. . . It is still a check and because of its 
 certification and thereby of the bank's promise to pay it, its 
 approximation to money and its negotiability in market are 
 increased."' 
 
 § 231. Authority of cashier to certify. " The cashier has a 
 right by virtue of his office to make this certificate when the 
 drawer has funds. He is the custodian of the funds of the 
 bank and of the books ; he receives money and gives vouchers 
 therefor, and whether upon receiving a cheek he pays it in 
 money or gives the holder a certificate of deposit or draft, or 
 a certificate that he will retain sufficient of the money stand- 
 ing to the drawer's credit to pay it when presented, he is in 
 either case acting within the line of his duty and within the 
 
 1 Andrews v. German Nat. Bank, 9 Heisk. pp. 218, 220, 221. 
 
§ 231 PAYMKNT OF CERTIFIKD CHECKS. 233 
 
 scope of the authority which necessarily attaches to his 
 office."' 
 
 (a) If drawer have no funds bank must fay. But he has no 
 right to make a certificate when the drawer is without funds. 
 If, however, he should do so, the holder could insist on pay- 
 ment of the check as though the drawer had money in the 
 bank. It could not plead want of authority in a suit by an 
 innocent holder of such a cheek. " The bank having placed the 
 cashier in the position which implies this inherent authority, 
 those who deal with the bank have a right to infer that he 
 possesses it, and although the exercise of it in a given case 
 may not be warranted on account of the existence or non- 
 existence of some extrinsic fact peculiarly within his official 
 knowledge, yet the bank is responsible instead of an innocent 
 party upon every principle of reason and morality."^ 
 
 (6) Extent of rule. The same rule prevails in several 
 States. And in a suit by a hona fide holder of a certified 
 check against the bank, the authority of its assistant teller to 
 certify checks as "good," may be shown by evidence of a 
 course of dealing as between himself, his principals and the 
 bank customers. But such authority cannot be shown by 
 evidence of a general custom of banks to authorize such 
 agents to pledge the credit of the bank by certifying checks.^ 
 
 (e) If check be uvusual cashier cannot certify. If a check is 
 not drawn in the usual course of business, for example, if it 
 contain the recital, " To hold as collateral for 1000 P. T. Oil 
 pipage paid," the cashier has no authority to certify, nor can 
 he render the bank responsible therefor by ratifying it.* 
 
 1 Church, C. J., Cooke ». state Nat. Bank, 52 N.Y. p. 114. 2Id.p.ll5. 
 
 ' Hill V. Nation Trust Co., 108 Pa. 1 ; French u. Irwin, 4 Baxter, 401. 
 " The certificate of the cashier of a bank that a check is ' good' is a repre- 
 sentation of a present existing fact within his knowledge as cashier, and if that 
 certificate be made by him in the course of his ordinary business as cashier, 
 it will bind the bank in favor of innocent third persons upon the principle 
 of estoppel in pais even if the certificate be not true and the drawer of the 
 check has no funds on deposit in the bank," Shepley, J., Morse v, Massa- 
 chusetts Nat. Bank, Holm. 209, p. 211. 
 
 * Dorsey v. Abrams, 85 Pa. 299. 
 
234 BANKS AND THEIR DEPOSITORS, § 231 
 
 {d) Must not be post-dated, Not only must the depositor 
 have a requisite deposit before the cashier can legally certify, 
 but the check must not be post-dated at the time of certifying. 
 When a post-dated check is certified before maturity this is 
 declared to be a notice to the world that the cashier is not 
 acting within his authority, and the bank cannot be required 
 to pay it.' 
 
 (e) Chester's case J' In February, 1866, B. drew his check 
 dated March 1,1866, on the defendant doing business at L. 
 On the face was written, "Accepted, A. J. Chester, A. Cash." 
 C, who wrote it, had been appointed assistant cashier by the 
 defendant bank for the special purpose of signing circulating 
 notes. He therefore had no authority for doing the act ; 
 furthermore, B. had no money on deposit. The check was 
 put in circulation in February, and cashed by Pope in l^ew 
 York, March 2d, without any notice of defects save those 
 appearing on the face of the instrument. In an action on the 
 check it was held that in the absence of prior practice or 
 usage the acceptance could not bind the bank, even in favor 
 of a bona fide holder, that Pope could not thus be regarded, 
 as the acceptance was not in the common form used by banks 
 to indicate funds on deposit to the amount of a check, and, 
 furthermore, that it appeared to be by a subordinate officer 
 whose authority must be shown, and that the cbeck, if ac- 
 cepted at date, could not have reached New York in the 
 ordinary course of mail at the time it was cashed, which facts 
 were sufficient to put Pope on inquiry. On the question of 
 authority the court said : " Where there is no authority for 
 the act called in question, a general or particular usage in a 
 given direction will not bind the bank to respond to a third 
 party who deals with it in good faith. In the present case 
 neither authority or usage is proved . , to sustain the act 
 of Chester, but the fact is just the contrary. Perhaps we 
 might assume that a cashier by virtue of his general author- 
 ity, in the absence of proof of any restriction upon it, could 
 
 • 1 Clarke Nat. Bank v. Bank of Albion, 52 Barb. 592, 
 " Pope V. Bank of Albion, 67 N. Y. 126 ; Rev, 59 Barb. 226, 
 
§ 232 PAYMENT OF CEETIFIED CHECKS. 235 
 
 certify that the check of a customer was good, and thus bind 
 the bank in favor of a bona fide holder whether at the time 
 the customer had funds or not.' And it may be that the 
 general usage of banks would require us to hold in the same 
 way where we have the proof that in this respect this power 
 of the cashier has been specially restricted, and that no such 
 usage had ever been practised by any of the officers of tlie 
 bank. In the ease of a subordinate officer or clerk it may be 
 affirmed, as a general rule, that his authority for any act out 
 of the mere ordinary routine of banking business must be 
 shown in order to bind the bank.^ Where a subordinate 
 officer or clerk has been .permitted to pursue a particular 
 practice in certifying checks for customers or otherwise, his 
 acts although wrongful will bind the bank in favor of a per- 
 son who fulfils the conditions of a dealer in good faith. 
 Being satisfied that the act of Chester was wholly without 
 authority, and unsustained by any prior practice or usage, 
 the plaintiff could not recover if he is to be regarded as a 
 bona fide holder in all respects." 
 
 § 232. Limited authority of president to certify. The presi- 
 dent of a bank has no authority to certify his own checks 
 drawn thereon. !N'or will a by-law conferring authority on 
 him to certify checks cover his own. " It is a necessary and 
 universal implication in all cases of agency that the power 
 conferred upon the agent is to be exercised for the exclusive 
 benefit of the principal. It is repugnant to the very nature 
 and essence of such power to hold that it may be used for the 
 benefit of the agent in hostility to the interests of the prin- 
 cipal. That a trustee or agent shall not act for his own 
 benefit in any manner relating to his agency or trust, is an 
 old and familiar doctrine of the court of equity, frequently 
 asserted in the courts of this country and in England. The 
 rule is applicable to all persons standhig in a trust relation. 
 The principal is entitled to the exercise in his behalf of all 
 
 1 Wild V. Bank, 3 Mason, 505. 
 
 2 Potter V. Merchants' Bank, 28 N. Y. 641. 
 
236 BANKS AND THEIR DEPOSITORS. § 234 
 
 the skill, industry, and ability of his agent, and to his inten- 
 sest fidelity to his trusts."' 
 
 § 233. Must pay certified forged check. If a bank certify a 
 forged check it' must pay the same.^ . ". The reason for this 
 rule was long ago given by Chief Justice Holt. " Seeing 
 somebody must be a loser by this deceit it is more reason 
 that he that confides in the deceiver should be a loser than a 
 stranger.'"^ And if such a check be advertised, but this is 
 not known to the holder, he is not prevented from recovering.* 
 A bank is also liable to the bona fide holder of a certified 
 check though obtained from the drawer by fraud and drawn 
 to the order of a fictitious person, if indorsed to the holder 
 by the person to whom the drawer intended that payment 
 should be made." 
 
 § 234. Pa3rment of forged certificate. So, if a check con- 
 taining a forged certification is presented to the teller, whose 
 certificate it purports to be, and he pronounces it genuine, 
 the certification is adopted and the bank is bound by it as 
 though it were genuine.' This was decided in a case in 
 which C. & Co. delivered to R. gold, checks, and certificates 
 receiving E.'s check on the plaintifl:''s bank which purported 
 to be certified by the teller. C. & Co. immediately sent a 
 messenger with the check to the plaintiff's bank, where, 
 handing it to the teller, he asked if it was all right. On re- 
 ceiving an affirmative reply, C. & Co. took the check. The 
 
 1 Smith, J., Claflin v. Farmers k Mechanics' Bank, 25 N. Y. p. 296 ; see 
 also Judge Denio's opinion in New York Central Ins. Co. v. National Protec- 
 tion Ins. Co., 14 N. Y. 85 ; Rev. 20 Barb. 468. 
 
 2 Farmers & Mechanics' Bank v. Butchers & Drovers' Bank, 16 N. Y. 125 ; 
 opinion of Denio, C. J., in the same case, 14 Id. 623 ; Hagen <,-. Bowery 
 Nat. Bank, 64 Barb. 197 ; Commercial & Farmers' Nat. Bank v. First Nat. 
 Bank, 30 Md. 11 ; Louisiana Nat. Bank v. Citizens' Bank, 28 La. Ann. 189. 
 
 8 Hern v. Nichols, 1 Salk. 289. 
 
 * Hagen v. Bowery Nat. Bank, 64 Barb. 197 ; S. C, 6 Lans. 490 ; Raphael 
 V. Bank of England, 17 C. B. 161. 
 
 5 Merchants' Loan & Trust Co. v. Bank, 7 Daly, 137. A certified check with- 
 out consideration to the drawer is subject to the equities of the bank against 
 the payee, Stevens v. Corn Ex. Bank, 3 Hun, 147 ; S. C, 5 Th. & C. 283. 
 
 6 Continental Nat. Bank u. National Bank, 50 N. Y. 575. 
 
§ 235 PAYMENT OF CERTIFIED CHECKS. 237 
 
 certification in truth was forged, and the certifying hank 
 having declined to pay it, C. & Co. brought a suit against it 
 and recovered.' And if the authority of the teller to certify 
 is limited to the amount of funds of the drawer the bank will 
 be liable if he violate his authority and certify to a larger 
 amount to accommodate the drawer. 
 
 § 235. Direction not to pay certified cbeck. (a) Opinion of 
 Daniels, J. As a bank is not liable on a certified cheek until 
 after delivery, so if while having a certified check in its pos- 
 session—drawn for the accommodation of the payee and 
 which without his indorsement is presented to the drawee 
 bank and certified — but which the maker directs the bank 
 not to pay, it cannot be legallj- paid. If the bank should pay 
 it the maker's account cannot be charged with the amount. 
 "The evidence," in a ease involving this principle, said 
 Judge Daniels, who delivered the opinion of the court, 
 "tended to show that the bank had merely certified but had 
 not delivered its certificate, when it was prohibited from pay- 
 ing the check. The certificate, in that condition, imposed 
 no obligation or liability on the bank for the payment of the 
 amount to the holders. A delivery, as well as the making of 
 the certificate, was necessary .to render the defendants liable 
 upon it. Until that took place the certificate was entirely 
 subject to the defendant's control. It was not bound to de- 
 liver it at all, but it had the right to reconsider and erase it or 
 otherwise remove it at any time before it passed out of the 
 defendant's control by a delivery, and it became the defend- 
 ants to do that when the notice was received forbidding pay- 
 ment of the check. It had then incurred no liability by 
 means of its certificate, and it was not afterward at liberty 
 to create it and charge the plaintift^'s funds with the conse- 
 quences of it."^ But if the check has been returned before 
 receiving the notice then the bank must pay it.* 
 
 • Continental Nat. Bank v. National Bank, 50 N. Y. 575. 
 2 Freund u. Importers & Traders' Nat. Bank, 3 Him, 689 ; S. C, G Th. & C. 
 236. 
 » Freund v. Importers & Traders' Nat. Bank, 76 N. Y. 352 ; AS., 12 Hun, 537. 
 
238 BANKS AND THEIR DEPOSITORS. § 235 
 
 (b) Nassau Bank v. Broadway Bank. In another case a 
 check having been indorsed by the payee was presented to 
 the drawee bank and certified to be " good." Afterward the 
 drawer requested the drawee not to pay the check. When, 
 therefore, the check was presented the bank wrote across its 
 face " payment stopped" and returned it to the payee. The 
 latter erased the words, jjut a revenue stamp over the erasure, 
 transferred the check to another through whom the plaintiff 
 received it for collection in good faith and without any mark 
 on its face sufficient to create inquiry. It was held that the 
 plaintiff must be regarded as a bona fide holder of the cheek 
 for value and entitled to recover the amount from the drawee.^ 
 
 (c) Nolan's case^ of stolen check. A check dated Jan. 21, 
 1865, was drawn by M., payable to his order on the defendant 
 bank and indorsed by himself. It was accepted by the 
 drawee, certified as "good,"* and registered. The cheek 
 was designed for circulation and not for immediate payment. 
 On the 4th of the following month the check, while in the 
 possession of G., was stolen. Notice of the theft was given 
 and payment of the check was stopped on the same day. In 
 May or June N^olan became the bona fide holder of it in a 
 legitimate manner and demanded payment to which the bank 
 refused to i-espond. The lower court decided in its favor on 
 the ground that the check was taken after it was overdue 
 and therefore subject to existing equities. But the Supreme 
 Court held that !N"olan made all needful inquiries before ac- 
 cepting it, that if the signatures to the check and certificate 
 were genuine he was not bound by anything appearing on the 
 face of it to exercise any other caution, vigilance, or diligence 
 so far as the bank was concerned. It was his duty to show 
 
 1 Nassau Bank v. Broadway Bank, 54 Barb. 236. ' 67 Barb. 24. 
 
 ' Brown, J., in Farmers & Mechanics' Bank v. Batchers & Drovers' Bank, 
 28 N. Y. p. 428, quoted with approval the remark of Hubbard, J., in Massey 
 V. The Eagle Bank, 9 Met. p. 311, " that unless the word ' good' carries with 
 it binding evidence of the fact that the money is in the bank to meet that par- 
 ticular check, and that it will be paid to the bearer at any time when presented, 
 it is of no practical utility." 
 
§ 236 PAYMENT OF CERTIFIED CHECKS. 239 
 
 that he was a bona fide holder for vahie, but the lower court 
 did wrong in not permitting him to establish the fact and 
 therefore a new trial was granted. 
 
 § 236. Certified check is payment. As the certification is 
 a simple and unconditional obligation to pay on demand, this 
 may be made whenever it suits the convenience of the party 
 entitled to the stipulated payment. " When the business of 
 the bank is properly conducted, it is the duty of the ofiicer 
 certifying the cheek to cause it to be immediately charged as 
 paid, in the account of the drawer, and when this is done the 
 sum thus charged will remain as a deposit in the bank to the 
 credit of the check and be forever withdrawn from the con- 
 trol of the maker except as a holder of the check. Such a 
 deposit stands exactly upon the same ground as every other." 
 N'o negligence, therefore, can be imputed to the holder of 
 such a check in delaying his demand for payment. " The 
 bank, instead of being prejudiced is benefited by the delay 
 of its owner in calling for its payment, and can with no more 
 propriety impute laches to the unknown holder of the cheek 
 than to a known holder of an ordinary deposit. . . There is 
 in reality, in good, sense, no distinction in the nature of the 
 liability created between a certified check and the note of the 
 bank payable on demand. Each is intended to circulate as 
 money, each is an absolute promise to pay a specific sum 
 upon demand, and laches in making the demand is no more 
 imputable in the one case than in the other."' 
 
 (a) Opinion of New York Court of Appeals. " Ordinarily 
 where the payee or holder of a check which is payable imme- 
 diately instead of demanding payment procures the check to 
 be certified, the check is as between the drawer and holder 
 regarded as paid, and the holder must look to the bank whose 
 obligation it has accepted in lieu of the money, because by 
 procuring the certification he has caused an amount of the 
 
 > C. J. Oakley, Willets v. Phoenix Bank, 2 Duer, p. 132 ; Nolau v. Bank, 
 67 Barb. 24 ; Faiquhar v. Southey, 2 Car. & P. 497 ; Dingwall v. Dunster, 
 Doug. 247. 
 
240 BANKS AND THEIR DEPOSITORS. §238 
 
 drawer's fund, or credit, equal to that for which the check 
 was drawn, to be set apart for the payment of that cheek and 
 withdrawn from the control of the drawer, and his funds are 
 as effectually diminished as if the money had been paid; 
 while the bank has given a negotiable obligation to the 
 holder of the check which is equivalent to a certificate of 
 deposit. If the holder -of the certified check should lose it, 
 he would still have his remedy upon it against the bank, but 
 could not have recourse against the drawer whose funds had 
 been thus locked up, or transferred to the credit of another 
 party. And even the subsequent payment of the check by 
 the bank upon a forged indorsement would not relieve it of 
 its liability upon the contract it had made with the true owner 
 nor restore to the drawer the right to draw upon the bank 
 for the funds which had been appropriated to the payment of 
 the check and were consequently no longer his."* 
 
 § 237. Acceptance by deducting amount from drawer's ac- 
 count. Beside accepting a check orally or in writing, this 
 can be accomplished in a third way, namely, by deducting 
 the check from the drawer's account. When this is done 
 the act is regarded as an acceptance.* But when a check 
 has been certified or accepted the holder " can have no greater 
 rights than those of any other depositor."^ 
 
 § 238. Certifying insolvent drawee's check. It is a fraud 
 for a drawer to obtain a certification after he has become in- 
 solvent. Whenever this is done the certifying bank has a 
 
 1 Rapallo, J., Thomson v. Bank, 82 N. Y. 1, p. 6, citing Freund v. Im- 
 porters & Traders' Nat. Bank, 12 Hun, 537, aflf. by 76 N. Y. 352 ; First Nat. 
 Bank v. Leach, 52 Id. 350 ; First Nat. Bank v. Whitman, 94 U. S. 343. " The 
 certification constitutes a new and distinct contract between the holder and 
 certifying bank, which becomes the debtor of and only liable to the holder. 
 The funds of the drawer have in legal contemplation been withdrawn from 
 his credit and appropriated to the payment of the check. He and the indor- 
 ser, if any, are released from all further liability. ; as to them the check is 
 paid," Clopton, J., National Com. Bank v. Miller, 77 Ala. p. 174. 
 
 ^ Seventh Nat. Bank v. Cook, 73 Pa. 483. 
 
 3 Strong, J., Girard Bank v. Bank, 39 Id. p. 99. 
 
§ 239 PAYMENT OF CEHTIFIED CHECKS. 241 
 
 right to reclaim or countermand the payment of the check 
 unless it has been previously transferred to an innocent holder.* 
 
 § 239. Certifying a draft or note. " The certification by a 
 bank of an acceptance made payable at its counter by one of 
 its customers has the same significance and imports the same 
 obligation on the part of the bank as a like certification of a 
 check drawn on it, and has the same legal effect. In one 
 instance it is an admission that the acceptor, and in the other 
 that . the drawer, has money on deposit in the bank with 
 which to pay the paper when presented for payment and the 
 bankwill retain the money on deposit to pay the holder, and will 
 retain the same on deposit subject to the order of the holder."^ 
 The certification is an absolute engagement on the part of the 
 bank and dispenses with protest or steps to charge the indorser 
 as much so as if the owner had actually received the cash on 
 the presentation of the note instead of taking the certificate 
 of the teller that the note is good. And if the teller certifies 
 falsely, but the owner does not know this, and omits to charge 
 an indorser he can recover.* 
 
 (a) Effect of taking it moay. But if the holder of a note pre- 
 sent it when due at the bank where it is made payable, and 
 the maker has enough money on deposit there to pay the 
 same, and the teller certifies that it is "good," this will 
 not change the liability of the parties if the holder take it 
 away, nor release the maker from his liability even though 
 he should lose his deposits by the failure of the bank the 
 next day.* It must be remembered, however, that in Illinois 
 a bank has no right without an explicit direction from its 
 depositor to pay his notes made payable there." 
 
 (6) Whsn certification may be corrected. If by mistake a 
 bank certify a promissory note to be " good" which is payable 
 
 » Bank v. Baxter, 31 Vt. 101. 
 
 = Barker, J., Flour City Nat. Bank v. Traders' Nat. Bank, 35 Hun, p. 244. 
 
 3 Meads v. Merchants' Bank, 25 N. Y. 143. 
 
 ' Wood V. Merchants' Sav., Loan, and Trust Co., 41 111. 267. 
 
 ? § 403, 6. 
 
 16 
 
242 BANKS AND THEIR DEPOSITORS. § 242 
 
 there, it can correct the mistake before any liability has been 
 incurred or loss sustained.* 
 
 § 240. Revocation of bank's action. " While the check is 
 ordinarily executory and revocable, and the drawer may 
 countermand its payment ; when the bank has certified the 
 check, and thereby comes under obligation to the holder to 
 pay it on presentment, the power to revoke ceases as eiFectu- 
 ally as if actual payment had been made. The drawer's 
 authority over the funds on which it is drawn terminates fro 
 tanto.'" 
 
 § 241. When money is due on certified check. Whenever a 
 check is certified the money is due and payable by the certi- 
 fier. Says Judge Peckham : " The bank virtually says, that 
 check is good ; we have the money of the drawer here ready 
 to pay it. We will pay it now if you will receive it. The 
 holder says no, I will not take the money ; you may certify 
 the check and retain the money for me until this check is 
 presented. The law will not permit a check when due, to be 
 thus presented and the money to be left with the bank for 
 the accommodation 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."* 
 
 § 242. Collecting bank should not send check to certifier. 
 A bank or agent in collecting a certified check should not 
 send it to the certifying bank itself for payment. This would 
 put the instrument in, the hands of the party primarily liable 
 and enable him to destroy the evidence of debt and repudiate 
 the transaction. Says Judge Schofield : " Surely it could not 
 be held reasonable care and diligence in an agent holding for 
 
 ' Second Nat. Bank v. Western Nat. Bank, 51 Md. 128. 
 
 2 National Com. Bank v. Miller, 77 Ala. 168, p. 176. 
 
 3 First Nat. Bank v. Leach, 52 N. Y. p. 353 ; Drovers' Nat. Bank v. Anglo- 
 American Pack. & Prov. Co., 117 111. 100. 
 
§ 242 PAYMENT OF CERTIFIED CHECKS. 243 
 
 collection the promissory note given by one individual to 
 another individual to send the promissory note to the maker 
 trusting to him to make payment, delay it, or destroy the evi- 
 dences of indebtedness, and repudiate the transaction, as his 
 conscience might permit."' In another noteworthy case 
 Judge Hopkins said that the duty of the defendant bank, 
 " upon receipt of the check for collection vpas plain. It was 
 to present 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 between 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 opera- 
 tion 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, particularly of the drawers. Before that, the 
 drawers could have stopped payment of the check or with- 
 drawn the funds by other checks. After the certification 
 they had no control over the funds 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 
 possessed the character of a check. If the drawers had takea 
 it up before its certification it would have been useless, but 
 after that they could only get the money by surrendering it. 
 It resembles, after certification, more the certificate of deposit 
 than a check. Ifow, what was the eflect upon the legal 
 rights and liability of the drawers ? Did it not discharge 
 them from all further liability upon the check ?" And the 
 court held that it did. And further, that the defendant 
 should make good the loss.* 
 
 1 Drovers' Nat. Bank v. Anglo-American Pack. & Prov. Co., 117 111. 100. 
 
 2 Essex Co. Nat. Bank v. Bank of Montreal, U. S. Cir. Ct., 15 Am. Law 
 Eeg., N. S., 418. 
 
244 BANKS AND THEIR DEPOSITOES. § 244 
 
 § 243. If no loss no recovery. A person cannot recover on 
 a certified check unless a loss has been sustained from receiv- 
 ing it. Thus C, W. & Co. were depositors with the Louisi- 
 ana State Bank and drew a check thereon for $5000 which 
 was cashed. Some of the deposits made by the firm con- 
 sisted of good money, but the principal portion consisted of 
 forged checks deposited on the day the above-mentioned check 
 was paid. Later in the same day the firm presented another 
 check for $10,000 for payment. This the bank declined to 
 pay until those previously deposited were certified. Shortly 
 afterward the Hibernia Bank on which they were drawn did 
 certify them. Had the firm called after this the money 
 would have been paid on the $10,000 cheek, but they 
 absconded, knowing that their forgeries would soon be 
 discovered. The Louisiana State Bank then sued the other 
 for their loss, but as it had not been occasioned by receiving 
 the certified checks it could not recover.' 
 
 § 244. Certified check altered by drawer. If a bank certify 
 a check as good, which is payable to the order of a certain 
 payee, and subsequently it is altered by the drawer and made 
 payable to bearer, and thus altered is paid by the bank to an 
 unknown person before the original payee is advised of the 
 certification and before any third person has acquired an in- 
 terest therein, the bank cannot be held for any loss that may 
 happen from paying the check springing from an agreement 
 between the several parties and to which the bank was not 
 privy.* 
 
 > Louisiana State Bans v. Hibernia Bank, 26 La, Ann. 399. 
 ! Abrams v. Union Nat. Bank, 31 Id. 61. 
 
§ 246 PAYMENT OF CERTIFICATES OF DEPOSIT. 245 
 
 CHAPTER Vin. 
 
 PAYMENT OF CEKTIFICATES OF DEPOSIT. 
 
 § 245. Bank liable to bona fide holder. Banks frequently 
 give certificates of deposit to persons who leave money with 
 them. " When they do this," says Judge Learned, " and 
 when they make the certificate payable on its return, properly 
 indorsed, they have then added to their original undertaking 
 as a depository an agreement that they will pay the deposit to 
 the holder of that certificate properly indorsed. . . It follows, 
 therefore, that they are liable to a bonajide holder of the cer- 
 tificate, notwithstanding a payment to the original depositor."* 
 
 § 246. Certificate described. The best mode of describing 
 a certificate is perhaps to give the form of one. The follow- 
 ing certificate of deposit, which occasioned litigation in Mas- 
 sachusetts, is more generally used than any other: "The 
 Pacific IJfational Bank of Boston, Mass., $1000, Boston, May 
 18, 1881. This certifies that Wm. H. Ifichols has deposited 
 in this bank one thousand dollars, payable to the order of 
 himself on. return of this certificate properly indorsed. J. 
 M. Pettingill, Cashier. No. 1807." Many variations of this 
 form occur. These consist chiefly in adding words relating 
 to interest, and also to the time when the deposit is to be 
 paid, instead of payment on demand. In one case the ques- 
 tion was whether the following instrument, given by a firm 
 of brokers who received deposits on demand, was a certificate : 
 " Due A. Ashton, trustee, $4000, returnable on demand. It 
 is understood that this sum is specially deposited with us 
 and is distinct from the other transactions with said Ashton." 
 This instrument was regarded a certificate of deposit.'' In 
 
 • National Bank v. Washington Co. Nat. Bank, 5 Han, 605. 
 
 * Smiley v. Fry, 100 N. Y. 262 ; Aff. 49 N. Y. Sup. Ct. 134. 
 
246 BANKS AND THEIR DEPOSITORS. § 246 
 
 another case L., on making a deposit with a banker, was 
 handed the following instrument: "Received from L. six- 
 teen hundred dollars on deposit, in national currency." 
 When L. sued to recover his money, more than six years 
 after depositing it, the hanker defended on the ground that 
 the instrument was not a certificate of deposit or contract in 
 writing, and consequently that the suit was barred by the 
 Statute of Limitations. But the court thought otherwise. 
 Judge Elliott said that the instrument was a written contract 
 which was to be given legal efiect, and to do this the court 
 must consider it as embodying all the legal obligations to be 
 implied from its language. These were a part of the written 
 contract. The law imported into it did not create an inde- 
 pendent agreement, but made the instrument express the full 
 agreement of the parties. All the words found in a con- 
 tract are to have a meaning attributed to them, and are not 
 to be thrust aside. We cannot, therefore, disregard the words 
 herein, " on deposit, in national currency." We know that the 
 words "national currency" denote money, and we know, there- 
 fore, that those. words, taken in connection with the words "on 
 deposit," mean that the defendant had received a deposit in 
 money from the plaintiflF. We know also that the law as a 
 factor is an essential- part of the contract, and it seems very 
 plain to us that the express agreement of the parties, consid- 
 ered in conjunction with this factor, imports a contract to 
 repay the deposit on demand. Suppose the defendant had 
 attempted to show by parol, that he was not to repay the 
 money, would not that attempt have been defeated by the 
 proposition that such a contract cannot be varied by parol 
 evidence ? Of this there can be no doubt. If the defendant 
 had inserted in the contract the words, " we promise to pay 
 back the depositor his money," the legal force and effect of 
 the contract would not have been increased, for the law im- 
 plies that this return was intended,' 
 
 1 Long V. Straus, 107 Ind. 94, 
 
§ 247 PAYMENT OP CERTIFICATES OF DEPOSIT. 247 
 
 § 247. Is certificate a promissory note, (a) Negative view. 
 Is a certificate of deposit a receipt for money, or a promissory 
 note? Judge Colburn, of Massachusetts, has said that a 
 certificate, similar to the one described, is not merely a pro- 
 mise to pay a certain sum, but it declares that a certain fund 
 has been deposited which is payable to the depositor, or his 
 order, on the return of the certificate properly indorsed. "A 
 promissory note, payable on demand, is due as soon as it is 
 given ; &.n action may be brought upon it immediately with- 
 out demand, and the Statute of Limitations begins to run 
 against it from its date.^ A certificate of deposit is not due 
 until a demand is made and the certificate returned or ten- 
 dered.^ Such certificates are issued with the design that they 
 shall be used as money, and taken with as much confidence 
 as the bills of the bank, and to avoid the risk and inconveni- 
 ence of keeping, carrying, and counting sums of money, and 
 are so regarded in mercantile aftairs."' Finally, the Judge' 
 added : " Such certificates are not commonly known in the 
 community as promissory notes."* In Pennsylvania the same 
 view has long been maintained,* and, consequently, as they 
 are not negotiable, a holder to whom one may be indorsed 
 subsequent to the service of an attachment on the bank hav- 
 ing the money cannot hold the amount against the attaching 
 creditor.' 
 
 (b) Affirmative view. On the other hand. Chief Justice 
 Ryan, of the Supreme Court of Wisconsin, after quoting 
 Story's definition of a promissory note, says : " The ordinary 
 form of a certificate of deposit of money falls precisely within 
 
 1 T'ield V. Nickerson, 13 Mass. 131 ; Newman <,-. Kettelle, 13 Pick. 418 ; 
 Burnham v. Allen, 1 Gray, 496. 
 
 2 Bellows Falls Bank v. Rntland County Bank, 40 Vt. 377 ; Miinger v. 
 Albany City Nat. Bank, 85 N. Y. 580. 
 
 3 Merchants' Bank v. State Bank, 10 Wall. 604, p. 648. 
 * Shute V. Pacific Nat. Bank, 136 Mass. p. 488. 
 
 6 Patterson v. Poindexter, 6 Watts & Serg. 227 ; Charnley v. Dulles, 8 Id. 
 353 ; Gillespie v. Mather, 10 Pa. 28 ; Lebanon Bank v. Morgan, 28 Id. 462. 
 B Lebanon Bank v. Morgan, supra. 
 
348 BANKS AND THEIR DEPOSITORS. § 247 
 
 the definition, and it seems strange that there ever was a 
 doubt that it was in law a negotiable promissory note.* Such 
 doubt, however, may now be considered at rest,"^ The Su- 
 preme Courts of Michigan, Minnesota, Iowa, iN'orth Carolina, 
 Georgia, Illinois, Vermont, and other States, maintain this 
 view.* 
 
 (c) Opinion of New York Court of Appeals. The opinion of 
 the l^Tew York Court of Appeals may be briefly reviewed. 
 An action was brought on the certificate of a savings bank 
 to recover a sum of money payable to the order of the plain- 
 tiff in current bank-notes on the return of the certificate with 
 interest, and indorsed by the defendant. It was conceded 
 that unless the instrument was negotiable by indorsement, 
 the plaintiff could not maintain his action against the indorser. 
 " It is laid down in Parsons on Bills,"^ said Judge Miller, 
 " that a certificate of deposit in the usual form possesses all 
 the requisites of a negotiable promissory note, and that such 
 is the prevailing opinion. In Miller v. Austen* this very 
 question was distinctly presented, and the same principle was 
 upheld. Catron, J., who delivered the opinion of the court, 
 says, ' The established doctrine is that a promise to deliver or 
 to be accountable for so much money is a good bill or note. 
 . . Every reason exists why the indorser of this paper should 
 be held responsible to his indorsee that can prevail in cases 
 where the paper indorsed is in the ordinary form of a promis- 
 sory note. . . Every reason exists why the indorser of this 
 
 1 O'Neill u. Bradford, 1 Finn. 390, and cases there cited. Some points in 
 this case were questioned in Ford v. Mitchell, 15 Wis. 304. 
 
 2 Klauber v. Biggerstaflf, 47 Wis. p. 555 ; Kilgore v. Balkley, 14 Conn. 362 ; 
 Bank ». Merrill, 2 Hill, 295 ; Miller v. Austen, 13 Hovr. 218. 
 
 3 Trip V. Curtenius, 36 Mich. 494 ; Gate v. Patterson, 25 Id. 191 ; National 
 State Bank v. Ringel, 51 Ind. 393 ; Drake v. Markle, 21 Id. 433 ; Gregg c. 
 Union Co. Nat. Bank, 87 Id. 238 ; Brown v. McElroy, 52 Id. 404 ; Carey v. Mc- 
 Dougald, 7 Ga. 84 ; Lowe v. Murphy, 9 Id. 338 ; Talladega Ins. Co. v. Wood- 
 ward, 44 Ala. 287, p. 289 ; Loughlin v. Marshall, 19 111. 390 ; Bank v. Farns- 
 worth, 18 Id. 563 ; Bean i. Briggs, 1 Iowa, 488; Welton v. Adams & Co., 4 
 Cal. 37. 
 
 * Vol. i. p. 26. 5 13 Ho^.^ u. S. 218, p. 228, 
 
§ 247 PAYMENT OF CKRTIFICATES OF DEPOSIT. 249 
 
 paper should be held responsible to his indorsees that can 
 prevail in cases where the pap^r indorsed is in the ordinary 
 form of a promissory note, and as such note, the State courts 
 have generally treated certificates of deposit payable to order, 
 and the principle adopted by the State courts in coming to 
 this conclusion is fully maintained by the writers of treatises 
 on bills and notes.' In this State we are not without au- 
 thority upon the subject, and in Bank of Orleans v, Merrill,* 
 where the action was upon a certificate of deposit, it was said 
 that the instrument in question was in efiect a promissory 
 note. . . In Barnes v. Ontario Bank^ the action was brought to 
 recover the amount of a certificate of deposit, and it was held 
 that a honafide holder could recover against the bank, although 
 the cashier had put it in circulation with the fraudulent de- 
 sign of diverting the funds of the bank, and that the indorser 
 was also liable upon said certificate. In the opinion by Com- 
 stock, J., it was said in reference to an instrument of this 
 kindj 'A certificate is a promissory note.' And in the 
 opinion of Allen, J., ' the certificate was a negotiable instru- 
 ment.' This case is directly in point, and, I think, settles the 
 question in this State. "^ 
 
 {d) Hotehkiss v. Mosher.* Although in New York a certifi- 
 cate is regarded as a promissory note, in this case the cer- 
 tificate given to the depositor was declared to be simply an 
 acknowledgment of money. The word " certify," remarked 
 the court, added "no additional force to the instrument 
 as purporting a contract." The facts were that H. paid the 
 amount of certain notes which he had guaranteed to M., a 
 banker, for the purposes of fulfilling his engagement. As a 
 voucher of the transaction, M. delivered to him a certificate 
 of deposit for the amount. In an action for converting them 
 
 1 2 Hill, 295. * 19 N. Y. 152. 
 
 ^ Pardee v. Fish, 60 Id., p. 268. A certificate of deposit in the usual form 
 with additional words agreeing to pay interest is a negotiable instrument, 
 Munger v. Albany City Nat. Bank, 85 Id. p. 587. Whether a clearing house 
 due bill is a certificate, see § 420. 
 
 * 48 N. Y. 478. 
 
250 BANKS AND THEIR DEPOSITORS. § 247 
 
 — having been left with M. for collection — it was decided 
 that the certificate was a voucher, and that the plaintiiF had 
 paid the money for the notes. 
 
 (e) Coleman's case^ is more instructive. He handed a sum 
 of money to the bank teller over the counter, stating that he 
 desired to leave it on deposit with the bank. The teller gave 
 him a certificate, which was in form an acknowledgment that 
 C. had deposited the money with Van C, and contained a 
 personal obligation on the part of the latter to repay the 
 amount. Van C. was the bank's president, the certificate 
 was signed by him, and not in his oflicial capacity. The 
 bank was not named in the certificate, and there was nothing 
 on its face indicating that the deposit was with the bank, or 
 that it assumed any obligation in regard to the money. C. 
 did not read the certificate when he received it. In an action 
 to recover the amount of the deposit, the defence was that 
 the certificate was a written contract by which alone Cole- 
 man's right could be determined, and that parol proof of 
 making the deposit with the bank could not be admitted. 
 " But," said Judge Andrews, " assuming that the certificate 
 signed by Van Campeu when accepted by the plaintiff be- 
 came a written contract between them, parol evidence that 
 the bank received the money as a deposit did not contradict 
 any written agreement between the bank and the plaintiff", 
 for they had made none. The real issue on the trial was 
 whether the bank or Van Campen was the depositary. Un- 
 explained, the fact that the plaintiff" accepted the certificate 
 of Van Campen was strong, if not conclusive evidence that 
 the bank was not a party to the transaction ; but it was evi- 
 dence only, and was subject to explanation by parol proof. . . 
 If the plaintiff had examined the certificate he would have 
 been apprised of the fact that it purported to be the individual 
 obligation of Van Campen. But he did not do so. He had 
 a right to suppose that it was the proper acknowledgment of 
 
 • Coleman v. First Nat. Bank, 53 N. Y. 388 ; West v. First Nat. Bank, 20 
 Hun, 408 ; Bowman v. Bank, 7 Alb. L. J. 170. 
 
I 248 PAYMENT OF CERTIFICATES OF DEPOSIT. 261 
 
 the bank with which the money was deposited. The doctrine 
 of constructive notice, from the possession of the certificate, 
 wduld be misapplied if, in this case, it should be held to 
 exempt the bank from liability." 
 
 (/) Criticism of eases. That justice was wrought in these 
 cases, no one will question ; but wherever a certificate is re- 
 garded as a promissory note, how can such evidence be 
 admitted without violating the general rule that parol evi- 
 dence is inadmissible to explain, vary, or contradict the terms 
 of the written contract? "We think the Supreme Court of 
 Indiana has been more consistent in holding that a certificate 
 of deposit is a contract, and that no parol evidence of a pi'c- 
 vious or concurrent agreement is admissible to contradict or 
 vary the legal effect of the certificate.' 
 
 Not only is the decision in Hotchkiss v. Mosher in conflict 
 with this view, but is also, said the Indiana court, " with 
 the cases in K"ew York and elsewhere, and cannot be accepted 
 as the law. The case is not a well-considered one, for no 
 authorities are cited in support of the conclusion announced. 
 It is held by many courts, including our own, that an order 
 for property, accompanied by a direction to change its value 
 to an owner, is a written contract containing the promise to 
 pay its value.' The principle which those cases declare is 
 the same as that here involved, for the principle on which 
 they proceed is that the law imports into the order a promise 
 to pay ; and that is true of such an instrument as the one 
 now before us." Evidence, however, may be introduced in an 
 action on a certificate, not to reform or contradict it, but to 
 establish a subsequent arrangement between the parties.* 
 
 § 248. Liability without deposit. A bank is liable for a 
 
 1 Long V. Straus, 107 Ind. 94. 
 
 2 Garmire v. State, 104 Id. 444 ; United States v. Book, 2 Cranoh, C. C. 
 294; United States v. Brown, 3 Id. 268 ; State v. Morgan, 35 La. Ann. 293 ; 
 State V. Ferguson, Id. 1042 ; Anderson v. State, 65 Ala. 553 ; Burke v. State, 
 66 Ga. 157 ; Peete u. State, 2 Lea, 513 ; State v. Keeter, 80 N. C. 472 ; People 
 V. Shaw, 5 Johns. 236 ; Commonwealth v. Fisher, 17 Mass. 46. 
 
 3 Woods V. Russell, Pa. Sup. Ct., 2 Eastern Rep. 638. 
 
252 BANKS AND THEIR DEPOSITORS. § 250 
 
 certificate of deposit signed by its cashier even though no 
 deposit has been made.' In a case of this kind the certificate 
 was made by the cashier for the purpose of raising money, 
 and was delivered to an agent to sell. He did sell it, the 
 buyer agreeing not to present it for thirty days. The bank, 
 therefore, received money for it though not fi-om the per- 
 son to whom it was given. 
 
 (a) Not liable if made with officer instead of com-pany. If, 
 however, the deposit be made with the officer of a company 
 and not with the company itself, the depositor cannot recover 
 against the latter. Thus, when M. deposited with the agent 
 of a banking association four hundred and thirty dollars in 
 tickets, to him only, and on the return of the certificate, the 
 association was not liable.* 
 
 § 249. Cannot question ownersMp. If the certificate be 
 ifjsued to an unincorporated association, as to the " Ladies' 
 Congregational Sewing Society," the bank cannot question 
 the right of the association to maintain an action thereon.* 
 
 § 250. Negotiability, (a) New York view. In the orderly 
 unfolding of the subject, we may next inquire whether a cer- 
 tificate of deposit is negotiable in the usual manner by 
 indorsement. Yes, if having the negotiable words usually 
 found in instruments of that nature.^ Of these requirements 
 one is that the promise to pay shall be money. Many certifi- 
 cates, however, are not expressed in that way, but, " in cur- 
 rent funds," and in such cases the question is. Are the words 
 an equivalent expression ? They are declai-ed to be in New 
 York. In Pardee v. Fish,* the negotiability of the certificate 
 
 I Barnes v. Ontario Bank, 19 N. Y. 152. 
 
 " Lake v. Munford, 4 Sm. & M. 312 ; First Nat. Bank v. Williams, 100 Pa. 
 123. 
 
 3 Bank v. Sewing Society, 28 Kansas, 423, citing Esley v. The People, 23 
 Id. 510. 
 
 * Finer v. Clary, 17 B. Mon. (Ky.) 645. A certificate of deposit issued by a 
 banker of another State and indorsed by the payee in Kentucky assumes in 
 the latter State the character of a foreign bill, Id. p. 663. 
 
 5 60 N. Y. 265. 
 
§ 250 PAYMENT OF CERTIFICATES OF DEPOSIT. 253 
 
 was disputed because it was payable in current bank notes 
 instead of money. -But Judge Miller said : " The authorities 
 in this State, I think, are adverse to this position. In Keith 
 V, Jones,' the note upon which the action was brought was 
 declared to be payable ip ' New York State bills or specie,' 
 a,nd it was said that it is the same thing as being made pay- 
 able in lawful current money of the State, for the bills men- 
 tioned mean bank paper, which is here, in conformity with 
 common usages and common understanding regarded as 
 cash.' In Judah v. Harris,' a promissory note, payable ' in 
 bank notes current in the city of New York,' was held to be 
 a negotiable note within the statute. It is said that these 
 decisions were placed upon the ground that the Court could 
 take judicial notice that such bills are equivalent to specie. 
 The same rule may well apply here, as ' current bank notes' 
 are notes or bills used in general circulation as money, and 
 constituted the general currency of the country, recognized 
 by law at the time and place where payment was to be made 
 and demanded. These notes, which were in circulation when 
 the certificate was given and payment demanded, were almost 
 of one kind and authorized by the government as currency. 
 They thus being lawful money of the United States, the 
 court were bound to take judicial notice of that fact."' 
 
 (b) Use of "currency." The word " currency" will suffice 
 in Wisconsin,* though it would not formerly,' and also in In- 
 diana.^ But if the depositor is to be paid " in current funds" 
 the certificate is not negotiable in Indiana,' nor in IsTorth 
 
 > 9 Johns. 120. ' 19 Id. 144. 
 
 » The oases of Lieher v. Goodrich, 5 Cow. 186, and. Thompson v. Sloan, 23 
 Wend. 71, were declared to be not in conflict with Keith v. Jones, and Judah 
 «. Harris. 
 
 * Klauber v. Biggerstaff, 47 Wis. 551, 
 
 6 Ford V. Mitchell. 15 Id. 304 ; Piatt v. Sauk Co. Bank, 17 Id. 222; Lind- 
 sey V. McClelland, 18 Id. 481. 
 
 6 Drake v. Markle, 21 Ind. 433. 
 
 ' National State Bank v. Ringel, 51 Id. 393 ; Conwell v. Pumphrey, 9 Id. 
 135. 
 
254 BANKS AND THEIR DEPOSITOES. § 250 
 
 Carolina,' nor in Pennsylvania.* It is negotiable, though, in 
 Tennessee.^ 
 
 (c) Assignable if not negotiable. While a certificate thus 
 payable is not negotiable in Indiana, like an inland bill of 
 exchange, it is assignable there. One result flowing from 
 this principle in that State is that the payee can recover the 
 amount when the certificate is stolen, on adequate proof of 
 the theft, without giving the bank a bond of indemnity 
 against a subsequent claim by another person.^ 
 
 (d) Effect of indorsement. Formerly a certificate in Wis- 
 consin was not negotiable, and consequently a payee who 
 transferred it by indorsement was not liable thereon,* but 
 this is no longer the law.® In lyiinnesota, however, an in- 
 dorsement of a certificate is nothing more than an assignment 
 of the beneficial interest therein. " The law relating to the 
 liability of indorsers of commercial paper is inapplicable to 
 the parties to such contracts."' This is not the rule prevail- 
 
 • Johnson v. Henderson, 76 N. Car. 227. 
 
 2 MoCormick v. Trotter, 10 Serg. & Kaw. 94 ; Wharton v. Morris, 1 Call. 
 125. 
 
 ^ Simpson v. Moulden, 3 Cold. 429 ; see Kirkpatrick i;. McCullough, 3 
 Humph. 171 ; Whelau v. Childress, 7 Id. 303. 
 
 * National State Bank v. Ringel, 51 Ind. 393. 
 
 6 O'Neill V. Bradford, 1 Finn. 390. « Ford v. Mitchell, 15 Wis. 304. 
 
 ' Easton v. Hyde, 13 Minn. 90. In this case a " certificate of deposit," 
 heginiiing with the words quoted continued thus : " Chicago, July 14, 1864. 
 Hyde and Broughton have deposited in this ofSce five hundred and thirty-five 
 and 75-100 dollars in treasury notes to the credit of themselves, and 
 payable to their order hereon in United States six per cent, interest-bearing 
 bonds." This was held to be not a, promissory note, but a contract to 
 deliver United States bonds of the nominal value of $535.75. See Smith v. 
 Dunlap, 12 111. 184 ; Anderson v. Ewing, 3 Littell, 245 ; Phelps v. Riley, 3 
 Conn. 266 ; Robinson u. Noble, 8 Peters, 181. 
 
 A certificate of deposit for $1150 to draw interest if left for thirty days and 
 payable on return of the certificate properly indorsed, is a good promissory 
 note, Cuyahoga Steam Furnace Co. v. Lewis, Cuyahoga District Ct. Ohio, 
 Cent. Law Rec. IS. 
 
 A certificate of deposit of money in bank payable to the order of the depos- 
 itor with interest at a future day on return thereof is not negotiable so as to 
 charge the indorser, Austin v. Miller, Superior Ct. Hamilton Co., Ohio, 4 
 West. Law Jour. 527. 
 
§ 251 PAYMENT OP CERTIFICATES OF BEPOSIT. 255 
 
 ing in most of the States. And the transfer of a certificate by 
 delivery without indorsement is a valid assignment and effect- 
 ually passes the property therein if this be intended.' 
 
 § 251. Their use as money. When the question was first 
 answered by the courts whether certificates of deposit were 
 promissory notes, it was asserted that they were used by some 
 of the banks as currency and consequently were forbidden by 
 law. Thus a certificate which was given by a New Yoi'k bank 
 payable to a person six months after date, with interest, was con- 
 sidered a promissory note, and its issue was held to be illegal by 
 law of that State ;^ and also in Illinois;' nor was their illegality 
 cured by circulation among innocent holders.* At a later 
 period it was declared more broadly that certificates of deposit 
 payable at a future day were promissory notes, and consequently 
 could not be legally issued." Likewise certificates of deposit 
 which were issued as loans, irredeemable within twenty years 
 and bearing interest, were declared to be a violation of the 
 issuer's charter, which forbade the issuing of notes or other 
 evidences of debt upon loan or for circulation as money.* 
 But the issue of negotiable certificates of deposit for large 
 amounts payable with interest at a distant day and in a for- 
 eign country, were not considered a violation of the statute 
 forbidding the issue of certificates for circulation as money. 
 It was said that " the large amount of each certificate, the 
 distant day at which they were payable, the fact that they 
 bore interest and were payable in foreign money and in a for- 
 eign country would entirely prevent them filling the place of 
 currency."' Even when the "charter of a company prohib- 
 
 ' Shanklin v. Commissioners of Madison County, 21 Ohio St. 675. 
 
 2 Bank of Orleans v. Merrill, 2 Hill, 295 ; Smith v. Strong, Id. 241 ; Safford 
 V. Wyckoff, 1 Id. 11. 
 
 3 Bank of Peru v. Farnsworth, 18 111. 563. 
 
 * Bank of Chillioothe v. Dodge, 8 Barb. 233. 
 
 5 Leavitt v. Palmer, 3 N. Y. 19 ; Southern Loan Co. v. Morris, 2 Pa. 175 ; 
 see Craig v. State of Missouri, 4 Peters, p. 433 ; Ontario Bank v. Sohermerhorn, 
 10 Paige, 109. 
 
 6 New York Life Ins. & Trust Co. v. Beebe, 7 N. Y. 364. 
 
 » Sohermerhorn v. Talman, 14 N. Y. 93 ; Curtis v. Leavitt, 17 Barb. 309. 
 
256 BANKS AND THEIR DEPOSITORS. § 253 
 
 ited it from issuing for circulation as money . . certificates 
 of deposit payable to bearer," it was decided that the issuing 
 of certificates of deposit, which were not intended to circu- 
 late as money, was not a violation of the instrument.' 
 
 § 252. Issue not forbidden by national banking law. IN'or is 
 the issue by a national bank of a certificate of deposit, simi- 
 lar to that described, a violation of the national statute, which 
 forbids these institutions from issuing other notes to circulate 
 as money beside those in general use. " If," says Judge Col- 
 burn, " the United States Revised Statutes forbade the issue of 
 any other notes whatever than such as were therein authorized 
 it would be diflicult to hold this certificate to be legal.* But, 
 assuming that it might fall within the general designation of 
 a note, it cannot be considered as a note intended to circulate 
 as money within the meaning of the statute. It requires to 
 be indorsed. It was understood not to be payable till a cer- 
 tain future date. It is not in a sum adapted for general cir- 
 culation as money. The form of the instrument, and the 
 incidents above mentioned, show that it was not intended to 
 circulate as money between individuals and between govern- 
 ment and individuals for the ordinary purposes of society."* 
 Nor is such a certificate a promissory note within the mean- 
 ing of a statute of Massachusetts, which provides that in an 
 action by an indorsee against the promissor on a promissory 
 note, payable on demand, any matter shall be deemed a legal 
 defence which would be a defence to a suit thereon if brought 
 by the promisee. Hence in an action by the indorsee to recover 
 the amount of the certificate the bank cannot set off a debt 
 due from the original depositor.* 
 
 § 253. Nor by New York banking law. N"or is a certificate 
 to the credit of the depositor payable on return thereof, pro- 
 
 1 Mumford ». American Life Ins. & Trust Co., 4 N. Y. 463. 
 
 « Miller v. Austen, 13 How. 218. 
 
 3 Hunt, appellant, 141 Mass. 515 ; Riddle v. First Nat. Bank, 27 Fed. Rep. 
 503. A bank certificate of deposit is not money or its equivalent, Dougherty 
 V. Hughes, 3 Greene, Iowa, 92. 
 
 * Shute V. Pacific Nat. Bank, 136 Mass. 487. 
 
§ 25'4 PAYMENT OF CERTIFICATES OF DEPOSIT. 257 
 
 perly indorsed " with interest 5 per cent, on demand, or 6 per 
 cent, if not called for in one year," contrary to the statute, 
 ■which declares that " no banking association or individual 
 banker, as such, shall issue or put in circulation any bill or 
 note of said association or individual banker, unless the same 
 shall be made payable on demand, and without interest. "^ 
 
 § 254, How affected by statute of limitations. In many 
 States a certificate is a continuing security, and no action can 
 be maintained thereon, or the Statute of Limitations be put 
 into operation against it until after making a demand for 
 payment.^ This is an exception to the rule concerning pro- 
 missory notes payable on demand.^ A bank which was sued 
 by the holder of a certificate of deposit defended on the 
 ground that as the certificate was payable forthwith, and 
 nothing had been heard of it for more than seven years, it 
 was presumed to be dishonored, and was, therefore, taken by 
 the assignee subject to all equities. But the court thought 
 otherwise. " The very nature of the instrument and the 
 ordinary modes of business show that a certificate of deposit, 
 like a deposit credited in a pass-book, is intended to represent 
 moneys actually left with the bank for safe keeping, which 
 are to be retained until the depositor actually demands them. 
 Such a certificate is not dishonored until presented."* But in 
 Indiana, the indorsee of a bank's certificate of deposit, not 
 hearing interest, who received it moi-e than six years after it 
 had been paid and should have been surrendered, took it as 
 dishonored paper and not as a continuing negotiable security, 
 
 ' Pelham v. Adams, 17 Barb. 384. 
 
 2 Hunger V. Albany City Nat. Bank, 85 N. Y. p. 587 ; Payne v. Gardiner, 29 
 Id. 146 ; Howell v. Adams, 68 Id. 314 ; Boughton v. Flint, 74 Id. 476 ; Pardee v. 
 Fish, 60 Id. 265 ; Bellows Falls Bank v. Rutland Co. Bank, 40 Vt. 377 ; 
 Brown u. McElroy, 52 Ind. 404 ; MoGougli v. Jamison, 107 Pa. 336 ; Fink- 
 bone's Appeal, 86 Id. 368. 
 
 3 Brown v. McElroy, 52 Ind. 404 ; Pardee v. Fish, 60 N. Y. 265. 
 
 * National Bank v. Washington Co. Nat. Bjink, 5 Hun, p. 607. When a 
 stockholder is liable for the default of a bank, the owner of a certificate of 
 deposit may sue him therefor without first making a demand of the bank, 
 Hodgson V. Cheever, 8 Mo. App. 318. 
 
 17 
 
258 BANKS AND THEIB DEPOSITORS. § 254 
 
 and could not enforce its second payment by the bank after 
 such unreasonable delay.' Such a certificate is to be regarded 
 as a promissory note, and if negotiable, must be regarded as 
 paper dishonored by lapse of time when it was negotiated.^ 
 
 {a) Varying effect among States. While the above rule with 
 respect to the need of making a demand before beginning an 
 action, or setting the Statute of Limitations in motion pre- 
 vails widely, it does not prevail evei-ywhere. Thus in Georgia 
 a bank certificate of deposit payable to the order of the de- 
 positor, but indicating no time of payment except as can be 
 inferred from the words " interest at the rate of 7 per cent, 
 on call, and 10 per cent, per annum," is payable on demand, 
 and therefore due immediately, and, consequently, bona fid.e 
 holders are aifected with the equities existing between persons 
 having it prior to themselves.^ The same view is maintained 
 in California* and in Michigan. The Supreme Court in the 
 latter State said : " In Brummagim v. Tallant,* it was held 
 that the Statute of Limitations begins to run against a bank- 
 er's certificate of deposit, payable on demand from the date 
 of the same, and that no special demand is necessary to put 
 the statute in motion. . . We think this is the safer and better 
 doctrine, and is correct in principle. To hold such instruments 
 to be in legal effect promissory notes payable on demand, and 
 yet not apply the principles applicable to demand promissory 
 notes, either because of the peculiar form of the instrument, or 
 because issued by a firm engaged in the business of banking, 
 would be to create a distinction unsound in principle and one 
 not warranted by any reason or necessity that we can discover.'"* 
 But in a later case the court said that if " the question were 
 an open one" in that State, they should be inclined to think 
 that such a certificate did not become due until payment was 
 demanded, as the courts in N^ew York and Vermont had held.'^ 
 
 > Gregg w. Union Co. Nat. Bank, 87 Ind. 238. a Id. 
 
 » Meador ». Dollar Sav. Bank, 56 Ga. 605. 
 
 ' 29 Cal. 503. Id. 
 
 ' Tripp V. Curtenius, 36 Mich. 494. 
 
 ' Birch V. Fisher, 61 Id. p. 39. See § 269. 
 
I 2oQ PAYMENT OF CERTIFICATES OF DEPOSIT. '259 
 
 § 255. When negotiable, transferable like note, Where cer- 
 tificates are negotiable when expressed in negotiable words, 
 their transfer is governed by the same rules which control 
 promissory notes, and the liability of the indorser is the same 
 as the indorser of a note. Hence, he is liable until actual 
 demand is made, nor is the holder chargeable with neglect for 
 omitting to make such a demand within any particular tirae.^ 
 This is in harmony with the principle which is applied to a 
 promissory note payable on demand with interest, and in- 
 dorsed ; in the words of Chief Justice Corastock, it " is 
 regarded as a continuing security ; so that, on the one side, 
 the maker is not deemed in default until the money is act- 
 ually demanded, while on the other the holder may make the 
 demand when he pleases and is not chargeable with neglect if 
 he does not make it within any particular time."^ But there 
 is another rule that the holder of such a note, if he wishes 
 to charge the indorser, must make his demand of the maker 
 without delay, or, in the language of the law merchant, 
 within a reasonable time. There is much conflict of authority 
 on this question, but the rule first given is the most widely 
 adopted. This rule was applied in the following case: A 
 certificate, dated May 11th, was transferred to P. June 5th, 
 the bank that gave it was adjudged a bankrupt on September 
 12th, and P. presented it for payment December 21st. In an 
 action against P., as indorser, it was held that if neglect to 
 make a demand within a reasonable time was a defence, there 
 was, under the circumstances, no such laches as would pre- 
 vent a recovery.* 
 
 § 256. Effect on ownership by delivery to mail. If the owner 
 of a certificate after indorsing the same to another should 
 send it to him by mail, but without his knowledge, he would 
 retain the ownership until received by the indorsee.* But if 
 through lack of ordinary business caution it should pass 
 beyond his control, any one who, within a reasonable time, 
 
 1 Pardee v. Fish, 60 N. Y. 265. ' Merritt v. Todd, 23 N. Y. 28, p. 29. 
 
 3 Pardee v. Fish, 60 N.Y . 265. * Talbot v. Bank, 1 Hill, 295. 
 
260 BANKS AND THEIR DEPOSITORS. § 259 
 
 might purchase it for value and without notice of defects or 
 equities, would be entitled to protection.' The question of 
 good faith in such a case is for the jury to decide. The lapse 
 of thirty-one days from the date of a certificate of deposit 
 does not raise the presumption that the paper is dishonored, 
 even though it be due at its date.* 
 
 § 257. Pledge of non-negotiable certificate. If a non-nego- 
 tiable certificate is indorsed in blank by the payee and deliv- 
 erable to the holder, he can pledge it to an innocent party 
 without reference to the equities between himself and the 
 payee. The pledgee is authorized to infer absolute ownership 
 and full right in the holder to pledge, but as against the 
 true owner his recovery will be limited to the amount of 
 the loan.^ 
 
 § 258. Personal transfer by cashier. A certificate of deposit 
 to " S. B. Knapp, cashier," may be transferred by him, al- 
 though the funds deposited belong to the bank. And when 
 they are transferred, even in bad faith, though to an innocent 
 holder, he will hold them against the bank.* 
 
 § 259. Grace and interest. In some places it is the custom 
 of banks to regard certificates of deposits issued by them as 
 payable without grace. This custom is valid, and though a 
 certificate in one case was in fact negotiable and entitled to 
 
 ' The indorsee of a negotiable certificate of deposit having sued the maker, 
 the latter denied that the plaintiff was the holder in good faith and for a val- 
 uable consideration. It appeared that the plaintiff's iudorser was indebted to 
 him and remitted the certificate with instructions to apply it to his credit when 
 collected. The court, therefore, held that the plaintiff was a collecting agent for 
 the indorsee and not a bona fide holder without notice, and that the certificate 
 was subject to the equities existing between the maker and indorser, John- 
 son V. Barney, 1 Iowa, hZX. 
 
 2 Birch V. Fisher, 51 Mich. 36. 
 
 ' International Bank v. German Bank, 71 Mo. 183 (rev. 3 Mo. App. 362), 
 citing Kortright v. Buffalo Com. Bank, 22 Wend. 348 ; Aff. 20 Id. 93 ; 
 McNeil V. Tenth Nat. Bank, 46 N. Y. 325 ; Moore v. Metropolitan Nat. Bank, 
 55 Id. 41 ; Weirick v. Mahoning Co. Bank, 16 Ohio St. 296 ; Combes v. 
 Chandler, 38 Id. 178 ; Winter v. Belmont Mining Co., 63 Cal, 428 ; Thompson 
 V. Toland, 48 Id. 99. 
 
 ' St. Louis Perpetual Ins. Co. v. Cohen, 9 Mo. 421. 
 
§ 261 PAYMENT OF CERTIFICATES OF DEPOSIT. 261 
 
 grace, the collecting bank was shielded by the custom in pro- 
 testing it on the day of its maturity.' And if a certificate 
 bear a specified rate of interest this will continue until it is 
 paid.^ 
 
 § 260. Is not pa3rinent. A certificate is payment only by 
 clearly-established usage. When this does not exist, the 
 taking of a certificate does not extinguish the debt for which 
 it was given. A. negotiated yvith B. for a loan of $2000 to 
 enable him to pay two mortgages on his fai'm to C. B. was 
 willing to loan the money on a first mortgage of the farm, 
 and applied to a banker, who was owing him, for the money 
 to pay A. The banker, not able to pay the whole at once, 
 paid A. $1000, and gave him a certificate of deposit for the 
 remainder, payable when the mortgage above mentioned 
 should be discharged. The banker failed, and his certificate 
 became worthless. A. then paid B. the $1000 he had re- 
 ceived from the banker, with interest, and tendered to him 
 the banker's certificate of deposit for the other $1000, and 
 desired a release of the mortgage he had given to him. B. 
 having refused to comply, A. appealed to the court, which 
 decided that he did not receive the certificate of deposit as 
 payment, and consequently that the loss thereon should be 
 borne by B. The fact that B. settled with the banker after 
 the giving of this certificate and credited him with the 
 amount, had no bearing on the question at whose risk was 
 the certificate held, for the banker should, as between himself 
 and B. have been credited with the amount while it was out- 
 standing, no matter who was the holder. IsTor did the fact 
 that A. attempted to get the money on the certificate before 
 the time fixed for paying the last mortgage to C, tend to 
 show that he had assumed the risk attending the keeping of 
 the certificate.* 
 
 § 261. Can a collecting bank receive its own certificate. 
 When can a bank, acting as collecting agent, receive its own 
 
 1 Haddock v. Citizens' Nat. Bank, 53 Iowa, 542. 
 
 2 Cordell v. First Nat. Bank, 64 Mo. 600 ; Payne v. Clark, 23 Id. 259. 
 a Burrows v. Bangs, 34 Mich. 304. 
 
262 BANKS AND THEIR DEPOSITORS. § 261 
 
 certificate of deposit in payment of a debt ? The well-known 
 rule is, that an agent, having a money-demand for collection, 
 can rightfully receive only money in payment, unless specially 
 authorized by his principal to receive something else. Not- 
 withstanding this rule, if the agent is a bank of deposit it 
 may receive its own certificates of deposit as money, and its 
 principal will be bound by the payment, and the debtor will 
 be discharged, even though the bank soon afterward should 
 become insolvent, and never remit to the principal. In such 
 a transaction the principal is especially bound if he has direct- 
 ed the remittance to be made by draft, for it must be pre- 
 sumed that he expected that the draft of his agent would be 
 sent.* 
 
 (a) Iowa case. The reason for this seeming exception to 
 the rule is that, by custom, certificates of deposit are regarded 
 as money. Of course, where they are not thus regarded, an 
 agent cannot rightfully receive them. But if the custom to 
 receive them as payment exist, the principal is bound by 
 it, even if he be ignorant of its existence. The owner of a 
 note and mortgage living in New York sent it to the Monroe 
 County Bank of Iowa for collection, as the debtor., Massey, 
 lived near that institution. Massey paid the note in a certifi- 
 cate of deposit issued by that bank. Becoming insolvent 
 before remitting 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 judicial 
 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 history affecting 
 
 1 British & Am. Mortgage Co. u. Tibballs, 63 Iowa, 468. 
 
§ 262 PAYMENT OF CERTIFICATES OF DEPOSIT, 263 
 
 the whole people ; and we think that the system by which 
 nearly all the banks in this country transact monetary aftairs 
 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 com- 
 pany, whose sole occupation is loaning money [which was the 
 business of the plaintijft'] should be allowed to profit by pleading 
 ignorance 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 to him, and then 
 counted it back to the cashier. The law does not require any 
 such vain and unnecessary formality in the transaction of 
 business."' 
 
 § 262. In what must payment be made. When the certifi- 
 cate requires the payment of " current notes," the issuer must 
 pay notes as valuable as those deposited in the event of a 
 change in the circulation during the interval of the deposit ; 
 consequently a bank in North Carolina, which in 1860 gave 
 a depositor a certificate stating that he had deposited a cer- 
 tain sum " in current notes of the different banks of the 
 State," and which was " payable in like current notes to said 
 depositor, or to his order on return of this certificate," was 
 held liable for the whole amount with interest from the date 
 of the demand in currency of the United States. The notes 
 deposited were worth about par, but when the certificate was 
 presented none of them were current. They had ceased to 
 .circulate as currency in consequence of their depreciation, 
 and had become articles of merchandise, without retaining in 
 any degree the character of current money. Owing to this 
 change the bank could not perform its agreement, and the 
 question was, on whom should the loss fall ? " Obviously," 
 said the court, " it must fall on the bank, for it has had the 
 use of the plaintiff's money and is unable to return funds of 
 the same kind ; and surely the plaintiff had a right to expect 
 funds as good as what he deposited."'' 
 
 1 British & Am. Mortgage Co. v. Tlbbals, 63 Iowa, 468. 
 
 2 Fort V. Bank of Cape Fear, Phil. (N. C.) 417. 
 
264 BAKKS AND THEIR DEPOSITORS. § 265 
 
 § 263. Must be given up oa payment. When the owner of 
 a certificate demands payment, the issuer has the right to 
 insist on its delivery as a voucher of payment and security 
 against a future claim. And if an administrator of the 
 owner of a certificate should sue a bank for the deposit and 
 show that it was in the possession of a third party, but fail 
 to show whether the owner indorsed it or not, he could not 
 recover without producing the certificate.' 
 
 § 264. Alteration excuse for non-payment. When will an 
 alteration of the certificate excuse the issuer from paying it ? 
 The alteration of a certificate after the dissolution of a part- 
 nership by the partner continuing the business before notice 
 to the holder does not relieve the retiring partner. Until 
 notice of dissolution the holder has the right to consider the 
 partnership as continuing and the alteration as authorized.* 
 When, however, a certificate was given " payable thirty days 
 
 after date, with ■ per cent, per annum," and there was 
 
 no agreement to pay ten per cent., and the holder, after say- 
 ing to the buyer that the agreement was for ten per cent, 
 interest, that the blank was left by mistake, and he inserted 
 ten therein, it was held that the alteration was fraudulent, 
 and that no action could be maintained against the maker, 
 either on the certificate itself or on the original consideration 
 for which it was given.* 
 
 § 265. Pa3nnent without indorsement. If a bank should 
 issue a certificate payable to the depositor or order on return 
 of the same properly indorsed, -when could it pay the certifi- 
 cate to another person on presentation, but without indoi-se- 
 ment ? This question arose in the following case : A husband 
 deposited money belonging to his wife and a certificate was 
 issued payable to him. He delivered it to her as soon as he 
 returned from the bank, and she kept it in her possession. 
 Afterward she presented the certificate to the bank and 
 demanded payment, at the same time informing the institu- 
 
 ' Fells Point Savings Institution w.Weldon, 18 Md. 320. 
 
 2 Howell V. Adams, 68 N. Y. 314. 
 
 3 Woqdsworth v. Anderson, 53 Iowa, 503. 
 
§ 267 PAYMENT OF CERTIFICATES OF DEPOSIT, 265 
 
 tion that she was the lawful owner and holder, and offering 
 to surrender it on payment. The bank refused payment, be- 
 cause the certificate had not been indorsed by J. C, who fur- 
 thermore claimed that it was his own. But the court said 
 that the certificate was in effect a negotiable promissory note. 
 The fact that the sum named in it was payable " on the re- 
 turn" of the certificate did not raise a contingency affecting 
 its character as such note. In the absence of these words the 
 duty to return it upon payment would be implied, as in " the 
 case of a negotiable promissory note in common form. Not- 
 withstanding it is made payable to the depositor or his order, 
 a third person may become its owner without indorsement." 
 The bank, therefore, was obliged to pay the certificate.^ 
 
 § 266. Should not pay if enjoined. In paying a certificate 
 to an indorsee while a bank is not required to ascertain 
 whether the assignment was in good faith, yet if enjoined 
 from paying the deposit to the depositor or his assignee, the 
 bank should not paj'^ the money thus deposited until the 
 parties claiming the same have had an opportunity to deter- 
 mine legally the good faith of the assignment.^ 
 
 § 267. Lost certificate. Whenever a certificate is lost can 
 a bank require a bond of indemnity before paying the deposit? 
 This question has been answered by Judge Moore of the 
 District Court of Cincinnati : " !N"o one can become a bona fide 
 purchaser of a certificate of deposit who does not take it 
 within some reasonably short time, for the reason that banks 
 would then be able to issue certificates of deposit of any de- 
 nomination as ordinary bank bills, and with like effect. . . 
 If the instrument was due at the time of its loss the finder or 
 subsequent holder took it subject to all the equities existing 
 between the original parties, and the payment to the original 
 holder would be a bar to another action by a person who 
 should receive the instrument after due." And hence it 
 follows that the bank in that case was not wronged in being 
 
 » Cassidy v. First Nat. Bank, 30 Minn. 86. See § 100. 
 2 Springfield Marine & Fire Ins. Co. v. Peck, 102 111. 265. 
 
266 BANKS AND THEIR DEPOSITORS. § 269 
 
 required to pay to the depositor without indemnity, because it 
 was under no legal obligation to recognize the present holderj 
 "if one existed as a bona fide holder."' 
 
 § 268, Where suit must be begun. "When a suit is brought 
 on a banker's certificate of deposit it must be at the place 
 where the same is payable, and not where he may happen to 
 reside.^ If the holder after bringing a suit thereon, surren- 
 ders it and takes a new one, his suit cannot be maintained.' 
 Likewise, if he surrender the notes of a bank, and take a 
 certificate therefor, he cannot claim the same rights in the 
 distribution of assets as he could if he had held the notes.* 
 
 § 269. Demand in action against firm. An action on a certi- 
 ficate against the personal representatives of a deceased member 
 of a firm and the. surviving partner, in which the latter is not 
 served and does not appear, is not a demand against him.* 
 If or is the rendering of a statement of account bj' a depositor 
 to the depository in which the sum mentioned in the certifi- 
 cate is charged against it under the head of accepted charges 
 sufficient evidence of a demand to set the Statute of Limita- 
 tions in motion.* 
 
 (a) When firm changes into corporation. A firm of bankers 
 doing business at the P, Savings Bank, issued a certificate of 
 deposit payable to the order of the depositor on its return. 
 Within a year from that time the bank was incorporated, the 
 firm transferring all their business to it. Subsequently, the 
 holder of the certificate presented it to the bank and demanded 
 payment from the members of the old firm. Having brought 
 his suit against them declaring that they were "lately doing 
 business as the P. Savings Bank," they defended on the 
 ground that no " proper or lawful demand" had been made, 
 but the demand was declared sufficient, and the depositor re- 
 covered.' 
 
 1 Brown «. Citizens' Nat. Bank, 38 Bank. Mag. 135. See § 420. 
 
 ' Sanbourn v. Smith, 44 Iowa, 152. 
 
 ' Manuel v. Mississippi K. Co., 2 Pa. 198. 
 
 * Ballard v. Central Bank, 1 Ga. 461. 
 
 5 Smiley v. Fry, 100 N. Y. 262. « Id. 
 
 ' McGough V. Jamison, 107 Pa. 336. 
 
§ 272 PAYMENT OF CERTIFICATES OF DEPOSIT. 267 
 
 § 270. Certificate as evidence. A certificate of deposit is 
 evidence of so high and satisfactory a character that to escape 
 its effect the maker must overcome it by clear and satisfactory 
 evidence. Slight, uncertain or contradictory evidence is not 
 sufficient.' Furthermore, as a certificate of deposit, properly 
 executed, is an acknowledgment that the bank has the money 
 specified therein and credited to the depositor, the burden of 
 proof in a suit to recover the amount, after producing the 
 certificate, is on the bank to show that it has discharged its 
 liability.^ 
 
 § 271. Change of company, for private certificate. A bank 
 which has given a certificate to a company for deposits, cannot 
 transfer them to the private account of its treasurer without 
 the company's knowledge. And certainly it would have no 
 authority to continue to charge the deposits to the private 
 account of the treasurer after he had ceased to hold the office, 
 whether he knew of the election of his successor or not.' 
 
 § 272. Holders of certificates given after bank failure. 
 "When a commercial bank makes an assignment in trust for 
 the benefit of a certain class of lenders and depositors, from 
 whom it receives considerable sums of money, the holders of 
 its certificates which are given for security will not be bound 
 by previous representations of the officers of the bank, that 
 the capital stock is a safety fund for the benefit of savings de- 
 positors, where it is not shown that the holders encouraged 
 them to be made, or even knew that they had been made 
 when they received their certificates, and especially where it 
 is not shown that the savings depositors relied on their truth- 
 fulness.* 
 
 » First Nat. Bank v. Myers, 83 111. 507. 
 
 2 Cushman v. Illinois Starch Co., 79 Id. 281. 
 
 3 Id. 
 
 * Ward V. Johnston, 95 Id. 215 ; Aff. 2 Brad. 261. 
 
268 BANKS AND THEIR DEPOSITOBS. § 273 
 
 CHAPTER IX 
 
 PAYMENTS IMPENDING AND AFTER INSOLVENCY. 
 
 § 273. When insolvency is unknown to receiver of check. 
 
 (a) Butcher case. There are two periods of payment, by in- 
 solvent banking institutions. The first period is when they 
 are really but not confessedly insolvent ; the second period is 
 after their insolvency has been judicially recognized. The 
 payment of a check by a bank whose solvency was known to 
 its officers, but not to the receiver of the money, was declared 
 in New York not to be contrary to the national bankrupt law 
 which rendered unlawful the transfer or assignment of any 
 property by an incorporated company in contemplation of 
 bankruptcy. In this case, therefore, the assignee could not 
 recover the money.' 
 
 (6) Other New York cases. Nor was this decision regarded 
 as militating against two others previously rendered by the 
 same tribunal. The first of these was rendered in Brouwer v. 
 Harbeck,'' in which the court held that payments and trans- 
 fers of money by a bank when actually though not avowedly 
 insolvent or in contemplation of insolvency with intent to 
 give a preference to creditors were within the statute which 
 declared invalid all conveyances and payments made by cor- 
 porations insolvent or in contemplation of insolvency. But 
 this, as subsequently explained, did not mean a payment in 
 the usual course of business, as was the payment in the 
 Dutcher case. Nor would ignorance concerning the condition 
 of the bank protect the receiver of the money when not re- 
 ceiving it in the ordinary way. In the other case^ it was 
 
 • Dutcher v. Importers & Traders' Nat. Bank, 59 N. Y. 5 ; Rev. 1 Th. & C. 
 400. 
 2 9 N. Y. 589. 
 ' Robinson v. Bank, 21 Id. 406 ; see Belden v. Meeker, 47 Id. 307. 
 
§ 276 PAYMENTS IMPENDING AND AFTER INSOLVENCY. 269 
 
 proved that the insolvent corporation, which was the Hollister 
 Bank, became indebted to the Attica Bank on the 28th of 
 August, 1857, on two drafts, one of which matured on the 
 3d of September; the other, two days afterward. On the 
 29th of August, the Hollister Bank became insolvent. On 
 the 31st of August, the payment was made by a transfer of 
 notes which had been discounted by the Hollister Bank and 
 by a small amount of money. The Attica bank, moreover, 
 knew of the condition of the other. " This," said the Court 
 of Appeals in a subsequent review of the case, " clearly was 
 not a payment made in the usual course of business. The 
 creditor was sought out by the debtor before the debt became 
 due and payment made, not in cash, but by transferring notes 
 discounted by the debtor. . . The payment was made by the 
 debtor in contemplation of insolvency," and was invalid.' 
 
 § 274. Non-delivery of deposit before insolvency. A bank- 
 ing firm just before the members had determined to assign 
 marked a package with the name of a general depositor and 
 the word " private." The amount was not all that was due 
 to the depositor. On making the assignment the firm asked 
 the assignee to give the package to the depositor who knew 
 nothing of these facts until afterward. It was held that the 
 moneywas not thereby delivered and consequently did not 
 belong to the depositor.* 
 
 § 275. Depositors are general creditors. When a bank 
 passes to open or declared insolvency, the depositors are 
 general creditors and share with the stockholders and other 
 creditors.^ 
 
 § 276. Preferences, (a) Bill-holders in Tennessee. When 
 these unwelcome events occur creditors often seek to establish 
 
 > Butcher v. Importers & Traders' Nat. Bank, 59 N. Y. p. 10. 
 
 » Coots V. McConnell, 39 Mich. 742. A bank at any time can tender the 
 full balance due to a general depositor, but cannot compel him to receive 
 less, Id. 
 
 An offer of partial payment can be withdrawn at any time before accept- 
 ance, and is withdrawn and annulled by a general assignment, Id. 
 
 » Matter of Franklin Bank, 1 Paige, 249 ; Bruyn v. Receiver of Middle Dist. 
 Bank, Id. 584 ; Marr v. Bank of West Tennessee, 4 Cold. 471. 
 
270 BANKS AND THEIR DEPOSITORS. § 276 
 
 preferences over one another, and these will now be consid- 
 ered. By statute in Tennessee bill-holders are entitled to 
 a preference in payment over all other creditors. And the 
 holders of certificates of deposit are also included among 
 the preferred creditora.' 
 
 (b) In the matter of Patterson^ a savings bank promised four 
 other hanks to deposit one-fourth of all the moneys received 
 by it with them. On the other hand, they promised to pay 
 interest on the daily balances in favor of the savings bank ; 
 also to pay at sight cheeks and drafts drawn on them, and to 
 receive no deposits from other persons or corporations less 
 than a thousand dollars. The contract was to run for three 
 years, and at the end, the four banks were to pay over to the 
 savings bank all moneys belonging to it. The court held 
 that the moneys thus deposited by the savings bank were 
 deposits, and that it was entitled to priority over the other 
 creditors by the law of that State when one of tlie four banks 
 failed. 
 
 (e) Fox's Appeal.* The charter of a bank provided that 
 for the security of the depositors a special capital should be 
 raised previous to the grant of letters of incorporation which 
 " shall at all times be liable to the depositors for the amount 
 of their deposits." The bank made an assignment "for the 
 benefit of its creditors, and in distributing its assets it was 
 held this capital was designed to constitute a fund to be 
 employed by the trustees for any of the legitimate purposes 
 of the association ; that it was not intended to be a special 
 fund, separate and distinct from other funds and for the ex- 
 clusive benefit of depositors. 2^or could such capital be 
 withdrawn by or refunded to the subscribers. 
 
 {d) Draft sent to pay note. The bank of Geneva having a 
 large deposit in the Canal Bank on which interest was paid 
 sold to C, on the 7th of July, a draft on the Canal Bank 
 payable on demand to the order of its cashier, which C. sent 
 
 ' Moseby r. Williamson, 5 {leisk. 278. 
 
 « 18 Hun, 221. s 93 Pa. 406. 
 
§ 276 PAYMENTS IMPENDING AND AFTEK INSOLVENCY. .271 
 
 by mail to the cashier with instructions that it was to pay 
 C.'s note of the same amount, payable at that bank on the 12th 
 of July. The draft was received by the cashier on the 8th, 
 and was neither indorsed by him nor accepted by the bank. 
 'On the 10th the bank failed, and on the 12th C.'s note was 
 presented at the bank and payment was refused. Afterward, 
 the draft was returned to C, at his request, by the receiver of 
 the failed bank. It was decided in a suit by C, against the 
 receiver, that C. had acquired no right to be paid the amount 
 of his draft from the assets of the bank in preference to 
 general creditors.* 
 
 (e) Purchased hank check. If one purchase a bank check 
 on another, but does not present it for payment until the 
 drawer has been declared a bankrupt, he is not entitled to 
 priority of payment from the fund in the hands of the assignee, 
 although the drawee has enough at the time of presentment 
 to pay the check. The purchase creates no appropriation of 
 the fund in the bank, nor gives a right of action against the 
 drawee.^ And if a sura of money be placed in a bank for a 
 special purpose the owner cannot claim a preference in the 
 event of the bank's insolvency.* 
 
 {f) Trust fund. A general deposit of a trust fund is not 
 entitled to a preference. The ordinary relation of debtor and 
 creditor exists in such a case and consequently the benefici- 
 aries must share with otber creditors.^ 
 
 {g) National bankrupt law. When the national bankrupt 
 law was in force preferences to creditors were not recognized, 
 yet when mutual debts were adjusted just before a bankruptcy, 
 
 1 Chapman v. White, 6 N. Y. 412 ; Cowperthwaithe u. Sheffield, 3 Id. 
 243 ; Harris !;. Clark, Id. 93 ; Winter v. Drury, 6 Id. 526. 
 
 2 In re Smith, 15 N. Bank. Reg. 459. 
 
 3 Brandywine Bank's Assigned Estate, 1 Chester Co. 431 ; see Parkesburg 
 Bank's Appeal, 6 Week. No. Cas. 394. In Pennsylvania note holders were 
 entitled to a preference over the holders of certificates of deposits. Pennsyl- 
 vania Bank Assignees' Account, 39 Pa. 103. They were also entitled to 
 interest on their claim in preference to depositors, Estate of Bank of Pennsyl- 
 vania, 60 Id. 471. 
 
 * Fletcher v. Sharpe, Ind. Snp. Ct., 9 Northeast. Rep. 142. 
 
272 BANKS AND THEIR DEPOSITOKS. § 277 
 
 like the charging of a depositor's note against his account, 
 this was declared valid for the reason that under bankruptcy 
 proceedings a similar adjustment of them would be made.^ 
 
 § 277. Completion of trust by insolvent bank, (a) People. 
 V. City Bank? When the insolvent bank has been acting in 
 the capacity of agent or trustee for another bank or for an 
 individual the execution of the trust is completed if possible, 
 consequently, whenever a bank fails, creditors not infrequently 
 have sought to show the existence of a trust relation, and 
 not the ordinary one of debtor and creditor, in order to es- 
 cape loss. This was attempted by a bank which had sent a 
 note for collection to another which failed after collecting the 
 money, but before paying it over. 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 purpose. A balance was struck 
 once a week and the 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 relation between them was simply that of 
 debtor and creditor, that the creditor bank acquired no lien 
 on any specific 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 prop- 
 erty or funds which went into the hands of the receiver and 
 obtain payment in preference to other creditors. Each sura 
 collected, as it came in, became the property of the collecting 
 
 ' Winslow ». Bliss, 3 Lans. 220 ; Hough ». First Nat. Bank, 4 Biss. 349. 
 A State under that law could prove a claim against a bankrupt bank for 
 money deposited by the warden of a State prison with it in his name if the 
 directors of the prison had previously arranged with the bank for such de- 
 posits and agreed on the forms of the account, although there was no law 
 requiring him to deposit it, and although the State held a bond requiring him 
 to account for all money coming into his hands, In re Corn Ex. Bank, 15 
 N. Bank. Reg. 216. 
 
 s 93 N. Y. 582. 
 
§ 277 PAYMENTS IMPENDING AND AFTER INSOLVENCY. 273 
 
 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 fjarties for a long period, and it established between them 
 the relation of debtor and creditor in respect to these collec- 
 tions." 
 
 (b) People V. Merchavts and Mechanics' Bank.^ In a some- 
 what similar case the Chemical Bank of N"ew York City having 
 received a check on a Troy bank sent it to the drawee for pay- 
 ment. That bank charged the check to the drawer, whose 
 account was then good for the amount, and returned the 
 check to the drawer. It sent a draft to the ISew York City 
 bank for the amount of the check, and two days afterward 
 closed doors before payment of the draft. After the appoint- 
 ment of a receiver the !N"ew York City bank applied to the 
 court for an order requiring him to pay the draft on the 
 ground that the assets came into Lis hands impressed with 
 the trust in its favor. The order was denied. Judge Hapallo, 
 speaking for the court, said : " There was no actual setting 
 apart or appropriation of any specific fund or property of the 
 bank, or of the drawer, for the payment of the check. . . 
 The bank was simply debtor to the depositor for the balance 
 of deposits which stood to its credit. By charging the check 
 in account the bank reduced its indebtedness to the depositor 
 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 by setting apart or 
 appropriating any particular property or fund for that pur- 
 pose, but by drawing a draft upon the Metropolitan Bank of 
 New York, and remitting that draft. 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 
 
 1 78 N. Y. pp. 289, 272. 
 
 18 
 
274 BANKS AND THEIR DEPOSITORS. § 277 
 
 that purpose." The counsel contended that the Troy bank 
 was agent for the Chemical Bank to receive payment of the 
 check. "Suppose it were," continued the learned judge, 
 " what did it receive as such payment? Simply its own ob- 
 ligation. If anything was set apart by charging up the check 
 it was only so much of the bank's indebtedness to its deposi- 
 tor. It constituted itself debtor to the holder of the check 
 in place of its indebtedness to its depositor. . . In paying the 
 cheek the bank merely complied with its own obligation to 
 its depositor to honor checks drawn against deposits, and if, 
 instead of demanding immediate payment the holder of the 
 check trusted to the bank to remit, the result was simply to 
 give credit to the bank ; not to constitute an agency." 
 
 (c) Different rule in Wisconsin. In Wisconsin, however, 
 a different view has been maintained. In that State a banker 
 who accepts a draft for collection and collects the money 
 holds the same as trustee for the owner. Should he assign 
 for the benefit of his creditors, the trust character of the 
 money would not be gone notwithstanding its transfer to the 
 assignee. And this would be so even though no portion of 
 the money coming into his possession could be clearly traced 
 to the person who paid the driaft.^ 
 
 {d) In a case of The People v. the City Bank,^ a firm that " 
 had made a note which was to be paid there, gave a check 
 for it, and which also directed the bank to "pay to our 
 note due," the amount of the same. The bank charged the 
 check to their account, and marked it " paid Nov. 3, 1882," 
 at the same time making a corresponding entry in its books, 
 A second note which the firm had given was treated in the 
 same manner. The bank, however, sold the notes and re- 
 ceived the avails from the purchaser, but the firm was io-no- 
 rant of this. On the other hand, the members supposed that 
 the bank held and owned the notes. The bank having failed, 
 a receiver was appointed, and the question arose, should he 
 
 > McLeod V. Evans, 28 Northwest. Rep. 173. See § 475. 
 2 90 N. Y. 32. 
 
§ 277 PAYMENTS IMPENDING AND AFTER INSOLVENCY. 275 
 
 pay these notes. The court said that the transaction in ques- 
 tion was not between the bank and S. H. & F., who were the 
 makers of the notes and depositors of the money, in the 
 relation of debtor and creditor, nor in the relation of bank 
 and depositor. " The object of the latter was to provide a 
 fund for the payment of specific notes, and the engagement 
 of the former was to apply that fund to such payment. Thus 
 a trust was created, the violation of which constituted a 
 fraud by which the bank could not profit, and to the benefit 
 of which the receiver is not entitled.' The checks . . were 
 money assets in the hands of the bank, and were so treated 
 by all parties ; they were delivered to it with explicit direc- 
 tions to apply the proceeds on payment of the notes ; those 
 directions were assented to by the bank-oflicer, and the checks 
 collected from the general fund. From that moment the 
 bank was bound to hold the money for and apply it to that 
 purpose and no other. . . The bank was bailee, or trustee, 
 but never owner. It is estopped from saying that all this is 
 matter of book-keeping. It assumed a duty, and the receiver 
 as its representative is bound by it. Ifor does this obligation 
 at all depend . . upon the question, when, where, and to 
 whom the notes were to be paid ; whether presently or in the 
 future is immaterial." 
 
 (e) Levi v. National Bank of Missouri' is worth mentioning. 
 The institution received from Levi a bill ot exchange " for 
 collection and credit," and accepted from the drawee his 
 check on a third bank for the amount, and surrendered the 
 bill of exchange. On presenting the check, instead of demand- 
 ing the money thereon, it accepted its certification as good, 
 and suspended the same day, having previously credited Levi 
 with the amount. The day after suspending it collected the 
 certified check. The principal question in the case was, 
 should Levi have the money, or should the receiver of the 
 bank retain it for the creditors. The court decided that the 
 bank was Levi's agent in collecting the draft, that the agency 
 
 « Libby v. Hopkins, 104 U. S. 303. ' 5 Dill. 104. 
 
276 BANKS AND THEIR DEPOSITORS. § 277 
 
 remained until the money was received on the check, which 
 was after the suspension of the bank, and consequently that 
 it received the money in trust for Levi, and that the receiver 
 had no right to withhold it from him. 
 
 (J) In Phelan v. Iron Mountain Bank^ an arrangement ex- 
 isted between the Central Savings Bank and the Iron Moun- 
 tain Bank, whereby the former acted as agent of the other, 
 in paying its checks in the clearing house. To eiFect this 
 purpose, the Iron Mountain Bank kept a suiBcient deposit 
 in the Central to meet all the checks it should be required to 
 pay. The Central Savings having failed, it returned to the 
 other all of its deposits not used for paying its checks. The 
 assignee maintained that the money thus paid was an illegal 
 preference, and ought to be repaid to him by the Iron Moun- 
 tain Bank. On the other hand, it refused to do so, maintain- 
 ing that the relation existing between the two banks was not 
 that of debtor and creditor, but one of trust. The court de- 
 cided otherwise, and the assignee recovered the money. In 
 general, if one has entrusted notes to a bank for collection, 
 which at the time of insolvency it has collected but not paid 
 o^'er, the proceeds do not constitute a pi-eference, and are not 
 shared with the general creditors of the bank.'' 
 
 (jg) In Farley v. Turner the question was again asked, when 
 has a bank so appropriated the money of a depositor to a 
 particular purpose at his request that the law will regard the 
 transaction with favor and complete the execution of the agree- 
 ment after the bank's insolvency ?3 Goodwin directed the 
 depositary to send £500, which wasonly a portion of his deposit 
 at that time,' to another bank to pay a bill that would soon be 
 due. The depositary sent the money, but before the bill be- 
 came due failed, and the question was whether the £500, 
 belonged to the depositor or to the general creditors of the 
 depositary. The court decided that though the bill had not 
 been paid the money had been appropriated for that purpose, 
 and consequently that it belonged to G-oodwin. 
 
 1 16 N. Bank. Reg. 308. " Bank i-. Russell, 2 Dill. 215. 
 
 » 26 L. J., N. S. 710. 
 
§ 277 PAYMENTS IMPENDING AND AFTER INSOLVENCY. 277 
 
 (A) The German American Bank sent T.'s draft to the Third 
 National JBank^ for " collection and credit." The draft was 
 received June 19, and presented to T., who gave his check 
 for the amount which was certified as good by the Franklin 
 Bank, on which it was drawn, and the draft was surrendered. 
 On the same day the defendant bank suspended payment be- 
 cause it was insolvent. On the 20th of June, it presented the 
 certified check and received paj'ment. It was decided that 
 the defendant bank was the agent of the German American 
 to collect the draft, that the agency continued until the money 
 was received on the check, and that having received it after 
 its suspension it was held in trust for the German American 
 Bank, and could not be distributed among the creditors of 
 the one that had failed. 
 
 ( I ) Stoller V. Coates.^ In another case, the Mastin Bank of 
 Kansas City received a draTt on deposit, which was credited 
 to the depositors. They then drew their check on the bank, 
 with the request that it would place the proceeds of the same 
 in the Exchange Bank of Denver, Colorado, to E.'s credit, 
 which the Mastin Bank agreed to do. The Exchange Bank 
 was a correspondent of the other, and the Mastin Bank gave 
 the depositors a memorandum addressed to the Exchange 
 Bank, stating that their account had been credited with the 
 amount of the check to E.'s use. The memorandum was at once 
 sent to E. by the depositors, while the Mastin Bank also sent 
 a copy to the Exchange Bank. Before it arrived, however, the 
 Mastin Bank had assigned for the benefit of its creditors. The 
 Exchange Bank refused to charge the amount to the Mastin 
 Bank, or to place it to E.'s credit, or to give him the amount 
 in money. It was decided that the Exchange Bank having 
 thus refused to accept the credit the fund remained in the 
 Mastin Bank impressed with the trust, and that the relation 
 of general creditors consequently did not exist between the 
 depositors and the Mastin Bank. 
 
 1 German American Bank v. Tliird Nat. Bank, 18 Alb. L. J. 252. 
 
 2 88 Mo. 514. 
 
278 BANKS AND THBIK DEPOSITORS. § 279 
 
 {j ) Recovery of collateral security. So, too, if a bank receive 
 a draft for collection accompanied with collaterals and fails 
 before collecting it, the property may be recovered of the 
 bank's receiver. Such an action was brought by the Com 
 Exchange Bank of Chicago, against the receiver of a bank at 
 Middletown, New York, to recover the collaterals that accom- 
 panied a draft which the former bank had sent to the other 
 for collection. The court declared it was quite apparent that 
 the latter had no right to detain it, and that the receiver was 
 hot justified in refusing to give it up, " It did not become a 
 part of the assets of the Middletown Bank to be distributed 
 to its creditors, and would not except upon the payment of 
 the lien of the drawers, who could sell it and apply the pro- 
 ceeds to meet the draft. It went into its possession charged 
 with a trust which has not been performed, and never became 
 its property."* 
 
 § 278. Check not credited or collected. If a depositor 
 cannot draw against a check until it is collected, it belongs to 
 him in the event of the bank's failure before making the 
 collection. In a case of this kind, the receiver having col- 
 lected the money the depositor claimed that it belonged to 
 him and not to the general creditors, because the collection 
 was not made until after insolvency. The court decided that 
 the check never became the property of the bank, and that 
 the proceeds, therefore, belonged to the depositor.' 
 
 § 279. When creditor can retain money to complete agree- 
 ment. On the other hand, when can the creditor of a bank 
 so appropriate its money to a particular purpose at its request 
 that the law will regard the transaction with favor and com- 
 plete the execution of the agreement after the bank's insol- 
 vency ? This question was not long ago answered. An oral 
 agreement was made in New York City in June, 1878, 
 between the cashier of a bank in Kansas City and its corres- 
 pondent banking firm in New York, that if they would 
 
 1 Corn Exchange Bank «. Blye, N. Y. Sap. Ct., 2 N. Y. State Rep. 112. 
 ' Haven's Petition, 8 Bened. 309. 
 
§ 279 PAYMENTS IMPENDING AND AFTEK INSOLVENCY. 279 
 
 accept drafts amounting to $35,000 it would keep on deposit 
 with the firm a balance equal to that amount until their 
 maturity, on which the firm should have a lien with the right 
 to charge the account at anj time with the acceptances, and 
 appropriate so much of the deposit as might be needful to 
 pay them. The firm were advised at that time by the cashier 
 that the bank was embarrassed, but that with this and other 
 assistance it could live. The firm accepted the draft, the 
 proceeds were shortly afterward deposited as agreed, and 
 later other deposits were made by the bank. In August the 
 bank failed, and the acceptances were immediately charged 
 to the bank. At that time the balance in its favor was 
 more than enough to pay the acceptances. In an action 
 brought by the assignee to recover the money thus appropri- 
 ated by the firm, it was held that the cashier had the authority 
 to make the agreement above mentioned with the firm, and 
 that it was not contrary to public policy to create a lien on 
 the deposit and authorize the appropriation. Furthermore, 
 it was not fraudulent with respect to the holders of drafts to 
 the amount of $40,000 drawn on the firm afterward and not 
 accepted. The accepted drafts were without interest, and at 
 the time of the appropriation were worth $34,833. It was 
 held that the right of the firm was not limited to the amount, 
 but that the face of the drafts could be charged against the 
 account and held to meet them when due. Judge Andrews 
 remarked : " It is said that it constituted an unlawful prefer- 
 ence. But the agreement of the lien was concurrent with 
 the obligation assumed by [the firm], and was made to 
 secure them against their liability as accommodation accep- 
 tors for the bank, assumed on the faith of the agreement. 
 When the fund was appropriated the appropriation was made 
 in pursuance of the original agreement as well as by the sub- 
 sequent express authority of the bank."* 
 
 1 Coats V. Donnell, 94 N. Y. 168 ; Aff. 48 N. Y. Sup. Ct. 46. In the same case 
 it was held that in the absence of statutory restrictions a corporation has the 
 right to prefer one creditor to another in distributing its property, ind that 
 the provisions of the New York statutes prohibiting preferences by insolvent 
 corporations do not apply to foreign corporations. 
 
280 BANKS AND THEIB DEPOSITORS. § 282 
 
 § 280. Whose loss when deposit is not in real owner's name. 
 
 When a deposit is made in the name, not of the real owner 
 but of the depositor, on whom shall the loss fall in the event 
 of the failure of the depositor^'. This question arose in Illi- 
 nois. A person consented that a deposit should be made in 
 his name simply to accommodate the real owner. The de- 
 positor had no control over the deposit except to draw it 
 whenever the owner should desire. The court said that the 
 depositor " clearly should not be made to suffer for an act of 
 gratuitous kindness," and consequently the owner did not 
 succeed in making another bear the loss.* 
 
 § 281. Depositor cannot change his relation after bank's in- 
 solvency. When a person reaps a profit on a contract with 
 another, he cannot abandon it to the prejudice of the credit- 
 ors of the other contractor, and participate after his insol- 
 vency equally with his creditors in his estate and in opposi- 
 tion to the terms and effect of the original agreement. Thus, 
 the depositor in an incorporated savings institution, requested 
 it to convert his deposits permanently into the stock of the 
 company. After its conversion he received increased divi- 
 dends and participated in its entire profits. The institution 
 having become insolvent, he received, like other debtors, its 
 own certificate of deposit in payment, which would absorb 
 all of its available funds. The depositor on the ground that a 
 conversion of his money into stock was in violation of the 
 charter of the company, applied for an injunction. It was 
 decided that whether the charter authorized the conversion 
 or not, he was not entitled to the restraining power of the 
 court.* 
 
 § 282. Holders of bank-notes. We have seen that the 
 holders of bank-notes were often regarded as preferred credit- 
 ors when the issuing bank failed ; on the other hand, these 
 could not be set oft" in pa3'ment of debts due to it. This ques- 
 tion arose and was decided for the last time in Virginia after 
 
 ' Dustin V. HodgeB, 38 111. 352. 
 
 • Maryland Sav. Institution v. Schroeder, 8 Gill & Johns. 93. 
 
§ 282 PAYMKNTS IMPENDINS AND AFTER INSOLVENCY. 281 
 
 the closing of the civil war. The banks which issued notes 
 in that State were hopelessly insolvent. They were compelled 
 to liquidate, and an act was passed for that purpose, under 
 which their property was conveyed to trustees for the pay- 
 ment of their debts. It was decided that these notes, which 
 they had previously been required to take in payment of 
 debts due to them, could not be bought by debtors after the 
 conveyance of their property' as above mentioned and paid to 
 the trustees in discharge of their debts.' Judge Christian, 
 who delivered the opinion in the latter case,^ said that the 
 whole current of decisions, with one exception, had been in 
 one direction, namely, " that the assignees of a bank are not 
 obliged to take from a debtor the notes of the bank obtained 
 after notice of the assignment. This has been the uniform 
 course of decision in New York.^ And such is the uniform 
 judgment of all the courts where this point has been adjudi- 
 cated, with the exception of the Court of Appeals of the State 
 of Maryland. That court has decided^ that the assignees and 
 trustees of an insolvent bank authorized to collect its debts 
 and pay its creditors, are bound under the statutes of that 
 State to receive the notes of such banks without reference to 
 the time at which they were required. But that case is 
 peculiar in this, that at a meeting of the Board of Directors of 
 the bank preparatory to the execution of the deed of trust, a 
 resolution was adopted by said board to the effect that ' the 
 debtors of this institution should have the privilege of paying 
 their debts in notes of that bank.' And the statute upon 
 which the decision is founded provides for the payment of 
 debts due to the bank, whether solvent or insolvent, in the 
 
 ' Bank u. Marshall, 25 Gratt. 378 ; Saunders v. White, 20 Id. 327 ; Ex- 
 change Bank v. Farmers' Bank, 19 Id. 739. See § 396. 
 
 2 P. 754. 
 
 3 Haxtun v. Bishop, 3 Wend. 13 ; Matter of the Receiver of Middle Dist. 
 Bank, 1 Paige, 585 ; Diven c. Phelps, 34 Barb. 224 ; Northampton Bank v. 
 Balliet, 8 Watts & Serg. 311 ; Housum i-. Rogers, 40 Pa. 190 ; Pancoast v. Ruffin, 
 1 Ohio St. 381 ; King v. Elliot, 5 Sm. & M. 428. 
 
 * Union Bank v. EUicott, 6 Gill & Johns. 363. 
 
282 BANKS AND THEIR DEPOSITORS. § 283 
 
 notes of the bank, whether it is carrying on its operations as 
 a bank or whether after the insolvency its assets have been 
 assigned to commissioners, to wind it up for the benefit of its 
 creditors."' 
 
 § 283. Savings bank depositors. The rights of the deposi- 
 tors of savings banks have been well considered in four recent 
 cases occasioned by the failure of four of these institutions. 
 
 (a) Law in New Hampshire. In one of them Judge Clark 
 said :^ " The assets of savings banks consist of loans of money 
 made by them for the benefit of their depositors from whom 
 the money was derived, and correspond to the capital stock 
 in banks of discount, and depositors in savings banks stand 
 in the same relation to the assets of the bank as stockholders 
 to banks of discount.' They are the owners of the funds of 
 the bank, entitled to share in its profits and liable to bear its 
 losses pro rata, and upon the winding up of the business of 
 the bank each depositor is entitled to his share of the assets 
 or property remaining after the payment of the debts." Other 
 creditors, too, share like the depositors, for example, a person 
 who has obtained a judgment against a savings bank.* "The 
 depositors are in fact the bank while the corporation is but 
 an agency for I'eceiving and loaning the money of the deposi- 
 tors." And the trustees and oiEcers of the bank are the 
 agents of the depositors."* 
 
 ' When a distribution of the assets of an insolvent bank is made in a court 
 of equity and some of the bill-holders have paid par for their bills, and others 
 have bought them up at a heavy discount, each will receive his part of tlie 
 whole amount of the assets upon his bills in proportion to the amount he 
 'paid for them. Belcher v. Wilcox, 40 Ga. 391 ; Collins v. Central Bank, 
 1 Id. p. 461. Numerous cases relating to the set off of bank-notes have been 
 reported more often in the Western and Southern States and especially Mis- 
 sissippi. 
 
 2 Cogswell V. Rockingham,Ten-Cents Sav. Bank, 59 N. H. 43. 
 
 3 Bunnell v. Collinsville Sav. Society, 38 Conn. 203; Simpson v. Savings 
 Bank, 56 N. H. 466 ; Osborn v. Byrne, 43 Conn. 155. 
 
 * People 0. Mechanics & Traders' Sav. Institution, 92 N. Y. 7 ; Rev. 28 
 Hun, 375. 
 
 5 Coite V. Society for Savings, 32 Conn. 173. 
 
 6 Cogswell !'. Rockingham Teu-Ceuts Sav. Bank, 69 N. H. p. 44. 
 
§ 283 PAYMENTS IMPENDING AND AFTER INSOLVENCY. 283 
 
 {b) When can bank and depositor's debt be set off against each 
 other. " The bank is not the separate and independent agent 
 of each depositor, hut the holder of a common fund in which 
 all the depositors are interested; and since the amount which 
 each depositor shall receive on a final distribution of the 
 assets depends on the amount realized by the bank from its 
 investments or debts due to it, the claim of a depositor for 
 his share of the assets, and of the bank against him for a debt 
 due to it, are not mutual nor in the same right, and the de- 
 positor cannot equitably set off his deposit in payment of his 
 debt to the bank." ' Nor does the pledging by the depositor 
 of his pass-book to the bank as collateral security for a debt 
 due from him, or in expectation at the time the debt is created 
 that he will apply his deposit in payment, confer the right to 
 have his deposit set off in payment of the debt. But if an 
 agreement is made with the bank by the depositor that his 
 deposit shall be applied next quarter-day in paj'ment of his 
 indebtedness to it with the understanding that the applica- 
 tion is then made, his deposit may be set off" against his debt. 
 A special deposit of money, also, which can be withdrawn on 
 call may be set off against the depositor's debt.* But if a 
 person be indebted to a savings bank and deposits an amount 
 less than the debt, intending to use the deposit in paying the 
 debt, it can be set off against the same. In Osborn v. Byrne,^ 
 Park, C. J., said: "It appears in her case that she made a 
 deposit in the bank not for the ordinary purposes of a deposit, 
 but for the purpose, and with the intention of applying the 
 same in payment of her indebtedness to the bank to that 
 amount. If the officers of the bank knew for Avhat purpose 
 the deposit was made, although the amount has never been 
 in fact applied in cancellation of so much of her indebtedness 
 to the bank, we think she should be allowed to set off the 
 
 1 Hall V. Harris, 59 N. H. 71, p. 73, citing Osborn v. Byrne, 43 Conn. 155; 
 Sawyer v. Hoag, 17 Wall. 610; Railroad Company v. Howard, 7 Id. 392; 
 United States v. Eckford, 6 Id. 484; Stockton v. Mechanics & Laborers' 
 Sav. Bank, 32 N. J. Eq. 163. 
 
 2 Hall 1-. Harris, 59 N. H. 71. ' 43 Conn. 155. 
 
284 BANKS AND THEIR DEPOSITORS. § 283 
 
 amount." A certificate of deposit of a savings institution in 
 Tennessee was assigned by J., the holder, to W., a debtor of 
 the bank, after its suspension and closing, but before the tiling 
 of the bill for settling its affairs as an insolvent corporation. 
 This was declared to be a valid offset in favor of "W., against 
 the debt owing by him to the bank when sued by the re- 
 ceiver.' 
 
 (e) Special deposit. "When a special deposit is received by 
 a savings bank not in the ordinary course of business, which 
 is appropriated, it is liable therefor, and cannot plead a want 
 of authority in defence.^ 
 
 {d) Points decided in a New Jersey case.^ In a 'Sew Jersey 
 savings bank case several important questions were decided 
 which are worth stating. The bank had a special charter 
 whereby it was authorized to receive and invest deposits for 
 the benefit of the depositors. The income was to be divided 
 among them after reasonable deductions for necessary expenses 
 and the principal and interest were to be paid to the deposi-. 
 tors, under regulations prescribed by the board of managers. 
 They not only received deposits which participated in the 
 profits and were paj'able after a thirty days' notice ; but also 
 "special deposits" which did not participate in the profits 
 and were to be repaid to the depositors without any pi'elinii- 
 nary notice. Both kinds were mingled, so that identification 
 was impossible, if there had been any occasion for wishing to 
 do this. The bank having failed, the receiver asked the 
 court for instructions. The chancellor decided : 1, that the 
 institution was a mere trustee for the benefit of depositors ;* 
 2, that a depositor who borrowed money from the bank 
 secured by his note or mortgage, could not offset his debt 
 
 ■ Moseby v. Williamson, 5 Helsk. 278. 
 
 8 Cogswell V. Rockingham Ten-Cents Sav. Bank, 59 N. H. 43. 
 
 3 Stockton V. Mechanics & Laborers' Sav. Bank, 32 N. J. Eq. 163. 
 
 * Newark Savings Institution Case, 28 N. J. Eq. 552 ; Huntington ». Sav- 
 ings Bank, 96 U. S. 388 ; Burrill v. Dollar Savings Bank, 92 Pa. 134 ; Coitei-. 
 Society for Savings, 32 Conn. 173 ; Bunnell v. CoUinsville Sav. Society, 38 
 Id. 203. 
 
§ 283 PAYMENTS IMPENDING AND AFTER INSOLVENCY. 285 
 
 against the amount of his deposit at the time when the de- 
 cree of insolvency was made ; 3, that the so-called special de- 
 positors were not entitled to priority in payment over the other 
 class of depositors ; 4, that debts and expenses contracted by 
 the bank in carrying on its ordinary business were to be pre- 
 ferred ; 5, that a claim under a covenant in the lease for rent, 
 accruing after the surrender of the premises to the lessor by 
 the receiver could not be maintained ; 6, that money paid to 
 the bank in exchange for its check given for the accommoda- 
 tion of the payee which was dishonored, presumably went 
 into the funds, and the debt should be preferred ; 7, that 
 checks given to depositors on account of deposits were not to 
 be preferred. 
 
 (e) Deposit claimed by assignee and by assignor's creditor. A., 
 a depositor in a savings bank, assigned and delivered his 
 bank-book to B., who gave notice of the transaction to the 
 bank. Afterwards the bank was required to appear in a suit 
 brought against A. by a creditor. The creditor having ob- 
 tained judgment, he made a demand on the treasurer of the 
 bank who issued a new deposit-book to the creditor's attorney 
 as trustee for A.'s deposit. The bank having failed, C. 
 claimed to be a creditor, but the court declared that the de- 
 posit belonged to B., the assignee above mentioned, and 
 whose title was beyond the reach of any dealings between 
 the bank and C 
 
 1 Commonwealth v. Scituate Sav. Bank, 137 Mass. 301. In New Hampshire 
 a law exists for scaling each deposit of a savings bank whenever it has be- 
 come insolvent. " It provided for a reduction of the deposit account of eacli 
 depositor, so as to divide the loss equitably among the depositors. In such 
 case when the accounts are reduced so as to equal the value of the assets, no 
 more and no less, and the assets are divided among the depositors according 
 to the accounts as reduced, each will receive his proportionate share of the 
 assets, and justice will thereby be done to all the depositors. By the so-called 
 reduction the right of the depositors to the property of the bank was not 
 concluded nor affected, nor were they deprived of their right to an equitable 
 share upon a division of all the assets of the bank. . . The funds being held 
 by the bank as trustee for the benefit of depositors, the gain on the funds, as 
 well as the funds themselves, belongs to the depositors," Francestown Bank 
 Case, 63 N. H. 138. 
 
286 BANKS AND THEIK DEPOSITORS. § 285 
 
 CHAPTEE X. 
 
 PRESENTATION OF CHECKS FOR PAYMENT. 
 
 § 284. Must be due diligence. To fix the liability of the 
 drawers and indorsers of checks they must be presented to 
 the drawees in accordance with the rules of law. The pre- 
 sumption when giving a check is that the drawer will provide 
 funds at the proper time for its payment. It is not reasona- 
 ble to require him to keep funds indefinitely for that pur- 
 pose at the place where the check is payable, for there is a 
 risk in doing so, the drawee may fail and the funds be lost. 
 It is important then to ascertain what the rules of presenta- 
 tion are. 
 
 § 285. Rule between holder and drawer. The question of 
 reasonable time is one of law. Furthermore, the courts very 
 generally have determined what is a reasonable time for present- 
 ing them. The rules which apply between holder and drawer 
 differ from those between holder and indorser and will be 
 first given. They have been stated by the Supreme Court of 
 Michigan in the following manner : — 
 
 (a) When both live at same place. If the pereon who re- 
 ceives the check and the banker on whom it is drawn are in 
 the same place, the check must, in the absence of special cir- 
 cumstances, be presented the same day, or at latest the day 
 after it is received.^ 
 
 {b) When both live at different -places. If, however, the per- 
 son who receives the check and the banker on whom it is 
 drawn are in different places, in the absence of special cir- 
 
 1 Hlmmelmann v. Hotaling, 40 Cal. Ill ; Wear v. Lee, 87 Mo. 358 ; Simpson 
 V. Pacific Mut. Life Ins. Co., 44 Cal. 139 ; Cawein v. Browinski, 6 Bush, 457 ; 
 Sclioolfleld V. Moon, 9 Heisk. 171 ; Alexander v. Burohfield, 7 Man. & G. 1061 ; 
 Boddington v. Scblencker, 4 Barn. & Ad. 752 ; Moule v. Brown, 4 Bing. N. 
 C. 266. 
 
§ 286 PRESENTATION OF CHECKS FOR PAYMENT. 287 
 
 cumstances the check must be forwarded for presentment on 
 the day after it is received, at the latest ; and the agent to 
 whom it is forwarded must in like manner present it at the 
 latest on the day after he receives it.' 
 
 § 286. First rule further considered. Concerning the first 
 of these rules, Chief Justice Nicholson, after remarking that 
 the cheek is " an appropriation as between the drawer and 
 holder to the latter of so much money in the banker's 
 hands," continues, " the holder of the check may allow the 
 money to remain in the banker's hands, and the drawer cannot 
 complain unless he is injured thereby. But the risk of allow- 
 ing the money to remain in the banker's hands after the ex- 
 
 J Hare v. Henty, 30 L. J., C. P., 302 ; Prideaiix v. Criddle, L. R., 4 a. B., 
 455 ; Griffin v. Kemp, 46 Ind. 172 ; Woodruff v. Plant, 41 Conn. 344 ; Burk- 
 halter ■-•. Second Nat. Bank, 42 N. Y. 538 ; Bond u. Warden, 1 Colly. 683 ; 
 Firth u. Brooks, 4 Law T., N. S., 467; Blair v. Wilson, 28 Gratt. 165. "If 
 payment is not thus regularly demanded," said Judge Lumpkin, " and the 
 bank or bankers should fail before the check is presented, the loss will 
 be the loss of tlie holder, who will make the check his own, at his sole risk, 
 by his laches. The reason for this strictness is said to be that a check, 
 unlike a bill of exchange, is generally designed for immediate payment, and 
 not for circulation, and therefore it becomes the duty of the holder to present 
 it for payment as soon as he reasonably may, and if he does not, he keeps it 
 at his own peril," Daniels n, Kyle, 5 Ga. 245 ; Himmelmann v. Hotaling, 40 
 Cal. 111. 
 
 "The law is well settled that all drafts, whether foreign or inland bills, 
 must be presented to the drawee within a reasonable time, and in case of non- 
 payment notice must be given promptly to the drawer to charge him. But what 
 is a reasonable time under all the circumstances, is sometimes a most difficult 
 question. The general doctrine is each case must depend on its own peculiar 
 facts, and be judged accordingly," Moutelius v. Charles, 76 111. 303 ; Stevens 
 V. Park, 73 Id. 387. In the absence of any qualifying circumstances the 
 holder should present the bill to the person or bank on which it is drawn, if 
 within reach of such drawee, witliiu business hours of the day next succeed- 
 ing the receipt of the paper and give notice of the dishonor to the drawer, 
 Bickford v. First Nat. Bank, 42 111. 238; Strong v. King, 36 Id. 9. "This 
 rule applies to bank checks as well as to bills of exchange, strictly so called. 
 But in case of either the rule is modified to a limited degree by the relations 
 of the parties, their circumstances, manner of doing business, and facilities 
 for making prompt presentation of the paper for payment," Bailey, 3., Allen 
 V. Kramer, 2 Brad. p. 209. But the court did not distinguish between checks 
 drawn in the same town and those out of town. 
 
288 BANKS AND THEIR DEPOSITORS. § 287 
 
 piration of tbe banking hours of the day after the check is 
 drawn rests upon the holder of the check."* 
 
 § 287. Second rule, (a) Little v. Phenix Bank? In apply- 
 ing the second rule it was held that the holder of a negotiable 
 check payable on demand, drawn in I^Tew York on a bank in 
 Mississippi, and presented for payment more than ten months 
 after its date and refused (the bank having suspended pay- 
 ment a few days before presentation, and owing the drawer), 
 could not recover against him, as the loss had been sustained 
 in consequence of the delay to present the check for payment. 
 
 {b) Cox V. Boone? On the evening of the 22d of February, 
 J. delivered to C. a check drawn on the Wheeling Savings 
 Institution. C. resided fifteen miles from Wheeling, and 
 his nearest post-office was three miles away. The mail from 
 there was tri-weekly, closing at half-past seven in the morn- 
 ing on Tuesday, Thursday, and Saturday, and arriving at 
 Wheeling before twelve. The bank was in truth insolvent 
 
 ' Schoolfleld v. Moon,' 9 Heisk. p. 173. In New York, Jndge lliller has re- 
 marked on the abundance of the authorities that the holder of a check has the 
 day after it is delivered to make a presentment for payment, Syracuse, Bing. 
 & N. Y. R. Co. V. Collins, 3 Lans. p. 31 (aff. in 57 N. Y. 641), citing Kelty v. 
 Second Nat. Bank, 52 Barb. 328 ; Johnson v. Bank, 5 Robt. 654 ; Hazleton 
 jj. Colburn, 1 Id. 345 ; S. C, 2 Abb. Pr., N. S., 199 ; Merchant's Bank v. Spicer, 
 6 Wend. 443 ; Mohawk Bank v. Broderiok, 13 Id. 133 ; Aff. 10 Id. 304. In 
 Cawein u. Browinski, 6 Bush, 457, the drawer of the check on the day of 
 drawing it had more than enough money on deposit to pay it, the bank 
 promptly paid all checks on that day, the check in question was drawn at 
 half-past twelve o'clock, the drawer, drawee, and payee resided in the same 
 city. If presented on the day of delivery it would probably have been paid, but 
 that evening the bank closed forever. The payee took it to the bank the 
 next day and demanded payment, on refusal of which he sued the drawer 
 and recovered. — The holder of a check on a drawee bank in the same town 
 may present it for payment at any time the day after it is drawn, and 
 his omission to do so sooner is no defence to the bank unless he had infor- 
 mation of its precarious condition. Bank v. Alexander, 84 N. Car. 30. — 
 When a check was drawn at two o'clock on Saturday afternoon and presented 
 for payment at eleven o'clock on Monday forenoon, the drawee was not dis- 
 charged, although his place of business was only eighty feet distant from 
 the holders. O'Brien v. Smith, 1 Black (U. S.), 99. See § 67. 
 
 s 2 Hill, 425. s 8 W. Va. 500. 
 
§ 287 PRESENTATION OF CHECKS FOR PAYMENT. 289 
 
 before the 22d of February, but continued to pay depositors 
 until Saturday noon, the 25th, when it failed and closed its 
 doors. It was decided that C. was not required to mail the 
 check to his agent or banker at Wheeling, for presentment, 
 on the day he received it ; nor to mail it on the morning of 
 the 23d in time for the half-past seven mail, as that was an 
 unseasonable hour at that season of the year, that he was not 
 negligent in delaying presentation before the failure of the 
 bank, nor was J. prejudiced by his conduct. 
 
 (c) In Woodruff v. Flant,^ Judge Foster has remarked 
 that " what is a reasonable time will depend upon circum- 
 stances, and will, in many cases, depend upon the time, the 
 mode, and the place of receiving the check, and upon the 
 relations of the parties between whom the question arises." 
 Thus, W. desiring to make a remittance to a creditor at a dis- 
 tance asked P., who had an account with the banker in another 
 place, to give him his check in exchange for bank bills, which 
 he did. P. knew why W". desired the check, and that several 
 days would elapse before it would reach the drawee. W. 
 indorsed the check to his creditor and sent it by the next 
 mail. When the check reached the drawee three days after- 
 ward, he had failed and payment was refused. W. having 
 sued P. on the check, it was decided that the presentment was 
 within a reasonable time and that he was liable. 
 
 (d) Freiberg v. Cody? A check for a small sum was given 
 late in the afternoon at a lumber camp twenty miles from the 
 bank to a merchant whose place of business was twenty-seven 
 miles by rail in another direction, and who had to be there 
 on the following day, which was Saturday. On Monday he 
 left the check at the local bank for collection, but the other 
 bank failed early that day. It was held that the delay in 
 presenting the check for payment was not such as would 
 lelease the debt for which it was given. 
 
 (e) Werk v. Mad River Valley Branch JBank? A., of Cin- 
 cinnati, who was indebted to B. & Co., of Springfield, Ohio, 
 
 1 41 Conn. 344. « 55 Mich. 108. a 8 Ohio St. 301. 
 
 19 
 
290 BANES AND THEIR DEPOSITORS. § 289 
 
 forwarded to them by mail, at their request, on Saturday, his 
 check of that date drawn on a Cincinnati bank. The check 
 was received by B. & Co. by due course of mail on Monday 
 morning and was mailed on the following day by the holder 
 to a bank in Cincinnati to be collected. It was received there 
 in due course of mail on Thursday morning, and presented 
 for payment on the same day. This was not such a want of 
 reasonable diligence as to discharge the drawers. On the other 
 hand, " a higher degree of diligence could not reasonably have 
 been expected by the drawers," nor was required by the rule 
 applicable to such a case. 
 
 § 288. Drawer can extend the time. " That the time for 
 presentment may be extended by the assent of the drawer, 
 express or implied," said Judge Foster,' "is well settled.* Here 
 the time for preseptment was extended by the assent of the 
 drawer, though not for a definite time." " Nothing is plainer 
 than that the time may be extended by the assent of the drawer, 
 express or implied."' And in Compton v. Gilman* Judge 
 Patton has remarked that " while it is settled that a check 
 should be presented promptly to the bank for payment, other- 
 wise the drawer will not be responsible, and no action can be 
 maintained against him upon thecheck, it is equally well settled 
 that the necessity for such presentment may be waived by 
 the representations and conduct of the drawer. What repre- 
 sentation and conduct are sufficient to dispense with the 
 prompt presentation of the check are matters of fact to be 
 determined under the circumstances of each case."* 
 
 § 289. Drawer not exonerated by delay. Although it is 
 the duty of the holder to present his check to the drawee in 
 accordance with the foregoing rules, yet if he neglect to do 
 
 1 Woodruff V. Plant, 41 Conn. 344. 
 
 2 Alexander v. Burchfield, 7 Man. & G. 1061. 
 
 3 Cliamplin, J., Holmes v. Eoe, 28 Northwest. Rep. 864. 
 ' 19 W. Va. 312, p. 316. 
 
 5 Devendorf v. West Virginia Oil & Oil Land Co., 17 W. Va. 135 ; Commer- 
 cial Bank V. Hughes, 17 Wend. 94 ; Franklin o. Vanderpool, 1 Hall, 78 ; Cox 
 V. Boone, 8 W. Va. 500. 
 
§ 290 PRESENTATION OF CHECKS FOK PAYMENT. 291 
 
 s6, the drawer is not exonerated from payment unless he can 
 prove an injury from the delay. " The rule is settled," says 
 Judge Miller,* " that in case of a check, the drawer is to 
 be treated the same as a principal debtor, and he is not dis- 
 charged by any laches [or negligence] of the holder in not 
 making due presentment thereof, or in not giving him notice 
 of dishonor, unless he has suffered some loss or injury thereby 
 and then only pro tanto} It must, however, be made to appear 
 that no damage or injury was caused in consequence of the omis- 
 sion."* The drawee of a negotiable check is not discharged 
 from liability by the delay of the holder to make presentment 
 and give notice of his dishonor, unless he has suffered loss 
 thereby, and then only pro tanto. If the drawee remains sol- 
 vent and the fund on which the check is drawn is unaffected 
 by the delay, the liability of the drawee continues in full force. 
 The bona fide holder is not affected by secret equities existing 
 between antecedent parties.* 
 
 § 290. What causes excuse presentation. As between the 
 drawer and holder, therefore, if the former has not sustained 
 injury by delay in presenting and demanding payment of his 
 check, he will not on that ground be exonerated from paying 
 it. In applying the principle the question is, has the drawer 
 suffered from delay in presenting his cheek? Putting the 
 question in another form, when is the holder excused from 
 not presenting a check to the drawee as the foregoing rules 
 require ?" 
 
 » Syracuse, Bing. & N. Y. R. Co. v. Collins, 3 Lans. p. 32. 
 
 2 Citing Harbeck «. Craft, 4 Duer, 122. 
 
 ' Commercial Bank v. Hughes, 17 Wend. 94 ; Little v. Phenix Bank, 2 
 Hill, 425 ; Murray v. Judah, 6 Cow. 484 ; Gough v. Staats, 13 Wend, p 552, 
 citing Rickford v. Ridge, 2 Camp. 537 ; Robson v. Bennett, 2 Taunt. 389 ; 
 Beeching v. Gower, 1 Holt, 313 ; Cromwell v. Lovett, 1 Hall, 56 ; Woodin v, 
 Prazee, 38 N. Y. Sup. Ct. 190 ; Church v. Farnham, 1 Sheld. 393 ; Scott v. 
 Meeker, 20 Hun, 161. 
 
 < Stewart v. Smith, 17 Ohio St. 82. 
 
 5 Elting V. BrinkerhoflF, 2 Hall, 459 ; Hoyt v. Seeley, 18 Conn. 353; Smith 
 V. Jones, 2 Bush, 103 ; Cawein v. Browinski, 6 Bush, 457 ; Finer v. Clary, 
 17 B. Mon. (Ky.) 645 ; Emery v. Hobson, 63 Me. 32; Cogswell v. Rockingham 
 
292 BANKS AND THEIR DEPOSITORS. § 290 
 
 First. When drawer has no funds. In the first place he is 
 excused when the drawer has no funds with the drawee to pay 
 it. In the words substantially of Judge Christian, in Bell v. 
 Alexander :* " When the drawer at the date of the check, or 
 at the time of the presentment of it for payment, has no funds 
 in the bank, or if, after drawing the check, and before its pre- 
 sentment for payment or dishonor, he has withdrawn his funds, 
 the drawer remains liable to pay the check, notwithstanding 
 the lapse of time." In another case the holder of a bank 
 check did not present it for payment until more than two 
 years after receiving it, omitting meanwhile to give any notice 
 to the drawer of non-payment. The drawer in truth never 
 had funds in the bank sufficient for the payment of the check 
 before it was protested, except at one time, and then they 
 were immediately drawn by himself. The bank was not in- 
 solvent and the drawer sustained no loss or injury from the 
 delay in the presentment or by the want of notice of iion- 
 payment. It was held that neither the delay in the present- 
 ment nor the notice of non-payment'' exonerated the drawer 
 from liability.' 
 
 Second. When funds are withdrawn, (a) Deener v. Brown.* 
 
 * 
 
 Ten-Cents Sav. Bank, 59 N. H. 43. In Jones v. Heiliger, 36 Wis. 149, the 
 payee presented the check on the next business day after receiving it, and 
 the day afterward notified the drawer of its dishonor and of his liability 
 thereon. This was held to be due diligence in the absence of any proof that 
 the drawer was injured by the delay, especially as it appeared that when the 
 check was given the drawee had already suspended payment. 
 
 1 21 Gratt, 1, p. 6. 
 
 2 If the maker of a check payable instantly has no funds at the time In the 
 bank in which it was drawn, the check while unexplained is regarded as a 
 fraud, and the holder can sustain an action thereon, without presenting the 
 same, or giving notice, True v. Thomas, 16 Maine, 36. "A check drawn 
 upon a bank in which the drawer has no funds need not be presented at all 
 in order to sustain an action upon it," Foster v. Paulk, 41 Maine, p. 428; 
 Franklin v. Vanderpool, 1 Hall, 78. When the maker of a check has no 
 funds in the bank on which It is drawn he is not entitled to notice of protest, 
 Fitch V. Redding, 4 Sand. 130 ; Sterrett v. Rosencrantz, 3 Phila. 54. See § 73. 
 
 » Hoyt V. Seeley, 18 Conn. 353 ; Shafi'er v. Maddox, 9 Neb. 205. 
 ' 1 MacArthur, 350. " If a check is made upon a supposed depository and 
 the drawer had no funds and made no provision to meet the check, or had 
 
§290 PRESENTATION OF CHECKS FOll PAYMENT. 293 
 
 If the maker should withdraw from the bank his entire de- 
 posit against which a check is drawn, he is not injured by 
 delay in presenting it, nor by lack of formal notice of its non- 
 payment before an action is brought thereon.* In one instance 
 a person drew his check for the accommodation of B. who 
 transferred it to D., but who did not present it for payment 
 for more than five months. When he did so the drawer had 
 no funds in the bank, though he had had for three months or 
 more, and if the check had been presented during that period 
 it would have been paid. Having been sued, the drawer 
 claimed that he was discharged in consequence of the holder's 
 delay in presenting it for payment. The court said : " By the 
 check he had appropriated its amount to this holder and had. 
 no right to withdraw it afterward. The delay in presenting 
 the check was at the risk of the holder. If the bank had 
 failed the loss would have been his. But the money so set 
 over was afterward withdrawn by the drawer of the check 
 himself, and thus, after having taken the money, he is now 
 attempting to throw the loss on the party whose money he 
 unjustly appropriated." He therefore was liable. 
 
 (6) If bank refuse to fay what holder must show. If a bsink 
 refuse to pay a check on the ground of inadequate funds, the 
 holder must show that at the time of presenting it for pay- 
 ment the bank had enough on deposit to the drawee's credit 
 to pay the check. It is not enough to show that the drawer 
 made adequate deposits on the same day as they may have 
 been made subsequent to the presentment of the check." 
 
 (e) St. John v. Homans.^ On the 16th of February, 1842, 
 A. drew his check on the Bank of Missouri for $1000. On 
 
 drawn them out, he will not be permitted to take advantage of want or dili- 
 gence in its presentation. To do it would enable him to work a fraud, to 
 pocket his original money and the consideration of the cheek." Bliss, J., in 
 Moody V. Mack, 43 Mo. 210. 
 
 » Emery v. Hobson, 63 Me. 32. 
 
 " International Bank v. Jones, 15 Brad. 594; see Richardson v. Inter- 
 national Bank, 11 Id. 582. 
 
 a 8 Mo. 382. 
 
294 BANKS AND THEIK DEPOSITORS. § 290 
 
 the 24th of the same month it was presented for payment, 
 which was refused except in bills of the State Bank of Illinois. 
 At the time the check was drawn, A. had on deposit in the 
 bank $1702.69 in bills of the other. On the 27th of the same 
 month he withdrew his deposits, they having depreciated in 
 value between the delivery of the check and its presentment 
 for payment. All of the parties resided in St. Louis. It was 
 decided that the holder could not, under the circumstances, 
 recover the check from the drawer. 
 
 Third. Insdlveticy of drawee. The insolvency of the drawee 
 within the time given to the holder for making presentment, 
 will excuse him from doing this. Thus, C. oftered to pay 
 on account, to his creditor's agent in money, but at the latter's 
 request gave him a check which was drawn on a bank in 
 which he had a sufficient deposit. The bank paid drafts as 
 appeared subsequently on the same day and during an hour 
 on the morning of the succeeding day ; it then became insol- 
 vent, and fifteen days afterward was declared a bankrupt. 
 'So presentation of the check was made at the bank or demand 
 of payment on C, nor did he have notice of non-payment 
 until two weeks after the delivery of the check. JSTeverthe- 
 less, the principal recovered.' "When one knowingly draws 
 his cheek on a bank which is insolvent and cannot pay, but 
 which if solvent, and able to pay, is not indebted to him 
 even on a balance of account, he is not in a condition to be 
 injured by failure to receive notice of dishonor.^ 
 
 (a) Morrison v. McCartney.' The 2d of October, A. drew 
 a check on B. a banker, in favor of C, who, on the same day 
 transferred it to D. The next day B. suspended payment. 
 On the 6th of October, A., who had previously begun suits 
 by attachment against B. to recover the amount of his de- 
 posits, compromised them and received the same. The check 
 was not presented until nearly the end of January, the follow- 
 
 > Syracuse, Bing. & N. Y. R. Co. o. Collins, 3 Lans. 29. 
 
 2 Warrensburg Co-operative Build. Ass'u v. ZoU, 83 Mo. 94, 
 
 ' 30 Id. 183. 
 
§ 290 PRESENTATION OF CHECKS FOR PAYMENT. 295 
 
 ing year, when payment was refused. The check was duly 
 protested and notice was giv^en. In a suit by D. the holder, 
 against A. the drawer, the latter was not discharged py the 
 delay. 
 
 Fourtb. When usage is followed. " The holder of a check 
 is in the exercise of due diligence when he presents it for 
 payment in accordance with the usage of the bank in the 
 place where it is made payable, and of the persons who have 
 accounts with such banks, provided such usage is well estab- 
 lished, lawful and reasonable in its character, uniform and 
 general in its application, known and recognized by the mer- 
 cantile and trading community, and by the parties to the 
 check. When such a usage exists, those who make contracts 
 within its purview are presumed to have made them with 
 reference to it ; and it is deemed to form a part of their con- 
 tracts, as much so as though it were actually incorporated 
 into them."^ 
 
 (a) Marrett v. JBrackett.^ The foregoing principles were 
 applied in the following case ; A well-known usage existed 
 among the banks in Portland, Maine, where all checks were 
 exchanged at a " clearing house" held every morning by the 
 clerks representing each bank. The exchange included 
 only checks held by each bank at the close of the previous 
 day's business ; and each bank receiving checks from the 
 clearing house, had the right by usage, immediately to return 
 those which were not covered with deposits. Persons also 
 having bank accounts deposited in their own bank checks 
 received by them on any other. The deposit was made on 
 the day of receiving the check if in time to do so, but if the 
 bank was closed, the check was deposited the next day. M., 
 who resided in Portland, was the holder of a note against B., 
 and requested its payment. B. sent C.'s check, which was 
 duly received, but too late for deposit on the same day. This, 
 however, was done the next day, and on the morning of the 
 
 1 Dickerson, J., Marrett v. Brackett, 60 Me. p. 527. 
 s 60 Id. 524. 
 
296 BANKS AND THEIR DEPOSITORS. § 290 
 
 third, it was presented for payment through the clearing house, 
 but was not paid because C. had failed. M. then brought a 
 suit a§jp,inst B. on the note, and recovered, the court declaring 
 that the taking of the check was not payment, and, further- 
 more, that the plaintiff was not negligent in presenting the 
 check by agreement of the parties as interpreted by the usage 
 in making presentment.' 
 
 (6) So in Hooker v. Franklin^ it was held that a bank is 
 not negligent in presenting the check of a depositor for pay- 
 ment on the following day, if this be the usage of business. 
 Hence, in such a case, if the check be not paid when presented 
 after due notification of presentment and refusal of the drawee 
 to pay, the depositor is liable thereon, although the drawer had 
 enough funds in the bank on which it was drawn during the 
 day it was deposited and subsequently. 
 
 (e) Usage not universal. But usage or custom does not af- 
 fect the rules of presentment so much everywhere. Thus, in 
 Missouri, the custom of banks in making payments through 
 the clearing house does not alter the rule that a check must 
 be presented to the bank on which it is drawn, at least during 
 banking hours of the next succeeding business day.^ 
 
 1 Williams v. Gilman, 3 Green. 276 ; Leaoh v. Perkins, 17 Me. 462. Judicial 
 notice must be taken of the ordinary rules and necessities of banking busi- 
 ness. " Banks have a right to expect their depositors to know these usages 
 and to conform to them. And they have a right to rely to a reasonable extent 
 on the presumption that their customers are thus dealing with them." 
 American Nat. Bank v. Bushey, 45 Mich. 135, p. 140. " Where the law 
 requires a certain thing to be done contract or usage may omit it by provid- 
 ing a substitute. But if the thing required be done, there is of course, no 
 need for the substitute." When there has been due presentment of a check 
 to the drawee and payment demanded and refussd, the drawer, if otherwise 
 liable, is not disohai-ged because of a failure to present the check at the 
 clearing house, in accordance with a mercantile usage, though it would have 
 been paid had it been so presented, Kleekamp v. Meyer, 5 Mo. App. 444. 
 
 2 2 Bosw. 500. 
 
 ' Rosenblatt v. Haberman, 8 Mo. App. 486 ; Alexander v. Burchfield, 1 
 Car. & M. 75 ; S. C, 7 Man. & G. 1061 ; Holmes ..-. Koe, 28 Northwest. Rep. 
 864 ; Davis v. Benton, 2 West L. Mo. 434 ; see Merchants' Nat. Bank v. 
 Procter, 1 Cin. S. C. Rep. 1. See § 426, note. 
 
§ 291 PRESENTATION OF CHECKS FOE PAYMENT. 297 
 
 Fifth. 'When prevented hy extraordinary causes. When the 
 holder of a check is prevented by a state of things beyond 
 his control from presenting or sending it to be presented for 
 payment, the delay is excused. But when the delay is for 
 three months or more the reason must be shown. The re(5[uire- 
 ment of due diligence of the holder will not be evaded by 
 showing that the drawer had no funds in the hands of the 
 drawee, unless it be made to appear that this want of them 
 was the result of some fraudulent act of the drawer or in- 
 dorser. If the maker or indorser has been guilty of some 
 fraudulent act concerning the check, for example, in not 
 having funds in the hands of the supposed depository, and 
 has made no provision to meet his check or has fraudulently 
 withdrawn his funds before the presenting of it, he cannot 
 avail himself of the negligence of the payee or holder as a 
 defence against the check.' 
 
 (a) iRemoval of bank. If the holder of a check be not able 
 to present it by I'eason of the removal of the bank and the 
 condition of the country, he should give notice of the fact to 
 the drawer and offer to return it. And if he fail to do so 
 the drawer is not liable." If the holder of a check be dis- 
 abled so that he cannot go in person to present the check for 
 payment, yet if he can send it by mail he will not be excused 
 for not presenting it.* 
 
 § 291. Presentation aflfeoted by agreement. If it is agreed 
 to send a check to another city to be cashed, the drawer will 
 remain liable if presentation for payment be made within a 
 reasonable time.^ And if the drawer of a check stop pay- 
 ment of it, he is not entitled to notice of non-payment ;° but 
 the payee cannot sue on the original cause of action without 
 accounting for the check.* 
 
 1 Moody V. Maok, 43 Mo. 210 ; Linville v. Welch, 29 Id. 203 ; Adams v. 
 Darby, 28 Id. 162 ; Morrison v. McCartney, 30 Id. 183. 
 
 ' Purcell V. Allemong, 22 Gratt. 739. 
 
 3 See Bell v. Alexander, 21 Gratt. 1. 
 ' * Stephens a. McNeill, 26 Barb. 651. 
 
 6 Purchase v. Mattison, 6 Duer, 587 ; Jacks v. Darrin, 3 E. D. Smith, 548. 
 
 6 Woodin V. Frazee, 38 N. Y. Sup. Ct. 190. 
 
298 BANKS AND THEIR DEPOSITORS. § 297 
 
 § 292. Effect of drawee's direction. If a bank direct that 
 checks drawa thereon be presented for payment to another 
 bank, and the holder of a check complies with the direction, 
 and payment be refused, the drawer is discharged whenever 
 notice of non-payment is not given, though the check be pre- 
 sented to the drawees on the following day.' 
 
 § 293. Presentation by public officer. If a public officer, a 
 county treasurer, for example, receive from the State treasurer 
 a bank check he must present it within a reasonable time, like 
 any other holder, and if he neglect to do this and the bank 
 fails and a loss is incurred he can be held therefor." 
 
 § 294. Effect of acceptance on sureties. The accepting of 
 a check by writing the word " accepted" thereon and by pay- 
 ing part of the amount is not such a change of the instru- 
 ment as to work a discharge of the drawer and its sureties. 
 This would be the case if the acceptance were conditional, fix- 
 ing some other time or mode of payment than is implied in 
 the language and terms of the check.* 
 
 § 295. Presentation through mail. If the holder sends a 
 check by mail to the drawee for collection he makes the 
 drawee his agent, and must bear any loss arising after the 
 time when the check could have been presented by express 
 or other usual method.* 
 
 § 296. Holder must prove no loss by delay. Though delay 
 in presenting a check will not discharge the drawer unless he 
 has been injured, the holder in such a case is obliged to show 
 affirmatively that no loss has happened to the drawer.* 
 
 § 297. Not dishonored by delay in presentation. Although 
 payable on demand, checks are not regarded as dishonored or 
 overdue on the day or immediately after the day of their date. 
 
 1 East Eiver Bank v. Gedney, 4 E. D. Smith, 582. 
 
 2 State ». Gates, 67 Mo. 139. 
 
 " Warrensburg Co-operative Build. Ass'n ». Zoll, 83 Mo. 94 ; Taylor v. New- 
 man, 77 Id. 265. 
 
 * Farwell v. Curtis, 7 Biss. 160. 
 
 6 Little V. Phenlx Bank, 2 Hill, 425 ; Griffin v. Riblet, 6 N. Y. Leg. Obs. 421 ; 
 Willits ». Payne, 43 111. 432 ; Stevens v. Park, 73 Id. 387. 
 
§ 296 PRESENTATION OF CHECKS FOE PAYMENT. 299 
 
 " A holder who takes a check in good faith and for value 
 several days after it is drawn, receives it without being sub- 
 ject to defences of which he has no notice before or at the 
 time his title accrues. This is the rule of law as settled by 
 uniform practice and the current of decisions in the courts of 
 the United States."' Hence a check thus taken ten days 
 after it was drawn was not subject to defences of which the 
 taker had no notice before receiving the check. And when 
 a check on a Boston bank was sent from that place by mail 
 to Rochester, New York, and brought there four days after- 
 ward, and two days later was presented for payment, the 
 check was regarded as not subject to equities that might exist 
 between the original parties.^ 
 
 (a) Unless kept very long. " A check may be retained so 
 long after its date, without presentation, as to cast discredit 
 on it," says Chief Justice Mercur. On one occasion a check 
 was drawn and delivered on Tuesday or Wednesday. The 
 drawer, having no money at the time, requested the payee 
 to hold it until the following Monday or Tuesday, or three 
 days after its date ; thie payee passed it to another person for a 
 valuable consideration. This was regarded not long enough 
 to put the holder on inquiry with respect to the consideration 
 for the check.' 
 
 (b) Remarks of Woodward, J. Again, Judge Woodward in 
 the well-considered case of Lancaster Bank v. Woodward,^ 
 has remarked that "checks are no doubt often negligently 
 retained and presented long after they should be ; but when a 
 bank sees that a customer appointed a day in his check for 
 its payment, that that day has long since passed, and that no 
 funds have been deposited to meet it, the bank must be held 
 to the rule in regard to overdue paper, and be presumed to 
 
 1 Bigelow, C. J., in Ames v. Meriam, 98 Mass. 294, p. 296, citing. In re Brown, 
 2 Story, 502. 
 
 ' First Nat. Bank v. Harris, 108 Mass., 514; see Stewart v. Smith, 17 Ohio 
 St. 82. See § 61; 
 
 ' Laber v. Steppaoher, 103 Pa. p. 83 ; Walker v. Geisse, 4 Whar. p. 256. 
 
 • 18 Pa. 357, p. 361. 
 
300 BANKS AND THEIR DEPOSITORS. § 298 
 
 have taken it on the credit of the indorser." In that case the 
 maker of the check paid it to the holder the day before the 
 time appointed for payment. "As he had no funds in the 
 Lancaster Bank when he drew the check he was bound to 
 place them there before it became payable, or pay the amount 
 directly to the holder." He chose the latter alternative, but 
 did not require the delivery of the check to himself as he 
 ought to have done. More than a year after the date of pay- 
 ment and actual discharge of the same, the Lancaster Bank 
 received it from the Penn Township Bank. Two days after- 
 ward the Lancaster Bank paid it, or rather placed it to the 
 credit of the other, and subsequently claimed " to have been 
 an innocent indorsee without notice." It was declared that 
 these circumstances were sufficient to put the bank on inquiry, 
 and therefore it could not thus be regarded. 
 
 § 298. Release of drawer by tendering payment. "The 
 presenting of a check for payment implies that the holder of 
 it desires and is ready and willing to accept payment. . , If he 
 should present it for the sole purpose of ascertaining whether 
 the signature was genuine, or whether the drawer had funds 
 to his credit, or merely for the purpose of being identified as 
 the person entitled to payment, not intending then to present 
 it for payment, it is clear that this would not constitute a de- 
 mand of payment, which in its very nature imports willingness 
 on the part of the holder to accept the money at that time. But 
 if the check is presented for payment with the present intention 
 in the mind of the holder to accept the money if tendered, 
 this must be deemed to be a demand of payment for all pur- 
 poses affecting the rights of the drawer, even though the 
 holder should afterward change his purpose and decline to 
 accept the money when tendered by the bank. Having once 
 demanded payment in due form and within the proper time, 
 and the bank being then and there ready and willing and 
 offering to pay the check, the holder is not at liberty after 
 this to retract or waive his demand and decline to accept 
 payment without thereby releasing the drawer from further 
 liability on the check. If the holder declines to accept pay- 
 
§ 301 PRESENTATION OF CHECKS FOE PAYMENT, 301 
 
 merit when it is tendered on a proper demand, the liability of 
 the drawer ceases, for the reason that his undertaking was 
 that the check would he paid when payment should be first 
 demanded in due form and within the proper time ; but he 
 does not undertake that it will be paid on a second demand 
 when payment has been tendered and refused on a prior de- 
 maud made in due form and within the proper time."' 
 
 § 299. Presentation of irregular check. If an instrument 
 be not a check, though having the proper form, because it is 
 not payable in lawful money, presentment should be made 
 and notice given to the drawer in the event of non-payment, 
 but protest is not necessary.^ But a check given for borrowed 
 money and held as evidence of the loan, need not be pre- 
 sented to the drawee.' 
 
 § 300. Presentation by porter. The delivery of a bank 
 check by one bank to the porter of another on which it is 
 drawn, and the return of the same as not good, accompanied 
 by evidence of the invariable practice of the porter to present 
 checks thus received, and to return them if dishonored on 
 the same day that they are delivered to him is sufficient 
 proof of presentment to satisfy the law.* 
 
 § 301. Indorsed check, (a) Must be presented in reasonable 
 time. As between the holder of a check and an indorser or 
 third person, payment must be demanded in a reasonable 
 time.'' Said Judge Sutherland in Gough v. Staats :^ " Whei'e 
 there is no dispute about the facts whether the presentment is 
 within a reasonable time or not is a question of law and must 
 in some degree depend upon the particular circumstances of 
 each case. Where there are no peculiar circumstances in the 
 case, the rule seems to be settled that no laches can be imputed 
 to the holder if the check is presented on the day next after 
 
 1 Crockett, J., Simpson v. Pacific Mutual Life Ins. Co., 44 Cal. 139, p. 143. 
 
 2 Bank of Mobile v. Brown, 42 Ala. 108. 
 » Currier v. Davis, 111 Mass. 480. 
 
 * Merchants' Bank v. Spicer, 6 Wend. 443. 
 
 « Cogswell V. Rockingham Ten-Cents Sav. Bank, 59 N. H. 43. 
 
 « 13 Wend. p. 552. 
 
302 BANKS AND THEIR DEPOSITORS. § 301 
 
 that on whicli it was given,"' In Mohawk Bank v. Broder- 
 ick,^ Chief Justice Savage, after quoting with approval from 
 the opinion of the court in another case,* that " checks are 
 considered as having the character of inland bills of exchange, 
 and the holder thereof, if he would preserve his right to 
 resort to the drawers and indorsers, must use the same dili- 
 gence in presenting them for payment, and in giving notice 
 of the default of the drawee, that would be required of him as 
 the holder of an inland bill," continues : " With regard to 
 inland bills of exchange and promissory notes payable on 
 demand, the only rule as to when payment must be demanded 
 is that it must be done within a reasonable time. What shall be 
 deemed a reasonable time nmst in some measure depend on the 
 circumstances of each particular case. In this court, whether 
 the presentment is made within a reasonable time is held to be a 
 question of law, where there is no dispute about facts, in some 
 other courts it is held to be a question for the jury." After 
 reviewing several cases he concludes : " The true rule undoubt- 
 edly is that a check, to charge an indorser, must be presented 
 with all the dispatch and diligence which is consistent with 
 the transaction of other commercial concerns."* Hence, when 
 a check Was received on the 14th of January drawn on 
 a bank sixteen miles from the receiver's residence, between 
 which places there was a daily mail, and it was not presented 
 until February 6th, the holder was declared to be negligent 
 in presenting the check and the indorser was discharged." 
 
 1 Citing Riokford v. Ridge, 2 Camp. 637 ; Robson v. Bennett, 2 Taunt. 389 ; 
 Beeching v. Gower, 1 Holt. 313 ; Cromwell v. Lovett, 1 Hall, 56. 
 
 » 10 Wend. p. 307. 
 
 ' Merchants' Bank v. Spicer, 6 Id. p. 44.5. 
 
 * ' 'As it is one of the peculiar characteristics of a bank check that it has 
 no days of grace, it is necessarily due as soon as it is drawn and delivered to 
 the payee or holder. As between the holder and indorser, therefore, the 
 holder is bound to present it for payment immediately or at least within a 
 reasonable time, according to the relative localities of the parties, otherwise 
 the Indorser ceases to be liable," Chief Justice Nicholson, Schoolfield t». Moop, 
 9 Heisk. 171, p. 174. 
 
 ' Mohawk Bank v, Broderick, 10 Wend. 304, also on appeal, 13 Id, 133. 
 
§ 302 PRESENTATION OP CHECKS FOR PAYMENT. 303 
 
 (6) Three days too late. In another case in which all the par- 
 ties to a check lived in the same place the omission for six 
 days to present it for payment discharged the indorser.' So 
 likewise a check dated and drawn on a bank in Boston and 
 presented three days afterward, was presented too late to 
 charge the indorser.^ 
 
 (c) Post-dated check, and check due Sunday. With respect to a 
 post-dated check, presentation will be sufficient if made within 
 a reasonable time to charge the indorsers.' If due on Sunday, 
 the presentation should be made on the following day ; if 
 done on Saturday this would not be valid/ 
 
 {d) Indorser discharged though not injured. Although the 
 indorser may not have been injured by the delay in present- 
 ing it within a reasonable time, yet he is discharged. " The 
 law presumes he has been prejudiced, and therefore his lia- 
 bility cannot be continued."' The indorser of a check drawn 
 for his accommodation, and who is bound to provide to meet 
 it, is not entitled to notice of non-payment.' 
 
 § 302. Notice. The next point to be considered is the no- 
 tice. As a bank check is essentially the same thing as a do- 
 mestic bill of exchange it is governed by the same laws with 
 respect to notice.' 
 
 (a) To drawer without fands. If the drawer has no funds at 
 the drawee's to pay his check he is not entitled to notice of 
 non-payment, nor is he discharged by its non-presentation 
 within a reasonable time.* The reason for the rule, as stated 
 long ago by Mr. Justice BuUer, is that the drawer could 
 not be injured by want of notice.' 
 
 1 Gough V. Staats, 13 Wend. 549. 
 
 ' Veazie Bank v. Winn, 40 Maine, 60. 
 
 " Middletown Bank v. Morris, 28 Barb. 616. 
 
 « Salter v, Burt, 20 Wend. 205. 
 
 5 Gough V. Staats, 13 Id. 549 ; Murray v. Judah, 6 Cow. 484 ; Cruger 
 V. Armstrong, 3 Johns. Cas. 5 ; Conroy v. Warren, Id. 259 ; Aymar ;;. Beers, 
 7 Cow. 705. 
 
 6 Williams v. Hood, 1 Pliila. 205. 
 
 ' Shrieve v. Duokham, 1 Littell, 194 ; Humphries v. Bicknell, 2 Id. p. 299. 
 * Eichelberger ». Finley, 7 Harris & Johns. 381. 
 9 Bickerdike v. BoUman, 1 Term, 405. 
 
304 BANKS AND THEIR DEPOSITOKS. § 302 
 
 (b) To draioer with funds. But if the drawer has funds in 
 the bank, he is entitled to notice of non-payment.' Mere de- 
 lay, too, in giving notice to him of dishonor does not discharge 
 him, but he is entitled to whatever damages he may have sus- 
 tained.' "When a check has been presented and payment has 
 been refused, and notice of non-payment duly given, the 
 drawer is as much liable thereon as he would be on a bill of 
 exchange. The holder can sue on this or on the debt for 
 which the check was given in payment.' 
 
 (c) To indorser. To charge an indorser with notice of pre- 
 sentation and protest, the notary must direct his notice to the 
 indorser at his proper post-office address, whenever thisiis done 
 by the use of the mail, otherwise the indorser is discharged.^ 
 
 A check drawn on Sunday, but with the date of the next 
 day, and delivered on Sunday, was regarded as dated on Mon- 
 day, and consequently all of the next day was left to send it 
 by mail.* 
 
 1 Flemming v, Denny, 2 Phila. 111. 
 
 2 Henshaw v. Root, 60 Ind. 220 ; Griffin v. Kemp, 46 Id. 172. 
 
 3 Henshaw v. Root, 60 Ind. 220 ; Griffin v. Kemp, 46 Id. 172. 
 
 * Northwestern Coal Co. v. Bowman, 28 Northwest. Rep. 496. In Daniel on 
 Negotiable Instruments, the cases are collected relating to notes, § 1022. 
 5 Braun t;. Kimberlin, Hamilton Co. Dis. Ct., Ohio, 9 Reo 405. 
 
303 IN WHAT MONKY SHALL DEPOSITS BE PAID. 305 
 
 CHAPTER XI. 
 
 IN WHAT MONET SHALL DEPOSITS BE PAID. 
 
 Formerly, when the State banks issued notes which circu- 
 lated as money and which were of varying value, the question, 
 in what money or funds should a deposit or check be paid fre- 
 quently arose. A second class of questions was occasioned 
 by the events of the civil war, beside the issue of legal tender 
 notes by the national government. Last, there is another 
 class of questions, of a more permanent nature, with which 
 we will begin the chapter. 
 
 § 303. Counterfeit notes. One of these questions relates to 
 the receiving of a counterfeit note from a bank in payment 
 of a check. Can it be returned ? this was long ago answered 
 in the affirmative. Said Judge Kent : " It would be mat- 
 ter of regret if the law obliged us to regard a payment in 
 counterfeit, instead of genuine bank bills as a valid payment 
 of a debt, merely because the creditor did not perceive and 
 detect the false bills at the time of payment. The reasonable 
 doctrine, and one which undoubtedly agrees with the common 
 sense of mankind, is laid down by Paulus in the Digest, and 
 has been incorporated into the French law. He says that if a 
 creditor receive by mistake anything in payment, diiferent 
 from what was due, and upon the supposition that it was the 
 thing actually due, as if he receive brass instead of gold, the 
 debtor is not discharged, and the creditor upon offering to 
 return that which he received, may demand that which is 
 due by the contract."* The receiver, however, must return 
 the counterfeit note within a reasonable time after discovering 
 the forgery. " But what shall be considered a reasonable 
 
 • Markle v. Hatfield, 2 Johns. 455 ; Boyd v. Mexico Southern Bank, 67 Mo. 
 537. 
 
 20 
 
306 BANKS AND THEIR DEPOSITORS. § 305 
 
 time must necessarily depend on the situation of the parties 
 and the facts and circumstances of each case."' 
 
 § 304. Genuine but worthless notes. When the notes paid 
 are genuine, but worthless, though this is not known either 
 by the payee or receiver, can they be returned? On this 
 point the Supreme Court of Michigan has declared that no 
 settled rule exists. Unhappily, that court did nothing in the 
 way of deciding what the rule ought to be.' 
 
 § 305. Must bank return an equivalent, (a) Rule in Illinois. 
 In Illinois if a bank receive a general deposit it must pay 
 money of equal value.* This rule has been applied in North 
 Carolina. A bank there in 1860 gave to a depositor a cer- 
 tificate stating that he had deposited a sum " in current notes 
 of the different banks of the State," which was " payable in 
 like current notes to the depositor, or to his order on return 
 . of the certificate." It was declared to be liable for the whole 
 amount with interest from the date of the demand, in cur- 
 rency of the United States.* And when a deposit account is 
 credited with " dollars," evidence of custom will not be ad- 
 mitted to prove that the liability can be discharged in some- 
 thing else." 
 
 » Simms v. Clark, 11 III. 137 ; Boyd ». Mexico Southern Bank, 67 Mo. 637 ; 
 Howe ». Huntington, 15 Me. 350 ; True v. Thomas, 16 Id. 36 ; Cocker v. 
 Franklin Hemp & Flax Manuf. Co., 3 Sumner, 530 ; Ellis v. Thompson, 3 Mees. 
 & Wels. 445 ; Burrill v. Watertown Bank, 51 Barb. 105 ; Union Nat. Bank 
 i: Baldenwick, 45 111. 375. 
 
 2 Atwood V. Cornwall, 28 Mich. p. 340. 
 
 » Marine Bank u. Birney,'28 111. 90. 
 
 * Fort V. Bank, Piiil. (N. C.) 417. The oases of Hamilton v. Eller, 11 Ire. 276, 
 and Lackey v. Miller, Phillips, 26,were declared to be distinguishable from 
 the above case. " Eller owed Hamilton the sum of $150, which Hamilton 
 agreed to receive ' in good trade, to be valued etc.,' provided it wiis delivered 
 on or before the first day of January, 1844. Eller failed to deliver the trade 
 and was obliged to pay the $150. Miller in 1865 bought a cow of Lackey 
 worth $20, in good money, and gave his note for ' $71 in current bank notes.' 
 It was held that it did not create a, debt of $71 in money, or United States 
 coin, but was a promise to pay ' seventy-one current bank money dollars,' 
 and a distinction is taken between a promise to pay in money, and a promise 
 to pay in currency which was even still more depreciated," Phelps v. Town, 
 14 Mich. 374. 
 
 ' Marine Bank v. Birney, 28 111. 90 ; Marine Bank v. Chandler, 27 Id. 525. 
 
§ 305 IN WHAT MONEY SHALL DEPOSITS BE PAID. 307 
 
 (6) Natioml rule. The United States Supreme Court has 
 declared a different rule. " Where the deposit is general," 
 said Judge Clifford,* "and there is no special agreement 
 proved, the title of the money deposited, whatever it may be, 
 passes to the bank, and the transaction is unaffected by the 
 character of the money in which the deposit was made, and 
 the bank becomes liable for the amount as a debt, which can 
 only be discharged by such money as is by law a legal ten- 
 der." This principle was applied by the United States 
 Supreme Court in the following case: A deposit of bank- 
 notes was made with the bank that issued them, which at 
 that time were worth one half of their nominal value. The 
 bank was required by its act of incorporation to redeem its 
 notes ill gold and silver. Subsequently, the depositor called 
 for the payment of his deposit in gold, but the cashier offered 
 to pay only notes equivalent to those deposited. In the end 
 the bank was obliged to pay the amount in gold or silver 
 demanded by the depositor. The court, after saying that the 
 language of the certificate of deposit given by the bank was 
 expressive of a general and not a special deposit, added, that 
 the transaction " was equivalent to receiving and depositing 
 the gold or silver; if the bank did not so understand it, 
 nothing would have been easier than to refuse to take the 
 money as a formal deposit ; and the holder of the bills would 
 then have been put to his action upon the bills themselves, 
 in which case he would certainly have received the gold or 
 silver to the amount upon the face of the bill."^ 
 
 (c) Distinction between the two. The distinction between the 
 two rules may appear sharper if they are brought closely 
 together. One requires the payment of money equal in 
 market value to that received — to render to the creditor an 
 equivalent in money for that received ; the other rule requires 
 the payment of the same amount of money without regard to 
 its market value. In other words, a general deposit of one 
 
 1 Thompson v. Riggs, 5 Wall. p. 678. 
 
 2 Bank- of Kentucky v. Wister, 2 Peters, 318; Wallace v. State Bank, 2 
 Eng, (Ark.) 61. 
 
308 BANKS AND THEIR DEPOSITORS. § 305 
 
 hundred gold dollars could be satisfied by paying one hun- 
 dred paper dollars, though the latter might not exchange 
 perhaps for fifty gold ones. 
 
 {d) National rule applied in Louisiana. In Louisiana, 
 likewise, a general deposit, though consisting of gold coin, 
 was satisfied by paying the same number of dollars in lawful 
 money whether they were coins, notes, or_ some other thing.* 
 The court said that where the simple relation of creditor and 
 debtor only existed they could not recognize any distinction 
 between a debt which sprung from an irregular deposit of 
 gold, and one which sprung from an irregular deposit of any 
 other lawful money. "N^or can we see why such a debt 
 contracted, for example, in 1860, should now be satisfied by a 
 judgment in lawful money, and one contracted in 1864, 
 should not be satisfied in the same way. This may seem a 
 harsh . doctrine in this case but such hardships are apt to 
 come when any thing else than gold and silver is made a 
 legal tender." 
 
 (e) In Pennsylvania. In Pennsylvania a certificate of 
 deposit of "gold payable . . in like funds with interest" 
 was legally discharged, after the enactment of the legal 
 tender law, in treasury notes. If the court regarded the 
 deposit as general, and not a special deposit of coins the 
 decision follows the above rule, but we cannot learn from 
 reading the case whether the court intended to discriminate 
 between a general and special deposit.^ In Georgia, it has 
 been decided that a bank fulfilled its duty by offering to pay 
 the checks of a depositor in such funds as he had there. 
 Thus a person died having the accepted check of Jones for the 
 balance due him on a certificate of deposit. The holder 
 after such person's death declined to receive the funds in 
 payment. They were Confederate notes. The bank could not 
 be held for any other.* 
 
 > Oiimbel II. Abrams, 20 La. Ann. 568. 
 2 Shollenberger v. Brinton, 52 Pa. 1, 26. 
 
 ' Lester v. Georgia Rail. & Bank. Co., 42 Ga. 244. The charter of the Bank 
 of Tennessee provided "that the bills or notes of said corporation originally 
 
§ 306 IN 'WHAT MONEY SHALL DEPOSITS BE PAID. 309 
 
 (/) Concerning legal tender notes issued by the national 
 government which creditors were compelled to receive in pay- 
 ment, the Supreme Court of Michigan remarked in 1873 
 that " if payment in what is supposed to be legal tender paper 
 is to be regarded as contingent and not absolute, the receiver 
 should be regarded as having elected to retain it unless he 
 uses^ speedy and aqtive diligence to determine its character, 
 and to notify the giver that he may protect himself against 
 prior parties. In Camidge v. AUenby' a party who kept 
 broken bank bills seven days without action was held es- 
 topped." In the case under review the receiver kept the 
 notes more than five weeks without making inquiry. He 
 coukl not return them after holding them so long.* 
 
 § 306. If bank agrees to pay gold, or in a particular manner. 
 
 {a) Mast do so. If, however, a bank agrees to pay in 
 bullion or coin, it must do so or be answerable for the injury 
 done ; and if it agrees to pay in depreciated paper, the tender 
 of it will satisfy the law, and in default of payment the de- 
 positor or promisee can recover only its market, and not its 
 nominal value.' This principle was frequently applied in Illi- 
 nois before the civil war, because the banks of the State were 
 of doubtful solvency and their notes circulated at less than 
 their face value. 
 
 made payable, or which shall have hecome payable on demand, in gold or sil- 
 ver coin, shall be receivable at the treasury of the State and by all the col- 
 lectors and other public officers, in all payments for taxes or other moneys 
 due to the State." This constituted a contract by the State to receive them 
 from all persons for payment due to the State. The guaranty was not a per- 
 sonal one but attached to the notes when issued as much so as if written on 
 the back of them. And it remained so long as the notes circulated, not- 
 withstanding subsequent legislation against receiving notes that did not pass 
 current as par, Furman o. Niohol, 8 Wall. 44. A certificate of deposit 
 payable in "currency" is prima facie payable in current money or paper of 
 equivalent value, and a witness without referring to any local custom or 
 usage cannot testify that such a certificate is payable in depreciated funds, 
 Phelps V. Town, 14 Mich. 374 ; see Phenix Ins. Co. v. Allen, 11 Id. 501. 
 
 1 6 Barn. & Cr. 373. 
 
 2 Atwood V. Cornwall, 28 Mich. 336. 
 
 3 Robinson v. Noble, 8 Peters, 181 ; McCormick v. Trotter, 10 Serg. & Raw. 94 . 
 
310 BANKS AND THEIR DEPOSITORS. § 306 
 
 (b) Kupfer V. Bank} In May, 1861, K. deposited with an 
 Illinois bank $1700 in American gold which was to be drawn 
 in gold. At that time, when currency was deposited, that 
 only could be drawn. K. drew $400 in gold. The difference 
 then in value between gold and currency was forty per cent. 
 He drew currency on other checks and the bank claimed that 
 K. appropriated the gold to pay them. Judge Breese, speaking 
 for the court, said : " This deposit of gold coin was a special 
 contract, to the effect that the bank would return the coin, or, 
 on failing to do so, the depositor should be entitled ibo the value 
 of the coin. The depositor was entitled, if he was paid in 
 currency at a discount, to have the amount of that discount 
 allowed to him, or, in other words, he was entitled to receive of 
 the bank the premium at which gold was sold over currency, 
 and this for the whole amount deposited unless he agreed to re- 
 ceive currency as coin. The bank had no right to make the 
 depositor's check for currency a charge against this deposit of 
 gold. What the gold was worth over and above currency at 
 the time the depositor drew it out should be allowed. The sev- 
 eral Acts of Congress making treasury notes a legal tender in 
 the payment of private debts were not then enacted ; conse- 
 quently, the depositor was entitled to recover the value of the 
 gold coin." 
 
 (c) Chicago Marine ^ Fire Ins. Co. v. Carpenter." In April, 
 1861, an Illinois bank, unwilling to receive more deposits in 
 notes of other banks of that State, agreed with a depositor to 
 receive and pay the same during the war. Afterwards he de- 
 posited there to a large amount. He also drew checks against 
 his deposits until the 18th of May when all the notes of the 
 Illinois banks, with a few exceptions, became so depreciated 
 that they ceased to circulate as money. At that time the 
 bank owed the depositor about $100 for deposits made 
 after the agreement. In an action against the bank the 
 depositor recovered the specie value of the deposits due to 
 
 1 34 HI. 328, p. 355. i 28 Id. 360. 
 
§ 307 IN WHAT MONEY SHALL DEPOSITS BE PAID. 311 
 
 him which had been made prior to the agreement and the 
 current value of those made afterwards. 
 
 {d) Case of mutual accounts. Two bankers in the usual course 
 of business, had mutual accounts for remittances and collec- 
 tions, the depositor having the right to withdraw his funds at 
 pleasure and the receiver having the same right to return 
 them. , In the absence of a special agreement on the subject 
 it was held that each holder of deposits would be compelled 
 to pay or return them in current or par funds.' But when 
 one of them, who had a balance in his favor, notified the other 
 that any remittances which he desired to make should be in 
 the notes of specified banks, the debtor banker had the right 
 to remit the entire amount in the notes of those banks 
 whether they were depreciated or not. 
 
 § 307. Payment of deposit in commodity. But if a bank re- 
 ceive, not money but a commodity, Confederate notes for ex- 
 ample, and the sender of a note to be collected supposes that 
 these will be received in payment, the bank is required to pay 
 only the value of the commodity when demanded. Should 
 the bank, in the interval between receiving the notes and the 
 demand therefor, employ them in its business, its liability 
 would not be changed.^ 
 
 (a) Cannot do this by custom. Furthermore, while banks 
 can agree with their depositors to discharge their indebtedness 
 in any commodity in lieu of money by special agreement, they 
 cannot do this in any locality by virtue of a custom prevail- 
 ing there. When this question was raised in an Illinois case. 
 Judge Walker said : " The special custom of banks in a par- 
 ticular locality [cannot] change the laws of the land, regulat- 
 ing the value of the currency and fixing a standard value of 
 the current coins. That parties may contract to receive any 
 commodity in lieu of money, in payment of indebtedness, is 
 undeniably true. . This can only be done by special agreement 
 and not by usage. No custom can compel a creditor in the 
 
 I Cnshman v. Carver & Co., 51 111. 509. 
 
 » Planters' Bank v. Union Bank, 16 Wall. 483. 
 
312 BANKS AND THEIR DEPOSITORS. § 310 
 
 absence of a special agreement, to receive anything but the 
 constitutional currency of the country. The fact that the 
 business men of a particular place have been in the habit of 
 receiving depreciated paper money in payment of their de- 
 mands, by no means proves that all creditors in that locality 
 have agreed to receive the same, much less a person residing 
 hundreds of miles distant. To have such an effect a special 
 agreement must be proved."^ 
 
 § 308. Depreciated and depreciating deposits. If a bank re- 
 ceive a deposit in current funds without direction to hold 
 them specifically, it must account for the amount without 
 diminution or discount, although they may have depreciated 
 in value since receiving them.'' But if bank notes are depos- 
 ited as depreciated paper, the depositor has no right to draw 
 for par funds, or expect that payment of a check thus drawn 
 will be paid.' 
 
 § 309. Check must be paid in money. A bank is not re- 
 quired to pay the check of a depositor in anything but money. 
 The giving of exchange instead of money can only be by 
 agreement. So, when a depositor drew a check on his bank 
 for Chicago exchange which he wished to send to his creditors 
 at their request, they could not, on the failure of the depos- 
 itor to send it, maintain an action against the bank on the 
 original check.* 
 
 § 310. Money in which bank must pay collections. When a 
 bank makes collections and mingles them with its general 
 fund, the money collected becomes a deposit and is governed 
 by the same rules as deposits in general. And if such funds 
 were depreciated at the time of receiving them, or become 
 BO before they are demanded, the bank must suffer the loss 
 arising from their depreciation.* Moreover, when a bank is 
 
 1 Marine Bank v. Chandler, 27 111. 525, p. 548. 
 
 2 Id. 525 ; Marine Bank v. Eushmore, 28 Id. 463 ; Willetts v. Paine, 43 Id. 
 432. 
 
 ' Id. ; Lawrence v. Schmidt, 35 Id. 440 ; Galena Ins. Co. v. Eupfer, 28 Id. 
 332. 
 * Hogue V. Edwards, 9 Brad. 148. 
 ' Marine Bank v. Rushmore, 28 111. 463. 
 
§ 313 IN WHAT MONEY SHALL DEPOSITS BE PAID. 313 
 
 tlius acting as collection agent it has no right, unless special 
 authority be given, to receive only the legal currency of 
 the country, or bills which pass as money at their par 
 value by the common consent of the community.* The doc- 
 trine that bank bills are a good tender, unless objected to at 
 the time on the ground that they are not money, only ap- 
 plies to current bills, which are redeemed at the counter of 
 the bank on presentation, and pass at par value in business 
 transactions at the place where offered. Notes not thus cur- 
 rent at their par value, nor redeemable on presentation, are 
 not a good tender to principal or agent, whether they are 
 objected to at the time or not.^ 
 
 § 311. Purport of check for " current funds." If a check is 
 drawn' for " current funds," the holder can demand coin or 
 its equivalent. " The term funds as employed in commercial 
 transactions usually signifies money." A check payable in 
 " current funds" means " current money ; par funds, or money 
 circulating without any discount." The holder of such a 
 check has the right to demand funds equal in value to the 
 current coin of the country.^ But if a cheek be given which, 
 presented wifhin a reasonable time, would be paid in current 
 funds, the maker cannot be held for its non-payment in 
 them.* 
 
 § 312. Payment by special law. By a Missouri law enacted 
 in 1857, all checks drawn on bankers and made payable " in 
 currency" were thereby made " payable" in silver and gold, 
 or the notes of specie-pajdng banks of that State. Checks, 
 therefore, which were expressed to be payable in currency, 
 could not be paid in the notes of depreciated banks, but only 
 those that paid specie or specie itself.* 
 
 § 313. Check drawn for dollars and not bank bills. In Law- 
 rence V. Schmidt,' " the check was drawn for money ; for dol- 
 
 1 Ward f. Smith, 7 Wall. 447 ; Levi v. National Bank, 5 Dill. 104. 
 
 " Clifford, J., Ward v. Smith, 7 Wall. p. 451. 
 
 a Galena Ins. Co. v. Kupfer, 28 111. 332. 
 
 * Willetts V. Paine, 43 Id. 432. 
 
 6 Morrison v. McCartney, 30 Mo. 183. « 35 111. 440. 
 
314. BANKS AND THEIR DEPOSITORS. § 314 
 
 lars and not for bank bills,' or otber kinds of circulating 
 medium. The check was presented on the day it was drawn 
 and payment in money was refused, but bank bills at 30 per 
 cent, to 40 per cent, discount were offered and refused. It 
 also appeared that the drawer did not have cash-money in the 
 hands of the drawee, and hence notice of non-payment was 
 unnecessary. He had no right to believe it would be paid in 
 money, or that the holder would, receive depreciated bills. 
 Upon its non-payment the drawer's liability was fixed with- 
 out any steps." 
 
 § 314. Civil war cases, (a) In what could drafts and deposits 
 be paid. We shall conclude the chapter by reviewing a few cases 
 which arose from the peculiar events of the civil war. When 
 Confederate treasury notes were bankable funds in New Orleans 
 and Ifashville, a deposit in a bank at New Orleans in checks 
 and drafts drawn by a Nashville bank and by citizens of the 
 State were subsequently considered by the courts of Louisiana 
 as having been made in these notes, nor could a depositor 
 recover the amount in money.' Nor could a check or draft 
 drawn by one person on another within the Confederacy and 
 payable in its notes be collected in money.^ B/ buying such 
 a check or draft the purchaser was giving credit to an illegal 
 currency, he was ^'■particeps criminis" and entitled to no re- 
 lief.' Nor could a deposit of Confederate money give the de- 
 positor the right to exact legal-tender notes in payment ; the 
 transaction was illegal.* But if the deposit had been made in 
 lawful money this could have been recovered by the depositor, 
 nor would the paying over of all its Confederate notes to 
 officers of the national government by their command have 
 furnished an excuse for not paying him, for the seizure of the 
 illegal, notes which the bank had no right to receive could not 
 exonerate it from paying a depositor. If, however, the de- 
 posit had been made in Confederate notes it could not have 
 been recovered.* But to excuse a bank on this ground from 
 
 1 Foster v. Bank, 21 La. Ann. 338. « Id. s Id. 
 
 * Schmidt v. Barker, 17 Id. 261. 
 
 * Nelligan v. Citizens' Bank, 21 Id. 332. 
 
§ 314 IN WHAT MONET SHALL DEPOSITS BE PAID. 315 
 
 paying a depositor or the maker of a note the evidence that 
 Confederate notes were received must be conclusive ; nothing 
 could be left to conjecture or inference.' 
 
 (6) What excused 'payment In another instance when the 
 money iri the bank was seized by the commanding general of 
 the Union army, this was declared to be a suiEcient excuse 
 for not paying a depositor whose deposit was a portion of the 
 amount thus taken.^ 
 
 (c) Usage and mode of paying after war. A bank which 
 during the civil war adopted a new usage and custom with 
 its depositors w.ith regard to Confederate currency could not 
 introduce proof of it to affect one who had been a regular 
 customer before the war and continued to be one, unless he 
 had notice of the same.' This was decided in a case against 
 the Bank of Cape Fear. Other novel questions arose and were 
 decided in that case. In October, 1861, a balance was due a 
 depositor in par funds. Subsequently his dealings with the 
 bank, were in Confederate notes which soon began to depre- 
 ciate, as both parties well knew. After the war the State 
 established a scale for ascertaining the value of deposits made 
 in these notes during the war and by which such transactions 
 were to be settled. It was held in a case involving the applica- 
 tion of the scale that the depositor's account must be divided, 
 that his deposit before October 1, 1861, should be estimated in 
 par funds. To give full effect to the payment of the bank and 
 allow the depositor the proper value of his deposit, each pay- 
 ment ought to be deducted from the next preceding deposit, 
 and when the deposits were, in excess of payment then a 
 balance ought to be struck and the value of the excess ascer- 
 tained by the scale and form a part of the general deposit. 
 In this way the nominal amount of the payments would be 
 deducted from the nominal amount of the preceding deposits, 
 and this process could be continued until all the payments 
 
 ' Greeves v, Louisiana State Bank, 22 La. Ann. 228 ; Weaver v. Anfonx, 20 
 Id. 1. 
 2 MandeviUe v. Bank, 19 Id. 392. 
 a Boyden v. Bank of Cape>Fear, 65 N. C. 13. 
 
316 BANKS AND THEIR DBPOSITOKS. § 314 
 
 were allowed as credits. The value of the excess of the vari- 
 ous deposits at the time they were made with the premium 
 added would constitute the true balance of the Confederate 
 currency transactions and this sum added to the amount of the 
 par funds due October 1, 1861, would constitute the amount 
 due the depositor at the time of the demand in March, 1864. 
 " When the final balance was struck in March, 1864, the 
 bank was not authorized by law to pay the balance due in 
 notes of like character and amount as those received ; but its 
 implied contract was to pay funds equivalent in value to the 
 funds deposited."^ 
 
 1 Marine Bank v. Chandler, 27 111. 525 ; Marine Bank o. Fulton Bank, 2 
 Wall, 252. In Tayloe v. Dagger, 66 Ala. p. 448, Stone, J., remarked that 
 the question how far Confederate treasury notes would discharge a debt when 
 accepted in payment had been a very vexed question ever since the downfall 
 of the Confederacy. " They had a purchasing power, and a conventional 
 value up to the surrender at Appomattox ; and they were, for four years, 
 almost the sole circulating medium accessible to many millions of people. 
 They were issued in aid of the struggle the Southern States were making 
 against the power of the Federal government to exercise dominion within 
 their borders ; and when that armed assistance to Federal authority was 
 overcome, and the Southern army vanquished, this established the fact that 
 the issue of such Confederate treasury notes was illegal, ah initio, because its 
 purpose was to aid an armed resistance to authority, ascertained and proved 
 to be rightful. . . Their issue was, then, illegal, because it was ascertained 
 they were aimed against the integrity of the Union. Viewed from the stand- 
 point the result of the civil war makes it our duty to take, all the Confederate 
 securities were issued against law, and they imposed no obligation on any 
 one for their redemption." Thorington v. Smith, 8 Wall. 1, and many other 
 cases relating to the subject, are reviewed in the above case. 
 
§ 316 WHEN CAN A DEPOSITOR SUE A BANK. 317 
 
 CHAPTER Xn. 
 
 WHEN CAN A DEPOSITOR SPE A BANK. 
 
 § 315. Must make demand before bringing action. When a 
 bank receives money on deposit in the ordinary way the de- 
 positor cannot maintain an action therefor, without making a 
 previous demand either by check or other means. In a 
 case involving the application of this principle Judge Bronson 
 said : "Judging from the ordinary course of this business [be- 
 tween bank and depositor] I think the understanding between 
 the parties is that the money shall remain with the banker 
 until the customer, by his check, or in some other way, calls 
 for its repayment ; and if such be the nature of the contract, 
 the banker is not in default and no action will lie until pay- 
 ment has been demanded. !N"o one could desire to receive 
 money in deposit for an indefinite period with a right in the 
 depositor to sue the next moment and without any prior 
 intimation that he wished to recall the loan."' 
 
 § 316. Same rule for certified checks. The same rule ap- 
 plies to a certified check. " The certification simply binds the 
 drawee bank to have and hold sufficient funds to pay the 
 
 1 Downes v. Phenix Bank, 6 Hill. 297, p. 299. Nor will the striking of a bal- 
 ance on a depositor's bank-book by a bank clerk change the rule. In the above- 
 mentioned case in which this was done Judge Bronson said it ' ' was but the ordi- 
 nary transaction of writing up the customer's book ; or, in other words, setting 
 the debits, or sums which had been paid upon his checks against the credits 
 which were given in the book at the time the deposits were made. It only 
 rendered the account complete up to the time when the balance was struck. 
 It furnished no evidence of a change of the contract upon which the money was 
 received in deposit.' ' No action can be maintained to recover a deposit before 
 demanding payment, National Bank v. Washington Co. Nat. Bank, 5 Hun, 
 605 ; Howell «. Adams, 68 N. Y. 314; Payne v. Gardiner, 29 Id. 146 ; Watson 
 V. Phoenix Bank, 8 Met. p. 221 ; Brown v. Lusk, 4 Yerg. 210 ; Levy v. Peters, 
 9 Serg. & Raw. 125 ; Adams v. Orange County Bank, 17 Wend. 514. 
 
318 BANKS AND THEIK DBPOSIXOES. § 319 
 
 check to one lawfully demanding payment. In other respects 
 it still remains a depository liable to pay only upon demand. 
 It would be a very inconvenient rule, subversive, it is believed, 
 of the usage and contrary to the understanding of bankers to 
 hold that all certified checks were due and could be sued 
 upon without demand."' 
 
 § 317. Same rule applicable to certificate of deposit, (a) 
 Applied everywhere. The same rule applies to a certificate of 
 deposit. Said Judge Andrews, in Howell v. Adams :^ "We 
 think it is in accordance with the general understanding of 
 the commercial community that a bank is not liable to de- 
 positors except after demand of payment. The fact that a 
 certificate is given on a deposit being made payable on the 
 return of the certificate instead of leaving the deposit subject 
 generally to check or draft does not change the reason of 
 the rule that the banker must first be called upon for pay- 
 ment before an action can be maintained."* 
 
 (b) It may be remarked in passing that in the States 
 which regard a certificate of deposit as a promissory note, 
 having all the characteristics of. that instrument — one of 
 which is that the maker can be sued without first demand- 
 . iiig payment of him — the maker of a certificate of deposit 
 cannot be sued until payment has been demanded of him.* 
 
 § 318. Must make demand for special sum when recoverable. 
 And whenever a depositor can recover an additional sum by 
 a special law on the failure of a bank to pay him his deposit, 
 he must make a demand for the sum to sustain an action for its 
 recovery." 
 
 § 319. Demand of entire deposit. A demand for the whole 
 of a deposit is not requisite to sustain a suit against the bank 
 for a part of the same. " The implied contract between a 
 
 ' Bank of British North American. Merchants' Nat. Bank, 91 N. Y. p. 110 ; 
 AS. 48 N. Y. Sup. Ct. 1. 
 
 2 68 N. Y. p. 321. 
 
 3 Bellows Falls Bank u. Rutland County Bank, 40 Vt. 377 ; Hunger !>. 
 Albany City Nat. Bank, 85 N. Y. 580. 
 
 * Pardee v. Fish, 60 Id. 265 ; Brown t>. MoElroy, 52 Ind. 404. 
 ^ Bank of Missouri ii. Benoist, 10 Mo. 519. 
 
§ 322 WHEN CAN A DEPOSITOR SUE A BANK. 319 
 
 bank and its depositor," said Jadge Miller/ " is that it -will 
 pay the deposits when and in such sums as are demanded. 
 Whenever a demand is made by presentation of a genuine 
 check in the hands of a person entitled to receive its amount, 
 for a portion of the amount on deposit and payment is refused, 
 a cause of action immediately arises. For the balance no 
 suit can be brought until demand is made. In other words, 
 the depositor has the election to make the whole claim pay- 
 able at one time by demanding the whole, or in instalments 
 by demanding portions." 
 
 § 320. Demand of savings bank deposit. If money be de- 
 posited in a savings bank which is payable at fixed times, 
 demand must be made, after which it can be recovered when 
 the proper time has arrived, and a depreciation of its funds 
 is no defence. But it M^as questioned in the case establishing 
 the foregoing principle whether a court of equity would not 
 apportion the loss among depositors in due proportion between 
 them if application were made to have this done.^ 
 
 § 321. Post-dated check. If a check be made payable fif- 
 teen days after date it is necessary in a suit against the payee 
 to prove that payment was demanded at the bank when it 
 became due.' If a declaration should aver that a demand 
 was made after a check became due according to the custom 
 of, merchants this would be a defective averment and a re- 
 covery could not be had in such a case.' 
 
 § 322. Demand when bank has failed, (a) Remarks of Hub- 
 bard, J. When a bank suspends payment a demand is not 
 necessary before bringing a suit to recover the deposit." Said 
 Judge Hubbard in Watson v. Phoenix Bank :* " Where the 
 bank has suspended payment and closed its doors and refuses 
 to admit its creditors, there a demand would be unavailing, 
 and the bank, by its acts, has waived the necessity of a 
 
 1 Viets V. Union National Bank, 101 N. Y. p. 573. 
 
 2 Makin v. Institution, 19 Me. 128. See § 188. 
 
 s Glenn v. Noble, 1 Blackf. 104. * Id. 
 
 5 Farmers & Mechanics' Bank v. Planters' Bank, 10 Gill & Johns. 422. 
 
 6 8 Met. p. 222. 
 
820 BANKS AND THEIR DEPOSITORS. § 324 
 
 demand."! j^ ^i^q foregoing case Watson went to the bank 
 for the purpose of obtaining his deposit, but was purposely 
 excluded by the person appointed by the president of the 
 bank to prevent persons from entering it in consequence of 
 the suspension of payments. This act was deemed equivalent 
 to a demand by "Watson. 
 
 {b) Allowance of claim proof of demand. Can he afterward 
 bring a suit against the bank for the amount allowed ? In 
 Massachusetts the court said in a suit involving this question, 
 if the depositor has begun a suit and made an attachment 
 which is not dissolved by the failure of the bank "he is 
 bound to make his election; and is not entitled to the 
 benefit of both funds to the exclusion of other creditors." 
 On the other hand, " he is not concluded as to this election by 
 the mere proof of his debt before the receivers, they not 
 having required of him to give up to them the evidence of 
 his demand, nor agreed to pay him a dividend."* 
 
 (e) Suit against bank for amount allowed. When the bank 
 has failed, the allowance of a depositor's claim by the receivers 
 is sufficient proof of a demand to maintain a suit against it 
 for his deposit.* 
 
 § 323. Demand not necessary after rendering account. A 
 demand is not necessary by a depositor after a bank has ren- 
 dered an account and claims the deposit as its own, for the 
 law compels no man to do a vain or nugatory act.* 
 
 § 324. Demand when deposit is illegal. If the contract of 
 deposit be illegal and not enforceable, the money can be re- 
 covered back in a difterent form of action.* And in such a 
 case the money can be recovered without first demanding 
 payment of the depository.* 
 
 1 Cooper V. Mowry, 16 Mass. 5. 
 
 2 Watson V. Phoenix Bank, 8 Met. 217, p. 222 ; Morse v. City of Lowell, 7 
 Id. 152. 
 
 3 Glenn v. Noble, 1 Blackf. 104. « Bank of Missouri v. Benoiat, 10 Mo. 519. 
 
 5 White V. Franklin Bank, 22 Pick. 181 ; Robinson v. Bland, 2 Burr. 1077 ; 
 Utica Ins. Co. „. Scott, 19 Johns. 1 ; Utica Ins. Co. v. Cadwell, 3 Wend. 296 ; 
 Utica Ins. Co. •/. Bloodgood, 4 Id. 652. 
 
 6 Id. 
 
§ 329 WHEN CAN A DEPOSITOR SUE A BANK. 321 
 
 § 325. Bank cannot be sued on verbal acceptance. As a 
 check is a bill of exchange within the meaning of the Statute 
 of Frauds — which requires a promise to be in writing — the 
 drawee cannot be held on a verbal promise of acceptance.' 
 
 § 326. Third party can sue bank on its promise to pay de- 
 positor's money. If a bank receive money from a depositor 
 and promise to pay the same to a third party, the latter may 
 maintain an action for the amount in the event of non-pay- 
 ment. ITor can a bank defend by showing that the money 
 was deposited in the'customer's name and with his consent, 
 or that he at the time promised to make a further deposit 
 to cover his own indebtedness to the bank and failed to do so.^ 
 
 § 327. Check sent by bank, but not received. A. in Boston 
 sent to a bank in Maine a check for $200 drawn on the bank 
 by one who had funds there, and in his letter said ; " Please 
 send me a check on some Boston bank for the inclosed check." 
 The bank sent in a letter $4.28 in currency and a check on a 
 Boston bank for $195.72, but the letter was never received. 
 Failing to get a duplicate check from C, who subsequently 
 failed, A. sued the bank and recovered.' 
 
 § 328. Fraud in former transaction no defence by bank. 
 Whenever a bank credits a depositor with the proceeds of a 
 note discounted by fraudulent representations and pays his 
 checks drawn against such deposits, it cannot set up the fraud 
 as a defence to an action to recover subsequent deposits.* 
 
 § 329. Recovery of interest. " As a general rule deposits 
 of money in bank subject to the checks of the depositor draw 
 no interest."" But if there should be unreasonable or vexa- 
 tious delay in paying them interest might be recovered.^ 
 Nor is the defending in good faith of a suit for the recovery 
 of a deposit a vexatious delay.' 
 
 1 Rlsley V. Phenix Bank, 83 N. Y. 318 ; Aff. 11 Hun, 484. See § 229, e, f. 
 
 2 Utley V. Tolfree, 77 Mo. 307. 
 
 » Ames V. York Nat. Bank, 103 Mass. 326. 
 * Andrews v. Artisans' Bank, 26 N. Y. 298. 
 
 5 First Nat. Bank v. Coleman, 11 Brad. p. 511. See § 45. 
 
 6 Id. ; Jassoy v. Horn, 64 III. 379. ' Aldrich v. Dunham, 16 Id. 403. 
 
 21 
 
322 BANKS AND THEIR DEPOSITORS. § 331 
 
 § 330. Loan to casliier is loan to bank. When loans have 
 been made to banks, they have sometimes resisted recovery 
 on the ground that they were personal to the cashier and not 
 to the bank itself. This ground has been taken when the 
 checks or notes for the loans have been made payable to the 
 bank with the addition of the word "cashier." But the clear 
 rule of law is, that if the word cashier be added to the name 
 of the payee bank in commercial paper the bank is neverthe- 
 less the payee and responsible therefor. Nor is his indorse- 
 ment necessary to give the bank title.' 
 
 § 331. When surety is discharged. When a person becomes 
 a grantor on a check running for a month, on the -representa- 
 tion of the maker that it shall be used as collateral security 
 for a note that is to be discounted, the discounter cannot 
 permit the use of the avails of the note when paid in any 
 different manner than that intended by the parties to the 
 check without discharging the guarantor. Said Ames, C. J.,' 
 " in such a case, the creditor is regarded as a trustee of the 
 security deposited with him, for the benefit of all parties 
 known to him to be interested in it, and is bound to admin- 
 ister the trust created by the deposit, unless discharged by 
 the surety, in his relief, as well as in accordance with his 
 own interests, and those of the principal. It follows, that any 
 application of the security by the creditor to other purposes 
 than those marked out by the terms of the deposit or any 
 decrease of its value by means of his negligence or mistake, 
 discharges the surety from liability to him in that character, 
 to the extent of the misapplication or decrease of value thus 
 occasioned.' . . The defendant is not only a surety, but be- 
 
 ' First Nat. Bank v. Hall, 44 N. Y. 395 ; Bamk of Genesee v. Patohin Bank, 
 19 Id. 312; Bank of New York v. Muskingum Branch of Bank of Ohio, 
 29 Id. 619 ; Fish v. Marine Bank, 17 Week. Dig. 287. 
 
 2 Hidden v. Bishop, 5 R. I. 29, after reviewing Lake v. Brutton, 8 De Gex, 
 M. & G. 440. 
 
 Mayhew v. Crickett, 2 Swanst. 193 ; Samuell v. Howarth, 3 Mer. 272 ; 
 Lawu. TlieEastIndiaCo.,4Ves., Jr.,824; 2 Am. Lead. Cas., Hare& Wallace's 
 Kotes, 343 to 369 inclusive, for American cases. 
 
§ 331 WHEN CAN A DEPOSITOR SUE A BANK. 323 
 
 came such in the matter of this discount, upon the repre- 
 sentation of his principal that the check was to be merely 
 collateral to the note of P. Allen & Sons, which was for an 
 amount exceeding it, and that he would thus be protected 
 from any loss in consequence of his sui'etyship. The plaintiff 
 was apprised of the character in which the defendant 
 engaged himself to him, by the very form of his engagement 
 as well as by the fact that the maker of the check procured 
 and received the benefit of the discount, and under the cir- 
 cumstances might reasonably have presumed, what turns out 
 to be true, that the defendant indorsed the check upon faith 
 of being protected in some mode by the note of P. Allen & 
 Sons. The application of the proceeds of that note by 
 direction of the principal, and without the assent of the 
 defendant, to other paper discounted by the plaintiff, and in 
 relief of other sureties, one of them his near connection, was 
 far within the rule so well and wisely established for the pro- 
 tection of sureties, a clear breach of the trust created by the 
 original deposit for the benefit of, the defendant. As the 
 note of P. Allen & Sons has been paid, and in amount exceeds 
 the amount of this indorsement, the equities between these 
 parties are perfectly administered by holding, as we do, the 
 defendant discharged as guarantor," 
 
324 SANES AKD THEIR DEPOSITOBS. § 333 
 
 CHAPTER XIII. 
 
 WHEN CAN THE HOLDER OF A CHECK SUE THE DRAWER AND 
 
 INDORSER, 
 
 § 332. Must demand payment of the drawee. Eefore the 
 holder of a check can maintain an action thereon against the 
 drawer, he must demand payment of the same of the drawee.* 
 The demand can be made at any time before bringing the 
 suit.* 
 
 § 333. must show notice of non-payment or excuse. He 
 must also show that notice of non-payment was given, or a 
 legal excuse for not giving it.' And if the check be post- 
 dated, the holder must likewise give notice to the drawer 
 that it was dishonored in order to recover.* 
 
 (a) Failure of drawee. Some things, however, will excuse 
 demand; one of which is the failure of the drawee.* "In 
 Bickei-dike v. Bollman,"' says Chief Justice Lewis, " it was 
 held that when the drawer had no effects in the hands of 
 the drawee at the time the bill was drawn, notice was not 
 necessary. It is sometimes said that this exception to the 
 
 1 Harker v. Anderson, 21 Wend. 372 ; Judd v. Smith, 3 Hun, 190 ; Murray 
 V. Judah, 6 Cow. 484 ; Sherman v. Comstock, 2 McLean, 19 ; Case v. Morris, 
 31 Pa. 100 ; Puroell v. AUemoug, 22 Gratt. 739 ; Little v. Phenix Bank, 2 
 Hill. 425. In an action against the drawer, the complainant must aver present- 
 ment of the check at the hank, and that notice of its dishonor was given to 
 the drawer, or some fact excusing presentment and notice, Dolph v. Eice, 
 18 Wis. 397. 
 
 2 Gough V. Staats, 13 Wend. 549. 
 
 " Case V. Morris, 31 Pa. 100; Pollard v. Bowen, 57 Ind. 232; Griffin v. 
 Kemp. 46 Id. 172. 
 
 * Bradley v. Delaplaine, 5 Harr. 305. 
 
 5 Little V. Phenix Bank, 2 Hill. p. 429 ; Gough v. Staats, 13 Wend. 549 ; 
 Jackson Ins. Co. v. Sturges, 12 Heisk. 339 ; Planters' Bank v. Merritt, 7 Id. 
 177 ; Planters' Bank v. Keesee, Id. 200. 
 
 » Case V. Morris, 31 Pa. 100, p. 104. 
 
§ 333 WHEN CAN THE HOLDER OF A CHECK SUB. 325 
 
 general rule is placed on the ground that it was a fraud to 
 draw the bill when the drawer knew that it would not be 
 paid. At other times, it is said that the drawer's knowledge 
 that it would be dishonored is tantamount to demand and 
 notice. But, whatever may be the grounds for that decision, 
 it is very certain that it introduced an exception to a plain 
 and intelligible rule of commercial law which many eminent 
 and experienced judges have since regretted. It is adhered 
 to on the principle of stare decisis, but it is not to be extended 
 a single step. . . The principle to be extracted from the cases 
 is that wherever the presentment for payment and notice of 
 dishonor could be of no benefit to the drawer it may be dis- 
 pensed with." Moreover, the principle is as applicable to 
 checks as to bills of exchange.' 
 
 (6) Lack of funds. Another excuse is the lack of funds 
 with the drawee. The drawing of a check under such cir- 
 cumstances, unexplained,' is a fraud which deprives the maker 
 of every right to requii-e presentation and demand of pay- 
 ment.^ 
 
 (c) Withdrawal of funds. When the drawer of a check in- 
 forms the payee that he has withdrawn his deposit from the 
 drawee bank, a demand is not necessary in order to sustain an 
 action against the di-awer. In a case of this kind in which 
 a drawer withdrew his deposit in order that his own check 
 might be dishonored, the court remarked, in an action brought 
 against him to recover the amount, " How then can he complain 
 of a want of demand or notice, when he himself purposely fixed 
 the refusal ; and of course by his own act had notice of the 
 consequent dishonor of his bill, even in anticipation of the 
 demand and refusal of payment. It would, too, be permitting 
 a man to take advantage of his own unjust device."* 
 
 (d) Part payment after maturity. "When a drawer pays 
 
 1 Case V. Morris, 31 Pa. 100, p. 104. 
 
 2 Franklin v. Vanderpool, 1 Hall. 78 ; Bond v. Farnham, 5 Mass. 170 ; 
 Fletcher v. Pierson, 69 Ind. 281. 
 
 s Sutcliffe V. McDowell, 2 Nott & McCord, 251. 
 
326 BANKS AND THEIR DEPOSITORS. § 336 
 
 part of a check after it becomes due it is not necessary in an 
 action for the balance to prove a demand on the bank.* 
 
 (e) Or before. JS'or would a demand on the bank be neces- 
 sary if the check had been paid in part before it became due. 
 Bat the holder of a check cannot by voluntarily giving. credit 
 for a part payment evade the necessity of proving a demand 
 on the drawee if the drawer disclaims such ci-edit and insists 
 on the want of demand. If, on the other hand, he acquiesces 
 in such credit and insists that the whole has been paid and' 
 relies on the length of time and other circumstances to dis- 
 charge him entirely, he admits the fact of part payment.* 
 
 § 834. Can sue in his own name, " It is well settled that 
 any holder of a check who can trace a clear legal title to it 
 may maintain an action upon it in his own name whether he 
 possesses the beneficial interest in its contents or not. The 
 possession of such holder is prima facie suflicient evidence of 
 his right to sue."^ 
 
 § 335. Demand necessary before resorting to original cause 
 of action. When a creditor receives from his debtor a check 
 -he can return the same and sue on the original cause of action 
 without first demanding payment. And if the check is 
 returned immediately after the drawee has signified its un- 
 willingness to certity it, this is a notice to the drawer that 
 the holder has declined to receive it for his debt.* 
 
 § 336. Demand in action against indorser. In an action 
 against the indorser a demand of payment from the drawee 
 must be shown even though he had no funds in his possession 
 
 • Levy V. Peters, 9 Serg. & Raw. 125. 2 Id. 
 
 5 Judge Lewis, Harpending v. Daniel, 80 Ky. p. 451 ; Murray v. Judah, 6 
 Cow. 484 ; Townsend v. BiUinge, 1 Hilton, 353. The holder of a check pay- 
 able to hearer may sue in his own name though he holds it as agent for 
 another, Mauran v. Lamb, 7 Cow. 174. A check imports consideration, and 
 the payee may sue in his own name though another be interested in the pro- 
 ceeds, Fish V. Jacobsohn, 1 Keyes, 539 ; S. C, 2 Abb. App. Dec. 132 ; Aff. 5 
 Bosw. 514. The drawer of an accommodation check is as much responsible 
 as he would be if it were issued for a consideration, Harbeck v. Craft, 4 Duer, 
 122. 
 
 * Bradford v. Fox, 39 N. Y. 289. 
 
§ 337 WHEN CAN THE HOLDER OF A CHECK SUE. 327 
 
 belonging to the drawer or any reasonable expectation of 
 having any.' 
 
 § 337. Post-dated checks. When two persons exchange 
 checks which are post-dated, each agreeing to meet his check 
 at maturity, and one of them fails to do so, this is no defence 
 to the other check when owned by a bona fide holder.^ 
 
 (a) Stedman v. Carstairs.' On one occasion A. and B. ex- 
 changed checks with each other. On depositing A.'s check 
 B. learned that there was no money to pay it, and he asked 
 A. to make his |check good. At that time A. was in fair 
 credit, though in tVuth insolvent. Having persuaded C. to 
 exchange cheeks, A. gave C.'s check to B. and received back 
 his own. B. then drew the money on C.'s check, while C, 
 on depositing A.'s check, received not money but unwelcome 
 light concerning A.'s condition. He had no money in the 
 bank. C. then sued B. to recover thie amount drawn on his 
 check, but it was decided that as A. was in " fair financial 
 standing," he gave a valuable consideration for C.'s check 
 and therefore the latter could not recover on the ground of 
 no consideration. 
 
 (b) Accommodation post-dated check. In a suit against the 
 maker of an accommodation post-dated check by an iudorser 
 for value the defence that the payee was to furnish the money 
 to pay the check is no defence.* 
 
 (c) Signed by agent. When an agent drew a post-dated 
 check or negotiable check on a bank and signed it with his 
 own name, adding thereto the word " agent," but without in- 
 dicating thereon the name of his principal and the party to 
 whom the check was delivered, negotiated it to a third person 
 before the day of its date, it was held that the principal was 
 not bound by the check and the holder could not maintain an 
 action against him.* 
 
 • Mohawk Bank i'. Broderiok, 10 Wend. 304. 
 
 2 Frazier v. Trow's Printing and Bookbinding Co., 90 N. Y. 678 ; Aff. 24 
 Hun, 281. 
 » 97 Pa. 234. * Mayer v. Mode, 14 Hun, 155. 
 
 s Anderton v. Shoup, 17 Ohio St. 126. 
 
328 BANKS AND THEIK DEPOSITORS. § 340 
 
 Check deposited on collateral agreement. A person 
 with whom a check is deposited on a collateral agreement 
 can maintain no action against the drawer if the collateral 
 agreement has not been performed.' 
 
 § 339. Forged indorsement. The drawer of a check is not 
 liable to any one claiming through a forged indorsement.^ 
 And if it be obtained from him by fraud and payable to an 
 existing firm he is not liable to an innocent indorsee holding 
 the check under a forged indorsement of the payee's name.' 
 
 § 340. Check for stolen goods. A person went to A.'s hotel 
 and registered his name as B. He then took goods to C, of 
 which he claimed to be the owner, for sale and which were 
 purchased in good faith. C. paid by giving his check paya- 
 ble to B.'s order and which he subsequently gave to the hotel, 
 receiving in return the balance of the amount in money. C, 
 learning. that the goods had been stolen, directed the bank 
 not to pay the check, but A. recovered thereon.* 
 
 1 Claflin V. Fisher, 8 Alb. L. J. 285 ; Aff. 55 N. Y. 657. 
 
 2 Palm V. Watt, 7 Hun, 317. 
 
 ' Rowe V. Putnam, 131 Mass. 281 ; Dana v. Underwood, 19 Pick. 99 ; Board- 
 man V. Gore, 15 Mass. 331, 338 ; Peaslee v. Robbins, 3 Met. 164 ; Carrier v. 
 Sears, 4 Allen, 336 ; Foster v. Shattnck, 2 N. H. 446. Rogers v. Ware, 2 
 Neb. 29, contains an elaborate review of the cases. 
 
 * Robertson v. Coleman, 141 Mass. 231. 
 
§ 341 WHEN CAN THE CHECK HOLDER SUB THE DRAWEE. 329 
 
 CHAPTER XIV. 
 
 WHEN CAN THE CHECK HOLDER SUE THE DRAWEE. 
 
 § 341. Check holder cannot sue drawee, {a) Opinion of 
 Davis, J. As the ordinary relation existing between bank 
 and depositor is that of debtor and creditor, no action can be 
 maintained by the holder of a cheek against a depository-bank 
 to recover the amount unless it has signified its willingness 
 to pay the same. There was a long controversy in the courts 
 before they reached this conclusion. In one of the earlier 
 cases,^ Judge Gardiner said : " The drawee owes no duty to 
 the holder until the check is presented and accepted." In 
 1869 the United States Supreme Court rendered an opinion 
 which is regarded as closing the controversy.^ Judge Davis 
 said that " there should be no mistake about the status which 
 the holder of a check sustains towards the bank on which it 
 is drawn. It is very clear that he can sue the drawer if pay- 
 ment is refused, but can he also, in such a state of ease, sue 
 the bank ? It is conceded that the depositor can bring [an 
 action] for the breach of the contract to honor his checks, and 
 if the holder has a similar right, then the anomaly is pre- 
 sented of a right of action upon one promise for the same 
 thing existing in two distinct persons at the same time. On 
 principle, there can be no foundation for an action on the 
 part of the holder, unless there is a privity of contract between 
 him and the bank. How can there be such a privity when 
 the bank owes no duty and is under no obligation to the 
 holder? The holder takes the check on the credit of the 
 drawer in the belief that he has funds to meet it, but in no 
 sense can the bank be said to be connected Vv^ith the trans- 
 
 1 Chapman v. White, 6 N. Y. 412. 
 
 2 Bank of the Republic v. Millard, 10 Wall, 152, p. 156. 
 
330 BANKS AND THEIR DEPOSITORS. § 341 
 
 action. If it were true that there was a privity of contract 
 between the banker and holder when the check was given, 
 the bank would be obliged to pay the check, although the 
 drawer before it was presented had countermanded it, and 
 although other checks, drawn after it was issued, but before 
 payment of it was demanded, had exhausted the funds of the 
 depositor. If such a result should follow the giving of 
 checks, it is easy to see that bankers would be compelled to 
 abandon altogether the business of keeping deposit accounts 
 for their customers. If then, the bank did not contract with 
 the holder of the check to pay it at the time it was given, 
 how can it be said that it owes any duty to the holder until 
 the check is presented and accepted ? The right of the de- 
 positor, as was said by an eminent judge, is a chose in action' 
 and his check does not transfer the debt or give a lien upon 
 it to a third person without the assent of the depository. 
 This is a well-established principle of law." 
 
 (b) Massachusetts. Shortly afterward the Supreme Court 
 of Massachusetts considei-ed the same question.' Judge Gray 
 remarked that "it is a general rule of law that upon a 
 promise made by one person to another for the benefit of a 
 third I'rom whom no consideration moves, the latter cannot 
 sue ; and the exception to this rule, which holds a person, 
 in whose hands funds have been placed to pay creditors of 
 the depositor, liable to actions by them, has not been ex- 
 tended in this Commonwealth or in England, to a case in 
 w^hich neither such creditors nor the amounts of their debts 
 are named or ascertained _at the date of the promise. . . The 
 relation between the defendants and the drawer [in this case] 
 was simply the ordinary one of banker and customer, which 
 is a relation of debtor and creditor, not of agent and principal. 
 The bankers agree with their customer to receive his de- 
 posits, to account with him for them, to repay them to him , 
 on demand, and to honor his checks to the amount for which 
 
 1 That is, a right which can be legally maintained. 
 
 2 Carr v. National Security Bank, 107 Mass. 45. 
 
§ 341 WHEN CAN THE CHECK HOLDEK SUE THE DRAWEE. 331 
 
 they are accountable to him when the checks are presented ; 
 and for any breach of that agreement they are liable to an 
 action by him. But the money deposited becomes the abso- 
 lute property of the bankers, impressed with no trust, and 
 which they may dispose of at their pleasure, subject only to 
 their personal obligation to the depositor to pay an equivalent 
 sum upon his demand or order. The right of the bankers to 
 use the money for their own benefit is the very consideration 
 for their promise to the depositor. They make no agreement 
 with the holders of his checks. A check drawn by him in 
 common form, not designating any special fund out of which 
 it is to be paid, nor corresponding to the whole amount due 
 to him from the bankers at the time, is a mere contract 
 between the drawer and payee, on which, if payable to bearer, 
 and not paid by the drawees, any holder might doubtless sue 
 the drawer, but which possess no title, legal or equitable, to 
 the payee or holder in the moneys previously paid to the 
 bankers by the drawer ; and the bankers' promise to the 
 drawer to honor his checks does not render them, while still 
 liable to account with him for the amount of any check as 
 part of his general balance, liable to an action of contract by 
 the holder also, unless they have made a direct promise to 
 the latter, by accepting the check when presented, or other- 
 wise."' 
 
 (e) Ahhama. Thus the law is clearly established that the 
 holder of a check cannot maintain an action against the 
 bank on which it is drawn unless the bank has accepted it. 
 Says Judge Clopton of the Supreme Court of Alabama:* 
 " The check, although drawn and delivered to the payee, 
 payable to his order, did not operate without acceptance by 
 the drawee as an assignment of the sum for which it was 
 given, though the drawer may have had funds in the posses- 
 sion of the drawee of an equal or larger amount. There 
 
 1 Creveling v. Bloomsbnry Nat. Bank, 46 N. J. Law, 255. Many autliori- 
 ties are cited in the opinion of the court in tliis case. 
 
 2 National Com. Bank v. Miller, 77 Ala. 168, p. 172. 
 
332 BANKS AND THEIR DEPOSITORS. § 342 
 
 being no privity, express or implied, the holder of the check 
 in its original form can bring no suit on the check against 
 the drawee ; even if it be conceded that l\e may maintain an 
 action for any special injury by reason of the omission of the 
 drawee to perform a legal duty. In case of non-payment the 
 recourse of the holder is against the drawer, and the indorser, 
 if any. The drawer alone can bring suit to recover the funds 
 against which the check was drawn ; and, ordinarily, he only 
 can maintain an action for a failure to pay on presentment. 
 He may revoke the check and countermand its payment be- 
 fore acceptance; and, if unaccepted, his death operates a 
 revocation."' 
 
 § 342. When check is assignment of deposit holder can sue. 
 In several of the States, though, the delivery of a check ope- 
 rates as an assignment of the maker's deposit to the extent 
 named therein, and wherever this is the law the check holder 
 can sue the bank for the amount. Illinois^ led oiF in estab- 
 lishing this rule, and Iowa,' Kentucky,* and South Carolina' 
 have followed, but the other rule prevails in far more of the 
 States* and also in England. 
 
 1 A bank check drawn only for a part of the drawer's fund does not ope- 
 rate either at law or in equity as an assignment of the deposit pro tanto, or 
 confer any lien thereon, Coates v. Doran, 83 Mo. 337; Reaff. Dickinson v. 
 Coates, 79 Id. 250. 
 
 2 Munn V. Burch, 25 III. 35. But Cooley, C. J., in Grammel v. Carmer, 
 55 Mich. 201, p. 203, said : "An examination of the facts in that case will 
 show very clearly that the question supposed to have been decided by it 
 did not arise at all, for the check which was in question had actually been 
 received by the bank on which it was drawn and actually charged up to him 
 on his pass-book. The court went beyond the case and expressed an unne- 
 cessary opinion." National Bank v. Indiana Banking Co., 114 111. 483; 
 Union Nat. Bank v. Oceana County Bank, 80 Id. 212 ; Shalfner v. Sdgerton, 
 13 Brad. 132. 
 
 3 Roberts u. Corbin, 26 Iowa, 315. 
 
 * Bnckner v. Sayre, 18 B. Mon. (Ky.) 745 ; Lester v. Jones, 8 Bush, 357. 
 Judge Norton in reviewing these cases in Dickinson v. Coates, 79 Mo. p. 257, 
 said that the decision in the second case was based on that made in the first, 
 and that case was " in accord with the New York and like cases." Weinstock 
 V. Bellwood, 12 Bush, 139. 
 
 » Fogarties v. Stillman, 12 Rich. 518. 
 
 « Chapman v. White, 6 New York, 412 ; Tyler v. Gould, 48 Id. 682 ; JEtna 
 
§ 343 WHEN CAK THE CHECK HOLDER SUE THE DRAWEE. 333 
 
 § 343. Can sue after acceptance, (a) Pennsylvania cases. 
 But if the bank, expressly or impliedly, promise the drawer 
 to pay the check, the holder may sue whenever payment ia 
 refused. Thus, when a check was drawn to C, and B. in- 
 dorsed C.'s name without authority and received the money, 
 and the bank deducted the check from the drawer's account 
 and settled with him on that basis, it was held that these acts 
 were an acceptance, and that C. could recover from the bank.' 
 When a depositor settles his account with the bank, and leaves 
 the exact amount of an outstanding check for its payment, 
 and the bank tacitly retains the money and settles on that 
 basis, it is liable to the holder on the implied acceptance. 
 All parties to a check may naturally infer from such action 
 that a bank has retained the money for the use of the holder.^ 
 
 Nat. Bank v. Fourth Nat. Bank, 46 Id. 82 ; Ketchum v. Stevens, 19 N. Y. 
 499 ; Butterworth v. Peck, 5 Bosw. 341 ; Harrison v. Wright, 100 Indiana, 
 515, in which Zollars, C. J., delivered an elaborate opinion reviewing most of 
 the cases ; National Bank v. Second Nat. Bank, 69 Id. 479 ; Moses v. Franklin 
 Bank, 34 Maryland, 574 ; Bush v, Foote, 58 Mississippi, 5 ; Dickinson u. 
 Coates, 79 Missouri, 250 ; Merchants' Nat. Bank v. Coates, Id. 168 ; Coates v. 
 Doran, 83 Id. 337. The St. Louis Court of Appeals in these cases had held to 
 tlie contrary, adopting the Illinois view, Seuter v. Continental Bank, 7 Mo. App. 
 532 ; MoGrrade v. German Sav. Institution, 4 Id. 330 ; Zelle v, German Sav. 
 Institution, Id. 401 ; Coloi-ado Nat. Bank v, Boettcher, 5 Colorado, 185 ; Case 
 V. Henderson, 23 Louisiana Ann. 49. In Ohio the Supreme Court lias rendered 
 no decision on the subject. In Morrisons K.Bailey, 5 Ohio St. 13, p. 18, and 
 in Gardner v. City Nat. Bank, 39 Id. BOO, p. 603, a remark or two was made, 
 but it need hardly be said that such passing utterances neither have nor are 
 intended to have the authority of decisions. The Superior Court of Cincin- 
 nati in McGregor u. Loomis, 1 Disney, 247, p. 255, have declared that they 
 " can see no just reason why the holder of a check for value, who has taken it 
 in the faith that the drawee was not only able but willing to honor it, should 
 not, when he has notified the banker, be permitted to hold the specific fund 
 appropriated by the terms of the check." See review of this case by Brown, 
 J., In re Smith, 15 N. Bank. Reg. 459, p. 465 ; First Nat. Bank v. Gish, 72 Pa. 
 13. The rule in England may be found in Hopkiuson v. Forster, L. R., 19 Eq. 
 Cas. 74. In Michigan the question has been considered but not decided, 
 Grammel v. Carmer, 55 Mich. 201 ; Strain v. Gourdin, 11 N. Bank. Reg. 156. 
 
 1 Seventh Nat. Bank v. Cook, 73 Pa. 483. 
 
 s Saylor v. Bushong, 100 Id. 23. 
 
334 BANKS AND THEIR DEPOSITORS. § 344 
 
 ' (b) Acceptance is question of fact. Acceptance is a question 
 of fact to be determined in each case. It has been decided 
 that the placing of a check on the cancelling fork by the 
 cashier of the bank on which it is drawn is not such an ac- 
 ceptance as will prevent him from correcting the mistake and 
 declining to pay on learning that the drawer has not sufficient 
 funds for the purpose.' In another case the holder of a check 
 deposited it in the Bank of Commerce of Ifew York to be 
 transmitted for presentation to a bank in Hoboken, ISTew 
 Jersey. The Bank of Commerce with the same view passed 
 it to the Ocean Bank of the same city, by which, on the 31st 
 of October," between twelve and one o'clock, it was delivered 
 to a messenger of the Hoboken bank. The check was re- 
 tained by it until about twelve o'clock the following day, 
 when it was returned to the Ocean Bank marked " not good." 
 At ten o'clock the next morning it returned the check to 
 the Bank of Commerce which immediately notified Overman 
 that the check had been dishonored. In a suit to recover 
 thereon it was decided that the delay of the bank in returning 
 the cheek in question was not of such a character that the law 
 would imply from it an acceptance.^ 
 
 § 344. Draft does not assign fimd in drawee's possession, (a) 
 Grammel v. Carmer. An attempt has been made to include 
 drafts in the rule that a check works an assignment of the 
 maker's deposit from the time of issuing the instrument. 
 This was tried in Michigan,^ but failed. The court declared 
 that there was no privity of contract between the payee and 
 drawee of an unaccepted sight draft drawn by a banker even 
 though the drawee has ample funds to pay it. But if the 
 principle be established that a check works an assignment, 
 and which has been as we have seen in some States, it will 
 be very difficult to draw a line between checks and drafts in 
 many cases. For, as the elements of the two instruments are 
 
 ' National Bank v. Second Nat. Bank, 69 Ind. 479, the court citing Bellamy 
 ». Marjoribanks, 7 Ex. 389 ; Warwick ». Rogers, 5 Man. & G. 340. 
 " Overman v. Hoboken City Bank, 31 N. J. Law, 563-; Aff. 30 Id. 61. 
 * Grammel v. Carmer, 55 Mich. 201. 
 
§ 344 WHEN CAN THE CHECK HOLDER SUE THE DRAWEE, 335 
 
 quite the same, if the drawee has funds of the drawer why 
 should not one instrument operate as an assignment as per- 
 fectly as the other. The following case will show the diffi- 
 culty in maintaining the distinction.' 
 
 (6) Gardner v. City National Bank? H. desiring money 
 procured it by giving his draft to the City National Bank of 
 Cleveland, Ohio. It was drawn on a banker in Philadelphia 
 for the full amount of his deposit in that place. Before the 
 draft was presented by the Cleveland bank the Philadelphia 
 banker remitted the amount by a certified check to H. He 
 deposited this in the Merchants' Bank of Cleveland, as cash, 
 and in due time the check was paid. After making other 
 deposits in the Merchants' Bank and checking out sums from 
 time to time, H. failed. In an action for equitable relief brought 
 by the City bank against the assignee and the Merchants' 
 Bank, the court held that as between H. and the City bank 
 it was his manifest intention to transfer the absolute right to 
 receive the amount from the Philadelphia banker, and, there- 
 fore, that the draft should operate as an equitable assignment 
 of the funds in the possession of the latter, and that when H. 
 received them in the form of a certified check as above men- 
 tioned he should havp delivered it to the City bank. This 
 decision was obviously just and in harmony with the general 
 principle that when checks or other instruments are deposited 
 for collection, either when this is expressly stated or implied, 
 and advances are made on the expectation of collecting them, 
 that the bank has a lieii on the proceeds for whatever has 
 been advanced. But was this instrument given to the City 
 
 1 N. kept a banking account with H. with whom he arranged for credit 
 needful in his business. Becoming indebted to E., N. drew his check for the 
 amount and deposited it with H. receiving in exchange a draft on a bank in 
 Chicago, which he intended to give to E., but did not. In a suit by E. against 
 H. based on the check drawn by it, it was held that there was no privity be- 
 tween the plaintiff and defendant, and no such setting apart of funds for the 
 plaintiff's benefit would make the banker liable, Hogue v. Edwards, 9 Brad. 
 263. 
 
 2 39 Ohio St. 600. 
 
336 BANKS AND THEIR DEPOSITOKS. § 345 
 
 bank on the Philadelphia banker a draft or a check ? and 
 would the rights of the parties have been different if it 
 had been treated as a check instead of a draft ? It would not 
 if advances had been made thereon, but, suppose none had. 
 been made, what then ? In the States which, do not recognize 
 this doctrine of a check working an assignment, of course 
 the City bank would have had no remedy against the assignee 
 or the Philadelphia banker in the event that he had not paid 
 H. ; but in the States which do recognize the doctrine of the 
 assignment of deposits by check, it is difficult to perceive 
 how they could have drawn any distinction between this and 
 the ordinary assignment of deposits by issuing checks.' 
 
 (c) Nor does check when deposit is unpaid credit. Even 
 though there may be an assignment of a deposit by check, 
 the holder can claim nothing if the deposit consist simply of 
 a credit given to the depositor for drafts which were not paid.' 
 
 § 345. If drawer fail who can take deposit, (a) Rule in Na- 
 tional Courts. If the maker fail before his check is paid, then 
 the courts will often go further to protect the drawee bank 
 in paying the amount to the check holder instead of the as- 
 signee. Whenever a bank has been in doubt who to pay in 
 such cases, it has resorted to a legal action, called a bill of 
 interpleader, to have the question determined. Such an ac- 
 tion was brought by the German Savings Institution against 
 Adae & Co.,* insolvents, to determine whether a check which 
 they had given on the above-named bank to Newman & Co. 
 should be paid to them or to Adae & Co.'s assignee. The 
 court said that if this were an action by a check holder against 
 the bank on the check, there could be no recovery. But such 
 was not the c&se. It was a bill of interpleader in equity, by 
 which the bank holding the fund in question, declared its 
 
 1 Weinstook v. Bellwood, 12 Bush, 139. 
 
 2 Jacob V. First Nat. Bank, Hamilton Co. Dis. Ct., Ohio, 3 Bull. 274. 
 
 ' 8 Fed. Rep. 106. This doctrine of equitable assignment was sanctioned 
 in Pease v. Landauer, 63 Wis. 20 ; but the case is no authority, for the other 
 rule, that the giving of a check in the ordinary course of business works an 
 assignment. 
 
§ 345 WHEN CAN THE CHECK HOLDER SUE THE DRAWEE. 337 
 
 readiness to pay as the court might order, and the controversy- 
 related to the equities of the different claimants of the fund. 
 The rule which protects a hank from being harassed by suits 
 brought by check holders had no application to the case. " "We 
 are at liberty, therefore," continued the court, "to inquire 
 which of the claimants here has the better right in equity 
 to the fund in question. There are, undoubtedly, numerous 
 respectable authorities which sustain the doctrine that the 
 execution of a check in the ordinary form, not describing 
 any particular fund, does not operate as an assignment, equit- 
 able or otherwise, of funds of the drawer in the hands of the 
 drawee. On the contrary, it was held by this court' that the 
 rule thus broadly stated seems to apply only to cases at law, 
 and 'that such an order, as soon as notice is given to the 
 drawee, works an assignment in equity,' and this view is well 
 sustained by authority.'" 
 
 (6) Discussion continued. "There is certainly no ground 
 for holding that a check or a draft drawn upon a fund in bank 
 is not an equitable assignment as between the drawer and 
 payee; and in a case where there is no controversy as to the 
 rights of the bank or drawee, it does not lie in the mouth of 
 the drawer or his assignee to say that such an instrument is 
 not an equitable assignment. If it were conceded that, as a 
 general rule, a check drawn upon a part of a fund in bank 
 will not of itself operate as an assignment pro tanto, it is 
 very clear to my mind that this is a case which a court of 
 equity might well regard as an exception to any such general 
 rule. As already suggested, the holder of the fund has come 
 voluntarily into a court of equity, bringing the fund with 
 him, and, disclaiming all interest in it, asks the court to dis- 
 pose of it as between the check holder and the assignee, ac- 
 cording to equity." Ifot long after the rendering of this de- 
 
 1 Walker v. Siegel, 2 Cent. L. J. 508. 
 
 2 " A bill of exchange or check is not an equitable assignment pro tanto of 
 the funds of the drawer in the hands of the drawee," Christinas v. Busseli, 
 14 Wall. 69, p. 84. 
 
 22 
 
338 BANKS AND THEIK DEPOSITORS. § 345 
 
 cision, Judge Miller, when holding the United States Circuit 
 Court, decided the question in the same manner.' 
 
 (c) Check holder must notify bank in order to hold it. But a 
 check does not operate as an equitable assignment of the 
 drawer's deposit until the bank has been notified that the 
 check has been drawn. In the words of Judge Miller:' 
 " However this doctrine may operate to secure an equitable 
 interest in the fund deposited in the bank to the credit of the 
 drawer after notice to the bank of the check, or presentation 
 to it for payment, we are of opinion that, as to the bank 
 itself, the holder of the fund, and its duties and obligations 
 in regard to it, the bank remains unaffected by the execution 
 of such a check until notice has been given to it, or demand 
 made upon it for its payment." 
 
 {d) Effect of maker's insolvency before notice to or demand of 
 bank. But if the drawer assign before such a notice has been 
 received by the bank or a demand has been made thereon, 
 the holder of the check has no superior equity to other credi- 
 tors. Says Judge Miller: "It is not easy to see any valid 
 reason why the assignment of an insolvent debtor for the 
 equal benefit of all his creditors, and all his property, does not 
 confer on those creditors an equity equal to that of the 
 holder of an unpaid check upon his banker." On the occa- 
 sion of this remark no superior right was acquired by receiv- 
 ing a check before the maker's assignment. 
 
 (e) Check dated, before but given after assignment. If, however, 
 a check be dated before the depositor has made an assignment, 
 though given afterwards, and the bank does not know this at 
 the time of its presentation for payment, but only that the de- 
 positor has failed, it ought nevertheless not to pay such a 
 check.* Thus L. & Co. made an assignment on the 26th of 
 September. Three days afterward they gave their check to 
 H., but dated it September 22d. On the 29th the bank, on 
 
 I First Nat. Bank v. Coates, 8 Fed. Rep. 540. 
 I! Schuler «. Laclede Bank, 120 U. S. 511. 
 s Chaffee v. Bank, 40 Ohio St. 1. 
 
§ 346 WHEN CAN THE CHECK HOLDER SUE THE DEAWEE. 339 
 
 which it was drawn, paid it knowing of the assignment, but 
 not that the check was wrongly dated. L. & Co.'s assignee 
 recovered all the money they had on deposit at the date of 
 the assignment, the court saying that the bank, having knowl- 
 edge of that event, should have made inquiry about the check 
 before paying it.* 
 
 § 346. Equitable assignment not recognized anywhere. Un- 
 happily, this rule has not been recognized by all the courts. 
 In a Pennsylvania case^ a check was made on the 27th of 
 March ; on the 3d of April the maker failed ; and two days 
 afterward the check was presented to the bank on which it 
 was drawn for payment. The court held that there had been 
 no appropriation of money to the payee, and that the funds 
 in the bank belonging to the maker of the check passed to 
 his assignee. The same rule had previously been laid down 
 in l^ew York in Lunt v. Bank of North America.* The 
 court in that case considered the question fully, and decided 
 that a check drawn in the ordinary form, not describing a 
 particular fund, and containing only the usual request to the 
 bank to pay to the order of the payee therein named, was the 
 same in legal effect as an inland bill of exchange, and did not 
 amount to an assignment of the funds of the drawer in the 
 bank. The plaintiff was the assignee of the makers of two 
 checks which were payable to the Bank of iforth America. 
 "When the makers failed, notice of the assignment was given 
 to the bank on which the checks were drawn, but the money 
 was paid over, the lower court having decided that it could 
 be legally done. As the Supreme Court reversed this deci- 
 sion, the payees were obliged to refund the money to the as- 
 signee. At a later date the cases were reviewed,* and the rule 
 laid down in Lunt v. Bank of N^orth America was declared 
 to be the settled law of the State. Chief Justice Church in 
 giving the opinion of the court said : " This doctrine accords 
 
 1 Chaffee v. Bank, 40 Ohio St. 1. 
 
 2 First Nat. Bank v. fiish, 72 Pa. 13. ' 49 Barb. 221. 
 
 • People ex rd. Attorney-General v. Continental Life Ins. Co., 71 N. Y. 325, 
 p. 331. 
 
340 BANKS AND THEIE DEPOSITORS. § 347 
 
 with the relations between the parties. Banks are debtors to 
 their customers for the amount of deposits. A check is a re- 
 quest of the customer to pay the whole or a portion of such in- 
 debtedness to the bearer, or to the order of the payee. Until 
 presented and accepted, it is inchoate ; it vests no title or 
 interest, legal or equitable, in the payee to the fund. Before 
 acceptance the drawer may withdraw his deposit ; the bank 
 owes no duty to the holder of a check until it is presented 
 for payment."' 
 
 § 347. But is when check is drawn en particular iimds. (a) 
 Opinion of Talcotl, P. J. Although in iN'ew York the courts 
 have steadily tried to resist every claim by the check holder 
 to the drawer's money before acceptance of his check by the 
 drawee, yet in some cases the justice of exempting checks 
 from the operation of the general rule has been so great that 
 the courts have shrunk from applying it. A small door has 
 been opened whereby the holders of checks drawn on a 
 specific fund may be paid.^ The exception is thus stated: 
 " Though an ordinary bill of exchange, or check on a bank, 
 does not operate as an equitable assignment of so much money, 
 so as to vest the title in the payee without acceptance ; yet, 
 when a particular fund is specified, out of which the amount 
 is payable, or the source from which the payment is to be 
 derived, the order operates as an equitable assignment of the 
 fund, or so much as is necessary to satisfy the draft with or 
 without acceptance by the drawee ; and so operating it transfers 
 the fund, so that the drawee, having notice of the draft, is 
 bound to keep the fund, as upon a special deposit, in his 
 hands for the benefit of the payee." So, too, in J^Tew Jersey 
 if an order be drawn by a creditor on his debtor directing 
 him to pay money from a specified sum or fund and which is 
 presented to, though not accepted by the debtor, in equity the 
 money is assigned to the person having the order.* 
 
 1 Randolph v. Canby, 11 N. Y. Bank. Reg. 296. 
 
 2 Ballou V. Boland, 14 Hun, p. 359. 
 
 s Kirtland v. Moore, 40 N. J. Eq. 106. 
 
§ 347 WHEN CAN THE CHECK HOLDER SUE THE DRAWEE. 341 
 
 (b) In BaUou v. Boland,^ a contractor had agreed to build 
 a school-house who sublet a portion of the work to Boland. 
 The contractor drew a draft on the treasurer who was to pay 
 for the building. This was held to be an equitable assignment 
 of the amount to Boland. In Hall v. The City of Buifalo,* 
 a city contractor had drawn orders in favor of several persons 
 on funds due to him from the city, which were directed to 
 the comptroller and duly presented to, and attached by him 
 to the 'drawer's contracts. It was held that the city had 
 notice of the claims of these persons and was liable therefor 
 to the amount unpaid to the contractor. Chief Justice 
 Denio,^ after reviewing several cases, further remarks that, 
 " passing over a considerable period of time we come to Lett 
 V. Morris,* where a builder, who was erecting a house under 
 a contract, gave an order to one who had furnished him with 
 lumber, for certain sums out of moneys which would be- 
 come payable to him on the contract. It was held a good 
 equitable assignment, and so much of these moneys as the 
 orders called for was decreed to be paid to the holder of the 
 order." See also, to the same general purport. Burn v. Car- 
 valho,' and Rodick v. Gandell.* In the first of these cases 
 Lord Chancellor Cottenham laid down the equitable principle 
 in these words : ' In equity, an order given by a debtor to his 
 creditor upon a third person having funds of the debtor to 
 pay the creditor out of such funds is a binding equitable as- 
 signment of so much of the fund.' Continuing his review of 
 English cases of the same purport he concludes that the prin- 
 ciple of them " has been adopted and frequently acted on in 
 this country." Thus, in Iowa, a check drawn on a particular 
 fund operates as an assignment of it. I^o particular form of 
 words is necessary to create it, " anything which evinces an 
 intent to do so is sufficient."^ 
 
 1 14 Hun, 355. ^ 1 Keyes, 193. " Id. p. 198. * Sim. 607. 
 
 <• My. & Cr. 490. « 1 De Gex, M. & G. 763. 
 
 ' County of Des Moines v. Hinkley, 62 Iowa, 637 ; Moore v. Lowrey, 25 Id. 
 336 ; McWilliams v. Webb, 32 Id. 577 ; First Nat. Bank ti. D. & S. W. R. Co., 
 62 Id. 378. 
 
342 BANKS AND THEIR DEPOSITORS. § 348 
 
 (c) If money is deposited for a particular purpose depositor's 
 assignee cannot withdraw it. When money has been deposited 
 for a specific purpose, the most of which has been applied as 
 the depositor directed, the remainder on his failure cannot be 
 otherwise applied by his assignee. Thus the Erie Railway 
 Company declared a dividend on its stock and left the money 
 with a banking house to pay it. Before all the stockholders 
 had received their dividend a receiver of the company was 
 appointed. The money in the possesion of the bankirig house 
 was withdrawn by the company and subsequently passed 
 with its other property to the receiver. In a suit by one of 
 the stockholders who had not received his dividend, it was 
 held that the fund deposited with the banking house should 
 be regarded as specially appropriated for the payment of a div- 
 idend made by the company and that the stockholders 
 acquired in equity a lien thereon which they could follow into 
 the hands of the receiver.* 
 
 § 348. When funds are insufficient can owner of check or 
 note claim them. When a bank holds a note that is due and 
 on the same day a check is presented for payment drawn by 
 the maker of the note, and the deposit is insufficient to pay 
 both, which shall the bank pay, the note or the check? 
 Judge Brewer has thus answered the question ? " I think 
 that it is equitable for a bank, upon the day on which a note 
 becomes due, and at any time during the day, having funds 
 of the maker in its possession, to apply those funds to the 
 payment of that note, although by so doing it leaves nothing 
 standing to the credit of the maker to apply on checks drawn 
 by him. As between the bank, the holder of a note due, and 
 the payee of a check upon that bank, the equities are in favor 
 of the bank. Or, at least, if the equities are equal, legal title 
 to the funds and possession, is with the bank, and it should 
 not be postponed." 
 
 1 Matter of Le Blanc, 14 Hun, 8 ; Le Roy ». Globe Ins. Co., 2 Edw. Ch. 657 ; 
 Lowene v. American Fire Ins. Co., 6 Paige, 482.; see also People ex rel. Attor- 
 ney-General V. Continental Life Ins. Co., 71 N. Y. 325. 
 
 2 Schuler v. Laclede Bank, 27 Fed. Rep. 424 ; Rev. on another point, see 
 § 345, c. 
 
§ 350 WHEN CAN THE CHECK HOLDER SUE THE DRAWEE. 343 
 
 § 349. Operation of cheok of insolvent bank, (a) Case of 
 hill of exchange. Having shown what principles apply to the 
 checks of insolvent personal debtors, we may inquire whether 
 different ones apply to the checks of banks that become in- 
 solvent. When a bank draws a bill of exchange in favor of 
 a depositor on a person who has funds to meet it, this is held 
 to be not such an assignment or appropriation of a particular 
 fund as to vest the property therein in the payee as against 
 a subsequent assignee of the bank for the benefit of creditors.' 
 
 {b) Payee of bill cannot be remitted to his original status. 
 When an insolvent bank draws a bill of exchange in favor 
 of a depositor on a business correspondent with whom it has 
 a deposit, and the bill is dishonored on presentation because 
 of the bank's insolvency, the payee cannot rescind the con- 
 tract and be remitted to his original status as a depositor. 
 And this is so especially when it is shown that no intentional 
 fraud or deception was practised on him and that the bank 
 had no reasonable expectation of the dishonoring of the bill.^ 
 
 § 350. Lender of check cannot recover of bank. As the 
 holder of a check cannot recover of the bank on which it is 
 drawn, neither can the lender of a check recover of the de- 
 pository bank even though the loan was made on the faith 
 of forged securities provided the bank had no knowledge of 
 the fraud.3 
 
 1 Ex parte Jones, 77 Ala. 330. « Id. 
 
 3 Justh V. National Bank, 56 N. Y. 478; Aff. 36 N. Y. Sup. Ct. 273; 
 
344 BANKS AND THEIK DEPOSITORS. § 352 
 
 CHAPTER XV. 
 
 WHEN A BANK CAN RECOVER MONET PAID BY MISTAKE. 
 
 § 351. Can generally be recovered. Money paid under a 
 mistake of fact generally may be recovered although the 
 payor had the means of avoiding it. If, however, he pays it 
 intentionally and without choosing to make a proper investi- 
 gation that would save him from error he cannot recover.' 
 Mere negligence in making the mistake will not preclude the 
 payor from demanding its correction. It does not give to the 
 receiver the right to retain what is not due unless he has 
 been misled or prejudiced thereby.^ 
 
 § 352. Money paid on forged checks cannot be recovered. 
 Of course this rule, as we have seen, cannot be applied by a 
 bank to recover of the drawer and depositor money paid on 
 forged checks and indorsements or on those of a correspondent. 
 Says Judge Rapallo :* " It has been decided that the drawee 
 is bound to know the signature of the drawer and that if he 
 accepts or pays he cannot recall his act.* So also it has been 
 held that if one pays a draft purporting to be accepted by 
 him he cannot afterward set up that the acceptance was a for- 
 . gery as against a bona fide holder to whom the payment was 
 made. That he was bound to know his own signature.* And 
 farther that if a bank purports to be its own bills or receives 
 them on deposit and passes them to the credit of its customer 
 
 1 Meredith v. Haines, Pa. Sup. Ct., 14 Week. No. Cas. 364 ; Kelly v. Solari, 
 9 Mees. & Wels. 54 ; Waite v. Leggett, 8 Cow. 195 ; Bell v. Gardiner, 4 Man. 
 & G. 11 ; Boylstou Nat. Bank v. Richardson, 101 Mass. 287. 
 
 s National Bank v. National Mechanics' Bank. Ass'n, 56 N. Y. p. 213. 
 
 3 Id. 
 
 * Price V. Neal, 3 Burr, 1354 ; National Park Bank ». Ninth Nat. Bank, 46 
 N. Y. 77. 
 
 5 Mather v. Lord Maidstone, 18 Com. B. N. S. 273. 
 
§ 355 BANK CAN RECOVER MONEY PAID BT MISTAKE. 345 
 
 it cannot recall the payment or revoke the credit on subse- 
 quently discovering that the bills had been fraudulently 
 altered by raising their amounts."* 
 
 § 353. Raised check. But if a person pass a raised bill or 
 cheek to a bank, especially when it is drawn thereon, and it 
 is paid on the faith of the presentor's indorsement, the excess 
 can be recovered unless damage would result therefrom to 
 the person who received it. There is no duty or obligation 
 of the bank to pay the wrongful amount, and, consequently, 
 however innocent the presentor of the check may be, he must 
 refund unless he can show that by so doing his condition 
 would be worse than it would have been had the bank de- 
 clined to pay the check on presentation.' 
 
 § 354. Raised draft. But if a person buy a draft of a bank 
 which is afterward raised it cannot hold him for the excess. 
 Thus B., of Texas, desirous of remitting a present of $500 
 to his son-in-law who lived in Kew York, purchased a draft 
 of a bank for the amount. The draft and letter accompa- 
 nying it were put in an envelope, which was directed by the 
 cashier at the sender's request, to the son-in-law, and mailed 
 with the bank mail. The figures $500 were by some unau- 
 thorized person afterward changed to $5000, and the draft for 
 that amount was paid in New York. The mistake was dis- 
 covered by the bank about a month afterward. B. was a de- 
 positor in the bank, and in an action to recover his deposit 
 the bank sought to make him liable for $4500, the excess in 
 the draft. But the court held that no contract existed be- 
 tween the parties which rendered B. liable for the amount, 
 and that having received no benefit from the mistake, he could 
 not be made liable for any fraud the payee committed.' 
 
 § 355. Reasonable diligence must be used to recover on raised 
 check, (a) Rule stated by Wagner, J. In demanding payment 
 of one who has passed a raised check, and especially of one 
 
 • United States Bank v. Bank of Georgia, 10 Wheat. 333. For recovery of 
 money paid on forged check see §§ 197-200. 
 2 National Bank v. National Mechanics' Bank. Ass'n, 55 N. Y. 211. 
 1 City Nat. Bank v. iStout, 61 Texas, 567. 
 
346 BANKS AND THEIR DEPOSITORS. § 355 
 
 to whom payment has been made on the faith of his indorse- 
 ment, only reasonable diligence is required. Whenever that 
 has been exercised and no injury has resulted from the delay 
 the amount erroneously paid can be recovered.' "The ac- 
 cepted rule is* that the payor must be allowed a reasonable 
 time to detect the forgery and demand restitution. What 
 will amount to a reasonable time will greatly depend on the 
 circumstances of each particular case. It is conceded, at all 
 events, that it is not necessarily the very day of payment, nor 
 the day after. For one who passes a forged bill, it is said, 
 cannot avoid his liability on pretence of delay in detecting 
 the forgery and giving notice ; and reasonable diligence is all 
 that can be required. Therefore where no negligence is im- 
 putable to the drawee in failing to detect the forgery, want of 
 notice within the time which ordinarily charges previous par- 
 ties on negotiable paper is excused, provided it be given to 
 the holder as soon as the forgery is discovered."* This rule 
 was applied in the following case : A bank, having paid a 
 check to a stranger, collected the amount' from the bank on 
 which it was drawn. It proved to be a forgery, but at the 
 time of payment, neither bank knew or suspected this. The 
 next day the paying bank learned that the check was forged, 
 and on that day or the one succeeding, notified the other bank 
 of the fact. This notification was declared to have been given 
 in a reasonable time and that the money could be recovered. 
 {b) Demand must be made. Whenever money is thus paid 
 a demand is necessary before bringing an action for its 
 recovery. The Statute of Limitations begins to run against 
 money paid in this way from the time of payment unless 
 
 1 City Bank .;. First Nat. Bank, 45 Texas, 203. The rule is absolute that 
 ■when money is paid on a forged draft, where the parties are in mutual fault 
 and are equally bound to payment, it can always be recovered back, Reding- 
 ton V. Woods, 45 Cal. 406. 
 
 2 Third Nat. Bank v. Allen, 39 Mo. 310. 
 
 » Canal Bank v. Bank of Albany, 1 Hill, 287 ; United States Bank v. Bank 
 of Georgia, 10 Wheat. 333 ; Bank of Commerce v. Union Bank, 3 N. Y. 230 ; 
 Espy ». Bank, 18 Wall. 604. 
 
§ 356 BANK CAN RECOVER MONEY PAID BY MISTAKE. 347 
 
 there be a fraudulent concealment of the knowledge surround- 
 ing the tranfsaction.' 
 
 (c) In whose name suit should be brought. When a bank 
 acts as the agent of another in presenting drafts for payment 
 and it is afterward necessary to bring an action to recover the 
 difference between the original amount stated in a draft and 
 the raised amount that is paid, the agent-bank is the proper 
 plaintiff.* 
 
 § 356. Mistake is question of fact. The principal question 
 in the cases to recover is, was the money paid by mistake ? 
 As previously stated, want of care in making payment will 
 not prevent a recovery.* 
 
 (a) Union National Bank v. Sixth National Bank.* A bank 
 in Troy received from its correspondent, a bank in 'Sew 
 York, a note for collection, the maker of which lived thirty 
 miles distant. The bank sent the note to a third and corres- 
 ponding bank at the residence of the maker. Palling to pay 
 the note at maturity, that bank caused it to be protested, and 
 notice of protest was duly sent to the endorsers in New York 
 and to the Troy and Sew York banks above mentioned. The 
 Troy bank; however, by some miscarriage did not receive the 
 notice, and supposing the note had been paid remitted the 
 amount to its Sew York correspondent. But it recovered 
 the money. Moreover, the fact that the Sew York bank had 
 received the amount of the note from an indorser, which was 
 afterward refunded on receiving the remittance from the 
 Troy bank, did not defeat a recovery in the absence of any 
 proof that the indorser was not yet liable and responsible to 
 the Sew York bank. 
 
 (6) Harley v. Eleventh Ward Bank? In another case, Har- 
 ley deposited with a Sew York bank for collection a sight 
 draft which it sent to another bank to be collected. Before 
 collecting the same, but supposing that it had done so, the 
 
 J Sturgis V. Preston, 134 Mass. 372. 
 
 " First Nat. Bank v. Continental Nat. Bank, 17 Week. Dig. 42. 
 
 » § 351. < 43 N. Y. 452. 
 
 5 76 Id. 618 ; Aff. 7 Daly, 476. 
 
348 BANKS AND THEIR DEPOSITORS. § 356 
 
 second bank credited the amount to the New York bank, 
 which, in turn, also credited Harley's account for the same 
 amount. The second bank having discovered its mistake, 
 charged back the amount to the New York bank, but Harley 
 having been notified of the mistake, refused to take back the 
 draft or have the amount charged to his account. The New 
 York bank accused the other bank of delay in not returning 
 the draft and stated that it would be compelled to demand 
 payment thereof, and afterward rendered Harley an account 
 without charging the draft back to him, and continued to 
 render accounts to him for two years in the same way. Subse- 
 quently, in a suit by Harley against the New York bank, the 
 court held that it was precluded from denying its liability for 
 the amount. 
 
 (e) De Nayer v. State National Bank} C, a debtor of D., 
 drew a draft on E., of St, Louis, for the amount of a debt 
 payable in thirty days from date. He delivered it to D., who 
 deposited it in a bank for collection. Before its maturity D. 
 was notified that it had been paid and he drew a portion of 
 the money. C, who was insolvent, having been notified of 
 the payment of the draft, called at the bank before its mar 
 turity and expressed surprise at what had happened, and 
 said that he was anxious to protect the draft, and that if it 
 was not paid he had some money which he intended to keep 
 for the protection of it. He was told that it had been paid, 
 but it was returned unpaid. The bank then sued D., to re- 
 cover the money paid above mentioned, and it was held that 
 as D. had lost no rights against C. in consequence of the mis- 
 take, the bank could recover the money thus paid on the 
 supposition that the draft had been discharged.^ 
 
 {d) Wetherill v. Bank? Ai deposited a note in a bank for 
 collection which at maturity was entered by the bank's 
 mistake in the bank-book of the depositor to his credit as 
 paid. The bank, discovering the mistake, erased the credit 
 
 1 8 Neb. 104. « 1 Miles, 399. 
 
§ 358 BATIK CAN RECOVER MONEY PAID BY MISTAKE. 349 
 
 from the depositor's book. He however gave notice to the 
 bank that he held it responsible for the amount and drew a 
 check therefor which the bank refused to pay. The bank 
 then sued the drawer of the note and afterward his bail bond, 
 but in neither suit recovered anything. The court held that 
 the bank was liable to the depositor for two reasons : first, by 
 instituting the suits mentioned it assumed the property in 
 the note ; and second, by reason of the lapse of time between 
 the date of the maturity of the note and notice to the deposi- 
 tor of the mistake in crediting his account with the amount. 
 
 (e) Payment of larger sum than stated in check. If the gen- 
 eral-manager of a corporation having authority among other 
 things to collect money on checks for his corporation presents 
 a check for $300 to the drawee bank and the paying teller 
 by mistake pays $800, the bank can recover $500, whether 
 the general manager ever accounted to the corporation for 
 the excess or not.' Money paid with the full knowledge of 
 the facts but under a mistake of law cannot be recovered.* 
 
 § 357. Who should sue for over-payment. The suit to re- 
 cover an over-payment should be brought in the name of the 
 paying bank and not in the name of the drawer of the check.^ 
 
 § 358. Payment of draft by mistake, (a) Citizens' Bank v. 
 Grafflin* The Citizens' Bank held a draft of M. on C, of 
 Newburyport, Mass., dated May 31st, 1867, and payable to 
 their order ninety days after date at a Boston bank, on their 
 indorsement. The draft was discounted by the defendant, on 
 the 22d of July, 1867, and having been presented for accept- 
 ance, but not accepted, it was protested for non-acceptance. 
 "When the draft matured it was protested for non-payment on 
 the 4th of September following. After the maturity of the 
 draft the defendant informed the bank that it had not been 
 paid, and requested the institution to make it good, which was 
 done. On the next day the defendant sent the draft with the 
 
 1 Kansas Lumber Co. v. Central Bank, 34 Kansas, 635. 
 
 2 Mutual Savings Institution v. Enslin, 46 Mo. 200. 
 » Keene v. Collier, 1 Met. (Ky.) 415. 
 
 * 31 Md. 507. 
 
350 BANKS AND THEIR DEPOSITORS. § 359 
 
 protest to the 'bank. The draft was paid by the bank, in 
 ignorance that it had been protested in July for non-accept- 
 ance. As soon as it ascertained this fact, it informed the de- 
 fendant that the draft had been paid in ignorance, and de- 
 manded a return of the money. The defendant having refused 
 to return it, the bank sued him and recovered. The court 
 held that if the bank had paid the money in ignorance of the 
 presentation and non-acceptance of the draft in July, and on 
 the fact that no notice had been duly given to it through 
 the post-office or otherwise, it could recover. 
 
 (b) Stephenson v. Mount.^ In another case S. received a let- 
 ter informing hi™ that a draft drawn by the steamboat Mag- 
 nolia for $1200, was placed in a bank for collection, which he 
 immediately paid, and took the draft. On the same day the 
 holder of the draft called, and the clerk of the bank paid 
 him the money charging no commissions and making no en- 
 tries of the transaction on the books of the bank. S. after- 
 ward learned that the letter and draft paid by him were 
 both forgeries. Ifevertheless his action relieved the bank 
 from all liability to him. 
 
 § 359. Mistake concerning security no ground for recovering 
 money paid. After accepting and paying a bill the drawee 
 cannot recover the amount from the payee on the ground 
 that he paid it under a mistaken knowledge of the worth 
 of his security, which had proved to be fictitious.^ 
 
 1 19 La. Ann. 295. ' First Nat. Bank v. Burkham, 32 Mich. 328. 
 
360 THE STATUTE OF LIMITATIONS. 351 
 
 CHAPTER XVI. 
 
 THE STATUTE OF LIMITATIONS. 
 
 § 360. Does not operate before making demand. " The en- 
 gagement of a bank with its depositor is not to pay abso- 
 lutely and immediately, but when payment shall be required 
 at the banking house. It becomes a mere custodian and is 
 not in default or liable to respond in damages until demand 
 has been made and payment refused. Such are the terms of 
 the contract implied in the transaction of receiving money 
 on deposit, terms necessary alike to the depositor and the 
 banker. And it is only because such is the contract that the 
 bank is not under the obligation of a common debtor to go 
 after its customer and return the deposit wherever he may be 
 found. Hence it follows that no right of action exists and 
 the Statute of Limitations does not begin to run until the 
 demand s'tipulated for in the contract has been duly made. 
 For this authorities are hardly necessary."^ 
 
 (a) W/ie7i statute will operate without demand. "Bank checks 
 are not designed or intended to be outstanding for years. 
 The holder has it in his power to make the liability of the 
 drawee absolute at any time. We are not prepared to hold 
 that, by omitting to make the necessary demand, he may 
 suspend the statute for an indefinite period. If he may sus- 
 pend it as against the drawer it must follow that the statute 
 will also be suspended in the favor of the drawer as against 
 the bank. If the drawer has funds in the bank the latter is 
 
 1 strong, J., Girard Bank v. Bank of Penn Township, 39 Pa. p. 98 ; Fink- 
 bone's Appeal, 86 Id. 368 ; Humphrey v. County Nat. Bank, 113 Id. 417 ; 
 Thomson v. Bank, 82 N. Y. 1 ; Payne v. Gardiner, 29 Id. 146 ; Howell v. 
 Adams, 68 N. Y. 314 ; Planters' Bank v. Farmers & Mechanics' Bank, 8 
 Gill & Johns. 449, second trial 10 Id. 422 ; Bank v. Merchants' Nat. Bank, 
 91 N. Y. 106 ; Brahm v. Adkius, 77 111. 263. 
 
852 BANKS AND THEIR DEPOSITORS. § 361 
 
 liable to him for refusing paj'ment.* A demand after six 
 years cannot be good as against the drawer unless the bank is 
 under an obligation to pay, notwithstanding an unexplained 
 delay for the period of time. But it would be a harsh rule 
 which would make a bank liable to its depositors for refusing 
 to pay out its funds upon a check of that suspicious charac- 
 ter. In many cases where the nature of the obligation was 
 Buch that the party was only bound to pay on demand, it has 
 been held that the statute began to run, although no demand 
 had been made. Those cases proceed upon the principle that 
 as the rule requiring a demand is for the protection of the 
 party sought to be made liable it cannot be used for his an- 
 noyance, and the fact that the opposite party omits to make 
 a demand which he can make at any time will not save the 
 statute."^ 
 
 § 361. Demand for certifying is not demand for payment. 
 The demand to have a check certified is not a demand for 
 payment.. By certifying the check the deposit represented 
 by it ceases to stand to the credit of the depositor and passes 
 to the credit of the check holder who is thereafter a depositor 
 for that amount with the same rights as any other. A cheek 
 was drawn October 7th, 1852, and certified but not presented 
 for payment until September 3d, 1859. The bank, though, in 
 October, 1854, paid the money to the original depositor, tak- 
 ing a bond of indemnity from him. The holder, it was de- 
 clared, was not barred from recovering by the Statute of 
 Limitations ; moreover, the taking of the bond was an ac- 
 knowledgment that the money then remained in the bank 
 'to the credit of the holder of the certified check.^ 
 
 With respect to certificates of deposit the statute does not 
 begin to run immediately after issuing them, not indeed until 
 after demand for payment.* Moreover, they are sufficient 
 
 > Marzetti v. Williams, 1 Barn. & Ad. 415 ; Little v. Phenix Bank, 2 Hill, 
 425. 
 
 2 Smith, J., Brust v. Barrett, 16 Hun, 409, p. 412. 
 
 3 Girard Bank v. Bank of Peun Township, 39 Pa. 92. 
 < Howell V. Adams, 68 N. Y. p. 321. 
 
§ 363 THE STATUTE OF LIMITATIONS. 353 
 
 written evidence of the existence of a debt to satisfy the 
 Statute of Limitations relating to written instruments.' 
 
 § 362. Operation on certificate of deposit, (a) Difficult cases 
 of deposit or loan. The question has arisen in at least two 
 cases whether the money received by the depositary was a 
 deposit or a loan. Thus P. delivered to a firm $1000, for 
 which a paper was given to him acknowledging the receipt 
 of the money and stating that he was credited with the same 
 at six per cent, interest. This transaction was held to be a 
 deposit and not a loan, and the rights and liabilities of the 
 parties were the same as if the money had been in a bank, 
 and hence no right of action existed against the firm until 
 demand was made, and that the statute began to run from 
 the time of making it and not before. If the transaction had 
 been treated as a loan, then the paper would have been con- 
 sidered a promissory note on interest and payable on demand, 
 and against which the statute would not have begun to run 
 until payment was demanded.^ 
 
 (b) Smiley v. Fry.^ In another case an instrument like the 
 following was given by a firm of brokers who received 
 deposits on demand : " Due A., trustee, $4000, returnable on 
 demand. It is understood that this sum is especially deposited 
 with us and is distinct from the other transactions with said 
 A." This was declared to be a certificate of deposit against 
 which the statute did not begin to run before demanding the 
 amount. 
 
 § 363. Trust deposits. When a deposit is made in trust 
 for another how does the statute operate ? In Mabie v. 
 Bailey,* the trustee withdrew the deposit and his executor 
 was subsequently sued by the beneficiary for the amount. 
 He sought to defend himself behind the Statute of Limita- 
 tions. Said Judge Andrews, who delivered the opinion of 
 the court : " We think the defence of the Statute of Limita- 
 
 > First Nat. Bank v. Coleman, 11 Brad. 508. 
 ' Payne v. Gardiner, 29 N. Y. 146. 
 
 > 100 Id. 262 ; Aff. 49 Id. Sup. Ct. 134. * 95 Id. 206. 
 
 23 
 
354 BANKS AND. THEIR DEPOSITORS. §365 
 
 tions was not made out, supposing the statute applies in such 
 a case. The withdrawal of the deposit was not so far as the 
 case discloses in hostility to the trust. The testator held the 
 legal title to the fund as trustee, and it was competent for 
 him to withdraw it to make another investment, or for any 
 purpose not inconsistent with the trust.' There is no evidence 
 that he ever repudiated the trust, and no presumption that 
 he did so can be indulged to let in the defence of the Statute 
 of Limitations. The right of action upon the facts presented 
 did not accrue until the testator's death, which, presumptively, 
 upon the evidence was the period when the trust terminated."^ 
 
 § 864. Suspension of specie payments. The suspension of 
 specie payments and the discontinuing of banking operations 
 are such acts as will, if known by the depositor, set the 
 statute running against him.^ 
 
 (a) When statute begins to run. The statute begins to run 
 not from the time of suspension but when the depositor learns 
 of the event* 
 
 § 365. Notice of unclaimed deposits. As a new promise 
 will revive a debt barred by the statute, so the publication of 
 unclaimed deposits remaining in a bank in pursuance of law, 
 is an acknowledgment of indebtedness to such depositors as 
 will prevent the bank from interposing the statute in defence 
 to an action for recovering them.* 
 
 1 Boone v. Citizens' Sav. Bank, 84 N. Y. 83. 
 
 2 In 1865, Margaret Ganley deposited two treasury notes with the Troy 
 City Nat. Bank for safe keeping, taking a, receipt from the cashier which 
 slated that they were to be delivered to her on its surrender. The next year 
 her husband, without her knowledge or subsequent ratification, induced the 
 bank to sell the notes and pay over the proceeds to him without surrender- 
 ing the receipt. She died in 1869, but no administrator was appointed until 
 1879, when the plaintiff qualified. The husband died in 1874. Having pro- 
 duced the receipt and demanded the notes of the bank which it refused to 
 deliver, the administrator began his suit. The bank's defence was the 
 Statute of Limitations, which was ineffectual, Ganley u. Troy City Nat. Bank, 
 N. Y. Sup. Ct. 20 Week. Dig. 541. Dec. noted but not rep. in 34 Hun, 630. 
 
 ' Planters' Bank v. Farmers & Mechanics' Bank, 8 Gill & Johns. 449. 
 
 * Union Bank v. Planters' Bank, 9 Id. 439. 
 
 5 Adams v. Orange County Bank, 17 Wend. 514, 
 
§ 367 THE STATUTE OF LIMITATIONS. 355 
 
 § 866. When one banking corporation sncceeds another. When 
 one banking corporation takes from another an assignment of 
 all its property, and as a consideration agrees to pay all of 
 the debts and liabilities of the assignor and proceeds to con- 
 duct the business of banking and credits a depositor of the 
 former bank with the amount of his deposits on its books of 
 account, it assumes toward the depositor the same relation 
 that its assignor bore. The creditor is a depositor of the second 
 bank and his claim cannot be barred by the Statute of Limi- 
 tations.' 
 
 § 867. When depositor is a lunatic, V., the plaintiff, at the 
 request of B., deposited money belonging to him with a bank, 
 depositing the same, however, in V.'s name. Ho afterward 
 gave B. two checks for the amount which in February, 1869, 
 he transferred to E., in consideration for her promise to marry 
 him. Lunacy proceedings were begun against B. the next 
 day, pending which the bank was enjoined from paying any 
 one. In March B. was declared a lunatic, and a committee 
 were appointed to whom the bank could and did legally pay 
 the deposit. In 1870, however, V. brought an action against 
 the bank to recover the amount of the deposit, but the court 
 held that it was barred by the statute. The running of the 
 statute against him was not affected by the fact that within 
 six years the bank had paid checks drawn by him for a bal- 
 ance due on his own account.' 
 
 • Green v. Odd Fellow.s' Sav. & Com. Bank, 65 Cal. 71. 
 
 " Viets V. Union Nat. Bank, 101 N. Y. 563. The plaintiff's right to recover 
 did not rest on the ground that he was the owner of the money deposited in 
 the bank or had any absolute title to the same. It clearly did not belong to 
 him, and if this action could be maintained It must be for the reason that 
 the deposit in his name with the consent of B., and the making and deliv- 
 ery of the checks under the circumstances stated conferred on him the right 
 to enforce payment against the bank. Opinion of the court, Id. p. 568. 
 April 1st, 1865, B. drew a check on a bank and delivered it to S., who on the' 
 same day indorsed and transferred the check to R. It remained in the latter's 
 possession until April, 1875, having been mislaid, when it was presented to 
 the bank and payment was refused. In an action thereon it was held to 
 be barred by. tlie Statute of Limitations. Whether or not the drawer h^d 
 funds on deposit in the bank at the time the check was drawn, or within six 
 years thereafter, was immaterial. Brust v, Barrett, 16 Hun, 409. 
 
356 BANKS AND THEIR DEPOSITORS. § 368 
 
 CHAPTER XVIL 
 
 OVERDRAFTS. 
 
 § 368, Account should not be overdrawn, {a) Opinion of 
 Woodward, J. A bank cannot justify itself in paying an 
 overdue check when the drawer has no funds there, on the 
 ground that he is a customer in good credit and had given 
 1)0 notice to the institution that the check had been paid.' 
 Yet a bank in Pennsylvania paid such a check and attempted 
 to prove afterward, in a suit to recover the amount of the 
 maker, that it was "a custom to pay overdrafts of solvent 
 dealers with banks." The bank failed to prove it, but, 
 "if it had not failed," said Judge Woodward, "such a 
 custom should be abolished. Our banking institutions are 
 generally conducted by boards of directors, to whom stock- 
 holders look for the proper use and management of the capital 
 invested ; whilst the ordinary routine of daily business is en- 
 trusted to cashiera and clerks who are not directors, generally 
 not stockholders, and who have no power to discount paper. 
 If these subordinate officers might pay checks, which are 
 properly drafts on funds deposited, where there were no funds 
 of the drawer on deposit, the capital of banks would be liable 
 to perversion to purposes, and in modes, that were never 
 contemplated, either by the Legislature or the stockholders. 
 That the practice of paying overdrafts has prevailed to some 
 extent is quite likely ; and it may be true that boards of 
 directors have in some instances sanctioned it ; but it has no 
 authority in sound usage or in law."* 
 
 • Officers of a 1)801: should not permit a deposit to be overdrawn. Minor 
 V. Mechanics' Bank, 1 Peters, 46, p. 72. Payment of overdrafts without a 
 special excuse is a violation of duty, Bank v. Calder, 3 Strob. 403. 
 
 s Lancaster Bank v. Woodward, 18 Pa. 357, p. 362. 
 
I 370 OVERDRAFTS. ' 357 
 
 (b) Maryland view. Judge Dorsey, of Maryland, also said 
 that the customers of the banks in that State had " no accom- 
 modation credit, and without a gross violation of their trust 
 they can honor no check or draft upon them beyond the 
 amount of deposits standing to the credit of him by whom 
 such check or draft may be drawn."' 
 
 § 369. Agent has no authority to overdraw. Authority to 
 an agent to collect debts and to draw money does not author- 
 ize an agent to overdraw, and if he should do so, a bank 
 would not be protected against his principal.^ And if over- 
 drafts are made by an agent through fraudulent collusion 
 with a book-keeper in a bank without the knoAvledge or 
 sanction of the principal, and who receives no part of the pro- 
 ceeds, it must bear the loss. Of course, the bank can look to 
 the book-keeper and his sureties, and to all who participated 
 in the fraud.^ In a case of this kind the loss was " occasioned 
 by the fraud of an agent clerk and servant of the bank ; by 
 the fraud of a clerk in regard to his legitimate busiuess in his 
 appropriate department in the bank, and therefore obligatory 
 on the bank so far as respects innocent third persons. In 
 judgment of law, therefore, the act of the clerk in this respect 
 was the act of the bank."* 
 
 § 370. Overdrawing at insolvent bank, (a) In re Bank of 
 Madison.^ If a bank receive a note for collection from a de- 
 positor which is discounted, and the proceeds are credited to 
 him, it becomes the property of the bank, and passes to the 
 receiver after its insolvency. If, at the time of receiving a 
 note from a depositor for discount his account is overdrawn, 
 but is made good before the bank becomes insolvent, this 
 does not constitute the bank a trustee for the proceeds of the 
 note. Another depositor prayed the court to order the re- 
 ceiver to refund the amount of a draft drawn on the Second 
 Ifational Bank of Chicago, and which the failed bank re- 
 
 • Eichelberger v. Finley, 7 Harr. & Johns. 381, p. 387. 
 
 2 Union Bank v. Mott, 39 Barb. 180. » Id. 
 
 « Peckham, J., Id. p. 182. See Washington Bank v. Lewis, 22 Pick. 24. 
 
 s 5 Biss. 515. 
 
358 BANKS AND THEIR DEPOSITOES. § 371 
 
 ceived for collection. The Second I^ational Bank collected 
 the draft, but kept the money as it was a creditor of the 
 other. 15'either the failed bank nor the receiver therefore 
 had the money to pay to the person who left the draft for 
 collection. The court said that the officers of the bank must 
 have known such would be the result when they received it 
 to collect, £tnd their conduct was deserving of the severest 
 censure.* 
 
 (b) Van Dyck v. MeQuade.' At the time of the failure of a 
 savings bank a depositor was indebted to it for an overdraft 
 of more than $5000. The receiver having sued him, he de- 
 fended on the ground that the institution had on deposit to 
 the credit of two parties more than that sum, which by an 
 agreement with the bank a year before, was transferable to 
 his credit. About the time of the failure, he also sought to 
 have these deposits applied to his indebtedness. But the 
 court said that he had no such right. The alleged agreement 
 imposed no obligation whatever on the bank to apply them, 
 but merely gave it an option to resort to those deposits for 
 the purpose of making good any overdrafts of the defendant. 
 On the approaching failure of the bank it was the clear duty 
 of its officers to abstain from exercising that option. 
 
 § 371. Bank can recover amount of overdraft. If an over- 
 drawn check be paid by a cashier the bank may maintain an 
 action thereon against the drawer. " If the cashier without 
 authority," said Judge Appleton in Franklin Baiikv. Byram,^ 
 " misappropriates the funds of the bank, if he violates his 
 trust, if he pay away money wrongfully and that money can 
 be traced into the hands of one conusant of his breach of 
 trust and participant in his wrong-doings it is difficult to per- 
 ceive why redress should be denied the bank. In this view 
 it is immaterial whether it is paid out on a check or not. If 
 the drawer of the check has no funds the cashier is under no 
 greater obligation to pay than if it were a mere verbal re- 
 
 • .5 Blss. p. 521. 2 85 N. Y. 616. See § 391. 
 
 3 39 Me. 489. 
 
§ 373 OVERDRAFTS. 359 
 
 quest. The overdrawing and the payment of the check over- 
 drawn are both wrongful acts. If in such case the money of 
 a bank has been misappropriated by its cashier, without the 
 knowledge or consent of its officers, there is neither law nor 
 equity in permitting the recipient to retain what he has r6- 
 ceived without right. The bank may consequently recover 
 the amount shown to have been overdrawn." 
 
 § 872. Reclaiming money fraudulently overdrawn. If a 
 person by fraudulent overdrawing obtain the money of another 
 and deposits it to his own credit elsewhere the title to the 
 money is not changed and can be reclaimed.' 
 
 § 373. Redemption of stock pledged for overdraft. A debtor 
 to a bank for an overdraft transferred stock at a fair price in 
 payment of the debt, " subject to his right of redemption in 
 two years," and was paid the difference between the stock 
 and his debt. It was decided that after the expiration of 
 the two years the stock could not be redeemed.^ 
 
 1 Tradesman's Bank v. Merritt, 1 Paige, 302. If a depositor fraudulently 
 overdraws his account the bank may recover the money of one who has re- 
 ceived it with knowledge of the fraud and without having given a valuable 
 consideration therefor, Mechanics' Bank v. Levy, 3 Paige, 606. 
 
 2 Lauman's Appeal, 68 Pa. 88. 
 
360 BANKS AND THEIR DEPOSITORS. § 376 
 
 CHAPTER XVin. 
 
 WHEN CAN A DEPOSIT BE RETAINED TO PAT THE DEPOSITOR'S 
 INDEBTEDNESS. 
 
 When has a bank the right to apply the funds of a de- 
 positor to the payment of a debt due by him to itself ? 
 
 § 374. Bank has a lien for depositor's indebtedness. The 
 principal rule is when a depositor is indebted to a bank by 
 bill, note or other matured indebtedness, it has the right to 
 apply his deposit to the payment of the obligation.' " It is 
 given by the law upon the presumption that it is upon the 
 faith of moneys and securities coming into the possession of 
 the banker, in the course of generaJ dealings, not especially 
 devoted to other uses a balance is suffered to accumulate 
 against the customer.'"^ The term lien is often used to ex- 
 press this right of the depository to retain the funds of a de- 
 positor. 
 
 § 375. Set-off. (a) This is a statutory right. A demand by 
 a depositor or depository can also be lessened or extinguished 
 by setting off a debt due from the demander. This right of 
 set-off is given by statute and does not exist at common law,* 
 though it does to some extent in equity.* The object of such 
 
 1 Commercial Bank v. Hughes, 17 Wend. 94 ; Union Bank v. Tutt, 5 Mo. 
 App. 342 ; Brandao v. Barnett, 12 Clark & Fin. 787 ; Rev. 6 Man. & Gr. 630, 
 which reversed 1 Man. & Gr. 908 ; London Chartered Bank ». White, L. R., 
 4 App. Gas. 413. A bank or banker has a lien on all moneys and securities 
 of a depositor coming into his possession iii the regular course of business 
 for any balance due him on general account, Lehman Brothers v. Tallassee 
 Manuf. Co., 64 Ala. 567. 
 
 » Briokell, C. J., In re Tallassee & Co., 64 Id. p. 595. 
 
 ' " The defence known as set-off is not a common law defence, but is wholly 
 the creature of statute and is regulated by statute," Lord, J., in Barnstable 
 Sav. Bank y. Snow, 128 Mass. p. 513. 
 
 < Story's Equity, ch. 38. 
 
§ 377 WHEN CAN A DEPOSIT BE RETAINED, 361 
 
 statutes, which exist everywhere, is to enable parties having 
 demands against each other to settle thera with the least pos- 
 sible litigation. This can be lessened by permitting parties 
 to determine their several claims in the same action instead 
 of separate ones. Set-off in many regards is in the nature of 
 a cross action. 
 
 (6) Their application. The statutes are those which have a 
 general application, and those which apply to insolvent or 
 bankruptcy proceedings. To understand the law relating to 
 the application of one debt to the payment of another these 
 distinctions must be kept in mind. 
 
 Lien. 
 
 § 376. Lien not recognized everjrwhere. Having shown the 
 distinction between a lien and set-off, we may remark that 
 the former is not recognized everywhere. It is not in Penn- 
 sylvania,' and in Illinois " a banker's lien cannot extend to the 
 money left on deposit with him according to the customs and 
 usages of banks. It has never been so extended, but is con- 
 fined to securities and valuables which may be in the banker's 
 custody as collaterals. The credit must be given on the 
 credit of the securities or valuables, either in possession or 
 expectancy.^ This is the extent of a banker's lien."' But a 
 bank has the right of set-oft" against a depositor's balance 
 remaining after all the checks drawn against the same have 
 been presented and paid.* 
 
 § 377. General lien not favored. " General liens," says 
 Judge Van Vorst, " for a balance of account are not favored. 
 If there be a usage giving to persons engaged in discounting, 
 buying, advancing on, or selling, bills or notes, a lien for a 
 general balance against their customer, such usage should be 
 proved. It will not be presumed to exist in the absence of 
 
 1 Appeal of Liggett Spring and Axle Co., Ill Pa. 291. 
 
 2 Russell V. Hadduck, 3 Gilm. (111.) 233. 
 
 a Fourth Nat. Bank v. City Nat. Bank, 68 111. 398, p. 402. « Id. 
 
362 BANKS AND THEIR DEPOSITOKS. § 379 
 
 an express agreement. Courts have judicially taken notice of 
 the lieu of bankers, who are strictly such, and who are dealers 
 in money. But even the lien of a banker does not exist if 
 there be circumstances in any case inconsistent therewith."* 
 
 § 878. Existence is question of feet. " Whether a banker 
 has a lien for any general balance due him depends upon the 
 circumstances of the particular case. The law will not force 
 a lien on a banker any more than upon any one else, against 
 the actual or presumed intention of the parties. If there is 
 a lien it is because there is, at all events, nothing in the trans- 
 action which expels the presumption of giving a credit on the 
 strength of the securities."* 
 
 § 379. Application of lien and set-oflF. (a) The case of the 
 State Bank v. Armstrong' is one of the most instructive in 
 applying the law of banker's lien and set^oif. The bank owed 
 Armstrong's estate $980 on general account ; on the other 
 hand, the bank had obtained judgment against him in his 
 lifetime for a much larger sum, while he had also retained 
 another sum paid over to him for deposit in the bank, but 
 which he had neglected to do. Judge Gaston, who delivered 
 the opinion of the court, after remarking that the deposits 
 made by Armstrong were general, consisting either of money, 
 notes of the bank, or of other banks, bank-checks and proceeds 
 of discounts, said : " They were incorporated into the mass 
 of the funds of the plaintiffs, became their property, and en- 
 titled Armstrong to a general credit for the amount thereof 
 in account. Upon a settlement the plaintiffs were bound 
 honestly to account with him for that amount, and faithfully 
 to pay over any balance, which on such settlement should be 
 
 1 Grant v. Taylor, 35 N. Y. Sup. Ct., p. 351, citing Brandao v. Barnett, 6 
 Man. & Gr. 630. 
 
 2 " It has been long settled that wherever a banker has advanced money to 
 another, he has a lien on all the paper securities which are in his hands for 
 the amount of his general balance, unless such securities were delivered to 
 him under a particular agreement," Taney, C. J., Bank of the Metropolis v. 
 New England Bank, 1 How. 234 ; Grant v.. Taylor, supra. 
 
 " 4 Dev. 519. 
 
§ 379 WHEN CAN A DEPOSIT BE RETAINED, 363 
 
 found rightfully due. They were undoubtedly entitled to 
 charge him with whatever sums they had paid to him, or to 
 his cheeks to others, and with such other disbursements and 
 demands, as by the agreement of the parties, or by the nature 
 of their dealings, or by the known usages of the institution, 
 or by the law of the land, were proper debits in such a run- 
 ning account. Had the plaintifl's the right as against Arm- 
 strong upon his refusal to pay over to them moneys which he 
 had received to their use, to charge this in the account to the 
 extent of his funds in bank? There can be no question but 
 if the bank had paid off a note or acceptance of his, pay- 
 able at the bank, this would have constituted a proper debit 
 in the account. It is not to be doubted also but that they 
 had a right to apply his funds in their hands to the payment 
 of any note or acceptance of his held by them.' Upon the 
 examination of the account referred to we find that the very 
 firet debit is [a note, and] that according to the course of deal- 
 ing between the parties he is charged in account with other 
 money demands. . . From the nature of this account, as an 
 open running account of the cash transactions of the parties, 
 embracingavariety of receipts and payments, debits and credits, 
 from the manner of their dealing with each other, and upon 
 common law principles . . we think that either has a right to 
 retain for, or to charge in account against the other, money re- 
 ceived by the latter forthe use of the former, so that the balance 
 thus ascertained shall be the true debt."* Furthermore, the 
 court continued : " If the claim of the plaintiffs against the 
 administrator were so connected with this balance appearing 
 due on open account that both were items in one continued 
 dealing, then the refusal to pay was rightful, because in truth 
 there was nothing due. If, however, these mutual claims 
 were unconnected, the plaintiffs had a right to refuse pay- 
 ment, because they had a proper set-off. A debtor who 
 makes an actual payment with his own money has a right to 
 
 ' Rogereon v. Ladbroke, 1 Bing. 93. 
 
 2 Dale V. Sollet, 4 Bur. 2133 ; Green v. Farmer, Id. 2214, p. 2221. 
 
3G4 BANKS AND THEIR DEPOSITORS. § 379 
 
 direct its application because it is his money, and he alone 
 has the legal control over it. But a creditor has no right to 
 direct his debtor to appl'y the sum due him to any one of two 
 cross demands which that debtor may have against the 
 creditor. The money in the hands of the debtor is yet his 
 money, he has the legal control of it ; its specific application 
 cannot be ordered by the creditor, and the right of opposing 
 a set-off, and if so, of selecting the set-off which he will thus 
 oppose, is the right of the debtor." In other language, if the 
 claims of the bank against Armstrong were a part of a gene- 
 ral transaction, there was no balance due to him or his estate 
 on general account ; if they were not a part of a general trans- 
 action, but disconnected, the bank had the same right as an 
 ordinary debtor to set off either one of its claims against this 
 balance. 
 
 (6) Falkland v. St. Nicholas Bank'- is a noteworthy case. 
 Ruger Brothers, a firm of ship brokers, becoming embarrassed 
 on July 13, 1886, opened a new account with the St. Nicholas 
 Bank in the name of their book-keeper, Falkland, who man- 
 aged the account in accordance with instructions received 
 from the firm. Prior to July 23, the bank received and dis- 
 counted in the regular course of business, a note made by 
 Ruger Brothers, which became due at that time. On the 
 16th of August the bank charged the amount due on the note 
 to Falkland's account. After his death his administrator 
 sought to recover the full amount of the deposit, but the 
 court said that " it nmst be made clear that the moneys 
 deposited actually belong to the person from whom the 
 account is due to entitle the bank to apply them in payment 
 of its demand. Conceding that the moneys are applicable, 
 even although they are deposited by and in the name of another, 
 the same as if in the name of the actual owner, the fact of 
 ownership must be made to appear, and it must be shown 
 satisfactorily that such owner is the person indebted to the 
 bank and really entitled to the funds deposited. . . The moneys 
 
 > 84 N. Y. 145, p. 150. 
 
§ 382. WHEN CAN A, DEPOSIT BE RETAINED, 365 
 
 in question were not actually the property of Ruger Brothers, 
 and they had uo right or title to the same, and the defen- 
 dant's demand was not the subject of set-off or recoupment 
 against such moneys." 
 
 § 380. Bankrupt depositor. Whenever a depositor becomes 
 bankrupt his deposit is a security for and payment -pro tanto 
 of his liabilities to the bank by the operation of the principle 
 of mutual credit. And if a bank has a contingent or unliqui- 
 dated claim against him, his deposit may be retained until 
 the amount of the claim is ascertained, when the deposit may 
 be applied in payment as far as necessary.* In such eases the 
 principal question is one of fact, does a lien really exist? 
 
 (a) In ex parte Hornby,^ a customer failed owing his banker 
 on bills of exchange that had been discounted for him. The 
 banker proved his claim for the whole balance due, and after- 
 ward when some of the bills were paid by those who were 
 liable thereon, before and after the dividend had been de- 
 clared, the banker's balance was reduced by the amount thus 
 paid, and the dividends on the excess were refunded. In 
 Kelly & Co. v. Phelan,' which was a suit against the assignee 
 of a bankrupt bank to recover money arising from the sale of 
 securities belonging to Kelly & Co., the lien was established. 
 
 § 881. Depositor's Check discharges lien. If a depositor is 
 indebted to the bank and draws a check thereon to pay his 
 debt, the amount is applied from the time of presenting the 
 check, nor can the bank refuse to accept it in payment of his 
 indebtedness.^ 
 
 § 382. What general lien does not cover. "What funds 
 can be applied by a bank to discharge the indebtedness of its 
 depositor is an important question. The general rule is, 
 when securities are specifically pledged to a bank to secure 
 the payment of a particular loan or debt it has no lien on 
 
 1 Ex parte Howard Nat. Bank, 2 Low. 487. 
 
 z De Gex. 69. ' 5 Dill. 228. 
 
 ' Laubach v. Leibert, 87 Fa. 55. 
 
366 BANKS AND THEIR PEPOSITOES. § 382 
 
 tbem for a general balance, or for the payment of any other 
 claim.* 
 
 (a) In the case of the Neponset Bank v. Leland^ the institu- 
 tion sought to enforce the collection of some notes which had 
 been made by the defendant on the ground that " a banker 
 has a lieu on all the paper securities which come into his 
 hands for a general balance." Judge Dewey said that the 
 general, principle subjeet to proper limitations might be well 
 sustained by authorities. "As in Bolland v. Bygrave,* which 
 was a case of bills delivered by a party to be discounted in 
 the ordinary course of business, and where it was held, in the 
 opinion given by Abbott, C. J., that a banker has a lien upon 
 any securities of the customer which may for any purpose be 
 placed in his hands. Lord Kenyon, in Davis v. Bowsher,* 
 states the principle thus: 'I am clearly of opinion that by 
 the general law of the land a banker has a general lien upon 
 all the securities in his hands belonging to any particular 
 person for his general balance, unless there be evidence to 
 show that he received any particular security under special 
 circumstances which would take it out of the common rule.' " 
 The bank failed to recover because the securities were de- 
 posited for a special purpose. 
 
 {b) Note left for discount and refused. A bank, therefore, 
 has no right to retain a note left for discount, but which has 
 been refused, to discharge an indebtedness due Irom the de- 
 positor. In Petrie v. Myers* Judge Barrett said that the 
 bank in that case " had no right, upon declining a discount, 
 to retain the note, and its action was clearly tortious. The 
 paper was not left for collection, nor for the performance of 
 
 1 Wyckoff V. Anthony, 90 N. Y. 442 ; Vanderzee r. Willis, 3 Bro. Ch. 
 Cas. 20 ; Davla v. Bowsher, 5 Term, 488 ; Lane v. Bailey, 47 Barb. 395 ; Dun- 
 can a. Brennan, 83 N. Y. 487 ; see also Wilmerding r. Hart, Hill & Denio, 
 Supp. 305 ; Eobinson v. Frost, 14 Barb. 536. 
 
 2 5 Met. 259 ; Re Bowes, Earl of Strathmore u. Vane, 55 Law T. Rep. N. S. 
 260. 
 
 > Ry. & M. 271. * 5 Term, p. 491. 
 
 » 54 How. Pr. 513. 
 
§ 382 WHEN CAN A DEPOSIT BE RETAINED. 36T 
 
 any banking duty, nor even for safe custody. It is contended 
 that the banker's lien extends to all securities which may 
 happen to be in its hands for any purpose, and Barnett v. 
 Brandao' is cited in support of that proposition. The case 
 holds directly the opposite." Lord Denman, in delivering 
 judgment in that case, said:^ " The right of bankers does not 
 extend to all securities which may hapj)en to be in their hands 
 for any purpose, but to such only as come to their possession 
 as bankers, in the way of their business; upon those they 
 have a general lien, ' unless there be,' in the language of Lord 
 Kenyon, ' evidence to show that the banker received an}- par- 
 ticular security under special circumstances which would take 
 it out of the common rule.' A lease, therefore, which was 
 accidentally left with a banker after he had refused to advance 
 money upon it, has been held not to be subject to any lien.^ 
 If it be a security for money within the meaning of the rule, 
 it is not in the banker's possession in the way of his business.; 
 and instances may be put of a special agreement to deal with 
 the securities in a manner inconsistent with the claim of lien 
 which would bring them within the exception stated by Lord 
 Kenyon." In the above case, Burns bought for Brandao, a 
 Brazilian, and with his money, exchequer bills which were 
 kept with his banker, Barnett, Burns retaining the key to the 
 box containing thera. As often as the time came for ex- 
 changing the bills for new ones Burns took them out of the 
 box and gave them to his banker, which was the usual course 
 of business. The new bills were given to Burns and locked 
 up by him in his box, and the interest on them was passed to 
 his credit in the account with his bankers. The bankers 
 never knew that they belonged to Brandao. On one occasion 
 Burns delivered the bills to his bankers to be exchanged. 
 Burns having failed While the bills were in possession of his 
 bankers, and owing them an account, they endeavored to hold 
 the bills for the balance due. Brandao, claiming the owner- 
 
 1 6 Man. & Gr. 630. ' Id. p. 666. 
 
 s Lucas V. Dorrien, 7 Taunt. 278 ; S. C, 1 Moore, 29. 
 
368 BANKS AND THEIR DEPOSITORS. § 382 
 
 ship of the bills, sought to recover them. The Court of Com- 
 mon Pleas decided in his favor, but their decision was reversed 
 by the Court of Exchequer Chamber for two reasons. " The 
 Court of Common Pleas appear to have decided this case on 
 the ground that . . it was not competent for the banker and 
 customer to agree expressly, or in any other manner, that the 
 banker should have a lien on the property of other persons, 
 on which the customer had no authority to give one." "While 
 this position was declared to be true with respect to goods, it 
 was declared not to be " with respect to negotiable securities, 
 the title to which is transferred by delivery to a bona fide 
 holder for value. These securities are to be deemed, with re- 
 spect to such holders and to the extent of the rights acquired 
 by them by the transfer, as the property of the person trans- 
 ferring, whether the transfer be express or implied ; and the 
 bona fide holder acquires a title which did not belong to the 
 person who gave it to him. The same rule which prevails as 
 to bills or notes payable to bearer, placed in the hands of a 
 banker to be received, would apply to exchequer bills trans- 
 ferrable to bearer ; in both, if the banker is a creditor on a 
 general balance, and bona fide receives them as the property 
 of the customer, he is entitled to a lien." For that reason, 
 therefore, the judgment could not stand. The other reason 
 was that the bills were I'eceived by the bankers in the course 
 of business. It is true that the " bills were delivered for a 
 special purpose, but that purpose was the performance of a 
 duty as bankers ; for which indeed, they would have been 
 entitled to commission, if the course of business with Lon- 
 don bankers admitted of such a mode of remuneration. . . If, 
 indeed, there had bfien an agreement, express or implied, 
 inconsistent with a right of lien, as, to return them absolutely 
 at all events to the depositor, at a certain time, the case 
 would have been different." ^Nevertheless, the House of 
 Lords' reversed the last decision, and sustained that of the 
 Court of Common Pleas on the ground that there was an 
 
 1 12 Clark & Fin. 787, pp. 807, 809. 
 
§ 382 WHEN CAN A DEPOSIT BE BETAINED. 869 
 
 implied agreement on the part of Brandao inconsistent with 
 the right of lien which he claimed. In thus reversing the 
 action of the Court of Exchequer Chamber, Lord Campbell 
 remarked that the "judgment will leave untouched the rule 
 that bankers have a general lien on securities deposited with 
 them as bankers, but will prevent them from successfully 
 claiming a lieu on securities delivered to them for a special 
 purpose inconsistent with the existence of the lien claimed." 
 
 (e) Nor the surplus of pledged property. In another case a 
 partnership had an account with a banking house, and A., the 
 senior partner, had also a private account there. The two 
 accounts were kept separately. To get an extension of part- 
 nership credit in the form of an overdraft. A., in the partner- 
 ship name, deposited the lease of his house as ^ecuHty. Some 
 time later the partnership account was closed, the lease of tho 
 house was sold and the proceeds were handed to the bankers. 
 A. also was adjudicated a bankrupt, and his trustees in bank- 
 ruptcy brought an action against the banking house to recover 
 the surplus of the proceeds of the sale of the house after de- 
 ducting the overdraft above mentioned. The bankers sought 
 to hold the surplus on both the partnership and A.'s private 
 account, but the court declared that the lease was deposited 
 merely for the purpose of securing the repayment of the over- 
 draft, and that they did not have a general lien on the pro- 
 ceeds of the sale, and consequently that the surplus must be 
 refunded.^ 'Sov can a savings bank apply the surplus from 
 the sale of stock held as collateral security, for the payment 
 of a note on the general balance due from the maker.'' 
 
 {d) Nor an assignee's deposit for personal debt. A bank can- 
 not retain a deposit made by a person as an assignee to extin- 
 guish a debt due from him individually.^ But a bank may 
 apply money deposited on private account, though in truth 
 
 I Wolstenholm v. Sheffield Union Banking Co., 54 Law T. Rep., N. S., 746. 
 8 Brown v. New Bedford Institution, 137 Mass. 262. 
 3 Lawrence v. Bank of tlie Republic, 35 N. Y. 320. 
 
 24 
 
370 BANKS AND THEIR DEPOSITORS. § 384 
 
 it is trust money, if having no knowledge of its nature, to 
 liquidate a balance due from the depositor.' 
 
 § 383. What general lien does cover. A bank has a lien on 
 a title-deed indorsed " lodged to cover overdraft," and signed 
 by the depositor as against the depositor's assignee, not only 
 for overdue bill, but for money dravt^n out by checks.^ Also 
 on a negotiable note deposited by an attorney for collection 
 •without stating for whose account. A bank which received 
 one in this way credited his account with the amount' and 
 applied the same in part payment of a debt he owed the in- 
 stitution. The attorney failed and the bank in settling with 
 the assignee included the note. A year afterward, the owner 
 of it, learning that it had been collected, demanded the pro- 
 ceeds of the bank and brought a suit to recover them, but 
 failed.^ 
 
 § 384. Notes sent for collection from another bank, (a) Federal 
 rule. The lien of a bank for a balance due from another 
 bank will cover notes, bonds or other securities sent to it for 
 collection, which, on their face, belong to the sender. This 
 principle was established in the case of the Bank of the Me- 
 tropolis V. The New England Bank.* The former, which was 
 located at "Washington, and the Commonwealth Bank of 
 Boston for a long time had made collections in their re- 
 spective cities for each other. The Boston bank became 
 insolvent. When this event happened the New England 
 Bank sued the "Washington bank to recover the amount of 
 notes belonging to the former which had been sent through 
 the Commonwealth Bank for collection. The Bank of the 
 Metropolis did not know at the time of receiving the notes 
 that they belonged to the- New England Bank ; indeed, in 
 every instance the notes and other securities sent belonged to 
 
 1 School District v. First Nat. Bank, 102 Mass. 174. 
 
 « In re Joseph Williams, I. R. 3 Eq. 546. 
 
 » Wood V. Boylston Nat. Bank, 129 Mass. 358. . 
 
 * 1 How. 234 ; S. C, ll Peters, 174, second trial, 6 How. 212 ; see also Wil- 
 son V. Smith, 3 Id. 763 ; Kathbone v. Sanders, 9 Ind. 217 ; Gordon v. Kear- 
 ney, 17 Ohio, 572 ; Cornwall v. Kinney, 1 Handy, 496. 
 
§ 384 WHEN CAN A DEPOSIT BE KETAINBD. 371 
 
 the sending bank so far as the receivers knew or had means 
 of knowing. The Bank of the Metropolis claimed the right 
 to apply the amount of the notes on the large balance due 
 from the Commonwealth Bank. " The paper in question," 
 remarked Chief Justice Taney, who delivered the opinion of 
 the court, " was the property of the ISTew England Bank, 
 and was indorsed and delivered to the Commonwealth Bank 
 for collection, without any consideration, and as its agent in 
 the ordinary course of business ; it being usual, and indeed 
 necessary, so to indorse it, in order to enable the agent to re- 
 ceive the money. Yet the possession of the paper was ■prima 
 facie evidence that it was the property of the last-mentioned 
 bank ; and without notice to the contrary the [Bank of the 
 Metropolis] had a right so to treat it, and was under no obliga- 
 tion to inquire whether it was held as agent or as owner ; and 
 if an advance of money had been made upon this paper to the 
 Commonwealth Bank, the right to retain for that amount 
 would hardly be disputed. We do not perceive any differ- 
 ence in principle between an advance of money and a balance 
 suffered to remain upon the faith of these mutual dealings. 
 In the one case as well as the other, credit is given upon the 
 paper deposited or expected to be transmitted in the usual 
 course of the transactions between the parties."^ 
 
 ' Where a draft was remitted by a collecting agent to a sub-agent for col- 
 lection and the proceeds were applied by the sub-agent in payment of the 
 indebtedness of the agent to himself, in ignorance of the rights of the princi- 
 pal, this court held that there being no new advance made and no new credit 
 given by the sub-agent, the principal was entitled to recover against him. 
 Wilson V. Smith, 3 How. 763 ; United States v. State Bank, 96 U. S. p. 35. 
 
 The Supreme Court at the second trial directed that the following instruc- 
 tions should be given to the jury when the case should be tried the third 
 time before them ; — 
 
 1. " If, upon the whole evidence before them, the jury should find that the 
 Bank of the Metropolis, at the time of the mutual dealings between them, ha4 
 notice that the Commonwealth Bank had no interest in the bills and notes in 
 question, and that it transmitted them for collection merely as agent, then 
 the Bank of the Metropolis was not entitled to retain against the New Eng- 
 
372 BANKS AND THEIR DEPOSITORS. § 384 
 
 (b) Followed in Maryland. In Maryland the rule of the 
 TJnited States Supreme Court as laid down in Wilson v. 
 Smith,* " that whenever by express agreement between the 
 parties a sub-agent is to be employed by the agent to receive 
 money for the principal, or where an authority to do so may 
 fairly be implied from the usual course of trade or the nature 
 of the transaction, the principal may treat the sub-agent as 
 his agent and when he has received the money, may recover 
 it," has been followed.* 
 
 (c) But not in New York. In ISew York, Pennsylvania, 
 and other States a different rule prevails. In these a bank 
 which receives notes from another for collection obtains no 
 better title to them or their proceeds than the remitting bank 
 had, unless it becomes a purchaser for value without notice 
 of any defect of title. ]!^or does the collecting bank become 
 the purchaser by having a balance against the remitting bank 
 arising from their mutual dealings, which it has refrained 
 from drawing.* " We cannot," said Judge Clark, " consent 
 
 land Bank for the general balance of the account with the Commonwealth 
 Bank. 
 
 2. "And if the Bank of the Metropolis had not notice that the Common- 
 wealth Bank was merely an agent, but regarded and treated it as the owner 
 of the paper transmitted, yet the Bank of the Metropolis is not entitled to 
 retain against the real owners unless credit wo,s given to the Commonwealth 
 Bank, or balances suffered to remain in its hands to be met by the negotiable 
 p'aper transmitted or expected to -be transmitted in the usual course of the 
 dealings between the two banks. 
 
 3. " But if the jury found that, in the dealings mentioned in the testimony, 
 the Bank of the Metropolis regarded and treated the Commonwealth Bank as 
 the owners of the negotiable paper which it transmitted for collection, and 
 had no notice to the contrary, 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 Commonwealth 
 Bank, to be met by the proceeds of such negotiable paper, then the [Bank of 
 the Metropolis] is entitled to retain against [the New England Bank] for the 
 balance of account due from the Commonwealth Sank." 
 
 1 3 How. 763. 
 
 2 Miller v. Farmers & Mechanics' Bank, 30 Md. 392 ; Cecil Bank v. Far- 
 mers' Bank, 22 Id. 148. 
 
 ' McBride v. Farmers' Bank, 26 N. Y. 450. In this case the remitting bank 
 
§ 384 WHEN CAN A DEPOSIT BE RETAINED. 373 
 
 to the doctrine that a mere usage and course of dealing be- 
 tween banks in the transmitting of bills and notes for collec- 
 tion by which they mutually credit the avails in account to 
 overbalances due can, without more, deprive a third person, 
 the real owner of the notes or bills, of his rights." * He there- 
 fore can stop the payment of a draft sent for collection, if the 
 bank to which it has been sent should become insolvent with- 
 out subjecting himself to the liability of a drawer in a suit 
 by the receiver." 
 
 (d) Missouri rule. In Missouri a rule differing from the 
 national or the New York one has been established. If two 
 banks have " mutual and extensive dealings . . on a mutual 
 account current between them" then the national rule is 
 applied and each bank has a lien on the notes sent by the 
 other for collection ; but, in the words of Judge Holmes, if 
 " there is no such mutual arrangement or previous course of 
 dealing between the parties whereby it is expressly or impli- 
 edly understood that such remittances of paper are to go to 
 the credit of the previous account when received and no ad- 
 vance is made nor any credit given on the basis of the par- 
 ticular bill, or upon the faith of such course of dealing and 
 
 (which assigned the notes to the plaintiff), having demanded them hefore 
 maturity and the proceeds afterwards, and both being foreign corporations, a 
 new demand was held not to be necessary. 
 
 A negotiable promissory note indorsed by the payee as owner, and by him 
 deposited in a bank for collection, and by that bank transferred in the usual 
 course of exchange to another bank for the same purpose, does not create by 
 lien or otherwise any title in the latter bank to the note or the avails as 
 against the payee, though the former bank fails before the maturity of the 
 note owing the- latter a large balance. Van Namee v. President of the Bank 
 of Troy, 5 How. Pr. 161 ; Commercial Bank v. Marine Bank, 3 Keyes, 337 ; 
 Coddington v. Bay, 20 Johns. 637 ; Rosa v. Brotherson, 10 Wend. 85 ; Stalker 
 <-■. M'Donald, 6 Hill, 93 ; Youngs v. Lee, 12 N. Y. 551 ; Lindauer v. Fourth 
 Nat. Bank, 55 Barb. 75 ; Dod .;. Fourth Nat. Bank, 59 Id. 265 ; Stark v. 
 United States Nat. Bank, 41 Hun, 506 ; Jones v. Milliken, 41 Pa. 252 ; Law- 
 rence V. Stonington Bank, 6 Conn. 521 ; First Nat. Bank v. Gregg, 79 Pa. 384. 
 
 1 Hackett v. Reynolds, 44 Leg. Int. p. 91. 
 
 2 Atkinson v. Stafford, 20 Week. Dig. 49, dec. but not rep., 34 Hun, 625 ; 
 see Bury v. Woods, 17 Mo. App. 245. 
 
374 BANKS AND THEIR DEPOSITORS. § 384 
 
 such future remittances or where the special circumstances 
 are inconsistent with the hypothesis of such mutual under- 
 standing, and the one hank merely passes the proceeds of paper 
 remitted for collection to the credit of the other on a suhsisting 
 indebtedness which it happens at the time to have standing 
 against the other, there is no such lien, and no right to retain 
 and apply the money collected in that manner ; but the real 
 owner of the funds may maintain an action to recover the 
 amount."' The learned judge cited "Wilson v. Smith^ to sus- 
 tain his position, and it may be that he intended to follow 
 the rule established in that case. But if he did his language 
 is not clear. It distinguishes more sharply between those 
 banks which have mutual dealings with each other and those 
 which have not, and declares that a lien exists between the 
 former kind, but not between [the other. Of course a lien 
 may exist, be created or withheld by express agreement. 
 
 (e) No lien exists if note be '•'■for collection'" only. Eeturning 
 to the rule prevailing in the federal courts, an important quali- 
 fication must he added. If the negotiability of the paper 
 sent to the collecting bank be restricted, for example, if the 
 indorsement be, " for collection, pay to the order of A. B.," 
 this is a notice that the indorser is entitled to the money. 
 Thus, a bank in New York sent checks to a Newark bank 
 for collection, which had the qualified indorsement: "For 
 collection, pay to the order of O. L. Baldwin, cashier," who 
 was cashier of the Newark bank. They were sent by him 
 to a bank in Jersey City to be collected, and the proceeds were 
 credited to it by virtue 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 
 defendant had been justified in assuming that such paper was 
 
 1 Milliken v. Shapleigh, 36 Mo. 596, p. 599. » 3 How. 763. 
 
 8 Bank of the Metropolis v. First Nat. Bank, 22 Blatchf. 58. 
 
§ 384 WHEN CAN A DEPOSIT BE KETAINED. 375, 
 
 the property of the K^ewark 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 in- 
 dorsement of the plaintift' 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.'^ The indorsement by the plaintiff, ' for collection,' 
 was notice to all parties subsequently dealing with the checks 
 that the plaintiff did not intend to transfer the titleof the paper, 
 or the ownership of the proceeds to another. As was held 
 in Cecil Bank v. Farmers' Bank of Maryland,* the legal im- 
 port and effect of such indorsement was to notify the defen- 
 dant that the plaintiff was the owner of the checks, and that 
 the Newark bank was merely its agent for collection. In 
 First ITational Bank v. Reno County Bank,^ paper was in- 
 dorsed, ' 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 indorse- 
 ment the natural and reasonable implication to all persons 
 dealing with the paper would seem to be that the owner has 
 authorized the indorsee to collect it for the owner, and con- 
 ferred upon him a qualified title for this purpose, and for no 
 other." 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 infirmity in the title of the latter. As the indoreement 
 of the checks was notice of the limited title of the Newark 
 
 1 Bank of Metropolis v. New England Bank, 1 How. 234. 
 
 2 Overton v. Tyler, 3 Pa. p. 347. ' 22 Md. 148. 
 * 3 Fed. Rep. 257. 
 
 5 Judge Wallace also cited the following authorities : Sweeny v. Easter, 1 
 Wall, 166 ; White v. National Bank, 102 U. S. 658 ; Lee v. Chillicothe Bank, 
 1 Bond, 387 ; Blaine v. Bourne, 11 R. I. 119 ; Claflin v. Wilson, 51 Iowa, 15. 
 
376 BANKS AND THEIR DEPOSITOB.S. § 384 
 
 bank, the defendant simply succeeded to the rights of that 
 bank. . . As against the plaintift", the defendant had no right 
 to retain the proceeds of the checks as security or payment 
 for any balance due to it from the Mechanics' Ifational Bank 
 of Newark after a demand by the plaintifl'."* 
 
 (/) Blaine v.^Bourne.^, 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 
 correspondents. The drawer paid it, but J. C. having failed 
 owing them, they applied the money toward his indebtedness. 
 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 declared to have no title 
 thereto, or right to the proceeds when collected ; the collect- 
 ing bank was merely the agent of the transmitter. Likewise^ 
 when a bank receiving such a check sent it to another for col- 
 lection, the latter wasdeclared to beonly theagentforthetrans- 
 mitter, and had no right to apply the proceeds to the payment 
 of an indebtedness due from that bank.' 
 
 {g) Wheyi collecting hank has made advance on discounted note. 
 If the drawer of a bill learns that the discounting- bank has 
 transferred it for collection to a business correspondent who 
 has acquired a lien thereon by advancing money on the same 
 before maturity, he ought not to pay the bill to the discount- 
 ing bank. And if he does, the payment is wrongfully made 
 and wrongfully accepted, and does not" discharge the drawee 
 from liability to the banker or person holding the lien unless 
 the act is ratified. If the payment be made in iron or other 
 commodity the discounting bank would hold it in trust for 
 its correspondent if the latter should decide to ratify the 
 payment.* But the correspondent must either ratify or dis- 
 affirm the payment as an entirety. He cannot while suing 
 the drawer maintain an action against the bank to which 
 
 • Central Railroad v. First Nat. Bank, 73 Ga. 383. 
 2 11 R. I. 119. N 
 8 First Nat. Bank «. First Nat. Bank, 76 Ind. 561. 
 
 * Williams v. Jones, 77 Ala. 294. 
 
§ 386 WHEN CAN A BEPOSIT BE RETAINED. 377 
 
 the money was paid, or fasten a trust on the property received 
 by it in payment.' 
 
 § 385. Partnership lien. A hanker has a lien on a deposit 
 to discharge a debt due from the depositor to himself and his 
 former partner.* But the bank has no lien on the deposit of 
 a partner, for a balance due from the partnership.^ 
 
 (a) Lien of new partnership for note of old firm. If a 
 partner in a banking firm withdraw before a note owing to 
 them matures, the new firm cannot apply deposits made 
 with them by the makers to its payment unless they directed 
 that this should be done. The money thus deposited belongs 
 to the new firm if nothing be said concerning it.* 
 
 § 386. Assignor's deposit cannot be applied by bank after 
 assignment. A bank cannot apply the funds of a deposit to 
 pay a balance due, or a note after he has made a general 
 assignment for the benefit of his creditor. Consequently a 
 bank in ]S"ew York, which charged the amount of a draft 
 that matured on the 27th of August to the account of a de- 
 positor, for whom it had been discounted, three days be- 
 fore he made an assignment of his property, was obliged to 
 pay the amount to the assignee though having no notice of 
 the assignment at the time of making the charge." But a 
 bank which holds a depositor's demand note has a lien on 
 the proceeds of drafts delivered to it for collection after the 
 giving of the note, though they are not collected until after the 
 filing of his petition in bankruptcy.* Nor can a bank hold 
 the proceeds of drafts collected after the depositor's assign- 
 ment to reimburse his indebtedness to itself.' 
 
 1 Williams v. Jones, 77 Ala. 294. If, however, the property was merely re- 
 ceived 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. 
 
 s Snead v. Williams, 9 Law T. Rep., N. S., 115. 
 
 ' Watts V. Christie, 11 Beav., 546 ; School District v. First Nat. Bank, 102 
 Mass. 174. 
 
 * Dawson v. Wilson, 55 Ind. 216. 
 
 5 Beckwith v. Union Bank, 9 N. Y. 211. See § 404. 
 
 5 In re F^rnsworth, Brown & Co., 5 Biss. 223, see Hough v. First Nat, 
 Bank, 4 Id. 349. 
 
 ' Hakman v. Schaaf, Hamilton Co. Dis. Ct., Ohio, 5 Bull. 851. See § 63, b. 
 
378 BANKS AND THEIR DEPOSITORS. § 388 
 
 Sel-off. 
 
 % 387. Depositor may apply his deposit on any account. 
 
 Turning now to cases involving the principles of set-off, a 
 depositor may apply his deposit on whatever account he may 
 have at a bank. "The general rule is," said Bayley, J., 
 " that the party who pays money has a right to apply that 
 payment as he thinks fit. If there are several debts due from 
 him, he has a right to say to which of those debts the pay- 
 ment shall be applied. If he does not make a specific appli- 
 cation at the time of payment, then the right of application 
 generally devolves on the party who receives the money."' 
 " But it is equally certain that a particular mode of dealing, 
 and more especially any stipulation between the parties may 
 entirely vary the case,"* for example, the giving of a bond to 
 a bank to secure future payment, and which is intended as a 
 continuing security. 
 
 § 388. Debts must be between same parties and in same 
 right, (a) Pennsylvania cases. Debts cannot be set off unless 
 they are between the same parties and in the same right. In 
 the following case is a recent application of this principle : A 
 debtor bank on a note gave the holder a check on another 
 bank. The bank on which the . check was drawn having 
 failed before its payment, the holder sued the debtor bank 
 thereon. It claimed that a sum which was due from the 
 holder to the failed bank ought to be set off against the note, 
 but the court thought otherwise. " It is diflicult to see," 
 said Mercur, Ch. J., " on what principle the application of 
 this sura can thus be enforced. The general rule is that a 
 set-off is not allowable unless the -debts be due between the 
 same parties and in the same right."* 
 
 1 Simson v. Ingham, 2 Barn. & Cr. p. 72. 
 
 2 Denman, C. J., in Heuniker v. Wigg, 4 Ad. & E., N. S., p. 794. 
 
 ' Canonsburg Iron Co. c. Union Nat. Bank, and Union Nat. Bank v. Canons- 
 burg Iron Co., 34 Pitts. L. J. 93, 94 (1886) ; Potter v. Burd, 4 Watts, 15 ; 
 Milliken & Co. v. Gardner, 37 Pa. 456 ; Scott v. Fritz, 51 Id. 418. 
 
§ 388 WHEN CAN A DEPOSIT BE RETAINED. 379 
 
 {b) Winthrop Savings Bank v. Jackson} In another case a 
 bank lent a person money, taking his note and a government 
 bond as collateral security. After the note was payable, but 
 before it was paid, the bond was stolen. The debtor sought 
 to have his claim against the bank set oft' against the note. 
 The court, however, held that even if the bank had been neg- 
 ligent and was responsible for the bond, no notice could be 
 taken of the claim in that suit. 
 
 (c) Tobey v. Manufacturers' National Bank? For the same 
 reason, the lack of mutuality, if a deposit be transferred from 
 an estate to the credit of the executors, the bank caunot 
 afterward set oft" a debt due from the estate against the 
 deposit. 
 
 {d) In Pedder v. Preston,^ it appeared that the corporation 
 of Preston kept an account at the plaintiff's banking house, 
 and afterwards undertaking an additional function a second 
 account was opened. Subsequently the banking house 
 stopped payment, owing the corporation on one account and 
 the creditors of it on the other. The question was, could the 
 assignee of the banking house recover the amount due from 
 the corporation, or could it oft'set the amount due to it from 
 the banking house in extinguishing the debt? The court 
 held that the set-off" might be made, for though the accounts 
 were separate, the defendants were creditors in the first 
 account and debtors in the second in the same right. 
 
 (e) A person who had a private account at the defendant's 
 bank opened another account there in the name of a mining 
 company, and signed all checks drawn against the same in 
 his official capacity as treasurer. He also notified the bank 
 in the beginning that he was acting as treasurer of the com- 
 
 > 67 Me. 570. 
 
 2 9 R. I. 236. A.'s money was wrongfully paid by a bank to B., and A. 
 sued the bank to recover it. B. on several occasions had paid money for A. 
 The applying of B.'s payment, which was done by the jury, did not have 
 the eflfect of ratifying the unauthorized act of B. in drawing A.'s money from 
 the bank, Heiderich v. Heiderioh, 18 Brad. 142. 
 
 3 9 Jurist, N. S. 496. 
 
380 BANKS AND THEIR DEPOSITORS. § 389 
 
 pany, and would not be individually responsible for its debts 
 or other liabilities. In an action to recover the balance of his 
 personal account the bank was not permitted to set oft" an 
 overdraft against the company, although occasioned by cred- 
 iting the depositor with a draft drawn by him as treasurer on 
 members of the company.' 
 
 § 389. When a discount bank is insolvent, (a) Matured 
 debts. When a bank is insolvent, debtors will be permitted 
 to set off its indebtedness to them while doing business against 
 their own to the bank.* Likewise a depositor in a national 
 bank which has failed maj^ set off the amount of his deposit 
 against his note held by the bank.' And in Tennessee a 
 certificate of deposit of a savings bank, assigned by the holder 
 to the debtor of a bank after its suspension, but before the 
 filing of a bill for closing its affairs, will be set off in an 
 action against the debtor.* 
 
 (6) Debts maturing after insolvency. Whenever an assignee 
 seeks to recover the value of a note due after the assignment, 
 the maker may set off a debt due to him by the assignor at 
 the time the assiainment was made.* But the maker can- 
 not set off a claim subsequently assigned to him.* And 
 whenever the action be against the indorser of a note which 
 fell due after the bank's insolvency, he may set off a deposit 
 standing to his credit.' 
 
 (c) Set-off of indorser' s deposit. If a note owing to an insolvent 
 bank has been discounted for the benefit of an indorser, his 
 deposit may be set off against the same. Thus in the Shack- 
 amaxon Bank v. Kinsler,* the defendant was sued as maker 
 
 » Miller v. Miokel, 12 Pacific Rep. 240. 
 
 ^ Clarke v. Hawkins,. 5 R. I. 219; McLaren v. Pennington, I Paige, 102; 
 Miller v. Receiver of Franklin Bank, Id. 444 ; Matter of Receiver of Middle 
 Dist. Bank, Id. 585 ; Receivers v. Paterson Gas Light Co., 23 N. J. Law, 283. 
 
 ' Piatt V. iJentley, 11 Am. L. Reg. N. S. 171. 
 
 * Moseby v. Williamson, 5 Heisk. 278. See § 413. 
 
 s Jordan c. Sharlock, 84 Pa. 366 ; see Stewart's Assignee v. National Secu- 
 rity Bank, 6 Week. No. Cas. 399. 
 
 6 Venango Nat. Bank v. Taylor, 56 Pa. 14. 
 
 ' Arnold v. Niess, 36 Leg. Int. 437. » 16 Week. No. Cas. 509, 
 
§ 390 WHEN CAN A DEPOSIT BE RETAINED. 381 
 
 of a note, which in truth was discounted for the benefit of 
 the indorser, the proceeds having been credited to him by 
 the bank. The indorser had a sufficient deposit there to pay 
 the note, which it was contended ought to be set olf against 
 the instrument. The court held that this should be done. 
 
 § 390. When a depositor is insolvent, (a) Notes offered for 
 discount and refused. A bank cannot set off notes left with 
 it for discount and refused, in action brought afterward by 
 the assignee of the depositor to recover a balance due before 
 his insolvency. Said Chief Justice Shaw:' "In one of the 
 latest cases on this subject^ it was held that where the bank 
 were creditors of the insolvent as holders of a discounted 
 note, and debtors to the same insolvent as a depositor at 
 the bank, these were mutual credits. But the distinction 
 was there expressly taken between such a pecuniary credit, 
 and the mere deposit of specific articles, without any lien or 
 pledge, by contract, usage of trade, or otherwise. The case 
 of Rose V. Hart' is there referred to, where this distinction is 
 fully considered. It was there held that to constitute such a 
 credit it must be property consigned, deposited, or intrusted to 
 be converted into money so that the liability to account for 
 it would ultimately become a debt." N'or can a bank set off 
 unmatured paper of an insolvent depositor against the balance 
 due him on his deposit.* In Ohio, though, a bank can set off 
 against the deposit of a bankrupt his unmatured note that 
 has been discounted for him, but not at the loss of bona fide 
 holders of checks." 
 
 (b) Liability on notes as principal and indorser. If the de- 
 positor fail and be indebted on notes as principal and indorser, 
 his deposit should be set off agaiust the aggregate amount of 
 his notes on which he is the principal debtor, or indorser if 
 
 • stetson T. Exchange Bank, 7 Gray, 425. 
 2 Demmon v. Boylston Bank, 5 Cush. 194. 
 » 8 Taunt. 499. 
 
 * Phil. Com. Pleas, Jones v. Manufacturers' Bank, 10 Week. No. Cas. 102. 
 6 Skunk V. Merchant's Nat. Bank, 19 Chic. Leg. N. 83. 
 
882 BANKS AND THEIR DEPOSITORS. § 391 
 
 the real principals are insolvent. But solvent principals, for 
 whom the bankrupt is surety, must pay their own notes.* 
 
 § 391. When savings bank is insolvent. An exception 
 exists with respect to savings banks and mutual insurance 
 companies. Whenever the depositor in an insolvent institu- 
 tion of this nature is also a debtor for money borrowed he is 
 not entitled to set off the amount of his deposit against his 
 indebtedness. The reason for this rule is that " the assets 
 of the bank are its invested funds, the common contributions 
 of all the depositors, in which they all have a common inte- 
 rest. All the profits of the business are divided among the 
 depositors or accumulated in a surplus fund for their joint- 
 benefit and greater security. As each depositor is entitled to 
 his proportionate share of the profits, so, in equity, each 
 should bear his proportionate share of the losses. So long as 
 the bank is solvent no injury can arise from permitting a de- 
 positor to offset his deposit against his debt due to the bank, 
 as no preference would be given in such case to one depositor 
 over another. But in case of insolvency to allow the set-off 
 to be made would give an unjust preference to debtor deposi- 
 tors over all the others."' 
 
 ' Ex parte Howard Nat. Bank, 2 Low. 487; see Hebb's Case, L. E., 4 Eq. 
 9 ; Kip V. Bank, 10 Johns. 63 ; PenneU v. Deffell, 4 De Gex, M. & G. 372. 
 
 ^ Green, J., Hannon v. Williams, 34 N. Jersey, Eq. 255 ; Stockton v. Me- 
 chanics and Laborers' Sav. Bank, 32 N. J. Eq., 163 ; Osborn v. Byrne, 43 
 Conn. 155 ; see also Lawrence v. Nelson, 21 N. Y. 158; Hillier v. Allegheny 
 Co. Mut. Ins. Co., 3 Pa. 470 : Matter of Receiver of New Amsterdam Sav. 
 Bank t>. Tartter, 54 How. Pr. 385 ; S. C, 4 Abb. N. C. 215. In this case it 
 was hejd that if a depositor was indebted to a savings bank on bond and 
 mortgage he should be credited on his bond for the amount of his deposit 
 in the event of the failure of the bank. This, however, is not the decision 
 of the highest court, and is contrary to nearly all of the authorities. 
 
 In an action by a savings bank against two persons on a joint and several 
 promissory note they cannot, under the statutes of Massachusetts, set off the 
 amounts severally due them from the bank, Barnstable Savings Bank v. 
 Snow, 128 Mass. 512. 
 
 If the directors of an insolvent bank make an assessment on unpaid stock 
 subscriptions, for the purpose of meeting its liabilities, a stockholder cannot 
 
§ 394 WHEN CAN A DEPOSIT BE RETAINED. 383 
 
 § 392. Set-off against repayment of forged note. Banks 
 which collect checks for each other cannot set off against the 
 proceeds of a note collected the amount of a check previously 
 collected, but repaid because it was a forgery.* 
 
 § 393. Cannot set off debt against check holder. A bank 
 cannot set off a debt that it may have against the holder of 
 a check when presenting it for payment.'' " In the case of 
 Cromwell v. Lovett' it was held that a check on a banker, 
 given in the ordinary course of business, is not presumed to 
 be received as an absolute payment, even if the drawer have 
 funds in the bank, but as the means to procure the money. 
 The holder, in such a case, becomes the agent of the drawer. 
 . . When it is remembered that almost all of the vast sums 
 of money employed in carrying on the commerce of the 
 world is paid out by means of checks which are not received 
 as payment by the creditor or vendor, but simply as the 
 means, and the usual means, of obtaining his money, it is but 
 reasonable to regard the holder of the check as an agent of 
 the drawer."* 
 
 § 394. Principles and practice in HoUister Bank case. In 
 August, 1857, the Hollister Bank of Buffalo discounted a 
 draft, payable at sight drawn by Monteath on Grrant and 
 others of Ifew York, and credited the drawer with that, 
 amount. Shortly afterward the bank failed and Monteath 
 notified the drawers, and advised them not to accept the 
 draft. It was therefore protested, and Monteath, in September, 
 assigned to Howes and Suydam the amount credited to him 
 by the bank on account of the draft. The Corn Exchange 
 Bank then held the draft for a balance due from the Hollis- 
 ter Bank, the receiver of the latter bank having discharged 
 this claim before beginning his action against Howes and 
 
 set off the amount of his deposit against the assessment ; the capital stock is 
 a trust fund for the benefit of all the creditors, Macungie Sav. Bank v. Bas- 
 tian, Sup. Ct., 10 Week. No. Cas. 71. 
 
 1 Hall V. Tioga Nat. Bank, N. Y. Sup. Ct., 21 Week. Dig. 416. 
 
 2 Brown v. Leokie, 43 111. 497. ' 1 Hall, 56. 
 * Chief Justice Walker in Brown v. Leokie, supra. 
 
384 BANKS AND THEIR DEPOSITORS. § 394 
 
 Suydam. It was held that he could recover the amount which 
 had been credited to Monteath b^' the bank on account of the 
 draft. " This gave the bank," said the court, " the right to 
 balance the credit by charging Monteath with the draft on 
 his acdount. The defendants, as assignees of Monteath, had 
 no greater rights than his assignor. Monteath, upon the dis- 
 count of the draft by the bank, had a right at once to the 
 proceeds, but not having drawn the money from the bank 
 prior to the protest of the draft for non-payment, the bank 
 could at once return the draft to him, and cancel the credit, 
 or avail itself of the draft as a set-off against the demand of 
 Monteath for the proceeds." 
 
 (a) Hollister Bank case. It was claimed by the defendants 
 that the plaintiff was precluded from cancelling the credit 
 given to Monteath for the proceeds of the draft in this way, 
 because at the time of the assignment of this credit by 
 Monteath to him the draft was in the possession of the Corn 
 Exchange Bank, that bank having a lien upon it with other 
 paper of the Hollister Bank, for whatever balance might be 
 due from the latter to the former. " While the Corn Ex- 
 change Bank so held the draft, the Hollister Bank or the 
 plaintiff could not charge the same to the debit account of 
 Monteath, and thus cancel the credit given for the proceeds, 
 or use it as a set-off in an action brought by Monteath for 
 the money. To enable the Hollister Bank or the plaintiff to do 
 either, the title to the draft must be absolute, and the holder 
 able to discharge Monteath from all liability as drawer. 
 This could not be done while the Corn Exchanse Bank had 
 a lien upon the draft for a general balance against the Hollis- 
 ter Bank. When the lien of the Corn Exchange Bank was 
 satisfied by the plaintiff, he acquired the same title to the 
 draft he would have had, had no such lien ever existed, with 
 the same right to use it against Monteath. The defendants 
 gave no notice of the transfer of the credit for the proceeds 
 of the bill by Monteath to tliera, and upon well-settled prin- 
 ciples, the claim of the defendants for that credit, whether 
 they sought to enforce it by action or by way of set-off", was 
 
§ 395 WHEN CAN A DEPOSIT BE RETAINED. 385 
 
 subject to any defence that existed against Monteath at the 
 time the bank or plaintiff had notice of the transfer."* 
 
 § 395. When unmatured debt may be set oflF. Equity will 
 permit and enforce a set-off of a debt not yet due against a 
 depositor's account. Ford's Administrator v. Thornton^ is one 
 of the best known cases on this point. A person named Greg- 
 ory, who was indebted to a bank by a note payable in sixty 
 days, died before its maturity, having a deposit in the bank 
 larger than the amount of the note. His estate was insolvent. 
 It was held that the bank had a right to deduct the whole 
 amount of the note from the sum on deposit, even though 
 there were claims against the estate of superior dignity to 
 the debt due the bank.^ President Tucker, in the above case, 
 said : " According to my view of the case, no part of Greg- 
 ory's deposit in bank constituted, upon his death, general 
 assets of the estate, except the excess above what was suffi- 
 cient to liquidate the note of Gregory due to the bank. The 
 
 ' RoWnsoB V. Howes, 6 Smith (N.Y.), 84. I. and A. agreed to speculate, 
 and to put into tlie hands of P. one hundred and fifty dollars apiece for that 
 purpose. I. drew his check on a bank in payment of a draft for his portion 
 which he ordered the bank to send to F. By mistake the draft was sent to 
 the wrong person, but was returned and cancelled. Afterward, A. ordered 
 the bank to send a draft for the same amount to Chicago, but I. was opposed 
 to this and demanded his money of A., who gave him fifty dollars. He then 
 demanded his money of the bank and denied A.'s authority to order the 
 Chicago draft. Having sued the bank for the amount, it was held that A.'g 
 payment should be deducted, and that I., therefore, could recover only the 
 balance, namely, $100, Ilgenfritz v. Pettis County Bank, 21 Mo. App. 558. — 
 A bank official who had been dismissed and who retained of its funds $1500 
 as his salary and who was afterward sued on his bond, was permitted to set 
 off so much as was due him for his service at the time the action was brought, 
 Union Bank v. Heyward, 15 S. Car. 296. — A note payable on demand may be 
 set off against a deposit without making a demand therefor, Ketohum v. 
 Stevens, 6 Duer, 463. — The public administrator of the city of New York can 
 offset against a debt due from him to a bank deposit whether made in his 
 own name, or as public administrator, and also notes issued by it that he 
 may have, Miller v. Receiver of Franklin Bank, 1 Paige, 444. 
 
 2 3 Leigh, 695. 
 
 3 Knecht v. United States Sav. Institution, 2 Mo. Ap. 563 ; Jordan v. Na- 
 tional Shoe & Leather Bank. 74 N. Y., p. 473. 
 
 25 
 
386 BANKS AND THEIR DEPOSITORS. § 396 
 
 bank, in fact, was only a debtor for the difference. Had 
 Gregory, in his lifetime, sued the bank for deposit, though 
 it could not set off at law, because his note was not due, yet 
 upon showing in a court of equity, that Gregory and his in- 
 dorsers were insolvent, there could be no question of its right 
 there, to stop the amount in its own hands. Equitable set- 
 off's or discounts existed prior to and independent of the statute.* 
 . . Although the bank could not, at law,^ set off" a debt pay- 
 able in fiituro against a debt due in presenti, yet it will scarcely 
 be denied that upon proof of danger of insolvency, equity 
 would stop the payment ; for, in equity, it matters not that 
 the debt due to the defendant, which he seeks to set off, is 
 payable in fatu.ro. . . If, then, in ordinary cases, where there 
 are mutual debts between two persons, a discount would be 
 allowed, upon its appearing that there was risk of insolvency, 
 although one of the debts may be solvendum in futuro, the 
 bank might in Gregory's lifetime, and to the moment of his 
 death, have insisted on retaining his deposit if there was dan- 
 ger of loss. The only doubt that could arise about this is 
 that the deposit of a dealer is, by the usage and custom of 
 the bank, held always subject to his check, notwithstanding 
 he is debtor on an accommodation note. But this usage or cus- 
 tom of dealing cannot be more obligatory on the bank than 
 an express promise to pay the amount of the deposits. And 
 yet an express promise to pay does not exclude the creditor 
 from the right of stoppage or retainer. This has been often 
 decided." 
 
 § 396. Bank notes of failed bank. Formerly when banking 
 institutions issued notes, questions arose on the failure of the 
 issuer- whether its notes, which were depreciated, could be set 
 oft' on its claim against its debtors. In some States the notes 
 which a debtor had at the time of its failure could be set off 
 
 1 Ex parte Stephens, 11 Ves., Jr., 24; Ex parte Blagden, 19 Id. 466 ; Ex 
 parte Flint, 1 Swans. 30. 
 
 ' An allowance by way of set-off must always be founded on an existing de- 
 mand in presenti and not one that may be claimed in futuro. Martin v. Kunz- 
 muUer, 37 N. Y. 396 ; AflF. 10 Bos. 16, the court citing many cases. 
 
§ 396 WHEN CAN A DEPOSIT BE KETAINED. 387 
 
 against a claim due from him.' lu other States this could 
 not be'done.^ In none of them, however, could a debtor buy 
 the notes of a failed bank and set them off against his indebt- 
 edness.' 
 
 (a) Could not be set off against garnishee. The same prin- 
 ciple applies to a garnishee debtor. He cannot set off against 
 his indebtedness to a bank of circulation its notes acquired 
 after the service of the process against him ; but he could 
 set off the notes he had before the process was served. This 
 principle was applied in the Farmers' Bank v. Gettinger,* 
 President Brown saying : " Upon the service of the attach- 
 ment on the garnishee debtor, the debt became fixed, and the 
 attachment creditor acquired a lien on the debt in the hands 
 of the garnishee, which could not be discharged but by pay- 
 ment or satisfaction, if the attachment be sustained. It 
 could not be affected by after-acquired set-offs, but would be 
 subject to the just and equitable set-offs which the garnishee 
 might bona fide have at the time of the service of the attach- 
 ment upon him. The bank notes of the Farmers' Bank, 
 which the garnishee held bona fide at the date of the service 
 of the attachment upon him, was a good set-off against the 
 claim of the attaching creditor of the bank ; but the notes of 
 the bank or other set-offs acquired by the garnishee after 
 service of the attachment upon him, and for the purpose of 
 being so set oft", could not be so applied as against the attach- 
 ing creditor."" 
 
 • Beers v. Maynard, 1 Bail. Eq. 168. 
 
 2 Eastern Banki). Capron, 22 Conn. 639 ; Savings Bank v. Bates, 8 Id. 605 ; 
 Diven v. Phelps, 34 Barb. 224 ; Matter of Receiver of Middle Dist. Bank, 1 
 Paige, 585 ; Clarke v. Hawkins, 5 R. I. 219. 
 
 3 Diven v. Phelps, supra. See § 282. 
 
 * 4 W. Va. 305. 
 
 5 Seamen v. Bank, 4 W. Va. 339 ; Brouwer v. Harbeck, 9 N. Y. 589 ; 
 McLaren v. Pennington, 1 Paige, 102; American Bank «. Wall, 56 Me. 
 167 ; Clarke «. Hawkins, 5 R. I. 219. 
 
388 BANKS AND THEIR DEPOSITORS. § 398 
 
 lAen on stock. 
 
 § 397. Lien on bank stock created by statute. A Hen on 
 bank stock exists only by charter, statutory law, or agree- 
 ment. "It is clear that there is no lien at common law 
 against stock for debts in favor of the corporation issuing the 
 stock. . . It is obvious that a different rule would subvert 
 the wholesome doctrine of the common law against secret 
 liens. When such a lien exists it is by statutory authority, 
 either expressed in the act of incorporation or by by-laws 
 made by authority of the act."' Hence, the dividend of an 
 insolvent bank, belonging _ to a stockholder's insolvent estate, 
 cannot be retained to pay his indebtedness to the bank, be- 
 cause neither by charter nor statute has any lien been created.' 
 
 § 898. None on national bank stock. "It has been expressly 
 decided in the Supreme Court of the United States, that since 
 the National Bank Act of June 3, 1864, went into effect, 
 neither by the Act itself, nor by any by-law based upon any 
 authorized provision in the 'articles of association,' can a 
 national bank create a lien upon the shares of its stockholders 
 for their indebtment to the bank. That such a lien is con- 
 trary to the whole policy of the Act is manifested by the 
 repeal of such a provision in the Act of 1863."' But a 
 
 • Thompson, J., Steamship Dock Co. ■;. Heron, 52 Pa. p. 281. 
 
 2 Merchants' Bank v. Shouse, 102 Id. 488. 
 
 ° Virgin, J., Hagar v. Union Nat. Bank, 63 Maine, 509 ; Bank v. Lanier, 
 11 Wall. 369 ; BuUard v. Bank, 18 Id. 589 ; Evansvllle Nat. Bank v. Metro- 
 politan Nat. Bank, 2 Biss. 527 ; Rosenback v. Salt Springs Nat. Bank, 53 
 Barb. 495; Delaware, Lack. & Western E. Co. u. Oxford Iron Co., 38 N. 
 J., Eq. 340. Judge Blachford, though, ruled in an early case under the 
 National Bankrupt Law that a bank could maintain a lien on its shares of 
 stock as against the assignee in bankruptcy of the stockholder to protect 
 itself against loss ; In reBigelow, 1 N. Bank. Reg. 632 (2d ed.). United States 
 District Judge McDonald ruled the same way ; In re Dunkerson, 4 Biss. 227 ; 
 and so did Judge Clifford in 1871, in Knight v. Old Nat. Bank, 3 Cliff. 429, 
 after the decision in Bank v. Lanier. This opinion contains a good review 
 of the cases. 
 
§ 399 WHEN CAN A DEPOSIT BE RETAINED. 389 
 
 national bank can hold the cash dividend of a stockholder 
 pledged for his debt.' 
 
 (a) Not even by agreement. Not even by agreement can a 
 national bank stockholder pledge his stock to secure a bank 
 on future indebtedness, for example, the balance due on col- 
 lections which a banker and a national bank may make for 
 each other.^ 
 
 § 399. Can be on State bank stock. State banking institu- 
 tions, however, may acquire a lien either by charter or statute 
 to secure the indebtedness of stockholdei'S.* Although a lien 
 can be thus acquired through duly authorized articles of 
 association or by-laws,* a lien cannot be acquired through a 
 simple delegation of authority to the directors to manage its 
 affairs. If, therefore, a Board of Directors invested with 
 genei'al authority should subject the stock of their bank to a 
 lien, it would not hold against the purchaser of any shares 
 for value and ignorant of the by-law." 
 
 (a) Equitable title. Even though a bank's charter should 
 prescribe how its stock must be transferred to confer a title 
 on the purchaser, yet an equitable title could be given vs^ith- 
 out following the mode prescribed which the institution 
 would be bound to respect from the time of receiving notice 
 of the transfer.* Consequently, debts contracted by the as- 
 signor to the bank after receiving such a notice would not be, 
 as against the assignee, liens on the stock.' 
 
 ' Hagar v. Union Nat. Bank, 63 Me. 509. 
 
 2 Conklin v. Second Nat. Bank, 45 N. Y. 655. 
 
 " Burford v. Crandell, 2 Cranch C. C. 86. 
 
 ' M'Dowell V. Bank, 1 Harr. 27 ; Leggett v. Bank, 24 N. Y. 283 ; Arnold 
 V. Suffolk Bank, 27 Barb. 424. 
 
 * Bank of Attica v. Manufacturers & Traders' Bank, 20 N. Y. 501. 
 
 ^ Conant v. Seneca County Bank, 1 Ohio St. 298, citing Bank v. Smalley, 
 2 Cow. 770; Gilbert v. Manchester Iron Manuf. Co., 11 Wend. 627; United 
 States V. Cutts, 1 Sumner 0. C. 133 ; Commercial Bank v. Kortright, 22 Wend. 
 348 ; Qulner v. Marblehead Ins. Co., 10 Mass. 476 ; Sargent v. Franklin Ins. 
 Co., 8 Pick. 90 ; Union Bank a. Laird, 2 Wheat. 390 ; Black v. Zaoharie, 3 
 How. 483. 
 
 ' Conant v. Seneca County Bank, 1 Ohio St. 298. 
 
390 BANKS AND THEIR DEPOSITORS. § 402 
 
 § 400. Fledge must be express and debt exist. To bind a 
 stockholder his pledge must be express, "otherwise," said 
 Judge Mills in Fitzhugh v. The Bank of Shepardsville,* "the 
 holder of such evidence might delude and impose upon pur- 
 chasers, and the bank stand as a tacit accomplice in that 
 delusion, and then be permitted to take from an innocent 
 purchaser the title thus acquired." !N'or will a pledge of 
 stock for a particular debt give a bank a lien thereon for 
 other debts due from the person for whom the stock is 
 pledged.'' 'Nov will a lien on stock for overdrafts on checks 
 include notes or bills to which the pledgor may be a party as 
 maker or indorser at the time of selling and transferring his 
 stock.* No lieu exists unless there be a debt ; and if a stock- 
 holder divest himself of his stock by sale, gift, or pledge, 
 which is known by the bank, it cannot claim a lien on later 
 advances.^ 
 
 § 401. Entire stock held regardless of amonnt of debt. If 
 the debt be less than the value of the stock, the bank can 
 hold the whole until the debt is paid ; it is not obliged to 
 appropriate a part and pay the rest.' It hardly need be 
 mentioned that a bank may waive its lien and permit a stock- 
 holder to sell his stock when such permission is necessary.' 
 
 § 402. Right to pledge depends largely on charter, (a) Fed- 
 eral court cases. The rights of banks and of stockholders are 
 largely determined by the charter or by-laws which relate to 
 the holding, pledging and transfer of stock. The decisions, 
 therefore, rendered in many cases have narrowed down to an 
 inquiry into the nature of the power thus existing. Long 
 ago it was determined that the Bank of Washington had a 
 right under its charter to prevent a transfer on its books of 
 a part of the bank stock of a debtor until the debt was paid, 
 
 1 3 B. Mon. (Ky.) p. 129. 
 
 * VFooUey v. Louisville Banking Co., 81 Ky. 527. 
 3 Reese v. Bank, 14 Md. 271. 
 
 * Bank v. McNeil, 10 Bush. 54 ; Neale v. Janney, 2 Cranoh C. C. 188. 
 ' Sewall V, Lancaster Bank, 17 Serg. & Raw. 285. 
 
 « National Bank v. Watsontown Bank, 105 U. S. 217. 
 
§ 402 WHEN CAN A DEPOSIT BE RETAINED. 391 
 
 although the value of the stock greatly exceeded the amount 
 of the debt.* But on the death of one of its stockholders, 
 who was msolvent and indebted to the United States, the 
 bank had no right to set off the dividends accruing on his 
 stock after his death against notes on which he was indorser. 
 The bank had no specific lien on the dividends of its stock- 
 holders in consequence of its right to prevent a transfer of 
 the stock until his debt to the bank should be paid.' 
 
 (6) Bank v. Pinson.^ The third section of the charter of a 
 Mississippi bank provided for a directory and a president, 
 who were empowered to make all needful rules and by-laws 
 for the management of the business of said company, " and the 
 mode and manner of transferring its stock." Having this 
 authority the bank enacted a by-law that " the stock of the 
 company shall be assignable only on the books of the company," 
 and no transfer of stock shall be made by any stockholder 
 who shall be indebted to the company ; and " certificates of 
 stock shall contain upon them notice of this provision." Cer- 
 tificates of stock were issued to C, which stated the number 
 of shares he owned, their nominal value, and that they were 
 "transferable at the office, in person or by attorney." C. 
 borrowed money from P. on these certificates as collateral 
 security, and assigned them to her by the following indorse- 
 ment : " For value received, I assign this certificate of stock 
 to P., and authorize her, as my attorney, to demand and have 
 transfer of the same made to her on the books of the com- 
 pany." When P. presented the certificates to the bank and 
 demanded their transfer, it refused to do this because C. was a 
 debtor for more than the value of his stock, and under the by- 
 law above quoted, it had a lien thereon for his indebtedness. 
 
 1 Pierson v. Bank, 3 Cranoh. C. C, 363. 
 
 8 Brent v. Bank, 10 Pet. 596 ; Afif. 2 Cranch. C. C. 517. 
 
 3 58 Miss. 422. An agent authorized to sell bank stock belonging to the 
 principal (who was his wife) had the stock transferred to himself on the 
 books of the bank. The agent afterward transferred the stock to the bank. 
 It was declared to be not an innocent purchaser, but held the same as trustee 
 for the principal, Bank of Louisville v. Grraj, 8 Kj. Law Rep. 664. 
 
392 BANKS AND THEIR DEPOSITORS. § 402 
 
 At the time of the assignment to P. she had no actual notice 
 of the lien claimed by the bank on C.'s stock. It was held 
 that P. did not have constructive notice by the charter that 
 there would be a by-law preventing a stockholder indebted 
 to the bank from disposing of his stock, but only that there 
 would be some regulation of the mode and manner of the 
 transfer, and that she had the right to presume the regula- 
 tion was announced in the certificate in the words " trans- 
 ferable at the office in person or by attorney," and was not 
 bound to inquire further. As P., therefore, was an innocent 
 purchaser for value, without notice actual or constructive, of 
 the bank's lien, she held the stock. 
 
 (c) Union Bank of Georgetown. On the other hand, the 
 charter of the Union Bank of Georgetown provided that 
 the shares should be transferable only on the books of the 
 bank and by the rules that the directors should establish. One 
 of these prescribed that all debts to the bank must be satisfied 
 before a transfer could be made unless the president and 
 directors should determine otherwise. These rules were de- 
 clared to be notice to all purchasers, and no one could acquire 
 a legal title save by a regular transfer, or an equitable title 
 save in subjection to the rights of the bank.* 
 
 1 Union Bank v. Laird, 2 Wheat. 390 ; Morgan o. Bank, 8 Serg. & Raw. 73. 
 
§ 403 PAYMENT OF THE DEPOSITOR'S NOTES. 393 
 
 CHAPTEE XIX. 
 
 PAYMENT OF THE DEPOSITOR'S NOTES. 
 
 § 408. Bank's duty to pay depositor's notes, (a) Affirmative 
 view. Ifot only is a bank required to pay its depositor's 
 checks, but hardly less imperative is the duty to pay his 
 notes when they are made payable there. Judge Rapallo, 
 speaking for the highest court of !N'ew York, has remarked : 
 " A note payable at a bank where the maker keeps his account 
 is equivalent to a check drawn by him upon that bank, 
 except that in the case of a note the failure to present for 
 payment does not discharge the maker.''^ The Supreme 
 Court of Pennsylvania has declared that a note which is thus 
 payable at a bank where the maker keeps his deposit is in 
 efl'ect a draft on the institution in favor of the holder and in 
 discharge of the indorser, if there be one.^ And Chief Jus- 
 tice Marshall has said that " by making a note negotiable in 
 bank, the maker authorizes the bank to advance on his 
 credit to the owner of the note the sum expressed on its 
 face."* Moreover, if a bank should not Charge the note 
 against the maker's deposit, and should permit it to go to 
 protest, the bank could not recover of the indorser.^ 
 
 (b) Negative view. This duty of a bank, however, to pay the 
 depositor's notes which are made payable there whenever his 
 deposit is sufficient, is not admitted everywhere. The courts 
 
 » Indig V. National City Bank, 80 N. Y. p. 106 ; Thatcher v. Bank of the 
 State of New York, 5 Sand. 121 ; ^tna Nat. Bank v. Fourth Nat. Bank, 46 
 N. Y. 82 ; Griffin v. Rice, 1 Hilt. 184 ; Commercial Bank v. Hughes, 17 Wend. 
 94 ; Beckwith o. Union Bank, 4 Sand. 604 ; Kymer v. Lawrie, 18 L. J. Q. 
 B. 218. 
 
 ' Commercial Nat. Bank v. Henninger, 105 Pa. 496. 
 
 ' Mandeville v. Union Bank, 9 Cranch, 9. 
 
 * Commercial Nat. Bank v. Henninger, supra. 
 
394 BANKS AND THEIR DEPOSITORS. § 403 
 
 in Illinois,' Indiana,'' Louisiana' and Massachusetts,^ have not 
 placed this on the roll of duties which banks owe to their 
 depositors. 
 
 (c) The case of the JEtna National Bank v. Fourth National 
 Bank^ is interesting, in several ways. The Florence Mills 
 deposited with the defendant bank. On the 3d of April the 
 concern had on deposit $694, but on the previous day it had 
 sent a cheek for $4895 in a letter, with the request to " credit 
 our account [with the amount], and charge us our note due 
 the 4th instant." The letter and check were received by the 
 defendant on the 3d of April, and the check was collected 
 and duly credited. On the 3d of April a note of the Florence 
 Mills for $5000, also payable at the defendant's bank, which 
 was due the day before, and which had been presented for pay- 
 ment and protested for non-payment, was paid by the defendant, 
 and the amount was charged to the depositor. On the next 
 day another note of the Florence Mills for $5000 belonging 
 to the plaintiff bank was presented at the other for payment, 
 which was refused for lack of funds. The lower courts could 
 not very satisfactorily determine the rights of the parties 
 and the case reached the Court of Appeals. " The Florence 
 Mills," said Judge Allen, " had and kept an ordinary bank- 
 ing account with the defendant, making deposits with and 
 drawing checks upon the latter as occasion required ; and 
 
 ' Wood & Co. V. Merchants' Sav. Loan & Trust Co., 41 111. 267 ; Eidgely 
 Nat. Bank v. Hamilton, 109 Id. 479. 
 
 2 Scott V. Shirk, 60 Ind. 160 ; Second Nat. Bank v. Hill, 76 Id. 223. 
 
 3 Gordon v. Muohler, 34 La. Ann. 604. 
 
 * " A hank is under no obligation whatever to pay a note made payable at 
 its counter, unless the maker has placed funds there for that purpose ; and 
 it has not the same means of ascertaining immediately whether it will be 
 paid by the maker that it has of ascertaining whether a check is good. The 
 rule as to checks, therefore, has no application to the payment of notes." 
 Endicott, J., in Exchange Bank v. Bank of North America, 132 Mass. p. 150. 
 
 A bank where a draft is made payable has no right to pay it, or apply the 
 money deposited there by the acceptor unless by his special direction either 
 verbally, or by check, draft or other writing, Haines v. McFerren, 19 Brad. 
 172. 
 
 6 46 N. Y. 82. 
 
§ 403 PAYMENT OF THE DEPOSITOR'S NOTES. 395 
 
 there was nothing in the transactions or mode of dealing 
 between the parties, to take the account out of the ordinary 
 rules, applicable to bankers' accounts, or vary the rights and 
 obligations resulting from the ordinary course of dealing 
 between bankers and their customers. . . The money was 
 not sent to or received by the defendant as the money of the 
 plaintiff, or a specific fund for the payment of the note held 
 by the plaintiff. . . The direction was to credit the account 
 with this sum, and this direction was complied with ; and the 
 relation of debtor and creditor between the defendant and 
 the Florence Mills to the amount appearing upon the books 
 of the bank to the credit of the depositor was the result. 
 The whole sum was at the disposal of the depositor, and sub- 
 ject to his cheeks ; and the duty of tlie defendant, as well as 
 its agreement, was to discharge the indebtedness by paying 
 the checks of the depositor, and the agreement being with 
 •the depositor, the responsibility for a breach of it was to the 
 same party. . . It is not claimed that there was an express 
 promise to or for the benefit of the plaintiff. There was a 
 promise and agreement with the Florence Mills of the char- 
 acter and to the extent indicated, and the law will not imply 
 a promise as a substitute for, or in addition to the express 
 contract of the parties.* . . The money deposited to the 
 credit, and going into the general account of the Florence 
 Mills, was payable only upon a proper voucher, upon check, 
 or in payment of an acceptance or promissory note of the de- 
 positor, payable at the bank. An acceptance or promissory 
 note thus payable is, if the party is in funds — that is, has 
 the amount to his credit — equivalent to a check, and is, in 
 effect, an order or draft on the banker in favor of the holder 
 for theamount of the note or acceptance. It was so regarded 
 in this case by the parties, and it was in substance a check 
 on the defendant in favor of the plaintiff, with a superadded 
 direction by letter from the drawer to the drawee to pay it 
 when presented. This direction was a work of supererogation, 
 
 1 Whiting V. Snlliran, 7 Mass. 107. 
 
396 BANKS AND THEIR DEPOSITORS. § 404 
 
 and gave no additional sanction or effect to the previous 
 direction embodied in the note. . . Before this note matured 
 or was presented for payment, the defendant paid upon 
 another note of the same maker, payable at the bank of the 
 defendant, and which, by commercial usage, takes the place 
 of, and is equivalent to a check, and charged the same to 
 the account of the maker, leaving an amount to the credit of 
 the account insufficient to pay the plaintiff. This payment 
 was valid as against the customer of the defendant, the 
 maker of the note, and that corporation has no cause of ac- 
 tion against the defendant, -either for the money or for not 
 paying the plaintisff's note when presented. The defendant 
 has performed its contract with the Florence Mills, and dis- 
 charged its obligation to it by honoring its drafts, and was 
 without funds for the payment of the plaintiff's note when 
 presented," and consequently was under no obligation to pay 
 the same. 
 
 (d) Rule in Missouri. In Missouri, a bank may, but is not 
 required to apply a depositor's balance on a bill or note. 
 Therefore in a suit by a bank against the acceptor of a bill, 
 the fact that the drawer had an account there and that after 
 the protest of the bill a balance was due him, did not prove 
 that he had paid or satisfied it.' 
 
 (e) Holder must surrender note. Moreover, a bank though 
 having a sufficient deposit, is not required to pay the note of 
 a depositor on his orar request, unless the holder is willing to 
 surrender it or to give other evidence of its payment." 
 
 § 404. Deposit may be applied to discounted note, {a) But 
 not on a joint note. If a bank discount a note for a depositor 
 which is not paid at maturity, his deposit or one subsequently 
 made, whether in the ordinary way or by leaving commercial 
 paper for collection, may be applied to discharge the obliga- 
 
 ' Citizens' Bank v. Carson, 32 Mo. 191. 
 
 " MoEwen u. Davis, 39 Ind. 109. If a bank receive a check from the maker 
 of a note in payment of the same, it cannot after the check is paid refuse to 
 deliver the note on the ground that it has not matured, Union Sav. Associ- 
 ation V. Clayton, 6 Mo. App. 58 7> 
 
§ 406 PAYMENT OF THE DEPOSITOR'S NOTES. 397 
 
 tion.' But if a bank own a joint and several note executed 
 by A. as principal and B. and C. as sureties, it cannot apply 
 a deposit belonging to A. alone in payment.^ 
 
 § 405. Reclaiming deposit applied by agreement. When the 
 balance of a depositor has been applied by agreement to dis- 
 charge his note, it cannot be claimed afterward by any one. 
 Chase requested a bank to pay a debt for him and agreed to 
 apply his balance in repayment. The bank paid the debt and 
 Chase gave his note for the amount, agreeing also soon to ad- 
 just his balance. Before the adjustment was made the bank 
 failed and the receiver sought to recover the balance, but the 
 court decided that the transaction was a contract under which 
 the bank advanced the money in consideration of Chase's 
 agreement that the funds should be so appropriated. After 
 the bank had advanced the money Chase had no legal right 
 to withdraw the funds and the bank might have withheld 
 them. " Nor were they liable to be attached by his creditors 
 as against the bank, for they were appropriated by the agree- 
 ment of the parties to the payment of the money which the 
 bank had advanced on Chase's account. If, therefore, Chase 
 could not have withdrawn the funds, and if they were not liable 
 to an attachment at the suit of his creditors, neither the bank 
 nor its creditors have any right to refuse to have them de- 
 ducted from the amount of the note."^ 
 
 § 406. Must follow depositor's direction. If a depositor 
 give a specific direction concerning the payment of a note 
 payable at a bank, this must be followed.^ If, however, the 
 
 ' Muenoh v. Valley Nat. Bank, 11 Mo. App. 144, citing Jonrdaine v. Lefevre, 
 1 Esp. 66 ; Scott v. Franklin, 15 East, 428 ; Ex parte Pease, 1 Rose, 232 ; Ex 
 parte Pease, 19 Ves., Jr. 25. 
 
 * Dawson v. Real Estate Bank, 5 Ark. 283. 
 » Chase v. Petroleum Bank, 66 Pa. 169. 
 
 * Egertou v. Fulton Nat. Bank, 43 How. Pr. 216 ; Bank of United States v. 
 Maealester, 9 Pa. 475 ; Wilson v. Dawson, 52 Ind. 513. When the holder of 
 a promissory note delivers the same to a bank and directs an appropriation of 
 the proceeds in a specific manner, the bank may realize these either by dis- 
 counting the note or collecting it of the maker at maturity, unless the holder 
 shall direct the course to be taken. Drown ti. Pawtucket Bank, 15 Pick. 88. 
 
398 BANKS AND THEIR DEPOSITORS. § 407 
 
 drawer of a draft send notice to the bank where it is payable 
 not to pay the same, and the notice is not received until after 
 payment has been made, the bank will not be liable, although 
 the payee-depositor may have an abundant deposit for that 
 purpose.' In Wilson v. Dawson,^ the principal of a note due 
 to a banking firm after its maturity deposited and checked 
 out by agreement more than the amount of the note. The 
 surety claimed that the money thus deposited ought to have 
 been applied by the bank on the note, but the court decided 
 otherwise, and consequently the surety was not discharged. 
 
 § 407. Payment of note by stranger. When a stranger who 
 is bound on a note pays the same to the bank having posses- 
 sion of it, the instrument is discharged as eftectually as though 
 it were paid by the maker.* In Citizens' Bank v. Lay,* the 
 person who paid the note did so in fulfilment of his contract 
 with the maker. This act discharged the obligation. " It is 
 certain that the maker was discharged by the payment to the 
 bank, and the law is well settled that after payment at ma- 
 turity a note cannot be reissued, so as to charge any party 
 thereto who otherwise would be discharged, unless with his 
 knowledge and consent."* 
 
 (a) Note made payable there by non-depositor. So, too, a non- 
 depositor who makes an obligation payable at a bank and 
 leaves funds there for the discharge of it at the proper time, 
 is discharged from further liability. In Lazier v. Horan,* 
 Judge Rothrock, after remarking that on this question there 
 was "a surprising paucity of adjudications," thus continued: 
 " When a note is made payable at a bank the parties expect 
 the collection to be made through the bank. It is true, when 
 
 1 Weedsport Bank v. Park Bank, 2 Keyes, 561. 2 52 Ind. 513. 
 
 3 Lancey v. Clark, 64 N. Y. 209 ; Eastman v. Plainer, 32 N. H. 238 ; Dooley 
 V. Virginia Fire & Marine Ins. Co., 3 Hughes, 221. 
 
 * 80 Va. 436. 
 
 6 Burbridge v. Manners, 3 Camp. 193 ; Gardner v. Maynard, 7 Allen, 456. 
 When a note is deposited for collection with a bank where it is payable, its 
 payment to the bank absolutely discharges the maker, Smith v. Essex County 
 Bank, 22 Barb. 627. 
 
 s 55 Iowa, 75. 
 
§ 407 PAYMENT OF THE DEPOSITOR'S NOTES. 399 
 
 the defendant [in the case under consideration] deposited the 
 money, the bank, while holding it, was technically the agent 
 of the depositor. Bat the money was deposited for the holder 
 of the note, and it required no act of the depositor to author- 
 ize the bank to pay the note. If the customer of a banker 
 accept a bill, and make it payable at his banker's, that is of 
 itself a sufficient authority to the banker to apply the cus- 
 tomer's funds in paying the bill.* And if money be deposited 
 for the payment of such a bill or note, the holder may main- 
 tain an action against the bank therefor.* By the very terms 
 of the contract the defendant agreed to pay the note at the 
 bank. ISow, 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. The 
 parties to the note did not contemplate that the payee should 
 make a journey from Indianapolis [where he lived] and meet 
 the maker at Allen's bank [where the note was payable], 
 and there receive his money from the hands of the maker 
 and deliver him the note. This court has three times deter- 
 mined that when the maker of a promissory note payable in 
 personal property, to be delivered at a specified time and 
 place, makes a tender of the specific articles and sets them 
 apart at the time and place stipulated, and the creditor is not 
 there to receive, or refuses to accept the property, the debt is 
 thereby discharged, and the title of the property passes to 
 the creditor." In one of these cases the note provided for 
 payment in brick. " If that could be discharged by deliver- 
 ing the brick set apart for the creditor at the time and place 
 designated, it is difficult to see why, if the note was payable 
 in dollars, it would not equally be a discharge to set apart 
 and deposit the dollars for the holder of the note." In the 
 case of Thatcher v. Bank,' a deposit was made by a person 
 
 • Byles on Bills, 151. ' Parsons on Com. Law, 130. 
 
 ' 5 Sand. 121. Earl, C, said in East River Nat. Bank v. Gove, 57 N. Y. p. 
 602, that this case was affirmed by the Court of Appeals. 
 
400 BANKS AND THEIK DEPOSITORS. § 407 
 
 for the payment of an accepted bill payable at that bank. 
 The bill was not paid, and the drawee, Thatcher, sued the' 
 bank for the damages he had sustained. It was decided that 
 while the duty of a bank to pay the notes or other obligations 
 of its depositors payable there might be implied, no such 
 duty existed with respect to strangers. The duty, therefore, 
 whenever existing, must be based on agreement made with a 
 proper officer of the bank. As such agreement* was not 
 proved in this case, the deposit having been made with the 
 paying teller, who had no right to receive it or to make any 
 agreement with the depositor, Thatcher could not recover. 
 
 (b) Stranger can withdraw his deposit. If a stranger, for 
 example, the acceptor of an overdue draft, should deposit 
 money to pay the instrument, he can withdraw the same. 
 And if he should do so, the drawers of the instrument, to 
 whom it has previously been returned as dishonored, cannot 
 maintain an action against the bank. Thus Higbee & Co. 
 drew a draft on G. payable at a bank which was accepted. 
 It was dishonored, however, and returned to the drawers. 
 G. then sent his brother to the bank with money to apply on 
 the draft. It was deposited to G-.'s credit, and a receipt was 
 given stating that it was to pay Higbee & Co.'s draft. 
 Afterward G. withdrew the deposit and returned the receipt. 
 In an action by the drawers against the bank to recover the 
 amount they failed, the court saying that " the deposit of the 
 money to pay the draft was not an equitable assignment of 
 the fund. Had it been deposited to the credit of Higbee & 
 Co. to meet the draft the case would have been different. 
 But it was not, nor could it well have been without risk to' 
 Gillespie, as the draft might have been discounted and held 
 by other parties. The money was deposited to the credit of 
 Gillespie, and the bank could not have refused to pay it out 
 on his check. It could not have paid it to Higbee & Co. 
 because it had no such order; it had no knowledge even that 
 they ever owned the draft ; the draft itself was not there, and 
 there could, therefore, have been no application to its pay- 
 
§ 408 PAYMENT OF THE DEPOSITOR'S NOTES. 401 
 
 ment. There was at most a direction to apply the money, 
 which was a mere executory order and revocable.' 
 § 408. Can deposit be applied before the last day of grace. 
 
 Admitting, therefore, that a bank has the right to pay a 
 note or bill of its depositor made payable there if having 
 adequate funds belonging to him, has a bank the right to 
 apply them on a depositor's note before the close of the 
 last day of grace? We know of no better statement of the 
 law than Judge Endicott's -.^ " A note entitled to grace is 
 payable on demand at any reasonable time and place on the 
 last day of grace, and, if not paid, an action may be brought 
 forthwith against the maker. But if no such demand is 
 made, the maker has the whole day in which to make pay- 
 ment.' When a note is made payable at a bank the contract 
 is that it shall be paid at some time during the banking houra 
 of the bank, and a demand for payment may be made at any 
 time during those hours. If no demand is made the maker 
 of the note is not in default until the close of business at the 
 bank on that day.* If a formal demand is made during 
 banking hours, by the holder of the note, at the bank where 
 it is payable, and there are then no funds, it is the duty of 
 the bank to say there are no funds ; and there is then a 
 breach of the contract on the part of the maker, and notice 
 thereof would bind the indorsers. There is no necessity for 
 a personal demand on the maker elsewhere, for he has made 
 it payable at the bank and the demand may be made there. 
 But if no such demand is made and the note is only sent or 
 placed in the bank for collection, then the maker has till the 
 close of business hours to make payment." 
 
 1 First Nat. Bank v. Higbee & Co., Pa. Sup. Ct., 16 Week. No. Cas. 415, 
 oiling Gibson v. Minet, 2 Bing. 7 ; Geist's Appeal, 41 Leg. Int. 500. 
 
 ' Exchange Bank v. Bank of N. America, 132 Mass. p. 148 ; see Home Nat. 
 Bank v. Newton, 8 Brad. 563. 
 
 ' Gordon v. Parmelee, 15 Gray, 413 ; Estes v. Tower, 102 Mass. 65 ; Pierce 
 V. Gate, 12 Gush. 190. 
 
 * Gliurch V. Glark, 21 Pick. 310; Glark v. Eldridge, 13 Met. 96; United 
 States Bank v. Carneal, 2 Pet. 543 ; Staples v. B^anklin Bank, 1 Met. 43. 
 
 26 
 
402 BANKS AND TIIEIK DEPOSITORS. § 410 
 
 § 409. Application of deposit after protest of note. If a de- 
 posit be made sufficient to pay a note after it lias been pro- 
 tested, this does not operate as payment between the bank 
 and indorser. The act does not indicate an intention by the 
 depositor or the bank to thus apply it. In the absence of 
 any direction or agreement to that effect it is optional with a 
 bank to apply such a deposit in payment ; it is under no ob- 
 ligation to do so.i If the application be postponed until after 
 recovering judgment on the note, the right will not be affected, 
 for the bank may apply the money after as well as before the 
 recovery of judgment in paying a debt due from a depositor. 
 "Whether the application is made or not is immaterial. If 
 not made the bank may, in an action by the depositor or his 
 assignee to recover the money deposited, use the judgment 
 thus obtained as a set-off against the demand." 
 
 § 410. Part payment. With respect to part payment of a 
 note payable at a bank, it can decline to pay or apply what 
 funds it has belonging to the depositor. In Kymer v. Laurie," 
 bankers having £20 belonging to their depositor, paid an 
 acceptance of £42 when it became due. Patteson, J., said 
 that " the plaintiff, by making the acceptance payable at the 
 defendants', clearly authorized them to pay it, and if the bal- 
 ance in his favor had been £42 . . they would have been 
 bound to pay it, unless the plaintiff, before it was presented 
 had countermanded that authority. They were not, indeed, 
 bound to pay it under the existing circumstances, because 
 they had not sufficient funds ; but they were fully authorized 
 to apply what funds of the plaintiff" they had towards the 
 payment." Whether they could recover the balance of the 
 £42 was not determined. " That question," said the court, 
 "might depend on the course of their dealings and other cir- 
 cumstances." 
 
 » National Bank v. Smith, 66 N. Y. 271 ; Marsh v. Oneida Central Bank, 
 34 Barb. 298 ; Pitts v. Congdou, 2 N. Y. 352 ; Beardsley v. Warner, 6 Wend. 
 610. 
 
 2 Marsh v. Oneida Central Bank, 34 Barb. 298. 
 
 3 18 L. J., Q. B. N. S. 218. 
 
§ 413 PAYMENT OF THE DEPOSITOR'S NOTES. 403 
 
 § 411. Cannot retain deposit to pay unmatured note. A 
 
 bank has no right to retain the money of a depositor to meet 
 his note which is not due,* or one which he has guaranteed. 
 "A debtor in one sum has no lien upon it in his hands for the 
 payment of a debt owed by him which has not yet matured ; 
 nor has a bank more than any other debtor."^ And if a 
 bank assign, the depositor may insist on the payment of his 
 note, even if it be not due at the time ©f the assignment.' A 
 note payable at a bank is payable in the bank, and a note 
 payable at or in a bank is payable to the holder or his agent 
 in the bank at its counter.* 
 
 § 412. Bank is not payee's agent by making it payable there. 
 The making of a note payable at a bank does not make it 
 the agent of the payee to receive payment unless the officers 
 are disposed to accept the agency. In Pease v. Warren" the 
 assignee of a mortgage given to secure notes made payable at 
 a bank presented them for payment at due time with the ac- 
 companying papers. The mortgagor objecting to pay on the 
 ground that the payee had not indorsed the notes, deposited 
 the money needful for that purpose with the bank, instruct- 
 ing its officers to apply it on the notes. Having refused to 
 obey the instructions, it was held that the money was not 
 subject to the control of the holder of the notes, and there- 
 fore would not operate as payment. 
 
 § 413. Maker's recovery of deposit when bank is bankrupt. 
 If a bank become bankrupt which has received the amount 
 of a note from the maker in advance of maturity for the 
 
 • Commercial Nat. Bank v. Proctor, 98 111. 658. 
 
 ' Folger, J., in Jordan v. National Shoe & Leather Bank, 74 N. Y. p. 473 ; 
 State Sav. Association v. Boatmen's Sav. Bank, 11 Mo. App. 292. See § 414. 
 s McCagg V. Woodman, 28 111. 84. 
 
 * Davis V. MoAlpine, 10 Ind. 137. 
 
 ^ 29 Mich. 9. If a depositor leave a check with the teller and direct him 
 to take up a note if presented there on which he is liable as indorser, the 
 teller is his agent, consequently, if he neglect to apply the check as directed 
 the bank is not liable, Newark India Rubber Mannf. Co. v. Bishop, 3 E. D. 
 Smith, 48. In this case the money was deposited solely with the teller, see 
 also Thatcher v. Bank, 5 Sand. p. 131. 
 
404 BANKS AND THEIR DEPOSITORS. § 415 
 
 express purpose of discharging the same, he can follow and 
 recover the money.' 
 
 § 414. Retaining of deposit to pay note maturing after 
 maker's death. If a depositor die the bank cannot retain his 
 deposit to discharge his liability on notes of which he was 
 the indorsee which were discounted for his benefit but due 
 and protested after his death.^ 
 
 § 415. Cannot apply surplus for security of note on general 
 balance. If a bank have collateral security for the note of a 
 depositor, which is sold, it cannot apply the surplus to dis- 
 charge a general balance due from him. For as the bank 
 could not hold the security if the note were paid at maturity, 
 no larger right in the security can be acquired by delay 
 in payment." Ifor can a bank to which a mortgage is given 
 " as collateral security for notes discounted or hereafter to be 
 discounted," claim the proceeds arising from the sale of such 
 mortgaged property in payment of notes discounted after the 
 entry of judgment on which it was sold, for the benefit of 
 another creditor, and thus deprive him of his lien and the 
 discharge of his debt.* 
 
 (a) Suit to recover security. If a bank decline for any 
 reason to return the security when the debt becomes due, the 
 owner must tender the amount before bringing his action to 
 recover the pledge. Thus C. sued a savings institution for 
 converting stock which had been deposited with it as col- 
 lateral security. C. offered to pay the note, which had been 
 given for the debt on the surrender of the collateral security, 
 but was informed that both the note and the stock were lost. 
 He, therefore, began his suit without making a tender of the 
 amount of the debt. Speaking for the court. Judge Field 
 said : " We think that the assumption is false, that a contract 
 of pledge, as a security for the payment of money, is analo- 
 
 1 Ellicott V. Barnes, 31 Kan. 170 ; Peak v. EUicott, 30 Id. 156. 
 
 2 Appeal of Farmers & Mechanics' Bank, 48 Pa. 57. 
 
 3 Hathaway v. Fall River Nat. Bank, 131 Mass. 14 ; Brown v. New Bedford 
 Institution, 137 Id. 262. 
 
 * Appeal of the Bank of Commerce, 44 Pa. 423. See § 382 c. 
 
§ 416 PAYMENT OF THE DEPOSITOR'S NOTES. 405 
 
 gous to a bilateral executory contract, in which the two 
 parties mutually promise to do concurrent acts, and the 
 promise of one is the consideration of the promise of the 
 other. The modern authorities, therefore, require a tender 
 of payment of the debt to enable the pledgor to maintain trover 
 for a conversion of property pledged, unless the lien created 
 by the pledge has been otherwise discharged. The distinc- 
 tion between a tender of payment of a debt due and an offer to 
 perform one of two mutual promises to do concurrent acts is 
 well known.' . . The contract of the defendant was to keep 
 the certificates of stock with due care, and to return them to 
 the plaintiff if the note was paid at maturity, or when, after 
 maturity, the note was paid, unless the stock was meanwhile 
 lawfully sold to pay the debt. The contract of pledge is col- 
 lateral to the contract to pay the debt. The promise is to 
 return the property pledged when the debt is paid. The 
 pledgee can maintain an action to recover the debt without 
 any offer to restore the property pledged, and he can main- 
 tain an action for money lent after he has converted the 
 property pledged by an unlawful sale, and can recover the 
 amount of the debt less the amount realized by the sale, if 
 the defendant pleads this in set-off"."^ 
 
 § 416. Can indorser's deposit be applied. Can a bank use 
 the deposit of an indorser for paying a note ? In Ticonic 
 Bank v. Johnson* a note was discounted for the benefit of the 
 first indorser, and the avails were credited to his account. 
 He afterward drew checks against the amount, but whether 
 the whole had been actually paid out at the time the note fell 
 due or not, did not appear. The court declared that the bank 
 might have retained a balance remaining deposited to the 
 indorser's credit when the note became due if it had thought 
 proper to do so. " It was clearly optional with the bank to 
 do so or not."* 
 
 > Cook V. Doggett, 2 Allen, 439. 
 
 2 Cumnock v. Institution for Savings, 142 Mass. 342. 
 
 3 21 Me. 426. « See § 389 o. 
 
406 BANKS AND THEIR DEPOSITORS. § 417 
 
 § 417. Bank need not bold deposit to secure indorser. (a) 
 Remarks of Gray, C. J. A bank is not required to hold a 
 deposit for the protection of an indorser of the depositor. In 
 other words, if the deposits of the maker of a note are not 
 sufficient at its maturity to pay it, the bank is not required 
 for the protection of the indorser to apply the subsequent 
 deposits of the maker on the obligation.* The weighty 
 words of Gray, C. J., in National Mahaiwe Bank v. Peck* ai-e 
 worth adding. "So long as the balance of account to the 
 credit of the depositor exceeds the amount of any debts due 
 and payable by him to the bank, the bank is bound to honor 
 his checks and liable to an action by hira if it does not. 
 When he owes to the bank independent debts, already due 
 and payable, the bank has the right to apply the balance of 
 his general account to the satisfaction of any such debts of 
 his. But if the bank, instead of so applying the balance, 
 sees fit to allow him to draw it out, neither the depositor nor 
 any other person can afterwards insist that it should have been 
 so applied. The bank, being the absolute 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 inde- 
 pendent debt from him to the bank can avail himself. . . 
 The right of the bank to apply the balance of account to the 
 satisfaction of such a debt is rather in the nature of a set-off, 
 or of an application of payments, neither of which, in the 
 absence of express agreement or appropriation, will be re- 
 quired by the law to be so made as to benefit the surety."* 
 
 (6) His statement of rule. " The general rule accordingly is, 
 that where moneys drawn out and moneys paid in, or other 
 
 1 People's Bank of Wilkes-Barre v. Legrand, 103 Pa. 309 ; First Nat. 
 Bank v. Zahm, 16 Week. No. Cas. 552 ; Martin ». Mechanics' Bank, 6 Harr. 
 & Johns. 235 ; National Bank u. Smith, 66 N. Y. 271 ; Voss v. German 
 American Bank, 83 111. 599. 
 
 s 127 Mass. 298. 
 
 3 Glazier v. Douglass, 32 Conn. 393 ; Field u. Holland, 6 Cranoh, 8, 28 ; 
 Brewer u. Knapp. 1 Pick. 332 ; Upham v. Lefavour, 11 Met. 174 ; Bank of 
 Bengal v. Radakissen Mitter, 4 Moore, P. C, 140, 162. 
 
§ 417 PAYMENT OF THE DEPOSITOR'S NOTES. 407 
 
 debts and credits, are entered, by the consent of both parties 
 in the general banking account of a depositor, a balance may 
 be considered as struck at the date of each payment or entry 
 on either side of the account, but where by express agree- 
 ment or by a course of dealing between the depositor and the 
 banker, a certain note or bond of the depositor is not included 
 in the general account, any balance due from the banker to 
 the depositor is not to be applied in satisfaction of that note 
 or bond, even for the benefit of a surety thereon, except at 
 the election of the banker."' 
 
 (c) Opinion of New York Court of Appeals. Likewise in 
 E'ew York when a note became due at a bank and was un- 
 paid for lack of funds, and subsequently a sufficient sum to 
 pay it was deposited which, however, the bank applied on 
 another note that became due after the first one, it was held 
 in a suit by the bank against the indorser that he had no 
 reason for complaining -of the action of the bank in applying 
 the mouej'. " The note had matured, and the liability of both 
 [the maker and the indorser] had become fixed and absolute 
 before the deposit was made ; and there was no appropriation 
 of the money to the note in suit by either the debtor or the 
 creditor, and [there were] no circumstances making the infer- 
 ence of such intent necessary. On the contrary, the act of 
 making a general deposit of the money on account without 
 any reference to the note in suit by the debtor or creditor, 
 indicates that the deposit was not designed or received as a 
 payment of the note in suit, and the acquiescence, so far as 
 appears, of the depositor in the subsequent appropriation of 
 the money aflrords evidence that there was no intention of 
 applying to the note in suit."* This opinion of the Supreme 
 
 • The learned judge cites many authorities. In Delaware, however, the 
 contrary doctrine is held, McDowell v. Bank, 1 Harr. 369. 
 
 When a bank sues the indorser on a note he cannot have its stock that 
 he may own deducted from the note, but he can have the money or other 
 funds belonging to him in the bank's possession, Whittiugton v. Farmers' 
 Bank, 5 Harr. & Johns. 489. 
 
 ' National Bank v. Smith, 5 Hun, 183. 
 
408 BANKS AND THEIR DEPOSITORS. §418, 
 
 Court was affirmed by the Court of Appeals with the remark 
 that " the general deposit of money afterwards without regard 
 to the note did not, of itself, operate as a payment. On the 
 contrary, as there was no agreement that the money deposited 
 was to be appropriated for such a purpose, the act itself indi- 
 cates that there was no intention by the depositor or the 
 plaintift' to apply it upon the note."* 
 
 § 418. VaytadA of note principal and surety, (a) Second 
 National Bank v. Hill? When a note payable at a bank is ex- 
 ecuted by one person as principal and by others as sureties, 
 what is the dtity of the bank with respect to applying the 
 -funds of the principal on deposit there in jDayment? The 
 bank may apply the |)rincipars deposit on the note, but, if 
 this be not done, the surety is not discharged. In Indiana, 
 in a well-reasoned ease, the court says that " the question is 
 not what the creditor might or could have done, but was he 
 obliged to do this or discharge the surety? The creditor 
 might sue the principal debtor as soon as the debt matured, 
 and thereby save the surety from future hazard, but he is not 
 obliged to sue. He may delay the collection of his debt even 
 until the principal del>tor fails, without discharging the surety. 
 To hold that the bank was obliged to applj' the deposits [of 
 the principal] to the payment of the note would be to compel 
 him to collect his debt, though none of the parties bound to 
 pay it had requested him to so." 
 
 (6) Nature of principal's deposit. It may be further re- 
 marked that a deposit by the principal debtor in such a case 
 is not a trust fund held by the bank for the benefit of the 
 sureties. The deposit is not a collateral security for the debt 
 due from the principal and sureties to the bank.^ 
 
 1 66 N. Y. 271. 
 
 2 76 lud. 323, p. 227, citing Voss v. German American Bank, 83 111. 599 ; 
 McDowell V. Bank, 1 Harr. 369 ; Law v. East India Co., 4 Ves., Jr., 824 ; Mar- 
 tin V. Mechanics' Bank, 6 Harr. & Johns. 235 ; Glazier v. Douglass, 32 Conn. 
 393 ; Pease v. Hirst, 5 Man. & R. 88. 
 
 3 Second Nat. Bank v. Hill, 76 Ind. 223, citing Philbrooks v. McEwen, 29 
 Id. 347 ; Hampton v. Levy, 1 McCord Ch. 107 ; Lang «,. Brevard, 3 Strob. 
 Eq. 559. 
 
§ 418 PAYMENT OF THE DEPOSITOR'S NOTES. 409 
 
 (e) Weiriek v. Mahoning County Bank.^ A note was made 
 by W. as principal, and K. as surety for the benefit of A. 
 who received the monej' from an Ohio bank of discount. 
 A. directed W. to sell a flock of sheep for him in Penn- 
 sylvania, which he did, depositing the monej' in a Philadel- 
 phia bank, to the credit of the other, which was a correspon- 
 dent. The Philadelphia bank notified the other bank of the 
 deposit, and also notified W. He delivered the letter to A. 
 with his indorsement, " pay the within to A." A. presented, 
 the letter to the Ohio bank and desired to be credited with 
 the amount, which was done, and afterward he drew the 
 money. Having failed, the Ohio bank sued the principal and 
 surety on the note, who defended on the ground that the 
 money deposited in the Philadelphia bank, as above described, 
 ought to have been applied on the note. But the court held 
 that W. gave A. full control of it, and therefore he had a right 
 to deposit and draw it as he pleased. 
 
 {d) In the case of the First National Bank v. Zahm's Execu- 
 tors^ a promissory note was indorsed by A. the day it became 
 due in the following manner : " I hereby guarantee the pay- 
 ment of the within note without protest." About two weeks 
 afterward, B., one of the indorsers of the note, at the cashier's 
 request, gave the bank which had discounted it the following 
 guaranty : " I hereby guai-antee the payment of all notes 
 drawn by C. and D. [the makers of the note in question] and 
 indorsed by me, now held by the First N^at. Bank of L., 
 either matured or to mature." The note was neither paid 
 nor protested at maturity, and the makers having become 
 insolvent, the bank sued A.'s executors on his guaranty. The 
 bank showed that in consideration of the guaranty the note 
 was not protested and that B. neither waived protest nor did 
 any other act except to execute his guaranty to continue his 
 liability. The bank therefore recovered. Moreover, the 
 mere knowledge by B. at the maturity of the note that it had 
 not been paid was not, in the absence of a protest, sufficient 
 
 1 16 Ohio St. 296. 2 16 Week. No. Cas. 552. 
 
410 BANKS AND THEIR DEPOSITORS. § 419 
 
 notice to continue his liability as indorser, which would be 
 prior to A.'s liability as guarantor. The subsequent guaranty 
 given by B. simply created a liability against him as guar- 
 antor which the bank might enforce after failing to collect 
 from the makers and from A., the prior guarantor.' 
 
 § 419. Application of rules of demand and notice, {a) Pre- 
 sentation at hank not necessary to fix liability of maker. Promis- 
 sory notes payable at a bank are governed by the rules that 
 apply to other notes of the same nature, and payment must be 
 demanded and notice given to indorsers, of a refusal to pay.^ 
 Hence, they are entitled to days of grace,' and if payment be 
 demanded before the last day they are not holden.* But in- 
 dorsers may waive the notice of non-payment by agreement." 
 
 (b) With respect to a note made payable at a bank, presentar 
 tiou there for payment is not necessary to fix the liability of 
 the maker ; but if he is there and ready to pay it at maturity, 
 or has funds there for that purpose, and suffers loss by the 
 failure of the holder to present it, this can be claimed of the 
 holder." 
 
 (c) Effect of making and dating a note at a particular place. 
 " The making and dating of a note at a particular place is 
 not equivalent to making it payable there; nor does it 
 supersede the necessity for presentment and demand at the 
 residence or place of business of the maker in order to charge 
 the indorsers. . . Where no residence or place of business 
 can be found, an inquiry at the place of the date of the note 
 might perhaps be regarded as essential in the exercise of due 
 diligence. . . A person who takes a promissory note, by 
 
 ' First trial, 103 Pa. 576 ; see First Nat. Bank v. Hartman, 16 Week. No. 
 Cas. 555. 
 
 2 Mims V. Central Bank, 2 Ala. 294 ; MoDougald v. Rutherford, 30 Id. 
 253. 
 
 5 Taryer v. Boykin, 6 Ala. 353 ; Crenshaw v. M'Kiernan, Minor, Id. 295. 
 
 * Jones V. Fales, 4 Mass. 245. ^ Rooker v. Morris, 61 Ind. 286. 
 
 ° Sims V. National Com. Bank, 73 Ala. 248. If a bank be designated as the 
 place at which a pnrchase-monej note is to he paid, the maker is not hound 
 to pay it until the note is received at the bank, Robinson v. Cheney, 17 Neb. 
 673 ; Ballard v. Cheney, 19 Id. 58. 
 
§ 419 PAYMENT OF THE DEPOSITOR'S NOTES. 411 
 
 indorsement, if he proposes to hold the indorser, takes it 
 with the knowledge that at its maturity a proper demand 
 must be made upon the maker for payment, and he is under 
 obligations, at the time he receives it, or in due time after- 
 wards, to know, or at least to inquire, where the maker lives ; 
 if he does not, and refrains from all inquiry, he should sufi'er 
 the consequences of not being able to make a regular demand. 
 In view of the peculiarities of the contract of indorsement, 
 and the rights and responsibilities resulting therefrom, the 
 holder of a promissory note should certainly be held to the 
 exercise of such diligence, in this respect, as ordinary fore- 
 sight and prudence would suggest ; and, in the absence of- 
 any efibrt, he should, we think, be held to be affected with 
 knowledge of that which by reasonable diligence he could 
 readily have ascertained."' 
 
 1 Clark, J., Oxnard v, Varuum, 111 Pa. 193, pp. 199, 20i. 
 
412 BANKS AND THEIR DEPOSITORS. § 420 
 
 CHAPTER XX. 
 
 PAYMENT THROUGH THE CLEARING HOUSE. 
 
 By far the greater portion of checks are deposited in other 
 banks, and are finally settled at the clearing house. The 
 mode of settling or clearing checks through this means may 
 be thus briefly described : " At a fixed hour, each day, rep- 
 resentatives of the banks meet at a specified place called a 
 clearing house, and exchange the checks or other papers 
 which they hold against one another. The paper which the 
 banks take to the clearing house is called the exchange, and 
 the total amount of paper exchanged is called the clearings, or 
 exchanges. Those banks which bring to the clearing house 
 a less amount in checks or other paper than they take away, 
 — called debtor banks — pay at a later hour on the same day 
 to the banks which bring more than they take away — called 
 creditor banks — a balance, either directly or through the 
 clearing house, in cash or its equivalent. The payment of 
 the balances by the debtor banks, and the receipts of these 
 balances by the creditor banks, complete each day's settle- 
 ment. As the, aggregate amount brought is always the same 
 as the amount taken away, so the balances due from the 
 debtor banks must be exactly equal to the amount due to the 
 creditor banks."' 
 
 § 420. Force of clearing house regulations, (a) A New 
 Orleans clearing house case. These institutions have made 
 rules for the management of their business, and some legal ques- 
 tions have arisen concerning them.* The first question to be 
 
 ' Practical Banking, 222. 
 
 ' A clearing house due bill is not a mere certificate of deposit creating a 
 contract of bailment, but is negotiable, like a check payable to bearer, and 
 is unfettered by any special condition or stipulation. It is also " simple" 
 in terms, " certain" in amount, " unconditional" in manner of payment, and 
 
§ 420 PAYMENT THROUGH THE CLEAKING HOUSE. 413 
 
 answered is what is the force of clearing h ouse regulations. The 
 following case has been decided in Louisiana. By the rules of 
 the l^ew Orleans bank clearing house, the hour for making 
 exchanges is nine o'clock. All errors in exchanges and 
 claims arising from the return of checks from any cause 
 must be adjusted before eleven o'clock. Half an hour later 
 the creditor banks receive the clearing house manager's 
 checks on the debtor banks in settlement of the respective 
 balances due them. Should any bank not be able to pay the 
 balance against it, resulting from the exchanges of that day, 
 it must inform the manager and also the other banks of such 
 inability by ten o'clock of the same day, and must hold in 
 trust until demanded all checks received by it from the banks 
 at the morning exchange of that day. As soon as the mana- 
 ger is informed of the inability of any bank to pay its checks 
 drawn, or to be drawn against it for the balance due, he must 
 strike from the list of exchanges both debit and credit of the 
 defaulting member and readjust the balance as though that 
 member had not appeared for exchange on that day. In this 
 case the Mechanics & Traders' Bank was a defaulter, but it did 
 not inform the manager, nor the other banks of its inability 
 to pay, as the rule required, hoping to meet its indebtedness. 
 In consequence of not receiving this notice, the defendant 
 bank placed the checks on the other, which it had received 
 the day before, to the credit of each depositor. Immediately 
 after the default occurred, the cashier of the Mechanics' Bank 
 and one of the commissioners who was put in charge of the 
 institution, demanded of the defendant bank the checks of 
 the Mechanics' in its possession that had been received the 
 day before, amounting to $4967.57. The defendant bank 
 offered to pay only the difi'erence between this amount and 
 the amount of checks held against it by the other, namely, 
 
 subject to no " contingency." If a bill be given and stolen on the same day, 
 and notice is given to the bank, and through it to the other banks the issuing 
 bank is entitled to require from the owner of the bill a bond of indemnity 
 before paying the same, Phila. Com. Pleas, Dutton v. Merchants' Nat. Bank, 
 16 Phila. 94. 
 
414 BANKS AND THEIR DEPOSITORS. § 421 
 
 $1266.71. A suit was then brought to recover the amount, 
 but failed, the court saying that " not only was the defendant 
 authorized by this silence of the Mechanics' Bank to treat 
 the checks it held against that bank as paid, but there was 
 express and positive action to that effect. The Mechanics' 
 at nine o'clock at the clearing house tendered and produced 
 the checks it held on the defendant against the counter 
 checks held by the defendant on it, thereby declaring in effect 
 to the defendant that the checks it held were treated as paid 
 by the like amount of checks upon it, and this regardless 
 and independent of the rules of the clearing house. The de- 
 fendant acted on that, as it had a right to. These mutual 
 credits could not be recalled afterwards by either one of the 
 parties to the detriment of the other." 
 
 (6) With respect to the clearing house rule above mentioned, 
 this, the court remarked, was " for the guidance of the 
 manager of the clearing house, and cannot effect, much less 
 control, the legal consequences of a virtual payment made by 
 one bank to another, or settlement each with the other in the 
 ordinary business manner. Besides, the Mechanics' Bank 
 forfeited or waived its right to the benefit accruing from that 
 rule by not complying with an essential requirement of it, 
 viz : giving notice by 10 A. M. to the other banks and thus 
 bringing to the knowledge of the defendant its disabled con- 
 dition. Had that been done, the defendant would not have 
 passed the several checks to the credit of its depositors. The 
 defendant could not revoke those credits to the prejudice of 
 its depositors. No more can the Mechanics' Bank, or those 
 who claim to represent it, revoke its settlement to the preju- 
 dice of the defendant."' 
 
 § 421. Regulations do not affect depositors. Whatever be 
 the force of the rules of a clearing house association, they 
 do not affect depositors. Says Judge Devens: "To the 
 regulations of this association, the customers of the banks are 
 not parties, and, whatever effect is to be given to them as 
 
 > Blafier i>. Bank, 35 La. Ann. 251. 
 
§ 423 PAYMENT THROUGH THE CLEARING HOUSE. 415 
 
 between the banks, their customers are not in a situation to 
 claim tlie benefit of them, nor are they liable to be injuriously 
 affected by them."' " Such an association," said Whelpley, 
 C. J., in Overman v. Hoboken City Bank,^ " can have no power 
 to make usages or rules to bind those who are not parties to 
 its organization. Its rules and usages, if not in conflict 
 with law, may by the implication of tacit adoption in the 
 contracts of members, bind them in the same way that a 
 general usage in trade may bind those who deal with refer- 
 ence to it, and are therefore held implicitly to adopt it.' But 
 those who are not bound by such usages, and have not con- 
 tracted with reference to them have no right to avail them- 
 selves of them to create an obligation against those who are 
 parties to their adoption, and bound by them inter sese only." 
 
 § 422. Effect of clearing house usages. "We may next in- 
 quire how far banks are affected by usage concerning clearing 
 house business. In an important Baltimore case relating to 
 a forged check the drawee bank having made the deposit 
 good for the amount, it sought to recover the same from the 
 bank whence it came on the ground that " a general and well- 
 established usage of the banks in Baltimore to the eflfect that 
 where one bank sends to the clearing house a check on another 
 bank, payable to order and purporting to be indorsed by the 
 payee, the bank sending it guarantees the indorsement of the 
 check to be the genuine indorsement of such payee." The 
 court did not say whether any such usage existed or not, but 
 decided the case against the bank that brought the suit on 
 another ground, its own negligence. For the same reason 
 no answer was given to the question of an alleged usage 
 among the banks " not to receive deposits from strangers 
 without identification."* 
 
 § 423. Recovery of money paid on checks by mistake. Oc- 
 casionally banks pay checks by mistake, as we have seen, and 
 
 ' Merchants' Nat. Bank v. National Bank, 139 Mass. p. 518 ; Manufac- 
 turers' Nat. Bank v. Thompson, 129 Id. p. 439. 
 
 » 30 N. J. Law, p. 63. » Robeson v. Burnett, 2 Taunt. 388. 
 
 * Commercial & Farmers' Nat. Bank r. First Nat. Bank, 30 Md. 11, p. 24. 
 
416 BANKS AND THEIR DEPOSITORS. § 423 
 
 if this happen when payment is made through the clearing 
 house, how is their right of recovery affected by the rules 
 that regulate the mode of transacting business by that insti- 
 tution ? Several cases have been reported which will be de- 
 scribed. 
 
 (a) Merchants' National Bank v. National Bank} A de- 
 mand was made by a bank on B. for payment of demand 
 notes which were then deemed to be amply secured by a 
 pledge of goods as collateral security. Two days after this, 
 B., who was a director in the bank, told the president that 
 he had sold, or had agreed to sell, a portion of the goods, 
 and the warehouse receipts were delivered to him, as agent 
 of the bank, to enable him to transfer the goods sold with 
 the understanding that the money received should be applied 
 on the debt for which they were held as collateral security. 
 About a week afterward B. wrongfully deposited the money 
 received from the sale to his own account in the bank, and 
 three days later he drew a check thereon which was paid by 
 that bank to another bank through the clearing house, of 
 which both banks were members. The president of the 
 drawee bank suspecting that B. was financially embarrassed, 
 discovered that he had made no payment on account of the 
 goods entrusted to him for sale, and, looking at the condition 
 of B.'s account, directed the return of the check to the other 
 bank, although it was after one o'clock in the day of receiv- 
 ing it. By the rules of the clearing house, checks not good 
 which were sent through it for payment must be returned to 
 the sender as soon as this should be found out, " and in no 
 case shall they be retained after one o'clock." Nevertheless, 
 it was decided that the check was paid under such a mistake 
 of fact that the paying bank could recover of the other if 
 the latter had not changed its position between one o'clock 
 and the time when the check was returned. 
 
 (6) Preston v. Canadian Bank? Although the clearing 
 house regulation did not bar a recovery in that case, a more 
 
 1 139 Mass. 513. ' 23 Fed. Rep. 179. 
 
§ 423 PAYMENT THROUGH THE CLEARING HOUSE. 417 
 
 defensive nature has been given to it in federal practice. 
 Thus C. deposited collateral securities with P. K. & Co., who 
 were bankers and members of the Chicago clearing house, 
 they agreeing that he might draw checks within ten per cent, 
 of the value of the securities. On the 5th of August C. drew 
 his check for $4000, which was deposited with the defendant 
 bank (a member also of the clearing house), to his credit, 
 and which went into the exchanges for collection through the 
 clearing house on the morning of the next day. By its rules 
 each member was required to pay its balances to the clearing 
 house by twelve o'clock, and any check which was found not 
 to be good when sent from the clearing house to the drawee 
 bank was to be returned to the bank which collected it 
 through the clearing house by half-past one o'clock of the 
 same day. When C.'s check came from the clearing house 
 into P. K. & Co.'s bank, his account was examined and the 
 collaterals were deemed sufficient to pay that check and others 
 that had been drawn and they were handed to the book-keeper 
 to be charged to his account. At forty-two minutes past 
 one, P. K. & Co. having heard that C. had failed, they made 
 a second examination of his account and found that a mistake 
 had been made ; the check was immediately sent to the de- 
 fendant bank and payment was demanded at fifteen minutes 
 before two o'clock which was refused. They then began a 
 suit agaiilst the bank to recover which was founded on pay- 
 ment by mistake, but failed to recover.' 
 
 (c) Amount that may be recovered. "With respect to the 
 amount that may be recovered where a check has been paid 
 through the clearing house by a mistake of fact caused by 
 
 1 A., the holder of a bank check drawn by B. on C, presented it on the 
 day of its date at the clearing house and after adjusting the accounts between 
 the various banks (his own among the number) received in settlement the 
 clearing house manager's warrant on C. The next day A. having presented 
 the warrant to C. who refused payment the original check was obtained from 
 the clearing house, presented to C. , dishonored, protested, and notice thereof 
 given to B. He was holden for the amount, Merchants' Nat. Bank y. Procter, 
 1 Cin. Sup. Ct. R. 1. 
 27 
 
418 BANKS AND THEIK DEPOSITORS. § 424 
 
 the drawer's fraud, it is the difference between the amount 
 of the check and the amount which the maker was entitled 
 to draw ; and if there be not enough money on deposit to 
 pay the check in full, the ordinary custom to return the 
 cheek does not aftect the question of recovery.' 
 
 § 424. Payment of notes tliroagh clearing house, (a) 
 National Exchange Bank v. National Bank.* Sometimes notes 
 have been paid through the clearing house, and the applica- 
 bility of its regulations to thera has received judicial con- 
 struction. By the rules of the Boston bank clearing house a 
 time before noon was fixed for making exchanges there; and 
 another time between twelve and one for paying balances. 
 The practice was to make exchanges and payments by the 
 tickets accompanying the vouchers presented for exchange, 
 and not from an examination of the vouchers themselves in 
 detail. The rules also provided that errors in the exchanges 
 should be adjusted between the banks ; and that, whenever 
 checks which were not good should be sent through the 
 clearing house, the banks receiving them should return them 
 to the sender as soon as it should be found that they were 
 not good, " and in no case shall they be retained after one 
 o'clock." In the absence of evidence of a uniform custom 
 among the banks which were members of the clearing house 
 to treat notes the same as checks, it was decided that the 
 sending of a note through the clearing house to a bank 
 where it was payable was not a formal demand for immediate 
 payment during business hours, but was equivalent to leaving 
 the note there for collection from the maker on or before the 
 close of banking hours ; and that the payment of it at the 
 clearing house was provisional only, which became complete 
 when the note was paid in the usual and ordinary course of 
 business, and, if not so paid, the payment at the clearing 
 house was to be treated as a payment made under mistake 
 of fact, to the same extent and subject to the same right of 
 
 » Merchants' Nat. Bank u. National Bank, 139 Mass. 513. 
 2 132 Mass. 147. 
 
§ 425 PAYMENT THRODGH THE CLEARING HOUSE. 419 
 
 reclamation, although the note was retained after one o'clock, 
 as if it had been without the intervention of the clearing 
 house. Even if the bank at which the note was payable had 
 fund's of the maker of the note on deposit, the retention of 
 the note until after one o'clock did not amount to payment, 
 in the absence of evidence that the maker had authorized the 
 bank to pay his notes out of his money on deposit. 
 
 (6) Manufacturers' National Bank v. Thompson.''- In an- 
 other case against the indorser of a promissory note payable 
 at the plaintiff bank and discounted by another banking in- 
 stitution, it appeared that when the note became due the 
 bank which had discounted it charged it to the other and 
 sent it through the clearing house for collection. The plain- 
 tiff's teller, supposing that the maker had sufficient funds, 
 stamped the word " paid" on the face of the note, but the 
 mistake was soon discovered, and before the close of banking 
 hours on the same day the other bank and indorser were 
 notified of its non-payment, and the note was duly protested. 
 The dispute between the banks concerning the effect of the 
 clearing house rules was ended by the one paying the amount 
 to the other without waiving its legal rights, while the bank 
 that was paid disclaimed all title or interest in the note. 
 The judge who tried the case found that the note was stamped 
 as paid by mistake, that the money paid by the plaintiff to 
 the other bank was not intended to pay, and did not pay the 
 note; and that the plaintiff had sufficient title and ownership 
 to bring the action. This decision was sustained by the 
 higher court, that body also holding, that the defendant 
 could not avail himself of the rules of the clearing house, to 
 which he was not a party, as a defence. 
 
 § 425. Liability of clearing house. When is the clearing 
 house itself liable for non-performance of its duties? The 
 defendant bank had a department for the general clearing of 
 contracts between its customers who were engaged in the 
 purchase and sale of gold. This was known as the clearing 
 
 1 129 Mass. 438. 
 
420 BANKS AND THEIR DEPOSITORS. § 426 
 
 house. Clearances were made each day by means of state- 
 ments furnished by the dealers to the defendant of purchases 
 and sales made by them, the defendant acting simply as a 
 mutual agent for the parties. On an occasion when many 
 members of the clearing house had failed to perform their 
 contracts and when there was great confusion in regard to 
 them, 0. & Co., the plaintiff's assignor, presented two state- 
 ments, one in the morning, and one in the afternoon. In the 
 first was an item of a transaction between 0. & Co., and a 
 .firm which had failed on the morning of that day. It was 
 not usual to present more than one statement during the 
 same day. When 0. & Co. called on the defendant lor the 
 balance that appeared to be due by the statements, they were 
 advised by its president that owing to the confusion in busi- 
 ness he could not tell how the statements stood, and that he 
 would only pay approximate balances, reserving a niftrgin to 
 secure the clearing bank against failures. The defendant 
 accordingly paid $30,000 on the second statement, leaving 
 $10,000 unpaid thereon, and paid nothing on the first. In 
 an action to recover the balances appearing by the statements, 
 the court held that the plaintiff must first show a clearance 
 or settlement by the defendant of the statements and that a 
 balance had been struck in favor of 0. & Co. ; that the state- 
 ments were to be considered as only one statement, but that 
 if considered separately there were no clearances of either 
 which bound the defendant, and consequently that the plain- 
 tiff' could not recover.* 
 
 § 426. Legal relations of banks when the checks of a non- 
 member are cleared by a member. A bank, instead of becom- 
 ing a member of a clearing house, sometimes has its checks 
 regularly cleared by another bank that is a member. In the 
 following case the M. & M. Bank was a member of the New 
 York bank clearing house and also an agent there for the 
 plaintiff. It received from the latter on different days several 
 forged checks taken on deposit from a forger. The M. & M. 
 
 _ > National City Bank v. New York Gold Ex. Bank, 101 N. Y. 595. 
 
§ 426 PAYMENT THROUGH THE CLEARING HOUSE. 421 
 
 Bank credited the checks to the plaintiff and sent them 
 to the clearing house, where it in turn was credited, and the 
 defendant, the drawee, another member of the clearing house, 
 was charged with them. The defendant without noticing the 
 private mark understood between them, charged the checks 
 as received from the clearing house to the supposed drawers. 
 On receiving the last check, several days after the receipt of 
 the others, the defendant discovered the forgery, and on the 
 same day tendered the checks and demanded payment of 
 them from the M. & M. Bank, which referred the matter to 
 the plaintiff. The plaintiff had meanwhile paid the forger's 
 drafts to the amount of the checks deposited, and refused to 
 pay. The M. & M. Bank then gave the defendant its own 
 check for the last of the forged checks, and the defendant 
 sent the remaining forged checks with the M. & M. Bank's 
 check through the clearing house to the M. & M. Bank. The 
 latter complying with the clearing house rules, paid them all, 
 and charged the amounts to the plaintiff's account, and sent 
 it the four forged checks. The plaintiff retained the checks 
 and tendered them the next day to the defendant and de- 
 manded payment but was refused. Twenty days afterward 
 the plaintiff sent them by its agent, the M. & M. Bank, 
 through the clearing house to the defendant, which paid^ 
 them and immediately returned them through the clearing 
 house to the M. & M. Bank, with notice that if they were 
 sent back through the clearing house it would discontinue 
 its exchanges with the M. & M. Bank. The latter bank re- 
 turned the checks and charged them to the plaintiff. The 
 plaintiff, as assignee of the M. & M. Bank, sued for the amount 
 of the checks. It was held, first, that the M. & M. Bank had 
 waived its right, if any, to insist on the acts of the defendant 
 as payment of a forged check by the drawee, and had affirmed 
 the acts of the defendant in obtaining repayment; second, 
 that the waiver was not void for coercion, for having received 
 the checks and passed them to the plaintiff's credit in its 
 ordinary account, the M. & M. Bank had become actual 
 owner of the checks and was rightly treated as principal ; third, 
 
422 BANKS AND THEIR DEPOSITORS. § 426 
 
 that if not rightly so treated it could not, as agent of the 
 plaintift', refund to the defendant without actual authority ; 
 fourth, that the plaintiff having given authority to the M. & 
 M. Bank to act for it under the clearing house rules, which 
 required it to act as principal, the plaintiff was bound as to 
 third parties by the acts of the M. & M. Bank.* 
 
 1 Stuyveaant Bank v. National Mechanics' Bank. Association, 7 Lans. 197. 
 
 " Country bankers who use the country clearing house have correspondents 
 in London whose name is printed on their checks. A check drawn on a 
 country bank and paid to a seoopd country bank situate at a distance from 
 tlie first, is sent to the London correspondent of the second bank, who pre- 
 sents it at the country clearing house, to the London correspondent of the 
 first bank. The London correspondent does not mark the check at once, or 
 give credit for it, but transmits it by the next post to his country banker, 
 who should advise the London correspondent by return of post to debit his 
 account with the same, when the London correspondent gives a draft for the 
 amount to the banker from whom he received the check," Walker's Treatise 
 on Banking Law, p. 131 ; Hare v. Henty, 30 L. J., C. P., 302; Bailey ». Bo- 
 denham, 33 Id. 252 ; see also Prideaux v. Criddle, L. E., 4 Q. B., 455 ; Pol- 
 lard <.-. The Bank of England, L. R., 6 Q. B., 623. 
 
 "A large portion of the checks which are paid into banks in London by 
 customers in order that the amounts may be carried to their accounts as 
 money, is never presented by such bankers as bearers, at the banking houses 
 on which they are drawn ; but that, instead, is established the practice of 
 placing them in the drawers at the clearing house belonging to the latter 
 banks. In other words, they are presented to the clerks of the latter, who 
 attend at the clearing house, and such presentment has been held to be suffi- 
 cient," Grant's Law of Bankers (4th ed.), p. 54 ; Reynolds i-. Chettle, 2 
 Camp. 596. " If a check be received by the banker too late for presentment 
 at the clearing house, it is the custom to send it direct to the hank upon 
 which it is drawn, and if it is to be dishonored it is initialed or marked, pri- 
 ority in payment being given to it on the following day. The only eflect of 
 this marking is that it may perhaps be considered as a binding representation 
 between bankers that the instrument will be paid," 1 Hutchinson's Practice 
 of Banking, p. 382 ; Boddingtou v, Schlencker, 4 Barn. & Ad. 752 ; Robson v. 
 Bennett, 2 Taunt. 389. 
 
§ 427 PUBLIC DEPOSITS. 423 
 
 CHAPTER XXI. 
 
 PUBLIC DEPOSITS. 
 
 § 427. Effect of adding official title. When a public officer 
 deposits money on an account which is kept in his own name 
 with his official title, as " Samuel Swartwout, Collector," this 
 is a private deposit unless there be evidence to the contrary.' 
 In a well considered Missouri case^ founded on a dividend 
 draft drawn by the United States Comptroller and payable to 
 the order of " Herman Eechtien, County School Treasurer," 
 Lewis, P. J., said : " The fact that a man is county treasurer 
 furnishes no presumption that money deposited by him in a 
 bank is the property of the county. The bank in receiving 
 the deposit becomes debtor to him as an individual. This 
 relation between the parties is not changed by the addition 
 of ' county treasurer' to his name in the bank account books 
 or in the checks drawn by him. It has been frequently held 
 that such additions impart no notice, that the fund is held in 
 a fiduciary capacity and that they have no legal significance 
 beyond a description of the person. Thus 'Herman Rechtien, 
 County Treasurer,' may be a form intended only to show 
 that the person is not some other having the same name who 
 is not county treasurer. Every legal presumption, as between 
 the parties, is in favor of the personal ownership of the fund 
 by the depositor; and, if nothing more appears, the bank 
 must be guided in all its transactions by these presumptions."' 
 
 ' Swartwout v. Mechanics' Bank, 5 Denio, 555. 
 
 ' Eyerman u. Second Nat. Bank, 13 Mo. App. 289. 
 
 ' " The principle is the same that was recognized in Powell v. Morrison, 35 
 Mo. 244, though with a different application. There a promissory note given 
 In the purchase of lands sold in partition was made payahle to ' the order 
 of James Costello, sheriff of St. Louis County.' The payee sold the note 
 before maturity and one of the partitioners sued the transferree for his share 
 of the partition proceeds contained in the note. It was held that the words 
 
424 BANKS AND THEIR DEPOSITOKS.' § 428 
 
 In this ease the court decided that " while the descripdo personce 
 was insufficient of itself to impart notice to the bank that 
 the dividend draft in controversy (which Rechtien having 
 transferred to the Second National Bank it had collected and 
 appropriated) represented a deposit of money belonging to 
 the city and county, yet when considered in connection with 
 the facts that Rechtien had had frequent consultations with 
 the directors touching his financial rela-tions to the city and 
 county, particularly wjth reference to deposits made by him 
 officially in another bank, a part of which was represented 
 by the draft in question, a proper showing at least was made 
 for the jury to determine whether the bank had taken the 
 draft as Rechtien's or not." Moreover, the conclusion thus 
 reached was sustained by the Supreme Court for the reasons 
 contained in the opinion from which we have quoted.* 
 
 § 428. Personally liable if deposit be on private account. 
 If an official deposit public money on his private account he 
 is liable for the amount should the depository fail. Thus a 
 justice of the peace who received money in satisfaction of a 
 judgment deposited the same in a bank to his private ac- 
 count. The bank having failed, the justice was declared to 
 be liable to the judgment creditor for the amount.^ 
 
 •■sheriff of St. Louis County' imparted no notice to the indorsee of the trust 
 attached, hut were merely descriptive of the payee, and the plaintiff could 
 not recover. A like conclusion was reached in Thornton v. Rankin, 19 Mo. 
 193, where, upon a sale of real estate belonging to certain minors, a note was 
 made payable to their guardian, by the description ' Isaac J. Cooper, guardian, 
 etc.,' and by him transferred to an Indorsee without other notice of the facts. 
 So, in Fletcher v. Schaumburg, 41 Mo. 501, it was held that a distributee in 
 partition could not set up her distributive interest against her note given at 
 the sale and indorsed by the sheriff, with his official addition to an innocent 
 purchaser. It must be observed that iu each of these cases the decision was 
 founded squarely on the propositions tliat the descriptio persona: imparted no 
 notice of the existing trust, and that the indorsees had in fact no notice 
 thereof from any other source. They were entitled therefore to be treated as 
 if no such trust existed." Lewis, P. J., supra. 
 
 1 84 Mo. 408. ■ 
 
 2 Shaw V. Bauman, 34 Ohio St. 25 ; Ringo v. Field, 1 Bug. (Ark.) 43. 
 
§ 431 ' PUBLIC DEPOSITS. 425 
 
 § 429. Deposit is general unless specially deposited. When 
 money is deposited by the clerk of a court under its order 
 which is entered like other general deposits and mingled with 
 the funds of the bank, it is a general deposit, and if the in- 
 stitution fail, the clerk must share pro rata with other gene- 
 ral depositors.' 
 
 § 430. Belongs to successor in office. When money is de- 
 posited by a board of persons in their official relation who 
 are superseded in office by other persons, the deposit is subject 
 to the order of the new board.^ By way of further illustration 
 when one city comptroller of New York succeeds another 
 the latter has the right to designate the banks in which the 
 money should be deposited.^ 
 
 (a) Duty of bank vihen demanded by opposing claimants. 
 And when both boards claim the deposit the bank ma^' 
 bring a bill of interpleader to have the court determine who 
 should be paid. Said Judge Van Vorst in applying this 
 principle : " It is true that a bank or other agent would not 
 be justified in commencing an action of interpleader upon 
 any and every claim made by others to moneys deposited 
 with it by a dealer. . . It may be conceded that actions of this 
 character are not to be encouraged and should be dismissed 
 if there exist any means of adjusting the claims with safety 
 to the holder of the funds.* To sustain such action it 
 must appear that the plaintiflF has good reason to believe 
 that the adverse claim is well founded, and that unless the 
 court protects him he will be exposed to loss."" 
 
 § 431. Should not pay to bankrupt official. A bank should 
 not pay money belonging to a county and kept in the name 
 
 1 Otis V. Gross, 96 111. 612. 
 
 2 Carman v. Franklin Bank, 61 Md. 467. 
 
 ' Lewis V. Park Bank, 42 N. Y. 463 ; Aff. 2 Daly, 85. 
 
 * Bedell v. Hoffman, 2 Paige, 199. 
 
 5 German Exchange Bank ». Commissioners, 6 Abb. N. C. 394, p. 397 ; see 
 Marvin u. EUwood, 11 Paige, 365 ; Balchen v. Crawford, 1 Sand. Ch. 380 ; 
 Bell V. Hunt, 3 Barb. Cli. 391 ; Bleeker v. Graham, 2 Edw. Ch. 647 ; Badeau 
 V. Tylee, 1 Sand. Ch. 270. 
 
426 BANKS AND THEIR DEPOSITORS.* § 433 
 
 of the county treasurer in his official capacity to his assignee 
 in the event of his becoming bankrupt.* 
 
 § 482. When bank has knowledge of wrongM conduct of 
 public depositor, Sometimes the law will regard depositories 
 as having knowledge of the wrongful acts of public officials 
 in drawing public money for private purposes, when in truth 
 they have not such knowledge. Thus, the treasurer of a 
 town made several notes in his official capacity without 
 authority to do so, which were discounted by a bank and the 
 avails were placed to his credit as treasurer. Public funds 
 were deposited by him from time to time in the same account, 
 and the notes above mentioned, after several renewals, were 
 paid by his checks drawn as treasurer. He afterward became 
 a defaulter. The money thus drawn by him would have 
 made good his defalcation. The bank supposed that he had 
 authority^ to make the notes discounted, and that the pro- 
 ceeds were used for the benefit of the town, but in truth a 
 large amount of the money drawn out on his checks as treas- 
 urer was used for private purposes. His integrity at that time 
 was unquestioned. Yet the court held that the bank must be 
 considered as having knowledge that he had no authority to 
 make the notes mentioned, that they must therefore be treated 
 as his private notes and the loans as personal, and further, 
 that when he drew out the town money to pay the notes, he 
 did what the bank must have known he had no right to do, 
 and that it could not consequently retain the money against 
 the town's demand.* In another case the trustee of a town 
 "sold its bonds and deposited the money in a bank to the 
 credit of himself, "J. C. "Wilson, Trustee." The money was 
 applied on a debt of Wilson due to the bank. The court held 
 that it had no right to apply the money in this manner.^ 
 
 § 433. Authority to pay public money. Twenty-five persons 
 raised money for the purpose of expending it in furnishing a 
 
 ' Board of Supervisors v. Bank of Havana, 5 Hun, 649. 
 
 ^ Town of East Hartford i'. American Nat. Bank, 49 Conn. 539. 
 
 3 Bundy v. Town" of Montioello, 84 Ind. 119, See § 40 o. 
 
§ 434 P0BLIC DEPOSITS." 427 
 
 hall in a certain building. They chose a committee and also 
 a treasurer, and through him in his official capacity deposited 
 the money in a bank. The committee having furnished a hall 
 in another building, the treasurer refused to pay the deposit 
 when demanded by that body. A majority of the twenty- 
 five approved the action of the committee, and appointed 
 another treasurer to whom the bank paid the money. The 
 treasurer first appointed then sued to recover the money on 
 the ground that it had been diverted from its rightful pur- 
 pose. But the court said that " the disposition of the fund 
 was given to the executive committee, and the appropriation 
 of the fund by that committee, acting with unanimity, as 
 fairly appears, was sufficient authority to warrant payment by 
 the bank, and the payment was a discharge."' 
 
 § 434. Liability of public officer for money. In South 
 Carolina an interesting case has been decided on this subject. 
 A commissioner in 1863 and 1864 deposited his official 
 moneys in a branch bank of the State, where they remained 
 until the failure of the bank at the close of the war. He was 
 declared to be not liable for any of the money thus lost. On 
 retiring from office in 1866, he reported an aggregate balance 
 due from estates larger than the amount to his credit on his 
 bank-book, nor did he account for the excess. After his 
 death, in 1874, an action was brought against his ad- 
 ministrator, and all his creditors were required to establish 
 their claims, the amount of which proved to be less than the 
 amount to his credit in the bank. The court assumed that 
 unpresented claims were satisfied, and that there was no 
 unpaid balance against the commissioner, except what was 
 covered by the deposit in the bank. Finally, the court de- 
 cided that when he turned over his office, bank-book, etc., to 
 his successor, claiming to withhold nothing, the Statute of 
 Limitations then began to run in his favor against persons 
 having funds in his hands, as the provision of the law which 
 imposed on him the duty of making a complete transfer was 
 
 » Tay V. Concord Savings Bank, 60 N. H. 277. 
 
428 BANKS AND THEIR DEPOSITORS. § 434 
 
 equi valent to a demand. On this point the court remarked that 
 "The law is too well settled to make any reference to author- 
 ity necessary, that when a trustee does an act which purports 
 to be a termination of his trust, it gives currency to the 
 statute from the time of such an act. This act may be simply 
 an act done in a public office, in which, by law, he must 
 render an account of his trust. "When the act purports to be 
 a complete termination of the trust he henceforth holds ad- 
 versely, and, at the end of the statutory period, all further 
 account is barred. Trustees are not the only persons who are 
 entitled to the benefit of the statute, and, therefore, it is not 
 important to determine whether the commissioner in equity 
 was or was not a trustee. He was, however, a public ofEcer, 
 to whom was entrusted, by law, the collection and custody of 
 the money of others, and the care and custody of their bonds 
 and other property."' 
 
 » State ex rel. Van Wyck v. Norris, 15 S. Car. 241, p. 257. 
 
BOOK III. 
 
 Collections. 
 
 (429) 
 
CHAPTER I. 
 
 COLLECTION OF NOTES AND CHECKS. 
 
 § 435. Kinds of collections and collecting agencies. We 
 
 shall now state the principles of law which have been applied 
 to banks when acting as agents in collecting notes, checks 
 and similar instruments. To understand these clearly several 
 distinctions should be kept in sight. The iirst is that a "col- 
 lecting agency" is not the same thing as a bank ; and conse- 
 quently different principles have sometimes been applied to 
 such an association than to a bank in making collections. 
 Again, the instruments left for collection are of four kinds, 
 those left by (a) depositors and by (b) non-depositors to be 
 collected by the bank itself, and those left by (c) depositors 
 and by (d) non-depositors with the bank to be sent by it to a 
 sub-agent for collection. The reasons for apjDlying different 
 principles on some occasions to these four kinds of instru- 
 ments will appear before concluding this and the following 
 chapter. 
 
 § 436. Is collecting bank the owner? (a) It is when advances 
 have been made. As a bank is the agent of the remitter, he 
 must bear the loss resulting from omissions or defalcations of 
 the agent in the line of his duty.' As soon as the note or 
 other instrument is received, the correspondent is usually 
 credited for the amount. This, however, is provisional only 
 in anticipation of prompt payment and the crediting can be 
 cancelled if the note be dishonored.^ But suppose the note is 
 credited as cash, and the sender draws against the amount, 
 does it belong to him ? The courts have answered that the 
 
 ' Moore v. Meyer, 57 Ala. 20. 
 
 s Trinidad Nat. Bank u. Denver Nat. Bank, 4 Dill, 290. 
 
 (431) 
 
432 BANKS AND THEIR DEPOSITORS. § 436 
 
 title is transferred to the bank, of which it cannot be divested, 
 notwithstanding its right to charge the note back in the event 
 of non-payment.' Said Judge Gardiner: "It would be a 
 singular mode of transacting business to give credit for se- 
 curities 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."^ 
 
 {b) 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 oi'der 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 be- 
 fore it had been collected the local bank failed. The depositor 
 then telegraphed the Chicago bank to stop payment. The 
 order was regarded and the check was returned to the defen- 
 dant bank. The depositor claimed to be the owner of the 
 cheek, and so did the defendant bank which had remitted on 
 the faith of it to the failed institution. The court decided 
 against the depositor. 
 
 (c) Bank is not owner unless it has advanced on specific note. 
 A bank though is not the owner until it has advanced the 
 amount or has become responsible for the same. The ownei'- 
 ship previous to collection can only be established by a con- 
 tract expressly proved or inferred from a course of dealing. 
 Such an inference does not flow from the fact that a customer 
 
 ' Flannery v, Coates, 80 Mo. 444 ; Ayres v. Farmers & Merchants' Bank, 
 79 Id. 421 ; BuUene v. Coates, Id. 426. 
 
 ' Clark V. Merchants' Bank, 2 N. Y. 380, p. 385 ; see Commercial Bank v. 
 Marine Bank, 3 Keyes, 337, p. 341. 
 
 3 55 Mich. 379. 
 
§ 438 COLLECTION OF NOTES AND CHECKS. 433 
 
 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.* 
 Says Judge 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 re- 
 sponsible 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, 
 though not of any particular note, will not transfer their 
 ownership to the collecting bank.' 
 
 § 437. Bank is not collecting agent by making note payable 
 there. -Nor does a bank become an agent for collecting a 
 note by making it payable there. No power, authority, or 
 duty is conferred on the association by drawing it in this 
 manner.* When such a note is thus left for collection the 
 bank becomes the agent of the payee to receive payment ; ' 
 when it is not left, whatever the bank receives from the 
 maker to be applied thereon ig received, not as the agent of 
 the payee but of the maker.* 
 
 § 438. Bank is real holder for notifying purposes. A bank 
 which receives and indorses a note for collection, although a 
 
 1 Seott V. Ocean Bank, 23 N. Y. 289, 
 
 ' Diokerson v. Watson, 47 Id. 439, p. 442. A bank does not become the 
 honafide holder of a draft remitted by another bank for collection unless it 
 makes subsequent advances thereon or transmits the proceeds, McBride v. 
 Farmers' Bank of Salem, Ohio, 26 Id. 450 ; Aff. 25 Barb. 657 ; Arnold v. 
 Clark, 1 Sand. 491 ; West v. American Ex. Bank, 44 Barb. 175. A collect- 
 ing bank is responsible directly to the owner of the paper, it may discharge 
 itself by an actual payment to its correspondent, but not passing the amount 
 to its credit in general account, Echarte v. Clark, 2 Edm. Sel. Ca. 445. 
 
 » Diokerson v. Watson, 47 N. Y. 439. ' Hills v. Place, 48 Id.. 520. 
 
 5 Ward V. Smith, 7 Wall. 447. » 
 
 5 Id. 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 indebt- 
 edness to the bank, and it does not receive or credit the note as collateral 
 security, it is merely the agent of such owner, Presoott v. Leonard, 32 Kansas, 
 142. 
 
 28 
 
434 BANKS AND THEIR DEPOSITORS, § 439 
 
 mere agent, is considered the real holder for the purpose of 
 receiving and transmitting notices respecting its non-payment.* 
 And when a note is indorsed to a cashier and given by him 
 to a notary for protest, these facts are sufficient to show that 
 it was either negotiated to the bank or left there for col- 
 lection.''. 
 
 § 439. Indorsement for collection does not render bank liable 
 as indorser. But an indorsement for collection does not pass 
 the title or render the indorser liable in that capacity.* iCfor 
 can parol evidence be introduced to show that a restrictive 
 indorsement, for example an indorsement " for collection," 
 was an absolute one.* 
 
 {a) Relation of bank to owner and, maker of note thus indorsed. 
 As an indorsement of a note for collection passes no title to 
 the indorsee on his own account, several consequences follow. 
 For example, 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 
 holder, which was indorsed to their order for collection. They 
 did not remit the money, and let the note remain uncancelled 
 among their collection papers, and after a time 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.'' 
 
 (6) Payment to another person is no discharge. Again, when 
 a note is thus indorsed, payment to any other party than the 
 indorsee is no discharge. Thus in Barnet v. Einggold,' the 
 payees of the note in suit indorsed it to a bank " for collec- 
 tion," but by mistake it was sent to the maker, who thus ob- 
 tained possession without payment. He contended that he 
 
 1 Ogden V. Dobbin, 2 Hall, 112 ; Mead v. Engs, 5 Cow. 303 ; Warren v. Gil- 
 man, 17 Me. 360; Freeman's Bank v. Perkins, 18 Id. 292. 
 » Burnham v. Webster, 19 Id. 232. 
 3 Broun v. Hull, 33 Gratt. 23. 
 * Third Nat. Bank v. Clark, 23 Minn. 263. 
 ' Sutherland v. First Nat. Bank, 31 Mich. 230. « 80 K7. 289. 
 
§ 439 COLLECTION OP NOTES AND CHECKS. 435 
 
 received it from an unknown person to whom he paid it. 
 The court, however, declared that the indorsement was a 
 special authority to the bank authorizing it to make the col- 
 lection of the note, and that the bank or its agents authorized 
 to act for it were the proper parties to whom the payment 
 should have been made, and by whom the note could have 
 been legally presented for payment, subject to the right of 
 interference of the owners by revocation or otherwise. " Had 
 the supposed holder to whom the maker contends he paid the 
 note produced it indorsed in blank, or had the note been pay- 
 able to bearer, either would have been sufficient evidence of 
 his right to present it and receive the payment. But the 
 payment by the maker to an unknown holder or stranger, 
 who had no right to collect it, either as agent in fact or bona 
 fide owner, in the face of the special indorsement to the bank 
 for collection by the holders, was made at his own risk, as the 
 possession with such an indorsement was notice to him that 
 none but the bank or its agents, or the holders and their 
 agents, were auj;horized to present the note or receive the 
 money thereon." 
 
 (e) Can bank maintain suit to recover on such a note. An 
 indorsement on a note, "Pay to A. B., or order, for collection," 
 and signed by the payee or owner of the note, merely makes 
 the indorsee agent for the indorser to collect it, but does not 
 vest in him a title on which he can maintain a suit.' This, 
 however, is a statutory regulation, and, of course, prevails 
 only in the States which have enacted it. At common law, 
 as said by Chief Justice Grilfillan, " the beneficial owner of a 
 negotiable bill or note, payable to bearer or indorsed in blank, 
 might institute suit on it in the name of any one who would 
 allow his name to be used for that purpose, and that unless 
 the maker had a defence to the note, good against the real 
 owner, he could not be permitted to show that the plaintiff 
 was not the real party in interest. "^ 
 
 1 Rock County Nat. Bank v. HolUster, 21 Minn. 385. 
 
 ' Morton v. Rogers, 14 Wend. 575 ; Lovell v. Evertson, 11 Johns. 52 ; Con- 
 roy V. Warren, 3 Johns. Cas. 259. If a note indorsed in blank be put into 
 
436 BANKS AND THEIR DEPOSITORS. § 440 
 
 (d) Indorsement in invoices accompanying bills of lading. Nor 
 is an indorsement " for collection" by a bank on invoices that 
 accompany bills of lading attached to drafts, a guaranty of 
 their genuineness. Says Judge Field in Goetz v. Bank of 
 Kansas City :* " A bank in discounting commercial paper 
 does not guarantee the genuineness of a document attached to 
 it as collateral security. Bills of lading attached to drafts 
 drawn, as in the present case, are merely security for the pay- 
 ment of the drafts. The indorsement by the bank on the in- 
 voices accompanying some of the bills ' for collection,' created 
 no responsibility on the pai-t of the bank ; it implied no guar- 
 antee that the bills of lading were genuine; it imported 
 nothing more than that the goods which the bills of lading 
 stated had been shipped, were to be held for the payment of 
 the drafts, if the drafts were not paid by the drawees, and 
 that the bank transferred them only for that purpose. If the 
 drafts should be paid the drawees were to take the goods. 
 To hold such indorsement to be a warranty, would create 
 great embarrassment in the use of bills of lading as collateral 
 to commercial paper, against which they are drawn." 
 
 § 440. Ownership can be changed by agreement. Of course, 
 the ownership of a note sent for collection may be changed by 
 special agreement. Thus a 'New York bank received from 
 Briggs for collection, a check drawn on a bank in !N^ew Jersey, 
 and sent it by mail to the drawee, which for a long period had 
 been its collecting agent in that State. The drawee on receiv- 
 ing 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 
 
 bank for collection and be not witbdrawn after it is protested, tbe bank may 
 support an action thereon in its own name, Sterling v. Marietta & Susque- 
 hanna Trad. Co., 11 Serg. & Raw. 179. 
 
 » 7 Sup. Ct. Rep. 318 (1887) ; Robinson v. Reynolds, 1 G. & D. 526 ; Craig 
 i: Sibbett, 15 Pa. 238 ; Thiedemann v. Goldschmidt, 1 De Gex, F. & J. 4 ; 
 Hunter v. Wilson, 19 L. J., Ex. 8 ; Leather v. Simpson, L. R., 11 Eq. 398. See 
 § 205. 
 
§ 441 COLLECTION OF NOTES AND CHECKS. 437 
 
 that the drawee had a right, under an agreement existing be- 
 tween the two institutions, to discharge the drawer and sub- 
 stitute itself as debtor, which it did, and that the 'Sew York 
 bank "must be regarded as having accepted the responsibility 
 of the drawee upon its credit in the collection account as pay- 
 ment of the check," and was consequently liable for the 
 amount.' 
 
 § 441. IHust use reasonable sMU and diligence in collecting. 
 A bank must use reasonable skill in making the collection, 
 and to that end must make a seasonable demand on the prom- 
 isor; and, if the note be dishonored, give due notice to the in- 
 dorsers in order to preserve the security of the owner.^ And 
 " any agent," in the language of Judge Selden,^ " whether it 
 be a bank or an individual, receiving a note or bill from the 
 holder for collection is responsible for any loss which the 
 holder may sustain on account of any neglect in presenting it 
 or in giving notice of its dishonor." He also added that " it 
 is the duty of an agent who receives for collection a bill of 
 exchange, payable at some future time, to use due diligence in 
 presenting the same for acceptance, and if he fail to do so, or 
 fail to give notice in case acceptance is refused, he will be 
 liable."^ The question, therefore, to be answered here is, 
 
 > Briggs V. Central Nat. Bank, 89 N. Y. 182. 
 
 ' Fabens v. Mercantile Bank, 23 Pick. 330. 
 
 " Walker v. Bank, 9 N. Y. 582, p. 584 ; Huff v. Langdon, 2 Disney, 63. 
 
 ' In Exchange Nat. Bank v. Third Nat. Bank, 112 U. S., p. 290, Judge Blatch- 
 ford said : " An agent receiving for collection, before maturity, a draft pay- 
 able on a particular day after date, is held to due diligence in making pre- 
 sentment for acceptance, and if chargeable with negligence therein, is liable 
 to the owner for all damages he has sustained by such negligence, Allen v. 
 Suydam, 20 Wend. 321 ; Walker v. Bank, 9 N. Y. 582. The drawer or in- 
 dorser of such a draft is, indeed, not discharged by the neglect of the holder 
 to present it for acceptance before it becomes due. Bank ». Triplett, 1 Pet. 25 ; 
 Townsley v. Sumrall, 2 Id. 170. But if the draft is presented for acceptance 
 and dishonored before it becomes due, notice of such dishonor must be given 
 to the drawer or indorser, or he will be discharged, 3 Kent's Com. 82 ; Bank 
 V. Triplett, 1 Pet. 25 ; Allen i>. Suydam, 20 Wend. 321 ; Walker v. Bank, 9 N. 
 Y. 582 ; Goodall v. Dolley, 1 Term 712 ; Bayley on Bills, 2d Am. ed. 213. 
 Moreover, the owner of a draft payable on a day certain, though not bound 
 
438 BANKS AND THEIE DEPOSITORS. § 441 
 
 what does reasonable skill and diligence require of a collect- 
 ing agent ; in other words, what omission or neglect renders 
 the collecting agent liable to the owner of the note or other 
 instrument sent for collection ? 
 
 First, (a) Must follow instructions. Central Georgia Bank 
 V. Cleveland National Bank.^ When a bank receives instruc- 
 tions concerning the collection of a note it must follow them 
 or be liable for the consequences. Thus, a bank, having taken 
 a solvent bill for collection, before it matured, was instructed 
 to permit a renewal for a furthdt 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 in- 
 dorser, surrendering the former bill to the acceptor, and re- 
 porting that a renewal had taken place in conformity with 
 instructions. The holder was injured in consequence of the 
 subsequent insolvency of the acceptor during the extended 
 term of credit, and the bank was holden for the damage sus- 
 tained.* 
 
 (b) Merchants and Manufacturers' National Bank v. Stafford 
 National Bank.^ A firm in Michigan left for collection with a 
 
 to present it for acceptance in order to hold the drawer and indorser, has au 
 interest in having it presented for acceptance without delay, for it is only by 
 accepting it that the drawee becomes bound to pay it, and, on the dishonor 
 of the draft by non-acceptance and due protest and notice, the owner has a 
 right of action at once against the drawer and indorser, without waiting for 
 the maturity of the draft ; and his agent, to collect the draft is bound to do 
 what a prudent principal would do, 3 Kent's Com. 94 ; Robinson v. Ames, 20 
 Johns. 146 ; Lenox v. Cook, 8 Mass. 460 ; Ballingalls v. Gloster, 3 East, 481 ; 
 Whitehead v. Walker, 10 Mees. & Wels. 696 ; Walker v. Bank, 9 N. Y. 582." 
 See also Mount v. First Nat. Bank, 37 Iowa, 457. 
 
 1 59 Ga. 667. 
 
 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 negligence 
 and the bank became liable for the amount, Capitol State Bank v. Lane, 52 
 Miss. 677. 
 
 - U. S. Dis. Ct., 44 Conn. 664. 
 
§ 441 COLLECTION OF NOTES AND CHECKS. 439 
 
 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 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 received 
 and paid. Don't draw any more." On the receipt 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 information 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 col- 
 lected without much difficulty. It was held, first, that the. 
 defendant bank, as agent of the other for the collection of 
 the draft, had been guilty of negligence in not obtaining pay- 
 ment of the draft or returning it at once to the Michigan 
 bank. Second, that although the Michigan bank paid the 
 money to the drawers on the statement of the drawee to the 
 drawers that the draft had been paid, yet, as it would have 
 been saved from loss if the defendant bank had performed its 
 duty, the defendant was liable for the actual damages result- 
 ing 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. 
 
 Second. Must protest an improperly accepted draft. The 
 collecting agent is negligent if he omit to protest a draft that 
 has been improperly accepted whereby the drawers and 
 drawees are discharged. Thus a draft, which was drawn by 
 the Empire Mills on " E. C. Hamilton, Esq., New York," 
 
440 BANKS AND THEIR DEPOSITORS. § 441 
 
 was sent to a bank for presentment. The drawee wrote across 
 the face of the draft, "Accepted, payable at Am. Ex. Bank, 
 Empire Mills, by E. C. Hamilton, treas." As the acceptance 
 bound neither the drawee nor the " Empire Mills," and the 
 bank omitted to protest the draft, it was liable to the holder 
 for the amount.' 
 
 Tbird. Note must be presented where it is made payable for 
 payment. When a note is made payable at a particular place 
 it must be presented there for payment. But when it is 
 made payable at a bank and is put into the cashier's posses- 
 sion for collection, there is no necessity for making a specific 
 demand. The legal requirements are fulfilled if the note is 
 in the bank when it is due ; in other words, is with the 
 cashier who is ready to receive the money. The demand will 
 suffice if the teller of the bank who presents the note inquires 
 of the book-keeper whether a deposit has been made to pay 
 it, and is informed that there are no funds to pay it. More- 
 over, the demand would be good, though the teller should 
 act as clerk of the notary public who protests the note.* 
 
 Fourth. Duty of bank when the note is to be collected in another 
 place. If a bank has a collection note against a person resid- 
 ing in another place, its duty consists in placing it with due 
 diligence for collection or protest into the hands of a com- 
 petent and responsible agent doing business at the residence 
 of the maker,* 
 
 ' Walker v. Bank, 9 N. Y. 582. 
 
 2 Browning v. Andrews, 3 McLean, 576 ; Berkshire Bank v. Jones, 6 Mass. 
 524 ; State Bank v. Napier, 6 Humph. 270. Says Johnson, J., " In commercial 
 places, usage has made banks the general repositories of the funds of indi- 
 viduals, and when one is told that he is to be paid money at a bank, he under- 
 stands that the promisor will deposit funds there for that purpose, and if, 
 upon inquiry, he ascertains that there are no funds there, he understands as 
 distinctly that he is not to be paid. He has done, therefore, all that the implied 
 undertaking on his part imposes when he makes a demand at the bank. 
 This rule is too well settled to admit of any controversy." Bank v. Flagg, 1 
 Hill (S. C), 177, p. 179 ; Saunderson v. Judge, 2 H. Black, 509. 
 
 8 Stacy V. Dane County Bank, 12 Wis. 629. 
 
§ 441 COLLECTION OF NOTES AND CHECKS. 441 
 
 Fifth. Must keep the seeuriiy for the note, (a) Woolen v. 
 New York and Erie Bank} When must the collecting bank 
 keep the security — the hill of lading or other thing — on the 
 strength of which the draft to he collected is drawn ? W., a 
 banker at Indianapolis, sent a draft to a bank at Buffalo, 
 drawn on B., who resided there, and also bills of lading for 
 some lumber which C. had sold to B. The draft was for the 
 purchase price which was discounted by W. on the security of 
 the bills of lading as collatei'al. In a letter accompanying 
 the draft and bills, W. stated that the draft was sent for col- 
 lection and desired the proceeds to be transmitted. The draft 
 was payable fifteen days after date, and was indorsed by M., 
 and then by W., specially to the cashier of the bank "for 
 collection." By its terms the drawer, indorsers, and acceptors 
 waived presentment for payment and notice of protest and non- 
 payment. The bills of lading set forth C. as the shipper of the 
 lumber, and were dated two or three days prior to the date of 
 the draft, and were indorsed by C, M. and "W. The draft 
 was accepted by D. and the bank delivered the bills of lading 
 to him. He failed, however, before its maturity. By ordi- 
 nary course the lumber would reach Buffalo eight days befoi-e 
 the maturity of the draft. W. brought a suit against the 
 bank to recover the amount of it on the ground that the in- 
 stitution did wrong in delivering the bills of lading before 
 collecting the draft. Judge Wallace said : " It is evident 
 that the draft originated from the shipment of the lumber, 
 was negotiated on the credit of that shipment, and that the 
 parties to it intended that the defendant should deliver the 
 bills of lading to the drawee upon his compliance with the 
 conditions of the agreement under which the lumber was 
 shipped. What those conditions were must be determined 
 by the draft and bills of lading only, and must resolve them- 
 selves into one of two alternatives. Either the drawer had 
 consigned the lumber on his own account to be sold for him 
 
 I 12 Blatcbf. 359 ; Lanfear ti. Blossman, 1 La. Ann. 148 ; see also Mason v. 
 Hunt, 1 Doug. 207. 
 
442 BANKS AND THEIR DEPOSITORS. §441, 
 
 by the drawee, and drawn upon the latter for an advancement 
 on the consignment, or the drawer had sold the lumber, to 
 the drawee, and drawn upon him for the purchase price. On 
 the first supposition the drawee was under no obligation to 
 accept the draft until he received the property consigned ; on 
 the second, the fact that the draft was payable fifteen days 
 after date, indicated that the sale was on the credit of that 
 time. If the sale was on credit the drawee was entitled to 
 a delivery of the property, and to require him to pay for it 
 on delivery would be to repudiate the agreement for credit. 
 Upon either hypothesis the drawee was entitled to the prop- 
 erty as the consideration of his acceptance of the draft. If 
 such was his right evidently- the drawer, iudorser, and owners 
 of the draft had no interest in the bills of lading except so 
 far as they were security for the acceptance of the draft ; 
 and it was reasonable to infer that they were forwarded to 
 the defendant to retain or return in case acceptance was re- 
 fused." The bank, therefore, was declared to be not negli- 
 gent in delivering the bills of lading to the acceptor of the 
 draft. 
 
 (6) National Bank v. City Bank} A., the owner of an ele- 
 vator, bought through B., of Milwaukee, two cargoes of 
 wheat and sent sight and time drafts in payment. A Mil- 
 waukee bank bought the drafts and received the bills of 
 lading. These described B. as the shipper and that the grain 
 was to be delivered at Oswego to the account of D., cashier 
 of the Milwaukee bank, care of the City Bank of Oswego; 
 The Milwaukee bank accordingly sent the drafts and bills of 
 lading to the other with the instruction : " On payment of 
 the drafts you will deliver the cargo to the order of A. If 
 not paid please hold and advise by telegraph." The bank 
 acknowledged their receipt, presented the sight drafts to A., 
 who paid them and accepted the time draft. On the arrival 
 of the wheat at Oswego the master of the vessel that carried 
 it reported to the cashier of the City Bank, who indorsed 
 
 1 103 U. S. 668. 
 
§ 441 COLLECTION OF NOTES AND CHECKS. 443 
 
 the bills of lading : " Deliver to the Corn Exchange Elevator 
 for account of D., cashier Milwaukee, subject to order of 
 the City Bank, Oswego." After the wheat had been thus 
 delivered, A., the ow^ner of the elevator as above nnentioned, 
 sold it. The City Bank in its account with the other made 
 a charge in addition to the customary percentage for collect- 
 ing and remitting the proceeds of the draft. Before the 
 time draft became due, A. failed. In an action by the Mil- 
 waukee Bank against the other it was held, first, that the City 
 Bank was its agent in transacting the business in question ; 
 and second, that whether it exercised reasonable care and 
 diligence in the matter was a question of fact for the jury to 
 decide. It may be added that the court thought that the 
 City Bank was negligent. The instructions were not to 
 deliver the wheat until the drafts were paid. The City Bank 
 did deliver it on payment of the sight draft and before pay- 
 ment of the other, whereby the Milwaukee bank lost its 
 security. 
 
 Sixth. What is reasonable diligence in givivg notice. Gen- 
 erally it may be said that a bank acts with reasonable diligence 
 after presenting a note and not receiving payment if it give 
 notice by the regular course of mail to the indorser from 
 ■whom it was received, so that he may transmit notice to his 
 immediate indorser, who may take the same course toward 
 the prior indorser. And if the indorsers in due season adopt 
 the regular course of mail for transmitting notices from one 
 to the other and by that means the route to the first indorser 
 is made circuitous, diligence is not wanting on their part, and 
 he cannot set up the manner of the giving of the notice and 
 the delay occasioned by it as a defence.* 
 
 {a) When indorsers live in the same town. "We may begin 
 the inquiry by asking v^hat does reasonable diligence require 
 when the indorsers live in the town where the note is pay- 
 able ? This may be answered in the words of Judge Johnson.^ 
 
 1 Ogden V. Dobbin, 2 Hall, 112 ; Mead v. Engs, 5 Cow. 303 ; Tunuo v. Lague, 
 2 Johns. Cas. 1 ; Haynea v. Birks, 3 Bos. & I'lill. 599. 
 
 2 Johnson v. Harth, 1 Bail. 482, p. 485. 
 
444 BANKS AND THEIR DEPOSITORS. § 441 
 
 " When a note is placed in bank for collection, if it is not 
 paid when due, it is placed in the hands of a notary, whose 
 duty it is to demand payment. If it is not paid within bank 
 hours of the last day of grace, the notary, on the evening of 
 that, or on the next day, gives notice to all the indorsers, if they 
 reside in town, if out of town, then by the next mail, and it 
 is not until after all this is done that he returns it tp the 
 bank, under protest, and notice to the holder is considered no 
 part of his duty." In one of the recent cases Judge Veazey 
 remarked that in giving notice by mail "the general rule 
 is that when the parties reside in the same city or town, 
 the notice, verbal or written, must be personal, or written 
 notice must be left at the dwelling house or place of business ; 
 and notice by mail will be insuiScient unless its reception iti due 
 time is proved. But if the instrument is protested at a place 
 difterent from the residence of the party who is sought to be 
 notified, the mail may be used. And it has been held that 
 it may be used by an indorser, who has received notice by 
 mail, in sending notice to a previous party residing in the 
 same town, provided the notice is re-deposited on the same 
 day it was received, so that it may reach the previous party 
 on the same day it would have been received by him if 
 originally addressed to him and had not been withdrawn 
 from the post-office and remailed."* 
 
 {b) Custom. A bank, by custom or usage, and consequently 
 by rule, may establish a mode of giving notice, difterent from 
 
 1 United States Nat. Bank i.. Burton, 58 Vt. 426, citing Eagle Bank v. 
 Hathaway, 5 Met. 212 ; Manchester Bank a. Fellows, 28 N. H. 302 ; Hartford 
 Bank v. Stedman, 3 Conn. 489 ; Shelburne Falls Nat. Bank v. Townsley, 102 
 Mass. 177. The rule is thus stated in Forbes v. Omaha Nat. Bank, 10 Neb. 338 : 
 If an indorser reside within the same post-office delivery, whether in or out 
 of city limits, notice of dishonor must be served personally or left at his resi- 
 dence or place of business, the court citing among other authority, Ireland v. 
 Kip, 10 Johns. 490; S. C, second trial, 11 Johns. 231 ; Babcock v. Benham, 4 
 Hill, 129 ; Ransom v. Mack, 2 Id. 587 ; Louisiana State Bank :;. Howell, 6 
 Martin, La. N. S. 506. But the rule established by the U. S. Supreme Court 
 is the other way and also by the highest courts of Pennsylvania, Indiana, 
 Missouri, and South Carolina. 
 
§ 442 COLLECTION OF NOTES AND CHECKS. 445 
 
 that required in commercial law ; for example, maj' provide 
 that notice shall be sent by post, even where all the parties 
 reside in the same place, and such a custom will be binding 
 on the parties to a bill made payable at a particular bank.' 
 
 (c) When holder lives in different town.. If the actual holder 
 of a bill of exchange reside in a difterent town from the par- 
 ties sought to be charged, the notice of non-payment may be 
 given through the post-office, by an agent of the holder to 
 whom the bill is transmitted for collection, although both the 
 agent and the party notified reside in the same place.^ 
 
 {d) When notary lives at different place from parties. "When 
 the instrument is protested by a notary living at a place differ- 
 ent from the parties the mail can be used.' 
 
 § 442. What presentment must be made, {a) Duties of hank 
 stated by Judge Archer. What is reasonable diligence with 
 respect to the time for demanding payment, and also the mode 
 of notifying indorsers will now be considered. The duties of a 
 collecting bank toward the indorser of a note are well stated 
 by Judge Archer of Maryland, in the case of the Farmers' Bank 
 V. Duvall.* After remarking that the liability of Duvall, the 
 indorser of the note, was contingent, depending on a demand 
 for payment of the drawer, and duly notifying the indorser 
 of its dishonor and that on failure to do either of these things 
 there could be no recovery against the indorser, the judge 
 added that "the authorities inde'pendent of any particular 
 usage, where the notes are payable so many days after date, 
 have definitely fixed the time and mode of demand, or pre- 
 sentment." 
 
 (6) Has the drawer the lohole of last day of grace. " It ap- 
 pears at one time to have been questioned, as the drawer had 
 
 1 Gindrat v. Mechanics' Bank, 7 Ala. 324. When a bank is the holder of 
 a note made payable at its banking house, the indorser is bound by a notice 
 of non-payment by the maker given conformably to the established usage of 
 the bank, though not conformably to the general law, Chicopee Bank v. Eager, 
 ? Met. 583 ; Mills v. Bank of United States, 11 Wheat. 431. 
 
 2 Gindrat ». Mechanics' Bank, 7 Ala. 324. 
 
 3 Hartford Bank v. Stedman, 3 Conn. 489 ; Dan. on Neg. Ins. § 1003. 
 < 7 Gill & Johns. 78. 
 
446 BANKS AND THEIR BEPOSITORS. § 442 
 
 the whole of the last daj' of grace to pay the money due, 
 whether the holder could notify the indorser of the present- 
 ment and dishonor on the last day of grace ; but whatever 
 doubts may at any time have existed upon this subject, it is 
 now abundantly settled that such a note may be demanded on 
 the last day of grace, and that notice of the dishonor may be 
 immediately given, or in other words, if payment on the last 
 day of grace be not made, or be refused upon demand, the 
 holder may at once treat the note as dishonored and give no- 
 tice accordingly. But no demand of payment at any anterior 
 day will, bj' the general principles of law, justify the holder 
 to treat the note as dishonored. . . The mode of demand ap- 
 pears to be equally well settled. A demand without the pre- 
 sentation of the note would in general be equivalent to no de- 
 mand, and when it is made, the holder should be prepared and 
 ready to produce it." If, therefore, payment of a note pay- 
 able sixty days after date, should be demanded on the sixtieth 
 day after its date, this would be too soon, for it has three days 
 more to run by commercial usage, and the indorser would not 
 be bound.' 
 
 (c) Farmers' Bank v. DuvalU "Sov does the bank practice 
 ■of giving notice to the makers of notes of the time when 
 they mature, and where they have been left for collection, 
 affect the rule with respect to making demand of payment. 
 In the case above mentioned the court held that by the going 
 of the mail from A. at sunrise on the 23d, and by the clos- 
 ing of the post-office for the receiving of letters at 9 o'clock 
 P. M. on the 22d, this was the mail of the 22d, and conse- 
 quently if a note was dishonored at A. on the 22d, it was 
 sufficient to mail the notice for the indorser ou the 23d, 
 although no mail went again to the indorser's residence until 
 the morning of the 25th. 
 
 {d) Whiting v. City Bank. Whiting sent to the City Bank 
 of Rochester for collection a note payable there, and made by 
 a depositor of the institution. The note fell due Sunday, 
 
 ' 7 Gill & Johns. 78. « Id. 
 
§ 442 COLLECTION OF NOTES AND CHECKS. 447 
 
 July 4th. The previous day the bank marked the note as 
 paid and sent Whiting a draft for the amount. The maker 
 at that time had a small balance to his credit, but not enough 
 to pay the note. The bank having learned on the 6th of July 
 that the maker of the note had failed, it stopped payment of 
 the draft, and requested Whiting to return it, saying that it 
 had been sent by mistake. He complied with the request ; 
 at the same time the bank caused the note to be noted for 
 protest, and mailed the notice of non-payment to the indorser. 
 Both the protest and notice, however, were dated July 3d. 
 The bank, though, was obliged to pay Whiting. Judge 
 Eapallo in reviewing the law and facts pertaining to the case 
 said: "Had the bank not treated the note as paid, and had it 
 not remitted to the plaintiff a draft for the proceeds, but had it 
 simply sent notice of non-payment to the indorser on the 
 sixth of July, it would hardly be pretended that it had not 
 performed its duty and legally charged the indorser. It was 
 not necessary to make any demand for payment of the note 
 as it was payable at the same bank to which it was remitted 
 for collection, and the funds not being there to meet it, all 
 that was necessary to be done was to notify the indorser of 
 the non-payment. This notice having been sent on the next 
 business day after the note became due was in time."' The 
 only questions therefore were: whether the bank acted under 
 a mistake of facts in treating the note as paid and in remitting 
 the amount to Whiting; and if so, whether the mistake could 
 be corrected. " If the payment," continued the Judge, " was 
 not made by the bank by mistake, but was made voluntarily 
 on the credit of the maker of the note, it is very clear that 
 it could not be retracted. The payment of the note under 
 such circumstances discharged the obligation of the indorser, 
 and that obligation could not be revived by the bank, nor by 
 any transaction between it and the plaintiff. The fact of the 
 mistake was directly in issue in the cause. The only evi- 
 
 I Farmers' Bank v. Vail, 21 N. Y. 485 ; Howard v. Ives, 1 Hill, 263 ; Burk- 
 halter v. Second Nat. Bank, 42 N. Y. 538. 
 
448 BANKS AND THEIR DEPOSITORS. * § 442 
 
 dence to sustain the allegation consisted of a telegram sent 
 by the assistant cashier of the bank to the plaintiiF stating 
 that the bank had remitted for the note by mistake and 
 requesting a return of the draft, and of a letter from the same 
 officer to the plaintiff, inclosing the note, stating that it had 
 been protested for non-payment ; that the book-keeper of the 
 bank had by mistake placed it among the notes which were 
 to be paid, and that in the press of business it was remitted, 
 although the maker had less than $100 to his credit ; that 
 the bank had found the address of the indorser and given 
 him notice of non-payment. A return of the draft remitted 
 was also requested in this letter. The plaintiff presented the 
 draft for payment and found that payment had been stopped 
 by the bank. . . This is all the evidence on the subject of the 
 alleged mistake. The book-keeper by whom it is said to 
 have been made was not called as a witness. . . The evidence 
 to prove the mistake, was to say the least, very slight, con- 
 sisting only of the unsworn declarations of the assistant 
 cashier, he not even being the person who is alleged to have 
 made the mistake. There is no legal presumption that pay- 
 ments made by a bank ai-e made by mistake, even when the 
 account of the party for whom they are made is not good. 
 The fact, if material, must be proved. Certainly the fact was 
 not conclusively proved in this case so as to justify the court 
 in refusing to submit it to the jury. In Troy City Bank v. 
 Grant^ the case was submitted to the jury, and from the 
 report it would seem that it was found or conceded that the 
 note was honored by the bank through the merest mistake, 
 and that the bank did not give credit to the maker, and there 
 was no understanding that it should take up the note."* 
 
 (e) Commercial Bank v. Union Bank? As a collecting bank 
 in New York is responsible for the negligence of a sub-agent 
 employed in the same business, illustrations of negligence 
 may be drawn indifferently from the one or the other. In 
 
 1 Hill & Denio, Supp. 119. = 77 N. Y. 363, p. 365. 
 
 3 11 Id. 203. 
 
§ 442 COLLECTION OF NOTES AND CHECKS. 449 
 
 the following case the sub-agent was negligent. The Troy City- 
 Bank on Friday morning the 19th of November presented 
 and delivered to the drawee a bill on receiving his check for 
 a larger amount, the bank paying him the excess in money. 
 At that time, however, the drawee had not funds in the bank 
 to the amount of the check, but on the evening of that day 
 he made good the deficiency, including also other checks, by 
 cash and sight drafts on 'Sew York, On the 20th he drew 
 checks on the bank which were paid by it, and in the even- 
 ing he made the bank good by cash and drafts on Sew York, 
 as he had done the day before. None- of the drafts w^ere 
 paid. On Monday, the 22d, the bank procured the bill from 
 the draw^ee and demanded payment of it, protested it for non- 
 payment and served a notice thereof on the drawer and in- 
 dorsers. The bank Was declared to be liable for the amount 
 of the draft. It may be added that the bank was declared to 
 be liable on a double ground, first, that the drawee had paid 
 the draft to it,' and second, that the drawer and indorsers were 
 discharged by omission of the bank to give the proper 
 notices of the dishonor of the bill by the drawee and to take 
 the proper measures to charge him. 
 
 (/) Trinidad National Bank v. Denver National Bank.^ A. 
 bank received from B. bank a sight draft for collection, 
 drawn on C. bank against funds belonging to the di'awer. 
 A. bank received this draft for collection January 10th, and 
 transmitted it directly to the drawee, its correspondent, on 
 the same day. The draft ought to have reached the drawee 
 in two days. The drawee continued good until January 29th, 
 when it failed. The drawee did not acknowledge the receipt 
 of the draft, and in fact the draft miscarried and was never 
 received. The defendant made no inquiries about it until 
 February 9th ; the plaintiff and defendant both supposing, 
 meanwhile, that it had been pa^^i. The defendant gave the 
 plaintiff no notice of any kind with respect to the draft until 
 February 11th. The plaintiff, having sued the defendant for 
 
 1 Pratt 0. Foote, 9 N. Y. 463. » 4 Dill. 290. 
 
 29 
 
460 BANKS AND THEIR DEPOSITORS. § 443 
 
 its negligent omission to gave notice, was declared liable. It 
 was also held that the usage or custom set up by the defend- 
 ant, that it was not required to make inquiries concerning 
 such remittances prior to the receipt of the regular monthly 
 statement of accounts between banks, was not established by 
 the evidence. 
 
 § 443. Liability for mistake, (a) In days of grace. If pay- 
 ment of a note is demanded on the first day after the third 
 day of grace and notice of dishonor is then sent, and such is 
 the well-known usage of that place, the demand and notice 
 are valid ; and the indorser is liable. Such a usage is regarded 
 part of the contract when borrowing the money, though 
 not incorporated in it, whenever it is personally known to the 
 borrower. Though three days are allowed for the payment 
 of negotiable paper from long and universal usage, yet " 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."' 
 
 (6) In nature of instrument. A bank is responsible for mis- 
 taking the nature of an instrument, a check for a bill of ex- 
 change, for example, whereby the owner suffers loss. Thus a 
 
 bill of exchange payable at was sent to a bank for 
 
 collection, which was, considered a bank check and not entitled 
 to days of grace. Accordingly it was presented for payment 
 and protested on the day of maturity without days of grace, 
 thereby discharging the indorser. It appeared on the trial 
 that the indorser notified the bank that the instrument should 
 have days of grace. The bank was held liable for the wrong- 
 ful presentation to the person who deposited the paper for 
 collection.^ 
 
 (e) In name of indorser. A bank is responsible for mistak- 
 
 ' Earle, J., Bank of Columbia v. Magruder, 6 Harr. & .Johns. 172, p. 180; 
 Bank of Columbia v. Fitzhugh, 1 Harris & Grill, 239 ; Renner v. Bank of Col- 
 umbia, 9 Wheat. 581. 
 
 2 Georgia Nat. Bank v. Henderson, 46 Ga. 487. 
 
§ 443 COIiLECXION OF NOTES AND CHECKS. 451 
 
 ing the name of the indorser and sending the notice to the 
 wrong person. Thus a bank received for protest a note in- 
 dorsed by John Becker. The bank officers knew a person 
 of that name who lived at a post town three miles distant 
 and who had property. Moreover, he was the only person of 
 that name known by the bank, and therefore it was supposed 
 that he was the indorser of the note. Accordingly, notice of 
 its non-payment was given to him through the mail. In the 
 end it was known that the indorser was another person of the 
 same name, and who lived in a different county. The in- 
 dorser having been released through the failure of the bank 
 to give notice, it was obliged to make the loss good to the 
 holder on the ground of negligence.^ But a notice is not defec- 
 tive vi^hich states the promisor's name wrongly if it can be 
 shown that the indorser is liable on no other note payable at 
 that bank.^ 
 
 (d) In date of note. A bank is responsible for mistaking 
 the date of a note in consequence of which it is presented for 
 payment before the correct time and the indorser is dis- 
 charged.* But if the notice be given on the day the note 
 falls due, although it states that the note fell due three days 
 before, it is good. 
 
 (e) Not liable for mistake in law. A collecting bank is not 
 responsible for loss caused by its mistake in a doubtful matter 
 of law. 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 payment and 
 gave notice of non-payment to the indorsers on the day 
 the note was due without grace whereby they were dis- 
 charged 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 
 
 • Mount' u. First Nat. Bank, 37 Iowa, 457 ; Borup v. Nininger, 5 Minn. 523. 
 
 2 Smith V. Whiting, 12 Mass. 6. 
 
 ' Bank of Delaware County v. Broomhall, 38 Pa. 135. 
 
452 BANKS AND THEIK DEPOSITOKS. § 446 
 
 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 en- 
 titled to grace on their post notes had never been decided, 
 and that there was no uniform practice in demanding pay- 
 ment of these notes and of notifying the indorsers after the 
 promisors failed. As the duty of the bank therefore in de- 
 manding payment and giving notice had not been clearly 
 established, the action against it could not be maintained.' 
 
 § 444. Miscarriage of note for collection. If a note depos- 
 ited for collection miscarry in consequence of the depositor's 
 omission to give the correct post-office address of the bank at 
 which it is payable, the collecting bank is not responsible fol" 
 the loss.* 
 
 § 445. When bank need not give notice of non-payment. 
 The collecting bank need not give notice of non-payment to 
 the indorser if he have knowledge of the fact; in short, 
 whenever it is unnecessary for the bank to give notice it will 
 not be liable for neglect to notify.^ Nor can a bank be held 
 for not giving legal notice of non-payment to an indorser if 
 it be shown that the notice was actually received in time.^ 
 But a bank is responsible to the real owner of a note for 
 omitting to give notice of non-payment, though it was de- 
 posited by one who held it as collateral security.^ 
 
 § 446. Demand and notice as affected by usage. If a bank 
 establish usages and by-laws concerning demands on makers 
 of promissory notes and notices to indorsers, the dealings and 
 contracts of those doing business with it are to be understood 
 and enforced with reference to them.* Thus, the usage of a 
 
 ' Mechanics' Bank v. Merchants' Bank, 6 Met. 13. 
 ^ Chapman v. Union Bank, 32 How. Pr. 95. 
 ' West Branch Bank v. Fulmer, 3 Pa. 399. 
 * Hallowell v. Curry, 41 Id. 322. 
 5 McKinste'r v. Bank, 9 Wend. 46 ; Aff. 11 Id. 473. 
 
 ^ Lincoln & Kennebeek Bank v. Page, 9 Mass. 165. See Boston Bank v. 
 Hodges, 9 Pick. 420 ; Cohea v. Hunt, 2 Sm. & M. 227. 
 
§ 447 COLLECTION OF NOTES AND CHECKS. 453 
 
 bank with respect to notes falling due on a particular day — 
 like the commencement day of a college* — to make a demand 
 on the maker and give notice to the indorser on the day pre- 
 ceding, will bind him on a note discounted for him at that 
 bank if he knows of the usage. And whether the note is 
 made payable at that bank or not is immaterial.^ 
 
 (a) And by ordinance of bank. So, too, if the ordinance of 
 a bank permitting the deposit of notes for collection should 
 prescribe that the depositor must previously deposit the costs 
 of protest, a bank would not be liable for an omission to have 
 a negotiable note, deposited by another bank, protested for 
 non-payment, and notices given, though it be important to fix 
 the indorsers, unless the costs have been deposited as the law 
 requires.* 
 
 § 447. When hank and holder are both negligent. If both 
 the collecting bank and holder are negligent, on whom shall 
 the loss fall? The United States Supreme Court have declared 
 that if through negligence the inference be that notice of pre- 
 sentment, demand and non-payment were not given to the 
 holder, thus keeping him from notifying prior parties, the 
 bank is responsible for the amount of the bill, even though 
 the holder may not have been so thoughtful, active, and 
 vigilant as he might have been.* On the occasion calling for 
 the application of this principle a bill had been sent by the 
 Philadelphia Bank to the other for collection, but the letter 
 containing it slipped through a crack in the cashier's desk 
 and was not found until after its maturity. It was contended 
 that as the bill was in the bank at that time, and as the accep- 
 tors had no funds there, a sufficient presentment and demand 
 had been made to satisfy the law merchant. But Judge 
 ]S"elson said : " It is true the bill was there physically, but, 
 within the sense of this law, it was no more present at the 
 
 ' Even if it lie not a legal holiday. 
 
 2 City Bank v. Cutter, 3 Pick. 414. 
 
 » Pendleton v. Bank, 1 T. B. Mou. (Ky.) 171. 
 
 * Chicopee Bank v. Philadelphia Bank, 8 Wall. 641. 
 
454 BANKS AND THEIE DEPOSITORS. § 449 
 
 bank than if it had been lost in the street by the messenger 
 on his way from the post-office to the bank, and had remained 
 there at maturity, and this loss, which occasioned the failure 
 to take the proper steps, or rather, in the present case, to fur- 
 nish the holder with the proper evidence of the dishonor of 
 the paper, so as to charge the prior parties, and enable him to 
 have recourse against them, is wholly attributable, according 
 to the verdict of the jury, to the collecting bank. In the 
 eye of the law merchant there was no presentment or demand 
 against the acceptors ; and, as a consequence of this default, 
 the holder has lost his remedy against the drawer and 
 indorser, which entitles him to one against the defendant."' 
 
 § 448. Agreement to collect note in another State. If a 
 bank agrees for a consideration to collect a note payable in 
 another State and neglects to give information of non-pay- 
 ment and to return the note to the depositor within a reason- 
 able time, it is liable. And if at the time of bringing an 
 action against the bank to recover the loss, the note is barred 
 by the Statute of Limitations and the bank has never re- 
 turned it until then, and the maker is solvent, the measure of 
 damages will be the amount due on the face of the note with 
 interest less the amount to be paid for collecting it.^ 
 
 § 449. Duty of bank when note is not negotiable. If a note 
 be not negotiable, of course, the duty of the bank is lessened. 
 But a bank is liable if any loss be made by regarding notes 
 as non-negotiable which are negotiable, and treating them 
 accordingly. Thus a note was given of the following form : 
 " Fourteen and one-half months after date, I promise to pay 
 to the order of the American Engine Company $450, at seven 
 per centum, at the Havana IN'ational Bank, at Havana, N. Y., 
 value received, being in part payment for a portable engine, 
 
 1 With respect to the burden of proof the judge said : " The loss of the bill 
 by the bank carried with it the presumption of negligence and want of care ; 
 and, if it was capable of explanation, so as to rebut this presumption, the 
 facts and circumstances were peculiarly in the possession of its officers, and 
 the defendant was bound to famish it." 
 
 ' Wingate v. Mechanics' Bank, 10 Pa. 104. 
 
§ 450 COLLECTION OF NOTES AND CHECKS. 455 
 
 which engine shall be and remain the property of the owner 
 of this note, until the amount hereby secured is fully paid." 
 It was indorsed and afterward deposited with the Havana 
 Ifational Bank for collection. In a suit against it for negli- 
 gence in not collecting the note, which consisted of an omis- 
 sion to protest the same properly and notify the indorsers, 
 the note was declared to be negotiable and the bank negligent 
 as described.* 
 
 § 450. When bank is liable though charging all parties. A 
 collecting bank may so act as to charge all the parties prop- 
 erly to a bill or note and yet be liable for a loss which could 
 have been prevented by the exercise of greater diligence on 
 its part. Says Judge Earl : " It is the duty of an agent who 
 receives negotiable paper for collection, in case such paper is 
 not paid, so to act as to secure and preserve the liability 
 thereon of all the parties prior to his principal ; and if he 
 fails in this duty, and thereby causes loss to bis principal, he 
 becomes liable for such loss. But this is not the utmost 
 limit of the agent's duty and liability. He may so act as to 
 charge all the parties to the paper and yet become liable for a. 
 loss occasioned by his negligence. The rule which will measure 
 the diligence which is exacted of a holder of such paper, in 
 order to charge the prior parties, will not always measure the 
 diligence which is required of a collecting agent in the dis- 
 charge of his duty to his principal. Suppose an agent re^ 
 ceives for collection from the payee a sight draft. No cir- 
 cumstance can make it his duty in order to charge the drawer 
 to present it for payment until the next day. He has entered 
 into no contract with the drawer, is not employed or paid by 
 him to render him any service, and owes him no duty to pro- 
 tect him from loss. What is required to be done to charge 
 the drawer is simply a compliance with the condition 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 
 
 » Mott V. Havana Nat. Bank, 22 Hun, 354. 
 
456 BANKS AND THEIR DEPOSITORS. § 451 
 
 agent on the day he receives the draft, obtains reliable in- 
 formation that the drawee must fail the next day, and that 
 the draft will not be paid unless 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 princi- 
 pal ; and yet the drawer would be charged if it was not pre- 
 sented until the next day. When 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 acceptance 
 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."* 
 
 § 451. Negligence of one bank to another. A bank failed 
 owing another for notes sent by it for collection. The bank 
 which sent the notes had paid the full amount to other banks 
 from which they had been received. The cashier of the 
 sending bank, which was the plaintiff in the case, had given 
 notice to the cashier of the failed bank to protest and return 
 all notes not paid, but the note of S., which had been sent 
 for collection and charged to the failed bank and entered in 
 the account against it, was not paid by S., neither was it pro- 
 tested or returned, or any notice of its non-payment given to 
 the sender. A semi-monthly statement of the account was 
 sent by the .cashier of that bank to the cashier of the failed 
 one who acknowledged that it was correct. The directors of 
 the failed bank did not know that the note had been re- 
 ceived, and its indebtedness to the other bank was met by 
 drafts furnished by S. to the cashier. A large portion of 
 
 > First Nat. Bank v. Fourth Nat. Bank, 77 N. Y. p. 323 ; Allen v. Suydam, 
 17 Wend. 368. 
 
§ 453 COLLBCTIOK OF NOTES AND CHECKS. 457 
 
 these, however, were not paid. The sending hank having 
 sued the other to recover the balance due,,it was decided, first, 
 that it did right in charging the note to the other bank 
 after a reasonable time had elapsed since sending it, and no 
 notice of non-payment had been received or the paper re- 
 turned ; and second, that the failed bank was liable ^notwith- 
 standing the lack of knowledge of the misdoings of its cashier 
 by the directors. "It is perfectly apparent," said Judge 
 Butler, " that the cashier of the defendant bank received the 
 notes, drafts and checks sent by the plaintiffs for collection ; 
 that he had ostensibly the powers usually given to the cashier 
 of such an association ; that it was his duty to collect them 
 or to protest and return them ; and that by retaining them 
 without collection, protest or notice, he made the defendant 
 bank liable to the plaintiffs for their amount."' 
 
 § 452. When last indorser can recover of collecting bank. 
 If the last indorser on a note left with a bank for collection 
 pays it supposing that proper demand has been made of the 
 prior indorsers, he can recover back his money on proving 
 that the bank neglected to do this thereby discharging them.^ 
 If, on the contrary, he should pay the note knowing that no 
 demand had been made, or that it was informal and irregular, 
 then, " on the clearest principles of common sense and common 
 justice," he could not recover.* 
 
 § 453. Bank cannot sell note. The leaving a note with a 
 bank for collection does not authorize it to sell the same. 
 But if it does so without authority, and satisfies the payee, 
 the purchaser cannot afterward collect it of the maker's 
 surety.* 
 
 (a) The payee of a joint and several note at the request of 
 the principal maker (the others having executed the same for 
 his accommodation), sent it to a bank for collection. C, at 
 the principal's request, and by agreement that the note should 
 
 ' Pahquioqne Bank v. Bethel Bank, 36 Conn. 325, p. 341. 
 
 2 Garland v. Salem Bank, 9 Mass. 408 ; Halls v. Bank, 3 Rich. 366. 
 
 ^ Halls V. Bank, supra. * Fuller v. Bennett, 55 Mich. 357. 
 
458 BANKS AND THEIK DEPOSITORS. § 455 
 
 be transferred to him, paid the amount to the bank and re- 
 ceived the note. The bank sent the money to the payee who 
 supposed that it had been paid to discharge the obligation. 
 After learning the facts however, he retained the money. 
 In an action by C. on the note, it was decided that although 
 the bank had no authority to sell it, yet the payee had 
 retained the money long enough after his knowledge of 
 the transaction to ratify the sale ; and' further, that in the 
 absence of evidence of injury to the sureties, by remaining 
 quiet under the belief that the note had been paid, C. could 
 recover.^ 
 
 § 454. How check must be collected. We now pass to the 
 collection of checks.^ Concerning these it is the duty of the 
 collecting bank to present them and demand payment within 
 the time prescribed by law, and if they are not paid, to notify 
 the proper parties of their dishonor. If credit has been given 
 to the depositor for the amount this may be cancelled.* 
 
 § 455. Principles in important cases, {a) First National 
 Bank v. Fourth National Bank.* Two cases, the outcome of one 
 event, illustrate some of the most important principles in the 
 collection of checks as well as in the mode of proceeding, when 
 they have been taken but not paid in discharge of a draft or 
 other written evidence of indebtedness. On the 22d of March, 
 1866, the Ifational Bank of Crawford County, at Meadville, 
 Pa., delivered to the First National Bank of Meadville a sight 
 draft drawn on Culver, Penn & Co., brokers in ITew York. 
 The latter bank indorsed the draft and sent it by mail to its 
 corresponding bank in New York, the Eourth National, for 
 
 ' CoykendaU v. Constable, 99 N. Y. 309. 
 
 * For duty of collecting bank to the sender of a forged check, see § 198. 
 
 3 Decatur Nat. Bank v. Murphy, 9 Brad. 112. " In cases of cliecks, which 
 bear a strong resemblance to bills of exchange, the party receiving one is not 
 chargeable with laches, though he does not present it the day it is drawn. 
 He is under no legal obligation to run with it immediately to the bank. A 
 reasonable time is allowed for that purpose, and the next day is held to be 
 such reasonable time," Hubbard, J., Taylor v. Wilson, 11 Met. p. 51. 
 
 • 77 N. y. 320 ; Rev. 16 Hnn, 332 ; second trial, 89 N. Y. 412. 
 
§ 455 COLLECTION OP NOTES AND CHECKS. 459 
 
 coHection and credit. The draft was received on the morning 
 of March 26th and immediately presented to the drawees for 
 payment. The drawees took the draft and gave their check 
 for the amount on the Third National Bank of the same city; 
 This check w^s not presented on the same day for payment, 
 but it was sent through the clearing-house on the 27th. On 
 tliat day, however, Culver, Penn & Co. failed, and the Third 
 National Banlc refused to pay the check. The Fourth Na- 
 tional Bank then returned the check to Culver, Penn & Co., 
 received back the draft, formally demanded payment of it, 
 caused the same to be protested for non-payment, and on the 
 next day, March 28th, served notice of the non-payment by 
 mail on the First National Bank of Meadville and also on 
 the drawer. In the first place it was decided that the Fourth 
 National Bank performed its whole duty in charging the 
 drawer, in other words, in rendering him liable on the draft.' 
 In the second place it was the duty of the Fourth National 
 Bank to have been reasonably diligent in presenting the check 
 for payment or certification, and this duty required it to pre- 
 sent the check to the Third National Bank for payment or 
 certification on the day it was received. Said Judge Allen 
 in another case^ involving the same principle : " 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 retaining the check and post- 
 poning presentment as between him and the persons in inte- 
 rest, whom he represents." He also added that "if a cus- 
 tom can exist in law and does exist in fact, authorizing such 
 delay at the risk of the absent principal, it must be shown ; 
 it cannot be presumed to exist without evidence." The account 
 of Culver, Penn & Co. at the Third National Bank was largely . 
 overdrawn on the day when the check was received by the 
 
 1 Turner v. Bank of Fox Lake, 3 Keyes, 425 ; S. C, 4 Abb. App. Dec. 434; 
 Aff. 23 How. Pr. 399 ; Bnrkhalter v. Seco^d Nat. Bank, 42 N. Y. 53^. 
 
 2 Smith B. Miller, 43 Id. p. 176. 
 
460 BANKS AND THEIR DEPOSITORS. § 455 
 
 Fourth JSTational Bank. On the other hand, the hank had 
 permitted them to overdraw during any day, they depositing 
 collaterals or making the account good the next day. More- 
 over, the bank paid all checks until Culver, Peun & Co.'s fail- 
 ure, including one drawn after the check given to the Fourth 
 ^National Bank in payment of the draft. These facts, the 
 court decided, justified the conclusion that the check in ques- 
 tion would have been paid had it been promptly presented. 
 
 (6) Barkhalter v. Second National Bank.^ In the other case 
 the Second I^Tational Bank of Erie, Pennsylvania, on the 24th 
 of March, drew a draft in favor of J. & B. on Culver, Penn 
 & Co. J. & B. indorsed and forwarded the same to Burk- 
 halter of itfew York, who received it on the morning of the 
 26th, about nine o'clock. It was soon afterward presented for 
 payment to Culver, Penn & Co., who gave their check for the 
 amount on the Third 2fational Bank of that city. The draft 
 was immediately charged to the drawer, the Erie bank. 
 When the check was presented the next day through the 
 clearihg-house in the usual course of business payment was 
 refused. Culver, Penn & Co. having failed on that day as pre- 
 viously described. Burkhalter then returned the check to 
 the makers, received the draft' and presented that again for 
 payment through a notary public, which was refused. The 
 draft was then protested for non-payment and notices of pro- 
 test were sent the next day, the 28th. If Burkhalter " had 
 demanded the currency on the draft of Culver, Penn & Co- 
 on the 26th, or early in the day of the 27th, it would most 
 probably have been paid ; but if all the persons, who, during 
 the same time presented drafts on them, had demanded cur- 
 rency, they could not have paid them all."* In a suit by 
 Burkhalter against the drawer, the Second National Bank, 
 Chief Justice Earl said that he was " bound to demand pay- 
 ment of the first draft on the day he received it [March 26th] 
 or the next day, and he had the right to hold it until the 27th. 
 The draft being payable on demand, he was bound to use 
 
 > 42 N. Y. 538. * Reporter's statement. 
 
§ 455 COLLECTION OF NOTES AND CHECKS. 461 
 
 reasonable diligence in demanding payment, and a demand 
 on the same day, or the next day, is, in the law, a demand 
 within a reasonable time.' It was sufficient to give the no- 
 tice of demand and refusal on the next day, the 28th of 
 March.' Therefore, in demanding payment of this draft on 
 the 27th and mailing notices of non-payment on the 28th, 
 Burkhalter did all that the law required of him, and the 
 Second National Bank was charged as drawer of the draft, 
 unless it was discharged by what took place on the 26th. On 
 that day the draft was neither paid nor refused to be paid. 
 Culver, Penn & Co. gave their check for it, and the check was 
 in due time, the next day, in the ordinary course of business, 
 through the clearing house, presented for payment and pay- 
 ment refused. There was no agreement to receive the check 
 in payment. It was taken by Burkhalter in the usual course 
 of business, he believing that it would be paid. He, then, on 
 the 27th, returned the check and reclaimed the draft and de- 
 manded payment upon it. The check did not for a moment 
 operate as a payment of the draft, and the whole transaction 
 does not show the absence of any diligence, which the defen- 
 dant had a right to demand of the plaintiff. It is settled that 
 upon precisely such a state of facts the drawer and indorser 
 of a draft are not discharged."' 
 
 (c) Shipsey v. Bowery National Sank. Shipsey deposited a 
 check drawn by M. on a bank at Portchester with a bank in 
 JSTew York for collection, which was credited to his account. 
 It forwarded the check on the second of the month. It 
 should have reached the other bank on the next day and an 
 answer would have reached the New York bank on the fourth. 
 The check was lost, but the New York bank did not know 
 
 1 Chitty on Bills, 377 ; Harker v. Anderson, 21 Wend. 372 ; Smith v. Janes, 
 20 Id. 192 ; Benton v. Martin, 31 N. Y. p. 385 ; Merchants' Bank v. Spioer, 6 
 Wend. 443 ; Hazleton v. Colhurn, 2 Abb. Pr. N. S. 199. 
 
 2 Farmers' Bank v. Vail, 21 N. Y. 485 ; Howard v. Ives, 1 Hill, 263. 
 
 ' Citing Johnson v. Bank of Nortli America, 5 Robt. p. 590 ; Smith v. Miller, 
 6 Id. 157, 413 ; Turner v. Bank, 3 Keyea, 425. For rule of damages in these 
 cases see § 482. 
 
462 BANKS AND THEIR DEPOSITORS. § 455 
 
 of this until the sixteenth. Two days afterward it notified 
 Shipsey that the check had not reached the Portchester bank, 
 and if not found, a duplicate would he required. The drawer, 
 M., had enough funds with the drawee to meet the check 
 until the twentieth, when he became insolvent, and subse- 
 quently the 'Sew York bank charged the check back to Ship- 
 sey. In an action to recover the amount of the check it was 
 held that the New York bank was negligent in not sooner 
 discovering the loss and notifying Shipsey and therefore was 
 liable to him for the damage he had sustained.' 
 
 (d) Application by depositor of his deposit. In the above 
 case another important principle was applied. The drawer, 
 M., left with Shipsey on the twentieth more than enough 
 money to pay the check. Shipsey at that time had other 
 cheeks of M. exceeding the amount paid which had been for- 
 warded for collection and dishonored, of which latter fact 
 however Shipsey was ignorant. M. did not direct how the 
 money should be applied, and Shipsey applied it on the 
 checks last mentioned. It was held that there was an 
 existing indebtedness to Shipsey on the dishonored checks at 
 the time of payment, although he was ignoi'ant of it, that he 
 had a right within a reasonable time to elect on which in- 
 debtedness he would apply the payment, and having so elected 
 the check in question remained unpaid and the defendant 
 bank was liable therefor. 
 
 (e) Indiana case.^ An interesting case involving numerous 
 questions of a very practical character was decided by the 
 Supreme Court of Indiana in 1881. A., a bank, holding a 
 check drawn in its favor indorsed it to B., a bank, " for collec- 
 tion for account of" A., and sent it by mail to B. with a let- 
 ter from the cashier stating, " I inclose for collection and cr., 
 as stated below (specifying other di-afts and checks). The 
 check was placed by B. on its collection register where checks 
 received for collection only were entered, nor was any credit 
 
 ' Shipsey v. Bowery Nat. Bank, 59 N. Y. 485. 
 « First Nat Bauk v. First Nat. Bank, 76 Ind. 561. 
 
§ 455 COLLECTION OF NOTES AND CHECKS. 463 
 
 given therefor. The cashier of B. inclosed the check for col- 
 lection and sent it to bank C, with authority by letter to 
 credit B. with the proceeds when collected. B. on the same 
 day failed, and the bank examiner took possession. Two days 
 afterward C. received the check and by its cashier presented 
 it, received payment, and credited the amount on its books to 
 B. which was at that time the debtor of C. Before the 
 cashier of C. collected the check, he had notice by newspaper 
 report of B.'s failure, but did not notify the drawee who had 
 no notice of the event. Shortly afterward the bank examiner, 
 who had the books of the B. bank in his possession, without 
 the knowledge or consent of A., credited A. and charged C. 
 with the amount of the cheek. The B. bank at that time 
 was also indebted to A. In an action by A. against C. it was 
 decided (1) that it could recover the money collected by C. 
 on the check ; (2) that the indorsement of the check to B. 
 by A. did not vest the title to it in B. nor give it any right to 
 the proceeds, and that the letter accompanying it meant sim- 
 ply that B. should collect the money for A. and place it to 
 A.'s credit, and not that B. should treat the check as its own 
 or credit A. therewith before collection, and that B. received 
 the check merely as the agent of A. for collection with 
 authority to credit A. when collected ; (3) that the transac- 
 tions did not make B. the debtor of A. before the check was 
 collected, nor did it deprive the latter of its right to the 
 check or its proceeds before collection by B. ; (4) that C. must 
 be regarded as the agent of B. in making the collection and 
 having been duly notified by the indorsement on the check that 
 B. was not the owner of it nor entitled to the proceeds, C. had 
 no right to credit the amount to B. on its indebtedness to C, ; 
 (5) that the newspaper notice of B.'s failure was sufficient to 
 require C. to regulate its action with a view to the rights of 
 A. as aftected by such failure. The failed bank had a power 
 to collect not coupled with an interest, for if it had collected 
 the money A. might have withdrawn the funds the next 
 moment, and as C. was the agent of that bank for collection it 
 had no greater right to the check as against A. than its prin- 
 
464 BANKS AND THEIR DEPOSITORS. § 456 
 
 cipal. (6) That the directions in the letter of the cashier of 
 A. to B. was an authority to mingle the fund with the gene- 
 ral funds of the bank when collected Avhereby A. would have 
 become the general creditor, but the insolvency and suspen- 
 sion of B, operated as a revocation of such authority, and if 
 it had the authority to collect at all after such suspension A. 
 was entitled to the specific fund, and C. being the agent of B. 
 had no more power or right to the specific fund than its prin- 
 cipal. (7) That what was done after B.'s suspension by the 
 direction of the bank examiner without the knowledge or 
 consent of B. could not injuriously aftect its rights. (8) That 
 the fact that C. had credited the amount collected on its debt 
 against B. could not discharge it from liability. (9) That the 
 bankruptcy of an agent operates as a revocation of his author- 
 ity, and authority to a bank to place collections to a custom- 
 er's credit when collected must be considered as revoked by 
 its suspension and failure. 
 
 § 456. Collection of check on forged indorsement. When a 
 collecting bank collects a cheek at the request of a party not 
 lawfully entitled to it, for example, a check having a forged 
 indorsement, the true owners are entitled to the money col- 
 lected whether it has been paid over to others or not. In 
 Johnson & Higgins v. The First l^ational Bank' the plaintiffs 
 were the owners of a series of checks payable to their order 
 that were stolen by their clerk, their indorsement was forged 
 thereon, and finally they came into the possession of the 
 defendant bank. It paid value for them, without notice that 
 Johnson & Higgins's name had been forged, and it collected 
 them in ignorance of the fact. The firm having sued to 
 recover the amount collected, the court followed the decision 
 in Talbot v. Bank of Rochester,^ in which case the bank was 
 held liable to the owner for the proceeds of a certificate of 
 deposit which it had received and collected on the faith of a 
 forged indorsement, and for the reason that it had received 
 and collected the obligation of the plaiiitifl' in the action, and 
 
 > 68 N. Y. ; Aff. 6 Hun, 124. 2 1 Hill, 295. 
 
§ 458 COLLECTION OF NOTES AND CHECKS. 465 
 
 by those acts had become liable to him for the amount real- 
 ized from it. In the case under consideration Judge Daniels 
 said : " The mere fact that the money of the plaintiffs col- 
 lected by the defendant without right was afterward paid 
 over to the other persons should not, upon principle, discharge 
 the defendant from liability. That occurred at once in the 
 present case as soon as the checks were disposed of and the 
 money was received upon them. The defendant then, in 
 judgment of law, held it for the plaintiff's, who were its 
 rightful owners, and it could not be exonerated from its 
 obligation by paying the amount to others who had never been 
 authorized to receive it. In making such payment, as well 
 as in the convei'sion of the checks, unindorsed by them, into 
 money, it acted so far in hostility to their rights as tg become 
 liable to them for the loss so occasioned. This is a general 
 principle well settled in the law ; and it includes commercial 
 paper not in a condition to be negotiated as well as other prop- 
 erty. The party receiving and disposing of it, in that condi- 
 tion, without authority, cannot avoid liability by showing 
 that its conduct was governed by good faith,^ or that it after- 
 ward paid over the proceeds to persons not in fact entitled to 
 receive them."^ 
 
 § 457. Unnecessary delay in presentation. If a bank receive 
 a check for collection and retain the same for four days 
 without making any effort to collect it or give notice to the 
 depositor of its non-payment, the bank is liable in the event 
 of loss. In such a case a promise subsequently made by the 
 depositor to pay to the bank the amount due by reason of the 
 loss is a contract without consideration.^ ' 
 
 § 458. Should not send check to drawee bank for pa3rment. 
 A collecting bank should not send a check or other instru- 
 ment to the bank primarily liable thereon for payment. To 
 
 1 Boyoe v. Brooiway, 31 N. Y. 490. 
 
 2 See also Justh v. National Bank, 56 Id. 478 ; Van Alstyne v. National 
 Com. Bank, 7 Trans. App. 241 ; S. C, 4 Abb. App. Deo. 449 ; Crandall ./. 
 Schroeppel, 1 Hun, 557. 
 
 3 Bank of New Hanorer v. Kenan, 76 N. Car. 340. 
 
 30 
 
466 BANKS AND THEIR DEPOSITORS. § 459 
 
 do this is negligence. In a recent case a certified check by 
 a banking house was deposited with a bank for collection, 
 which sent it to the certifiers for payment. The reason why 
 the bank did so was because it had no correspondent in the 
 town Avhere the bankers lived to demand payment of the 
 check. The bankers, instead of sending money for the check, 
 sent their own draft on another banker ; this, however, was 
 not paid because they were insolvent. The depositor asked 
 the collecting bank to make his loss good, and Judge 
 Schofield, who delivered the opinion of the court, said : 
 " Surely it could not be held reasonable care and diligence in 
 an agent holding for collection a promissory note given by 
 one individual to another individual, to send the promissory 
 note to the maker, trusting to him to make payment, delay it, 
 or destroy the evidences of indebtedness, and repudiate the 
 transaction as his conscience might permit ? If this would not 
 be held to be reasonable care and diligence, why should the 
 same contract be held to be reasonable care and diligence when 
 applied to a bank ?" The bank maintained it had no other 
 means at the place of payment to collect the check. But it 
 was under no obligation to the plaintiff to undertake this col- 
 lection. It should have informed the plaintiff of the difficulty 
 it was under, and then acted on its directions. If the defendant 
 felt authorized to take the risk without special stipulations 
 the plaintiff was authorized to assume that it was able to 
 make the collection, and that it had a proper agent through 
 whom to do it promptly.' 
 
 § 459. Liability when acting for public accommodation, 
 The State treasurer of New Jersey having been informed that 
 the State Bank at l^ew Brunswick was in an embarrassed con- 
 dition, drew on a State deposit 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 While it was forwarded for collection the same day, 
 
 1 Drovers' Nat. Bank .ii, Anglo-American Pack, and Prov. Co., 117 111. 100: 
 Aff. 18 Brad. 191 ; Merchants' Nat. Bank v. Goodman, 16 Week. No. Cas. 613. 
 
§ 461 COLLECTION OF NOTES AND CHECKS. 467 
 
 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 
 insolvency. The Trenton Bank was declared to be not charge- 
 able with the loss, as it was acting only as a collecting agent 
 for the accommodation of the State ; besides, the omission of 
 the treasurer to impart his knowledge of the failing condition 
 of the State Bank discharged the other.* 
 
 § 460. Is consideration necessary to hold bank for negligence. 
 In some cases stress has been laid on the want of consideration 
 for collection to excuse the collecting bank. In an Ohio case, 
 in which a jDank was excused for another reason, the court also 
 added as a kind of make-weight that the institution had no 
 agreement for compensation as collecting agent, nor any ex- 
 pectation of receiving one beside the incidental advantage 
 pertaining to such service.* 
 
 § 461. Notice, {a) How notice should be given. " Sometimes," 
 says Daniel, " a bank holding indorsed paper for collection 
 sends notice, in the event of its dishonor, to the indorser 
 from whom it was received. Sometimes it sends notices not 
 only to him, but also to the drawer and to all the indorsers, 
 addressed to their post-offices, or delivered at their places of 
 business, respectively. Sometimes it incloses notices for all 
 the parties entitled thereto under one envelope in company 
 with notice to the last indorser, that he may thus be conve- 
 niently supplied with the means of transmitting notice to 
 the successive indorsers, and to the drawer, antecedent to 
 him, if such there be. But how far the duty of the bank 
 extends in this regard, and what it must do to discharge 
 itself of liability, is a question upon which opinion has di- 
 vided. The weight of authority, however, is strongly to the 
 effect, and the law may be assumed to be, that it is only 
 necessary for the bank to notify its immediate predecessor, 
 that is, the party from whom it received the paper, no matter 
 
 » Freeholders of Middlesex v. State Bank, 32 N. J. Eq. 467. 
 2 Bank v. Butler, 41 Ohio St. 519. 
 
468 BANKS AND THEIR DEPOSITORS. § 461 
 
 what may be the nature of the title or interest of that party 
 to or in it. But special circumstances may vary this general 
 principle. Thus an agreement between the bank and its 
 principal may vary it. So also may a usage of the collecting 
 bank. And a local usage, as in the city of New York, for the 
 collecting bank to notify all parties entitled to notice, would 
 undoubtedly be respected and enforced."* 
 
 (6) Notary must disclose his agency. In giving notice the no- 
 tary must disclose his agency. Whenever a suit is brought to 
 recover on a protested draft the plain tift' must prove the notice ; 
 that it was in due time and was by some party to the instru- 
 ment, but the holder may act, in giving notice by an agent, 
 and in his name. And in a suit on such an instrument if there 
 be any evidence to show that the notary acted in behalf of the 
 holder, judgment will be rendered in his favor. And when 
 the evidence in a case showed that the notary was employed by 
 a bank holding a draft to protest it, that on the same day a 
 notice of dishonor was made and forwarded by him, the court 
 declared that " the notary had no motive to act in his own 
 behalf," and that " the duty rested on the bank to give notice" 
 and that these facts and circumstances seemed sufficient to 
 prove the agency of the notary.^ 
 
 (e) Notice must he froperly addressed. The letter or envelope 
 containing the notice must be " accurately directed and ad- 
 dressed." Says Judge Veazey : " This is the tenor if not the 
 precise language of all the books, the same particularity 
 being required in the direction as in the address. Yet it is 
 not every change or mistake in the direction of a notice that 
 vitiates it." " ' If the error is merely nominal,' " quoting from 
 Story, '"and is not calculated to mislead, or does not mislead 
 the party, the mistake will not be fatal.' The word ' accu- 
 rately' as applied to direction and address of notice of dis- 
 honor, has not been so defined that a court can in each case 
 say as matter of law just what alteration constitutes an in- 
 
 1 Neg. Inst. § 331, approved in Looke ». Merchants' Nat. Bank, 66 Ind. p. 
 363. 
 
 2 United States Nat. Bank v. Burton, 58 Vt. 426. 
 
§ 462 COLLECTION OP NOTES AND CHECKS. 469 
 
 accuracy." In a Vermont case the draft was signed Burton 
 & Sowles, who were copartners. The envelope containing the 
 notice was addressed, " 0. A. Burton, Edward A. Sowles," 
 one name above the other. It did not appear that there was 
 any delay, or that any one was misled. Consequently, though 
 the letter was not accurately addressed, the judgment was not 
 erroneous.* 
 
 (d) Notice must be given to all indorsers. In giving notice 
 to indorsers all are included, whether indorsers for value or 
 agents for collection. Thus, a branch of the Planters' Bank, 
 in Tennessee, purchased a bill of "W". The bill was transmitted 
 to J., president of the principal bank at Nashville, who 
 indorsed the same to a New Orleans bank for collection. 
 Having been protested, a notice of the same was sent to J. 
 He, too, had the same time to give notice to the branch bank 
 as though he were the owner of the bill, and so had the 
 branch bank the same time to give notice to "W"., and he to 
 M., a prior indorser.^ 
 
 In the event of a bank's failure, if it should put its notes 
 for collection into the hands of a private bank, and make his 
 office its own for discount and deposits, and the maker and 
 indorser of a note should know this, a presentation and de- 
 mand of payment at his office would be sufficient.* 
 
 § 462. Authority of collecting agents, (a) Are holders for 
 collection, demand and notice. " Collecting agents are recog- 
 nized in the law as holders for collection, and for all purposes 
 of demand and notice, and the exercise of due diligence after 
 dishonor, they are holders of the note ; and the law imposes 
 upon them the duty of doing all that the owner would be 
 
 ' United States Nat. Bank v. Barton, 68 Vt. 426. " In the Bank of Utica 
 V. Smith, 19 Johns. 231, the court decided that a demand of payment of a 
 note by a notary, or a person having a parol authority for that purpose, or 
 the lawful possession of the note, is sufficient." The note, on payment, 
 would have been surrendered, and wherever this may be lawfully done by 
 the holder, he may make the demand," McLean, J., Browning v. Andrews, 3 
 McLean, p. 578. 
 
 2 McNeil V. Wyatt, 8 Humph. 125. 
 
 s Crews v. Farmers' Bank, 31 Gratt. 348. 
 
470 BANKS AND THEIE DEPOSITORS. § 4G2 
 
 required to do for the protection of his rights, and makes 
 them liable over to the owner for default in that duty."' 
 ' (6) Degree of diligence in notifying. In a well-considered 
 case against a collecting agent in which it was claimed that 
 he had been negligent in notifying the indorser, Judge Butler 
 said •} " Due diligence in respect to notice becomes necessary 
 in consequence of the dishonor of the note, is to be exercised 
 subsequently to that event, and can involve no prior pre- 
 cautionary act. In strictness, therefore, it cannot be claimed 
 as an element of due diligence, that the owner, if he- has 
 knowledge of the residence of an indorser, shall send or give 
 that knowledge, prior to dishonor, to a distant holder for 
 collection ; although if the holder ' for collection' has such 
 knowledge, he must communicate it to the servants or notary 
 whom He employs after dishonor." 
 
 (e) What knowledge owner must give to agent. " A rule re- 
 quiring the owner to send his knowledge of the residence of 
 the indorser with the note to a holder for collection, would 
 be one involving much painstaking on the part of the owner, 
 which the indorser has no just right to insist upon. If pre- 
 caution is to be exercised before dishonor, to avoid the 
 possibility of mistake, the indorser should be required to 
 append his residence to his indorsement."' 
 
 {d) Bemarks on the rule. " Moreover, such a rule would em- 
 barrass the collection of negotiable paper, for unless a special 
 communication from the owner to the holder for collection 
 accompanied the note, the latter would not know whether 
 the owner knew the residence or not, and consequently 
 whether any diligence on his part would avail or not, and 
 his only safe rule of action would be to send the notices, in 
 all cases, to the owner to be forwarded. Such a rule is un- 
 
 1 Davey v. Jones, 42 N. J. Law, p. 30, citing Bartlett v. Isbell, 31 Conn. 
 296 ; Titua v. Mechanics' Nat. Bank, 35 N. J. Law, 588 ; Beale v. Parrish, 20 
 N. Y. 407. 
 
 s Bartlett v. Isbell, 31 Conn. 296. 
 
 ^ See the remarks of Brouson, J,, in Ransom v. Mack, 2 Hill, p. 592, and 
 of Church, J., in Belden v. Lamb, 17 Conn. 441. 
 
§ 462 COLLECTION OF NOTES AND CHECKS. 471 
 
 necessary. If a holder for collection or his servant, or a 
 notary, can not learn the residence of the indorser by due 
 diligence, he can and should send the notice to the owner, to 
 he forwarded." In this case the collecting agent presented a 
 note for payment, which having been refused, he delivered it 
 to a notary for protest. ISTeither the agent nor the notary 
 had any knowledge of the indorser's residence. The plaintiff 
 had knowledge of it, but did not communicate the infor- 
 mation. The agent and the notary used due diligence to 
 ascertain it, and were led lo believe that it was in M., and 
 sent a notice to the indorser there. He resided in N. and never 
 received the notice. Nevertheless, it was declared to be 
 sufficient. 
 
 (e) When collecting agent is responsible for draft left by another 
 agent. When a draft is left with a banker for collection and 
 he transmits the same to a collecting agency near the drawee, 
 the agency is directly responsible to the owner of the draft. 
 Such an agency can be discharged, however, by paying over 
 the money when collected to the banker from whom the draft 
 was received, but not by crediting his account with the 
 amount.' 
 
 1 Echarte v. Clark, 2 Edm. Sel. Ca. 445. The principal collection agency 
 cases not mentioned are Hoover v. Wise, 91 U. S. 308 ; Bradstreet v. Everson, 
 72 Pa. 124 ; Morgan u. Teuer, 83 Id. 305 ; Weyerliauaeu v. Dun, 100 N. Y. 
 150. 
 
472 . BANKS AND THEIK DEPOSITORS. | 463 
 
 CHAPTER 11. 
 
 LIABILITY OF THE COLLECTING BANK AND SUB-COLLECTING BANK 
 TO THE OWNER. 
 
 A LONG controveray has been waged by the State courts 
 whether a second or sub-collecting bank, appointed by the 
 first, shall be held responsible for its negligence to 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. 
 
 § 463. In New York first bank is responsible for sub-agent. 
 In New York, the first bank is responsible for the negligence 
 of the second. Judge Allen thus broadly declares the law : 
 " A bank receiving a bill or promissory note for collection, 
 whether payable at its counter or elsewhere, is liable for any 
 neglect of duty occurring in its collection, by which any of 
 the parties are discharged, whether of the officers and im- 
 mediate servants or other agents of the bank, or corres- 
 pondents or agents employed by such correspondents."- In 
 1839, the highest Court in the State* rendered this formal 
 determination on the subject : " Resolved, that when a bank or 
 broker, or other money dealer, receives upon a good considera- 
 tion a note or bill for collection in the place where such bank, 
 broker, or dealer carries on business, or 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 negotiation, collec- 
 tion, or paying over the money, by which the money is lost or 
 
 1 Ayrault v. Pacific Bank, 47 N. T. 570, p. 573 ; Walker u. Bank, 9 Id. 
 582 ; Commercial Bank u. Union Bank, 11 Id. 203 ; Montgomecy Co. Bank 
 V. Albany City Bank, 7 Id. 459. 
 
 2 Allen V. Merchants' Bank, 22 Wend. p. 244. 
 
§ 463 LIABILITY OF SUB-COLLECTING BANK. 473 
 
 other injury sustained by the owner of the note or bill, unless 
 there be some agreement to the contrary express or im- 
 plied." 
 
 (a) Where this rule prevails. The same rule has been ap- 
 plied in New Jersey,' Pennsylvania,^ Ohio,* Indiana,* Michi- 
 gan,* and by the Supreme Court of the United States^ and in 
 England. In the case before the latter tribunal a Pittsburgh 
 bank sent to one in New York for collection drafts drawn on 
 a company in Newark, New Jersey. The New York bank 
 accordingly sent them to a bank in Newark for collection, 
 and which was negligent in performing the service. The 
 Pittsburgh bank having sued its New York correspondent 
 to recover the loss. Judge Blatchford said in delivering the 
 opinion of the court : " We regard as the proper rule of law 
 applicable to this case that declared in Van Wart v. Woolley,' 
 where the defendants, at Birmingham, received from the 
 plaintiff a bill on London, to procure its acceptance. They 
 forwarded it to their London banker, and acceptance was 
 refused, 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 neglect of the 
 duty which they owed to the plaintiff, their employer, and 
 from whom they received a pecuniary reward for their ser- 
 vices. The plaintiff is, therefore, entitled 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 pecuniary reward for the service. But upon the prin- 
 
 1 Titus V. Mechanics' Nat. Bank, 35 N. J. Law, 588. 
 
 ° Wingate v. Mechanics' Bank, 10 Pa. 104. 
 
 3 Reeves v. State Bank, 8 Ohio St. 465. 
 
 * Tyson v. State Bank, 6 Blackf. 225. 
 
 5 Simpson v. Waldby, 30 Northwest. Rep. 199 ; Mackersy v. Ramsays, 9 
 Clark & Fin. 818; Bank v. Moore, Hamilton Co. Dis. Ct., 4 Bull. 291. 
 
 « Exchange Nat. Rank v. Third Nat. Bank, 112 U. S. 276 ; Taber v. Perrot, 
 2 Gall. 565 ; Hyde v. First Nat. Bank, 7 Biss. 166. 
 
 ' 3 Barn. & Cr. 439. 
 
474 BANKS AND THEIR DEPOSITORS. § 464 
 
 ciples we have stated, we are of opinion that by the. receipt 
 by the defendant of the drafts in the present case for collec- 
 tion, it became, upon general principles of law, and indepen- 
 dently of any evidence 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." 
 § 464. In Massachusetts first bank is not responsible for 
 sub-agent. 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 payment. 
 And as a part of the same doctrine it is well settled that if 
 the acceptor of a bill or promisor of a note has his resi- 
 dence in another place, it shall be presumed to have been in- 
 tended 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 was payable at that 
 place." In Eabens' Case "it was known at the time of the 
 indorsement of the note that the promisor lived in Philadel. 
 phia, and, of course, that the note must be sent there for col- 
 lection. "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."' 
 
 1 Shaw, C. J., Fabens a. Mercantile Bank, 23 Pick. p. 332, the learned 
 judge adding that " we cannot perceive that it makes any difference 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 col- 
 lected for him," Dorchester Bank v. New England Bank, 1 Cush. 177. 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 pre- 
 sented, for, although the defendant bank in that case was held to have con- 
 tracted directly with 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 situ- 
 ated," Exchange Nat. Bank v. Third Nat. Bank, 112 U. S. p. 282. 
 
§ 465 LIABILITY OF SUB-COLLECTING BANK. 475 
 
 (a) Where this rule prevails. This rule is followed in Con- 
 iiecticut,^ Maryland,* Missouri,* Illinois,* Tennessee,' Iowa,® 
 Wisconsin,'' Kansas,' and Mississippi.' " The authorities 
 which support this rule," says Judge Blatchford," " rest on 
 the proposition that since what is to be done by a bank em- 
 ployed to collect a draft payable at another place, cannot be 
 done by any of its ordinary officers or servants, but must be 
 entrusted to a sub-agent, the risk of the neglect of the sub- 
 agent is upon the party employing the bank, on the view 
 that he has impliedly authorized the employment of the sub- 
 agent, and that the incidental benefit which the bank may 
 receive from collecting the draft in the absence of an express 
 or implied agreement for compensation, is not a sufficient 
 consideration from which to legally infer a contract to war- 
 rant against loss from the negligence of the sub-agent." 
 
 § 465. Liability for neglect of notaries. While the two 
 rules are thus clearly defined other rules apply to collecting 
 banks for the negligence of notaries that are employed by 
 themselves or by sub-collecting agents. 
 
 First. Where principal bank is liable for negligence of notary. 
 In New York and iN'ew Jersey a collecting bank is liable 
 for the negligence of a notary or correspondent as well as of 
 its own immediate servants in presenting notes and giving 
 notices.*' " If," says Judge Allen, " the bank employs a notary 
 
 > Lawrence v. Stonington Bank, 6 Conn. 521 ; East-Haddam Bank v, Scovil, 
 12 Id. 303. 
 
 ' Jackson v. Union Bank, 6 Harr. & Johns. 146. 
 
 3 Daly V. Botchers & Drovers' Bank, 56 Mo. 94. 
 
 * iStna Ins. Co. v. Alton City Bank, 25 111. 243. 
 
 " Bank of Louisville v. First Nat. Bank, 8 Baxter, 101. 
 
 « Guelich u. National State Bank, 56 Iowa, 434. 
 
 ' Stacy V. Dane County Bank, 12 Wis. 629. 
 
 8 Bank v. Ober, 31 Kansas, 599. 
 
 ' Third Nat. Bank v. Vicksburg Bankj 61 Miss. 112 ; Tiernan v. Commer- 
 cial Bank, 7 How. (Miss.) 648. 
 
 » Exchange Nat. Bank v. Third Nat. Bank, 112 U. S. 276. 
 
 " Allen V. Merchants' Bank, 22 Wend. 215 ; Ayranlt v. Pacific Bank, 47 N. 
 Y. 570 ; Titus v. Mechanics' Nat. Bank, 35 N. J. Law, 588 ; Davey v. Jones, 42 
 Id. 28 ; Patterson Bank v. Butler, 7 N. J. Eq. 268. In South Carolina when 
 
476 BANKS AND THEIR DEPOSITORS. § 465 
 
 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 performed 
 by any clerk or other servant of the bank. This general lia- 
 bility may be varied by express contract or by implication 
 ai'ising from general usage.' . . But the practice and usage 
 of the banks adopted for their own convenience cannot vary 
 the contract between them and their dealers." 
 
 (a) When direction has been given to bank concerning protest. 
 Nor does a direction to the collecting bank to protest the note 
 if it be not paid, mean simply the handing 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 due and reasonable notice to the indorsers.^ 
 
 (6) Ignorance of legal duty no excuse. When a debt is lost 
 by the omission of a notary to give notice of the non-accept- 
 ance of a bill presented before maturity, the collecting bank 
 cannot be excused on the ground of not knowing its legal 
 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 con- 
 sequence 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 neces- 
 sary 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-accept- 
 ance to be given. Said the court : " Those who undertake to 
 collect foreign paper are as much bound to inform themselves 
 as to what is necessary to protect the holders of such paper 
 
 a bank places a note left for collection in the hands of a notary puhlio, he will 
 he regarded as an agent of the bank, for whose omissions or mistakes the bank 
 is liable, Thompson v. Bank, 3 Hill, 77 ; S. C, Riley, 81. 
 1 Ayrault v. Pacific Bank, 47 N. Y. p. 574. « Id. 570. 
 
§ 465 LIABILITY OF SUB-COLLECTING BANK. 477 
 
 as if it were domestic, and governed wholly by their own 
 local law."' 
 
 Second. Where sub-agent is liable for negligence of notary. 
 In Kansas,'' the sub-agents are liable for the negligence of the 
 notaries employed by them. 
 
 Third. Where principal bank is responsible for sub-agent, but 
 not for notary. In Ohio and in Federal practice the collect- 
 ing bank, though responsible for the negligence of the sub- 
 agent is not resyjonsible for the negligence of the notary'. 
 The reason is that he is an independent officer.' 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 repu- 
 table notary in season. We think this maj' 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."* 
 
 (a) Britton v. Niccolh.^ In another case decided by the 
 Supreme Court of the United States, Judge Field said : " It 
 is enough here that the notary was not in this matter agents 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 learn- 
 ing to whom they might have handed the notes for collection 
 in the conduct of a suit brought upon them." 
 
 I Allen V. Merchants' Bank, 22 Wend. p. 239. 
 
 8 Bank v. Ober, 31 Kan. 599. 
 
 3 Bank v. Butler, 41 Ohio St. 519. 
 
 * Bank v. Butler, Id. p. 525 ; Tiernan v. Commercial Bank, 7 How. (Misg.) 
 648 ; Agricultural Bank v. Commercial Bank, 7 Sm. & M. 592 ; Bowling d. 
 Arthur, 34 Miss. 41. 
 
 « 104 U. S. 757. 
 
478 BANKS AND THEIR DEPOSITORS. § 467 
 
 {b) Is responsible for notary appointed by itself. But a collect- 
 ing bank is responsible for the negligence of a notary appointed 
 by it for a year, and from whom a bond is required for the 
 faithful discharge of his duties, in failing to give notice to an 
 indorser of a negotiable promissory note of a demand upon 
 and refusal of payment by the maker by which the indorser 
 was discharged. The notary, when thus appointed, is not an 
 independent officer in the discharge of a duty devolved upon 
 him by law, but is the agent of the bank.' 
 
 FourtL Where principal bank is responsible for neither sub- 
 agent nor notary. The fourth rule is that a collecting bank 
 which is not responsible for the negligence of the sub-agent 
 is not responsible likewise for the negligence of a iiotary 
 employed by it.' 
 
 § 466. Liability of bank for sub-agent by agreement. If a 
 bank be not responsible for the negligence of a sub-agent, it 
 may become so by special agreement. Thus, if a bank in 
 Philadelphia should enter into a special agreement or receive 
 a pecuniary reward for its service in collecting bills, beyond a 
 mere charge to cover expense, and a bank in Virginia should 
 be its agent for that purpose, it would be responsible for the 
 neglect of the Virginia bank.* 
 
 § 467. Duty of principal bank to notify sub-agent about in- 
 dorser. If a banker at St. Paul, Minnesota, for example, 
 receive a note for collection payable at St. Anthony, and is 
 
 1 Gerhardt v. Boatman's Sav. Institution, 38 Mo. 60. This is New York 
 doctrine, Allen v. Meroliants' Bank, 22 Wend. 215, and other cases ; Reeves 
 V. State Bank, 8 Ohio St. 465 ; American Express Co. v. Haire, 21 Ind. 4 ; 
 Branch of Bank of State of Ala. v. Knox, 1 Ala. 148 ; Bank of Mobile v. 
 Hnggins, 3 Id. 206 ; Taber v. Perrot, 2 Gall. 565 ; Van Wart v. Woolley, 3 
 Barn. & Cr. 439. But not in Conneticut, East-Haddam Bank c. Scovil, 12 
 Conn. 303 ; Warren Bank v. Suffolk Bank, 10 Cnsh. 582 ; Citizens' Bank ». 
 Howell, 8 Md. 530 ; Bowling v. Arthur, 34 Miss. 41 ; Hyde v. Planters' Bank, 
 71 La. 560 ; Bellemire v. Bank of United States, 1 Miles. 173 ; Aff. in 4 Whart. 
 105. 
 
 ' Agricultural Bank v. Commercial Bank, 7 Sm. & M. 592; Tiernan v. 
 Commercial Bank, 7 How. (Miss.) 648 ; Bowling v. Arthur, 34 Miss. 41. 
 
 " Mechanics' Bank v. Earp, 4 Raw. 384. 
 
§ 468 LIABILITY OF SUB-COLLECTING BANK. 479 
 
 informed that there are two persons of the same name as the 
 indorser, one of them residing at St. Paul and the other at 
 Nininger, not far away, and that the one residing at the 
 latter place /is the indorser, the banker should convey this in- 
 formation to the agent employed at St. Anthony to collect 
 the note. Said the court in a case of this kind : " No custom 
 could absolve the banker from this duty, as it was the very 
 essence of his undertaking, the fixing of the liability of the 
 indorser."' 
 
 § 468. Duty of bank to depositor for note left for collection 
 through another banki When a bank receives a note from 
 a depositor for the purpose of transmitting it to another bank 
 where it is payable for the purpose of receiving payment, a 
 sub-agency is not created, the depository therefore is not re- 
 sponsible for the negligence of the other. Thus in Indig's 
 case^ a note was sent by the National City Bank of Brooklyn 
 to a bapk in Lowville for collection. Indig contended 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 charging 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. " The note," said Judge Rapallo, " in so far 
 as it relates to its presentment at the bank and the duties of 
 the bank in respect to it, was equivalent to a check drawn by 
 the maker upon the bank where the note was made payable.* 
 The bank owed a duty to its customer to pay it on presenta- 
 tion, if in funds. The defendant used the United States mail 
 to make the presentment, and by this means caused it to be 
 presented to the bank for payment on the day when due. It 
 did not deposit it there for collection. If there had been 
 indorsers it might be argued that the defendant constituted 
 the bank of Lowville its agent to notify the indorsers of non- 
 
 1 Borup V. Nininger, 5 Minn. 523, p. 555. " 80 N. Y. 100. 
 
 3 ^tna Nat. Bank v. Fourth Nat. Bank, 46 Id. 82. 
 
480 BANKS AND THEIR DEPOSITORS. § 468 
 
 payment, but even this is very questionable, for it was held 
 in a similar case that if the proceeds were not remitted the 
 paper should be deemed dishonored, and notice of non- 
 payment should be given by the bank which had sent it.* !N^o 
 such question arises however in the present case for there were 
 no indorsers. 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 defend- 
 ant. There is nothing in the nature of the transaction which 
 should render the defendant guarantor of the solvency of the 
 Bank of Lowville. It was recently held by this court in the 
 case of the People v. The Merchants & Mechanics' Bank of 
 Troy^ that by sending a check through the mail to the bank 
 on which it was drawn, the sender did not constitute that 
 bank its agent to receive the proceeds. And, as before said, 
 a note payable at a bank where the maker keeps his account 
 is equivalent to a check drawn by him upon that bank, except 
 that in the case of a note the failure to present for paymeilt 
 does not discharge the maker. But as far as the question now 
 under consideration is concerned, the effect is the same. 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 pi'esents it by mail different from 
 that which would exist if presented 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 same principle had been long 
 before applied in Pennsylvania.' But if a bank accept a 
 draft from a customer for collection, and no special contract is 
 made concerning its liability, the bank is liable for the amount 
 
 1 Bailey v. Bodenham, IS C. B. N. S. 288. 2 78 N. Y. 269. 
 
 3 Mechanics' Bank v. Earp, 4 Raw. 384. 
 
§ 471 LIABILITY OF SUB-COLLECTING BANK. 481 
 
 in the event of the failure of an agent who has collected the 
 same.' 
 
 § 469. Sub-collecting bank cannot acquire title to draft 
 against true owner, If a collecting bank put a bill into 
 another bank as security for a prior loan the title of the 
 second bank will not stand against the owner.'' And if a 
 collecting bank deliver a note, which has been indorsed for 
 collection to a sub-agent, and afterward fail owing the sub- 
 agent on account of overdrafts, the latter cannot keep the note 
 or its proceeds from the true owner. 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 instruc- 
 tion to collect 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 assigned the 
 note and draft to the plaintiff, it was decided that he could 
 recover them of the latter institution.' 
 
 § 470. Title of first bank to draft is not lost by sending it to 
 sub-agent. As a bank that receives drafts merely for collec- 
 tion is the agent of the holder for that purpose its title is not 
 divested by sending them to another bank to be collected. 
 Consequently the first bank has the right to present them for 
 payment whenever the other becomes insolvent without sub- 
 jecting itself to liability as the drawer in a suit by the receiver 
 ceiver of the insolvent institution.* 
 
 § 471. If instructions to principal bank be violated sub- 
 agent cannot be held therefor. If a draft be deposited with a 
 bank and its instructions with respect to collecting the same 
 
 • Power V. First Nat. Bank, Montana Sup. Ct., 12 Pacific Eep. 597. 
 
 2 Lee V. Smead, 1 Met. (Ky.) 628. 
 
 ' Stark V. United States Nat. Bank, 4 N. Y. State Rep. 56. 
 
 ' Atkinson .;. Stafford, N. Y. Sup. Ct., 20 Week. Dig. 49. 
 
 31 
 
482 BANKS AND THEIR DEPOSITOES. § 472 
 
 and keeping the proceeds are violated, the depositor cannot 
 hold the sub-agent liable. Thus a draft was deposited with 
 instructions to treat it as a separate fund. It was forwarded 
 by the bank to its correspondent for collection and credit. 
 The deposits of the correspondent bank were constantly- 
 changing by reason of drafts and deposits so that no specific 
 moneys could be identified. The original depositor on the 
 failure of the first bank could not reclaim the entire amount 
 of his draft from funds then remaining in the correspondent 
 bank to the credit of the other, nor could he recover more 
 than his pro rata share like any other creditor.' 
 
 § 472. Liability of bank for branch bank. A promissory 
 note payable twelve months after date at the Citizens' Bank 
 in New Orleans, 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 Rouge. 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 notices of protest for 
 the indorsers were mailed to the cashier of the branch bank. 
 A., on whom reliance was principally 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 protest. The bank therefore was 
 declared liable for any loss sustained by the holder of a note.' 
 
 ' Edson ». Angell, 58 Mich. 336. , 
 
 2 iiird V. Louisiana State Bauk, 93 U. S. 96. 
 
§ 474 PROCEEDS OF COLLECTIONS. 483 
 
 CHAPTER III. 
 
 PROCEEDS OF COLLECTIONS. 
 
 § 473. Bank can receive only money. In the absence of 
 special authority or usage a collecting bank has a right to 
 receive only money in payment. And if it receive the debtor's, 
 check on another bank this is conditional payment only, 
 and it becomes the agent of the drawer of the check to 
 receive the money ; until this is received the payment is not 
 complete.^ Hence a collecting bank without instructions 
 cannot be relieved from paying the amount in lawful money 
 by showing that Confederate notes, for example, were in circu- 
 lation at the time the note was collected, and that it received 
 and paid these indifferently with other currency. It would be 
 protected though in receiving them if it could show that the 
 owner of a note, sent for collection, knew that such notes 
 were received in payment and assented to or ratified the tak- 
 ing of them.* In Alabama a depositor left notes and drafts 
 for collection between 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 Confede- 
 rate currency at the time of making the demand.' 
 
 § 474. Bank is debtor, not agent, for amount. "As a gene- 
 ral rule, after the collection is made the bank becomes a sim- 
 ple contract debtor for the amount, less any commissions 
 which may be charged. If the party for whom the collection 
 
 » Levi V. National Bank, 5 Dill. 104 ; Ward «.. Smith, 7 Wall. 447 ; Mer- 
 chants' Nat. Bank t'. Goodman, 14 Week. No. Cas. 531 ; S. C, 16 Id. 513. 
 
 ' Greeves v. Louisiana State Bank, 22 La. Ann. 228. 
 
 ' Henry & Co. v. Northern Bank, 63 Ala. 527 ; Planters' Bank v. Union 
 Bank, 16 Wall. 483. 
 
484 BANKS AND THEIR DEPOSITORS. § 475 
 
 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 differ- 
 ent course of dealing. If the party has no deposit account the 
 bank simply owes him the amount on demand."' In Illinois 
 if a collection is mingled with other funds of the bank it be- 
 comes a general deposit and is governed by the same rules. 
 Hence if the money collected depreciates the bank must suffer 
 the loss.* This rule though does not apply everywhere.* 
 
 (a) Unless bank is insolvent before collecting. But it does 
 apply very generally to solvent collecting banks. In the 
 ^vent of failure the Supreme Court of Texas has remarked 
 that both on principle and authority a bank ceases to have 
 the genera] power and authority which it previously had to 
 collect paper. The " subsequent collection must be held by 
 it as agent in trust for the owner."* 
 
 § 475. Use of proceeds by collecting bank, {a) First 
 ■ National Bank v. Gregg ^ Co? A collecting bank has no 
 right to use the proceeds of a collection for its own benefit. 
 Thus a note made to the order of Gregg & Co. and indorsed 
 by them was sent through B.'s banking house for collection. 
 B. indorsed the note and sent it to the defendant bank " for 
 collection and credit." By indorsing the note B. did not be- 
 come the owner of it and had no right to pledge it or direct 
 its proceeds to be credited to him in payment of his indebt- 
 edness to the bank. If, however, the bank had made ad- 
 vances or had given a new credit to Brady on the faith of the 
 note it could have retained the amount from the proceeds. 
 
 (6) Charlotte Iron Works Case? An interesting question 
 joccurs when a collecting bank diverts the proceeds of a bill 
 
 1 Bonner, J., Jocknscli v. Towsey, 51 Texas, p. 132 ; Planters' Bank v. 
 Union Bank, 16 Wall. 483 ; In re Bank of Madison, 9 N. Bank. Reg. 184; 
 Duncan v. Magette, 25 Texas, 245 ; Tinkham & Co. v. Heyworth, 31 111. 519. 
 
 « Marine Bank v. Rushmore, 28 Id. 463. » See § 277. 
 
 • See § 277. German American Bank v. Third Nat. Bank, 2 Texas L. J. 150. 
 
 6 79 Pa. 384. 
 
 ° Charlotte Iron Works v. American Ex. Nat. Bank, 34 Han, 26. 
 
I 475 , PROCEEDS OF COLLECTIONS. 485 
 
 or note collected from its true destination, for examp e, when 
 it uses the money collected to extinguish an obligation of its 
 own without any knowledge by the payee of the source 
 whence it came. Such a case arose in New York. The 
 Charlotte Iron Works held a draft which was accepted by 
 Dunning, payable December 19th, at the National Exchange 
 Bank of Auburn. Several days before maturity the draft 
 was sent by the holder to the City Bank of Rochester, where 
 an account was kept, stating that it was sent for collection, 
 and directing that the proceeds be credited to its account. 
 On December 9th the City Bank sent the draft to the Auburn 
 bank, where it was payable, directing it to send the proceeds 
 when collected to the American Exchange Nat. Bank of 
 New York City. On the 19th of December the Auburn 
 bank charged the amount of the draft to Dunning, drew its 
 own draft on the National Park Bank of New York City to 
 the order of the cashier of the American Exchange Nat. Bank, 
 and sent the same to it by mail, stating that it should be 
 credited to the City Bank. The draft was paid the next day 
 through the clearing house and credited to the City Bank, 
 which at that time was indebted for more than that amount 
 to the American Exchange Nat. Bank. The City Bank was 
 insolvent on the 19th of December and closed its doors at 
 three o'clock in the afternoon. It was decided in a suit by 
 the Charlotte Iron Works against the American Exchange 
 Nat. Bank that as it had received the draft of the Auburn 
 bank and had applied the amount in good faith toward the 
 discharge of a debt due to it from the City Bank, it could 
 retain the money. 
 
 "All persons," said Judge Barker in his opinion, "dealing 
 with the City Bank in the due course of business and in 
 good faith, acting upon the assumption that it was the owner 
 of the draft and its proceeds and being ignorant that it was 
 the mere agent of the plaintiff, the owner, are protected by 
 well-settled principles. By the several transactions had, the 
 Dunning acceptance was paid up in cash. There was no. 
 longer in existence any paper representing the plaintiff's debt 
 
486 BANKS AND THEIR DEPOSITORS. § 475 
 
 against Dunning, In legal effect the debt had been paid 
 in money to the defendant. This money came to the defend- 
 ant from one of its customers, who was its debtor, in the due 
 course of business, with directions to credit the same on its 
 overdrawn account. The transaction is the same and the de- 
 fendant's title to the money as good as if Dunning had paid 
 the draft in currency and ,^he Auburn bank had remitted 
 the identical moneys to the defendant in compliance with 
 the order given to it by the City Bank of Rochester. The 
 intermediate transaction, which was adopted by the bank in 
 Auburn, to secure a transmission of the proceeds to the de- 
 fendant was for its own convenience and was the customary 
 mode of making remittances between those places. The 
 collection through the clearing house was in legal effect the 
 same as if the defendant had sent the draft for- payment by 
 its own messenger, and at the counter of the Park Bank had 
 received the currency and returned it to the defendant, and 
 the amount credited to the City Bank of Rochester as cash 
 paid on its indebtedness."' 
 
 (c) When principal cannot follow the money. "Asa general 
 rule where the trustee or agent has converted the subject of 
 his trust or agency into money and pays the same in the due 
 course of business, in discharge of his own indebtedness, to 
 one ignorant of the nature of his title, the payee acquires a 
 perfect and indefeasible one as against the real owner. In 
 such a case the right to follow the money by the principal is 
 gone."* 
 
 {d) The case of Espy v. Bank of America is instructive. 
 Espy had been accustomed for two years to send frequently 
 to the defendant bank notes and drafts for collection on a 
 merchant residing in the town where it did business. They 
 were presented and almost always he drew drafts on mer- 
 
 .1 Indig V. National City Bank; 80 N. Y. 100 ; First Nat. Bank v. Leach, 52 
 Id. 350 ; Justh v. National Bank, 56 Id. 478 ; Turner v. Bank, 3 Keyes, 425. 
 
 2 Charlotte Iron Works v. American Ex. Nat. Bank, 34 Hun, 26, p. 30 ; 
 Wood V. Boylstou Nat. Bank, 129 Mass. 358 ; Stephens v. Board of Education, 
 79 N. Y. 183. 
 
§ 476 PROCEEDS OF COLLECTIONS. 487 
 
 chants in Cincinnati for the amount, which were accepted by 
 the bank and sent to Espy, who never returned any of them. 
 Finally a draft which was thus sent not having been paid, 
 Espy tried to recover the amount from the bank. But it was 
 decided that by accepting such drafts for so long a period 
 a custom was created in favor of the defendant, and con- 
 sequently that he was relieved from paying.' 
 
 (e) In Bank of Attica v. Metropolitan National Bdnlc^ the lat- 
 ter institution collected several drafts that were sent by the 
 other and applied the proceeds by direction of another party 
 to discharge commercial paper in its possession belonging to 
 the iBank of Attica. This, however, was a violation of its 
 duty and the Bank of Attica recovered the amount. In an- 
 other case A. drew his draft on B., payable to the Bank of 
 Dansville and sent it there for collection, with' specific instruc- 
 tions to remit the proceeds. The draft was duly paid, but 
 instead of remitting the proceeds (as the bank was insolvent) 
 it drew another draft on a corresponding bank for the amount, 
 payable to A. and sent this to him. He sent this draft for 
 collection, but it was returned dishonored. It was decided 
 that this draft was no payment,.that the Bank of Dansville 
 was merely a bailee of A.'s funds, and, therefore, he could 
 follow them into the hands of its receiver.^ 
 
 § 476. Bank shonld not send check to drawee for payment. 
 " It is not a reasonable usage that one who collects a draft for 
 an absent 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."* The collecting bank should send it to 
 Ian independent agent for collection, and who, furthermore, 
 should receive money and not another instrument in payment. 
 If, therefore, a bank should give a check received from a de- 
 positor to the drawee bank for payment, and should accept 
 
 1 New York Daily Reg., Jan. 7th, 1885. 2 97 N. Y. 639. 
 
 ' People V. Bank of Dansville, 23 Week. Dig. 358. 
 
 * Chapman, C. J., Whitney v. Esson, 99 Mass., p. 311. 
 
488 BANKS AND THEIR DEPOSITOES. § 478 
 
 in return its check on another bank -v^hich is not paid, the 
 depositor could recover the amount from the depository.* 
 
 § 477. Rights of parties when one note is wrongfully taken 
 for another. As a collecting bank should not take another 
 note for the one to be collected, if it does so and fails, 
 what claim has the owner of the note first sent on the collect- 
 ing bank? This question was decided in a Kansas case. 
 The Harrison Ifational Bank sent a note for $2000 to the 
 Riley County Bank for collection. The latter bank, instead 
 of collecting it, took a new note for the amount payable to 
 itself, and not long afterward failed. The Harrison Bank 
 sought to have the court declare that the assignee of the 
 Riley Bank was a trustee of a fund to the amount of $2000 
 belonging to the other bank. This the court would not do. 
 Judge Valentine said that other creditors beside the Harrison 
 Bank had rights to the general funds and assets of the 
 insolvent bank, and that their rights must be protected. 
 The most that could be done in such a case by the Harrison 
 Bank was to recover the note from the assignee and then sue 
 the maker.^ 
 
 § 478. How long authority continues to collect. " A bank at 
 which a negotiable note is payable, and at which it is deposited 
 for collection, is of course the agent of the holder or depositor 
 to receive the money if paid at such bank at the maturity of 
 the note, and, though not then paid, has no doubt implied 
 
 1 Merchants' Nat. Bank v. fioodman, 16 Week. No. Cas. 513 ; Aff. 14 Id. 
 531. The leading features in this case are stated more fully and with ac- 
 curacy by the reporter in the head-note : A bank with which a check is 
 deposited by a customer for collection, under an agreement that the de- 
 positor's liability as indorser shall continue until payment is ascertained 
 by the bank, is bound to transmit the check to an independent agent for 
 collection, with instructions to present the same for payment, and if this be 
 refused, to have the check protested and immediately returned. It should 
 not send the check to the drawee bank and accept from it a draft on another 
 bank in payment. If it does so, the original check is cancelled, and the ac- 
 count of the drawer is charged with the amount, and if by reason of the fail- 
 ure of the bank on which the check is drawn, the draft remains unpaid, the 
 first bank is responsible to the depositor. 
 
 > National Bank v. EUiuott, 31 Kansas, 173. 
 
I 479 PROCEEDS OJ' COLLECTIOHS. 489: 
 
 authority to receive the money at any time thereafter and 
 ■while the note remains at the bank. It very often happens 
 that such a note is taken up at bank shortly after the protest, 
 and with a view to save the credit of the debtor; and it there- 
 fore very often happens that a protested note is suft'ei-ed by the 
 owner to remain at bank some time after protest, with a hope 
 that it may be thus takeii up." In regard to notes payable 
 at a bank in Virginia before the civil war, deposited for col- 
 lection, and protested for non-payment, but neglected to be 
 withdrawn from bank by the owner residing in that State, it 
 was questioned whether after the lapse of two or three years, 
 the bank would have authority to receive payment of such 
 Botes in a currency which came into existence after the protest 
 of the note, and which at the time of such payment had depre- 
 ciated in value as 12 to 1 compared with specie, in which 
 payment might legally have been demanded ; or whether the 
 debtor having notice of the facts could make a valid payment 
 of the note in such a currency and under such circumstances. 
 It might not be reasonable to infer an authority to receive 
 payment in such a currency under such circumstances from the 
 mere omission to withdraw the notes from the bank. But in 
 the case of a non-resident owner a bank would have no au- 
 thority to receive payment of notes in depreciated Confederate 
 currency.* 
 
 § 479. Remedy. When a collecting bank fails to pay over 
 the money received on drafts collected for another, between 
 which an account is kept, the remedy is against the defaulting 
 bank and not against the drawers.* 
 
 » Alley V. Rogers, 19 ffratt. 366. 
 
 " Kupfer V. Bank of Galena, 34 IZI. 328. 
 
490 BANKS AND THEIR DEPOSITORS. § 482 
 
 CHAPTER IV. 
 
 DAMAGES. 
 
 § 480. Amount recoverable. The damage that may be re- 
 covered of the collecting bank when in the wrong is the amount 
 actually sustained by the sender. If the instrument left for 
 collection 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 in- 
 terest.* 
 
 § 481. Bank not liable for expense in prosecuting indorser. 
 But a bank which is thus liable for the amount of a note and. 
 interest is not liable for the costs and expenses incurred in 
 prosecuting the indorser.^ 
 
 § 482. Damage recoverable in Culver, Penn & Co. cases. In 
 the litigation growing out of the failure of Culver, Penn & 
 Co., which has b#en described, 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 recovered 
 against the collecting agent. This presumption, however, 
 does not stand in the way of proving and recovering the actual 
 loss incurred by the negligence of the collecting bank. Ac- 
 cordingly, on a second trial of the case, for the purpose of 
 showing damage to the full amount of the draft, the Mead- 
 ville Bank offered in evidence the judgment record of a 
 
 1 Amerioan Express Co. v. Haire, 21 Ind. 4 ; Chapman v. McCrea, 63 Id. 
 360 ; Tyson v. State Bank, 6 Blaokf. 225. 
 
 2 Downer v. Madison County Bank, 6 Hill, 648. 
 
§ 483 DAMAGES. 491 
 
 Pennsylvania court in an action on the draft whereby it was 
 adjudged that the acceptance of the check and omission to 
 make due presentment constituted as between the Crawford 
 County, Meadville and Fourth iSTational 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 be the full amount of the draft. 
 It may be also added that it was declared to be not necessary 
 to tender the draft to the Fourth iffational Bank before 
 beginning the suit thereon.' 
 
 § 483. Remarks of Minnesota court on the subject. 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 
 insolvency of the iudorser, or that the 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."^ But the mere fact 
 that the indorser was in embarrassed circumstances is imma- 
 terial and forms no defence.* " In an actipn 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 obliga- 
 tion of the maker. The general rule is that in an action for 
 negligence 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 particu- 
 lar 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 
 
 ' First Nat. Bank of Meadville v. Fourth Nat. Bank of New York, 89 N. 
 Y. 412. 
 
 ' Bornp V. Niniiiger, 5 Minn. 523, p. 549, citing among other cases, Hoard 
 V. Garner, 3 Sand. 179 ; Blot v. Boioeau, 3 N. Y. 78. 
 
 » Steele v. Russell, 5 Neb. 211. 
 
492 BANKS AND THEIR DEPOSITORS. § 484 
 
 fade appear to have been sustained by the negligent omission 
 to charge the indorser."' 
 
 § 484. Loss must be proved, (a) Indig's case? In order to 
 recover of a collecting agent the party suing must prove that 
 he has sustained loss. Indig deposited with a Brooklyn bank 
 for eolleetion a note to which there was no indorser save the 
 maker. It was payable at a bank in LoVville, 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 received the 
 draft the next day, Saturday, after business hours, and for- 
 warded it on Monday morning in the usual course of business 
 to the clearing house in I^ew York, which returned it " not 
 good." The Brooklyn bank immediately 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 suftered any 
 damage, for the receipt of the draft was not payment, and 
 consequently the maker was not discharged from liability. 
 
 (6) North Carolina case. In the Bank of If ew Hanover v. 
 Keiiau,* Moffit drew 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, speaking for the court, said that " the 
 measure of damages which the holder is entitled to recover 
 of the bank or collecting agent who has been guilty of neg- 
 ligence is the actual loss which has been suffered. That loss, 
 prima facie, is the full amount of the bill or note ; but evi- 
 
 1 Taloott, J., Mott V. Havana Nat. Bank, 22 Hun, 354, p. 358, citing First 
 Nat. Bank v. Fourth Nat. Bank, 77 N. Y. 320 ; Allen v. Suydam, 20 Wend. 
 321. 
 
 • Indig V. National City Bank, 80 N. Y. 10.0.. ' 76 N. Car. 340. 
 
§ 484 DAMAGES. '493 
 
 deuce is admissible to reduce it to the actual loss.' Eut 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 cheek on itself. Of 
 necessity it must be assumed that it was presented for pay- 
 ment, that it acted upon, at the time it was payable by the 
 bank. If it was then accepted by the bank, the amount of 
 the check became a cash deposit to the credit of the defend- 
 ant, paid out of the funds of Mofiit 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 acceptance on 
 its part. When a holder of a check presents it for payment 
 the drawee has only a reasonable time to inspect 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 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 collectino- asent, 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 Sep- 
 tember; it both received and paid out large deposits made by 
 him up to the 13th of September. . . Why was this cheek 
 not provided for? Moffit says he thought it had been, and 
 had been paid out of his deposits, and had he known that it 
 had not been paid he would have paid it or have failed sooner. 
 Why was payment of the check not demanded and why was 
 the defendant kept in ignorance of its non-payment until 
 after the failure of Moffit became known to the world four 
 
 " Stowe V. Bank of Cape Fear, 3 Dev. 408. 
 
494 BANKS AND THEIE DEPOSITORS. § 484 
 
 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." 
 
IlfDEX. 
 
 [the FiaUKES KEFEB TO SECTIONS.] 
 
 ACCEPTANCE. 
 
 1. Check may be accepted by deducting amount from depositor's account, 
 
 237. 
 may be accepted verbafly, 229. 
 
 2. Check holder can sue after, 343. 
 
 ACCOUNT. 
 
 1. Is open to examination though pass-boot has been settled, 48. 
 
 2. Evidence may be admitted to explain technical terms, 48, b. 
 
 3. How account must be kept, 37. 
 
 4. How account can be closed, 38. 
 
 5. Ownership of deposits when account is overdrawn, 17. 
 
 6. Partnership account. See Paetnekship Deposits, 1. 
 
 ADMINISTRATOR. See Savikgs Bank REGuiATioifS, 10. 
 
 AGENT. 
 
 1. Fiduciary deposit cannot be retained to discharge agent's debt, 171, e. 
 
 2. When principal can recover money deposited by agent without giving 
 
 bond, 185. 
 
 3. When husband is agent for wife in drawing deposits. See Husband 
 
 AKD Wife, 3, 5, 6. 
 
 4. Wrongful action in forging checks. See Fobged Check, 15. 
 
 5. Wlien bank acting as agent in collecting draft is liable as principal, 
 
 208, e. 
 
 6. Cannot bind principal on post-dated check, 337, c. 
 
 7. Fiduciary deposit cannot be retained to discharge agent's debt, 171, e. 
 
 See FoEGED Check ; Attached Deposit, 2 ; Collections, 3, 4, 55. 
 
 AGREEMENT. See Special Ageeemeht. 
 
 ALTERED CHECK. See Ceetified Check. 
 
 ASSIGNMENT. 
 
 1. If money is deposited for a, particular purpose depositor's assignee 
 cannot withdraw it, 347| c. 
 
 (495) 
 
496 INDEX. 
 
 ASSIGNMENT— Continued. 
 
 2. Effect of making and delivering check before, 63. 
 
 3. Equitable assignment. See Check Holder, 13-20 ; Iksolvekct. 
 
 ATTACHED DEPOSIT. 
 
 1. It should not be paid by a bank, 115. 
 
 2. Principal's deposit cannot be held for agent's debt, 116, 129. 
 
 3. Effect of giving a certified check before attachment, 117. 
 
 4. When a check can and cannot be paid after attachment, 118. 
 
 5. Deposit consisting of certified check can be attached, 119. 
 
 6. Check deposited for collection cannot be, 119. 
 
 7. How long attachment holds, 120. 
 
 8. Attachment cannot be defeated by the acceptance of a check outside 
 
 a bank, 121. 
 
 9. How long a bank should hold disputed deposits, 122. 
 
 10. Attachment of funds deposited, in name of another person to avoid 
 
 creditors, 123. 
 
 11. When deposits are held by attachment process subsequent to it, 124. 
 
 12. Attachment of borrowed money, 125. See Cebtifibd Check, 28. 
 
 AUCTIONEER. 
 
 His deposits cannot be claimed by owners of goods, 133. 
 
 AUTHORITY. 
 
 1. To receive special deposits, 26. 
 
 2. Of national banks to receive them, 27. 
 
 3. Of insolvent banks to receive them, 28. 
 
 4. To receive contingent deposits, 29. 
 
 5. Transfer of deposit should not be made without, 41. 
 
 what is sufficient authority for, 41, a. 
 
 6. Of president and cashier to certify. See Certified Check, 9, 11, 13, 
 
 BAILMENT. See Deposit. 
 
 BANK. , 
 
 Is not required to receive deposits, 32. 
 
 BANK-BOOK. See Pass-Book. 
 
 BANK-NOTES. 
 
 1. Rights of holder after bank's insolvency, 282. 
 
 2. Recovery of forged, 204. 
 
 BANKING HOURS. 
 
 Receipt of deposits after, 30. 
 
 BILLS OP LADING. 
 
 Drafts drawn against forged bills and paid by bank can be charged to 
 depositor, 205. 
 
INDEX. 497 
 
 BOND OP rNDEMNITY. 
 
 1. When can bank require it. See Savings Bank Regulations, 8. 
 
 2. When certificate of deposit is lost, 267. 
 
 BRANCH BANK. See Collections, 52. 
 
 CASH. 
 
 1. What deposits are considered as cash, 16. i 
 
 2. Collecting bank can receive only cash iu payment, 473. See Owner- 
 
 ship OP Deposit. 
 
 CERTIFIED CHECK. 
 
 1. Certifying equivalent to acceptance, 224. 
 
 2. Nature of the act, 224. 
 
 3. Liability on check raised before certifying, 225. 
 
 4. Liability on check raised after certifying, 226. 
 
 6. Efifect of subsequent inquiry about certification, 227. 
 
 6. Bank is not estopped from showing alteration, 228. 
 
 7. Check can be verbally accepted, 229. 
 
 8. Import of "good," 230. 
 
 Tennessee view, 230, a. 
 
 9. Authority of cashier to certify, 231. 
 
 10. Bank must pay though drawer has no funds, 231, a. 
 
 11. If check be unusual cashier cannot certify, 231, u. 
 
 12. Must not be post-dated, 231, d, e. 
 
 13. Authority of president to certify, 232. 
 
 14. Must pay certified forged check, 233. 
 
 15. Must pay forged certification if once declared to be genuine, 234. 
 
 16. Must not pay it if so ordered before delivery, 235. 
 
 17. Certified check is payment, 236. 
 
 18. Check may be accepted by deducting amount from drawer's deposit, 
 
 237. 
 
 19. It is a fraud for insolvent drawer to get his check certified, 238. 
 
 20. Draft or note may be certified, 239. 
 
 21. Effect of taking note away after certification, 239, a. 
 
 22. When certification may be corrected, 239, b. 
 
 23. Drawer cannot revoke, 240. 
 
 24. When money is due on, 241. 
 
 25. Collecting bank should not send it to certifier, 242. 
 
 26. Nothing can be recovered on, if no loss has been sustained, 248. 
 
 27. Effect of alteration of, by the drawer himself, 244. 
 
 28. Attachment of deposit for which certified check has been given, 117. 
 
 29. Holder must make demand before bringing his action to recover, 316. 
 
 30. What is misapplication by bank of deposit of a, 171, f. 
 
 81. It is a fraud for insolvent drawee to get his check certified, 238. 
 
 32 
 
498 INDEX. 
 
 CERTIFICATE OF DEPOSIT. 
 
 1. Bank is liable to bona fide holder, 245. 
 
 2. Description of certificate, 246. 
 
 3. Is certificate a promissory note, 247. 
 
 4. Is certificate a contract or receipt, 247, d. 
 
 5. Bank is liable even if no deposit has been made, 248. 
 
 6. Not liable if made with officer instead of bank, 248, a. 
 
 7. Bank cannot question ownership, 249. 
 
 8. Negotiability of, 250. 
 
 9. If payable in currency will this suffice, 250, a,' b. 
 
 10. May be assigned if not negotiable, 250, c. 
 
 11. Effect of indorsement, 250, d. 
 
 12. Use of, as money, 251. 
 
 13. Issue of, not forbidden by nationa,! banking law, 252, 
 
 14. Nor by New York banking law, 253. 
 
 15. How aff'ected by Statute of Limitations, 254, 362. 
 
 16. When negotiable may be transferred like a note, 255. 
 
 17. How delivery by mail affects the ownership, 256. 
 
 18. Pledge of non-negotiable certificate, 257. 
 
 19. Personal transfer by cashier, 258, 
 
 20. Days of grace on, 258. , 
 
 21. Interest on, 259. 
 
 22. Is not payment, 260. 
 
 23. Can a collecting bank receive its own certificate, 261. 
 
 24. When payment of current notes is required what must be paid, 262. 
 
 25. Must be surrendered when paid, 263. 
 
 26. What alteration will excuse payment, 264. 
 
 27. Payment without indorsement, 265. 
 
 28. Bank should not pay if enjoined, 266. 
 
 29. When lost can bank require bond of indemnity before paying, 267, 
 
 30. Where suit on should be begun, 268. 
 
 31. How demand on, should be made, 269. 
 
 32. Bank should not transfer deposits of a company to which a certificate 
 
 has been given to an individual, 271. 
 
 33. When can legal payment be made to one who is not the owner, 100. 
 
 34. Indorsement of. See Leqal Indorsement, 16. 
 
 CHECK. 
 
 1. Is check a bill of exchange, 53. 
 
 opinion of Shaw, C. J., 53, b, 
 
 opinion of U. S. Sup. Court, 53, o. 
 
 opinion of Sharswood, J., 53, d. 
 
 rule in various States, 53, e. 
 
 Rhode Island case, 53, f. 
 
 question should be settled, 54. 
 
 when it is a bill in New York by statute, 55. 
 
INDEX. ' 499 
 
 CUEGK— Continued. 
 
 2. Is not a bill if drawn on a closed bank, 56. 
 
 3. Must be payable in money, 67. See Money, 11—28. 
 
 4. Purport of check for ciirrent funds, 311. 
 
 5. Consideration of check to bearer need not be proved, 58. 
 
 6. Must be properly signed, 59. 
 V. Must be delivered, 60. 
 
 8. Holder of, is the rightful holder, 61. 
 
 9. Law presumes that the drawer put it into circulation, 61. 
 
 10. Check is valid if owned by bona fide holder though contrary to bank- 
 
 rupt law, 61. 
 
 11. When does check become stale, 61, 297. 
 
 12. Description of memorandum check, 62. 
 
 13. Construction of foreign check, 63. 
 
 of corporation check, 65. 
 
 14. Cannot be contradicted by oral evidence, 64. 
 
 15. When check is considered as cash, 16. 
 
 16. Check is not payment, 66. See Payment, 1. 
 
 17. How money should be applied In payment, 455, d. 
 
 18. Certified check. See Certified Check. 
 
 19.. When check must be presented for payment. See Presentation op 
 
 Check. 
 20. How check must be collected. See Collections, 30-32. 
 
 CHECK HOLDER. 
 
 1. Must demand payment of the drawee, 332. 
 
 2. Must show notice of non-payment or an excuse for not notifying, 333. 
 
 3. Excuses for not notifying parties to check, 333. 
 
 failure of drawee, 353, a. 
 
 lack of funds, 333, b. 
 
 withdrawal of funds, 333, o. 
 
 part payment after maturity, 333, d. 
 
 or before, 333, b. 
 
 4. Holder can sue in his own name, 334. 
 
 5. Is demand necessary before resorting to the original debt, 335. 
 
 6. Demand must be made of drawee before suing indorser, 336. 
 
 7. When maker of post-dated check can be sued, 337. 
 
 8. Agent cannot bind principal on post-dated check, 337, u. 
 
 9. When suit cannot be maintained on check deposited on collateral 
 
 agreement, 338. 
 
 10. Drawee is not liable to one who has obtained his check through forged 
 
 indorsement, 339. 
 
 11. If check be given for stolen goods the drawee is liable, 340. 
 
 12. Cannot sue the drawee, 341. 
 
 13 When the check operates as assignment of the deposit he can sue, 342. 
 14. Can sue after acceptance, 343. 
 
500 INDEX. 
 
 CHECK T3.0l.TlER— Continued. 
 
 15. Draft does not assign the drawer's funds in possession of the drawee, 
 
 344. 
 
 16. Nor does a check when drawn on a deposit consisting of unpaid 
 
 credits, 344, «. 
 
 17. If the drawer fails does the cheekrholder or depositor's assignee take 
 
 the deposit, 345. 
 
 18. Must notify the bank in order to hold the deposit, 845, «. 
 
 19. Effect of check dated before but given after the assignment, 345, f. 
 
 20. Equitable aasignmeut, where the doctrine is recognized, 346. 
 
 is recognized whenever check is drawn on par- 
 ticular funds, 347. 
 
 21. Where funds are insufficient to pay note and check who can claim 
 
 them, 348. 
 
 22. Efifect of check of insolvent bank, 349. 
 
 23. Lender of check cannot recover of the bank, 350. 
 
 CLEARING HOUSE. 
 
 1. Force of clearing house regulations, 420. 
 
 2. These do not affect depositors, 421. 
 
 3. Effect of clearing house usages, 422. 
 
 4. Recovery of money paid on a check by mistake, 423. 
 
 5. Amount that may be recovered, 423, o. 
 
 6. Payment of notes through the, 424. 
 
 7. Payment of checks through the clearing house does not alter rule of 
 
 presentation, 290, o. 
 , 8. Liability of, for settlement, 425. 
 
 9. When checks of non-member are cleared by a member, 426. 
 
 COLLATERAL SECURITIES. 
 
 1. Liability for their loss, 15. 
 
 2. When accompanying draft sent for collection may be recovered of in- 
 
 solvent bank, 277, j. 
 
 COLLECTING AGENTS. 
 
 1. Are holders for collection, demand and notice, 462, a. 
 
 2. Degree of diligence in notifying, 462, b. 
 
 3. What knowledge the owner must give to, 462, c, d. 
 
 4. When agent is responsible for draft left by another, 462, b. 
 
 COLLECTIONS. 
 
 1. Kinds of collections that are made, 435. 
 
 2. Is collecting bank the owner, 436. 
 
 is when making specific advances, 436, a. 
 is not otherwise, 436, c. See Lies, 9. 
 
 3. When is a bank debtor and when agent in collecting, 35. 
 
 4. Bank is not a colleeting agent by making note payable there, 437. 
 
INDEX. 501 
 
 COLLECTIONS— Conftnued. 
 
 5. Bank is real holder for notifying purposes, 438. 
 
 6. Bank can treat the deposit of a check as for collection, 23. 
 
 7. Indorsement for collection does not render bank liable as indorser, 439. 
 
 8. Relation of bank to owner and maker of note indorsed for collection, 
 
 439, a. 
 
 9. Payment to another of note indorsed for collection is no discharge, 
 
 439, b. 
 
 10. Bank can maintain snit to recover on a note indorsed for collection, 
 
 439, c. 
 
 11. Indorsement for collection on invoices accompanying bills of lading, 
 
 439, d. 
 
 12. Ownership of note can be changed by agreement, 440. 
 
 13. Must use reasonable skill and diligence in collecting, 441. 
 
 14. What is reasonable diligence, 441. 
 
 First, must follow instructions, 441 (First). 
 
 Second, must protect an improperly accepted draft, 441 (Second). 
 Third, note must be presented where it is made payable for pay- 
 ment, 441 (Third). 
 ~ Fourth, duty of bank when the note is to be collected in another 
 
 place, 441 (Fourth). 
 Fifth, must keep the security for the note, 441 (Fifth). 
 Sixth, in giving notice, 441 (Sixth). 
 
 where indorsers live in the same town, 441, a. 
 
 effect of custom, 441, b. 
 
 where holder lives in different town, 441, c. 
 
 where notary lives at different place from parties, 441, d. 
 
 15. What presentment must be made, 442, a. 
 
 16. Has the drawer the whole of last day of grace, 442, b. 
 
 17. Effect of giving notice of the time where note matures, 442, c. 
 
 18. Payment of note by mistake, 442, d. 
 
 eases of negligence, 442, e, f. 
 
 19. Liability for mistake, 443. 
 
 in days of grace, 443, a. 
 
 in nature of instrument, 443, b. 
 
 in name of indorser, 443, c. 
 
 in date of note, 443, d. 
 
 not liable for mistake In law, 443, e. 
 
 20. Miscarriage of note for collection, 444. 
 
 21. When bank need not give notice of non-payment, 445. 
 
 22. Demand and notice, how affected by usage, 446. 
 
 and by bank ordinance, 446, a. 
 
 23. Liability when bank and holder are both negligent, 447. 
 
 24. Agreement to collect note in another State, 448. 
 
 25. Duty of bank when note is not negotiable, 449. 
 
 26. When bank is liable though notifying properly all parties, 450. 
 
502 INDEX. 
 
 COLLECTIONS— Continued. 
 
 27. When one bank is negligent to another, 451. 
 
 28. When last indorser can recover of a negligent bank the amount of 
 
 note, 452. 
 
 29. Bank cannot sell note, 453. 
 
 30. How checks must be collected, 454. 
 
 31. How they must be presented, 454, 455. 
 
 32. E£fect of indorsement for collection, 455, e. 
 
 33. Collection on forged indorsement, 456. 
 
 34. Unnecessary delay in presentation, 457. 
 
 35. Should not send check to drawee bank for payment, 458. 
 
 36. Liability of bank when acting for public accommodation, 459. 
 
 37. Is consideration needful to hold bank negligent in collecting, 460. 
 
 38. How notice of non-payment should be given, 461. 
 
 39. Notary must disclose his agency, 461, b. 
 
 40. Notice must be properly addressed, 461, c. 
 
 41. Notice must be given to all indorsers, 461, d. 
 
 42. Where first bank is responsible for negligence of sub-agent, 463. 
 
 43. Where first bank is not responsible, 464. 
 
 44. Where banks are liable for negligence of notaries, 465. 
 
 First, where principal bank is liable for negligence of notary, 465 
 
 (First). 
 Second, where sub-agent is liable for negligence of notary, 465 
 
 (Second). 
 Third, where principal bank is responsible for sub-agent, but not 
 
 for notary, 465 (Third). 
 Fourth, where principal bank is responsible for neither sub-agent 
 
 nor notary, 465 (Fourth). 
 
 45. Bank may be liable for sub-agent by agreement, 466. 
 
 46. Duty of principal bank to notify sub-agent concerning residence of 
 
 indorser, 467. 
 
 47. Duty of bank to a depositor who leaves a note to be collected of bank 
 
 where it is payable, 468. 
 
 48. Collection of note for depositor, 468. 
 
 49. Where the true owner can recover draft of sub-agent, 469. 
 
 50. Title of first bank is not lost by sending draft to sub-agent, 470. 
 
 51 . If instructions to principal bank be violated sub-agent cannot be held 
 
 for violation, 471. 
 
 52. Liability of bank for branch bank, 472. 
 
 53. Bank can receive only money, 473. 
 
 54. What money should be received for collections, 310. 
 
 55. Bank is debtor, not agent, for the amount, 474. 
 
 unless insolvent before collecting, 474, a. 
 
 56. Use of proceeds by collecting bank, 475. 
 
 57. When principal cannot follow the money, 475, u, d, e. 
 
 58. Bank should not send check to drawee for payment, 476. 
 
INDEX. 503 
 
 COLLECTIONS— Conii'nuerf. 
 
 59. Nor certified check to certifier, 242. 
 
 60. Rights of parties where one note is wrongfully taken for another, 477. 
 
 61. How long authority to collect continues, 478. 
 
 62. Remedy when collecting bank fails to pay over the money, 479. 
 
 63. Damage that may be recovered of bank when negligent, 480, 482, 483. 
 
 64. Bank not liable for expense in prosecuting indorser, 481. 
 
 65. Loss must be proved, 484. See Legal Indoesgmekt, 8. 
 
 CONSIDERATION. 
 
 1. Of check to bearer need not be proved, 58, a. 
 
 2. When want of, may be shown, 58, b, u. 
 
 CONSTRUCTION. 
 
 Of foreign check, 63. 
 
 Of corporation check, 65. 
 
 Cannot be contradicted by oral evidence, 64. 
 
 CONTINGENT DEPOSIT. 
 Authority to receive, 29. 
 
 CONTRACT. 
 
 1. Nature of depositor's, 32. 
 
 2. When is bank debtor and when creditor of depositor, 34. 
 
 is a question of fact, 42. 
 
 when deposit is payable to non-depositor, 34, a. 
 _ 3. When is a bank debtor and when agent, 35. 
 
 4. Must the order to a bank to pay be in writing, 36. 
 
 5. How an account should be kept, 37. 
 
 6. How an account can be closed, 38. 
 
 7. Deposit should be credited to right person, 39. 
 
 8. Deposit is presumed to belong to depositor, 40. 
 
 9. Bank cannot question ownership, 40, b. 
 
 10. Bank should not transfer deposit without authority, 41. 
 
 CORPORATION. 
 
 1. How check should be signed, 53. 
 
 2. How check should be paid. See Payment of Check, 34. 
 
 COUNTERFEIT NOTES. See Monet, 2. 
 
 COUNTERMANDING PAYMENT. 
 Of check, 81, a. 
 
 CURRENT FUNDS. 
 Meaning of, 311. 
 
 CUSTOM. See Usage. 
 
504 INDEX. 
 
 DAMAGES. 
 
 1. Of drawer for not paying his check, 81, a. 
 
 2. Of bank for not paying check. See Collections, 63, 65 ; and other 
 
 subjects from which they arise. 
 
 DEATH. 
 
 Operates as a revocation of check, 99. 
 
 DEBTOR AND CREDITOR. 
 
 Existence of relation between bank and depositor. See Coktkact, 2. 
 
 DELAY. 
 
 In presenting check for payment. See Pkesentation of Check. 
 
 DELIVERY OF DEPOSITS. 
 To what officer, 31. 
 
 DEMAND. 
 
 1. Before bringing suit depositor must make, 315. 
 
 2. Holder of certified check must make, 316. 
 
 3. Holder of certificate of deposit must make, 317. 
 
 4. Must be made on raised check, 335, b. 
 
 5. Must for a special sum recoverable by a particular law, 318 
 
 6. Whole of deposit need not be demanded, 319. 
 
 7. Demand of savings bank deposit, 320. 
 
 8. Post-dated check, 321. 
 
 9. How must be made when bank has failed, 322. 
 
 10. Not necessary after account has been rendered, 323. 
 
 11. Need not be made to recover illegal deposit, 324. 
 
 12. Bank cannot be sued on verbal acceptance, 325. 
 
 13. Third party can sue a bank if it has promised to pay the depositor's 
 
 money, 326. 
 
 14. Bank can be sued for check that has been sent and paid for but not 
 
 received, 327. 
 
 15. Bank cannot defend paying a check on the ground of fraud in a for- 
 
 mer transaction, whereby it was the loser, 328. 
 
 16. When interest can be recovered, 329. 
 
 How must be made for payment of note payable at bank, 419. 
 
 DEPOSIT. 
 
 1. Definition, 1, a, c. 
 
 2. Present affected by former meaning, 1, b. 
 
 3. General and special distinction between, 2. 
 
 is regarded as money, 33. 
 
 4. Special, kinds of, 5. 
 
 what are included in, 13, a. 
 
INDEX. 505 
 
 DEPOSIT— Continued. 
 
 Special deposits by clerk, 13, a. 
 
 receiver, 13, a. 
 court officer, 13, a. 
 of public securities, 13, a. 
 for specific purpose, 13, u,. 
 sealed and unsealed deposits, 13, h. 
 bank bills, 13, c. 
 
 5. Not special by advertising it so, 13, d. 
 
 6. Negligence in keeping, 6. 
 
 a question of fact, 8. 
 
 7. Care in keeping that is required, 6. 
 
 8. Gratuitous keeping, 6, 7. 
 
 9. Special contract for keeping, 10. 
 
 10. Loss within and without official sphere, 9. 
 
 11. Who is the owner of. See Ownership op Deposit. 
 
 12. Liability for loss of general, 3. 
 
 special, 3, 6, 11. 
 
 collateral securities, 15. 
 of directors for loss of, 4. 
 not liable if possession is unknown, 12. 
 
 13. Recovery of, 14. 
 
 of profit while keeping it, 14. 
 
 of gold deposit, 14. 
 
 of special deposit of uncurrent bills, 14, u. 
 
 14. Can holder of check or note claim, when it is insufficient to pay both, 
 
 348. 
 
 DEPOSIT BY AGENT. 
 
 1. When can principal claim, 126. 
 
 2. When is bank protected in paying the agent through ignorance, 127. 
 
 3. When is bank protected in knowingly paying to agent, 128. 
 
 4. Cannot be taken for agent's debt, 116, 129. 
 
 5. Bank cannot refuse to pay agent because principal is a lunatic, 130. 
 
 6. Principal's proof must be clear to recover, 131. 
 
 7. Recovery of identical money, 132. 
 
 8. Liability of bank when acting as agent, 134. 
 
 9. Bank cannot retain principal's money for agent's debt, 135. See 
 
 Agent. 
 
 DEPOSITOR. 
 
 1. Collection by bank of note for, 468. 
 
 2. His liability not affected by his relation with the bank, 43. 
 
 3. Relation between bank and. See Contbaot, 2. 
 
 4. When agent is. See Deposit by Agekt. 
 
506 INDEX. 
 
 DEPOSITOR'S NOTES. 
 
 1. Should bank pay them, 403. 
 
 2. Deposit may be applied to discounted note, 404. 
 
 3. Deposit left to pay note may be reclaimed by agreement, 405. 
 
 4. Bank must follow depositor's direction in paying, 406. 
 6. Payment to bank of a note by a stranger, 407. 
 
 can withdraw his deposit, 407, b. 
 
 6. Can deposit be applied before last day of grace, 408. 
 
 7. Application of deposit after note has been protested, 409. 
 
 8. Part payment of note, 410. 
 
 9. Bank cannot retain deposit to pay an unmatured note, 411. 
 
 10. Bank is not the agent of payee by making note payable there, 412. 
 
 11. When maker of note can recover his deposit of insolvent bank, 413. 
 
 12. Bank cannot retain deposit to pay note that matures after depositor's 
 
 death, 414. 
 
 13. Bank cannot apply surplus for security of note on a general balance, 
 
 415. 
 
 14. Can indorser's deposit "Ije applied on a note, 416. 
 
 15. Bank need not hold the maker's deposit to secure the indorser, 417. 
 
 16. How demand must be made, 419. 
 
 17. How notice must be given, 419. 
 
 DIRECTORS. 
 
 Liability for loss of deposits, 4. 
 
 DONATIO CAUSA MORTIS GIFT. 
 
 1. Deposit may be given in this way, 167. 
 
 2. Delivery of bank-book is essential, 168. 
 
 3. No explanation for its non-delivery is permitted, 169. 
 
 4. Delivery of the book may be made to a third person, 169, b. 
 
 5. Gift to survivor of two depositors, 170. See Gift Deposit, 1-7, 
 
 15-20. 
 
 DRAWEE. See Check Holder ; Demand ; Fobged Indobsemeht ; Collec- 
 tions, 35, 58, and other subjects. 
 
 DRAWER. See Check Holder ; Demand ; Forged Indo3Sement ; Certified 
 Check ; Agent, 3 ; Depositor ; Joint Deposit, 2 ; Check, 9 ; Payment of 
 Check ; Presentation of Check ; Collections, 16, and other subjects. 
 
 ELECTION. 
 
 Right of bank to elect whether check is for deposit or for collection, 23. 
 
 ENTRY. 
 
 In pass-book. See Pass-Book, 1-8. 
 
 EQUITABLE ASSIGNMENT. See Check Holder, 20. 
 
 ESTOPPEL. See Forged Check, 3 ; Certified Check, 6. 
 
INDEX. 507 
 
 EVIDENCE. 
 
 1. Cannot be introduced to contradict check, 64. 
 
 2. Admissibility of, to explain entries and pass book, 47-49. See 
 
 Pass-Book. 
 to show intention to give deposit, 164. 
 to show non-delivery of check, 64, a. 
 
 who were the intended parties, 64, b. 
 
 identity in payiijg check, 210. 
 
 3. Written sum controls figures, 64, c. 
 
 4. Title of deposit is evidence of ownership, 110. 
 
 5. Certificate of deposit as evidence of deposit, 270. 
 
 of ownership, 246, e, f. 
 
 6. Check as evidence of debt and payment, 68. 
 
 7. Of custom will not be admitted to prove that a deposit account cred- 
 
 ited with " dollars" can be discliarged with something else, 305. 
 
 8. Must be clear for principal to recover his deposit of agent, 131. See 
 
 Gift op Deposit, 9, 14-18. 
 
 EXECUTORS. 
 
 How they must sign checks. See Payment of Check, 35, 38. 
 
 FIDUCIARY DEPOSITOR. 
 
 Dnty of bank when he meditates breach of trust, 40, c. 
 
 FORGED CHECK. 
 
 1. Bank must know signature of depositor, 189. 
 
 2. Parties may change the rule by agreement or conduct, 190. 
 
 3. When depositor is estopped from questioning the genuineness of his 
 
 checks, 191, 192. 
 
 4. Money paid on, cannot be recovered if bank be negligent in paying it, 
 
 193. 
 6. If holder be negligent he cannot retain the money, 194. 
 
 6. Holder cannot retain the money unless bank alone is wrong, 195. 
 
 7. If both parties be innocent money can be recovered, 196. 
 
 8. Loss must fall on party that is negligent, 196, b. 
 
 9. It is negligence to take third party's check without inquiry, 196, d. 
 
 10. It is negligence to present check without saying anything about it if 
 
 a prior check from same maker was suspicious, 196, c. 
 
 11. It is not negligence to send letter with check by clerk to post-office, 
 
 196, e. 
 
 12. Responsibility of bank for check altered after the drawer has deliv- 
 
 ered it, 197. 
 
 13. Liability of collecting bank for forged check, 198. 
 
 14. Bank-book is presumed to be correct, 199. 
 
 presumption may be disproved, 199, b, 
 
 15. Agent's wrongful action will not bind principal, 200. 
 
 16. Is depositor required to examine book to detect forgery, 201. 
 
508 INDEX. 
 
 FORGED Ca^CK— Continued. 
 
 17. Payee bank ia not liable in Pennsylvania, 202. 
 
 18. Notice of forgery muist be given, 203. 
 
 19. Recovery of forged bank-notes, 204. 
 
 20. Drafts drawn against forged bills of lading and paid can be charged 
 
 to depositor, 205. See Fobqed Indobsehent. 
 
 FORGED INDORSEMENT. 
 
 1. Bank must pay on genuine indorsement of payee, 206. 
 
 2. Payment to person of same name as real payee, 207, 208, f. 
 
 3. Only payee has the title, 208, a. 
 
 4. Acceptor cannot dispute the drawer's signature, 208, b. 
 
 5. Lapse of time does not affect the drawee's remedy, 208, u. 
 
 6. Rights of successive indorsera, 208, d. 
 
 7. When bank acting as agent is liable as principal, 208, e. 
 
 8. Indorsement a warranty of genuineness, 209. 
 
 9. Identification, 210. 
 
 10. Bank is not required to know intermediate indorsers, 211. 
 
 11. Liability in Louisiana on forged indorsement, 212. 
 
 12. Payment of check which was received by forging indorsement on a, 
 
 draft, 213. 
 
 13. Collection on forged indorsement, 456. 
 
 14. When the government can recover on a forged indorsement, 214. 
 
 15. Drawer is not liable to one who has obtained his check through forged 
 
 indorsement, 339. 
 
 16. When forgery is discovered notice must be given, 215. 
 
 GARNISHEE. 
 
 Bank notes of failed bank cannot be set off by garnishee debtor, 396, a. 
 
 GARNISHED DEPOSIT. See Attached Deposit. 
 
 GARNISHMENT. 
 
 Acceptance of check discharges drawer from, 74. 
 
 GENERAL DEPOSIT. See Deposit, 1, 2. 
 
 GIFT DEPOSIT. 
 
 1. Two kinds described, 151. 
 
 2. Payment or acceptance of check is essential, 152. 
 
 3. Of bank-book and order for money, 152, b. 
 
 4. When check is taken back gift is not complete, 152, o. 
 
 5. When check is deposited and drawn against, 152, d. 
 
 6. Check payable at future day is not a gift, 153. 
 
 7. Of check received from another person is valid, 154. 
 
 8. What is an inter vivos gift, 155. 
 
INDEX. 509 
 
 GIFT mPOSlT— Continued. 
 
 9. First rule. If the donee be present when the deposit is made and the 
 bank-hook is given to him and accepted, this is conclusive evidence 
 of an intention to give and an acceptance of the gift, 156. 
 
 10. Second rule. Delivery of tho book need not be formally made if the 
 
 donee has possession of it, 157. 
 
 11. Third rale. A gift can be made without delivering the book to the 
 
 donee, and consequently payment may bo demanded without pro- 
 ducing it. To make a gift in such u, case the deposit must be put 
 in the name of the donee with the intention of giving it to him, 
 and must be accepted, 158. 
 
 12. Fourth rule. The acceptance need not be at the time of making the 
 
 deposit, 159. 
 
 13. Fifth rule. Before acceptance, the depositor may act as trustee in 
 
 keeping the book for the donee and without his knowledge ; or, the 
 depositor may regard the book as delivered to and accepted by him- 
 self as trustee from the time of receiving it from the bank, 1 60. 
 
 14. Sixth rule. Whether, while holding the book, the depositor is acting 
 
 as trustee or for himself, is a question of fact to be determined by 
 proper evidence in each case, 161. 
 
 15. Is the keeping of bank-book consistent with intention to give deposit, 
 
 162. 
 
 16. When deposit is made in trust to evade the law limiting the amount, 
 
 163. 
 
 17. Evidence to show intention to give deposit, 164. 
 
 18. Absence of parol evidence to explain intention, 165. 
 
 19. When the trust to keep deposit for donee is incomplete it will not be 
 
 enforced, 166, a. 
 
 20. Usual mode of creating trust is in some States insufficient 166, b. 
 
 GRAT0ITY. 
 
 Measure of liability for keeping deposits without, 6, 7. 
 
 HOLDER OP CHECK. See Check Holdek. 
 
 HUSBAND AND WIFE. 
 
 1. Bank can pay deposits to wife if not knowing that she is married, 146. 
 
 or if she is, 147. 
 
 2. Can bank pay wife's deposit to husband, 148. 
 
 3. When husband is not wife's agent to draw deposit, 149. 
 
 4. Bank should not pay her deposit on legal process for his debt, 150. 
 
 5. When husband deposits his money in his wife's name can he draw it, 
 
 173, b. 
 
 6. When action of both is necessary to draw deposit, 34, a. 
 
 7. How long bank should hold deposits of one attached for debt of the 
 
 other, 122. 
 
 8. Payment of joint deposit to the survivor, 144, a, c. 
 
510 INDEX. 
 
 IDENTIFICATION. See Foeged Isdobsemekt, 9 ; Liability of Bamk, 2 ; 
 Payment op Check, 23. 
 
 ILLEGAL DEPOSIT. 
 
 1. Liability of bank for, 98. 
 
 2. Application of deposit to illegal purpose, 87. 
 
 INDORSEMENT. See Fokged Ikdoksement ; Legal Indorsement. 
 INDORSER. See Foeoed Indorsement ; Legal Indobsehent. 
 
 INSOLVENCY. 
 
 1. When lien exists on deposit of insolvent, 380. 
 
 cannot be applied after his assignment, 386. 
 
 2. It is a fraud for insolvent drawer to get his cheek certified, 238. 
 
 3. Bank should not pay a public deposit to a bankrupt official, 431. 
 
 4. When maker of note can recover deposit left to pay it of inboivent 
 
 bank, 413. See Insolvent Bane. 
 
 INSOLVENT BANK. 
 
 1. Authority to receive deposits, 28. 
 
 2. Conditional receipt of them, 28, b. 
 
 3. Receipt of deposits when insolvency is unknown, 28, c, d. 
 
 4. Payment when insolvency is unknown, 273. 
 
 5. Payment in usual course of business is not a preference, 273, b. 
 
 6. When payment is a preference and void, 273, b. 
 
 7. Non-delivery of deposit before insolvency, 274. 
 
 8. Depositors are general creditors, 275. 
 
 9. Preferences. 
 
 bill-holders in Tennessee, 276, a. 
 
 deposits of savings bank, 276, b, c. 
 
 draft sent to pay a note, 276, d. 
 
 purchased bank check, 276, e. 
 
 trust fund, 276, f. 
 
 under the national bankrupt law, 276, g. 
 
 10. Completion of trust by insolvent bank, 277. 
 
 courts go as far as possible to complete it, 277. 
 
 11. A draft collected by Wisconsin bank is always held in trust, 277, c. 
 
 12. Collateral security accompanying draft sent for collection may be re- 
 
 covered of insolvent bank, 277, j. 
 
 13. Check deposited by but not credited to customer, is his, 278. 
 
 14. When creditor of a bank has so far appropriated its money that the 
 
 appropriation may be completed, 279. 
 
 15. Who is the loser when deposit is not in the real owner's name, 280. 
 
 16. Depositor cannot change his relation after the bank's insolvency, 281. 
 
 17. Rights of holders of bank notes, 282. 
 
 18. EflFeot of check given by insolvent bank, 349. 
 
INDEX. 511 
 
 INSOLVENT BA^K— Continued. ' 
 
 19. Efifeot of overdrawing account at, 370. 
 
 20. When maker of note can recover deposit left to pay it, 413. 
 
 21. Savings bank depositor. Rights of a, 283. 
 
 when can liis and bank debt be set off against each 
 
 other, 283, b, 391. 
 special deposit, 283, c. 
 bank is trustee for, 283, d, 1. 
 
 cannot offset his debt against his deposit, 283, d, 2. 
 special, not entitled to priority, 283, d, 3. 
 what are or are not preferred claims, 283, d, 4, 6, 7. 
 when assignee can hold deposit instead of assignor's* 
 
 creditor, 283, e. See Insolvency. 
 
 INTEREST. 
 
 1. Is not paid on deposits except by special agreement, 45. 
 
 2. When it can be recovered, 329. 
 
 INTERPLE.4DER. 
 
 When bill of, can be brought, 345, 430, a. 
 
 INTER VIVOS GIFT. See Gift Deposit, 8-20. 
 
 ITEMS OP DEPOSIT. 
 
 General deposits consist of what, 13. 
 
 JOINT DEPOSIT. 
 
 1. When joint deposit can be paid to survivor, 144. 
 
 2. When part of a joint deposit is drawn the law presumes that the por- 
 
 tion drawn was the drawer's, 145. 
 
 3. Bank is not bound by agreement not known by it made by the depos- 
 
 itors, 172. See Hhsband and Wipe, 8. 
 
 LEGAL INDORSEMENT. 
 
 1. Bank must pay only on payee's, 89. 
 
 2. Right of holder of check payable to order transferred orally with 
 
 manual delivery, 216. 
 
 3. When holder gets a good title to a lost or stolen check, 217. 
 
 4. How title is affected if check be overdue, 217, b. 
 
 5. Can loser demand new check, 217, d. 
 
 6. Liability on, made to identify holder, 218. 
 1. Legal purport of second, 219. 
 
 8. Nature of, for collection, 220, 455, e. 
 
 does not render bank liable as indorser, 439. 
 
 9. Nature of lunatic's, 221. 
 
 10. Indorser's liablity after notice, 222. 
 
 11. Defences that may made to dishonored check, taken by indorser, 223. 
 
 12. Can indorser's deposit be applied on note at bank, 416. 
 
512 INDEX. 
 
 LEGAL INDORSEMENT— Continued. 
 
 13. When indorsed check must be presented, 301. 
 
 14. When last Indorser can recover the amount of a note paid to a bank, 
 
 452. 
 
 15. Duty of principal bank to notify sub-agent concerning indorser, 467. 
 
 16. Certificate of deposit. Effect of indorsing, 250, d. 
 
 payment without indorsement, 265. 
 
 LIABILITY OF BANK. 
 
 1. For crediting deposit to wrong person, 39, 50. 
 
 2. For mistaking depositor, 97. 
 , 3. For illegal deposit, 98. 
 
 4. For misapplying trust fund, 113. 
 
 5. When acting as agent, 134. 
 
 6. For loss of deposit. See Deposit, 10, 12. 
 
 7. For paying certified check after the deposit covered by it has been 
 
 attached, 117. 
 
 8. For not paying depositor's check, 84; 
 
 9. For signature of depositor, 189. 
 
 10. Of assorting bank for deficiency in money left with it to be counted, 
 
 174. 
 
 11. Of collecting bank for forged check, 198. 
 
 12. In Louisiana on forged indorsement, 212. 
 
 13. Of depositor to others is not affected by his relation to the bank, 43. 
 
 LIEN. 
 
 1. When does it exist, 374. 
 
 2. Not everwhere recognized, 376. 
 8. General, not favored, 377. 
 
 4. Existence is a question of fact, 378, 379. 
 5i When the depositor is bankrupt, 380. 
 
 6. Depositor's check discharges, 381. 
 
 7. What general lien does not cover, 382. 
 
 securities deposited for special purpose, 382, a. 
 note left for discount and refused, 382, b. 
 nor the surplus of pledged property, 382, c. 
 nor assignee's deposit for a personal debt, 382, d. 
 
 8. What general lien does cover, 383. 
 
 9. Are collection notes from another bank covered by, 384. 
 
 are by Federal rule, 384, a. 
 and in Maryland, 384, b. 
 but not in many States, 384, c. 
 Missouri rule on the subject, 384, d. 
 lien exist nowhere if the note be indorsed " for 
 collection" only, 384, e, f. 
 10. When the collecting bank has made an advance on the note, 384, g. 
 
INDEX. 513 
 
 LIEN — Continued. 
 
 11. On partnership deposits, 385. 
 
 12. Assignor's deposits cannot be applied after Ms assignment, 386. 
 
 See Set-off. 
 
 LIEN ON STOCK. 
 
 1. Is created by statute, 397, 402. 
 
 2. None exists on national bank stock, 398. 
 
 3. Does exist on State bank stock, 399. 
 
 4. Eqiiitable title may be granted even if law is not followed regulating 
 
 tlie transfer, 399, a,. 
 
 5. Pledge must be express, 400. 
 
 6. Debt must exist, 400. 
 
 7. Entire stock pledged may be held without regard to amount of debt, 
 
 401. 
 
 LOAN. 
 
 To cashier is to the bank which is liable, 330. 
 
 LOSS OF DEPOSIT. 
 
 Liability for. See Deposit, 10, 12. 
 
 LOST CHECK. 
 
 If a debt be paid by check which is lost must the maker pay again, 76. 
 See Leqal Indoksement, 3. ' 
 
 LUNATIC. 
 
 1. When bank is protected in paying money of, 172. 
 
 2. Indorsement of, 221. 
 
 3. When principal becomes a lunatic deposit should be paid as before to 
 
 agent, 130. 
 
 ' MAIL. 
 
 1. How ownership of certificate of deposit is affected by delivery to, 256. 
 
 2. Liability for loss of check sent through, 101, b. 
 
 3. Presentation of check through, 295. 
 
 MEANING OP TERMS. 
 
 1. Deposit, 1, a, c. 
 
 2. Certified check, 224. 
 
 3. Certificate of deposit, 246. 
 
 4. Check, 53-61. 
 
 5. General deposit, 2. 
 
 6. Items of deposit, 16. 
 
 7. Lien, 374. 
 
 8. Memorandum check, 62. 
 
 9. Overdraft, 368. 
 10. Pass-book, 46. 
 
 33 
 
514 INDEX. 
 
 MEANING OF 'TERMS— Continued. 
 
 11. Post-dated check, 88. 
 
 12. Special deposit, 2, 5. 
 
 13. Set-off, 374. 
 
 14. Reasonable diligence. See subjects to which it relates. 
 
 MEMORANDUM CHECK. 
 
 1. Description of, 62. 
 
 2. Example of, 62, b. 
 
 3. New York view of, 62, c. 
 
 4. Exchange of, 62, d. 
 
 5. Holder may present it immediately, 79. 
 
 MISTAKE. 
 
 1. Money paid by, can generally be recovered, 351. 
 
 2. Money paid on forged check cannot be, 352. 
 
 3. Recovery on raised check, 353. 
 
 4. Recovery on raised draft, 354. 
 
 5. Reasonable diligence must be used to recover on a raised check, 355. 
 
 6. Demand must be made, 355, b. 
 
 7. In whose name suit should be brought to recover on raised check, 
 
 355, b. 
 
 8. Mistake a question of fact, 356. 
 
 9. Who should sue for an over-payment, 357. 
 
 10. When draft has been paid by, 358. 
 
 11. Mistake concerning security is no ground for recovering the money 
 
 paid, 359. 
 
 MONEY. 
 
 1. Deposit is regarded as, 33. 
 
 2. Counterfeit note is no payment, 303. 
 
 3. Can genuine but worthless notes be returned, 304. 
 
 4. In what must a baijk pay a general deposit, 305. 
 
 5. When deposit is in current notes, 305, 308. 
 
 6. When deposit is in specie, 305, b, c, d, tj, f. 
 
 7. When bank agrees to pay gold or in a particular way, 306. 
 
 8. When deposit is payable in a commodity and not money, 307. 
 
 9. Commodity can be paid only by agreement and not by custom, 307, a. 
 
 10. When deposit is in notes that are depreciating, 308. 
 
 11. Check must be paid in money, 309. 
 
 12. In what must bank pay collections, 310, 473. 
 IB. Purport of check for current funds, 311. 
 
 14. Payment by special law, 312. 
 
 15. Check drawn for dollars and not for bank bills, 313. 
 
 16. Checks payable in Confederate notes, 314. 
 
 17. What excused the paying of deposits during the civil war, .314, h. 
 
 18. Usage and mode of paying after the war, 314, c. 
 
INDEX, 515 
 
 NEGrLIGENCE. See Liability ; Deposit, and other subjects to which it re- 
 lates. 
 
 NOTARY. See Collections, 5, 14, sixth ; Notice. 
 
 NOTE. 
 
 Collection of, for depositor, 468. See Depositob's Notes. 
 
 NOTICE. 
 
 1. What must be given when check is not paid, 302. 
 
 2. Need not be given if drawer has no funds, 302, a. 
 
 but must be if he has, 302, b. 
 
 3. Must be given to indorser, 302, v. 
 
 4. Must be given of forgery, 215. See Collections, 5, 14, sixth, 46. 
 
 OFFICER. 
 
 To what officer deposits should be delivered, 31. 
 and note be paid, 31, c. 
 
 ORDER. 
 
 Must, order to bank to pay, be in writing, 36. 
 
 ORDER OF PAYMENTS. 
 
 1. What priority must be observed, 77. 
 
 2. Date confers no priority, 77, b. 
 
 3. When amount of cheeks exceeds deposits, 78. 
 
 4. Holder of memorandum check may present it immediately, 79. 
 
 OVERDRAFT. 
 
 1. Account should not be overdrawn, 338. 
 
 2. Agent has no authority to overdraw, 369. 
 
 3. Where account is overdrawn at insolvent bank, 370. 
 
 4. Bank can recover overdraft, 371. 
 
 5. Money fraudulently overdrawn can be reclaimed even if deposited in 
 
 another name, 372. 
 
 6. Redemption of stock pledged to secure an overdraft, 373. 
 
 OVERDRAWING. 
 
 Effect of, at insolvent bank, 370. See Oveedbapt. 
 
 OVERPAYMENT. 
 
 1. Of deposit, 31, c. 
 
 2. Cannot be recovered if too long delayed, 93. 
 
 OWNERSHIP OP DEPOSIT. 
 
 1. When account is overdrawn, 17. 
 
 2. When check is drawn on depository, 18. 
 
 3. When check is not drawn against funds, 19. 
 
 4. When check is not drawn on depository, 20, 384, 436. 
 
516 INDEX. 
 
 OWNERSHIP OF DVPOSIT— Continued. 
 
 5. When distinction how check is drawn is not observed, 21. 
 
 in Alabama, 21, a. 
 
 in Pennsylvania, 21, b. 
 
 in Louisiana, 21, u. 
 
 6. Is retained by a. restrictive indorsement, 22. 
 
 unless the depositor is credited for the amount, 23. 
 
 7. Bank can treat the deposit of a check as cash or for collection, 23., 
 
 8. Bank cannot question title, 40, 249. 
 
 9. Evidence of title of, 110. 
 
 10. Invalid check, 24. 
 
 11. Insolvent bank-notes, 25. 
 
 12. Money deposited for a special purpose, 44. 
 
 13. How title to certificate of deposit is affected by delivery to mail, 256. 
 
 PARTNERSHIP DEPOSITS. 
 
 1. How they must be entered, 136. 
 
 2. Cannot be drawn on individual partner's check, 137. 
 
 3. How they are drawn in England, 138. 
 
 4. When one partner dies the survivor can draw,, 139. 
 
 5. Application of after the death of. a partner, 140. 
 
 6. Of new partnership cannot be applied to debt of old one, 141. 
 
 7. Bank cannot inquire into the right of a partner to transfer money 
 
 from one account to another, 142. 
 
 8. If partnership check be inaccurately signed, bank can inquire about 
 
 it, 142. 
 
 9. Liability of retiring partner on check given by partnership after dis- 
 
 solntion, 143. 
 10. Lien on, 385. 
 
 PART PAYMENT. 
 Of eheek, 85. 
 
 PASS-BOOK. 
 
 1. What it contains, 46. 
 
 2. Entry is presumed to be correet unless disputed, 199. 
 
 3. What is an original entry in, 47. 
 
 4. Entry not binding on bank or depositor, 47-49. 
 
 5. What books contain original entries, 47, a.. 
 
 6. Admission of evidence to explain technical terms, 48, b. 
 
 7. Duty of bank to notify depositor on discovery of error, 48, 
 
 8. How far pass-book is conclusive evidence, 49. 
 
 9. Liability of bank for receiving money without, 50. 
 
 10. California usage in entering checks, 51. 
 
 11. Pass-book is not negotiable, 62. See Savings Bank Eeghlatiohs ; 
 
 Gift Deposit. 
 
INDEX. 517 
 
 PAYMENT OP CHECK. 
 
 1. I3 not payment till paid, 66. 
 
 2. Payment by agent of check instead of money, 66, b, 0. 
 
 3. Acceptor must be diligent in collecting, 67. 
 
 4. When check is payment by agreement, 69, a. 
 
 5. Presumptively check is not payment, 69, b. 
 
 6. Acceptance of an appropriation of deposit, 70. 
 
 7. Acceptance of third party's check is not payment, 71. 
 
 8. When draft is paid by check and check is paid in money the draft is 
 * paid, 72. 
 
 9. Check is not payment if deposit is withdrawn, 73. 
 
 10. Acceptance discharges drawer from garnishment, 74. 
 
 11. When check is a loan and not payment, 75. 
 
 12. When a check is paid and lost must the maker pay again, 76. 
 
 13. Duty of bank to pay checks, 81. 
 
 14. When justified in not paying, 82. 
 
 15. Liability of maker for countermanding payment of check, 81, a. 
 
 16. Bank must pay check in reasonable time, 82. 
 
 17. Effect of crediting the depositor with check of another depositor, 83. 
 
 18. Must pay if deposit be sufficient, 84. 
 
 19. Part payment, 85. 
 
 20. Of special deposit, 86. 
 
 21. Of deposit for illegal purpose, 87. 
 
 22. Of post-dated check, 88. 
 
 23. Must pay only on indorsement of payee, 89. 
 
 24. Drawer's intention is no excuse for wrong payment, 89, b. 
 
 25. Telegraph order, 90. 
 
 26. Bank is excused if forced to pay, 91. 
 
 27. Cannot be recovered if mistake consist in not knowing correct amount 
 
 of maker's deposit, 92. 
 
 28. Through fraud of paying teller, 94. 
 
 29. To messenger or agent, 95. 
 
 30. Of check drawn on another bank is proper, 95, b. 
 
 31. Where money is loaned for a specific purpose, 96. 
 
 32. By draft at request of depositor, 101. 
 
 33. Duty of successor to pay predecessor's deposits, 102. 
 
 34. How corporation checks should be paid, 103. 
 
 authority of president to draw, 104. 
 
 35. Co-executors must sign, 105. 
 
 in England one can sign, 105, b. 
 
 36. Trustees must all sign, 106. 
 
 37. Duty of bank when trustee has also a private account, 107. 
 
 38. How deposit of sheriff should be paid, 108, a. 
 
 when he is executor, 108, b. 
 
 39. When deposit is in trust for a fixed period, 109. 
 
 40. Title of deposit is evidence of ownership, 110. 
 
518 INDEX. 
 
 PAYMENT OF CKVCK— Continued. 
 
 41. Bank pays at its own risk after prohibited from paying, 111. 
 
 42. Cannot divert trust fund to reimburse itself, 112. 
 
 43. Liability of bank for misapplying trust fund, 113. 
 
 44. How far beneficiary can follow trust fund, 114. 
 
 45. Bank cannot pay deposit that has been attached, 115. See Attached 
 
 Deposit ; Patmehts by Special Agkeement. 
 
 PAYMENTS BY SPECIAL AGREEMENT. 
 
 1. Deposit must be applied as depositor intended, 171, a, g, h. 
 
 2. Special deposits in a sayings bank, 171, ki, d. 
 
 3. Fiduciary deposit to discharge agent's debt, 171, e. 
 
 4. Misapplication by bank of a deposit of certified check, 171, f. 
 
 5. Bank is not bound by unknown agreement of joint depositors, 172. 
 
 6. When deposit is in trust in form, but not so in fact, 173. 
 
 7. When deposit is made in a bank to be sent to a third for assorting, 
 
 174. 
 
 8. A principal on a note is not prevented by his surety from making an 
 
 agreement concerning his deposit, 175. 
 
 9. Agreement to pay check contrary to the Statute of Frauds, 176. See 
 
 Insolvent Bank, 14 ; Pbesentation of Check, 6. 
 
 POETER. 
 
 1. Delivery of deposit to, 31. 
 
 2. Presentation of check by, 300. 
 
 POST-DATED CHECK. 
 
 1. Payment of, 88. 
 
 2. Presentation of, 301, c. 
 
 3. Should not be certified, 231, d. 
 
 4. When demand must be made before suit, 321. 
 
 5. When maker can be sued, 337. 
 
 6. Agent cannot bind principal on, 337, e. 
 
 7. Usage cannot be introduced to show authority to certify, 231, o. 
 
 PRESENTATION OF CHECK. 
 
 1. Must be due diligence in presenting checks for payment, 284. 
 
 2. Rule of diligence between holder and drawer, 285. 
 
 when both live at one place, 285, a, 286. 
 when both live at different places, 285, b, 287. 
 
 3. Drawer can extend the time, 288. 
 
 4. Drawer not exonerated by delay, 289. 
 
 5. Excuses for non-presentation, 290. 
 
 first, when drawer has no funds, 290 (First). 
 
 second, when funds are withdrawn, 290 (Second). 
 
 third, insolvency of drawee, 290 (Third). 
 
 fourth, when usage is followed, 290 (Fourth). 
 
 fifth, when prevented by extraordinary causes, 290 (Fifth). 
 
INDEX. 519 
 
 PRESENTATION OF CSWK— Continued. 
 
 6. How presentation is affected by agreement, 291. 
 
 7. Effect of drawer's direction, 292. 
 
 8. Presentation by public officer, 293. 
 
 9. Effect of accepting on sureties, 294. 
 
 10. Presentation through mail, 295. 
 
 11. Holder must prove no loss by delay, 296. 
 
 12. Not dishonored by delay in presentation, 297. 
 
 13. Release of drawer by tendering payment, 298. 
 
 14. Presentation of irregular check, 299. 
 
 15. Presentation by porter, 300. 
 
 16. When indorsed check must be presented, 301. 
 
 17. Indorser is discharged if presentation is too late, 301, d. 
 
 three days too late, 303. 
 
 PRINCIPAL. See Agent; Subett. 
 
 PRINCIPAL'S DEPOSIT. See Attached Deposit ; Agent. 
 
 PROCEEDS OF COLLECTIONS. See Collections, 53-62. 
 
 PROFIT. 
 
 Recovery of on deposit while keeping it, 14. 
 
 PUBLIC DEPOSITS. 
 
 1. Effect of adding official title, 427. 
 
 2. Depositor is personally liable if deposit be on private account, 428. 
 
 3. Deposit is general unless specially deposited, 13, a, 429. 
 
 4. Belongs to successor in office, 430. 
 
 5. Bank should not pay bankrupt official, 431. 
 
 6. What bank can do when opposing parties claim the deposit, 430, a. 
 
 7. Duty of bank when it has knowledge of wrongful conduct of public 
 
 depositor, 432. 
 
 8. What authority must a bank have to pay public money, 433. 
 
 9. Liability of public officer for a public deposit, 434. 
 
 PUBLIC OFFICER. 
 
 Presentation of check by, 293. 
 
 RAISED CHECK. See Cebtified Check. 
 
 RECOVERY OF MONEY. 
 
 1. None if check be paid through mistake of amount of drawer's deposit, 
 
 92. 
 
 2. Nor of overpayment in final settlement with depositor if too long de- 
 
 layed, 93. See Mistake. 
 
 REGULATIONS. See Savings Bank Regulations. 
 
520 INDEX. 
 
 REVOCATION. 
 
 1. Can revoke a check, 99. 
 
 2. Certified check cannot be revoked, 240. 
 
 3. Death of drawer revokes it, 99. 
 
 where rule does not apply, 99, b. 
 
 SAVINGS BANK DEPOSITORS. 
 
 Rights of, when bank becomes insolvent, 283. See Insolvent Banks, 21. 
 
 SAVINGS BANK REGULATIONS. 
 
 1. Part of the contract, 177. 
 
 2. When they are waived, 177, a. 
 
 3. Production of book a reasonable regulation, 178. 
 
 4. May pay without producing the book, 179. 
 
 5. Degree of diligence required in paying, 180, 181, 182. 
 
 agreement to nse its best efforts, 180, d. 
 
 6. Is bank protected by presentation of the book, 183. 
 
 7. By-laws existing at time of deposit govern, 184. 
 
 8. When book is lost what should the bank do, 185. 
 
 9. When bank can pay on a written order without the book, 186. 
 
 10. Payment to administrator, 187. 
 
 11. Bank should not pay on presumption of death, 187, b. 
 
 12. When depositor may recover notwithstanding heavy loss by bank, 188. 
 
 SECURITIES. See Collateral Securities. 
 
 SET-OFF. 
 
 1. Is a statutory right, 375. 
 
 2. When does it exist, 379, 394. 
 
 3. Depositor may apply his deposit on any account, 387. 
 
 4. Debts must exist between same parties and in the same right to be, 
 
 388. 
 
 5. When discount bank is insolvent, 389. 
 
 6. When savings bank is insolvent, 391. 
 
 7. When depositor is insolvent, 390. 
 
 8. Against repayment of forged note, 392. 
 
 9. Debt against check holder cannot be, 393. 
 
 10. When unmatured debt may be, 395. 
 
 11. Bank-notes of a failed bank, 396. 
 
 cannot be set off by garnishee debtor, 396, a. 
 
 SHERIFF. 
 
 How bank should pay his deposit. See Payment op Check, 38. 
 
 SPECIAL AGREEMENT. 
 
 1. When check is payment by, 69, a. 
 ; 2. How presentation of check is affected by, 291. See Payments bt 
 Special Agreement : Insolvency ; Presentation op Check, 6. 
 
INDEX. 521 
 
 SPECIAL DEPOSIT. 
 
 Should be paid as depositor directs, 87. See Deposit. 
 
 STATUTE OF FRAUDS. 
 
 1. Agreement to pay check contrary to, 176. 
 
 2. Verbal acceptance not contrary to, 230, u. 
 
 bank cannot be sued on, 325. 
 
 STATUTE OP LIMITATIONS. 
 
 1. Does not operate before making demand, 360. 
 
 2. When statute will operate without making demand, 360, a. 
 
 3. Demand to have a check certified is not a demand for payment and does 
 
 not set the statute in motion, 361. 
 
 4. On certificate of deposit. Operation of, 362. 
 
 runs from its date, 247. 
 or from demand, 254. 
 
 5. Operation of on trust deposits, 368. 
 
 6. Operation of on certified check, 361. 
 
 7. Operation of, when specie payments are suspended, 3^4. 
 
 8. When deposits are unclaimed, 365. 
 
 9. When one bank succeeds another, 366. 
 10. When a depositor is a lunatic, 367. 
 
 STOLEN CHECK. See Legal Indoesemeut, 3. 
 
 SUIT. 
 
 1. To recover security left for a discounted note, 415, a. 
 
 2. In whose name should be brought to recover on raised check when 
 
 bank is acting as agent for another, 355, b. 
 
 3. When can the drawer sue the bank. 
 
 4. When suit cannot be maintained on check deposited on collateral 
 
 agreement, 338. See Demand ; Mistake ; Check Holder. 
 
 SUNDAY. 
 
 Presentation of check due on, 801, c. 
 
 C 
 
 SURETY. 
 
 1. When surety on check is liisoharged, 331. 
 
 2. Effect of accepting a check on, 294. 
 
 3. Payment of note of principal and, 418. 
 
 4. Principal is not prevented by surety from making agreement concern- 
 
 ing his deposit, 175. 
 
 TELEGRAPH ORDER. 
 Payment of, 90. 
 
 TRUST DEPOSITS. See Statute of Limitations, 5; Paymekt of Check, 
 35^i4; AoENT ; Ixsolvekt Bakk, 10, 11. 
 
522 INDEX, 
 
 TRUSTEES. 
 
 1. How they must sign checks, 106. 
 
 2. Duty of bank in paying them. See Payment op Check, 36, 37. 
 
 USAGE. 
 
 1. In indorsing notes for collecting, 384, a, d. 
 
 2. In paying note of depositor payable at a bank, 403, o. 
 
 3. In making remittances, 475, b. 
 
 4. In paying Southern checks after the civil war, 314, o. 
 
 5. In some places certificate of deposit is payable without grace, 259. 
 
 6. Days of grace may be controlled by, 443. 
 
 7. Of clearing house does not affect depositor, 421. 
 
 how far it affects banks, 422. 
 
 8. Cannot he admitted to justify paying a deposit in a commodity instead 
 
 of money, 307, a. 
 
 9. Banker's lieu is not created everywhere by, 376. 
 
 must he proved to create it, 377. 
 
 10. How demand and notice are affected by, 446, 461, a. 
 
 11. Collecting hank should not send check to drawee, 476. 
 
 12. May be proved concerning book entries, 14, b. 
 
 13. Cannot be introduced to show authority to certify post-dated check, 
 
 231, c. 
 
 14. When deposit account is credited with "dollars" usage cannot be 
 
 proved to discharge it in something else, 305. 
 
 15. Deposit is held subject to check, 395. 
 
 16. Presentation of check sufficient if following 290, (fourth), a, b, c. 
 
 17. Certificate of deposit is not payment unless usage be clear, 260. 
 
 where it is regarded as money, 261, a. 
 
 18. To show whether check is for deposit or for collection, 23. 
 
 19. In California in entering checks, 51. 
 
 WIFE. See Husbahd ahd Wife. 
 
KF 97^ B69 
 
 ■uthor Vol. 
 
 Bolles, Albert Sidney 
 
 Title Copy 
 
 The law realitng to vanks and 
 
 I n • 1 1 1 ■ — = — ' "^