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HG2702..W^ Entered according to Act of Parliament of Canada, in the year of our Lord one thousand eight hundred and eighty-eight, by Frank Weir, in the Office of the Mi;''i3ter of Agriculture. PREFACE. The want of a Text Book on the Law and Practice of Banking, specially applicable to the Dominion of Canada, has induced the Author to prepare such a Work, which he now presents to the favourable consideration of Bankers and Merchants. In preparing this volume he has not attempted to usurp the office of counsel in complicated cases, aiming only to pre- sent a clear exposition of those general principles of banking law with which every Bank Director, Manager, and Officer should be fully acquainted. Nor is such a knowledge less necessary to the Merchant, and those having the conduct of his financial affairs. It is hoped that this Work will also be found a useful ad- dition to the Libraries of professional men, on account of the numerous judgments embodied in it, all of which have been carefully compiled and fully indexed. Primarily, the Author is indebted to the leading English and American text writers, more especially, as will be seen, to Grant and Morse, for the general principles of law which have been enunciated ; and secondarily, to the decisions of 8610 iv PREFACE. Canadian Courts, which latter have enabled him to note the manner in which those principles have been interpreted and applied in the various Provinces. It will be seen that many points commented upon have not yet come before our Courts for consideration, and the Author has had to place reliance on foreign rulings. Other points, which have been adjudicated upon, may, should they again arise, receive a different interpretation if taken to the higher Courts. F. .W Montreal, ist June, 1888. I TABLE OF CONTENTS PAGE INDEX TO CA.NADIAN CASES CITED xi INTRODUCTION 3-6 THE BANK ACT 7-48 COMMENTARY ON THE BANK ACT. CHAPTER I. ORGANIZATION. Sect. t. — Introduction Si-54 2. — Acts of Incorporation 54-60 3.— General Meetings 60-64 4.— By Laws 65-69 CHAPTER H. MANAGEMENT Sect. i. — Board of Directors. General Func- tions 70-85 2. — Prfsident. Duties and Powers 86-90 3 — Liability of Board for Mismanagement 90-97 I ' vl Contents. CHAPTER III. CHARTER RIGHTS AND rRIVH.EGES. PAOE Sect, i.— Ok thk Power to Receive Deposits.... 98-126 2.— Of Checks 126-147 CHAPTER IV. CHARTER RIGHTS AND PRIVILEGES. Sect. i. — Of the Power to Issue Notes 148-163 CHAPTER V. ft CHARTER RIGHTS AND PRIVILEGES. collateral securities. Sect. i. - General Ouservations 164-170 2. — Hypothecation cf Real Property 170-183 3. — Hypothecation of Personal Property 183-185 4. — Documents ok Title 1^5-195 5.— Stocks, Bonds and other Public Secu- rities 195-196 CHAPTER VI. OF OH-ICIAL BONDS Sect. i. — General Observation 197-210 CHAPTER VII. OF FORFEITURE OF CHARTER RIGHTS. Sect, i Forfeiture for Malfeasance 211-222 2. — LvsoLVENCv 222-226 3. — Winding up Act 226-254 Contents. C.IAPTER VIII. SHARES AND SHAREHOLDERS. vii PAGE Sect. i. — Liahility of Shareholdkrs 255-262 a. — Lien on Shares for Holders Indebt- edness TO Bank 263-266 3. — Transfer and Transmission of Shares.. 266-271 4. — Rights of Shareholders to Dividends, New Shares, Surplus Assets, etc.. 27 2-273 CHAPTER IX. OF COLLECTIONS. Sect. i. — Of the Power Generally 274-288 CHAPTER X. OF THE CHIEF EXECUTIVE OFFICER. Sect. i. — The Cashier. 289-297 CHAPTER XI. REGULATIONS FOR THE GUIDANCE OF OFFICERS OF BRANCHES. Sect. i. — Cash and Securities 298-299 2. — General Business 299-300 3. — Discounts.... 300-301 4. — Overdue Bills 301 5. — Insurance 301-302 6. — Warehouse Receipts 302 7. — General Instructions 302-303 vUI Conienta. THE BILL AND NOTE ACT PACE .307-326 COMMENTARY ON THE BILL AND NOTE ACT. CHAPTER I. FORM AND CHARACrERISTICS. Sect. i. — Definitions, &c 317-328 2. — General Ouservations 328-331 3. — Customary Forms 33'-338 CHAPTER H. OF PRESENTMENT AND ACCEPTANCE. Sect, i.— General Observations 339-34^ 2. — Presentment for Accei-tance 341-346 3. — Acceptance 34^-347 ^ISF CHAPTER HI. OF PRESENTMENT AND PAYMENT. Sect. i. — Presentment for Payment 348-355 2. — Payment 35^-359 CHAPTER IV. OF PROTEST AND NOTICE OF DISHONOUR. Sect. i. — Protest for Non-Acceptance 360-363 2. — " " Non-Payment 363 3. — Notice op Dishonour i^Z-ZTi OF THE AL. Contents, ix CHAPTER V. :iON AND FORGERY OK A HILL OR NOI'E. PAr.E Skct. I. — Of the Ai.TF.RATroN of a Bar. or Notf. 374-377 2— Of thk Forgkry of a Bill or Noik ...377-381 CURRENCY AND LEGAL TENDER 382-386 APPENDIX. An Act respecting the Currency 387-390 " . " Dominion Notes 39'-393 " " Government S.\vi.>^us Banks.. .394-401 " " Savinos Banks in Ontario and QuEHEc 402-414 " " Returns by Persons receiving Deposits 414 " " Interest 415-420 " " Accessories 421-422 " " Lai CENYANDSiMiLAROFFENCEs.423-434 ^''JKGERY 435-441 TABLE OF CANADIAN CASES CITED. PAGE Agricultural Invest. Co. z'. Federal Bank 381 Amazon Ins. Co. v. Quebec and Gulf Ports Steamship Co 136 B Bank of B. N. A. v. Clarkson 187 V. Ross, 367 Hamilton z;. Noye 186,187,188, 193 Liverpool r. Bigelow 85, 261 Michigan 7', Gray 370 Montreal v. Little 126 V. Rankin 106 Toronto v. Perkins 169, 175, 178 Bank of Toronto v. Wilmot 209 Bank U. C. v. Covert 203 Brooke v. Bank of Upper Canada 258 Browne et al. v. Commercial Bank 277 C. Cameron v. Kerr 180 City Bank r;. Barrow 100 City Bank j;. Brown 209 Clench v. Consolidated Bank 107 Coffee V. Quebec Bank 188 Collins r;. Bradshaw ,^- Commercial Bank v. Bank of U. C 169, 170, 180, 191 V. Fleming 134 V. Eccles 367 Conn p. Merchants Bank 116, 151, 152 Cook V. Royal Canadian Bank 268 xii Table of Cases. D. PAr.E Denholm v. Merchants Bank i86 Dominion Bank v. Davidson 187 Drake r. Bank of Toronto 74 E Exchange Bank v. Burland 226 V. Gault 204 F, Foster v. Bowes 185 Fournier z'. Union Bank 121 G. Gore Bank 7'. Royal Canadian Bank 146 Grant v. La Banque Nationale 169, 179, 180, 187 Great Western Ry. Co, v. Hodgson 1S8 H. Harrison and Standing ex^xfr/e 226 Hudon V. Painchaud ^"ji J- Jones 7'. Bank of Montreal 141 V. Imperial Bank 167 L. Laine v. Clarke 334 La Banque Jacques Cartier v. Giraldi et vir 107 La Banque Nationale v. Lesperance 207, 209 La Rocqueetal. v. Franklin County Bank 337 Lee 7'. Bank of B. N. A 124 Llado 7>. Morgan 187 Low V. Owen 394 Table of Gases. xiii M. PAGE Mander 7>. Royal Canadian Bank 124, 125 Marler T'. Molsons Bank 100, 114 Mason v. Great Western Ry. Co 188 McDonald v. Bank of Upper Canada 169, 171, 184 Merchants Bank of Canada v. McKay 182 V. Smith 187, 188, 192, 194 Milloy V. Kerr 192 Molsons Bankz/. Corp. Town of Brock ville 106 i;. Janes 187 V. Lanaud 194 Monteith, In Re ... 192, 193 Mount z/. Dunn 276, 355 O. Ontario Bank v. Miner 185 Owens V. Quebec Bank 279, 280 R. Rcgina !<. Bank of Upper Canada 63 Rice f . Bowker 355 Richer v. Voyer et al 124, 125 Robertson v. La Banque d' Kochelaga 260, 262 Royal Canadian Bank v. Cummer 180 V. Carrutiiers 187 V. Miller 187 S. Sarazin 7'. Bank of St. Hyacinthe 222 Smith f. Bank of Nova Scotia 258 T. Thompson v. Cotterall 364 Thorn v. Sandford 364 Todd z'.Gore Bank 288 Trustees of the Bank of U. C. v. Can. Nav. Co 150 xiv Table of Cases. U. PACE Union Bank z/. Ontario Bank 37S W. Walsh IK Union Bank 270 Wen ham 7/. La Banque du Peuple 379 Wilson V. La Banque Ville Marie 122 V. Pringle 367, 369 Wisconsin Marine and Fire Ins. Co. v. Bank of B. N. A 288 Wood t;. Stephenson 129 PAGE 378 270 379 122 367, 369 ^ 288 129 INTRODUCTION. The business of banking consists in dealing in coin and bullion, bills of exchange, promissory notes and other nego- ciable securities, collecting bills and notes, receiving deposits, issuing circulating notes and letters of credit, and dealing gen- erally vn. fioating as distinguished {xovc\ fixed capital. The large capital required to carry on the business of most civilized countries has led to the establishment of Joint Stock banks ; and while in the money centres of Europe and the United States private bankers do a large and profitable business, the great bulk of banking in Canada is carried on by the chartered banks. The banker whose duty it is to conduct the various and extensive operations of banking has a task of great responsi- bility, and the knowledge required to enable him to discharge successfully the duties of his calling may be said to have raised his business to the dignity of a profession. A know- ledge of the laws and customs which govern banking trans- actions must be carefully acquired, and while no mere treatise can take the place of experience, prudence and sound judgment, the prudent banker will not fail to inform himself on all points of law and practice connected with his profession. At present the information which the banker requires has to be obtained from various sources, and the object of the present work is to present in one volume the knowledge which cannot now be so obtained. It is not necessary in a work of this kind to enter into any lengthened account of the origin and growth of banking institutions, but it may be well to notice briefly the causes which led to their establishment and which contributed to their growth. If, in this country at least, incorporated companies have monopolized, so to speak, the business of banking, the private bankers may lay claim to a much longer descent, as A INTRODUCTION. their origin is almost lost in antiquity. At the commence- ment of the Christian era, it seems to havt; been a common practice for prudent and careful people to carry their money to the "exchangers" or bankers " that they might receive their own with usury." The gentlemen bankers of antiquity did not, however, like their successors of modern times, " dwell in marble halls," but sat in public places on wooden benches with tables before them, some of those of Jerusalem occupying the very porch of the Temple. The early bankers were evidently in the first place dealers in money or exchanges, and as they required to keep "strong boxes " for the safety of their treasures, became in time the custodians of other people's savings, just as at a later period in England the Goldsmiths occupied a similar position. It was not, however, until the year A.D., 1171, that we have any authentic record of the establishment of a bank. In that year the Bank of Venice, a bank of deposit only, opened its doors, and continued for six hundred years to provide a place of safety for the money and valuables, not only of Venice but of a great part of Europe. Two hundred years later the Bank of St. George at Genoa was established, and appears to have been the first bank of discount. Banks, however, did not come into existence in those days so rapidly as in later times, as the ne.xt important institution the Bank of Amsterdam was not opened till two hundred and forty years later, and it was not till eighty years more had elapsed that the Bank of England was established, in 169 1. The establishment of banks in Scotland and other European countries soon followed. In Canada the early French settlers followed the customs of their forefathers, and "counted down their crowns and caroluses " to each other for generations. Having suffered severely through the "Assignats," issued under the French regime, and only redeemed at a fraction of their nominal value, they naturally dreaded all kinds of paper money. It was not therefore till near the close of the second decade of the present century, when British merchants had become INTRODUCTION. largely interested in the commerce of the country, that chartered banks found a foothold in Canada. The Bank of Montreal was opened on the third of Novem- ber, 1817, having a paid up capital of ;t87,500 or $350,000. It was incorporated in 18 18, its first issue being dated the first of January of that year. The Quebec Bank commenced business in July, 1819, with a paid up capital of £S2,SOO, or $210,000. The Banque du Peuple established as a banking firm by Viger, De Witt & Co., obtained its charter in 1835. The Bank of British North America began business in 1836, and was incorporated by Royal Charter at the union of the two Provinces in 1840. The Bank of Upper Canada having its head office in Toronto was established in 1 8 19, to meet the growing requirements of commerce in the Upper Province. The charters of Canadian Banks were, and still are, modeled partly on the banking system of Scotland and partly on that of the United States. The comparatively large capital, numerous branches, and note circulation resembling the Scottish banks, while the liability limited in extent, and the method of doing business is more in accordance with the American model- For many years the failure of a Canadian Bank was a thing unknown, the only suspension of Specie Payments among the Banks occurring in 1837, during the great panic in the United States, and decided upon to protect their reserves. Until 1866 no bank of any standing had closed its doors, but in that year the Bank of Upper Canada suspended pay- ment. From 1853 till 1864 this bank kept the Government Account, to which it was largely indebted at the time of its suspension. Its capital ($3,9391267) was entirely lost, and both the Government and other creditors lost heavily, but the double liability was never enforced. In 1867 another important institution suspended, namely, the Commercial Bank of Canada, having a paid up capital of $4,000,000, and its head office at Kingston. The bill-holders 6 INTRODUCTION. I and depositers were paid in full, but the stockholders lost two- thirds of their stock, receiving payment of the other third in the stock of the Merchants Hank of Canada into which it was merged in March, 1868. More recent suspensions and failures are yet familiar to the present generation, and need not be referred to here. From 1854 to 18C0, during the exciting times of the Crimean War, and the building of the first great Canadian railroads, bank charters were granted with too little regard to the character of the applicants, and as a natural result a number of these were obtained by, or fell into the hands of, speculators, who used the privileges thus acquired to defraud the public. Fortunately the character of these institutions soon became known, and when they collapsed the losses sustained were unimportant. The Colonial Bank and the Intercolonial Bank, both of Toronto, and the Bank of Clifton, were of this class. The charters of these institutions, as well as of some others which had never been put in operation, were shortly afterwards repealed. This brief notice of Canadian Banking would be incom- plete without a reference to the Free Banking Act of 1850. This Act, drawn up and carried through Parliament by the late lamented Sir Francis Hincks, resembled in many respects the present National banking system of the United States, although existing in Canada ten years before its introduction into the American Republic. It authorized the issue of notes on deposit of Government securities, and conferred other valuable privileges. So long, however, as charters could be obtained authorizing the issue of circulating notes without any such deposit, few availed themselves of the Act, which is no longer in force. The Molsons Bank commenced business under the Free Banking Act, but obtained a special charter two years later. Several other institutions came into existence under the same Act, but soon afterwards obtained special charters or passed out of existence. An Act respecting Banks and Banking. a. d. 1886. TFER Majesty, by and with the advice and consent -*--*" of the Senate and House of Commons of Cauada, enacts as follows : — 1. This Act may be cited as '' The Bank Act!' 46 short title, v., c, 20, s, I, J8. In this Act, unless the context otherwise re- interpretn- q^'--^^'- . "Goods. (a.) The expression "goods, wares and merchandise"" w.ires and includes in addition to the things usually understood „ 2i^'^^^»'*"" thereby, timber, deals, boards, staves, saw-logs and other lumber, petroleum, crude oil, and all agricultural produce and other articles of commerce ; [b) The expression " warehouse receipt " means any "Warehouse receipt given by any person, firm or corporation for any ''^"'P'- goods, wares or merchandise in his or their actual, visi- ble and continued possession as bailee or bailees, in good faith, and not as of his or their own property, and includes receipts from any person who is the keeper of any harbor, cove, pond, wharf, yard, warehouse, shed, storehouse, tannery, mill or other place in Canada, for goods, wares or merchandise in the place or in one or more of the places so kept by him, whether such per- son is engaged in other business or not, and includes also specifications of timber ; {c.) The expression "bill of lading" includes all re- "Bill of ceipts for goods, wares or merchandise, accompanied by "^^'^'"g-" an obligation to transport the same from the place where they were received to some other place, whether by land or water, or partly by land and partly by water, and by any mode of carriage whatever ; id.) The expression "ship" or "shipment" means «ship" or the delivery of any article for transport as aforesaid ;" shipment." 43 v., c. 22, s. 7, part. r 8 Chap. 120 The Bank Act. 49 VlCT. "Tiic Bank." (f.) The expression "the bank" means any bank to which this Act applies.' To what 3. The provisions of this Act apply to every bank hanks the Act . i. j j • ^i • r ..i u r ^ e applie*. incorporated during the session of the rarnament of Canada, held in the forty-third year of Her Majesty's reign or thereafter, or hereafter, whether this Act is specially mentioned in its Act of incorporation or not, as well as to all banks, (except where otherwise express- ly mentioned) whose charters or Acts of incorporation are hereby continued, but not to any other, unless extended to it under the special provisions hereinafter made. 34 V., c. 5,s. 2; — 43 V., c. 22, s. i. li' 11 Charters con- 4. The charters or Acts of incorporation of the July* 1891.* several banks enumerated in the schedule A to this Act, and any Acts amending them, are hereby continued and shall, subject to the provisions of this Act, as to their incorporation, the amount of capital stock, the amount of each share of such stock, and the chief place of busi- ness of each respectively, remain in force until the first day of July, in the year one thousand eight hundred and ninety-or subject to the right of any such bank to increase its capital stock in the manner hereinafter pro- vided ; and as to other particulars this Act shall form and be the charter of each of the said banks, until the said first day of July, one thousand eight hundred and ninety-one, and the provisions hereof shall apply to Proviso: as to each of them respectively: Provided always, that the said charters or Acts of incorporation are only hereby continued in force in so far as they or any of them are not forfeited or void under the terms thereof or of this Act or any other Act passed or co be passed in that behalf, by non-performance of the conditions of such charters or Acts of incorporation respectively, or by insolvency cr otherwise. 34 V., c. 5, s. 1 ; — 43 V„ c, 22, s, II. As to other particulars. forfeiture. 1886. The Bank Act. Clmi). 120. CAPITAL STOCK. H» The capital stock of every bank hereafter incor- Matien to poratcd, the amount of each share, the name of thefor'i'ni^piciftl bank, and the place where its chief office is to be situate, ^'='- shall be declared in the Act of incorporation of every such bank. 34 V., c. 5, s. 3. Conditions previous tu commencing luisiness by new banks. 6. No bank hereafter incorporated, unless it is other- wise provided by its Act of incorporation, shall issue notes or commence the business of banking until five hundred thousand dollars of capital have been bona fide subscribed and one hundred thousand dollars have been bona fide paid up, nor until it has obtained from the Treasury Board a certificate to that effect : 2. Such certificate shall be granted by the Treasury Board when it is proved to the satisfaction of such board that such amounts of capital have been bona fide subscribed and paid respectively : 3. If at least two hundred thousand dollars of the subscribed capital of such bank have not been paid up before it commences business, such further amount as is required to complete the said sum shall be called in and paid up within two years thereafter ; and it shall not be necessary that more than two hundred thousand dollars of the stock of any bank, whether incorporated before or after the passing of this Act, shall be paid up within any limited period from the date of its incorpor- ation. 34 v., c. 5, s. 7. T. The capital stock of the bank may be increased, increase of from time to time, by the shareholders at any annual <='»?'''*'• general meeting, or at any general meeting specially called for that purpose ; and such increase may be agreed on by such proportions at a time as the shareholders determine, and shall be decided by the majority of the votes of the shareholders present at such meeting in person, or represented by proxy. 34 V., c. 5, 5.5. When certifi- cate may be granted. A certain sum to be paid up within two years. Not more than $200,000 need be paid up. 10 How stock shall be allot- ted. Chap. 120. The Bank Act. 49 Vict. S. Any of the original unsubscribed capital stock, or the increased stock of the bank, shall, when the directors so determine, be allotted to the then shareholders of the bank pro rata, and at such rate as is fixed by the directors, but no fraction of a share shall be so allotted ; and any of such allotted stock which is not taken up by the shareholder to whom such allotment has been made, within three months from the time when notice of the allotment was mailed to his address, may be opened for subscription to the public, in such manner and on such terms as the directors prescribe. 34 V., c. 5, s, 6. By laws may be made. Election. Qualification of director. Proviso : as to banks en commandite. INTERNAL REGULATIONS. 0» The shareholders in the bank may regulate, by by- law, the following matters incident to the management and administration of the affairs of the bank, that is to say : the i'jumber of the directors, which shall not be less than five and not mere than ten, and the quorum thereof; their qualification ; the method of filling up vacancies in the board of directors whenever the same occur during each year, and the time and proceedings for the election of directors, in case of a failure of any election on the day appointed for it ; the remuneration of the president, vice-president and other directors ; and the closing of the transfer book during a certain time, not exceeding fifteen days, before the payment of each semi-annual dividend : 2. The directors shall be elected annually by the share- holders, and shall be eligible for re-election : Provided, that no director shall hold less than three thousand dollars of the stock of the bank, when the paid-up capi- tal thereof is one milion dollars or less, or less than four thor'.and dollars of stock when the paid-up capital thereof is over one million and does not exceed three millions, or less than five thousand dollars of stock when the paid-up capital thereof exceed three millions : Provi- ded, also, that the foregoing provisions of this section, 1886. The Bank Act. Chap. 120. 11 -'* touching d'rectors, shall not apply to a bank en comman- dite, which shall in these matters be governed by the provisions of its charter : 3. The shareholders (or if the bank is en commandite, Discounts to the principal partners) may also regulate, by by-law, the ''"'^'^'°"' amount of discounts or loans which may be made to directors (or if the bank is en commandite, to the princi- pal partners), either jointly or severally, or to any oue firm or person, or to any shareholder or to corporatiom : 4. Provided, that until it is otherwise prescribed by Certain by. by-law under this section, the by-laws of the bank, on tlnued° any matter which may be regulated by by-law under this section, shall remain in force, except as to any pro- vision fixing the qualification of directors at an amount less than that hereby prescribed ; and no person shall be elected or continue to be a director unless he possesses the number of shares hereby required, or such greater number as are required by any by-law in that behalf. 34 v., c. 3, ss. 28 and 30, part. 10. Every shareholder in the bank shall, on all occa- Votes on sions on which the votes of the shareholders are taken, ^"'*'^^*' have one vote for each share held by him for at least thirty days before the time of meeting : shareholders may vote by proxy, but no person but a shareholder shall be permitted to vote or act as such proxy, and no manager, cashier, bank clerk or other subordinate offi- cer of the bank shall vote, either in person or by proxy, or hold a proxy for that purpose : 2. All questions proposed for the consideration ofMniontyto the shareholders shall be determined by the majority of ' '^^" their votes ; the chairman elected to preside at any such meeting of the shareholders shall vote as a shareholder only, unless there is a tie, in which case, except as to the election of a director, he shall have a casting vote: Casting vote. 3. If two or more persons are joint holders of shares, As to joint anj^ one of such joint holders may be empowered, by 'i"'^l*-'fs of SIiut*6S ■ letter of attorney from the other joint holder or holders, 12 Chap. 120. The Bank Act. 49 Vict. Ballot. ii or a majority of them, to represent the said shares, and vote accordingly : 4. In all cases when the votes of the shareholders are taken, the voting shall be by ballot. 34 V., c. 5, s. 27. Special general meetings Removal of president, director, »S:c II- The directors of the bank, or any four of them, — or any number not less than twenty-five of the share- holders of the bank, who are together proprietors of at least one tenth of the paid-up capital stock of the bank, by themselves or by their proxies, — may, at any time, call a special general meeting of the shareholders, to be held at their usual place of meeting, upon giving six weeks' previous public notice, specifying, in such notice, the object of such meeting : 2. If the object of any such special general meeting is to consider the proposed removal of the president or vice-president, or of a director of the bank, for mal- administration or other specified and apparently just cause, and if a majority of the votes of the shareholders New election, at such meeting are given for such removal, a director to replace him shall be elected or appointed in the manner provided in the by-laws of the bank, or if there are no by-laws providing therefor, then by the share- holders at such meeting ; and if it is the president or vice-president who is removed, his ofllice shall be filled up by the directors in the manner provided in case of a vacancy occurring in the office of president or vice-pre- sident. 34 v., C.5. s. 29. T^oard of directors. 12. The stock, property, affairs and concerns of the bank shall be managed by a board of directors, the number of whom shall be fixed as herein provided, who shall choose from among themselves a president and vice-president ; the directors shall be natural-born or naturalized subjects of Her Majesty, and shall be elected on such day in each year as is appointed by the charter or by any by-law of the bank, and at such time of the day and at such place where the head office of the bank 49 Vict. shares, and holders are c. 5, s. 27. ir of them, r the share- ietors of at f the bank, t any time, Iders, to be giving six luch notice, I meeting is resident or <, for mal- ;rently just liareholders , a director ted in the , or if there the share- resident or ill be filled in case of a 5r vice-pre- erns of the "ectors, the vided, who sident and ral-born or be elected the charter ime of the jf the bank 1886. The Bank Act. Chap. 120. 13 is situate, as a majority of the directors for the time be- ing appoint ; and public notice shall be given by the directors, by publishing the same for at least four weeks ^°"?s °^ , ,. 7 , , , 1 , . , election, in a newspaper published at the place where the said head office is situate, previous to the time of holding such election ; and the election shall be held and made by such of the shareholders of the bank as have paid all calls made by the directors and as attend for the purpose in pel son or are represented by proxy : 2. All elections of directors shall be by ballot ; and Ballot, the said proxies shall be held and voted upon only by Pfo*»*;s> shareholders then present ; 3. The persons, to the number fixed by by-law, as who shall be hereinbefore provided, who have the greatest number of ''"'"'°"- votes at any election, shall be directors. 4. If it happens at any election that two or more per- Provision in sons have an equal number of votes, and the election or P.^*^ °'^ ^fl"^'" ^ ity of votes. non-election of one or more of such persons as a director or directors depends on such equality, then the direc- tors who have a greater number, or the majority of them, shall determine which of the said persons so hav- ing an equal number of votes shall be the director or directors, so as to complete the full number ; and the said directors, as soon as may be after the said election, ,1, 1 • i-i 1 t I II .Election of shall proceed in like manner to elect, by ballot, two of president, &'c. their number to be president and vice-president respec- tively : 5. If a vacancy occurs in the board of directors, such Vacancies, vacancy shall be filled in the manner provided by the '^'^^ '^''^'^' by-laws ; but the non-filling of the vacancy shall not vitiate the acts of a quorum of the remaining directors ; and if the vacancy so created is in the oflicc of the pre- sident or vice-president, the directors, at the first meet- ing after completion of their number, shall, from among themselves, elect a president or vice-president, who shall continue in office for the remainder of the year. 34 V., c. 5, s. 30. 14 Chap. 120. The Bank Act. 49 Vict. In certain 13* No shareholder, in any bank to which the three must be paid Sections next preceding apply, shall vote, either in per- before voting, son or by proxy, on any question proposed for the consideration of the shareholders of the bank at any meeting of such shareholders, or in any case in which the votes of the shareholders of the bank are taken, unless he has paid all calls made by the directors which are then due and payable. 40 V., c. 44, s. I. Renewal of proxies. 14. No appointment of a proxy to vote at any meet- ing of the shareholders of the bank shall be valid for that purpose, unless it has been made or renewed in writing within the three years next preceding the time of such meeting. 43 V., c. 22, s. \2,part. Provision in 15» If an electio.": of directors is not made on any day of de^ctio^n ""^^ when it shou. J be made, the corporation shall not for that cause be deemed to be dissolved, but an election of directors may take place on any other day in such man- ner as is provided by the by-laws made by the share- holders in that behalf; and the directors then in office shall so remain until a new election is made. 34 V., c. 5. s. 31. Quorum, &^c. 16> At all meetings of the directors not less than three shall constitute a quorum for the transaction of business ; and at such meetings the president, or in his absence the vice-president, or in the absent of both of them, one of the directors present, chosen to act pro tempore, shall Casting vote. Preside ; and the president, vice-president or president pro tempore so presiding, shall vote as a director, and if there is an equal division on any question, shall also have a casting vote. 34 V., c. 5, s. 32. General powers of directors. IT* The directors for the time being, or a majority of them, may make by-laws and icgulations f'not repug- nant to the provisions of this Act or the laws of Canada) touching the management and disposition of the stock, property, estate and effects of the bank, and touching the 1* X 1886. The Bank Act. Chap. 120. 15 the three ler in per- d for the nk at any in which are taken, tors which any meet- id for that in writing le of such n any day ot for that lection of iuch man- the share- n in office 34 v., c. than three business ; 5 absence them, one pore, shall president or, and if also have , majority lot repug- f Canada) the stock, iching the duties and conduct of the officers, clerks and servants employed therein, and all such other matters as appertain to the business of a bank: Provided always, that all J'''*'^'^° \ '"^s 'o DV'iAws in by-laws of the bank lawfully made before the fourteenth force, day of April, one thousand eight hundred and seventy- one, and now in force, in respect to any matter respect- ing which the directors may make by-laws under this section (including any by-laws for establishing a guar- antee fund for the employees of the bank) shall remain in force until they are repealed or altered by others made under this Act. 34 V., c. 5, s. H^part. IS. The directors may appoint as many officers, Appointment clerks and servants for carrymg on the busmess of the bank, and with such salaries and allowances, as they consider necessary — and they may also appoint a direc- tor or directors for any branch of the bank : 2. Before permitting any cashier, officer, clerk or Security to be c'ivtn servant of the bank to enter upon the duties of his office, the directors shall require him to give bond or other security to the satisfaction of the directors, for the due and faithful performance of his duties. 34 V., c. 5, s. 11, part. SHARES AND CALLS. 10» Books of subscription may be opened, and Subscription shares of the capital stock may be made transferabL, ""sto^"^!^'^ and the dividends accruing thereon may be made pay-^"''^'* able in the United Kingdom, in like manner as such shares and dividends are respectively made transfer- able and payable at the head office of the bank ; and for that purpose the directors may, from time to time, determine the proportion of the shares which shall be so transferable in the United Kingdom, and make such roles and regulations, and prescribe such forms, and appoint such agents, as they deem necessary. 34 V., c. 5, s. 17. w 16 Chap. 120. The Bank Act 49 Vict. Payment of shares. 20. The shares of the capital stock shall be paid in by such instalments, and at such times and places as the directors appoint, and executors, administrators and curators paying the instalments upon the shares of deceased shareholders shall be indemnified for paying Provison : ten the same : Provided always, that no share shall be ahle"n'subl^"^^^'*^ '° ^^ lawfully subscribed for, unless a sum equal scription. to at least ten per centum on the amoimt subscribed for is actually paid at the time of or within thirty days after the time of subscribing. 34 V. c. 5, s. 18. 21. The directors may make such calls of money from the several shareholders for the time being, upon the shares subscribed for by them, respectively, as they find necessary : 2. Such calls shall be made at intervals of not less than thirty days, and upon notice to be given at least thirty days prior to the day on which such call shall be payable; and no such call shall exceed ten per cent, of each share subscribed. 34 V., c. 5, s. ^4, part. 22. The directors may, in the corporate name of the bank, sue for, recover and get in all such calls, or cause and declare such shares to be forfeited to the bank, in case of non-payment of any such call: 2. An action mry be brought to recover any money due on any such call ; and it shall not be necessary to set forth the special matter in the declaration, but it shall be sufficient to allege that the defendant is holder of one share or more, as the case may be, in the capital stock of the bank, and is indebted to the baiik for a call or calls upon such share or shares in the sum to which the call or calls amount, as the case may be, stating the amount and number of auch calls, whereby an ac- tion has accrued to the bank to recover the same from such defendant by virtue of this Act ; and to entitle the directors to recover in such action it shall be sufficient to prove by any one witness (a shareholder being com- petent) that the defendant, at the time of making any Calls on shares. Time of calls and notice. Limitation. Recovery of calls. Recovery by suit. What only need be provsd. M n 1886. The Bank Act. Chap. 120. 17 such call, was a shareholder in the number of shares alleged, and to proL ce the by-law or resolution of the directors making such cdl, and to prove notice thereof, given in conformity with such by-law or resolution ; and it shall not be necessary to prove the appointment of the directors or any other matter whatsoever. 34 V., c. 5. s. 34. P^^^' 23. Provided always, that if any shareholder refuses Forfeit urt of or neglects to pay any instalment upon his shares of^o^'^p3y'JJ,eni the capital stock at the time appointed by such call, as of calls, aforesaid, such shareholder shall incur a forfeiture to the use of the bank of a sum of money equal to ten per cent, on the amount of such shares ; and the directors Sale in such of the bank may, without any previous formality, other than thirty days' public notice of their intention so to do, sell at public auction the said shares, or so many of the said shares as shall, after deducting the reasonable expenses of the sale, yield a sum of money sufficient to pay the unpaid instalments due on the remainder of the said shares and the amount of forfeitures incurred upon the whole ; and the president, or vice-president, manager And transfer. or cashier of the bank, shall execute the transfer to the purchaser of the shares so sold ; and such transfer, when accepted, shall be as valid and effectual in law as if the same had been executed by the original holder of the shares thereby transferred ; but the directors, or the Proviso. shareholders at a general meeting, may, notwithstanding anything in his section contained, remit either in whole or in part, and conditionally or unconditionally, any forfeiture incurred by the non-paymqpt of instalments as aforesaid, or the bank may enforce the payment of any call or calls by suit instead of declaring the shares forfeited. 34 V., c. 5, s.35. ANNUAL STATEMENT. 24. At every annual meeting of the shareholders for statement to the election of directors, the out-going directors shall ''^ •'''f ^^'^^^ ° ° annual meeting. m 18 Liabilities, Assets. \Vhat state- ment shall show. Chap. 120. The Bank Act. 49 Vict. submit a clear and full statement ot' the affairs of the bank, containing on the one part, — The amount of the capital stock paid in, the amount of notes of the bank in circulation, the net profits made, the balances due to other banks and institutions, and the cash deposited in the bank, — distinguishing deposits bearing interest from those not bearing interest ; and on the other part, — The amount of the current coin, the gold and silver bullion, and the Dominion notes in the vaults of the bank, the balances due to the bank from other banks and ins- titutions, the value of the real and other property of the bank, and the amount of debts owing to the bank, — including and particularizing the amounts so owing upon bills of exchange, discounted notes, mortgages and other securities, — Exhibiting on the one hand the liabilities of, or the debts due by the bank, and on the other hand, the assets and resources thereof; and the said statement shall also exhibit the rate and amount of the last divi- dend declared by the directors, the amount of reserved profits at the time of declaring the said dividend, and the amount of debts due to the bank, overdue and not paid, with an estimate of the loss which will probably accrue thereon. 34 V., c. 5, s. 36. I I •'k I In<;pection of books, (Sr'c. Dividends. INSPECTION BV DIRECTORS. 25. The books, correspondence and funds of the bank shall, at all times, be subject to the inspection of the directors, but no shareholder who is not a director shall be allowed to inspect the account ot any person dealing with the bank. 34 V., c. 5, s. 37. DIVIDENDS. 26. The directors of the bank shall declare half- yearly dividends of so much of the profits of the bank as to the majority of them seems advisable, and not inconsistent with the provisions of the two sections of i 49 Vict. lirs of the e amount fits made, ;ions, and g deposits t ; and on and silver f the bank, s and ins- irty of the e bank, — so owing mortgages of, or the hand, the statement e last divi- )f reserved idend, and je and not probably s of the inspection a director my person clare half- the bank and not ections of 1886. The Bank Act, Chap. 120. 19 ,1 s this Act next following ; and they shall give at least thirty days' public notice of the payment of such divi- dends previously to the date fixed for such payment. 34 v., c. 5, s. 38. S8T. No dividend or bonus shall ever be declared so Dividend not as to impair the paid up capital; if any dividend or [.^ '["^y""^ bonus is so declared or made payable, the directors who knowingly and wilfully concur therein shall be jointly and severally liable for the amount thereof, as a debt due by them to the bank ; and if any part of the paid- up capital is lost, the directors shall, if all the subscribed Capital lost to stock is not paid up, forthwith make calls upon the *^ "'^ ^ "^' shareholders to an amount eqr.ivalent to such loss ; and such loss (and the calls, if any) shall be mentioned in the next return made by the bank to the Minister of Finance and Receiver General : Provided that, in any case in which the capital has been impaired as aforesaid, all net profits shall be applied to nake good such loss. 34 v., c. 5, s. 10. *2H. No division of profits, either by way of dividends Dividend or bonus, or both combined, or in any other way, Ihere*^' Tier- exceeding the rate of eight per cent, per annum, shall be'*'" "■^^^''^e. made by the bank, unless, after making the same, it has a rest or reserved fund equal to at least twenty per cent, of its paid-up capital ; and all bad and doubtful debts shall be deducted before the amount of such rest is calculated. 34 V., c. 5, s. ii. TRANSFER AND TRANSMISSION OF SHARES. 29. The shares of the capital stock shall be personal Shares and estate, and shall be assignable and transferable at ihe!!,^"^^^ chief place of business of the bank or at any of its branches which the directors appoint for that purpose and according to such form as the directors prescribe ; but no assignnient or transfer shall be valid unless it is made and registered and accepted by the person to B 20 Chap. 120. The Bank Act. 49 Vict List of transfers to be kept. Sale of shares under execu- tion. whom the transfer is made, in a book or books kept by the directors for that purpose, nor unless the person making the same has, if required by the bank, previously discharged all his debts or liabilities to the bank which exceed in amount the remaining stock, if any, belong- ing to such person, valued at the then current rate ; and no fractional part of a share, or less than a whole share, shall be assignable or transferable. 42 V., c. 45, s. i, farf. 80. A list of all transfers of shares, registered each day in the books of the bank, showing the parties to such transfers and the number of shares transferred in each case, shall be made up at the end of each day and kept at the chief place of business of the bank for the inspection of its shareholders. 34 V., c. 5, s. 20. 31. When any share of the capital stock has been sold under a writ of execution, the officer by whom the writ was executed shall, within thirty days after the sale, leave with the cashier, manager or other ofificer of the bank, an attested copy of the writ, with the certifi- cate of such officer indorsed thereon, certifying to whom the sale has been made ; and thereupon (but not until after all debts and liabilities of the holder of the share to the bank, and all liens existing in favor of the bank thereon, have been discharged as herein provided), the president, vice-president, manager or cashier of the bank shall execute the transfer of the share so sold to the purchaser ; and such transfer when duly accepted, shall be, to all intents and purposes, as valid and effec- tual in law as if it had been executed by the holder of the said share. 42 V., c. 45, s. \,part. Transmission 32. If the interest in any share in the capital stock ofshares becomes transmitted in consequence of the death, otherwise than by bankruptcy or insolvency of any shareholder, or in authenti-'^"^ consequcnce of the marriage of a female shareholder, or cated . \\\ 49 Vict ks kept by the person , previously bank which ny, belong- t rate ; and ifho'o share, c. 45, s. I, stered each : parties to \nsferred in ich day and jank for the s. 20. :k has been y whom the ys after the ler officer of 1 the certifi- inir to whom lut not until of the share of the bank provided), ishier of the so sold to ly accepted, id and effec- he holder of :apital stock the death, )lder, or in ucholder, or 188G. The Bank Act. Chap. 120. 21 'i by any o'iher lawful means than by a transfer accordin^j to the provisions of this Act, such transmission shall be authenticated by a declaration in writing, as hereinafter mentioned, or in such other manner as the directors of the bank require, and every such declaration shall dis- tinctly state the manner in which and the person to whom such shares have been transmitted, and shall be made and signed by such person ; and the person making and signing such declaration shall acknowledge the same before a judge of a court record, or before the mayor, provost or chief magistrate of a city, town, borough or other place, or before a notary public, where the same is made and signed ; and every declaration so signed and acknowledged shall be left with the cashier, manager or other officer or agent of the bank, who shall thereupon enter the name of the person entitled under such transmission in the register of shareholders ; and until such transmission has been so authenticated, no person claiming by virtue of any such transmission shall be entitled to participate in the profits of the bank, or to vote in respect of any such share of the capital stock : Provided always, that every such declaration and ins- Proviso: a* trument as, by this and the next following section of this n^ad^lfurdr Act, are required to perfect the transmission of a share Canada, &~c. in the bank which is made in any other country than Canada, or any other British colony in North America or in the United Kingdom, shall be further authenticated by the British consul or vice-consul, or other the accre- dited representative of the British Government in the country where the declaration is made, or shall be made directly before such British consul or vice-consul or other accredited representative ; and provided also, that rroviso: fm- thc directors, cashier or other officer or agent of the bank '''^'' /'^''•«"ce ° may be re- may require corroborative evidence of any fact alleged quired. in any such declaration. 34 V., c. 5, s. 21. ission »». If the transmission of any share of the capital Transm stock has taken place by virtue of the marrian-e of a ^^ '"^"''^B = ° of female sharehoUler, 22 Chap. 120. The Hank Act. 49 Vict. female shareholder, the declaration shall be accompanied by a copy ot the rej^ister of such marriage, or other par- ticulars of the celebration thereof, and shall declare the identity of the wife with the holder of such share, and shall be made and sijjned by such female shareholder and her husband ; and they may include therein a decla- ration to the effect that the share transmitted is the sepa- rate property and under the sole control of the wife, and that she may receive and grant receipts for the dividends and profits accruing in respect thereof, and dispose of and transfer the share itself, without recjuiring the consent or authority of her husband ; and such declaration shall be binding upon the bank and the persons making the same, until the said persons see fit to revoke it by a written notice to that effect to the bank ; but the omission of a statement, in any such declaration, that the wife making the same is duly authorized by her husband to make the same, shall not invalidate the declaration. 34 W, c. 5, s. 22. ii TMiismission, •^■^* If the transmission has taken place by virtue of Iv decease, jjpy testamentary instrument, or by intestacy, the pro- bate of the will, or the letters of administration, or act of curatorship or an official extract therefrom, shall, toge- ther with such declaration, be produced and left witii the cashier or other officer or agent of the bank, who shall, thereupon, enter the name of the person entitled under such transmission in the regi. ter of shareholders. 34 V.,c. S, s. 23. Fuither jiiDvj^ion in sucli c.nse. •W. If the transmission of any share of the capital stock has taken place by virtue of the decease of any shareholder, the production to the directors and the de- posit with them of any authenticated copy of the probate of the will of the deceased shareholder, or of letters of administration of his estate granted by any court in Can- ada having power to grant such probate or letters of administration, or by any court or authority in England, 40 Vict. 1886. Tlw Bank Act. Cliap. 120. 38 :ompanicd other par- Jcclarc the '^M^l 11 ch share, ■''J^H liarchoklcr 't^^^^l in a dccla- s the scpa- "^1 c wife, and ,' dividends )()se of and 'jB consent or 'JB on shall bo ^ the same, ' a written lission of a nic niakinjT o make the 'fli ^ v., c. 5, s. ly virtue of y, the pro- )n, or act of shall, toffc- ;ft witli the iV who shall, '1 itled under 1 V Iders. 34 the capital m :ase of any md the de- the probate f letters of lurt in Can- r letters of n England, Wales, Ireland or any British colony, or of any testa- ment, testamentary or testament dative expede in Scot- land — or, if the deceased shareholder dietl out of Her Majesty's dominions, the production to and deposit with the directors of any authenticated copy of the pro- bate of his will or letters of administration of his pro- perty, or other document of like import granted by any court or authority having the requisite power in such matters, shall be sufficient justification and authority to the directors for paying any dividend, or for transfer- ing or authorizing the transfer of any share in pursuance of and in conformity to such probate, letters of admin- istration, or other such document as aforesaid. 34 V., c. 5, s. 24. •<0* Whenever the interest in any share of the capital Provision ii) stock is transmitted by the death of any shareholder or „!,(„ .^,.5",,' otherwise, or whenever the ownership of or legal right «"''''•-■''• of possession in any such share changes by any lawful means, other than by transfer according to the provisions of this Act, and the directors of the bank entertain rea- sonable doubts as to the legality of any claim to and upon such share, the bank may make and file in one of the superior courts in the Province in which the head office of the bank is situated, a declaration and petition in writing, addressed to the justices of the court, setting forth the facts and the number of shares previously belonging to the person in whose name such shares stand in the books of the bank, and praying for an order or judgment declaring to whom the said shares belong, — by which order or judgment the bank shall be guided and held fully harmless and indemnified and released from every other claim to the said shares or arising therefrom : Provided always, that notice of such p petition shall be given to the person claiminti such share, ""''" 01- fc> > given, or to the attorney of such person duly authorized for the purpose, who shall, upon the filing of such petition, establish his right to the several shares referred to in roviso : to be li 24 Chap. 120. The Bank Act. 49 Vict. costs. such petition ; and the times to plead and all other pro- ceedings in such cases shall be the same as those observed in analogous cases before the said superior Proviso : as to j.Qyrj.g . Provided also, that the costs and expenses of procuring such order or judgment shall be paid by the person to whom the said shares are declared lawfully to belong ; and that such shares shall not be transferred until such costs and expenses are paid, — saving the recourse of such person against any person contesting his right. 34 V., c. 5, s. 25. Bank not bound to see to trusts. Executors mid trustees iKit person- ally liable- Exception. 3T. The bank shall not be bound to see to the execu- tion of any trust, whether expressed, implied or cons- tructive, to which any share of its stock is subject ; and the receipt of the person in whose name any such share stands in the books of the bank, or, if it stands in the name of more persons than one, the receipt of one of such persons shall be a sufficient discharge to the bank, for any dividend or any other sum of money payable in respect of such share, unless express notice to the con- trary has been given to the bank ; and the bank shall not be bound to see to the application of the money paid upon such receipt, whether given by one of such persons or all of them. 34 V., c. 5, s. 26. 3S« No person holding stock in the bank as execu- tor, administrator, guardian or trustee, of or for any person named in the books of the bank as being so represented by him, shall be personally subject to any liability as a shareholder, but the estate and funds in his hands shall be liable in like manner and to the same extent as the testator, intestate, ward or person interes- ted in such trust fund would be, if living and competent to hold the stock in his own name ; and if the trust is for a living person, such person shall also himself be liable as a shareholder; but if such testator, intestate, ward or person so represented, is not so named in the books of the bank, the executor, administrator, 49 Vict. ,11 other pro- le as those aid superior expenses of paid by the red lawfully e transferred —saving the n contesting to the execu- lied or cons- subject ; and y such share stands in the ipt of one of to the bank, ;y payable in ^ to the con- e bank shall f the money one of such ik as execu- or for any as being so bject to any nd funds in to the same rson interes- d competent the trust is himself be )r, intestate, so named ministrator, 1886. The Bank Act. Chap. 120. 25 guardian or trustee shall be personally liable in 'respect of such stock, as if he held it in his own name as owner thereof. 43 V., c. 22, s. 2. OBLIGATIONS AND POWERS OF THE BANK. 39. The bank shall always hold, as nearly as practi- Part of cable, one half of its cash reserves in Dominion notes, [^'^ominiS and the proportion of such reserves held in Dominion notes, notes shall never be less than forty per cent, thereof; and every bank holding at any time a less amount of its cash reserves in Dominion notes than is prescribed by penalty for this section shall incur a penalty of two hundred and not holding • • L xi. Q"^ propor- fifty dollars for each and every time it appears, by thction of Do- monthly statement hereinafter mentioned otherwise, "1'"'°" "o'^s. that such violation of this section has occurred : 2. The Minister of Finance and Receiver General supply of shall make such arrangements as are necessary for insur- J;JjJ™'"'°° ring the delivery of Dominion notes to any bank, in exchange for an equivalent amount of specie, at the several offices at which Dominion notes aiv^ redeem- able, in the cities of Toronto, Montreal, Halifax, St. John (N.B.), Winnipeg, Charlottetown and Victoria, respec- tively. 34 v., c. 5, ss. 14 and 16; — 43 V., c. 22, s. 3 ;— 46 v., c. 20, s. 4. 40. The amount of notes of the bank intended for Amount and circulation, issued by the bank and outstanding at any ^f ^ank notes, time, shall never exceed the amount of its unimpaired paid-up capital : and no such note for a sum less than five dollars, or for any sum which is not a multiple of five dollars, shall be issued or re-issued by the bank, and all notes for a less sum than five dollars, or which are not such multiple as aforesaid, heretofore issued, shall be called in and cancelled as soon as practicable ; 2. If it appears by the monthly statement hereinafter penalties on mentioned, made by the bank, that the amount of its ^'"'"'** H^'"8 excess of notes in circulation has, during the month to which such circulation. 26 Chap. 120. The Bank Act. 49 Vict. statement relates, exceeded the amount authorized by this section, such bank shall incur a penalty of one hun- dred dollars, if the amount of such excess of circulation is not over twenty thousand dollars, — a penalty of one thousand dollars, if such excess is over twenty thousand and not over one hundred thousand dollars, — a penalty of five thousand dollars, if such excess is over one hundred thousand dollars, and not over two hundred thousand dollars, — and a penalty of ten thousand dollars, if such excess is over two hundred thousand dollars. 34 V., c. 5, s. 8 ; — 43 v., c. 22, s. \2^ part ; — 46 V., c. 20, s. 3. 41. The bank shall always receive in payment its own notes at par at any of its offices and whether they are made payable there or not ; but shall not be bound to redeem them in specie or Dominion notes at any place other than that at which they are made payable : Payable at 2. The chief place of business of the bank shall always C1II61 D1lIC6 of business. ^^ *^"^ ^^ the places at which its notes shall be made payable. 34 V., c. 5, s. 9. Redemption of notes. Piiyments in Dominion notes. 42. The bank, when making any payment, shall, on the request of the person to whom the payment is to be made, pay the same, or such part thereof not exceeding sixty dollars as such person requests, in Dominion notes for one, two, or four dollars each, at the option of the receiver. 43 V., c. 22, s. 12, part ; — 46 V., c. 20, s. 5. Bonds, not3s, 43. The bonds, obligations and bills obligatory or of by'^who°m to" credit of the bank under its corporate seal, and signed by be signed. the president or vice-president and countersigned by a cashier or assistant cashier, which are made payable to any person, shall be assignable by indorsement thereon ; and bills or notes of the bank signed by the president, vice-president, cashier or other officer appointed by the directors of *^he bank to sign the same, promising the payment of money to any person or to his order, or to the bearer, though not under the corporate seal of the V*(»l 49 Vict. [lorized by )f one hun- circulation alty of one y thousand I penalty of ne hundred I thousand ars, if such 34 v., c. 20, S. 3. lymcnt its lether they t be bound t any place Die: liall always II be made t, shall, on ;nt is to be exceeding nion notes ion of the . 20, s. 5. itory or of signed by ned by a ayable to t thereon ; president, ted by the iiising the der, or to cal of the 1886. The Bank Act. Chap. 120. 27 bank, shall be binding and obligatory on it in like man- ner and with the like force and effect as they would be upon any private person, if issued by him in his private or natural capacity, and shall be assignable in like man- ner as if they were so issued by a private person in his natural capacity : Provided always, that the directors of Proviso : r .' i ^' i.1- • J i. power ma}' be the bank may, from time to time, authorize or depute {reputed to any cashier, assistant cashier or officer of the bank, or ^^fficer. any director other than the president or vice-president, or any cashier, manager or local director of any branch or office of discount and deposit of the bank, to sign the bills of the bank intended for general circulation, and payable to order cr to bearer on demand. 34 V., c. 5, s. 55. 44. All bank notes and bills of the bank whereon the Notes may be name of any person intrusted or authorized to sign such machinen-. notes or bills on behalf of the bank is impressed by machinery provided for that purpose, by or with the authority of the bank, shall be good and valid to all intents and purposes, as if such notes and bills had been subscribed in the proper handwriting of the person intrusted or authorized by the bank to sign the same respectively, and shall be bank notes and bills within the meaning of all laws and statutes whatever, and may be described as bank notes or bills in all indictments and civil or criminal proceedings whatsoever. 34 V., c. 5. s. 56. 45. The bank shall not, either directly or indirectly, Certain bnsi- lend money or make advances upon the security, mort- "«ss may not gage or hypothecation of any lands or tenements, or of by t'he'bank. any ships or other vessels, or upon the security or pledge of any share of the capital stock of the bank, or of any goods, wares or merchandise, except as authorized in this Act ; and the bank shall not, either directly or indirectly, deal in the buying and selling or bartering of goods, wares or merchandise, or engage or be engaged li fif:i! 28 Chap. 120. The Bank Act. 49 Vict. in ixny trade whatsoever, except as a dealer in gold and silver bullion, bills of exchange, discounting of promisso- ry notes and negotiable securities, and in such trade ge- nerally as appertains to the business of banking ; and the bank shall not, either directly or indirectly, purchase or deal in any share of the capital stock of the bank, except when it is necessary to realize upon any such share held by the bank as security for any pre-existing and matu- red debt : 2. Every bank which violates any provision of this section shall incur a penalty not exceeding five hundred dollars. 34 V., c. 5, s- 40;— 38 V., c. 17, s. I ; — 46 V., c. 20, s. 9, /ar/. Branches and 4v#. The bank may open branches and agencies and agencies. offices of uiscount and deposit, and may transact busi- ness at any place or places in Canada. 34 V., c. 5, s. 4. Penalty for contraven- tion. Real estate for occupa- tion. Mortgages as additional security. 47. The bank may acquire and hold real and immov- able property for its actual use and occupation and the management of its business, and may sell or dispose of the same, and acquire other property in its stead for the same purposes. 34 V., c. 5, s. 39. 4**. The bank may take, hold and dispose of mort- gages and hypotheqiies upon real or personal property, by way of additional security for debts contracted to the bank in the course of its business ; and the rights, powers and privileges which the bank is hereby decla- red to have or to have had in respect of real property mortgaged to it, shall be held and possessed by it, in res- pect of any personal property which is mortgaged or hypothecated to it. 34 V., c. 5, s. 41. Purchrseof 49. The bank may purchase any lands or real pro- ' "'^ untler perty offered for sale under execution, or in insolvency, execuiion,(2r'c. *^ ^ •' or under the order or decree of a court, as belonging to any debtor to the bank, or exposed to sale by the bank 49 Vict. 1886. The Bank Act, Chap. 120. 29 igold and promisso- 1 trade ge- y ; and the urchase or nk, except share held ind matu- ion of this /e hundred I ;-46 V, encies and nsact busi- ^, c. 5, s. 4. ,nd immov- ion and the dispose of ead for the e of mort- 1 property, icracted to the rights, rcby decla- al property jy it, in res- )rtgaged or Dr real pro- insolvency, elonging to )y the bank under a power of sale given to it for that purpose, in cases in which, under similar circumstances, an indivi- dual could so purchase, without any restriction as to the value of the lands which it may so purchase, — and may acquire a title thereto as any individual purchasing at sheriff's sale, or under a power of sale, in like circum- stances, could do,— and may take, have, hold and dispose of the same at pleasure. 34 V., c. 5, s. 42 ; — 43 V., c. 22, s. 5. 50. The bank may acquire and hold an absolute title Absolute , , , . . . , , , title may be m or to land mortgaged to it as security for a debt due acquired, or owing to it, either by obtaining a release of the equi- ty of redemption in the mortgaged property, or by pro- curing a foreclosure, or by other means whereby, as between individuals, an equity of redemption can, by law, be barred, — and may purchase and acquire any prior mortgage or charge on such land; Provided Proviso: sale always, that no bank shall hold any real or immovable acquired, property howsoever acquired, except such as is required for its own use, for any period exceeding seven years from the date of the acquisition thereof: 2. Every bank which violates any provision of this Penalty for section shall incur a penalty not exceeding five hundred t^n?^^*^" dollars. 34 V., c 5, s. 43 ;- -43 V., c. 22, s. 6;— 46 V., c. 20, s. <^, part. 51. Nothing in any charter, Act or law shall be "^'''^ '« '^"^^ , J , . , so acquired ; construed as ever having prevented or as preventing power of sale, the bank from acquiring and holding an absolute title to *^^"" and in any such mortgaged lands, whatever the value thereof may be, or from exercising or acting upon any power of sale contained in any mortgage given to it or held by it, authorizing or enabling it to sell or convey away any lands so mortgaged. 34 V., c. 5, s. 44. 52. Every bank advancing money in aid of the^**"^,' ,.,,.. , . vances for building of any ship or vessel shall have the same right building ships. 30 Chap. 120. The Bank Act. 49 Vict. Interpretation of " Afient." What shall be deetiied possession. Warehouse receipts may be taken as collateral security. of acquiring and holding security upon such ship or ves- sel, while building and when completed, either by way of nio«-tgage, hypothcque, hypothecation, privilege or lien thereon, or purchase or transfer thereof, as individuals have in the Province wherein such ship or vessel is being built, and for that purpose may avail itself of all such rights and means of obtaining and enforcing such secu- rity, and shall be subject r the repayment ofvcndur. such advances on the goods, wares and merchandise therein mentioned, or into which they have been con- verted, prior to and by preference over the claim of any unpaid vendor. 43 V., c. 22, s. 7, part. ^H, No sale without the consent in writing of the Notice to he owner of any timber, boards, deals, staves, saw logs or ^{p" /'^^'^j other lumber, shall be made under this Act until notice pleiiged. of the time and place of such sale has been given by a registered letter, mailed in the post office to the las t known address of the pledger thereof, at least thirty days prior to the sale thereof; and no goods, wares or or merchandise, other than timber, boards, deals, staves, saw logs or other lumber, shall be sold by the bank under this Act without the consent of the owner, until notice of the time and place of sale has been given by a registered letter, mailed in the post office to the last known address of the pledger thereof, at least ten days prior to the sale thereof ; 2. Every such sale of any article mentioned in this Sale by anc- section, without the consent of the owner, shall be made tjce '^ *^ " ' by public auction, after a notice thereof by advertise- ment, stating the time and place thereof, in at least two newspapers published in or nearest to the place where the sale is to be made ; and if such sale is in the Prov- ince of Quebec, then at least one of such newspaper shall be a newspaper published in the English language, and one other such newspaper shall be a newspaper publish- ed in the French language. 43 V., c. 22, s. J,prr^t. m 11 i.i i M 34 Chap. 120. The Bank Ad. 49 Vict. No loan to be ^W. The bank shall not make loans or grant discounts o'wnyock"hiit °" the security of its own stock, but shall have a privi- iwnk to have Icged lien, for any debt or liability for any debt to the for overdue"^ bank, on the shares and unpaid dividends of the debtor debts. or person liable, and may decline to allow any transfer of the shares of such debtor or person until such debt is paid; and, if such debt is not paid when due, the bank may sell such shares, after notice has been given to the holder thereof of the intention of the bank to sell the same, by mailing such notice in the post office to the last known address of such holder, at least thirty days Transfer in prior to such sale ; and, upon such sale being made, the case of sale, president, vice-president, manager or cashier shall exe- cute a transfer of such shares to the purchaser thereof in the usual transfer book of the bank, — which transfer shall vest in such purchaser all the rights in or to such shares which were possessed by the holder thereof, with the same obligation of warranty on his part as if he were the vendor thereof, bi t without any warranty from the bank or by the officer of the bank executing such transfer : 2. Every bank which violates any provision of this section shall incur a penalty not exceeding five hundred dollars. 43 V., c. 22, s. %,part ; — 46 V., c. 20, s. S^, part. 60. Nothing in this Act contained shall prevent the to collateral bank from acquiring and holding, as collateral security sccuritv for any advance made by the bank, or debt due to the bank, or for any credit or liability incurred by the bank to or on behalf of any person (and either at the time of the making of such advance, or the contracting of such debt, or the opening of such credit, or the incurring of such liability). Dominion, provincial, British or foreign public securities, or the stock, bonds or debentures of municipal or other corporations, except banks : How collater- 2. Such stock, bonds, debentures or securities may, in al security case of default to pay the debt for securing which they may be dealt . , , 1 , , 1 , , .1 , , , with. were so acquired and held, be dealt with, sold and con- Penalty for contraven- tion. Provision as 1880. The Bank Act. Chap. 120. 85 veyed in like manner, and subject to the same restric- tions as are herein provided in respect of stock of tlie bank on which it has acquired a lien under this Act ; but the right to so deal with and dispose of such stock, bonds, debentures or securities in manner aforesaid may Provision may be waived or varied by any agreement between the ''^ ^'*"'''' bank and the owner of such stock, bonds, debentures or securities, made at the time at which such debt has been extended, then by an agreement made at the time of such extension. 43 V., c. 22, s. ^,part. 01. The bank shall not be liable to incur any pen- No penalty alty or forfeiture for usury; and may stipulate for, take, '""^ "*"^' reserve or exact any rate of interest or discount not exceeding seven per centum per annum, and may receive and take in advance any such rate, but no higher rate of interest shall be recoverable by the bank ; and the bank may allow any rate of interest vvhatever upon What interest money deposited with it. 34 V., c. 5, s. 52. j^^^J^ '''■ 62» No promissory note, bill of exchange or other No instrument negotiable security, discounted by or indorsed or other- '° ^ ^°^^ °" wise assigned to the bank, shall be held to be void, usu- usury, rious or tainted by usury, as regards such bank or any maker, drawer, acceptor, indoser or indorsee thereof, or other party thereto, or bona fide holder thereof, nor shall any party thereto be subject to any penalty or forfeiture by reason of any rate of interest taken, stipulated or received by such bank, on or with respect to such pro- missory note, bill of exchange, or other negotiable secu- rity, or paid or allowed by any party thereto to another in compensation for, or in consideration of, the rate of interest taken or to be taken thereon by such bank ; but no party thereto, other than the bank, shall be entitled to recover or liable to pay more than the lawful rate of interest in the Province where the suit is brought, nor shall the bank be entitled to recover a higher rate than c h X ,Y a 36 Clinp. 120. The limik Ad. 49 Vict. As to innocent seven per cent, per annum ; and no innocent holder of or party to any promissory note, bill of exchange or other negotiable security shall, in any case, be deprived of any remedy against any party thereto, or liable to any penalty or forfeiture, by reason of any usury or offence against the laws of any such I'rovince, respecting inter- est, committed in respect of such note, bill or negotiable security, without the complicity or consent of such innocent holder or party. 35 V., c. 8, s. 2. Collection fees. OJI. The bank may, in discounting at any of its places of business, branches, agencies or offices of discount and deposit, any note, bill or other negotiable security or paper payable at any other of its own places or seats of business, branches, agencies or offices of discount and deposit in Canada, receive or retain, in addition to the discount, any amount not exceeding the following rates per centum, according to the time it has to ruH) on the amount of sich note, bill or other negoti- able security or paper, to defray the expenses attending the collection thereof, that is to say : under thirty days, one eighth of one per cent. — thirty days or over, but under sixty days, one-fourth of one per cent. — sixty days, and over, but under ninety days, three eighths of one pe cent. — ninety days and over, one-half of one per cent. 34 v., c. 5, s. 53. Agency fees. ©4. The bank may, in discounting any note, bill or other negotiable security or paper, bona-fide payable at any place in Canada, different from that at which it is discounted, and other than one of its own places or seats of business, branches, agencies or offices of discount and deposit in Canada, receive and retain in addition to the discount, thereon, a sum not exceeding one half ol one per centum on the amount thereof, to defray the expense of agency and charges in collecting the same. 34 v., c. 5, s. 54. f\\ 1886. TIcc liaak Art. Cliiip. lUO. 87 «5« The bank may receive dejjosits from any person iVpo»it« may wliomsDevcr, whatever is his a^je, status or condition in [^";\,'''''^','^'',,, life, ami whether such person is (jualified by law to unable to enter nito ordinary contracts or not ; and, from tnne to time, may repay any or ail of the principal tliereof, and may pay the whole or any part of the interest thereon to such person, without the authority, aid, assistance or intervention of any person or official bein^ required, unless before such repayment themoney so deposited in and repaid by Hie bank is lawfully claimed as the pro- perty of some other person, — in which case it may be paid to the depositor with the consent of the claimant, or to the claimant with the consent of the depositor : Provided always, that if the person making any such Proviso : deposit could not, under the law of the Province where ","^['"^5^' the deposit is made, deposit and withdraw money in and from a bank without this section, the total amount to be received from such person on deposit shall not, at any time, exceed the sum of five hundred dollars : 2. The bank shall not be bound to see to the execu- Hank not tion of any trust, whether exi)r' .sed, imi)lied or con-^°""'' '".**^* ' _ _ ' ' to trusts in structive, to which any deposit made under the author- relation to ity of this section is subject ; and except only in the case ^^^ ' epos-'ts. of a lawful claim, by some other person before repay- ment, the receipt of the person in whose name any such deposit stands, or if it stands in the name of two persons the receipt of one, and if in the names of more than two persons the receipt of a majority of such persons shall be a sufficient discharge to all concerned for the pay- ment of any money payable in respect of such deposit, notwithstanding any trust to which such deposit is then subject, and whether or not the bank sought to be charged with such trust (and with whom the deposit has been made), had notice thereof; and the bank shall not be bound to see to the application of the money paid upon such receipt. 35 "'., c. 8, ss. 3 ami ^. 38 Chap. 120. The Bank Act. 49 Vict. Monthly returns to Government. Penalty for RETURNS BY THE BANK. 66. Monthly returns shall be made by the bank to the Minister of Finance and Receiver General in the form set forth in Schedule B. to this Act, and shall be made up and sent in within the first twenty days of each month, and shall exhibit the condition of the bank on the last juridical day of the month next preceding ; and such monthly returns shall be signed by the chief accountant, and by the president, or vice-president or the director (or, if the bank is c/i coininanditc, the prin- cipal partner) then acting as president, and by the manager, cashier or other principal officer of the b:ink at its chief place of business : 2. Every bank which neglects to make up or to send not niakintj up . ^ ., ^,, ^ -ii^i- monthly m as aforesaid any monthly return required by this returns in du^ggction o' this Act, within the time thereby limited, shall time. incur a penalty of fifty dollars for each and every day, after the expiration of the time hereby limited during which the bank neglects so to make up or send in such return ; and the date upon which it appears by the Post Office stamp or mark upon the envelope or wrapper enclosing such return for liansmission to the Minister of Finance and Receiver General, that the same was deposited in the Post Office, shall be \.-\Vqx\ privia facie, for the purposes of this section, to be the date upon which such return was made up or sent in. 34 V., c 5, s. 13 ; — 43 v., c 22, s. 4, part ; — 46 V. c. 20, s. 7. Special 6T. In addition to the returns specified in the next bt called for. preceding section, the Minister of Finance and Re- ceiver General may call for special returns from any particular bank, whenever, in his judgment, the same are necessary to a ford a full and complete knowledge of its condition. 43 V., c. 22, s. 4, part. Transmission 6S. Certified lists of the shareholders (or of the ?' ''^'^'f''^' principal partners if the bank is en commandite), w.'th holders to their additions and residences, and the number of shares 1886. The Bank Act. Chap. 120. 39 they respectively hold, and the value at par of the said Minister of shares, shall be transmitted every year to the Minister '"'*"'^^' of Finance and Receiver General, before the day appointed for the opening of the session of Parliament, and shall be by him laid before Parliament within fifteen days after the opening of the then next ses- sion ; and such transmission shall be made by the delivery of such lists at the Department of Finance, or by registered post-letter, posted at such time that, in the ordinary course of the post, it may be delivered at the Department of Finance before the day appointed for the opening of the session : 2. Every bank which neglects to transmit to the penalty for Minister of Finance and Receiver General the lists "^s^'^'^t to , . , . . . , , . . , transmit such mentioned m this section, within the time limited lists. thereby, shall incur a penalty of fifty dollars for each and every day during which such neglect continues. 46 v., c 20, s. 2. 60. The annual returns required by this Act shall Annual be made up to the thirty-first day of December, in the '"'''"'■"*• year next preceding each session of Parliament. 46 v., c. 20, s. 12. INSOLVENCY. 70. In the event of the property and assets of the Liability of bank being insufficient to pay its debts and liabilities, ?'^'"^^'^°'''5'''' in case of in- the shareholders of the bank shall be liable for the sufficiency of deficiency so far as that each shareholder shall be so ^**^'*- liable to an amount, over and above any amount not paid up on his shares, equal to the amount of such shares. 34 V., c 5, s. $S, part. Tl. Any suspension by the bank of payment of any „ ,..,.., . Suspension of its liabilities as they accrue, in specie or Dominionfor 90 days to notes, shall, if it continues for ninety days, constitute *^""*''""'^ the bank insolvent and operate a forfeiture of its char- ter or Act of incorpo»-ation, so far as regards the issue or re-issue of notes and other banking operations ; and insolvency. If, ■ n, :;tt m 40 J! Chap. 120. The Bank Act. 49 Vict. Calls in such cases. How such calls shall be niarle and enforced. Refusal to make calls under this section a miS' demeanor. Calls under winding-up Act. the charter or Act of incorporation shall remain in force only for the purpose of enabling the directors or other lawful authority to make the calls mentioned in the next following section of this Act and to wind up its business. 34 V., c 5, s. 57. T2. If any suspension of payment in full in specie or Dominion notes, of all or any of the notes or other liabilities of the bank, continues for six months, and if no proceedings are taken under any general or special Act for the winding up of the bank, the directors shall make calls on such shareholders, to the amount they deem necessary to pay all the debts and liabilities of the bank, without waiting for the collection of any debts due to it or the sale of any of its assets or pro- perty : 2. Such calls shall be made at intervals of thirty days, and upon notice to be given thirty Hrys at least prior to the day on which such call sh. 'i b*^ payable, and any number of such calls may be niade by one resolution ; any such call shall not exceed twenty per cent, on each share ; and payment of such calls may be enforced in like manner as payment of calls on unpaid stock may be enforced ; and the first of such calls may be made within ten days after the expiration of the said six months : 3. Every director who refuses to make or enforce, or to concur in making or enforcing, any call under this section, is guilty of a misdemeanor, and liable to impris- onment for any term not exceeding two years, and shall further be personally responsible for any damages suffered by such default. 34 V., c. 5, s. ^9,, part, and ^s. 63 atid 67, part. TJJ. In the event of proceedings being taken under any general or special winding-up Act, in consequence of the insolvency of the bank, the said calls shall be made in the manner prescribed for the making of such calls in such genera' or special winding-up Act. 1886. TJie Bank Act. Chap. 120. 41 74. Any failure on the part of any shareholder Forfeiture for liable to any such call to pay the same when due, shall "°"P''^'"^"'' operate a forfeiture by such shareholder, of all claim in or to any part of the assets of the bank, — such call and any further call thereafter being nevertheless recover- able from him as if no such forfeiture had been incurred. 34 v., c. 5, s. S^ypart. T3. Nothing in the five sections next preceding Liability of contained shall be construed to alter or diminish the ^I''^?'?? j°* diminished. additional liabilities of the directors as hereinbefore mentioned and declared. 34 V., c 5, s. $%,part. T6. If the bank is en commandite Sind the principal As to banks «« partners are personally liable, then, in case of any such "»""'^"'^''^- suspension, their liability shall at once accrue and may be enforced against such principal partners, without waiting for any sale or discussion of the property or assets of the bank, or other preliminary proceedings whatsoever, and the provision respecting calls shall not apply to such bank. 34 V., c. 5, s. i%, part. 77. Persons who, having been shareholders in the Liability of bank, have only transferred their shares or any of them shareholders , • ,1 <- 1 ^ . , . who have to others, or registered the transfer thereof withm one transferred month before the commencement of the suspension of ''^^''^ *'°'^''' payment by the bank, shall be liable to all calls on such shares, as if they had not transferred them, saving their recourse against those to whom they were transferred. 34 v., c. 5, s. 59, part. 75. If the bank is en commandite., the liability of the Liability if principal partners and of the commanditaires shall con- bank is m tinue for such time after their ceasing to be such as is provided in the charter of the bank, and the foregoing provisions with respect to the transfer of shares or calls shall not apply to such bank. 34 V., c. 5, s. 59, part. 7tt. The payment of the notes issued by the bank Notes to be 42 If Chap. 120. The Bank Act 49 Vict. President, etc., giving undue prefe- first charge on and intended for circulation, then outstanding, shall be assets. ^ ° the nrst charge upon the assets of the bank in case of its insolvency. 43 V., c. 22, s. 12, />ari. OFFENCES AND PENALTIES. SO. Every one is guilty of a misdemeanor and liable to imprisonment for a term not exceeding two years rence to any who, being the president, vice-president, director, princi- creditor, , ,. i • . guilty of a P^l partner en comwa/iaife, managei, cashier or < ther misdemeanor, officer of the bank, wilfully gives or concurs in giving any creditor of the bank any fraudulent, undue or unfair preference over other creditors, by giving security to such creditor or by changing the nature of his claim or otherwise howsoever, and shall further be responsible for all damages sustained by any person in consequence of such preference. 34 V., c. 5, ss. 61 and 6"], part. Making false statement in returns, etc., a misde- meanor, etc. SI. The making of any wilfully false or deceptive statement in any account, statement, return, report or other document respecting the affairs of the bank is, unless it amounts to a higher offence, a misdemeanor punishable by imprisonment for a term not exceed- ing two years ; and every president, vice-president, director, principal partner en commandite, auditor, man- ager, cashier or other officer of the bank, who prepares, signs, approves or concurs in such statement, return, report or document, or uses the same with intent to deceive or mislead any person, shall be held to have wilfully made such false statement, and shall further be responsible for all damages sustained by such person in consequence thereof. 34 V., c. 5, ss. ^2 and ^y, part. Unauthorized, S2. Every person, firm or company assuming or •"^Brnk'-'etc. "sing the title of " bank," " banking company," " bank- a misde- ing house," " banking association " or "banking insti- tution," without adding to the said designation the words " not incorporated," or without being authorized so to do by this Act, or by some other Act in force in that behalf, is guilty of a misdemeanor and shall incur meanor. 1886. The Bank Act. Chap. 120. 43 a penalty not exceeding one thousand dollars. 43 V., c. 22, s. 10 ; — 46 v., c. 20, s. 8. S3. Every person or corporation, except a chartered Penalty for ... . . , . , unauthorized bank, who issues or re-tssues, makes, draws or indorses [gg^g of^iugg any bill, bond, note, cheque or other instrument, in- f^o»' circulation. tended to circulate as money, or to be used as a substitute for money, for any amount whatsoever, shall incur a penalty of four hundred dollars, which shall be recoverable with costs, in any court of competent juris- diction, by any person who sues for the same ; and a moiety of such penalty shall belong to the person suing for the same, and the other moiety to Her Majesty for the public uses of Canada : 2. The intention to pass any such instrument as What shall he mon^y shall be presumed, if it is made for the pay-^otes" ^"^ ment of a less sum than twenty dollars, and is payable either in form or in fact to the bearer thereof, or at sight, or on demand, or at less than thirty days there- after, or is overdue, or is in any way calculated or designed for circulation, or as a substitute for money ; unless such instrument is a cheque on some chartered bank, paid by the maker directly to his immediate creditor, or a promissory note, bill of exchange, bond or other undertaking, for the payment of money paid or delivered by the maker thereof to his immediate creditor, and is not designed to circulate as a substitute for money. 34 V., c. 5, s. 68, part. NOTICES. 84. The several public notices by this Act required jj^,^^, notices to be given, shall be given by advertisement in one orslmll begiven. more of the newspapers published at the place where the head office of the bank is situate, and in the Canada Gazette. 34 V., c. 5, s. 69. FUTURE LEGISLATION. 85. The bank shall alwavs be subject to any pren- ^ . , . ■' •' " Bank sunject eral provisions respecting banks which Parliament deems to any general Apt necessary in the public interest. 34 V., c. 5, s. 71. ri ■ !, I I (I r $ illJ' ! 44 How certain banks may come under this Act, Chap. 120. 2'Ae Bank Act. 49 Vict. What sections shall apply to Bank of B. N. A. SPECIAL PROVISIONS AS TO CERTAIN BANKS. 86» This Act shall not apply to any bank in exis- tence at the commencement of the session of the Parliament of Canada held in the forty-third year of Her Majesty's reign, which is not mentioned in sche- dule A to this Act (except the Bank of British North America, La Banque du Peuple and the BanK of British Columbia, to the extent hereinafter mentioned), unless the directors of such bank, by special resolution, apply to the Treasury Board to have the provisions of this Act extended to such bank, nor unless the Treasury Board allows such application ; and upon publication in the Canada Gazette of such resolution, and of the minute of the Treasury Board thereon, allowing such application, such bank shall come under the provi- sions of this Act. 34 V., c. 5, s. T^ ; — 43 V., c. 22, ss. I and 1 1. ST. The Bank of British North America, which, by the terms of its present charter, is subject to the general laws of Canada with respect to banks and banking, shall not issue or re-issue in Canada any note for a less sum than five dollars, or for any sum not being a multiple of five dollars ; and any such note of the said bank outstanding shall be called in and redeemed as soon as practicable : and the provisions contained in the second, fourteenth, thirty-ninth, forty-first, forty-second, forty- fourth, fifty-second, fifty-third, fifty-fourth, fifty-fifth, fifty-sixth, fifty-seventh, fifty-eighth, fifty-ninth, six- tieth, sixty-first, sixty-second, sixty-third, sixty-fourth, sixty-fifth, sixty-sixth, sixty-seventh, sixty-eighth, six- ty-ninth, seventy-ninth, eightieth, eighty-first, eighty- fourth and eighty-fifth section of this Act shall apply to the said bank ; and those contained in the other sections of this Act shall not apply to it. 34 V., c. 5, s. 7-2 ;— 35 v., c. 8, s. 3 ;— 40 V., c. 54 1—43 V., c. 22, s. I ; — 46 v., c. 20, ss. I and 12, part. 1886. The Bank Act. Chap. 120. 45 HH. All the provisions of this Act, except those contained in sections three, four, five, six, seven, eight, ten, eleven, twelve, thirteen, fourteen, fifteen, sixteen, seventeen, eighteen, twenty-three, twenty-four, twen- ty-five, seventy, seventy-one, seventy-two, seventy- three, seventy-four, seventy-five, seventy-six, seven- t> -seven, seventy-eight, eighty-six, eighty-seven and eighty-nine, and so much of section nine, as is de- clared not to apply to the banks en commandite, shall apply to La Banque du Peuple : Provided, that wherever the word " directors " is used in any of the sections which apply to the said bank, it shall be read and construed as meaning the principal partners or members of the corporation of the said bank ; and so much of the Act incorporating the said bank or of any Act amending or continuing it as is inconsistent with any section of this Act applying to the said bank, or which makes any provision in any matter provided for by the said sections, other than such as is hereby made, is hereby repealed. 34 V., c. 5, s. 75. What provi- sions shall apply to La IJanque du Peuple. Proviso : as to directors. Inconsistent enactments repealed. S9. The provisions contained in the second, twenty- What pro- seventh, twenty-eighth, thirty-ninth, fortieth, forty first, ]^'''''j"^^^^'j^^^ forty-second, forty-fourth, forty-fifth, forty-seventh, l^ank of B. C. forty-eighth, forty-ninth, fiftieth, fifty-first, fifty-third, fifty-fourth, fifty-fifth, fifty-sixth, fifty-seventh, fifty- eighth, fifty-ninth, sixtieth, sixty-first, sixty-second, sixty-third, sixty-fourth, sixty-fifth, sixty-sixth, sixty- seventh, sixty-eighth, sixty-ninth, seventy-ninth, eightieth, eighty-first, eighty-fourth and eighty-fifth sections of this Act shall apply to the Bank of British Columbia: 2. The chief seat of business of the said bank shall. Chief seat of for the purposes of the several portions of this Act '"^^'*" hereby made applicable to the said bank, be the office of the bank at Victoria, in the Province of British Columbia. 48-49 V., c. 83, ss. i, 2, 3 and 4. I ■ 46 Chap. 120. The Bank Act. 49 Vict. i tr'. SCHEDULE A. BANKS WHOSE CHARTERS ARE CONTINUED BY THIS ACT. 1. The Bank of Montreal. 2. The Quebec Bank. 3. La Banque du Peup'e. 4. The Consolidated Bank. 5. Molsons Bank. 6. The Bank of Toronto. 7. The Ontario Bank. 8. The Eastern Townships Bank. 9. La Banque Nationale. 10. La Banque Jacques Cartier. 11. The Merchants' Bank of Canada. 12. The Union Bank of Lower Canada. 13. The Canadian Bank ot Commerce. 14. The Mechanics' Bank. 15. The Dominion Bank. 16. The .Merchants' Bank of Halifax. 17. The Bank of Nova Scotia. 18. The Bank of Yarmouth. 19. The Bank of Liverpool. 20. The Exchange Bank of Canada. 21. La Banque Ville Marie. 22. The Standard Bank of Canada. 23. The Bank of Hamilton. 24. The Halifax Banking Company. 25. The Maritime Bank of the Dominion of Canada. 26. The Federal Bank of Canada. 27. La Banque d'Hochelaga. 28. The Stadacona Bank. 29. The Imperial Bank of Canada. 30 31 32. 33 3+ 35' The Pictou Bank. La Banque de St. Hyacinthe. The Bank of Ottawa. The Bank of New Brunswick. The Exchange Bank of Yarmouth. The Union Bank of Halifax. 36. The People's Bank of Halifax. 37. La Banque de St. Jean. 38. The Commercial Bank of Windsor. 43 v., c. 22, Schedule B :—i,i, V., c. 9 ;— 4849 V., c. 84, s. i. 1886. The Bank Act. Chap. 120. SCHEDULE B. Return of the Habih'ties and assets of the on day of , A.D., i8 Capital authorized S Capital subscribed. $ Capital paid up.. 8 Amount of rest or reserve fund $ Rate per cent, of last dividend declared per cent. LIABILITIES. 1. Notes in circulation $ 2. Dominion Government deposits payable on demand 3. Dominion Government deposits payable after notice or oil a fixed day 4. Dejiosits held as security for the execution of Dominion Government contracts and for insurance companies... 5. Provincial Government deposits payable on demand 6. Provincial Government deposits payable after notice or on a fixed day.. 7. Other deposits payable on demand 8. Other deposits payable after notice or on a fixed day 9. Loans from or deposits made by other banks in Canada, secured 10. Loans from or deposits made by other banks in Canada, unsecured 11. Due to other banks in Canada 12. Due to agencies of the bank or to other banks or agen- cies in foreign rountrics 13. Due to agencies of the bank, or to other banks or agen- cies in tne United Kingdom 14. Liabilities not included under foregoing heads 47 ASSETS. Specie $ Dominion notes Notes of and cheques on other banks Balances due from other banks in Canada Balances due from agencies of the bank or from other banks or agencies in foreign countries Balances due from agercies of the bank or from other banks or agencies in the United Kingdom Dominion Government debentures or stocks Provincial, British or foreign or colonial public securities other than Canadian § M '•;< M^ ^itl- 48 Chap. 120. The Bank Act. 49 ViCT. ), T.oans to the Government of Can.ida 10. Loans to rruvincial ClovernmoiUs... 11. Loans, discounts, or advances for which stock, bonds or debentures of municipal or other corporations, or Dominion, Provincial, Uritijh or foreign or colonial public securities other than Canadian, are held as collateral securities 12. Loans, discounts or advances on current account to munici|)al cor])orations 13. Loans, discounts or advances on current account to other corporations 14. Loans to or dejiosits made in other banks, secured 15. Loans to or deposits nvide in other banks, unsecured.... 16. Other current loan.;, discounts and advances to the public. 17. Notes and bills discounted overdue and not specially scoured.. 18. Other overdue debts not s|)ecially secured 19. Notes and bills discounted overdue and other overdue debts secured, by mortgage or other deed, on real estate or by deposit of or lien on stock, or by other sccuiities -"D. Real estate, the property of the bank (other than the bank premises) 21. Mortgages on real estate sold by ihe bank 22. liank premises 23. (>ther assets not included under the foregoing heads I Aggregate amount of loans to and liabilities, direct or indirect, of directors, and firms or partnerships in which they or any of them have an} interest, % Average amount of specie held <■'' :lng the month, $ Avera;^e amount of Dominion Notes held during the month, 8 I declare that the above return has been i)rei)ared under my directions and is correct according to the books of the bank. E. F., Chief Accountant. We declare that the foregoing return is made up from the books of the bank, and that to the best of our knowledge and belief it is correct, and shcv.s truiy and clearly the financial position of the bank ; and we further declare that the bank has never, at any time during the period to which the said return relates, held less than forty per cent, of its cash reserves in Dominion notes. {Place) this day of A. B., President. C. D., General Manager, 43 v., c. 22, s. .\,part; — 46 V., c. 20, s. 6. THE LAW AND PRACTICE OF BANKING CORPORATIONS. PART FIRST. COMMENTARY ON THE BANK ACT. rn COMMENTARY ON THE BANK ACT. CHAPTER I. ORGANIZATION. .SECT. I. — INTRODUCTION. 2. — ACTS OF INCOUrORATIO.V. 3. — OKNKRAL Mr.KTlXGS. 4. — HV-LA\VS. SECT. I.— INTROnUCTION. The exclusive power to legisl.ite on all matters relating to the incorporation of lianks, the regulation of Hanking and the issue of paper money is vested by the British North America Act of 1867 in the Federal Parliament. The Bank Act is, therefore, a Dominion Statute, and Banking Corporations derive their charter rights and privileges from the Federal power. It would appear, however, that while the Dominion Parliament may grant a charter to a Bank, authorizing it to transact business within the purposes of its organization anywhere in the Dominion, it is for the provinces to decide whether they will admit it to such privileges, or enable it to enforce such contracts as may be entered into. Any pro- vincial legislature is competent in its discretion to exclude a Dominion corporation from entering into contracts within the limits of the Province, or may exact whatever security it ^'ouid deem to be reasonable for the performance of its contracts. This principle was acknowledged in the judgments I l|i' I 52 Commentary on the Bank Act. ;i til rendered by the Ontario Court of Appeals in March and May, 1879, concerning certain insurance companies (i), and is applicable by analogy to Banking Corporations, the same question being involved, namely, the right of a corporation to transact business in foreign jurisdictions. In practice, however, this right is universally recognized, not indeed as being inherent, but rather as bestowed, and this is due to the good will and sufferance of each particular Province. Tho interest which every place possesses i" encouraging within its borders every kind of business not inconsistent with public policy is its sure guarantee. At common law, the right of Banking pertains equally to every member of the community, but its iree exercise can be restricted by legislative enactments emenating from the pro- per source, the evident effect of restraining acts being to secure the public welfare and safety from the inroads of incompetent and irresponsible men. This common law right has not, however, been restricted by the legislature, excei)t in so far as the provisions of the Bank Act may be construed as a restraint, in makin'jj the unauthorized use of the title of Bank or its equivalent a misdemeanor subject to heavy penal- ty (2). It cannot be said to take away anj- of the privileges inherent in the business of Banking, being a simple prohibi- tion denying the right to use as the firm name a word, or set of words, which by general acceptance conveys the idea of incorporation, and consequently of extra privileges confer- red through motives of public interest. The provisions of the succeeding paragraph of the Act may also seem at first sight to be of the nature of a restraint, but when we consider that the power to issue and circulate notes or paper certificates of any kind, intended to circulate as money, is the exclusive pre- rogative of sovereignty, it will be apparent that such a right has never been accorded to individual bankers. If such were the case the exclusive power conferred upon the Federal Government over the currency would be wholly ineffectual. (I) See Todd, Pail. Gov't in the Colonies, p. 378. (2) Section 82. f \[ Organization. 53 In fact, so far from its being an individual and common right, it would appear that the sovereign holds the power to coin money as an inalienable prerogative for the benefit of the state and subject to its laws, the public faith being surety for the money, (i) The incorporation of Banks is in itself, however, a restriction on private Banking, for with the numerous connections of joint-stock associations, ramified through all ranks of society, the days of the private Banker may be considered as almost numbered. A few of the most eminent may continue to flourish, maintaining their hereditary and long established connections for some time to come, but most of the new business will go to chartered corporations. Every case of failure and mismanagement of a private Banker tends to shake the credit of the majority of the remainder. Ikit no failure of a joint-stock Bank can destroy the system, because however much the shareholders may suffer, the customers and depositors seldom suffer. To discuss the comparative merits of private and joint stock B.iiiking is not within the province of this commentary. It is sufficient to know that business of this nature is free to all within certain limits, and the public wants will maintain in existence a sufficient supply of representatives of the former class, if equal security can be assured. In granting acts of incorporati( n to Banks the manifest in- tention of the Legislature is to afford additional accommoda- tion to the business community, to provide safe institutions of deposit for the accumulations of the public, and to facilitate mercantile transactions by providing safe credits and a cir- culating medium. The restrictions placed upon the extra powers thus given are enacted with peculiar distinctness, and must be followed in every particular or forfeiture of the charter will ensue. The law of Banking forms part of the /ex Mcrcatorix or Law Merchant, so called from being founded on the custom of merchants. V:'l,. I.ii i' I 1 ■' I (I) See Doutre on the B. N. A. Act, p. l63. 54 Commentary on the Bank Act. 1*' J' ,. I '''ii h i »M1.1 :i The mercantile Law of England is in point of fact an edifice erected by the merchant with comparatively little assistance either from the courts or the legislature. The former have, in very many instances, only impressed with a judicial sanction, or i !uced proper and reasonable consequences from those regulations, which the experience of the trader, whether borrrowing from foreigners or inventing himself, had already adopted as the most convenient. The latter, wisely reflecting that commercial men are notoriously the best judges of their own interests, has interfered as little as possible with their vocations, has shackled trade with few of those formalities and restrictions which are mischievous, if only on account of the waste of the time occupied in com- plying with them. The mercantile Law of England is, perhaps, of all laws in the world, the most completely the offspring of usage and convenience, the least fettered by legislative regulations. (l) The legislature, in framing the present Bank Act, has not attempted to define the business of Banking, nor yet to explain the ordinary rules which regulate its operations. The forty-fifth section confers upon banking associations the power to engage "in such trade generally as appertains to the business of banking," of which the dealing in gold and silver bullion and bills of exchange, and the discounting of promis- sory notes and negotiable securities are declared to form part. The court is left to decide wherein consists the business of banking in its widest sense, and by it this will be deter- mined in accordance with the custom of merchants. SECT. 2. — ACTS OF INCORPORATION. Any five or more persons, who desire to associate them- selves for the purpose of carrying on the business of bank- ing in the form of a corporation aggregate must proceed by a petition to the Federal legislature, setting forth the pro- (I) Smith's Mercantile Law. Introduction. 1: Organization, 55 posed name of the bank, the place where its chief office is to be situate, the amount of capital stock, and the number and value of each share. Although it is not specially enacted that five shall be the minimum number of petitioners, as is the case in ordinary Joint Stock Companies, it is conceived that the section of the Bank Act which requires that the number of directors shall not be less than five is equivalent to such enactment. The object of the petition having thus directly come under the scrutiny of the authorities, it rests with them either to refuse or to issue the desired Act of In- corporation. The special Act of Incorporation, if granted, declares the amount of capital stock, the value of each share, the name of the bank, and the place where its chief office is to be situate, as declared in the petition (i). Provision is also made for a temporary Board of Management. If;, HEAD OFFICE. The object of fixing and making public the place where the head-office or legal domicile of the Bank is situated is to determine the jurisdiction to which the bank is amenable, and the place where service of any notice or legal process may be made. In other words the main object of the pro- vision is the protection of the creditors of the Bank, afford- ing such information in this respect, as may at any future time be required in enforcing obligations, which the com- pany in the course of its dealings may have incurred. The Bank, however, may open branches and agencies and offices of discount and deposit, and may transact business at any place or places in Canada (2), subject to t le approval of the legislature having jurisdiction in the province in which the .agencies are opened. Assent and recognition wi'J be consi- dered as having been given if, by law, no restraint is put upon the opening of such agencies. A banking corporation must be held to reside in the town where its principal office (I). Section 5. (2) Section 46. 66 Commentary on the Bank Act. is as a local inhabitant. Its residence depends not on the habitation of the shareholders, but on the official exhi- bition of legal and local existence. VI ' NAME. The corporate name of the Bank will also be provided for in the charter, being that in which all suits for or against the Bank juay be had. A corporation being a fictitious per- son created by special authority, and endowed by that authority with a capacitj' to acquire rights and incur obli- gations, requires a name in order that its individuality may be established. The legislature is to be the judge as to the propriety of the name recommended by the petitioners, and it will take all necessary precaution to avoid granting a title which through confusion with one already in use may lead to serious misapprehension. It is doubtful whether the legislature would authorize the use by a banking corporation of any name which would lead the general public to infer that it occupied the position of a State Bank. In selecting a name, therefore, the pro- moters should avoid suggesting any word, or set of words, which might convey that impression. The title " Bank of Canada " may be instanced as one coming within the above conjecture. Though partnerships are at liberty to change their firm name or style, yet after a bank has been incorporated by a name set forth in the Act of Incorporation, such bank has not the right or power to change its name. The identity of name is the principal means for effecting that perpetuity of succession with members frequently changing which is an important purpose of incorporation, and the corporate name can be changed only by the same power by which the cor- porate body has been created. CAPITAL STOCK. Of all the provisions set forth in the Act of Incorporation, the most important is that fixing the amo int of stock which Organization. 57 is to constitute, for the time being at least, the capital fund. By it <-he public are enabled to judge of the amount of credit of which the bank is worthy, and the extent to which it may be safe to go in dealing with it. It will be necessary however for the public to keep well in view the difference between the nominal capital and that which is actually paid in. The unimpaired paid-up capital fixes the limit as to the amount of notes which the bank is auth-^rized to put in circu- lation. In making use of the word capital it may, perhaps, be well to note, that in its operations at least, the actual capital oi the bank may be many times the amount of its paid-up capital stock. Viewing from an economic point of view the question of capital we will find that it is defined as •' any economic quantity used for the purpose of profit " (i), and that economic quantities are of three distinct species, symbolized by the terms money, labor, and credit. The actual capital of the Bank is, therefore, the amount of its paid-up capital, the amount of money received for its notes in circulation and for its bills of exchange drawn on time, the amount of funds held on deposit, and the amount of undistributed profit. The capital stock paid in thus forms but a small proportion of the earning power of the Bank, and while it may b:^ taken as the basis of credit, it must never be considered as constituting the source whence all profit is to be derived. The nominal capital of an association formed on the prin- ciple of limited liability, ard dependent in a great degree on credit, should be considerably greater than the immediate necessities the corporation require, as the balance remain- ing uncalled will, if the shares are in the hands of substantial holders, be a sufficient security for the creditors. This security is further enhanced by the double liability clause (2). The capital stock of the Bank, as fixed by the charter, may be increased from time to time by the shareholders at I; ' i ! '1 II ii: I: i I (I) Macleod on Banking vol. i. p. 48. (2) Section 70. '\a¥ !i i ■■' • ■ i ' ^ i" 58 Commentary on the Bank Act. any annual general meeting or at any general meeting spe- cially called for that pupose ; and such increase may be agreed on by such proportions at a time as the shareholders shall determine, and shall be decided by the majority of the votes of the shareholders present at such meeting in person or represented by proxy (i). When the increase is thus decided upon the sanction of the Federal authority is not specially required. Although a variance from the original franchise, it is a variance authorized by the terms creating the franchise. The capital stock of the BanI', however, may not be reduced by the shareholders without special authorit/, in the form of an amendment to the charter. The power, ♦•hus to diminish the security afforded to creditors and the public in general, is justly reserved by the Legislature as guardian of the public interest. When, therefore, the capital stock of the Bank is impaired, owing to heavy and unexpected losses, and the payment of dividends suspended (2) in consequence, a petition to the legislature is imperative, which body, if it deeti the proposed measure advisable, will by the necessary enact- ment give legal authority to the desired reduction. The liability of holders to pay up in full at the original value any shares held by them and unpaid or not fully paid-up will not be diminished. Although the value of each share may be reduced, let us say one half, from one hundred to fifty dollars, or the number of shares reduced in like proportion, original shareholders still remain liable for any amount unpaid on the original stock. This liability is usually provided for in the amending Act. It is conceived that the legislature would not sanction a reduction so great as to nullify the provision of section six, which makes a bona fide subscribed capital of at least five hundred thousand dollars a conditicii precedent to the en- joyment of the corporate franchise. (I) Section 7. (2) Section 27. Organization, SHARES. 59 The division of the capital into shares is one of the most striking features of a company organization, as distinguished from an ordinary partnership. It is this which enables all the world to contribute to its capital fund, by which its mem- bership may undergo daily alteration without any derange- ment of its corporate functions, and which gives generally that elasticity to a company which forms its chief advantage. The amount of eacl. share in banking corporations is usually placed at one hundred dollars. That amount is sometimes reduced to fifty, or even twenty-five dollars, later on in the existence of the Bank. Shareholders consider it of greater benefit for them to receive the regular semi-annual dividends, even if on a reduced share, to no dividend at all, and where the capital is even three-quarters lost the Bank may in time partly make good the reduction, besides paying its regular dividends. Each shareholder in the Bank shall, on all occasions on which the votes of the shareholders are to be taken, have one vote for each share held by him for at least thirty days before the time of meeting. Provided always that he has paid one instalment of at least ten per cent, within thirty days after the date of his subscription (i), and all calls since become due and payable. PROVISIOXAL DIRECTORS. In addition to these provisions and for the purpose of organizing the proposed Bank, and of raising the amount of its capital stock, a provisional Board of directors, from five to ten in number, are named in the Act of Incorporation, who are authorized to open stock books, after giving due public notice, in order to record the signatures and subscriptions of such persons as desire to become shareholders of the Bank. Until the first general meeting of the company the persons named as provisional directors manage the affairs of the (I) Section 19. 1- !, •I tii 'I 'li^ ■. r < Rif. '.] 60 Commentary on the Bank Act, company : and so soon as five hundred thousand dollars of the capital stock is subscribed for, and at least one hundred thou- sand dollars paid up, they are required to call a general meeting of its members for the election of Directors and the further organization of the company, paying due regard to the delays and other formalities precedent to such meeting, provided for by the charter itself. These delays and form- alities ordinarily take the form of a public notice, published for at least four weeks previous to the holding of such meet- ing in a newspaper published at the place where the head office is sit 'ted. ' o {eriod is fixed within which such first meeting m ■ ', leld, but it should be called as soon as convenient a 'i .' ',1. rovisions of the Act arc complied with regarding the ^k p ""'' up. At the first meeting a. is called, the shareholders of the Bank who have paid all calls made by the provisional Direc- tors which are then due and payable, and attend the meeting in person, or are represented by proxy in the person of other shareholders present, proceed with the organization of the Bank, and the enactment of by-laws for its regulation and government. From the time of its incorporation, the Bank will have come under the provisions of the l^ank Act, and the method of procedure to be followed at such meeting will be that pro- vided for by the legislature. SECT. 3. — GENERAL MEETINGS. The general meetings of a Bank may be divided into two kinds, viz : — Ordinary and Extraordinary. The former are the regular annual meetings of the share- holders, convened for the annual election of Directors, for receiving the annual report, and for the consideration of matters in general. The latter are those which are convened at any time, at the usual place of meeting, for the transaction of special Organization. 61 business, unforsecn or not provided for at the ordinary gen- eral meetings. All extraordinary or special general meetings must be called by notice, given at least six weeks previous to the day appointed, which must specify the object to consider which the shareholders are being called together (i). A publication of the notice must be made in one or more newspapers published at the place where the chief office is situated, and also in the Canada Gazette (2). The Directors, or any four of them (3), may at any time convene a special general meeting ; and as a rule the Board will be the conveners. Occasions, however, may arise when the Directors may refuse to call a meeting for the special con- sideration of a subject, which may be deemed by the share- holders of vital importance. Such an occasion might be the proposed removal of the President, Vice-President, or othet Director of the liank for mal-administration or other specifie 1 and apparently just cause. In case of such refusal, any numb n not less than twenty-five of the shareholders, who are toge <.i proprietors of at least one-tenth of the paid-up capital stock of the Bank, by themselves or by their proxies, may call h meeting by giving due notice (4). The ordinary general meetings are called by the Directors, and must be held on the day appointed by the charter or by any liy-Law of the Bank, and at such time of the day, and at such place where the head ofhce of the Bank is situated, as the majority of the Directors for the time being appoint (5). Public notice, as in the case of special meetings, is required, and must be given at least four weeks previous to the meet- ing, by a like publication. A question might arise as to whether any special business may be transacted at the annual general meeting without giving a further notice of two weeks. And whether the notice of such annual meeting should specify the special business, if any, to be transacted. (1) Section 11. (2) Section 84. (3) Section II. (4) lb. II. (5) Section 12. r w y f :: 62 Commentary on the Bank Act. til' m\ n w Such extra notice, and any such specification we opine is not necessary, The question of increasing; the capital stock, one of vital importance to the shareholders generally, would, if suddenly brought up at an annual general meeting, be a question somewhat of a special nature, and yet the Act pro- vides for its consideration at either an annual general meeting, or at a general meeting specially called for that purpose (i). The Act does not specify the number which shall constitute a quorum for the transaction of business at any general meeting, and in the absence of special provision any number, however small, is considered by law as constituting a quorum. The meeting being ready for the transaction of business, the President of the Hank, if present, is the natural chairman of the meeting. If he is absent, a chairman will be chosen from among the shareholders present, in the ordinary manner. The rules governing the deliberations of the meeting are the same as those governing the proceedings of deliberative assemblies generally. The chairman elected to preside at any meeting may vote as a shareholder, but will not have a second vote ex-officio except there is a tie, in which case he will have a casting vote(2). This casting vote, however, may not be used to decide the election of a Director (3); tor it is provided that when two or more persons at any election have an equal number of votes, and the election or non-eleclion of one or more of such persons as a Director or Directors depends on such eciuality, then the Directors who have a greater number, or the majority of them, determine which of the persons for whose election there has been a tie in the voting shall be considered elected (4). All questions, proposed for the consideration of the share- holders of the Bank at any meeting, shall be determined by a majority of votes taken by ballot (5), and every shareholder shall have one vote for each share held by him at least thirty (1) Section 7. (2) Section 10, sub-section 2. (3) lb. (4) Section 12, sub-section 4. (5) Section 10,, sub-sections 2 and 4. Organ izdt'wn. 68 days before the time of meeting, upon which he has paid all calls made by the Directors which ar*^ then due and payable ( i). In making calls it is usual to .- upulate in the notice that the call will be due and payable on and after a certain day, and therefore until such day has passed a shareholder will not be affected if the day of meeting should intervene. If two or more persons are joint liolders of shares, any one of such joint holders may be empowered by letter of attorney from the other joint holder or holders, or a majority of them, to represent the said shares and vote accordingly (2). Shareholders are entitled to tender their votes by proxy (3), a right which is not recognized by the common law. The object of this privilege is, clearly, to allow those who are unable to be present at a general meeting, either from sick- ness, distance, or any other cause, to exercise through or by means of others the rights which their shares give them of influencing theaff.iirs of an institution in which their fortunes are involved, liut all proxies must be held and voted upon by shareholders present at the meeting, and no manager, cashier, bank clerk or other subordinate officer of the Hank may act as proxy. Nor indeed can any manager, cashier, bank clerk or other subordinate officer of the Bank, who is at the same time a shareholder, record a vote either in person or by proxy (4). It has been held that the President, not being an officer of the Hank, may vote by proxy at the annual meeting of Directors (5). So also may he vote on shares of which he may be the holder. The appointment of a proxy to vote at any meeting, in order to be valid for that purpose, must have been made or renewed in writing within three years next preceding the time of such meeting (6). This provision has the effect of preventing shareholders from making use of old proxies, which may have been granted for a special purpose and their cancellation neglected. (1) SfCtion 13. (2) .Section 10, sub section 3. (3) Section 10, sub-section i. (4) Section 10. (5) Regina v. The Bank of Upper Canada, 5 U.C.Q.B., 338 (1849). (6) Section 14. > It iB'^n ; (' i II i • 64 Commentary on the Bank Ad. The (iiicstion has arisen as to the power of trustees to vote on stock held by them in trust, and of which they are the mere nominal hoUiers. VViiere the trustees acted as such for the corporation, itself holding' stock, nhich had reverteii to the corporation in pledge or payment, it was held tiiat such stock could not be voted upon. (l). It would indeed be a strange holding of the law if a company shouUl be allowed to procure stock in any shape which its officers mij^ht make use of in an election to secure themselves against the possibility of removal. Where a clear case of hypothecation can be shown, there is no tloubt but that the pledger of the stock is the one entitled to vote thereon. The possession may well continue with him, consistently with the nature of the contract, and the stock remains in his name. Until the pledge is enforced, the title to the stock made absolute in the pledgee, and the name changed on the books, the pledger should be received to vote (2). While stock stands in the name of a person on the books of a corporation he has a right to vote thereon, even although he has become bankrupt, and his property by operation of law vested in his assignee. The mere circumstance that impropt;r votes are received at an election will not vitiate it. The fact must be affirm- atively shown that a sufficient number of improper votes were received for the successful ticket to reduce it to a minority if they had been rejected, or otherwise the election will stand (3). Where votes rejected by scrutineers at an election of directors would if received have elected a certain ticket, and are adjudged to have been erroneously rejected, the only remedy is to set aside the election. The court, in such a case, has not the power to declare the ticket successful for which the votes would have been cast had they been received. (i) Angell iSr* Ames. Corp. 3rd. Am. Ed. p. 98, (2) An{jell &" Ames. Corp. p. 99. (3) idem. p. loi. Orijain:ation. SECT. 4.— IJY-LAWS. 65 At the first, or any annual |j[cncral nicctiiifj, or at any subscciUL'iit general tncctin^ specially called for the purpose, the shareholders may regulate by by-law any or all of the following matters incident to the mana^'enient and adminis- tiation of tile affairs of the liank (i). That is to say : — 1. The number of Directors ami the quorum thereof. — The power of the shareholders to determine the number of the Jioard of mana^^emcnt anil its (juorum is jjreatly curtailed by the Act. A by-law which would provide for a board ijf less than five members, or for one of more than ten, would be invalid (2). Nor can any number less than three consti- tute a (juorum (3), 2. The qualification of Directors. — A person to act as Director in a Hankinj; corporation must be the Iwna fide owner of a certain number of shares as a guarantee of his interest in its affairs. This number will vary according to the paid-up capital of the bank. When such capital is one million dollars or less, the value of shares to be held by any director must not be less than three thousand tloUars ; and where the paid-up capital is over one million dollars, but does not exceed three millions, he must hold at least four thousand dollars of stock. l*\)i any amount above three million ilollars of paid-up capital the cpialification is five thiuisand dollars of stock (4). While this is the smallest amount required by the act, it rests with the shareholders whether or not to accept this minimum qualification. They iiave a perfect right to enact that the qualification as to the number of shares shall be increased to any extent that may seem to them desirable. If a person be not qualified according to the by-laws of the Bank at the time of his election, the whole transaction will be null, although a sufficient number of shares be after- (i) Section 9. 12) IL^. (3) Section 9, Sub-section 2. (4) Section 16. \ '• i i ti; , ii :\ i.l ■'i, i i]kpm mm 66 Commentary on the Bank Act. wards allotted to him in order to qualify him for the position. It is not necessary, however, that he should hold these shares or any fixed period, prior to the election unless the by-laws so require, but he must continue to possess them during the full term of his office (i), and any by-law to the contrary will be void in effect. Other qualifications are left to the discretion of the shareholders, with the single exception that it is not within their power to appoint as director any share- holder not a natural-born or naturalized subject of Her Majesty (2). 3. T/ic method of filling up vacancies in the Board of Directors xvlicnever the same occur during each year. — The non-filling of a vacancy, through the absence of any by-law to that effect or other cause, will not vitiate the, acts of a r jrum of the remaining directors (3). Should the vacancy wave occurred in the office of the President or the Vice- President, the directors at the first meeting after completion of their number shall, from among themselves, choose a presi- dent or a vice-president, who shall continue in office for the remainder of the yea.- (4). It would seem from the sub- section above quoted that a vacancy created in tlie office of president or vice-president cannot be filled until the directors constitute a full board as fixed by the by-laws. 4. TJic time and proceedings for the election of Directors in case of failure of any election or the day appointed for it. — A particular day is generally appointed by the incorporating act for the election, annually, of the principal officers of the corporation. This is known as the charter day, and is usu- ally fixed with so much certainty that no doubt can arise. The majority of the IJanks subject to the provision of the present Act have not had any particular day fixed by their several acts of incorporation. A by-law passed by the shareholders has, as a rule, appointed the day of meeting. The failure of election or any day when it should be made (i) Section 9, sub-section 4. (2) Section 12. (3) lb. sub-section 5. (4) lb. (iASl- Organization. m 67 will not dissolve the corporation, and the Directors then in office shall so remain until a new election is made in the manner provided by the By-Laws (i). The proceedings on the day so fixed will be in accordance with the provisions of the Bank Act. It would seem, therefore, that the clause providing that Directors should be chosen annually is only directory, and does not determine the office at the end of the year after election, but that the persons legally elected may continue in office until removal. 5. The remuneration of the President, Vice-President and other Directors. — The Directors are entitled to liberal remuneration for the time and thought they devote to the affairs of the Bank. In the absence of a by-law granting remuneration, however, Directors cannot, from the nature of their position alone, lay claim to any remuneration, however arduous may have been their duties. They occupy the position, not of servants, but of managers and trustees. But where a Director renders services under a resolution of appointment which does not specify his remuneration, he may recover the reasonable value of such services — for example, he may be appointed the attor- ney of the Bank or act as arbitrator in a disputed claim. It is usual and expedient to settle the matter of remuneration at the first general meeting. It has been held that there is no presumption that such fees are to be paid out of the proi, s only, and that where no profits were made they could remun- erate themselves out of the capital. Although Directors are not entitled to recover remuneration, where it lias not been provided for, they are entitled to indemnity for losses and expenses incurred m discharge of their duties. 6. The closing of the transfer hook during a certain time not exceeding fifteen days before the payment of each semi-annual dividend. — The object of closing the transfer books is to enable the officers of the Bank to apportion the dividend, declared by the Directors for the half year, without being !■ ! li.ii i ''\\ (i; Section 15. E il' 68 Commentary on the Bank Act. trammeled by daily use of the books by transferring shareholders. It also serves to establish the names of the then holders of the Bank stock to whom the declared profit is to be paid. 7. T/ie auiount of discount or loans luhich may be made to Directors, — Nothing, perhaps, has been a more fruitful source of disaster to Banks than the tendency in Directors to specu- late, either directly or by the medium of others, with the funds under their control. Having extraordinary powers with regard to the funds of the bank, and being entrusted with these funds for the furtherance of the object for which the Baniv was formed, it is always well to place some restric- tion on the use which the)' may make of these funds for the furtherance of private objects. According to the Bank Act, it is necessary for Directors to mention in the monthly return to the Government the aggregate amount of loans to and lia- bilities direct or indirect, of Directors, and firms or partner- ships, in which they or any of them have any interest. The shareholders are, of course, presumed to take monthly cogni- zance of these returns, and may at any time limit thj amount of individual loans to Directors by calling a special meeting for that purpose in the manner provided by the Act. It is we think rather unusual for a By-Law of this nature to be passed in Canada, the Directors of our Banks being as a rule the largest holders of the Banlc ;itock, and consecjuently the most interested in preventing any member of their board from involving the Bank in loss. The severe penalty ('voked by the law, for the making of any wilfully false or deceptive statement in the government returns, will alwaj's serve to prot.vct the shareholders, and will give them an opportunity of providing, at the first alarm, for tiie non-repetili'>n of a pre- carious loan. According to the organic law, under wliich the National Banks in the United Slates come into existence, it is especially enacted that loans to any one person sliall never exceed one-tenth of the amount of capital stock ; did such a provision find expression in our law, we might be spared the unfortunate losses which more than once have been the more or less immediate cause of insolvency. Organization. 69 8. T/ic amount of discounts or loans to any one firm or per- son^ or to any shareholder or to corporations. — The remarks which we have made in considering the previous by-law ap- ply with equal force to the present. The monthly returns require the directors to make known the amount of loans, dis- counts, or advances to (A) municipal corporations, (B) other corporations, and (C) to other Banks, made with or without security. Should the directors at my time prove lax in their duties to the shareholders, and make excessive loans to any person or persons or to corporations, the shareholders may bring them to a knowledge of their proper duties by passing a By-Law at any time, al a general meeting or a special meeting called for the purpose in the manner provided by the Act, limiting the loans which they may make to parties considered irresponsible by the shareholders. I-. i; m ■■ >' ? p Pi m I in CHAPTER II. MANAGEMENT. SECT. I. — BOARD OF DIRPXTORS. GENERAL FUNCTIONS. 2. — PRESIDENT. DUTIES AND POWERS. 3. — LIABILITY OF BOARD FOR MISMANAGEMENT. , ' -f ' h SECT. I. — BOARD OF DIRECTORS — GENERAL FUNCTIONS. It is customary in the incorporating act to confer upon the directors in broad phraseology the general poAver to conduct and manage the corporate business. This 'anguagr is practically only a recognition of the function.-, which the board would be entitled and called upon to exercise b;. the rules of the common law, and does not ( pcrate to en je those functions or to designate them with a.) grcit. r particularity. Nor can the duty thus confer, ed h construed as a requisition upon the i'cctors to undertake the perfor- mance, in person, of all the jjCIl-! ci'''.d for by the daily rou- tine of the business o. the llTik it ^xtends to such pir iters only as are usually and conveniently allotted to the charge of directors in the banking business. Some such acts they must perform, others they may perform. But the obligation is measured by an uniform usage prevailing among banks universally. Their personal execution may be restricted to the matters thus designated, unless others be specifically named or added in the law, Besides a variety of specific acts which they must initiate or wholly do, this uniform usage imposes upon them the general superintendence and Bi Management. 71 active management " of the corporate stock, property, affairs and concerns." They are bound to know all that is done, beyond the merest matter of routine ; and they are bound to know the system and rules arranged for its doing. For this purpose the books, correspondence and funds of the Bank are at all times subject to their inspection (i). POWER OF DELEGATION. So although it has been said that powers of a public char- acter given by the legislature to any body of individuals can never be sub-delegated by the recipients, yet this doctrine has never been allowed to prohibit bank directors from appointing agents and endowing them with sufficient powers fur executing the resolutions of the board and carrying on, without specific authority in each individual case, the ordin- ary transactions of daily business. Thus the directors may appoint as many of'ricers, clerks and servants for carrying on the business of the Bank, and with such salaries and allowances as they consider necessary ; and they may also appoint a director or directors for any branch of the Bank (2). So in like manner they may delegate to a committee of their own number power to mortgage real estate of the corporation, including as a necessary implication power to execute and deliver the ordinary proper instruments (3). Although dealings in real estate are of the most digni- fied and formal character of any dealings in the eye of the law, yet general supervision even of these satisfies the duty of the board. All beyond this may be delegated. They may empower the president alone, or the president and cashier conjointly, to borrow money on behalf of th- Bank, to indorse its promissory notes, to obtain discounts for its use ; these powers also including the power to make delivery of the paper thus negotiated. It seems also that these powers may be conferred not o-Jy i I 'II (i) Section 37. (3) liunill V. Nalwnt Bank, 2 Met. 163. (2) Section 18. 72 Commentary on the Bank Act, by a special vote with a view to a single occasion, but also by a general resolution looking to their frequent exercise on various occasions (i). But votes of this broad nature, unless very cautiously indulged in, are likely often to be improper and in some degree unsafe. For if they appear to go too far in throwing within the discretion of others the decision of weighty matters covering a wide ground of responsibility, they would amount to an efifort in a measure to delegate the " management " of the business of the Bank. To this extent the board of directors cannot go. Within reasonable and moderate limits, so narrow that their general supervision must practically cover all that their delegates can do within these limits, they may confer powers by a general resolution, which may be valid for an indefinite period and for any number of separate transactions. But authority so large as to transfer in an important degree the control of the corporate affairs they cannot confer. M/ 5f!> In sir DIRECTORS HAVE SOLE POWER TO MAKE DISCOUNTS. Thus the making of discounts is an inalienable function of the directors. They cannot part with it, or invest any officer or officers with it. It rests m them alone an J exclu- sively. It is a power of that degree of vital importance that it cannot be taken out of the policy of the general principle that powers of a public nature, given by the legislature, can< not be sub-delegated (2). The legislature imposes upon the board t'lo duty of taking charge of all those matters of business upon the wise and skilful conduct of which the prosperity of the corporation, and the safety of persons dealing -.ith it depends. This duty they cannot shift in whole or in part upon others, and it covers no department of banking business more unquestionably than the making of loans and discounts. (!) Pidgway V. Farmers' Bank, 12 Serg. and R. 256; Merrick v. Bank of the Metsopolis, 8 Gill. 59 ; Fleckner v. Bank of the United States, 8 Wheat. 338. (2) Lyon V. Jerome, 26 Wend. 485. Management. now FAR THIS POWER MAY BE DELEGATED. 73 The board may, however, give the financial officer of the Bank by a siiigle resolution power to make a considerable number of discounts or loans, provided they be requested. But this single resolution must name the person or persons to whom the loans may be made, the aggregate sum which they must not exceed ; the time ; and such other particulars as the directors may deem of moment. Thus in fact though many separate acts may be authorized by this one vote, yet nothing is really done beyond the supervision of the directors, or without the active exercise of their discretion. They may order the cashier to let A, have such loans as he shall wish, in such sums and at such times as he shall ask, within a certain period, up to the amount of a designated sum, to run for specified times, at rates of interest named, and upon desig- nated conditions concerning indorsers or collateral security. This does not leave each individual discount made to A. to be passed upon by the directors ; yet in fact no discount is made to him by any official authority other than that of the board or at the substanti.d discretion of any person save the directors. EXECUTORY FUNCTIONS MAV HE DISCHARGED BY AGENTS. The ordinary executory functions of the various officers of the Hank are not necessarily affected b)' the statutory dele- gation of the management of all corporate affairs to the board. Management is not identical with execution and does not in- tend execution. Checks are drawn, notes and bills endorsed, deposits received, drafts paid, and the like transactions con- ducted as matter of course by the aj^propriate customary officers, without any authorizing \ote of the directorial board. These matters do not constitute the "management" of the bank, nor interfere with the "control" of its affairs. They are properly the medium through which that management and control are introduced into the practical transactions. Fi| ■ 74 p J i ^ Commentary on the Bank Act. DIRECTORS AS TRUSTEES. The high degree of confidence and responsibility resting upon directors of corporations has often led courts to regard them as trustees, and to declare the relationship existing between them and the stockholders to be that of trustees and ccstitis que trustait, respectively. If this can be asserted with regard to the generality of corporations, it is peculiarly and exceptionally true with regard to banking corporations, in whose solvency the whole neighboring community must be at least indirectly interested. A bank of issue may properly be regarded as a quasi-public corporation. The directors of a bank are not trustees for the shareholders alone, but they owe an even earlier duty to the depositors, and, if the bank exercises the privilege of circulation, still a prior duty to the public at large. The law is, as it ought to be, very zealous in exacting the strict and thorough performance of these duties, and it is in the scrutiny of ])ossible breaches of them that the rfgid rules which govern trustees have been applied ( l). It is not enough, to exculpate a director, that no actual dishonesty can be shown, that he cannot be positively proved to have been influenced by interested motives. Like a trustee he is absolutely prohibited from the performance of those questionable acts, wherein his conduct may be wholly free from blame, but where the bias of self interest is strong and may influence him even without his own recognition of the fa.l. A director, who wishes to keep completely within the protection of the law, must look to something more than the mere integrity of his own intentions. The law is obliged to forbid a certain general class of actions in which the tempta- tion is so great that it is wisely regarded as better wholly to remove human frailty from the possibility of yielding than to be continually plunging into darkling inquiries as to the probable purity and uprightness of sundry isolated transac- tions. It is possible that any person, being a director, might, at a meeting of the board, vote honestly and with a single eye (i) See Drake v. Bank of Toronto, 9 Chy. U. C. 134 Vankoughnet C. Management. 75 to the Bank's welfare, upon a question in which he had an individual interest opposed to that of the corporation. It is also possible that he might intend so to vote, and yet not succeed in doing so by reason of the unconscious obliquity of mental vision which such circumstances may often produce. But a sound precaution prefers to exchange these possibilities for a certainty. The law, therefore, has, with wholesome care, declared that it is a duty of a director, resulting from the employment itself, not to acquire any interest in any matter adverse to that of the Bank so long as he remains in office. Likewise as a trustee is not allowed to make any profit from, or by the aid or use of, the object matters of his trust, so a director is forbidden to make any profit out of his employ- ment. Not only must he refrain from voting on questions in which he is directly interested, but he must not use his in- fluence, resulting from his official position, to secure his own ends or his private advantage. Neither, of course, can he directly or indirectly barter this influence to any outside person upon any species of consideration moving from that person to himself- It is not enough in the eye of the law to protect him that he did not mean to prejudice the Bank, if his act is open to suspicion he will, like a trustee, be held to have violated his duty, which is not to strive to do question- able things conscientiously, but wholly to refrain from all actions or intermeddling in them of what nature soever (i). Attempts have often been made to prevent, by statutory enactment, some of the more definite and openly dangerous acts which directors may sometimes be tempted to do for their own use and advantage. But this method is neces- sarily insufficient. The language, if specific, will cover too little ; if general, will cover too much ; and so in cither case the phraseology will be easily perverted and the intent evaded on the plea of reasonable construction or necessity. The present act, like the National Banking Act of the United States, wisely refrains from any enactment on the (I) The English and American cases in support of these common law rules are cited in Morse, p. 115, from whose work the principles here laid down are taken. i II I ! '> i ! I 76 Commentary on the Hank Act. subject of loans or discounts made to directors. It leaves their conduct in all particulars to the supervision of the common law, which, as it has been above laid down, must be regarded as requirinf^ only proper and efficient enforcement to render it fully ecpial to the task thus imposed upon it, of securing perfect purity in the administration of the Bank's affairs. In the absence of legislative prohibition there is no rule of the common law which prevents the making a loan or discount to a director any more than to any other person. Only a director, applying for such a loan, must not vote or officially aid in the discuivsion concerning its allowance. The same principles of law will be applied to this as to other loans; but they Vvill be rigidly enforced, and the proceedings will be severely scrutinized (l). He must behave himself strictly like any other oiiisidc customer of the corporation. He must cause his request to be acted upon by the majority ofln's co-directors, strictly exclusive of himself. It is pro- bable that any circumstances of impropriety or suspicion attendant upon the fact of his making the application at all, or upon the manner of the making it or the procuring its acceptance, will be construed with a degree of stringency as against him, greater than would be exercised towards an ordinary outside borrower. Under any circumstances favor- itism or fear of offending are too likely to have some influ- ence in such a transaction, and even the suspicion of them cannot be too carefully guarded against. Prudence no less than right feeling should prevent the applicant from even being present at the discussion and vote. Although, as we have said, the present Act wisely refrains from any enactment on the subject of loans and discounts made to directors, such subject has not been entirely ignored. A provision inserted in section 6G, schedule B, will be found to have reference thereto. This requires a statement of the " aggregate amount of loans to and liabilities, direct or indi- (1) See Conynham's Appeal, 57 Penn. St. 474. Management 77 rcct, of Directors, and forms or partnerships in which they ->r any of them have any interest" to be appended to each monthly return. In this manner publicity is ^n'ven to any ex- traordinary abuse of the powers veiled in the board, and the shareholders are thus afforded ample opportunity to exercise their ri^dits with regard to the framing of a by-law to restrain the otherwise unlimited power of the directors. A method frequently resorted to for securing the fidelity of directors in the exercise of their duties is to require them to own in their own right and unincumbered a certain amount of tlie Cv)rporate stock. Imperfect astliis must be, as a check upon men of large property, it is perhaps the best available plan, and it has been adopted in the present Act. A provision to this effect is to be found in section 9, which declares that each director shall own at least " three thousand dollars of the stock of the bank, when the paid up capital thereof is one million dollars or less; four thousand dollars of stock when the paid up capital thereof is over one niillon and does not exceed three millions, and five thousand dollars of stock when the paid up capital thereof exceeds three millions." CONTROL OF DIRECTORS (WKR THH BANKS TROrKKTV. Directors can use the funds and property of the Hank only for proper banking purposes, and for the strict furtlierance of the business objects and financial prosperity of the corporation. Tlieir discretion and power to manage its afTairs extend only to the conducting those affairs in the best manner that their knowledge, foresight and observation can suggest, to the end of increasing the profits and enhancing the value of the investments which have been entrusted to their cluirge by others. Tliey cannot use any portion of the money for such objects of usefulness or charity, or the like, as they may consider worthy of encouragement and aid. All their transactions must be strict matters of business. They cannot make gifts from the corporate property. They can- not, without authority from the stockholders, subscribe money i 1 , "1 ' It ^tl' I ^, IMAGE EVALUATION TEST TARGET (MT-3) // ^>. .*■«>. ^^ A ^ 1.0 I.I liO 1^ 1^ iS |2£ 1 2.2 L25 iu 1^ 0% /A 7 Photographic Sciences Corporation 23 WIST MAIN STIKT WEBSTER, NY. MSIO (716) •72-4S03 4^ y. <^ 78 Commentary on the Bank Act. to any objects, however meritorious, unless with the imme- diate view and expectation of thereby furthering the actual worldly and material well-being of the Bank. They are trustees of the property of others for this sole and only purpose, and if they appropriate any portion of the property for any other purpose whatsoever, however intrinsically deserving, it is yet a deviation from their obvious duty, both legal and moral, for it is nothing else than a clear breach of a plain and simple trust. Such an act, if upon its face perfectly regular, and within the scope of the directorial authority, and if the circumstances did not affect third parties with notice of its wrongfulness, would, as toward such parties, bind the Bank. But if the real nature of the act were known to the outsider he would be held to a knowledge of its illegality arising from its not being within the ordinary agency conferred by the corporate prin- cipal upon its official agents. For directors, though they are the government of the corporat'on, are yet, no less than any subordinate officers, its agents with a definite scope to their agency, and can only act legally within this soope (i). If their act is such that it is the duty of the party dealing with them to know that it falls without the ordinary limits of directorial power, he will be affected by its invalidity. If the facts are known to him which show that as a matter of law the directors are undertaking an act of this description, he deals with them at his own peril if he neglects to satisfy himself that they have received a special and extraordinary authority in the particu- lar case. If they have not, any loss he may incur is only the natural result of his own laches. Thus it is a principle of law that the directors can only use funds of the Bank for legitimate banking purposes. If they borrow money intending to use it for other purposes, and the lender is aware of this intent, then their use of it accordingly will relieve the Bank from indebtedness upon the loan (2). (1) Salem Bank v. Gloucester Bank, 17 M!>ss. I ; Ridley v. Plymouth Grind- ing and Baking Co., 2 Exch. 71 1. (2) Bank of Australasia v. Breillat, 6 Moore, Privy Council, 197. Management. 79 As a rule they cannot voluntarily release a debt owing to the corporation (i) ; but where the emergencies of business require it they may make a normal or merely apparent sacrifice of bank property, if it seems reasonably likely to redound to the substantial benefit of the institution. In the bona fide pursuit of this end, their power is not limited by technical restrictions which, under other circumstances, would forbid their cancelling debts owing to the Bank. Cases shew that they may commute a debt if it seems to them practically more advantageous to do so than it would probably be to push it at law, or to retain the naked legal claim for the full amount. In like manner if any officer of the Bank is in arrear or default, it is perfectly in their power to compound and settle with him in any manner and upon any terms which seem to them likely to secure the most complete reimbursement to the Bank. Their contract of this nature can be subsequently avoided by the Bank, solely on the ground of further fraud or dishonesty of the compounding officer occurring in the negotiation itself (2)" In like manner it not unfrequently occurs that the wrongful or erroneous act of an officer causes a loss to the Bank which he can be held liable to reimburse, but which there is reason to believe can only be recovered by a suit against some other third party. But if recourse is had to the suit against the third party, then the testimony of the officer in fault may be absolutely essential, or at least very desirable, to secure the success of the Bank. Whereas on the ground that he is a party immediately interested in the result of the litigation, he must in all probable expectation be rejected at the trial as an incompetent witness, unless he is first legally and fully released from his liability to the corporation. In this dilenrima it is the duty of the directors to consult solely comparative ultimate probability of securing reimbursement to the Bank from the defendant or from the officer. It may be that the amount of the loss is greater than can possibly r I : iifi I J t F [ I (1) Stanhope's case, 3 De G. (Sf Sm. 198. (2) Frankford Bank v. Johnson, 24 Me. 490. 111' ) H 80 Commentate on the Bank Act. be recovered from the officer or from his bondsmen, while the defendant would be amply able to pay it. It may be that the result of the suit is doubtful ; or it may be that only a successful result can in reason be anticipated. Upon the consideration of such facts, the directors must conclude whether or not worldly wisdom would lead them to release the claim of the Bank against the officer, or to abandon the notion of the other suit, or to sacrifice in its prosecution the advantage of his evidence. If their choice is of the first alternative, then it is not only in their power but it becomes their duty to execute to him a full, valid, and sufficient release from his liability. We say they must be guided solely by their notion of worldly wisdom in the case ; unless by direct sanction from the shareholders, their feeling towards the officer, and their opinion of his conduct and character, cannot be allowed any weight whatsoever ; and this equally whether this feeling and opinion would lead them to punish him to the utmort extent of their power, or to pity and relieve him. The question is purely of dollars and cents, not of moral desert, vindictiveness, or of commiseration (i). OVER-ISSUE OF NOTES. Where the Bank has the legal authority to issue its bills or n^tes for circulation as currency, the power to make the issue is one of the ordinary and inherent functions of the board which the public has a right to presume is vested in, and will be honestly exercised by, the directors. The Bank is held to warrant their fidelity. If the issue is attended with any error, neglect, or fraud, the resulting loss is that of the Bank. For example, if there be, from any of these causes, an over-issue, the Bank must yet redeem all the notes in the hands of innocent holders(2), and pay any penalty which may be imposed by the legislature in cases of over- (i) Lewis V. Eastern Bank, 32 Me. 90. (2) McDougall V. Bellamy, 18 Ga. 411. Management. 81 issue (i). The transaction, falling within the ordinary scope directorial authority, is one wherein the Bank guarantees both the integrity and the accurr.cy of its agents. DUTY OF DIRECTORS CONCERNING UNAUTHORIZED ILLE- GAL ACTS OF OFFICERS. It will sometimes happen that a subordinate officer will do an act either illegal or fraudulent, which is of such a nature or done in such a manner that it does not necessarily bind or affect the Bank. Thus the conduct of a single official may be such that if it could be construed as the action of the corporation, it would cause a forfeiture of the charter ; but if it be without the direction or privity, a fortiori if it he contrary to the actual orders, of the board of directors, the punishment will be meted solely to the wrong-doer, and it will be considered that the nature of the case furnishes no ground for a proceeding for forfeiture or penalty against the Bank itself. But whenever knowledge of the commission of an act of this description, any or all the possible results of which mignt be averted from the Bank, is brought home to the directors, it is incumbent upon them at once to dis- avow the doings of their officer on behalf of the body corporate, to decline to allow the corporation to receive any benefit from them, and, so far as can be done reasonably and without injury, to seek to undo the transaction if it be still inchoate or imperfect. If the whole affair is completed and can no longer be repudiated or undone, or if no good or just end could be attained by the repudiating or undoing when knowledge of it first reaches the board, still it is their duty promptly to remove the official who was guilty of the misdemeanor. If they neglect these steps, if they knowingly suffer the Bank to reap advantage from the wrongful conduct, or if they continue to retain the wrong-doer in the service of the Bank, they will be regarded as sanctioning and adopting his acts on behalf of the Bank, and it will be affected by 1' s (I) Section 40, sub-section 2. I f: J J 82 Commentary on the Bank Act. i these precisely as if they had been originally done under direction, or with the cognizance, approval, or collusion of the corporate government (i). Before permitting any cashier, officer, clerk or servant of the Bank to enter upon the duties of his office, the board of directors must require him to give bond or other security for the due and faithful performance of his duties (2). Such obli- gation may be in any sum which the directors see fit. The power to take official bonds is inherent in every corporation, independently of statutory permission ; and the permission, or the command, to take them from any particular officers can- not be construed to preclude the power of taking them from others also (3). The Act gives no right to the corporation to require bonds of a director, at least, unless he shall also fill some other office. But this does not render the taking of a bond from a director illegal, nor does it prevent such a bond from being valid at common law. It only deprives the bond of a statutory character, which is an insignificant loss, inasmuch as it seems to be attended by no very definite practical advantage. The statute gives no description concerning the terms of the bond, and thereby it saves the chance of considerable litigation in cases where the bond might not precisely conform to the legal requirements. Generally it may be said that any condition in the bond, consistent with its general character, and not in contravention of the rules of law, of good morals, or of public policy will be sustained. Although the obli- gation may be in any sum which the board may see fit, it is not probable that they would be allowed to recover any desig- nated sum as " liquidated damages" in all cases, neither any money in the nature of vindictive or penal damages, at least from the sureties. From them the recovery should be limited to the actual amount of the loss. The bond is strictly (1) Hank Commissioners v. Bank of Buffalo, 6 Paige, 497 ; Robinson v. Bealle 20 Ga. 275, (2) Section 18, sub-section 2. (3) Bank of Northern Liberties v. Cresson, 12 Serg. dr* R., 306 ■ Management. 83 for reimbursement, not for either punishment or profit. This character imperatively fixes the measure of damages at the amount of actual p .'cuniary loss or injury which the Bank has sustained (i). And it is conceived that only the injury, naturally and in the ordinary course of business arising from the misconduct, can be recompensed. Remote lesults cannot be proved against the sureties ; much less results, which are in a measure due to negligence or ignorance of the directors in the events transpiring after the malfeasance. THE BANK IS BOUND BY THE ACTION OF THE MAJORITY, THOUGH INFORMAL, PROVIDED IT BE TAKEN AT A REGU- LAR MEETING OF THE BOARD. Kr The Bank is bound by the action of the majority of the board, taken in the manner usually adopted by the board, no matter how informal or peculiar that manner may be. An expression of the will of the majority is what the law looks for and rQcognizes(2). It seems, however, that it is indispen- sable to the validity of any action that it should be taken by the board ; that is, that it should be the vote of a majority of a quorum, at a regular and legal meeting of the board. Thus it has been held, that the assent of a majority of the directors, expressed by them individually, and not at a regular stated meeting of the board, is not sufficient to confer upon the cashier authority to do any act which he would not have authority to do unless it was conferred upon him by the directors(3'). But it also appears that when a quorum of the directors are assembled at a legal meeting, they will bind the Bank by their proceedings, even though the remainder of their number have had no notification of the meeting (4). Though the action of the quorum may be valid as the action of the corporation under such circumstances, yet it by no (1) Bank of Washington v. Barrington, 2 Penn., 27. (2) Bank of Middlebury v. Rutland dr* Washington R.R. Co., 30 Vt. 159. (3) Elliot V. Abbot, 22 N. H. 549. (4) Edgerly v. Emerson, 3 Fost. 555. ;t 1 i^ 84 Commentary on the Bank Act. means follows that they may not themselves be in fault if the failure to notify all the members of the board was not abso- lutely unavoidable. DIRECTORS ENTITLED TO NOTICE OF MEETING. CANNOT BE DEPRIVED OF RIGHTS PERTAINING TO THEIR OFFICE. It is the duty of every director to be present at every meeting of the board. Clearly the responsibility which rests upon him as a part of the government of the corporation, gives him the absolute right to demand that due notice be given him of all meetings of the government for deliberation or action. The directors have no power or discretion, direct- ly or indirectly, to debar any one of their number from the exercise of all his rights, a fortiori, from the performance of all his duties. Not even the conviction, honestly entertained by all the rest, that one of the members is secretly hostile to the real interests of the Hank, will authorize them to refuse him any of those means of scrutinizing its affairs which ordinarily pertain to his incumbency in office. Even the formality of a by-law is impotent to deny him access to the books and accounts. A by-law assuming to do so is simply invalid, being " repugnant to the provisions of this Act, " and especially to section 25. The effort to exclude by such a by-law constitutes, by itself, sufficient and proper ground for the granting of a writ of inandavius in favor of the excluded official ; and the writ may be directed, not alone to the other directors, but also to any subordinate officer who has assisted in the attempt to prevent the ousted petitioner from exercis- ing any of his legal functions. The supposed hostility on the part of the petitioner towards the corporation, even if it should be proved, would furnish no valid cause for withholding the writ (i). RECORDS. Records of the proceedings of the board of directors are (i) People V. Throop, 12 Wend. 183, % t Management. 85 good at law, although not taken at the time of the meeting. They may be made at any time subsequently and relate back (i). VACANCIES. In case of a vacancy occurring in the number of the board, such vacancy mus!- be filled in the manner provided by the by-laws, but the non-filling of the vacancy will not vitiate the acts of a quorum of the remaining directors (2). Nor will the filling of such vacancy in an illegal manner have that effect (3). The attempted act being a mere nullity, the vacancy still exists. When by-laws had never in fact been made by the shareholders as required, and a vacancy occurring in the board, three of the directors had appointed one A to fill such vacancy, it was held that A had not been legally made a director. But when a call had been made by four of the directors, of whom the one who seconded the resolu- tion was the director thus illegally appointed, it was held that such call was valid, three of the directors who made it being legally qualified (4). CONTINUANCE IN OFFICE. It is a common proviso that directors, once chosen, shall remain in oflice until a choice of successors has been made (5). This is a useful and convenient precaution by which accidental or unavoidable intervals are bridged over, without an inter- regnum, than which nothing could be more injurious to the interest of the Bank. Though the original term of office be limited to one year, yet it may be indefinitely prolonged under this provision. The rule and its workings are usually simple enough, and we have found only one case where litigation has arisen under it. (1) Commercial Bank v. Bonner, 13 Sm. &' M.649 (2) Section 12, sub-section 5. (3) Bank of Liverpool v. Bigelow, Russ dr* Creas , N.S.R. Supreme Court, 236(>878). (4) Ibid. (S) Section 15. '' lif i J t' '■ i HI : ' i! i ll it 1- i' : I 86 Commentary on the Bank Act. SECT. 2.— THE PRESIDENT, OF HIS TOWERS AND DUTIES GENERALLY. Ordinarily the position of President is one of dignity and of an indefinite general responsibility rather than of any accurately known power. He is usually expected to exercise a more constant, immediate, and personal supervision over the daily affairs of the Bank than is required from any other director. Usage or directorial votes may confer upon him special functions, and may extend his authority to correspond with the increase of actual duties. But the authority inherent in the office itself is very small ; indeed, it is very difficult to say precisely how or wherein it is really much in excess of that which can be exercised by any other single director. Practically this legal principle is not known or not distinctly recognized in very many Banks, and frequently Presidents undertake to exercise a very considerable control in the daily routine of business. When this is done with the knowledge and approbation, or the tacit sanction of the board of directors, it may be regarded as legalized by the principles of ratification or usage. Yet these afford an indefinite and dangerous basis on which to rest important dealings. A careful collation of all the adjudicated cases, it must be con- fessed, wears a striking and peculiar aspect, which is not very favorable to the assumption of any species of executive power by a bank President without direct authorization. With scarcely an exception all the decisions are to the effect that the President had no right to perform some particular act, which he had undertaken, probably in perfectly good faith, to perform, and which had been called in question, and had given rise to the litigation in which it was condemned. So the reader will notice that in discussing this topic we are obliged to confine ourselves almost wholly to declaring what a President can )ioi do. Indeed it is a singular fact that the entire collection of judicial authorities justifies the enunciation of only one act as falling within the properly inherent power of the Presi- Management. 87 dent. This solit y function is to take charge of the litijja- tion of the Hank. There is no question but that this matter belongs to hitn by virtue of his office. He may institute and carry on legal proceedings to collect demandsorclaims of the Bank. He may appear, answer, and defend in suits against the Hank. Me may retain and employ counsel on behalf of the Bank. Counsel requested by him to act for the Hank will bind it by their action in the case, within the ordinary powers of counsel, by sole authority of their engagement by him. Nor will it make any difterence though circumstances render that engagement originally wrong or improper (i.) This would be his own breach of trust towards the Hank, committed within the scope of his authority, damages for which the liank could only recover from himself, and which could affect no inno- cent outside parties, whether these should be the counsel employed or the other litigants in the cause. Where o e transacts business or enters into contracts or agreements with the President of the Hank, which in form run between the person upon thf one part and the President, described as such, upon the other, if it was understood by the party at the time that he was in fact dealing or agreeing with the Hank ; if he acted upon this supposition in good faith ; if the President had from any source authority to bind the Hank in such a transaction ; and especially if the Hank actually receives whatever benefit may accrue from it, then there can be no doubt that the Hank could be held to perform whatever was undertaken on its behalf by its President. But if the President was acting beyond the scope of any author- ity derived from his office, or from directorial votes or from usage, then his act, except of course by virtue of a subse- quent ratification, could not bind the Hank. Even where the President does not designate himself as such, yet the circumstances of the transaction may be put in evidence, to (I) Savings Bank of Cincinnati v. Benton, 2 Mete. (Ky.) 240 ; American Ins Co. V. Oakley, 9 Paige, 496 ; Mumford v. Hawkins, 5 Den. 355 ; Oakley v. Workingmen's Benevolent Society, 3 Hilt. 487 ; Alexandria Canal Co. v. Swann, 5 How. 83. 1 ' j ' « j i i ! •- \ m I ; II 88 Commentary on the Bank Act. show, so far as they may be able, that he was in fact acting in his official capacity, and, if this be established, the failure to designate himself formally by his official title will not aff*ect the binding force of the transaction upon the Hank. But if the dealing was with him as an individual not as an officer, the Hank has nothing to do with the afi"air. Thus where one gave money to a bank President, who signed a receipt for it " to be deposited in the Hank to the credit of A.," and signed the receipt simply with his name alone, it was held that the facts were admissible to go to the jury for what they might be worth as tending to show that the money was paid to and received by the President in his official capacity on behalf of the Hank ; but that they were by no means conclusive of this, and that if the jury should find that the money was intrusted to the President as a private individual, simply for the convenience of getting him to deposit it on behalf of A., then he was A.'s agent, and if he failed to make the deposit regularly and honestly, it was his individual, not his official, default, and the Hank was not lia- ble, (i). Precisely to the same eft"ect was the decision in Terrell v. Hranch Hank (2). Though the officer receiving the money was in this case a director, the principle of law is identical in the two rulings. president's control over property of the bank. I-; The control of the President of a Dank over its property of any description whatsoever, from real estate down to a naked right to bring an action at law, is of the slightest. He has no power to draw checks in its behalf, or against its funds. He is not the executive officer who has charge of its moneyed operations. It is not among his functions to with- draw or remove its deposited funds, or to use them for any purpose whatsoever. He cannot even employ any portion of the assets or credits of the Bank for paying or settling with its (i) Sterling 7'. Marietta &* Susquehanna Trading Co., II Serg. 6f R. 179. (2) 12 Ala. 502. Management. 89 creditors, unlesr, by virtue of an express delegation of author- ity from ♦^''<' directors. He has no more power of manage- ment or ^ ^ .dl over the property of the corporation than any other single member of the board, (i) These remarks, of course, refer to his inherent powers enjoyed viftitte officii; for, of course, if any resolution or any established usage gives him the j)ower, either at all times or under special circumstances, to draw against the corporate deposits, he may do so within the limits of the power. The President does not possess the power to surrender or release claims of the Hank against any person, from whatso- ever source arising; or to stay the collection of an execution against the estate of a judgment debtor. For either of these acts is the exercise of a discretionary authority over the affairs and i»roperty of the liank, which is the peculiar and exclusive province of all the directors (3). Unless specially empowered, the President cannot enter into contracts or agreements on behalf of the corporation. Au- thority so to do may however be conferred on him by vote of the board of directors, or by the existence of such facts as cons- titute a jiublic holding out, and warrant the public in believ- ing that the undertaking is within the scope of his legitimate delegated authority (4). But a directorial vote, conferring a power upon the " president and cashier, " will be strictly construed as conferring only a joint power, exclusively, and by no means a joint and several power. The execution can be by neither of the designated parties singly, but must always be strictly by both in conjunction (5). Though if both agree that a certain course shall be pursued, and that an executive act occurring therein shall be done by (1) Gibson v. Goldthwiiite, 7 Ala. 281. (2) Neiffer v. Bank of Knoxville, I Head. 162 ; Fulton Bank v. New York &* Sharon Canul Co., 4 Paige, 127. (3) Olney v, Chiidsey, 7 R. I. 224 ; Brouwer v. Appleby, I Sandf. 158 ; Spyk- er V, Spence, 8 Ala. 333. 4) Mt. Sterling Turnpike Co. v. Looney, i Met. (Ky.) 550 : Farmers' Bank V. McKee, 2 Penn. St- 318. (5) Ridgway v. Farmer's Bank, 12 Serg. &• R. 256. ■11 .™ ( ii- m 90 Commentai'y on the Bank Act. one alone, that act may be legally performed according to such arrangement. This is mere matter of detail, and per- tains to the execution not to the exercise of the power. For example, where the power is to borrow money, if they agree upon all the items going to make up the transaction, but that the note given for the loan shall be indor&'^'d by the cashier alone, this will be a perfectly regular and siifficient execution of the duty intrusted to them (i). SECT. 3. — LIABILITY OF DIRECTORS FOR MISMANAGEMENT. If Bank directors do not manage the affairs and business of the Bank according to the directions of the charter and in good faith, they will be liable to make good all losses which their misconduct may inflict upon either shareholders or creditors, or both. But for excusable mistakes concerning the law, and for many errors strictly of discretion, they are not liable. Though in cases in which their action has been so grossly ill-advised as to warrant the imputation of fraud, or to show a want of the knowledge absolutely necessary for the performance of their duties, so great that they were not justified in assuming che office, they may beheld responsible. (2) They are required simply to show a reasonable capacity for the position they accept ; to use in it their best discretion and industry ; to show the scrupulous bona fide and conscien- tiousness in every matter, however minute, which is exacted rigorously from all trustees of the property of others ; and to obey accurately the requisitions of the charter, or of the general banking law under whose provisions they come. IMPROPER DECLARATIONS OF A DIVIDEND OR BONUS. For example, if directors decla e a dividend at a time when the Bank is so far embarrassed that such a needless disburse- (1) Fleckner v. Bank of United States, 8 Wheat. 334. (2) Godbold V. Branch Bank, 11 Ala. 191 ; Smith iv. Prattville Manf. Co., 29 Id. n. s. 503. Management. 91 ment of money must be regarded as an act of either fraud or folly, and which could have been advocated by no man who was not either dishonest or grossly incapable, they may be held liable for the consequent loss to the corporation, (i) The act is not to be excused, for it must be either fraudulent or the result of such excessive unfitness as to become the legal equivalent of fraud. It will be a breach of charter provisions to declare a dividend or bonus out of the capital stock of the Bank instead of out of earnings, and such an act of malfeasance will render the directors concurring therein jointly and severally liable for the amount equal to the impairment, as a debt due by them to the Bank (2). And so in like manner will they be held iiable, if having a rest or reserved fund of less than twenty per cent, of the paid-up capital of the Bank, they authorize a division of profits, either by way of dividend or bonus, or both combined, or in any other way exceeding the rate of eight per cent, per annum (3). OFFICIAL BONDS. Again, the directors may render themselves liable to the corporation for neglect of their duty, in failing to comply with the requirements of section 18, with reference to official bonds. If any mischief results to the corporation by reason of their failure to take the bonds required by law, they may be held rebponsible for it, as they may for any other malfea- sance in office. When the charter forbids the issue of bills for circulation, before a certain portion of the capital stock has been subscri- bed and paid in, an issue before that time will make the directors personally liable to redeem any of the bills which the Bank is unable to pay in the due and ordinary course of its business. A statutory requisition of a nature so plain and simple as this cannot be excusably broken. If broken, the ¥'l (1) Gunkle's Appeal, 48 Penn. St. 13. (2) Section 27. (3) Section 28. f I! ' I 1^ i •J- If 92 Commentary on the Bank Act. breach cannot be regarded as a mistake of law ( i)- Mistakes as to what is the law serve to excuse cases where correct knowledge could be reasonably expected only from a pro- fessional man, and even in such cases if the directors feel any doubts they may be guilty of neglect if tluy fail to seek and be guided by competent legal advice (2). But ignorance of any fact in the Bank's affairs, which it is their duty to know, can never be set up by them in defence or exculpation for any act which the existence of thai: fact should have prohi- bited (3). THE LIABILITY AN ASSET OF THE BANK. If liability of a director once accrues for any species of malfeasance in office, whether his acts have been the result of dishonesty, negligence, or incompetence, the claim of the bank against him becomes a part of the assets of the institu- tion. An assignee or other party whomsoever, who may come into possession of the corporate property for the pur- pose of collecting it and distributing it among the creditors and shareholders, is obliged to regard the right of action against such delinquent directors as a part of the available assets. It is his duty to push the claims ; to make what he can out of them, and to apply the proceeds together with the other funds of the corporation to the discharge of its indebt- edness, and the reimbursement of its creditors and share- holders. The liability is at common law, and though a statute or charter may declare what acts of a director, and under what circumstances committed, shall render him liable, yet these enactments will not operate to alter the nature of the liability, once accrued, or to render it statutory. They must be construed as simply relating to evidence, and as declaring that testimony establishing the act and circumstances des- cribed, shall suffice to fix the liability ; which, however, after (i) Schley v. Dixon, 24 Geo. 273. (2) Godbold V. Branch Bank, 11 Ala. 191. (3) Bank Commissioners v. Bank of Buffalo, 6 Paige 497. Management. 93 it has been thus fixed, will still retain its original and inhe- rent common-law character. But whatever liability may have been incurred by all or any of the members of a board of direction, it will not descend to their successors in office, who are blameless upon their own account. Neither will it pass to any third party to whom they have assigned corporate property, if he took it in good faith, without collusion, and for value (i). FALSE AND DECEPTIVE STATEMENTS, It sometimes happens that the directors of a banking corporation put forth deceptive and fraudulent reports, and make false statements concerning its affairs, in order to keep up its good repute with the public, and to sustain or raise the price of shares by attracting purchasers. A collection of case-law on this and cognate subjects is to be found in Shelford's Law of Joint Stock Companies, and other books, referring to the highest sources of authority in cases upon this subject in England ; both on the question of a report of directors being in any sense a representation to an outsider who buys on the faith of it ; and also on the point whether it is to be considered a report of directors, or (after its adop- tion by the Hank) a report by the latter as havinga pproved of it and profited by it. Reports made and accounts rendered by directors in the course of their duty, though made and issued to the share- holders only, as to the state and affairs of the company, are considered the representations of the company, not only to shareholders, but to the public, if they are publishtid and circulated by the authority of the directors, or a general meeting. But such reports and accounts made and issued to the shareholders are not the representations of the company to a person who obtains knowledge of their contents only (4) Schley v. Dixon, supra. -r ; ., , il- ^^^K^' |i ! ■ ■ r. • H ^f-i^ ■'' 1/ ' w -v , , ; \\\- Ij Br if <-» ri 1 ' .-.■ % r|^ \-'- ii' 1 94 Commentary on the Bank Act. from private sources(i). The various judgments with res- pect to this part of the law are very conflicting, both on account of the view formerly taken by the courts as to the difference between companies and other persons as to their liability for the frauds of their agents, and from its having been considered that reports made to shareholders could not be considered reports made by them. The real question, however, . seems to be whether the person deceived has ob- tained knowledge through persons he has a right to consider authorized by the company to afford such information (2). In the case of the National Exchange Bank of Glasgow v. Drew (3) Lord Cranworth said: "What is the consequence of the company receiving a report and publishing it to the world ? I confess that in my opinion, from the nature of things, and from the exigencies of society, that it must be taken, as between the company and third persons, to be a representation of the company. The company, as an abstract thing, can reprc. ont or do nothmg, it can only act by its managers ; where, therefore, the directors, in the discharge of their duty, fraudulently, for the purpose of misleading others, as to the state of the concerns of the company, represent the ( 1 ) The Bank in its corporate capacity can never be held to answer for any species of fraud or deception of this nature, practised by any of its directors or other officers, individually, though at the banking-house and in banking hours. No single director, neither any other official, has it within the scope of his custom- ary authority to bind the bank by any representations whatsoever made concerning itD condition or affairs. The bank does not hold them out as competent to give information of this character, and any person who relies on statements thus receiv- ed puts his confidence in the individual from whom the statements proceed ; and though he may have a good cause of action against him, it is against him as a private individual and not as an officer of the bank, and can by no means be against the bank itself. The corporation can only be held liable if it publishes corporate reports, as such, falsely and with the criminal intent. Such would be a statement adopted at a general meeting of the directors and intentionally put forth to the public, or left to reach the community in the ordinary course of busi- ness. Morse on Banks and Banking, p. 137. (2) Shelford on Joint Stock Companies, vol. Ill, par. 15, p. 56. (3) Macq. 103. Management. 95 company to be in a different state from that in which they know it to be, and the persons to whom the representation is addressed act upon it, in the belief that it is true, I cannot think that society can go on without treating that as a repre- sentation by the company, otherwise companies of this sort would be in this extraordinary predicament, that they may employ, nay must employ, agents to carry on their concerns, and that those agents might make representations, be they ever so false and ever so fraudulent, and yet that the com- pany might benefit by those representations." And in the same case Lord St. Leonards said : " I have certainly come to the conclusion, that if representations are made by a com- pany fraudulently, for the purpose of enhancing the value of their stock, and they induce a third person to purchase stock, these representations so made to them for that purpose do bind the company. I consider representations by the direc- tors of a company as representations of the company ; although it may be a representation to the company, it is their own representation." These remarks are sanctioned by Lord Chcmsford in a more recent case, (i) And finally it has been said by Lord Westbury : " If reports were made to the shareholders of a company by their directors, and adopted by the shareholders at a regular meeting, and those reports were afterwards industriously circulated, undoubtedly representations contained in those reports must be taken, after their adoption, to be represen- tations and statements made with the authority of the com- pany, and, therefore, binding on the company ; and if those reports, having been industriously circulated, should be clearly shown to be the proximate and immediate cause of shares having been bought from the company by any indivi- dual, undoubtedly it would be impossible consistently with the principles of equity to permit the company to retain the benefit of that contract, and to keep the purchase money." (2) In fine, it has been the opinion of the most eminent ■«■ ;! : (1) Western Hank of Scotland v. Addie, L. R. I Sc. Ap. 156. (2) New Brunswick R. Land Co. v. Conybrare, 31 L. J. 302. 96 Cor,imentary on the Bank Act. judges of the present day, that if in a body consisting of a great number of shareholders, the directors whose duty it is to present a balance sheet or report to the body at large containing a representation of the state of the affairs of the company ; if that body executing that duty or that function make a report that is entirely false, and if that is made to a public and general meeting, although there be no order to publish it either by the directors or the body at large from the very nature of the case, it must be made public, (i) A great number of cases, more or less distinguishable from each other in some of their details, are collected in the work already mentioned, as also in a recent work by Mr. Buckly, the third edition of which appeared in 1879 — but without going into them it may be gathered from what we have already observed that if representations made in a report should turn out to be false and to have caused injury, there is abundant authority for holding that such a representation is a representation made to the outside public for which the directors, and, in certain cases the corporation itself, may be held liable. With regard to the personal liabilty on the part of the directors, in certain cases, there can be no manner of doubt. The 8 1st section of the present Act says that every president, vice-president, director, principal partner en covimandiie^ auditor, manager, cashier, or other officer of the Bank, who prepares, signs, approves or concurs in the making of any false or deceptive statement, or uses the same with intent to deceive or mislead any person shall be responsible for all damages sustained by such person, in consequence thereof, and shi ' be further liable to imprisonment for a term not exceeding two years. Here we have both, criminal and civil responsibility, the latter expressly extended to Bank directors. This is only a reiteration of the common law rules as declared in article 1053 of the Civil Code of the Province of Quebec, that " Every person capable of discerning right from wrong is responsible for the damage caused by his fault to another, (i)I*er Kindersley V.C.NiUional Patent Steam Fuel Co. v. Worth, 4 Drew, 529. Management. 97 whether by positive act, imprudence, neglect, or want of skill." LIABILITY TO SHAREHOLDERS INDIVIDUALLY. The right to sue directors for malfeasance in ofifice, whereby loss accrues to the shareholders, is often expressly given to the shareholders by statutory enactment, though, without doubt, it exists at common law in the absence of legislative intervention. Errors of judgment, unless so gross as to resemble fraud, or 'io render the acceptance of office practical- ly a fraud I y reason of entire incapacity and unfitness for it, give no right of action. But any fraudulent act or any breach or neglect of charter provisions, whereby loss is entailed upon the corporation, and the value of the share- holder's property is a? a necessary consequence depreciated, gives a right of action at law to each one of them to recover the damage or loss which he individually has sustained. The suit need not join all the directors, nor even all who parti- cipated in the wrongful act, as defendants; but any one of them may be sued singly. In this case, however, the declaration is insufficient, if it alleges simply that this sole defendant did an act which could in fact be done only by several directors. The allega- tion must be that he, together with others, did the act complained of, neither is it sufficient simply to allege that he has done wrongful acts. The nature of the acts should be set forth in general terms, though an accurate description of each part or element going to make up the entire act complained of must often be impossible and may be dispensed with. An allegation that by reason of the act the plaintiffs shares depreciated in value is a sufficient allegation of loss. That the directors declared a dividend out of the capital stock of the bank, instead of out of earnings, is a good cause of action. Nor is it a defence that the shareholder who brings the suit has himself received the dividend upon his own shares, provi- ded that he did not know at that time the improper basis upon which it had been declared. '■■ M CHAPTER III. CHARTER RIGHTS AND PRIVILEGES. SECT. I — OF THE POWER TO RECEIVE DEPOSITS. SECT. 2 — OF CHECKS. SECT. I — OF THE POWER TO RECEIVE DEPOSITS. It is of the essence of the business of banking that the Bank or banker should receive on deposit the money and funds of other persons. In receiving deposits and opening accounts the Bank is free to choose whom it will as customers from among those that offer. The receiving a deposit from a person, without explanation or understanding to the contrary, at once and without more makes that person a customer of the Bank. But no implied undertaking to allow him to continue so for any length of time exists, neither is he under any obligation to continue so. The relationship may be dissolved at any time by either party, saving the then existing liens and rights of each. The Bank may receive deposits from any person whom- soever, whatever is his age, status or condition in life, and whether such person is qualified by law to enter into ordinary contracts or not ; and, from time to time, may repay any or all of the principal thereof, and may pay the whole or any part of the interest thereon to such person, v.'ithout the au- thority, aid, assistance or intervention of any person or official being required, (i) The total amount which may be received on deposit from any one person or firm, legally capable of entering into ordinary contracts, may of course be the subject of convention between the contracting parties, but in the absence of con- (i) Section 65, .i Charter-rvjhts. Deposit. 9® vention it is without limit.ition. If, however, the person making any deposit could not, under the law of the Province where the deposit is made, deposit and withdraw money in and from a Bank without bein^j autliorized by the above cited section of the Act, the total amount to be received from such person on deposit must not, at any time, exceed the sum of five hundred dollars, (i) As to what persons are or are not qualified by law to enter into ordinary contracts, it may be stated generally, that all persons are capable of contracting, except those whose inca- pacity is expressly declared by law. (2) Consent being one of the four requisites (3) to the validity of a contract, such persons as are considered levoid of that freedom of will, combined with that degree of reason and judgment which can alone enable them to give the assent necessary to constitute a valid engagement, are declared by law incompetent to enter into a valid contract. Minors, married women, and persons insane or suffering a temporary derangement of in- tellect arising from disease, accident, or drunkenness or other causes, or who by reason of weakness of understanding are unable to give a valid consent, compose the classes of persons who in general are incompetent to acquire the rights and incur the obligations incidental to an intended deposit. (4) RELATION OF THE CUSTOMER ON A SIMPLE DEPOSIT ACCOUNT. The ordinary relation existing between a Bank and its customer, if not complicated by any futher transaction than that of the depositing and withdrawing of moneys by the customer from time to time, ib simply that of debtor and credi- tor at common law. The original and every subsequent dei)o- sit by the customer, is in strict legal effect, a loan {inuinuin) by the customer to the Bank, and e convcrso every payment by the Bank to, or on account of, the customer, is a repayment of the loan pro tanto. Wherefore it follows that the customer (1) Section 65. (2) C. C. L. C, Art. 985. (3) Ibid., Art. 984. (4) Ibid., Art. 986. ' 'i I! .) .), I ' 100 Commentary on the Bank Act. can never hold or charjje the Hank as a trustee, I lii?# I ! 102 Commentary on the Bunk Ad. he Is really the creditor. Article 2351 of the Civil Code entirely cuiifirins the principle stated. After providing]; that the holder of a check is not bound to present it for accept- ance apart from payment, it is added, " nevertheless, if it be accepted, he has a direct .ction against the Hank or banker, without prejudice to his claim against the drawer." This is sim[)ly the application of the princi|»les and rules which govern sales of liebts and rights of action. Articles 1570 and 157 1, Civil Code. This is shown by article 1573." This point does not seem to have been raised in any of the other Provinces, so the question as to the rights of a holder against a Hank, without acceptance, elsewhere in Canada than in Quebec must remain an open one. Where the customer paid to his banker a certain sum, with the express contemporaneous stipulation that it should be useil to take up a bill which he had accepted paj'able at the house of his l» inker's London correspondent, ami afterward, upon the customer's becoming insolvent, and before the banker had adviseil his London correspondent to pay the bill, the banker appropriated the sum to meet the indebtedness of the customer to him, it was held that the drawers of the bill could not maintain an action against the acceptor's banker, on the grounil of a lack of privity, (i) Though it might be inferred ..lat, had the banker advised his correspondent to pay the bill, the decision might have been otherwise. In England it has been held that where money is paid in to the banker by his customer, for the express and declared purpose that the same should be paid over to a third party, nevertheless such third party can enforce no claim against the fund until the banker shall, by some act upon his own part, have come under an obligation to pay to him. (2) All the sums paid into the Hank on general deposit, by the same or different depositors, form one blended fund. (3) So (1) Hill V. Royds, 8. L. R. Eq. 390. (2) Milcolm V. Scott, S Exch. 610 ; Grant on Bankers and Banking, 3d ed. p. 4- (3) Devaynes ?'. Noble, I M.-r. 541 ; Bodanham v. Purchas, 2 Barn. (Sr* Aid. 39 ; llenniker v. Wigg, 4 Q. B. (Ad. tSr'El.) 79a; Commercial Bank of Albany v. Hughes, 17 Wend., 94. Charter-riyhts, DeiWHit. 103 soon as the money has been handed over to the Hank, and the credit ^iven to the payer, it is at once the proper money of the Hank. It enters into the ji[eneral fund and capital, and is undistin^juishable therefrom. Tliereafter the depositor has only a debt owin^ him from the Hank, a chose in action, not any specific money, or a right to any specific money, (i) It follows that the act of tleposit having; been once consummated, nothin^^ short of payment on the part of the Hank, or .some act of the tlepositor himself, will suffice to exonerate it from the indebtedness it has assumeil. The identical ba^ of coin or roll of bills in which the deposit was made may be stolen, before it has been in any practical manner cominjfled with the funds of the Hank ; it may be embezzled or fr.uidulently misapplied by an officer of the Hank ; still the indebtedness of the Hank subsists entirely unaltered by these circum- stances- On the other hand, however, it appears that umler cer- tain peculiar circumstances, the customer may follow and establish his ownership of funds deposited by him, but not yet actually minjjled with the assets of the Hank. Thus, when money is paid in by a customer after banking hours, and is put in a separate place by itself, and not entered in the regular books of the Bank, and the Hank fails and does not open on the next day, the necessity of failing having been already agreed upon by all the partners, the cus- tomer may reclaim his deposit and hold it as against the assignee of the bankrupt. (2) Though in another case, wherein it was shown that the bankers were in the habit of receiving, and the customer was in the habit of making, deposits after banking hours, and that such deposits were always regarded and treated by both parties as if regularly made during banking hours, and the bankers had not deter- (i) M.iriiie Kiink v. Fulton Bank, 2 Wall. 252 ; Thompson v. Riggs, 5 id. 663 Bank of the Republic v. Millard, 10 ici. 152 ; A'Ana. National Hank r'. Fourth National Bank, 46 N. V. 82 ; Carr v. National Security Bank, 107 Mass. 45 ; First National Bank v. Ocean National Bank, 60 N. Y. 278. (2) Threlfal " Giles, cited 2 M d** Rob. 492 ; Sadler v. Belcher, id. 489. ■i I'^i ■ Ib i \i 104 Commentary on the Bank Act. mined upon the necessity of failing when the deposit was made, a contrary decision was reached (i). The various items of deposit with and payment by the Bank form a running account between the Bank and the customer. For any indebtedness accruing from the custo- mer to itself, the Bank has the right of set-off. If the depositor becomes bankrupt, his deposit becomes security for the payment of his debt to the Bank. If this debt be contingent in character, or if it be a claim for unliquidated damages arising out of a contract, then the Bank may retain possession of the deposit until such time as the probable indebtedness shall be ascertained, when the deposit may be set off against it. (2) The rule was laid down by Judge Lowell, in the case cited, that " The credit should be set off against the whole ultimate debt of the Bank, that is to say against the aggregate amount of the notes of the bankrupt in which he is the principal debtor ; and as to those on which he is indorser, so far and so far only, as is made necessary by the insolvency of the real principals." But though the items constitute a running account, yet it is not of such a nature that a bill in equity for an accounting will lie. At any timt; the simple striking of a balance be- tween the two columns of debits and credits will show a sum which is a simple debt ; so that there is in fact no ground on which an accounting can be demanded in equity. An ordi- nary action of debt will lie on behalf of the depositor, and if the Bank answer payment or discharge, it is matter of common law, where the remedy for either party is perfect. Neither, as has been stated, is there a fiduciary relation of any nature whatsoever between the parties which could justify recourse to equity. Suit will lie on the common money counts. This has been conclusively settled by the sound decision given by the House of Lords in the case of Fole> . Hill. (3) (1) Ex parte Glutton, i Fonb. 167. (2) In re North, i6 N. B. R. (Mass. Dist.) 420. (3) 2 II. L. Cas. 39. Charter-riyJds. Deposit. 105 OBLIGATION OF THE BANK TO HONOR CHECKS. The Bank is under the obligation of honoring the custom- er's drafts and checks whenever the same are presented for payment, provided that at the time of such presentment the balance of the account, if then struck, would show a credit in favor of the customer of funds, on which the Bank has no lien, sufificient to meet the sum called for by the check or draft. The contract so to honor the depositor'^, orders is implied from the usual course of business. The deposit is made with the tacit understanding that the Bank shall res- pond to the depositor's orders, so long as there is a sufficient balance to his credit, (i) Such an order is almost always expressed in writing, by check or otherwise. But there is no absolute necessity for this. A verbal direction from the customer to the Bank, to pay a sum or to transfer a credit, would fully justify the Bank in so doing. If the Bank itself is willing to act upon a verbal order, this would be a perfect defence to a suit by the depositor for the amount transferred under it. But though the Bank may, if it choose, act upon such direction.s, it is under no obligation to do so ; by the usages of the banking business it is entitled to demand some written evidence of the order. (2) So, too, the customer may draw out his funds in such parcels as he may see fit, both as regards number and amount. The rule of law forbidding a creditor to split up his demand does not affect this principle, which is based upon a custom of the banking business that has been well said to be so ancient, unquestioned, and well known that courts will take judicial notice of it, without proof (3) The banker cannot excuse his disobedience of his r Lom- er's orders, in the due course of business, by setting up ,i t (1) Downes J'. Phoenix Bank, 6 Hill, 297 ; Marzetti z'. Williams, ' rn > Ad 415 ; Watson v. Plioenix Bank, 8 Met. 217. (2) Walts ?'. Christie, li Beav. 546; Coffin zs Henshaw, 10 Intl. 277 ; Walker V. Rostron, 9 M. Mechanics' Bank, 8 id. 449; Bank of Missouri y. Benoist, 10 Mo. 519 ; Cooper v. Mowry, 16 Mass. 7. J( ' f ! ilii 110 Commentary on the Bank Act i>- rv The acts which have been held to waive demand by the depositor are: i. Notification to him by the Hank that his claim will not be paid, (i) 2. The rendition to him by the Bank of an account, in which it claims the money as its own. (2) 3. Suspension of specie payment and discontinuance of banking operations by the Bank, with knowledge thereof by the depositor, (3) 4. Suspension of payment and closing the doors of the Bank. (4) LIEN OF BANK ON FUNDS OF DEPOSITOR. The rule may be broadly stated, that the Bank has a general lien on all moneys and funds of a depositor in its possession for the balance of the general account. Of course, so long as the balance is in favor of the depositor, the lien has no vitality in it. But when payment upon an overdraft, a discount, an acceptance, or other species of ad\'ance or loan by the Bank to him creates an indebtedness on his part, all the funds which the Bank has or obtains to his credit may be applied upon such indebtedness until it is fully discharged. The funds thus applicable have been said to be not alone the general deposit of the customers, but any business paper, as notes or bills, belonging to him and which he has intrusted to the Bank for collection. {5) Upon precisely what property of the customer in the possession of the Bank the lien will attach is a subject upon which there have been but few decisions in America. In England, where persons possessed of an independent pro- perty are wont to place many things of value in the custody and charge of their bankers, in a manner not so much practised here, the decisions have been numerous. The English cases eliminate from the operation of the lien all property which comes into the banker's hands plainly ear- For notes to I -4, see Marse on Banks and Banking, 42. (5) Ex parte Pease, 1 Rose, 232; Ex parte Wakefield Bank, I id. 243; I9 Ves. Jr. 25. But see Lord Bolingbioke's case, in Joy v. Campbell, i SclnSr' Lef- 346- kj> \ Charter-rights. Dejwait. Ill marked or appropriated for any special purpose. A cus- tomer's security, specifically stated to be for the amount " \vhich shall c may be found due on the balance of his account," was helu to be security for the then existing balance only, and not to be applicable upon the subsequent floating balance, (i) In like manner, a security specifically given for a contemporaneous advance of one thousand pounds by the banker was held not to be applicable against an independent indebtedness of five hundred pounds, afte.- wards arising upon the ordinary running account. (2) It seems, too, that the deposit should be made with the banker in his character as such, and should not be in the nature of a special deposit for a particular purpose not connected with the banking business. Thus, for example, a chest of plate confided to the banker, not as a banker but as a custodian, merely for safe custody in his vaults, was held not subject to the lien. (3) Neither will the lien attach on securities left with the banker by mistake or casually ; as where they were delivered as part of an application for a further loan, for which they were expected to serve as security, but which he refused to make ; (4) and, if title-deeds comprising two distinct estates are left with a banker, with a memorandum pledging one of them as security to him, this precludes the idea of any pledge of the other, and no. lien will attach thereon. (5) Neither shall the banker have his lien upon property subject to a trust and improperly left with him or pledged to him by the trustee without notice of the trust ; unless, indeed, the icstni que trust shall have done some act or been guilty of some negligence such as to deprive him of his counter rights. (6) But if the trust property consist of bills (1) /// re Medewe, 26 Heav. 588 ; 2S L. J. Ch. 891. (2) Vanilci/.ee v. Willis, 3 Brown C. C. 21 ; Ziiick v. Walker, 2 W. HI. 1 154. (3) /•;,< /.;//.■ Hyre, I Ph. 235; Brandao v. BarneU, 12 CI. ^ F. 809; O'Connor r . Majoiil),-inks, 4 Man. tSr" G. 435. (4) Lucas V. Di)rrt'in, 7 Taunt. 279. (5) Wylile V. Rmlforil, 33 L. J. Ch. 51. (6^ Manniii^ford v. Toleman, I Coll. 670 ; StacUhouse c. Countess of Jersey, 30 L. J. Cli. 421 ; Murray y. Pinkett, 12 CI. ^ F. 764 ; Locke v, I'rescott, 3a Beav. 261. 112 Commentary on the Bank Act. ' '^n or notes, payable to bearer, or other property transferable by delivery merely, and be not ear-marked as trust property, if the customer deposit them as if they were his own, and the banker receives them in due course, bona fide, and with no notice of the trust, he shall hold them under his lien, (i) Though it has been held, that if A. delivers promissory notes to B., to get discounted for him and B. takes them to liis own banker for that purpose, who insists on placing them to the credit of B., Ji 's account then showing a balance against him, equity would still compel the banker to account to A. (2) Where a depositor keeps several accounts with his banker, as, for example, a general account, a loan account, and a dis- count account, all being in fact kept by him in his own right, nothing short of a clear and distinct contract to that effect will prevent the Bank from fastening its lien upon any secu- rities it may obtain for reimbursement of any of these accounts which may be overdrawn. (3) The lien of the Bank does not attach until some indebted- ness is actually in existence and matured. Thus, a Bank holding a note of a depositor has no right of set-off, and no valid lien before the note matures : so that it has been held, that if, in the interval before the maturity, the depositor makes an assignment of his funds, without the knowledge of the Bank, but otherwise legal, the amount of his balance will pass to the transferree. (4) Tliisis at strict law. But it would seem that in equity the liank might have a safeguard. The case has arisen where a depositor's note had been discounted by the Bank, before its maturity he died ; at the time of his death the amount of his deposit exceeded the amount of the (1) Harnett v. Branclao, 6 M. iSr' G. 630. (2) Giant on Banking, 307; Lord liolingbroke's Ca. in Joy?'. Camiibell, i Sch. (&^ L. 346. (3) In le European Bank, 8 L. R. 41 ; and see Pedder v. Preston, 9 Jiir. N. S. 496 ; U C. H, X. S. S3S, ante, p. 34. (4) Giles V, Perkins, 9 East, \2 [ Urandywine, I Ilarring, 369 ; Dawson ;■. Real Estate Bank, 5 I'ikc, 283. Charter-H(jhts, Deposit. 115 circumstances, would clearly appear to be contrary to any such use of the money, (i) The lien and the right of set-oflf only exist where the indi- vidual, who is both depositor and debtor, stands in both these characters nlike in precisely the same relation and on pre- cisely the same footing towards the Bank. The Bank can claim no lien on the deposit of a partner, made on his separate account, in order to set off the same against a debt owing them from the firm ; {2) and this not even if property, specifically pledged to the Hank by the partner on his sepa- rate account, afterwards becomes the property of the firm. Even then, if the firm fails, the banker can hold the property thus pledged solely as security for any separate indebtedness of the individual partner. (3) Neither can the individual partner and the firm so shift their respective credits and debits as to set them off, the one against the other, when the Bank itself is insolvent. (4) iti IN WHAT FUNDS DEPOSIT AND REPAYMENT MAY BE MADE. As a general rule, the depositor, having once brought his funds securely into the hands of the proper officer, and having duly received his credit for the amount in dollars and cents, has thereafter a perfect claim on the Bank for this amount, in money. (5) One of the cited cases shows that when a deposit was made in good faith of the bills of a Bank, supposed at the time by both parties to be solvent, but which had in fact already stopped payment, and the amount was in ordinary course passed to the credit of the depositor as so much money, so many dollars, the Bank was held to repay the amount in good money ; although it was shown as a fact that the bills had been kept by themselves and not mingled with the general funds of the Bank, and that they still contin od (i) National Bank of Newburgh v. Smith, 66 N. Y. 271. (2) Watts V. Christie, li Heiiv. 546. (3) Ex parte McKenna, 30 L. J. Bank, 20. (4) Watts 7^ Christie, 11 Bcav. 546; 26 L- J. Ch. 71 1. (5) Thompson v. Riggs, 5 Wall. 663. H r! >, 1 I i II ^ IIG Commentary on the Bank Act. so when the insolvency of the issuing Bank was discovered, when the reccivinj^ liank proniptly soujjht to undo the credit. This seems a hard ride, contrary to the ana!o{jy of deposits in forced bills or base coin, and is not in accord with the ^'eneral run of decisions in Canada. It has been held in Ontario, that if a customer pay to his account with his banker notes of a Hank which has failed, and the Hank is guilty of no laches, the loss falls on the customer. lUit in all cases where the Hank seeks to return notes so deposited, it must do so within a reasonable time, (i) If the deposit be made in for^jed paper or in base coin, although the nominal amount be duly passed to the dcp(»sitor's credit, yet no indebtedness shall accrue; for a deposit made in such material is not a payment, and can in no wise affect the relationship previously existing; between the parties. It goes absolutely for nothinj; ; and as it is a familiar rule that the transfer of such worthless stuff could not discharj^e a debt, so on the other hand it is equally clear that it cannot create one. (2) In like manner it would seem that the Hank would be entitled to defend in a suit by the de[)ositor by showinjj misrepresentation, concealment, or other species of fraud on liis part. AVhere the payment into the Hank is made in its own bills, or in bills purporting to be its own, if the Hank receives them and gives credit for tiicni, it cannot, after the lapse of several days, repudiate them and annul the credit, on the ground that the bills were forged or fraudulently altered. (3) This rule is based on principles oi' a sound public policy. A banker is held to know his cu . .mer's handwriting; the acceptor of a bill of exchange is held to know the drawer's handwriting. Vastly more strong arc the reasons for holding a Hank to know its own bills. (1) Conn. V. Merchant's Bank, 30 C.P.R. Ont. 387. See post. Chap. IV. (2) Bank of United States f. Hank of Georgia, lo Wheat. 333 ; Corbit v. Bank of Smyrna, 2 Harring. 235 J Gloucester Bank ?*. Salem Bank, 17 Mass. 33; Jones 7'. Kyde, 5 'launt. 488; 1 Com. Law, 166 ; Markle r'. Hatfield, 2 Johns. 4SS ; Y< ung v. Adams, 6 Mass. 182 ; Willson v. Force, 6 Johns, no. (3) Bank of the United States i'. Bank of Georgia, lo Wheat. 333. Charter-rights, Deposit. 117 It socms, however, anil it is certainly a reasonable rule, that if the bills were paid in inci credit was jjiven at once in the hurry of business hours, and that if on the first possible opportunity afterwards on the same tlay the Hank ofTicers should examine the bills, find them forced or false, and at once notify the depositor, the repudiation would be in time to save the Hank, at least unless the depositor had suffered substantial injury by reason of the delay. The Hank should have a reasonable time to examine the bills ; and thouj^h this limit of reasonable time should be construed withjjreat strict- ness and so as to hokl the Hank to jjreat promptitude, still it could hardly be said that the receivinjj officer should pause in the midst of business hours to examine the marks of identification on each one of a lar^^e number of bills. It has been well said that in such cases the Hank must be allowed to put some, at least temporary, confidence in its customers. DANK-HOOKS OR PASS-HOOKS. The custom is probably universal in this country for every depositor with a Hank to have his bank-book, so called. In ICngland the same thin^ is called t'. " passage-book " or "pass-book." It is hardly necessary to describe anything so fainilL-^rly known. Ordinarily, whenever a deposit is made, the bank-book is presented at the Hank counter, for the purpose of having the amount and date of the deposit contemporaneously entered therein by the Hank clerk or teller. At intervals, also, it i^: sent into the Hank to be balanced by the proper officer, after which it is returned to the depositor, customarily accompanied by all his checks which have been paid by the Hank since the date of ihe next preceding balancing. It will be seen that the chief value of the book is that the depositor may have a species of check upon the Hank, and may use it as evidence upon the occurrence of any dispute and lawsuit. The entries in the bank-book, made by the proper officer, bind the Hank as admissions. Especially the balancii g of the book is conclusive upon the Hank in the same manner ;:t : I / / / [^ ' 118 Commentary on the Bank Act. as an account stated. But the entry of credit for a deposit is held to be an original entry only on the supposition that, as in the ordinary course of business above described, the book accompanied the deposit and the entry was made by the teller simultaneously with the receipt of the money and as part of the same transaction. For if the book was sent to be written up afterwards from the books or memoranda in possession of the Bank, the entries are not original, and may be examined into, (i) But the entry of the credit is, after all, only a receipt. It \s prima facie evidence against the Bank, and binds it like any other form of acknowledg- ment or receipt. (2) But apparently it binds it no more ; and as a receipt it is open to explanation by evidence aliunde. So that if the Bank succeeds in showing clearly that the entry is a mistake, it will no longer be binding. (3) If the correctness or incorrectness of the entry be disputed between the customer and the Bank, a question of fact is thereby made for the jury. (4) But the most difficult questions arise in considering to what extent the bank-book can be regarded as binding upon the depositor. In the simple case of an erroneous entry by the receiving teller, of course the customer may insist upon correction. Even where, when making his deposit, he also hands in with it the ordinary memorandum, stating what sums he is depositing, and the receiving teller's entry corres- ponds with this memorandum, he may afterward be allowed to show that both his memorandum and the entry were wrong, and gave him credit for too small a sum. For the Bank is in fact liable for precisely the amount of money it receives. It is the act of receiving which by itself creates and perfects the debt, and which alone need be shown. The receipt therefore is open to correction in favor of the depositor, if it (1) Manhattan Co. v. Lydig, 4 Johns. 377. (2) Union Hank v. Knapp, 3 Pick. 96 ; Commercial Bank of Scotland v. Rhind I Macq. H. L. Cas. 643 / Shaw v. Dartnall, 6 B. «fe C. 57. (3) Shaw V. Picton, 4 B &* C. 715. (4) Snead v, Williams, 9 L. T., N. s., Exch. llj. Charter-rights. Deposit, 119 be erroneous. The actual fact of the real deposit is alone absolutely conclusive. This rule of law is rigid, and can only be dispensed with by the express agreement of the parties. It cannot be infringed or modified by reason of any orders or by-laws of the Bank, (i) When, however, the book has been balanced by the Bank officer, has been returned to the depositor together with his checks, and has been retained by him for any length of time without objection, the matter becomes less clear upon principle, and the decisions are, perhaps, not wholly harmonious. The object which the Bank declares itself to have in view is to put the depositor in the way promptly to discover and demand correction of any mistake existing in its account with him. Accordingly it has been held in England that the silence of the customer, for a reasonable time after receiving back his books and checks, would be deemed an admission on his part of the correctness of the balance- (2) It is not that his right to have the book amended to agree with the fact has been modified ; but that he has lost that right altogether by reason of his own laches in failing to demand the amendment earlier. On an action on a deposit account kept by the plaintiff in the defendants' Bank for the sum of $1,732. 18, which had been charged against the plaintiff in his pass-book and in the Bank ledger, but which he declared he had never withdrawn, the plaintiff, before bringing his action, had called on the defen- dants to produce the check, but this they had failed to do, although by their plea they alleged that all the plaintiffs checks had been returned to him. Defendants, in fact, admitted that the check had been mislaid, but sought to prove by evidence that the check was drawn by plaintiff and paid by themselves. It was certain that it had been paid, and the evidence as to the mode of paying it was as follows. The clerk to whom the disputed check was presented, and by whom it was accepted says : " A few "days before the i6th of January, a low-sized man, whom I f w ■■ ! I.' (1) Mechanics' *Sr» Farmers' Bank v. Smith, 19 Johns, II5. (2) Devaynei: i\ Noble, I Meriv, 541. 120 Commentary on the Bank Act. if li< ) "did not know, presented the check. I ascertained that "there were no funds to pay it. I submitted it to Mr. H., "and he told me to tell the man to present it again, as he " presumed it would then be all right. I told this to the "man. He replied that it was strange, as the plaintiff had "written to him or told him that there were sufficient funds. "A day or two afterwards, a deposit was made to the credit " of the plaintiff, and two days after the same person return- " ed with the check, and said, ' I suppose it is all right.' I "said, ' Yes.' " The witness also said he knew the plaintiffs signature, and was positive that it was his writing at the foot of the check, and being now examined for the defendants, .said he was not sure if he had ever before seen the person who presented the check, but thought he was familiar with him. The clerk who paid the cheque saw nothing to dis- tinguish the signature from the ordinary signature of the plaintiff, and besides, while, in his examination for the plaintiff, he said that he did not know the person who presented the check, in his second he said he was not sure, but thought the person familiar to him. The court would have deemed that evidence sufficient to establish the genuine- ness of the check, if it remained, as now, uncontradicted, and if the check made part of the record. But the defen- dants, by their negligence in losing the check, had made it impossible to contradict their evidence, and it was, therefore, incumbent on them to make it morally certain that even if the check were in the record their evidence could not be contradicted. This they had failed to do, though there were circuL stances which confirmed the parole evidence. Thus the pass-book was sent to plaintiff on the 27th July, 1871, and showed a balance of only $444, whereas, according to his pretension, the balance should have been $1,736.62 ; and on the 3rd August, 1871, the defendants wrote to him that his account was overdrawn, and that if there were any errors he should let tLjm know, when, according to his pretension, there should have been a balance of $1,719.62 in his favor. They also again drew attention to the state of his account Charter-rights. Deposit 121 on the 30th August, and it was strange that plaintiff did not answer these letters, nor complain for several months after- wards though the disputed check was dated i6th January, 1 87 1. But when he saw the pass-book, and that it had not been balanced for seventeen months, during which time plaintiff had made deposits to the amount of $12,637, this oversight did not appear so unaccountable as at first. His conduct was, at all events, most careless ; but the defendants were also chargeable with grave carelessness, and he did not think the plaintiff ought to be made answerable for the check they had mislaid. He did not pronounce that the check was forged, but that he could not on the evidence declare it genuine, and therefore must give judgment for plaintiff, saving their recourse to defendants if they should find the check, (i) INTEREST ON DEPOSITS. Ordinarily, a general deposit with an incorporated Bank in this country does not bear interest. It is, however, a proper subject for a special agreement or understanding between the parties. In casting interest or making the charge to the drawer, it is clear that the banker must debit the drawer of a check, not from the date of the drawing but from the date of the actual payment of the check. (2) It has been said that the accept- ing of a check payable at a day future is equivalent to a loan, by the drawer to the banker, of the amount named, for the interval. Following this principle, it would practically amount to a debiting at the time of payment. For if the debit were made at the time of acceptance, yet the acceptance, creating at once a loan from the depositor to the banker for the inter- val, would cause interest to run on the same sum, for the same period at the same rate per cent., from the banker to the customer, and the one amount would exactly offset the (1) Fournierf. Unioa Hank, S. C 1873 (Que). (2) Goodl)ody i-. Foster, cited to this point in Byles on Billsi, Sharswood's ed., p. 25. ,,l 122 Commentary on the Banh Act, • I: ' \m other. But since the acceptance only binds the banker, at his own peril, to have funds enough of the depositor to meet it when payment is demanded, and as until such demand he has the full use of such funds, it would seem interest should in reason be calculated to the date when demand may be made. If the banker accepts the check some time before actually paying it, it has been decided that he may debit the drawer from the date of the acceptance, (i) In this case the plaintiff, a merchant having a deposit account with the defendants claimed the sum of $168.98 as the balance due him, inclu- ding interest at a stipulated rate of six per cent. The djfence of the Bank was that only $18.89 remained due, which it tenderf>i. The question between the parties arose as to the interest on *'5,i3i, amount of two checks, one for $10,000 presented August 7, and the other $5,131, presented August 8, and certified good by the Bank, but not paid until October 8 following. The plaintiff contended that he was entitled to interest until payment, while the Bank said the interest stop- ped at the time the checks were presented and certified. The Court maintained the pretension of the defendants and gave judgment only for the amount tendered. The grounds of the judgment were that the two checks drawn by the plaintiff were certified good by the defendants in the usual course of banking business, and the amounts were charged to the draw- er, the holders of the cheques taking possession of them so certified. As between plaintiff and defendant, the operation is as much the '^ame as if the Bank had paid the money ins- tead of certifying the checks. The obligation of the Bank was to pay to any holder of the checks who asked for the money, and it had afterwards paid the amount to a third party. The plaintiff ceased to be entitled to any interest after the funds had been so withdrawn from his name. The books of the Bank are admissible evidence in its behalf as against a depositor, or one who has been a depositor. (i) Wilson t'. Banque Ville Marie, 3 L. N. 71, 1880. Charter-rights. Deposit. 123 But when offered by the Bank, the entries must be proved by the evidence of the clerk who made them, or if he be dead or inaccessible, then by proof of his handwriting (i). So too the cashier of the Bank is competent to prove the amount of a deposit in favor of the Bank, certainly, if the Bank releases him from any possible liability he may be under to it for any mistake or misconduct of his own in the matter; and perhaps so even if the Bank does not thus release him (2). It has been held in England, that the name in the Bank- book is not conclusive as to the person with whom the Bank contracted. If money be deposited by A, in his own name, B may recover from the Bank by showing that the deposit was in fact made upon his account, that he was the principal and the real lender, creditor, or depositor. But the evidence to this effect must be very clear and explicit (3). DEPOSIT RECEIPTS. A certificate of deposit or a written acknowledgment of the Bank, that it has received from a certain person a stated sum on deposit, is an instrument occasionally issued. Chiefly it is given to persons not regular customers of the Bank and not designing to become such, but who have for some reason, and on an isolated occasion, desired to leave a sum of money in the custody of the Bank. Sometimes, though more rarely, a regular customer, having some special object to subserve, may desire such a certificate. In form it is substantially a simple receipt of the Bank, and as such, like a pass-book, is only evidence of an indebtedness. A certificate of deposit may or may not be made negotiable. It may be made payable to A. B. when it is not negotiable. It may be made payable to A. B. or order, when it is nogotiable by endorsement. Or it may be made payable to A. B. or (1) Union Bank v. Knapp, 3 Pick. 96 ; Watson v. Phoenix Bank, 8 Met. 217. Johnson v. Farmers' Bank, I Harring. 117. (2) Johnson t^. Farmers' Bank, I Harring. 1 17. (3) Sims V. Bond, 5 Barn. (Sr* Ad. 389. i 1 ^ hi iiri ip 124 Commentary on the Bank Act. bearer, when it is negotiable by simple delivery. Considerable diECUs^ion has taken place in Canada and the United States as to the legal character of a document of this kind. On the one hand it has been held that such an instrument has all the the attributes of a promissory note ; on the other, that it is but an acknowledgment of a deposit, and, although it may be made payable to order, is still not negotiable in ihe strict legal sense of the word. Certain provisions, imparting conditions and contingencies incompatible with the certainty required in a promissory note, inserted in such documents give occa- sion for argument against the pretension of negotiability. Such, fcr example, the provision that the deposit is not to bear interest unless it remains three months at least in the Bank ; and that the amount is not to be withdrawn until after the giving of fifteen days' notice, interest to cease from the date of such notice. In answer to this objection it has been argued, and with considerable force, that the provision as to interest merely prescribes the time when it was to commence and cease ; and that the stipulation for fifteen days' notice introduced no more uncertainty into the promise than occurs in a bill payable so many days after sight. Several cases have come before the courts in Ontario on instruments drawn out after this form, and it has been held that neither in law nor in equity can the holder by endorse- ment demand payment of the fund secured by it. (i) A similar decision was arrived at in a case which came before the courts ■ " Quebec. (2) On appeal being had to the Privy Council, It was there stated that high authority could be cited in favor or the opposite contention ; and although this vexed question did not call for solution in the cited case, the result turning on other grounds, their Lordships were of the opinion that deposit receipts were in fact equivalent to promissory notes, and if made payable to order, negotiable (1) Mander v. Royal Canadian Bank. 20 C. P, Rep., Ont. 123 ; Lee v. Bank of British North America, 30 C P. Rep., Ont 255. (2) Richer v. Voyer et al. 13 L. C. J. 30. ,1! -. Charter-rights. Deposit. 125 by indorsement, (i) This also seems to be the holding of the highest authorities in the United States. (2) But the provisions of the law governing the sales of debts and rights of action in general can at all times be taken advantage of to avoid any doubts as to the right of a trans- feree for value to sue the Hank on a deposit receipt. These provisions call for a signification of the transfer to be made to the I^ank and a copy of it delivered. An acknowledgment of the notice of transfer oy the Bank would of course render the holder's right more secure. (3) Where the certificate, as is not unfrequently the case, states that the amount is payable "on the return of this certificate," or on its presentment, or other such phrase, this language docs not alter the legal effect of the instrument. As a pro- missory note, naming ho place of payment, — for a heading, with the name of the Bank is not such a naming, — its maker the Bank, is bound to find it out and offer to pay it ; and not till then can a return of it be claimed, Neither is the holder generally deemed to be under any obligation to pre- sent it for payment before suit upon it. (4) Though where a certificate was given to A., " payable to order of himself on presentation of this certificate properly indorsed," the court regarded this as so far an ordinary deposit that A. could not sue the Bank upon it without previous demand. (5) A condition on a Bank deposit receipt, that the receipt, should, on payment, be given up to the Bank, may not be void ; but it does not entitle the Bank to retain the money (i) Richer v. Voyer et al., 3 Rev. Critique, 444. (2) .See Morse on Banks and Banking, 64 et seq. o (3) In the cited case of Mander v. Royal Canadian Bank a plea for defence on equitable grounds was held to be good, which averred in substance that the plain- tiff had for good and valuable consideration transferred all his right, and interest at law and in equity, by endorsement on the receipt and delivery to the persons named in the plea to receive and demand payment of the fund, with the intention of passing to such person all his right and title to the money represented by the receipt, which money the defendants had paid over to the transferee. (.+) Hunt V. Divine, 37 111. 137 ; Smiiie r. Stevens, 39 Vt. 315, affirmed in Bellows Falls Bank ?'. Rutland Country Bank, 40 id., 337, (S) Bellows Falls Bank v. Rutland County Bank, 40 id., 377. 'Hu : '!■ -I ill 126 Commentary on the Bank Act. in case the receipt is not forthcoming. The depositor is entitled, on proof of loss and indemnity (if required) to relief in equity (i). Ordinarily, the signature of the cashier to the certificate is sufficient. Though it is a contract in strict law, and though statutes often designate the manner in which " contracts " shall be signed, yet the phrase thus used in the statutes has, by sheer force of necessity and common sense, been cons- trued by the courts not to apply to those instruments, which by the daily course of business in all banking institutions the cashier alone is wont to execute, and among which the sim- ple receipt and promise to repay, which constitute a certifi- cate of deposit, are to be included. SECT. 2. OF CHECKS. A check is the instrument by which, customarily, a depo- sitor seeks to withdraw his funds, or any part thereof, from the Bank. It is a draft or order on the Bank requiring it to pay a sum named. It may be made payable " to bearer," or to "A. or bearer," or to " A. or order," or " to the order of A. " In the two latter forms it must be paid to A. in person, or to one deriving title from him through his indorsement. It is customary to indorse even when the payee makes the presentment and demand, the indorsement then having the effect of a receipt. The rules governing indorsement in cases of bills of exchange, promissory notes, and other business paper made payable to order, govern checks also. (2) Thus a check may be indorsed generally, or in blank, or to the order of B., who again may indorse generally, or in blank, or to the order of C. Any bona fide holder of the check indors- ed in blank may fill in a special direction above the indorse- ment, making it payable to himself or order ; and in suing thereon, though he has not written in such direction, he may declare upon it as indorsed to himself, and will sufficiently (1) Bank of Montreal v. Little 17 Chy. Onl. 685. (2) C. C. L. C, Art. 2349. it ' ? Chaiier-inghla. Checks. 127 support his declaration by showing that it was indorsed in blank, and that he is the holder for value and in due course of business. If a liank refuses, without sufficient excuse, to pay a check of its depositor, it is liable to him (as will be seen hereafter) in substantial damages, (i) It is therefore of the first im- portance that it should be clearly understood by the paying officers of lianks what are essential requisities going to the validity of a check, and what are merely customary formali- ties which may yet be legally dispensed with. For if the check be lacking in any of the former class of characterstics, the Bank is not only justified in refusing to pay it, but if it does pay it, and there turns out to have been anything wrong about it, rendering the payment improper, the Bank must bear the loss, and restore to the drawer's credit the amount paid. But, upon the other hand, though some of the latter class of characteristics may be wanting, yet the Bank is not thereby excused from its obligation to pay ; for the order being good at law, though in an unusual form, is competent to draw the money of the depositor. If the Bank refuses to pay upon such an order, it must still, in strict law, be held to answer in damages. Clearly this is the logical sequence of the reasoning, and yet, though there is now no judicial author- ity for saying so, it seems highly probable that in cases where this rule would operate with excessive and unreasonable severity upon the Bank it may be relaxed. FORM AND CHARACTERISTICS. At common law no precise form is indispensable to the validity of a check, though there are some few elements which are essential and which must be present to secure its legal sufficiency. I. Signature of the Draucr. — In the first place the signa- ture of the drawer is necessary. (2) But it is not indispen- (i) Marzetti u. Williams, I B, mi fide and with no low- ledge of the precedent circumstances. In short, checks are commercial papei, and are generally affected by the rules which ?.ffect comm'^rcial paper. Thus the holder of a check payable to bearer, or indorsed in blank, is presumed to be the owner, bona fide and for value. It is only after proof that the original issue of the check was a fraud, or that it was lost by the drawer before issue, that such a holder will be required to show his bona fides, to prove that he has given value for the check, and that he has come into posses- sion of it in the usual course of business. ERRORS IX WRIIIXG CUKCKS. An error or omission occurring in the writing of a check, which is simply clerical, and so obvious that there can be no question in the mind of a reasonable person as to what was (1) See note (2) ante, p, 31. (2) Grant on baiikerb and Banking, p. 14, citing ex parte Bignold, I Deac. 735; 2 Mont. &> A. 633. li ' ! Charter-vights. Checks. 133 the actual intent of the drawer, may be safely disregarded by the Bank. A payment made upon such a check according to its clearly intended tenor will be protected. Of course in determining what particular defect will be covered by this rule, the officers of the Bank can have no guide beyond their own discretion. If there can be any shade of doubt in their own minds, they are perfectly at liberty to decline to put an interpretation upon the document other than that which its naked phraseology distinctly expresses. It is only where they voluntarily consent to adopt its obvious intent in place of its strict expression, that they will be saved harmless in doing so, if the case shall be judged to be a sufficiently clear and certain one to have authorized their action. A fair example of the species of correction which it would be safe for a Bank to make is furnished by the check which the court had to construe in the case of Phipps v. Tanner, (i) There the words " twenty-five, seventeen shillings arid three pence " were written, and alone designated the sum for which the order was drawn. The omission of the word "pounds " after "twenty-five" was declared to be so clearly accidental that it might be supplied. Where the sum written in the body of the check differs from the sum expressed in figures in the corner or margin, the written words, as being the more deliberate act of the drawer are presumably correct and will control the figures. (2) This rule received a strong illustration in the cited case of Smith V. Smith. The marginal figures differed from the sum written in the body, and were altered by the holder so as to make them conform to the written words, but without the knowledge or consent of the drawer. It was sought to have this transaction declared a forgery, as being an altera- tion of the instiument in a material part. But the court said that the marginal figures in a bill of exchange served only as an index for convenience of reference, and formed no (1)5 Carr. iSr" P. 488. See also Elliott's case, 2 East. P. C- 951 ; I Leach, 175, S. C; Rex, V. Port, Bayley, 12, 6ih ed. (2) Saunderson ». Piper, 5 Bing. (New R.) 430 ; Smith v. Smith, i R. I. 39S. t im^ „ , , gjl 11 ' K'!'^ ': i 8 IK t. I'ln wm ' r' ' ■ 1 3 H'i [1^ ■ : i 134 Commentary on the Bank Act. part of the bill. The bill was not vitiated by an alteration in them which only caused them to conform to the written sum. Nay, where they differ from the body, it is even laid down that evidence is inadmissable to show that the bill was ii. fact negotiated for their amount, and not for the amount expressed in the written words, (i) No case could well go farther, or be more conclusive of the whole matter than this. CHECKS AS BILLS OF EXCHANGE. Mr. Morse, in his work on Banks and Banking, to which we are mainly indebted for our observations on this subject, inclines to the opinion that a check should be treated as an altogether independent and distinct instrument from a bill of exchange, admitting at the same time that in some few specific matters the resemblance between the two instru- ments is sufficiently strong to cause one and the same rule to cover and include them both. (2) .^ r.d he is supported in this view by the Supreme Court ol pe United States. (3) Mr. Grant, an English authority on the same subject, would appear to be of the contrary mind ; and together with the majority of English and American text writers, has expressed in favor of putting checks on the same footing with inland bills as to their general legal incidents and characteristics, admitting, however, that there are points of dissimilarity between the two. (4) (1) Saunderson v. Piper, 5 Bing. (New R.) 430. (2) Morse un Banks and Banking, p. 259. (3) Merchants' Bank v. State Bank, 10 Wall, 604. (4) Grant on Bankers and Banking, p. 103 et seq. Byles on Bills, p. 13 ; Keene v. Beard, 8 C. B. n. s. 272 ; C. C. L. C, arts. 2353, 2354 ; Commercial Bank v. Fleming. Stevens Dig., N. B. Reports, 93 ; 2 Revue Critique 242-3. " All rules relating to checks are derived from usage^ sometimes general and sometimes purely local, as it has sprung up for X\\<'. convenience of busint ss opera- tions. These rules are founded for the most part upon the resei.il)lance which checks have to bills of exchange. They are indeed in almost all resj^cts identical with inland bills of exchange, and are so treated by the writers on English and Ameri- can law. It is not so in modern France from their not being in the form which the Code de Commerce (article iio) makes sacramental, and not being necessardy drawn in one place and payable in another-" C. C. L. C. Reports, 111, 220. Charter-Hghta. Cliexks. 135 The controversy seems to be little more than one of lan- guage. It makes very little difference whether it be stated that a bill of exchange and a check are substanially one and the same instrument, but that they differ, by reason of the usages of business and the manner of drawing them, in some very material points ; or whether on the other hand it be stated that they are distinct instruments, but that they have very many and very strong points of resemblance and even of identity. So long as all are agreed on what are in fact the points of difference, this is all that is really essential. The points of dissimilarity have been declared by Mr. Grant to be, briefly, as follows : — First. No days of grace are allowed upon checks. (I) Second. The payee of a check does not obtain any more time by employing a banker to present it; whereas, the holder of a bill, by the same course, would obtain an extra day. (2) Third. The death of the drawer of a check revokes the drawee's authority to pay ; whereas, the death of the drawer of a bill has no effect upon the duties of the other parties to the instrument. (3) Fourth. A check must be drawn against funds of the drawer in the hands of the drawee ; whereas, there need be no funds of the drawer in the hands of the drawee of a bill. (4) Fifth. The drawer of a bill is discharged by want of due presentment to the drr.vvee ; whereas, the drawer of a check is not discharged by any length of delay in present- ment, at least unless he can show actual loss or injury to himself by reason of such delay, as, for example, by the failure of the drawee in the interval. (5) (1) C. C L. C. Art., 2350, Moyserz/. Whitaker.g Barn. vSr' Cress. 409 ; Sutton V. Toomer, 7 id. 416 ; Down v. Hailing, 4 id. 330. (2) Alexander v- Buichfield, 7 M. «& G. I060. (3) Hilling V. Devaux, 3 M. dr* G. 571. (4) Keene v. Beard, 8 C. B. n. s., 372, 381. (5) Ibid; C. C I.- C Art. 2351 ; and ■iz^ post, "Liability of drawer on delay of presentment." p. 138. m ■is p li YV i! 1S6 Commentary on the Bank Act. t. h! i- Sixth. Bills of exchange, payable on a fixed day, differ in this respect from a check, which is not due before pay- ment is demanded, (i) The points of resemblance between checks and bills of exchange noted by Mr. Grant, in the same connection, are as follows : — First. That notice of non-payment of the check, and non- acceptance of the bill may be dispensed with, if the drawer had no funds or no sufficient reason to expect the payment or acceptance. (2) Second. That checks may be accepted (though unfrcquent- ly) and may pass by delivery. (3) Third. That the holder of a check is affected by the equities and infirmities, in like manner as would be the holder of a bill. (4) It has been held under article 2287 of the Civil Code, that in Lower Canada, a person receiving by indorsement a bill of exchange after it is due holds it subject to all the objec- tions to which it was liable in the hands of the indorser ; and that this article differs from the law of England, which makes the indorsee liable to the equities attaching to the note itself, (5) that is, to the equities arising out of the transaction in the course of which the note was made — but not to a set- off arising out of a collateral matter. (6) !.;■■ » DUTY OF THE BANK CONFINED TO SIMPLE PAYMENT. The only act which the Bank is under obligation to per- form for the holder of the check is to pay it. It is not (i) Boehm v. Sterling, 7 T. R. 430 ; Alexander v. Burchfield, 7 M- dr" G. at. p. 1067 (2) Thomas v. Fenton, 5 D. dr* L. 28 ; Kemble v. Mills, I M. &• G. 757 ; 9 Dowl. 446 ; Caiew r. Duckworth, 4 L. R. Exch. 313 ; Robinson v. Hawkesford, 9Q. B. 52. (3) Keene v. Beard, 8 C B. N. S. 372, 380. (4) Whistler v. Forster, 14 C. C. n. s. 248. See C. C. L. C. art. 2287. (5) See Sturtevant v. Ford, 4 M. & G. loi. (6) The Amazon Ins. Co. v. The Quebec 6* Gulf Ports Steamship Co., 2 Q. L. R. 310, SC. 1876. f^',.i'' d Charter-rights. Checks. 137 required to answer the abstract question whether or not the drawer has funds. It is not obliged to accept or to certify. It is not bound to promise to reserve funds of the drawer to pay it at any future hour or day. Its sole and entire duty is, at the time when actual and immediate payment is demanded, to make such actual and immediate payment. It may volun- tarily bind itself by any other undertaking ; but in doing so, it goes beyond what can be legally required of it. For its refusal to do anything, save to pay at once and in full, renders it liable to no action by any person whomsoever. It has been noted as one of the distinguishing differences between a check and a bill of exchange, that the former is presentable, as of right, only for payment, and not for acceptance. PRESENTMENT FOR PAYMENT. We have already observed, that checks are in legal effect inland bills of exchange, payable to bearer on demand ; and we shall hereafter see, that an ordinary bill of exchange, payable on demand, must be presented for payment, or, if the parties live at a distance, forwarded for presentment within a reasonable time, which is generally held to com- prehend the day after it is issued. Such also is the general rule as to the presentment of checks. It is the right of the drawer of a check to expect it to be presented for payment at latest within banking hours on the day following the day of its delivery to the payee, if the Bank on which it is c.awn be in the same place where the payee lives or does business, (i) If the Bank be not in such place, then the check must, within the same time, be put in due course for presentment, either by being sent by mail to the drawee (2) or by being deposited for collection with a Banker, according to the ordinary custom of such business in that place. (l)Rickford v. Ridge, 2 Camp. 537; Moule 71. Brown, 4 Uing. N.C- 268; Bailey v. Bodenham, 16 C. B., n.s. 288 ; BoJdington v. Schlencker, 4 B. dr' Ad. 752. (2) Hare v- Henty, 10 C. B., n.s. 6j ; Bailey v. Bodenham, 16 Id. 288 Prideaux v. Cridle, L. R., 4 Q. B. 455. '1 ,f Wn '• i 138 Commentai'y on the Bank Act, :i i: But the holder does not gain an extra day for present- ment by depositing the check in his Bank Tor collection. If the payee of the check receive it on Monday and deposit it in his Bank, presentment must still be made in the same place, or the check forwarded to any other place where the drawee Bank is, by the payee's Bank (as by himselO during bankmg hours on Tuesday. (l) LIABILITY OF DRAWER ON DELAY OF PRESENTMENT. But where a check, instead of being presented for payment in due course, is transferred and circulates through several hands, it is conceived that there is a distinction between the time of the presentment necessary as against the original drawer, in the event of the insolvency of the Bank, and the time necessary to charge the person from whom the check was immediately received. The liability of the drawer cannot, it is apprehended, be enlarged by circulating the check, and, therefore in order to charge him, if the Bank fail, the check, in whose hands soever it be, must be pre- sented within the period within which the payee or first holder should have presented it ; but as against the party transferring the check to the holder, it is sufficient, whatever be the date of the check, to present it or forward it for pre- sentment on the day next after the transfer. But though the drawer has the right to expect present- ment for payment to be made within the period aforesaid, yet his obligations will be affected by a breach of this duty only under peculiar circumstances. The check which he delivers is only a means whereby he seeks to enable the payee to obtain payment. As a general rule it does not acquit him of his indebtedness, but is only evidence of that indebtedness. It may be held, therefore, for an indefinite period, short of the running of the Statute of Limitations, by the payee or by any subsequent assignee, and if not ultimately paid by the Bank upon presentment and demand (I) Alexander v. Burchfield, I Carr. &" M. 75 ; S. C 7 Man. 6* Gr. 1061 ; Moule V. Brown, 4 Bing. N.C. 266. U Charter-rights. Checks, 139 it still remains as evidence of the unsatisfied debt, (i) This rule is subject only to one limitation, viz., that if by the delay in presentment the drawer has suffered any injury, he shall be absolved at least to the extent of such injury (2). The most natural form for j-uch injury to take is where the insolvency of the Bank, intervening between the proper time of the presentment and thf. actual time of presentment, has caused the dishonor of a check which would otherwise presumably have been duly paid upon demand. PAYMENT OF CHECKS BY THE BANK. Strictly speaking, if the Bank has, at the time of present- ment of a check for payment, funds to the credit of the drawer sufficient to meet it, unpledged by any acceptance or undertaking of the Bank on his behalf, and upon which no lien for any indebtedness due from him to the Bank has attached, the obligation to pay accrues instantly. If payment is demanded at noon upon a check which the depositor's unincumbered balance at that hour is sufficient to pay in full, the obligation of the Bar.k to pay it in full is at once mature and perfect. It is no matter how many checks may be presented at later hours, or how much the sum of all the checks presented in the course of the day may exceed the amount of the customer's balance. This is no concern of the Bank ; not even if it has been informed that such checks have been drawn and will be presented for payment. The rule is " first come, first served." The perfectly simple duty of the Bank is to pay in full each check presented, at the time of present- ment, so long as the unincumbered credit of the depositor suffices to enable it to make such payments in full. When this credit will no longer suffice for that purpose, then the Bank must refuse payment altogether. But it has no right to (1) Robinson v. Hawkesford, 9 Q. B. 52; Mullick v. Radakissen, 28 Eng. L, dr' Eq. 94 ; Alexander v. Uurchfield, 7 M. dr* G. 1067 ; Serle v. Norton, 2 Moody &> R. 401 ; Law v. Rand, 3 C B- ; n.s- 442. (2) C. C L. C. Art., 2352. !■ 140 Commentary on the Bank Act. I make itself an agent either of the customer or of the hoklcrs of his checks, or of both, with the view of securing an equal distribution, pro rata, of the deposit of the former among such of the latter as shall make their demand during banking hours in the day. Any such proceeding is totally beyond the range of its powers and functions, and is a clear and unwarrantable usurpation of authority. The only position of difficuly which can be anticipated as likely to occur for the Bank is presented by the supposition, that a check for an amount exceeding the drawer's balance should be presented and refused for want of funds, and that afterwards a check small enounfh to be discharged in full from the balance should be presented. The duty of the Bank in such a case has never been judicially determined, yet upon general principles little doubt can be entertained but that the Bank should cash the latter check. The fact of present- ment for payment of an attempted overdraft creates no lien of any description upon the balance of the customer. If the Bank has not funds enough to the credit of the drawer to pay his check in full, it is not obliged to make payment in part, (i) Whether or not it would be justified in doing so may be questioned. There is no authority on the point, nor would Banks often try to exercise such a right. If they can do so, they are obviously bound to indorse the amount of the payment on the check, which would of course still remain in the payee's hands. A device whereby the check-holdc* may seek to obtain payment, where his check calls for a larger amount than the drawer'^ balance at the time of presentment, is that the holder may himself pay in, or cause to be paid in, the amount of the deficiency, and have the same placed to the drawer's credit. The drawer's account being thus made good, the check might perhaps be safely honored by the Bank. But the Bank is not justified in informing the holder what is the (I) Murray v. Judah, 6 Cow. 490. Charter-rights. Checks. 141 amount of the deficiency, or what the state of the drawer's account. He must find it out elsewhere if he can, since the Bank can give such infomation only at his own peril, (i) If the customer is injured by the disclosure an action will He against the Bank, (2) When a note or bill of a customer, discounted by the Bank, falls due, and is unpaid, and the bankers are the legal holders thereof, they are entitled to apply any balance which the customer has to his credit, to the payment of the dis- counted bill or note ; and if such appropriation exhausts the funds which the customer has to his credit, the Bank will not be liable to any action, at the suit of their customer, for after- wards dishonoring his check. (3) Nor will they be liable to such action, if the drawer's assets have been exhausted by the payment of bills, accepted by him, payable at the Bank ; and it is not necessary for the Bank to show any special authority, or any further order than that contained in such acceptance, to enable it to pay the amount due upon the bills. (4) IN WHAT MONEY CHECKS MAY BE PAID. The legal obligation of the Bank is to pay the customer's checks in such paper or coin, and in such quantities of such paper or coin of any specific denomination, as the law of the land makes legal tender in the case of any ordinary debt. (5) Hence a tender, though of gold coin, if it be the coin of an- other country is not sufficient. The question of value does not enter into the matter at all, it is a question solely of legal tender. (6) No other species of tender than that authorized by the laws of the land can relieve the Bank from liability to the drawer. (1) Foster v. Bank of London, 3 Post. F. 214. See Section 25. (2) Hardy v. Vesey, L. R., 3 Exch, 107. (3) Jones V. Bankot Montreal, 29 Q. B. (U. C.) 448. (4) Kynier v. Laurie, 18 L.J. Q. B. 2l8. (5) See " Legal Tender," /<'^' PART II. (6) Grant on Bankers and Banking, pp. 36-38, 40 ; Ware's Ca.se, Rep. Pt. 5, 114, a, Co. Litt. 207. b. II', ' i Tr 'I I w\ , i :\ :;j: ■ i 1 ■ li i ^ i'l^Hl' \ vj , ; '.jfi i : 1^ 142 Commentavj/ on the Bank Act. But this obli}^Ption of the liank, at strict law, may of course be waived and dispensed with by the express or implied consent of the holder of the check. He is perfectly at liberty to accept any representatives of value which the liank may offer to him. If he does so accept, that is to say, if at the time when such representatives aie offered to him, he does not object to receive them on the grouni! that they are not what at law he has a right to demand, then this accept- ance operates as a complete waiver of the holder's right to refuse anything save legal tender, and the Hank is discharged by this payment both as towards the drawer and the holder of the cJieck. Payments are usually offered either in whole or in part of bank-bills or notes, either of the Kank on which the check is drawn, or of other Banks, which circulate as currency in the community. The holder may refuse these, when offered to him, if he wishes ; but if he takes them, in the absence of fraud on the part of the Bank he assumes as his own the risk of their value. The waiver was perfected by the very act of acceptance, and cannot be afterward undone, (i) In short, the r.ion^y or representatives of value, on the moment when they have he.c.n paid over the counter and have been fairly received and accepted without objection by the payee, become the properly of »"'■>_ payee, for good or for ill. From the moment that the act of transfer is completed, and the minds of the parties have met and agreed upon the things transferred as constituting a payment, instantly the right of either to repudiate or annul, the transaction ceases. If the Bank discovers at once that the drawer's account was over- drawn before thfj check was paid, it cannot recall the funds from the possession of the holder, not even if he be still at the counter, provided the act of transfer had been perfected by the intent and act of both parties, leaving nothing further to be done. (2) (1) Polglass V. Oliver, 2 C. Lefr. 318; Uriiry t". Smith, I P. Uins 404; Miller '}. Miller, 3 P. Uins, 356; Aml>ler, 68. " These remarks, however, could only .'pply in their full si_-nifi- cauce to Hank of England notes, which by statute take the place of coin, for otiier bank notes, while in the ordinary transactions of business, take the place ol and are treated as cash or money, are nevertheless essentially distinjjuished from it." Daniel on Neg. Instr., vol. 2. (2) Chapman ?'. Hart, I Ves. Sr. 271. (3) Miller r. Race; Corbitt v, Uank of Smyrna, 2 Harring, 235 ; Handy v. Dibbin, 12 Johns, 220 ; Wright v. Reed, 3 T. R., 554. ', \ lilt H M' I 150 Commentary on the Bank Act. and it is an essential proviso, that they are current notes pass- ing at their par value in business transactions at the place where they are offered, (i) But though Bank notes are not a legal tender among the community generally, they are so toward the Bank itself which issued them. (2) For every Bank coming under the provisions of this Act is obliged to receive in payment its own notes at par, at any of its offices, and whether they be made payable there or not. (3) To this general and seemingly absolute rule, however, it is apprehended that there are exceptions, and that if the indebtedness to the Bank should arise upon the debtor's subscription for shares of the capital stock, he would be required to discharge such indebtedness in specie or Dominion notes. (4) And further that if the Bank be insolvent, the debtor can tender the amount of notes licld by him, for their full nominal or face value, provided only he has come into possession of them prior to the insolvency. (5) If a bill of exchange or promissory note made or become payable to bearer be delivered without indorsement, not in payment of a pre-existing debt, but by way of exchange for goods, for other bills or notes, or for money transferred to the party delivering the bill at the same time, such a trans- action has been repeatedly held to be a sale of the bill by the paily transferring it, and a purchase of the instrument, with all risks, by the transferee. (6) And such seems the general (1) (iiit^by f. Oakes, 2 R. dr^ P. 526 ; Brown ?'. Saul, 4 l"sp. 267 ; Owenson V. Morse, 7 T. R. 64 ; Hyles on Hills, p. lo and note. Morse p. 460 and note, (2) See The Trustees of the bank of Upper Canada v. The Canadian Naviga- on Coy., 16 Chy. (U. C.) 479. (3) See Section 41. (4) See Niaj^ara Bank v. Roosevelt, 9 Cow. 409; Bailey 7: Bacon, 26 Miss., 455 ; .Morse V. Chapman, 24 Ga. 249 ; Commercial Bank of Columbus v. Wall, 56 Me. 167. (5) Thorp V. Wegefarth, 56 Penn. St. 82. Such h undoubtedly the law with respect to set-otr, the right given by law to every debtor. Miller v. Receiver of the Iranklin Bank, I Paige, 444 ; Hruyn v. Receiver, 9 Cow. 413, n. ; Haxlon V. Bishop, 3 Wend. 13; Diven z'. Phelps, 34 Barb. 224; American Bank v. Wall, 56 Me. 167. (6) I'tnn w. Harrison, 3 T. R. 759 ; and see Evans v. Whyle, 5 Bing. 4S5 ; 3 M. &^ P. 130. Charter-rights. Circulation. 151 hi'! ru'e governing the transfer by delivery, not only of ordinary bills of exchange and promissory notes, but also of bank notes, (i) Nor is there any hardship in such a rule, for the remedy against the transferor may always be preserved by indorsement or by special contract. The rule, however, is not without exceptions. And it it conceived, that as ai. express contract would make the transferor liable without indorsement, so there are other circumstances from which m jury may infer that the intention, and implied contract of the parties was, that the notes were not to be payment, if dishonoured. (2) If, for example, a man ask another to change a Bank note for him as a favor, and the Bank fail, it is conceived that a jury would be justified in inferring an implied contract to refund the change, if the note were duly presented and dis- honored, and due notice given ; (3) and it has been held that if a customer pay to his account with his banker notes of a Bank which has failed, and the banker is guilty of no laciies, the loss falls on the customer. (4) In all cases where the receiver of notes seeks to return them he must do so with- in a reasonable time. (5) Where a deposit of Mechanic's Bank (i) Camidge ?'. Allenby, 6 B. iSr" C. 373 ; 9 D. &• R. 391 ; see Robson v. Oliver, 10 Q. B. 704 ; and see Ward v. Evans, 2 Ld. Raym. 928 ; and Rogers v Langford, I C. 6^ M. 637. j^ichfield Union v. Greene, i H. 6^ N. 884, 26 L. J. ; Exch. 140. (2) See Van Wart jj. Woolley, 3 B (Sr- C.446. (3) See Rogers v. I^ingfo.d, I C. &" M. 637 ; Turner v. Stones, i D. (£^' L. 122 ; Ex parte Isbester I Rose, 23 ; Woodland v. Fear, 7 E. dr* B. 522. (4) " It is bo perfectly reasonable that a person receiving Bank notes in payment of property, or in exchange for cash, or in deposit to be credited to the payer, should, whether the Bank, whose notes they are, should have failed befoie such transfer or deposit of them, or after it, have the ric;ht to return the notes upon the one who gave them, so long as that is done within a proper time after they have been received, that I have no difficulty whatever in accepting it as the rule and law upon the subject. And so far we determine that when the defendants received the notes in question from the plaintiff (it was by way of deposit) they did not receive them absolutely as cash, but conditionally only, that is, with the right to return on the failure of tiie bank, so that the return is made within a reasonable time," per Wilson, C. J ., in Conn- v. Merchants Bank, 30 C.V'.R. (U.C.) 387. (5) See Rogers v, Langford, I C. 6^ M. 642. ■ n 152 Commentary on the Bank Act. bii s had been made on the forenoon of the 28th May, and the amount was credited to the customer's account, the deposit being in good faith, and news was received in the afternoon that the Bank had stopped payment ; it was held that for want of a tender of the notes on the 29th, the defendants made them thei/ own, and the plaintiff was entitled to have the amount replaced to his credit at the Bank. " It may be," said the Chief Justice, "that the defendants, if they had pre- sented the notes for payment to the Mechanic's l^ank at Montreal on the 29th or 30th of the month, might have given the plaintiff due notice of dishonor on the 30th or 3i.st of the month, and that might have been suhicient without tendering the notes back, (i) But no such notice of dishonor was given to the plaintiff. He was told on the 30th tlie notes were to be charged back to him, but that was not a notice of dishonor." (2) If a bank note is handed over on account of a previously existing debt, the note is not considered as sold ; therefore, if the Bank having stopped payment, it is not paid, and due notice of the dishonor of it is given to the transferor, the transferee may have recourse to his original remedy for the antecedent debt ; (3) for the creditor is entitled to cash, and if he takes notes, that is, out of favor to the debtor, and it will be inferred, unless there is evidence to the contrary, that the notes were agreed not to be payment if they turned out to be of no value, without laches in presenting, or other m (1) 'J'immins r. Gibbins, 18 Q. B. 722. (2) Conn. V. Merchants Hank, 30 C. P. R. (U.C.) 385 ; 16 C. I,. J. 31. (3) Grant on Bankers and Hanking, pp. 419 et seq. ; Byles on Bills, pp. 163 et seq. i Ward ?'. Evans, 2 Ld. Kaym. 928 ; Camidge v. Allenby, 6 B. 6^ C 373; Miiore v. Warren, i Stra. 415; Holr i. Barry, I Slra. 415. An Amer- ican writer remarks as follows in this connection : — " Bank notes when jias.sed without indorsement for an antecedent debt are regarded by some authorities as conttitional payment only, and if not paid, they hold that the debt revives. Even if this be correct (and we think otherwise), it is because ihcy are not offered uik to be in rt state of insolvency at the time, the tormer may recover fi m the latter, (i) As has been noticed, when bank-notes are taken at the same time that goods are sold, or a consideration of any sort l)asses, all in one uninterrupted transaction the transferor of the bank-notes is not considered as guaranteeing the sol- vency of the Bank which issues them, and the transferee takes them for better and for worse. Jkit although the transferor does not under these circum- stances take the risk of the solvency of the makers of the notes, he does in all cases ("except where there is an express agreement to the contrary, or perhaps circumstances from which a jury might infer an intention to the contrary) warrant Uie genuineness of the instrument, and must in all such cases bear the loss if it turns out to be forged or fictitious. (2) But, as already stated, the person who receives forged or counterfeit bank-notes is not without a duty on his part. In order to recover the debt for which they were given in payment, or receive genuine notes in their stead, he must use diligence, by giving notice that they are counterfeit, and offering to return them within a reasonable time. And what such reasonab'e time is must depend upon all the facts and circumstances of each particular case. If the forgery be dis- covered immediately the transferor should be notified imme- diately, for he may have recourse against some antecedent (i) Per Bayley J. in Camidge 7'. Allenby, 6 B. ^^ C. 373; per Hramwell B. in Lichfield Union j'. Greene, 26 L. J., Exch. 140; i H. &' N. 884. (2) Jones 7'. Ryde, 5 Taunt. 4S7 ; Fuller v. Smith, Ryan 6^ M. 49 ; Smith t. P.tercer, 6 Taunt. 76. And so it has been repeatedly held in America. Byles (m Bills, p. 164, note (q). lb. 6th Am. eJ., p. 255. Grant on Bankers and Banking, p. 421. I'i ■ i i: ' I I m « 154 I Commentary on the Bank Act. transferor.and lose his opportunity of asserting it by delay, (i) Bank-notes are negotiable like money, and pass from hand to hand by delivery, possession in itself being sufficient evidence of title. This doctrine was established in the leading case of Miller v. Race (2) where a bank-note payable to bearer was stolen from the mail, and on the next day was acquired by the plaintiff for full value, in the usual course of business, and without any notice of the circumstance. The liank-clerk detained the note when presented for payment; and it was held that the plaintiff could recover it, because such notes wer-' imivc^lly .reated as cash, and it was necessary for the purj, • ^s :ommcrce that their currency should be establish- ed ai; . '•..!, '. These views are now universally entertain- ed. (3; Mere possession being sufficient prima facie evidence of boJia fide ownership for valuz of a bank-note, the holder may enforce its payment, unless his position as a bona fide holder be successfully combated. It will not be a sufficient defence to show that the holder was negligent in inquiring when he received it, and he took it under circumstances which would excite the suspicions of a man of ordinary prudence. (4) In the cases of bills of exchange and promissory notes the same principle prevails ; but when it is shown that such a bill or note was lost or stolen, or obtained by fraud or felony, the burden of proof is shifted upon the liwlder, who must show in answer that he acquired it bona fide in the usual course of business and without notice. But in favor of the holder of a bank-note, the law in America goes a step further, and exonerates him from any such burden and he can rest secure in its possession, as the evidence of his right to recover, until (i) Pooley V. Brown, 3 I L. J. C. P. 135. (2) I Burr. 452. (3) " It may be taken as settled th.it Bank-notes are considered and treated for all business purposes and in cominon daily transactions of mankind as money or cash." Wilson, C.J ,in Conn. v. Merchants Bank, 30 C. P.R. (U.C.) 385. (4) Raphael v. Bank of England, 17 C. B. 16 ; 33 E. L. dr' Kq. iiyC ; Solo- mons V, Bank of Eng. 13 East, 135 ; Lowndes v, Anderson, 13 East, 130. 1.1 } Chcnier-righta. Circulation. 166 the defendant shows that he was in privity with the fraud, or actjuired the note mala fide, or with notice. This distinction between bank-notes and other negotiable instruments is not admitted in England, (i) but in the United States it is upheld by high authority, (2) and seems to be clear- ly the correct doctrine. Bank-notes pass as cash, and are seldom identified by any peculiar earmarks ; and it is next to impossible for a trader to remember where, or when, or from whom, or for what consideration he received any parti- cular bank-notes in his cash drawer, and to require him to do so would be an intolerable burden. The holder is, in fact, regarded as in effect the original promisee of the Bank, and not as taking by assignment only the title of the trans- feror ; and a payment to him by the Bank will discharge the debt, unless it knows, or has reason to know, that he acquired the note by fraud, or with notice of fraud on the part c- ^.i., transferor, which equally impeaches his title. 1 ' ' . t :.1 ' ^' WHEN AND WHERE PAYABLE. Every bank-bill or note is redeemable in ^ci*^' or Dominion notes (3) immediately upon demand, laaue in business hours at the banking house of the corporation in the place where by its tenor it is made payable. This place, or where more than one is mentioned, one of these places, must always be the chief seat of business of the bank. (4) There is no necessity for a separate presentment and demand upon each separate bill. The presentment of a package is perfectly proper. But for the purpose of deter- (l) De La Chaumette v. Hank of England, 9 B. dr* C 208, where it was held that the holder of a bank-note which had been stolen must show that he had given value for it. See also Solomons v. Bank of England. (2.) Daniel on Neg. Inst-, vol. 2, p. 388, and cases there cited. (3) "The Bank, when making any payment, shall, on the request of the person to whom the payment is to be made, pay the same, or such part thereof not exceeding sixty dollars as such person requests, in Dominion notes for one, two or four dollars each, at the option of the receiver." Section 42. (4) Section 41, sub-section 2. ji ■ \:\' I \ w H 15G Commentary on the Bank Act, niiiiiiif; in what description of coin, and in how many pieces of each respective denomination payment may be le^^ally tendered by the Hank, it has a right to treat each bill as a distinct demand. An artifice, which is often resorted to by Banks, when short of funds, is to delay payment ui)oii tiie bills presented as much as possible by the exercise of every method of exhausting time which the ingenuity of the officers can invent. The employment of only a single official, the inspection by him with affected accuracy and minuteness of every individual bill presented, the slow counting out by him of the smallest coins in which payment can be legally made, are all familar devices by which Hanks hard pressed not un- frequently seek relief. Such proceedings have been uniformly and resolutely condemned by the courts. The duty aiul undertaking of tlie Hank is not alone to redeem its bills, but to redeem tliem with reasi>nable dispatch ; and intentional dilatoriness is a clear breach of the obligation. What is a reasonable dispatch is a point which is of ctnirse incapable of accurate abstract definition. No precise number of officers can be declared to be necessary, and no precise number of minutes or seconds can be arbitrarily allotted as proper for the payment of a certain number of bills. The Hank is entitled to an opportunity to satisfy itself of the genuineness of the bills before it pays them. Hut unless some peculiar circumstances give rise to unusual suspicions, it is c.xpecteil to be able to do this with considerable expedition. In each particular case the court will look at all the circumstances, and will infer from them the animus of the Hank. \{ mala fide intent is apparent, the proceedings will be regarded as tantamount to a deliberate refusal in terms on the part of the corporation to redeem its circulation on demand. As a general rule Hanks are entitled to the benefit of the limitation of Hank hours. It is absolutely necessary that they should have some of the afternoon hours free from the interruptions, and even more from the constant changes in their accounts and money matters, unavoidably produced by the transactions of business. Hut an effort to take advantage m. Charter-riyhta, Circulatlo n. 157 of H.iiik hours, which is clearly evasive of a reasonable duty will not be protected. Thus, if a parcel >f bills be presented just before the close of Hank hours for r xieniption, a refusal to redeem simply because the transaction could not be whol- ly completed before the hour would be unjustifiable ; but if it would necessitate the trespassing to a substantial and rc.illy inconvenient extent into the afternoon period of ofTice labor, then the refusal would be proper. The criterion of reasonableness will be applied in all such cases, and only within its protection will the rule of Banking hours be recog- nized and respected (i). UILI.S STOLEN AND I'UT IN CIRCULATION. A bank bill stolen from the Hank and fraudulentlj- put in circulation is good as against the liank in the hands of any bona fide holder for value, provided the bill was completed in its execution as an instrument at the time of the theft. Hut if it was incomplete in any material respect, and this defect was fraudulently supplied subsequently to the robbery, then its reiiemption cannot be enforceil. (2) The cited case was argued by eminent counsel, and excited unusual interest at the time. The bills sued upon had been completed in every respect with the sole exception of the president's signature. In this condition they were put away in the cashier's desk, a place of very slight security, and were thence stolen ; the president's signature was forged, and they were placed in circulation. Of course the Hank had never executed its promise, and so was not technically liable. Hut the plaintiffs, among other arguments, urged that the Hank should be held liable, on the ground that it had been guilty of gross negli- gence, in leaving the bills thus exposed when they were in a state so nearly perfect. The court, however, held that no case was made out. The fact that the independent crime of (1) SulTulk Hank v. Lincoln Bank, 3 Mason I ; People v. State Tieas., 24 III. 433- (2) Siilem Rank v. Gloucester Bank, 17 Mass. i \ Gloucester Bank v. Sulera Bank, id. 33. I'J 1 \i\ I ! ,h i 158 Commentary on the Bank Act. forj^cry necessarily intervened between the theft and the issuin^f, and was indispensable to the possibility of issuing, rendered it impossible to hold tiie IJank. PAVMKNT OF LOST OK DKSTKOYED 111 M.S. Onh'narily payment upon a l^ank bill or note is conditional upon its surrender. I'our classes of cases ha\e arisen in which payment has been souj^ht to be enforced without an offer of surrender, viz., where there has been : (l) iJestruction of the \vlu)le bill ; (2) Loss of the whole bill ; (3) Destruction of a part of the hill ; and (4) Loss of a part of the bill. I. Dcstniction of the xvholc JUll, — The least difficulty is encountered in laying down the rule in this case. It cannot be questioned that if the total and absolute destruction of the bills can be shown the last holder or owner of them, he who was entitled to demand payment upt)n them at the time of the destruction, can recover from the Hank ; not of course upon the instruments themselves, which must be oft'ered for surreiuler as prelim- inary to collection upon them, but upon the orijfinal promise of the liank of which they were the documentary eviiU-nce. This rule is perfectly established, and the difficulty arisinji; in cases of destruction does not grow out of any doubtfulness concerning it, but of the stringent rules which are applied to the sufficiency of the evidence offered by the Plaintiff. It is obvious that the liank must always labor under extreme disadvantages in suits of this character, and the Courts have made it their task to surround the Bank with such substan- tial protection as the nature of the case permits. It is probable that in the great bulk of such cases the Bank would be without any possible means of disproving either the Plaintiflf's possession, or the alleged destruction of the bills, even though the entire story were false. Beyond the testimony to these points therefore he is further held to considerable accuracy in the secondary evidence, descrip- tive of the bills and notes asserted to have been destroyed. Cluirter-ritjhla. Circulation, 159 I'roof of destruction of bills and notes is not enough ; it niiist be proof of the destruction of specific bills ami notes, aiul tliis can be accomplished only by means of a descrij)tion of each one of them. ICvidence adduced by the I'laintiff, and naturally uncontroverted by the liank, that he had lost in a fire a parcel of the circulatiiifj bills of the Hank, amounting' in nl! to a certain sum, is insufficient ; for it would not serve as an identification of the Hills, nor enable the Hank to protect itself aj^ainst them should the destruction at any time after- ward appear not to have been accomplished. The same impossibility of identifying the bills would render it also iinpossibile to fifive to the Hank any sufficient bond of indem- nity against reappearance. For no particular bills can be described in such a bond. 2. — Loss of the xvholc Bill. — In this case it cannot be doubt- ed that the loser could have no right to demand payment of the original debt from the IVuik. It may be properly con- sidered that so long as the bill in a perfect condition, that is to say not materially mutilated, continues to exist, the origi- nal debt is inseparable from it. It is only after it has been destroyed, cither wholly or to such an extent that it has lost its negotiability, that the right to sue upon the original indebtedness accrues. For bank-notes notoriously pass by delivery. Any person who takes them bona fide for value has a claim against the Hank for their amount, which is unaffecteil b}' any previous circumstance in the claim of title. This being tlie case, therefore, it is clear that the Hank may to called upon to pay twice over if it can be held to pay both the loser and a subsequent botia fide holder. There is no reason why the Bank should be subjected to a gross and obvious injustice, simply to relieve the loser from a hardship or misfortune. 3 aiiddf. — ^destruction of apart of the Bill. Loss of a part. — These two may be considered together, for they both rest upon the same general principle. That principle is that a piece or fraction only of a bank-bill is non- negotiable, , \* , t 1 ■! 1 1 1 ■ I: I f 1 1 li ' '' -I i I! 160 Commentary on the Bank Act. m 41 negotiability is an attribute of the bill as a whole. When it has severed into parts, this quality pertains to no one of them. They are not even payable /r^/'ij:;//6', according to the ratio of the size of the part to the whole. For the holder of a part is never entitled to a proportionate payment. The indebted- ness is indivisible. Some one person is entitled to the whole, and no other person can be entitled to anything less. Any person who takes a piece takes it subject to all the equities which burden it in the hands of the party transfer- ring it. It makes no difference whether or not value has been parted with by the holder in exchange for it. It must be traced back through the series of intermediate holders until it is brought into the hands of the first person who received it in its fractional condition. If he came by itdis- nonestly, or if he found it and so parted with no value in exchange for it, then this imperfection in his title adheres to it throughout its entire subsequent career, and no recovery can be had upon it. Hence, it is obvious that the liank can never be held to pay more than once upon one bill. Only the original owner who was entitled to the whole bill could show a good title, and he only could recover. There seems there- fore to be no sound reason why any person presenting a fragment of a bill, and proving conclusively his ownership of the whole bill, could the remainder of it be produced, should not be allowed to recover its full amount. For there can be no other true owner of the entire bill, and no one who cannot prove himself such can ever recover. But claims of this description would seem to furnish peculiarly proper opportu- nity for demanding that indemnity be given to the Bank, and it will be seen on examination of the cases that it is generally expected, (l) \t> u . i-.:. (I) It is generally maintained that the second part is non-negotiable. See remarks of Judge Marcy in Hinsdale y. Hank of Orange, 6 Wend. 378. Also Byles on Bills, 13 ed. Eng. 383. Redmayne v. Burton, 9 Jur. 21 ; Smith ?'. Monday, 6 Jur. 977 ; State Hank zj. Aersten, 3 Scam. 135 ; Farmer's Bank 7/. Reynolds, 4 Rand, 186. Commercial Bank v, Benedict, 18 B. Monr. 307 ; Nothern Bank v. Farmer's Bank, id. 506. Morse, p. 476, and cases there cited. uu 4. Charter-rights. Circulation. 161 When it of them. e ratio of of a part ndcbtcd- to the ing less. :) all the transfer- al lie has It must holders son who by it dis- valuc in dheres to overy can can never Only the )iild show ms tliere- sentin^ a nership of ;d, should re can be ho cannot is of this opportu- iank, and generally liable. See 378. Also I ; Smith ?'. er's liank v, Monr. 307 ; there cited. An effort has sometimes been made by Banks to save themselves altogether from the necessity of ever paying upon any portion less than the whole of a bill, by publishing the statement that they will not hold themselves liable upon severed bills, and by otherwise using such means as are in their power to notify the community generally of this inten- tion. But such attempts are utterly impotent towards effecting the desired immunity. The Bank is simply a party to the contract to which the rightful owner is the other party. Neither can by a simple proclamation of his wishes or inten- tions, injuriously affect the rights which the law gives to the other under the contract, and as an essential part of it. The sole exception must lie in the express assent of the other party, and his consequent voluntary abandonment of his rights, which would have to be afifirmatively shown. So improbable an inference as against the bill holder will never be based solely upon the simple fact of the declarations made by the Bank and published by it in the newspapers, (i) PRESCRIPTION AS APPLIED TO BANK HILLS. A bank note is not subject to the running of the statute of limitations, as any other simple indebtedness or promise to pay would be, although the note is not distinguishable in form from such a promise. Its purpose of circulation neces- sarily involves this result. Every time that it is reissued by the Bank the pronn'se is renewed, and it must usually be impossible in the case of any particular note to say how often it has passed into, and again has been paid out by, the Bank, or when it was last so paid out. But even if in any indivi- dual case it could be shown that the last issue was at a time so long past, that the period of the statute has since elapsed ; yet another objection, which goes to the root of the matter, still remains behind. For lapse of time, in the case of these intrunients, affords no presumption of their having been paid. (I) Martin 7>. Bank of the United States, 4 Wash. C. C. 254. United States Bank V. Sell. 5 Conn, 106. V // 162 Commentary on the Bank Act. On the contrary, their existence in other hands than those of the Bank is at \e3ist prima facie evidence of non-payment, since they are never paid, and generally speaking payment can never be enforced upon them at law, unless they are surrendered to the promisor. F^urther, as already shown, a new contract and a new cause of action is created by each transfer, so that it might be argued that the statute could be- gin to run only from the time when the last holder came into possession, (i) The privilege of issuing Bank notes is confined to incorpo- rated Banks, and none but such corporations can issue notes designed for the purpose of a circulating medium. (2) According to the Act (3) the amount of notes issued by any Bank, and outstanding at any time must never exceed the amount of its unimpaired paid up capital, and all notes so issued for circulation must be for the sum of five dollars, or a m'.iltiple thereof. The government reserves to itself the right to issue notes of all other denominations. (4) The execution of Bank notes should conform to the pro- visions of the statute authorizing their issue. They are usually required to be signed by the President and cashier of the Bank, and where this is required no note will be v^lid unless so signed. Where Bank notes prepared for the official signatures were stolen from the Bank's possession and the signatures forged, it was contended that the neligence of the Bank should render it liable for their payment. B it it w a held otherwise, because the crime had been committed after tne notes had left the Bank. Had they been complete when they were stolen it would have been different. (5) If signed (') See " Winding up Act." Sec. 103, Jicst. Chap. VIIj as t■^ the reservation of ui/idends in respect to outstanding notes. (2) Section 83, atUt p. 52. (3) Section 40. (4) See sections 43 and 44 for statutory provisions as to the issuing of notes for circulation. Also section 70, which makes the payment of Bank-notes a first claim on the assets incase of the insolvency of the Bank. (5) Salem Bank v. Gloucester Bank, 17 Mass. i . Also see id, 33. Charter-rights. Circulation. 163 but incomplete at the time of the theft, it is conceived that they would not be binding on the Bank, (i) The date of bank notes is not evidence of the time they were issued, because they are often held by the Bank for a long time after being prepared for circulation, and the date indicates rather the series to which the notes belong than the actual day of issue. (2) (1) Daniel on Neg. Inst. vol. II. p. 377. (2) F. ir' M. Bank v. White, 2 Sneed, 482. .(.:, CHAPTER V. CHARTER RIGHTS AND PRIVILEGES. COLLATERAL SECURITIES. SECT. I — GENERAL OBSERVATIONS. SECT. 2 — HVrOTHECATION OF REAL PROPERTY, SECT. 3 — HYPOTHECATION OF PERSONAL PRCCERTV. SECT. 4— DOCUMENTS OF TITLE. SECT. 5 — STOCKS, BONDS AND OTHEii PUBLIC SIX." MTIES, SECT. I — GENERAL OP iERVATICXVS. A Bank by its charter is created a " bo iy pcli ic and cor- porate." This is the legislative rccugnition of its existence as a corporation, .' ;.i confers all the rights and privileges of a corporation knowat ■, the i . mmon law (i) not inconsist'?nt with any of '. i e provisio!iS scl ibrth in the incorporating Act, or any general Act in force on that behalf. It alio renders the Bank liable to all the obligations of a corporation. The (i) At common law the rights which a corporation may exercise, besides lliose specially conferred l«y its cliatter, are all those which are necess.iry to attain the object of its creation ; thus it may acquire, alienate and possess property, sue and be sued, contract, ir.^-ur obligations, and bind others in its favour. For all these objects every corporation has the right to select from its members, officers, whose number and denomination are determined by the instrument of its creation or hy its by-laws and regulations. These officers represent the corporation in all acts, contracts or suits, and bind it in all matters which do not exceed the limits of the \ Charter-rights. Securities. 165 common law, having been called upon to determine the posi- tion to which corporations are to be assigned, has formulated certain rules as applicable to them ; these rules are well de- fined, and are outlined with peculiar distinctness. The title of creation may either enlarge or diminish the rights which are thus enjoyed, and these altered privileges will take precedence over those acknowledged by the common law. A Bank, therefore, in its operation and management, is governed by the rules of the common law and of its charter. !■'.. i it It is necessary to confer in distinct terms in the chartc or Act of incorporation only those powers which the Bank could not otherwise exercise, or those concerning which there might be some doubt. Various powers have been pc different times declared by the courts to be inherent, and to be properly enjoyed by banking corporations simply by virtue of th^jir creation and existence as such, and for the designated end of conducting the banking business, ikit po\vcrs ofthis nature, being based only upon a legal implication, must be used only in a manner and for purposes strictly consistent with such restrictions, and in furtherance of such duties as are specifically prescribed by law. Thus a Bank, though not directly thereto empowered by its charter, may borrow money, (i) It is a necessary and inherent privilege. But it is limited by the same necessity or intrinsic propriety which gave it birth. The borrowing must be incidental to the legitimate banking business of the corporation. Otherwise as if the loan was obtained for use in speculation, the act would be u//ra vives. II Wv powers conferred on them. These jiowers are either determineil by law the by-laws of the corporation, or by the nature "ftiie duties imposed. Uuli the corporate name, which is given to it at its creation, the coiporation is kn< ■ ii and designated, sues a:ul is sued, and does all iis acis, and exercises all I n};htF; which In long to it. That a banking corporation is in the full enjoynu-: ; of these elementary rights goes without saying. To be deprived of them w i,i be to nullify the fact of legal existence, and to render impossible the exeuise of any gel ral powers confem-d. (I) Bank of Australia v. Breillat, 6 Moo.,l'rivy Council, 152. \m 166 Commentary on the Bank Act. U M The intention of charters, granted to <-rading corporations especially, is to confer certain facilities, privileges and exemp- tions, which may encourage and enable them to prosecute their objects efl'ectually ; and though this, no doubt, is gene- rally done more for the sake of the public, who are to be benefited by their operations, than for the sake of the corpo- ration, yet the legislature has in each case to take care that it sets just bounds to the facilities and privileges granted, in order that such corporation may not interfere prejudicially with private individual enterprise, and may not, so far as depends on the solvency of the corporation, endanger the public interest, by engaging in imprudent transactions which may involve it in ruin. Such has been the desire of the legislature, in framing the general prohibitions enumerated in the forty-fiftli section of the present act, a section which in a most stringent manner guards against the corporation applying its capital and corporate privileges to speculations, which might interfere injuriously and unfairly with private enterprise, involve it in business of a very precarious and hazardous nature, or enable it o acquire a monoply to the general prejudice of trade. A banking corporation c^n engage in no business transac- tion, which is not, properly speaking, of a banking nature, and within the scope of the purposes for which the corporation was organized, save as authorized in this act. The powers with which it is invested must be exercised in strict subor- dination to this purpose, for the prosecution of which alone they were conferred. A transgression, though under color of an act covered by the designated power, will be illegal. When, therefore, it is specifically permitted to conduct a banking business, it has no power to do any other specie., of business not because it has been stripped in any manner of that power, but because that power has never attached to it. A Bank may, however, do on isolated and especial occa- sions, or for certain purposes, what it cannot do generally and for all purposes. It cannot buy and sell merchandise, but it can take merchandise from a debtor, if this is the only Charter-righta. Securities. 167 way to save the amount of the debt : and of course having taken property of any nature for this proper purpose, it may sell it in any manner that will bring the best price. It may acquire and hold as collateral security for any advance, credit or debt, made or incurred by or to the Bank, Domi- nion, Provincial, British and Foreign public securities, or the stock bonds or debentures of municipal or other corporations, cxcc/ii Banks, and may sell them if need be to save the debt. ( i) And such security may be taken either at the time of the making, opening or incurring of such advance, credit or debt or on the maturity thereof. So also may it acquire and hold as security for any pre-existing and matured debt any share or shares of the capital stock of the liank, and when necessary realize upon any such share or shares (2). And it may pur- chase public securities in order to invest its surplus funds in them. But it cannot "traffic" in them ; it cannot buy them with a view to sell them shortly at an anticipated advanced price. (3) Such would not fall within any department of the ■general province of banking, which alone the association can carry on, only in the manner, with the powers and for the objects directly set forth or necessarily implit i u' the law of the corporate existence. This view, however, although supported by many English and American cases is not that taken by the Ontario courts. (4) In the cited case it was coi;sidered that the words " in such trade generally as appertains to the business of banking " covered the purchasing of municipal bonds. Mr. Justice Proudfoot thus summarizes his opinion on the point in consideration. " The conclusion which seems to me deducible from these acts, is that the business of banking consists in dealing in money, the precious metals, and in bonds and (I) Section 60. (2") Section 45. (3) First N.at. Bank of Charlotteville?'. Nat. Exc. Bank of Kaltimore, 39 Md. 600; Weckler f. First Nat. Bank, 42 Md. 581. See also Conistock ?'. Willou- ghby, Hill &" Den. 271 ; T.ilmage v. Pell, 3 Seld. 328 ; Leavitt v. Yates, 4 Edw, Ch. 134; Sacket's Harlwr Bank v. Pres. of Lewis County Bank, II Barb. 213 ; Portland Bank v. Storer, 7 Mass. 433. (4) Jbnes V. The Imperial Bank, 23 Gr. 269 1. i ! i ■ I ^1 168 Commentary on the Baak Act. negotiable securities ; that this deah'ng confers the power of tending on them or of purchasing them, which ever the Bank directors may deem most for the advantage of the corpora- hon ; and that whether to buy or lend is a matter of internal management which the directors may determine." Banking corporations, by virtue of a long established and universal custom, are permitted to receive the amount of interest in advance, by holding it back at the time when they make a loan, handing over the balance only to the borrower. The Bank can thus secure a slight increase in the actual amount of money which it receives in payment for the use of its funds. This is termed "discounting," and is a part of the general business of banking, enjoyed even without specific authority conferred in the incorporating Act. Ordinarily it is no part of the banking business to hold or deal in real estate, and no general right to do so can be con- sidered to be inherent in a Bank. Certain obvious cases, however, in which it is eminently proper, almost even neces- sary that a Bank should be able to acquire, to hold and to sell land and interests in land, will suggest themselves at once to every mind. Thus it may often, especially in small towns, be impossible to obtain a building with the suitable appliances for security, unless the corporation can buy land and erect a structure for itself. Again the mortgage or con- veyance of real estate to it may often be the only means by which debts owing to it can be secured or discharged. If a Bank should come into possession of land in perfect good faith for either of these purposes, and should hold it or sell it, only in due and do/ia fide prosecution of these objects, it seems unreasonable to imagine that the most rigorous court of justice would, even in the absence of statutory provision, declare the transaction illegal. But the necessity of discuss- ing the question of the absolute legality of such proceedings has been saved by the insertion in the present Act of clauses specifically enabling Banks to acquire, hold and sell real estate for these purposes. The legislative expression of the power to take and hold real Charter-righta. Securities. 169 estate in fee and in mortgage, as set forth in the forty-seventh and following sections, of course excludes its exercise other- wise than in precise :icordance with the statutory provisions. The holding, acquiring or selling to any greater extent, in any other manner or for any other end than is therein set forth, would be unquestionably illegal (i). Thus, if the corporation should purchase a township of land, and take a conveyance of it, in which should be recited that in order to encourage emi- gration it had resolved to buy a large tract of land, which the corporation was satisfied it would dispose of at such prices as would yield it a considerable profit ; or if it should take a mortgage, in which it was recited that A. B. was desirous of obtaining such advances from the Bank as he might require in his business for the following year, and had given it that mortgage as a security for such advances as he might there- after require, no court of justice would treat such a mortgage or such a conveyance as valid. It would be evident on the very face of it that it was taken in violation of a positive statute, and did not come within any of the exceptions which could render it legal (2). Any shareholder may interfere to restrain the Bank from doing a wrongful act. It has been contended, however, that a wrongful act once done cannot be questioned, except on proceeding by sd. /a., taken by the Crown, to repeal the Bank's charter; and that the title to any land wrongfully taken would revert to the Crown, the debtor being fully acquitted of any indebtedness. Our Courts, however, seem unanimous in holding that proceedings to set aside a mortgage, as being in contravention of the Banking Act, need not necessarily be by the Crown. (3) The authority given to Banks to purchase land at mort- gage sales, etc. does not limit the Bank to the purchase of land of only that e.xact amount and value which will suffice (1) Bank of Toronto v. Perkins, 8 S. C. Rep. (D) 603. (2) Per the Chief Justice in McDonald v. Bank of U. C. 7 Q.B. (U. C.) (3) Grant v. La Banque N'ationale, 9 Ont. R. 411; Commercial Bank z'. Bank of Upper Canada, 7 Gr. 250, 423. ; If- :'^ ^^1^ :■' fir 170 Commentary on the Bank Act. to secure the debt, (i) It is only necessary that the real and dof/a fide object of the purchase shall be the securing of debts due to the Bank ; and provided this be the case, a purchase of land exceeding in value the amount of the debt is perfectly lawful. The right to commute debts for land is of course general, and is net limited to cases where any doubt exists as to the perfect safety of the debt. ff Vifl;: Sect 2. — hypothecation of real property." It is provided by section forty-eight that a debt contracted to the Bank in the course of its business may be secured by the hypothecation of real property. It has been repeatedly held in the United States that a debt to be thus validly secured must have had existence prior to the taking of the mortgage, and that where the advance and the security are contemporaneous acts, the transaction is null and void, and injunction will issue to prevent foreclosure by the Bank. The only Canadian case reported, in which this point seems to have been directly in issue, came up before the courts in Ontario, and it was there held that not only may Banks take a mortgage upon real estate as collateral security for sums advanced bona fide in the way of their business, but also that such debts need not have been contracted pre- viously, but that the advance and the security may be contemporaneous acts. (2) And this was affirmed in Appeal. (3) It would be a question of fact for a jury to determine whether the mortgage was in truth taken to secure the trans- action, or the bill or note discounted, or the debt created for the mere purpose of upholding and giving colour to the mortgage. The following is the reasoning of the court in rendering this decision, a decision which must be considered a leading one upon this point. (1) Section 49. (2) Commercial Bank v. Bank of Upper Canada, 7 Chy. 250.' (3) lb. 423. iiH i':-j Charter-rights. Securities. 171 "The case turns upon the proper construction of the 19th section of the act passed in the 6th year of Her Majesty, to amend the charter of the Bank of Upper Canada. That section, so far as it is material to our present purpose, provides that the said corporation shall not, " either directly or indirectly, lend money, or make advances upon the security, mortgage or hypothecation of any lands or tene- ments ; ♦ • ♦ • ♦ provided always that the said corpora- tion may take and hold mortgages or hypothcqnes on real estate and property in this province, by way of additional secinity, for debts contracted to the corporation in the course of their dealings." Now the first clause distinctly prohibits the Hank of Upper Canada from advancing money upon the security of land, and I agree in the opinion expressed by his L(jrdship the Chief Justice, in McDonald v. the Hank of Upper Canada (i), that a mortgage executed in violation of that express prohibition would be, unless helped by the proviso, void. That proposition is not, I believe, denied. The contest is as to the effect of the proviso. The plaintiffs contend that where the advance of money, and the execution of a security upon land for the sum so advanced, are con- temporaneous acts, the case falls clearly within the prohibi- tion, and is not helped by the proviso ; and the argument in favour of that construction is undoubtedly of great weight ; for, if the advance of the money and the execution of the security may be contemporaneous acts, it must be admitted that almost every case may be brought, by a little manage- ment, within the exception. But on the other hand, if the language of the proviso be clear, we have no authority to depart from its plain meaning for the purpose of creating a more effectual check than the legislature has seen fit to impose. "Now, upon the best consideration I have been able to give to the subject, I am of opinion that the construction for which the plaintiffs contend is not warranted by the language of the statute. The legislature have not provided that this (I) 7 Q. B. (U.C.,) 252. '' n,: I! 'A ' I - ■ IMAGE EVALUATION TEST TARGET (MT-3) /. «> 1.0 I.I IM 12.5 m^ m 111 2.0 IL25 i 1.4 HM I IIIJI^H i.6 -► oll^ ^%. <^ v> / Hiotografiiic Sciences Corporalion 33 WKT MAIN STRfIT WIBSTIR.N.Y. t4SI0 (716) S72-4S03 ;\ 172 Commentary on the Bank Act. m i Bank may take mortgages for debts contracted at some previous time. Had that been so, it is probable that the conclusion fur which the plaintiffs contend would have been correct, (i) But that is not the language of the Act. The proviso is, that the corporation may take mortgages upon land, by way of additional security, for debts contracted to the corporation in the course of their dealings. The question, therefore, is not whether the creation of the debt and the execution of the mortgage were contemporaneous acts, but whether the debt was created upon a legitimate transaction, and the mortgage taken as additional security. Where that is the case, where there is a dofia fide contract to advance money upon a legitimate transaction, and that is accompanied by an agreement for a mortgage on land, by way of addi- tional security, the proviso applies, and the mortgage is valid. On the other hand, when the money is really advanced upon the land, and the other parts of the trans- action are colourable, the mortgage is void. "I cannot deny that upon this construction the statute is open to great abuse, and that when an attempt is made to defeat it, there must be considerable difficulty in determining whether the money was advanced upon the land, or the mortgage taken as additional security. But that difficulty is not sufficient, in my opinion, to justify an alteration of the plain meaning of the Act. The recent decisions upon the acts for the amendment of the usury laws in England appear to me to furnish an analogy for our guidance in the presenl case. By the 3 & 4 Wm. IV., ch. 98, bills of exchange and promissory notes, payable at or within three months, were exe.iipted from the operation of the usury laws, but all other contracts remained subject to the provisions of the statute of Anne, and were of course void when more than legal interest was reserved. A question soon arose, as might have been expec- ted, whether the discount of a bill accompanied by a deposit of title deeds, or other real security, was within the statute, (I) But see Baird w. the Bank of Washington, n dr* Serjj. R. 416, and Silver- lake Bank v. Nortli, 4 Johnson, C. R. 370. Charter-rights. Securities. 173 and it was argued with great force there, as here, that such a construction, if adopted, would have the effect of withdraw- ing every contract from the operation of the statute of Anne, as it would only be necessary to make the discount of a bill or note part of the transaction to bring every case within the exception in the statute of William. The court decided, however, that the validity of the transaction depended upon the question whether the discount was real or colourable merely, and where the discount was a real transaction, and the mortgage was taken as collateral secu- rity, they held that the case was protected by the statute. Lane v. Horlork recently decided by the House of Lords, is a remarkable case to that effect. " Had I been able to satisfy myself on the one hand that the legislature merely meant to prohibit this institution from embarking in land speculation, and that this transaction, which clearly was not of that character, ought, therefore, to be upheld ; or, on the other hand, that they meant to pro- hibit mortgages in every case, except when taken as collate- ral security for a debt contracted at a previous time, — had I been able to adopt either view, the law would have rested, I must admit, on a more satisfactory basis. But I have not been able to reconcile either construction with the language of the statute." His Lordship, before applying the view he had taken of the law to the case before the court, concluded his remarks as follows: "I cannot say, however, that the opinion I have formed is entirely satisfactory to my own mind, and as the question is one of great importance to the Banking institu- tions of this province, I hope that it may be brought before a higher tribunal." Immediately upon the rendering of this decision, proceed- ings were taken to have the case heard before the Court of Appeal, and in February of the following year (i860) judg- ment was there rendered, affirming the decision of the court below, and holding further that all chartered Banks have the same power. "I if'i ^ i 11 'Ii V ::1 '11 •Ii 174 Commentary on the Bank Act. 1 !! The judgment of the Court of Appeal was delivered by Sir J. B. Robinson, Bart., C. J,, who thus dealt with the main point at issue. " When it is shewn that the mortgage in any case was taken by a Bank, 'as an additional security for a debt con- tracted to it in the course of its business' then the ques- tion occurs whether that can only be taken to mean a debt that has been previously incurred with it in the course of its business, or whether a mortgage may not be taken as an additional security for a debt that had no previous existence, but which the Bank was about to allow a party to contract, by advancing him money at that time in the proper course of their business ; as, for instance, if any merchant had brought to the Bank on the 2ist of May, 1855, for discount, a bill drawn by Henry Bull, Jr., on Bull Brothers, and accepted by the latter, could the Bank properly have taken a mortgage from either party to the bill, or from the person who brought it and got the money, to secure them in the money which they advanced upon the bill .'' That is not this '^ase, and I shall only therefore say that, as the words of the statute are not against it, so I think it might perhaps be held that the spirit and intention of the Act are not opposed to it; and that a mortgage so taken might be upheld, when it appears that the mortgage was really and in truth taken to secure the transaction upon the bill, and not that the bill was created for the mere purpose of upholding and giving colour to the mortgage. That would be a question of fact upon which the conclusion that a jury might come to would be in general so uncertain, that I dare say the Banks will not think it prudent to risk their money on a real security in any such case where the nature of the transaction might appear to be at all equi- vocal, — so long, I mean, as the present statutes continue in force. " It is unnecessary to add that no change has been made in the statutes. The section of the present Act is similar in wording to the section commented upon by the Chief Justice, (i) (I) Section 48. Charter-rights. Securities. 175 In a more recent case (i) this point seems to have been incidently raised, but not so, in our opinion, as to over-rule the decision in the case just considered. At least one of the Judges, however, ventured the decided opinion that a mort- gage given to cover a contemporaneous loan and not a past debt was null and void under the statute. (2) This case came before the Supreme Court on appeal from a judgment of the Court of Queen's Bench (appeal side), Province of Quebec, affirming a judgment of the Superior Court. The question of the validity of a mortgage taken simultaneously with the advance, but on an utterly unbusi- nesslike transaction was distinctly raised in the pleadings, and the Chiet Justice thus expressed himself on the point involved. " I agree with Chief Justice Dorion that the transfer made to the appellants of a mortgage to secure an advance made on a promissory note discounted at the same time that the transfer was made, was on the part of the Bank in violation of the Banking Act, which enacts that : "The Bank shall not, either directly or indirectly lend money or make advances upon the security, mortgage or hypothecation of any lands or tenements." It will be noted that the learned Judge refrained from any reference to the forty-eighth section, which provides for the taking of such security " for debts contracted to the Bank in the course of its business," From this might be inferred, either that the transaction was so clearly a loan on land, that this proviso could not be invoked ; or that it did not apply because the transaction was a simultaneous advance and security, which even the proviso could not make valid. Mr. Justice Gvvynne, however, in the course of his extended judgment, referred in distinct terms to the proviso, and did not consider the Court called upon to question its full import, the transaction being so clearly not of an ordinary banking (1) The Bank of Toronto v Perkins, 8 S. C. R. 603 (2) Mr. Justice Strong, p. 616. •i! ill ■$ . lf.!,[ 176 Commentary on the Bank Act. n.'iture. He, however, cited the remarks of the Chief Justice of Upper Canada in the case last considered (i) and in his conclusions made use of terms adapted from the judgment there given. Mr. Justice Fournier was also of opinion that the whole transaction was on its face an advance on laud, pure and simple, and on that ground alone was for dismissing the appeal. The following is a brief summary of the cited case, and of Mr. Justice Gwynne's interpretation thereof: The transfer of the mortgage was based upon the following recital in the deed of tranter : Whereas the said Walter Bonneil stands indebted to the said Bank of Toronto in the sum of twenty-six thousand dollars currency as represented by a certain proniissoKy note signed by the said Walter Bonnell, and payable to his own ot^der and endorsed by him, and dated at Montreal, the 30th day of December, 1875, and payable at twelve months from the date thereof at the Bank of Toronto, and bearing interest at the rate of seven per centum per annum ; and whereas the said Walter Bonnell desires to furnisli the said J>ank with collateral security for the due and faithful repayment of his said indebtedness. The deed then assigned among other things : The sum of $15,000 currency being the amount of a certain mort- gage granted by Samuel S. Campbell to the said Walter Bonnell, passed before the said undersigned notary, and bearing even date herewith, and hypothecating lot No. 446 un the official plan of the St. Antoine ward, of the said city of Montreal. No such debt as that here recited did, in truth, then exist ; no such note as that here recited had then been discounted by the Bank or constituted a debt due from Bonnell to the Bank, but upon the same day as the execution of the mort- gage from Campbell to Bonnell, which was executed under instructions from the Bank manager, and its transfer to the Bank, namely, the 19th January, 1876, Bonnell addressed a letter to the Bank manager enclosing to him the note for $26,000, which letter was as follows : (I) See ante page 174. Charter-rights, Securities, 177 Montreal, ]2in\i2LXy 19th, 1876. To tlie Manager, Bank of Toronto, Montreal: I hereby hand you my prontiissory note for twenty-six thousand dollars, made payable to my own order one year after date with interest at the rate of 7 per cent, per annum, the above note bearing date the 30th December, 1875, the proceeds of which you are hereby authorized to retain as collateral security for any sterling bills of exchange, now or hereafter to be discounted by the bank of Toronto for me made by L. J. Campbell & Co., on Messrs. Hutchins and Macdonald of London, England, or other parties in Great Britain, and bearing my endorsement. (Signed) Walter Bonnell, Thos. Doucet, witness. The signature of Mr. Doucet, who was the notary before whom the mortgage and transfer of it was executed, indicated the time when the note was made, and that it was ante-dated for the purpose of upholding the recital in the transfer was apparent. The only drafts which were shown to have then had any existence upon which was Bonnell's name in aiiycharac- ater were the following: — A draft dated 19th January, 1876, by Bonnell (not said upon whom) for .£'1,458 Ss. sterling, endorsed L. J. Campbell and Co., payable in 90 days ; another of same date by Bonnell upon Hutchins and MacDonald, also at 90 days for .£2,000, also endorsed by L. J. Campbell & Co. ; also notes drawn by Campbell & Co., and endorsed by Bonnell for $1,850, $1,100 and $3,000 respectively. It will be observed that none of these drafts or notes came within tlie description of the drafts which, by the letter of the 19th January, 1876, endorsing the note for $26,000, were contemplated as drafts collateral to which the proceeds of the note for $26,000 were, by that letter, authorized to be held and applied. All drafts, such as those referred to in the letter, had, therefore, yet to come into existence. The note, therefore, for $26,000 had no original as collateral to which it could be held or applied, at the time it was enclosed to the Bank. A note payable at twelve months to one's own order, and endorsed to the Bank as collateral security for the payment 178 Commentary on the Bank Act. of drafts and notes at ninety days discounted by the Bank, upon which as drawer, maker or endorser, the Bank had already the security of the maker of the note at twelve months, can, with no propriety, be said to be a banking transaction in the ordinary course of business, nor could the Bank, going through the form in their own books of putting the proceeds of an apparent discount of such note to the credit of the maker of it to be held, however, by the Bank as security for the due payment of the drafts actually discoun- ted as banking paper, be said, with any propriety, to con- stitute a debt due to the Bank contracted in the due course of banking business and due to the Bank on the 19th Janu- ary, 1876, when the note was first placed in their hands. Moreover, on the 20th April, 1877, when the Bank manager, who negotiated the whole of this transaction, proved in Bonnell's insolvency for the debts due to the Bank by Bonnell no claim whatever was made as for a debt due to the Bank upon this note for $26,000. Upon a consideration of these facts Mr. Justice Gwynne came to the conclusion " that the note was given existence for the sole purpose of upholding and giving colour to the mortgage and its transfer, which latter contained a false recital of a debt due for the purpose of eluding a discovery of the true nature of the transaction." From the view we have taken of this case we are forced to consider the decision in the Commercial Bank v. The Bank of Upper Canada (as cited on page 170) the law on this point. It must be stated, however, that since the rendering of the decision in the Bank of Toronto v. Perkins, it seems to be the opinion of Bank solicitors in general, that a simul- taneous advance and hypothecation is illegal, or of such doubtful legality as to render a loan so secured precarious. It is to be regretted that the legislature has not removed all doubts by a more explicit rendering of its intent. Having seen fit to enact that warehouse receipts and bills of lading are to be taken as security for simultaneous advances oft/y ; and that stock, bonds and securities majf be taken for such m Clmrter-Hghts. Securities, 179 adv.inces, it is clearly a ^rave omission on its part not to have cii.icted thatonly such debts as have been previously contrac- ted may be secured by the hypothecation of real property ( i) It certainly is in the interest of lianks to have their posi- tion clearly defined, either by distinctly forbidding the sinuiltaneous acceptance of hypothecs on real estate, or by conferring upon them the unconditional right to take such hypothecs as additional security for loans on current dis- counts, leaving to the discretion of the lianks to guard af_jainst the locking up of their funds in such a way as to cici)rive them of the benefits arising from their circulation and deposits, which would result from simple loans on real estate. This important question will no doubt be fully discussed before the Hanking Committee on the renewal of the liank charters in 1890. As has been stated, a mortgage can be taken as security, for a debt previously contracted, and also, as it seems, for a debt simultaneously contracted, liut a mortgage taken for debts to be thereafter contracted is illegal and void, and injunction will issue to prevent foreclosure by the liank. In a suit to realize upon a mortgage created in favour of a bank by the deposit of title deeds, the debtor swore that the deposit hail been made to secure ct;rtain future advances all of which had been paid off; the ofiicer of the Hank, on the other hand, swore that the security was rec]uired by the Hank and given by the debtor to secure all his indebtedness, past as well as future, and a memorandum indorsed at the time of the deposit on the envelope containing the deeds was to the same effect. The Court, in the view that the deposit, if made as alleged by the Bank, was lawful, while if made for the purpose stated by the debtor it would have been illegal, made a decree in favour of the Hank with costs. In delivering judgment the court said : " A deposit by way of (I) It was remarked in a recent case by an Ontario judge that it was not maile clear that the word " contracted " meant contracted at the ti nie of the advance bein^ made, and that if the matter in difference rested here his opinion would be in favor of deciding against such meaning. Grant z-.La Banque Nalionale, 9 Ont. R. 423. ■ ' 1 \ 1 1 \ 1 '; 1 1 1 1 1 1 i ■ ''i i 1 p r- : 1 ; 1; '\ • " I 1. 180 Commentary on the Bank Act, security against which the Bank customer might draw wnvild be against the law, and the law upon this point is so well know to bankers that they would hardly be likely to trans- gress it." (i) A mortgage may, however, be validly taken as a ccmtiiitiing security for the amount due when the mortgage was given, and such mortgage may be worded so as to secure and co\ xt any sum to become due in respect of interest or commission upon the secured notes or renewals, or other commercial paper. (2) A firm, being desirous of obtaining additional advances from a Bank, executed a mortgage to secure a large sum for which they were liable on the 31st December, 1873, on commercial paper of the firm and its customers which had been discounted by the I^ank. The mortgage provided that it should continue a security for the said sum, and all renewals or substitutions therefor. After the mortgage was given the firm's line of discount was increased, but no separate account of the liabilities secured by the mortgage and these fuither advances was kept, the proceeds of the discounts and cash deposits being carried to the firm's credit in one open cur- rent account, against which they drew checks, to retire the notes secured by the mortgage as they matured. The firm became insolvent on the 12th August, 1875, their indebted- ness in the meantime never having been reduced. It was held, affirming the judgement of the Vice-Chancellor, that this mode of keeping the accounts had not operated as a discharge of the mortgage debt. (3) Where in one and the same mortgage, debts previously contracted, and also debts to be thereafter contracted, are alike secured, if the line separtiting the good from the bad be plain, then the consideration will be divisible, and the (1) Royal C.inadian Bank v. Cummer, 15 Chy. 627. See also Grant r'. I^ lianque Nationale 9 Ont. R. 411 (1885). Commercial Bank v. Bank of Upper Cani-Jda, 7 Gr. 250, 423. (2) Cameron v Kerr, 3 Ont App. R., 30. (3) lb. Charter- rghts. Securifiea. 181 niortf^age will be void only for so much as is illegal and will be valid for the rest. (l) It would seem that if a mortgage upon lands be given to a H;ink as security for future adv.ince.s in contravention of the Act, and after the debt has been contracted or advances made, another mortgage be executed upon the same property as acUlilional security for the debts so contracted or advances made, the second mortgage will be valid, (2) K. & Co. were customers of the plaintiffs, and gradually accumulated a liability of about $26,000, to secure which the defendants gave a mortgage containing a recital that the plaintiffs had agret^d to make further advances to K. & Co. on receiving security for the then present indebtedness, and a redemption clause providing for payment of all bills, notes and paper, upon >• hich K. & Co. were then liable together with all substitutions and alterations thereof and all indebted- ness in respect thereof, the same being a continuing security. The Hank did business with K. & Co. in two different ways, one by discounting K. & Co's. customers' notes, in which case their rule was to notify the customers that they held their notes ; and another by discounting K. & Co's. own notes and taking their customers' notes as collateral, in which case they always got the collateral notes to an amount exceeding the advance, but did not notify the customers. At the time the mortgage was given all the notes held by the liank were believed to be genuine, and the discount of the customers' paper very largely exceeded the discount of K. & Co's. notes. K. & Co. suspended two years later. At the time of the suspension it was discovered that by renewals and substitutions nearly all the notes at the date of the mortgage had been replaced by K. & Co., in renewals and substitutions by forgeries, and that the amount of the discounts of K. & Co's. notes secured by the collateral very (1) Kansas Valley Nat. Bank v. Rowell, 2 Dillon, C.C. 371 ; Allen v First Nat. Hank of Xenia, 23 Ohio St. 97. Commercial Bank v. Bank of Upper Canada 7 Gr. 430. (2) Grant v. La Banque Nattonale 9 Ont. R. 412. i! II i! II' :i'li::j It 182 Commentary 07i the Batik Ad. I! < largely cxcci'ded the discounts of the customers' notes. In an action by the Hank to foreclose the mortgage the mort- gagors claimed that they, as sureties, were discharged by the Bank's action. //i/(l, that the Hank parted with genuine and received fab- ricated securities, and through its laches or default necessarily worked prejudice upon the rights of the sureties ; that of two innocent parties of whom one must suffer on account of the fraud or crime of a third, the one most to blame by enabling the wrong to be committed should bear the loss, and the defendants were exonerated from liability in so far as they were prejudiced by the conduct of the Hank. Prima facie the Hank were liable to the extent of the face value of the securities surrendered, but they were at liberty to reduce such amount by evidence as they might be advised. (l) It must be regarded as appurtenant to, or even a part of, the jiower to take land in mortgage or pledge, that the Hank should also be permitted to acquire and hold an absolute title in and to land so mortgaged. And further to deal in reference to the land or interest therein, in any manner, as, e.g. by buying in any outstanding title or interest, or in any other way whatever, that may prove desirable for rendering the security more perfect or more available. And this principle is recognized by the Act. Section fifty confers upon the Bank the power to "purchase and acquire any prior mort- gage or charge" that may exist upon any land mortgaged to the Hank as security for a debt due or owing to it. In selling and conveying real estate, pursuant to the general powers conferred by the Act, a bank may of course lawfully take and hold a mortgage thereon as security for the payment of the purchase money. A most important amendment to the provisions of the Banking Act is contained in section fifty. It is there pro- vided "that no Bank shall hold any real or immoveable (i) Merchants Bank of Canada ^. McKay, et al., 12 Ont. R. 498. Oharter-righfe. Securities. 183 property howsoever acquired, except such as shall be rc(iuirecl for its own use, for any period excccdin^j seven years from the date of the accjuisition thereof." The object of such an enactment is manifest. The clause is merely a transcript of a clause which is used in bank charters in other countries, and was doubtless adopted by the le^,Mslature from tiiose examples. The National Hanking Act of the United States limits the period to five years. ICvery Hank which violates any provision of this section is liable to a penalty not exceeding five hundred dollars. .SKCriON 3. — IIVl'OTIIKCATION OF PKRSON'AI, I'UOPKKTV. At one period of their history Canadian Hanks were pro- hibited from lending money or making advances upon the security, mortgage or hypothecation of personal property, cither by way of additional security or otherwise. Of late years, however, their powers have been much increased, and Hanks may now take hold and dispose of mortgages and hypo- t'leques upon personal as well as upon real \>v )pert)', by way of additional security for debts contracted o them in the course of their business. And, moreover, the same rights, powers and privileges, held and possessed by them in respect of any real estate which may be mortgaged to them, extend to any j)ersonal estate so mortgaged, (i) It was once said that a provision which would warrant the Bank in taking security on every species of personal property, perishable or otherwise, must inevitably lead to one of the very acts prohibited — namely, that the corporation on taking possession of the personal property mo. tgagcd, and in dispo- si.ig of it, would directly deal in the selling of goods, or in a trade other than such as generally appertains to the business of banking. The legislature, however, has seen fit to enact (I) Section 48. See, therefore, ante SECT. 2. 1;' m \x * 184 Commentary on the Bank Act. such a provision, and it must be considered as an exception to this general prohibition, (i) in the same manner as taking security upon upon real estate is an exception ^o the one denying to Banks the right to loan money or muke advances upon the security of any lands or tenements. And the provision is a wise one. For in the one case as in the other, where a debtor to the Bank becomes of doubtful sol- vency, it is manifestly expedient to allow the Bank to take security for its debt on any property he may have ; and one can conceive of no good reason why i«" should not be allow- ed to do so. By holding it for a limited time it could not incur any risk of involving itself on a hazardous business, or in unforseen liabilities. Ships and ether vessels are of course included in the term personal property. (2) Any Bank advancing money in aid of the building of any ship or vessel shall have the same right of acquiring and holding security upon such ship or vessel while building and when completed, either by way of mortgage, hypothec, hypo- thecation, privilege or lien thereon, or purchase, or transfer thereof, as individuals have in the Province wherein such ship or vessel is being built, and for that purpose may avail itself of all such rights and means of obtaining and enforcing such security, and shall be subject to all such obligations, limitations and conditions as are by the law of such Province conferred or imposed upon individuals making such advances. (3) It would appear from the above cited section that a Bank may take security for future as well as for past advances when made in aid of the building of any ship or vessel. (4) This provision is no doubt intended to promote and encour- age the ship-building industries of the Dominion. The manager of the Branch of an incorporated Bank, to (1) Mr. Justice Draper in McDonald et al. v. Bank of Upper Canada ; 7 Q. B. R.(U. C.) 292. (2) Vide McDonald et al v. Bank of Upper Canada. (3) Section 52. (4) GormuUy v. Sinclair, Bank Act. 26. Charter-Hghta. Securities. 185 which a chattel mortgage is made for debts due the Bank at that Branch, is an agent authorized to make the affidavit of Iwna fides, under 34 Vict. cap. 17, Manitoba. Under the Ontario Chattel Mortgage Act, a manager would have to be appointed agent for the corporation under its corporate seal, (i) ! t , ! SECT. 4.— tDOCUMENTS OF TITLE. The m?.y Bank acquire and hold any warehouse receipt or bill of lading as collateral or additional (2) security for the payment of any debt incurred in its favor in the course of its banking business provided the bill or note so secured is negotiated ^3) or the debt contracted at the time of the acquisition thereof by the Bank, or upon the promise that such warehouse receipt or bill of lading would be transferred to the Bank. And any bill, note or debt, so secured, may be renewed or the time for payment extended without affecting such security. (4) The customer of a Bank bought a quantity of wheat for cash, and obtained delivery promising immediate payment. Being remonstrated with by one of the officers of the Bank for having overdrawn his account, and being pressed for immediate settlement, he drew a bill on England, and attached (1) Ontario Bank v. Miner. Armour''s Man, R. 169. In this case the mortgagor was indebted to the Hank on account of promissory notes wliich had been renewed from time to time and partly reduced. The mana- ger refused to renew again and insisted on security, and the mortgagor gave a chattel mortgage under the pressure. The manager swore that he did not know that the mortgagor had other creditors at the time, and the mortgagor sworo that he gave the mortgage solely on account of the pressure and to guin time, and not for the purpose of defrauding any creditor. Held, that the mortgage was valid. (2) Early v. Early, L. R. 16 Chy. D., 214 ; In re Athill L. R-, 16 Chy. D. 222, (3) " Transferred for valuable consideration," Foster v. Bowes, 2 Ont. P. R. 256. (4) Section 53, sub-sections 2 and 4. I I m- 186 Commentate on the Bank Act. to it the bill of lading for the unpaid wheat. The Bank dis- counted the bill, and placed it the customer's credit, where it extinguished his indebtedness, he never having had possession or control of the proceeds. The bill was not paid in England and the wheat was sold for the profit of the Bank. Appel- lant sued the Bank for the proceeds of the sale on the ground that the bill transaction was fraudulent, and was only a cov- ert mode of avoiding the terms of the Banking Act, and obtaining the payment of an overdue debt. It was held con- firming the judgment of the Superior Court that the transac- tion was legitimate, (i) Where the Bank holds warehouse receipts to collaterally secure the payment of notes, and the notes become overdue, and an extension of time is agreed on, the delivery up of the receipts and overdue notes being a surrender of the Bank's lien is a valuable consideration for, and therefore a negotiation of the new renewal notes. Moreover it is only a substitution or continuation of securities according to the original under- standing of the parties. (2) True, it is not necessary to deliver up the first receipt when a further extension of time is given. But if it should be improvidently or ignorantly handed over to the debtor it is still competent to remedy that error by giving new receipts. (3) Warehouse receipts or bills of lading so acquired vest in the Bank, from the date of the acquisition thereof, all the right and title of the previous holder or owner, or of the person from whom such goods, wares and merchandise were received or acquired by the Bank, if the warehouse receipt or bill of lading is made directly in favor of the Bank instead of to the previous holder or owner of such goods, wares and merchandise. (4) At one time the Bank could only acquire a warehouse receipt or bill of lading by endorsement from a previous (i) Denholmr'. The Merchant's Bank. M. 22 June 1877 App, (2) Bank of HamiUon v. Noye, 9 O. R., 637. (3) lb. (4) Section 53, sub-spctioi 2. Charter-rights. Securities. 187 holder or owner (i) but by an amendment to the Act, enacted in 1880 and embodied in the present Act as above, the ware- house receipt or bill of lading may be given directly in favor of the Bank. (2) It would seem, however, that a warehouse receipt or bill of lading may not be made out directly, to the Bank if the person desiring to pledge such goods, wares and merchandise is only the agent of the owner ; for in such case there must be a previous holder of the receipt or bill /. e., the agent, and there must be a transfer of an existing receipt or bill to the Bank. (3) In such case all the right and title of the owner will be vested in the Bank, subject however to the owner's right to have the same retransferred to him if the debt, as security for which they are held by the Bank, should be paid. (4) In order to a valid transfer of any warehouse receipt or bill of lading to the Bank a special endorsement is not re- quired, an endorsement in blank being quite sufficient. (5) The act does not specify any particular mode in which the property in the receipt is to be transferred, and the notes and receipts attached may be read together. When taking warehouse receipts, the goods intended to be covered thereby should be described therein with reasonable certainty, and the agent of a Bank should, if possible, see that the goods themselves are in the warehouse and separated from other goods of a similar class. The receipt only covers the actual goods mentioned therein ; it does not ordinarily cover substituted goods. (6) In the cited case the receipt covered thirty bales of corks, and the court held that it (1) Bank of H. N. A. v. Clarkson, 19 C. P. (U.C) 182; Royal Canadian Bank v. Miller 28 C. P. (U.C) 593; 29 Q. B. (U.C.) 266. But sec Molson's Bank V. Janes, 9 L-C. Jiir.,8l ; Royal Canadian Bank z'. Carrutheis, 29 Q.B. (U.C. 283. (2) Merchants' Bank of Canada v. Smith, 8 S. C R. 512; 8 Ont. App. R. 15; 28 Gr. 629. Dominion Bank v. Davidson, 12 Ont. App. k. 90. (3) Section 53, sub-section 3, Merchants Bank of Canada v. Smith, 8 Ont. App. R. 15. (4) lb. (5) Bank of Hamilton v. Noye, 9 Ont. R. 631, (1883). (6) Llado V. Morgan, 23 C. ?• (U.C) 525. m f: '■'■i %' \ 188 Commentary on the Bank Act. covered the specific bales, and those only in the warehouse at the time of the giving of the same. Where, however, there is a custom or usage of trade (such as exists in the grain trade) not to deliver back the specific goods, (i) but the same quantity of goods of a similar kind and quantity (or such as exists in the milling business (2), not to deliver back the wheat at all but its equivalent in flour) the operation of the receipt would probably not be restricted. Where the warehouseman improperly mixes the goods covered by the warehouse receipt, with his own goods, espe- cially where in the warehouse receipt he promises to keep the goods separate ; the holder of the receipt as against the ware- houseman and as against his assignee in insolvency, or for the benefit of creditors, is entitled to be satisfied out of similar goods in the warehouse to the quantity mentioned in the warehouse receipt. (3; AGENTS. An agent may create in certain cases in favor of the Bank a valid pledge on goods belonging to his principal, even though such pledge may be a wrongful and unlawful dealing with the goods, as between the agent and the prin- cipal. But he may not give a valid security by way of ware- house receipts on goods in his own possession but belonging to his principal, even although he may be engaged in the calling, as his ostensible business, of keeper of a yard, cove, wharf or harbor, of warehouseman, miller, saw-miller, malster, manufacturer of timber, wharfinger, master of a vessel, or other carrier by land or by water, or by both, curcr or packer of meat, tanner, dealer in wool or purchaser of agricultural produce. According to the Act the expression " agent " means any (1) Coffee V. Quebec Bank, ao C. P. (U.C.) m and 555. (2) Wilmot V. Maitland, 3 Gr. 107; Mason v. Great Western Ry. Co. 31 Q.B. (U.C) 73. (3) Merchant s Bank of Canada v. Smith, 28 Gr. 638-9; Great Western Ry. Co. t. Hodgson, 44 Q.B. (U.C.) 196; Bank of Hamilton v, Noye, 9 Ont. R. 631. Charter-rights. Securities. 189 person intrnsted with the possession of goods, wares and mer- chandise, or to whom the same are consigned, or who is possessed of any bill of lading, warehouse, wharfinger's or cove- keeper 's receipt or order for the delivery of goods, wares and merchandise, bill of inspection of pot or pearl ashes, or any- other document used in the course of business as proof of the possession or control of goods, wares and merchandise, or authorizing or purporting to authorize, either by endorsement or by delivery, the possessor of such document, to transfer or receive goods, wares and merchandise thereby represented : and such person shall be deeemed the possessor of such goods, wares and merchandise or bill of lading, warehouse, wharfinger's or cove-keeper's receipt or order for the delivery of goods, wares and merchandise, bill of inspection of pot or pearl ashes or other document as aforesaid, as well if the same are held by any person for him or subject to his control as if he is in actual possession thereof, (i) This is a transcript of the definition as understood under the English Factor's Act and therefore recourse must be had to the law of England, in order to determine more particu- larly the exact meaning to be given to the word. It has been held that the term " agent," under the Factors Acts, does not include a mere servant or caretaker or one who has possession of goods for carriage, safe custody or otherwise, as an independent contracting party, but only "persons whose employment corresponds to that of some known kind of commercial agent, like that class from which the Act has taken it name." (2) For example if a furnished house be let to one who carries on the business of an auctioneer, he is entrusted as tenant with the furniture, being in fact an auctioneer ; but it never was the common law, and could not be intended to be enacted that, if he carried the furniture to his auction room and there sold it, he could confer any better title on the 1151 (1) Section 53, sub-section i. (2) Heyman v. Flewker, 13 C. B. N s. 519. 190 Commentary on the Bank Act. V i purchaser, than if he had as auctioneer acted for some other tenant, who committed a similar larcency, as a fraudulent bailee ; nor to come nearer to the present case, that a ware- houseman or wharfinger, who, as such, is intrusted with the custody of goods, if he happens also to pursue the trade of a factor, can give a better title by the sale of the goods than if they had been intrusted to some other warehouseman who employed him to sell (i) In the case of City Bank v. Barrow (2), a tanner in Mon- treal received from a merchant in luigland hides to be tanned ; they were tanned ind freight was procured for them, but in the meantime the tanner had obtained from the Toronto Bank advances, on his own account on bills, and hypothecated the hides to the bankers, as security for such advances, engaging to hand over to them the bills of lading if his bills of exchange were not duly honored. They were not duly honored, and the bankers (who had acted in entire ignorance of the transaction between the merchant and the tanner) claimed to retain the bills of lading and the hides until their demands were satisfied. The House of Lords, however, decided that the tanner was not a factor or agent, entitled to pledge under any law, Canadian or English, and that the Bank of Toronto acquired no valid lien on the hides, either under the Civil Code, the Consolidated Statutes of Canada, c. 59, or the Bank Act. Lord Selborne, in the course of his judgment, at page 6y^, says: "It"' manifest that the operation of these Factor's clauses under the Canadian Code (which is the same as Con- solidated Statutes of Canada, c 59, in this respect), is the same as the operation of the Factor's Acts in England in a similar case. They are taken almost entirely from the English Factor's Acts." Again, at page 675, he says : " I do not propose to dwell longer upon the case. The Bankers Act seems to me to carry it no further. It is true it refer, to (1) Per Blackburn J. in Cole v. North Western Bank, I^. R. lo C. P. 369. See also Johnson v. Credit Lyonnais, L. R. 3 C. P. D. 32. (2) L. R. 5 App. Cas. 664. Ch arte r-rights, Hecu r i ties. 191 th'.' Consolidated Statutes and not to the Code ; but the Code is, on this point, only a repetition of the Consolidated Stat- utes, and is a legislative declaration of the true meaning of those former statutes which are incorporated in it." Lord Blackburn, in the course of judgment, at page 678, says ; " It is sufficient to say, briefly, that the decision in Cole vs. the North Western Bank (from which an extract is given above) comes to thi ; that an agent who can pledge or sell nuist be an agent of that class which, like factors, (taking almost the words of Mr* Justice Willcs in the case which has already been referred to of Heyman vs. Flewker) have a business which, when carried to its legitimate result, would properly end in selling or in receiving payment for goods. That would be a kind of class ; factors, and agents in the class of factors. If such a person is "entrusted" and "is entrusted in that capacity," then, in the absence of bad faith on the part of the pledgee, the pledge is good." The meaning of the words "and such person shall be deemed the possessor of goods or documents of title as well if the same were held by any person for him or subject to his control as if he is in actual possession thereof" as useil in the concluding i)art of the definition of agent in section 53, will be found discussed in the case of Portalis vs. Tetley (1) where it was held that "a factor by pledging goods in his possession or under his control, as agent, for an amount which did not exhaust their value, had not thereby parted with his control over the goods, so as to preclude himself from making a further pledge for the balance of their value which should be valid as against the principal under the Factor's Acts." Ilifjl ■ if lULLS OF LADING AND WAREHOUSE RECEIPTS. A bill of lading is a memorandum signed by a master of a ship acknowledging the receipt of a merchant's goods. By the English law it is generally supposed that a bill of buing properly so called is confined to maritime adventures. The (i) L. R. 5 Eq. 140, : ! i 1' ' ^ 192 Commentary on the Bank Act, Bank Act, however, extends its meaning so as to cover re- ceipts for goods to be carried by water or land, " The expres- sion bill of lading includes all receipts for goods, wares or merchandise, accompanied by an obligation to transport the same from the place where they were received to some other place, whether by land or water, or partly by land and part- ly by water, and by any mode of carriage whatever." (i; The expression " warehouse receipt " means any receipt given by any person, firm or corporation for any goods, wares or merchandise in his or their actual, visible and con- tinued possession as bailee or bailees, in good faith, and not as of his or their own property, and includes receipts from any person who is the keeper of any harbor, cove, pond, wharf, yard, warehouse, shed, storehouse, tannery, mill or other place in Canada, for goods, wares or merchandise in the place or in one or more of the places so kept by him, whether such person is engaged in other business or not, and includes also specifications of timber. (2) The above definition was first introduced into the Hanking Act in 1880. It is generally supposed that it was enacted to meet the difficulties caused by a series of decisions in Ontario, to the effect that under a section corresponding nearly to section 53 of this Act, the warehouse receipt to be valid must be given by a person exercising the business of a ware- houseman, (3) Under the law as it at present stands it is supposed that A., a dry-goods merchant, could deliver a bale of silk into the possession of H., another dry goods merchant, to be deposited and kept in H.'s store, B, could then issue a valid wareiiouse receipt to A. for this bale of silk. (4) The definition above given of a warehouse receipt is therefore to be read so as to discriminate between two classes of persons who are authorized to issue such receipts. (i) Section 2, sub-section (c.) (2) Section 2, sub-section (b). (3) The Merchants Bank v. Smith, 8S. C. R., 512 ; Milloy v. Kerr, 8 S. C. R. 474- (4) AV Monteith, 10 Ont. R. 529 (1886), Charter'inghts. Secvritiea. 193 1. Any hfia fide bailee of goods, which are in his actual, visible and continued possession, may give receipts therefor ; and 2. Any person who is the keeper of a warehouse or othor place for goods can, in respect of goods being in that ware- house or place, give such receipts, (i) The same sort of proof is not, it seems, required in the case of a warehouseman granting such documents as in the case of a mere bailee of the goods. It is only in the latter Liisc that it is necessary to the vali 'ty of the receipt to prove that he is actually, visibly and continuously in the possession of them from first to last. (2) Such was the decision in the cited case, Mr. Justice Proud- foot dissenting. (3) From the facts adduced in the case it appeared that M., who was a provision merchant, in his life- time, had obtained advances from the Hanks on the faith of the receipts being valid securities, he representing to them that he had rented the cellar of his warehouse to H. as ware- houseman, and that as such H. had sole charge of the cellar. Before the receipts matured M. disappeared and was sub- sequently found dead. Before his death became known, II. and his solicitor took possession of the cellar and the pro- perty covered by the receipts, and posted up in the cellar a notice stating that H. held tlie property therein as ware- houseman of the banks, to whom he had granted receipts. Two days after taking possession, H. refused to be any longer responsible for the property, which was subsequently taken by the Hanks under their receipts, and as it was rapidly deteriorating was sold by them. It appeared by the evi- dence of H. that he had signed the receipts at M.'s request, and as a matter of form, but that he had not leased the (1) See Bank of Hamilton v. Noye, 9 O. R. 631. (2) Re Monteith, supra. (3) Per Proudfoot, J.— That the section in question authorizes persons who are not warehousemen alone, but who may have other business, also to give receipts ; but these are comprised in the definition of " warehouse receipt," pre- viously given in the statute, which requires the goods to be in the " actual, visible, and continued possession of the bailees." I \ I! ill I AA I ^ I 194 Comoifiiry on the Ii. Mechanics' Bank, I Pet. 46. (3) American Hank v. Adams, 12 Tick. 303. Ojfficial Bonds. 199 11 1. n ! H .1 ■ ■ ' ; ■ i i ■ 1 ': f: Ul 11 i the transaction of over-payment, but equally in reference to all matters which, however remotely, concern it or are con- nected with it. If he subsequently commits any deceit or fraud, or makes false entries in the books, for the purpose of concealing the deficiency, his dishonest dealing in this parti- cular will suffice in the eye of the law to give the coloring of guilt to the entire affair from the very outset. It may still remain true that the actual loss of the money was cansed wholly and solely by the innocent over-payment ; and that the subsequent misconduct could not aggravate the injury, as subsequent good conduct could not have remedied it. Still the acts resorted to for securing conceahnent are a sug-- gcstio falsi; the concealment itself is a suppressio veri. Each is an unfaithfulness, and will, as a rule, be assumed to have contributed to the injury suffered by the bank, (i) But a loss of moneys or securities by reason of a theft or robbery, accomplished without the collusion of the officer, and not furthered or rendered possible by his negligence or incompetence, would be a good defence to a suit upon a bond written in any of the forms heretofore described. (2) The bondsmen are certainly not insurers against the acts of any person, save the principal in the bond. Where the obligee, being a joint-stock banking company, re- ceived, after execution of the bond, a considerable accession of proprietors and capital, and thereupon increased the number of directors and changed its name, it was nevertheless held that the bond continued a live security, surviving these changes, on the ground that the bank, not having chan?^ / its constitution in any respect, had preserved its identit' (3) This seems to be the true test, in theory, whether ' e obligee has lost or continued his or its identity. But, .-. ^i'l' (i) Union Bank v, Clossey, II Johns. 182; Rochester City Bank v. Elwood, 21N. V. 88. (2) Allison V. Farmers Bank, 6 Rand. 204; American Bank z'. Adams, 12 rick. 303 ; Planters iSr* Merchants Bank v. Hill, I Stew. 301. (3) Metcalfe v. Bruin, 12 East, 400. » ;Ii i'l I-- 200 Commentary on the Bank Act, usual, the difficulty lies in applying the theory to the facts, and determining the question of continued identity. EVIDENCE. In a suit to recover a deficiency in money, or the value of securities which ought to be but are not forthcoming, it is sufficient for the bank in the first instance to allege and prove that they came into the hands and possession of the officer, and have not since been returned or accounted for by him. These facts, laid in declaration and satisfactorily established on the trial, suffice to create a presumption that the missing property has been wasted or misappropriated by the officer. If the deficiency is in the money, or uninvested funds of the bank, it is not necessary for the bank to declare or to prove the receipt, at certain times, of specific sums by the cashier, from individuals named, and to allege these par- ticular sums io have been since lost or "onverted. Obviously this would be at once a useless and an impossible requirement. All the sums paid into the bank are usually blended into one aggregate mass, and the waste, loss, or embezzlement in the great majority of cases takes place from this. If at any time an officer should lose or embezzle the whole of any especial sum taken by him at one time from an individual, it would probably be totally impossible for the bank to assure itself of the fact. Consequently it is incumbent upon the bank to allege and prove simply that the officer has received a certain amount as a sum total, and that he has returned or accounted fora less amount, likewise as a sum total. If then the defendants seek to rebut the presumption of his liability for the difference which, unless they do so, becomes conclu- sive and supports a judgment against them, the burden is shifted upon them to allege and show that the deficiency occurred in some manner such as to relieve them from a liability, under the bond, to make it good. If to this end they intend to rely upon the innocent mistake of the officer, or upon a robbery from him, either of which is a sufficient th Official Bonds. 201 defence,(i) they must set forth the time, place, and other cir- cumstances attendant upon the mistake or theft with such certainty, if possible, as to show that it befell while the officer was acting duly and properly in the discharge of his functions, according to the ordinary rules and customs of the business. It is not sufficient for them to show simply that the explanation is a reasonable or a probable one ; they must maintain it affirmatively as a positive fact.(2j But the proof which will be required must be in accordance with the intrin- sic nature of the fact itself. It would be seldom, for example, that a paying teller could show, with the certainty of dcmcn- stration, especially after the lapse of much time, that he had overpaid certain amounts on certain checks. The question would seem to be eminently fit for the decision of a jury. If the plaintiffs assert that the officer has received a certain amount which he has never accounted for, it will be proper for the defendants to deny that he has ever received, the amount. This leaves the burden of proving the receipt upon the bank. 13ut if the defendants only answer that the officer has accounted for all that he has ever received, they have the onerous task of proving the correctness of both sides of the account, and of making them balance. They in fact relieve their adversaries of nearly all that work which would otherwise have to be done in establishing ^ prima facie case. Furthermore, if they deny the receipt, they may still plead excuses, if the receipt should be proved, which they could not do if they had adopted the other form of answer.(3) Entries made by the clerk in the books kept by him in the course of his duties will, after his death, be evidence against the sureties in his bond, of his receipt of the moneys therein entered as received. (4) (1) Walker v, British Guaranty Association, 18 Q. B. 277. (2) Allison V. Farmer's Hank, 6 Kami. 204; Minor jj. Mechanics' Bank, i Pet. 46 ; American Hank v. Ailams, 12 Pick, 303 ; Morris Canal \ 1 1 ,ii r ■;■ \\ i ' ■ ' t ilk l; J 202 Commentary on the Bank Act. DESIGNATION IN THE BOND OF THE DEPARTMENT IN WHICH THE OFFICER IS TO SERVE. It is commonly the case that the bond of the officer desig- nates in some manner the department in which he is to serve. It may either state that he has been " appointed the cashier," or may simply describe him as " teller," or may contract that he shall perform " the duties of the office of book-keeper ;" or by some other similar form of words may recognize the general nature of the functions which he is in- tended to fulfil. It is obvious that these functions may be subsequently altered and enlarged by the directors, or that they may be in a measure curtailed and others substituted for them, or that the officer himself may without authority transcend them, and that having so transcended them he may, in a province not his own, unintentionally commit some blunder, and tnereby cause a loss to the bank, or may design- edly commit a fraud or a theft. In all these cases nice ques- tions arise as to whether the act is covered by the undertak- ing of the bond. It is clear that the directors cannot materially increase the risks against which the bondsmen have consented to give their guaranty, without the assent, express or implied, of the bondsmen themselves. It has been frequentl)* declared, however, that assent to moderate and reasonable alterations or extensions, made in the duties of officers, will be assumed by the law. The bOiidsmen are supposed to know that the powers of the board extend to making such changes as it may see fit in the regulations and conduct of the routine of corporate business. They are supposed to contemplate the probability, or at least the possibility, of such action interven- ing during the period of their liab'l'ty, to nffect it in some small degree, it may be slightly favorably or it may be slightly unfavorably. Within a reasonable scope they must anticipate and submit to variations thus caused. IJut mani- festly this rule must be restrained within the limits of the practical necessities and common-sense rules of the business. tii '4 Offi^cial Bonds. 203 Assent to any considerable increase of risk can never be implied. The character of the risk can never be materially altered. A book-keeper may have many more books given him to keep than he had at the time of the execution of the bond ; a cashier may be deputed to act as teller, " for the office of teller is not higher than that of cashier." Such changes do not work substantial increase in the bondsmen's risk, or an increase which it can be supposed that they would have repudiated or would have considered unlikely to occur, when they entered into the contract of insurance. The book-keeper is a book-keeper still ; though he has more labor, it is of the same nature ; the cashier only fulfils in person the functions of a subordinate, which are strictly consistent with his own office. But to raise an assistant book-keeper to the office of teller, or to the still higher office of cashier, would assuredly be to vitiate his bond as a security for his good conduct and sufficient skill in his new position, (i) It would be absurd to take for granted that per- sons willing to guaranty that a man has skill and ability enough to assist in keeping books are therefore willing to guaranty that he has skill and ability enough to be the teller or cashier of a banking corporation ; equally absurd to declare it to be an implication of law that, because the same persons will guaranty his honesty in the circumstances of such moderate opportunity and temptation to fraud as he must encounter in the book-keeping, therefore they will, and in fact do, guaranty the same honesty in the face of the vastly increased opportunity and temptation held out by the duties of teller or cashier. (2) And so it has been held in Canada (3) that a surety by bond for the due performance of the office of a bank agent is not (1) Anderson t'. Thornton, 3 Q. B. 271. See also Grant on Bankers and Banking, p. 260, and cases citeti. (2) Minor v. Mechanics' Bank, I Pet. 46 ; Rochester Bank v. Ehvood, 2i N. Y. 88. (3) Bank of Upper Canada v. Covert, 5 O. S. 541, 1834. IM^ \ l/l 1 I i ii. \ / mm: tf It^- 1! 204 Commentary on the Bank Act. responsible for losses occurring after the nature of the agency has been changed and the agent appointed a cashier, (i) Next is the case where the officer deliberately transcends the allotted duties of the office named in his bond for the purpose of committing a fraud ; as, for example, where a book- keeper, having given bond specially to perform the duties of book-keeper, and having, as book-keeper, no occasion and no right to handle the money of the bank, nevertheless, overstepping the ordinary routine of his functions, does touch and abstract money. Though there is a conflict of judicial authority concerning the law in such a conjuncture, yet we think that little hesitation will be felt by any professional man (and certainly none whatsoever by any unprofessional man) in selecting the better principle. In Allison v. Far- mers' Bank, (2) a Virginian bench held that the sureties on an accountant's bond were not liable for his theft of money from the teller's drawer, since his bond secured only his fide- lity in the "office of accountant-," and as accountant he was not put in possession of any money of the bank. This rul- ing seems thoroughly narrow and unsatisfactory ; it was rendered only by a divided court, and has been deliberately overruled in New York in the case above cited, of Rochester Bank v. Elwood (3), with the true criticism that its principle, if followed, would substantially cancel all official bonds. In this latter case, also, the bond specifically secured the faithful discharge "of the trust reposed in [the officer] as assistant book-keeper." In this case, also, he embezzled funds which, in the strict performance of his duties, he had no occasion to touch, and then he made false entries in his books to conceal the fact. This last feature in the case gives rise to some remarks in the opinion not perhaps strictly bearing upon the precise point in discussion ; but rather than mutilate, or give in an imperfect shape, the reasoning of the court, we shall (i) Where the bond was to guarantee the principal " as an employee " he being then cashier, his election as managing director and later as President rende- red such bond void. Exchange Bank y. Gault 30 L. C. J. 259. (2) Rand. 204. (3) 21 N.Y. 88. Official Bonds. 205 condense the whole. Thf* judge said that, construing the instrument by the h'ght of attendant circumstances, he did not think that the bond was limited to insuring mere fidelity in the actual book-keeping. The book-keeper was in such close contact that he could easily abstract money, and more easily than any one else could conceal the abstraction by falsifying his books. These facts must be presumed to have been known to the sureties, when they gurantied his faithful performance of a trust as an employee in the Bank. It can- not be fairly supposed that they intended to guaranty only that he should keep the books correctly, but rather that he should be honest and faithful in his trust as an employee of the bank. They engaged absolutely for his integrity and fidelity in the discharge of the trust of assistant book-keeper. The bond indicated the department to which he was to be assigned, and guarantied that he was a trustworthy person to discharge its duties. His " faithful discharge " of the trust implies an engagement that he shall not transcend it to embezzle. If he does transcend it, and uses the opportuni- ties it affords him, for the purpose of stealing, it is not a " foithful discharge." Therefore he is liable for the abstrac- tion /c/' J'^:. But especially would he be liable if the false entries were concurrent and simultaneous with, and a part of the guilty res gestae. A liability which would clearly have accrued had these entries been made to enable a confederate to take the money cannot be evaded by the book-keeper's taking it himself. It is no defence that the false entries were made solely to enable him to escape detection. He used a means furnished by his agency to consummate successfully a fraud. The taking and the entries were one transaction, and it can hardly be contended that the ultimate loss of the bank was in no degree attributable to the false book-keeping and the abuse of trust as book-keeper. The falsification was parcel of the wrongful act, and this is deemed sufficient. Indeed it seems a reasonable general rule to assert that if the officer has, in any part of the transaction, acted otherwise than in perfect honesty and good faith, excuses cannot be '! ; ; j 11 . i \ i ' 1 ' i p r: }lji ) '1 i '■ tiiiiii ■ ^'j ! , \ 1 ^ ;: '. ! I \\\ >!i 11 1*1 , Iff! 206 Commentary on the Bank Act. heard to absolve the defendants. It is impossible to split up the transaction into parts, and to say this part was the only part which actually caused the injury, and this part was honest. Such a system of legal anatomy is simply absurd. THE PERIOD COVERED BY THE OBLIGATION UNDER THE BOND. The bond of an officer remains in force ns a continuin'r obligation only during the period for which he legally holds office under his appointment. His re-appointment at the end of this period and his entry upon a second term of office, though no actual gap intervenes, do not operate to revive or to keep alive his bond. If the office be annual, the bond should be annually renewed. And such bond will cover deficiencies, only clearly shown to have been made during the pendency of the contract- P'acts and proof must show this, not hypothesis and opinion (i) ALLEGED ILLEGALITY ATTENDANT UPON THE ORIGINAL UNDERTAKING. We come now to that class of cases, wherein some illegality in the undertaking itself, or in the circumstances attendant upon its inception, are relied upon to invalidate it. The first question which presents itself is, whether a director can be a surety upon the bond of any officer of his own bank. In some countries this has been forbidden by legislative enactment. But it is not thus forbidden by the Banking Act ; and when not forbidden by statute it cannot be said to be absolutely illegal. As a matter of practice it is not of unusual occurrence, although as a general rule Guarantee companies incur the obligations incidental to a bond. In dealing with the parties who purpose to become sureties upon an officer's bond, the directors are held to perfect good faith. The sureties, unless they are informed to the con- (I) La Banque Nationale v. Lesperance, 4 L. N. 151. Ojfficial Bonds. 207 trary, have a right to suppose that their undertaking is in the onlinary course of business, similar in all material respects to other like undertakings, and exposing them to no [)eculiar aiul hidden risks. If the directors are aware of secret facts which do in truth materially affect and enhance the danger of the obligation, it is their duty, if they iiave an opportunity, to state the fact to the bondsmen before the delivery of the instrument. It is not enough that they take no positive pains to conceal the truth, and that they answer honestly such questions as the bondsmen put to them. They are bound to give the information, if they have a proper oppor- tunity for doing so. Hut they arc not bound to state facts which only ff/aj' make the risk greater in the particular case than in some other cases. It is facts which they know actually have made it greater. To illustrate the distinction : If an officer already in their service is re-guarantied they are not b'lund to state to his suret''.'s, offered upon his new bond, that he is careless, negligent, stupid, or a poor and inaccurate accountant. They are not obliged to state that they themselves have been remiss in examining into the condition of the bank, the amount of its funds on hand, and the correctness of its accounts. Neither need they state the existence of other and prior bonds, even though they may be still in force. But if they know that there is in fact a defalcation existing which will be covered by the terms of the proposed bond they are bound to state it, and their failure to do so is such a breach of good faith on their part as will invalidate the contract. Even where a party oti'ered as bondsman had been a director in the bank itself at the time the defalcation took place, and ought therefore from the nature of his official duty to have been aware of it, it was held that he should show that as matter of fact he did not know it ; that his co-directors had carefully concealed it from him up to and after the time of his executing the bond, and apparently with the very object of leading him to execute a bond which would by its terms cover it. But the practice of any such fraud by the directors does not invali- m4 , f N 208 Commentary on the Bank Act. date the instrument as a whole ; it simply annuls and avoids the liability of the individual surety towards whom the fraud was practised. The co-sureties, with whom the dealin P. 419. CHAPTER VII. FORFKITURIi: OF CMARTKR RIGHTS. SRCTION I.— FOKFFJTURK FOR MALFEASAVCE. SECTION 2.— INSOLVENCV, SECTION 3. — THE WINDING UP ACT. SECTION 1.— FORFEITURE FOR MALFEASANCE. Generally it may be said that any violation, wilfully or knouin^fly committed, of any material direction or provision embodied in the law of the corporate existence ; or any frau- dulent or dishonest act ; or the occurrence of anything which slious that for any reason, whether of fault jr misfortune, the liank is incompetent in any respect to perforin safely and usefully any of its functions, will furnish sufficient ground for takinij away the corporate franchise. The refusal to transmit ast-'tenient of the condition of the Bank, required by law to be made to a fjovcrnmeiit official ; excessive loans to directors, though no by-law exists in reference thereto ; the making of a note to the Hank, without consideration and merely colorable, which the Hank receives and uses for the purpose of making its assets appear greater ; all these, in the United States, have worked forfeiture of the corporate fran- chise. Matters which area cause of forfeiture of charter cannot beset up and tried in collateral proceedings. There must be a direct process, instituted by the government, in which the defence, excuse, or explanation of the Hank will be heard, and the distinctive question will be judicially passed upon, free Irom the complication of any other parties, issues or interests. N t \ V '1 mm r . V^ 212 Commentary on the Bank Act. ■J '^■• i t\¥\ An act or omission, in order to furnish ground for proceed- ing to take away the corporate franchise, must be the act of the corporation itself. Cases might arise in which the act or omission of the shareholders, as a body, could have this effect. Ordinarily, however, the law regards the board of directors as constituting the body corporate for all matters of this description. The fault must accordingly be theirs, either directly or by legal implication. Otherwise it will not be the act of the Bank, and will not be a cause of for- feiture. Thus, if a cashier or teller, although acting within the scope of his allotted functions, commits a breach of the organic law, this fact alone is not sufficient to cause a forfeit- ure. On the contrary, it will be presumed that he alone and individually, of his own motion, is guilty of the misdoin^j, But if the contrary be affirmatively shown, and it be actually proved that the directors ordered, or knowingly permitted or ratified, the illegal act, then it remains no longer the act of the individual officer, but becomes the act of the Bank and as such furnishes ground for the process for disfranchise- ment. It is only when the act of the subordinate is rendered by the attendant circumstances, in the view of the law, the act of the principal, that is to say of the board of directors, or of the Bank itself, that the principal will be deprived of its corporate existence by reason of it. (i) Upon whom the burden of proof, rests, whether with the prosecution to show that the act of the officers was in fact the act of the Bank, or with the Bank to show the contrary, is a point which we have nowhere found discussed or decided. It is not im- probable, that in any particular case it might depend some- what upon the nature and the aspect cfthe act itself; and according as these presumably pointed to the directorate or only to the officer as the origin of the transaction, the onus might be shifted to the one side or the other. If, however, a rule of general application is demanded, the directors or Bank may claim the benefit of the presumption of innocence. (i) Clarke v- Metropolitan Bank, 3 Duer, 241 ; State r. Commercial Bank, 6 Sm. &' Mar. 218. Forfeiture of Charter-rights. 213 The decision of the Attorney General of Canada, (i) on a petition for a writ o( scire facias, to annul the charter of the Bank of St. Hyacinthe for certain alleged infractions, goes into the question of forfeiture at some length, and we will consider it iti extenso : This case was argued on the 22nd of June {1881), and again, after the filing of all the affidavits and documentary evidence on both sides, on the 2nd Nov ; and was treated as an application for a fiat for a writ of scire facias, to be prosecuted in the name of the Attorney General, but by the petitioner, though the petition did not so run. The petitioner did not allege that he had suffered any prejudice by reason of the alleged infractions of the charter ; he in fact averred that he was petitioning in the interest of the public. It was pressed upon by petitioner's counsel that the fiat of the Attorney General in such a case as this should go as " a matter of right " upon the presentation of an ex-parle reasonable case by the petitioner, and that the Bank should not have been allowed to file affidavits in contravention or rebuttal of the petitioner's /n'wa/^iZir/V case. Before enterinj]^ into the facts, the Atty. General said : — " I desire, as far as may be in my power, to state the principles upon which I think the Attorney General should be governed in dealing with an application of this kind. "The ordinary applications in England are against/rt/'r;//'j of incorporation, when the Crown, through its courts, can cancel, on sufficient ground, what the Crown has granted ; but, here, Parliament has incorporated the Bank, and I find no authority (and have asked counsel on both sides, for a reference to any) of a case where an English court has assumed to annul a charter of incorporation created by an act of parliament. " Reference is made by petitioner to the Canada Joint Stock Companies' Act, 1877, as establishing that no difference (i) Mr. Campbell, now Sir Arch. Campbell, Lieut. Governor of Ontario. s ii ! 1 214 Commentary on the Bank Act. U U exists between charters created by letters patent and charters granted by Parliament, because by the provision of that act, charters granted thereunder invest the company thereby created with the same powers, privileges, etc., " as if it were incorporated by a special act of Parliament, embodying the provisions of this act and of the letters patent." "That provision, it seems to me, is no more than a delegation by Parliament to the Governor General in Council, in certain cases, of certain of its powers, such powers to be exercised I'pon compliance by intending corporators with the prciiai- inary conditions laid down for that purpose. But the \cry fact that the Joint Stock Companies' Act specially excludes banking, from the purposes for which a charter may be granted thereunder, clearly shows that Parliament did not intend to delegate to the Governor General in Council its powers in respect to charteri.ig banks, and establishes a dis- tinction between the case of a bank incorporated by special act of Parliament, and a company incorporated under the provision of a general act. And even as to general patents, the powers therein contained, when they are laid down in enabling acts of Parliament, only come into life by the breath of the Crown, and, therefore, I think, differ essentially from acts of Parliament creating corporations. "The petitioner refers me to the case of Derby vs. The Qn.en (i/, but that was a proceeding against a pcK-.un who had usurped an office created by act of parliameat, and the pro- ceeding " did nut tend to annul the act but to regulate pro- ceedings and redress a wrong committed under it. The act itself remained untouched, and the corporation created by it was not fur a moment in jeopard)'. The reference to lilack- stone I, 502 "Corporations" does not seem opposite to the point in question. " I am aware ihat my predecessor, Mr. Attorney General McDonald, in the case of " La Banc^ue Nationale," which held a charter granted by act of parliament, gave \\\s fiat (1; J2 Clark iSr* Finnelly, 520. Forfeiture of Charter-rights. 215 upon an ex-parte application for a writ such as is now applied for ; and that in some of the States of the Union it has been held that in this respect there is no distinction between charters granted under the great seal of the State and those granted by the Legislature. It is not a question upon which I need express an opinion. But I think its existence increases the responsibility of the Attorney General before whom P.. application of this kind, against a charter granted by act of parliament, is made. " The counsel of the petitioner endeavored to minimize the discretionary power of the Attorney General, as far as was possible, and urged upon me that, if, assuming the statements made in the petition to be true, I was of opinion that .^n infraction of the charter — one or more — had been committed I was bound ''ex dcbito jiistitiae" wpon prima facie evidence furnished by the petitioner's declaration of their truth (under the Statute for suppressing extra judicial oaths), to grant my fiat for the writ ; but such a doctrine would, in fact, deprive the Attorney General of all discretion, and put it in the power of any malevolent individual, upon an ex parte sizic- ment to bring an incorporated bank — no matter of what magnitude, or with what delicate and extended interests — before the courts in defence of its charter; — a position which, even if it emerged from the presence of the tribunal, without stain of wrong doing, might be attended with the gravest results to its shareholders, depositors, and other creditors, and be reflected upon the whole community where the corporation was domiciled. " It is contended that under the provisions of article 997 of the Code of Civil Procedure of Lower Canada, it is my duty as Attorney General to prosecute in this case, in Her Majes- ty's name, upon security being given to indcmnif-' Govern- ment against costs. The articlt in question is founded on C. S. L. C, cap. 88, sec. 2, and expressly states that in cases of violation by a corporation of its charters, " It is the duty of Her Majesty's Attorney General/ll:i! Forfeiture of Charter-rights. 217 " I believe, however, that the law will not be found to be so unreasonable. " In the first place, the Attorney General in a case of this kind may, and I think should, investigate the alleged fact, allow them to be controverted by counter affidavits and others documentary proof, on the part of the Bank ; and not admit them to be established as the basis of action on his part until their truth shall be made manifest to his satisfac- tion. " 2ndly. If so established, it would be incumbent upon him further to consider whether they amounted to such clear and hurtful infraction of the charter of the Bank, as to warrant the machinery of the law being set in motion, at the risk to tlic probable injury to the important attendant interests before referred to ; and, — " 3dly. Whether the applicant has suffered any prejudice by reason of the alleged infractions or had any private inte- rest in the question he was endeavoring to raise. "The rule is thus laid down by Lord Campbell in the Queen against the Eastern Archipelago Company, (i) " The defendants' counsel rely upon data to be found in " the books, that thisy?^/ is matter of right. It is matter " of right to all who are justly entitled to it, but those only " are entitled to it who suffer a prejudice by the letters patent "and the breach of the condition upon which they have been " granted. No mandamus would lie to the Attorney Gene- " ral to grant his fiat for a scire facias. If he were impro- " perly to withhold it, he might be questioned in Parliament, " and he might be punished for his misconduct. But upon " such a complaint being brought forward against him, if he " could show that the applicant had no interest whatever in " the subject matter, and was only actuated by spleen or " malevolence, and that it was for the public advantage that " the letters patent should not be assailed, instead of being " punished, he would be applauded." (2) i.M I ! (1) Ellis 6r Blackburn, 354. (2) And see ihe judgment of Wightman, J., in the same case, p. 333. 218 Comtnentary on the Bank Act. \V\\ " The facts in the case before me as presented in the peti- tion have, upon the principle I have above referred to, been controverted by the Bank and supported by the petitioner in numerous affidavits at great length, and he has in one of the supplementary affidavits stated for the first timo that he was and is a shareholder in the Bank. It has been my duty to examine the various allegations which these affidavits and the documentary evidence submitted lo me with them present for my consideration. " The breaches of the terms of the charter of the Bank com- plamed of in the Petition are as follows : — 1st. Taking a higher rate of interest than the law allows to be received by Banks. 2nd. Advancing money on real estate. 3rd. Advancing money on shares of the Bank. 4th. Advancing money on merchandise. 5th. Buying and :>elling chattels. 6th. Buying and selling real estate. 7th. Buying and selling shares of the Bank. "All these breaches are averred in the petition to nave taken place — denials, or explanations exculpatory, of all are given in the affidavits fyled by the Bank, and re-assertions with many details and circumstances are submitted in the mass of counter affidavits and papers presented by the petitioner. I have caused a synopsis of the statements made in all thest ^)apers to be prepared and placed on record, but in the meantime will consider in succession each of the alleged breaches of the charter in the order in which they are above mentioned. " 1st. The maximum rate of interest which a Bank can recover by process of law is by the Banking Act fixed at seven per cent. ; but by express enactment no penalty follows its having accepted payment of a higher rate, and to forfeit its charter would be the extreme penalty to which it could be subjected. I do not think there is anything in this alleged infraction of the Bank of St. Hyacinthe. Forfeiture of Charter-righis, 219 "2nd. Advancing money on real estate. There does not appear to have been any advances made on real estate ; but after a debt of the ordinary character is incurred by a firm or firms, mortgages are taken as collateral to secure a debt already existing, giving time for the pay- ment of such debts, — and taking renewals of the notes or bills which represent them Pt the time of the execution of the mortgages, or afterwards, is not contrary to law, and is not advancing money on real estate. " 3rd. Advancing money on the shares of the Bank. The transaction with Mr. Lippe was, I think, a legitimate one — there was no reason why he should not transfer liank shares in trust to secure his indorser, nor why when the paper went into default the trustee, Mr. St. Jacques, should not transfer them to Mr. Beaudry, the indorser, to be sold to pay the paper. 4th. Advancing money on merchandise. 5th. Buying and selling chattels. 6th. Buying and selling real estate. " These three alleged breaches may be considered together. The Bank of St. Hyacinthe, like most institutions of the kind, on many occasions, found itself under the necessity of dealing with insolvent debtors, and, to make the most of assets of which the Bank was the beneficiary, disposed, in some cases directly, in others through third persons, of merchandise and other chattels belonging to the estate of such insolvent debtors, and in other instances bought in the whole assets of the estate and had the business of the insol- vent carried on for a certain time, buying additional stock to work out that already on hand, and buying or paying off on occasions, and even as independent transactions, mort- gages made by the deb' ^r on real estate which had not passed under his assignment, but which seem to promise to help to make the estate pay the liabilities to the Bank. In all the transactions under these three heads referred to in the mass of papers before me, I found that the Bank has i 1 ' 1 f 1 II i 1 • 1 1 f I :j ' H ' i j i 'An I' 1 ♦ i ■. 220 ; i •'I : I 1 mill Commentary on the Bank Act. uniformly been in pursuit of the recovery or saving of some already existing debt, and not embarking in original purchase or sale of merchandise or chattels in the ordinary way of buyers and sellers. Any one familiar with the affairs of Banks in time of depression will quite understand how unwillingly managers are driven into such efforts to secure doubtful debts from danger. It is not necessary, I think, in an application of this kind, and when the object is such as it is here, that I should find categorically that each particular transaction complained of is in all its details an act within the powers of the Bank under its charter. I do not think any Bank in the Dominion could pass scathless through a searching investigation of that kind, but I certainly shall not use the discretion which the law in my judgment gives me to grant my fiat for a writ under which a person who does not aver that he has suffered injury from any of the alleged infractions (although a shareholder in the Bank and in a manufacturing company which the Bank advanced money to,) shall seek to have the charter of the Bank declared forfeited. I may add here that whatever may be said from a banker's point of view against the alleged purchase of the right of the debentures referred to in the petition, even if it were proved, which it was not, I think, I do not see in the transaction any violation of the Banking Act. " 7th. Buying and selling shares of the Bank. " This is not established, I think, by the evidence, but many of the observations made under the preceding head applied to this — the transactions were all with reference to legitimate debts which the Bank was endeavouring to secure, and, as the Banking Act expressly gives a Bank a lien on shares held by a debtor, I do not think effect should be given to the objection to the course pursued by the Bank of St. Hyacinthe in the instance set forth in the papers before me. " The petitioner in his factum calls attention to the last return to Government made by '^e Bank, which shows that the Cashier holds a large amount the Stock of the Bank in H ' in Forfeiture of Charter-rights. 221 trust, and points out the danger to the pubh'c which would result from the Hank owning a controlling share of its own stock. I quite agree with the petitioner as to the danger resulting from such an absorption of stock by ;i Bank, but ill the present instance I cannot infer from the return that the stock menuoned therein as held in trust by the Cashier is held otherwise than as permitted by the section of the Hanking Act, which gives the Bank a lien on the stock of shareholders for overdue debts. " As to the animus by which the petitioner is actuated in taking these proceedings, I need only remark that its nature appears to me clearly established by the evidence, and that the declarations produced by the petitioner do not, in my jiulgnient, rebut the conclusion that he is inspired by motives of i)ersonal vindictiveness. " I may here remark, in passing, that there appears to me to be some force in the objection made by counsel, on behalf of the Bank, that the alleged infractions having all taken place before the 1st of July last, and the charter of the Bank having been renewed from that date by act of last session, no proceeding to forfeit the Bank's new charter can be taken on account of alleged violation of the old one. (i) " It does not seem to me that any case is made out under the rules which I endeavored to lay down in the earlier part of this paper for the issue of a scire facias as prayed for. After a careful consideration of the petitioner's able and elaborate factum, and of the authorities quoted by him, the value of which latter has been in some degree lessened by the fact of their exact application not being in all cases pointed out, — and after weighing to the best of my ability (I) It seems well established, however, that a renewal of a Bank charter is simply a contiuuiitKe of the prior charter, and that the corporation succeeds both to the rights and to the liabilities of its predecessor. If the remarks of the Attorney General in the cited petition for set. fa,, are the law on the point, no penalty provided for by the llank Act can be imposed, unless proceedings are taken during the term of the charter in which the wrongful -■"■t is done. Is this the intent of the Legislature ? >■ '1 iL ,1 222 mi' ui^ ■'VT', ml': Commentary on the Bank Act, the evidence adduced on both sides, I am not satisfied that the officers of the Hank have intentionally and materially violated the terms of their Charter ; and for an immaterial or unintentional breach of the terms of a Charter the Crown would not at the present day seek to forfeit a charter, I think that in the acts complained of they have, in dcaliivr with real and personal property, been endeavouring to roalizo g/i(isi securities for debts legitimately due to the Bank. It wou'd be most lamentable if, under such circumstances, the Attorney General was compelled to grant his ^at for an inquiry so calculated to prejudice the Hank and its bill holders, depositors and general creditors, as well as the public in the locality where it does business. I am relieved to believe that no rule of law exists requiring a course fraught with so many evils to be pursued by the Attorney General. 1 therefore decline to grant the prayer of the Petition." (i) SECT. 2— INSOLVENCY. A suspension by the Hank of payment of any of its liabil- ities as they accrue, in specie or Dominion notes, will, if it continues for ninety days, constitute the Hank insolvent, and operate a forfeiture of its charter or act of incorporation, so far as regards the issue or reissue of notes and other banking operations ; and the charter or Act of incorporation will remain in force only for the purpose of enabling the directors or other lawful authority to make the calls mentioned in the 72nd section of the Act and to wind up its business. (2) The question of insolvency is one which cannot be treated of at any length in the present work, (3) and we will there- fore confine our inquiries solely to one or two points of uni- versal interest. (I) Sarazin r.\ The Bank of St. Ilyacinthe, 28 L. C, J. 270. (-; Section 71. (3) The Author has in course of preparation a Work on iNSOi.VENrY, in which this subject will be found considered in a manner befitting it!> importance. Forfeiture of Charier-rights, 223 Tllli LAW OF SET OFF. Under the English Winding-up Act of 1862 (i) it has bctii held by the ICnglish courts that the object of the Act is to create a common fund, which is to be the source of ;).i aytuent for every creditor of the company ; and that the liiibility of the contributories is a liability not to make pay- ments to the creditors, but to contribute and make good to this common fund the amount required for the payment of all the liabilities of the insolvent liank or company. (2) The liability of a contributory for the debts of a company commences at the date wlien he entered into the contract, which made him a member or shareholder of the company, A)rinuier the Act (3) no other date can reasonably be assi^Mied as "the time when such" contributory 's liability commenced and under which he is bound to contribute to the assets of the company. (4) Owing to this definition of the rights of creditors on the common fund for the paymei.t of their debts, and the limited right of set-off allowed by the Imperial Act (5), the courts have held that the equitable principle of the bank- ruptcy law, that cross accounts should be set-oft", was not in- corporated into the winding up clauses of the English Com- panies Act of 1862. This appears from Lord Chelmsford's commentary on the Act in Grissell's case. (6) " The Act," he says, " creates a scheme for the payment of the debts of a company in lieu of the old course of issuing execution against individual members. It removes the rights and liabilities of parties out of the sphere of the ordin- ary relation of debtor and creditor to which the law of set- off applies. Taking the Act as a whole, the call payable by (1) 25 and 29 Vict., c. 89, Imp. (2) Wcbl.. V. Whiffen, L. R. 5 II. L. 711. (3) Section 46, Imp Act. s. 77. (4) Ex parte Canwell, 4 Ue G. J. 6^S. 539. (5) Section loi. (6) II. R., I Ch. 528. i ' ' i! t 'I M 224 Cornmentdry on th' Bank Act. i: a contributory is to conic into the assets of the company, to be applicil with the other assets in j).iyment of debts ; to allow a set-off a^jainst the call would be contrary to the vvhok' scope of the Act." The only provision in the Knplish Act allowiiifr a ii;;ht of set-off is the loist section, which provides that a coiitri- butory in an unlimited company may set off a debt due to him by the company ajjainst a call, althoujjh the creditors have not been paid — evidently because he is liable to con- tribute to any amount until all the liabilities of the company are satisfied. It has been decided that the princii)le of Grissell's case was not applicable to a voluntary winding up ; and the Court of Common I'leas in that case allowed a contributory to set off a debt due to him by the company against his liability on his shares, (i) Hut that case has since been disapproved of, and is no longer an authority. (2) All the latter cases under the Knglish Act affirm the prin- ciple of Grissell's case: and if the Canadian VVindinj; Up Act was identical in the matter of set-off with the En^Hish Act, t')e rule laid down by the Judicial Committee of the Privy Council in Trimble ^'. Hill (3) would make the Kn^iisli decisii)ns binding upon tlie courts in Canada — the rule beinj^r that where a Colonial Legislature has passed an Act in the same terms as an Imperial statute, and that statute, has been authoritatively construed by a Court of Appeal in England, such construction is to govern the courts of the colony. But the Canadian Winding-up Act has two sections as to set off (4) which are not in its English orginal. The 57th section expressly imports the law of set-off into the liquida- (1) Hri^jhton Arcade Co. v. Dowling, L. R., 3 C. P. 175. (2) Kf Wliitehouse 9 Ch. D. Sec also Black vSr-Co's case, L.' R., Ch. 254. (3) 5 App. Las., 342. (4) Sections 57 and 73. ■H«: Forfeiture of Charfcr-righta. 225 tion proceed in^js in respect of (i) claims upon the estate of tlu- company ; and (2) all proceedinjjs for the recovery of iltbts due or accruing due to the company at the commence- ment of the winding up, as if the company was not being wound up under the Act. The 73rd section exckules from scl-off ilebts ac([uired by a contributory who knows, or has probable cause for believing, that the company is then insol- vent, for the purpose of enabling such contributory to set-off such debts against his liability to the company. Section 57 is a re-enactment of tlic 107th section of the Insolvent Act, 1H75, and is similar to the sections respecting set-off found in the Insolvent Acts of 1865 (s. 24) and of 1869 (s. 124). Its applicability to the claim of set-off made by the contributiories in any case must depend upon the words " debts due and accruing due to tlie company at the commencement of the winding up" to the sections of the Act defining the liability of contributories. These sections are the 44th, which declares that the amount for which each sharelnuler is liable in respect of his unpaid shares, or his liability under the Act of incorporation or otherwise, shall be "a debt due to the company" and the 46th, which says that the liability of a contributory under the Act shall be a " ilebt accruing due from such pcr.-.un at the time when his liability commenced.'' The words in section 44, liability under the Act of incorporation of the company, cover the claim of the bank under the double liability clause of the Hank Act. Applying the well-known canon of construction that where the same words occur in different parts of the same statute they must be taken to be everywhere used in the same sense, (i) it would seem reasonable to hold that the words "debts due and accruing due to the company, " being found in tiie sections defining the liability of contributories and the sec- •I ;C (I) Dwarrison Statutes, S74- im t I 226 Commentary on the Bank Act. tion giving the right of set-of. — that contributories, although shareholders, have grounds for claiming that they come within the operation of the S/th clause providing for the set-off of debts. This view is further supported by the interpretation given by Lord Wcstbury to the words used in the 46th section (Eng., s. 75), *' debt accruing due from such person at the time when his liability commenced, " which, as has been already shown, he held to be the date when the contributory became a member and shareholder in the company, (i) But apart from the' e considerations, the intention of the Legislature in excluding, under s. 74, the right of set-off in the special cases there legislated against, may be referred to as evidence that set-off was to be allowed to contributories in other cases. According to another canon of construction the exception indicates that what is excepted would oti r. wise have been included in the statue. (2) Against the conclusions which have thus been arrived at in Ontario (3) is an L'.'versc judgment of a Quebec judge on this same question of set-off. Mr. Justice Papineau of the STiperior Court held that contributiories had no right under the provisions of the Winding Up Act to set off debts or deposits due to them by the bank against their liability under the Bank Act : even where, as in the case before him, the liquidators had allowed the contributory to set off a por- tion of his deposit as a creditor against his liability on the first call. {4) ii-^? Sect. 3. — The Winding up Act. The following is the text of the winding up act (1) Ex parte Canwell, 4 De G. J. df S. 539. (2) Uwanis on Statutes, 516. (3) Ex parte Harrison and Standing, May, 1888. (4) The Excliange Bank v. Uurland, 7 L. N. 18. (1885.) An Act respecting Insolvent Banks, Insurance Com- a. d. isse. panics, Loan Companies, Building Societies, and Trading Corporations. III II 1 '■ '\, Ml ' . • i; <■: ! . • il » ' (,,' |!^ \■^■:^ :l' w V If* •: r Mi HER Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows : SHORT TITLE. 1. This Act may be cited as " The Winding Up Act." short title. Interpretation. * Lumpany.* ' INTERPRETATION. 2. In this Act, unless the context otherwise requires, — (a.) The expression " company " includes any corporation subject to the provisions of this Act ; (^.^1 The expression "insurance company" means a com-" ''""'""^e, . . ' " company.' |Kiny carryuig on, either as a mutual or a stock company, the l)usiness of insurance, whether life, fire, marine, ocerai or in- land marine, accident, guarantee or otherwise; (c-) The expression " trading comi)any " means any com-"T"'''"8 . ' . a I J J "company. pany, except a railway or telegraph comjjany, carrying on business similar to that carried on by apothecaries, auction- eers, bankers, brokers, brickmakers, builders, carpenters, car- riers, cattle or sheep salesmen, coach proprietors, dyers, fullers, keepers of inns, taverns, hotels, saloons or coffee houses, lime burners, livery stable keepers, market gardeners, millers, miners, packers, printers, quarryinen, share-brokers, ship- owners, shipwrights, stock-brokers, stock-jobbers, victuallers, warehousemen, wharfingers, persons using the trade of mer- chandise by way of bargaining, exchange, bartering, commis sion, consignment or otherwise, in gross or by retail, or by persons who, either for themselves, or as agents or factors for others, seek their living by buying and selling or buying and letting for hire goods or commodities, or by the manufacture, O f 1 h V [■: ( i 1 't . '^\- 4 "^a !.■ ' ^ ,>•; h ■■■ r i 1 !■■' ■ ;. 1 \ \l 'f 228 Commentai'y on the Banking Act. "Court." I m "Official "(Jazette." " Contributor>' ' Winding-up 'order." workmanship or the conversion of goods or commodities or trees ; ((/.) The expression " court " means, in the Province of Ontario, the High Court of Justice for Ontario; in the Pro- vince of Quebec, the Superior Court for Lower Canada; in the Province of Nova Scotia, the Supreme Court ; in the Pro- vince of New Brunswick, the Supreme Court; in the Province of Prince Edward Island, the Supreme Court ; in the Pro- vince of British CoUimbia, the Su])reme Court ; in the Pro- vince of Manitoba, Her Maje'sty's Court of Queen's Bench for Manitoba ; in tlie North-West Territories the Supreme Cnirt of the North-West Territories ; and in the District of Kee- watin, such court or magistrate or other judicial authority as is designated, from time to time, by proclamation of the Gov- ernor in Council, published in the Canada Gazette, i^i'.) The expression " Official Gazette " means the Canada Gazette and the Gazette published under t)^e authority of the Government of the Province, where s' c Oi-oceedings fur the winding-up of the business of the com])any are carried on, or used as the ofticial means of communication between the Lieutenant Governor and the people ; and if no such Gazette is published, then it means any newspaper published in the Province, which is designated by the court for publishing the notices required by this Act ; (/•) T''"^ expression " contributory " means a person liable to contribute to the asr?ts of a company under this Act; it also, in all proceedings for determining the persons who are to be deemed contributories, and in all proceedings prior to the final determination of such persons, includes any person alleged to be a contributory; (g.) The expression " winding-up order " means an order granted by the court under this Act to wind up the business of the company, and includes any order granted by the court to bring within the provisions of this Act any company in liquidation or in process of being wound up. 45 V., c. 23, ss. 3, 4, 5, 6, 8 and 13, part ;—4g V., c. 25, s. 14. APPLICATION OF ACT. 3. This Act .,p])lies to incorporated banks, saving banks, incorporated msurance companies, loan companies having The Winding-up Act. 229 borrowing powers, building societies, having a capital stock, and incorporated trading companies, doing business in Can- ada, wheresoever incorporated ; and — (a. ) Which are insolvent ; or — (/;.) Which are in liquidation or in process of being wound \i\). and on petition by any of their shareholders or creditors, assignees or liquidators, ask to be brought under the provisions of this Act ; 2. This Act does not apply to railway or telegraph compan- Certain corpora- . ' ' ' . ■' . tioiis excepted. ies or to building societies which have not a capital stock. 47 v., c. 39, s. I. 4. The provisions of sections eight to ninety-six, both in- Application of ■ , ° •' certain sections. elusive, are, in the case of a bank oilier than a savings bank, sul)ject to the provisions contained in sections ninety-seven to one hundred and four, both inclusive ; and, in the case of an insurance company, the provisions of sections eight to ninety-six, both inclusive, are subject to the provisions con- tained in sections one hundred and five to one hundred and twenty-three, both inclusive. 45 V., c. 23, s. 2. WHEN COMPANY DEEMED INSOLVENT. a. A comixiny is deemed insolvent — ,„, ' ■' When a com- (a.) If it is unable to pay its debts as they become due ; Sc"m^'f«soU (d.) If it calls a meeting of its creditors for the purpose of ^""■ compounding with them; (c.) If it exhibits a statement showing its inability to meet its liabilities ; ((/.) If it has otherwise acknowledged its insolvency; (dr.) If it assigns, removes or disposes of, or attempts or is about to assign, remove or dis|)ose of, any of its property, with intent to defraud, defeat or delay its creditors, or any of them ; (/.) If, with such intent, it has procured its money, goods, chattels, lands or property to be seized, levied on or taken, under or b any process or execution ; (g.) If it has made any general conveyance or assignment of its property for the benefit of its creditors, or if, being unable to meet its liabilities in full, it makes any sale or con- ' »■ 1 ; fH ' I:'; 1^ ^^. \U .r-. . 1 230 Commentary on the Banking Act. veyance of the whole or the main part of its stock in trade or assets, without the consent of its creditors, or without satisfying their claims ; (//.) If it permits any execution issued apainst it, under which any of its goods, chattels, land or i roperty are seized, levied upon or taken in execution, to remain unsatisfied till within four days of the time fixed hj the sheriff or proper ofticer for the sale thereof, or for fifteen days after such seizure. 45 V.,c. 23, s. 9. wiien a company (J. A Company is deemed to be unable to pay its debm as sluill he deemed ' •' ^ ■' iiiiaiiie to pay they bccome due, whenever a creditor, to whom the coninaiiv us debts. _ Z ' ' ' •' IS indebted in a sum exceeding two hundred dollars then due, has served on the company, in the manner in which process may legally be served on it in the place where service is made, a demand in writing, requiring the comjiany to pay the sum so due, and the company has, for ninety days, in the case of a bank, and for sixty days in all other cases, next succeeding the service of the demand, neglected to pay such sum. or to secure or compound for the same to the satisfaction of the creditor. 45 V., c. 23, ss. 10 and 11. PROCEEDINGS FOR WINDING-UP ORDER. '^ When winding- 7, The wiudiug-up of the business of a company shall Ijc up commences. o • i ' deemed to commence at the time of the service of the notice of presentation of the petition for winding up. 45 V., c. 23, s. 12. Application to H. \\\kx\ a company becomes insolvent, a creditor for the d'liig-up order, sum of at least two hundred dollars may, after four days' notice of the application 10 the company, apply by petition to the court in the Province where the head office of the com- pany is situated, or if there is no head office in Canada, then in the Province where its chief place or one of its chief places of business is situated, for a winding up order. 45 V., c. 23, s. IT,, 2i<'rt. Power of court {). Thc court may make the order applied for, may dismiss on the applica- . . . i • tion. the petition with or without costs, may adjourn the hearing conditionally or unconditionally, or may make any interim or other order that it deems just. 45 V.,c. 23, s. 14. If company lO. If the compauy opposes the application, on the ground t'loliT" ^^^ "^" that it has not become insolvent withii. the meaning of this The Winding-up Act. 231 Act, or that its suspension or default was only temporary, and was not caused by any deficiency in its assets, and shows rcnsonable cause for believing that such opposition is well founded, the court in its discretion may, from time to time. Court may ' ' adjourn the pro- adjourn the proceedmgs upon such application for a time not ""^^I'ng^ »"»'yo<'company and its oflicers under the next preceding section, for an inquiry into the affairs if inquiry is , • , ,' \- , , ordered. of the company, the president, directors, orhcers and employ- ees of the company and every other person shall respectively exiiibit to the accountant or other person named for the purpose of niaking such inquiry, the books of account of the company, and all inventories, papers and vouchers referring to the business of the company or of any ])erson therewith, which are in his or their possession, custody or control, resi)ectivel> ; and they shall also respectively give all such infor- mation as is required by such accountant or other person as aforesaid, in order to form a just estimate of the afdiirs of the company ; and any refusal on the part of the president, direc- Punishment for tors, officers or employees ot the company to give such information, information shall be a contempt of the court, and shall be punishable by fine or imprisonment, or by both, in the discre- tion of the court. 45 V., c. 23, s. 16. I, Is :( '■' i 13. Upon receiving the report of the accountant or person Power of ihe ..... ,--.-, , - court after leiiort ordered to inquire into the arUiirs of the company, and after on inquiry, hearing such shareholders or creditors of the company as desire to be heard thereon, the court may either refuse the application or make the winding-up order. 45 V., c. 23, s. 17. 13. The court may, upon the api)lication of the comjiany, Actions against - ,. •, ... company may be or of any creditor or contributory, at anytime after the pre- restrained, sentation of a petition for a winding-up order and before making the order restrain further proceedings in any action, suit or proceeding against the company, upon such terms as the court ihinks fit. 45 V., c. 23, s. 18. ,, I , I i . 232 Commentary on the Banking Act A< to com- panies in liquidation on 17th May, I;ainst company void. Ciiirt may stay wimline-up procc.iIinKS. 15. The company, from the time of the making of tiie winding-up order, shall cease to carry on its business, except in so far as is, in the oi)inion of the liquidator, retiuired for the beneficial winding-up thereof: 2. All transfers of shares, except transfers made to or with the sanction of the lic[uidators, under the authority of the court, and every alteration in the status of the members of tiie com])any, after the commencement of such winding up, shall be void ; but the corporate state and all the corporate ])owers of the company, notwithstanding it is otherwise i)ro- vided by the Act, charter or instrument of incorporation, shall continue until the affairs of the company ar^^ wound up. 45 v., c. 23, s. 19. 16. When the winding-up order is made, no suit, nction or other proceeding shall be proceeded with or commenced against the compan", except with the leave of the court, and subject to such terms as the court imposes. 45 V., c 23, s, 20. 17. Every attachment, sequestration, distress or execution put in force against the estate or effects of the company after the making of the winding-up order shall be void. 45 V., c, 23, s. 21. 18. The court may, upon the api)lication of any creditor or contributory, at any time after the winding-uj) order is made, and upon proof, to the satisfaction of the court, that all pro- 2'he Winding-up Act. 233 ceedings in relation to the winding-up ought to be stayed, make an order staying the same, either altogether or for a limited time, on such terms and subject to such conditions as it deems fit. 45 V., c. 23, s. 22. 10, The court may, as to it seems just, as to all matters wishes of ^ ' ■" ' creditors, &c., relating to the winding-up, have regard to the wishes of the how ascertained creditors, contributories, shareholders or members, as proved to it by any sufficient evidence, and may, if it thinks it expe- dient, direct meetings of the creditors, contributories, shareholders or members to be summoned, held and con- ducted in such manner as the court directs, for the purpose of ascertaining their wishes, and may appoint a person to act as chairman of any such meeting, and to report the lesult of such meeting to the court : 2. In the case of creditors, regard shall be had to the a? to amount ' ° ol claim ana amount of the debt due to each creditor, and in the case of """>'«- of votes on snares. shareholders or members, to the number of votes conferred on each shareholder or member by law or by the regulations of the company ; and the court may prescribe tiie mode of Court may ... r r 1- 1 1 • f 1 ,-1 require proof. prehmmary proof of creditors clauns for the purpose of the meeting. 45 V., c. 23, s. 23. LIQUir)AT. The court may, at any lime after the presentation of the petition, and before the first api)ointmcnt of a licpiidator, appoint provisionally a liquidator of the estate and effects of the company. 45 V., c. 23, s. 30. 37. A liquidator may resign or may be removed by the court on due cause shown, and every vacancy in the office of liquidator shall be filled by the court. 45 V., c. 23, s. 31. 38. The liquidator shall be paid such salary or remunera- tion, by way of percentage or otherwise, as the court directs, upon such notice to the creditors, contributories, shareholders or members, as the court orders ; and if there is more than one liquidator, the remuneration shall be distributed amongst them in such proportions as the court directs. 45 V., c. 23, s. 32. 31). In all jiroceedings connected with the company a liquidator shall be described as the " liquidator of the {niune of company),'' and not by his individual name only. 45 V., c- 23, s. ii. 30. The liquidator, upon his appointment^ shall take into his custody or under his control, all the property, eflccts and choses in action to which the company is or a|)pears to be entitled ; and he shall perform such duties in reference to winding up the business of the company as are imposed by the court or by this Act. 45 V., c. 23, s. 34. Jil. The liquidator may, with the approval of the court, and upon such previous notice to the creditors, contributorie;;, shareholders or members, as the court orders — (a.) Bring or defend any action, suit or prosecution or other legal proceeding, civil or criminal, in his own name as liqui- The Winding-up Act. 235 dntor, or in the name or on behalf of the company, as the case may he ; 'yb.) Carry on the business of the company as far as is Business of necessary to the beneficial winding-up of the fame ; company. {c.) Sell the real and personal and heritable and movable Saie of property, property, effects and choses in action of the company, by j)iil)lic auction or private contract, and transfer the whole thereof to any person or company, or sell the same in i)arcels ; (it ) Do all acts, and execute, in the name and on behalf of General acu. the company, all deeds, receipts and other documents, and for that purpose use, when necessary, the seal of the com- pany. (f.) Prove, rank, claim and draw dividends in the matter of I'roving inl•:ulk- the i)ankrupt(7, nisolvency or secpiestration of any contribu- tory, for any balance against the estate of such contributory, and take and receive dividends in respect of such balance in the matter of tlie bankruptcy, insolvency or sccjuestration as a seiuirate debt due from such bankrupt or insolvent and ratably with the other separate creditors ; (/.) Draw, accept, make and indorse any bill of exchange nniwinu or , , 1 1 !<• /• 1 imliirsing hilU, or i)romissory note in the name and on behalf of the com- \c , ami raisinj; jiany ; raise upon the security of the assets of the company,"'" from time to time, any requisite sum or sums of money ; and tlie drawing, accepting, making or indorsing of every such bill of exchange or promissory note, as aforesaid, on behall' of the company, shall have the same effect, with resjiect to the liabil- ily of such company, as if such bill or note had been drawn, accejjted, made or indorsed by or on behalf of such company in the course of the carrying on of its business ; (,(,'.) Do and execute all such other things as are necessary General powers, for winding up the affairs of the company and distributing its assets. 45 V., c. 23, s. 35. IV-i. The liquidator may, with the approval of the court, \vi,en solicitor appoint a solicitor or law agent to assist him in the performance i",'[^ '"^ appom- of his duties. 45 V., c. 23, s. 36. \V,\. The licpiidator may, with the approval of the court, pebis, &c., due conqjromise all calls and liabilities to calls, debts and liabil- In;,V'i.e'^"c"mpn>- ities capable of resulting in debts, and all claims, whether pre """^ ' sent or future, certain or contingent, ascertained or sounding ifif Ivilr m ! : 1 if h;; \m 236 Commentanj on the Bauh'nig Ad. only in dnmag«s, subsisting or supposed to subsist between the company and any coiitributnry or Oilier debtor or jjerson apprehending liability to ihe company, and all (juestions in any way relating to or affecting the assets of the company or tlic winding u|) of the company upon the receipt of such sums, payable at surh times, and generally upon such terms, as arj agreed upon ; and nuiy take any security for the discharr, of such debts or liabilities, and give a complete discharge m res- pect of all or any such calls, debts or liabilities. 45 V., c. 23, s. 37- JJ4 Upon the ajjpointmentof the licpiidator, all the powers of the directors shall cease, except in so far as the couit or the liquidator sanctions the continuance of such powers. 45 v., c. 23, s. :^i. IJi>. The liquidator shall deposit at interest in some char- tered bank or post office savings bank or otlu^r (loveriiiiient savings bank designated by the court, all sumsof money which he has in his hands belonging to the company, whenever and so often as such sums amount to one hundred dollars, 45 V., C.23, s. 39. A separaK- '*M\. Such dcposits shall Hot bc made in the name of the deposit accouiv ,• • , ^ ■ ,■ • , i, • r i' • i i tobekept. nquidator individually, on pain of dismissal ; but a sei)arate account shall be kept ''.^i the company of the moneys belong- ing to the company in the na;;ie of the li(iuidator as such liquidator. 45 V., c. 23, s. 40. Powers of direcuirs to ceiise. li'oiii v« to tie (lepos teit >n Hank hook to lie pri diiccti at nicciiiig. 31. At every meeting of the contributories, creditors, shareholders or members, the liquidator shall produce a bank pass book, showing the amount of the deoosits made for the compj'.ny, th^ dates at which such deposits were made, the amount witlidrawn and dates of such withdrawal, — of which ]jroduction mention shall be made in the minutes of such meeting; and the absence of such mention shall h^ prima facie evidence that such pass book was not produced at the meeting. 45 ^'•. c- 23. s. 41- , , IJ8, The liquidator shall also produce such pass book when- And on order of ' ' ■ f^oun. ever ordered so to do by the court, and on his refusal so to do he may be treated as being in contempt of the court. 45 V., c. 23, s. 42. m} The Winding-up Act. 237 IM). The liquidator shall be subject to the si'mmary juris- liqnicinor . Miiiici;t to.iiim- (li( lion of the court in the same manner and to tlie same extent mary juried, c- , ,, „. - , , , . , . ,. tluii of court, as the ordmary omcers of the court are subject to Us jurisdic- tion ; and the performance of his duties may be compelled, R.medie» aiul all remedies sought or demanded for enforcing any claiin lT,'i';'.imi'i\y' for a debt, privilege, mortgage, lien or right of property upon, M"\'llur\'y i"t, in or to any effects or property in the hands, possession or*""' custody of a liquidator, may be obtained by an order of the court on summary petition, and not by any action, suit, attach- iiKiit, seizure or any other proceeding of any kind whatsoever ; and obedience by the liciuidator to such order may be enforced by the court under the i)enalty of imprisonment, as for contempt of court or disobedience thereto; and he may be removed, in the discretion of the court. 45 V., c. 23, s. 43. II 4<). The liquidator shall, within three days after the date I'aianceon ha ' ■' l.y li"v ' _ ^ inay be iiiiiile in^-up order, and either before or after it has ascertained '""^"""•''j"'i"'i" the suflicicncy of the assets of the company, make calls on and order i)ayment thereof by all or any of the contribu- tories for the time being settled on the list of contributories, to the extent of their liability, for jiayment of all or any sums it deems necessary to satisfy the debts ami liabilities of the comi)any, anil the costs, charges and expenses of wind- ing-up, and for the adjustment of the rights of the contribu- tories amongst themselves ; and the court may. in making a call, take into consideration the ])rol)ability that some of the contributories uixm whom the same is made may partly or wholly fail to pay their respective portions of the same ; ivoviso. I'rovided, however, that no call shall compel jiayment of a debt before the maturity thereof, and that the extent of the liability of any contributory shall not be increased by anything in this section contained. 45 \'., c. 23, s. 50, pitrt, ami s. 53. i>0. The court may order any contributory, purchaser orMnn^y, n,,y other person from whom money is due to the company, to pay J|^ u",d7mo'' t'le same into some chartered bank or post office savings bank, '^^"""• or other Government savings bank, to the account of the court, instead of to the licpiidator ; and such order may be enforced in the same manner as if it had directed p.ayment to the liquidator. 45 V., c. 23, s. 54. !l 'f i w f!i- 240 Commentary on the Banking Act. Distribution of surplus. 51. The court shall adjust the rights of the contributories among themselves, and distribute, among the persons en- titled thereto, any surplus that remains. 45 V., c. 23, s. 55. Contributory ^^' '^'^e court may, at any time before or after it has t''J;l'i'^comi'''™c' m^ide a winding-up order, upon proof being given that there may be arrested, is reasonable cause for believing that any contributory or any past or present director, manager, c'^.t:er or employee of the company is about to quit Canada or otherwise abscond, or to remove or conceal any of his goods or chattels, for the purpose of evading payment of calls, or for avoiding exam- ination in respect of the affairs of the company, cause such person to be arrested, and his books, papers, moneys, secu- Aiid his papers, ritics for Hioncys, iroods and chattels to be seized, and him may be seized or them to be safely kept until such time as the court orders. 45 v., c. 23, s. 56. rsooks tc of **'^' If the business of a company is being wound up under company tn \k [\^\^ \q.i all books of the couipauy and of the liquidators shall, /ir/iiia/iim- _ _ ' "^ ' . ' evidence as ,^5 betwccn the contributories of the comiiany, be prima favlc lieiween contri- . butories. evidcncc of the ,'ruth of all matters purporting to be therein recorded. 45 V., c. 23, s. 57. 54. After a winding-up order has been made, the court may make such order for the inspection, by the creditors, shareholders, members or contributories of the company, of its books and papers, as the court thinks just ; and any books and papers in tiie possession of the company may be inspected in conformity with the order of the court, but not further or otherwise. 45 V., c. 23, s. 58. Person entitled ^^' No Contributory, creditor, shareholder, or member p'cr'iion.iiV'or'^by ^^^li votc at any meeting, unless present personally or repre- written proNy. gentcd by some person acting under a written authority, filed with the chairman or liquidator, to act as such representative at the meeting, or generally. 45 V., c. 23, s. 59. creditors' claims. Court may allow inspection by creditors, &i:., of company's books, Sic, 11 What debts 50. When the business of a company is being wound up ^gam^TtKr'"^ under this Act, all debts payable on a contingency, and all company. claims agaiust the company, present or future, certain or con- tingent, ascertained or sounding only in damages, shall be The Winding-up Act. 241 admissible to proof against the company, — a just estimate being made, as far as is possible, of the value of all such debts or claims as are subject to any contingency or sound only in damages, or which, for some other reason, do not bear as certain value : 2. Clerks and other persons in or having been in the PnTiiegeof , ^ , . , . , . cliiims uf clerks employment of tne company m, or about its business or trade, and employees shall be collocated in the dividend sheet by special privilege ceruin extent, over other creditors, for any arrears of salary or wages due and unpaid to them at the time of the making of the winding- up order, not exceeding the arrears which have accrued to them during the three months next previous to the date of buch order. 45 V., c. 23, s. 60, jxirt ; — 49 V., c. 46, s. i. 5T. The law of set off, as administered by the courts, whe Law of set-off ther of law or equity, shall apply to all claims upon the estate ^''■'''^^' of tile company, and to all proceedings for the recovery 01 debts due or accruing due to the company at the commence- ment of the winding up, in the same manner and to the same extent as if the business of the company was not being wound up under this Act. 45 \'., c. 23, s. 60, part, /}any to the satisfaction of the liquidator against any claim by reason of such previous mortgages, judgments, executions, liyi)othecs and liens ; and if there are mortgages, judgments, executions, hypothecs or liens thereon, subsequent to those of su( h creditor, he shall only obtain the property by consent of the subsequently secured creditors, or upon their filing their claims, specifying their security thereon as of no value, or upon liis paying them the value by them placed thereon, or upon his sec urin4. Upon a secured claim being filed, with a valuation of r>"«yof'iq"i- dator if a secu- the security, the licpiidator shall procure the authority of the re 1 claim is court to consent to the retention of the security by the credi- tor, or shall require from him an assignment and delivery thereof. 45 V., c. 23, s. 67. (»5. In the preparation of the dividend sheet, due regard Rani^. ftc.. on , , , , ■ ., r ,• , dividend sheet. shall be had to the rank and privilege of every creditor, but no dividend shall be allotted or paid to any creditor holding secur- ity upon the estate of the company for his claim, until the amount for which he may rank as a creditor upon the estate, as to dividends therefrom, is established, as herein provided. 45 V-) c. 23, s. 68. (»<>. No lien or privilege upon either the real or personal no lien by property of the company shall be created for the amount of^'ielJ'S."'"^ any judgment debt, or of the interest thereon, by ;he issue or delivery to the sheriff of any writ of execution, or by levying upon or seizing under such writ the effects or estate of the company ; nor shall any lien, claim or privilege be created upon the real or personal property of the company or upon any debts due or accruing or becoming due to the company, by the filing or registering of any memorial or minute of judgment, or by the issue or making of the attachment or garnishee order or other process or })rocecd- ing, if, before the pa)ment over to the plaintiff of the moneys ; 1 !fi I'lf IV Hr: 244 Commentary on the Bank Act. This provision not lo apply to jicii fur custs. Cbim or dividend may be olijected to. (llijcclions to be tiled in wric.ng. Answers and replies. Pay to be fixed fur hearing. Costs. Ifclai'r.ant does not answer ohjcLiions. Sei'iirity for costs. actually levied, paid or received under such writ, memorial, minute, attachment, garnishee, order or other process or pro- ceeding, the winding-up of ihe business of the company has commenced; but this section shall not effect any lien or pri- vilege for costs, which the plaintiff possesses under the law of the Province in which such writ, attachment, garnishee order or other processs or proceeding was issued. 45 V., c. 23, s. 69. part. <>7. Any creditor or contributory or shareholder or mem- ber may object to any claim filed with the liquidator, or to any dividend declared : 2. If a claim or a dividend is objerlcd to, the objections shall be filed in writing with the liquidator, together with evidence of the previous service of a copy thereof on liie claimant : 3. The claimant shall have six days to answer the objec- tions, or such further time as the court allows, and the con- testant siiall have three days to reply, or such further time as the court allows • 4. Upon tiie completion of the issues upon the objections, the liquidator shall transmit to the court all necessary papers relating to the contestation, and the court shall then, on the ajiplication of either party, fi.\ a day for taking evidence upon the contestation, and hearing and determining tlie same: 5. The court may make sucli order a.s seems proper in res- pect to the payment of the costs of the contestation by either l»arty, or out of the estate of the company : 6. If, after a claim or dividend has been duly objected to, the claimant does not answer tliC objections, the court may, on the application of the contestant, make an order barring the claim or correcting the dividjnd, or may make such otlu'r order in reference thereto as appears right : 7 The court may order the person objecting to a claim or dividend to liive security for the costs of the contestation within a limited time, and may, in default, dismis; the con- t^.^iation or stay proceedings thereon, upon such terms ai the court thinks just, 45 V., c, 23, s, 70. FRAUDULENT PREFI.'iENCES. cratnitoMs (»8. All gratuitous contra'^ts, or conveyances or contracts lOntra. ts, &C,, . , • i .• ■ i i • i • i lubcvuid. Without consideration, or with a merely nominal considera- The Winding-v,p Act. 245 tion, respecting either real or personal property, made by a company i.i respect to which a winding-up order under this Act is afterwirds made, with or to any person whatso- evei (whether such person is its creditor or not), within three months next |)receding the commencement of the winding. up or at any time afterwards, — and all contracts by which Contracts creditors are injured, obstructed or delayeo, made by a com- obstructing cre- II • 1 ■ I • . ditors. pany unable to meet its engagements and m respect to which a winding-up order under this Act is aft-.-rwards made with a i)erson knowing such inability or having probable cause for believing such inability to exist, or after such inability is public and notorious (whether such person is its creditor or not) shall be presumed to be made with intent to defraud its creditor-;. 45 V., c. 23, s. 71. ri (»1). A contract or conveyance for consideration, respecting when contracts . "^ ° with considera- eithcr real or personal property, by which creditors are in- ion shall be voidable* jurcd or obstructed, made by a company unable to meet its en- gagements with a person ignorant of such inability, whether such person is its creditor or not, and before such inability has become public and notorious, but within thirty days next before the comir.Micement of the winding-up of the business of such comi' iny under this Act, or at any time afterwards, is voidable, and may be set aside by any court cf competent jurisdiction, upon such terms as to the protection of such person from actual less or liability by reason of such contract, as the court orders. 45 V., c. 23, s. 72. f I 70. All contracts or conveyances made and acts done by As to contracts made in fraud a coinpany, respecting either real or personal property, with or to obstruct or r , , . • J , J . • ;■ • J«!'ay creditor.. intent fraudulently to impede, obstruct or delay its creditors in their remedies against it, or with intent to defraud its creditors or any of them, — and so made, done and intended with the knowledge of the person contracting or acting with the com- pany, whether such person is its creditor or not, — and which have the effect of impeding, obstructing or delaying the credi- tors of their remedies, or of injuring them, or any of them, shall be null and void. 45 V., c. 23, s. 73. ^ Mi- - 71. If any sale, deposit, pledge or transfer is made of any securities given , , , . 1 ..• by company for projjerty, real or personal, by a company m contemplation payment, when of insolvency under this Act, by way of security for payment it- 246 Payments by company when to be void. Proviso. As to debts of company transferred to contributories. Comentary on the Bank Act. to any creditor, — or if any property, real or personal, movable or immovable, goods, effects or valuable security, are given by way of payment by such company to any creditor, whereby such creditor obtains or will obtain an unjust preference over the oiher i,reditors, such sale, deposit, pledge, transfer or payment shall be null and void ; and the sul;ject thereof may be recovered back for the benefit of the estate by the liqui- dator, in any court of competent jurisdiction ; and if the same is made within thirty days next before the commencement of the winding-up under this Act, or at any tim ; afterwards, it shall be presumed to have been so made in contemplation of insolvency. 45 V., c. 23, s. 74. 72. Every payment made within thirty days next before the commencement of the winding-up under this Act l)y a company unable to meet its engagements in full, to a pi;r«nn knowing such inability, or having probable cause for believ- ing the same to exist, shall be void, and the amount paid may be recovered back by the liquidator by suit or action in any court of competent jurisdiction: but if any valuable security is given up in consideration of such payment, such security or the value thereof shall be restored to the creditor upon the return of such payment. 45 V., c. 23, s. 75. 73. When a debt due or owing by the company has been transferred within the time and under the circumstances in the next preceding section mentioned, or at any time after- wards, to a contributory who knows or has probable cause for believing the company to be unable to meci i^s engagements, or in contemplation of its insolvency under this Act, for the purpose of enabling such contributory to set up, by way of compensation or set-off, the debt so transferred, such debt shall not be set up by way of com'' usation or set-off against the claim upon such contributory. 45 V., c. 23, s. 76. v, Appe*ls. APPEALS. 74. Any person dissatisfied with an order or decision of the court or a single judge in any proceeding under this Act may, by leaveof a judge of the court, appeal therefrom, if the question to be raised on the appeal involves future rights, or if the order or decision is likely to affect other cases of a simi- The Winding-up Act. 247 lar nature in the winding-up proceedings, or if the ptnount involved in the appeal exceeds five hundred dollars : 2. Such appeal shall lie, — In Ontario, to the Court of Appeal for Ontario; In Quebec, to the Court of Queen's Bench ; In any of the other Provinces, and in the North-West Terri- tories, to the full CGiiit : 3. In the Distrif ' of Keewatin any person dissatisfied with in Keewatin. an order or decision of the court or a single judge, in any proceeding under this Act, may, by leave of a judge of the Supreme Court of Canada, appeal therefrom to the Supreme Court of Canada : 4. All ap])eals shall be regulated, as far as possible, accord- practice, ing to the practice in other cases of the court appealed to : but no such appeal shall be entertained unless the appellant has, security on within fourteen days from the rendering of the order or deci- tj^nefor,*" sion, or within such further time as the court appealed from '"""'**■ allows, taken proceedings therein to perfect his appeal, nor unless, within the said time, he has made a deposit or given sufficient security, according to the practice of the court that he will duly prosecute the said appeal and pay such damages and costs as may be awarded to the respondent. 45 V., c. 2;, s. ■]8,jHirt., mid s. 793 — 49 V., c. 25, s. 16. 75. If the party appellant does not proceed with his appeal, if not pro- cccdcd wicti according to the law ci the rules of practice, as the case may appeal may be be, the court appealed to, on the application of the respondent, '^""""^ • may dismiss the appeal, with or without costs. 45 V,, c. 23, s. 80. % i ■ 1 ■ ■ m 76. An appeal shall lie to the Supreme Court of Canada, Further appeal by leave of a judge of the said Supreme Court, from the judg court^'*""' ment of the Court of Appeal for Ontario, the Court of Queen's Bench in Quebec, or the full court in any of the other Pro- vinces or in the North-West Territories, as the case may be, if the amount in the appeal exceeds two thousand dollars. 45 v., c. 23, s. 78, part. PROCEDURE. su 77. The powers conferred by this Act upon the court may. How the powers bject to the appeal in this Act provided for, be exercised by °^ ^^ *^°"''' 248 Commentary on the Bank Act. may be exerci- sed. Id Ontario, Orders of Court to be deemed judgments. How to be executed. a single judge thereof; and such powers may be exercised in chambers, either during term or in vacation : 2. In the Province of Ontario such powers may, subject 'o an appeal, according to the ordinaiy practice of the coua, be exercised by the master, referee or other officer who, under the practice or procedure of the court, presides in chambers, or by the master in ordinary, or by any local r.iaster or referee. 45 v., c. 23, s. 77 ;— 47 v., c. 39, s. 5. 78. F-" y Older of the court or a judge for the payment of til *v t-osts, charges or expenses made under this Act, sL I CHAPTER VIII. SHARES AND SHAREHOLDERS. SECT. I. — LIABILITY OF SHAREHOLDERS. SECT. 2. — LIEN ON SHARES FOR HOLDER'S IN- DEBTEDNESS TO BANK. SECT. 3. — TRANSFER AND TRANSMISSION OF SHARES. SECT. 4. — RIGHTS OF SHAREHOLDERS TO DIVI- DENDS, NEW SHARES, SURPLUS ASSETS ETC. r- ;;«: M 1 1 .. t f ! SECT. I. — LIABILITY OF SHAREHOLDERS. Asa general rule any person whose name is registered on tlie stock-ledger of the Bank as a shareholder will be held liable as such. The records in this book are prima facie evidence of ownership (i) Where directors, for the purpose of sustaining the credit of the Bank and without any ulterior motive beyond the corporate welfare, allow shares to be placed in their names simply as a cover, and because they believed that the same could not be properly purchased or owned by the Bank, they will be treated as owners so far as liability is concerned. (-^ A double liability attaches to the subscription for shares in the capital stock of a banking corporation. (1) Thornton v. Lane, II Ga. 459. (2) Morse on Banks and Banking, p 496. 256 Commentary on the Bank Act. The Jirsf is for the full amount of the shares subscribed for ; the second, for an additional like amount in the event of the property and assets of the Bank being insufficient to pay its debts and liabilities upon liquidation. As a general rule the obligation of payment is created and perfected by the act itself of subscription. It would appear, however, that this act would not be considered as perfected unless a sum equal to at least ten per cent, on the amount subscribed for is actually paid in at the time of or within thirty days after the time of subscribing. Sucli, we apprehend, is the construction to be placed upon tlic proviso introduced into section twenty of the Bank Act. Shares otherwise will not be held to " have been lawfully subscribed for." This point, however, has never been adjudi- cated upon. Where the act of subscription is thus perfected, the whole amount, in the absence of a proviso to the contrary, is payable in terms of the Act. A proviso may be inserted that it shall be demanded only in instalments of specified amounts, to be called for within longer periods, but no statement, however explicit, in the original contract of subscription can relieve the subscriber from the ultimate necessity of paying the full par value of the full number oi shares subscribeil for, and the double liability in addition, so long as any creditors of the coi'poration remain unpaid. The doctrine that the stock subscriptions are in the nature of a trust fund for payment of corporate liabilities seems to be well established, l-rom it results the principle that subs- cribers cannot avail themselves of the statute of limitations in bar of the claims of creditors to have full payment made. For tl' - subscribers are chargeable with the trust, and though the corporation may never have seen fit to enforce it, )'et the ccstuis do not thereby lose their rights, (i) The collection in due season by the corporation is a matter lying wholly (I) Payne v. Bullard, 23 ; Miss. 88; King v. Klliott, 5 Sm. dr". Mar. 447; Arthur v. Commercial Cr- R , R, Hank of Vicksburg, 9 id. 430. Morse on liankb and banking, p. 489, notes I aiid 2, Shares and Shareholders. 257 between itself and the subscribers. The neglect of the for- mer cannot exonerate the latter from obligations which do not run alone to the corporate body for its sole benefit, but rather continue throtigh it for the real and ultimate benefit of creditors. The corporation cannot stand between the real debtors and the real creditors, and by its laches, contin- ued for several years, which under such circumstances would often be voluntary and culpable, save the former from a dofia fide liability to the latter. Whether the corporation itself, by neglecting for several years to call for any instalment, would thereby forfeit its right to demand further payment for any other purpose than that of meeting corporate debts which the corporate assets do not suffice to pay, is a question which has never been decided, (i) The lapse of several years creates a natural presumption that the subscriptions have been paid in (2) and, therefore, one who held through mesne conveyances from an original subscriber, and had no personal knowledge of the fact that full pajincnts had not been made, might have a reasonable and a sufficient claim to protection. To the same doctrine of trust must be referred the further piiiici|)'e that a subscription for Bank stock cannot be dimin- ished after once made. So soon as it is legally complete ii is an obligation from which even the directors cannot grant the subscriber any absolution, cither for the whole or for any part, which will avail him as against persons who are credi- tors of the corporation prior to the diminution. The direc- tors do not represent these persons, and are unauthorized to discharge an indebtedness of which they are the real beneficia- ries ; though as towards subsequent creditors the proceedings may tloubtless be perfectly valid, if not tainted in any respect with ill-faith. (3) (i) Hut see Georgia Manuf. df Paper Mill Co. v. Amis, 53 G... 228. (2) Aj^iicultural liink r\ lUiir, 23 Me. 256. (3) I'ayne 7'. HuiianI, 23 Miss. 88; Penobscot &• Kennebec R. R. Co. v. Dunn, 3O Mc. sol J Mann v. Pcntz, 2 Sandf. Ch. 257. R) I r.i t; ■ j i i 25& Commentary on the Banking Act. After shares have been issued, the owner, of course, has the ordinary power to sell and transfer them (i) equally, whether the whole price or only an instalment hr" been paid up, unless the by-laws declare otherwise. But before this stage has been reached, while his position is simply that of a subs- criber, his privilege of transfer exists indeed, but is subject to the restriction that it will not be valid so far as to relieve him from his liability upon the unpaid balance of his subscrip- tion, unless it is assented to by the corporation, and his assignee is accepted, either directly or by sufficient implica- tion in his place. After such acceptance the assignor is fully relieved and exonerated from all liability or his subscription and the assignee, by virtue of the same act, succeeds in e\ ery respect to all the liabilities, rights, privileges and disabilities of his assignor. After an issue of shares the shareholder is an owner of assignable personal property, before the issue he is only a party to a contract in which his interest en be divested only with the consent of thj second contractor The liability of a shareholder for an amount over aud above any sum not paid up on his shares, equ.il to th'.^ par value of such shares, does not accrue, unless the pioperty avA issets of the Hank arc insufficient to pay its deh-.^and liaoilit (2) A bill will lie in equity at the suit of a crecii.r ,, to en'tr >:e the double liability of the shareholders of ai. insolvent Bank; but such bill must be on I-c!t, bj 'au, ir- .. him from liability in respect thereof (4), or if he is by law liable to the company or its members or creditors, as the case may be, to an amount beyond the amount unpaid on his shares, he Vvill be deemed a member of the company for the purposes of this Act, and will be liable to contribute, as aforesaid, to the extent ot his f'l) Section 29 ; Smith v. Bank of Nova Scotia, 8 S. C. R. 558. (2) Section 70. (3) Brooke v. Bank of U. C. 16 Chy. 249, 17 Chy. 301. (4) Sec Section 77. Shares and Shareholders. 259 liabilities to the company or its members or creditors, inde- dependently of this Act ; and the amount which he is so liable to contribute will be deemed an asset and a debt as aforesaid, (i) The liability of any person to contribute to the assets of a company under the Act, in the event of the business of the same being wound up, will create a debt accruing due from such person at the time when his liability commenced, but payable at the time or respective times when calls are made, as hereinafter mentioned, for enforcing such liability ; and in the case of the bankruptcy or insolvency of any contributory, the estimated value of his liability to future calls, as well as calls already made, may be proved against his estate. (2) As a general rule after a company has been organized under charter, the legislature has no power to create ^y subsequent enactment any personal liability on the part of the shareholders, in excess of the amount provided for in the charter. But where, as in the present Act (3), provision is made for future legislation by way of amendment in the public interest of any of the provisions in the Act contained, this rule does not apply. The legislature may therefore, if it deem the measure advisable, provide for an unlimited liability on the part of shareholders. Although, as we have seen, a shareholder cannot in general claim prescription when payment is sought to be enforced, for any unpaid balance on his original subscription, it is appre- hended that this liability, and the further liability for an amount equal to his original subscription, would come under the operation of the statute of limitations once the Ban passed into the hands of liquidators. If this is so the time wh' the statute begins to run is, we apprehend, a question not dun- cult of solution. By the Winding-up Act the liability creates a debt accru- ing due at the time when the liability comraencei but (I) Section 45, Winding-up Act, (3) Section 85. (2) Section 46, do. ' ': '\ -■IP l!^ 260 Commentary on the Bank Act. '^wM payable at the time or respective times when calls are made for enforcing such liability, (i) It is further enacted (2) that no call shall compel payment of a debt before the maturity of such call. P'roni this it follows that the liability for con- tribution matures on the several days fixed for payment of the calls, and the statute of limitations will commence to run for each call from the maturity thereof as aforesaid. The liability accrues not upon the suspension of the Bank, but upon the discovery of the insufficiency of the assets to pay the corporate indebtedness, and this discovery is evidenced by the demand for contribution payable on a fixed day. CALLS. The shares of the capital stock of the Bank when not fully paid up must b:. paid in by such instalments, and at such times and places a/i the directors appoint (3) ; and the directors are authorized to make such calls for money from the several shareholders for the time being, upon the shares subscribed for by them, respectively, as they find necessary. (4) No call exceeding ten per ce- \ of the par value of each share can be made (5) ; and there must be an interval of not less than thirty days between the making of two successive cal's, as well as an interval cf at least thirty days between the time of making a call, and the time fixed for payment thereof. (6) Where one call could not be enforced for want of sufficient notice, it does not vitiate other calls in the same notice, where t!ie full time was given. (7) A call made by four directors, one of whom was not legally ap[)ointed, was held valid, three of the directors who made (1) Section 46, Ante, CHAP. VIL (2) Section 49. (3) Section 20. (4) Section 21. (5) Section 21, sub-section 2. (6) Robertson v. La Hanque d'llochelaga, 4 L. N. 314, 6 L. N, 307. Gee also St. Jolin bridge Co, v. Woodward, i Kerr, 29. (7) St. John Bridge Co. v. Woodward, I Kerr, 29. '^m:.rr SJiares and Shareholders. 261 it being duly qualified, and that number being a sufficient quorum under section i6, (i) It is also laid down in the text books generally that where the power to make calls is vested en the directors, a call made by those who are actually directors and not yet removed, even though illegally elected, will be good. {2) It would seem, however, from a recent decision of the Privy Council that to justify a forfeiture for non-payment of calls, the calls must have been regularly made by a board of directors who had been duly elected, and this case seems to throw doubt or the validity of calls made by a dc facte board of directors. (3) If any suspension of payment in full in specie or Dominion notes, of all or any of the notes or other liabilities of the Hank, continues for six months, and if no proceedings are taken, und;;r any general or special act for the winding up of the Bank, the directors are required to make calls on all shareholders, to the amount they deem necessary to pay all the debts and liabilities of the Bank, without waiting for the collection of any debts due to it or tlie sale of any of its assets or proi)erty. Such calls are to be made at intervals of thirty ti.i;-,, and upon notice to be given thirty days at least prior to the diy on which such calls shall be paj-able, and any number of such calls may be made by one restilution ; any such call shall not exceed twenty per cent, on each sb.are ; and payment of such calls may be enforced in like manner as payment of calls on unpaid stock may be enforced ; and the first of such calls may be made within ten days after the expiration of the said six months. Every director who refuses to make or enforce, or to con- cur in making or enforcing, any call under this section, will be guilty of a misdemeanor, and liable to imprisonment for ( 1 ) Hank of Liverpool v. Bigelow, 3 R. vS^ Co. 236, Nova Scotia. . (2) Bruce on Ultra Vires, 2nd ed. 3O2. (3) Tiie liarden Ciully United Quart/. Mining Co. v. McLister, L. R. I App. Gas. 39 (1875). See also Bottomley's Case, 16 Ch. Div. 681 (1S80). i 1 *■ * I '' ^ *'&fii 1 ■ 1 ■'M I I t i \ i ^1 ';f.'' 't I : I 1 .1 262 C(ynimentary on the Bank Act. any term not exceeding two years, and will further be person- ally responsible for any damages suffered by such default, (i) In the event, however, of proceedings being taken under any general or special winding-up Act, in consequence of the insolvency of the Bank, all calls must be made in the manner prescribed for the making of such calls in such general or special winding-up Act. (2) A joint stock company may take a promissory note from a shareholder for an amount due by him on an asscsjnicnt of his stock, there being nothing in the Act of incorporation to prohibit it. (3) In the event of non-payment of any call made by the directors an action may be at once brought in the corporate name of the Bank to recover and get in all moneys due on such call. (4) But the enforcing of payment in this manner is not the only remedy given by the Act to the Hank, for it is further provided that the directors have it in tlieir option to declare such shares forfeited to the Bank (5), and they arc empowered to sell, at public auction, on giving thirty days prior public notice, the said shares or so many of them as shall, after deducting the reasonable expenses of the sale, yield a sum of money sufficient to pay the unpaid instalment due and an additional sum, by way of forfeiture, of ten per cent, on each share upon which the instalment is due. Where the directors elect to sue for non-payment of calls, in virtue of the provisions of the Act, and notify defendant of their election, they cannot afterwards alter their election and proceed to confiscate the shares without first giving the owner notice, and putting him en dcmeure. (6) (1) Section 72. (2) Section 73. See also antt CHAP, VII. (3) St. Stephen's Branch Ry. Co. v. Black, 2 Han. 137. (4) Section 22. (5) Sections 22 and 23. (6) Robertson v. La Banque d'Hochelaga, 4 L. N. 314 ; 6 L. N. 307. ''^rfflF Shares and Shareholders, 263 SECT. 2. LIEN ON SHARES FOR HOLDERS INDEBTEDNESS TO HANK. Section fifty-nine provides that the Bank shall have a privileged lien for any debt or liability for any debt to the Bank, on the shares and unpaid dividends of the debtor or party so liable, and may decline to allow any transfer of the shares of such debtor or party until such debt is paid ; and, further, that if such debt is not paid when due, the Bank may sell such shares after due notice, given to the holder thereof, of the intention of the Bank to sell the same. Should the value of the shares at the then current rate exceed the amount of the debt, it is apprehended that the debtor is entitled to demand an aj)portionment, and that the more general terms of this section are to be considered as modified by the provisions of the twenty-ninth section of this Act. This latter section has declared as follows : " No assignment or transfer shall be valid until the person or persons making the same shall, if rccjuired by the Bank, previously discharge all his, her or their debts or liabilities to the Bank, which may exceed in amount the rcuiainiiig stock, if any, belonging to such person or persons valued at the then current rate ; and no fractional part or parts of a share, or less than a whole share, shall be assignable or transferable." No lien exists at common-law upon the shares of a share- holder who is indebted to the Bank. But the importance of such a provision has caused it to be thus established by legislative enactment. The lien which exists upon unpaid dividends may be said to partake more of the nature of a set-off than of a lien proper, and might with more exactness be so termed. Inasmuch as a dividend is a simple debt owing from the corporation to the shareholder, and as such recoverable bj' action, the liank has always the right to off- set such dividend against any indebtedness to the Bank, and this, too, though the dividend have been substantially earned before the indebtedness accrued. I I I • i.' \ 2G4 Ctmmeniary on the Bank Act. FOR WHAT INDEUTEDNKSS THE LIEN ATTACHES. I ■ The nature of the indebtedness, whence or how arisiii',', is a matter of no consequence as regards the attaching of the lien. Nor is it of any moment whetiier or not tiie iiidcbtcu- ncss has actually matured at the time when a demand for transfer is made. It now attaches in like manner to secure liability for debt. Such was not the case, however, befcjrc the amendment of 1880 came i.Uo force. And certainly it seems reasonable that the lien should secure indebtedness which has not fully matur^id ; otherwise a large portion of the good which is sought to be accomplished by it must be wholly annulled. The liank, knowing itself to be entitled to such a lien, may fairly be supposed to rely upon it in allowing the indebtedness to be assumed originally, and would be justified in regarding it as a valu;i.ble contribution towards perfect security, on the faith of which the directors may not improperly neglect to demand such strong adilitional safeguards as they arc wont. Further if the lien did not apply to immature indebtedness, what is to prevent the grossest frauds by the debtor? He could not be legally opposed, if with the express purpose of stripping the Hank of all possible means of repaying itself, and knowing that he will not and cannot himself pay it, he transfers all his shares upon the very day before hi:; note to the liank is to fall due. It does not prevent the lien from attaching, or the liink from refusing, to permit a transfer, that the deposit account of the debtor is greater than the amount of his indebtedness. The Bank is under no obligation to look to the deposit account before or in preference to the stock. And even if the shareholder offer ample security for the debt, and the Bank still refuse to permit the transfer, the shareholder may not have a right of action against the Bank for the refusal. There seems to be some reason for doubting by what right the courts could compel the Bank to exchange, or punish it for refusing to exchange, a security of a peculiar nature, which the law has directly given to it, and to take in its stead Sharea and Shnrehohlera. 265 another species of security wliich, thoii^jh it may ai)[)car equally valuable and sufficient, may yet for divers reason be less acceptable to the directors, (i ) Ikit if the Hank assents to accept other security, the lien will be thereby discharpjed, unless the contrary understanding be affirmatively proved. WAIVER AND LOSS OF LIKN. If the Hank suffers the transfer to be made upon its books, without the express stipulation that the shares shall still be held by the assignee subject to the lien for the then subsist- ing indebtedness of the assignor, it will amount to a waiver of the lien. (2) Hut the Hank may at any time demand and receive further security from any indorser or guarantor for the shareholder's indebtedness without in anyway infringing or affecting its right of lien. (3) The lien is appurtenant to the indebtedness and not to the remedy. Whence it follows that though the right of action at law may have been barred, and the remedy lost by the running of the statute of limitations, still, the indebtedness not being thereby discharged, the lien subsists. The two are co-existent. (4) I ■J I ! f f}:n SUBROGATION OF SUKKTIES TO HANK S LIEN. The lien is primarily for the benefit of the Hank. Hut if the principal debtor furnishes sureties or guarantors upon the debt, and they pay the amount to the Hank, they will then be subrogated to all the rights of the Hank. (5) They will be entitled to avail themselves of the lien, and the Hank will owe to them the duty of refusing to allow a transfer of the shares, and must not suffer a waiver or loss of the secu- rity by any other means, until they have been reimbursed. (i) Hut sec Mechanics Hank 7>. Earp, 4 Rawle, 384. (2) Sewall ?'. Lancaster Hank, 17 Serg. &• R. 285 ; Rogers ~: Huntingdon Hivnk, 12 id. 77. (3) Union Bank 71. Laird, 2 Wheat. 390. (4) Farmers Hank z/. Iglehart, 6 Gill, 50. (5) Art. 1950, C. C. L. C. I ! I' il ' '1 ^H^Btt ' '■ ^ »«,. i ^iikiiLa ^>. IMAGE EVALUATION TiEST TARGET (MT-3) 1.0 If >^ 1^ I.I 11.25 u m ■ 2.2 140 I. ^ I 2.0 I. ^IM 6" oS <^ > / Photographic Sciences Corporation 33 WIST MAIN STRUT WftSTH.N.Y. MS80 ( 71* ) 872-4503 z % I 266 Commentary on the Bank Act. After payment by th^m, the Bank in fact becomes a trustee for them, for the purpose of doing whatever may be neces- sary to retain and secure the lien for their benefit, (i) The rule that the surety is entitled to the benefit of all the credi- tor's securities has been carried so far in respect to liens upon Bank shares, that it has been held that the Bank has no right to appropriate or shift the lien for the purpose of covering a new demand, with the effect of leaving the debt on which the surety is liable either unsecured or imperfectly secured (2) It being a recognized principle of law that the obligation of a surety is at an end, when by the act of the creditor the surety can no longer be subrogated in the rights, hypothecs and privileges of such creditor (3), it follows that all sureties and guarantors of the shareholder's indebtedness to the Bank will be discharged by any waiver of its lien. SECT. 3. TRANSFER AND TRANSMISSION OF SHARES. Every person, who becomes the owner of shares, is entitled to demand that the Bank shall permit the necessary forma- lities, accompanying and requisite to the completion of a transfer, to be performed on its books, and it shall issue to him a certificate for the shares, such being the ordinary usage of business in this respect. (4) An action will lie for a wrong- ful refusal to comply with these obligations. (5) Though if the Bank has any lien upon the shares, or if the party himself or the seller of the shares fail to conform to the requisite and reasonable formalities established by the Bank in the matter of transfer, the Bank will be entitled to refuse to act until the obstacle is removed. Statutory provisions declaring the shares to be transferable at the Bank, or (i) Klopp V. Lebanon Bank, 46 Penn. St. 88, (2) Kuhnsz'. Westmoreland Bank, 2 Watts, 136. (3) Art. 1959, C. C. L. C. (4) Husseyz/. Manufacturer's Bank, lo Pick. 415. (5) Morgan v- Bank of North America, 8 Serg. (Sr* R. 73. Sha.re8 and SharehoMera. 267 that the transfer shall be registered on the books of the Bank, are designed for the protection of the Bank, and will be so construed as to secure that protectson. The transfer will not be considered as having been made "at the Bank," simply because the parties have passed and received the certificate within the walls of the banking house. The act must be so done as to assume a formal and authentic shape, under the official cognizance of the officers of the institution. The regulations of the corporation in the premises, unless unreasonable, must be complied with. Section 29 of the Act contains the provision that the directors have power to regulate transfers of stock, with regard at least to the place or places where any transfer is to be made and to the form which such transfer will take. It is especially provided by the Act itself that no assignment or transfer shall be valid, unless it is made and registered and accepted by the person to whom the transfer is made in a book or books kept by the directors for that purpose. The directors may also require that the person making any transfer of stock shall have previously discharged all his debts or liabilities to the Bank, which exceed in amount the remaining stock, if any, belonging to such person valued at the then current rate. / rm ¥m f ir u ^1 ''^m •;. 1 At common law an incorporated Bank has no implied lien upon the stock of a shareholder which has been trans- ferred by him as security for any demand against him, and the Bank is under obligation, notwithstanding it may have any such demand to enter on its books the transfer of such stock in pursuance of the assignment of the same, and becomes liable in damages to the assignees for a refusal so to do. This rule, however, does not of course hold, if by the charter of the Bank it is provided that all debts due the Company from a shareholder must be satisfied before any transfer of his stock shall be made. Such is the provision of 268 Commentary on the Bank Act. the Bank Act. In the case of the Union Bank versus Laird, it appeared that by the Act of incorporation the shares of a stockholder were transferable only on the books of the Bank, and that all debts due and payable to the Bank by a stock- holder must be satisfied before the transfer shall be made, unless the president and directors should direct to the contrary. It was held by the Supreme Court of the United States that no person could ncquire a legal title to any shares, except under a regular transfer according to the rules of the Bank, and that if any person took an equitable assignment it must be subject to the rights of the Bank under the Act of incorporation of which he was bound to take notice. As a creditor may take and hold several securities for the same debt from his joint debtors, and cannot be compelled to yield up either until the debt is paid, it was therefore further held that the Bank had a right to take security from one of the parties to a bill or note, and also to hold the shares of another party as security for the same. When an intending purchaser of stock enquired of the Bank officers what claims the Bank held against such stock, and certain information was given, but before the arrange- ment for the transfer of the stock was completed another claim, which was then current in one of the other agencies of the Bank, was returned unpaid, it was held that the Bank, had a right to retain its lien on the stock for the additional sum be- fore allowing the transfer of the stock in its books, (i) The cashier properly makes or superintends the transfer of shares. Any person showing, prima facie, a legal right to demand a transfer to himself may demand it from the cashier or any other principal officer left in general charge and super- intendence of the business of the Bank. Any officer, who can properly make the transfer at all, will be protected in making it without going behind the apparent legality and propriety of the demandant's right in order to determine whether or (I) Cook V. Royal Canadian Bank, 20 Chy., i (1873), Shares and Shareholders. 269 not there is any hidden cause for objecting to it. A prima facie title is enough, as if one who had bought shares sold by the sheriff asks for a transfer of them, the cashier is not only justified in giving it, but it is even his duty to do so, and the Bank cannot subsequently be held liable on the ground of any original irregularity, which should have altogether prevented the making of the sale. It is an incumbent duty on the part of the Bank not to permit a transfer of stock until it is satisfied of a party's authority to transfer. If stock be transferred under a forged power of attorney, the real proprietor is entitled to have it replaced by the Bank, and also to the dividends due thereon. This point was determined in a case in which the Bank of England was defendant, and the Court laid down the broad principle, that transferable shares of the stock of any com- pany could not be divested out of the proprietor by any act of the Company without the authority of the stock- holder, and that a transfer in writing, not made by the party transferring or by some agent duly authorized, could have no effect. J. L. made in favor of his son, a boy of about seven years of age, a document purporting to be a transfer often shares of bank stock ; the document, which was regularly entered on the Bank's books, was in substance as follows : This inden- ture made the 7th of June 1875, between J. L. of the first part, and J. L. in trust for his son P. L. of tlie second part, and the Union Bank of the third part, witnesseth that for value received the party of the first part doth by these pre- sents sell and assign to the said party of the second part ten shares of the capital stock of the Union Bank. And whereas the said party of the second part hath, with the approval of the Board of Directors of the said Bank, become the purcha- ser of the said ten shares, " etc. Then followed a covenant on the part of the purchaser to observe all his obligations under the by-laws of the Bank, and the deed was signed by "J. L. ; J. L. in trust for son P. L. ; for the Union Bank, 1 1 '. 1 Kn fli "1 Hi it i:. - ^1 I ■ I, 270 Commentary on the Bank Act. J. J. L., assistant cashier." Two dividends were paid to J. L. in trust for his son, and the Bank then refusing to pay fur- ther, the plaintiff was appointed tutor to the minor, and brought suit to be declared proprietor of the said shares — Hc/d, that the transfer or donation so attempted to be made was null and void for want of legal acceptance, (i) I i The mere fact that a Bank permits stock which stood in the name of the testator to be transferred by the executor furnishes no ground of complaint against the Bank, although it is made to appear that the executor was by the act of transfer converting the money to his own use ; for a party dealing with an executor is not bound to enquire into his his object, nor is at all liable for the executor's misapplication of the money. The party dealing with an executor must have reasonable ground for believing that the executor intended to misapply the money. For the daily inspection of the shareholders of the Bank a list of all transfers of shares is required to be made up at the end of each day, showing the parties to such transfers and the number of shares transferred in each case, and this list must be kept at the chief place of business of the Bank. Offices for the transfer of shares and the payment of divi- dends may be open in the United Kingdom under such agents, and according to such rules and regulations and after such forms as the directors may appoint. SHARES PERSONAL ESTATE. The provision of section 29 that the shares of the capital stock shall be deemed personal estate is merely declaratory of what the law would be, without special enactment to tha' effect. As personal estate of the holder they are liable to (i) Walsh V. Union Bank, Q. 4 June 1880. Confirmed in Appeal. Shares and Shareholders. 271 bofta fide creditors for debts incurred, and may be attached, seized and sold under writs of execution in like manner as other personal property may be so seized and sold, (i^ A share, however, maybe defined to be a right to partake accor- ding to the nominal value of said share of the surplus profits obtained from the use and disposal of the capital stock of the Bank to those purposes for which the Bank was insti- tuted. They are not therefore strictly speaking chattels, and it has been considered that they bear a greater resemblance to choses in action, or in other words they are merely evidence of property. They are, it is held, mere demands for dividends as they become due, and differ from moveable property which is capable of possession and manual apprehension. In fine Bank stock is individual interest in the dividends as they are declared, and a right to 2l pro rata distribution of the effects of the Bank on hand at the expiration of the charter ; and the Capital Stock of the Bank is the whole individual fund paid in by the stockholders, the legal right to which is vested in the corporation to be used and managed in trust for the benefit of the members. HOW FAR SHARKS ARE GOODS, WARES AND MERCHANDISE. It was for some time a matter of doubt in England whether shares in an incorporated company were of the nature of goods, wares, and merchandise within the statute of frauds, so as to require an agreement for a transfer of them to be in writing, etc. It is now, however, well settled that shares arc not goods, wares, and merchandise within the statute of frauds, and that therefore a contract relating to a sale and transfer of them need not be in writing. In the United States, however, a different opinion seems to be held, and contracts for the sale of shares are not valid unless there has been a note or memorandum in writing or earnest or part payment. (I) In Quebec, Bank shares cannot be seized by saUie arret, Hudon et al v. Painchaud, Ramsay's App. Cases. 11 W\ '! 'i 1 r^ifi *';f fl TfH : W \ f. ■. ■I \'' ' \' )':/■ ;. t % r ■ 1 [' \ ! hi m i' i I 272 Commentary on the Bank Act. SECT. 4— SHAREHOLDER'S RIGHT TO SURPLUS ASSETS. Any surplus, which may remain, after payment of corporate debts, in the hands of the liquidators who have had the corpo- rate property committed to them for the purpose of wind- ing it up belongs to the shareholders. They are entitled to have it apportioned among them according to the number of their respective shares, and this will be done by order of the court, who will adjust the rights of the contributories among them- selves, (i) The trust is first for the discharge of the indebted- ness of the Bank-, and next for a division of the remaining assets among the corporators. For this reason, and also because of the number of persons interested, a bill in equity may properly be brought against the trustee, demanding that he account, and that he collect and distribute the surplus property. Though if it should happen that an apportion- ment has already been made, and that only payment in accordance with it is sought, then each individual shareholder might maintain his own action at law for the collection of the sum due to him, like any other action for simple debt, (2) But the ownership of shares, or the payment of a contri- butory share under the apportionment for the payment of corporate debts, does not render the shareholder a creditor of the corporation, or entitled to any dividend out of its assets till all the proper indebtedness has been discharged in full. (3) Not even if the shareholders have been assessed upon the basis of an undervaluation of the corporate assets can they have any dividend returned to them so long as there are creditors of the corporation remaining unpaid. (4) A failure on the part of any shareholder liable to any call to pay the same when due will operate a forfeiture ( 1 ) See Section 5 1 , Winding-up Act. post. (2) Bacon v. Robertson, 18 How. U. S. 480 ; Smith v. Snow, 3 Mad. C. C. 310. (3) Hollister v. Hollister Bank, 2 Keyes (N. Y.), 245 ; Coulter v. Robertson 24 Miss. 278. (4) Pruyn v. Van Allen, 39 Barb. 354. Shares and Shdreholdera. 273 by such shareholder, of all claim in or to any part of Uie assets of the Bank, — such call, and any further call thereafter, being nevertheless recoverable from him as if no such forfei- ture had been incurred, (i) shareholder's right to new shares. Where there is an increase of the original amount o*" the capital stock of the Bank, and new shares are created to re- present it, those who are shareholders at the time of the creation have the first right to subscribe, in the proportion of their original shares, for the new ones, before these can be offered generally. (2) Nor can they be deprived of this right by the board of directors ; but, if they be deprived of the pri- vilege by the action of the board, they or any of them may sue the corporation by special count in assumpsit, and recover, by way of damages, any premium the shares might be worth above par. (3) But where the full amount of the original capital stock has never been subscribed for, and the full number of shares thereof has never been issued, the case is different. If the directors then see fit to accept or solicit subscriptions for the shares remaining untaken, they are not obliged to give to those who are already shareholders any preference, but may offer the fresh shares in open market. (4) shareholder's right to dividends. Dividends are only payable to the shareh older on demand ; and accordingly he has no right of action against the Bank to recover them until after demand has be;n made for them, and made for them at a time when the shareholder has a right to have them paid. If he make the demand when the Bank is rightfully retaining the dividend in set-off against his indebtedness to the Bank, he cannot bring suit, after this indebtedness has been paid, without renewing the demand, (c) (1) Section 74. (2) Gray v. Portland Bank, 3 Mass. 364. (3) Eidman v. Kowman, 58 111. 444. (4) Curry v, Scott, 54 Penn. St. 270. (5) Hagar v. Union Bank, 63 .Me. 509. I' N :"f in r R; ■ I. ■I CHAPTER IX. OF COLLECTIONS. SECT. I— OF THE POWER GENERALLY, Collection upon checks, notes, drafts, bills of exchange, and in short upon every species of business paper, is a duty very commonly undertaken by banks on behalf of their cus- tomers. Collection upon checks is probably a universal necessity of the business. Specific power to assume this duty is not usually conferred in the charter of a banking corporation. It is not necessary that it should be so, since the courts regard it as a part of the banking business, (i) After the collection has been made the Bank becomes a simple contract debtor for the amount, less the commis- sion. If the party for whom the collection is made is a regular depositor, the sum will be properly placed to his credit upon his general deposit account, (2) unless a peculiar usage or special instructions demand some different course of dealing. If the party has no deposit account the Bank simply owes him the amount on demand. But it would seem that, if it chooses, the bank may credit him with it as if it were an ordinary payment on deposit, and thus initiate and establish the relation of banker and depositor between itself and him. For though this may operate to place the Bank under obligations and duties towards him which would not otherwise have existed, yet these are all for his advan- (1) Tyson v. State Bank, 6 Blackf. 225. (2) Marine Bank v. Rushmore, 28 111. 463 ; Cullediona. 275 tagc, and his own right to withdraw the whole sum instantly upon demand is in no respect altered, if he does not wish to ratify the option of the Bank and to become an ordinary dcptsitor. (i) A Bank receiving paper for collection is generally the agent of the party from whom it receives it ; (2) sometimes of the real owner, if he stands further removed in the chain of title. But in no case and in no sense is it the agent or trustee for the maker of the paper, or for the party who is indebted thereon. If the debtor simply pays into the Bank the amount due and takes up his paper, he is thereby fully acquitted and absolved. He is not responsible for the subsequent fate of the sum, and is not bound to inquire whether it comes to the hands of the person entitled to it, or is lost, wasted, or embezzled in the Bunk. Ashe is under no liability of this description, so it follows that he has no right of action against the Bank if it fails to pay over properly The whole business is completed, so far as he is concerned, by his payment and the contemporaneous surrender, cancel- lation, or destruction of the evidence of his debt. (3) A note given in charge to a Bank for collection, and so indorsed as to place the apparent and technical title in the Bank, if not withdrawn after non-payment and protest, may be sued upon by the Bank in its own name. But unless specially so instructed it is not the duty of the Bank to bring suit under such circumstances. It would seem therefore that its doing so will be purely a gratuitous undertaking upon its part, for which it might perhaps be allowed its actual and necessa»'y disbursements, but certainly nothing more in the way of compensation for its trouble in attending to the proceedings. (4) (1) Tinkham v. Hayworth, 31 111. 519. (2) Daly V. Butchers' and Drovers' Bank of St. Louis, 5') Mo. 94. (3) Smith V. Essex County Bank, 22 Barb. 627. (4) Sterling v. Marietta iSr» Susquehanna Trading Co., 11 Serg. cr* R. 179. } I t •■^1 t ;>?i ■:a : u li :' ,i 11^;! . in ' I '[; if. m iif 276 Cummeiitary on the Dank Act. BUSINESS PAPKR MADK PAYAHI-K AT HANK. If a note, bond, or other instrument be made payable at a bank, and be deposited in that Hank for collection, the Hank becomes the agent of the payee to receive the money. Hut if it be not deposited in the Hank and the debtor deposits money there to meet it, then the Hank is the agent of the debtor, Hy making such deposit in due season, the debtor so far fulfils his duty that if the obligation be not presented there for payment at the day of its maturity, the debtor is liable for no loss or damage which may subsequently accrue either in the way of interest or costs of suits by reason ol the delay, (i) Apparentl)', too, he should be acquitted if subse- quently and before demand by the holder of the paper the Hank should fail. NOTICE OF DISHONOR. Where a Bank, not upon its own account but as agent for collection, holds indorsed paper of any description which is dishonored, it has been questioned to whom it is bound to give notice of the dishonor, — whether only to its own princi- pal, that is to say, the party from whom it received the paper, or to the makers and all the indorsers thereon. The deci- sions, in American courts have not from the outset been per- fectly harmonious. Hut the doctrine that the duty extends to the notification of any persons behind the party recogni- zed by the Hank as its immediate principal is comparatively weakly supported. According to Mr. Morse (2) it may be assumed now to be the law in the United States that the notification to the principal — /. c, to the immediate predecessor in possession, the party from whom the Hank receives, no matter what may be the nature of the title or interest of that party to or in the paper- is sufficient to acquit the Hank. Hut though this is settled as (1) Ward V. Smith, 7 Wall. 447 ; Mount v. Dunn, 4 L. C. R. 348. (2) Morse on Bank and Banking, 400-402. Collections. 277 the pcncral rule, it is of course opcfi ^^iterial variation fiDtn extrinsic causes. A special a^jrct ncnt, express or implied, between the Bank and its principal, may require notice to be given to all the parties, or to any particular party, on the paper. So a local usage, or the usage of the collecting Hank, to notify indorsers or makers, may render it obligatory upon the Bank to do so, as a part of the con- tract of collection. It seems hardly necessary to state that which is the natu- ral and necessary inference from the doctrines and cases ahead}' given, viz., that if any breach or neglect on the part of the Bank occurring in any portion of its duty in the task of collection results in any loss to any party interested in the paper, whether his name appears thereon or not, (i) such party will have his right of action against the Bank to recover reimbursement or damages for the injury. The measure of damages will be the amount of actual loss which he has sustained. (2) It has been held also that where a Bank demands and receives payment of a dishonored note from an indorser, and he, seeking in his turn to recover from a prior indorser, fails to do so by reason of a default by the liank in not making a proper demand upon the maker, which insufficiency was unknown to the paying indorser when he made the payment, he shall recover back the amount of his payment from the Bank. DUTY OF BANK TO HOLDER OF PAPER LEFT ON COLLECTION. The duty of the Bank to the holder of the paper which is received for collection differs slightly according to the char- acter of the paper and the place where it is made payable. First in order will be considered those collections which are to be made in the same place where the collecting Bank itseii' (i) McKinster v. Bank of Utica, 9 Wend. 46 ; 11 id. 473. Browne et al v. Commercial Bank, lo Q. B. (U. C. 129,) (2) Bank of Wasliington v, Triplett, i Pet. 25 ; McKinster v Bank of Utica, 9 Wend. 46; Tyson v. State Bank, 6 Blackf. 225. ■ ■ i m 1 ?! ri [■! ; , I;'! pi:. 1 "4 278 Commentary on the Bank Act. % is situated. For the purpose of this discussion it makes no difference whether the Bank is itself the owner ; or has come by the p^per directly from the hands of the owner or his agent ; or has received it from a correspondent of its own in some distant place. The only conditions are that the Bank performing the actual collection be situated in the same town where is also the person who is bound to make the payment, or the banking house at which, by the terms of the instru- ment, payment is to be made. Where the instrument received for collection is a prorr.is- sory note, a bill of exchange or a draft, the duty of the collecting Bank is comparatively simple. It must perform the ordinary requirements in the way of presenting for acceptance if the instrument ought to be accepted, and of presenting for payment at maturity when such presentment is necessar). But the Bank is not liable for neglecting to present a draft, \vhere presentment is not necessary for charging any of the parties, and must therefore be legally useless even if made. If either acceptance or payment is refused, the paper must be sent to a notary for protest, pro- vided there is any occasion for having it protested at all. And the Bank is liable if, through an erroneous opinion as to the legal character of any especial piece of business paper, though in an unusual form, it does not cause presentment, demand, and protest to be made in the manner which the court holds to be necessary. Though if the person from whom the Bank received the paper is immediately accessible, there seems to be no reason why the Bank should not be allowed at once to return the paper to him and leave him to have it protested, if he sees fit. But in such case it is t scn- tial that the return can be, and in fact is, accomplished with sufficient despatch to leave him reasonable time for attending to the protesting before it is too late to secure its advantages. Where the instrument received for collection is a check, the duties of the Bank become somewhat more complicated, i. Collections. 279 at the same time that a more correct understanding of them is rendered vastly more important by reason of the immense amount of business of this description which all Banks are oL'iged to transact. Every Bank of deposit in the country is wont daily to receive from its customers upon deposit for their credit great numbers of checks drawn upon other Banks ; though it will be remembered that the present dis- cussion is confined to those cases where the drawee Banks are in the same city or town as as the receiving Bank. Whenever a check is deposited and credit therefor is given in the depositor's account, the check is taken, in the absence of any special agreement, for collection by the Bank . s agent for the depositor ; it is not taken as cash. It fol- lows that the memorandum of credit may subsequently be cancelled if the collection should not be accomplished in due course (i). If circumstances should cause the obligation in any particular transaction to run to any person or party other than the one from whom the liank receives the check, the nature of the obligation is not thereby substantially affected, certainly it can never be increased. The duty of the Bank is still precisely the same duty, though it may prove that a true owner, not at first known to the Bank, is the party who is really entitled to claim a performance of that duty, or damages for its breach. For the sake of brevity we will hereafter designate the person, whoever he may be, to whom the obligation of the Bank runs, as the depositor or the customer. It is necesary in the outset thoroughly to disembarrass the relation of the Bank to the customer, and consequently the whole matter of the duties and liabilities of the Bank in the premises, from two wholly distinct and alien subjects, to wit: The relation of the payee, owner, or holder of the paper to the maker, drawer or acceptor there- of ; and the relation of the party giving it in charge to the Bank to any other person standing earlier in the progres- sion of title. With the two last mentioned considerations (I) Nat. Gold Hank v. McDonald, £1 Cal. 64, Owens z*. the Quebec Bank, 3oQ.B.(U. C.)382. i^H • 1: 1 ■■1 ! i; t y f i: f f M i ■ I p. I' I: 280 Commentary on the Bank Act. W the collecting Bank has nothing whatsoever to do; it may ignore them utterly, in fact oftentimes it may even be incumbent upon it to ignore them utterly, for they may be rendered by circumstances in any paiticular case inconsis- tent with its own different, peculiar, and wholly independent obligation in the business. The reiteration of this doctrine must be pardoned by reason of its importance. The common law, speaking through a great multitude of decisions, has laid down the rules which govern the presentment of checks as between the drawer, the indorsers, and the various subsequent hold- ers ; and there is complication enough in the topic. The common law has, in like manner, laid down the principles controlling the presentment of checks by a collecting Bank as between the Bank and the depositor ; and in this topic also there is independent and ample complication. The entanglement of the two would result in a senseless and inextricable confusion. If, then, one deposits a check in a Bank, there is a certain time within which the Bank is bound to that depositor to present the check to the drawee for payment. It may be that a presentment within a shorter limit of time would be necessary to enable the payee to hold the drawer, or to enable the holder to hold his indorser, in case of non-payment ; or it may be that presentment after that time would suffice for both these purposes. Neither of these facts modifies or affects the time within which the Bank is bound to its czistomer to present. By the ordinary rule of common law, this time is until the close of banking hours on the business day next following that on which the Bank comes into possession of the check (i). This is the general rule, and of course is liable to occasional modifications which will be noticed hereafter. It may be well to illustrate the principles above laid down, (i) Byles on Bills, p. 20. Boddington v. Schlencker, 4 B. &' Ad., 752 (24 E. C. L. R.); I Nev. v. Man., 540, S.C. Alexander!'. Burchfield, I Cor. iSr-M. 75 (41 E. C. L. R.), 34 ScoU, N. R. 555, Owens v, Quebec Bank, 30 Q. U. (U.C.) 382. Collections. 281 for they are fundamental and important. A. and B. are both living in the same town, and keep their Bank accounts at the C and D. Banks respectively, also in the same town. A. gives his check upon the C Bank to B. on Monday. B. deposits it in the D. Bank on Tuesday. D. Bank presents it for payment to C Bank on Wednesday. In this case the D. Bank will have done its full duty by B. under the rule of the common law above laid down- It will have presented for payment on the day after it received the check. So, if the C. Bank were paying checks all day. Tuesday, but stop- ped payment on Wednesday morning, B. would have no remedy against D. Bank for laches or neglect of duty. Nei- ther could he look to A., for A. had a right to have payment of his check demanded upon Tuesday, and the depositing it in the Bank could not be allowed to extend his risk over Wednesday also. If A did not wish, or was not able, to deposit on Monday, he should either have made demand himself on Tuesday, instead of depositing, or he should have deposited under a special agreement with his Bank that it was either to demand payment on Tuesday, or else itself to assume the risk of the customary postponement till the following day, In like manner, if A. and B., and their res- pective Banks, were in two distant towns, and A, deliver- ed or sent to B. his check, the common-law would declare in what manner and within what time B. must despatch his check to the C. Bank for payment. The later cases are to the effect that this should be done by mail, and during the day next following B.'s receipt of the check. Bi't this is the rule as between A. and B. only, and the breach of it would only operate to imperil B.'s right of action against A. But if B, deposits in his Bank, his Bank has the right to for- ward the check to the C. Bank through its wonted channel or correspondence ; and it is not ordinarily obliged to start it upon this progress until the day after it receives, it. Lord Ellenborough well said that it would be impossible for any banker, receiving checks by mails due at various i>ii [■ h ! I '» . , i- ■1 . I-' i-' I ..ii:^* 282 Commentary on the Bank Act, hours all through the day, to keep an army of clerks ready to present them, or forward them all, upon the day of receipt. " Bankers would be kept in a continual fever, if they were obliged to send out a check the moment it is paid in." The arrangement of presenting or forwarding on the next follow- ing day " appears subservient to general convenience, and not contrary to the law-merchant, which merely requires checks to be presented with reasonable diligence." (i) In like manner each Bank in the chain of progress has a right to delay forwarding until the business day next follow- ing the day of its own receipt. So if C. Bank and D. Bank are in two provincial towns, and D. Bank has neither agent nor correspondent in the place where C. Bank is situated, it may send to its agent or correspondent in the nearest large town or city whose facilities for collecting from C. Bank arc, or might reasonably be supposed to be, greater and more available. This course of proceeding on the part of B's Bank may be perfectly sufficient as acquittance of its duty and liability to B. Yet it may also be perfectly consistent with B's loss of his remedy against A. in case payment of the check should be lost by reason of its arriving at C. Bank later by this process than it would have arrived if sent according to those ordinary requirements of the common law which govern the relations of drawer and payee. It will be seen therefore that the deposit of a check in the holder's bank for collection may in a certain conjunction of circum- stances result in his total loss of the amount, without any right of action against any person or corporation for reim- bursement. Several facts must combine, it is true, to produce this conjunction, to wit: first, the presentment by the collecting Bank to the drawee Bank for payment must be later than it would have been, had the ordinary rule of pre- sentment as between drawer and drawee been followed ; second, it must appear that the check would have been paid had it been presented within the time set by this rule, or, at (I) Rickford v. Ridge, 2 Camp. 537. Collections. 283 least, that the Bank was paying during that time, and that the drawer's account was good for the sum called for ; third, payment must be refused, and the refusal must be by reason of the failure of the Bank occurring subsequent to such time and before actual presentment, or by some other like reason beyond the control of the drawer. But the common rule giving to the Bank the whole of the day following its receipt of the check is liable to be material- ly qualified through various causes. The time may be short- ened or extended, either (i) by express instructions given by the depositor, or an express understanding had between him and the Bank, in reference to the particular transaction ; or (2) by the uniform course of dealing previously pursued between himself and the Bank in the conduct of similar jusiness ; or (3) by the known usage of the individual Bank in such matters, provided the usage is one which the courts can properly sustain ; or (4) by the general usage of Banks and custom of the banking business in the city or town where the Bank is situated. The customer is entitled to expect and require of his Bank that it shall not capriciously or needlessly deviate from the established system, whatever that may be ; and if it does so deviate and a loss is the result, he may look to the Bank for compensation. Of course the Bank must always make the presentment directly to the drawee, and cannot send it through other Banks or agents of any description, when the collecting Bank and the drawee Bank are both in the same place. If the collecting Bank, without distinct permission, sees fit to have recourse to them, it does so at its own risk of all the conse- quences which may result, (i) r ■ I u -•■:.H f ii k,\ if: u ;i ■ til I t LIABILITIES OF THE VARIOUS BANKS DIRECTLY TO THE OWNER. If commercial paper is deposited in a Bank for collection, and is by that Bank transmitted to any other Bank or agent, Oifl^i (I) Moule V. Brown, 4 Bing. N. C- 265 ; 5 Scott, 694. 284 Commentary on the Bank Act. or through any series of Banks or agents, until it reaches the possession of the last Bank or agent, whose duty it becomes to make the collection, the Bank or agent actually making the collection can be held directly by the owner of the paper to pay the amount, less charges and expenses to him. If his demand of payment is refused, without sufficient excuse, he may at once sue the Bank or agent. So if the paper is transmitted through several Banks, each one of them is directly liable to the owner for its prompt and accurate forwarding to the next Bank or agent. In this principle the courts may be regarded as concurring unanimously, though they reach it by somewhat various routes. Some of the opinions — those only of course which hold that the first Bank, or any Bank in the series, is not liable for the act of any sub- sequent Bank or agent, but only for the due performance of the especial task allotted to itself — regard each Bank, and the notary too, if a notary is employed, not as a sub-agent of its predecessor or of the first Bank, but as the direct agent of the owner of the paper, for the purpose of doing the precise act which falls to its share in the chain of proceeding. CESSATION OF THE COLLECTING BANK'S LIABILITY TO THE OWNER. When the last Bank has successfully effected the collection, it is directly liable to the owner to pay the money over to him only until such time as it has actually remitted the amount to its predecessor, (i) But some nice questions have arisen where such predecessor, inte. ening between the real owner of the paper and the Bank actually receiving the money, becomes insolvent before the receiving Bank has actually paid over the amount to this predecessor. The general rule of law is that if a person employs an agent to collect money under such circumstances that the agent naturally employs a sub-agent to accomplish the actual collection, then the prin- cipal will be entitled to sue the sub-agent, and collect the (i) Union Bank zf. Johnson, 9 Gill &']. 297. yy- Collections. 285 money directly from him without regard to the relationship or condition of accounts existing between such agent and sub-agent, and although the sub-agent had no knowledge that his employer was an agent and not a principal. But if the owner has delivered the paper to the agent with no indicia whatsoever to show that such agent is not the owner, and the sub-agent receives it from the agent, supposing him to be the owner, and gives him credit upon the strength thereof, then the principal cannot recover from the sub-agent. WHEN THE FH87 effect of such dealing, its long continuance gives no real right whatsoever to the depositor to demand its continuance or its practice in any individual case wherein the bank may, for any arbitrary reason, see fit to withhold the favor, (i) In England a decision, given by Lord Ellenborough (2) wont much further even than this. Bills, not yet due, were sent to a country banker to collect ; according to the custom of country bankers, these were actually entered in the bank- er's own books to the depositor's credit, with the proper discount, and he was thereafter entitled to draw against this credit before the actual collection. Upon the subsequent failure of the banker, before the collection, it v.'as he 1 that the title in the bills had not passed to him, and that the depositor should recover them specifically, or their amount if the bankrupt's assignees had already made the collection. DEFAULT OF THE FIRST BANK. f!; Ml t 1 I f !- Any act of neglect committed by the first bank itself renders it liable for the loss or injury resulting therefrom to the depositor. Thus if the paper is returned to it by its correspondent as uncollectible, it must in its turn promptly send the paper back with this information to the owner. (3) If it is the duty of the bank to procure the acceptance of a draft or bill, it is bound to procure an absolute and outright acceptance, legally binding upon the acceptor, at least so far as concerns the form and circumstance of the act itself of accepting. If it takes any acceptance which is irregular in form, and which therefore fails to hold the party drawn upon, and rests satisfied with this without at once notifying its principal, it will be liable itself to pay the amount of the paper, if otherwise the amount would be lost to the depositor by reason of his inability to hold the proper party as ac- :•■ f (1) Scott V. Ocean Bank, 23 N. Y. 289. (2) Giles 7'. Perkins, 9 East, 12. (3) Van Wart v. Woolley, 3 Barn &• Cress. 439 ; Wingate v. Mechanics' Bank, 10 Barr, 104 ; McKinster v- Bank of Utica, 9 Wend. 46 ; 1 1 id. 473. V' I i t. / / 288 Commentary on the Bank Act. ceptor. (i) If the bank takes the check of the party who Is bound to pay the paper, and thereupon surrenders the paper up to him, it assumes the responsibility for the check proving good. If it is not paid, the bank is still obliged to pay the amount to the person from whom it received the paper. (2) A check lost in course of transmission to the drawee Bank, and which was never paid, or credited to depositor in the receiving Bank, gives no right of action against receiving Bank for money had and received to its use. (3) DUTY OF COLLECTING BANK CONCERNING COLLATERAL SECURITY. It has been held that where a time draft, drawn by con- signors of merchandise upon the consignees, is forwarded to a bank without any special instructions, but having the bills of lading for the merchandise attached, the bank is justified, by reason of the implied intention of the parties and the usages and necessities of business, in surrendering the bills of lading to the consignees upon their acceptance of the draft, without waiting for them to make final payment of it. (4) (1) Walker, President of Bank of Utica v. Bank of State of New York, 5 Sv.-l(l. 582. (2) Commercial Bank v. Union Bank, I Kern. 203. (3) TocUl V. Gore Bank, i Q.B. (U.C.) 40. (4) National Bank of Commerce v. Merchants' National Bank, 91 U.S. (i Otlo) 92; l.anfear z/. Blossom, I La. An. 148; Wisconsin Marine (Sr" Fire Ins. Co. V. Bank of British North America, 21 Upper Canada, Q.B. 284; S.C affirmed, 2 Upper Canada, E. dr' A. 282. / .' OLLATERAL CHAPTER X. OF THE CHIEF EXECUTIVE OFFICER. SECT. I. — THE CASHIER. The cashier is the chief executive officer of the liank, the one who traf/sacfs the business of the Hank, as distiuj^uished from the regulation and control of it. This as we have already seen (i) is the peculiar function of the board of directors. Great difficulty has been experienced in defining the exact functions of this officer on account of the necessity which exists of giving him sufficient practical power to enable him to conduct the daily routine of business, without trespassing upon the domain of discretionary authority. He is j)roperly the executive agent of the directors, his duty being to carry out what they devise. They are responsible for the soundness of the action resolved upon ; he is respon- sible for the honesty, accuracy, regularity, and skill with which that action is carried out. They are the mind and he the hands of the corporation. They may decide to make a certain loan or discount, to sell or mortgage corporate property. He will pay over the money, take the borrower's promissory note, and see that it is in proper form ; he may, by direction of the board, affix the corporate signature and seal, and make delivery on behalf of the corporation of all instruments necessary to complete the conveyance of the mortgage. It is not wholly unapt to liken the board of directors to a bench of judges, and the cashier to the clerk of the court. i= I' (i) Ante', page 70. 290 Cotnmentari/ on the liunk Act, It may be laid down that the Cishicr, once appriintcd, is duly authorized to transact on behalf of the Hink all busiiK ss which judicial decisions or hanki: ,; usa^jes have remlered inherent functions of the office desi^jnatod by this name. Any act done by him within this scope and on behalf of the liank is the act of the Hank. (l) C.KNERAI. STATKMENT OF TIIK CASIIIKR S DUTIES. The cashier is the chief "executive officer, throuj^h whom the whole financial operations of the bank are conducted." (2) Its money transactions, of every description, though tlicy may not be determined by his discretion, will yet be cnn- ducted by and through him. (3) He has charge of all its pro[)crty, its money, its securities, its valuable papers. (4) He has the superintendence of its bot)ks of accounts. (5) Judf^e Shepley has {jiven the following very good abstract of the orilinary duties of a cashier : "To keep the funds, notes, bills, and other choses in action, of the bank, to be used from time to time for the exi<^encies of the bank ; to receive directly, and throu ; imU N 292 V. i; ill ■si vr [. H^l Commentary on the Bank Act. POWER OF BORROWING. The cashier may borrow money on behalf of the Bank, and may bind the Bank by a promissory note executed therefor, (i) Such is the usage of the Banking business. Though if in any individual institution any other officer is selected for this duty, the cashier could no longer bind the Bank to any lender who was aware of the variation. The right of borrow- ing is a function of which he will be wholly deprived by the act of the directors in selecting any other person as th "ir general borrowing agent. But the usage to allow him to borrow is so universal that notice of the deprivation must be brought home to any person who is to be affected by it. Otherwise the public are warranted in dealing with him on the assumption that he possesses it. The power extends only to borrowing in the ordinary course of the daily business of the Bank. But he cannot borrow simply for the purpose of increasing the available funds of the Bank, so that in effect its disposable working capital shall be increased. This is exercising a discretionary control over its affairs which none but the directors possess. CHARGE OF THE PERSONALITY OF THE BANK, AND HEREIN ALSO OF INDORSEMENTS. The cashier has full charge, control and power of disposi- tion over all personal property of the Bank, whether specie, notes, bills, bonds, or of whatsoever other description it may be. (2) All its negotiable paper he may negotiate and transfer on its behalf, (3) and to this end may indorse it over, so as to bind the Bank like any ordinary indorser on similar ISifc. (1) liarnes v. Ontario Bank, ip N. Y. 152; Ballston Spa Bank v. Marine Bank, i6Wis. 120; Sturges w. Banr. of Circleville, n Ohio St. 153; Ridgway V. Farmer's Bank, 12 Serg. &> R. 256. (2) Wild V. Bank of Passamaquoddy, 3 Mason, 505 ; Franklin Bank r-. Steward, 37 Me. 519; Morse v. Massachusetts National Bank, I Holmes, C. C. 209. (3) W!'d V, Bank of Passamaquoddy, 3 Mason, 505, MD HEREIN' The Cashier. 293 paper. But the character of negotiability is a strict limita- tion upon his inherent power. He cannot, solely by virtue of his office, pass title to non-negotiable paperof any sort, or to any other description of corporate property, as for example a judgment given in favor of the Bank. His action in mak- ing transfers of this latter description can be sustained only by authority directly conferred by the directors, or arising from established usage, (i) Of course this power of transfer, like almost every power which an agent can possess, may easily be so abused by him as to n^nder him liable to his principal. It is very difficult to say precisely how much discretion can be properly exercised by the cashier in trad- ing in negotiable securities. Clearly he has no right to push it to that point where virtually it become a considerable and important branch of the Bank's business, and is nevertheless conducted solely by himself. Since the cashier has the general power to indorse over bills and notes of the Bank, tor the purpose of passing title therein, he of course has the lesser and included power to indorse for special purposes, as for discount. So also for collection, and for transmission for collection, he may indorse both paper belonging to the Bank and paper intrusted to it for collection, or given to it as collateral security. (2) If piper is indorsed by him for this special and limited purpose, and is s Mbsequently fraudulently converted, yet if the indorse- ment be general and the paper comes to the hands of a bona fide holder for value and without notice, who presumes and has a right to presume from the style of the indorsement that it was made in the ordinary course of business, and created a guaranty on the part of the Bank, the Bank may be held to respond as an ordinary indorser. (3) The various forms of indorsement which have been employed by cashiers have given rise to important questions (i) Barrick v, Austin, 21 Barb. 241 ; Holt v. Bacon, 25 Miss. 567. (2) Elliot V. Abbot, 12 N. H. 549 ; Corser v. Paul, 41 id, 24 ; Potter v. Mer- chants' Bank, 28 N. Y. 641. (3) Robb V. Ross County Bank, 41 Barb. 586. I f'; 294 Commentary on the Bank Act. ill m concerning their respective validity. The possible diver- gence seems to be limited substantially to four different methods, viz., " Bank, by A. B., cashier;" "A. B., cashier of the Bank ; " " A. B., cashier ; " or finally simply the name of " A. B.," without any other words what- soever. These are the four cardinal forms which alone call for consideration. Others are only slight modifications of these, such as " For the Bank, by A. B., cashier," or verbal variations by the use of simple abbreviations, as "cash." "cas." or "cr." Such will be easily recognized as substantially identical with one or other of these four, and will be governed by the same rules, respectively. It is obvious at once that the first of these forms is the technically proper one. It alone accords with the old established rule of the common law of agency, that where a contract is made through an agent, the principal must be directly named as the contracting party, properly with the addition of further words sufficiently indicating that the principal in this particular case is contracting through the instrumentality of A. B., authorized agent, and the signature must be in like manner of the name of the principal with the additional intimation that it is written by his agent on his behalf, (i) But though it is safest and wisest always to indorse in this manner, and so to obtain the full protection of the ancient and general principle, yet special decisions have declared other forms, theoretically less correct, to be sufficient. So it can no longer be questioned that the second and third forms will bind the bank. (2) But as far as the courts have gone in declaring the indorse- ment in the third form to be binding as the indorsement of the corporation, they have yet much further to go if they are (1) Spear v. Ladd, II Mass. 94. (2) State Bank 7>. Fox, 3 Blntchf. 431; Bank of Genesee v. Patchin Bank, 3 Kern. 309; Northampton Bank ?■. Pepoon, 11 Mass. 288; Folger 7'. Cha.se, 18 rick. 63 J Robb v. Ross County Bank, 41 Barb. 566. The Cashier. 295 resolved to sustain the validity of the fourth form as a corporate undertaking. We find no adjudicated case which directly settles this point, (i) THE CORRESPONDENCE OF THE BANK. The cashier has charge of the correspondence of the Bank. Letters on corporate business are properly addressed to him, and whatever statements or information are contained in them will, in law, affect the Bank with notice. If the subject written about is one in which he has no authority to act, or no duty to perform, it is nevertheless his duty to communi- cate the contents of the letter to the officials within whose province the object-matter falls. It is his duty to see that the information contained in the letter is promptly laid before the proper person. A cashier has no power to contract for the Bank, but if the negotiations concerning a proposed contract are conducted by letters, he properly writes and receives these, and the assent of the third party to the propositions of the Bank, expressed by him in a letter written to the cashier, affects the Bank and completes the legal contract. (2) POWER TO DRAW CHE":KS. The cashier has power to draw checks or drafts upon the funds of the Bank deposited elsewhere. Indeed he is ordin- arily the only officer of the institution who can legally do this. It is proper for him to designate himself as " Cashier of the • Bank," in order to show that he is acting offi- cially, and that the check is intended to withdraw corporate funds. pff'l i li 1 1 '' ^'1 1 11 ^B<^' '^'^ H 'A H-. 11 OF EXTRAORDINARY ACTS AND SPECIAL POWERS AND DUTIES. At this point closes the list of the powers and duties which the cashier may exercise simply by virtue of his office, and (1 ) But see remarks of Judge Denio in, Bank of Genesee v. Patclien Bank, 3 Kern 309. (2) New Hope and Delaware Bridge Co. v. Phoenix Bank, 3 Comst. 166 ; Branch Bank v. Steele, 10 Ala. 915. I I ^t ; « ll I I '! Pii i. >t 296 Commentary on the Bank Act. within the scope of which he may bind the Bank by reason of his being held out to the world as cashier, and as entitled to fulfil all the ordinary and inherent functions of that office. Outside these limits, however, there are great numbers of acts which are frequently undertaken by cashiers, which are strictly consistent with the nature of their office, and which are properly allotted to them for performance. Within this wide classification may be included everything of an execu- tive character, and many matters partially discretionary, or discretional y within certain limits, so that in delegating power over them the directors do not, in fact, part with any governmental authority or divest themselves of the perform- ance of any inalienable duty. That corporate agents, especially agents having such large and important general powers as are enjoyed by Bank ca'-'-'iers, should be allowed some degree of latitude of discretion is inevitable, and, within reasonable limits, is desirable. But the power to exercise discretion, except in comparatively unimportant matters of routine, should be distinctly conferred by the directors or very clearly proved by custom. Even if it be thus conferred or proved, it will be upheld only upon the condition that it is not a material encroachment or usurpa- tion upon the governmental province. It has already been seen that of their obligations and responsibilities of this high nature the directors cannot strip themselves if they would. They are entitled to abdicate only by means of a direct and formal resignation. SELECTION OF DEPOSITORS. The cashier is the proper officer to accept or refuse the account of one who wishes to become a depositor in the Bank, (i) This of course is the case only in the absence of action by the directors in the premises. The decisio.. of the cashier could at any time be overruled by them if they should see fit. (I) Thatcher r. Bank of State of New York, 5 Sandf. I2i. The Cashier. 297 w i i 1. LIABILITY OF THE CASHIER TO THE BANK. The cashier is, of course, liable to the Bank, in an action of damages to make good any and all injury arising from his fraudulent or wrongful acts of an official nature, from his un- authorized assumption of power, or from his breach of the directions imposed upon him to govern his conduct in his agency. ( i ) How far he is responsible for innocent errors and mistakes will be considered under the topic of " Official Bonds." The tellers, book-keepers, &c., arc his subordinates and sub-agents. But he is not answerable, like an ordinary principal, for their defaults, whether intentional or innocent, unless perhaps in those cases in which it can be shown satis- factorily that the default was occasioned, or opportunity or temptation thereto was furnished, by his improper or negli- gent performance of his duty of general superintendence. This rule is supported by the necessity of the business. It is impossible for him to be omnipresent and omniscient among all his servants in the institution, and he is not liable for his failure to perform this impossibility. He is required only to direct them properly in the performance of their several functions, and to exercise the most thorough supervision which is practicable in view of the amount of daily business and the method of conducting the routine of daily affairs. The sub- officers and their respective provinces are usually well known. But if the duties which are ordinarily done solely by the cashier become too onerous to be executed by one man, any arrangement for a partial sub-delegate, which circumstances authorize the cashier in assuming to be satisfactory to and ratified by the directors will be valid, and will thereafter save the cashier from liability for frauds or errors committed in the delegated department. (2) (1) Austin V. Daniels, 4 Den. 299. (2) Bank of the State v. Comegys, !2 Ala. 772. u m ' rf w i. m m m : u 'M JfM K^ ^Pl Kil '1 ^bCm^ mMi HaHISli-. ■a CHAPTER XI. REGULATIONS FOR THE GUIDANCE OF OFFICERS OF BRANCHES. SECT. I- SECT. 2- SECT. 3- SECT. 4- SECT. 5- SECT. 6- SECT. 7- -CASH .\ND SECURITIES. -GENERAL BUSINESS. -DISCOUNTS. -OVERDUE BILLS. -INSURANCE. -WAREHOUSE RECEIPTS. -GENERAL INSTRUCTIONS. In order that managers and other officers at Bra'iches and Agencies may be fully informed of their duties and respon- sibilities, many Canadian Banks issue a form of rules and regulations for their guidance. These regulations may be summarized as follows : SECT. I— CASH AND SECURITIES. r. The combination of the cash safe shall be known to the Manager alone. He shall keep therein all the cash and securities of his Agency. 2. The Teller shall have placed in his hands only such sums as are necessary for the current business, his cash shall be kept in a separate cash box and handed over to the Agent at the close of each day's business, and deposited Ly him in the cash safe. 3. The Manager shall keep a constant supervision over the Teller's cash, and shall count the same at irregular intervals, and not more seldom than four times every month. Instructions to Agents. 299 4. All cash remittances must be mad^ 'jy express, except when other instructions are received from the Head Office, Checks and drafts to order may be sent by mail. 5. When customers order money to be forwarded to them by mail they must order the same (in writing) to be sent at their own risk. 6. All securities requiring registration shall be registered immediately on completion. A proper record of all securities shall be kept by the Manager and when given up, a receipt shall be taken. 7. All powers of Attorney must be examined by the Manager before being recorded or acted upon, :.t! SECT. 2 — GENERAL BUSINESS. 8. The Manager shall study carefully the Acts relating to Canadian Banks and Banking as well as the Acts relating to Insolvency. Also the provisions of the law respecting Bills of Exchange, checks and promissory notes. He shall also make himself acquainted with such securities as can be legally ta!:en by a Bank, and the method of transferring the same. 9. He shall make himself acquainted as fully as pof. i An ir ciiac 1. is m the saiiK pay.' is n payi on t all c c. i< pay: falls I'ro' the juri( gra( :i proi obsi to s 49 VICTORIA. CHAPTER 123. 'If f :iM \ t ' II '■■m n If i An Act respecting Bills of Exchange and Promissory a. D. 1886. Notes. HER Majesty, by and witri the advice and consent of the Senate and House of Commons of Canada, enacts as follows : — 1. Every bill of exchange or promissory note which On what days J ui 4. 1\ ..1 r J ri. hills and notes IS made payable at a month, or montlis, trom and 'titer gj^jjn mature, the date thereof, shall become due and payable on the same numbered day of the month in which it is made payable as the day on which it is dated, — unless there is no such day in the month in which it is made payable, in which case it shall become due and payable on the last day of that month, — with the addition, in all cases, of the days of grace allowed by law. 35 V., c. 10, s. I. 2« Whenever the last day of grace, in respect of the When last day payment of a bill of exchange or a promissory "ote, J^„|^'j^''^j,^gj^j falls on a legal lioliday or non-juridical day in the'l^y- Province where any such bill or note is payable, then the day next following not being a legal holiday or non- juridical day in such Province shall be the last daj- of grace as to such bill or note. 35 V., c. 8, s. 8, part ; — 42 v., c. 47, s. 4. 5$. In all matters relating to bills of exchange and Xon-juridical promissory notes, the following and no other shall be^^^^^" observed as legal holidays or non-juridical days, that is to say ; — ::f. •f,; S I I 308 The Bill and Note Act. 11 Elsewhere (^-^ In all the Provinces of Canada, except the Prov- than in Que- jnce of Quebec— bee. ^ * Sundays ; New Year's Day ; Good I'riday ; Piaster Monday ; Christmr.s Day ; The birthday (or the day fixed by proclamation for the celebration of the birthday) of the reigning Sove- reign ; The first day of July (Dominion Day,) and if that day is a Sunday, then the second day of July as the same holiday ; Any day appointed by proclamation for a public holiday, or for a general fast, or a general thanksgiv iiv^r thoroughout Canada : and the day next following New Year's Day and Christmas Day, when those days respectively fall on Sunday ; In Quebec. l^-) -^"^1 in the Province of Quebec the said days, and also — The PLpiphany ; The Annunciation ; The Ascension ; Corpus Christi ; St. Peter and St. Paul's Day ; All Saints' Day, Conception Day ; Days fixed by (^O -^'""^^ 3.ho, in any one of the Provinces of Canada, proclaniatim. ^^y jyy appointed by proclamation of the Lieutenant Governor of such Province, for a public holiday, or for a fast or thanksgiving within the samel 35 V., c. 8, s. 8, part ;— 42 V., c. 47, s. 3 ;— 46 V., c. 20, s. 1 1. Acceptance ^* ^^ acceptance of any bill of exchange shall be to be in sufficient to bind or charge any person, unless such writing on , . . . . , 1 mi •.- 1 the bill. acceptance is in writing on the bill, or if there is more than one part of such bil , then on one of the said parts. The Bill and Note Act. 309 C. S. U. C, J. 42, s. 7 ;— C. S. L. C, c. 64, s. 5 ; — 28 V. (N S.), c. 10, s. 5;— R. S.N. B., c. 116, s. 4;— 27 V. (P.E.I.), c. 6, s. 2. 5» Notice of the protest or dishonor of any bill of wiiat notice exchange or promissory note payable in Canada shall ^15.1^)°^^ shall be sufficiently given, if it is addressed, in due time, to ^^^ sufficient, any party to such bill or note entitled to such notice, at the place at which such bill or note is dated, unless any such party has, under his signature, on such bill or note, designated another place, — and in such latter case such notice shall be sufficiently given if addressed to him, in due time, at such other place ; and such notices so addressed shall be sufficient, although the place of residence of such party is other than either of such before mentioned places. 37 V., c. 47, s. i. tt» No dam-'ges shall be recoverable in any action. Damages on suit or proceeding, brought in any Province of Canada, hills payable *^ ° ** "' m Canada or upon any bill of exchange drawn upon any person at Newfound- any place in Canada or in the Island of Newfoundland, '^" * against any party thereto, except for the amount for which such bill of exchange is drawn, and for such furtlier amounts as arise from the noting and protest of such bill of exchar-ge, and interest thereon, and exchange and re-exchange thereon : 2. No damages shall be recoverable in any action, ^nd on bills suit or proceeding, brought in any Province of Canada I'^jy^'''^ '•''s^* upon any bill of exchange drawn upon any person at any place not being in Canada or in the Island of New- foundland against any party thereto, except for the amount for which such bill of exchange is drawn, and for two and one half per cent, thereon, and for such further amounts as arise from the noting and protest of such bill of exchange, and interest thereon, and ex- change and re-exchange thereon. 38 V., c. 19, ss. I and 2. u vi 11 310 The Bill and Note Act. in Nova Scotia Protest of "y* All bills of exchange and promissory notes drawn non-accepted ^^ made at any place in the Province of Nova Scotia. or unpiiiil •' ^ "' bills or notes for the suni of forty dollars and upwards, upon or in favor of any person or persons in the said Province, may, on default of the acceptance or payment thereof, be protested by a notary public ; and such protest shall, in any action on such bill or note, he prima facie evidence of presentation and dishonor, and also of ser- vice of notice of such presentation and dishonor as stated in such protest ; for which protest there shall be charged a notarial fee of fifty cents for protest and twenty-five cents for each notice. 42 V., c. 46, s. i. And in Prince Edward Is- land. tatccl in such protest ; for which protest there shall be charged a notarial fee of fifty cents for protest and twenty-five cents for each notice. 46 V., c. 22, s. 2. Ge ml ac- ^" ^" ^^^^ Province of Prince Edward Islantl, if any ceptance of a person accepts a bill of exchange, payable at the office " ' ' or place of business of any bank or other place, without fur'-'ier expression in his acceptance, such acceptance shall be deemed and taken to be, to all intents and pur- poses, a general acceptance of such bill ; but if the Qualified acceptor, in h'; acceptance, expresses that he accepts the accej tance. \^[\\ payaLie at the office or place of business of any hank, or other place only, and not otherwise or elsewhere, such acceptance shall be deemed, and taken to be, to all intents and purposes, a qualified acceptance of such bill ; and the acceptor shall not be liable to pay the said bill, The Bill and Note Act. 311. unless payment has been first duly demanded at such office or place of business in such bank or other place. 27 V. (P. E. I.), c. 6, s. I. 10. When any promissory note or bill of exchange is Notarial pro- payable at anyplace out of the Province of New Bruns- {^^]| "^1^°^^^°' wick, whether the same is drawn in or out of the said Pro- in N.B , vince, a notarial protest of the presentment and dishonor of such promissory note or bill of exchange shall be recei- ved in all courts in the said Province as evidence of the fact of presentment and dishonor stated in such protest, in like manner as in case of a protest of non-payment of a foreign bill of exchange. 22 V. (N- B.), c. 22, s. 4. 11« No clerk, teller or agent of any Bank shall act No officer of a as a notary in the protesting of any bill or promissory |^'^"^^'" ^'^^ ^^ note, payable at the Bank, or at any of the agencies of the l^ank, in which he is employed. C. S. C, c. 57, s. 3. 12« Every bill of exchange or promissory note, the Bill given for consideration of which consists, in whole or in part, off i';'^''^"' "S^t ' ^ ' to have cer- the purchase money of a patent right, or of a partial fain words on interest, limited geographically or otherwise, in a patent right, shall have written or printed prominently and legibly across the face thereof, before the same is issued, the words "given for a patent right." 47 V., c. 38, s. i. its face. 1: :' m *l l! Ill" The indorsee or other transferree of any such in- Transferee to strument, having the words aforesaid so printed or ment'subject written thereon, shall take the same subject to any to ''g'lt of defence or set-off in respect of the whole or any part thereof, which would have existed between the original parties. 47 V., c. 38, s. 2. 14. Every one who issues, sells or transfers, by in- Penalty for dorsement or delivery, any such instrument not having !'"^""S *"*^'^ J ' J o instrument the words " given for a patent right " printed or written not so in manner aforesaid across the face thereof, knowing the consideration of such instrument to have consisted, -M ■ 't- 312 The Bill and Note Act. in whole or in part, of the purchase money of a patent right, or of a partial interest, limited geographically or otherwise, in a patent right, is guilty of a misdemeanor, and liable to imprisonment for any term not exceeding one year, or to such fine, not exceeding two hundred dollars, as the court thinks fit. 47 V., c. 38, s, 3. Provisions 1»5. Sections sixteen to twenty-six, both inclusive, Onurkl.'''' '" ''^rP'y ^° ^'^^ Province of Ontario only. General 10« If any person accepts a bill of exchange, payable acceptance n , i .11 • 1 and pion)ise. ^^ '^ Ijank, or at any other particular place, without further expression in his acceptance, or makes a promis- sory note payable at a bank, or at any particular place, without further expression in that respect, such accept- ance and such promise shall be deemed and taken to be a general acceptance and a generd promise respective- ly: Qualified ac- 2. If the acceptor expresses, in his acceptance, that Dromi"se! ^' ^ ^^ accepts the bill payable at a bank, or at any other particular place only and not otherwise or elsewhere, or if the maker of a promissory note expresses in the body of the note that he promises to pay at a bank, or any oiher particular place only, and not otherwise or else- where, then such acceptance or promise shall be deemed and taken to be a qualif. \ acceptance or promise, and the acceptor or maker shall not be liable to pay the bill or note, unless payment has been first duly demanded at such bank or other place. C. S. U. C, c. 42, ss. 5 ami 6. promise. Bill or note not void for IT- No bill of exchange or promissory note, although usury in cer- given for a usurious consideration, or upon a usurious tain cases. contract, shall be void in the hands of an indorsee (or if a note transferable by delivery, in the hands of a person who acquired the same as bearer), for valuable considera- tion^ unless such indorsee or bearer had, at the time of di counting or paying such consideration for the same, The Bill and Note Act. 313 actual knowledge that such bill of exchange or promis- sory note was originally given for a usurious considera- tion upon a usurious contract. C. S. U. C, c. 42, s. 8. l^i. No bill of exchange shall be presented for ac- No rresent- ceptance on any non-juridical day. C. S. U. C„ c. 42, "Sical day": s. 19. \9» If any promissory note payable only at some Damages and place in the United States of America, or in some one "jjl^^'^yg'^j j^ of the Provinces, Territories or Districts of Canada certain cases other than the Provinces of Ontario and Quebec, or in honored the Island of Newfoundland, and not otherwise or""''^''* elsewhere, is made or negotiated within the Province of Ontario, and is protested for non-payment, the holder shall, in addition to the principal sum mentioned in the note, recover damages at the rate of four per cent, upon such principal sum, and also interest thereon at the rate of six per centum per annum, to be reckoned from the day of the date of the protest, and such aggre- gate amount, together with the expenses of protesting the note, and all charges and postages incurred thereon^ shall be paid to the holder at the current rate of exchange of the day when the protest is produced and repayment demanded, that is to say: the holder of any such note, returned under protest, may demand and recover from the maker or indorsers thereof so much current money of Canada as shall then be equal to the jjurchase of a bill of exchange of the like amount drawn on the same place at the same date or sight, together with the damages and interest above mentioned, and also the expense of protesting the note and all charges and postages incurred thereon. C. S. U. C, c. 42, s. 11. 20. When the holder of a protested bill or note iiow rate of returned for non-payment, notifies the drawer, maker "'^!'.^"se or indorser of the dishonor thereof, in person, or deli- ascertained, vers notice thereof, in writing, to an adult person at his or their counting house or dwelling house, and they I ' ^ I. "i I 314 The Bill and Note Act. Inland bills and notes to bear interest. Protest may be made on (lay of dis- honor. How notice protest may be served. disagree about the then rate of exchange for commer- cial bills, the holder and the drawer, maker or indorser so notified, or any of them, may apply to the president or, in his absence, to the secretary of any board of trade or chamber of commerce in the city or town, in which the holder of such protested bill or note, or his agent, resides, or in the city or town nearest to the residence of such holder or agent, in which there is a board of trade or chamber of commerce, and obtain from such president or secretary a certificate in writinL,^ under his hand, stating the said rate of exchange ; and the rate stated in such certificate shall be final and conclusive as to the then rate of exchange, and shall regulate the sum to be paid accordingly. C. S. U. C, c. 42, s. 12. 21. Every bill, draft and order drawn by any person in the Province of Ontario on any person in either of the Provinces of Ontario or Quebec, and every promis- sory note made or negotiated in the Province of Ontario, if protested for non-payment, shall be subject to interest from the date of the protest, or if interest is therein expressed as payable from a particular period, then from such period to the time of payment ; and in case of protest, the expense of noting and protesting, and the postages thereby incurred, shall be allowed and paid to the holder, over and above the said interest. C. S. U. C, c. 42, s. 13. 2S8. Every protest of inland or foreign bills of exchange or promissory notes, for dishonor, either by non-acceptance or non-payment, may be made on the day of such dishonor, at any time after non-accep- tance, or in case of non-payment, as any time after the hour of three o'clock in the afternoon. C. S. U. C, c 42, s. 15. of 23. A notice of such protest shall be sent . Mch of the parties to the bill or note, and such notice ahall be The Bill and Note Act. 315 dccincd to have been duly served, for all purposes, upon the person to whom the same is addressed, if it is depo- sited in the post office nearest to the place of making presentment of such bill or note, at any time during the day whereon such protest has been made, or the next juridical day then following. C. S. U. C, c. 42, s. 16. 24. Iwcry such protest and notice may be according J'^orm ofpio- to the forms set forth in schedule A to this Act, or to ,njj,ce. tile like effect. C. S. U. C, c. 42, s. 21, part. 2*5. The fees to be taken by notaries public, for the Notary's fees 1 • c • I I II I /- 11 1 '" Ontario. services hereinafter mentioned, shall be as follows, and no more, that is to say : for the protest of any bill, draft, note or order, fifty cents ; for every notice, twenty-five cents ; and foi" postage, the amount actually expended. C. S. U. C, c. 42, s. 22 ; — C. S. C, c. 57, s. i. 20. The Act of the Parliament of Great Britain, Certain passed in the fifteenth year of the reign of King George |'|j|!j"|,^i'^|,j!jii tile Thirtl, intituled. " An Act to restrain tlic negotiation "o't^s "ot in of Proniisssory Notes and Inland Bills of Exehangcy Ontario. binder a limited sum, ivitldn that part of Great Britain called England" and the Act of the said Parliament, jiassed in the seventeenth year of his said Majesty's reign, intituled 'Win Act for further restraining the negotiation of Promissory Notes and Inland Bills of Exchange, under a limited sum, ivithin that part of Great Britain called England" which are inapplicable to the Province of Ontario, shall not extend to or be in force therein, nor shall the said Acts make void any bills, notes, drafts or orders, which have been or may be made or uttered therein. C. S. U. C, c. 42, s. i. 27. The following sections of this Act apply to the Provisions Province of Quebec only. 25. The several fees and charges mentioned in Notary's fees schedule B to this Act, relating to the protesting and '" Q^^^^^. noting of bills and notes in the Province of Quebec, applicable to (Quebec. „■ l.iltl t • i r ' I ^M 316 The Bill and Note Act. Forms in (Quebec . Tenalty if unqualified person notes or protests bills or notes, together with the postages pre-paid upon notices depos- ited at any post-office, may be claimed from the holder of the bill or note by the notary or justice of the peace performing such duties, and shall be recovered from such parties thereto as are liable for the payment of the same. C. S. L. C, c. 64, s. 21. 20. The several notings, protests, notices thereof, and services of notices hereinbefore mentioned, siiall be in the forms set forth in the said schedule. C. S. L. C, c. 64, s. 22. •JO. Every person who represents himself to be a notary for or justice of the peace in the Province of Quebec, and who acts as such in and about the protest- ing of a bill or note, or in and about the noting of a bill, not being such notary for or justice in the Province of Quebec, is guilty of a misdemeanor, and liable to im- prisonment for a term not exceeding six months, C. S. L. C, c. 64, s. 23. The articles of the Civil Code of Lower Canada relating to this subject will be found in the collection of Statutes not consolidated. The Bill and Note Act. '6X1 SCHEDULE A. On this day of , in the year one thousand eight hundred and , at the request of , holder of the bill of exchange hereunto annexed, I, , a notary public for the Province of Ontario duly appointed, did exhibit the said bill unto , at , being the place where the same is payable, and speaking to //////, did demand payment of the said bill ; to which demand he answered Wherefore, I, the said notary, at the request aforesaid, have protested, and do hereby solemnly protest, as well against all the parties to the said bill as against all other persons whom it may concern, for all interest, damages, costs, charges, expenses and other losses suffered or to be suffered for want of payment of the said bill. And afterwards, on the day and year mentioned in the margin, I, the said notary public, did serve due notice, according to law, of the said present- ment, non-payment and protest of the said bill, upon the several parties thereto, by depositing, in Her Majesty's post office at , being the nearest post office to the place of the said presentment, letters containing such notices, one of wliich letters was addressed to each of the said parties, severally ; the superscription and address of which letters arc respectively copied below, as follows, that is to say : ^ {Here insert the directions of the letters.) In testimony whereof, I have hereunto set my hand and affixed my seal of office, the day and year first above written. {Signature) L. S. *f;i 'I i M 318 Thi Bill and Note Act. FORM OF NOTICE TO I'AKTIES. To Mr. (t/a/c:) Sir, Take notice that a bill of exchange, dated on the day of , for the sum of $ (or £ ) , drawn by , ,„i and accepted by , payable (f/inc tnont/is) after the date thereof, at the liank of , in {Toronto), and indorsed by A.H„ CD., IC.F., &c., was this day presented by lue fur payment at the said liank, and that i)aynunt tliereof was refusetl, and that , the holder of the said bill, ioc ks to you for payment thereof. Also, take notice that the same bill was this day protested by me for non-payment. Your obedient servant, A. H., Notary Public, Tlie aliovp forms may lie clianped to fiiiit protest for non-acceptance or iion- paynicni of liills, or non-payment of notes, C. S. U. C, c. 42, s. 21, fart. SCHKDULE B. TARIFF OF FEES AND CHAKCJES IN THE PROVINCE OF gUElJEC. For presenting and noting for non-acceptance any bill of exchange, and keeping the same on record .. $1 00 Copy of the same when required by the holder o 50 For noting and protesting for non-payment any bill of exchange or promissory note, draft or order, and putting the same on record \ 00 For making and furnishing the holder of any bill or note with duplicate copy of any protest for non- acceptance or non-payment, with certificate of ser- vice and copy of notice served upon the drawer and indorsers o 50 Th; Hill (Dul Note Ad. 310 For every notice, includin}^ the service and recordinf^ copy of the same, to an indorser or drawer, in addi- tion to the postages actually paid o 50 C.S.C, c. 57, s. 2 ; — C. S. L. C, c. 64, sch. :i , ' « f m^ Form A. NOTINO FOR NON-ACCKl'TANCE. OVIXCK OF any rd.. $1 00 bill SO and I CO 1 or lon- ser- vver .... 50 {CoP}' of J) ill ami Indorsements) On the 18 , the above bill was, by me, at the request of , presented for acceptance to I'M'., the drawee, personally {or, at his residence, office or usual place of business in the city (town or village) of ), and I received for answer, " ", The said bill is therefore noted for non-acceptance. A. H., Notary Public. , 18 . Due notice of the above was by me served upon \ / • i )" \ i.1 ( drawer, ) n ^^i \ c the I • , { personally, on the day of ( iniiorser, ) (('/', at his residence, office or usual place of business in ), on the daj' of {or, by depositing such notice, directed to him, at , in Her Majesty's post office in this city (town or villaj^e), on the day of , and prepaying the postage thereon.) A. B., Notary Public. 18 . 1, . 1 1 ( ■ , 1 il '.f - i 320 The Bill and Note Act. Form B. protest for non-acceptance or for non-payment of a bill payable generally. (Copf of Bill and Indorsements) On this day of , in the year i8 I, A. B., notary public for the Province of Quebec, dwelling at in the Province of Quebec, at the request of , did exhibit the original bill of exchange, whereof a true copy is above written, unto E. F., thP-l , !- thereof ^^ I acceptor, J personally (^or, at his residence, office or usual place of busi- ness in ), and, speaking to himself {or his wife, his clerk, or his servant, &c,); did demand •< ' ^ ^ '' }■ ' ' ( paynent j thereof ; unto which demand \ , >■ answered, " ." Wherefore I, the said notary, at the request aforesaid, have protested, and by these presents do protest against the ac- ceptor, drawer and indorsers {or, drtiwer and indorsers) of the said bill, and other parties thereto or therein concerned, for all exchange, re-exchange, and all costs, damages and interest, present and to come, for want of ■! ' ' > of ^ I payment ) the said bill. All of which I attest by my signature. (Protested in duplicate.) A. B., Not'rry Pid'lic, Form C. protest for non-acceptance or for nox-pavmkxt of a bill payable at a staged place. {Copy of Bill and Indorsements.) On this day of , in the year 1 8 , I, A. B., notary public for the Province of Quebec, dwelling The Bill and Note Act. 321 at , in the Province of Quebec, at the request of , did exhibit the original bill of exchange* whereof a true copy is above written, unto E. F., J drawee ) the ( acceptor j thereof, at , being the stated place where the said bill is payable, and there, speaking to , did demand ■I ' ^ ^ f of the said bill ; unto which demand he I payment J answered, " ." Wherefore I, the said notary, at the request aforesaid; have protested, and by these presents do protest against the accept- or, drawer and indorsers (or drawer and indorsers) of the said bill, and all other parties thereto or therein concerned, for all exchange, re-cxchange, and all costs, damages and interest, present and to come, for want of ■< ' ^ ' > ^ ( payment ) of uie said bill. / 1^' All which I attest by my signature. (Protested in duplicate.) A. B., Notary Public, % ^ I- \l |. '',1 '• I Form D. protest for non-pavmknt of a bill noted, but not protestkd for non-acceptanck. If the protest is viadc by the same notary who noted the bill, it should immediately follow the act of uoling and memorandum of service thereof, beginning ivith thj tuords "and afterwards, on, &c„ " continuing as in the last preceding form, but intro- ducing betzvecn the zvords "did exhibit," the ivord "again;" and, in a parenthesis, betzvecn the words "written " and " unto " the zvords (" and which bill was by me duly noted for non- acceptance on the day of last.") But if the protest is not made by the same notary, then it should follozv a copy of the original bill and indorsements and l^i m ' f:' 322 The Bill and Note Act. noting marked on the bill— and then in the protest introduce, in a parenthesis, between the zvords " written " and " uiitu " the zuords (" and which bill was on the day of last, by , public notary for the Province of Quebec noted for non-acceptance, as appears by his note thereof marked on the said bill.") Form E. PROTEST FOR NON-PAYMENT OF A NOTE PAYABLE Gi:\E- KALLY. {Copy of Note and Indorsements.) On this day of ■ , in the year i8 , t A.B., notary public for the Province of Quebec, dwelling at , in the Province of Quebec, at the request of , did exhibit the original promissory note, whereof a true copy is above written, unto , tho promisor, personally {or, at his residence, office or usual place of business, in ), and speakiiiL; to himself {or his wife, his clerk, or his servant, &c.), diil demand payment thereof; unto which demand \ \^ \ \ die V answered. " ." Wherefore I, the said notary, at the request aforcsaitl, have protested, and by these presents do protest against the promisor and indorsers of the said note, and all other parties thereto or therein concerned, for all costs, damages and in- terest, present and to come, for want of payment of the said note. All which I attest by my signature- (Protested in duplicate.) A.B., Notary Public, The Bill and Note Act. Form F. 323 PROTEST FOR NON-PAYMENT OF A NOTE PAYABLE AT A STATED PLACE. {Copy of Note and Indorsements). On this day of , in the year 1 8 , I, A. B., notary public for the Province of Quebec, dwelling at , in the Province of Quebec, at the request of , did exhibit the original pro- missory note, whereof a true copy is above written, unto , the promisor, at , being the stated place where the said note is payable, and there, speak- ing to did demand payment of the said note, unto which demand he answered : " ." Wherefore I, the said notary, at the request aforesaid, have protested, and by these presents do protest against the promisor and indorsers of the said note, and all other parties thereto or therein concerned, for all costs, damages and interest, present and to come, for want of payment of the said note. All which I attest by my signature. (Protested in duplicate.) A. B., Notary Public. Form G. NOTARIAL NOTICE OF A NOTING, OR OF A PROTEST FOR NON-ACCEPTANCE, OR OF A PROTEST FOR NON-PAYMENT OF A BILL. {Place and date of Noting or of Protest) 1st. To P. Q. {the drazver) at Sir, Your bill of exchange for $ dated at the , upon E. F., in f^vor of C. D., payable days U ;; 1^ \ \ ! I■ after date (on J \ F °F I '^^ order, and indorsed by you, was this day, at the request of , duly protested by me for non- payment. A, D», Notary Public. The Bill and Note Act. Form I. 325 I NOTARIAL SERVICE OF NOTICE OF A PROTEST FOR NON- ACCEPTANCE OR NON-PAYMENT OF A BILL, OR OF NON- PAYMENT OF A NOTE {t(f be subjoined to the Protest). And afterwards, I, the aforesaid protesting notary public, did serve due notice in the form prescribed by law, of the foregoing pro- f non-acceptance | ^^ ^^^ j bill 1 test for ( non-payment ) ( note ) ^ protested upon { ^^; g- } the | j^^oTrj^s \ P''"'-so"ally, on the day of {or, at his residence, office, or usual place of business in ,) on the day of {or, by depositing such notice, directed to the said-| ^ V)' f ^^ » '" ^^'* Majesty's post office in this city (town or village), on the day of , and prepaying the postage thereon). In testimony whereof, I have, on the last mentioned day and year, at aforesaid, signed these presents. A. B., Notary Public, Form J. I'ROTEST BY A JUSTICE OF THE PEACE (WHERE THERE IS NO NOTARY) FOR NON-ACCEPTANCE OF A BILL, OR NON-PAY- MENT OF A BILL OR NOTE. {Copy of Bill or Note and Indorsements.) On this day of , in the year i8 , I, N. O., one of Her Majesty's justices of the peace for the district of , in the Province of Quebec, dwelling at (or near the village of ), in the said district (there being no practising notary public resident at or near the said village, or any other legal cause), did, at the request of and in presence of , a house- holder in the said district, well known unto me, exhibit ■;s( s li Mi '■ iF ■ lii "I '.J, 1: ...'»•■ 1, ■ .ts ! k!" 326 The BUI and Note Act. the original < . | whereof a true copy is above written C drawer 'j unto P. Q., the < acceptor V thereof, personally (or, at his ( promisor j residence, office or usual place of business in ) and speaking to himself (his wife, his clerk or his servant, &c.), did demand -j " nt i thereof, unto which demand -j . j- answered, " " Wherefore I, the said justice of the peace, at the request aforesaid, have protested, and by these presents do protest C drawer and indorsers ^ against the < promisor and indorsers >- of the said (^acceptor, drawer and indorsers j \ ^ [ and all other parties thereto and there in con- 1 note j '■ cerned, for all exchange, re-excha-ige and all costs damages and interest, present and to come, for want oi I acceptance J ^^ ^,^^ ^^.^ j bill ) (^ payment ) ( note ) All which is by these presents attested by the signature of the said (f/ie zcituess), and by my hand and seal, (Protested in duplicate-) {Signature of the zvitucss.) {Signature and seal of the J. P.) C, S- L. C, c. 64, sch. ere in con- COMMENTARY ON THE BILL AND NOTE ACT. CHAPTER I. FORM AND CHARACTERISTICS. SECT. I — DKFINITIONS, &C. SECT. 2 — GENERAL OBSERVATIONS. SECT. 3 — CUSTOMARY FORMS. , If : SEJT. I — DEFINITIONS, &C. Bills of exchange and promissory notes are, in their incep- tion, mere contracts, having parties thereto, as in the case of all ordinary contracts. A Bill of exchange may be defined as a written order for the payment of money absolutely and at all events. All that one understands thereby is, however, essential. It must be in writing, and contain the signature or name of the drawer, and it must be for the unconditional payment of a specific sum of money. The order is made by a person who is called the drawer, and is addressed to a person who is called the drawee. When the latter undertakes to pay the bill, he is known as the acceptor, and if the bill be to pay a third person named in it, such person is known as the payee. And if the payee, either before acceptance or after acceptance transfer the bill by indorsement he becomes iudorser, and so ^;-iiP ! I; i 1, I \i). 328 Commentary on the Note Act, each person who does likewise, until the bill is returned for payment. The holder is a general term applied to anyone in actual or constructive possession of the bill and entitled at law to recover or receive its contents from the parties to it. No one but such holder can maintain an action upon it. A promissory note, or, as it is frequently called, a note of hand, is not much dissimilar. It is a written promise to pay a certain sum of money at all events and without any condition, m de by one person known as the maker to another person k )wn as the payee, who, if he indorses to a third person btcomes the indorser. The moment the note is indorsed, the situation of all the parties becomes precisely similar to that of the parties to a bill. The payee, who, on the face of the note is entitled to the money which it represents, by the act of his indorsement, orders the maker to pay *he indorsee. The indorse*' becomes, as it were, the drawer ^.f a bill for the amount represented by the note, the maker the acceptor, and the indorsee the payee. Thus it follows that bills and notes, as respects the rights of parties, are governed by the same set of rules. This similiarity of the two forms of instru- ments gives rise to a current which runs through all decided cases, and is evidenced by uniformity of decision. SECT. 2 — GENERAL OBSERVATIONS. The legal effect of drawmgabill payable to a third person is a conditional contract by the drawer to pay the payee, his order, or the bearer, as the case may be, if the acceptor do not. The effect of accepting a bill or making a note is an absolute contract on the part of the acceptor of the one, or the maker of the other, to pay the payee, or order, or bearer, as the instrument may require. The effect of indorsing is a conditional contract on the part of the indorser to pay the immediate or any succeeding indorsee, or bearer, in case of default by the acceptor or maker. Form arid Characteristica. 329 If a bill or note were to remain between the original parties, the ordinary rules applicable to cases of contract would be found sufficient for the enforcement of payment, and the final disposition of the parties one to the other. But because the quality of negotiability is not a quality of ordinary contracts those special rules which, more or less, govern every case where the rights of a party to a bill or note are brought into question, must be considered as occasion requires. A bill or note may be made payable either to a certain person by name or other sufficient indication, or to such person or his order, or to the order of the drawer or maker, or to bearer. When it does not contain a direction or promise to pay to the order of the payee or to bearer it is not transferable ; that is so as to give to the second or any subsequent holder a right of action against the drawer or acceptor. But if, nevertheless, the payee do indorse a bill not negotiable, he is liable on his indorsement. For every indorser of a bill is in the nature of a new drawer, and therefore a blank indorse- ment on such a bill has been held to operate as the drawing of a bill payable to bearer. Should a note not negotiable be indorsed the indorser is liable in like manner to his indorsee. The words or " fo his order " or " to bearer" if omitted by mistake may be afterwards inserted without vitiating the instrument. The insertion of these words in a bill or note, whether originally or subsequently, in case of error, confers upon it its negotiable character. TRANSFER. When made payable to bearer a simple delivery is sufficient to constitute a transfer ; but when to order an indorsement is necessary. The transfer of a bill or note by indorsement may be made either before or after it becomes due. The holder acquires, in the former case, a perfect title, free from .-I i p- 1- ■M' i ■ ' ; '"t'^- |:ii-. S*- i m m 330 Commentai'y on the Note Act, all liabilities and objections which any parties may have had against it in the hands ofthe indorser ; but in the latter case the instrument, according to the law of ihe Province of Quebec, is subject to such liabilities and objections in the same manner as if it were in the hands of the previous holder. The law of England, followed in the other Pro- vinces, makes the indorsee liable to the equities attaching to the note itself, that is to the equities arising out of the transaction, in the course of which the bill or note was made, but not to a claim a/ising out of collateral matters. Indorsements are of two sorts, full or special or blank. A full or special indorsement mentions the name of the person to whom the instrument is assigned, as " Pay A H or order." A blank indorsement consists in the simple writing of the name of the peison who ! ransfers upon the back of the note. The difference between the two in their several effects is that in the first case, the indorsee cannot transfer the instru- ment without himself indorsing m full or in blank, whilst in the latter case the transfer may be made by simple delivery. Thus a bill or note, when indorsed in blank, becomes sub- stantially a bill or note payable to bearer. And yet if the payee of a note payable to bearer, or the i'.aorsee of a note who receives it under a blank indorsement, chooses for any cause to write his name upon the back of it, as he is at liberty to do, he becomes liable as an indorser as much as if his indorsement were necessary to a transfer. One result of the foregoing principles is, that if a person steal or otherwise become wrongfully possessed of a bill or note specially in- dorsed he cannot negotiate it without forging the name of the indorsee ; whereas if the bill or note be payable to bearer, or be indorsed in blank, he may negotiate it by mere delivery. It is not essential to the validity of these written transfers, though called indorsements, that they be written on the back of a bill or note ; they may be on its face. As no indorse- ment other than that by the payee can stop the negotiability of such an instrument there is no legal limit to the number Form and CharactcrUtica. . 331 of prior indorsements that may be made. If there be no room to write them all distinctly on the back, the supernumerary indorsements may be written on a slip of paper annexed to the bill or note, called in French an ^^ allonge',' thencefoth part of the instrument. As we have seen, the drawer and acceptor of a bill of exchange are both liable for its payment, and cannot divest themselves of their responsibility ; but the payee or any sub- sequent special indorst r may relieve himself of all responsi- bility by indorsing the bill, annexing thereto in French the words "sans rccours" or in English "without recourse to me," or any equivalent expression. And if there be a written or even a verbal agreement between the indorser and his imme- diate indorsee that the latter shall not sue the former, but the acceptor only, it has been held that such an agreement is a good defence on the part of the indorser against his immediate indorsee suing in breach of the agreement. The maker of a note is of course liable unconditionally for its payment, but the payee or any s\ibsequent special indorser has the same privilege as is accorded to an indorser on a bill. As a general rule an indorsement may be restrictive, quali- fied or conditional, and the rights of the holder under such indorsement are regulated accordingly. Any negotiable security, whether check, note or bill of exchange, indorsed in blank, may be afterwards transferred by special indorsement. The last holder may transfer it thus, either to himself or to another party by writing before or after the name of the last blank indorser the words, " Pay A. B. or order." The latter is the course generally adopted by banks in remitting bills and notes to and from their various branches, agents and correspondents. SECT. 3 — CUSTOMARY FORMS. The law does not require a bill of exchange or promissory note to be of any particular form, but usage has adopted forms for the sake of convenience and of uniformity. When- I i :'l 1 • 332 Commentary on the Note Act, ever forms generally used and approved can be had for bills or notes, or for any other contracts, such forms should not be despised. A departure from tliem, unless for ^'ood reason, is hkely to produce mischief, either because of the omission of that which is material, or the insertion of that which is illegal: and an adherence to established forms is, therefore, most strongly recommended. They are usually, but it is apprehended not necessarily, written on paper. Parchment, linen, and any other con- venient substitute for paper not being a metallic substance may, it is conceived, be made >ise of. A bill or note may be written in any language, and in pencil as well as in ink. " There is, " says Abbot*" C.J., " no authority for saying that when a law requires a contract to be in writing, that writing must be in ink. There is not any great danger that our decision will induce individuals to adopt the mode of writing by pencil in preference to that in general use. The imperfection of this mode of writing, its liability to obliteration, and the impossibility of proving it when so obliterated, will prevent its being generally adopted." An important distinction is made between bills of exchange drawn or payable (or both) abroad, and bills the drawer and drawee of which reside in the same country. The former arc termed foreign, the latter inland bills, and though governed generally by the same rules, each is subject to a number of special principles peculiar to itself. Foreign bills of exchange are usually drawn in sets ; that is, exemplars or parts of the bill are made on separate pieces of paper, each part referring to the other parts, and contain- ing a condition that it shall continue payab.c only so long as the others remain unpaid. All of these the drawer is bound to deliver to the payee. A written order upon a bank or banker for tie payment of money on demand, called in practice a check, is in legal effect an inland bill. Being made payable to order or to a/' Form and Chamdcriatics. 333 bearer it is negotiable in the same manner as bills or notes ; but nothing forbids its being made payable to a particular person. Checks have of late years come into such common use as to replace, in payment of any considerable amount, not only gold and silver coin, but also bank notes themselves. With their universal use there has grown up certain usages peculiar to themselves, which are now grafted on the commercial law of the country. Hut in so far as the application of the ordinary rules to which inland bills are subject is not inconsistent with these usages of trade, such instruments are governed thereby. rL.\CE. It is proper, though not necessary, to superscribe the name of the place where the bill or note is made. 1 DATE. Neither is a date in general essential to the validity of a bill or note ; and if there be no date, it will be considered as dated at the time it was made, (i) The date expressed in the instrument 'm^ prima facie evidence of the time when the instrument was made. (2) In general, a bill or note may be post-dated. (3) SUM IN FIGURES. The sum for which a bill is made is usually superscribed in figures ; in a note or cheque the figures are commonly subscribed. The superscription, or subscription of the sum payable is not, however, necessary, if the sum be stated in (1) De la Courtier :'. Bellamy 2 Show, 422. Parole evidence is admissible to show from wiiat time an undated instrument was intended to operate, Davis v. Jones, 25 L. J. C. P. v'» '7 <^- ^- 625, S. C. (2) Anderson v. vVeston, 6 Bing. N. C. 296. But see Cowie v. Harris, i M. &" M. 141 ; 4 M (Sr* r. 722, Except when it is tendered by assignees of a bankrupt, as evi.ience of a petitioner's creditor's debt. Wright e. Lawson, 2 M. &' W . 739 . (3) Byles on Bills, 80, cases cited. x 1*1 334 Commentary on the Note Act. the body of the note, but it will aid an omission in the body, as, where the word fifty was written in the body of the note, without the word pounds, (i) TIME OF PAYMENT. The time of payment is regularly and usually stated in the beginning of the note or bill, but, if no time be expressed, the instrument will be payable on demand. (2) The word " months," if omitted by mistake after the word expressing the time, as " three," may be inserted by the holder without vitiating the instrument (3). The expression after sight, on a bill, means after accept- ance, or protest for non-acceptance and not after a niLMc private exhibition to the drawee, for the sight must appear in a legal way. (4) But if a note is made after sight, the expression merely imports that payment is not to be demanded till it has been again exhibited to the maker (5) ; for a note being incapable of acceptai.ce, the word "sight" must, on a note, bear a different meaning from the same word on a bill. ORDER TO PAY. The order to pay need be in no particular form ; any expression amounting to an order (6), or direction, is suffi- cient. The word "pay" itself is not indispensable. Any synonymous or equivalent expression will suffice, as "credit in cash." (7) I'AYEE. The payee should be particularly described, so that he cannot be confounded with another person of the same (1) Elliot's case, 2 East., P. C. 951; I Leach, 175, S. C. (2) Whitlock V. Underwood, 3 Dowl. &' R. 356. (3; 1-aine v. Clarke, 3 R. L. 450. (4) See Campbell v. French, 6 T. R. 212. (5) Holmes v. Kerrison, 2 Taunt. 323 ; Byles on Bills, p. 81, cases cited. (6) Hamilton v. Spottiswood, 4 Exch. 200. (7) Ellison V, CoUingridge, 9 C. B. 570. Form and Characteristics. 335 i\ name, and must be a person who is capable of being ascer- tained at the time the instrument is made, (i) It is suffi- cient that the payee be so designated, though he be not named. (2) But if the bill get into the hands of a wrong payee, unless it be payable to bearer, he can neither acquire nor convey a title. One Ch'*istian drew a bill on the defen- dant in London, payable to Henry Davis. The bill got in the hands of another Henry Davis than the one in whose favor it was drawn, was accepted by the defendant, and by the wrong Henry Davis was indorsed to the plaintiff. Held, that the indorsement of his own name by Henry Davis was, under these circustances, a forgery, and {disscuticnte Lord Kcnyon) could convey no title to the plaintiff. (3) If the name be spelt wrong, parole evidence is admissible to show who was intended. (4) M' ■ i H \. If there be father and son of the same name, it will be payable to the father till the contrary appear. (5) But if the son be found in possession of the note, and he indorse, that is evidence that he, and not the father, is payee (6). If the bill be not made payable, either to any payee in particular, or the drawer's order, or to bearer in general, it would seem, according to the opinion of the majority of the judges (7), to be payable to bearer ; but, according to the opinion of Eyre, C.B., in the same case, it is mere waste paper. (8) If drawn payable to a fictitious payee, and the drawer indorse the fictitious payee's name, the holder cannot, either as indorsee or bearer, recover against the acceptor (9) ; (1) Yates V. Nash., 29 L. J., C. P. 306. (2) Storm V. Stirling, 3 E. A' B. 832. Also 6 E. dr" B. 333. (3) Mead v. Young, 45 T. R. 28. (4) Willis V. Barrett, 2 Stark. 29. (5) Sweeting z^. Fowler, i Stark. 106. (6) Stebbing v. Spicer, 19 L. J. C. P., 24. (7) Minet v. Gibson, i H. Bl. 608. (8) See also Rex. v. Randall, Russ. C. C. 185 ; Rex. v. Richards I R. iSr' R. C. C. 193- (9) Bennett v. Farrell, I Camp 130. I 336 Commentary on the Kote Act. but, if the holder's money has got into the acceptor's hands, the holder may recover it as money had and received. If the acceptor, at the time ^ acceptance, knew the payee to be a fictitious person, he may not take the advantage of his own fraud ; but a dona fide holder may recover against him on the bill, and declare on it as payable to bearer, or may recover on the money counts, (i) If a blank be left for the payee's name a bona fide holder may fill it up with his own name, and recover against the drawer. (2) But, in order thus to charge the acceptor, the holder must show that he had authority from the drawer to insert his own name as payee. (3) If the name of the payee do not purport to be the name of any person, as where a note was made payable to " Ship Fortune or bearer,'' it is a note payable to bearer simply. (4) SUM IN WRITING. The sum for which a bill is made payable is usually writ- ten in the body of the bill in words at length, the better to prevent alteration ; and, if there be any difference between the sum in the body and the sum superscribed, the sum mentioned in the body will be taken to be that for which the bill is made payable; (5) when the figures express a larger sum than the words, evidence to show that the differ- ence arose from an accidental omission of words, is inadmis- sible. (6) We have already seen, that an omission in the body will be aided by the superscription. (7) An inaccurate, but intelligible statement of the sum payable will not vitiate. Thus, an order, or promise to pay (1) Minet v. Gibson, 3 T. R. 481 ; i H. Bl. 569. (2) Cruchley v. Clarence, 2 M. (Sr* Sel. 90. (3) Cruchley v. Mann, 5 Taunt. 529 ; Awde v. Dixon, 6 Exch. 869. (4) Grant v. Vaughan, 3 Burr. 1516. (5) Saunderson v. Piper, 5 Bing. N. C. 425. (6) Ibid. (7) Elliots Case, 2 East. P. C. 951. Form and Characteristics. 337 . >y so many " pound," insteads of " pounds," is a good bill or note, (i) A bill for "twenty-five, seventeen shillings and three," is a bill for 25I. 17s. 3d. (2) STATEMENT OF CONSIDERATION. There are some old cases tending to show that the words value received are an essential part of a bill, but it is now well settled that they are not at all material. (3) Though the nature or particulars of the consideration appear on the bill or note, it was not necessary to state it in the declaration, or it might be , stated generally as value received. "The defendant," says Maule, J., "may prove that the note was given for a different consideration, or without any consideration at all." (4) SIGNATURE. Without the drawer's signature, a bill payable "to my order," though accepted, is of no force (5), either as a bill of exchange or as a promissory not.„. (6) The signature of the drawer or maker of a bill or note is usually subscribed in the right-hend corner ; but it is suffi- cient if written in any other part. Thus "I. J. S., promise to pay," has been held a sufficient signature of a promissory note. (7) A man who cannot write may sign a bill by his mark. (8) ADDRESS. A bill of exchange being in its original a letter, should be properly addressed to the drawee. (9) But where a bill was (1) Rex. V, Port, Bayley, 12, 6th ed. (2) Phipps V. Tanner, 5 C & P. 488. (3) Grant v. Da Costa, 3 M dr' S. 351 . (4) Abbott V. Hendrich, I M dr" G. 796 ; La Rocque et al. v. the Franklin County Bank, 8 L. C. R. 328. (5) Goldsmid v. Hampton, 27 L. J., C P. 286. (6) McCall V. Taylor, 34 L. J., C P. 365. (7) T-aylor?/. Dobbins, 1 Stra. 399. (8) George v, Surrey, i M &* M 516 ; Collins v. Bradshaw, 10 L. C. R. 366. (9) Peto V. Reynolds, 9 Exch. 410 :' f 1:1 I -J i I UOO Commentary on the Note Act. made payable "at No i, Wilmot street, opposite the Lamb, Bethnal Green, London," without mentioning the drawee's name, and the defendant accepted it, he was not allowed to make the objection, (i) But a bill cannot be addressed to one man and accepted by another. (2) A bill directed to A., or in his absence to B„ being accepted by A„ may be declared on without taking notice of B. (3) If the word at precede the drawee's name, whether inserted ignorantly or fraudulently, the instrument is still a bill of exchange. (4) A bill may be directed to the drawer himself, though it is, in that case, rather a note than a bill. (5) The direction to place to account is unnecessary. (6) (1) Gray v. Milner, 8 Taunt. 739. (2) Davis V. Clarke I3 L. J., Q. B, 305. (3) AtioH, 12 Mod. 447. (4) Shuttleworth v. Stephen, i CnT.p ^^07. (5) Block V. Bell, i M tSr- Rob. 149. Cases cited Byles on Bills, 90. (6) Laing v. Barclay, i B &^ C 398. 'I CHAPTER II. OF PRESENTMENT AND ACCEPTANCE. SECT. I — GENERAL OBSERVATIONS. SECT. 2 — PKESENIMENT FOR ACCEPTANCE. SECT. 3 — ACCEPTANCE. SECT. I — GENERAL OBSERVATIONS. The legal effect of drawing a bill, payable to a third person, is a conditional contract by the drawer to pay the payee, his order, or the bearer, as the case may be, if the acceptor do not. The effect of accepting a bill, or making a note, is an absolute contract, on the part of the acceptor of the one or maker of the other, to pay the payee, or order, or bearer, as the instrument may require. The effect of indorsing is a conditional contract, on the part of the indoi::cr, to pay the immediate or any succeeding indorsee or bearer, in case of the acceptor's or maker's default, (i) So long as the bill remains in th j ownership and possession of the payee, therefore, his undertaking is limited to the mere duty of presenting the bill for acceptance and payment within the proper time, and of giving notice to the drawer within the time prescribed bylaw of the refusal ofthe drawee to accept, or to pay the bill ; on failure of either of which the drawer is exonera':ed from all liability on the bill. (2) But as soon as the payee indorses the bill, his undertaking assumes a much broader character and extent. The indorsement of a (1) Byles on Bills, p. 3. (2) Bridges r. Berry, 3 Taunt. 130. If I 340 Compientary on the Note Act. bill by the payee, or by any subsequent holder, implies an undertaking from the payee, or other indors-^r, to the person in whose favour it is made, and to every other person to whom the bill may afterwards be transferred, exactly similar, as we have seen, to ihat which is implied on the part of the drawer, by drawing the bill, (i) Where a bill is payable to the bearer, or being payable to the payee or order, it is indorsed in blank, .^nd afterwards is transferred by the holder by mere delivery thereof, without any indorsement, such holder is not responsible thereon to the immediate party, to whom he delivers the same, or to any subsequent holder, upon the dishonour thereof; for no person, whose name is not on the bill as a party thereto, is liable on the bill, and he cannot be deemed to undertake any of the obligations of a drawer or indorser. l\y not indorsing it, he is generally understood to mean that he will not be responsible upon it. (2) Every indorsement admits the signature and capacity of every prior party (3), and implies that the instrument upon which the indorser writes his name is a genuine instrument, and that he has a good right to transfer the same to the immediate indorsee. (4) The receipt of a bill implies an undertaking, on the part of the indorsee or other holder, to every other party to the hill who would be bound to pay it, and would be entitled to bring an action on paying it, to present it in proper time, when necessary, for acceptance, and at maturity for payment ; to grant no extra time, and grant no indulgence for ^.aynient ; to give notice without delay to every such party of a failure (1) Penny v. Innes, i C, M. &> R. 441. See Allen v. Walker, 2 M. & W. 3>7. (2) See Camidge v. Allenby, 6 B. <&* C. 373 ; Rogers t. Langford, i C. d^^ M. 637, 642. (3) I^imbert i^- Oakes, i Lord Ray m. 443 ; 12 Mod. 244; Free v. Hawkins, Holt. N. P. R. 550. (4) Story, Prom. N. p. 123. ! Acceptance. 341 in the attempt to procure acceptance or payment ; and to take all the proper steps (such as making a protest), and do all the proper acts, required by law upon such dishonour, to verify and establish the same. A default in any of these respects will discharge the parties in respect to whom there has been any such default, and who otherwisr- would be bound to pay tlie same, from all responsibility o i account of the non- acceptance or non payment of the bill, and will operate as a satisfaction of any debt or demand for which it was given. Having thus briefly considered the several rights, duties, and obligations of the parties to a bill before acceptance, let us next proceed to consider those acts, which the payee or other holder of a bill is bound to perform, before he can hold any antecedent party liable for the amount the bill is intend- ed to represent, in case -acceptance or payment thereof be refused by the drawee or acceptor. The first of these acts, as we have already seen, is present- ment for acceptance ; this will now be our subject of inquiry. HI i '. f I. i, I 1 SECT. 2 — PRESEN'TMKNT FOR ACCEPTANXi:. I'resentment for acceptance is not, in all cases, necessary, for the law, taking into consideration the apparent intention of parties to a bill, has distinguished between one period for payment and another. Hut even when presentment may be dispensed with, mercantile usage has deemed the adoption of such a course imprudent. It is considered advisable, in every case, for the holder of an unaccepted bill to present the same to the drawee for acceptance without delay. In the event of acceptance he obtains the additional security of the acceptor, and the negotiable quality of every instrument is enhanced in proportion to the security given for its pa)'- ment when due. Whilst if acceptance is refused, the antece- dent parties become liable immediately. It is considered advisable, too, on account of the drawer, for by receiving early notice of dishonour, such party may, under certain i;l ; I 342 Commentary on the Note Act. circumstances, be better able to get his effects out of the drawee's hands. Upon all bills payable at sight, or at stated periods after si^ht, or after demand, or after any other event not absolutely fixed, a presentmeiit to the drawee for acceptance is necessary in order to determine the date at which the bill is to be paid, Till such presentment there is no right of action against any party ; and unless it i--' made itli'n a reasonable time from the drawing of the ,', 1 nolder will lose his renuily against any of the ant • ':•;>! , irties from or through whom he derived his title What will be a "reasonable time" depends upon the circumstances of each particular case, and is a mixed ques- tion of law and fact (l) ; although reasonable 'ime in general, and reasonable time for giving notice of dishonour in parti- cular, as will be hereafter seen, is clearly a question of law. If a bill, whether inland or foreign, is kept in circulation, and not held by any one holder, through whose hands it passes, an unreasonable time, it seems difficult to assign any particular time within which it should be presented for acceptance. In respect to foreign bills, the convenieni ;, if not the necessities of trade, seem to require that a very liberal allowance of time, both for the transmission and the presentment of bills, should be allowed to every successive holder. (2) Clear and determinate usage may ascertain and fix a dt fi- nite time, within which the presentment must be made, in which case such usage will undoubtedly govern. Illness or other reasonable cause, not attributable to the misconduct or negligence of the holder, will, under certain circumstances, be a sufificient excuse for delay in making the presentment. (1) Muilman 7'. D'Equino, 2 H. Bl. 565, and cases cited, Byles on Bills, 1S3. (2) Mell.sh V. Rawdon,9 Ding. 416; 2 M. &* be. 570, S. C "Imw,* Acceptance. 343 But presentment for acceptance is not necessary in the case of bills drawn payable at a certain period afterdate. It is said, however, that it is incumbent on a holder who is a mere agent, and on the payee when expressly directed by the drawer so to do, to present such a bill for acceptance as soon as possible, and that for loss arising from the neglect, the payee must be responsible, and the agent must answer to his principal, (i) In practice, however, it is usual to present for acceptance all bills drawn payable after date ; but when such presentment is made the holder is bound, in case of non-acceptance, to make protest, and to give notice thereof to the proper parties, unless otherwise authorized, in the same manner as if presentment had been required by law. W b! HY WHOM AND TO WHOM PRESKNTMKNT SHOULD BE MADE. Let US now proceed to consider by whom and to whom the bill is to be presented for acceptance. In general, presentment must be made, when necessary, by the holder or by some one duly authorized on his behalf. If it is not made by some person having proper authority to hold the bill the drawee is not bound to accept it. I^ut if he does the acceptance will avail in favour of the true holder. As to the person to whom the bill should be presented, it in obvious that it should be presented to the drawee, if he can be found or to his authorized agent. If he cannot be found, or if he refuses to accept, it should then be presented to the person, if any, to whom in case of need (an bcsoiu) the holder is directed to apply. The death of the drawee or his known bankruptcy will be no excuse for the omis- sion of presentment. In the former case the holder should inquire after his personal representative if any, and, provided he live within a reasonable distance, present it to him for acceptance ; in the latter, presentment should be made to li (I) Chit. 9th ed. 237; Poth. 128; Maiius, 46. 344 Commentary on the Note Act. the drawee in person, if lie can be found, or to his agent, in the same manner as if the condition of his affairs were not known. A bill drawn upon a partnership should be presented for acceptance to all or to some one of the partners, and the acceptance of one will bind all. If drawn upon two or more persons, not being partners it should be presented to each for acceptance, and if not accepted by all it may bo treated as dishonoured. Acceptance will, however, be bind- ing upon such of them as do accept. If upon presentment the drawee is found incompetent to contract, as for example by reason of minority or coverture, the bill may be treated as dishonoured, and be protested accordingly, notice thereof being given as required to antece- dent parties. The liolder is not bound to take the pre- ferred acceptance of such a drawee, and this follows from the principle of law that every hill drawn imports, as has been seen, a contract on the part of the drawer, that the drawee is a person competent to accept. Should such an acceptor refuse payment when the bill matured, no action could be maintained against him. WHERE rUESKNTMENT SHOULD BE MADE. As to the place where presentment for acceptance is to be made, the rule is, that it must be made at either the domicile of the drawee or his place of business, without any regard to whether the bill is drawn payable generally or at a parti- cular place specified, It is always presumed that the par- ties intend that the acceptance shall be at one or other of these places, whatever may be the place of payment, If the bill is directed to the drawee at a particular place, it is to be considered as dishonoured if such party has abscon- ded. Kut, if he has merely changed his place of residence, or if the bill is not directed to him at any particular place, it is incumbent on the holder to use due diligence to find him out. And due diligence is a question of fact for the jurj-. If the drawee has left the country, it will be sufficient to pre- Acceptance. 345 sent the bill at his last known domicile or place of business, unless he has a known agent in the same place ; for, in that case, the bill should be presented to the agent. If the drawee is dead, and is not represented, presentment must be made at his late domicile or place of business, and there be protested according to the facts. A i)rescntment made on a legal or religious holiday will be deemed a mere nullity if not duly answered. A question arises in this connection, consideration of which will come up more prominently at a further stage of our inquiries, at what hours during the day is presentment pro- jicr and allowable. We will discuss this questional some length when we arrive at the consideration of presentment for payment, (i) It may be well to remark that it is of the greatest import- ance that the presentment of a bill for acceptance should be made in a perfectly legal manner. And, moreover, that protest should not be made without full inquiry as to whether the bill will be accepted or not. It is not sufficient in an action against the drawer for non-acceptance, to merely allege non-acceptance ; presentment for acceptance must also be alleged (2) and proved satisfactorily. If the original drawee should refuse to accept the bill it should be presented to the drawee «// besoin, precisely in the same way, and in the same place, and after the same inqui- ries, as if he were the original drawee. I / / I \ I WHAT TIME FOR DELIBERATION MAY BE GIVEN TO DRAWEE. When the bill is presented, it is reasonable that the drawee should be allowed some time to deliberate whether he will accept or not. It seems that he may demand twenty-four hours for this purpose, and it is usual in such cases for the holder to leave the bill with him during that period. If (1) /Vj/page 354. (2) Mercer v. Southwell, 2 Show. 180. i 1 ^1 {': I 34G Commentary on the Note Act. more than twenty-four hours be given, the holder ought to inform the ajiteccdcnt parties of it, (i) SECT. 3.— OF ACCEPTANCE. We will now proceed to the consideration of the accep- tance of bills of exchange, a duty on the part of the drawee, if he has funds appropriated for the purpose in his hands. The drawee of a bill, unless he has for adequate considera- tion, expressly or imi)liedly engaged to accept it, is not, however, although indebted to the drawer in the full amount, or although adecjuate funds have been remitted to him for the express purpose, legally bound to accept, nor is he liable to any action for the consequences of his refusal; though, according to mercantile usage, such refusal would be deemed very improper. In this respect, the situation of an ordinary debtor, or agent, differs from that of a banker, who is liable on an action if he should refuse, having sufficient moneys in hand to honour the cheque of his customer ; yet in case of refusal, the holder (though the drawer may with- draw hi.s funds, or sue the drawee for the debt) has no remedy at law against the drawee or the funds in his hands('2). Acceptance, in its ordinary signification, is an engagement by the drawee to pay the bill when due (3), in money (4). Such engagement must be absolute and unconditional, but if the holder consents to a conditional or qualified acceptance.the acceptor is bound by it. An acceptance, without any express words to restrain it, is an absolute acceptance, and renders the acceptor liable to pay the money according to the tenor and effect of the bill, unincumbered with any conditions or qualifications ; this the holder is entitled to require, and he (1) Ingram v, Foster, 2 Smith, 242. (2) See (?«/<• pp. 100,105. (3) Clark V Cock, 4 East, 72. (4) Russell V. riiillips, 19 L. J., Q. B. 297. Acceptance. 347 is not bound to take any other. lUit if the drawee (.ffers a (lualified acceptance, the holder may cither refuse or accept the offer. If he means to refuse it he may tio/e the bill, and should ^ive notice thereof to antecedent parties. if he intends to acquiesce in it, he must j^ive notice of the nature of the acceptance to the previous parties, and, it would seem, must obtain their consent or they will be dischar^'ed (i) ; but he must not protest or note the bill, or give a ^jeneral notice of dishonour, fur he would thereby pteclude himself from recovering against the acceptor (2). The acceptance must be in writing upon the face of the bill or upon one of tlie parts of it. (3) Any written words, clearly denoting a present intention to acceptor honour, will be deemed an acceptance, although the appropriate mode is to express in positive terms as, for example, "January i, 1888. Accepted to pay according to tenor of Bill, " or, "I accept to pay this bill, " or simply. " Accepted. " But any other words will suffice, if expressive of the same intent, or admitting of no other reasonable and just interpretation. Thus, if the drawee writes on the Bill, with or without his signature. "I will pay this bill," " I honour this bill" or simply. " Honoured," or, " Presented," it will amount to an acceptance. Again if the drawee should write on a bill " seen, " or the date of the month and year, or his own signature in blank, or a direction to a third person to pay it, such circumstances would, if not otherwise explained, be deemed an acceptance of the bill. If any conditions are annexed to an acceptance, they should all appear upon its face for it is clea'" that as to any subse- quent holder, dona fide, for value, without notice, any verbal conditions would not be binding or qualify his rights. By acceptance the drawee admits the signature and capa- city of the drawer, and he cai lot, after thus giving the bill currency, be admitted to prove tiiat the signature was forged. (i) Rowe V. Young, 2 B. vSh B. 244. (2) Sproat V. Matthews, I T. R. 182 ; Bentick v, Dorrien, 6 East, 200. (3) Note Act, section 4. w^- u iii * ■ IJ;!^ i , I i CHAPTER III. I' OF PRESENTMENT AND PAYMENT. SECT. I — PRESENTMENT FOR PAYMENT. SECT. 2 — PAYMENT. SECT. I — PRESENTMENT FOR PAYMENT. We have seen tb acceptance imports an engagement upon the part of tl ^ acceptor, to the payee or other lawful holder of the bill, to pay the same upon due presentment at its maturity according to the tenor of the acceptance. That moreover it is incumbent upon the holder of a duly accepted bill to present the same when it becomes due to the proper person in order that it may be paid. And further that in case of non-payment the drawer and the indorscrs are jointly and severally liable for the amount payable upon the bill, provided due protest is made by the holder and due notice of the dishonor given them within the time and after the manner prescribed by law. Hence it becomes important to ascertain at what time the presentment for payment ought to be made in order to bind the drawer and indorsers, and, if not duly paid, within what time the protest should be made and notice given to them respectively of the dishonor. The contract of the acceptor is an aboulute one, and is in every respect exactly akin to that entered into by the maker of a promissory note. The holder of a note is subject to the same obligations as is the like party to a bill of exchange. We will now proceed to the consideration of the present- ment of a bill or note for payment, and the person by whom and the person to whom such presentment should be made will be first considered. Presentment and Payment. 349 BY WHOM PRESENTMENT SHOULD BE MADE. As regards the person by whom the presentment must be made, it may be remarked that here the same general doc- trine applies as in cases of presentment for acceptance. A bill or note must be presented for payment by the person entitled to receive payment upon it, or by his agent duly authorized. If the person to whom the bill had been legally transferred after acceptance is dead, the presentment must be made by his executor or administrator, if any has been appointed. If the holder has become bankrupt and assignees have been appointed, the presentment should be made by the assignees. If the holder is a woman and she marries before the bill arrives at maturity the presentment should be made by her husband, ifmadeby her she must be authorized to act as his agent, and payment otherwise will not discharge the acceptor. '; i ■ / hn f ■ r nm •1 ^ 1 ■ .1 ■ ' > TO WHON[ PRESENTMENT SHOULD BE MADE. In the next place as to the person to whom presentment of the bill or note for payment is to be made. Here also the same general rules apply as in cases of presentment for acceptance. It must be made to the drawee or acceptor of a bill or to the maker of a jjromissory note. If he be abroad, presentment at his residence or office or usual place of busi- ness will be sufficient. If by reason of his absence, and not having any known residence or oiTice or place of business, or of his death, such presentment cannot be so made it should be made at his last known residence or place of business where the acceptance, or if there be no acceptance where the instrument bears date. A personal demand on the drawee or acceptor or maker is not necessar)^ It is sufificient if payment be demanded at the places stated above of his wife or other agent ; for it is the duty of an acceptor or maker if he is not himself present to leave provision for the pajmcnt. In case of death the bill or note should be presented to his personal representative if any is appointed, and his place is i.: i 1 ■ 350 Commentary on the I^ote Act. known or can be upon reasonable inquiries. Unless indeed the bill was originally made payable at a particular place, in which case it is not necessary also to present it at the house, of the executor or administrator. If the drawee or person to whom presentment should be made has shut up his house the holder viust enquire after him and attempt to find him out. WHEN PRESENTMENT TO BE MADE. Coming now to treat of the time when presentment is to be made, it will be necessary to consider first, how on the various sorts of bills and notes time is computed, and then on what bills and notes, and to what extent days of grace are allowed. It has been already stated that when a bill is drawn at a certain number of days after date or after sight, those days are reckoned exclusively of the day on which the bill is drawn or accepted, and inclusively of the day upon which it falls due. 1 he present Act provides further that " Every bill of exchange or promissory note, which is made payable at a month, or months, from and after the date thereof, shall become due and payable on the same numbered day of the month in which it is made payable as the day on which it is dated, unless there is no such day in the month in which it is made payable, and in such case it becomes due and payable, on the last day of that month, with the addition in all cases of the days of grace allowed by law." We have also ob-.erved that on a bill the words "after sight" are equivalent to "after acceptance" for sight must appear in a legal way. Upon bills and notes made payable on demand no days of grace are allowed, nor in the case of such bills is it necessary that presentment for acceptance be made apart from present- ment for payment. But upon all bills or notes made payable at sight or at a stated period after sight or after date or on or after the happening of any other certain event, the law Presentment and Payment. 351 allows three days of grace exclusive of the day on which such bills or notes become due and payable. And the present Act has provided that "With regard to bills of exchange and promissory notes, whenever the last day of grace falls on a legal holiday or non-juridical day in the Province where such bill or note is payable, then the day next following not being a legal holiday or non-juridical day in such Province shall be the last day of grace as to such bill or note." And the same statute has declared that in all matters relating to such negotiable securities the following and no other shall be observed as legal holidays or non- juridical days (i) (a.) In all che Provinces of Canada, except the Province of Quebec — Sundays ; New Year's Day ; Good Friday ; Easter Monday ; Christmas Day ; The birthday (or the daj- fixed by proclamation for the cel'^bration of tiie birthday) of the reigning Sovereign ; The first day of July (Dominion Day), and if that day is a Sunday, then the second day of July as the same holiday ; Any day appointed by proclamation for a public holiday, or for a general fast, or a general thanksgiving throughout Canada ; and the day next following New Year's Day and Christmas Day, when those days respectively fall on Sunday ; (/;.) And in the Province of Quebec the said days, and also — The Epiphany ; The Annunciation ; The Ascension ; Corpus Christi ; St. Peter and St. Paul's Day ; All Saints' Day ; Conception Day ; ^;i' [1 i ?'^i ii' (I) Section 3. H 352 Commentary on the Kate Act. W !H (c.) And also, in any one of the Provinces of Canada, arv day appointed by proclamation of the Lieutenant Governor of sui.li Province, for a public holiday, or for a fast or thanks- giving within the same. Days of grace are so called because they were formerly allowed the drawee as a favor, but the laws of commercial countries have long since recognized them as a right. A presentment for payment before the expiration of the days of grace is premature, and will not enable the holder to charge the antecedent parties. But it is the peremptory duty of the holder to demand payment on the very day of the maturity of the bill, and even, as has been already stated, the bankruptcy or death of the acceptor or maker, before or at the time of its falling due, will not excuse or justify the omission. Neither will a declaration by the acceptor before the bill is due, that he will not pay, though made in the drawer's presence, for in such a case presentment to the one and notice of dishonor to the other is indispensable. Bills and notes payable on demand must be presented within a reasonable time, and what fs a reasonable time lias been held to be a question of f;.ct for the jury. A man taking a bill or note payable on demand is not bound, however, laying aside all other business, to present or transiiiit it for payment on the very first opportuti.l' . It hns long since been decided iu numerous cases, that thoiij.;h iri< >arty by w'hoin the bill or note is to be paid i- /es in tlie .saai place, it is not necessary to present the instrument for payment till the day next after that on which it was received. If the bill must be sent by post to be presented, it ought to be posted on the day next after that on which it was received, and then the person who receives it by post, that he may present it should do so on the day next following that on which l.c receives it. Such a'so are the general rules regulating the presentment of chf.ki which, as has been seen, are really bills of exchange (i); (I) A me pn^e IJ4. Presentment and Payment 353 but as checks on bankers are now extremely common, it has been thought convenient to discuss the presentment of such instruments more in detail in the chapter relating to checks. A common promissory note payable on demand diiTers from a bill so payable in this respect, the bill is evidently intended to be presented and paid immediately, and the drawer may have good reason for desiring to withdraw his funds from the control of the drawee without delay ; but a common promissory note payable on demand is very often originally intended as a continuing security, and afterwards indorsed as such. Indeed it is not uncommon for the payee, and afterwards for the endorsee, to receive from the maker interest, periodically, for many years on such a note. And sometimes the note is expressly made payable with interest which clearly indicates the intention of the parties to be that "ihough the holder j/iajy demand payment immediately, yet nc is not bound to do so. It is therefore thought that a ''ommon promissory note payable on demand, especially if made payable with interest, is not necessarily to be presented the next day after it has been received, in order to charge the indorser ; and that when the indorser defends himself on the ground of delay in presenting the note, it will be a question for the jury whether under all the circumstances the deh.y was or was not unreasonable. Bank notes differ again from other promissory notes in this that they are intended to pass from hand to hand, and are issued that they may circulate as money returning to the Bank as seldom as possible, but they are not intended as a continuing security in the hands of any one holder. There- fore a man who takes bank notes in payment must present them or forward them for presentment the day after he receives them, in order to enable him in the event of the bank failing to sue the person from whom they were received, on the consideration of what was given for them. But as it would be inconsistent with the very nature and design of such notes that every man who takes them should present them ' ' 1 1 \ :1 1 M !■ I 'f II f 354 Commentary on the Note Act. for payment, it is sufficient to exonerate the taker from the charge of laches, if he circulated them within the time in which he ought otherwise to have presented them, and with- out circulating them, it would seem that if, according to the course of business, it is usual to retain such notes, a reasonable time that may be an excuse for omitting instant present- ment, (i) In the previous chapter we left an important question to be considered when we came to treat of presentment for payment. (2) At what hours during the day is presentment proper and allowable ? Presentment, both for acceptance and payment, when made at the place of business of the drawee or acceptor, must be made during the usual hours of business, and if at a banker's, either within or after the usual hours of bankin!--. It has been decided that business hours, except in the case of bankers, range throughout the whole day dow to the hours of rest in the evening. But tliis must be taken with the pr(ri'2so that there is some person there who is authorized to accept or pay, or to make refusal. If presented at the dwelling house of the acceptor or maker, it must be within the hours at which the family are up and the acceptor or maker may reasonably transact business. Presentment at any other time than during the hours stated above will be a mere nullity ano without any legal effect. Where a bill or note was made or accepted, payable at a particular place, it was formerly a point much disputed whether a presentment at that place was necessary in order to charge the acceptor, maker or other parties. At length it was decided in the Houseof Lords that an acceptance, payable at a particular place was a qualified acceptance, rendering it necessary in an action against th? acceptor to aver and prove presentment at such place. This decision occasioned the passing of the first and second Geo. (1) But see this question discussed aiiie CHAP. IV., p 148. (2) AnU page 348 . Presentment and Payment. 355 IV, c. 78, by which it is enacted that an acceptance payable at a particular place is a general acceptance unless expressed to be payable there only and not otherwise or elsewhere. On this statute it has been decided that an acceptance is general, though the bill be made payable at a particular place by the drawer and not by the acceptor. The provisions of this enactment apply to Ontario (i) and Prince Edward Island (2), the Act so providing. But in Quebec, according to the Civil Code of Lower Canada a bill or note is only considered to be payable generally if no par- ticular place of payment is specified. If either by the original tenor of the bill or by a qualified acceptance a particular place is specified, presentment must be made at such place. (3) The consequence of not duly presenting a bill or note is that all the antecedent parties are discharged from their liability whether on the instrument itself or on the consider- ation for which it was given. The acceptor or maker, however, still continues liable. And indeed presentment is not in general necessary for the purpose of charging him, the action itself being held to be a sufficient demand, and that though the instrument be made payable on demand. (4) But if a bill or note be payable at or after sight it must be presented in order to charge the acceptor or maker, so must a note payable at a particular place as we have just seen. But though the absence of demand be in general no defence, yet if the acceptor or maker pays on action brought without any previous demand, it seems the Court would, where it has the power, take the question of costs into consideration. (1) Section 16. (2) Section 9. (3) C. C. L. C. Art 2307. (4) Rice V. Bowker et al, 3 L, C. R. 305. Even if made payable at a certain place. Ibid. But a maker may allege and prove that at the time he was rr^ay with funds to pay if demand had been made. Mount -■. Dunn, 4 L. C. ^ , 348. W i M ■ ■ i^iH 356 Commentary on the Note Act. SECT. 2— PAYMENT. Payment should be made to the true holder of the bill or note ; for payment to any other party is no discharge to the acceptor or maker, unless, indeed, the money paid finds it way into the holder's hands, and the holder has treated it as received in liquidation of the bill. (i). There are some cases in which payment to a wronsTful holder would be protected, and others in which it would not. If a bill or note, payable to bearer, either originally or by a blank ndorsement, be lost or stolen, the bona fide \\o\dcv nvAy compel payment. And such payment may be made so as to discharge the maker or acceptor, (2) provided it is not m.ulc with knowledge or susjiicion of the infirmity of the holder's title, or under circumstances which might reasonably awaken the suspicion of a prudent man. P'or it is a general rule that where one of two innocent parties must suffer from the acts of a third, he who has enabled such third person to occasion the loss must sus- tain it. (3) Payment before the bill or note is due or long after it is due, or in case of a check long after it is drawn, or when the marks of cancellation are on the instrument, are examples of payment out ol ihe usual course of business. And, therefore, though a cheque be really drawn by a banker's customer, but torn in pieces before circulation by the drawer with intention of destroying it, and a stranger, picking up the pieces, pastes them together, and presents the check soiled and so joined together to the banker, and he pays it, the banker cannot charge his customer with this payment, for the instrument was cancelled, and carried with it reasonable notice that it had been cancelled. (4) (1) Eield V. Carr, 5 Bing. 13. (2) Smith V. Sheppard, Sel. Ca. 243. (3) Lickbarrow ?'. Mason, 2 T. R. 70. (4) Scholey v. Ramsbottom, 2 Camp. 485. ^'mt Presentment and Payment. 357 If the bill or note be not payable to bearer, but transfer- able by indorsement only, and be paid to a party whose title is made through the forged indorsement, the payer is not discharged, (i) If a bill or note be paid before it is due, and is afterward indorsed over, it is a valid security in the hands of a dofia fide indorsee. " I agree, " says Lord Ellenborough, " that a bill paid at maturity cannot be re-issued, and that no action can be afterwards maintained upon it, by a subsequent indor- see. A payment before it comes due, however, I think, does not extinguish it any more than if it were merely dis- counted. A contrary doctrine would add a new clog to the circulation of bills and notes, for it would be impossible to know whether there had not been an anticipated payment of them. " (2) If an acceptor discount his own acceptance, he may trans- fer it, and the indorsee will be liable to a subsequent holder, even with notice. (3) But if the acceptor is the holder when the bill falls due, it is extinguished. If the bill be paid, the payer has a right to insist on its being delivered up to him; but if it be not paid the holder should keep it. Yet it has been held that an agent is justified by the usage of trade, in delivering it upon receiving a cheque, though that cheque is afterwards dishonoured. (4) But the drawers or indorsers in such a case would be dis- charged, for they have a right to insist on the production of the bill, and to have it delivered up on payment by them. (5) If the holder of a cheque receive Bank notes instead of cash, and the Bank fail, the drawer is discharged. (6) If bonds (0 Smith z/. Mercer, 6 Taunt, 76. (2) Hurbidge v. Manners, 3 Camp. 193. (3) Attenhorough v. Mackenzie, 25 L. J., Exch. 244. (4) Russell y. Hankey, 6 T. R. 12. (5) Powell V. Roche, 6 Esp. 76. (6; Vernon y. Bouverie, 2 Show. 296. 1 i t ; i i \ ■■■* \ ^^ I If i? It! ' ft fi ill I X IBi, * i )H i^ Si i> : i 358 Commentary on the Note Act. be accepted in payment, the payment is good even though they prove to be valueless, (i) A set-off does not amount to payment, unless it be mutu- ally agreed that one demand shall be set off against the other. Such an agreement, even by one of several partners, with a debtor to the firm that a separate debt due from the part- ner shall be set off against a joint debt due to the firm, binds the firm. (2) Credit given to the holder of a bill by the party ultimately liable is tantamount to payment. (3) Where a banker takes from a customer and his surety a promissory note, intended to secure a running balance, and makes advances on the faith of the note, it is not discharged by subsequent unappropriated repayments made by the cus- tomer to the banker, but still continues as security for the existing balance. (4) If the drawee discover, after payment, that the bill or cheque is a forgery, he may in general, by giving notice in the same day, recover back the money. And if he have paid the bill with the understanding that he was to receive it back, and do not, he may bring an action to retract the the payment. (5) And an indorser may sue on a bill which he has been induced by fraud to pay on behalf of the party liable. (6) Money paid under a mistake of law cannot be recovered back ; (7) but money paid under a mistake of fact, or even in forgetfulness of a fact, may be recovered back. (8) Payment of a bill accepted under a mistake of fact is money paid under such mistake, and can be recovered back. (9) (1) .Schraeder's case, L. R., II Eq. 13 1. (2) Wallace v. Kelsall, 7 M. &^ W. 264. (3) Atkins V. Owen, 4 Nev. (Sr* Man. 123, (4) Pease v. Hirst, 10 B. dr* C. 122. (5) Alexander ». Strong, 9 M. 6^ W. 733. (6) Bell V. Buckley, II Exch. 631. (7) Kitchen v. Hawkins, Law Rep. 2 C. P. 23. (8) Kelly v. Solari, 9 M. dr* W. 54. (9) Kendall ». Wood, L. R., 6 Ex. 243 ; 39 L. J. 167. Preaentment and Payment. 369 Money laid down on the counter by a banker's cashier in payment of a cheque cannot be recovered back by action, though it were handed over under a misapprehension of the alatc of the drawer's account ; still less can it be taken back by force from the party receiving it. (i) A banker's counter is in the nature of a neutral table, provided for the use of both banket and customer. As soon as the money is laid down by the banker upon the counter, to be taken up by the receiver the payment is complete. (2) (1) Chiimbers v. Miller, 11 L. J., C. P. 30 ; Pollard v. Bunk of England, L, R., 6 Q B. 623. (2) Chambers v. Miller; su/ra. )^l IMAGE EVALUATION TEST TARGET (MT-3) .) 41^:^ 1.0 1.1 12.8 ■ 40 1^ US 2.0 L25 i 1.4 U4 HiotographJc Sciences Corporation ^ i\ k*^' L<>' N> 23 WIST MAIN STIHT WIUTM,N.Y. UStO (71«)I73-4S03 <^^' ^ I ■i:;; CHAPTER IV. OF PROTEST AND NOTICE OF DISHONOUR. SECT. I. — PROTEST FOR NON-ACCEPTANCE. SECT. 2. — PROTEST FOR NON-PAYMENT. SECT. 3. — NOTICE OF DISHONOUR. SECT. I. — PROTEST FOR NON-ACCEPTANCE. Upon the dishonour of a bill of ei:change by the refusal of the drawee to accept it, it is in general the indispensable duty of the holder to have the bill duly protested, and notice thereof given to the antecedent parties to whom he looks for reimbursement and indemnity. If he neglects so to do the antedecent parties are discharged, and are not liable for subse- quent non-payment, (i) There is no difference in this respect whether the bill be payable at a certain time after date or after sight ; for although the former class of bills are not required to be presented except at maturity, yet as we have seen if such a bill is actually presented for acceptance and dishonoured, the antecedent parties have a right to a protest and notice thereof. A protest is in form a solemn declaration written under a fair copy of the bill, stating that acceptance has been demand- ed and refused, the reason if any assigned, and that the bill is therefore protested. When the protest is made for a qualified acceptance, it mu:.t not state a general refusal to accept, otherwise the holder cannot avail himself of the qualified acceptance. (i) Roscow V. Hardy, 12 East, 434. Protest and Notice of Dishonour. 361 According to the Civil Code of the Province of Quebec the holder of any bill of exchange, however, instead of making protest, may at his option cause it to be nofed for non-acceptance, and when the bill is so noted he is not bound to give notice of the same in order to hold any party liable thereon, (i) Noting is a minute made on the bill (2) by the proper person at the time of the refusal to accept. It consists of his initials, the month, the day, the year, and his charges for so minuting. (3) It is considered in general as a preparatory step to protest, which latter may be drawn up and completed at any time before the commencement of the suit, or even before or during the trial, and ante-dated accordingly. When a bill which has been noted for non-acceptance is afterwards protested for non-payment, a protest for non-ac- ceptance need not be extended, but the noting with the date thereof and the name of the notary by whom the same was made must be stated in the protest for non-payment. (4) The noting and protesting of bills and notes, whether for non-acceptance or for non-payment, and the giving notice thereof, are done by the ministry of a single public notary without witnesses in the manner and form prescribed by law. In case there is no notary in the place where the dishonour occurred, or the only notary is unable or refuses to act, any Justice of the PeaCe may make the required noting and protest, and give notice thereof, but the protest must set forth the reasons why the same was not made by the ministry of a notary. (5) No clerk, teller or agent of any Bank may act as a notary in the protesting of any bill or promissory note, payable at the Bank, or at any of the agencies of the Bank, in which he is employed. (6) (1) c. C. L. c. Art. 2302. (2) C. C L. C. Art. 2301. (3) See Form A., nn/e p. 319- (4) See Form D., ante p, 321 ; C. C. L. C. Art. 2300, 2302. (5) See Form J., ante 325 ; C. C. L. C; Art. 2304. (6) Section 11. H'"' h 11* 1:1 i PI I4i V k4 362 Commentary on the Note Ad. The duplicate protest and notice with a certificate of service, and all copies thereof attested by the signature of the notary or of the Justice of the Peace, as the case may be, are prima facie evidence of the facts contained therein, (i) Upon due notice of protest for non-acceptance to the parties liable upon the bill, the holder may demand immediate pay- ment of it from such parties in the same manner as if the bill had become due and had been protested for non-payment. And after such protest and notice he is not bound to present the bill for payment or if it be so presented to give notice of the dishonour. (2) To the general rule that protest and notice is necessary to bind antecedent parties, there are certain exceptions which are entirely consistent with the reason on which it is founded. One is where the drawer or indorser has agreed or requested that in case of dishonor it should be returned without protest, in order to save expense. Another is where the drawer has no effects in the hands of the drawee, and therefore can have no reasonable expectations that the bill will be honoured. And a third is where the drawer has admitted his liability by a promise to pay. " By the drawer's promise to pay," says Lord Ellenborough, "he admits the existence of every- thing which is necessary to render him liable. When called upon for payment he ought to have objected that there was no protest. Instead of this he promises to pay it. I must therefore presume he had due notice, and that a protest was regularly drawn up by a notary." But in all such cases of exception and excuse, the effect is strictly limited to those parties who have made such an agreement, or who stand in the peculiar predicament pointed out by the nature of the acceptance, and it does not extend to other parties. The question as to the manner in which notice of dishonor (1) Section 10 ; C. C. L. C. Art. 2305. (2) C. C. L. C. Art. 2298. Protest and Notice of Diahonour. 363 should be given, we will discuss when we come to consider notice of protest for non-payment. SECT. 2 — PROTEST FOR NON-PAYMENT. We will now proceed to consider the obligations and duties of the holder of a bill or note upon its dishonour, by reason of non-payment either in whole or in part. And these may be compresed under two heads : (i) The obligation or duty to make a due protest for non-payment ; and (2) that of giving due notice of the dishonour to the other parties upon the bill or note, who may be liable to pay him the amount, in case of its dishonour. In the first place, then, it is ordinarily indispensable that a protest should be made immediately upon the dishonour, according to the course prescribed by law therefor. By the law of this country the protest may be made in the afternoon of the last day of grace (i) at the place where the bill or note is due. If part payment only is made by the acceptor protest should be made, and due notice given exactly as in other cases, stating the facts. SECT. 3 — NOTICE OF DISHONOUR. In general it is incumbent on the holder of a bill or note dishonoured, whether by non-acceptance, or by non-payment, to give notice of that fact to the antecedent parties. The requisites of notice and the consequences of neglect being much the same in both cases, under the general head of notice of dishonour will be considered notice of non-accep- tance and notice of non-payment. In considering this subject, let us inquire, — first, what form of notice is required ; secondly, how notice is to be transmit- (I) Section 22 ; C. C. L. C. Art. 2306. M! 364 . Commentary on the Note Act. i\ ted ; thirdly, at what place it is to be given ; fourthly, at what time ; fifthly, by whom it must be given ; sixthly, to' whom ; and lastly, what are the consequences of neglect. FORM OF NOTICE. First, as to the form of notice required. And here it must be premised that notice does not mean mere knowledge, but an actual notification. For a man who can be clearly shown to have known beforehand that the bill or note would be dishonoured is nevertheless entitled to notice when such dishonour occurs, (i) No particular form of words is required in giving notice of the dishonour of a bill or note, but the language used must be such as to apprise the party liable of the dishonour {i.c., of presentment and non-acceptance or non-payment), and to intimate that he is expected to pay it. An announcement of the dishonour will, however (at least if it come from the h(^lder), amount to a sufficient intimation to the indorser that the holder looks to him for payment. (2) But a mere demand of payment, unaccompanied with notice of dishonour, will not be sufficient. From the decisions it would seem that but slight difference exists between what would be deemed a sufficient notice, and what would be considered insufficient, it therefore is hardly safe to give notice of dishonour without professional aid. The notice must not so describe the instrument that the defendant may be led to confound it with some other. But if there is more than one bill to which the notice can apply, it lies on the defendant to prove that fact. (3) So long as the misdescription does not mislead it is immaterial, and this is a rule of convenience and justice, as well as of law. (4) If a (1) See Burgh v. Leggc, 5 M. iSr" W. 418 ; County v. Thompson, 18 L. J. ; C. P. 127; 7 C. B. 4CX), S. C. (2) Furze v. Sharwood, 2 G. dr» D. 1 16. (3) Shelton v. Braithwaite, 7 M. 6* W. 436. (4) See Thompson v. Cotterall, Q. B. (U.C) 185; Low i/. Owen, 12 C. P. (U.C.) loi ; Thorn, v. Sandford, 6 C- P. (U.C) 462. Protest and Notice of Dishonour. 365 note is improperly called a bill it is no objection, (i) nor if a bill is improperly called a note, (2) nor yet if the character of drawer and acceptor is transposed. (3) It has been held in England that notice of dishonou- need not state on whose behalf payment is applied for, not where the bill is lying (4) and a misdescription of the place where the bill is lying is immaterial (5), unless, perhaps, a tender were made there. If the notice, by mistake, misdescribe the person giving it, by representing that it is given by or on behalf of A., when in reality it is given by or on behalf of B., it is, nevertheless, good. But the party who receives the notice is to be placed in the same position as if the notice had really been given by A., and is at liberty tp object any inability in A. to give notice ; as, for example, that A. had no right of action on the bill. (6) The notice need not in any case contain a copy of the protest. TRANSMISSION OF NOTICE. Secondly, as to the mode of transmitting the notice of dishonour. The most common and the safest mode of giving notice is by forwarding it by post, and it is in such case unnecessary to prove that the letter was received, for any miscarriage will not prejudice the person giving the notice. Where a witness said that the letter containing notice of dishonour was put on a table to be carried to the post office, and that by the course of business all letters deposited on this table were carried to the post office by a partner, Lord Ellenborough said : " You must go further ; some evidence (1) Messenger r. Southey, i Man. &' Gr. 76. (2) Stockman v. Parr, li M. df \V. 809. (3) Mellish V. Rippen, 7 Exch. 578. (4) WoocUhorpe f. Lawes, 2 M. dr* W, I09 ; Maxwell v. Brain, Exch, 1866 ; but such is not the law in Ontario, Clarke on Bills, 133. (5) Rowlands r. Sprinjett, 14 L. J., Exch. 227; i M. d-W. 7, S. C. (6) Harrison v. Ruscoe, 15 L. J., Exch. iio, 15 M. ^ W. 231, S. C. \ ' 1 :-f 366 Commentary on the Note Act. must be given that the latter was taken from the table In the counting house and put into the post office. Had you called the porter, and he had said that, although he had no rcci)l- lection of the letter in question, he invariably carried to the post office all the letters found upon the table, this might have done, (i) but I cannot hold this general evidence of the course, of business, in the plaintifiTs counting house, to be sufficient." (2) The post marks in town or country proved to be such are evidence that the letters, on which they are, were in the office to which those marks belong at the time of the dates of such marks. (3) But they are not conclusive evidence. (4) PLACE. Thirdly, as to the place at which notice is to be given. A notice of dishonour will be deemed to be sufficiently given, if it is addressed, in due time, to any party entitled to such notice, at the place at which the bill or note is dated, unless any such party has, under his signature, on the bill or note, designated another place. In this latter case notice will be sufficiently given if addressed to him, in due time, at such other place. Any notice addressed as above will be deemed sufficient, although the place of residence of the party thus sought to be notified is other than either of such places, (s) TIME. Fourthly, as to the time when notice of dishonour should be given. The general rule is that notice must be sent to each of the parties to the bill or note, at any time during the day whereon such protest has been made, or the next juridical (1) Skilbeck t>. Garbett, 14 L. J, Q. B. 388. (2) Hetherington v, Kemp, 4, Camp. 194. (3) Kent V. Lower, I Camp. 177, Bylcs 283. (4) Stocken v. Collin, 7 M- <3^ W. 519 ; 9 C. (Sr* P. 653. (5) Section 5. Protest and Notice of Diahonour. 3G7 day following ; and any notice will be deemed to have been duly served upon the person to whom the same is addressed if it is deposited in the post office nearest to the place of makinfj the presentment, (i) This is provided for in the Act as being applicable to Ontario. In the Province of Quebec notice may be served any time \v'ithin the three days next following the day of protest. (2) As to what will be due time in the giving of any notice elsewhere in Canada than in the above Provinces, will be a question of law depending on the facts of each particular case. But the same rules which we find provided for by the Act in respect to the Province of Ontario may be taken as applicable to the whole Dominion, exclusive of Quebec, and should be followed in order to avoid atiy doubt as to the sufficiency of notice. While it is usual for the holder to have notice sent upon dishonour to all the parties liable on the bill or note, his duty will have been duly fulfilled if he notifies the immediate party from whom he had received the bill or note. In such case all other parties will be released from any liability to /«";;/. But upon receipt by the party to whom notice has been sent such party may transmit, in due time after receipt of notice by him, a notice to any or all of the parties from or through whom he received the bill or note, and whose names appear before his on the ba :k of the instrument. In fine any party liable on a bill or note may hold the immediate holder from whom he received it, upon giving such party notice of disho- nour within the delay prescribed by law after notice received by him. It may indeed be doubted, however, whether any party other than the actual holder at the moment of protest, has in the Province of Quebec, three days within which to transmit a notice of such protest to antecedent parties. (1) Section 23; Wilson z'. Pringle, 14 Q. B. (U.C.) 230 ; Bank of B. N. A. V. Ross, Q. B. (U.C.) 199 ; Com. Bank v. Eccles, 4 Q. B. (U.C) 336; (2) C. C. L. C. Art. 2330. .■I < I i.j! i '.. 3G8 Commentary on the Note Act. When a bill or note is in the hands of an agent, as an attorney or Bank, he is considered as a separate party as regards time for giving notice and consequently he has a day to give notice to his principal, and the latter another day to give notice to the antecedent parties, (i) BY WHOM NOTICE TO BE GIVEN. Fifthly, we are to consider by whom the notice ought to be given. The object of notice is twofold : First, to apprise the party to whom it is addressed of the dishonour; and, secondly, to inform him that the holder, or party giving the notice, looks to him for payment. Hence it follows that notice can only be given by some party to the instrument, though he need not be the actual holder of the bill at the time but that a stranger is incompetent to give it. And it has been held by Lord Eldon, that notice by the first indorsee, who had not himself received notice from the second indorsee, and who was not, therefore, obliged to take back the bill, was insufficient as between the second indorsee and the drawer. (2) And it seems clear that even a party to the bill, who has been already discharged by laches, or who could not in any event sue, is incompetent to give notice. (3) But a prior indorsee who has himself received due notice may transmit it (4), though he may not know that the bill has been dishonoured. (5) And the notice by the holder, or by a party who is liable to be sued and may be entitled to sue, will enure to the benefit of all antecedent or subsequent parties. So that a notice by the last indorsee to the drawer will operate as a notice from each indorser to the drawer; (1) R.ilson V. Bennett, 2 Taunt, 388. (2) ex fiartc B.irclay,7 Ves. 597 ; but quaere, since Chapman v. Keane, 3 Ad, d'' E. 193 ; 4 N. d^ M. 607, S. C, unless the party giving the notice had been already discharged by laches. (3) Harrison v. Ruscoe, 15 L. J., Exch. Ilo. (4) Jameson v. Swinton, 2 Camp. 373; 2 Taunt. 224, S. C. (5) Jennings z/. Robert, 24 L. J., Q.U. 102; 4 E. dr* B. 615, S. C. Protest av'^ Notice of Dinhonour. 3G9 and if the payee or first indorser has duly received notice, or has not been discharged by laches, a notice by him to the drawer will be equivalent to a notice from each indorser and from the holder to the drawer, (i) And a notice from an intermediate party may, in pleading, be described as a notice from the plaintiff. (2) Notice of dishonour may be given by any agent who holds the bill as a banker or attorney, and in the agent's own name. (3) And it has been held that a notice given by a party to a bill in the name of an indorser, but without his authority, is good. (4) A creditor who holds a bill as a collateral security is bound to present and give notice of dishonour, and is liable for the consequences if he omit to do so (^5). I r TO WHOM NOTICE TO BE GIVEN. Sixthly, to whom notice is to be ^ iven. Each indorser is entitled to notice. The drawer of a bill payable to a third party is also entitled to notice. The drawee or acceptor is not entitled, nor is the maker of a promissory note. !t is the safest course for the holder to give notice himself to all the parties against whom he may wish to proceed within the time within which he is, by law, required to give it to his immediate indorser (6) ; for, if he merely give notice to his immediate indorser, and it be not regularly transmitted to the antecedent parties, they are discharged : and, even if it be so transmitted, the evidence required to trace the notice back to a remote party is more voluminous, and may be (1) Hyleson Bills, 291. (2) Newen v. Gill, 8 C. 6- P. 367. (3) WoocUhorpe v. Lawes, 2 M. dr* W. 109 ; Rowez/. Tipper, 13 C. B. 249 ; Wilson V. Pringle, 14 Q. B. (\J. C.) 230. (4) Rogerson v. Hare, I Jur. I. (5) Peacock v. Pursell, 14 C, B. N. S. 728 ; 32 L. J., C. P. 266, S. C. (6) Rowe V. Tipper, 13 C. B. 249. i| h)i 5M 870 Commentary on the Note Act. difficult to procure. Rut if, where there are several indorse- ments, notice of the dishonour be given by the holder to liis immediate indorser, and to him only ; but an unbroken chain of notices, each given in due time, hang regularly from indorsee to indorser, back to a distant indorser or to the drawer, the latter is liable either to his indorser or to the holder. As notice may be given by leaving it at the counting; house, so notice to an agent for the general conduct of business is sufficient notice to the principal, (i) But notice to a man's attorney or solicitor is not sufficient. (2) A verbal message left at the drawer's house with his wife has been held sufficient. " A person, not a merchant," says liolland H., " who draws a bill of exchange, undertakes to have some one at his house to answer any application that may be made respecting it when it become due." (3) If the drawer of a bill become bankrupt, notice must nevertheless be given to him, whether a trustee have been appointed (4) or not. If the bankrupt have absconded, there being as yet no assignees, and a messenger be in possession, notice should be given to the messenger, and to the petition- ing creditor. If the party be dead, notice should be given to his personal representatives, and if there be no personal representatives, a notice sent to his late residence is sufficient. ($) Where partners are jointly liable on the bill, notice to one is sufficient. (6) And where a note is made payable to and indorsed by several persons, though not in partnership, notice to one is notice to all. (2) (1) Crosse ?/. Smith, i M. &' Sel. 545. (2) Ibid. (3) Honsego v. Cowne, 2 M. dr* W, 348. (4) See cases cited in Bytes on Bills, p. 294. (5) Merchants Bank v Birch, 17 John's Rep. 25. (6) I'orthouse v. Parker, i Camp. 83 ; Bignuld v. Waterhouse, I M. &• Sel. 259. (7) Bank of Michigan v. Gray, i Q. B. (U.C) 422. i Proteat and Notice of Dishonour. 371 A man mt rnarantccing the payment of a bill, but not a party to it, s not discharged, by the neglect of the holder to give him notice of dishonour unless he has been actually prejudiced by such neglect, (i) And though a man indorse a bill, yet if he also give a bond conditioned for its payment, absence of due notice of dishonour is no plea to an action on the bond. (2) CONSEQUENCES OF NEGLECT TO GIVE NOTICE. Let us now inquire, seventhly, what are the consequences of neglect to give due notice. The law presumes that, if the drawer has not had due notice.he is injured, because,otherwise, he might have immediately withdrawn his effects from the hands of the drawee ; and that, if the indorser has not had timely notice, the remedy against the parties liable to him is rendered more precarious. The consequence, therefore, of neglect of notice is, that the party to whom it should have been given is discharged from all liability, whether on the bill or on the consideration for which the bill was paid. (3) The old doctrine on this subject was, that it lay on the defendant to prove that he had been injured by the want of notice ; but it is now settled that the want of notice is a complete defence, and that evidence tending to show the defendant was not prejudiced by the neglect is inadmissible except in an action against the drawer who held no effects in the hands of the drawee. (4) And if a man who is dis- charged for want of notice nevertheless pays the bill, he cannot recover against prior parties. WAIVER OF NOTICE. Notice may be dispensed with and excused by a prior agreement on the part of the party otherwi se intitled to it (1) Warrington v. Furbar, 8 East 143. (2) Murray v. King, 5 B. <5r* Aid. 165. (3) Bridges v. Berry, 3 Taunt, 130. (4} Dennis v. Morrice, 3 Esp. 158. X if u I I 372 ComTnentary on the Note Act. that it shall not be necessary to give him notice. Thus, where the drawer stated to the holder a few days before the bill became due that he would call and see of the bill had been paid by the acceptor, it was held that he had dispensed with notice, (i) Where the drawer has countermanded payment, notice of dishonour to him is dispensed with, although it may be still necessary to present. (2) If the drawer had no effects at any time during the cur- rency of the bills in the hands of the acceptor, and will have no remedy against the acceptor or any other person if he be obliged to pay the bill, he cannot, in general, have been pre- judiced by want of notice, and, therefore, cannot set that up as a defence. (3) But this decision, substituting knowledge for notice, has been much regretted. Ignorance of a party's residence will excuse neglect to give notice of dishonour. So long as that ignorance continues without neglecting to use the ordinary means for acquiring information. Nemo ad ivipossibile tenetur ; and, therefore, it would seem, on general principles, that the death or dangerous illness of the holder or his agent, or other accident not attributable to the holder's negligence rendering notice impossible, may excuse it. (4) But where an indorser left home on account of the dangerous illness of his wife, at a distance, and a letter con- taining notice of dishonour of a bill lay unopened at his shop during his absence, till after the proper time for giving his indorser notice. Lord EUenborough held that these circum- stances afforded no excuse for the delay (5) Where a bill is drawn by several persons upon one of themselves, since the acceptor is likewise a drawer, notice of (1) Byles on Hills, cases cited p. 298. (2) Hill T. Heap, D is' R. N. P. C. 57. (3) Wiith V. Austen L. R., lo C. P. 689. (4) C. C. L. Art. 2324. (5) Tuinei V. Leach, Chit, ged. 330. 'ment, notice of 1 it may be still during the cur- r, and will have person if he be have been pre- inot set that up ting knowledge ? neglect to give •ance continues s for acquiring , it would seem, >us illness of the ibutable to the le, may excuse account of the d a letter con- ned at his shop for giving his t these circum- Protest and Notice of Dishonour. 373 dishonour is superfluous as the dishonour must be known to one of them, and the knowledge of one is the knowledge of all. (I) (I) Porthouse v. Parker, i Champ. 82. But see Bignold v. Waterhouse, I M. &• Sel. 259. i ■ r ( * M 1*1'.,, r\ \m ; upon one of awer, notice of CHAPTER V. OF THE ALTERATION AND FORGERY OF A BILL OR NOTE. SECT. I — OF THE ALTERATION OF A BILL OR NOTE. SECT. 2 — 01' THE FORGERY OF A BILL OR NOTE. SECT. I — OF THE ALTERATION OF A BILL OR NOTE. A bill of exchange or promissory note is voided by an alteration in a material part, made while it is in the custody of the plaintiffs, although that alteration be by a stranger, unless all parties consent thereto, (i) For a person who has the custody of an instrument is bound to preserve it in its integrity. And as it would be avoided by his fraud in altering it himself, so it will be avoided by his ladies in suffering another to alter it. It is held in the United States however, that an alteration by a stranger, though material, will not render the instrument inoperative. Where a bill was drawn payable to A. B., and whilst in his possession the date was altered, and the bill was subse- quently indorsed to the plaintiffs for value, it was held that they could not recover against the acceptor, " It seems admitted," says Ashurst, J., " that if this had been a deed, the alteration would have vitiated it. Now, I cannot see any reason why the principle on which a deed would have been avoided should not extend to a case of a bill of exchange. There is no magic in parchment or wax, and the principle to I Davidson v. Cooper, ii M. W. 778, 13 M. & W. 343. Alteration and Forgery. 375 be extracted from the cases is, that any alteration voids the contract. If A. B. had brought this action, he could not have recovered, because he must suffer from any alteration of the bill whilst in his custody ; the same objection must hold against the plaintiffs, who derive title from him." (i) So, where the drawer, without the consent of the acceptor, added to the acceptance the words, " Payable at Mr. B.'s, Chiswell street," it was held that this was a material altera- tion, discharging the acceptor. (2) r II OR NOTE. But it has been held by the same learned judge (3) and by the court of exchequer, that a similar addition, with the consent of the acceptor, would not invalidate the instrument. Where a bill was addressed to A. B. & Co., and the acceptance was by A. and B., and the address was afterwards altered to correspond with the acceptance, as the acceptors would be liable either way, the alteration was held to be immaterial. (4) An alteration of a foreign bill, by adding either on the face of the bill or to the indorsements the rate of exchange, according to which the bill is to be paid, is fatal. (5) The addition of the words " interest to be paid at six per cent, per annum," written at the corner of the note, and not in the body, is a material alteration avoiding the note. (6) There are, however, two cases in which an alteration, though in a material part, will not vacate the instrument ; first, where such an alteration is made before the bill is issued, or become an available instrument ; and secondly, where the bill is altered to correct a mistake, or supply an (i) Master v. Miller, 4 T. R. 320 ; 2 H. Bl. 140. (2) Cowie V. Halsall, 4 B. iSr" Al. 197. (3) Stevens v- Lloyd, M. (5^ M. 292. (4) Farquhar v. Southey M. 6^ M. 17. (5) Hirschfield 0. Smith, 35 L. J., C. P. 177. (6) Warrington t;. Early, 23 L. J., Q. B. 47. 376 Commentary on the Note Act. omission, and in furtherance of the original intention of the parties, (i) Thus, where the drawer of a bill, payable to his own order, sent it to the drawee for acceptance, and the drawee requested that a longer time might be allowed for payment, and an alteration to that effect was accordingly made with the consent of the drawer, and the bill was afterwards accepted ; it was held that the alteration being made before the bill was an available instrument against any party, the instrument was valid. (2) Upon the same principle, where three persons joined, as drawer, acceptor, and indorser, in the fabrication of an accommodation bill, and the date was altered before it came into the hands of a holder for value ; it was held that, as the accommodation parties could not sue upon it inter sc, it was not, till it came into the hands of a holder for value, an available instrument, and therefore that an alteration before that time did not vitiate it. (3) But if either payee or indorsee have given value for it ; so that the drawer is liable, an alteration, though before accept- ance, vacates the bill. If, again, the alteration were merely to correct a mistake, or to make a bill what it was originally intended to be, it will not avoid it. Thus, where the drawee intended to make the bill negotiable, and indorsed it over, but had omitted the words " OR ORDER," their subsequent insertion in pur- suance of the original intention was held not to vacate the bill. (4) So, where a bill having been dated, by mistake, 1822 instead of 1823, the agent of the drawer and acceptor, to whom it had been given to be delivered to the indorsee, without their knowledge or consent corrected the mistake ; it was held, that such alteration did not vacate the bill. (5) So, again, a man, who has agreed beforehand to be (1) Dodge V. Pringle, 29 L. J., Exch. 1 15. (2) Kennerley v. Nash, I Stark, 452. (3) Downes ». Richardson, 5 B. dr" Ad. 674. (4) Kershaw r. Cox. 10 East. 437. (5) Ibid. Alteration and Forgery. 377 r " ' a surety, may, after the advance to another maker, sign the note, (i) A bona fide holder of a bill of exchange accepted payable to , or order, may insert his own name as payee, and indorse it, and the bill may be declared on as payable to the party who has inserted his name. (2) Whether the intent of the alteration were to vary the original contract, or merely to correct a mistake, is a ques- tion of fact to the jury. If a bill be altered so that a man otherwise liable on it is discharged, he is not liable on a bill given in renewal of the altered bill, unless he were actually apprised of the alteration at the time he gave the substituted bill. (3) Where an alteration appears on the face of a bill or note, it lies on the plaintiff to show that it was made under such circumstances as not to vitiate the instrument. And this rule is most reasonable ; for, if it lay on the defendant, on an acceptor for example, sued by an indorsee, to show that the alteration was improperly made, it might be a great hardship ; for he may have no means of proving that the bill went unaltered from his hands, or of showing the circum- stances of a subsequent alteration. But the burthen of explaining an alteration imposes no hardship on the plain- tiff, for if the bill was altered while in his hands, he may, and ought, to account for it ; if before, then he took it with a mark of suspicion on its face, which ought to have induced him either to refuse it, or to require evidence of the circum- stances under which the alteration was made. (4) SECT. 2. — OF THE FORGERY OF A BILL OR NOTE. Forgery is defined to be the making; altering, or misapply- ing any writing with intent to defraud. (i) Dodge V. Pringle, 29 L. J., Exch. 115. (2) C. C. L. C. Art. 2282. (3) Bell V. Gardiner, il L. J., C P. 195. (4) Byles on Bills, p. 329. liiiiri n •I f i ' !■ 378 Commentary on the Note Act. Forging bills or notes or any part of them, as well as uttering them, knowing them to be forged, are each felonies, punishable by imprisonment in the Penitentiary for life, or for any term not less than five years — or by imprisonment in any other gaol or place of confinement for any term not exceeding two years with or without hard labour, and with or without solitary confinement. If several persons make different parts of the instrument, they are each chargeable with forging the entire instrument, though they may be ignorant of each other's proceedings, (i) The offence of forgery is complete without any publication or uttering. (2) Altering the date of a bill of exchange after acceptance (3) : altering the place where a note is made payable (4) ; or altering the sum for which a bill or note is made payable (5), are forgeries. (6) If a person is authorized to fill up a bill or note with one sum, it is forgery to fill it up with a larger sum, or even a less sum, and apply the instrument to purposes different from his instructions. (7) To write one's own name with the intention that it should pass as the signature of another person of the same name is forgery. (8) (1) Rex V. Bingley, R. &* R., C. C, 446. Rex v. Kirkwood, i Mood., C. C, 304. Rex p. Dade, i Mood., C. C, 307. (2) El u's case, i Leach, C C, 175. Crocker's case, R. &> R., C. C, 97. (3) Master v. Miller, 4 T. R., 320. Rexw. Atkinson, 7C. &* P., 669. (4; Rex V. Treble, 2 Taunt., 328. (5) Rex V. Post, R. (Sr- R . , C. dr* C, lOI. (6) And payment of such will be the loss of the payer for any excess. So one branch of a Bank paying a draft on another branch cannot recover fron< the party to whom it pays, if an innocent party, though the amount of the draft have been increased. Union Bank of Lower Canada v. Ontario Bank, 2 L. N. 132 (I079). (7) Rex V. Hart, Mood., C.C., 486. The Queen f. Bateman, i Cox, C. C, 186. The Queen v. Wilson, 1 Den., C. C, 284. (8) Mead v. Young, 4 T. R., 28. Rex. v, Parkes, 2 Leach, C.C, 775. Alteration and Forgery, 379 A person having obtained two genuine signatures wrote above one a promissory note ; and on the other side of the other a promissory note payable to that person, and so chan- ged the signature into an indorsement, was convicted of forging the note and the indorsement, (i) Using the genuine signature of one person in any way, so as to make it appear that it is the signature of another person of the same name, is forgery. (2) Discounting bills or drawing drafts with fictitious names on them is forgery. (3) Signing a bill or note by procuration for another person fraudulently, and without lawful authority, and uttering such a bill, knowing that it is so signed by procuration without lawful authority, is felony, punishable with imprisonment in the Penitentiary for not more than fourteen and not less than two years ; or imprisonment in any other gaol or place of confinement for not more than two years, and with or without hard labour and solitary confinement. It ■ li 'i CIVIL CONSEQUENCES OF FORGERY. Where the title to a bill or note is necessarily made through a forgery, even a dotia fide holder for value has in general no right to sue upon it, or even return it ; and therefore, as a general rule, if the acceptor or maker pay one who derives his title through a forgery, that will not discharge him. (4) So, if a bill or cheque be altered and made payable for a larger sum than that originally inserted, should the drawee, (1) Rex V. Hales, 17 State Tr., 161, 209, 229. (2) Reg. V. Blenkinsop, I Den.. C. C, 276. Reg. v, Mitchell, i Den. C C, 282. Reg. z/. Rogers, 8 C. dr* P., 649. Reg. v. Parke, 1 Cox, C.C.,4. (3) Dunn's case, I Leach, 57. Bolland's case, i Leach, 83. Lockett's case, I Leach, 94. Taft's case, i Leach, 172. Shephard's case, i Leach, 226. Reg. I/. Warden, 3 F. (Sr- F . , 82. (4) See Wenham v. La Banque du Peuple, I L. C. L. J., 30. In this case the signature was so perfect that the Court could scarcely discover any difference between it and the genuine one. m 4 1 1 380 Commentary on the Note Act. banker or acceptor pay it, he cannot charge the drawer for the difference. But in case any act of the drawer facilitated or gave occasion to the forgery, he must bear the loss himself. A customer of a Banker, on leaving home, entrusted to his wife several blank forms of cheques, signed by himself, and desired her to fill them up according to the exigency of his business. She filled up one with the \ as follows : 1. The denominations of money in the currency of Canada Denominations shall be dollars, cents and mills, — the cent being one hun- '" •^^'""'^y- dredth part of a dollar, and the mill one tenth part of a cent. 34 v., c. 4, s. 2. *fi. The currency of Canada shall be such, that the British Standard of ^ , . , , ,. -1111 value of Canada sovereign, ol the weight and niieness now prescribed by the currency, laws of the United Kingdom, shall be equal to and shall pass current for four dollars eighty-six cents and two-thirds of a cent of the currency of Canada, and the half sovereign of proportionate weight and like fineness, for one half the said sum : and all public accounts throughout Canada shall be kept in such currency ; and in any statement as to money or money value, in any indictment or legal proceedinir, the same shall be stated in such currency ; and in all private accounts puWic accounts, and agreements rendered or entered into on or subsequent to i„'^it.'"^ ' '^' the first day of July, one thousand eight hundred and seventy- one, all sums mentioned shall be understood to be in such currency, unless some other is clearly expressed, or must, from tlie circumstances of the case, have been intended by the parties. 34 V., c. 4, s. 3. 3. No Dominion note or Bank note, payable in any ot!. . \, banknotes, currency than the currency of Canada, shall be issued o* re- , i,,.-. ' "rency?*^ issued by the Government of Canada, or by any Bank, ana 11 such notes issued before the first day of July, one thous eight hundred and seventy-one, shall be redeemed, or notes payable in the currency of Canada shall be subsiituted or exchanged for them. 34 V., c. 4, s. 5. 4. Any gold coins which Her Majesty causes to be struck Coia coins may for circulation in Canada, of the standard of fineness pres- Lailada. Y Ml p 1 388 Appendix. Certain silver and copper coins struck by order of Her Majesty to be a legal tender through- out Canada. scribed by law for the gold coins of the United Kingdom, and bearing the same proportion in weight to that of the British sovereign, which five dollars bear to four dollars, eighty-six cents and two-thirds of a cent, shall pass current and be a legal tender in Canada for five dollars ; and any multiples or divisions of such coin, which Her Majesty causes to be struck lor like purposes, shall pass current and be a legal tender in Canada at rates proportionate to their intrinsic value respect- ively ] and any such coins shall pass by such names as Her Majesty assigns to them in her proclamation declaring them a legal tender, and shall be subject to the like allowance for remedy as British coin. 34 V., c. 4, s. 6. 5. The silver, copper or bronze coins which Her Majesty has heretofore caused to be struck for circulation in the Pro- vinces of Quebec, Ontario, and New Brunswick, under the Acts then in force in the said Provinces respectively, shall be current, and a legal tender throughout Canada, at the rates in the said currency of Canada assigned to them respec- tively, by the said Acts, and under the like conditions and provisions : and such other silver, copper or bronxe coins as Her Majesty causes to be struck for circulation in Canada, shall pass current and be a legal tender in Canada, at the rates assigned to them respectively by Her Majesty's Royal Proclamation, — such silver coins being of the fineness now fixed by ^the laws of the United Kingdom, and of weights bearing respectively the same proportion to the value to be assigned to them, which the weights of the silver coins of the United Kingdom bear to their nominal value ; and all such silver coins aforesaid shall be a legal tender to the amount of ten dollars, and such copper or bronze coins to the amount of twenty-five cents, in any one payment : and the holder of the notes of any person, to the amount of more than ten dollars, shall not be bound to receive more than that amount in such silver coins in payment of such notes if presented for payment at one time, althcagh any of such notes is for a less sum. 34 V., c. 4, s. 7. No other coins 6. No Other silvcr, copper or bronze coins than those ^/jJj*'|JjjJi/^"P' which Her Majesty causes to be struck for circulation in Canada, or in some Province thereof, shall be a legal tender in Canada. 34 V., c. 4, s. 8. Amount which may be tendered in one payment. Currency. 389 7. Her Majesty may, by Proclamation, from time to time. As to foreign fix the rates at whicli any foreign gold coins of the descrip- ^° tion, date, weight and fineness, mentioned in such Proclama- tion, shall pass current, and be a legal tender in Canada : Provided that until it is otherwise ordered by any such Proclamation, the gold eagle of the United States of America. Provis : as to coined after the first day of July, one thousand eight hundred ' ' ^^^' and thirty-four, and before tlie first day of January, one thousand eight hundred and fifty-two, or after tlie said last mentioned day, but while tlie standard of fineness for gold coins then fixed by the laws of the said United States remains unchanged, and weighing ten pennyweights, eighteen grain?, troy weight, shall pass current and be a legal tender in Canada for ten dollars ; and the gold coins of the said United States being multiples and halves of the said eagle, and of like date and proportionate weights, shall pass current and be a legal tender in Canada for proportionate sums. 34 V., c. 4. s. 9. 8. The stamp of the year on any foreign coin made current Proof ofciate, , , . , T-> 1 • • 1 1 • . .. &c., of coins. by this Act, or any Proclamation issued under it, shall establish prima Jacie the fact of its having been coined in that year ; and the stamj) of the country on any foreign coin shall establish primn facie, the fact of its being of tlie coinage of such country. 34 V., c. 4, s. 10. i). No tender of payment in money in any gold, silver or nefaced coin copper coin which has been defaced by stamping tlieuon anyjer.'' *''^' name or word, whether such coin is or is not thereby diminisii- cd or lightened, shall be a legal tender. 32-33 V., c. 18, s. 17, part. 10. All sums of money payable on and after the first day of Payment-; in T. 1 11.1111 .^ N.Jva Scotia on July, one thousand eight hundred and seventy-one, to Her ami after .-t Majesty, or to any person, under any Act or law in force in in'cina/ia'cur-"' Nova Scotia, passed before the said day, or under any '^"''"'^' bill, note, contract, agreement or other document or instru- ment, made before the said day in and with reference to that Province, or made after the said day out of Nova Scotia and Howtobe cai- with reference thereto, and which were intended to be, and but "" for such alteration would have been payable in the currency of Nova Scotia, as fixed by law previous to the fourteenth day of April, one thousand eight hundred and seventy-one, shall hereafter be represented and payable, respectively, by equiva- ciilaleJ . 1'' ^ 1 ■ !i 1' i 1 1 1 ■i I A ■ si 1 As to debt-; in H.C.& P.E.I, cuiitracted be- fore ISC July, 1881. 390 Appendix. lent sums in the currency of Canada, that is to say, for every seventy-five cents of Nova Scotia currency, by seventy-three cents of Canada currency, and so in proportion for any greater or less sum : and if in any sucli sum there is a fraction of a cent in the equivalent in Canada currency the nearest whole cent shall be taken. 34 V., c. 4, s. 4. 11. Any debt or obligation contracted before the first day of July, in the year one thousand eight hundred and eighty- one, in the currency then lawfully used in the Province of British Columbia, or in the Province of Prince Edward Island, shall, if payable thereafter, be payable by an equivalent sum in the currency hereby established. 44 V., c. 4, s. i. The Sums mentioned 'l-*'i' All sums mentioned in dollars and cents in " ["""^nlittyo' British Xorth America Act, 1867," and in all Acts of the Par- Canada, liament of Canada, shall, unless it is otherwise expressed, he understood to be sums in the curreney by this Act established. 31 c. 45, s. 2. I [1 if CHAPTER 31, A. D. 1886. A n Act respecting Dominion Notes. HER Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows : — It The expression " specie" in this Act means coin current interpretation, by law in Canada, at the rates and subject to the provisions of the law in that behalf, or bullion of equal value according to its weight and fineness. 31 V., c. 46, s. 13, jjar^ 3. The Governor in Council may authorize the issue of issue of Domin- Dominion Notes to an amount not exceeding that herein specified, and such Dominion notes may be of such denom- national values and in such form, and signed by such persons and in such manne-, by lithograph, printing or otherwise as he, from time to time, directs : and such notes shall be redeemable in specie on presentation at branch offices estab- lished or at banks with which arrangements are made as hereinafter provided at Montreal, Toronto, Halifax, St. John, N.13., Winnipeg, Charlottetown and Victoria, and at that one of the said places at which they are respectively made pay- able. 31 v., c. 46, s. S,part: — 43 V., c. 13, s. 4, })art. Ml li. The amount of Dominion notes issued and outstanding Amount of Do- at any time may, by Order in Council, founded on a report '"'"'"° of the Treasury Board, be increased to, but shall not exceed twenty million dollars, by amounts not exceeding one million dollars at one time, and not exceeding four million dollars in any one year : Provided that the Minister of Finance and Proviso: amount T-. • ^1 1 1 11 1 111/- 1 1 in poliland giiar- Receiver deneral shall always hold, for securmg the redcmi>ameed securities tion of such notes issued and outstanding an amount in redemption'.' gold, or in gold and Canada securities guaranteed by the Government of the United Kingdom, eq'-'.:'.l to not less than twenty-five per cent, of the amount of such notes — at least fifteen per cent, of the total amo uit of such notes being so held in gold ; and provided, also, that the said minister shall And in unguar- always hold for the redemption of such notes an amount equal tullt 392 Appendix. to the remaining seventy-five per cent, of the total amount thereof, in Dominion debentures issued by authority of Parliament. 43 v., c. 13, s. I, part. Notes to be a Ic^al tender. Pelientures may be delive Minister 4. Such notes shall be a legal tender in every part of Canada, except at the offices at which they are respectively made payable : the proceeds thereof shall form part of the Consolidated Revenue Fund of Canada, and the expenses lawfully incurred under this Act shall be paid out of the said fund. 43 V., c. 13, s. ^,p(irt. 5. Debentures of Canada may be issued and delivered to be delivered to [he Minister of Finance and Receiver General for the Rene- itiiiiisicr 01 rill" D "used oT'b''' him '"''^^ purposes of this Act, and to enable him to comply with its }i>r the purposes requirements, — such debentures being held as aforesaid for of this Act. ' _ ° securing the redemption of Dominion notes, and the said Minister having full power to dispose of them, and of the guaran- teed debentures aforesaid, either temporarily or absolutely, in order to raise funds for such redemption, and for the i)urpose of i)rocuring the amounts of gold required to be held by him Proviso. under this Act, but nothing herein contained shall be construed to authorize the issue of debentures not otherwise authorized by Parliament, or any increase of the debt of Canada beyond the amount soauthorized. 43 V.,c. 13, s. 2. Amount to be issued nxninst gold only. 6. If any amount of Dominion notes is issued and outstand- ing at any time in excess of the amount then authorized as aforesaid, the Minister of Finance and Receiver General shall hold gold to the full amount of such excess, for the redemption of such notes ; and any amount of such notes which the public convenience requires may be issued and remain outstanding, provided the excess of such amount over that so authorized is represented by an equal amount of gold held by the Minis- ter of Finance and Receiver General as aforesaid ; and the issue of Dominion notes so represented in full by gold, shall not be deemed an increase of the public debt ; but except in the case of notes so issued against an equal amount of gold, the totni amount of Dominion notes outstanding shall never exceed the amount authorized under section three of this Act. 33 v., c. 10, s. 6. 7. The Minister of Finance and Receiver General shall Finance to pub- publish monthly in the Canada Gazette a statement of tiie Minister of Dominion Notes. 393 amount of Domi. "in notes outstanding on the last day of the ii,h monthly preceding month, and of the gold, guaranteed debentures and »'"'*'"«""• unguaranteed debentures then held by him for securing the redemption thereof, distinguishing the amounts of each so held at each of the cities at which Dominion notes are redeem- able ; and such statements shall be made up from returns made to the said Minister by the branch offices, bank or banks at which such notes are redeemable. 43 V., c. 13, s. 3. 8t The Governor in Council may, in his discretion, estab-omcesoragen- lish branch offices of the Department of Finance at Montreal, tionofnotes.'"''" Toronto, Halifax, St. John, N.B., Winnipeg, Charlottetown, and Victoria, respectively, or any of them, for the redemption of Dominion notes, or may make arrangements with any chartered bank or banks for the redemption thereof, and may allow a fixed sum per annum for such service at all or any of the said places ; and gold or debentures held at any such branch office or by any such bank for the redemption of Dominion notes, shall be deemed to be held by the Minister of Finance and Receiver General : Provided that any Assis- tant Receiver General appointed at any of the said cities nnderlhe^' Act respecting Government Savings Bitnks," shall be an agent for the issue and redemption of such notes. 33 V., c. 10, s. 7 ;— 39 v., c. 4 ;— 43 V., c. 13, s. 4, part. 9. Provincial notes issued under the Act of the late Pro- Redemption of ._, , 1-, •111'. -1 I'rovincial notes. vmce of Canada, passed m the session held m the twenty-nuith and thirtieth years of Her Majesty's reign, chapter ten, shall be held to be notes of the Dominion of Canada, and shall be redeemable in specie on presentation at Montreal, Toronto, Halifax or St. John, N. B., and at that one of the said places at which they are respectively made payable, and shall be (as provided by the lastly mentioned Act) a legal tender except at the offices at which they are respectively made payable. 31 v., c. 46, s. 8, part. J** i i 1 f '8 :; ii i f \ 1 il'l Interpretation. " Minister." "Agent." CHARTER 121, A.D. 1886. An Act respecting Government Savings Banks. HER Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows : — INTERPRETATION. 1. In this Act, unless the context otherwise requires, — («). The expression " the Minister" means the Minister of Finance and Receiver General : (b). The expression "agent" includes Assistant Receiver General. 34 v., c. 6, s. I, part. I certain places. Savings Hanks ESTABLISHMENT OF SAVINGS BANKS. Assistant Recei- 3. The Govemor in Council may, from time to time, brappo"imed"!it^ appoint at each of the cities of Toronto, Montreal, Halifax, St. John, N. B., and at any place within the rrovinces of British Columbia, Prince Edward Island and Manitoba, and at any place within any Province which shall hereafter form part of Canada, a person who shall be called an Assistant Receiver General ; and the Governor in Council may also !?t'suchpiiace**'^ establish a savings bank at each of the said cities and at any place in each of the said Provinces, and in any Province which shall hereafter form part of Canada, — of which savings banks respectively, the Assistant Receiver General appointed for the city or place where the savings banks are respectively established, shall have the management : (2) The Governor in Counci! may also establish, in any other places in the Provinces of Nova Scotia and New Bruns- wick, branch savings banks, and may appoint persons as agents for the management thereof. 34 V., c. 6, s. i, part and s. \2>, part. And at other places. Deposits may be received. DEPOSITS AND DUTIES OF OFFICERS. 3. Every agent shall, under regulations from time to time made in that behalf by the Treasury Board, with the approval Government Savings Banks. 395 of the Governor in Council, receive deposits of money on account of the Minister, and shall repay the same with inte- rest to the depositor as hereinafter provided : 2. Such of the collectors of customs, in the Province of r^ept^'i" wi'h collectors of New Brunswick, as are authorized to receive deposits of moneys Customs in n.b. as savings, shall continue to receive the same until other savings bank agents are appointed in their stead respectively, and shall be subject to all the provisions of this Act as such agents, and any moneys received by such collectors before the coming into force of this Act shall be dealt with by them as moneys received by them under ihis Act. 34 V., c. 6, s. i, jHirt, 4. The Governor in Council may also appoint an inspec- iii'^pect>.r« may tor or inspectors, to inspect, investigate and report upon the business which arises in carrying out the i)rovisions of this Act, to which inspectors the agents appointed to receive leposits, and all other persons .vho are employed under this Act, shall afibrd all needful facilities for such inspection and investigation ; and the duties and powers of such inspectors Their duties. shall be such as are assigned to them under the regulations made under this Act. 34 V., c. 6, s. 14. f l,.ji iY: 14: 5. Every agent, officer, clerk and servant employed under Security to be this Act, who is intrusted with and has the custody of any ^'^'^"" moneys or valuable securities, shall, before entering upon the duties of his office or employment, give such security for the faithful discharge of the same, and for the due account- ing for all such moneys, as is required of him by the Treasury Board ; and shall also take an oath or affirmation before a And oath taken, justice of the peace, faithfully to perform his said duties • which oath or affirmation any justice of the peace is hereby authorized to administer ; (2.) Such oath or affirmation shall be in the form following Form d oath. in word;, to the same effect, that is to say : I, A. B., of being duly sworn, swear, (or do solemnly affirm) that so long as I am employed in assisting to carry out the provisions of the Act intituled " An Act respecting Government Savings Bnnlcs," I will perform ii 'ft 396 Appendix. faitlifiilly and to the best of my ability the duties that are assigned to me. And I have signed, Sworn (or affirmed) at this day of , i8 , before me, A. B., Justice of the Peace /or the of 34 v., c. 6, s. II. From whom de- 0. Every agent appointed to receive deposits may receive rcceived"';uui to dcposits from any person, whatever is his status or con- may"bc'nuX." dition in life, and whether such person is qualified by law to enter into ordinary contracts or not ; and, from time to time, may pay any or all of the principal thereof, and the whole or any part of the interest thereon to such person, without the authority, aid, assistance or intervention of any person or official being required, notwithstanding any law, Proviso: limit usagc or cuslom to the contrary: Provided always, that if in a certain case. , i i • i i , the person who makes any such deposit could not, under the laws of the province where the deposit is made, deposit and witliJraw money in and from a bank, in such case the total amount of deposits to be received from such i)erson shall not exceed the sum of five hundred dollars. 34 V., c. 6, s. 7. Hepositor to INC his address, &c. 7. Every depositor, on making his first deposit, shall declare his name, residence and occupation ; but the i)er- sons employed in the receipt or payment of such deposits shall not disclose the name of any depositor, or the amount deposi- ted or withdrawn, except to the minister or to such of his offi- cers as are apjjointed to assist in carrying into operation the provisions of this Act. 34 V., c. 6, s. 3. Deposits how made, entered and proved. 8, Every such deposit received by such agent shall be entered by him, at the time, in a book to be kept by him for that purpose, and at the same time shall be entered by him in a pass book to be furnished to the depositor; and the entry in such pass book, attested by the signature or initials of the agent who receives the deposit, or of his deputy or clerk, shall be evidence of the claim of such depositor to the repayment thereof, with interest thereon upon demand made during office hours by such depositor on such agent or his successsor Oovei'nment Savings Banks. 397 ities that are in office, at the office or place where such deposits are pay- able, subject to the provisions followinj:, that is to say : — (a.) Every agent shall report to the Minister, at such times Report to mini«. and in such forms as are prescribed by the regulations under this Act, all deposits received by him. (/>) At such times as are prescribed by the regulations made rerimiicai re- undcr this Act, but not at less intervals than the beginning ofeiT[.ct''ai to'ie- each calendar month, the oflicer appointed thereto by the Min-*""" '"°"""' ister shall send, by mail, to each depositor, to the address given by him, a notice stating the amount deposited by him since tlie statement of the same kind then last sent to him, if any, and the total amount then at his credit; and the amounc mentioned in such notice, and no more, shall be the amount for which the Crown shall be liable up to the last deposit therein mentioned, unless the depositor, within thirty days after the reciept of such notice, notifies the Minister, in such manner as is prescribed by the regulations then in force, that there is some error and what error, in such notice, — in which case the amount shall be ascertained, and the depositor shall be notified accordingly. 34 V., c. 6, s. 2. 1>. Every agent shall, at such times as are prescribed by the nuposai of de- re^'.uiations then m force, pay in to the account of the Minister „,ent of wUh- at such bank as is prescribed by the Minister, all moneys re- ceived on deposit, and he shall pay all moneys which are withdrawn in such manner as by the said regulations is pres- cribed. 2. Every agent shall also, at such times as are prescribed Detailed account transmit to the Minister, in such form as is prescribed by the to the minister. Minister, a detailed account of the business of his office during the time that has elapsed since the transmission of his next preceding account. 34 V., c. 6, s. 4. 10. The interest payable to the persons making such duerest on de- deposits shall be at such rate, not less than four per centum per annum, as the Governor in Council, from time to time, prescribes; but such interest shall not be calculated on any sum less than one dollar, or on any sum other than a dollar or the multiple of a dollar. 34 V., c. 6, s. 5. 11. On the thirtieth day of June in every year the interest interest added accrued on deposits shall be added to and become part of the principal money. 34 V., c. 6, s. 6. pusits. yearly to capital. m 898 Ap'pendix. I i Offlc«r« of Ciov- crninenl nut hoiiiul tu lec to truill. 152. No officer of the Government of Canada shall he hound to see to the execution of any trust, whether expressed, implied or constructive, to which any deposit made under the autho- rity of this Act is sul)ject ; and the receipt of the person in whose name any such deposit stands, or, if it stands in the name of more than one person, the receipt of any one of such persons shall be a suflicient discharge to all persons concerned for the payment of any money payable in respect of such de- posit, notwithstanding any trust to which such deposit is then subject, and whether or not the agent sought to be chargc;• benefit of his creditors, or absents himself, without the consent of the board, for twelve consecutive months from the m^jetings of the directors, or is convicted of any felony, shall thereupon, ipso facto, cease to be a director, and the vacancy so created shall forthwith be filled up in the manner provided by the charter. 34 V., c. 7, ss. 7 and 2/. 5. No failure to elect directors of the Bank shall operate f "''"•■« »"«'"' ' directors, how any dissolution of the corporation ; but in case of such failure remedied. to elect, the required election shall be made as soon thereafter as possible, at a special meeting of the shareholders, — which the directors are hereby authorized to call for that purpose ; and until such subsequent election takes place, the official acts ..f the directors holding office shall be valid. 34 V., c. 7, s. 26. M CALLS. 6. The directors may call up the stock subscribed for and Caiis on stock, remaining unpaid, by calls not exceeding five per cent, made at intervals of not less than three months, whenever it is, in their opinion, necessary or expedient to make such calls ; and all stock when paid up shall be invested in the manner here- inafter provided as to the investment of moneys denosited with the Bank: Provided that the limitation of the amount of Proviso, any call, or of the intervals at which calls may be made, shall not apply to the case of deficiency of the funds of the Bank to meet the claims of depositors and other liabilities hereinafter provided for. 34 V., c. 7, s. 9; — 36 V., c. 72, s. i,_part. I IV^, ii' 404 Appendix. Recovery of calls 7. The amount of cvcry such call, if not paid when due, hy action and , .... i i i- ■ i proof in such may be recovered with interest by the directors, m the name of the Bank, in any court having jurisdiction to the amount ; and in any action for the recovery thereof, it shall be sufficient to allege and prove the charter, and that the calls were made under this Act, and that the defendant is the holder of a share or shares in respect of which the amount is due, without alleging or proving any other matter or thing whatsoever; and thee vidence of any officer of the Bank, cognizant of any fact required to be proved, shall be sufficient proof thereof, and any copy of the charter, purporting to be certified as a true copy thereof by the Secretary of State of Canada, shall be deemed authentic and shall be prima facie evidence of the charter and of the contents thereof. 34 V., c. 7, s. 10. Liability of shareholders in case of defici- ency of assets. Calls in SJch case. Intervals and notice. Amonnt and en- forcement. First call. EFect of failure topiy LIABILITY OF SHAREHOLDERS. 8. The shareholders of the Bank shall, in the event of its funds in money and assets immediately convertible into money becoming insufficient to satisfy its debts and liabilities, be liable for the deficiency, so far as that each shareholder shall be liable to an amount equal to the amount, if any, not paid up, of his shares, and no more ; and the directors may and shall make calls on the stock not paid up to the full amount not paid up, or to such less amount as they deem necessary to pay all such claims and other liabilities, without waiting for the collection of any debts due to the Bank, or the sale of any of its assets or property : 2. Such calls shall be made at intervals of thirty days, and upon notice to be given thirty days at least prior to the day on which the call is payable ; 3. No such call shall exceed twenty per cent, on each share, and payment thereof may be enforced in the manner herein- before provided as to calls on unpaid-up stock : 4. The first of such calls shall be made within ten days after such deficieney is ascertained : 5. Failure, on the part of any shareholder liable to sucli call, to pay the same when due, shall operate a forfeiture by such shareholder of all claim in or to any part of the assets of the Bank ; but such call and any further call thereafter shall Saviings Banks. 405 nevertheless be recoverable from him as if no such forfeiture had been incurred : 6. Every director who refuses to make or enforce, or to Liability of di- ' . , rector failing to concur in making or enforcing any call under this section, is maice such call. guilty of a misdemeanor, and shall be personally responsible for any damages suffered by reason of such default : and every liquidator or other officer or person appointed to wind up the affairs of the Bank, in case of its insolvency, shall have the powers of the directors with respect to such calls. 34 V., c. 7, s. II and s. 12, part. 9. Persons who, having been shareholders in the bank, have f;ifn''sfe'/i^'^'" only transferred their shares or any of them to others or regis- "'■'^'" ""• tered the transfer thereof, within one month before the com- mencement of the failure of the bank to meet the claims of its depositors on demand, shall be liable to calls on such shares under the next preceding section, as if they had not transferred them, saving their recourse against those to whom they were transferred. 34 V., c. 7, s. 12, jnirt DIVIDENDS. 10. The directors of the Bank shall make half-yearly divi- Dividends dends of so much of the profits of ihe Bank as to the majority thereof."^* of them seems advisable, and as is not inconsistent with the provisions of this Act, and .hey shall give public notice of the payment of such dividends at least thirty days previously, in the manner herein provided, as to notices of meetings. 44 v., c. 8, s. 4. en davs after TRANSFER OP SHARES AND DEPOSITS, 11. The shares in the Bank shall be personal property and Transferor shall be transferable in the manner provided by the by-laws *'*"'^^' and regulations made as prescribed by the charter ; and the transferee shall have the rights and shall be subject to the lia- bilities of the original holder : 2. No share shall be divided, — and if any share is held by joint holders several persons jointly, one of them shall be appointed by let."^**'"^*- ter of attorney by the others to vote thereon, to receive divi- dends and to do all things that require to be done in respect thereof; and such letter of attorney shall be lodged .ith the Bank. 34 V., c 7, s. 13. 406 Appendix. Transmission of 13. If the interest in any deposit or share in the Bank be- *is"otherwise'"" comes transmitted in consequence of the death or insolvency than by transfer. q£ ^j^y depositor or sharelioldcr, or in consequence of the mar- riage of a female depositor or shareholder, or by any other lawful means than by a transfer upon the books of the Bank or by deed served upon the Bank, such transmission shall be authenticated by a declaration in writing, — which declaration Declaration in shall distinctly State the iiianner in which and the person to whom such deposit or share has been transmitted, and shall be, by such person, made and signed ; and every such decla- ration shall be, by the person making and signing the same, sworn to before a judge or justice of a court of record or chief magistrate of a city, town, borough or other place, or before a notary public, where the same is made and signed ; and every such declaration, so signed and sworn to, shall be left with the manager or other officer or agent of the Bank, who shall there- upon enter the name of the person, so entitled to such deposit or share under such transmission, as proprietor thereof, in the books of the bank ; and until such transmission is so authenti- cated, no person claiming by virtue of any such transmission, shall be entitled to receive such deposit or share, or any part thereof, or any interest or dividend thereon : How authenti- 2. Every such declaration and instrument as by this and the thin*'in'a' Bruuh "cxt following scction of this Act are required to perfect the possession. transmission of a deposit or share in the Bank, made in any other coimtry than Canada or some other of the British colo- nies in North America, or in the United Kingdom of Great ■^ritain and Ireland, shall be further authenticated by the Bri- cish consul or vice-consul, or other accredited representative of the ilritish Government in the country where the declara- tion is made, or shall be made directly before such British consul or vice-consul or other accredited representative : Further evidence 3' Nothing in this Act contained shall prevent the directors, "^y*^ '"'""'**'• manager or other officer or agent of the Bank from requiring corroborative evidence of any facts alleged in any such decla- ration : Payment to dis- 4' ^^ paymcnt is made to any depositor of any deposit or of charge the bank, ^ny interest thereon, or of any dividend on any share, after transmission thereof by any of the means mentioned in this section, but before such declaration is made and authenticated Savinga Banks. 407 as aforesaid, such payment shall be valid and shall discharge the Bank. 34 V., c. 7, s. 28. 13. If the transmission of any deposit or share is by virtue Transmission by of the marriage of a female depositor, the declaration shall ^g ■""""*'• accompanied by a copy of the register of such marriage and shall declare the identity of the wife with the holder of such deposit or share : and if the transmission has taken place by By testamentary . - , , , , instrument. Virtue of any testamentary instrument or by mtestacy or by the vacancy of the estate of a deceased depositor or share- holder, the probate of the will, or, if it is notarial, an authen- tic copy thereof, or the letters of administration or act of tutorship, or authentic certificates of birth, as the case may be, shall, together with such declaration, be produced and left with the manager or other officer or agent of the Bank, who shall thereupon enter the name of the person entitled under such transmission in the books of the Bank. 34 V., c. 7, s. 29, DEPOSITS AND LOANS. 14. The Bank may receive deposits of money for the benefit Bank may re- of persons depositing the same, and may invest the same as and pay'imereit. hereinafter provided, and may accumulate the revenues and profits derived from the investment of so much thereof as is not required to meet ordinary demands by the depositors, and, out of such accumulation, may -allow and pay to the deposi- tors thereof such rate of interest on such deposits as is, from time to time, fixed by the Governor in Council, not being more than five per cent, per annum. 34 V., c. 7, 5. 14; — 44 V., c. 8, s. 2. 15. Every depositor, on making his first deposit in the Depositor to Bank, shall disclose and declare his name, residence, quality addr^s?' *"** and occupation. 34 V., c. 7, s. 15. 16. The Bank may receive deposits from any person, Deposits by whatever is his status or condition of life, and whether such '"'"°"' '^' person is qualified by luw to enter into ordinary contracts or not J and the Bank may pay the principal or any part thereof, and the whole or any part of the interest thereon, to such person, without the authority, aid, assistance or intervention of any person or official being required : Provided always, that if the person making any deposit in the Bank is not, by L Si 408 Appendix. Proviso- Cer«ouni, Sic respecting the affairs of the Hank is, unless it amounts to a higlier oflence, a misdemeanor ; and every one who is a presi- dent, vice-president, director, auditor, cashier, or other olhcer of the Hank, and who prepares, signs, approves or concurs in such statement, return, report or document, or uses the same with irtent to deceive or mislead any person, shall be held to have wilfully made such false statement, and shall further be responsible for all damages sustained by such person in con- sequence thereof. 34 V., c. 7, s. 34. SCHEDULE. Return of the amount of liabilities and assets of the (name 0/ the Hank) on the day of 18 Capital Stock, $ . Capital paid up, $ LIAHILITIES. 1. Dominion Government deposits, payable on demand 2. Provincial Government deposits, i)ayable on demand 3. Other deposits, payable on demand 4. Dominion Government deposits, payable after notice or on a fixed day 5. Provincial Government deposits, payable after notice or on a fixed day 6. Other deposits, payable after notice or on a fixed day 7. Special Poor Fund or Charity Fund Trust.... 8. Liabilities not included under the foregoing heads ASSETS. 1. Dominion sec.irities 2. Provincial or municipal securities 3. Loans for which Dominion or Provincial securities are held as collateral security. cts. ,!(. 414 Appendix, 4. Loans for which bank stocks are held as colla- teral security 5. Loans for which other stocks, bonds or deben- tures, as authorized by law, are held as collateral security 6. Cash in hand or in deposit on call in chartered Banks 7. Special Poor Fund or Charity Fund invest- ments 8. Investments in bank stock made previous to the incorporation of the bank 9. Other assp.s, not included under the foregoing heads We declare that the foregoing return is made up from the I ooks of the bank, and that it is correct, to the best of our knowledge and belief. (Place) this day of 18 A. B., President, ivc. C. D., Cashier, tfrc. 36 v., c. 72, s. 2, part. Every person receiving savings on deposit bound to make returns, &c. Penalty for default. CHAPTER 126, A. D. 1886. An Act respecting returns by certain persons and cor- porations receiving moneys on deposit at interest. HER Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows : — 1. Every person, corporation or institution, except char- tered banks, receiving money in small sums, on deposit at interest as aavings, shall be bound to make such returns as to such deposits, and the investment thereof, as the Governor in Council, from time to time, requires, and to register with the Mmister of Finance and Receiver General, and notify in such manner as the Governor-in-Council directs, the nan;e of the institution, and thatot the officer or person on whom process may be served in any suit or proceeding ; and every wilful refusal or neglect to obey any such Order in Council shall be a misdemeanor. 34 V., c. 6, s. 24. CHAPTER 127, A.D. 1886. An Act respecting Interest. HER Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows : — 1. Except as otherwise provided by this or by any other Any person » /• 1 T-. 1- /• »-i 1 • I nnt excepted Act of the Parliament of Canada, any person may stipulate may agree for for, allow and exact, on any contractor agreement whatsoever, any rate of any rate of interest or discount which is agreed upon. C. S. C, '" "" ' c. 58,8. 3 J— 38 v., c. i8, s. I. V '■ ■Hi 3. Whenever interest is payable by the agreement of parties six per cent. . ' ' ^ o I to be the rate or by law, and no rate is fixed by such agreement or by law, if there is no the rate of interest shall be six per centum per annum. C, c. 58, s. 8 ; — 36 v., c. 71, s. I. other pro- C. S. vision. INTEREST ON MONEYS SECURED ON MORTGAGE. 3. Whenever any principal money or interest secured by no interest re- mortgage of real estate is, by the same, made payable on the cer^aVn c\ises sinking fund plan, or on any plan under which the payments mdrtEagl of principal money and interest are blended, or on any plan ^""'^'.^^sfai^. which involves an allowance of interest on stipulated repay- ""'"'• ments, no interest whatever shall be chargeable, payable or recoverable, on any part of the princijial money advanced, unless the mortgage contains a statement showing the amount of such principal money and the rate of interest chargeable thereon, calculated yearly or half-yearly, not in advance. 43 v.. c. 42, s. I. 4. Whenever the rate of interest shown in such statement No rate is less than the rate of interest which would be chargeable by benmalhat virtue of any other provision, calculation or stipulation in the Ma^teme'iur"^ mortgage, no greater rate of interest shall be chargeable, pay- able or recoverable, on the principal money advanced, than the rate shown in such statement. 43 V., c. 42, s. 2. 416 Appendix. No fine allowed on payments in arrear. Proviso, as to interest on ar. ears oi interest. Overcharge may lie re- covered back. 5. No fine or penalty or rate of interest shall be stipulated for, taken, reserved or exacted on any arrear of principal or interest secured by mortgage of real estate, which has the effect of increasing the charge on any such arrear beyond the rate of interest payable on principal money not in arrear; but nothing in this section contained shall have the effect of prohibiting a contract for the payment of interest on arrears of interest or principal at any rate not greater than the rate pay- able on principal money not in arrear. ^^ V., c. 42, s. 3. 6. If any sum is paid on account of any interest, fine or penaltv not chargeable, payable or recoverable under the three sections next preceding, such sums may be recovered back, or deducted from any other interest, fine or penalty chargeable, payable or recoverable on the principal. 43 V., c. 42, s. 4. 7. Whenever any princiial money or interest secured by mortgage of real estate is not, under tht ; nms of the mortgage, payable till a time more than five y.s.-" rfter the date of the mortgage, then, if, at any time after the expiration of such five years, any person liable to pay or entitled to redeem the mort- gage tenders or p^nys to the person entitled to receive the money the amount due for principal money and interest to the time of payment, as calculated under the four sections next preced- ing, together with three months' further interest in lieu of notice, no further interest shall be chargeable, payable or recoverable at any tinr ■? thereafter on the principal money or interest due under the mortgage. 43 V., c. 42, s. 5. Arpiication 8, The provisions of the five sections next preceding shall of live sections next preceding Only api)ly to moneys secured by mortgage on real estate executed after the first day of July, in the year one thousand eight hundred and eighty. 43 V., c. 42, s. 6. No further interest pay- able after five year'. ot\ certain con- ditionis. ONTARIO AND QUEBEC. on-ario and 9. The two sections next following apply to the Provinces of Ontario and Quebec. No higher 10. Except as otherwise provided by this or any other rate than six . ^ , . • .• /- per cent, to be Act or law, no corporation or company or association of jier- cor^rationr sons, not bein"- ct bank authorized by law before the sixteenth day of August, one thousand eight hundred and fifty-eight, to Interest. 417 lend or borrow money, shall, upon any contract, take directly or indirectly, for loan of any moneys, wares, merchandise or other commodities whatsoever, above the value of six dollars, for the advance or forbearance of one hundred dollars for a year, and so after that rate for a greater or less sum or value, or for a longer or shorter time : 2. Provided that any insurance company, incorporated by ^ruvi ,o ; cs Act of the legislature of the late Province of Canada, or of insurance either of the late Provinces of Upper or of Lower Canada, or by charter froT. Her Majesty, or by an Act of the Parliament of the United Kingdom, and any corporation constituted for religious, charitable or educational purposes, in the Provinces of Ontario or Quebec, authorized by law to lend or borrow money, may stipulate for, allow and exact, on any contract or agreement whatsoever, any rate of interest or discount which is agreed upon, not exceeding eight per centum per annum. C. S. C, c. 58; ss. 6 and 9. part ; — C. S. U. C, c. 43, s, 4, part;—2i V. (Can.), c. 34;— 36 V., c. 70. )>i Contracts void if fure- goiiig pro- visions are violateJ. 11. All bonds, bills, promissory notes, contracts and assurances whatsoever, made or executed in violation of the provisions of tiie section next preceding, whereupon cr whereby a greater interest is reserved and taken than authorized by this or any other Act or law, shall be void; and every corporation, company and association of persons, not being a bank, authorized to lend or borrow money as aforesaid, which, directly or indirectly, takes, accepts and receives a higher rate penalty of interest, shall incur a penalty equal to treble the value of the moneys, wares, liierchandise, or other commodities lent or bar- gained for : 2. Such penalty may be recovered by action in any court of Recovery and competent jurisdiction, and one moiety thereof shall belong to penaTty.'"" ° Her Majesty for the public uses of Canada, and the other moiety to the person who sues for the same. C. S. C, c. 58, s. g,part; — C. S. U. C, c. 43, s. i\, part. ! n NOVA SCOTIA. 12. The five sections next following apply to the Province ^ova Scotia. of Nova Scotia, but shall not extend to any hypothecation or fgreement in writing entered into for money advanced upon 418 Appendix- the bottom of a ship or vessel, her cargo or freight. S. (2nd S.), c. 82, s. 3 ; — 36 v., c. 71, s. 4. R. S. N, Seven per cent may be stipulated for. And ten per cent, in cerrain cases. 13. Any person may stipulate and agree in writing for any rate of interest not exceeding seven per centum per annum, for the loan or forbearance of money to be secured on real estate or chattels real ; and any person may stipulate in writing for or may receive in advance any rate of interest not exceed- ing ten per centum per annum, whenever the security for the payment of the money consists only of personal property or the personal responsibility of the person to whom forbear- ance is given, or of others. 36 V., c. 71, s. 2. Excessive interest to be deducted. As to con- tracts entered into previous to a 3rd May, 1873. Penalty. Limitation of time, Banks ex- empted. As to con- tracts respect- ing grain and live stock. 14. In any acticn brought on any contract whatsoever, in which there is, directly or indirectly, taken or reserved a rate of interest exceeding that authorized in the next preceding section, the defendant may, the same being duly pleaded, as in other cases, prove such excessive interest, and it shall be deducted from the amount due on such contract. 36 V., c 71, s. 3. 15. No person shall, upon any contract or security, made or entered into, given or taken before the twenty-third day of May, one thousand eight hundred and seventy-three, take, directly or indirectly, for the loan of moneys or goods, above the rate of six per centum per annum, and every such contract and security whereby a greater rate of interest is reserved shall be void ; and every person who takes or receives, upon any such contract or security, a greater rate, shall incur a penalty equal to treble the value of the moneys or goods in such con- tract or security contracted for or secured ; but no prosecution for any such penalty shall be commenced except within twelve months from the commission of the offence. R. S. N. S. (2nd S.), c. 82, ss. I and 6 ; — 36 V., c. 71, s. 6. 16. Nothing in the three sections next preceding shall apply to any chartered bank. 36 V., c 71, s. 7. 17. Any person may contract for the loan or hire of grain or live stock, upon halves or otherwise, upon the lender taking upon himself all risk of such stock, but if it appears that the same, or any part thereof, perisheU or was lost through Interest. 419 the wilful neglect of the borrower, he shall make good to the lender the full value thereof. R. S. N. S. (2nd S.), c. 82, s. 2. i'l NEW BRUNSWICK. 18. The five sections next following apply to the Province New Brunswick. of New Brunswick with respect to : — (a) Banks which are not subject to " The Bamc Act ; " (J>) Other incorporated companies, but subject to any special provision in any other Act ; and — (c) Contracts made between the thirteenth day of April in the year one thousand eight hundred and fifty-nine, and the eighth day of April, in the year one thousand eight hundred and seventy-five. 38 V., c. 18, ss. 2 and 3. 11). No person shall, directly or indirectly, receive on any Not more contract, for the loan of any money or goods, more than six cew to''i)c\'ak£:n. dollars for the forbearance of one hundred dollars for one year, and after that rate for a greater or lesser sum, and a longer or shorter time. 22 V. (N.B.) c. 21, s. 2,j}art. J30. No deed or contract for payment of any money loaned, contracts not or for the forbearance of any thing undertaken, upon or by ^"' which more than such rate of interest is reserved or received, shall be void by reason thereof. 22 V. (N.B.), c. 21, s. 2, jKirt. 31. In any actior brought on any contract whatsoever , Excessive , . , , .... .... , , interest to be m which there is, directly or indirectly, taken or reserved a deducted. rate of interest exceeding six per centum per annum, the defendent, or his attorney, may, under the general issue, with notice of defence as in oilier cases, prove such excessive interest, and it shall be deducted from the amount due on such contract. 22 V. (N. B.), c. 21, s. 3. 5J3. Every Bank not subject to the " Bank Act" which, Penalty if , , J ^ ^ . , bank takes upon any such deed or contract, receives or reserves, by mure than means of any loan, bargain, exchange or transfer of any money or goods, or by any deceitful means, for tiie forbearing or giving day of payment beyond a year, of its money or goods, more than six dollars for one hundred dollars for one year, and after that rate for a greater or lesser sum and longer or AA r.'] 420 ApinncUx. Recovery and applicAtioti, Certain matters excepted. shorter time, shall incur a penalty equal to the value of the principal sum or goods so loaned, bargained, exchanged or transferred, and all interest and other profits accruing there- from ; and such penalty may be recovered by action in any cou.'^ of record in the county in which the offence was com- mitted, — which action shall be brought within twelve months from the time of such offence and not afterwards ; and one moiety of such penalty shall belong to Her Majesty for the public uses of Canada, and the other moiety to the person who sues for the same. 22 V. (N. B.), c. 21, s. 4. 33. Nothing in the four sections next preceding shall apply to bottomry bonds or contracts on the bottom of any vessel, damages on protested bills allowed by law, penaliies incurred for the non-fulfilment of any contract, if such pen- alties are mutually binding, and contracts for the loan or hire of any grain, cattle, or live stock let out as the parties agree, if the lender takes the risk of casualties upon himself, in which case the borrower shall not avail himself, — of any loss suffered through his wilful neglect, or any voluntary damage which is committed by him. 22 V. (N.B.), c. 21, s. 6. TRINCE EDWARD ISLAND. Prince Edward '^^* "^'^^ foUowing provisious apply to the Province of i.siand. Prince Edward Island. What rate of interest niny be recovered. Cert.Tin riulits and lial I'liies not uticcted, JiO. No person shall recover, in any court, more than six per centum per annum interest on any account, contract or agreement, unless it appears to the court that a higher rate of interest was agreed to in writing between the parties. 31 V. (P.E.I.,) c. 8, s. 2. tJO. Nothing herein shall prejudice or affect the rights or remedies of any person, or diminish or alter the 'labilities of any person, in respect of any act done previously to the hfteenlh day of April, in the year one thousand eight hun- dred and seventy, and if interest was payable at that date upon any contract, express or implied, for the payment of the legal or current rate of interest, or upon any debt or sun. of money by any rule of law, the same shall be recoverable as if the provisions of the next preceding section had not been enacted. 31 V. (P. E.I.,) c. 8, ss. 3 and 4. ii CHAPTER 145, A.D. 1886. An Act respecting Accessories. HER Mcajesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows : — FELONIES. es the (act rovincc of 1. Every one who becomes an accessory before the fact to ^^5.^;^™,^^ any felony, whether the same is a felony at common law or ["/„'jIi°"^,p""' by virtue of any Act, may be indicted, tried, convicted and principals punished in all respects as if he were a principal felon. 31 v., c. 69, s. 9, part, and c. 72, s. i ; — 32-33 V., c. 20, s. 81 part, (ind c. 21, S. lo"], part. Punishment of person counselling, &.C., the committing of a felony. *ii. Every one who counsels, procures or commands any other person to commit any felony, whether the same is a felony at common law or by virtue of any Act, is guilty of felony, and may be indicted and convicted, either as an accessory before the fact to the principal felony, together with the principal felon, or after the conviction of the prin- cipal felon, — or may be indicted and convicted of a substan- tive felony, whether the principal felon has or has not been convicted, or is or is not amenable to justice, — and may thereupon be punished in the same manner as any accessory before the fact to the same felony, if convicted as an acces- sory, may be punished. 31 \., c. 2, s. 2. !{. In every felony, every principal in the second degree Punishment , ,, , • 1 1 1 • 1 1 .... of princiixil shall be punishable m the same manner as the principal 111 in second the first degree is punishable. 31 V., c. 69, s. g,part, and c. ''^^^'" 72. s- 3 ;— 32-33 v., c. 21, s. It-], part. 4. Every one who becomes an accessory after the fact to Accessories after the fact any felony, whether the same is a felony at common law or may be in- ,. - , ,.,., , .... dieted as «uch by virtue of any Act, may be indicted and convicted, either or as substan- c < r 1 • • 1 <■ 1 1 'i^^ felons. as an accessory after the fact to the principal felony, together with the principal felon, or after the conviction of the princi- cipal felon, or may be indicted and convicted of a substantive rs ; 422 Appendix. Punishment of accessories after the fact. Prosecution ofaccessory. after principal offender convicted, S'c, felony, whether the principal felon has or has not been con- victed, or is or is not amenable to justice, and may there- upon be punished in like manner as an accessory after the fact to the same felony, if convicted as an accessory, may be punished. 31 V. c. 72, s. 4 ; — 32-33 V., c. 20, s. 8,2>"rf. 5, Every accessory after the fiict to any felony (except when it is otherwise specially enacted), whether the same is a felony at common law or by virtue of any Act, shall be liable to imprisonment for any term less than two years. 31 v., c. 69, s. 9, part, and c. 72, s. $,]nirt ;— 32-33 V., c. 19^ s. ShP'irt. (5. If any principal offender is, in any wise, convicted of any felony, any accessory, eiiher before or after the fact, may be proceeded against in the same manner as if such principal felon had been attainted thereof, notwithstanding such i)riu- cipal felon dies or is pardoned or otherwise delivered before such attainder ; and every such accessory shall, ui)on con- viction, suffer the same punishment as he would have suffered if the principal had been attainted. 31 V., c. 72, s. 6 ; — 2)-'c)i v., c 20, s. 8, 2Htrt. MISDEMKANORS. 7. Every one who aids, abets, counsels or procu/es the Abbettors in . . ■' ... misticnie.inors commission of any misdemeanor, whether the same is a mts- piinishable as ,•/-.• -i principals. demeanor at common law, or by virtue of any Act, is guilty of a misdemeanor and liable to be tried, indicted and punished as a principal oflender. 31 V., c. 72, s. 9 ; — 32-33 V., c. 19, 8. S7fP'"'(> ""'^ c. 21, s. 107, part ; — t^ V., c. 32, s. 13 ; — 40 v., c. 32, s. 1, part. Abbettors in O fences punishable summarily punishable as principals. OFFENCES rUNlSIIABLE ON SUMMARY CONVICTION. 8. Every one who aids, abets, counsels or procures the commission of any offence punishable on summary convic- tion, either for every time of its commission, or for the first and second time only, or for the first time only, shall, on conviction, be liable for every first, second or subsequent offence, of aiding, abetting, counselling or procuring, to the same forfeiture and punishment to which a person guilty of a first, second or subsequent offence as a principal offender, is liable. 32-33 V., c. 21, c. 108, and c. 22, s. 70, and c. 31, s. 15, part ;— 33 V., c. 31, s. 5, i>urt. CHAPEP 164, A. D., 1886. An Act respecting Larceny and similar Offences. TTER Majesty, by and with the advice and consent of the J^A Senate and House of Commons of Canada, enacts as follows : — SHORT TITLE. 1. This Act may be cited as " The Larceny Act^ short title. INTERPRETATION. Interpreta- tion. 2i In this Act, unless the context otherwise requires : (rt) The expression " document of title to goods " includes " Document any bill of lading, India warrant, dock warrant, warehouse- goods^" keeper's certificate, warrant or order for the delivery or trans- fer of any goods or valuable thing, bought and sold note, or any other document used in the ordinary course of business as proof of the possession or control of goods, authorizing or purporting to authorize, either by indorsement or by delivery, the possessor of such document to transfer or receive any goods thereby represented or therein mentioned or referred to ; (h) The expression " document of title to lands " inrludes " Document ,1 , • -J of title to any deed, map, paper or parchment, written or printed, or part- "land" ly written and partly printed, being or containing evidence of the title, or any part of the title, to any real property, or to any interest in any real property, or any notarial or registrar's copy thereof, or any duplicate instrument, memorial, certificate or document authorized or required by any law in force in any part of Canada, respecting registration of titles, and relating to such title ; (c) The expression " trustee " means a trustee on some " Trustee." express trust created by some deed, will or instrument in writing, or a trustee of personal property created by parol and includes the heir or personal representative of any such trustee, and every other person upon or to whom the duty of such trust has devolved or come, and also an executor and administrator, and an official manager, assignee. !■(, l' 421 Appendix. " Valuable ccurity " Properly." ,^i!A*'>' liquidator or other like officer actiny under any Act relating to joint stock companies, bankruptcy or insolvency, and anj person who is, by tlie law of U.e Province of Quebec, an '* ad- minlsimteur," and the expression " trust" includes whatever is by that law an ' adminint ration; " ( d) The expression " valuable security " includes any order, exchequer acquittance or other security whatsoever, entitling or evidencing the title of iny person or body corporate to any share or interest in any public stock or fund, whether of Canada or of any Province thereof, or of the U'r.ited Kingdom, or of Great Britain or Ireland, or ofanyBrit'sh colony or possession, or of any foreign state, or in any fund of any body corporate, company or society, whether within Canada or the United Kingdom, or any British colony or possession, or in any foreign state or country, or to any deposit in any sr.vings bank or other bank, and also im ludes any debenture, deed, bond, bill, note, warrant, order or other security whatsoever, for money or for payment of money, whether of Canada or of any Province thereof, or of the United Kingdom, or of any British colony or ])03session, or of any foreign state, pnd any document of title to lands or goods as hereinbefore defined, and any stamp or writing which secures or evidf^nces title to or interest in any chattel personal, or ^i y lelease, receipt, discharge or other ins trument evidencing payment of money, or the delivery of any chattel i)ersonal ; and every such valuable security shall, where value is material, be deemed to be of value equal to that of such unsatisfied money, chattel personal, share, interest or deposit, for the securing or payment of which, or delivery or transfer or sale of which, or for the entitling or evidencing tit'e to which, 3uch valuable security is applicable, or to that of such money or chattel personal, the payment or delivery of which is evidenced by such valuable security ; (<•) The expression "property" includes every description of real and personal property, money, debts and legacies, and all deeds and instruments relating to or evidencing the title or right to any property, or giving a right to recover or receive any money or goods,— and also not only such property as was originally in the possession or under the control of any person, but also any property into or for which the same has been con- verted or exchanged, and anything acquired by such conver- I J Larceny. 425 sion or cxcluinge, whethet immediately orotlierwise, and also any postal card, postaj^c stamp or other stamp issued or pre- pared for issue by the authority of the Parliament of Canad.i or of the Lei^islature of any Province of Canada, for the payment of any fee, rate or duty whatsoever, and wiicther, still in the possession of the Crown, or of any person or cor- porption, or of any ofticer or agent of tiic Government of Canada, or of the Province by the authority of the Legisla- ture whereof it was issued or prepared for issue; and such postal card or stamp shall be held to be a chattel, and to be equal in value to the amount of the postage, rate or duty which can be paid by it, and is expressed on its face in words or figures, or both ; {g) The expression " banker " includes any director of any Banker." incorporated bank or banking company ; (/t) The expression "writing " includes any mode in which" Writing." and any material on which words or figure ot length or abridged are written, printed or otherwise expressed, or any map or plan is inscribed ; (/) Whenever the having anything in the possession of any Having in person is m this Act expressed to be an offence, then if any possessiun. person has any such thing in his personal custody or possession, or knowingly or wilfully has any such thing in any dwelling- house or other building, lodging, apartment, field or other place open or enclosed, whether belonging to or occupied by himself or not, and whether such matter or thing is so had for his own use or benefit, or for that of another, such person shall be deemed to have such matter or thing in his custody or possession within the meaning of this Act, and if there are two or more persons, any one or more of whom, with the knowledge and consent of the rest, have any such thing in his or their custody or possession, it shall be deemed and taken to be in the custody and possession of all of them. 32-33 V., c. 21, s. I ;— 35 v., c. 33, s. I, part 3—40 V., c. 29, s. i. !* FRAUDS BY AGENTS, BANKERS OR FACTORS. 59. Every one who being a cashier, assistant cashier, mana- stealing nr ger, officer, clerk or servant of any bank, or savings bank, by banii!"*^ secretes, embezzles or absconds with any bond, obligation; bill °"'"^"' 42G Aitpcndix. Ai;enl Ac, iiiliiisit'l, iiioncy, &c. lO l)l> UWIt use. obligatory or of credit, or other l)ill or note, or any security for money, or any money or effects intrusted to him as sucli cashier, assistant cashier, manager, ofticcr, clerk or servant, whither the same belongs to the bank or belongs to any [.erson, body torjiorate, society or institution, and is lodged with such banki is guilty of felony, and liable to imi)risonment for life or for any term not less than two years. 34 V., c. 5, s. 60, itm/ c. 7, 8. 33. (JO. Every one who, — (a) Having been entrusted, either solely or jointly with any other person, as a banker, merchant, broker, attorney or other agent, with any money or security for the payment of money, with any direction in writing, to apply, pay or deliver such money or security, or any part thereof respectively, or the pro- ceeds or any jnirt of the proceeds of such security, for any pur- pose, or to any person specified in such direction, — in violation of good taith and contrary to the terms of such direction, in anywise converts to his own use or benefit, or the use or bene- fit of any ])c:son other than the person by whom he has been so intrusted, such money, security or proceeds, or any part thereof, respectively, or — Or any chat- t.i, v;ilii:ilile setiirity or jiower iif auoriicy (l>) Having been intrusted, either solely or jointly with any other jjcrson as a banker, merchant, broker, attorney or other agent, with any chattel or valuable security, or any jiower of attorney for the sale or transfer of any share or interest in any public stock or fund, whether of the United Kingdom or any l)art thereof, or of Canada or of any province thereof, or of any British colony, possession, or of any foreign state, or in any stock or fund of any body corporate, company or society, for safe custody or for any s])ecial purpose, without any authority to sell, negotiate, transfer or pledge, — in violation of good faith, and contrary to the object or purpose for which such chattel, security or power of attorney has been intrusted to him, sells, negotiates, transfers pled^'es, or in any manner converts to his own use or benefit, 01 the u. e or benefit of any person other than the person by whoiii he has been so intrusted, such cht-t- icl or security, or the proceeds of the same, or any part thereof, or the share or interest in the stock or fund to which such power of attorney relates, or any part thereof, — I i'. Larceny. 427 Is guilty of a misdemeanor, and liable to seven years' im- ''""'''""•"•• prisonment : 2. Nothing in this section contained relating to agents shall |^°,*^,'|^,JPPjy affect any trustee in or under any such instrument whatsoever, •»'"•'«»««»• or any mortgagee of any property, real or personal, in respect to any act done by such trustee or mortgagee in relation to the I)roperty com|)rised in or affected by any such trust or mortgage ; N't »" '">"''. nor sliall restrain any banker, mcrciiant, broker, attorney or runivini . . riuiiicy line on otlier agent from receiving any money due or to become actually '«<=" "f With any other person, with any power of attorney, for the sale ait..rni.y r r .- 1 I 1 II ,- fr.llHllllclUly or transfer of any property,^ — Iraudulently .sells or transfers, or selling I • I I /• 1 • proiierly. otherwise converts the same or any part thereof to his own usc or benefit, or the use or benefit of any person other than the ])erson by whom he was so intrusted, is guilty of a misdemea- nor, and liable to seven years' imprisonment. 32-33 V., c. 21 s. 78. (515. Every one who, being a factor, or agent intrusted, either Factors . . > ' olitaining solely or jointly with any other person, for the purijose of sale'"ivancusoii ■'■>■' ■' r I II ,),g property or otherwise, with the possession of any goods or of any docu-ofii"-i'- principals ment of title to goods, — contrary to or without the authority of ¥ i! 1. 1 iil 428 Appen W" 'VI his principal in that behalf for his own use or benefit, or the use or benefit of any person other than the person by whom he was so intrusted, and in violation of good faith, makes any consignment, deposit, transfer or delivery of any goods or docu- ment of title so intrusted to him as in this section before men- tioned, as and by way of a pledge, lien or security for any money or valuable security borrowed or received by such factor or agent at or before the time of making such consignment, deposit, transfer or delivery, or intended to be thereafter borrowed or received, — or contrary to or without such authority, for his own use or benefit, or the use or benefit of any person other than the person by whom he was so intrusted, and in violation of good faith, accepts any advance of any money or valuable security on the faith of any contract or agreement to consign, deposit, transfer or deliver any such goods or document of title, is guilty of a misdemeanor, and liable to seven years' imprison- ment : Persons wilfully assisting. Exception when the pledge does not exceed the amount of their lien. 2. Every one who, knowingly and wilfully acts and assists in making ^ny such consignment, deposit, transfer or deli- very, or in accepting or procuring such advance as afore- said, is guilty of a misdemeanor, and liable to the same punish- ment : 3. No such factor or agent shall be liable to any prosecution for consigning, depositing, transferring or delivering any such goods or documents of title, if the same are not made a security for or subject to the payment of any greater sum of money than the amount which, at the time of such consign- ment, deposit, transfer or delivery, was justly due and owing to such agent from his principal, together with the amount of any bill of exchange drawn by or on account of such principal and accepted by such factor or agent. 32-33 V., c. 21, s. 79. When agent shall be deemed to be intrusted with the goods. 64, Any factor or agent intrusted, as aforesaid, and pos- sessed of any such document of title, whether derived im- mediately from the owner of such goods or obtained by reason of such factor or agent having been intrusted with the pos- session of the goods, or of any other document of title thereto, shall be deemed to have been intrusted with the possession of the goods represented by such document of title ; and every contract pledging or giving a lien upon such document of title Larceny. 429 as aforesaid, shall be deemed to be a pledge of and lien upon the goods to which the same relates ; and such factor or agent what shall be deemed a shall be deemed to be possessed of such goods or document, pledge. whether the same are in his actual custody or held by any other what shall be person subject to his control, or for him, or on his behalf; and possession. whenever any loan or advance is bona fide made to any factor agent intrusted with and in possession of any such goods or document of title, on the faith of any contract or agreement in jeemed'^'ioa writing to consign, deposit, transfer or deliver such goods o"" "[ sf,' h"" d document of title, and such goods or document of title is or are actually received by the person making such loan or advance, without notice that such factor or agent was not authorized to make such pledge or security, every such loan or advance shall be deemed to be a loan or advance on the security of such goods or document of title, within the meaning of the next preceding section, though such goods or document of title are not actually received by the person mak- ing such loan or advance till a period subsequent thereto ; and any contract or agreement, whether made direct with such factor or agent or with any clerk or other person on his jje,'J,e^\'" ^' behalf, shall be deemed a contract or agreement with such contract. factor or agent ; and any payment made, whether by money or bill of exchange, or other negotiable security, shall be deemed to be an advance within the meaning what shall be deemed an of the next precedmg section ; and a factor or agent in advance. possession, as aforesaid, of such goods or document, shall be taken, for the purpose of the next preceding section, to have P""'*."'""" '° . ' » ' I- o » be evidence oi been intrusted therewith by the owner thereof, unless the con. ""-"sting. traiy is shown in evidence. 32-33 V., c. 21, s. 80. _ Trustees 65. Every one who, being a trustee of any property for the frandiiientiy use or benefit, either in whole or in part, of sOme other person property. or for any public or charitable purpose, with intent to defraud converts or appropriates the same, or any part thereof, to or for his own use or benefit or the use or benefit of any person other than such person as aforesaid, or for any purpose other ihan such public or charitable purpose as aforesaid, or otherwise disposes of or destroys such property or any part thereof, is guilty of a niisdemeanor, and liable to seven years' imprisonment : 430 Appendix. No prosecu- tion without sanction of the Attorney General. When civil proceedings na\e l>eeii taken. Direcors 6\c., of any Ixuly. corporate or public com- pany fraudu- lently appro- priating property . Or fraudu- lently keep- ing false nccoiuus or books. Or wilfully .•'.cstriiyiny or falsifying booV's or papers, &c. ( )r fraudulently publishing false statements or accounts. 2. No proceeding or prosecution for any offence mentioned in this section shall be commenced without the sanction of the Attorney General or Solicitor General for the Province in which the same is to be instituted : 3. When any civil proceeding has been taken against any person to whom the provi.sions of this section apply, no person who has taken such civil proceeding shall commence any prosecution under this section without the sanction of the court or judge before whom such civil proceeding has been had or is pending. 32-33 V., c. 21, s. 81. G6. Every one who, being a director, member, manager or officer of any body corporate or company, fradulently takes or applies, for his own use or benefit, or for any use or purpose other than the use or purpose of such body corporate or com- pany, any of the property of such body corporate or comi)any is guilty of a misdemeanor, and liable to seven years' imprison- ment. 32-33 v., c. 21, s. 82. G7. Every one who being a director, member, manager or officer of any body corporate or company, as such receives or jiossesses himself of any of the property of such body cor])or- ate or company, otherwise than in payment of a just debt or demand, and, with intent to defraud omits to make or to cause or direct to be made a full and true entry thereof in the books and accounts of such body corporate or company is guilty of a misdemeanor, and liable to seven years' imprison- ment. 32-33 v., c. 21, s. 83. 08. Every'one who, being a director, manager, officer or member of any body corporate or company with intent to defraud, destroys, alters, mutilates or falsifies any book, paper writing or valuable security belonging to the body corporate or company, or makes or concurs in the making of any false entry or omits or concurs in omitting any material particular in any book of account or document, is guilty of a misdemeanor and liable to seven years' imprisonment. 32-33 V., c. 21, s. 84. CI). Every one who, being a director, manager, officer, or member of any body corporate or company, makes, circulates or publishes, or concurs in making, circulating or publisiiiiig any written statement or account which he knows to be false in Larceny. 431 any material particular, with intent to deceive or defraud any member, shareholder or creditor of such body corporate or company, or with intent to induce any person to become a shareholder or partner therein, or to intrust or advance any property to such body corporate or company, or to enter into any security for the benefit thereof, is guilty of a misdemeanor and liable to seven years' imprisonment. 32-33 V., c. 21, s- 85- 70. Every one who, being an officer or member of any unin- Kmbezziement -' ' ° •' by olliccr'i, tVc. , corijorated body or society, associated together for any lawful of unincorpor- purpose fradulcntly takes or applies to his own use or benefit, or for any use or purpose other than the use or purpose of such body or society, the whole or any portion of the funds, moneys or other property of the society, and continues to withhold such property after due demand has been made for the restora- tion and i)aymeiit of the same by some one or more of the members or officers duly appointed by and on behalf of the body or society, is guilty of a misdemeanor, and liable to three years' imprisonment. C. S. C, c. 71, s 8; — R. S. B, C, c. 162, s. 9. 71. Nothing in any of the twelve sections next preceding >>•'" pe"on to shall enable or entitle any person to refuse to make a full andfr-"' :«iiswer- complete discovery by answer to any bill in equity or to in any conn; . .. , . . I'Ut tu) person answer any cjuestion or interrogatory in any civil i)roceeding in nKikin^acii-;- any court, or upon the hearing of any matter in bankruptcy or rnnZtisnry'^ insolvency; and no person shall be liable to be convicted of t'!'hc''n'abie to any of the misdemeanors in the said sections mentioned by any '"'"'"'''" '""• evidence whatsoever, in respect of any act done by him, if, at any time jjreviously to his being charged with such offence, he has first disclosed such act on oath, in consecuence of any com- pulsory process of any court of law or equity, in any action, suit or proceeding bonafide instituted by any party aggrieved, or if he has first disclosed the same in any compulsory examination or deposition before any court, upon the hearing of any matter in bankruptcy or insolvency, 32-33 V., c, n, s. 86. 7!v'Tier, or thereby receives or endeavors to receive any money ' . to any such owner, or to obtain any such grant of land, or such scrip or allowance in lieu thereof as aforesaid, as if such offender were the true and lawful owner, is guilty of f'.;lony, and liable to imprisonment for life. 32-33 v., c. 19, s. 6. Forging alleviation to pow cr I if nucrnej' for transfer uf stock, i;Lc. 10. Every one who forges any name, handwriting or sig- nature purporting to be the name, handwriting or signature of a witness attesting the execution of any power of attorney or other authority to transfer any share or interest of or in any such stock, annuity, public fund or capital stock, or grant of land or scrip or allowance in lipu thereof, as in eitlier of the two sections next preceding mentioned, or to receive any dividend or money payable in respect of any such share or interest, — or offers, utters, disposes of or puts off any such power of attorney or other authority, with any such forged name, handwriting or signature thereon, knowing the same to be forged, is guilty of felony, and liable to seven years' impri- sonment. 32-33 v., c. 19, s. 7. BANK NOTES. Forging bank notes and bills. 18. Every one who, with intent to defraud, forges or alters, or offers, utters, disposes of or puts off, knowing the same to be forged or altered, any note or bill of exchange of any body corporate, company or person carrying on the business of bankers, commonly called a bank note, a bank bill of exchange or bank post bill, or any indorsement on or assignment of any Forgery. 437 bank note, bank bill of exchange or bank post bill, is guilty of felony, and liable to imprisonment for life. 32-33 V., c. 19, s. IS- 19. Every one who, without lawful authority or excuse, the ^'recewmg proof whereof shall lie on him, purchases or receives from any ?org?(i'i"mk other person, or has in his custody or possession any forged""'" or buu. bank note, bank bill of exchange or bank post bill, or blank bank note, blank bank bill of exchange or blank bank post bill, knowing the same to be forged, is guilty of felony, and liable to fourteen years' imprisonment. 32-23 V., c. 19, s. 16. MAKIXti i'APER AND ENGRAVING PLATES FOR BANK NOTES, ETC. ISJO. Everyone who, without lawful authority or exr'ii:e, tl lakingor proof whereof shall lie on him, makes or uses, or kr ^"'n;^;^ ... Hi'id^i for has in his custody or possession, any frame, mould in '-u- wuh'ililmu'" ment for tlie making of paper used for Dominion or Tro ' v-irli'Iomuu,,, notes, or for bank notes, with any words used in r ich notes, "o'^^' Jj^"'' or any part of such words, intended to resembk p^.j for the same, visible in the substance of the paper, or tor the making of paper with curved or waving bar lines, or with lay- ing wire lines thereof, in a waving or curved shape, or with any number, sum or amount, expressed in a word or words in let- ters, visible in the substance of the paper, or with any device or distinction peculiar to and ap[)earing in the substance of the paper used for such notes, resjiectively, — or makes, uses, sells, exposes for sale, utters or disposes of, or knowingly has in his custody or possession any paper whatsoever with any words used m such notes, or any part of such words, intended to resemble and pass for the same, visible in the substance of the paper, or any paper with curved or waving bar lines, or with the laying wire lines thereof in a waving or curved shape, or witli any number, sum or amount expressed in a word or words in letters appearing visible in the substance of the paper, or with any device or distinction peculiar to and appearing in the substance of the paper used for any such notes respectively — or by any art or contrivance, causes any such words or any <> selling ■' ■' ; .» J J,,;.), paper or part of such words, intended to resemble and pass for the hnving it iu '■ . , . possession. same, or any device or distinction peculiar to and appearmg i I 438 Appendix. Or cmi«inK di'tinctive markn to appear' thtieoni in tlie substance of the paper used for any such notes, respec- tively, to appear visible in the substance of any paper, or causes the numerical sum or amount of any such note, in a word or words in letters to appear visible in the substance of the paper, whereon the same is written or i)rinted, is guilty of felony, and liable to fourteen years' imprisonment. 32-33 V,, c. 19, s. 17. Exceptional *^^' Nothing in the next preceding section contained shall /o/bnu 'or'ex. P*"^^'^'"' '''">' person from issuing any bill of exchange or i)ro- chaiige, &0. missory note, having the amount thereof expressed in a nu- merical figure or figures denoting the amount tiiercof in pounds or dollars, appearing visible in the substance of the paper ujion which the same is written or printed, or shall prevent any per. son from making, using or selling any paper having waving or curved lines, or any other devices in the nature of water marks visible in the substance of the paper, not being bar lines or laying wire lines, provided the same are not so contrived as to form ihe groundwork or texture of the jiaper, or to resemble the waving or curved, laying wire lines or bar lines, or the water-marks of the paper used for Dominion notes or Provincial notes or bank notes, as aforesaid. 32-33 V., c. 19. s.i8. Enpraving or h..ving plate fur making Dominion or bank notes. t/nlawfnlly littering such note or part thereof. *4**» Everyone who, without lawful authority or excuse, the proof whereof shall lie on him, engraves or in anywise makes upon any plate whatsoever, or upon any wood, stone or o.her material, any promissory note or part of a promissory note, purj)orting to be a Dom'iiion or Provincial note, or bank note, or to be a blank Dominion or Provincial note or bank note, or to be a part of any Dominion or Provincial note, or bank note, as aforesaid, or any name word or character resembling, or apparently intended to resemble, any subscription to any such Dominion or Provincial note, or bank note, as aforesaid, — or uses any such plate, wood, stone or other material, or any other instrument or device for the making or printing of any such note, or part of such note, — or knowingly has in his cus- tody or possession any such plate, wood, stone or other material, or any such instrument or device, — or knowingly offers, utters, disposes of or puts off, or has in his custody or possession any paper upon which any blank Dominion or Pro- vincial note, or bank note, or part of any such note, or any name, word or character resembling, or apparently intended to Forgery. 439 a nu- resemhle, any such subscription, is i lade or printed, is guilty of felony and liable to fourteen years' imprisonment. 31 V., c. 46, s. 14;— 32-33 v., c. 19,5. 19. 23. Everyone who, without lawful authority or excuse, the EnKravingon ■' ■' ' a plate, etc., proof whereof shall lie on him, engraves or in anywise makes a"y ""'f*' ° ' mimlirr, or , upon any plate whatsoever, or upon any wood, stone or other device, . • 1 1 1 r J • 1 reHeml>linK material, any word, number, figure, device, character or orna-partofanote. ment, the impression taken from which resembles, or is appar- ently intended to resemble, any part of a Dominion or Provin- cial note, or bank note, or uses or knowingly has in his custody or possession any such plate, wood, stone or other material, or any other instrument or device for the impressing or making upon any paper or any other material, any word, number figure, character or ornament, which resembles, or is apparently intended to resemble, any part of any such note as aforesaid, or uttering or knowingly offers, utters, disposes of or puts off, or has in his paper^on"' custody or possession any paper or other material upon which mich won?, there is an impression of any such matter as aforesaid, is guilty *^,;,Js«!d. of felony, and liable to fourteen years' imprisonment. 32-33 v., c. 19, s. 20. 24. Everyone who, without lawful authority or excuse, Making or ... _ having mould the proof whereof shall he on him, makes or uses any frame, for making mould or instrument for the manufacture of paper, with thetiienameof name or firm of any bank or body corporate, company or Siifg or° person carrying on the business of bankers, appearing visible papc"?*"' in the substance of the paper, or knowingly has in his custody or possession any such frame, mould or instrument, — or makes, uses, sells, or exposes for sale, utters or disposes of or know- ingly has in his custody or possession any paper, in the sub- stance of which the name or firm of any such bank, body cor- porate, company or person appears visible, or, by any art or contrivance causes the name or firm of any such Bank, body corporate, company or person to appear visible in the sub- stance of the paper upon which the same is written or printed, is guilty of felony, and liable to fourteen years' imprisonment. 3233 v., c. 19, s. 21. 25. Every one who forges or alters, or offers, utters, dis- Forging poses of or puts off, knowing the same to be forged or altered, and'mtering any bill of exchange, promissory note, undertaking or order ''^*"""*; i 440 Appendix. Engraving plates fur foreign billn or notes, or using or having >nch platei. Uttering paper on which any f)art of such )ill or note is printed. Forging bills of exchange or promissory notes. for payment of money, in vhatseover language or languages the same is expressed, and whether the same is or is not under seal, i)uri)orting to be the bill, note, undertaking or Older of any foreign prince or state, or of any mini.sier or officer in the service of any foreign prince or state, or of any body corporate or body of the like nature, constituted or recognized by any foreign prince or state, or of any person or company of persons resident in any country not under the dominion of Her Majesty, — and every one who, without law- ful authority or excuse, the proof whereof shall lie on him, engraves, or in anywise makes upon any plate whatsoever, or u|)on any wood, store or other material, any bill of exchange, promissory note, undertaking or order for payment of money, or any part of any billof exchange, .promissory note, undertak- ing or order for payment of money, in whatsoever laniruage the same is expressed, and whether the same is or is not, or is or is not intended to be under seal, purporting to be the bill, note, undertaking or order or part of the bill, note, undertak- ing or order of any foreign prince or state, or of any minister or officer in the service of any foreign prince or state, or of any body corporate or body of the like nature, constituted or recognized by any foreign prince or state, or of any person or company of persons resident in any country net under the dominion of Her Majesty, — or uses or knowingly has in his custody or possession any plate, stone, wood or other material, upon which any such foreign bill, note, undertaking, order, or any part thereof, is engraved or made, — or knowingly offers, utters, di.sposes of or puts off, or has in his custody or possession any paper upon which any part of any such foreign bill, note, undertaking or order is made or printed, is guilty of felony, and liable to fourteen years' imprisonment. 32-33 V., c. 19, s. 22. DEEDS, WILLS, BILLS OF EXCHANGE, ETC. 88. Every one who, with intent to defraud, forges or alters, or offers, utters, disposes of or puts off, knowing the same to be forged or altered, any bill of exchange, or any acceptance, indorsement or assignment of any bill of exchange, or any promissory note for the payment of money, or any in- dorsement on or assignment of any such promissory note, is guilty of felony, and liable to imprisonment for life. 32-33 V., c. 19, s. 25. Forgery. 441 29t F-very one who, witli intent to defraud, forces orForginK alters, or offers, utters, disposes of or puts off, knowing the Receipt's ,r<" C' I. TRACT. Bound by acts of its ofticer>, Eftect of continuing an old, 206 (note). Relations of, to depositor. See Depositor. How far liable to suit by third party for a deposit, 107. Obligation upon, to pay depositor's checks, 105, See Action ; Chkck. Is entitled to written order from depositor for payment of money, loj. Cannot refuse to honor clieck on ground of depositor's unlawful pur- pose, 105. When protected in refusal to honor check, 113, 127. Under obligation to pay depositor's bills, notes, and acceptances made payable at bank, 107. Advancing money to pay customer's drafts, 108, no. Index. 447 BANK,— Has lien on funds of depositor, iio. See Lien. Shall not disclose state of depositor's account, 140. Liable for act of its general manager, 290. How far liable for wrongful or irregular acts of officer or agent, 81, 212. Liable for notes unlawfully issued, 80. Property of, how far controlled by directors, 77. Duty of, in case of wrongful act of officer, 8l, 210, 212. Duty of, to pay check, but not certify or accept, 136. Pelationsof, in matter of presentment of check. &^ Check. Liability of, when ownership of deposit is in dispute, 107. Held to know signature of customer, 381. Duty of, to owner of paper left with it for collection, 278. May bring action in its own name on paper left with it for collection, See Action ; Collection. Insolvent, bills of, maybe used in set-off, 150. Bill holders as preferred creditors of insolvent, 162, note (4). As owner of shares in Its own capital stock, 218. Limitation on obligation of, to honor customer's checks, 105, 127. Liability of, for paying in bad money, 143. As trustee, loo. Relations to holder, drawer, &'c., of certified check. See Check. BANK BILLS, May be signed by machinery, 27. Not to exceed unimpaired capital, 162. No, for less than $5.00 to be issued or re-issued, 162. Penalty if issue exceeds unimpaired capital, 25. Power to si^n, may be deputed, 30. Redemption of, 26. Where payable, 26. Issued by directors, are liabilities of bank, 80. Liability of directors for, if improperly issued, 91. Payment of forged by bank, 162. Power to issue, 148, 162. Same as bank-notes, 148. Form and characteristics of, 148. How far to be regarded as money, 149. Payment in, 149. to bank in its own, 1 50. To what extent available in set-off against debts owing to banl ng them, 150. Not subject to statute of limitations. 161. When demand on, is necessary before suit may be brojght, 467. Demand on, may be made at any office of bank, ii;o. May be presented in a parcel for redemption, 155. ! II i 448 Index. BANK BILLS,— Each one may be treated by bank as a separate demand, 156. Dilatory redemption of, 159, Redeemable only in bank hours, 156. Liability of bank after destruction of, 158. After loss of, 159. Liability of bank, in case of partial loss or destruction of, 159, Negotiability of fraction of, 160. Insolvent bank, deposit made in, 115. Holder of, as preferred creditor of bank, 41, 162 (note). Stolen and put in circulation, may be collected from bank, unless incomplete at time of theft, 157, 162. Deposit made in forged, 1 16. What warranty is assumed on part of transferrer of, 1 50. How may be signed, 162. BANK-NOTES. Aif Bank-Bills. BANK-BOOK, Sometimes cr.lled pass-book, 117. Character of entries in, 1 1 7. Entries in, as evidence, 117. Same, as affected t)y lapse of time, 1 19, 381. Whether binding on customer as "count stated, 118. Admissible in evidence, 1 18. BANKING, Power to legislate concernu'^, 51. Right to conduct the business of, 52. Laws in restriction and prohibition of, 52, May be carried on by an individual, 52. Nature of business of, to be judicially noticed, 54, 165. Certain functions incidental to business of, 54, 165. Discountiiiij an element of the business of, i68. Receipt, on deposit, of the money of others is of the essence of the business of, 98. Collection an element of the business of, 274. Dealing in municipal bonds, 167. BANKRUrrCY, Of bank. .iVir Winding up Act. EILLS OF EXCHANGE AND PROxMISSORY NOTES— ACT RESPECTING. Acceptance — what is an, 308. Bank officer — when he may not act as a notary, 31 1. Damages— on bills, &'c., payable in Canada or Newfoundland, 309. on bills payable elsewhere, 309. Index. 449 r the business BILLS OF EXCHANGE,— Dishonor — what sufficient notice of, 309. Holidays — what are in Canada, 307. Quebec, 308. Maturity of, 307. when last day of grace a legal holiday, 307. Patent right — what must be marked on, if given for, 311. when nr.ist 'se so marked, 311. penalty for uttering, if not so marked, 311. Protest — what sufficient noticed of, 309. In New Iki'.dswick, piotest, what evidence of, jii. In Nova Scotia, bills, 6^c., for $40 and upwards may be protested, 310. notary's fees, 310. protest, what evidence of, 310, Ir Ontario, acceptance — general, 312. qualified, 312. if qualified where presentment should be made, 312. Daniayes — what recoverable, 313. Exchange — how rate ascertained, 313, Forms — for use in Ontario, 315. Schedule A, 317. of protest, 317. of notice of protest, 318. Holiday — no presentment for acceptance on, 315. Interest on, 314. Notary's fees, 315. Protest— form of, 315. for non-payment may \>c on day of dishonor, 314. In Ontario — must be after 3 o'clock, 314. may be immediately after non-acceptance, 314. notice of — how served, 314. Statutes not in force in Ontario, viz, 15 Geo. 3, 17 Geo. 3, 315. Usury — not void for, 312. In Prince Edwartl Island, acceptance — general, 310. qualified, 310. if qualified where presentment should be nnade, 310. Notary's fees, 310. Protest — what evidence of, 310. In Quebec, Forms — for use in Quebec, 316. Schedule 13, tariff' of fees, 318. Form A — Noting for non-acceptance, 319 450 Index. BILLS OF EXCHANGE,— B — Protest for non-acceptance or non-payment of a bill payable generally, 320. C — Protest for non-acceptance or non-payment of a bill payable at a stated place, 320. D — Protest for non-payment of a bill noted, but not protested for non- acceptance, 321. E — Protest for non-payment of a note payable generally, 322. F — Protest for non-payment of a note payable at a stated place, 323. G— Notarial notice of noting or of protest for non-acceptance or non- payment of bill, 323. H — Notarial notice of protest for non-payment of note, 324. I — Notarial service of notice of protest, 325. J — Protest by justice of peace, 325. Holidays, 308. Justice of the peace may protest, 316. Notary's fees, 315. Penalty — if unqualified person acts as notary, 316. BONDS — provisions for sale of, held as collateral security for advances, 34. Official. See Official Bonds, BOOKS, 1 Of the bank, subject to director's inspection, 71, 182. how far admissible in evidence in behalf of bank, 123. Entries in, as evidence, 122. BORROWING, A function of directors, but may be delegated, 7 1 . May be done by cashier on behalf of bank, 292, BRANCH BANKS, May be established, 28. BY-LAWS, Certain, continued in force, 1 1. Matters that may be regulated by, 65 et seq. May be made by shareholders, 65. c. CALLS, Amount and intervals of, 260, 261. How enforced by action, 16. by forfeiture, 262. forfeiture may be remitted, 17. Who qualified to make, 260. In case of insolvency, 261. how made and enforced, 261. refusal to make, a misdemeanor, 261. Under Wiuding up Act, 40. See Winiinj up Act. Index. 451 a bill payable ill payable at a otested for non- lly, 322. ted place, 323. eptance or non- :, 324. nances, 34. 123. CAPITAL, Amount which mj3t be subscribed before commencing business, 9. If any lost, calls to be made, 19. Loss of, to be mentioned in next return, 19. Profits to be applied to make good loss of, 19. Wliat amount to be paid up, 9. Defined, 57. Can be increased by act of shareholders, 57. how may be increased, 57. reduced, 58. CASHIER, Character of office and functions of, 289. Duties of, 290. Entitled to subordinates, 291. His relation to them, and their duties, 291. Must superintend collection of debts owing to bank, 291, deliver up and discharge security, 29I. May indorse on behalf of bank for collection, 293, And also for other purposes generally, 293. May borrow money on behalf of bank, 292. May draw checks on behalf of bank, 295. Has charge of personalty of bank, 292. Forms of indorsement by, on behalf of bank, 293. Has charge of correspondence, 295. How far may make contract by letters, 295. Duty to make transfers of shares, 268. Power of, to accept or refuse person applying to become a depositor, 296. Presumptions as to authority, 293. Necessary limitations upon power of, 294. Binds bank by implications and inferences arising from his acts, 290, How far liable for his subordinates, 297. liability of, 297. Extent of power concerning notes belonging to bank, 292, CERTIFICATE — treasury board must grant, before commencing business, 9, Purchaser of shares entitled to demand, 266. Stipulations in, as to manner of transfer, 266. CERTIFICATE OF DEPOSIT, Form and nature of, '?3. Power of bank to issue, 123. Indorsements of, 124. Return of on payment, 125. Rights of action on, 124. How far negotiable, 124. Cashier may issue, lio. CHAIRMAN to have casting vote, 62. CC 'Hi 45i Index. CHARTERS— cerlnin, continued, 8. NVhnt should contain, 55. Charncter cf, 164. What powers should be specifically conferred by, 165. CHECK, What, 126. Duty of bank to honor, 105, 127. Characteristics of, 126. Signature of, 1 27. Amount must he named, 128. Abbreviations cx|)ressint; amount in, 128. Must be addressed, 129. dated, 129. Hut see, iJ,-},. Payment of, before day of date, 130. When i)ayable, 130. Dated on Sunday, 130. \'.ust express an order, 13 1. Not invalidated by immaterial matter, 131. Payable to order of fictitious name or mere words, iSr'c, I3I. How issued, 132. Lost or stolen, 132. Negotiability of, by transfer, 132. How far to be regarded as bill of exchange, 134. Effect oUaches in presenting, 138. Not presentable for acceptance, 145. No grace allowed on, 135. No time gained by presenting through banker, 135, 138. Not due tdl dem.ind is made, 136. When notice of non-payment of, may be dispensed with, 136. May be accepted, 136. How far holder of, is affected by equities and infirmities, 136. Post-dated, 130. Payable on future day named, I30. Duty o( bank to pay, on presentment, 136. Order of payment of several, 139. Calling for more than depositor's balance, followed by one calling for less, 140. Presented after wrongful refusal to honor one, 140. In what kind of money must be paid, 14I . What payment of, will discharge drawer, 142. payment in forged paper or base coin, 143. Need not be paid except in banking hours, 137. Need not be paid in part, 1 40. Where holder of overdraft seeks to pay in deficit, 140. Payment of, by credit given, 143. by certification, 143. How far an assignment, 100. Index. 453 CHECK— Continued. Excuses for non-payment of, 103, et siu/. 127. Revokc(l t)y death of drawer, I35, 145. Paid after revocation by deatii, 145. Ai evidence of debt, 139. Presentment of, for payment, when should be made, 137. through post-office, 137. Eflect, as towards drawer, or delay in presentment, 1381 Delay in presenting, is at peril of holder, I35, 13!!. Notice of dishonor of, 136, 147. Duty of bank to honor, not affected by age of, 138. Rules iroverning presentment of, as t)etween liolder and indorser, 280. Duty of l)ank as to, is only to pay, not to accept or certify, 136, Who may draw, against a deposit, 106, Who may draw, against a deposit, in case of trustees, io6. Si^Miature of, drawn by agents, tSr'c., 38 1. How far revocable by drawer, 130, 344. Ceitification and acceptance of, may be made, 145. Obligation of bank upon certified, 146. Relation of holder of certified, to bank, 146, Whether certification of, relieves bank from liability to drawer, 147. drawer from liability to holder, 146. Certified, becomes a new contract, 146. not affected by statute of limitations till demand has been raads, 138. As evidence of payment, 144. of debt, 138. between drawer and bank, 144. Right to possession of, after payment, 144. As voucher in hands of bank, 144. Clerical errors or contradictions in writing, 132. Form and characteristics of so-called "miuioranJum," 131. Must be paid, if presented, 139. Ante-dated, payable immediately, 130. Post-dated, characteristics of, 130. when payable, 130. Falling due on Sunday, 130. Action for refusal to honor, 127. Justification for refusal to honor, 127. Liability for paying, in bad money, 143, Right of holder of, to sue bank for amount of, 127, 146. CIRCULATION — penalty for excessive, 25. Redemption of, 26. COLLATERAL SECURITV-biUs of lading as, 30. Real estate as, 168, 170, el seq. Personal property as, 183. h. IMAGE EVALUATION TEST TARGET (MT-3) 1.0 I.I |5o ^^™ MIH Lo 12.0 I 11.25 Riotographic Sciences Corporation 33 WBT MAIN STRliT WIUTM.N.Y. USM (7l«)t7a-4S03 •^^%.^ "VV ^ .** 4' i 454 Index. COLLATERAL SECURITY— Continued. Warehouse receipts and bills of lading as, 185, et uq. Stock, bonds and other securities as, 167, 195. COLLECTION, Fees, 36. Duty of cashier to superintend, 291. Power of cashier to indorse for, 293. Agents have no title in notes forwarded to them for, 286. A part of banking business, 274. Obligation of bank having made, 274. Consideration for undertaking, 274. Character of agency of bank undertaking, 275. Duty of bank as to presenting paper left with it for, 278. Of paper payable at bank of deposit, 276. Duty of bank to owner of paper intrusted to it for, 278. as to protest, 278. return, 278. Relationship and duties of various parties inter sese concerning paper in trusted to bank for, 280. Duty and liability of bank as affected by custom concerning forwarding for, 285. To whom notice of dishonor must be given by bank undertaking, 276. If not properly made, bank is liable in damages, 277. Whether bank is liable for other banks and agents employed by it in making, 284. How far agents employed by first bank in making may be directly resorted to by principal, 284. When and how liability of bank employed to make, comes to an end, 284. Questions of ownership as between bank employed to make, and subsequent banks, 285. At what stage of, the first bank is bound to pay the customer, 285. Title to paper deposited for, as between first bank and customer, 286. Liability of bank undertaking, for its own defaults, 286. Accepting check of debtor if at risk of bank undertaking to make, 288. 357. Duty of bank undertaking, as to surrender of collateral security, 288. How far the undertaking of, includes duty or authority to bring suit on un- • paid paper, 275. CONTRACT, How far may be entered into by president, 87, 89, Of bank, by cashier, 290, 2o2, 295. ' Made by letters by cashier, 295. CONTRIBUTION, Air Shareholder. CORPORATION. See Bank. CORRESPONDENCE, To be conducted by cashier, 295. IndeSD. 455 COUNTERSIGNING, In what form may be done by cashier, 293. CURATOR — indemnified for paying instalments on shares, 16. When not personally liable as a shareholder, 24. When so liable, 24. CURRENCY— ACT RESPECTING. American eagle, value of, 389. Bank notes, to be payable in, 387. Definitions — " dollars," 387, Denomination in, 387. Foreign coins — date of, how proved, 389. how made current, 389. Gold coins — may be struck in Canada, 387. Legal tender — what is, 388. Amount which may be tendered in one payment, 388. defaced coin not, 389. what in B. C., after 1st July, 1881, 390. what in P. E. I., after 1st July, 1881, 390. what in N. S., after 1st July, 187 1, 389. Public accounts to be kept in, 387 . Standard of, 387. Statements in indictments to be in, 387. CUSTOMER. As creditor of bank effecting collection, 274. Can sue for deposit only after demand made, 109. May recover damages for wrongful refusal to honor his check, loS. in bad money, 143. As owner of paper deposited for collection. 5« Collection. See Depositor. DAMAGES, Recoverable from bank for loss arising from default in making collections, 287. In suits by customer against bank for wrongful refusal to honor his check, 127. See Action. DEBTS, Mature upon insolvency, 1 14. Ov\'ing to bank, how far may be released or commuted by directors, 79. Pue to bank may not be released by president, 89. DEFINITIONS— "Acceptor," 327. *« Agent," 181. "Bill of lading," 191. "Collateral," 185. «• Debts contracted," 1 79. 456 Index. DEFINITIONS— Continued. "Drawer," 327. "Drawee," 327. " Goods wares and merchandise," 7. "Holder," 328. "Indorser," 327. " Maker," 328. "Negotiate," 185. "Payee," 327. " Ship," " shipmert," 7. •' Warehouse receipt," 192. DEMAND. See Collection. DEMAND AND NOTICE, To surety on official bond, 210. DEPOSIT, Of the money of others an essential part of the business, 98. How far receivable from jjersons not able to contract, 99. Relation of customer on a simple deposit account, 99. The word a misnomer, loo. Of several sums constitute one blended sum, 102. May sometimes be followed and reclaimed by depositor, 103. Items of, form a running account, 104. May be held by bank as security for debt of depositor, 104 Even if debt be contingent or be a claim for unliquidated damages, 104, The simple striking of a balance shows state of account, 104. Bank must honor customer's check drawn against, 105. May be withdrawn in sums to suit customer, 105. How and to whom joint payable, 106. Trust funds payable, 107. Claim for, as affected by prescription, 108. May or may not be applied, at bank's option, to pay depositor's debt to it, 113. May be of such a nature as to take away right of lien, i lo. See Lien. customers notes payable at Bank to be paid out of, 107 In what funds must be made, 115. In what funds must be repaid, 115. In bills of insolvent bank how far good, 115. In forged paper or base coin how far good, 1 16. In bills of same bank if forged or fraudulently altered, 1 16. ^ Entries of in depositor's pass- book by proper officer how far admissions by bank, 1 17. Entries how far binding on depositor, ii8. Interest on, 121. Receipt, 123. See Certificate of Deposit. Index. 457 DEPOSITOR, Relation between, and bank is that of simple creditor and debtor, 99. not of trustee and cestui, 100. Debt from bank to, accrues immediately on deposit being made) 103. Unaffected by subsequent loss or theft, 103 May sometimes follow and reclaim deposit, 103. Keeping different accounts at same bank, 112. Right of, to have his checks paid. See Check. bills, notes, and acceptances paid, 107. right of action of. See Action. Lien of bank on funds of, See Lien. For what description of funds, is entitled to draw, 115. State of account of, not to be disclosed by bank, 140. Acceptance or rejection of person wishing to become, 98, 296. how far bank-book of considered as evidence against, 1 18. DIRECTORS— Annual election of, 10, 12. Board of, 12. vacancies in, how filled, 13. Chairman at meetings of, (4. to have casting vote, II. Discounts to, 11. Election of, by ballot, 12, 13. Notice of, 13. Provision in case of failure in election, or equality of votes for, 13. When and where to take place, 13. General powers of, 14. to appoint officers, 15. To apply to court when in doubt as to owner of stock, 23, To call speci.al general meetings, 12. To declare dividends, 18. To declare stock forfeited for non-payment of calls, 17. To elect president and vice-president, 13. To enforce calls by action, inspect books, 16, 18. To make calls, 16. Giving undue preference, guilty of misdemeanor, 42. Loans to, 11. Notice of holding of election of, 1 3. Number of, lo. President and vice-president whom to be elected by, 13. Punishment of, for making false statement in returns, 42. Qualification of, lo. must be natural born or naturalized subjects, 12. must continue, 14. Quorum of, 14. Refusing to make certain calls, guilty of misde-neanor, 40. Removal and replacing at special general meeting, 12. Remuneration of, lo. 458 Index. DIRECTORS— Continued. Voting for, 13. "Who shall be, 13. Loans to, as cause for forfeiture of franchise, 3 11. General functions of, 70. power of delegation of these functions, 7 1 Have sole power to make discounts, 72. how far may delegate this power, 73. Subcommittees in board of, 71. Limitations upon power of, 77. Majority of, may bind bank by informal action, 83. but must act at regular meeting, 83. Each one entitled to notice of meetings, 84. Are trustees, 74. Loans or discounts made to, 68, 74, 76. Must not vote on loans to themselves, 74. Obligation upon, to own shares in corporate stock, 65, 77. Control exercised by, over property of bank, 77. Power of, to release or commute debts owing to bank, 79, delinquent officer from liability to bank, 79. Control issue of bank-bills, 80. Liability of, to shareholders or creditors for losses, 97 Tor improperly declarmg dividend, 90, 97. Liable for ignorance of fact, 92. but not of law, 92. Liable for issue of bank-bills when capital has not been paid in, 9 1. Liability of, is part of assets of bank, 92. for false or deceptive statements of bank's condition, 93. To what extent may receive compensation for services, 67. de facto, acts of, 261. Liable for neglecting to take bonds from officers as required by statute, 91. May be sued by shareholders for malfeasance, 97. DISCOUNTING, Character of, 168. Power of, lodged in directors, 72, to what extent this power may be delegated, 73. Made to director, 68, 74, 76. Dishonestly procured by director, 74. DIVIDEND, Declared by directors, 18. ^ Liable for overdue debts of owner, Notice of, 19. Not to impair capital, 19. capital lost by. to be made up by calls, 19. penalty for excessive, 19. Not to exceed 8 p. c. unless a certain reserve fund exists, 19. Index. 459 DIVIDEND— Continued. May be made payable in United Kingdom, 1$. Improper declaration of, casts liability upon directors, 90, 97. May be set off against debt of shareholder to bank, 273. Right of shareholder to sue for, 273. Effect of wrongfully declaring, 90. DISHONOR— i-w Notice. DOMINION NOTES— Arrangements for supplying, 25, DOMINION NOTES— ACT RESPECTING. Agencies for redemption of, 393. Amount of issue of, 391. if exceeded, gold equivalent to excess to be held by Minister of Finance, 392 . to be held in gold for redemption of, 391, 392. Debentures of Canada to be held for securing redemption of, 391. Definition — " specie," 39 1. How signed, 391. redeemable, 391. Monthly statement as to, to be published by Minister of Finance, 392. To be legal tender, 392. Who may issue, 391. When redeemable, 393. E. ELECTION— &f Directors, ENTRIES, in books of bank. See Books. ESSENTIALS IN A BILL OR NOTE, 331-338. See Checks. EVIDENCE, Bank-book as, concerning namcof party contracting, 123. Books of bank admissible in, on behalf of bank, 122. Entries in books of bank, how far, as against bank, 123. In suits on official bonds, 200 . Possession of bank-bill is prima faete, of title, 154. Books of the bank are admissible in, in its behalf, 122. but entries in these books must be verified, 1 23. Depositor's bank-book it admissible in, Ii8. EXCHANGE, Rate of, how calculated, 384. EXECUTOR— 5^a Administrator. F. FALSE statements in returns— A misdemeanor, 42. 460 Index. FORGERY OF A BILL OR NOTE. Definition of, 377. Punishment for, 378. Persons making separate parts of forged instruments, 378. Complete without uttering, 378. Instances of, 378. Filling up a bill or note with different sum than authorized, 378. Intending one's own name to pass as that of another, 378. Misusing a genuine signature, 379. Discounting bills with fictitious names, 3-9. Signing by procuration without authority, 379. Civil consequences of, 379. Payment of a forged bill, 357, 379. When money paid on forged bill may be recovered back, 358, 380. FORGERY— ACT RESPECITNG, Attestation to power of attorney, punishment for, 436. Bank notes, 436. purchasing, receiving or having forged, making paper or engraving plates for forging, 437. Exception as to paper for bills of exchange and promissory notes, 43S. Bills of exchange, punishment for, 440. accepting without authority, punishment for, 44I. Claim for land s'''int» punishment for, 435. Cheques-obliterating crossing, punishment for, 441. Foreign bills — engraving or making plates for forging, uttering forged, 439, Mould — punishment for making or having mould for making paper with name of bank, company or person carrying on business as bankers or for having such pap>er, 439. Notes— engraving, making, having in possession or uttering forged Domi- nion, Provincial or bank, punishment for, 438. Engraving a part of or having or using any forged plate or having any paper on which any part of such note is impressed, punishment for, 438. Power of attorney, punishment for, 435. Promissory note, punishmert for, 440. Promissory note, making without authority, punishment for, 441. Receipts, punishment for, 441. Transfer of stock, punishment for, 435 , Personating, owner of stock, punishment for, 435. FORFEITURE OF FRANCHISE, See Franchise. ^ FORGED BILL, Effect of making deposit in, 1 16. where bills are of the same bank, 1 16, FRANCHISE. General character of acts involving forfeiture of, 21 1. ' Index. 461 FRANCHISE— Continued. Specific acts which have been held to be ground for forfeiture of, 211. Matters involving forfeiture of, cannot be tried collaterally, 21 1. Procedure in action for forfeiture of, 21 1, 213 <•/ sey. FRAUDUi^ENT preference, a misdemeanor, 42. G. GOODS— Sale of, on non-payment of debt, 33. Sale of, notice of, 33. effect of want of notice, 33. without owners consent must be by public auction, 33. GOVERNMENT SAVINGS BANKS—ACT RESPECTING. Accounts of, to be laid before Parliament yearly, by Minister of Finance, 399. Agents of, altering entries, embezzling, &'c., punishment for, 400. Collectors of customs in N.B. i.iay act as, 395. Agents of — duties, 395. to give security, 395. receive deposits, 394. take oath of office, 395. Assistant receivers general, appointment of, 394. Definitions — " agent," " Minister," 394. Depositor, report to, its effect, 397. to give his address, &'c., 396. who may lie a, 396. Deposits— falsely pretending to own, punishment for, 400. How made and proved, 396. Interest on, 397. capitalization of, yearly, 397. In joint names, 398. receipt of one sufficient, 398. In N. B. andN.S. on 1st July, 1867,400. Received from persons whether qaalified *o contract or not, 396. limitation of amount to $500, 396. To be deposited to credit of Minister of Finance, 397. To form part of Con. Rev. Fund, 398. Establishment of, at Toronto, Montreal, Halifax, St. John (N.B.) and else- where, 394. Inspectors— appointment of, 395. duties, 395. Interest — capitalization of, 397 , on deposits, 397. Payments— certain, to be valid, 398. Public debt —increase of, by deposits beyond certain amount, 399. Regulations — by Governor in Council, 398. IK! 462 Index. GOVERNMENT SAVINGS BANKS— ACT RESPECTING,— Regulations^flTect of, 399. Publication of, 399. When to be laid before Parliament, 399. Returns — Monthly statement by Minister of Finande in Cunada Gautte, 399. When accounts to be laid before Parliament by Minister of Finance, 399. Trusts— Government offices not bound to see to, 398. Withdrawals, 396. GRACE, Days of, 352. no, on demund bills or notes, 350. ,nor on checks, 135. GUARDIAN— A? Curator. HOLDER of check. See Check. bills and notes, 328. HOLIDAYS, What days are legal, 351. H. INDIVIDUALS, May conduct banking business. 52 . Not make use of title "Bank." 52. INDORSEMENT, Of certificates of deposit, 123. May be made by cashier on behalf of bank, 292. By cashier in behalf of bank, forms of, 293 . Authority for making, by cashier should appear, 294. Of bills and notes, various significations and effect of, 329 et seq. Title of person holding under forged, 379. INSOLVENCY. Calls on, 40. how made, 16, 40. if not paid, forfeiture incurred, 17. Of banks en-commandite, 41. Shareholders liability, 39. if shares transferred within one month of, 41. See Winding up Act. INTEREST, Does not usually accrue on general deposit account, 121, Index. 463 INTEREST.-Continued. but may by agreement or usngc, I2i. Statutory provisions concerning rate of, to be taken by banks, 35. when taken by banks limited to 7 per cent, 35. If more paid, excess not recoverable, 35. On deposits, 121. See Act Kespectino. INTEREST— ACT RESPECTING. general provisions, 415. Not recoverable on mortgage on sinking fund plan, aiy, 342. When not necessary, 343. Should be made within a reasonable time, 342. When excused, 342. By whom and to whom should be made, 343. Where should be made, 344. At what hour, 354. What time may be given fcr deliberation, 345. Whether the bill may be left, 345. Consequence of neglect in party making, 339. PRESENTMENT FOR PAYMENT, By and to whom should be made, 349. When to be made, 350, Computation of time, 350. At what place, 354. Consequence of neglect in party making, 355. At what hour, 354. Of a check, 137. Of bank notes, 155. Of check for payment, when should be made, 280, et se//. See Check. Diligence in, required, 352. Of post-dated ciicck falling due on Sunday, 130. Duty of bank receiving paper for collection as to, 280, et se//. Of check by mail, 281 . Of bill of exchange through a banker, 281. Of bank-bills, to be made at bank of issue, 155. Index. 469 PRESENTMENT— Continued. Of bank bills, may be made of a parcel, 155. must be made in bank hours, 156. PRESIDENT— election of. 12, 13. How removed at special general meeting. 12. How .replaced, 12. See DIRKCTORS. removable by shareholders, 61. notice to, how far notice to bank, functions of, 86. may institute and carry on lawsuits, 87. may bind bank by contracts made in his own name. 87. lawsuits may be conducted in name of, 87. extent of control of, over corporate funds, 88. may not release debts, 89. cannot enter into contracts, 89. but may formally execute them. 89. whether or not entitled to payment for services. 67. PROCEDURE— To eft'ect forfeiture of stock. 17. sale of lumber, goods, d-c, held in ple(ii;e, 33. sale of stock for debt of owner. 34. PROFITS to be applied in making good loss of capital, »9. PROTEST for non-acceptance and non-payment. By whom to be made, 360. Through whom, 361. Consequences of neglect to, 360. What. 360. Forms of, 317, 320-323. Copy of as evidence, 362. Effect of, 362. Notice of See NoTicK. When unnecessary, 362. waiver of, 362. Copy of need not he sent with notice, 365. When to lie made for nonpayment, 363. for non-acceptance. PROMISSORY notes. .Si-^ Bills of exchange, PROXIES— renewal of. 63. Who may vote on, 63. QUORUM of directors, 65. of shareholders, 62. 470 Index. R. REAL ESTATE, May be taken, held, sold, and mortgaged by bank, 169. but must l)e acquired in good faith, 169. Right of bank to purchase, 168. acquire by mortgage, 168. Sfe Banks. For actual occupation, 168. If mortgaged to bank may be acquired absolutely, 182. May only be held for 7 years, unless in actual occupation, 183. May l)e sold under power of sale, 29. Purchased, if sold under execution, 169. As' collateral security, 179 ft scq. RECEIPTS — false statements in, a misdemeanor, 31. RECORDS, Good, though not contemporaneously made, 84. REDEMPTION, Of bank-bills. See Hank-Bills. REPORT, False or deceptive, 93- RESERVES — part of, to be in Dominion notes, 25. RETURNS— Annual, to be made, to 31st December, 39. Monthly, to be made, 38. form of, 47, 413. how attested, 38, 413. penalty for not making, 38. Special, may be called for by Minister of Finance, 38. RETURNS— AC r RESFECI'ING, BV PERSONS RECEIV- ING MONEYS ON DEPOSIT AT INTEREST, 414. REVOCATION, See Check. S. SALE OF GOODS — on non-payment of debt, 32. Notice of, 33. effect of want of notice, 33. Without owner's consent must be by public auction, 33. SALE of stock for overdue debts, 34. Index. 471 SAVINGS BANKS IN ONTARIO AND QUEBEC— ACT RES- PECTING. Annual meeting, 402, Bank notes, not to issue, 41 1 . Calls, — on stock generally, 40^. in case of insolvency, 404. recovery of, by action, 404. proof in such cases, 404 Charities —charity fund at Quebec, 411. distribution to, 410. poor fund at Montreal, 410. Charters — certain continued, 402. Collateral security — loans on, 408. accountability of bank in sale of, 409. enforcing payment of loans on by sale, 409. Proviso as to other remedies, 409. transfer of, on sale, 409. Definition — "bank," 402. Depositor — to give name and address, 407. who may be a, 407. Deposits — bank may receive and pay interest, 407. investment of, 408. on call in chartered banks, 408. receivable from jiersons ordinarily unable to contract, 407 but amount limited to $2,ooo, /|o8. 'ransmission of, by death or marriage, 406. Directors — calls by, 403. election of, 402. failure to elect, how remedied, 403. liability of, for failing to make calls if bank insolvent, 405. Qualifications of, 402. to declare half-yearly dividends, 405. when disqualified, 403. Dividends— to be declared half-yearly, 405. Dominion securities — amount to beheld by, 408. Election — of directors, when held, 402. who may vote at, 403. Loans — none on real estate, 408. on collateral security, 408. Meetings— notice of, 402. Offences— altering book, &^., or embezzling, punishment for, 412, falsely pretending to own deposits, punishment for, 412. making false statements in accounts, punishment for, 413. Officers of — not to vote or hold proxies, 403- Payments — certain, made in good faith on certain documents, valid, 408. Real estate — may exercise power of sale over, 410. ':: i 472 Index. SAVINGS BANK IN ONTARIO AND QUEBEC— ACT RESPECTING may obtain absolute title by release of equity of redemption — foreclosure or purchase of prior mortgage, 410. may purchase, if sold by bank under execution, 409. no loan on, 408. Returns — annual list of shareholders to be laid before Parliament by Minister of Finance, 412. form of, 413. monthly, to Minister of Finance, 41 1. Shareholders — calls on, generally, 403. liability of, in case of deficiency of assets, 404. calls in such cases, 404. forfeiture for non-payment of such calls, 404. votes of, 403. proxies, 403. Shares — ^joint holders of, to appoint attorney in writing, 405. personal property, 405. transfer of. 405. transmission of, otherwise than by ordinary transfer, 406. declaration in foreign country, 406. by marriage or death, 407. Trusts — not I'oundtosee to, 411. ( SECURITIES— i^f^ Collateral Securities. SET-OFF, as between bank and depositor, 1 12. in nature of lien on deposit, 112. .S'lV LlKN. in favor of depositor against insolvent bank, 223. when bank is insolvent, 223. whether can be made of debt due from bank to shareholder to relieve him from personal liability, 223. dividends may be subject of, 263 SHAREHOLDERS, who are, 255, alone have power to incre; cai)ital, 57. cannot escape liability to pay full amount of their subsciplions, 256, not protected from such payment by statute of limitations, 256. &<• SL'BSCRU'TION, liability of, in excess of amount named in subscription, 258. measure of this liability, 255}. h)W liability of, may be increased by legislation subsequent to charter, 259 liability of, to contribute towards indebtedness of bank, is barred by statut e of limitations, 259. who are considered to be such for purposes of contribjtion towards paymeB t of bank's indebtedness, 255, 258. 1 Index. 473 SHAREHOLDERS— Continued . in insolvent bank, how soon suit can be instituted against, 258. nature of liability of, 255. can set off against their liability debts due to them from bank, 226. by whom liability of, may be enforced, 258. lien "upon shares of, for debt to bank, 263. See Lien. entitled to surplus remaining after pay-nent of all corporate debts, 272. apportionment of such surplus may be sought in equity, 272. but each may have action at law to recover his several proportion after allotment, 272. not entitled to share in assets till all debts are paid, 272. right of, to new shares, 273. claim against directors for refusing this privilege, 273. right of, to sue for dividends, 273. entitled to demand transfer and cerlilicate, 266. bank as, in its own capital stock, 220. have certain rights of action against directors for malfeasance, 97. personal liability of, 255. to wliat extent this liability is avoidable by transfer of shares, 256, 258, All calls on, to be paid before voting, 60. 63. Liability of, on insolvency. 256, 258. calls to meet such liability. 46. 257, 260, et seq. forfeiture for non-payment of such calls, 17, 41, 272. who have transferred stock within a month before insolvency, 41. List of, to be transmitted yearly lu Minister of Finance, 38, penalty for omission, 39. May regulate certain matters by by-law, 65. vole by proxy, 63. Not allowed to inspect books, d-^c, 18. To vote by ballot, 62. SHARLS— amount of, to be declared in act of incorporation, 55, 59, Amount payable on. in 30 days from subscription, 56, 256. As personal estate. 270. Books of subscription for, may be opened in United Kingdom, 15. Calls on, 260 . Directors when in doubt as to owner of, to apply to court, 23. notice of application to be given to claimant, 23. proviso as to costs, 24. Dividend on, may be made payable in United Kingdom, 15. forfei:ure of, for non-payment of calls, 17, 4', 272. how and when paid, 260. lien on for overdue debts, 34, 267. List of transfers of, to be made up daily, 20. to be open to shareholders, 20. No fractional part of, transferable, 20. 474 Index. SHARES— Continued. Sale of, on execution, 20. how title obtained, 20. who to transfer, 20. Transferable at will of holder, 266. Transfers of, when valid, 267. in ease of sale by bank for over due debts, Transmission of, otherwise than by transfer, 20. how proved, 21. how authenticated if made out of Canada, 21, On marriage of female shareholder, 21. on death of shareholder, 22. further provision in such case, 22. Votes on, 59. Transfer of, to be made b> cashier, 268. To whom may be made, 268. Of bank, as security for debts due to it, 195. New, must be allotted among shareholders, 273. Lien on, for shareholder's debt due to bank. Ste LiEN. SHIPS — advances for building, 184. SPECIE PAYMENTS, suspension of, by bank, constitutes insolvency. 222. SPECULATION, borrowing by bank for purpose of, is illegal, 165. STOCKHOLDER. See Shareholder. STATEMENT— False, in returns, a misdemeanor, 42. SUBSCRIPTION, No escape from payment of, in full, by shareholder, 256. Not barred by statute of limitations, 256. Effect of transfer of shares on liability for, 258. What constitutes, 256. SUNDAY, Check dated on, is good, 130. SURETIES, On official bonds. See Official Bonds. T. TENDER, Bank-bills as legal, 149. TITLE, In bank-bill passes by delivery, 154. TRANSFER book, closing of, ID, 67. Of bills and notes, 329. Stipulations in certificate concerning manner of. See Certificatk. Of shares. See Shares. Index. TRUSTS — bank not bound to see to, TRUSTEE-i-^^ curator. Banker is not, for his depO'-itor, loo. But may become such, in a certain limited way, loo. Checks drawn against deposit of, io6 u. USURY— bank not liable to penalty for, 35. Not to render innocent party liable to penalty for, 35 Not to render innocent party liable to loss of remedy, 35. Provisions as to, 35, Banks not subject to laws relating to, 35. No penalty for exacting, 35. Contracts involving, not invalid in toto, 35. As ground for forfeiture of franchise, 218. 475 VENDOR, unpaid, has no lien over bank in certain cases, 33, VESSEL— advances for building, 184. VICE-PRESIDENT— election of, n, 13. Mow removed and replaced at s|)ecial general meeting, 12, VOTES — if a tie, at annual general meeting, 11, 13, 62. If a tie, cli.iiniian to have casting vote, 11, 62. Majority of, to determine questions, II, 62. By joint holders of shares, 11, 63. On shares, 11, 62, To be by ballot, 12, 62. w. WAREHOUSKMAN, when also owner, 194. Distiller as, 195, WAREHOUSE r2ceipt— as (ollateral security, 1S5. How goods should l)e described in, 187. M.iy be exchanged ft>r bill of lading, 31. Transfer of, by agent of owner, 31, 187. WINDING-UP— ACT RESPECTING. Appeals from court or judge, 246. dismissal of, for non-prosecution, 247, practice in, 247. security on, 247. to Supreme Court, 247. Application of act, 228. corporations excepted from, 229. 476 Index, WINDING-UP— ACT RESPECTING— Continued. Application of sections 8-95, 229. Assets — how distributed, 241. when distributed, 241 . Attachment of debts, 248. Banks — application for, must be by creditors for $1,000, 352. Liquidators — numlserand appointment of, 253. to reserve dividends in respect of outstanding ndtc*. 253. Meeting of shareholders and creditors of, must be calleij by courts before granting order for, 253. Chairman at, appointment of, 253. to report result of votes to court, 253. votes at, 253. Notice to holders of notes. 254. Sections 98-104, exclusively, applicable to. 252. Commencement of, 230. Company — when deemed insolvent. 229. unable to pay its debts. 229. Contributories Absconding, may be arrested and papers seized, 240. Booksof company //7V;/rt/(7f;V evidence as between, 240 Calls on, when may be made. 239. Calls on. not to compel payment of debt before maturity. 23Q. Court may adjust rights of, 240. order payment by, 239. inspection of company's books by, 240. Liability of, 238. Liability of shareholders as. 238. Liability of shareholders after transfer of shares, 238. List of. what must show, 237. Payment into court by, 239. When may vote at meetings. 240 Costs of, 251. Courts — Powers conferred on by this Act additional to all other powers of, 249 Provincial — auxiliary to each other, 249. Orders of, to be deemed judgments, 24S. how enforced, 248. Creditors — Claims of certain privileged, 241. Compromising with, 242. Contestation of claims of, 244. Duty of, when holding security, 242. Inspection of company's books by, 240. Judgment and execution, have no lien, 243. Proviso as to costs, 244. Rank on dividend sheet, 243. Tn<1ex. 477 WINDING UP-Coiuiimcd. Rights of, wlien holding security, 24^. Set off to ripply to claims of, 241. Time for sending in claims, 241. Voting by, 233. Wjiat claims may lie proved, 240. Wishes of — how ascertained, 233, Definitions — " Company,'' 227. " Contributory " 228. " Court," 228. " Insurance Company " 227. " Official Ga/ctte,"' 228. "Trading Company," 227, " Winding up order," 228. Dividends— Payable to Receiver General if unclaimed for three years, 252. Fraudulent preferences — Contracts by company which obstruct creditors — void, 245. When gratuitous contracts ra.nde by company void, 244. Contracts with consideration, whv-n voidable, 245. I.lebts transferred by company to contributory, wlien cannot be set off, 246 F'ayinents by company when void, 246. Securities given by company vnid, 245. Liquidator — Actions how to lie brought by, 234. Appointment of, by court, 233. Solicitor by, 235. Balance in hands of, how disposed nf, if unclaimed for 3 years. 237. Bank book of, 236. Custody of property where no, 234 Deposits by, how made, 236. when and where to \m made, 236. Duty of, after appointment, 234. If a second claim liled, 243. 'I'o deposit balance after final winding up, 237. To produce bank book at meetings, 236. Topro( com-