UnW.!ll«^ of CUComt^ DIGEST of LEGAL OPLNIONS of THOMAS B. PATON, General Counsel of the American Bankers Association, which have been published in the issues of the Journal of the American Bankers Association from July, 1908, to June, 1919, inclusive With an Index Digested by THOMAS B. PATON, Jr. of the New York Bar, Assistant to the General Counsel Published by the AMERICAN BANKERS ASSOCIATION 5 Nassau Street New York 1919 ri<- :50/ Copyright, 1919 by the American Bankers Association New York PREFACE FROIV I July, 1908 , t o June , 1919, th ere h ave been publ is hed in the Journal of the American Bankers Association the legal opinions of its General Counsel. Inasmuch as there have accumulated during the past eleven years as many as 1,346 of these opinions, it was thought advisable by the Executive Council in the interests of all the members that a digest of them be made and pubUshed. Accordingly this Digest has been prepared and an attempt has been made in each case to write, in concise form, a statement of the facts, followed by the opinion. It seemed best from the busy banker's point of view, not to deal too much in detail in a book of this kind but rather to state in a terse way the conclusions which a banker or other business man may wish to know, without taking the time to read through the citations of legal decisions or the discussion of underlying principles or reasons upon which the opinions are based. A fuller treatment of the subject quoting the basic legal authorities or discussion can always be had by referring to the full text from which the digest was made. For the variety of subjects treated and their practical bearing upon banking operations, the bankers are solely responsible as it is they who have voluntarily submitted questions on the problems confronting them in every day business. It would then seem to follow that the book has the advantage of containing a selection of subjects confined to those mat- ters only which have been troubling bankers most and which have already proved of suf- ficient interest to cause them to request legal advice. It is, of course, understood that the opinion of a lawyer, even though based on de- cisions of the courts of last resort or, in the absence of legal precedent, reasoned out upon sound legal principles, still remains an opinion. At most the reader can choose to use it and to depend upon it as a possible guide and source of information, and for these objects this book is published. Thomas B. Baton, Jr. New York, N. Y., July 1, 1919. ACCEPTANCE AND CERTIFICATION Certification after banking hours 1. (Ala.) A bank certifies or pays a customer's check after banking hours and the customer, before banking hours of the next day seeks to stop pa}Tnent. The ques- tion was raised whether the payment or certification was binding on the customer. Opinion: Sucli payment or certification is probably valid, although the point has never been directly passed upon by the courts in a case between the customer and the bank. Vol. 5, p. 19, July, 1912. Acceptance must be written 2. (Ark.) A livestock company in- structed its bank to honor a draft drawn in its name by C and D, who were buying stock for it, and the bank agrecs require acceptance to be in writing, a promise over the telephone to pay a check, not being in writing, does not bind the drawee; but in Indiana where the common law rule prevails that verbal acceptances are valid, such telephone promise would probably bind the drawee in favor of one who in reliance thereon cashed the check. Where, however, the drawee simply answers that the check is ''good'' or "all right" without coupling with such answer any specific promise to pay, such answer is insufficient to bind the bank as an acceptor. Vol. 3, p. 337, December. 191(». Note: The Negotiable Instruments Law re- quiring acceptances to be in writing was passed in Indiana in April, 1913. 5. (Ohio) The indorser of a check at- tempted to cash it at Bank A, which bank as a precaution teleplioned Bank P, the drawee. In reply to tlie question whether or not the check was good, Bank P said "yes,'' and when asked if it would protect Bank A on the check, it replied over the telephone, "We will.'' Bank A cashed the check on these representations and upon dishonor wishes to hold the drawee liable, because the indorser proved wothless. Opinion: Bank A cannot hold Bank P on the hitter's oral promise to pay the check, because the Nego- tiable Instruments Act requires acceptance to be in writing; nor is Bank P l)ound to Bank A, the holder, who has cashed tiie check on faith of such promise, on the principle of estoppel, as this principle is inaj)plicable in tlie face of positive statutory nx|uiremcnt of written acceptance. Bank .\, however, would liave a right of recoverv against the drawer of the check. Vol. 7, p." 165, Sept., ^'^\■\. 6. (Okla.) A bank purchased a chock from the payee after receiving a statement over the telephone Ity the drawee that the check was good. Payment wa*; stopped. Opinion: Umler the leading case construing the Negotial)l(> Instruments Law of Colorado, the bank had no recourse upon non-payment against the drawee, as certification over the telephone is invalid, not being in writing. The bank's sole recourse is against the drawer and payee. Vol. 5, p. 104, Aug., 1912. 7] DIGEST OK LKdAL OPINIONS 7. (Tex.) All nccoptaiicc of a check or (Inift l)y ti'k'pliono in Texas is valid, because there is no Nej^otiable Instruments Act, or any otiier statute in force requirinj^ accept- ances to he in writing'. Vol. (i, p. ;'>:{, July, 1913. Notk: Tlic Negotiable IiiHtnimcntH I.aw re- quiring aceej)tances to l)e in writing was passed in Texas in Marih, 1919. Acceptance on note 8. (Pa.) A re«j;ular form of a negoti- able promissory note, made by A payable to his own order forty-five days after date at the X bank, was indorsed in blank by A. Across the face the following acceptance was written by a third party: "Accepted payable at the X bank, signed B." The question is asked what is the liability of the acceptor. Opinion: Where a third person whites an acceptance across the face of a promissory note, the holder has the option of treating the instrument as either a bill or note and the person so signing can be held liable as acceptor of a bill of exchange. Vol. 10, p. 528, Jan., 1918. Bank's obligation to pay, not to certify See 24 9. (Iowa) A check was presented at the drawee bank at a time when there were sufficient funds. The drawee returned it for proper indorsement and inquires if it was under obligation to first certify the check in case of subsequent depletion of the maker's account. Opinion: The certification is optional not obligatory, and the bank would not be liable for refusal to certify, if the check in this case thereafter became "not good." Vol. 2, p. 538, June, 1910. 10. (Mass.) A customer gave instruc- tions to his bank not to certify any of his checks and the bank desires to know if there is any ruling which makes it compulsory for the bank to certify upon demand if the funds are sufficient. Opinion: The bank is not obliged to certify a check when requested. Its only obligation is to pay. The customer's instruction is sufficient reason for the bank's refusal. Vol. 5, p. 28, July, 1912. 11. (Pa.) A check made payable to a firm was brought to the bank by the firm's agent with the request that it be certified. The bank doubted the authority of the agent and refused to certify. Opinion: Certifica- tion is a matter of favor on the bank's part and cannot be claimed as a right. Vol. 4, p. 681, May, 1912. Certified checks post-dated 12. (Nev.) A bank certified a post- dated clieck before its date at the request of tlio iiolder. The bank questions its responsi- bility should it refuse another check not post-dated, which would have been good but for the certification of the post-dated check. Opinion: The bank has no right to pay or certify a post-dated check at the request of tlie holder, before its date and .so acts at its peril. Such certification at tiie request of the drawer is also held irregular, although in Idaho, it is held proper, if the funds are sufficient, when the amount becomes im- mediately chargeable to his account and pay- able to the holder irrespective of the date. Vol. 5, p. 750, May, 1913. 13. (Ark.) A check payable to A was post-dated December 1, 1912, and was certi- fied June 1, 1912, before its date. It was delivered to a trustee in escrow. The trustee in breach of the trust delivered it to A, who negotiated it to a purchaser for value four months after its date. Opinion: It might be held by the courts (1) that the irregular certification put the purchaser on inquiry, or (2) that the check was overdue when negotiated, so as to deprive the purchaser of the status of a bona fine holder. If such were held, the check in the hands of the purchaser would be subject to the same de- fenses as if held by the payee. Vol. 6, p. 210, Sept., 1913. 14. (Okla). A gave B a check post- dated. B wTote to the bank on which it was drawn, asking that payment be guaranteed. The cashier sent B a written guaranty that the check wiU be paid when due. Opinion : The cashier has no authority to certify a post- dated check before the due date and a holder taking with notice, cannot recover thereon from the bank. In this case B could not hold the bank upon its cashier's letter. Vol. 8, p. 322, Oct., 1915. See 180. Certification equivalent to acceptance 15. (N. H.) The Negotiable Instru- ments Law of New Hampshire requires that "an acceptance must be in writing" and further provides that "certification is equiva- lent to an acceptance." Vol. 4, p. 375, Dec, 1911. Certifying bank's liability to fraudulent holder 16. (Conn.) According to a New Jer- sey decision, a certifying bank can refuse ACCEPTANCE AXD CERTIFICATION 24 payment to a fraudulent holder where a check has been certified for the drawer, but cannot so refuse where the certification is for the holder. If this decision is sound law, there might be a desirability for separate certification stamps to indicate for whom the check was certified. An Ohio decision ignores this distinction and holds that a bank must pay fraudulent holder whether the check is certified for the drawer or for the holder. Vol. 5, p. 740, May, 1913. Drawer's liability on accepted draft 17. (Tex.) A draft was drawn by Smith and Company on Jones & Company at sixty days' sight and accepted by Jones & Com- pany. Opinion: The effect of the acceptance is not to discharge the drawer but to con- stitute the acceptor the principal debtor. In Texas, the liability of the drawer of an accepted draft is fixed by due protest and notice, or without protest, by suit against the acceptor as provided for by statute. Vol. 8, p. 326, Oct., 1915. Certification of forged checks See 21, 47 18. (111.) A bank certified checks bear- ing forgery of the payee's indorsement. The checks were purchased by another bank which received payment therefor. Opinion: The certifying bank does not warrant the gen- uineness of the pa5'ee's indorsement and is not responsible to the purchaser. If money is paid by the certifying bank thereon, it may be recovered. Vol. 5, p. 590, March, 1913. 19. (Kan.) A forged check was given in payment of a diamond ring. Before ac- cepting the check, the seller required a responsible indorser, and the latter before indorsing the check telephoned the bank which promised to pay the check. The bank did not pay the forged check. Opinion: The bank's promise to pay was not binding where the check was a forgery, as its promise related to a valid check; even in case of a valid check, the bank would not be bound because its promise was not in writing. Vol. 2, p. 153, Oct., 1909. 20. (Pa.) A bank certified its custom- er's check, wliich remained outstanding and which was claimed by the drawer to be forged. The bank doubted the fact of forgery and re- fused to reimburse its customer's account. Opinion: If the check remains outstanding the bank in a suit by the customer would be held liable for the amount of the deposit, for his positive testimony of the forgery would probably outweigh the presumption of genuineness arising from the fact of certifi- cation. Vol. 6, p. 576, Feb., 1914. Certification guarantees signature and sufficiency of funds 21. (N. J.) A bank certified a check payable to a specified person for a stranger who was not entitled 'to tivic instrument. The holder negotiated the check under a forged indorsement to an innocent purchaser for value. Opinion: The certifying bank binds itself that there are sufficient funds to pay the check and guarantees the genuine- ness of the drawer's signature. The bank is not responsible to the innocent purchaser because (1) it does not guarantee the gen- uineness of the payee's indorsement, and (2) it is not negligent in certifying a check for an unidentified person. Vol. 9, p. 582, Jan., 1917. Holder in due course 22. (Okla.) A check to drawer's order was certified for the drawer, who indorsed it to B. B cashed the item at the D bank. The drawer upon learning that B was guilty of fraud, stopped pa}'ment, and the certifying bank refused to pay the D bank. Opinion: D bank paid value to B for the certified check without notice of the fraud and as a holder in due course can recover from the certify- ing bank. Had B presented the check to the drawee some (but not all) authorities hold tluit the certifying bank could refuse payment and plead in defense the fraud upon its depositor. Vol. 6, p. 820, June, 1914. See 21, 55. Indorsement must be properly made See 42, 380 23. (Cal.) A check for $5,000 wa^^ presented at the drawee bank and payment was refused because tlie check was not in- dorsed. The presenting bank then indorsed the payee's name for the payee and again presented the thcck which was again refused. The holder demanded tliat the bank certify the check. Opinion: The drawee bank was under no obligation to the holder to certify the check. Its only obligation was to pay when dulv presented. Vol. 5, p. 311, Nov., 1912. 24. (N. Y.) A bank although in funds refused payment of a check because it lacked 25 DIGEST OF LEGAL OPINIONS tlic payee's indorsement. Later, when the check properly indorsed was presented, there were no funds to meet it. The holder claimed that drawee was liable for failure to certify the check in Ihe first instance. Opinion: The hank was not obliged to certify, but only to pay. Banks frcfiuently certify such checks "n^ood wlicn jiroperly indorsed," but do so })urelv out of accommodation. Vol. 2, p. 188, Nov., 1909. 25. (Pa.) A bank received through the mail a check drawn on one of its customers, but whicli was improperly indorsed. The bank returned the check for correction and in the meantime the customer reduced his ac- count so that check was not good. Opinion: The drawee bank is not liable to the holder for failure to certify the check before return- ing it for proper indorsement. Many banks do certify "good when properly indorsed" but the bank is under no obligation to certify a check. Vol. 7, p. 165, Sept., 1914. Immediately charging customer's account 26. (D. C.) A bank certified a check payable to a distant firm at the request of the holder who was its traveling salesman. Of this fact the depositor was ignorant. The depositor believing that the check could not be presented for several days, drew a second check, which overdrew^ the account because of the certification. He threatened suit for damages because of the bank's refusal to pay. Opinion: The bank had the right to certify the first check when presented by the holder and immediatelv charge same to the custom- er's account. Vol. 5, p. 170, Sept., 1912. See 55. Language expressing certification construed See 4, 35, 36 27. (Cal.) A bank in which A. Brown is a depositor sent the following telegram, "Check of A. Brown for five hundred dollars now good." Opinion: This telegram would not constitute a sufficient acceptance to bind the bank. It is not an absolute promise to pay, and there is an implication that the bank would not answer for B^o^^^l's check aft^r sending the wire. Vol. 9, p. 147, Aug., 1916. 28. (Ind.) The drawee of a check in answer to an inquiry by the holder replied over the telephone simply that the check was good. Notwithstanding a subsequent stop payment order, the check w^is paid. Opinion : Jn Indiana, where the Negotiable Instru- ments Law has not been enacted, oral accept- ances are valid. But it is doubtful if the mere oral answer that a check is good, so clearly indicates an- absolute promise to pay as to be binding as an acceptance. Vol. 3, p. 675, May, 1911. Note: Tlie Ncf^otiahle Instruments Law wliich requires acci'ptaiieeH to he in writing wae passed in Indiana in April, 1913. 29. (Mo.) A bank received a wire: "Will you pay check signed A, $335?" and replied by wire, "A's check good for amount." Opinion: The reply will be held an accept- ance binding the bank to })ay check to a bona fide liolder who has purchased same on faith thereof. Vol. 6, p. 33, July, 1913. 30. (N. M.) A check may be accepted by telegram which is a sufficient compliance with the statutory requirement that accept- ance must be in writing, but to be binding the telegram must clearly import an absolute promise to pay. Where a bank wired, "Will you pay A's check on you $100 ?" and the drawee wired reply, "A's check on us good for $100." Opinion: That the reply wire sufficiently imports an absolute promise to pay and is binding as an acceptance. Vol. 10, p. 527, Jan., 1918. 31. (N. Y.) In reply to a telegram ask- ing "Is John Smith good on your books for $50?" A bank answered by wire and con- firmed by letter as follows : "John Smith good on our books for $50 today." When the check reached the bank it was refused because the funds had been withdrawn. Opinion: The bank's wire confirmed by letter was not binding on the bank as an acceptance. It was not a promise but merely a statement of fact as to the condition of the customer's account on a given dav. Vol. 4. p. 680, Mav, 1912. 32. (Okla.) A bank before advancing value in reliance upon a telegram concern- ing some particular check should see that the answer by wire contains or imports an ab- solute and unequivocal promise to pay. For the wording of telegrams illustrating this point, see Vol. 3, p. 338, Dec, 1910. 33. (Okla.) A drew two checks of $303.40 and $75 respectively and had his bank wire the purchasing bank as follows: "We will honor Mr. A's draft for $400 this attached." Later A stopped payment and A's bank refused to pay the amount claiming that its acceptance was of a single draft of $400 and did not accept the particular checks of ACCEPTANCE AXD CERTIFICATIOX 41 amount less than $400. Opinion: The drawee is not bound to honor the two checks, as an agreement to pay a single draft of $400 would not bind the bank to pay two drafts of a lesser amount. Vol. 1, p. 367, April, 1909. 34. (Tex.) Bank A phoned Bank B saying that C wants to draw on Bank B and is informed that C has no credit with Bank B. Thereupon, Bank A reads a letter from C stating that he will be at Bank B's place before the draft reaches and will give security for the draft. Bank B replied, "let him draw draft then." Opinion: Although an oral acceptance is binding on the drawee in Texas, Bank B's promise should be construed as a conditional promise to pay after C docs what he says he Avill do, and wliere C lias not per- formed the condition, Bank B will not l)e liable. Vol. 4, p. 490, Feb., 1912. Note: The Negotiable Instruments Law re- quiring acceptances to be in writing was passed in Texas in March, 1919. Letters "O. K." as certification 35. (Ark.) Opinion: The letters "0. K." placed on check with signature of certifying oflficer constitute a certification equally as if "good"' were written, and if placed upon an overdraft, contrary to provisions of the National Bank Act, would subject officer to criminal penalty. Vol. G, p. 269, Oct., 1913. 36. (Cal.j The letters "0. K." were placed on a check by the Vice-President of the drawee bank over his signature, there be- ing no funds on deposit at the time to meet the check. Tlie understanding was that the maker of the check would deposit sufficient funds. Payment was refused. Opinion: The "0. K." of the Vice-President would constitute a certification provided the officer had power or authority to certify. Where tlio check was certified witliout funds, the bank is liable to the bona fide payee for value. Vol. 3, p. 587, April, 1911. Limitation as to time 37. (N. Y.) A l)ank ccrtiluation stamp bears the clause "good if presented within six months." Upon the supposition tliat the bank after the expiration of tlie six months repaid the funds to its depositor wlio claimed he had lost the certified check, and later the check was presented l)y a holder in due course, the bank inquires, first, as to the legal effect of such a clause and, second, would the inser- tion of the clause afford it better protection than if it was omitted. Opinion: In the ab- sence of judicial interpretation, the contract would probably be construed not as relieving the bank entirely from its promise to pay after six months, but as permitting the bank, if the check is afterwards presented, to plead any equities which it might have in defense of 'payment. Vol. 11, p. 484, March, 1919. 38. (Pa.) A bank uses a certification stamp which reads ''good if presented within five days" with a place and date of certification. It has adopted this form as protection against a possible form of fraud wherein the deposi- tor after issuing his check to a confederate who procures its certification, claims forgery and obtains the amount from the bank, after which the check is negotiated to a bona fide holder. The bank asks whether such condi- ti{»nal form of certification is valid and whether it could refuse payment if the check was presented after five days. Opinion: Such form of certification is valid and would seem to have utility in affording the desired protection. In a case where the bank cred- ited the money to the depositor after the ex- ]»iration of the period of certitication, it would be relieved from liability and whatever recourse the bona fide holder would have would be solely against the drawer. Vol. G, p. 576, Feb., 1915. Outstanding certified checks See 340 39. (Pa.) A bank certified a check pay- able to a corporation at the request of its cus- tomer. The check has been out>?tanding five years and never presented. Opinion: In Pennsylvania, the statute of limitations begins to run against the holder from the date of the bank's refusal to j>ay. The bank remains liable to pay the check until the statute comes to its relief. Vol. 5, p. 449, Jan., 1913. 40. (Pa.) The provision of the Nego- tiable Instruments Law that, where an instru- ment is jiayable on demand, jiresontation must be made within a reasonable time after its issue, has reference only to charging ])arties contingently liable. A \n\uk remai.is liable on an outstanding certified check until the statute of limitations comes to its relief, and such statute does not begin to run until pavment of the check has been demanded and refused. Vol. 5, p. 449, Jan., 1913. 41. (Pa.) A bank certified the check of its dejKisitor in favor of an attorney who acted as bondsman for the depositor. The check was lost and lias remained outstanding for ten years, and at the same time the do- 42 DICIEST OF LEGAL OPINIONS ])osit is not released. Opinion: The certified (;lu'(;k is not outlawed iu PLMinsylvania until six years after payment has l)('en demanded and the hank heforc payinj,' the amount of the deposit represented hy the lost certified check is entitled to satisfactory indemnity, or conclusive proof of its destruction. Vol. 7, p. 4i)0, Jan., 11)15. 42. (Mont.) A check to the drawer's order was certified for the drawer. The drawer delivered the check without indorsement to a third person at an auction sale hefore he be- gan bitlding. Through some misunderstand- ing the dealings fell through. On present- ment of the check by the holder, payment was refused by the drawee because it lacked the payee's indorsement. The check remains out- standing and the drawer wants the use of his money. Opinion: The drawee bank is not liable to the holder of the check, as one of the conditions of certification upon which the bank's obligations to pay depends, is that the check shall be indorsed by the drawer, who is also payee. To release his money, the drawer may bring replevin to recover the check, or he may give the bank satisfactory indemnity against the possibility that the check may thereafter be presented properly indorsed. Vol. 7, p. 165, Sept., 1914. Rule of twenty-four hours for acceptance 43. (Conn.) Opinion: The section of Negotiable Instruments Law allowing drawee twenty-four hours after presentment in which to decide whether or not he will accept, does not apply to sight drafts which, under the law, are payable on demand, and collect- ing bank is not obliged to hold twenty-four hours for convenience of drawee. Possible doubt created bv law can be cured bv amend- ment. Vol. 3, p. 82, Aug., 1910. 44. (Kan.) The rule allowing the drawee twenty-four hours to decide whether to accept is not applicable to checks or demand drafts, but only to drafts legally presentable for ac- ceptance. Vol. 6, p. 432, Dec, 1913. 45. (Miss.) The drawee of a bill of exchange is entitled to twenty-four hours after presentment in which to decide whether he will accept, and is entitled to have the bill left with him for that period ; but in the ab- sence of agreement, drawee is not entitled to documents of title att^ached to the draft, prior to acceptiince, and a collecting agent, unless expressly instructed, should withhold the at- tached documents upon leaving the draft with the drawee for acceptance. Vol. 9, p. 819, April, 1917. 46. (Tex.) The rule allowing a drawee twenty-four hours to determine whether or not he will accept does not apply to checks or drafts payable on demand, but only to drafts legally presentable to the tin- wife of A, dcposita money with a bank as collateral security on a note discounted by .\ for bis business. B wants the fund free from attachment and the bank advises her to indorse a certificate of deposit in blank and leave it with the bank accompanied by a letter stating the desired purpose. Opinion: A creditor of the hus- band would have no right to attc- longing to the wife specially pledged by her 15 128 DK!EST OF LEGAL OPINIONS as security for lior luishaiid's deljt. In Rhode Island a deposit represented l)y an outstand- ing nefifotiablc certificate is exempt from at- tachment; but the certificate itself is subject to seizure l)y cr18. Proceedings may be instituted before judgment 139. (Okla.) A customer overdrew his account in a bank and opened up a new ac- count in anotlier bank in Oklahoma. The creditor bank wishes to garnish the new ac- count. Opinion: The creditor bank should bring an action against its del)tor and after the action is brought, proceed at once by writ of garnishment against the otlier bank. Oarnishment proceedings may be instituted before judgment against the principal debtor under the laws of Oklahoma but the plaintiff nuist have judgment in the princijial action I)efore trial can be had in the garnishee ac- tion. A'ol. 5, p. TjI, :Mav, 1!I13. Property subject to garnishment 140. (Cal.) A bank rentiil a .safe de- posit box to a holder, giving him two keys and keeping a master key for all of the boxes held. A creditor of the box holder desires to attach the contents of the box. Opinion: The contents of the safe deposit box belong- ing to a box renter are subject to attachment, and according to the weight of more recent authority the bank may also be garnished for such contents. Vol. (i, p. 505, Jan., 1014. 141. (Idaho.) A savings account is sub- ject to garnishment, and it is doul)tful if the garnishee bank can require n-turn of the book, as it is the property of the dej)ositor and is not negotiable. The dilTerence between a negotiable certificate of dejiosit and a savings bank book with respect to attachment or gar- nishment proceedings is that in case of a ne- gotialde certificate the debt of the bank runs to the holder of the certificate and not to the oriirinal depositor. Vol. 10, j). 3S0, Nov., 1917. 142. (Mich.) An account rej)rescntcd by a savings i)aidv pass-book is subject to gar- nishment. Vol. 4, p. 21(), Oct., 1911. 143. (Mont.) In Mont-ana, where a bank is served with a writ of attachment of moneys owing its depositor, it is only liable for the amount of the balance to the credit of the depositor at the time the write is served. 17 144 Dir^KST OF LF/IAL OPIMOXS This rule also liolds in California, (^miiccli- cut, (jicorgia, Iowa, Kansas, iMaino, Michij^an, Minnesota, Texas and Wisconsin. The statutes in Alabama, Arkansas, Illinois, Maryland, Massachusetts, Missouri, New Hampshire, North Carolina, rcnnsylvania, Vermont, West Virulations in promissory notes providing for attorney's fees are against public policy, void and unenforce- able, and the Su])reme Court of Ohio has held that the provision of the Negotiable In- struments Act providing that buch stipula- tions do not all'ect negotial)ilitv, does not make them valid. Vol. 6, p. 759", May, 1914. 159. (Mich.) A note in Michigan con- tained the following provision: "I further agree to pay ten per cent, additional as at- torney fee, if this note is not jiaid when due, and is coll(>ited by or through an attorney at law." Opinion: Prior to tlic passage of the Negotiable Instruments Act in Michigan, the attorney fee provision was void and un- enforceable but under the Act which makes a note containing such a clause negotiable it has not been deciaiil non-assessable stock issued by a Mississip{)i bank at a time when the law provided for no double liability of stork- holders. Under the Mississippi Banking Act of March, 1914, .V has been assessed equal to the par value of his stock. Opinion: A's stock is subject to the assessment. Al- though the law under which the bank was or- 27 223 DIGEST OF TJOriAL OPIN'IOXS gaiiized provides no double liiil)ility of stock- holders, the k'^nslature may amend the law and create such liability where the state con- stitution, as in i\Iississipi)i, reserves power to the legislature to amend the law of incor- poration. Vol. 9, p. 145, Aug., I'JIG. 223. (N. J.) Section 23 of the Federal lieserve Act provides in part: "The stock- holders of every national banking association shall be held individually responsible for all contracts, debts and engagements of such association, each to the amount of his stock therein, at the par value thereof in addition to the amount invested in such stock." The question is raised as to the meaning of the underscored ])hrase; whether it means the price that is paid for the stock in the open market. Opinion: In event of failure, stock- holder loses the amount invested in the stock and in addition is liable for debts, pro rata with other stockholders, up to the amount of the par value of his stock. If the stock- holder has bought stock in an open market above par and thereafter the national bank goes into the hands of a receiver, he loses the amount invested in such stock, namely, the market price paid for it, and is also liable to assessment to the extent of the amount of his stock at the par value thereof. Vol. 11, p. 402, March, 1919. 224. (Utah.) A national bank held stock of the B national bank as security for a loan and bid in the stock, having it trans- ferred to its own name upon the books of the B bank. Thereafter B bank failed and A bank is charged with payment of the stat- utory assessment of 100 ])er cent. Opinion: The A bank is liable for the assessment. The fact that it became owner of the stock by necessity and not by choice would not change the result. Vol. 11, p. 438, Feb., 1919. Increase of national bank stock 225. (Del.) Where stock of national bank is increased by the vote of necessary number of shareholders, and resolution authorizing increase fixes premium at which new stock shall be sold. Opinion: The stockholder not participating or voting for increase has right to purchase his proportion of new shares at par. Vol. 5, p. 754, May, 1913. Inspection of books and records See 164 ct scj 226. (Pa.) A stockholder in a national bank is entitled to inspect the books of the corporation. In some states this right is ab- solute, while in other states such as Pennsyl- vania the law conditions the enforcement of the right upon the proper motive of the stock- holder. Vol. 7, ]). 090, March, 1915. 227. (Pa.) Opinion expressed that a depositor as distinguished from a stockholder has no such interest in the Ijank as would give him the right to inspect its books and records. The contrary statement in two early cases that on all proper occasions a de- ])ositor has a right to inspect the books of the bank is a mere expression of opinion, not having the force of law. If any right of in- spection exists in the depositor, it would at most be confined to his particular account and could not extend to the accounts of other customers or to the general business of the institution. Vol. 7, p. 578, Feb., 1915. Lien for stockholder's indebtedness 228. (Ark.) The stockholder of an Ar- kansas bank owed his bank on an overdraft but had transferred to another his stock, upon which the bank claimed a statutory lien. After the stockholder died the bank trans- ferred the stock to the purchaser but applied part of the dividends to payment of the over- draft and paid the balance of the dividends to the decedent's administrator. Opinion: By statute in Arkansas, a bank has a lien on the stock and dividends of its stockholder for an indebtedness to the bank, superior to the claim of the transferee. The transferee, however, can recover from the bank the bal- ance of dividends paid to the administrator in view of the due notice to the bank of the transfer of the stock. Vol. 5, p. 597, March, 1913. See 237, 238. 229. (Kan.) The Kansas Banking Law protects a bank against a transfer of bank stock so long as the registered holder is indebted to the bank, and provides that all dividends, interest or profit shall be retained by the bank and applied to the debt. The bank cannot sell the stock, unless authorized bv a court order granted in a proper case. Vol. 5, p. 518, Feb^, 1913. 230. (Md.) The stockholder of a na- tional bank owed the bank on several notes which matured after his death. The bank questions its right to claim a lien on its stock for the indebtedness or to refuse to transfer its stock to another upon the sale by the ex- ecutor. Opinion: The national bank has no lien and cannot refuse to transfer the stock should the executor see fit to sell it to an- other. Vol. 6, p. 100, Aug., 1913. 28 BANK STOCK AND STOCKHOLDERS [239 231. (Mich.) A national bank has no lien on its stock for the indebtedness of its stockholder. Where such stock is in the hands of a pledgee as security for a loan it is not subject to any claim of lien by the issuing bank. Vol. 7, p. 306, Nov., 1914. 232. (Mo.) A stockholder of a national bank borrows money of the bank without se- curity. When the note falls due, he fails to pay it. The bank asserts a lien on his stock for the indebtedness. Opinion: A national bank has no lien on its stock for the indebt- edness of a stockholder and cannot refuse to transfer his stock until the debt is paid. But it would seem that the national bank act would not prevent the bank attaching the shares for his indebtedness, where in posses- sion of the stockholder at the time of the at- tachment. Vol. 3, p. 401, Jan., 1911. 233. (Ohio.) By statute in Ohio, a bank has a lien on the stock owned by its debtors and may refuse to transfer the same mitil the indebtedness is satisfied. For Ohio de- cisions cited see Vol. 5, p. 753, May, 1913. 234. (N. Y.) The stockholder of a state bank in New York pledged his stock to a na- tional bank as collateral for a loan. The stockholder was indebted to his own bank. The national bank claimed the right to sell the stock to secure themselves, while the state bank claimed a prior lien on the stock pur- suant to a provision of its by-law giving it a secret lien. Opinion: The state bank has no lien on its stock and cannot refuse to transfer it. Section 51 of the Stock Corporation Law of New York gives a bank or other cor- poration a lien on its stock or right to refuse to transfer while the stockholder is in- debted to the bank, provided a copy of the section is printed on the certificate — where not so printed, a lien for indebtedness created by the by-law is not effectual against a pur- chaser of the stock for value without notice. Vol. 6, p. 370, Nov., 1913. 235. (N. Y.) A bank holds its stock- holder's note of $1,000. He has not paid his indebtedness and claims he has sold his cer- tificate of stock to a third person. The bank refused to transfer the stock until the note was paid. The certificate contains no pro- vision claiming a lien for the indebtedness of the stockholder. Opinion: Whore stock- holder indebted to state liank in New York has assigned his stock, bank may refuse trans- fer to assignee until stockholder's indebted- ness is paid, provided section of statute de- claring lien is printed on certificate; other- wise not. Vol. 10, p. 530, Jan., 1918. 236. (Pa.) A borrower pledged as col- lateral for a loan the stock of a national and of a state bank. The stockholder is indebted to the banks which claim a prior lien. Opin- ion: A national bank has no lien on the stock for the indebtedness of its stockholder, and in Pennsylvania there is a statutory prohibition (Act of 1901) of a lien by state banks. The Uniform Stock Transfer Act passed in Penn- sylvania in 1911 provides that no corporation shall have a lien upon its shares or restrict their transfer unless notice is imprinted on the certificate. It is doubtful if this would be construed as repealing the Act of 1901 prohibiting banks from acquiring liens upon their stock. Vol. 8. p. 14G, Aug., 1915. Right to dividends on pledged stock See 228 237. (Ga.) A loaned B $1,000 on 50 shares of the capital stock of X Company, due notice of the pledge having been given to the company. Dividends have accrued on the stock and are due and payable. Opinion: Dividends accruing on the pledged stock be- long to the pledgee, and the company after notice is liable to the pledgee therefor. If the company went into liquidation, A would be entitled to liquidation dividends. Vol. 5, p. 6G7, April, 1913. 238. (W. Va.) A bank held as collater- al certain stocks of a company indebted to the bank, upon which a dividend was de- clared. After the dividend was due and be- fore received by the bank, the funds of the pledgor with the company were attached by one of his creditors. Opinion: The bank had the right as unrecorded pledgee of the stock to the dividends declared thereon, as against an attaching creditor of the pledgor. Vol. 5, p. 520, Feb., 1913. Stock issued in name of partnership 239. (N. J.) Jolni Smith and Son, a partncrshiji, have l)Ought bank stock and re- quest that the certificate be issued under the firm name. The bank is uncertain as to whetber one of the firm under such issue could qualify to act as a director of the bank. Opinion: A certificate of bank stock may be issued to a firm in the firm name and a di- rector's qualification shares may be held by tlie partnership of which he is a member. Where a certificate of stock is issued in the name of a partnership, a valid transfer there- 29 240] DIGEST OF LEGAL OPINIONS of may 1)0 cxocutocl by any nionibor of tlie firm who is authorized to 8ip:n tlie firm name. Vol. 10. ]K TIC, April, 1!H8. Transfer of stock Rc<> 220, Li.it!, KiM, KH, i:i:t!) ct scq 240. (Ga.) A, tlic owner of a ctTiificatc of stock in a Georgia bank, pledged tlie same as security for a loan from B, who held his note for the amount. Afterwards the pledg- or obtained a new certificate of stock from the bank without returning the original certifi- cate. A defaults on his note and B tenders the original certificate to tlie bank, requesting the issue of a new certificate of stock. The bank refused on the ground that another cer- tificate had been issued to the original stock- holder. Oinnion: In issuing a new certifi- cate without surrender of the original, the bank took the risk of the original certificate being outstanding in the hands of a bona fide holder. The pledgee is entitled to damages against the bank for such refusal, being the amount of his loan and interest unless he has bought the stock in, in which case the meas- ure of damages is the value of the stock at the time of refusal to transfer. Vol. 11, p. 393, Jan., 1919. 24L (Va.) A Virginia bank purchased at a private sale ten shares of stock of an Ar- kansas bank which it had held as security for a loan to a stockholder of the latter bank. The Arkansas bank refused to transfer the stock thus sold, claiming that under the Ar- kansas statute the pledged stock was not registered in the county clerk's office as re- (juired by law. Opinion: Notwithstanding ])rovisions of Arkansas statutes that upon transfer of stock a certificate of transfer must be deposited w'ith county clerk, it has been decided that a pledge of stock is valid without such deposit and the statute is only applicable to transfers by the stockholder bv way of sale. Vol. 6, p. 213, Sept., 1!n .3. Voting See 225, 439, 440 242. (Iowa.) The pledgor of certain stock in a national bank became bankrupt. The trustee in bankruptcy claimed the right to vote the stock at the stockholders meeting. Opinion: The trustee had the right to vote the stock in the hands of the pledgee of the bankrupt, where the stock had not been trans- ferred to the pledgee on the books of the bank. Vol. 5, p. 378, Dec, 1912. 243. (N. Y.) It is a general rule of law that an executor has the right to vote with respect to the stock standing on the corpor- ate books in the name of the testator on ex- hibiting an exemplified copy of his letters testamentary. There is nothing in the na- tional bank act which restricts this right with respect to stock in a national bank. Vol. 7, p. 996, June, 1915. BILLS OF LADING For Attachment of Proceeds of B/L Draft, see 136 et seq; for Collection of B,^L Draft, see 367 et seq Acceptor's liability on b /I draft 244. (Miss.) The drawee of a draft with an attached bill of lading representing cotton accepted the draft before checking the invoice. Before the expiration of the three days of grace, the drawee discovered an error in the invoice and refused payment of the draft at maturity, whereupon the instrument was protested. Opinion: Under the Missis- sippi law (the Anti-Commercial statute) the acceptor of. the draft is not liable to a bona fide holder where it has a good defense against the drawer. Vol. 4, p. 613, April, 1912. Note: Under tlie Negotiable Instruments Act, which became a law in Mississippi in 1916, the acceptor would be liable. Recovery by drawee of money paid on non-negotiable b 1 draft 245. (Mich.) A draft was drawn pay- able "on arrival"' and provided that the "paid freight bill will be accepted as part payment." The drawer cashed the draft with the bill of lading attached at the bank, which forwarded the instrument for collection. The drawee paid the draft upon surrender of the bill of lading, but afterwards repudiated the trans- action and recovered the money from the col- lecting bank, claiming that the goods were bought on sample from the drawer and were not as represented. Opinion: The draft not being an unconditional order to pay money was not negotiable and the bank which pur- chased the draft was liable to refund where it 30 BILLS OF LADING 253 was shown that there was failure of consider- ation for the draft. Vol. 5, p. 519, Feb., 1913. Rights of attaching creditor of shipper See 13G et scq 246. (Cal.) A bank discounted and be- came owner of a draft with an attached order bill of lading representing prunes. The draft was paid by the consignee of the goods, but wliile the funds were in the hands of the collecting bank they were attached by a cred- itor of the shipper. Opinion: The purchas- ing bank has a right to the proceeds in the hands of the collecting bank superior to that of the attaching creditor. Vol. 4, p. 614, April, 1912. 247. (Me.) Where goods, shipped under an order bill of lading, are attached by a creditor of the shipper, the courts quite gen- erally hold that a bank to whom the bill has been pledged for value as security for ad- vances has a right to the property superior to that of an attaching creditor. Vol. 1, p. 203, Dec, 1908. 248. (N. Y.) A bank discounted a shipper's draft with an accompanying bill of lading representing hay, and credited the shipper with the amount. The drawee re- fused to pay the draft and attached the goods because of an alleged prior indebtedness of the shipper to him. Opinion: The bank was not simply collecting agent of the shipper but acquired special title to the hay superior to that of an attaching creditor of the shipper, even though the credit was not checked out. Vol. 3, p. 11, July, 1910. 249. (N. Y.) It is the undoubted rule of law that where a bank purchases or makes advances upon a draft, to which is attached a bill of lading as security, the purchasing bank takes a right to the property su])eri()r to that of an attaching creditor. Vol. 3, p. 11, July, 1910. Bank's liability for violation of instructions 250. (La.) A bank held a bill of lading to be delivered to the consignee after he had signed an attached agreement to buy a soda fountain. In violation of instructions from its principal, the bank as agent delivered the bill of lading without procuring the signature to the agreement. Opinion: The bank was liable to its principal for the damages suffered by reason of the violation of instructions, but if the principal was not rightfully entitled to have the agreement signed as a condition of delivery of the bill of lading and the im- posing of such condition was wrongful or fraudulent, the loss of opportunity on the part of the principal to drive an unconscion- able bargain would not be legitimate actual damage recoverable from the agent bank. A^ol. 5, p. 101, Aug., 1912. See 3G8. Liability for issuing bill of lading without receipt of goods 251. (111.) A bank purchased and col- lected of the drawee a bill of lading draft, given for goods to be shipped on the Wabash railroad. The goods were never delivered to the railroad and the consignors failed. The drawee sued the purchasing bank for money paid under a mistake of fact. Opin- ion: The purchasing bank was not liable to the drawee as warrantor of the accompany- ing bill of lading; but the drawee's remedy, if any, was against the railroad for issuing an accommodation bill of lading without the receipt of the goods. Vol. 2, p. 3 To, March, 1910. Consignor cannot change routing 252. (N. Y.) The consignor of goods having transferred an order bill of lading as security to a bank, has no right without the bank's consent to have the shipment di- verted en route, and it' the railroad obeys his instructions it would be liable in damages to the bank. In the case of a shipment from California to New York, if the bank sued the railroad for damages in converting and injuring the property, the law of the state where the injury occurred would govern ; but if the bank sued the railroad for breach of contract, the law of the state where the con- tract was made would govern. Vol. 3, p. 335, Dec, 1910. Shipper's indorsement supplied by collect- ing bank 253. (Ala.) The shipper's indorsement on an "urder notify'' bill of lading was sup- plied by a collecting bank in order to facili- tate the payment of the attached draft and the delivery of the goods to the consignee. Opinion: The collecting bank would incur no resjionsibility in supplying the indorse- ment where the transaction was bona fide and the bill of lading represented the actual goods, but might incur responsibility in the event of a forged or false bill of lading. Vol. 5, p. 313, Nov., 1912. 31 254 DIGEST OF LEGAi. OPINIONS Effect of absence of shipper's signature 254. (N. J.) 'I'lic ro(|iiiR'nu'iit of the siffiiatui'c (if tlu" sliii)i)('r, wlicre a l)lank is provided on the uniionn bills, is not a re- (luircnuMit of law but a rcconmiondation of the Iiitorslato Commerce Commission. It is a matter of practice, not of law, and the ab- sence of tiie shipper's signature does not ren- der the document invalid. Vol. 2, p. 37G, March, 1910. Uniform Bill of Lading Act relative to purchase and collection 255. (N. Y.) Tender Sections 37 and 39 of the Pomcrene bill (embodying the main features of the Uniform Bills of Lading Act), which has passed the United States Senate and is pending in the House 1. Where a bank purchases a draft witli an order bill of lading attached and assigns it with indorsement to a European bank for value, the bank guarantees the genuineness of the bill to the purchaser but 2. Where a bank forwards the draft with the attached bill of lading for collection from the drawee, the bank does not warrant the genuineness of the bill of lading to the payor. Vol. 5, p. 246, Nov., 1912. Note: The above bill became a law August 29, 1916, and took effect January 1, 1917. In the law as passed the sections above referred to are numbered .34 and 36 respectively. Rights of payor of draft where goods not according to contract See 252 256. (Minn.) A bank purchased a num- ber of drafts covering cars of hay with order bills of lading attached and forwarded the same to another bank for collection. The drawee paid the drafts but later attached the funds in the hands of the collecting bank, be- cause the goods were not according to the contract. Opinion: The purchasing bank had a right to the proceeds in the hands of the collecting bank as against the drawee. Vol. 5, p. 518, Feb., 1913. 257. (Colo.) A bank received payment of a draft with bill of lading attacTied for consignment of goods, in payment of pur- chase price. It later develops that the goods were not according to contract and the ques- tion is raised as to whether the receiving bank is liable as an agent of the seller guaranteeing performance of the contract, unless it dis- claims such warrantor liability by indorse- ment on the bill of lading. Opinion: The almost universal judicial rule in this country, now enacted in statutory form as to inter- state bills by Section 3(> of the Federal Bill of Lading Act is that a bank which purchases a draft witii bill of lading attached is not re- sponsible to the drawee who pays the draft for the genuineness of the bill or the quan- tity or quality of the goods therein described. There is no necessity of stamping on the draft an express disclaimer of such warrantor lial)ility except ])ossibly in the case of intra- state bills of lading in Mississippi. Vol. 11, p. 278, Nov., 191S. 258. (Ga.) A purchasing bank placed a rubber stamp indorsement on a draft with a bill of lading attached, whereby it dis- claimed liability as warrantor of the quan- tity, quality, and delivery of the goods affected. The bank questions the effect of such disclaimer. Opinion: Xo decision by a court of last resort has been rendered testing the effect of such disclaimer. It is almost the universal rule that the bank does not incur this warrantor liability and it would probably be held that the written disclaimer would be surplusage and would not give a bank any more protection than it already had. Vol. 1, p. 142, Oct., 1908. 259. (Mich.) A bank indorses a draft with a bill of lading attached, using its rubber stamp as follows: "By indorsing this draft or receiving a payment thereon we do not warrant the genuineness of the bill of lading attached, nor the quantity or quality of the goods therein. Bank Michigan." The bank asks whether this disclaimer of warrantor liability invalidates its title to the goods covered by the bill of lading. Opin- ion: Bank which purchases and collects draft to which bill of lading is attached as security holds a special title to the goods as pledgee which is divested upon payment of the draft, but does not warrant the quantity or qual- ity of the goods therein described. A dis- claimer of such warrantor liability, stamped upon a bill of lading draft is unnecessary, except probably in case of drafts drawn on Mississippi, where the warrantor doctrine still prevails; but if such disclaimer stamp is indorsed upon the draft, opinion expressed that it would not weaken the bank's special title in the security. Vol. 10, p. 713, April, 1918. 260. (Ohio.) It is almost universally held that a bank which purchases a draft with a bill of lading attached does not war- 32 BRAXCH BANKS 268 rant to the drawee who pays the draft the quantity and quality of the goods. An e;s- press disclaimer by the bank of such liability, where it is thought necessary to guard against a possible liability, should be placed on the draft rather than on the bill of lading and such stipulation would probably be binding on the drawee. Vol. 3, p. 277, Nov., 1910. BRANCH BANKS Presentment and payment of checks 261. (Ala.) The drawer of a check on his deposit in a brancli bank can stop pay- ment thereof after the check has been pur- chased by the parent bank but before it has been presented at the branch bank, and the parent bank is not a payor of the check but a holder in due course, entitled to enforce payment against the drawer and prior in- dorsers. Vol. 9, p. 905, May, 1917. 262. (Ga.) In the city of C, there is the "Bank of C" and also a branch located in a different part of the cit}^ known as the "Bank of C Home Savings Branch." A check drawn on the branch was presented for payment at the parent bank. Opinion: The presentment of the check was not sufficient and therefore would be no basis for a pro- test. In case of a check dra^\^l on the parent bank and presented at that bank where pay- ment was refused although the drawer had all his funds in the branch, the bank would not be responsible for damages. While the branches of a bank are agencies and not dis- tinct banks, the courts recognize that for cer- tain purposes, including the presentment and payment of checks, the dilferent branches are to be regarded as distinct. Vol. 4, p. 552, March, 1912. 263. (S. C.) A clieck drawn by a cus- tomer of a brancli bank upon sucli l)ranch bank against funds deposited therein is pay- able only by the branch upon which drawn and not by the parent bank. Presentment at the parent bank would not be sufficient presentment and would not justify a pro- test. Vol. 7, p. 169, Sept., 1914. Presentment and payment of note 264. (Mich.) A note for $500 was made payable at a designated branch office of a bank. The notary presented the note at the main office and the item was protested for non-payment. The indorser claims non-lia- bility. Opinion: Presentment for payment at the main office of the bank was not suffi- cient to hold the indorser. Vol. 4, p. 305, Nov., 1911. Right to establish branches 265. (Mass.) Under the present Fed- eral law, national banks are not permitted to establish branches, either in or outside of the city in which they are located. Under the ^lassachusetts law a savings bank can es- tablish branches for deposit only within a certain area and under certain restrictions. A'ol. 8, p. 1102, June, 191G. XoTE: Section 25 of the Federal Reserve Act authorizes national banks liaviiii,' cajiilal of .51. 0(10, 000 or more, Jipon j)ornii-;si()ii d for })a}meiit at a l)ank by a bona fide liolder after tbo payee's death. Opinion: that the l)ank should pay such certideate. The case dilfers from that of a clieck, in which the death of the drawer revokes the authority of the bank to pay, in the absence of statute expressly authorizing post mortem ])ayment. A'ol. -i/p. G85, May, 1913. 270. (Miss.) A bank should pay a ne- gotiable certificate of deposit to a bona fide indorsee of the payee, although not presented until after the pavce's death. Vol. G, p. 274, Oct., WU. Payable "in current funds" See 125 271. (Ind.) A certificate of deposit pay- able '"in current funds" is not negotiable in Indiana. The decisions of other states con- flict upon this proposition. Vol. 3, p. 468, Feb., 1911. 272. (Minn.) The original owner of a certificate of deposit payable "in current funds" was held up by a thief and forced to indorse and part with the certificate. The thief negotiated it to an innocent purchaser for value. In the meantime the issuing bank was notified to stop payment. Opinion: According to a Minnesota decision, the certi- ficate is negotiable, and for that reason the innocent holder is protected as against the original owner. Vol. 2, p. 20, Jul}^, 1909. Rights of innocent purchaser 273. (Pa.) A bank issued a negotiable certificate of deposit for $500 to one of its depositors in exchange for her check on the same bank for $500, which, as it turned out, was an overdraft of $100. The bank seeks to know if it can refuse payment in case the certificate should come to it through an inno- cent purchaser. Opinion: So long as the certificate remains in the depositor's hands or is presented by her in person, the bank has the right to withhold papnent of the excess over $400. But if the certificate had been negotiated. to a holder in due course the bank would be liable for the full amount and would have to look to the depositor for the over- draft. Vol. 9, p. 750, March, 1917. • 274. (Wash.) A bank issued a nego- tiable demand certificate to a depositor against deposit of his check upon another bank. Four days later the bank over the long distance telej)liono, uj)on depositor's re- <{uest, advised tiiat the certificate could be cashed 0. K., as the dcpositele, it is prol)- able that it would have a right to recover the excess from the bank receiving payment. Vol. G, p. 685, April, 1914. 365. (S. C.) A bank refused to pay its customer's check, which was written for "two dollars" but which contained the marginal figures of "$200," the credit balance of the customer being $190. The drawer threat- ened to sue the bank, although the latter had tendered the $2 to the holder on the same day the check was presented, which tender was refused by request of the drawer. Opinion: AAHiere there is a discrepancy between the words and figures, the words control, but the court may justify the bank's refusal to honor the check because the figures are an index of the sum payable in the body and contributed to mislead the bank. Nominal damages at" most might be awarded the cus- tomer. Vol. 6, p. 757, May, 1914. 366. (Wyo.) A check was presented for payment in which the figures read $181.50 and the body of the check read One Eighty One and 50-100, the hundred being omitted. Opinion: It would be safe for a bank to pay $181.50, because where the words are ambiguous, reference may be had to the figures. Vol. 4, p. 426, Jan.', 1912. COLLECTION Bill of lading draft See 136 et seq, 247, 254 367. (La.) A bank through error mailed a draft and an indorsed order bill of lading to the consignee. The consignee ob- tained the goods upon the bill of lading w'ith- out paying for the draft. Opinion: The bank is liable to its customer for the amount of the draft on the ground of negligence. Vol. 4, p. 556, March, 1912. 368. (N. Y.) A bank received from a firm for collection a draft with a bill of lading for a motor cycle attached. The firm by letter agreed with its customer that the ma- chine would be shipped subject to examina- tion, but the bill of lading was silent on this point. KnoAving that this condition ex- isted, the bank on receipt of the customer's deposit for the amount of the draft surrend- ered the bill of lading. The customer pre- sented the bill of lading, received and tried the machine, but being dissatisfied there- with returned it to the freight office and received a new bill of lading. This he at- tached to the draft and returning same to the bank was repaid his deposit. The firm lost the sale. Opinion: The collecting bank is not liable for any neglect of duty. It had, in the absence of contrary instructions, a right to rely on the letter of the firm permit- ting inspection as evidencing the agreement between seller and prospective buyer, and to construe this permission as extendmg to an actual test and for that purpose to surrender the bill of lading, safeguarding its principal by requiring a conditional deposit to be re- funded if the machine proved unsatisfactory. 46 COLLECTION 375 Such deposit was not a payment of the pur- chase price, the surrender of which would have made the bank responsible. Vol. 5, p. 101, Aug., 1U12. See 250. 369. (Tex.) A bank receives for col- lection a draft to which is attached a bill of lading which allows inspection. The car has not yet arrived. The bank questions whether it shall hold for arrival of car or protest im- mediately. Opinion: The better practice is to hold the draft for a reasonable time before presentment to permit of arrival and inspec- tion. Vol. 4, p. 557, March, 1912. Circuitous routing 370. (Mont.) A city in southern Mon- tana is a conmiercial center for points along two forks of a railroad running from there south into Wyoming. A bank at the south- ern end of one of these forks holds a check on a town along the same line, a little distance to the north. Instead of sending direct to the town of the drawee, the check is for- Avardcd to the central clearing point in south- ern Montana. The question arises whether this is reasonable diligence. Opinion: Such circuitous method of presentment, although declared negligent in some early cases, has been held reasonable diligence by one court under the Negotiable Instruments Act. A special state statute legalizing the customary mode of presentment through bank corres- pondents is desirable in the interest of cer- tainty. Vol. 2, p. 105, Sept., 1909. 371. (Pa.) ^Yhe^e a bank in Baltimore, holding for collection a check on an interior city in Pennsylvania, mails same to its Pitts- burgh correspondent and the latter after making the collection defaults as to the pro- ceeds, the routing through Pittsburgh instead of direct to an agent in the city of the drawee is not negligent. Vol. 6, p. 209, Sept., 1913. 372. (S. Dak.) A bank in South Da- kota receives from the payee a check drawn on a bank eighteen miles distant. Instead of forwarding direct to a bank in the drawee's town, the collecting bank mails the check to its Chicago correspondent and it reaches the drawee by a circuitous route. Payment was refused and the notice of dishonor docs not reach the payee until live days after the payee delivered the check. Did the collecting l)ank exercise due diligence? Opinion: Under the state statute which defines due diligence in making collections, the collecting bank did in this case exercise due diligence in adopting such method of presentment. The payee is responsible as indorser. Vol. 3, p. 144, Sept., 1910. Selection of correspondent 373. (Ind.) A check drawn by B on a bank in South Dakota was deposited by the payee M in an Indiana bank, and was for- warded to a Louisville, Kentucky bank, thence to a Chicago bank, thence to a central South Dakota bank, which forwarded it to another South Dakota bank at the place of the drawee. The drawee paid the check and charged it to the accoimt of the drawer and the collecting South Dakota bank remitted therefor by its draft, which was not paid be- cause of the failure of such bank. Opinion: In case of loss, it would fall upon the payee j\I, the owner of the check, and not upon any of the banks which handled the check for col- lection. The authorities of Indiana, Ken- tucky, Illinois and South Dakota hold that the collecting bank is not responsible, pro- vided it uses due diligence in selecting a suit- able correspondent. In South Dakota the payee M would have a preferred claim against the receiver. Vol. 4, p. 554, March, 1912. 374. (Miss.) In ^Mississippi the bank undertaking the collection of paper merely undertakes to use due care in selecting a sub- agent and in transmitting the paper, and is not responsible for the defaults of corres- pondents, if duly selected, who arc not its agents but the sub-agents of the owner of the paper. Vol. 6, p. 90, Aug., 1913. 375. (Wis.) An item is entrusted for collection by bank No. 1 to bank No. 2 and by the latter to bank No. 3, and there is a loss caused by the negligence of bank No. 3. The question is asked whether bank No. 1 can hold bank No. 2, which has not been neg- ligent, or must look to bank No. 3 with which it has had no direct dealings. Opinion: In some states a l)ank undertaking a distant col- lection is an independent contractor liable for the defaults of the correspondents wliom it selects, unless such liability is changed by agreement, while in other states, including Wisconsin, such bank merely undertakes to use due care in selecting a sub-agent and in transmitting the paper, and is not responsible for the acts or defaults of the latter. In Wisconsin bank No. 1 would have to look di- rectly to l)ank No. 3, which under such rule is its sub-agent. It is quite customary for banks in states where tlie rule first stated prevails, to change tiieir legal liability in this regard by notices or contracts printed on their literature to the effect that in receiving out- 47 376 DIGEST OF LE(JAL OPINIONS of-to\vn items they act as a^ent only and dis- (;laiin iesponsil)ility for acts and defaults of correspondents wliere didy sele(;ted. Vol. 11, p. (;:;}, June, i!)r.>. Liability for default of correspondent 376. (Ala.) A l)ank in Alabama casliiM' for its customer a draft drawn on a hank in Florida and forwarded the item to A, its cor- respondent, for collection. A forwarded to its correspondent hank B, which collected from the drawee and failed before its draft in remittance could he paid. Opinion: Bank A, whether located in Alabama or Florida (the location not being given), is not respon- sible for the default of Jiank B, provided B is a duly selected correspondent, because under the law of both states a collecting bank is not responsible for the default of sub- agents. If the Alabama bank received the check as agent for collection, it can charge the amount back to its customer's account. The authorities conflict on the question whetlier the holder of B's dishonored draft in remittance has a preferred claim against B's receiver. Vol. 7, p. 218, Oct., 1914. 377. (Conn.) A bank in Connecticut received as collecting agent a check on a bank in Tennessee, which it forwarded to its cor- respondent, a Philadelphia bank. The cor- respondent in turn forwarded the item to its correspondent, the C bank, which collected from the drawee. Afterwards the C bank failed and its draft in favor of the Philadel- phia bank Avas protested. Opinion: In Penn- sylvania and Connecticut the collecting bank is not liable for the correspondent's default, if duly selected. The owner of the check probably has a preferred claim against the failed bank. Vol. 6, p. 685, April, 1914. 378. (Miss.) A bank in Mississippi re- ceived for collection a check drawn on a bank in Louisiana. The check was sent to the Bank of C of New Orleans, which in turn sent the item to the bank of D. The bank of D failed after it had collected of the drawee. Opinion: Under the Mississippi law the Miss- issippi bank, taking the check not as owner but as a collecting agent, is not responsible for the loss occasioned by the failure of the D bank, and it can charge its depositors ac- count. Under the Louisiana law the depos- itor can collect from the C bank, wdiich is liable for the default of its correspondent, the D bank. Vol. 6, p. 433, Dec, 1913. 379. (N. J.) The bank of A in New Jersey received for collection a clieck drawn on a bank in Arkansas. The check was sent to B bank of Philadelphia, which in turn sent it to its correspondent in St. Louis. The St. Louis bank forwarded it to tiie bank of C, which collected the amount of the drawee and later failed. Opinion: In New Jersey the hanlv of A is liable for default of corres- ])ond('nt. As no such liability exists in Pennsylvania and Missouri, the sole redress of the bank of A is against the failed bank. Vol. 6, p. 511, Jan., 1914. 380. (N. M.) A bank receiving a check for collection forwarded the same to its cor- respondent, the X bank of El Paso, Texas. The Texas bank forwarded the item to its correspondent, which collected from the drawee and failed before remitting. Opin- ion: In Texas tlie El Paso bank is liable for the default of its correspondent, in the ab- sence of an agreement relieving it from such liability. In no event is the drawee which paid the check responsible. Decisions of other states conflict. Vol. 4, p. 554, March, 1912. 381. (Okla.) A check drawn on the H bank of Texas was deposited by the payee in an Oklahoma bank and was forwarded to the M bank of Texas, thence to the F bank of Texas, thence to the C bank of Texas, which forwarded it to another Texas bank at the place of the drawee. The drawee paid the check and charged the account of the drawer, and the collecting Texas bank remitted there- for its draft, but failed while the said draft was in transit. Opinion: Under the Texas decisions a bank is liable for the default of its correspondent and the loss would fall upon the C bank, unless it had protected itself from such default by an agreement. Assuming all of the Texas banks were thus protected, the question of responsibility for the loss would arise between the Oklahoma bank and the pa3-ee. Until the Oklahoma courts adopt either the rule that the collecting bank is liable for correspondents' defaults, or not liable if a suitable correspondent is selected, the question is uncertain. Vol. 4, p. G12, April, 1912. 382. (Tex.) A bank in Texas received from its customer an out-of-town check for collection. The check was forwarded by it to a bank in Fort \Yorth, Texas, and by it to the E bank which in turn presented the in- strument and received payment from the drawee. Before remitting the proceeds to the Fort Worth bank the E bank failed. On whom should the loss fall? Opinion: Lender the law of Texas, a bank receiving an out-of- 48 COLLECTION 389 town check for collection is an independent contractor and is liable to its principal for the defaults of subsequent banks to whom the item is forwarded, unless, by stipulation, it relieves itself from such liability. Vol. 10, p. 47, July, 1917. 383. (Tex.) In Texas a bank receiving a draft for collection at a distant point is re- sponsible for the default of the correspond- ent. Said collecting bank is treated as an independent contractor and the subsequent agents as its own and not the sub-agents of the owner. Vol. 5, p. 379, Dec, 1912. Disclaimer of liability for negligence See 399 384. (Mo.) The validity of an agree- ment, contained on a credit advice card and remittance letter, that "when instructions to the contrary are not given, items may be sent to the banks upon which they are drawn" as relieving the sending bank from respon- sibility for loss through the failure of the drawee presents an unsettled question upon which the courts take different views. Vol. 4, p. 432, Jan., 1912. Note: The Missouri legislature in 1919 passed a law providing that the forwarding of items direct to the payor shall be deemed due diligence. 385. (Ore.) A bank submits a form of agreement to be signed by depositors, author- izing the collecting bank to mail checks direct to the drawee where there is only one bank in the place. The agreement is as follows : "Astoria, Oregon To the First National Bank of Astoria : Having deposited with you a check drawn by on at for $ , and there being no other bank in the said town to which you can send this cheek for collection, you are instructed to send it direct to the bank on which it is drawn, and I assume all responsibility for any failure on your part to receive full and final payment from the said bank, either by failure of said bank to make returns or by the return of a draft which you are unable to collect." Opinion: In view of the numer- ous decisions which hold sending to the drawee negligent, such agreement might possibly be held to contravene public policy as a stipulation by the bank to be relieved of its own negligence, but this would be an ex- treme position in view of the fact that some courts justify such method of collection and the agreement would probably be held valid. Vol. 2, p. 108, Sept., 1909. XoTE: Tlie Oregon legi>latur.' in 1919 passed a law providing tiiat the forwarding of items direct to tlie i)ayor sliall be deemed due diligence . Duty of collecting bank S.-e 1097, 1118, 1119 386. (Ala.) A bank received for collec- tion a check on which payment was refused because not properly indorsed. The bank returned the check for correction and in- quired as to its liability for failure to request certification, should the check afterwards be protested for lack of sufficient funds. Opin- ion: It is not unlikely that the courts might hold that due diligence requires that the collecting bank request certification before returning the check for correction, for such would seem the action a discreet person would take in his own interest in an attempt to insure ultimate payment. Although the pa^'or bank is not obliged to certify, certifica- tion in such case is a common practice. The courts have not yet passed upon the precise question whether it is the duty of a collecting bank to request certification of an improperly indorsed check before returning same for cor- rection. Vol. 7, p. 33, July, 1914. 387. (Cal.) A check drawn by A in favor of himself but not bearing his in- dorsement, was forwarded by B bank to a correspondent bank, which returned the item to B bank for indorsement, without first forwarding for payment by the drawee. Opinion: The action of the bank as collection agent was proper. Vol. 5, ]i. 100, Aug., 1912. 388. (Conn.) Bank A received a time draft drawn on a party in the same state. The item was forwarded to its correspondent Bank B, which in turn forwarded it to its cor- respondent Bank C, located in the same place as the drawee. Bank C held the draft fifteen days without presenting it for acceptance, but l)rescnted it for payment at maturity, when j)ayment was refused. Opinion: The collect- ing bank must present a time draft for accep- tance when received and is negligent if it waits until maturitv and merelv presents the draft for pavment". Vol. 8, p. 708. Feb., 1916. 389. (Kan.) A collecting bank for- warded a siglit draft delivered in Kansas upon a bank in Missouri to its correspondent, whicli ]>rcsented the same to the drawee. In the meantime the drawer hurried home and stopped })ayment and the draft was protested and returned. Opinion: The l)ank used due diligence when it forwarded the draft in the usual course, and its customer has no reason 49 390 DIGEST OF LECJAL Oi'lMOXS lo C()mi>laiii. In tlic nhsoiice of some special reason or instruction given the collecting hank, it was not inciuni)ent iii)on it in the ex- ercise of due diligence to attempt to ])rocure acceptance hy telegram. Vol. 4, p. 555, March, 1912. 390. (N. M.) A Texas hank receiving a note for collection forwarded it to a hank in Utah, with specific instructions to have tlie instrument collected hy that hank's attorney. The Utah hank held the note for four months hefore returning the same uncollected. 0pm- ion: The Utah hank, having undertaken the collection, must use reasouahle diligence, and its retention of the note for four months without advising the Texas hank is itself a negligent act. If it can he proved that the del)tor could have heen forced to pay by ])rompt action, but has since become insolvent, the Utah bank is liable for the amount of damages proved. Vol. 8, p. 911, April, 1916. Express company as collecting agent 391. (Ala.) A collecting bank forwards items by express for collection wdiich it has been instructed to have protested in the event of non-payment ; the bank knows that the ex- press company does not undertake to have the items protested. Opinion: The company is not a suitable agent for collection of protest- able items and the bank is negligent in select- ing such agent. Vol. 4, p. 218, Oct., 1911. 392. (Tenn.) The Interstate Commerce Commission has not ruled that express com- panies have no right to make collections. A drawer has a right to insert words in his check restricting the collection through specified channels, as for example "Not valid if paid through the Y Express Company." Vol. 3, p. 674, May, 1911. See 325, 326, 327. Following instructions 393. (Ala.) Where a bank holds for col- lection checks upon itself without a deposit against the same and receives a specific de- posit from its customer to he paid upon a later described check, its duty is to obey the instructions and in so doing it incurs no lia- bility to the owners of the checks which it holds for collection. Where several checks are received any one of which would be an overdraft, the bank if it chooses can pay an overdraft and apply a future deposit thereto. Vol. 8, p. 909, April, 1916. 394. (Cal.) A bank in California for- warded to another bank in the same state a note payable in Iowa, which had matured nearly ten years previously, with instructions lo collect, obtain a new note, or place in the hands of an attorney, and failing in any of the foregoing, to return the note within ten days of its receipt. The collecting bank undertook the collection hut neglected to follow the instructions, and returned the note after it became outlawed, to the owner's dam- age. Opinion: The bank is liable for such damages as were caused by its neglect of duty. The owner lost his remedy at law and his prima facie damages are the full amount of the note. Vol. 5, p. 664, April, 1913. 395. (Kan.) A bank forwarded to its correspondent a draft with the following in- structions : "This item is payable on presenta- tion and is not to be held for arrival of goods, for the convenience of the drawee or for any other reason. If not paid on presentation protest and return immediately, advising by telegraph. Our customer will hold the col- lecting bank strictly accountable for failure to follow the foregoing instructions." The item was properly protested and handled in accordance with instructions, except that the bank failed to wire the protest. Had the sending bank paid out money in the trans- action, would the collecting bank have been liable ? Opinion : A bank acting as agent for collection is under duty to follow special in- structions with regard to the collection and for any neglect to follow instructions, from which damage results, it will be liable to its principal. Vol. 11, p. 166, Sept., 1918. 396. (Pa.) A bank received three in- dorsed notes for collection w4th instructions to protest if not paid, and upon learning that renewals had been forwarded, returned the notes to its principal without protesting or taking steps to hold indorsers. The renewals were not received by the principal, and would have been unacceptable if received, as upon non-payment the principal intended to bring suit against the maker and indorsers. Opin- ion: The collecting bank is liable to its prin- cipal for any loss sustained because of viola- tion of instructions. Vol. 5, p. 100, Aug., 1912. 397. (Tex.) A draft is marked "no pro- test," but the letter of instructions reads "protest all items $10 and over unless marked X," and there is no X marked on the letter opposite the listed item. Opinion : It is safer for the collecting bank to be governed by the letter of instructions, as they are the instruc- tions from the immediate principal. Vol. 4. p. 556, March, 1912. 60 COLLECTIOX 405 Forwarding paper direct to drawee Note: A bill recommended by the American Bankers Association which provides that the for- warding of an item by a bank directly to the payor shall be deemed due diligence and the fail- ure of the payor bank to account for the proceeds, shall not render the forwarding bank liable, provided it has used due diligence in other respects, became law in 191!) in the following states: Michigan, Minnesota, iiissouri, Nevada, New Mexico, North Carolina, Ohio, Oregon, South Dakota. A similar law was passed in Louisiana in 1916 and in Montana in 1917. 398. (Ark.) A New York Itank sent a check on the State Bank of G., Arkansas, to a bank at H., Arkansas, which sent it to a Little Rock bank. The latter sent it to its Kansas City correspondent and the Kansas City bank sent the check direct to the drawee, receiving St. Louis exchange which was not paid because of the failure of the G bank drawee. Opinion: The Kansas City corres- pondent was negligent in mailing the check direct to the drawee and is responsible if the loss is a result of this negligence. If, how- ever, it can prove the check would not have been paid if payment had been demanded by an independent agent, it might escape liabil- ity, for although negligent, no loss would have resulted therefrom. Assuming the non-liabil- ity of the Kansas City bank, the question of negligence of the Little liock bank, and lia- bility if loss resulted therefrom, depends upon v.'hether the requirement of presentment with- in a reasonalile time was violated by the cir- cuitous method of forwarding, upon which question the courts differ. Vol. 4, p. 494, Feb., 1912. 399. (Ga.) A customer deposited for collection a check drawn on a Texas bank. The collecting bank mailed the item direct to the drawee and failed to hoar from the same for over two years, during which time the drawee's name disappeared from the bank directory. Depositor did not sign deposit slip relieving bank from responsibility for losses in the mail. Opinion: The collecting bank was negligent and is liable to its cus- tomer for the loss resulting. The sending of the check direct to the drawee was a negli- gent act and the presumption is the check was received by the drawee and not remitted for. But, assuming loss in mail, the failure to promptly trace was negligence, and even if depositor signed slip this would not relieve the bank from the consequences of its own negligence. Vol, 4, p. 154, Sept., 1911. 400. (111.) A bank in Illinois received for collection certain checks which it for- warded direct to the drawee, the only bank in the place. The drawee remitted a draft in payment, which was protested because of the drawee's failure. Opinion: The sending of the checks direct to the drawee, unless jus- tified by custom, is such negligence as will render the Illinois bank liable, whether it took the paper as owner or as collecting agent. As holder of the protested draft, it has no preferred claim against the failed bank. Vol. G, p. G28, March, 1914. 401. (La.) ]\railing a check direct to the drawee is held an act of negligence in Texas and other states, and if loss results the sending bank is liable. Vol. 2, p. 19, Julv, 1909. 402. (Miss.) A bank sent a check re- ceived for collection direct to the drawee. The collecting bank received in payment the drawee's draft, which was protested because of the hitter's failure. Opinion: Sending check direct to drawee is negligent and send- ing bank is liable for resultant loss. Vol. 6, p. 686, April, 1914. 403. (Mont,) The payee of a check de- posited it in a bank for collection and the bank mailed it to a correspondent, which latter bank mailed check directly to tlie drawee. After charging the amount to the drawer, the drawee failed without remitting to the correspondent. Opinion: The drawer is discharged, the payee is relieved from re- sponsil)ility and the correspondent of the first bank is responsible because of mailing the check direct to the drawee. Vol. 4, p, 2 IT, Oct., 1!)11. 404. (N. Y.) A bank in Cleveland, to whom a check had been forwarded for collec- tion, mailed the item direct to tiie drawee in Ohio, which hold it ten days and then re- turned it un})aid and unprotested because the drawee had failed. Opinion: The drawer is discliargod to the extent of the loss caused by tiie delay and the Cleveland bank is respon- sible for its negligence. Vol, 6, p, 275, Oct., 1913. 405. (N, M.) A draft on a bank at Clovis, New ^lexico, was deposited in a bank at Las Vegas, forwarded to a bank at Kl Paso, Texas, from thence to a bank at Tu- cunuari, New Mexico, and I)y the latter for- warded by niai! direct to the drawee I)ank at Clovis. The Clovis bank paid the same bv its own draft, wiiich was dishonored because of the bank's failure. Opinion: The collect- ing bank mailing the check direct to the drawee and taking the worthless draft in pay- 51 400 DIGEST OF LEGAL OPINIONS raciit is resj)oiisible for the loss. Vol. G, p. 35, July, 11)13. 406. (Okla.) Tlic majority of courts hold that mailing a clicck direct to the drawee is imi)roi)or, even though the drawee is the only bank in the place. There is need of legislation defining due diligence in the pre- sentment and collection of distant items in accordance with legitimate banking customs. Vol. 2, p. 73, Aug., 1909. 407. (Pa.) A collecting bank which sends a check direct to the drawee for pay- ment does not use due diligence and is liable for any loss resulting. Vol. 6, p. 820, June, 1911. 408. (Pa.) A bank receiving for collec- tion a check forwarded the same direct to the drawee and not to its correspondent, for the purpose of facilitating collection. The drawee failed before its draft in payment could be collected. Opinion: Sending check to drawee is negligent and the collecting bank is liable if loss results therefrom. Vol. 6, p. 208, Sept., 1913. 409. (Tex.) A customer deposited for collection a check which was forwarded by mail by a correspondent bank in Dallas to the drawee bank, being the only bank in the place. The drawee sent the Dallas bank its draft, but in the meantime failed. Opinion: Assuming a custom can be proved of sending a check to the drawee where the only bank in the place, the Texas courts will probably hold the Dallas bank free from negligence, and the customer would have to look solely to the assets of the drawee. Vol. 6, p. 34, July, 1913. Insolvency of collecting bank 410. (Ala.) A check was forwarded ''for collection and returns" and the collecting bank failed after making the collection. Opinion: The proceeds in the hands of the failed bank are recoverable as a trust fund provided their identity can be traced. ^Yhe^e a failed bank in Alabama is not a trustee but a debtor for collection proceeds, a creditor, unless he is a depositor, is subordinated to claims upon non-interest bearing deposits. Vol. 8, p. 40, July, 1915. 411. (Del.) A bank in Delaware re- ceived from its customer ''subject to final payment" a check drawn on a trust company in North Carolina, The check was for- warded to a Baltimore correspondent, thence to a bank in the same place as the drawee, which collected from the drawee and failed two d'Axs later without remitting. Opinion: The amount is chargeable back by the Bal- timore bank to tlie Delaware bank, and by the latter to its customer, who, however, has a claim upon the receiver of tlie failed bank for the full proceeds as a trust fund. Under the law of Maryland a collecting bank is not liable for its correspondent's defaults, and this would relieve tlic Baltimore Ijank. In Del- aware, the point is not decided, but the credit of the check "subject to final payment" would relieve the Delaware bank. Vol. 9, p. 49, July, 1916. 412. (Fla.) A check drawn on a Florida bank is cashed in Kansas City, is forwarded through the mail and the proceeds remitted by the drawee to the last collecting bank, w^hich fails before itself remitting. The Kansas City bank seeks to recover from the drawer. Opinion: When the proceeds w^ere remitted by the drawee to the collecting bank, this constituted payment which discharged the drawer. The owner bank in Kansas City which first cashed the check, would, therefore, have no recourse upon the drawer but must look to the assets of the failed bank for reim- bursement. Vol. 9, p. 828, April, 1917. 413. (Kan.) A customer shipped a car of corn and deposits with his bank a draft drawn on the consignee with bill of lading at- tached, with instructions that the same should be sent to the First National Bank of X, Kansas, for collection. The draft was col- lected and remitted for by the collecting bank's draft, which was dishonored because of insolvency. Opinion: The customer's bank because of the special instructions took the draft not as owner but as agent for collec- tion and can charge the amount back to the customer. Although the customer received credit for the draft, it would be regarded merely as provisional, which could be re- voked upon non-payment. The customer would be entitled to payment of the proceeds in full by the receiver of the collecting bank. Vol. 1, p. 366, April, 1909. 414. (Mich.) An item drawn on B bank sent for collection to C National Bank in Michigan was collected and remitted for by that bank's draft, which was dishonored because of the bank's failure. Opinion: Under the law of Michigan (the authorities elsewhere being in conflict) bank owning item collected is entitled to pa^-ment of pro- ceeds in full bv receiver. Vol. 2, p. 417, April, 1910. 415. (Mont.) Where A deposits money in H bank to pay a draft which is forwarded 52 COLLECTION [424 by B to H bank for collection and II bank applies money and sends its own draft in re- mittance, which is dishonored because of its failure, the loss falls on B, not on A. Vol. 5, p. 379, Dec, 1912. Preferred claim against insolvent collect- ing bank See 373, 376 416. (Wash.) A bank took a check for collection and credit, but credit was not given at the time of deposit and the returns were not received until after the bank had failed. Opinion: The depositor is entitled to the en- tire proceeds. The check was deposited at a time when the bank was insolvent and re- mains the property of the depositor. ^""01. 7, p. 387, Dec, 191-1. 417. (Wis.) A note was sent to the First National Bank of X for collection, and the amount was paid to said bank at matu- rity, by a check against the account of one ^M in said bank. Two days later )the bank failed. The receiver forwarded to the owner the draft of the First National Bank of X which had been drawoi for the purpose of re- mitting for the collection. Opinion: The owner of the draft has no preferred claim against the insolvent bank, there being no increase of the bank's assets by the trans- action. Vol. 2, p. 484, May, 1910. Collection of draft covering interstate shipment of liquor 418. (Mo.) A bank collecting a draft with a warehouse receipt for intoxicating li- quor attached, coming from another state, would not violate Section 239 U. S. Criminal Code, under which, according to a Federal de- cision in N'orth Dakota, it is unlawful for a bank to collect a bill of lading draft covering an interstate shipment of intoxicating liquor. A^ol. 5, p. 169, Sept., 1912. 419. (Pa.) Section 239 of the United States Criminal Code makes it criminal for a bank to collect a draft with a bill of lading attached covering a shipment of intoxicating liquor from one state to another. Vol. 4, p. C14, April, 1912. Items received oy insolvent banker 420. (Va.) Where a private banking firm receives paper for collection, knowing at the time that it is insolvent and will not be able to make a return. Opinion expressed that this is such fraud as will entitle the de- positor of the items to reclaim the same or their full proceeds from the receiver or as- signee. Vol. 3, p. 522, March, 1911. Lien on paper forwarded 421. (W. Va.) The bank of A received for collection from the bank of C, which thereafter failed, a note drawn by B and in- dorsed in blank by the payee, "Pay to the order of any bank, banker or trust company." Opinion: This form of indorsement indi- cated that the bank of C was not tiie owner but the collecting agent for the note. A bank therefore acquired no right of lien upon tlie paper for an indebtedness to it of the bank of C. A^ol. 6, p. 372, Nov., 1913. 422. (W. Va.) The bank of A received from the bank of C for collection a draft drawn by B, both banks having mutual deal- ings. After the C bank had failed the draft was paid and the A bank, having no knowl- edge from the form of the draft that the C bank was not the owner, credited the latter bank with the amount. Opinion: Unless the A bank knew that the C bank was the col- lecting agent of the drawer, it had a lien upon the paper or its proceeds for a balance of account due from the failed bank. Vol. 6, p. 91, Aug., 1913. Liability for not turning over proceeds 423. (Ind.) Where J gave D his check to take up a note upon which J was surety and after the check had been paid, the collect- ing bank returned tlie money to the drawee because the latter claimed payment had been made by mistake, and that J had counter- manded it. Opinion: That such collecting bank is liable to D for tlie money so collected, and that this liability would exist, even tliough the note for which the check was given was based on an illciral consideration. Vol. 1, p. 60, Aug, 1908. Recovery of proceeds paid in advance of collection 424. (N. Y.) A New York bank re- ceived for collection a chock drawn on Bank A of N'orth Carolina and forwarded it to its Kaleigh correspondent. The Ealeigh bank forwarded the item to its correspondent, Bank B, which collected from the drawee. The Raleigh bank took its correspondent's draft as cash and in advance of collection re- mitted to the New York bank. Bank B failed and its draft was dishonored. Opin- ion: In North Carolina a collecting bank is not liable for its correspondent's default, if 53 425 DICIEST OF LEGAL OPINIONS duly selected, and in the absence of ne^'li- <,^'nce on the part of the IJaleigli bank and iniless ])aynK'nt of the i)r()cee(ls led the New York bank to do somethint; whicli if repay- ment was made would result to its injury, the ])aymcnt by the Haleigh bank is not iiiuil but can be recovered as money paid by mistake without consideration. Vol. 4, p. 91, Aug., IDIL Charging note against subsequent deposit 425. (Ohio.) A bank received for col- lection a note payable at the same bank and the maker's account is insuflficient at matu- rity. The maker made a subsequent deposit, sufficient to meet the past due instrument. Opinion: The bank should not charge the instrument against the subsequent deposit without express instructions from the maker. Vol. 5, p. 309, Nov., 1913. See Notes pay- able at bank, 1007 et seq. Duty to trace unacknowledged items 426. (Ark.) A collecting bank which re- ceives and forwards an item to a correspond- ent which is not acknowledged or remitted for in due course, must promptly trace such item and notify its principal, and a delay of 47 days is unreasonable and will make the col- lecting bank responsible to its principal for the loss. Vol. 11, p. 557, April, 1919. 427. (Tex.) On July 31, 1918, a cus- tomer deposited a check drawn on a bank in L., Texas. The bank of deposit sent the check as a cash item to its correspondent at A., Texas, which at once sent it to the drawee bank. On November 22, 1918, four months later, the correspondent bank at A. reported that the check had been lost between A. and L. The correspondent bank contends that it took the check subject to final payment and is not responsible. Opinion: It is tiie duty of a collecting bank to ascertain within a rea- sonable time whether paper entrusted to it for collection and transmitted by it to a cor- respondent has been received by such corres- pondent; and if not, to advise its customer of such fact and it is liable for loss resulting from its failure to do so. Just what consti- tutes a reasonable time depends upon the facts of each individual case. In a Kentucky case a delay of eight davs was held to amount to negligence. Vol. if, p. GIO, May, 1919. Payment against uncollected funds Ivflatioii of iMiik upon deposit of check. See 299 428. (Conn.) The majority of courts hold (some decisions contra) that upon credit to a depositor of a check indorsed in blank, title passes to the bank and the de- positor has an immediate right to check against the credit unless there is a contrary understanding or agreement based on (1) general usage not to pay against uncollected funds, (2) notice printed in pass-book or on deposit slip, (3) special agreement with par- ticular depositor, (4) crediting deposit as paper and not as cash. Vol. 2, p. 333, Feb., 1910. 429. (111.) A bank credited its depos- itor with a check on an out-of town point, still uncollected. The depositor presented his check against said item for certification. Opinion: The bank is not obliged to certify the check. Lender the law of Illinois, in the absence of a contrary agreement or usage, a bank becomes a debtor for deposited items immediately upon credit, but the custom is quite universal not to pay checks against such credit prior to the collection of the items it represents. Vol. 7, p. 1001, June, 1915. CORPORATIONS Power to indorse for accommodation 430. (N. J.) As a general proposition no corporation in any state, in the absence of statutory authority, has power to make or in- dorse paper for accommodation. Such paper is valid and enforceable only in the hands of a holder taking the same before maturity, in good faith and without notice. Vol. 8, p. 250, Sept., 1915. Failure to adopt by-laws 431. (Miss.) A corporation transacts business without adopting any by-laws. The corporation becoming involved in damage suits and approaching insolvency questions the validity of its corporate acts by reason of the omission. Opinion: When the govern- ing statute in express terms confers upon a corporation the power to adopt by-laws, the failure to exercise the power will be ascribed to mere non-action, which will not render void any acts of the corporation which would otherwise be valid. Vol. 5, p. 6oration l)y a fraction of a share. Opinion: The control of the corporation would be held to rest in A because he is the majority stockholder. A single share is the voting unit and a fraction of a share cannot be voted in the absence of an express provi- sion therefor in a statute or by-laws of the corporation. But if A was unable to exercise control by inability to vote the fraction, a court of equitv would doubtless enforce his rights. Vol. 7, p. 995, June, 1915. 55 440 DRJEST OF LEGAL OPIIS'IONS Voting power of stockholder See li2."i, 242, 2V.i 440. (Wash.) At common law each stockliolder in a corporation has one vote, ir- respective of the number of shares lield l)y him. This has been changed by statute in most states, which hohl tiiat tlie stockholder has one vote for each share of stock owned by him, and in some states cumulative voting is ])rovided for. Vol. 7, p. 995, June, 1915. DEATH AND DECEDENT'S ESTATE Payment of deposit to administrator 441. (Kan.) A bank refused to pay a chock drawn against the account of its de- ceased depositor until further evidence of the drawer's authority. The drawer, wlio was the administrator, claimed that the indorse- ment of the bank through whom the check was presented was sufficient assurance that he had been legally appointed administrator. Opinion: A bank has the right to demand the production of letters of administration before paying the deposit of a decedent upon check of one claiming to be administrator. Vol. 10, p. 852, June, 1918. Right to credit decedent's account 442. (N. J.) Several certified checks payable to a decedent were offered for deposit to the credit of the decedent's account by one of the executors, prior to the qualification of the executors under the will of the decedent. Opinion: A bank whose customer has de- ceased may properly, in the interests of his estate and before an executor or administra- tor has qualified, receive money or checks offered by a debtor of the decedent and place them to the credit of his account, but until the bank has been duly authorized to receive such money or receive and collect such checks, payment of the latter would not be a dis- charge of liability to the estate and the payors would, in the event of the failure of the bank, remain liable to the estate. Vol. 5, p. 245, Oct., 1912. 443. (N. Y.) A owes a customer of the bank, who is deceased, and wishes to deposit the amount in the hank for him. The ques- tion is whether the amount should be credited to the account of the decedent or to the ac- count of his estate. Opinion: Strictly the bank has no right to receive the deposit to the credit of the estate unless authorized by the legal representative. But it might be con- venient for the bank to credit it to the estate to be held for and paid to the representative. Vol. 5, p. 176, Sept., 1912. Deed for annuity 444. (Okla.) A, the owner of a tract of land, proposes to deed it to B upon the condi- tion that B pay A an annuity of $1,000 during A's lifetime, and thereafter upon A's death to continue the annuity to C during C's life- time. A wishes to construct the proper form of deed. Opinion: The deed could be drawn with a condition subsequent incorporated therein by the use of the words "upon condi- tion" with a clause providing for the reentry of A or his heirs upon the land on the breach of such condition. Vol. 5, p. 104, Aug., 1912. Delivery of deed after death 445. (Mo.) A widow with two children owns land, and does not want to make a will. She proposes to make deeds to each child, which she can hold until her death and then have them delivered to the two children. Opijiion: Deeds executed by the grantor to her two children and held by her with inten- tion that tliey shall be delivered after death would be ineffectual, if not delivered during her lifetime, to pass title to the grantees. A"ol. 10, p. 380, Nov., 1917. See 499. Disposal of funds of intestate by bank 446. (N. J.) A New Jersey bank asks how to dispose of funds which it has on de- posit in the name of a depositor who died intestate, his only survivors being a son and a former wife who was divorced and re- married in his lifetime. Opinion: The mar- ried woman is not the widow of the deceased, and the only surviving son is entitled to the entire deposit under the provisions of the New Jersey statutes. Vol. 10, p. 598, Feb., 1918. Authority to renew notes of testator 447. (Pa.) In the absence of statute or of express authority in the will, an executor would have no power to bind the estate of the testator by making, as executor, a new note in renewal of one made by the testator or by renewing indorsements on notes originally in- 56 DEATH AXD DECEDEXT'S ESTATE 455 dorsed by the testator, and such acts bind only the executor personally. No such stat- ute exists in Pennsylvania. Vol. 7, p. 104, Aug., 1914. Heir's note for decedent's debt 448. (111.) A widow and daughter of the decedent gave their notes to a bank in part payment of a note of the decedent which the bank neglected to prove against the de- cedent's estate within the time required by law. Opinion: The authorities are in con- flict whether such notes of widow and daugh- ter, receiving assets of the estate, given in part pa3'ment of a note of the decedent, outlawed by non-claim, are supported by a sufficient consideration and enforceable. In Illinois, the question is yet to be litigated. Vol. 5, p. 375, Dec, 1912. Payment of check after drav^er's death See 004 449. (Mass.) The death of a drawer revokes the authority of a bank to pay his outstanding checks, and payment by the bank after knowledge of the death of the drawer is unauthorized, but the bank is protected where it pays the clicck in ignorance of the death. A statute in ^Massachusetts, however, author- izes a bank to pay a check of a depositor, not- withstanding his death, if presented within ten davs after date and tliis applies to nation- al banks. Vol. 7, p. 307, Nov., 1914. 450. (N. C.) Except where a contrary rule is provided by statute and in the few states where check is an assignment, death of drawer of check revokes bank's authority to pay, although if bank pays in ignorance of death it is protected. Vol. 5, p. 523, Feb., 1913. Note: Rule that clicck is assignment has been abrogated by Negotiable Instrument Law, passed in all states except Georgia. 451. (Wash.) While the common law rule estal)lisbed l)y tlie weight of authority in this country is that death of tlio principal revokes an agent's authority and payment thereafter to the agent, even though in ignor- ance of such death, does not discharge the obligation, the courts whicli administer such rule admit its harshness, and some courts have made an exception wliere a bona fide payment is made in ignorance of the princi- pal's death. The New York Court of Ap- peals in a recent decision has declared in view of long-established custom that payment of a check by a banker in ignorance of the drawer's death constitutes an exception to the common law rule and is valid, and the reasoning of the court would lead to a like conclusion where payment of the check of an attorney in fact is made in ignorance of the principal's death. It is reasonable to assume that courts in future cases will so hold. Vol. 11, p 1G4, Sept., 1918. See 4G2. 452. (Ga.) A Imsband, critically ill, drew and delivered to his wife a check for "all of my deposit." The husband died and the wife is likely to present the check. Opinion: The bank would be safe in paying the wife after the husband's death, on the ground that the check constituted an assignment of the entire deposit, and its delivery completed a gift causa mortis, by virtue of which the de- posit belonged to the wife and not to the husband's estate. Vol. 5, p. 661, April, 1913. 453. (Idaho.) A check draw^l on a I)ank in Oregon was given in pajinent for goods sold and delivered. The check in due course reached the drawee bank which re- fused payment on the ground that the drawer was dead. Opinion: The death of the drawer operated as a revocation of the authority of the bank to pay liis check. Vol. 6, p. 434, Dec, 1913. 454. (Kan.) The death of the drawer revokes the bank's authority to pay his check except where the check is an assignment, or the statute expressly authorizes pa\iuent dur- ing a limited time after the drawer's deatli; but where the bank pays in ignorance of the death it is protected. In Kansas a check is not an assignmeiit — the Negotiable Instru- ments Law expressly provides the contrary. Vol. 5, p. 107, Aug., 1912. 455. (111.) Several checks of a decedent were presented for payment at the bank, wliere the depositor had sufficient funds. The bank, having received notice of the depositor's death, refused payment and was sued by one of the holders. Opinion: Under the Nego- tiable Instruments Law of Illinois the bank was not liable to the holder on the narrow ground that death of drawer revoked the bank's authority to pay and on the broader ground that the bank owed no duty to the holder. Death of the drawer revokes the authority of a bank to pay his checks wherever the rule prevails that a check is not an assign- ment, except in a few states where special statutes authorize payment within a limited period after death. Vol. 5, p. G59, April, 1913. 57 456] DIGEST OF J.ECJAL Ol'lMOXS 456. (Mass.) In Massaclmsctls Ji bank is iiiilliorizcd lo pay a clicck after the draw- er's (loalh within ten days (and a savings bank within thirty days) after its date. A check is dated June 3, and ten days would bring it to the 13th, but that day being Sun- day, wouhl the 14th, Monday, be considered the 10th day? Opinion: The authority does not extend the time limited, although the last dav falls on Sunday. Vol. 9, p. !)04, May, 11)1 7. 457. (Minn.) In Minnesota, by a recent decision of the Supreme Court, a check op- erates as an assignment and the death of the drawer does not revoke the authority of the bank to pay. Vol. 4, p. 610, April, 1912. Note: This rule is overturned by tlie Negotiable Instruments Act passed in Minnesota in April, 1913. 458. (Pa.) In the absence of a statute, the death of the drawer revokes the bank's authority to pay the draw^er's checks, and payment after knowledge of the death is un- authorized. Vol. 3, p. 276, Nov., 1910. 459. (S. C.) In South Carolina, where the rule prevails that a check is an assign- ment, a check is payable by a bank to a bona tide holder notwithstanding the death of the drawer before its presentation for payment. Vol. 6, p. 434, Dec, 1913. Note: Tliis rule is overturned by the Negotiable Instruments Act jiassed in South Carolina in March, 1914. 460. (S. Dak.) Under the Negotiable Instruments Act a check is not an assignment and death of the drawer revokes the author- ity of the bank to pay his outstanding checks, in the absence of a special statute authorizing the bank to pav within a limited period after death. Vol. 6^, p. 434, Dec, 1913. 461. (W. Va.) A gave B his check in the afternoon and died that evening. B pre- sented the check the next morning. Opin- ion: The death of the drawer revokes the au- thority of the bank to pay his check and pay- ment with notice or knowledge of death is at the bank's peril in the absence ot a statute providing for payment after death of the drawer. Such a statute exists in West A'^ir- ginia but is applicable only to savings banks. Ohio has no statute on the subject. Vol. 8, p. 420, Nov., 1915. Power of attorney affected by death 462. (Tenn.) A depositor gave instruc- tions to her bank that checks against her ac- count should be signed cither by herself or by lier nephew signing her name by him. Jler nephew presented checks signed in the usual manner, but before payment the bank learned of its customer's death. The bank refused payment but questions whether if the checks had been paid in ignorance of the de- l)ositor's death it would have been protected. Opinion: The general rule at common law is that a power of attorney, unless coupled with an interest, is revoked by tiie principal's death. The Appellate Division of the New York Supreme Court has held that payment by a bank to an agent under power of attor- ney after the priiicipal's death does not bind the estate, although the bank was ignorant of the death at the time of payment. Under the existing conditions of law there is con- siderable danger and risk to banks which pay checks signed under power of attorney in case of unknown death of principal. Doubtless in many states the courts would not hold to the rule of the common law in all its rigor but would apply equitable principles and hold that payment to the attorney after death of the jDrincipal and before notice thereof would be valid. Vol. 4, p. 558, March, 1913. See 451, 1074. Transfer of stock of decedent See 1340 463. (N. J.) A bank holds stock as col- lateral security for a loan made to a person since deceased, with power to transfer on the back of the certificate, duly executed by the decedent. The bank is about to transfer but is advised that new powers must be executed by the administrator of the estate, since the death of the principal terminated the bank's authority. Opinion: Bank holding stock as security for loan with power to transfer on back of certificate, has right to transfer of stock notwithstanding death of borrower, since power to transfer being coupled with an interest is not revoked by death of the giver of the power. Vol. 10, p. 466, Dec, 1917. 464. (Okla.) The adminstratrix of an estate is entitled to the transfer of the de- cedent's stock upon delivering to the bank an authenticated copy of the letters of ad- ministration, but where there is no will and no administrator appointed the next of kin is not entitled to the transfer in the absence of a court order. Vol. 9, p. 347, Nov., 1916. 58 474 DEPOSITS Assignment of deposit 465. (N. Y.) There is nothing in the law which will prevent a national bank in New York State from making a loan to a depositor in a savings bank and taking an assignment of his deposit evidenced by his savings bank-book as security. But as a savings bank-book is not a negotiable instru- ment, notice of the assignment should be given to the savings bank to safeguard it against subsequent withdrawals, which might be effected by the depositor upon the claim of loss without production of the book. Vol. 9, p. 50, July, 1916. 466. (Ore.) In the case where a depos- itor has been paid a savings deposit under false claim of loss, an assignee to whom the depositor had assigned his deposit would have no rights against the bank. A savings pass- book is not a negotiable instrument and an assignee takes no greater rights than the as- signor. Vol. 9, p. 826, April, 1917. 467. (Pa.) A deposit account in a na- tional bank or a trust company may be as- signed by the depositor like any other debt or chose in action, and the assignment is Ijinding upon the bank when notified thereof. Vol. 6, p. 435, Dec, 1913. Use of assumed name 468. (Cal.) A woman, married a second time, desired to open an account in a bank under her former name. Opinion: It would be lawful and proper to receive the married woman's account under her former name, provided the purpose is honest and not fraud- ulent. Vol. 7, p. 898, May, 1915. Bank not obliged to receive deposits 469. (N. J.) A bank is under no obli- gations to receive deposits from undesirable persons and may close an accoimt at any time it chooses by tendering to the depositor the amount due and declininii' to receive more. A'ol. 5, p. 590, ]\rarch, 19 13. 470. (Ala.) A customer opened a small checking account with a ])ank. The bank later discovered that the customer was a pro- fessional forger and questions its legal right to close the account. Opinion: A l)ank, un- like a common carrier, has power to select its customers and may refuse to receive a deposit of a particular customer or can close an account out at anv time bv tendering the amount due. Vol. 4,^p. G88, May, 1912. Banks as depositaries Ste 210 471. (Wash.) Moneys belonging to In- dians on Reservations under the supervision of an agency may be deposited in either state or national banks which submit bids therefor, giving the rates of interest on open accounts and time deposits and otherwise complying with certain requirements. Vol. 7, p. 689, March, 1915. Deposit for safe-keeping 472. (Wis.) A bank which undertakes the safe-keeping of securities or valuables for a customer, either gratuitously or for hire, as by receiving rental of safe deposit boxes, is not an insurer against loss by fire, burglary or theft, but in the absence of special contract of hire which would define the terms of lia- bility is under duty to exercise reasonaljle care in the safe keeping of property. Where the bank is a gratuitous bailee it is responsible for gross negligence, and where it receives com- pensation it is responsible for ordinary neg- ligence. Vol. 5, p. 065, April, 1913. See 186. Nature of deposit slip 473. (Ala.) B deposited in a bank $: 3.- 44, and transferred to D a deposit ticket, which read : "deposited and pending settle- ment with D." B claimed he owed D $55.44, wliereas D claimed B owed him $73.44. The bank refused to honor the deposit ticket pre- sented by D. Opinion: A deposit slip given l)y a bank to a depositor is simply an ack- nowledgment of the receipt of money and its delivery by the depositor to a third person does not operate to assign the deposit. Vol. 8, p. 806, March, 1916. 474. (N. Dak.) A duplicate deposit slip showing a deposit of $10 currency was issued to a depositor who checked against the account and obtained cash from A, thereby exhausting the credit. Thereafter the depos- itor meets B and obtains $10 cash from him on the original deposit slip. Opinion: B cannot hold the bank. The duplicate deposit slip is merely evidence of a receipt of de- posit on a stated date. It is not a binding obligation or promise of the bank to pay the 59 475] DIGEST OF LEGAL OPINIONS amount to the transferee of the deposit slip, like a negotiable certificate of deposit. Vol. 5, p. 176, Sept., 1912. 475. (N. M.) The payee of a check leaves it with the teller of the drawee hank for safe keepinth bank and express company had equal means of knowing genuineness of counter- signature, and the express company could recover from the bank which received pay- ment under the rule that money paid under 77 009 DIGEST OF LEGAL OlMNIONS a mutual mistake of fact, without coiiHiflo ra- tion, is recoverable. Vol. 2, ]>. IKl April, 1910. 609. (Tex.) A travelers' cheek, sold by a bank in Nebraska, issued to one II, and pur- chased by a bank in Texas, was lost by II, and his countersignature thereon was forged. Opinion: That the Texas bank having cashed the check upon the forgery took no title and must look solely to the person from whom it purchased for reimbursement. Vol. 6, p. 816, Jime, 1914. 610. (W. Va.) A bank became the in- nocent purchaser of an express money order bearing the forged countersignature of the issuing agent. The order was paid by the company before the forgery was detected. Opinion: In the absence of decided cases on the right of an express company to recover money paid on the forged countersignature of an agent, the question depends upon whether the courts will apply the rule (1) that money paid under mistake of fact is re- coverable, or (2) that the payment is final and irrevocable on the theory (a) that the paying agent is bound to know the signature of the countersigning agent, and (b) that be- tween parties equally innocent the law will place the loss where the course of business has placed it. Vol. 5, p. 668, April, 1913. Check signed in fictitious name 611. (N. Y.) A person signs a check in a fictitious name with intent to defraud. The question is raised as to whether he can be punished as a forger or whether the crime is simply that of larceny or obtaining money under false pretenses when he actually ob- tains money or property thereon, or whether he can be punished under some of the special statutes making criminal the mere issuing of checks against insufficient funds. Opinion: According to the decisions in the various courts, it is well settled that the signing of a check in a fictitious name, with intent to defraud, is a forgery. The importance of this question lies in the fact that the penalty for forgery is more severe than in the other offenses above stated and it is more desirable to prosecute under the forgery statutes. Vol. 9, p. 492, Dec, 1916. Indorser's warranty to subsequent purchaser 612. (111.) A bank cashed a check, pay- ment of which was refused on the ground that the drawer's signature was a forgery. The bank sought to recover tli(; amount from the indorser. Opinion: The indorser of the check warrants the genuineness of the check to a subsequent purchaser and if the check is forged is liable upon breach of such warranty. Vol. i), p. 656, Feb., 1917. See 556, 560, 737. Estoppel to assert forgery of indorsement 613. (111.) A, the maker, forges the in- dorsements of B and C to his note, which is discounted for A by a bank. At maturity B and C are notified but pay no attention there- to, and afterwards B sees the note and instead of disclosing the forgery, says he will en- deavor to get A to renew with additional in- dorsers. Afterwards, upon A's death, leav- ing no estate, B and C assert forgery. Opin- ion: If C's silence when it was his duty to speak, and B's affirmative representation of the genuineness of the indorsements were in- tended to and did prevent the bank from pro- tecting itself from the loss, there would seem fair ground for holding B and perhaps C liable. Vol. 8, p. 1099, June, 1916. 614. (N. Y.) The maker of a note upon which the indorser's name is forged lets it go to protest. The purported indorser, upon being notified and questioned, does not in- form the bank of the forgery, but makes an evasive reply. After the dishonor of a second note likewise forged, the purported indorser for the first time notified the bank of both forgeries. The maker died insolvent. Opin- ion: The purported indorser is liable if he knew of the forgery of the first note and his failure to notify the bank caused a loss. Vol. 6, p. 208, Sept,. 1913 . Liability of person identifying impersonator 615. (Ark.) A bank cashed a forged draft for a forger identified at the bank by A. Opinion: A is liable to the bank, provided he made a false statement of fact upon which the bank relied to its injury. Vol. 7, p. 167, Sept., 1914. 616. (Colo.) The customer of a bank who identified the holder of a forged check as the payee is liable to the bank cashing the check, because of a false representation, though innocentlv made. Vol. 6, p. 275, Oct., 1913. 617. Forged name of drawee (Okla.) A's check on D bank, in- dorsed by B, is paid, and afterwards A trans- 78 FEAUD AND CRIMES 625 fers his account to C bank. One year later the same check with date altered, name of drawee changed to C bank, and hearing an additional indorsement under that of B, is presented by D bank to C bank and paid. The cashier of 1) bank does not know where he got the check and refuses to make its amount good to C bank. Opinion: C bank can re- cover from I) bank which first cashed the al- tered check, under the rule that money paid under a mutual mistake, without considera- tion, is recoveral)le. Vol. 4, p. 308, Nov.. 1911. Altering name of drawee on forged check 618. (Neb.) A check signed "II. Greve/' whose signature was forged by the payee, was presented by the payee to the First National Bank of X, Nebraska, as drawee. That bank, having no account with Greve, took it to the X National Bank, where Greve had an account, struck out the word "First," inserted "X," indorsed the check, received the money and paid over the proceeds to the payee. Opinion: In view of the policy of the Nebraska courts to place the responsibility in case of a forged check upon the bank which first takes it from the forger, rather than upon the drawee which mistakes the signature and pays it, as between the two banks, the First National Bank would be responsible for the loss. Vol. 2, p. 415, April, 1910. Forged draft against lost letter of credit 619. (Wyo.) A bank purchasing a forged draft against a lost letter of credit is the loser unless the draft is paid by the drawee, in which case the latter would prob- ably be bound by payment. Vol. G, p. 817, Juno. 1914. See 812. Check dated on Sunday 620. (Ind.) A decision in Michigan holds that the uttering of a forged check, dated on Sunday, is not a crime because an instrument void on its face cannot be the subject of forgery. The decisions bearing on the subject of the forgery of checks, dated on Sunday, both in states where the common law prevails that Sunday contracts are valid, and in states where such contracts are made void by statute, are collected and discussed in Vol. 4, p. 547, March, 1912. FRAUD AND CRIMES Criminal liability for issuing bad checks Note: A statute rccommcMided by tlie American Bankers Association to punish the giving of cliecks or drafts without sufliciont funds in bank and making the issue of the insufficient check prima facie evidence of intent to defraud lias })een passed in nearly all tlie states, with various modifica- tions. States still needing this law arc Mary- land, Massachusetts, Oklahoma and Pennsylvania; also the District of Columbia. 621. (Ark.) Where a per.son gave a worthless check and obtained money or any- thing of value therefor, he could be prosecuted criminally, but if he simply gave the check in payment of some existing indebtedness, there would not be a criminal offense. Vol. 6, p. 36, July, 1913. 622. (Colo.) A corporation having its account in a Colorado bank has been in the habit of overdrawing. The bank seeks to punish the president and treasurer of the cor- poiation, although none of the checks bear their signatures. Opinion : Where a st^itute makes it a misdemeanor for any person, with intent to defraud, to issue a check upon a bank wherein the maker lias insuflicient funds, and a corporation depositor habitually overdraws its account, the corporation as well as the issuing officer is liable to prosecution, and the president and treasurer who do not sign such checks but have knowledge of and power to prevent their issue are, probably, also subject to jirosecution. Vol. 11, p. 42, July, 1918. 623. (Fla.) A owed a bank $500. evi- denced by a note which at maturity the bank agreed to renew. A sent a renewal note upon which the bank surrendered the original. A also sent a worthless check for the advance interest. Ojnnion: The giving of the worth- less check did not violate the Florida criminal law.s, because A did not obtain anything of value thereby. Vol. 5, p. 171, Sept.. 1912. 624. (111.) A person in Illinois negoti- ated a worthless check against an account in which he had only a nominal Italance of 48 centos. The drawee bank had refu.^ed many similar checks and the depositor could not claim that he thought he had money on de- posit. Ojnniou: The person could be pun- ished ( riiniiuilly for obtaining money under false preten.ses and with intent to defraud. Vol. 8, p. 39. July, 1915. 625. (Kan.) A person issued a check on a Kansas bank where he never carried an 79 62G DIGEST OF LEGAL OPINIONS account. Tlie bank seeks to liold liini liable for obtaining money under false pretenses. Opinion: The burden is upon the state to prove the drawer's intent to defraud, but it es- tul)lif;lics a prima facie case vhcre it sliows that the drawer issued a check on a bank where he never carried an account. Vol. 5, p. 83'.\ July, 1013. 626. (Mich.) A man drew two checks on his bank in Wasliington without having sufficient funds to meet them, and obtained cash thereon from a bank in ^lichigan. The drawer has returned to Washington. Opin- ion: The purchasing bank can bring an action to recover the amount of the protested checks. If the drawer can be located in Michigan, he probably can be punished criminally for ol)- taining money under false pretenses. A^ol. 3, p. 585, April, 1911. 627. (S. Dak.) xV person issued checks on a bank in South Dakota where he never had an account. Under the law of that state he is guilty of a felony where he either ob- tains or attempts to obtain money or prop- erty thereon. There is no statute in South Dakota similar to that enacted in several of the states, which makes the mere issuing of a "not good" check, with intent to defraud, a crime. Vol. 3, p. 335, Dec, 1910. Obtaining bill of lading under false pretenses 628. (Ala.) A bank received for collec- tion a draft with a bill of lading attached. The consignee obtained the bill of lading upon tender of a check to the bank and re- ceived the goods. The consignee, asserting that the freight on the goods was not prepaid, stopped payment on the check, but at the same time retained the goods and refused to pay the bank. Opinion: The consignee can be convicted of obtaining goods under false pretenses if it can be proved that, at the time he gave his check in order to get the bill of lading and the goods, he intended to stop pajTnent. The action must be brought with- in three years if a felony, and within one year if a misdemeanor. Vol. 6, p. 99, Aug., 1913. Burglary policy of the American Bankers Association 629. (Miss.) The American Bankers Association Burglary Policy covers opening safes by "chemicals or electricity," as well as by "tools or explosives." Vol. 5, p. 246, Oct., 1912. Conspiracy to commit robbery 630. (Ark.) A person, learning that a shipment of currency is to be made by one bank to another, proposed to another person to commit robbery, pointing out the subject of the robbery and outlining a plan; but the second person refused and the first person went no further. Opinion: The first person was guilty of a misdemeanor in soliciting a person to commit robbery. Vol. 8, p. 39, July, 1915. Conversion of notes by innkeeper 631. (Fla.) W. S. S., a lodger at a boarding house, died, and among his effects were two notes for $200 and $180 respec- tively, which were not indorsed by him. W. W. S., the boarding-house keeper, indorsed the notes in his own name, cashed them at a bank, and appropriated the money thus col- lected in satisfaction of an alleged board bill. The makers who through a Nebraska bank paid the notes are sued by the estate of W. W. S. Opinion: The innkeeper in col- lecting the notes in the method used was guilty of conversion, and the makers are still liable to the estate, although the makers in turn can recover from the Nebraska bank the money as having been paid under a mistake of fact without consideration; and the Ne- braska bank can recover from W. W. S. on the same grounds. W. W. S. would not be crim- inally liable for larceny or embezzlement if it could be shown he collected the notes in good faith under a supposed claim of title. Vol. 4, p. 619, April, 1912. Delivery of goods without taking up w^arehouse receipt 632. (N. Y.) The Uniform Warehouse Receipts Act passed in Louisiana in 1908 among other provisions contains one punish- ing an officer or agent of a warehouse who delivers goods represented by a negotiable receipt without taking up the receipt. Vol. 1, p. 204, Dec, 1908. Fidelity bonds 633. (Cal.) Upon application for re- newal of a fidelity bond for its employee, a banking corporation upon request execut-es a certificate to the surety company stating that his books and accounts have been ex- amined and found correct in every respect. A loss through a dishonest employee was thereafter discovered, wliich had actually 80 FRAUD AXD CRIMES [640 taken place during the life of the original policy. Opinion: The surety company would be liable for the loss under the original policy and the certificate of renewal would not affect such liability. The execution of such form of renewal certificate is objectionable from a banker's standpoint because there is danger that the renewal bond may be declared by the courts to be void if the certificate is regarded as a false representation of a material fact. Vol. 5, p. 26, July, 1912. 634. (N. Y.) The teller of a bank without authority dishonestly allows overdrafts and hides them from the management of the bank. The bank holds the American Bankers As- sociation's Standard Form of Fidelity Bond. Opinion: Such bond insures the bank against any loss that shall happen '^through the dis- honesty of any of the (bonded) employees or through any act of omission or commissioTi of any of the employees done or omitted in bad faith and not through mere negligence, incompetency or error in judgment. This bond is broad enough to cover the loss in this case. Bad faith and dishonesty is the test by which liability under the bond is deter- mined. Vol. 6, p. 684, April, 1914. Firm checks issued through fraud of employee 635. (Tenn.) A firm through tlie fraud of an employee signed checks (1) payable to the order of the employee, (2) payable to the order of the X bank, and (3) payable to other persons bearing forged indorsements of the payees. These checks were all deposited by the employee in the X bank and checked out by the employee, and the firm seeks re- imbursement from the bank. Opinion: (1) As to the checks payable to the employee, the X bank is not responsible to the firm; (2) as to the checks payable to the X bank, there is conflict of authority whether or not the bank is responsible; and (3) as to checks payable to third persons whose indorsements were forged, the bank is responsible, according to the weight of authority, notwithstanding the trust and confidence imposed by the firm in the employee. Vol. 1, p. 96, Sept., 1908. Introducing swindler to bank 636. (Tenn.) A bank cashed a check in the sum of $105 for a stranger who was correctly introduced by a customer using these words : "This man is all right, ])lease wait on him." The stranger was a swindler, and his check was no good. Opinion: The customer was not liable for the swindler's fraud because his statement was a matter of opinion and not of fact. Vol. 2, p. 20, Julv, 1909. See 182, 615, 616. Obtaining money under false pretenses Sue 28 1, 04U 637. (Pa.) A customer drew two checks, for $200 and $300 respectively. Although the customer's deposit was insufficient the bank promised to pay the checks upon the customer's false promise that he would have enough money to cover the checks when his wagons came in the next morning. The checks were paid, but the customer closed out his business without reimbursing the bank. Opinion: The customer could not be held criminally for obtaining money under fals-.* pretenses, because the pretense relied upon by the bank must relate to a past or an existing fact and not upon any representation as to the future, as in this ease, Vol. 4, p. 427, Jan., 1912. 638. (Tenn.) A daughter signed her father's name to a check per her own and cashed it at a bank. Payment of the check was refused because tlie father, upon beinof notified of the check by the drawee, refused to pay any attention to it. Twice before the daughter had signed such checks, the first one being paid Init the second refused, the daughter afterwards inducing her fatiier to settle. The forwarding bank delayed two months, expecting either the father or daugh- ter to settle. Opinion: If the check was un- authorized, the daughter can be prosecuted criminally for obtaining money under false pretenses, but not for forgery. The bank has no recourse against the father but only against tlie daughter, and its delay would not affect its rights. Vol. 6, p. 98, Aug., 1913. 639. (Wyo.) A bank in Wyoming asked its correspondent at L. to pay Mr. F. $100, wliich was due him from a bank in >raryl;ind. In the meantime and through error the ^fary- land bank wired the correspondent at L. to l)ay Mr. F. $100. :\rr. F. received the $20(», knowing that he was only entitled to $1(KI. Opinion: A person receiving money knowing he is not entitled to it, from one who believes he is entitled to it, without making any other false representiition or preten.«;e. is proliably not guilty of a crime under the false pretense statute of \Vvomin, Nov., 1918. 810. (R. I.) A gave his note payable at a bank to B, who lost the instrument. C found it and negotiated it to an innocent pur- chaser for value, who received payment at the bank before B could serve notice. Opinion: Where a note indorsed in blank by the payee is lost and negotiated by the finder to a holder in due course, the latter acquires a good title 101 811 DIGEST OF LEGAL OPINIOXS as a;j:ainst the payee. Assuminf2[ payment has been stopped and notice of the loss published in the newspaper, this wouhl not be sulhcient to protect the maker and payee from liability, unless it could be ])roved that the purchaser for value read the article. Vol. 11, p. 279, Nov., 1918. 811. (W. Va.) A check indorsed in blank by the payee was stolen and cashed at a bank. The drawer stopped payment before the check reached the drawee. Opinion: The cashinfj bank was a bona fide purchaser from the thief, and being a holder in due course can enforce against the drawer and the in- dorser. Vol. 7, p. 168, Sept., 1914. Lost letter of credit 812. (Cal.) A Texas bank issued a gen- eral letter of credit to one J. E. C, authoriz- ing the latter to draw drafts up to $200. The letter contained the signature of J. E. C. for identification. The letter was stolen and attached to a forged draft for the full amount and cashed by a bank in California Opinion: The California bank is the loser and cannot hold the bank issuing the letter of credit responsible. Vol. 7, p. 34, July, 1914. See G19. 813. (N. M.) A bank issued a letter of credit addressed generally and authorizing a specified customer, and not the bearer to draw for amount within thirty days from date. The letter became lost before any checks were drawn, and the customer desired a duplicate. Opinion : A duplicate can safely be issued by the bank without indemnity except as against the customer's dishonesty. The bank would be liable to bona fide purchasers of checks ne- gotiated bv the customer. Vol. 8, p. 908, April, 1916. Lost pass-book 814. (Cal.) The fund in a savings bank had been withdrawn by a depositor upon claim of loss of his pass-book. Later he fraudulently negotiated to an innocent pur- chaser his draft and pass-book on the ac- count. Can payment of the instrument be enforced against the bank? Opinion: A bank which pays a savings deposit to its de- positor without production of the book, upon claim of loss, is not liable to an innocent pur- chaser to whom a draft upon the bank, ac- companied by the pass-book, has been nego- tiated, the pass-book not being a negotiable instrument. Vol. 9, p. 820, April, 1917. 815. (Cal.) A savings bank depositor claimed tliat his bank-l)Ook was either lost or stolen. ^J'he bank re'juired an indemnity Ijond in douijle the amount of the deposit, be- fore issuing a duplicate book or before paying over the balance. Oirinion: It is customary for savings banks to print in pass-books a rule that indemnity will be required before mak- ing payment in case of loss. These pass-book rules are generally held contracts, but the courts are divided as to enforcing the contract of indemnity. A majority hold that the pass-book being non-negotiable, the bank is protected if it pays or issues a duplicate with- out indemnity. But where the bank is not satisfied as to the identity of the depositor who claims payment, the right to indemnity may be upheld'. Vol. 4, p. 618, April, 1912. 816. (Pa.) The depositor of a savings bank lost his pass-book and applied for a duplicate. The bank asks as to the necessity of a bond of indemnity before issuing the du- plicate. Opinion: There is no necessity for a bond of indemnity before paying money or issuing a duplicate, except where the bank is uncertain as to the identity of its depositor. Ordinarily, there is no necessity for such re- quirement, the pass-book being non-negoti- able. Where there is a by-law providing for such indemnity, the courts will refuse bank's right to require a bond unless some necessity is shown. Vol. 5, p. 662, April, 1913. Duplicate for lost checks See 824 817. (Colo.) A check was lost in the mail after the payee had deposited it in his bank. Opinion: Where the bank takes the check as owner, it has the burden of obtaining a duplicate and the duty of presenting the item in order to charge the indorser in case of dishonor ; but if the bank received the item for collection, its duty is simply to notify the customer of the loss without unreasonable de- lay. The legal right of the bank to charge back to a customer a check lost in the mail depends on where title to the check rests, which must be determined by the rule of law in the state where the bank is located, or may depend upon agreement or custom. Vol. 2, p. 155, Oct..- 1909. See 798. 818. (N. C.) A customer mailed to his bank several checks for deposit. The bank acknowledged receipt by regular card but the checks were misplaced by the bank before they were entered in the books to his credit. After seven months, the customer claimed 102 LOST AXD STOLEN PAPER S25 credit for these items, which the bank refused to give without receiving duplicates of the lost checks. The bank had forwarded monthly statements of the depositor's account, in each of which there was an omission of the credit. Opinion: The bank cannot refuse to give the customer credit before obtaining duplicate, but there is an equitable obligation on his part to give the bank all the information in his power to enable the bank to frame dupli- cates or written particulars upon which pre- sentment for payment can be made, and the drawer ultimatelv looked to for payment. Vol. 4, p. 192, Feb., 1912. Duplicates for lost government bonds 819. (W. Va.) Where coupon bouds of the government are lost or stolen and are ac- quired by a bona fide purchaser from a finder or thief, the hitter's title is superior to that of the former owner and there is no provision of the Federal Statutes to protect the original owner in such case. But where such bonds are wholly or partly destroyed or defaced and can be identified, the Federal Statutes provide for the issue of duplicates upon giving of in- demnity and also provide for the issue of dup- licates for lost or destroyed registered bonds. Vol. 11, p. 41, July, 1918. Duplicate for lost stock certificates 820. (N. J.) A stockholder in a bank claimed to have lost his certificates of stock unindorsed. The bank wishes protection against dishonesty. Opinion: The l)ank should issue duplicate certificates and reayment thereon and applied for a duplicate certificate, al- though he could not alTord an indoninity boiul. The l)ank was not well aci]uainted with the depositor. Opinion : Whore a dejws- itor claims that his neirotiable certificate of deposit has been lost or stolen, the only safe course for the bank is to require a bond of indemnity before issuing a second certificate. But if the amount of certificate is small and the bank believes the statement of the depos- itor, it can waive the bond and take the de- 103 82G DKIKST OF LEGAL OPINIONS positor's adidavit. Vol. 5, p. 301, Nov., 1912. 826. (N. Dak.) Where a bank issues its tlral't upon its correspondent in favor of a third party who claims to have lost same and requests a duplicate, tlie issninand or other maker. The Enabling .\ct of 1893 exprcs.sly excepts contract.^; of this character. Vol. 3, p. 1 i:.. Sept.. 1910. 843. (W. Va.) In West Virginia a mar- ried woman can bind herself as .•surety upon note of her husband. Vol. 7. p. 383, Dec., 1914. 105 844 MINORS AND INCOMPETENTS Contracts of persons under guardianship 844. (Minn.) An old man was put uiuler j^aiardiHiisliip on May 2G, 11)10. Not knowiiifj^ this, a bank on October 31, ]!)10, consolidated three notes, which he owed it, into one and surrendered the old ones. Two of the notes were dated prior to the guardian- ship. Opinion: The ]\Iinnesota statute makes contracts of a person put under guardianship void — but notes given before the guardian was appointed are collectible, if acquired in good faith and without notice of the incom- petency. The bank would have a right in a proper proceeding to recover the amount of the two notes, which were surrendered under mistake of fact. Vol. 5, p. 99, Aug., 1912. Liability of minor as stockholder 845. (Fla.) A minor was presented with a share of stock in a national bank, the trans- fer being registered on the books. Fifteen months later the bank failed and the receiver is trying to enforce the full 100 per cent, assessment against the parent of the child. Opinion : The minor cannot be held liable for the assessment, as he has no capacity to assent to become a stockholder, but the person mak- ing the transfer is not relieved from liability. The parent of the minor cannot be held liable for the assessment unless he himself owned the stock and transferred it to his child. Vol. 11, p. 5G1, April, 1919. Payment by bank to incompetent deposi- tor unsafe See 275, 302 846. (Cal.) A "trusty" in a hospital for treatment of the insane had earned and de- posited in a bank a considerable sum of money. The "bank questions its right to allows the depositor to withdraw any of his deposit. Opinion: The bank should make payment only to the legally appointed guard- ian. It would be unsafe to pay the "trusty" who has been judicially declared insane and has not been discharged as cured. Vol. 5, p. 380, Dec, 1912. 847. (N. Y.) Checks are signed by a depositor, who is in a sanitarium taking the "gold cure" for alcoholism and wdiose father notified the bank that the depositor is in- competent. Opinion: The safest course is for the bank to refuse to honor the checks until it is reasonably sure that, in issuing them, the drawer was in possession of his reason sujfi- ciently to know the nature of his acts. The liability a bank would iiK.ur for injuring the depositor's credit in a case of pos^ilde com- petency would be negligible. Vol. 2, p. 229, Dec, 1909. Payment of check to infant agent 848. (Wis.) A customer sends his son, a minor, to the bank to cash checks amount- ing to $1,000. In the event the boy is robbed on his return to his father, would the bank in any way be liable? Opinion: An infant or minor may act as the agent of another per- son and a bank which pays a check to an in- fant, who has been authorized by his prin- cipal to collect same, is protected, although the money is lost by or stolen from tlie infant and never reaches the principal. Vol. 10, p. 714, April, 1918. Withdrawal of deposit by minor 849. (N. Y.) Tlie Xew York statute allowing banks to pay deposits to minors w^ould probably be held applicable to national banks. The statute contemplates a deposit by or in the name of any minor, and requires that the bank shall hold the deposit for the benefit of the minor with the authority to pay the same to him. There is no provision fix- ing a minimum aae limit. Vol. 9. p. 502, Dec, 1916. 850. (N. Y.) A minor deposited $25 in a bank, obtaining the bank's certificate of de- posit. The minor indorsed the certificate to a firm in payment for a suit of clothes. Be- fore the certificate reached the bank for pay- ment, the minor's father stopped payment. Opinion: The bank has the right to pay the amount of the certificate to a bona fide in- dorsee of the minor, although the father or- dered the bank not to pay. The indorsement by the minor would pass the property in the certificate to the indorsee, although the minor might not be lialile on the indorsement. Vol. 5, p. 243, Oct., 1912. Withdrawal of deposit by parent 851. (Cal.) A bank which holds a de- posit of a minor receives the following letter : "First Xational Bank of , Gentlemen : You and each of you are hereby notified not to cash any more checks drawn by , my son, he being a minor, until further notice 106 MORTGAGES S59 from his father. Signed, his father." The bank asks if it should obey the instructions. Opinion: Where a minor makes a deposit to his personal credit and there is a statute, as in California, exempting such deposit from the control of all persons except creditors and authorizing pa3'ment to the minor, it is be- yond the power of the father of the minor to stop payment of the minor's check. A par- ent, as natural guardian, cannot control or withdraw a deposit to the credit of a minor in the absence of leijal appointment as guard- ian of the estate. Vol. 11, p. G09, May, 1919. 852. (Cal.) A father, who deposited money in a bank in California to the credit of his son, a minor, has no right to withdraw the same. By statute in California, the bank holds the deposit free from the father's con- trol and may pay the same to the minor, taking his receipt or acquittance therefor. Vol. 5, p. 244, Oct., 1912. 853. (N. J.) A parent cannot withdraw a deposit to the credit of a minor without letters of guardianship. When the New Jer- sey statute provides that such deposit shall be held for the ''exclusive right and benefit" of the minor and "free from control of all other persons except creditors" and "shall be paid" to the minor whose receipt shall be a dis- charge to the bank, it is doubtful whether even a legally appointed guardian would have the right to withdraw the deposit; and it is uncertain whether this statute applies to a national bank. Vol. 5, p. 52(j, Feb., 191 :i. 854. (Pa.) Inder decisions in Penn- sylvania a parent has no right to withdraw a deposit to the credit of a minor child, even though the parent made the dejiosit; the par- ent cannot control the child's property unless he ha? been duly appointed as guardian and the judicial policy of Pennsylvania is not to appoint the parent as curator of the child's estate. The statute in Pennsylvania on this subject allows the bank to pay the deposit to a minor free from the control of the legally ap))ointed guardian. Vol. 6. p. 32, Julv, 1913. 855. (Tex.) A parent, as natural guard- ian, cannot withdraw a deposit to the credit of a minor in the absence of a legal appoint- ment as guardian of the estate. Vol. 9, p. 422, Xov., 1916. MORTGAGES Mortgage in name of cashier 856. (Wis.) A mortgage runs to "John Doe, Cashier, First National Bank," and an assignment of such mortgage is executed by "John Scott, Cashier, First National Bank," successor of Doe. Opinion : The courts would be likely to hold that the mortgage so drawn and assignment so executed were instruments running to and executed by the bank and not the person named as cashier individually, but the authorities are not all uniform. Although a national bank has no power to take a real estate mortgage for a present loan, only the Government can complain and the mortgage as ])etween the parties is not invalidated. Vol. 5, p. 1 Of), Aug., 1912. Chattel mortgages See 738, 864 857. (Colo.) A note was payable on de- mand, and the chattel mortgage given to se- cure the same provided that if the mortgagor shall pay the note of even date "due on de- mand after date, or if no demand is made, then note is due two years from date," the mortgage shall be void. Opinion: A reason- able construction is that the debt matures in two years unless sooner demanded and the holder is protected for thirty days thereafter under the Colorado statute allowing thirty davs after maturitv of the debt to take posses- sion of the chattels. Vol. 8. p. :^1. Julv. 1915. 858. (Iowa.) A chattel mortgai:*' wms given to secure the purchase price of personal property bought by a man at a farm sale. The bank to wiiom the mortgage was exe- cuted asks whether it is necessary to have his wife join in the mortgage. The question is raised in view of the Iowa Code (Sec. 290('i, Code 1897) which provides as follows: "That no incumbrance of personal property which may be held exempt from execution by the head of a family, if a resident of the state. shall be of any validity as to such exempt property, utdess the husband and wife, if both are living, concur in ami sisrn the same joint instrument." Opinion: Iowa statute which invalidates chattel mortpige of exempt prop- erty unless both husliand and wife join in mortgage, does not require joinder of wife where mortgage executed to secure purchase price of propertv. Vol. 11, p. 609, May, 1919. 859. (Kan.) In the absence of a statute requiring the specific amount .secured to be 107 800 DIGEST OF LEGAL OPINIONS stated in the cliattel mortf]faKe, tlio weight of authority is to the elTect tliat a provision in the mortpjagc that it is given to secure a speci- fied amount and "any other indehtedness" to the mortgagee on future advances is valid and enforceahle. Where the statute (as in Kan- sas) requires the filing of an affidavit upon renewal sjuHMfically stating the amount yet due and un])aid under the chattel mortgage, it is qnestionahlc whether additional advances therafter made would he protected as against a subsequent incumbrance under the terms of the chattel mortgage which secures "any other indehtedness," and it would be unsafe to make an additional loan during the pen- dency of the renewal. Vol. 6, p. 62G, March, 3914. 860. (Kan.) A note was dated and de- livered in January and a chattel mortgage to secure its payment was given by the maker of the note the following February. Opin- ion: The chattel mortgage was valid. The mortgage should bear the date of its actual execution, reference being made in the body thereof to the note. Vol. 6, p. 213, Sept., 1913. 861. (Neb.) The owner of a farm filed a lease containing an agreement by the lessee to execute a chattel mortgage on the crops as soon as planted and growing. Opinion: The lessor would not be protected against a sub- sequent mortgagee of the crops after they were grown, in the event the promised mort- gage was not given. Vol. 7, p. 308, Nov., 1914. 862. (Neb.) An order of release of a chattel mortgage in Nebraska must be at- tested and unless a chattel mortgage w'hich has been paid is discharged in one of the two modes prescribed by the statute within ten days after request, the mortgagee would be liable to the statutory penalty. Vol. 5, p. 23, July, 1912. 863. (N. J.) A bank, through its exec- utive committee, sanctioned a loan of $1,500, crediting this amount to a mortgagor and taking as evidence three four-months' notes of $500 each, secured by a chattel mortgage. The mortgagor orally agreed with the bank's cashier that, in case the committee a week hence should object to the amount of the loan, the mortgagor would then consent to charging back $500 before maturity. The bank under the New Jersey chattel mortgage act, filed an affidavit of consideration, which did not in- clude the oral agreement. The statute pro- vides that a mortgage is absolutely void as against creditors of the mortgagor unless it has annexed thereto an affidavit stating the consideration of tiie mortgage. The mort- gagor became bankrupt and the bank relies on the validity of the mortgage to recover the loan. Opinion: It would seem that the affi- davit stating that the consideration of the chattel mortgage was for $1,500, was the substantial truth and should not be held defective, and the mortgage should not be held void because it did not include a state- ment of the oral agreement. Vol. 5, p. 446, Jan., 1913. Foreclosure of mortgage 864. (Iowa.) In the case of the fore- closure of a mortgage on realty in Iowa, a personal judgment is rendered against the mortgagor (save in some excepted cases), and a special execution issues against the mort- gaged property; and where the debt is not satisfied a general execution for the deficiency issues against any other realty than held by the mortgagor. In the case of the fore- closue of a chattel mortgage in Iowa, where the proceeds of a sale of the mortgaged chat- tels are insufficient to pay the mortgage, the mortgagor is personally liable for the defi- ciency. Vol. 7, p. 99fi, June, 1915. Mortgage notes See 790 865. (Colo.) A mortgage note payable to a bank was indorsed by the bank to John Doe or Anna Doe without recourse. John Doe died and the mortgagor is ready to pay the note at maturity, but hesitates to receive the release signed by Anna Doe. Opinion: Anna Doe could execute a good release to the mortgagor upon payment and surrender of the note. The note indorsed by the bank payable to alternative payees is negotiable imder the Negotiable Instruments Law and the indorsement by either one of the payees passes title. Vol. 8, p. 611, Jan., 1916. 866. (Mo.) A first mortgage real estate note gave the maker the option to pay $100 or any multiple thereof on the principal at the maturity of any coupon by giving the holder of the note thirty days' notice in writing of his intention. The maker gave notice that he would pay the whole note at maturity of a certain interest coupon. At such maturity the maker paid the interest but concluded not to pay the principal until it was due. Opin- ion: The mere giving of notice of intention does not mature the note, where the intention 108 NATIONAL BANKS 872 has not been carried out by payment of the principal. Vol. 3, p. 586, April, 1911. 867. (Neb.) A real estate mortgage given to secure a loan drawing ten per cent, interest, the highest legal rate in Nebraska, contains a clause providing that the mort- gagor shall pay taxes levied upon the mort- gage or debt, or against the holder. Opinion: The clause would probably render the trans- action usurious, because it calls for payment of taxes in addition to the highest legal rate. Such a clause was formerly held to render the mortgage note non-negotiable but a Ne- braska statute now provides that its negotia- bility is unaffected. Vol. 8, p. 419, Nov., 1915. Priority between mortgage and mechan- ic's lien 868. (N. C.) A mortgagor caused some improvements to be made upon his property after he had mortgaged it to a bank. The party making the improvements was not paid and duly filed a mechanic's lien. Thereupon the property was sold, but the proceeds were only sufficient to cover the mortgage. Opin- ion: In the absence of a statute giving the mechanic's lien priority, a prior recorded mortgage takes precedence over a subsequent mechanic's lien. Vol. 1, p. 140, Oct., 1908. Wrong description in mortgage 869. (Okla.) A national bank as mort- gagee of certain real estate recorded the mortgage and learned tliat the mortgage papers described a different parcel of land from that intended. Opinion: If the owner of the real estate which through error was not described disposes of his rights therein by sale or by mortgage to an innocent purchaser for value, the latter's rights are superior to those of the bank, regardless of the recorded mortgage, but the bank has an equitable title, good against the owner or attacliing creditor. The course to pursue is to have the owner cor- rect the mistake by giving a new correct mort- gage and have that mortgage recorded ; if the owner refuses, to file a bill in equity to compel reformation of the mortgage. Vol. 4, p. 431, Jan., 1912. NATIONAL BANKS See Banks and Banking, 164-193 ; Branch Banks, 261-265. Advertising for "savings" accounts Deposits with trust company permitted 870. (N. Y.) A national bank about to establish a savings department asks if there is any state law prohibiting it from using the words "savings department" or "savings" in advertising in this connection. Opinion: The conclusion seems warranted, despite state laws prohibiting other tiian savings banks from using or advertising the word "savings" or from transacting business as a savings bank, that it would be held within the power of a national bank, free from con- trol of state laws, to establish and advertise a savings department and for savings ac- counts (in so doing necessarily using and advertising tlie word "savings''), and to carry on sucli department in the same manner that a savings bank carries on its business subject, of course, to national laws and regulations of tlie Federal Reserve Board. The question will not be positively settled until decided by the court of last resort. Wliile there may be danger of violating a state law and of incur- ring a penalty of $100 a day, it is for tlie na- tional banks to consult their own attorneys upon the proposition. Vol. 9, p. 404, Nov., 1910. See 188. 871. (Ind.) Tlie Federal Reserve Act permits a national bank to carry on deposit with a trust company to the extent of ten per cent, of its own paid-up capital and sur- plus. Vol. 8, p. 805, March, 1916. Examination by revenue officer 872. (N. J.) The Collector of Internal Revenue of a certain district in New Jersey sent a man to examine the notes of a national bank to see if they were properly stam{>cd. The bank officer refu-sed him permission. Opinion: According to the decision of a Fed- eral district court in Pennsylvania (contrary to the decision of another Federal district court), a national l)ank officer lias no right to refuse permission to an int<'nial revenue officer or agent, acting luider Section 3177» Rev., Stat., to examine tlie notes in its pos- session to see if properly stamped, and the bank is not exempted because of Section 5241, Rev. Stat., limiting visitorial powers to the Comptroller and the courts, but only an officer or agent authorized l)y the statute has such power of examination, whicli cannot be delegated to a clerk or other person. Section 109 873 DIGEST OF LECJAL OPINIONS 21 of the Federal Eeserve Act lias amplified Section 5241, Eevised Statutes, and provides "No bank shall lie subject to any visitorial powers other than such as are authorized by law, or vested in the courts of justice or such as shall be or shall have been exercised or di- rected by Congress, or by either House there- of, or by any committee of Congress, or of either house duly authorized." Vol. 11, p. 390, Jan., 1919. * See 173, 1312, 1324. Federal jurisdiction 873. (N. Y.) The United States courts had jurisdiction in cases brought by and against the Second United States Bank but not in cases by and against the First United States Bank. The Federal statutes formerly conferred jurisdiction upon the circuit court in all suits brought by or against national banks in the district, but this was repealed in 1882 and the statute now provides that the jurisdiction of suits by and against national banks, except suits between them and the United States or its officers and agents, shall be the same as and not other than the juris- diction of suits by or against banks not or- ganized under any law of the United States. Vol. 6, p. 504, Jan., 1914. Guaranty of draft See 177 ct seq 874. (Tenn.) B in Tennessee drew on A in Ohio and a national bank in Ohio wired a bank in Tennessee that it would guarantee that B's draft would be paid. The Tennessee bank paid B the amount of the draft, but could not collect from the national bank which was enjoined from making payment. Opinion: The national bank had no power to guarantee B's draft in which it had no inter- est and from which it derived no substantial benefit. The guaranty was idtra vires and unenforceable. The same underlying prin- ciple applies as well to state bank and trust companies. Vol. 4, p. 27, July, 1911; Vol. 4, p. 152, Sept., 1911. Limit of loan by national bank 875. (Col.) A national bank with a cap- ital and surplus of $90,000, having loaning capacity of $9,000 to any one borrower, dis- counted a note of a state bank for $8,000 and allowed such bank to overdraw its account by $2,500. Opinion: The national bank ex- ceeded the legal limit of its loaning power. Vol. 9, p. 422, Nov., 1916. 876. (111.) When the limit is loaned by a national bank to a corporation, an addi- tional loan to a stockholder is not excessive unless corporation is maker or indorser on paper or loan to stockholder is for its benefit. The National Bank Act contemplates that no loan in excess of the limit shall be granted to any one interest. Vol. 5, p. 108, Aug., 1912. 877. (N. Y.) Certain national bank ex- aminers made a ruling that the purchase of drafts with bills of lading attached in excess of ten per cent, of the capital and surplus of the bank created an excess loan to the concern issuing the drafts ; that such excess loan was a violation of Section 5200, United States Ee- vised Statutes, unless the drafts are accepted by the drawee before the purchase by the bank. Opinion: Such ruling is not war- ranted by the law and will not be sustained by the courts. The Comptroller of the Cur- rency concurs in the opinion that Section 5200, U. S. Revised Statutes, excepting from the 10 per cent, limit of indebtedness of any one person of money borrowed '^the discount of bills of exchange drawn in good faith against actually existing values*' does not re- quire that such bills of exchange must be first accepted before purchase. Vol. 1, p. 300, Feb., 1909. 878. (N. Y.) Section 5200 U. S. Eev. Stat, limiting loans by any association to a single borrower to ten per cent, of capital and surplus, although not judicially passed upon is construed as not including liability of the borrower for the interest upon the principal sum loaned. Vol. 10, p. 780, May, 1918. 879. (Pa.) A national bank with a cap- ital and surplus of $50,000 loaned A and B as individuals $1,500 and $2,500 respectively. A and B as partners want to borrow in ad- dition ten per cent, of the capital stock and surplus. Opinion: The National Bank Act limits liability of any one borrower for money borrowed to ten per cent, of capital and surplus and includes in the liability of a firm the liabilities of the several members. The proposed loan would therefore be ex- cessive. Vol. 9, p. 350, Oct., 1916. 880. (Tex.) A national bank loaned to a firm ten per cent, of it^ capital and surplus. An individual member of the firm asked for a further loan of ten per cent. Opinion: The further loan to such individual member of the firm would be excessive and violative of the National Bank Act. Vol. 4, p. 758, June, 1912. 110 NATIONAL BANKS 887 881. (W. Va.) Section 24 of the Fed- eral TJeserve Act empowering national banks to make loans on farm lands in an aggrcgaie sum equal to 25 per centum of its capital and surplus does not modify Section 5200, U. S. Revised Statutes, limiting loans to a single borrower to 10 per cent, of capital and sur- plus and no national bank may loan to any person upon real estate more than 10 per cent, of its capital and surplus. Vol. 11, p. 559, April, 1919. Loan on certificates of deposit 882. (N. J.) There is nothing in the National Bank Act to prohibit a bank from loaning money on the security of its own cer- tificates of deposit. It cannot, however, loan on the security of its own shares of stock. Vol. 2, p. 374, "March, 1910. Power to donate services of clerk 883. (111.) The right and power of a national bank to furnish such gratuities as check books, pass-books, calendars and other articles of utility has never been brought into question. Should a dissatisfied stockholder complain, the furnishing of such gratuities to a reasonal)le extent would proliably be held within the implied powers of the bank, as in case of gratuitous collections. It has been held an executive officer has no power to do- nate the bank's funds for erection of a paper mill. The donation of services of a clerk to assist in conduct of a public sale as a means of getting business for the bank might be witliin its implied powers ; at all events not a serious abuse of power. Vol. 5, p. 063, April, 1913. Power to loan on mortgage See S.jC), 8S1 884. (W. Va.) A customer borrowed money from a national bank, and e.xecuied a mortgage as security. The customer later became bankrupt. Opinion: The security is valid as against the borrower and his credit- ors, and only the Governnient can attack the transaction as an ultra vireff act. Tiie liank can hold the security as against the trustee in liankru|)tcy of the borrower. Vol. 4, p. 755, June, 1912. National bank as surety 885. (Tenn.) -\ national liank has no power to become guarantor of the obligation of another person in which it has no inter- est. The individual members of the board of directors of a national bank desiring to be- come sureties on the bond of a county oflRcial have the power so to do, but cannot bind the bank upon such a contract. A'ol. G, p. 212, Sept., 1913. 886. (W. Va.) A national bank as pledgee of certain stock certificates pledged as collateral becomes surety on an indemnity bond authorized by its directors to enable the owner to obtain duplicate for the stock col- lateral, which has been stolen from the bank. Opinion: The execution of such indemnity bond by the bank either as principal or surety was probably within the power of the bank and even if ultra vire.r •S?00 to Bank A for borrowed money; Bank A indorses same and pledges to Bank B as collateral for a note. Afterwards X pays Bank A $100 on the note and takes cashier's receipt for same. Bank .\ does not advise Bank B to make proper credit on note. Bank A becomes insolvent. Opinion: Assuming the note was transferred by Bank A to Bank B before maturity, the paynjent l)y the maker to Bank A was inelTective against Bank B, which can recover the full amount of the note from the maker, or so much thereof as is nec- essary to satisfy the lien. Vol. 8. p. 147, Aug." 1915. 970. (Md.) A bank discounted for its customer three notes, the proeeetis of which were credited to the indorser's account. At maturity of the notes payment was refused by tiie makers, who claimed fraud. The in- dorser cliecked out the credit he had received from the bank, hut has a de|>osit with the hank sutlicient to meet the notes. Opinion: Tlie bank at maturity of the notes can enforce payment of the nuikers free from the defen.se of fraud in procurement, provided the pro- ceeds credited to the indorser were withdrawn prior to maturity. The bank is not obliged to apply a sutlicient deposit of the indorser in ."Satisfaction of the notes, in preference to suing the makers. Vol. 8, p. 706, Feb., 1910. 110 971 DIGEST OF LEGAL OPINIONS 971. (Mich.) A gave B in part pay- ment fur real estate two time notes bearing interest at the rate of six per cent. On A's default at maturity B wrote A that he would charge 7 per cent., because the payments were not met when due. A did not respond to the letter. B seeks to enforce the payment of seven per cent, interest, and until such payment refuses to give A a deed. The agreement was that deed should be delivered when notes were paid. Opinion: B has no right to enforce payment of seven per cent, interest, because there was no binding agree- u\Qi\t between A and B changing the original contract, and has no right to refuse deed when balance of principal and six per cent, interest are tendered. Under the laws of Michigan it is lawful to contract for a seven per cent. rate. Vol. 4, p. 375, Dec, 1911. 972. (Miss.) The maker and indorser of a note having become liable thereon, the holder desires to know which to sue first to recover the money. Opinion: Under the law merchant, the holder of an indorsed instru- ment upon which the indorser has been duly charged, can sue both maker and indorser in separate actions at the same time or either, at his election, but cannot join both in the same action in the absence of statutes authorizing such joinder, which have been passed in many states. Negotiable Instruments Act does not alter the rules as to remedy "by suit. The Code of Mississippi denies the right of sep- arate action against indorser where the maker is a resident of the state and requires joinder of maker and indorser in the same action. Vol. 10, p. 122, Aug., 1917. Governed by law of place where payable 973. (111.) Where a note is made in one state or jurisdiction and is payable in another, the law of the place where payable governs the instrument. Vol. 6, p. 213,' Sept., 1913. Note with impossible date 974. (Ga.) A bank receives for collec- tion a note reading "February 30th after date I promise to pay." The collecting bank in- quires as to the liability of the maker, and whether if collection is made and the maker later discovers the error in date and contends that it was collected illegally, the collecting bank would be liable. Opinion: The note is not illegal or void, but is payable on the near- est date of the same month, namely February 28. Vol. 1, p. 407, May, 1909. Joint and several notes Sec 092 975. (Ga.) At common law, a note drawn *'We promise," etc., signed by two or more is joint only, but "1" promise, so signed, is joint and several. By statute in some states a joint note in form is made joint and several. In absence of statute, bank desiring joint and several note should have it read "We or either of us," or "We jointly and severally" promise. Vol. 6, p. 215, Sept., 1913. 976. (111.) Note reading "I" promise to pay, signed by two or more makers, is joint and several under the law merchant and Ne- gotiable Instruments Law and is a better form from the standpoint of the holder than one reading "we" promise to pay, which at com- mon law is a joint note only. Vol. 5, p. 109, Aug., 1912. 977. (W. Va.) A note written "We promise to pay" is joint only, in the absence of a statute making it joint and several and all the makers must be joined in an action thereon, but each maker is liable for the full amount. Vol. 6, p. 756, May, 1914. Judgment notes 978. (Del.) A note contains a clause confessing judgment if payment is not made at maturity, and an express waiver of de- mand, protest and notice embodied in the in- strument itself. Opinion: The note is valid and negotiable under the Negotiable Instru- ments Law, and neither demand nor notice is necessarv to hold indorsers. Vol. 4, p. 493, Feb., 1912. 979. (Pa.) A form of note, submitted on the question of negotiability, contains a stipulation in addition to the promise to pay, that the maker will "confess judgment for the above sura with 5 per cent, added for col- lection fees." Opinion: Where a promissory note contains a clause authorizing confession of judgment without the restriction "if not paid at maturity" so that thereunder judg- ment may be entered at any time, negotiabil- ity of the note is destroyed. The Negotiable Instruments Act declares that negotiability is not affected by a provision which author- izes confession of judgment if the instrument is not paid at maturity and a note conforming to this provision would be negotiable. Vol. 11, p. 669, June, 1919. 980. (Pa.) A, who borrowed $5,000 from a bank, executed a promissory note for 120 NOTES [989 $5,000 and a judgment note for a like sum. After he had paid $3,000, he requested a new loan of $3,000. The bank questions the ad- visability of taking a new judgment note or of permitting the old judgment note to cover the old and new debts. Opinion: The old judgment note would not be enforceable for the amount of the new loan, and a new judg- ment note should be taken. Vol. 9, p. 241, Sept., 1916. 981. (Pa.) A promissory note contains a clause empowering any attorney of record "to appear for and confess judgment for the above sum, with or without declaration, with costs of suit, release of errors, without stay of execution.^' Opinion: The provision would destroy negotiability of the note, as there- under judgment could be entered up before maturity. Such notes were held non-nego- tiable in Pennsylvania before the Negotiable Instruments Act, and that act makes the note negotiable only where the clause authorizes confession of judgment "if the instrument be not paid at maturitv." Vol. 7, p. 895, Mav, 1915. 982. (Pa.) A clause in a note authoriz- ing confession of judgment "at any time" de- stroys its negotiability. A surety consenting to the entry of judgment prior to maturity is not discharged by such entry. Vol. 7, p. 306, Nov., 1914. 983. (Pa.) When a note contains a judgment clause constituting an immediate confession of judgment, upon which judg- ment could be entered before maturity, it is non-negotiable, both under decisions in Penn- sylvania and under the Negotiable Instru- ments Act. Vol. 4, p. 374, Dec, 1911. 984. (Pa.) A and B borrowed $1,000 from S, giving therefor a note containing power to confess judgment, a seal being op- posite their signatures as makers. C signed tlie note for acconnnodation only and no seal follows his name. A and B liavo as- signed and C contends that he cannot be held because his signature was not under seal. Opinion: The validity of a judgment note is not affected bv the fact that it is not given under seal. Vol. 4, p. 156, Sept., 1911. Liability of surety 985. (Tex.) A signed a {jroniissory note in favor of a bank, whicli discounted it for him. The understanding witli A was that B would also sign as surety, but B was not pres- ent at tlie time. Later B did sign as surety. On A's failure to pay, payment is sought to be enforced against B. Opinion: B's signa- ture is without consideration and not binding unless made in pursuance of a promise made in advance of discount. Vol. 8, p. 145, Aug., 1915. See 67, 68, 69, TOO. t»82. Maturity of notes 986. (Miss.) The rule of the law mer- chant is that the term "month" in a bill or note means a calendar and not a lunar month. A note dated January 31st payable in one month, fixed, after date, matures on Febru- ary 28. The common law rule is tiiat when the date of maturity falls on a Sunday or hol- iday it is pavable on the next succeeding bus- iness day, but if the instrument carries grace, it must be presented on the business day pre- ceding. The due date of holiday maturing paper is now quite generally regulated bv statute. Vol. 1, p. 297, Feb., 1909. 987. (Neb.) Under the law merchant and the Negotiable Instruments Act, in com- puting the time an instrument lias to run, the day of the date is excluded and the day of the payment is included. A note dated January 1, 1915, given for one vear, i< pavable Jan- uary 1, 1916, not December 31, 1915. Vol. 6, p. 759, May, 1914. 988. (N. Y.) A note dated December 29, 30 or 31, payable two months after date, falls due on February 28, or in leap year. February 29. It is the rule of the hiw merchant that when a note payal)le one or more months after date is dated on a day of the month which has no corresponding day in tlie month of maturity, the day of maturity is not carried over to the following montli but falls on the last day of the month in whicli it is i)ayablc. Vol. 10, p. 715, April, 1918. 989. (Pa.) A provision in a collateral note authorizing the holder to demand addi- tional security from time to time and in de- fault thereof immediately maturing the note. destroyed negotiability under the majority of earlier decisions, as it made the note uncer- tain as to amount and time of payment. Since the enactment of the Negotiable Instru- ments Law, the question of nrgotinbility is still doubtful, except in Wisconsin, where a special provision of the Negotiable Instru- ment.s Law makes such a note negotiable, and it would be safer for a bank to regard such note non-negotiable until the question is de- cided. Where such a note is held negotiable and is indorsed, the question of precii^e date {,f maturitv. whether the note immediately 121 9901 DIGEST OF LEGAL OPINIONS matures upon default or only at tlic o])tion of the holder, is important (1) as respects the rights of suhpcqucnt purchasers (2) as to charging indorsers. There is a difference between the Wisconsin and federal courts upon this question. Vol. 2, p. 533, June, 1910. See 893, 893, 895. Note collected by agent without authority 990. (Okla.) The purchaser of a cream separator gave the company selling the same his note of $60, The company's agent, who liad authority only to sell, collected payments on the note, giving a receipt therefor, and did not account to his principal. The com- pany sought to hold the purchaser liable on the note. Opinion: Authority to the agent to sell did not include authority to collect the note unless the company intrusted the agent with the possession of the note. Payment to the agent was at the purchaser's risk, unless he can prove that the agent had actual or os- tensible authority to receive payment without having possession of the note. Vol. 7, p. 35, July, 1914. See 671 et seq. Renewals 991. (Fla.) Where there is a binding agreement supported by a valid consideration between the holder and maker to extend the time of payment of a note, the extension is just as bincling if the contract is evidenced by indorsement on the note and the giving of a receipt for the interest for the extended per- iod, as if a new note is taken in renewal. The effect of such an agreement indorsed on the note is to postpone the holder's right of action and the commencement of the running of the statute of limitations until expiration of the period for which extension is granted. Vol. 10, p. 597, Feb., 1918. 992. (Mich.) A and B sign a joint note for $500, due in three months. A signed a new note in renewal, but B being absent was unable to sign. Both notes were retained. Opinion : The new note does not operate as a payment of the original, but only as a sus- pension of the debt evidenced thereby. Vol. 7, p. 997, June, 1915. 993. (Pa.) A, B and C were makers of a note held by a bank. The bank, not wish- ing to carry the note as overdue paper, caused A and B to execute a new note in renewal of the indebtedness, which C, because of sick- ness, was unable to sign. The bank did not destroy the old note but kept both. Opinion : Where a new note is given in renewal of an old note and the latter is retained, the weight of authority is to the efTect that the old note is not extinguished unless the intention is to accept the new note in satisfaction and dis- charge of the first. Vol. 6, p. 272, Oct., 1913. 994. (Wis.) A gave a note to B Corpor- ation for goods sold, and at maturity by ar- rangement with B for renewal of part of the debt, paid the note to the holding bank and executed a new note for a less amount. The B Corporation indorsed and discounted the renewal note. Opinion : The transaction con- stituted a renewal and not a payment, and the new note is based on the same considera- tion as the old note. The indorsement of the B Corporation is therefore not for accommo- dation, and the bank can hold the corporation in the event of non-pavment bv the maker. Vol. 8, p. 323, Oct., 1915. Use of seal See 984 995. (Fla.) A note is drawn by the maker, payable to his own order, and in- dorsed by him to another. It provides for costs of collection, attorney's fees, and con- tains provisions waiving the benefit of certain laws intended for the benefit of the obligors. A seal is attached to the maker's name. Opinion: The note is negotiable under the Negotiable Instruments Law, although at common law the seal would destrov the nego- tiability. Vol. 4, p. 95, Aug., 1911. 996. (Pa.) It is a well settled doctrine that a corporation may make promissory notes and simple contracts without affixing its corporate seal. LTnder the law merchant, the affixing of a seal to an individual note de- stroyed its negotiability but this rule was generally held not to apply to corporate notes under seal. Under the Negotiable Instru- ments Act the validity and negotiable char- acter of an instrument are not affected by the fact that it bears a seal. Vol. 5, p. 523, Feb., 1913. 997. (Pa.) A seal is not necessary to the validity of a corporation note, but the use of a seal does not affect its negotiability. Un- less the charter or governing statute requires it, the act of a corporation need not be evi- denced by its corporate seal, except where a seal would be required in the case of indivi- duals. Vol. 5, p. 523, Feb., 1913. 998. (S. C.) At common law a note of an individual under seal is not negotiable, but under the Negotiable Instruments Act, the nee:otiabilitv is not destroved bv the ad- dition of a seal." Vol. 6, p. 274, Oct., 1913. 122 NOTES 1006 Statute of Limitations on demand note 999. (Cal.) In California the Statute of Limitations begins to nm against the maker from the date of a demand note, not from the date of its apparent maturity, and the note is outlawed four years from date. Vol. 9, p. 825, April, 1917. 1000. (La.) In Louisiana, the Statute of Limitations begins to run from the date on a demand note and not from demand, such being the rule in most other states and the note is outlawed unless an action is brought within five years from the date. Vol. 6, p. 757, May, 1914. 1001. (N. J.) A corporation issued its demand note in 1911, there being several in- dorsers each waiving presentment, demand and notice of protest. No demand upon the instrument Avas made until 1918. Are the indorsers liable? Opinion: The six year lim- itation provided by the New Jersey Statute of Limitations will not only bar recovery from the makers but also the indorsers. The statute begins to run from the date of the instrument, whetlier or not it draws interest. Vol. 11, p. 171, Sept., 1918. 1002. (N. Y.) A bank received as se- curity for a loan of $15,000 made to a fruit growers' association, thirty demand notes of $500 each, payable to the order of the asso- ciation. The bank raises three questions. First: Should a place of payment be desig- nated in the notes ? Second : How long is the demand note good? and third: Would a de- mand note draw interest where it contained no provision to that effect? Opinion: Tt would be preferable as a matter of conven- ience to have the demand note payable at the bank. The Statute of Limitations begins to run \ipon a demand note from its date and an action is barred after six years. Where the note makes no provision for interest the rule in New York is that it does not draw in- terest before demand or commencement of an action. Vol. 11, p. 670, June, 1919. 1003. (N. Y.) Under the Statute of I>im- itations in New York the person wlio guar- antees payment of a note and any renewal of the same is liable for six years from the time the cause of action on tlie note accrues, which would be the date of maturity of the note — or of the renewal if such was the case. The guaranty of payment of a demand note would run six years from the time of delivery. Vol. 4, p. 28, July, 1911. Notes containing words "with exchange" 1004. (Ind.) A note for .^'i.oUO wjis drawn and made payable at one and the same place "with exchange," without designating that the exchange is on another place. The full amount of the note was paid witiiout de- duction. Opinion: The words ''with ex- change" in the note were meaningless and no exchange charges were collectible from the payor bank. Vol. 0, p. 701, May, 1914. See 300, 3(J1, 362, 1061. Indorser released by extension of time 1005. (Ore.) A gave B his nt-gutialde promissory note, due in six months, jiaynient of which was guaranteed by B, who dis- counted it at the bank. At maturity the bank extended A's time of payment thirty days. The note also contained the accom- modation indorsement of C. Opinion: An indorser who guarantees payment is second- arily liable under the Negotiable Listruments Act and if a binding extension of time is granted to the principal maker without his consent he is discharged from liability. Under the Negotiable Listruments Act a surety who signs as maker is not discharged by such ex- tension, the common law being changed in this particular. Vol. 9, p. 657, Feb., 1917. See 964-967. Accommodation maker not released by extension of time 1006. (S. Dak.) A note ha.l lioen signed bv two jiarties. one who received tiie money, the other acting as accommodation maker. The note being past due, the payee took a new note from the first party. Does the ex- tension of the time of paNTnent release the accommodation maker? Opinion: The doc- trine of the hiw of suretyship that a binding extension of time by the crnlitor to the prin- cipal debtor releases a non-consenting surety has, according to a number of authorities, been abrogated by the Negotiable Instruments Act where the surety signs the instrument as one of the makers. This point has not been decided in South Dakota, but according to the weight of authority the accommodation maker being primarilv liable would not be re- leased. Vol. 11, p. 213, Oct.. 1918. 123 1007 NOTES PAYABLE AT BANK For Stoi)j)in;,^ J'iij'inout of iS'otes i'liyablc at Jiuiik, Suo l2l'.)-\252 Equivalent to order to pay at maturity See 772, 1212, 1330 NoTK: TIic Ncpjotiablc Instnimont.s Act, Sec. 87, ])rovide.s: "U'lierc the iiislnmiiMit is made ])iiyivl)le at a bank it is equivalent to an order to tlie l)ank to pay the same for the account of tlio jirincipal debtor thereon." The Negotiable Instruments Act has been passed in all the states except Georgia. As passed in Illinois, Nebraska, and South Dakota, however, the above provision is omitted; in Kansas, the section, while originally enacted, was repealed by chapter 94, Laws of 1915, and in Minnesota the word "not" was in- terpolated. In tliose states, therefore, the bank is not authorized or obliged to pay its custom- er's note, made payable at the bank (as indicated in the opinions digested below), without express instructions from him. In all other Negotiable Instruments Law states it is so authorized and obliged. In Missouri, the legislature by amend- ment in 1909, added the following at the end of the Section : "But where the instrument is made payable at a fixed determinable future time, the order to the bank is limited to the day of ma- turity." 1007. (Mo.) Under the rule of the Ne- gotiable Instruments Law a man who makes his note payable at his bank thereby orders it to pay it at maturity and the bank is obliged to carry out this order, when in suffi- cient funds, the same as if the order was by check. Vol. 3, p. 276, Nov., 1910. 1008. (N. C.) Under the Negotiable Instruments Law it is probable that the au- thority of a bank to pay a time instrument, payable at the bank, is limited to the day of maturity only, although the point lias not yet been passed upon in this country. Vol. 3, p. 524, March, 1911. 1009. (Okla.) In Oklahoma, under the rule of the Negotiable Instruments Law, a depositor who issues his note payable at the bank wherein he keeps an account, thereby orders the bank to pay the same at maturity. It becomes the duty of the bank, if in funds, to pay the note, and the bank incurs no lia- bility to the depositor for so doing, even though he afterwards objects to the payment and claims he had good reason for having payment of the note refused. Vol. 3, p. 336, Dec, 1910. 1010. (Pa.) A note is made payable at a bank. At maturity the account is good for the amount. No order has been given not to pay. The bank inquires whether a specific notice must be given the bank by the maker to entitle it to pay the note. Opinion : LTnder the Negotiable Instruments Law it is the au- thority and duty of a bank to pay a customer's note made payable at the bank without ex- press instructions from the customer. Vol. 4, p. 304, Nov., 1911. Express instructions to pay See 425 1011. (Cal.) Notes made payable at a California bank, where the maker had suffi- cient funds, were forwarded to the bank for collection. The bank inquired of the maker by mail and telephone whether it should pay or refuse payment but received no response. Opinion: The law in California is uncertain whether the note operates as an order or au- thority to the bank to pay and charge to the maker's account, or whether the bank has no right to do so in the absence of express in- structions from the maker. Vol. 7, p. 383, Dec, 1914. Note: In 1917, California passed the Nego- tiable Instruments Act, Sec. 87 of which (Civ. Code §3168) provides: "Where the instrument is made payable at a bank it is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon." See note under heading "Notes payable at bank." 1012. (Cal.) ^Miere A and B have a joint account in bank payable on presenta- tion of pass-book, and A makes her individual note payable at bank. Opinion: That bank, holding note for collection at maturity, has no right to charge same to joint account, but should protest unless funds to pay note are taken out of joint account by A on presen- tation of pass-book or are otherwise provided by A for purpose of meeting the note. Vol. 6, p. 96, Aug., 1913. 1013. (111.) In Illinois the Negotiable Instruments Law omits the provision 'Where the instrument is made payable at a bank it is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon" which is contained in the uni- form law of other states. Under the judi- cial decisions of Illinois it would seem that a bank has no authority to pay its customer's note made payable at the bank, unless express- ly ordered to do so by its customer, the note itself not constituting such order. Vol. 3, p. 337, Dec, 1910. 1014. (Minn.) Where customer makes note payable at bank it is bank's duty, under Negotiable Instruments Act, to pay and charge same up to customer's account with- out special order. In a few states, however, including Minnesota, the rule of the Nego- tiable Instruments Act has been changed and 124 NOTES PAYABLE AT BAXK 1023 bank should not pay without special order from customer. Vol. 10, p. 854, June, 1918. 1015. (Miss.) In states having the Ne- gotiable Instruments Law (\.<-e !U)7 1032. (Neb.) B and C made a note payal)U' to A. At maturity B refused to pay. Six months later A demanded payment from C, who refused on the ground that he received no notice of dishonor. Oinnion: No notice was required to bind C, who is one of the makers, even though he is suretv for another maker. A'ol. 4, p. 94, Aug., 1911. 1033. (S. C.) Notice of dishonor is not required to be given the maker of a note, and a joint maker, though a surety, is not entitled to such notice. Vol. 6, p. 687, April, 1914. Waiver of notice of dishonor See 1170 et scq 1034. (Mass.) Under the Negotiable Instruments Law a waiver of demand and notice if embodied in the instrument binds all parties, but where it is written above the signature of an indorser it binds him only. The law does not recpiire the waiver to be handwritten. Vol. 9, p. 415, Nov., 1916. 1035. (S. C.) In the body of a note was inserted "notice of ])rotest is hereby waiveriniary rigid to have the money applied in payment of the chattel nmrtgage note, but where the bank ap|)lied the {)ayment upon another debt, asc(|uiescen('e bv the debtor ratified such ap- plication. Vol". 7, p. 37. July. 1:M I. Conditional payment by check 1050. (N. Y.) .\ check taken a» abso- lute payment of a note will operate to extin- guish the note, but, in the absence of an agreement, the giving and receipt of a check is usually considered a conditional payment onlv and not ab.'iolute until the check itself is paid. Vol. '\ p. 829, June, 1913. 1051. (Wis.) A check was received by a bank to take up a note held by it due on 129 1052 DKii'is^r oi' lI':(;ai. oimxions the fitli. The noto was rctaiiul until jmy- iiiont of the check on the 7th. Oijinioii: The checjk was received as conditional payment, and the stainpin*^ of the note "paid on the 7th" is correct as indicating the date of ac- tual i)avnicnt. Vol. 0, p. J)4, Aug., 1913. See 11(5'). Payment by mistake Sec 4-24, 4S4, 4S.j, (iUi, (V.U 1052. (111.) A customer handed in to liis hank several checks aniountin_ti; to several hundred dollars, and from this amount a note and interest was deducted and a halance struck in favor of the customer, which was paid over. It was afterwards discovered that the balance was incorrectly figured at an ex- cess of $30. Opinion: The bank can recover the money as being paid under a mistake of fact. The fact that the error was made in figuring the balance makes the case stronger for the bank than if the balance was correctly struck and the mistake occurred in paying over the cash, for the teller's testimony of over-payment would be supported bv the orig- inal figures. Vol. 4, p. 493, Feb.,"l912. 1053. (Mont.) A bank in Montana re- ceived from a Kentucky bank a sight draft for $72. G7 with a bill of lading attached covering a balance claimed due on a shipment of liquor from a Kentucky distillery to a local liquor dealer. The local dealer paid the Montana bank the amount, surrendered the bill of lading and obtained his goods. The Montana bank by mistake sent its draft pay- able to the distillery instead of to the bank. The distillery under the misapprehension that the draft came from the local dealer, instead of turning it over to its bank or returning it to the Montana bank, indorsed it in blank and returned it to the local dealer. The dealer cashed it at the Montana bank and held the money, claiming that "the distillery was in- debted to him for $68. The Montana bank wishes to be advised. Opinion: The local dealer is not a holder in due course and the Montana bank has a right of recovery of the money paid to him under the rule that money paid under mistake of fact is recoverable. Vol. 10, p. o9G, Feb., 1918. 1054. (Mont.) A bank in the ordinary course of business pays to a bona fide holder a check drawn on it, under the mistaken be- lief that the drawer had funds when he had not. Opinion : Payment cannot be recovered, and the fact that the holder would be in no worse position if com])elled to refund than if payment had not been made does not author- ize a recovery. Vol. 10, p. 377, Nov., 1917. 1055. (Neb.) A will bequeathed a leg- acy (o John iirown of Howard, 111,, the real legatee intended being John Brown of Hall, III., who had never lived at Howard. The executrix notified John I>rown of Howard, sending him a receifjt and instructing a bank to forward him the amount upon receiving the receipt. The instruction was cariied out by the bank. Opinion: There is no liability on the part of the bank but the executrix is liable to the real legatee, unless the misde- scription of his address in the will should be held sufficient to estop him from question- ing the validity of the payment. Vol, 10, p. 715, April, 1918. 1055. (Pa.) A deposit of $105 made by one depositor was erroneously credited to an- other depositor, who checked out the amount. Opinion: The bank has a right of action against the custom.er to recover the amount of the overdraft with interest from the time overdrawn. Vol. 7, p. 492, Jan., 1915. See 484, 485. 1057. (Tex.) A bank collected A's bill of lading draft from B and remitted the pro- ceed by mistake to C, who was a creditor of B on open account; C took the money and applied it on B's debt and thereafter settled with him and relinquished security for in- debtedness. The bank paid A and having paid twdce made demand on C. C refused to refund, claiming that it is B's duty to return the money to the collecting bank. Opinion : It is a general rule that money paid under a mistake of fact may be recovered back, and unless C received this money in the honest belief that it was intended as a pav'ment on account of B's indebtedness and on faith thereof surrendered the security to B, C would be liable. Vol. 8, p. 34, July, 1915. Payment of overdrawn letter of credit 1058. (Kan.) A bank issued a letter of credit for $100, promising to honor drafts to that amount. The letter required that the amount of each payment be indorsed on the letter and negotiation of the draft to consti- tute a guaranty that the requisite indorse- ment Avas made and that all drafts "be drawn against our letter of credit No. 101." Five drafts of $25 each were drawn and paid, creating an overdraft of $25. The first draft stated it was drawn against the letter; the next three did not so state and the letter was attached to the last draft drawn. Opinion: The bank has recourse upon its customer for the overdraft but will have no recourse against anv of the cashing banks unless it 130 PLEDGE AND COLLATERAL 10G3 can prove the drafts were negotiated against the letter and the requirements not complied with. The bank should have refused pay- ment of drafts not indorsed as drawn against the letter, for otherwise such drafts could be negotiated witliout showing the letter. Vol. 6, p. 573, Feb., 1914. 1059. (Okla.) A bank issued a general letter of credit authorizing drafts to a certain amount to be indorsed upon the letter of credit. The question is raised as to whom would be the loser, if another bank m.iking a payment on the letter of credit neglected to make a notation of this payment and through this neglect gave the holder an opportunity to draw more than the face of the letter of credit. Opinion: The bank issuing the letter of credit is liable to the innocent purchaser of a draft drawn against the latter and within its amount, notwithstanding the holder of the letter has previously exhausted the credit by drafts not so indorsed. It would be liable for an amount within the unindorsed total of the letter of credit, although it had paid the full amount of the letter upon drafts which had not been indorsed thereon. In order to safeguard the issuing bank from being misled into paying an ordinary draft i)y the drawer of the letter but not indorsed there, the only protection would be to require that drafts drawn against the letter should specify upon their face that they were so drawn and that their amount had been indorsed upon the letter; the bank refusing to pay such drafts as did not contain this statement. The draft might contain a clause : "Drawn against your letter of credit No and the amount of this draft has been indorsed there- on." If the draft itself contained such state- ment, this would be an express warranty by the purchaser to the drawee of a material fact which, if false and the drawee relied thereon to his injury, would entitle him to recourse upon such purchaser. Vol. 11, p. 494, March, 1010. Partial payment S,-.. 771. <)Glt, 11^8, 1211 1060. (Mo.) A credit of $1,000 on a note as part payment was in the maker's handwriting. The executor of the payee doubts that such payment was ever made, and inquires iiow to proceed to overcome the indorsement. Opinion : The burden of proof is on the maker to establish the fact of part payment, unless the indorsement is in tlie liandwriting of the creditor. Vol. 5, p. 517, Feb., 1!)i:]. Effect of words "with exchange" 1061. (Conn.) A draft payable in Phil- adelphia "with New York Exchange" was presented for payment. The acceptor ten- dered the face amount in New York exchange, which was refused by the collecting bank. The collecting bank considered "with New York Exchange" meant "plus New York Ex- change" and required the payment of the cost of exchange on New York. Opinion: The draft called for payment of tiie face amount plus the cost of exchange on New York, and the collecting bank would be jus- tified in protesting and returning the draft. Vol. (), p. fi;n, :March, 19 H. See 3C)0, ofil, 302, 1004. PLEDGE AND COLLATERAL Accounts receivable as collateral security 1062. (Pa.) To constitute a valid pledge of an account receivable there must be an assignment in writing, mere delivery of a copy of the account being insufficient. In case of such assignment of accounts, tbe bank is safe if the debtor is notified before ]iay- nent to the assignor; or where the borrower acts as the lender's agent to colloct tiie ac- counts, a bond or security for tbe fidelity of the agent should be required. Where the as- signment is for the ])urpose of securing credit and not for a prior debt, the bank in the event of the borrower's bankruptcy, would have a prior claim upon such accounts for the amount of its advances ; but wliere the as- signmtMit is made within four months of the borrower's l)ankruptcy for the purpose of ise- (iiring an existing debt, such assignment would pnibablv be void as a preference. Vol. 8, p. (507. Jan., 101 fi. Application of surplus security pledged for specific debt 1063. (Ala.) It is a well established rule at cDniinon law that in the absence of an agreement to the contrary, securities pledged to a bank to secure a specified demand cannot be held for other demands though against the same debtor. It is owinir to such rule that clauses are inserted in collateral notes makinj? the provision that such collateral is not only 131 1064 DIGEST OF LEGAL OPINIONS pledf^c'd for a particular debt but for any otbcr liability of tbe pledgor. Vol, 3, p. 10, July, 1910. 1064. (Pa.) Tbe following clause in- serted in a note is legal and can be enforced : *'aud it is. bcreby agreofl tbat sucb surplus, or any excess of collateral upon tins nolo, sliall be applicable to any other note or claim against beld by said bank." Tbis form would be improved by adding a provision that the collateral might be held and applied upon any other note or claim against the individual maker or against any firm of which he is a member. Vol. 5, p. 169, Sept., 1912. 1065. (Pa.) A bank held a firm note which was secured by collateral and also held a past due note of a third person which bore the indorsement of one of the firm members. The firm became bankrupt and the bank, after selling the collateral in satisfaction of the firm debt, attempted to apply the surplus on the indorsed note. Opinion: The bank can- not appropriate the surplus of the collateral upon the independent debt of the individual member of the firm, in the absence of an agreement. Vol. 1, p. 202, Dec, 1908. 1066. (Tenn.) Bank A borrowed $5,000 from Bank B, executing its note therefor, and pledging $10,000 as collateral in good receiv- ables. The note did not provide that the col- lateral was to secure "this or any other in- debtedness that may be incurred." Bank A overdrew its account by $5,000 and became bankrupt. Bank B desires to apply all the proceeds of the $10,000 collateral in payment of the overdraft as well as the note. Opin- ion ; The collateral being pledged for a speci- fic debt, Bank B cannot in the absence of an agreement apply the surplus to another in- debtedness. Bank B cannot claim the sur- plus under the doctrine of banker's lien, be- cause the collateral was not received in the ordinary course of business but for a specific purpose. Vol. 8, p. 252, Sept., 1915. Bond for title given as security 1067. (Ga.) A purchased a farm from B, giving him cash and notes therefor, and re- ceiving from B a bond for title. A transferred the bond to a bank as security for a loan. After the bond and transfer had been duly recorded, the bank temporarily surrendered the bond to A but A wrongfully disposed of it. B was notified of the transfer and the recording clerk was also notified not to can- cel the entry. Opinion: The bank has not lost its security and is protected in such bond as against a subsequent innocent purchaser or assignee of the bond. Vol. 5, p. 103, Aug., 1912. Corporate stock as collateral Sec 403 1068. (N. Y.) A bank holds fifty shares of common stock of an industrial corporation as collateral. Some time later, without knowl- edge on the part of the bank, the corporation issues preferred stock to the original holder, which depreciates the value of the collateral. The bank seeks to protect its rights as pledgee. Opinion: Where common stock of an industrial corporation is pledged with a bank as collateral, the bank to protect its col- lateral and right to dividends should either have the stock transferred or notify the cor- poration of the pledge; for otherwise, if the corporation without notice of the pledge, issues preferred stock to the original holder which depreciates the value of the collateral and the latter negotiates the stock, the trans- feree or pledgee thereof w^ould have a superior right thereto than the original pledgee. Vol. 11, p. 606, May, 1919. Enforcement of collateral notes 1069. (Iowa.) Bank loaning $250, and taking as collateral an unmatured negotiable note of third person for $500 is a holder for value to the extent of the amount advanced with interest and can enforce the collateral note for that amount, free from defenses available to the maker against the payee. If the collateral note is not subject to defense the full amount is recoverable, the bank being accountable for the surplus to the pledgor. Vol. 9, p. 416, Nov., 1916. 1070. (La.) X issued his negotiable note of $200 payable to A, which was in- dorsed to B as collateral. X paid A $100 on the note, taking A's receipt, but A failed to advise B to make the proper credit on the note. A failed and B seeks to collect the full amount from X. Opinion : Payment by X to A was inefl'ective against B, who can recover the full amount of the note or so much there- of as will satisfy his lien. Vol. 8, p. 147, Aug., 1915. 1071. (Minn.) A wholesale house de- livered machinery to a retail firm, title to which was to remain in the former until paid for by virtue of a contract which was put on record. The firm received several notes from various purchasers of the machinery, which 132 PLEDGE AND COLLATERAL 1078 notes it pledged as collateral security for a loan from the firm's bank. The notes con- tained statements to the effect that they were in payment for a plow or other specified ar- ticles. The borrowing firm became insolvent. The bank seeks to enforce the notes and the wholesale house, as owner of the machinery, makes a demand on the bank for a portion of the notes. Opinion: The recital in the notes that they were given in payment for certain articles of machinery does not affect their negotiability. The notes are enforce- able by the bank free from any equities and the bank is entitled to the proceeds as against the claim of the owner of the machinery. The fact that the wholesale house held the machinery under contract, which was re- corded, whereby title thereto should remain in the house until the machinery was paid for would not affect the rights of the bank as holder in due course of the collateral notes. Vol. 9, p. 583, Jan., 1917. Liberty Bond as collateral security 1072. (S. Dak.) A bank loaned its de- positor $100, taking his note therefor, pay- able October 23, 1918, and holding his $100 Liberty Bond which he purchased with the money borrowed as security for the note. In view of the fact that his bond is a little below par, the bank seeks to hold $10 of his deposit balance as additional security, while the de- positor seeks to withdraw the entire bahmce. Opinion: A bank which holds the unmatured note of depositor secured by a Liberty Bond, purchased with proceeds of note, cannot re- tain a portion of depositor's balance, before maturity of note, as additional security for its payment, in the absence of express con- tract. Vol. 10, p. 720, April, 1918. Life insurance policy assigned as collat- eral security 1073. (Mich.) The insured and the ben- eficiary assigned a life insurance policy to a bank as collateral. The policy contained a provision that all parties must join in any settlement of the policy. Opinion: Tiie bank holds the policy subject to the right of the insurance company to require all parties to join in the settlement of the policy. Where there exists a disability on tlie part of the beneficiary, the rule varies as to the right of the insured or the beneficiary to make a valid assignment in such a case. Vol. 5, p. 592, March, 1913. Power of attorney to sell collateral 1074. (Pa.) A promissory note was given with collateral security coupled with a power of attorney to the holder to sell the col- lateral. Before the sale the maker died. Opinion: The power of sale, being an author- ity coupled with an interest, is not revoked by the maker's death. Vol. 7, p. 167, Sept., 1914. Sale of collateral on outlawed note 1075. (N. C.) A bank held a note for $300 secured liy a stoc-k certificate with power of sale. The note became outlawed by the Statute of Limitation.^. Tlie bank wishes to sell the collateral and apply the proceeds towards payment of the note in order to re- vive the indebtedness. Opinion: The bank has the right to sell the stock, but the note once outlawed could not be revived by credit- ing the proceeds on the note. Vol. 6, p. 215, Sept., 1913. Securities guaranteed by salesman 1076. (111.) The liability of a bond salesman as individual guarantor of securities sold where he is not interested in the securi- ties beyond his profits on the sale would ex- tend or be limited to the terms of his agree- ment strictlv construed. A'ol. 4, p. 307, Nov., 1911. What constitutes valid pledge Soo -241. 101)2 1077. (Tenn.) A form of pledge of per- sonal proper as security for a loan is legally sufficient in Tennessee where it contains a provision constituting the pledgor the agent of the pledgee to retain possession and care for the property as such agent. To consti- tute a valid pledge there must be delivery of the j)roperty to the pledgee and in some states (Georgia and Kentucky for example) a pledge wherein the pledgor retained posses- sion as agent would be invalid ns against a bona fide purchaser of the projvrty without notice of the i)ledge. But in Tenncpf^ec it has been held the pledgor can holil the prop- erty as agent of the i)le, ]>. 575. Feb., 1014. 1228. (Ohio.) The general rule is that a bank has a right to apply a deposit to the payment of any nuitnred debt due the bank from the depositor. It has been held in Ohio and other states (but the right is denied in many states) that a bank may apply a deposit to the payment of the depositor's indebted- ness not yet matured, provided the depositor is insolvent. Under the Xational Bankrupt Act a bank may set off an unmatured note against the deposit of the maker. Vol. 5, p. 828, June, 1913. 1229. (Pa.) The rule that a bank has a right to set off a deposit against its cus- tomer's matured indebtedness applies equally to his indebtedness upon paper discounted for the customer and paper of the customer purchased from a third person in the usual course of business. The bank purchasing from a third person would have the right to apply the deposit of the maker of a note equally as if it had been discounted for the maker directly, subject, of course, to the limitation that the paper was acquired in the usual course of business and not purchased for the e.xpress purpose of enabling the seller to realize out of the funds of the maker aj)proacliing insolvency. The riglit of set off of unmatured paper upon the depositor's insolvency is not recognized in Pennsylvania. The rule is conflicting in other states but it exists under tiie Xational Bankruj^t Act. It would seem competent for a bank to make an agreement with its customer giving the former the right to such set off. Vol. 10. p, 48, July, 1917. 1230. (S. Dak.) Where a borrower l)e- comes bankrupt, the bank has the right, under the provisions of the Xational Bank- rupt Law, to apply his deposit upon his notes, though unmatured. Aside from the Bankrupt Act, the right of set off of an un- matured note against the deposit upon the insolvency of the maker is recognized in some states and denied in others, but where the right is given by contract it can be enforced. The following form of contract, if inserted in the borrower's note, would protect the bank: "the bank at which this note is payable is hereby authorized, in the event of the maker's insolvency before matur- ity hereof, to thereupon apply any balance in said bank standing to tlie credit of the maker in pavmcnt of this note.'' Vol. 7, p. 221, Oct., lit 14. STOPPING PAYMENT For Revocation of Check by Bankruptcy, 210, by Death. 452 et seq.; by Insanity or In- competency, 84G et seq.; see also 275, 302 Accuracy of notice 1231. (Ala.) In A])ril a customer wish- ing to stop payment on his clieck, notified the bank and described the check as being for $50, payable to John Doe and dated some time in April, the exact date he did not know. A check payable to John Doe for $50 and dated July 2 was presented and paid by the bank. The customer seeks to hold the bank liable for violating his stop order. He claims he omitted to date the check and the payee supplied the date. Opinion: The bank is not liable, as the check was not described witli sufficient accuracy. When stopping pay- ment he did not describe the check as dated, l)ut stated it was dated in April. This mis- description was material. Vol. 9, p. 349, Oct., 191(5. 1232. (Cal.) .\ l)ank having before it an order sto})i)ing payment of a post-dated check, describing the check by name of the drawer, number, date, amount and payee, nevertheless paid the check when presented on the day of its date because the number of the check (12) was different from that (13) given in the stop order. The bank endeav- 151 1233 I)I(;est of legal opinions ored in vain to rcacli the drawer before pay- ment, but construed the order to refer to another cheek. Opinion: Nolwithstandinf,' a mistake in the number of the check, tlic order was sunicient as an instruction to the bank not to pay the presented ciieck. Vol. 8, p. 144, Aug., 1915. Bank's liability for payment 1233. (N. J.) A depositor drew his check and ten days later stopped payment. Through an oversight the bank paid the check. Opinion: The bank is liable to depos- itor for any resultant damage; but if the bank could prove payment had been made to a holder who had enforceable rights against the drawer, probably it would escape liabil- ity. Vol. 5, p. 595, March, 1913. 1234. (Ohio.) A depositor, after his check had been paid and returned to him as a paid voucher, in ignorance thereof, issued a duplicate check and notified the bank in writing not to pay the original. Opinion: The bank is not liable to the depositor because the duplicate is paid. The bank is not chargeable with knowdedge that the original was paid and returned and that the stop payment order was issued in error. Vol. 8, p. 517, Dec, 1915. 1235. (Pa.) A gave B his check which B lost, after he had indorsed it in blank. A stopped payment, but the bank inadvert- ently paid the check contrary to the stop order. Opinion: If check paid to a holder in due course, bank not liable for loss because drawer not damaged, holder having right to enforce payment from drawer and payee and check operating as payment of drawer's debt to payee ; but if check paid to finder or other than holder in due course, drawer's debt to payee would remain and bank would be liable for loss. Vol. 10, p. 118, Aug. 1917. Cashier's and certified checks See 50, 54, 55 1236. (Mont.) A cashier's check upon which there were three indorsements was piir- chased by a bank and presented by it to the drawee, where payment had been stopped be- cause of fraud. Opinion: The purchasing bank has recourse upon the drawer as well as upon the indorsers, provided they have been duly charged. Vol. 7, p. 898, May, 1915. 1237. (Ga.) A bank certified a check for the drawer, who later requested the bank to stop payment, as the agreement was not fulfilled. Opinion: The drawer cannot stop payment as a matter of right, but where the drawer has been defrauded the bank may in some cases comply with the drawer's request and refuse payment upon receiving proper in- demnity against ultimately being com])el!ed to pay the holder. A^ol. 0, p. 750. May, 1914. 1238. (Mo.) The customer of a bank })urchused its cashier's check of $600, pay- able to his order. Afterwards without giving any specific reason he wired the bank a re- quest to stop payment and upon presentment of the check payment was refused and the item protested. Later the bank learned that the customer had delivered the check in some trade and becoming dissatisfied wired the stop payment order. The bank is threatened with a suit by the holder to enforce payment of the check. Opinion: Certified and cash- ier's checks, being used in place of money, the courts refuse, as a general proposition, to per- mit the issuing bank to refuse payment and defend against the holder, even though he has procured the check from the bank's cus- tomer by fraud. In New Jersey, however, it has been held — contrary to decisions else- where — that where a check has been certified for the drawer before delivery by him (as distinguished from certification for the holder after delivery by the drawer) the certifying bank can plead fraud of the holder upon the drawer in defense of pavment; In this case the bank is the primary debtor upou the check and is liable thereon to the holder who has the legal title by indorsement. Vol. 11, p. 387, Jan., 1919. 1239. (N. J.) A contractor delivered his certified check for $1,000 as liquidated damages prior to entering upon a contract for municipal improvements. The contract was offered to him, but he refused to sign and do the work. His certified check was deposited and returned by the bank stamped "payment stopped." The municipality seeks to recover the amount. Opinion: Where check certified for the drawer and payment is stopped by the bank at the instance of the drawer, the bank can defend against a fraudulent holder, but where the certified check is delivered as liquidated damages upon failure to perform a contract according to bid, the certifying bank and drawer are both liable thereon. Vol. 10, p. 125, Aug., 1917. 1240. (N. Y.) A firm in New York re- ceived a certified check on a New Jersey bank in payment of merchandise. The check was 152 STOPPING PAYMENT 1247 forwarded through a local bank, and when presented payment had been stopped by the maker. Opinion: The courts generally hold that after a bank has certified a check, whether for the drawer or the holder, it is obligated thereon as for so much money, and cannot interpose, in defense of payment, an equity of the drawer against the payee or holder. In New Jersey, however, where a check is certified for a fraudulent payee, the bank is liable to him and cannot plead fraud upon the drawer in defense; but where the check is certified for the drawer the bank can refuse payment and plead fraud of the payee in obtaining check from drawer in de- fense of liability to payee. Vol. 11, p. 440, Feb., 1919. 1241. (Pa.) A purchases goods from B giving in payment his check and B procures its certification. B fails to deliver the goods and A requests bank to refuse payment. Opinion: Where check has been certified for payee and drawer afterwards reqiiests bank to refuse payment, some cases hold (a) bank liable on check even to fraudulent payee while others hold (b) bank not liable to payee who has received check through fraud or with- out consideration or where drawer has set off against payee. The point has not been de- cided in Pennsylvania. Bank is liable on its certified check in any event to an innocent purchaser for value. Vol. 6, p. 680, April, 1914. Disclaimer of liability for payment of stopped checks 1242. (Ala.) In a form submitted for protection of a bank in case of payment of a stopped check, the bank acknowledges receipt of the stop-payment order and states that "we will make every effort to protect you, but will not hold ourselves responsible in case of pay- ment.'' Opinion: According to a decision in New York the bank, notwithstanding such form of notice or agreement, will not be re- lieved from responsibility for payment of a stopped check unless it has been free from negligence in making payment. Vol. 5, p. 594. March, 19i;i. 1243. (N. Y.) A depositor agrees to hold a bank harmless in the event the bank inadvertently pays a check after a stop pay- ment notice has been received. In this case, the stop payment agreement is not merely a statement in the pass-book, but is actually signed by the depositor. Is the bank ab- solved from liability? Opinion: The agree- ment being virtually one exempting the bank from liability for its own negligence will be strictly construed. Such exemption contracts are not favored by the courts and will, if pos- sible, be construed in such a way as not to relieve from negligence. How a specific con- tract of this kind would be construed has not been decided and cannot be foretold with cer- tainty. Contracts for immunity from negli- gence will be upheld in the State of New York if expressed in unequivocal terms. Vol. 11, p. 495 March, 1919. 1244. (N. Y.) A clause is inserted in a stop payment order to a bank which reads as follows: "Should you pay this check through inadvertency or oversight, it is expressly un- derstood that you will in no way be held re- sponsible." Opinion: It is doubtful wheth- er under this clause the courts will relieve the bank in all cases of mistaken payments of stopped checks, irrespective of whether or not the bank has used reasonable care. The ten- dency of the courts to to attach to all agree- ment relieving the bank from liability an implied condition that the bank on its part must exercise reasonable care. Vol. 9, p. 318, Oct., 1916. Duty to obey instructions See 850, 1159 1245. (Kan.) A gives his check in pay- ment of a horse, and later, finding the horse not as represented, stops payment on the check, which had been indorsed to a holder in due course. The bank refuses to pay. Opinion: Such holder has no remedy against the drawee bank, but must look to the drawer and any prior indorsers. It is not for the bank to go into the equities of the case be- tween holder and drawer, as its duty is solely to its customer. The rule is otherwise in a few states where a check is regarded as an assignment of funds. Vol. 2, p. 335, Feb., 1910. XoTK: The oiiactniont of the Negotiable Instru- ments Law in all states except Georgia lias abol- ished tins last stated rule. 1246. (Minn.) A depositor purchased goods, giving his check in pa^Tiient. Upon discovering an error he stopped payment. Tiie holder presented the check at the drawee hank and demanded payment. Opinion: The l)ank was in duty bound to obey the instruc- tion and refuse payment, and it incurred no liabilitv to the holder for such refusal. Vol. r, p. 897, :Nray, 1915. 1247. (Pa.) A depositor purchases goods of a wholesaler giving his check in 153 1248 DIGEST OF LEGAL OriNIOXS payinciit. Aflor rccoiviiifj the ^oods the de- positor stops payment. Opinion: The draw- er's liahility to punishment for obtaininj^ ^^oods under false pretenses depends upon proof of intent to stop payment at the time of giving the check. A liank is not liable to the holder for obeying tlic stop payment order of its depositor, but where the drawer con- tinually practices such fraud, the best course for tlie hank is to close his account. Vol. 7, p. 778, April, IDLl 1248. (S, C.) A customer issues his clieek in payment of an automobile. Find- ing the machine unsatisfactory, he instructs his bank not to honor the check. A third party, the collecting bank, presents the item and payment is refused. Both the hank and the customer are sued for non-payment. Opinion: Drawee bank must obey customer's instruction not to pay check where given be- fore acceptance or payment and is not liable to holder for refusing payment. Vol. 11, p. 40, July, 1918. Notes payable at bank 1249. (Ala.) In the event the maker of a note payable at a bank does not desire bank to pay at maturity, it is necessary for him to stop payment; where the bank wrongfully re- fuses to pay a check when in funds, the courts have in many cases awarded the depositor damages for injury to his credit, and it would seem, the same principle would apply to notes payable at bank. Vol. 4, p. 304, Nov., 1911. 1250. (N. Y.) Note payable at bank is equivalent to order to bank to pay same for account of maker and latter has right to stop payment. Vol. 7, p. 39, July, 1914. 1251. (Pa.) A gave his promissory note to B, payable at A's bank. B negotiated the note in his own bank and at maturity pay- ment was stopped, although there were suffi- cient funds to cover the note. Opinion: A note payable at a bank constitutes an order to the bank to pay the same for the account of the maker, but payment should be refused where the maker instructs the bank not to pay. Vol. 6, p. 628, March, 1914. 1252. (Wash.) B purchased goods of A, giving him in payment an acceptance covering the invoice, payable at a bank at a future date. Before maturity B stopped pajnnent, although B had on deposit in the bank sufficient funds. Opinion: An accep- tance or note payable by the acceptor or maker at a bank is not an assignment of the deposit to the holder and is subject to countermand by the maker before the bank has paid the acc('[)tance or accepted or paid the note. Vol. 9, p. GGl, Feb., 1917. Notice holds good indefinitely 1253. (N. J.) An order to stop payment can be made by a customer to his bank before the check has been paid or accepted and such order does not expire after a certain time limit, but holds good indefinitelv. Vol. 9, p. 582, Jan., 1917. 1254. (Va.) A hank which pays a check after receiving a stop-order from its depos- itor does so at its peril. The usual custom of banks in Xew York City with respect to ac- cepting notices of stop-payment is to keep the orders on file indefinitely; if a check is three or four years old, the banks inquire of the drawer whether or not there was a stop- payment order. Vol. 1, p. 296, Feb., 1909. Oral notice 1255. (Ala.) Under the Negotiable In- struments Law a drawee bank is not liable to the holder of a check, unless it accepts or certifies the check, and the maker has the right to stop payment. An oral notice to stop payment is probably sufficient and a written order is not necessary, although the point has not yet been judiciallv passed upon. Vol. 4, p. 376, Dec, 1911. Note: In Peoples Sav. Bank it Tru«t Co. v. Lacey, 40 So. (Ala.) 346 it was held that a de- positor may prove a verbal notice given hy him l)efore payment to the bank's receiving teller not to pay a check, though afterwards at request of the teller he reduced the notice to \vriting. 1256. (Del.) The customer of a bank met its cashier at a social function and verbally notified him to stop payment on a certain check. The next day the cashier made a written memorandum of the order. About a month later the check was paid. Opinion: The notice was valid and binding on the bank. The law does not require that the notice be in writing, and although an oral notice might not be valid when given outside of the bank, the fact that a written memorandum of the notice was made by the cashier at the hank would validate it. Vol. 1, p. 299, Feb., 1909. 1257. (N. Dak.) A made his check to B in payment of a debt but later verbally stopped payment because he had settled the debt by giving B a note. Two years later, after the debt was paid, B deposited the check for collection and the same was paid. Opin- 154 STOPPIXG PAYMENT 1265 ion : The drawee cannot charge the amount to A's account, because it has violated the stop order and has paid a stale check. The drawee, however, can recover from the payee under the rule that money obtained by deceit and in bad faith is recoverable. Vol. 9, p. 51, July, 1916. 1258. (Okla.) John Jones issued a check, wliieh was presented and paid about one year later. The depositor claimed that he stopped payment a few days after the issue, but the bank had no record of the stop order. Opinion : If the depositor can prove an oral instruction not to pay, he can recover, unless the bank can prove that the check when paid was in the hands of a holder in due course •who could enforce the check against the drawer. If a check is stale it places the bank on inquiry before payment, but whether a check one year old can be called stale is an unsettled question. Vol. 5, p. 658, April, 1913. Practice of stamping "payment stopped" 1259. (N. Y.) Following its usual cus- tom, a bank to whom a check was presented stamped across the face "payment stopped" and returned the same to the payee. The maker of the check had previously counter- manded payment. The payee claimed that as the check was his property, the bank had no right to deface it by such stamp. Opin- ion: Custom of bank to stamp a counter- manded check "Payment stopped*' before re- turning to the holder serves a beneficial pur- pose without injury to a bona fide holder and will doubtless be sustained by the courts. Vol. 10, p. 205, Sept., 1917. 1260. (N. Y.) There is no law express- ly forbidding a drawee bank from stamping "payment stopped" upon a check, which has been refused for that reason. Such a prac- tice has the beneficial result of warning sub- sequent holders that payment has been stop- ped, thereby preventing further negotiation. A"ol. 4, p. 92, Aug., 1911. 1261. (Pa.) A bank refused payment of a check in pursuance of instruction from the drawer not to pay, and stamped "payment stopped" upon the instrument, before return- ing the same to the holder. The presenting bank objected to this action, taking the posi- tion that the drawee had no right to so mark the check, which was not its property. Opin- ion: The act of stamping "payment stopped" upon the check was proper in view of the custom so to do, the beneficial purpose there- by served, and the fact that no substantial right of the holder is violated. Vol. 4, p. 681, May, 1912. NoTK: It has been held that no action for dama<,'e will lie against a bank for defacing a note, as by writing on the face there payment on his check of $200. The stop order was unfortunately overlooked and the check was paid. The bank had evi- dence from the holder that the maker re- 155 12GC:i DIGEST OF LEGAL OPINIONS ceivcd value for the check, and the hohler re- fuses to refund the amount. In tlie event the maker recovers the amount from the bank, it believes he will be receiving double value. Opinion: Where a bank pays a stopj)0(l check it docs so at its peril, hut where i)ayment is made to a liolder in due course or where the drawer has received full value for the check, there is ground for maintaining the conten- tion that the bank can set oiT the amount against the drawer's account as equitable purchaser of the check. Where a stopped check is an enforceable obligation against the drawer in the hands of a holder in due course, the former is not damaefcd because of its pay- ment by the bank, for, if refused payment, the drawer would be answerable to such holder. Vol. 10, p. 463, Dec, 1917. Rights of holder in due course See 506 ct scq., 646 et seq., 1265 1266. (Ariz.) A bank purchased a New York draft of $50 from A, who received the instrument in payment for goods delivered to B. The draft was presented and the payment was stopped by the bank issuing the draft at the request of B, the payee, who discovered that the goods had been mortgaged. Opinion: The purchasing bank, as a holder in due course, can recover payment from the issuing bank and from the prior indorsers and its rights cannot be defeated by stopping pay- ment. The drawee bank, however, is in duty bound to obey the stop payment order. Vol. 9, p. 585, Jan., 1917. 1267. (Cal.) John Doe purchased from a stranger an automobile appliance, giving his check of $50 in payment. Having be- come dissatisfied with the article, he stopped pa}Tiient. In the meantime, a bank in good faith cashed the check from the stranger, and John Doe refuses to pay the amount. Opin- ion: A bank which in good faith purchases a check from the payee without notice of any defense thereto is a holder in due course and can hold the drawer liable for the full amount thereof, free from his defense against the payee. Vol. 11, p. 389, Jan., 1919. 1268. (Colo.) A client purchased from a bank a draft drawn by it on its Chicago cor- respondent for $2,500. Two days after said issue, upon the payee's request given at the time, the bank stopped payment on its draft, which had come into the hands of an innocent purchaser for value. The holder now seeks to recover damages from the drawer of the check, besides the amount of the draft. Opinion: The drawer of a check who stops its payment at the request of the payee is liable thereon io a holder in due course for its face amount with interest and protest fees, together with court costs in case of suit; but there is no additional liability to such holder for damages because of such stoppage of ))ay- ment. The rule is that where a bank wrong- fully refuses payment of its customer's check, the latter has a right of action for damages in addition to the amount of the check, be- cause of injury to his credit, but the reason for allowing damages in such a case does not apply to an indorser as in this case. The holder does not receive injury to his credit by non-payment of the check, because it is not his check which has been dishonored, but the check of someone else. Vol. 11, p. 275, Nov. 1918. 1269. (Colo.) A gave his check in pay- ment for beaver hides. The check was pur- chased from the payee by a bank. Later A was arrested for having the hides in his pos- session during the closed season, being contrary to law, and accordingly stopped payment of the check. Opinion: The bank purchasing the check from the payee may enforce payment from the drawer, if it ac- quired the check without knowledge of the illegal consideration. Vol. 6, p. 34, July, 1913. 1270. (Colo.) A bank in Colorado sold its draft on a New York bank to A, who gave it to B to close up a deal. B cashed the draft with C. Payment was stopped by A because of fraud. Opinion: C as bona fide purchaser for value of the stopped draft which has been duly protested has recourse upon the drawer and prior indorsers. Vol. 5, p. 373, Dec, 1912. 1271. (111.) A issued his check to B for $650. Before negotiation A notified B that he had stopped payment because of fraud. Disregarding the notice, B negotiated the check to C, who had no notice of the stop payment and who gave part cash and the balance for a bill owed by B to C. Opinion: C may recover from A, as he was an innocent purchaser for valuable consideration. Vol. 8, p. 611, Jan., 1916. 1272. (Kan.) A check was issued in pa3inent for certain goods. Shortly there- after the drawer discovered he had been de- frauded and stopped payment of the check. In the meantime a bank cashed the check. Opinion: The bank which cashed the check for the payee was a holder in due course and can enforce payment from the drawer. Vol. 8, p. 913, April, 1916. 156 STOPPIXG PAYMENT 1284 1273. (La.) A live stock dealer pur- chased five head of cows, giving his check for $95 in payment. He drove the cattle to an- other state and then stopped payment of the check, which, in the meantime, had been purchased by a bona fide holder. Opinion: The holder can enforce payment from the drawer and prior indorser, assuming the latter's liability has been preserved by due notice of dishonor. As to criminal liability, the drawer could be convicted of obtaining goods upon false pretenses, provided a jury could be convinced that he gave the check and received the cattle with the fraudulent intent to stop payment of the check. Vol. 7, p. 777, April, 1915. 1274. (Neb.) A gave B his check, which was indorsed by B to C. For some reason of his own, B stopped payment of the check. Opinion: B had no right to stop pay- ment, but where the drawer stops payment at the payee's request, a holder in due course may hold both drawer and pavee liable. Vol. 7, p. 307, Nov., 1914. 1275. (Neb.) A gave B his check, which was cashed by C. C was later notified not to cash the check, because A had stopped payment. Opinion: C having cashed the check for B in good faith can recover from the drawer. Vol. 5, p. 245, Oct., 1912. 1276. (Okla.) F. Brothers issued their check to A. S. Brown, who used it in payment of a bill which he owed to A. F. Brothers, discovering that they had been defrauded by Brown, stopped payment of the check. Opinion: A, the innocent purchaser for value of the check, can recover from F. Brothers. Vol. 8, p. 33, July, 1915. 1277. (Okla.) The drawer of a check who purchased several bales of cotton from A, discovered that the cotton was mortgaged and immediately stopped payment of the check. In the meantime A had received the money from a bona fide purchaser of the check. Opinion: The drawer had the right to stop payment of the check, l)ut he would still be liable to the purchasing bank which cashed the check in good faith. A^'ol. 4, p. 431, Jan., 1912. 1278. (Pa.) A gave his check to B, who cashed it with C, and later payment was stopped by A. Opinion: C, who purchased from B without notice, was a holder in due course and can enforce pavment from A. Vol. 8, p. 1103, June, 1916.' 1279. (Pa.) A purchaser gave his check in payment for some goods which were not as represented. The drawer stopped pay- ment, but in the meantime the payee of the check cashed it at a national bank. The payee was irresponsible. Ojnnion: The na- tional bank, which purchased the check in the regular course of business, is a holder in due course and can recover the amount and pro- test fees from the drawer. Vol. 6, p. 438, Dec, 1913. 1280. (Tenn.) A customer issued his check of $22 to a negro in payment for a cow, and later stopped payment thereon when he learned that the cow had been stolen. In the meantime the negro had cashed the check at a bank. Opinion: The liank was an inno- cent purchaser for value and as such can en- force pavment from the drawer. Vol. 8, p. 33, July; 1915. 1281. (Tex.) A gave B his check for $100. B indorsed to C, who cashed it with Jones, an innocent party. B on discovering that C had defrauded him, requested the drawee not to pay, which request was com- plied with. Opinion: Jones can enforce pay- ment from the drawer and prior parties, free from the defense of fraud, l)ut cannot com- pel the bank to pay. Vol. 7, p. 165, Sept., 1914. 1282. (Wash.) A bank cashed a check indorsed by the payee and another. Payment of the check was stopped because the maker received no consideration from the j>ayee. Opinion: The bank which ])urchased the check in good faith can enforce payment from the drawer, free from the latter's defense against the payee. Vol. 7, p. 776, April, 1915. Where instrument is an assignment 1283. (111.) A draft on a Minnesota bank, payable to Henry Brown, was indorsed by Brown to an Illinois bank, a holder in due course. Before the check was presented, pay- ment was stopped. Opinion: In Minnesota, where a check is an assignment, the drawer cannot countermand payment when in the hands of a bona fide holder and the latter has a right of action against tlie drawee bank which refuses payment, when in funds, be- cause of stop order. Vol. 5, p. 372, Dec, 1912. NoTK: The Xpj;otial)le In^trunionts Act passed ill Miniiosota in .April. l!»l.{. iias chnnpod this riilo liy providing; tliat tin* jjivinp of a clipck doos not opprate as an assijjnnuMit of funds. This in effect ijivcs the drawer the riglit of stop payment. 1284. (S. C.) Under the law of South Carolina. (dilTering from the large majority 157 128^ Dir;T':sT of lec.al optxioxs of states), the drawer of a clieek li.is no riglit to stop payment of his check, unless perhaps it was obtained from him by fraud and is still in the hands of the payee, but if the c-lieck has Iteen neij;otiated to a bona fide liolder, tlic rigiit to countermand would be lost. Vol. 2, p. 415, April, ]J)10. NoTK: Tlu> Nof^'otialilo Tiistninitnts Act iia-^Hcd in Soutli Carolina in iMaroli, 1914, lias clianpcd this rule liy proviilinji that the givinir of a check does not o|)erate as an assij^ninent of funds. This in etrect {^ives the drawer tlie ri and the old certificate was cancelled. The question was raised whether or not tlie new certificate required a 10 cent stamp. Opinion: Under a ruling by the Conimis- 101 1321 DIOEST OF LEGAL OPINION'S sioiior of Intornal Rovcnuo, no stamp is re- quired on the n(>\v certificate. Vol. 7, p. 4!)r), Jan., IDIT). State taxation of national banks S(M' i;;()i, i.'fo,") 1321. (Cal.) A state or city has no power to inii)osc a license or privilege tax upon the national hanks. Vol. 7, p. 304, Nov., 1!)1 !. See 1309, 1310. 1322. (Mo.) Income Tax Law of Mis- souri imposing one-half of 1 per cent, tax upon net incomes of individuals and corpor- ations is inapplicable to national banks and not enforceable against such institutions, as the states cannot tax national banks except as Congress permits and Section 5219, U. S. Eev. Stat., which is the measure of permis- sion by Congress, does not authorize such a tax. Vol. 11, p. 410, Feb., 1919. 1323. (N. C.) An incorporated town in North Carolina lias the right to assess for town purposes the stock of national bank shareholders owned by non-residents of the state and to require the bank to pay the taxes so assessed. Vol. 9, p. 503, Dec, 1916. 1324. (Okla.) A county tax assessor sought to compel a national bank officer to furnish a list of the names of shareholders and the number of shares held by each. Opinion: Under the Oklahoma statute, the county assessor had the right to compel the bank officer to furnish the list. The Supreme Court of the United States has upheld such right in a state official, acting pursuant to state law. It lias been held that national banks are subject to state legislation, except where such legislation is in conflict with some act of Congress or where it tends to impair or destroy the utility of such banks as agents or instrumentalities of the United States, or interferes with the purpose of their creation. Vol. 9, p. 140, Aug., 191(5. See S7'?. 1325. (S. C.) It would seem that a state has a right, in providing for the taxation of national bank shares, to permit the owner to deduct the value of non-taxable state bonds owned by the bank, although denying to the shareholder the right to deduct the value of non-taxable United States Government bonds so owned, the refu.-al to permit such deduc- tion in the latter case being upheld by the Supreme Court of the L'nited States. Vol. 9, p. 410, Nov., 1916. Transfer tax of decedent 1326. (N. J.) A deposit of a non-resi- dent decedent in a New York Savings bank is subject to the Transfer Tax. The same rule applies to similar deposits in a Trust Company. Vol. 3, p. 675, May, 1911. Treasury notes subject to taxation 1327. (N. C.) United Slates Treasury notes are subject to state taxation as money on hand or on deposit. Vol. 7, p. 898, Mav, 1915. TRADE ACCEPTANCES Acceptance payable at bank in another locality 1328. (N. Y.) In view of the rule of law that an acceptance made payable at an- other place varies the terms of the bill as drawn and discharges non-consenting parties, it has been thouglit desirable to have inserted in the instrument a clause protecting the holder. Opinion: The following clause is suggested : "The drawee may accept this bill, payal)le at any bank, banker or trust company in the United States which he may desig- nate." This clause will operate to hold the drawer and indorsers liable to the holder who takes an acceptance pavable at a bank in an- other state. Vol. 10. p. 461, Dec, 1917. Completing signature of drawer after acceptance 1329. (N. Y.) It has been the custom among merchants to send out trade accep- tances with only a printed signature of the drawer, as for example "'Smith Manufactur- ing Company," underneath which is a blank line starting with the word "By." After the acceptor has signed and mailed the instru- ment back to the drawer there is added in pen and ink after the word "By" the words "John Smith, Treasurer." The purpose of the foregoing is to protect the instrument should it be lost in the mail or otherwise fall into improper hands. The question is raised whether there has been a material alteration which would entitle the acceptor to repudiate his obligation. Opinion: The completion of the drawer's signature after the instrument has been returned, accepted, would not be a material alteration within the meaning of the law. There is no change in the number or relations of the parties and no change in the legal effect of the instrument and further- more, the execution of the instrument by the 162 TRADE ACCEPTAXCES 1335 acceptor, with the blank unfilled, would con- stitute an implied authority to the drawer to fill in the blank with his completed signature upon return of the instrument to him. Vol. 10, p. 526, Jan.,"l918. Effect of mechanic's lien rights 1330. (N. Y.) The question has arisen as to the status of the material man who takes a trade acceptance to cover shipment made to a contractor for use in construction work. Does he thereby lose any mechanic's lien right which he would have had under the open book accoiuit system? Does he become a money creditor in place of a creditor for ma- terial? Opinion: The material man who takes a trade acceptance for material supplied does not thereby lose mechanic's lien right which he otherwise might have. The right to enforce the lien would, however, be sus- pended until maturity of the acceptance and a pre-reqnisite to sucli right of enforcement would be a tender of the return of the trade acceptance as a condition precedent. If he has negotiated same and cannot return it, the mechanic's lien ri^ht would not be enforce- able. Vol. 10, p. 591, Feb., 1918. Negotiability 1331. (Cal.) When a trade acceptance is not paid when due, the acceptor is liable for the principal and interest. The drawer is also lial)le, provided the necessary steps upon dishonor are taken. Under the provisions of the California statute a trade acceptance is a negotiable instrument. Vol. 9, p. 501, Dec, 1916. 1332. (111.) A firm in Chicago has pre- pared a form of trade acceptance, using the standard form, but changing it to read: "Ac- cepted (date.) Payable at (designated bank or trust company) with Chicago or New York exchange." A bank desires to know whether the addition of the words "with Chi- cago or Xew York exchange'' will destroy the negotiability of the acceptance. Opinion: The insertion of the words will not affect ne- gotiability. The Negotiable Instruments Act expressly provides : "Sec. 2. The sum payable is a sum certain within the meaning of the act, although it is to be paid x x x 4, with exchange, whether at a fixed rate or at the current rate x x x ." Vol. 11, p. 39, July, 1918. 1333. (Minn.) A business house uses the regular form of trade acceptance and prints on the face of the acceptance the fol- lowing words: "5 per cent, discount will be allowed if this acceptance is taken up within thirty days from date." The business house holds the acceptance until the thirty-day period has expired. If the buyer sends them the money they allow him 5 per cent, dis- count, cancel the trade acceptance and return it to him. If lie does not pay in thirty days they offer the trade acceptance to the bank for discount. At the time the acceptance is thus offered, the discount clause means noth- ing, for the discount period has expire Statute of limitations 39-U Stranger, certification for 21 Telegraph, certification by 51-55 Telephone, certification by 56-65 Trade acceptances . 132S-133S ACCOMMODATION IND0R8ERS Accommodation and commercial paper distinguished 66 Corporation's power to act as accommodation indorser 130, 994 Entitled to notice of dishonor . .76, 1022-1024, 1173 Illegality as a defen.se 77 Indorsement after delivery 67-69 Liability 70-72 Liability as between themselves 73-75 Liability on corporation note 76-77, 1023 Married woman as accommodation indorser 834-843 ACKNOWLEDGMENT See Notaries ADMINISTRATOR See Executor and Administrator ADVERTISEMENT Opinion Numt)C'r8 A7 Bank as borrower on personal note of executive officer 168-169 Bank loans. See Loan and Discount. Banking customs. See Custom. Banking hours 1 "0- 1 7 1 Books and records, examination of 164-165 Books, use of loose leaves 166 Branch banks 261-265 Cashier's unauthorized act, liability for 195-196 Customer's balance for tax purposes, etc., compulsory disclosure 173-176 Deposits, no obligation to receive 469-470 Deposits, unclaimed required to be published 503 Derogatory statements affecting banking institutions 792-797 Dishonor of check, liability for wrongful 506-511 Duty of substituted presentment when check is lost 798, 817-818 General duty of secrecy as to customer's affairs 172 Guaranty by bank 17/ -180 Guaranty of payee's indorsement, right to require 695 Indemnity bond, covering risk of unauthorized indorsements 181 Letter of credit, protection against overdraft 105.8-1059 Liability of bank to checkholder • 345-346 Liability to bank of pcr.son identifying payee 182 Lien of stockholder 228-236 National Banks 870-887 Notes payable at bank 1007-1021 Payment to minors and incompetents 844-8.)5 Postal savings depositary, right to act as 489-190 Private affairs, investigation by Congressional Committee 184 Right to pledge assets ^8"' Safe depositary, bank as 1^' Same room for savings bank and bank 1^' "Savings, " by commercial bank, use of word 1^ iii BANKS AND BANKING— Ojntinued Opinion Numbers Set off 1177-1230 Statement, due diligence in examining 189 Statement of customer's financial condition, liability for 190-192 Statement to procure credit 044 Taxation of l)ank8 1290-1327 Ultra Vires Acts 177, 178, 823, 874, 884 Vouchers returned without receipt unsafe 359 BANK OFFICERS AND DIRECTORS See Cashier Bank as holder of director's note 194 Bank's liability for officer's false statement 192 Bank's liability for unauthorized act of cashier 195-196 Cashier buying liis own note for bank 961 Cashier of national bank need not be a director 197 Director of national bank as surety 885 Duty to deface counterfeit money 19S Interlocking bank directorates 199-201 Loans to bank official 183 Officer and director as notary 914-957 Officer as attesting witness 202 Overdraft by director 203 Personal liability 204-206 Power of officer to certify checks 14, 38, 180 Power to borrow money for use of bank 207 President of national bank as bond broker 193 Subpoena duces tecum served on officer 104-165 BANKRUPTCY AND INSOLVENCY Assignee of accounts receivable as preferred creditor 1062 Certified checkholder not a preferred creditor 208 Claim of attorney's fee 150 Claim to dividends 209 Collecting bank's insolvency 410-417 Depositaries for estates in bankruptcy- 210 Discharge as bar to unlisted claim 211 Dividend check of failed national bank 212 Innocent purchaser of negotiable paper transferred by bankrupt 216 Liability of transferor of stock to assessment 220 Liens within four months of bankruptcy 213-214 Payment of check on insolvent bank 215 Preference not created where collateral renewed 217-218 Preferred claim against insolvent collecting bank 416-417 Property inherited after adjudication 219 Recovery of paper deposited for collection when bank insolvent 420 Rights and liabihties as to collection proceeds 410-415 Right of trustee in bankruptcy to vote national bank shares 242 Set off against deposit of insolvent borrower 1188, 1190-1193, 1227 Set off of unmatured note against insolvent's deposit 1224-1230 BANK STOCK AND STOCKHOLDERS See Corporations, Dividends and Liens Bank as lienor can refuse to transfer stock 230, 233-235 Corporation tax on bank shares 1301 Dividends 221 iv BANK STOCK AND STOCKHOLDERS— Continued Opinion Xumbera Double liability 222-224 Holder in due course of lost certificate 808 Increase of national bank stock 225 Inspection of books and records 226-227 Liability of minor as stockholder 845 Liability of transferor to assessment 220 Lien of national bank for stockholder's indebtedness .... 230-232, 236 Lien of state bank for stockholder's indebtedness 22<, 229, 233, 235 Loan on shares of stock by national bank prohibited 882 Right to dividends of pledged stock 237-238 Stockholder as notary 914-957 Stock issued in name of partnership 239 Transfer of bank stock 240-241 Voting ... 242-243 BILLS OF LADLVG Acceptor's liability on B/L draft 244 Bank's liability for violation of instructions 250 Collection of B/L draft 367-369 Consignor cannot change routing 252 Disclaimer of warrantor liability 257-260 Effect of absence of shipper's signature 254 Guaranty of draft by bank 178 Interstate shipment of intoxicating liquor 418-419 Interstate shipment, — jurisdiction of cause of action 252 Liability for issuing B/L without receipt of goods 251 Obtaining B/L under false pretenses 628 Protest of draft 1133 Purchase of B/L drafts by national banks 877 Recovery by drawee of money paid on non-negotiable B, L draft 245 Rights of attaching creditor of shipper 246-249 Rights of payor of draft where goods not according to contract 256-260 Shipper's indorsement supplied by collecting bank 253 Uniform B/L Act relative to purchase and collection 255 BLANK SPACES Check signed in blank -293-294 Payee blank unfilled puts bank on inquiry 890 Space filled in accordance with authority 960 Space for interest left on note 746 BONDS Bank's liability on indemnity l)ond 886 Bank's right to require l)ond for lost paper 824-826 Bond to protect against payment upon unauthorized indorsement 181 Duplicates for lost government bonds 819 Fidelity bonds 633-634 President of national bank as bond broker 193 BRANCH BANKS Presentment and payment of checks 2'U-263 Presentment and payment of note 2**'* Right to estal)lish branches 265 V BV-LAWS Opinion Numbers Bj'-law providing for secret stock lien 230 By-lHW re(|uirinn surety company bond 822 Disclaimer of liability iii)on loss of passbook 1045 Failure to adopt by-laws does not invalidate acts of corporation 431 Lost paper, requiring bond for » 816 CASHIER Cashier buying his own note for bank 961 Cashier has no authority to bind bank in guaranty agreement 14, 180 Cashier of national bank need not be director 197 Cashier's checks 130, 570-571, 809, 824, 1236, 1238 Liability of bank for unauthorized act 195-196 Mortgage to national bank in name of cashier 856 Power to borrow money for use of bank 207 CERTIFICATE OF DEPOSIT Attachment of funds represented by certificate 124-127 Bank's obligation to know payee's signature 280 Demand and time certificates distinguished 266-268 Forgerj' of payee's indorsement 280, 512, 515, 563 Holder protected by guaranty fund 480 Indorsement "all prior indorsements guaranteed" 724 Indorsement by alternative paj-ee 670 Rights of innocent purchaser 273-274 Insanity of payee 275 Issued in two names 502 Loan by national bank on security of its certificates 882 Lost certificate of deposit 281, 806, 825 Maturity 267, 278 Negotiability * 276-277 Passbook and negotiable certificate distinguished 141 Payable "in current funds" 271-272 Payable to minor 850 Presentment after death of payee 269-270 Statute of hmitations 278-279 Transfer without indorsement 281 Withholding payment of time certificate 282 CASHIER'S AND CERTIFIED CHECKS Cashier's checks 130, 570-571, 809, 824, 1236, 1238 Certified checkholder not a preferred creditor 208 Postdated certified checks 12-14 Stopping payment of cashier's and certified checks 1236-1241 CHATTEL MORTGAGES Chattel mortgages 857-863 CHECKS— PAYMENT OF Ambiguous and incomplete checks 2S3-2S5 Bad checks, criminal liability for issuing 621-627 Bearer check without indorsement 2S9-292 Bearer checks, instruments purporting to be 286-2SS Blank form of another bank used 82-84 vi CHECKS— PAYMENT OF— Continued Opinion Numbers Cashier's checks 130, 570-571, 809, 824, 1236, 1238 Certified checks, post dated 12-14 Certified checks, stopping payment of 1237-1241 Check as an assignment 450-461 Check drawn on another department of same bank 297 Check without funds 621-627 Checks for less than one dollar 333 Checks signed in blank 293-294 Checks with suspicious appearance S46 Conditional deposit of check 475 Conditional payment by check 1050-1051 Conversion of check by bank 295 Counter check, receipt as substitute for 296 Crediting depositor's account with checks on same bank operates as payment 297-298 Draft drawn on particular fund 323 Drawer of check a fugitive from justice 302 Drawer's liability on unpaid check 303 Duty of care of check book 304 Exchange charge, payment of 305-306 "For full payment of account" 307-311 Gambling debt, given for 313-314 Holder in due course. See Holder in Due Course. Holiday, payment on G5-227 By-laws, failure to adopt 431 Corporation tax law 1293-1295 Criminal liability for issuing bad checks 622 Dividends, nature of unpaid 432 Dividend, right of purchaser of stock to 433 Double liability of bank stockholder 222-224 Indorsement by corporation on renewal of trade paper 994 Personal and corporate liability on note 434-438 Power to guaranty debt of another 874 Power to indorse for accommodation 430 Seal unnecessary on corporation note 996-997 Signature to corporation note 434-438 Transfer of stock on books 1339-1342 Ultra Vires Acts by banking corporations 177- ITS, 823, 874, 884 Usury pleaded as defense 786 Voting control by fraction of share 439 Voting power of stockholder 440 CURRENCY See Legal Tender Deposit of moneys belonging to Indiana 471 Duty to deface counterfeit coins 198 Legal tender qualities of money 788 Note payable in "legal tender" and "gold coin'' 789 Photographing United States notes 641 Taxation of Canadian currency 1290-1292 Theft of unsigned bank currency 828 CUSTOxM Calculation of interest 747-748 Filing stop payment notices 1254 Lost checks and drafts charged back to customer's account 817 Mailing check direct to drawee 400, 409 Payee's indorsement as prerequisite of payment 714, 716 Payment of check after drawer's death 451 Presentment of check through clearing house 1 107 Protest by notary's clerk 1111 Stamping " collection " on notes 86 Stamping "Payment stopped " upon checks 1259-1261 DAMAGES Bank's neglect to follow instructions in collecting paper 394 False statement of customer's financial condition 190-192 Refusal to transfer stock to bona fide purchaser 240 Violation of B/L instructions 250 Wrongful dishonor of check ... 506-51 1 DEATH AND DECEDENTS ESTATE Agency revoked by death 47'J Authority to renew notes of testator 447 Bank's right to credit decedent's account 442-443 DKA'IH AM) I )I':(;i': DENT'S ESTATE— Continued Opluion Numbers Dpo(1 for annuity 444 Doiivcry of deed after death 445 Delivery of K'ft after (lonce's death 830 Disposal of funds of intestate hy bank 446 Heir's note for dcc^cdent's debt 448 Partnership account where one partner dies 334, 488 Payment of check after drawer's death 449-461 Payment of deposit to administrator 441 Power of attorney affected by death 462 Presentment of certificate of deposit after payee's death 209-270 Renunciation of interest by heir procured by fraud 643 Set olT atr;ainst indebtetlness of decedent 1197-1202 Survivorship where husband and wife [)erish in same disaster 668 Transfer of stock of decedent 463-464 DEED Deed for annuity 444 Delivery after death ineffectual 445 DELIVERY Delivery necessary to constitute valid pledge 1077 Delivery of deed after death ineffectual 445 Delivery of express package after banking hours 171 Gift not complete without delivery 667, 830, 1339 Postmaster's liability for misdelivery of registered package 833 Transfer of stock by deUvery 1339-1340 DEPOSITS Assignment of deposit 465-467 Bank not obliged to receive deposits 469-470 Banlcs as depositaries 471 Check as an assignment 450-461 Crediting depositor's accoimt with check on same bank operates as payment of check 297-298 Deceased depositor's accounts 441-464 Deposit by one person crediting account of another 478-479 Deposit for safe-keeping 4.2 Deposit slip, nature of 4/ 3-476 Disclosm-e of customer's balance 4i 7 Gift by delivery of pass book 667 Giving cash instead of credit for deposited item 496 Guaranty fund of depositors 480 Husband and wife, deposits of 664-668 Joint deposit • 502 Legal tender, pajTnent in "^87 Made outside of bank 481-482 Military company, deposit of 483 Minors and incompetents, deposits of 846-855 Mistaken credit to account 494-495 Mistaken payment of deposit 484—485 National bank deposit in trust company 871 Notice of withdrawal of savings deposit in national bank 504 Partnership, deposit by 4S7-488 Payment on oral order 486 Postal savings 489-490 Public deposits = 491 Reserve against savings deposits 492 X DEPOSITS— Continued Opinion Numbers "Savings, " use of word ISS, S70 Set-off of deposits 1177-1230 Specific deposits 493 Subsequent deposits U3, 393 425, 1212 Time deposits 497 Trust funds 493 Two names, deposit in 502 Unclaimed deposits required to be published 503 Use of assumed name 408 DISHONOR Drawer's liability on unpaid draft 505 Wrongful dishonor of checks 506-5 1 1 Presentment of instrument with indorsement lacking 1131-1134 DIVIDENDS Dividend check on failed national bank 212 Nature of unpaid dividends 432 Pledgee's right to dividends of pledged stock 237-238 Right of purchaser of stock to dividends 433 DRAFTS Draft drawn on particular fund 323 Drawer's liability for stopped draft 049 Drawer's hability on unpaid draft 505 Form of indorsement to restrict negotiability 725 Gift through the mail 830 Guaranty of draft by bank 874 Holder in due course of stolen draft 801, 803 Holder in due course of stopped draft 6 17, 049 Indorser discharged by payment ^099 Lost or stolen drafts 799-801, S03, 826, 827 Negligence in failing to notify of lost di-af t 799 Negotiation within reasonable time 801 Payable "through" or "in care of" bank 1103, 1104 Payable "with New York exchange" 1061 Payment by mistake 1053 Presentment of time draft for acceptance 3S8 Protest of draft 109S. 1133, 1145 Provisions affecting negotiability 2 1 1, 323. 909, 1 145 Rule of 24 hours for acceptance 43-40 EXCHANGE Checks "not payable through express company" .■>25-327 Exchange charge 305-30«i Instrument payable "in current funds" 271-272 Effect of words "in exchange" 315-316 Effect of words "with exchange " 300-302 EXECUTOR AND ADMINISTRATOR Authority to renew notes of testator 1 17 Bank may demantl letters of administration 441 Decedent's stock claimcil by administrator 479, 1 197 Deposit of check by administrator l^efore lie has qualified 442 Transfer of stock to administrator 464 Voting 243 FORGERY Sec Altered and Raised Paper Opinion Numbers Altering name of drawee on forged check OIH Bank bound to know depositor's sinnature 512-017 Certifindion of forged cliocks 18-20 CJieck hearing forged and genuine signatures 52.'J-o2i) Checks cashed for strangers 5!j7-'A')() Check (hiled on Sunday 020 Checks signed in fictitious name Oil Criminal ofTense, possession of'forged instnuuent 642 Drawer's duty of examination and verification 527-528 Effect of delay in giving notice of forgery 575-570 Effect of waiver of identification 595 Estoppel to assert forgery of indorsement 613-614 Forged counter-signature to traveler's check or money order 608-610 Forged draft against lost letter of credit 619 Forged name of drawee 617 Forged order on savings deposit 529-533 Forged telegrai)h order to pay money 564-566 Forgery of signature by mark 561-563 Indorsement by person of same name 585-590 Indorsement by precise person intended 591-594 Indorser's warranty to subsequent purchaser 612 Liability of person identifying impersonator 615-616 Non-recovery of money paid on forged check 534-547 Non-recovery of money paid on forged indorsement 582-584 Obtaining money under false pretenses 638 Payment of forged check not chargeable to drawer 51S Payment chargeable where drawer estopped 519-522 Protest of forged checks 1123-1 125 Recovery of money paid on forged bearer check 596-597 Recovery of money paid on forged check 548-556 Recovery of money paid on forged indorsement 567-569, 572-574 Recovery where indorsement guaranteed 577-581 Signature and indorsement both forged 598-604 Statute of limitations as apphed to forged indorsements 605-607 FRAUD' AND;^ CRIMES Bad checks, criminal liabihty for issuing 621-627 Bill of lading obtained under false pretenses 628 Burglary policy of the American Bankers Association 629 Certification by officer of overdraft 35 Check signed in fictitious name with intent to defraud 611 Collection items fraudulently received by insolvent banker 420 Conspiracy to commit robbery 630 Conversion of notes by innkeeper 631 Delivery of goods without taking up warehouse receipt 632 Derogatory statements affecting banks 792-797 Duty to deface counterfeit coins 198 False statement that certificate of deposit is lost 281 Fidelity bonds 633-634 Firm checks issued through fraud of employee 635 Forgery of check dated on Sunday 620 Fraud in overdrawing letter of credit 1059 Interstate shipment of intoxicating liquor 418-419 Introducing swindler to bank 636 Obtaining money under false pretenses 637-639 Passing worthless state bank bill 640 Photographing United States notes ."/. . T 641 xii FRAUD AND CRIMES— Continued Opinion Numbers Possession of forged instrument with intent to defraud 642 Renunciation of interest by heir procured by fraud 643 Statement to procure credit 644 Theft of registered mail by railroad employee 832 GIFl'S Gift of bank draft through the mail 830 Not complete without delivery 499, 667, 830, 1339 Of bank stock. 1339 GUARANTY "All prior indorsements guaranteed " . . 71S-724 Cashier's guaranty of post dated check ISO Defective indorsement 696-C98 Drawee's right to require guaranty of payee's indorsement 694-695 Guaranty fund of doiK)sitors 4S0 Guaranty of missing indorsement 669-685 Indorscr as guarantor 700 Power of bank to guarantee draft . . 177-17S Release by extension of time . . 9(>4-9()6 Securities guaranteed by salesman . . 1076 Signature guaranteed 179, 517 Statute of limitations 961, 1003 HOLDER IN DUE COURSE Certificate of deposit indorsed by minor 850 Certified check 22 Check given for gambling debt 313-314 Check payable to drawee and presented by third person 338 Check signed in blank 293-294 Effect of indorsement "without recourse" 740 Instrument indorsed in blank and stolen 806-81 1 Negotiable certificate of deposit 273-274 Paper indorsed for accommodation by corporation 430 Raised checks 99-100 Rediscounted note • ■ t>45 Stolen paper . . SOl-805 Stopped check . • t>4«)-650 Stopped draft (J-i7, 649 HOLIDAYS, SATURDAY AND SUNDAY Forgery of check dated Sunday <''20 Instrument executed on holiday l>51-653 Instrument maturing on Saturday 654-656 Notes executed and delivered on Sunday 657-058 Payment of check on holiday • 659-<}63 HUSBAND AND WIFE See also Married Women Attachment of wife's account by husband's creditor 127 Authority to draw checks 664-666 Husband's account in name of wife 667 Husband's account in trust for wife •'*'8 Joinder of wife in chattel mortgage ^8 INDORSER— INDORSEMENT Opinion Xuiubere Ahsoncc of payee's indnrsomcnt 6t)9 Acc()imn(Hl:itii)ii iiulorsomoiit 66-77 Altonition of dnift jiftcr indorsement 94 Alternative payee, indorsement \>y 670 Authority of a^ent to indorse 671-678 Bearer elieeks do not legally require indorsement 679-680 Blank indorsement followed hy sjjeeial indorsement 681-683 Charge indorscr's account, right to 684 " Credit account of witliin named payee " 685-<)86 Extension of time, release of indorser by 1005 " For identification only " 687 Form and language of indorsement 688-693 Guaranty of defect ive indorsement 696-698 Guaranty, drawee's right to require 694-695 Indorsement before payee 703-704 Indorsement by mark 705-707 Indorsement by minor 850 Indorsement of past due note 1 105 Indorser discharged by payment 699 Indorser as guarantor 700 Indorser's liability preserved by demand and notice 701-702 Partnership, indorsement by 708 "Pay any bank or banker " 709-710 Precise person intended, indorsement by 711-712 Prerequisite of payment, indorsement as 713-717 " Prior indorsements guaranteed " 718-724 Restrictive indorsement 725-730 Rubber stamp 731-736 Same name as payee, indorsement by person of 743-744 Statute of Limitations apjjlied to forged indorsement 605-607 Transfer without indorsement 281 Warrant genuineness of signature, indorsement does not 737 "Without recourse" 734-742 INTEREST AND USURY Attorney's fee as cover for usury 745 Blank space for interest left in note 746 Calculation of interest 747-748 Collection annually and at maturity 749-752 Compound interest 753-755 Discount greater than legal rate 756-757 Legal rate collectible after maturity 758-759 Legal rate on loans 760-761 Maker's readiness to pay note stops interest 1019-1020 Maximum legal rate, discount at .' 762-766 Mmimum charge of one dollar for small loans 783 Negotiability affected by interest clause 767-769 Parol evidence to prove usury 770 Partial paj'ment applied to reduce interest 771 Payment of interest in advance 772-773 Pajinent of principal before maturity 774-776 Penalty for usury 777-778 Rate on loans outside of state 779-782 Slight excess interest 784 Usury pleaded as defense 785-786 INTOXICATING LIQUOR Interstate shipment 418—419 xiv LEGAL TENDER Opinion Numbers Deposit in gold coin payable in legal tender 787 Legal tender qualities of money 788 Legal tender substitute for gold coin 789-790 Standard silver dollars 791 LETTERS OF CREDIT Duplicate for lost letter 813 Forgery against lost letter 812 Payment of overdrawn letter 1058-1059 LIBEL AND SLANDER Derogatory statements affecting l^anks 792-797 Publication of names of bank debtors in "delinquent book" 191 Slander of bank depositor 190 LIENS Collecting bank's lien on paper forwarded 421-422 Judgment lien against bankrupt's estate 214 Lien of national bank for stockholder's indebtedness 230-232, 236 Lien of state bank for stockholder's indebtedness 228-229, 233-235 Lien on dividends of pledged stock 237-238 Lien on security pledged for specific debt 1063-1066 Mechanic's lien affected by trade acceptance 1330 Negotiability of vendor's lien note 903 Priority between mortgage and mechanic's lien 86S LOAN AND DISCOUNT Bank as agent to procure loan li>7 Bank as borrower on personal note of executive 168 Legal rate, discount greater than 756-757 Legal rate of interest on loans 700-761 Limit of loan by national bank S75-S81 Loan to bank official restricted 183 Maximum legal rate, discount at 762-766 One dollar minimum charge for small loans 783 Power of national bank to loan on mortgage 884 Rate of interest on loans outside of state 779-782 Rebate of interest on prepaid loan 771 LOST AND STOLEN PAPER Check indorsed in blank followed by special indorsement 682 Check signed in blank and stolen 800 Checks, duplicate for S17-S18 Checks lost in mail 798-799 Duplicate for stolen draft . . 803, 826 " Duphcate unpaid" on draft, effect of S27 Duty of care of check book 304 False statement that certificate of deposit is lost 281 Forged countersignature of lost traveler's check 609 Forged draft against lost letter of credit 619, 812 Government bonds, duplicates for 819 Holder in due course of stolen paper 801-805 Indemnity bond for issue of duplicate 824-826 Instrument indorsed in blank and stolen . . 806-811 Letter of credit 812-813 Passbook 814-816 LOriT AND STOLEN TAPEIl— Continued Opinion NumbtTH Stock corf ificafo, dviplicatc for lost 820-823 Substituted |)rcs(Mitiiicnt wlicu check is lost 798, 817-818 Unackuowlcdficd items, duty to trace 420-427 Unsigned bunk currency stolen and circulat<'tl 828 MAIL Accejitance of ofTer by nuiil 829 Bank's negligence in mailing draft to wrong person 586, 594 Checks and drafts lost in the mail 798-799 Gift of bank draft through the mail 830 Loss of registered mail 831-833 Point of time when check received through mail is paid 300-301 MARRIED WOMEN See also Husband and Wife Account opened vmder maiilen name 468 As surety and accommodation party 834-843 MATURITY Bank's right to charge to customer's account at maturity of note 1179 Certificate of deposit, maturity of 266-268, 278 Collection of interest at maturity 749-752 Days of grace abolished 962 Instrument maturing on Saturday 654-657 Legal rate of interest collectible after maturity 758-759 Maturity of notes 986-989 Negotiable instruments in Illinois, maturity of 660 Notes payable at bank equivalent to order to pay at maturity 1007-1010 Notes payable at bank presented after maturity 1008, 1336 Overdue trade acceptance presented after maturity 1335-1336 Payment of principal before maturity not usurious 774-776 Protest after maturity 1139 MINORS AND INCOMPETENTS Contracts of persons under guardianship 844 Liability of minor as stockholder 845 Payment by bank to incompetent depositor unsafe 846-847 Payment of check to infant agent 848 Withdrawal of deposit by minor 849-850 MISCELLANEOUS TOPICS PERTAINING TO THE FORM AND LANGUAGE OF INSTRUMENTS Bond to protect against payment upon unauthorized indorsement 181 Certificate of deposit subject to attachment 125 Certification "good if presented within five days " 38 Certification stamp including amount disadvantageous 49 Check payable " to order of payee shown on back" 324 Clauses inserted in trade acceptances 1328, 1332-1333 Deed for annuity 444 Disclaimer of liability for negligence of collecting bank 3S4-3S5 Disclaimer of liability for payment of stopped check 1242-1244 Excess collateral, appUcation to " any other claims" 1064 Form and language of indorsement ." 688-693 Form authorizing mailing paper direct to drawee 385 Form of note to make indorsers liable as sureties 700 Guaranty by indorsers of check-drawer's signature 513 xvi MISCELLANEOUS TOPICS PERTAINING TO THE FORM AND LANGUAGE OF INSTRUMENTS Continued Opiuiiin Numbers Instrument drawn on check form paj-able at future date 312 Letter of credit to safeguard against overdraft 1059 Negotiability of draft, form to restrict 725 Note retaining lien 903 Note securing warehouse collateral 1079 Notice of dishonor 1030 Payroll checks to protect against loss 339 Pledge whereby pledgor retains possession 1077 Receipt as substitute for counter check 296 Set off of unmatured note against insolvent borrower 1230 Two accounts, check where depositor has 1220 MISTAKE Certificate of deposit issued for erroneous amount 273 Legacy paid by mistake 1055 Mistaken credit to account 494—495 Money paid without consideration recoverable 631, 1052, 1057 Payment of check without funds 1054 Payment of deposit by mistake 4S4-4S5 Payment of draft by mistake 1053 Revocation of mistaken certification of stopped check 4S MORTGAGES Chattel mortgages 857-863 Foreclosure 864 Mortgage in name of cashier 856 Mortgage indebtedness payable in gold coin 790 Mortgage notes S65-S67 Power of national bank to loan on mortgage 884 Priority between mortgage and nieclianic's lien 868 Provision in mortgage governs interest clause in note 752 Wrong description in mortgage S09 NAMES Assumed name, opening account under 4u'> Deposit in two names 502 Garnishment notice with incorrect name 131-132 Indorsement by person of same name as payee 585-590 Mortgage given to bank in name of cashier 856 " Mrs." not part of name 689 Right to change name 1345 NATIONAL BANKS Advertising for "savings" account S70 Branch banks not permitted 2''>5 Cashier need not be director 197 Deposits with trust company permitted 871 DouI>le liability of stockholder 223-224, 1200 Examination by revenue officer 872 Federal jurisdiction 873 Guaranty of draft in which it has no beneficial interest 874 Increase of national bank stock 225 Lien for indebtedness of stockholder 230-232, 236 Limit of loan by national bank 875-88 1 Loan on certificates of deposit 882 xvii NATIONAL BANKS— Continued Opinion NumberR Loan on shares of stock proliilutcd 882 Miniinuiii charge on small loans 783 National l)ank as surety 885-886 Power to act as broker 193 Power to donate services of clerk 883 Power to loan on mortgage 884 Publication of unclaimed deposits -WS Kate of interest on loans outside of state 779 State taxation 1321-1325 Transfer of stock 1339-1342 Trust powers 887 Usurious discount and penalty 745, 750, 777 NEGLIGENCE Attorney's delay in bringing suit 1343 Circuitous method of presentment of check not neghgent 370-372 Collecting bank forwarding paper direct to drawee 398-409 Collecting bank's violation of instructions 394-396 Disclaimer of liability for maiUng check direct to drawee 384-385 Disclaimer of liability for mistaken payment of stopped checks 1242-1244 Duty of care of check book 304 Duty of care in preparing check 341-344 Failure to present for acceptance 388 Failure to trace unacknowledged items 426-427 Liability for loss of registered mail 831-833 Liability of telegraph company for forged telegrams 564-566 Mailing check to wrong person 588, 590, 594 Safe depositary responsible for negligence 472 NEGOTIABILITY Acceptance indorsed on back of bill 888 Certainty as to payee 889-S90 Certainty of place of payment 891 Certainty of time of payment ■ • • 892-S93 Certificate of deposit 276-277 Certificate of stock 808, 894-S95 Check paj'able to payee only 83, 287 Certificate of deposit payable "in current funds" 271-272 Clause confessing judgment 978-9S4 Costs of collection and attorney's fees 151-163 Extension clause 896-900 " In exchange" instrument payable 901 Instrument must be negotiable to justify protest 1140-1146 Instrument stamped by protect ograph 343 "Not payable through express company," effect of provision 325-327 Note reciting executory consideration 902 Note retaining lien upon property 903 Note secured by mortgage 865, 867 Note secured by warehouse collateral 1079 Passbook of savings bank non-negotiable. . . .' 814, 1038-1040 Provisions destroying negotiability 287, 892, 1145 Provisions regulating payment of interest 767-769 Statement of "particular fund" 323, 1140 Trade acceptance 1331-1333 Undated checks 356-358 Use of seal • 995-993 Waiver of protest and exemptions, effect of 904 xviii NEGOTIABILITY— Continued Opinion Numbers Warehouse receipt 905 Warrant drawn for municipal debt 906 Words affecting negotiability 907-909 PROVISIONS IN THE NEGOTIABLE INSTRUMENTS LAW REFERRED TO IN THE FOLLOWING TOPICS Accommodation indorser's liability 71 Attorney's fee stipulation 151-155 Blank space filled in "strictly in accordance with authority given" 285, 960 Certification must be in writing 15 Check is not an assignment 454-455 Check signed in blank and filled in 294 Circuitous routing of checks 370 Computation of time 987 Days of grace abolished 4r), 962 Drawee's liability upon stop payment 1255 Form of notice of dishonor 1030 Indorsement before payee "03 Indorsement in blank followed by special indorsement 681 Indorser's liability ns affected by agreement 73 Negotiation of check within reasonable time 801 Notes paj^able at bank 1007-1018 Presentment on Saturday 654-<')55 Protest must be under hand and seal of notary 1111 Rule allowing drawee 24 hours to accept 43 Statement of "particular fund" in instrument 323, 1140 Surety maker not discharged by extension of time 963, 967-968 Undated checks 357-358 Waiver of protest • • • ■ 1 1"3 Words and figures differ 3»)3 NOTARIES Acknowledgment by party in interest 910 Acknowledgment over telephone 911-912 Certificate of protest 1111-1112 Competency of bank officers, directors, stockholders and employees 91 !~957 Employee of member of Federal Reserve Bank as notary ' 1'>1 Form of acknowledgment •*'*'^ Notary's fee in Alabama 913 Protest by Justice of the Peace ^ ' '^ Protest by notary's clerk 1 ' ' 1 Relationship to mortgagee does not disqualify 9^ NOTES Accommodation maker not released by extension of time • 1006 Accommodation notes 100<>. 1022 Alteration of note •♦<'' ^ \-^ Attorney's foe notes 149- Hm Bank as holder of director's note 1^ Blank space filled " in accordance with authority " 9t>0 Blank space for interest '"*" Cashier buying his own note for bank ^" Collateral notes, enforcement of 1069-10/ 1 Corporation note, accommodation indorser's liability 76-77 Days of grace abolished ^"'^ Demand notes 1188-1190 xix NOTt:;^ Continued Opinion Numbers Dishonor of nolo payiil)!^ in inHtalnicnU 102H-1029 Knforceinont by holder 909-972 Extension of time of payment 903-908 Holder in due course of redi.scounted note ^^5 Inipos!sil)le date, note with 974 Indorser released by extension of time 1005 Joint and several notes 975-977 Judf^ment notes 978-984 Lopal tender, payable in 789-790 Liai)iiity of surety 985 Maturity of notes 9S0-989 Mortgage notes 865-807 Negotial)ility of notes 889-900 Note collected by agent without authority 990 Note governed by law of place where payable 973 Renewals 991-994 S.-al, use of 995-998 Signature on corporation note 434-^38 Statute of limitations on demand note 999-1003 Warehouse collateral, secured by 1079 ''With exchange", containing words 1004 NOTES PAYABLE AT BANK Equivalent to order to paj' at maturity 1007-1010 Express instructions to pay 1011-1015 Liability of maker when note not presented 1019-1020 Maker's readiness to pay stops interest 1019-1020 Negotiable Instruments Law, application of 1016-1018 Partial payment where funds insufficient 1210 Payment after maturity 1021 Stopping payment 1249-1252 Subsequent deposit cannot be applied 425, 1210 NOTICE OF DISHONOR Accommodation indorser entitled to notice 1022-1024 Duty to notify 1025-1027 Necessary to hold indorser 1 149 Notice upon default of instalment 1028-1029 Not required where indorser is accommodated party 1109 Provisions in Negotiable Instruments Law 1030 Should be given within reasonable time 1031 Sufficiency of notice 1031 Surety-maker not entitled to notice 1032-1033 Waiver 1034-1036 Waiver of protest includes demand and notice 1170-1176 OVERDRAFT By director 203 Certification of overdraft illegal 35 Pa\nncnt and credit of overdraft as deposit 1347-1350 Payment of overdrawn letter of credit 1058-1059 Payment from subsequent deposit 393 Payment to bona-fide checkholder 1054 Right to charge back overdraft 297 Recourse by bank which pays overdraft 1347-1350 WTiere depositor has two accounts 1220-1223 XX PARTNERSHIP Opinion Numbers Bank stock issued in name of firm 239 Deposit by partnership 487-488 Partnership indorsement 708 Payment of partnership checks to survivor in case of death 334 Set off against individual account of partner 1217-1219 PASSBOOKS Assignment of passbook 1037-1040 Credit of overdraft irrevocable 1347-1350 Delivery necessary to complete gift of deposit G07 Duty of examination by depositor 49G, 1041 Garnishee bank requires return of passbook 141 Lost passbook 814-81G Nature of passbook 1042 Presentation of savings passbook 1043 Provision in passbook to protect bank against crediting overdraft 1347-1350 Rules in savings passbook 1044-1045 PAYMENT Acceptance of check "for full payment of account" 307-311 After banking hours 1 After notice of assignment 1040-1047 Application of payment 1048-1049 Bank's refusal to pay duly presented check 345 Conditional payment by check 1050-1051 Crediting depositor's account with checks on same bank operates as payment 297-298 Exchange charge 305-30G Extension of time of payment 963-908, 991-991 "In current funds" 271-272 Indorsement of check as prerequisite of payment 713-717 "In exchange" 31.>-316 Interest paid in advance 772-773 Legal tender 787-791 Minors and incompetents, payment to S4G-8.')5 Mistake, pajnnent by 1052-1057 Note payable in instalments 102S-1029 Official check for private use, payment unsafe 32S-332 Overdraft paid or credited as a deposit 1347-13r»0 Overdrawn letter of credit 105S-1059 Order in which checks for more than balance should be paid 318-322 "Paid" stamp on check 35;i-354 Partial payment lOtW) Payment of check after drawer's death 449-4(il Payment of check on holiday G59-()03 Payment of checks with suspicious appearance 340 PajTnent of note payable at bank after maturity 133G Payment of note payable at bank at maturity 1007-1010 Payment of principal before maturity 774-770 Payment on rubber stamp indorsement unsafe 735 Payment upon indorsement of precise person intended 711-712 Payment upon indorsement of person of same name as payee 743-744 "With exchange" 1061 PLEDGE AND COLLATERAL Accounts receivable as collateral 10G2 Application of surplus security pledged for specific debt 1063-1066 Bank's power to pledge its assets 185 Bond for title as security 1067 I'LEDGE AND COLLATERAL— Continued opinion Numbers Corporate stork plodKccl as collateral 1068 Enforcement of collateral notes 1060-1071 Lib(>rty bonds as (collateral 1072 Lien on dividends of jjled^ed stock 237-238 Life insurance j)oliey a-ssi^ned as collateral 1073 Passbook assigned as collateral 1037-1040 Power of attorney to sell collateral 1074 Sale of collateral on outlawed note 1075 Securities guaranteed l)y salesman 1076 Warehouse receipt, validity as pledge 1078-1081 War Savings certificates as collateral 1082 What constitutes valid pledge 1077 POSTDATED CHECKS Certified checks 12-14 Duty of collecting bank 1083 Payment 1084r-1089 Protest 1090-1095 Set of! 1096 POWER OF ATTORNEY Power of attorney affected by death 462 Power of attorney to sign checks 351 PRESENTMENT See Collection At branch banks 261-264 Circuitous routing of checks 370-372 Duty of collecting bank 386-390 Forwarding paper direct to drawee 398-409 Necessity of presentment 701-702 Over telephone 109S-1099 Place of presentment 1100-1104 Presentment for acceptance 388, 1083 Presentment of check a second time 1154-1156 Reasonable time for presentment 1105-1108 Rule to allow drawee 24 hours for acceptance 43-46 Simultaneous presentment of checks for more than balance 318-322 Substituted presentment when check is lost 798, 817-818 When presentment excused 1109 PROTEST See Notice of Dishonor Altered check 1110 Certificate of protest 1111-1112 Checks payable in one state and negotiated in another 1113 Demand over telephone does not justify protest 109S-1099 Drawee's duty of protest 1115-1117 Duty of collecting bank 1118-1119 Fees 1120-1121 For better security 1122 Forged checks 1123-1125 Formal protest 1126-1128 xxii PROTEST— Continued Opinion Nambers Indorsement of check incorrect 1129-1130 Indorsement on instrument lacking 1131-1134 Inland and foreign bills of exchange distinguished 1135-1136 Instructions to protest 1137-1139 Instrimient must be negotiable 1 140-1 146 Not abolished in any state 1 147 Notice of protest 1025-1027 Payment of protested check 1114 Permissible but not compulsory 1 148-1 149 Persons authorized to make protest 1150-1151 Place of protest 1152-1153 Postdated checks 1090-1095 Second protest of check 1154-1 15G Signature on instrument lacking 1 157 Stopped check 1 158-1 159 Surety-maker of note not entitled to protest 967 Time of protest 1 160-1 169 Waiver 1 170-1 176 SAVINGS DEPOSITS Account of husband in trust for wife 068 Attachment and garnishment of savings deposits 141-142, 144-145 Notice of withdrawal 282 PajTiient on production of passbook 1043 Rules in saving passbook 1044-1045 Savings account as time deposit 497 Savings deposit in national bank 504 Savings deposits not exempted from taxation 1314 Set off where depositor has savings and chocking accounts 1220-1221, 1223 l^se of word "savings" ISS, S70 SET OFF Collection proceeds set off against bankrupt .-. . . 1 177 Consent of depositor required in Louisiana 1 178 Consent of depositor unnecessary 1179-1 181 County warrant set off against deposit of county 1 182 Debt protected by collateral 1 183-1 185 Debt must be contracted in good faith 1 186 Debt of presenting checkholdcr 1 187 Demand note 118.8-1190 Deposits impressed with trust character 1 I'M Deposit received after maturity of note 1 1'>1 Deposits made in view of insolvency 1 192-1 193 Depositor's right to set off against insolvent bank 1206-1209 Indebtedness of decedent, set off against 1 197-1202 Indorser's account, set off against 120;j-1205 Maker's account charged in interest of indorser 1210-1213 Note set off against insolvent l>ank by indorser 1214-1216 Partnership debt set off against indivithml account 1217-1219 Postdated check 109*'. Set off against city deposit 1 195 Set off by bank to defeat attachment 146-148 Set off of claim for interest 1 196 Stopped check, sot off after payment of 1265 Unmatured debt set off against l)ankrupt 1224-1230 Whore depositor has two accounts 1220-1223 xxiii SIGNATURES Opinion Numbers Agont signing for principal 605 Bank bound to know depositor's signature 512-617 Bank's obligation to know payee's signature on certificate of deposit 280 By mark and witness .' 202, 561-503 By power of attorney 351 Comparison of signatures 350 Corporation signature on note 434-438 Forgery of signature by mark 561-5G3 Guaranty of signature 179, 617 Hectograph signature valid 349 Joint and several notes 975-977 Indorsement by mark 705-707 Indorsement does not warrant genuineness 737 Missing signature 254, 1 157 Notary's certificate signed by clerk 1111 Partly genuine 348 Partnership signature 487-488 Surety-maker's signature after discount of note 985 Unsigned bank currency stolen and circulated 828 STATUTE OF LIMITATIONS Begins to run from maturity of note 968 Certificate of deposit 278-279 Certified check 39-41 Checks 1106 Demand note ' 999-1003 Effect of payment of interest after maturity 74 Forged indorsements 605-607 Guaranty of payment •. 1003 Postponement by extension of time of payment 991 Sale of collateral security on outlawed note •. 1075 Statute of Limitations against indorser 74, 100 1 STOPPING PAYMENT Accuracy of notice 1231-1232 Bank's liability for payment 1233-1235 Cashier's and certified checks 1236-1241 Disclaimer of liabiUty for payment of stopped check 1242-1244 Duty to obey instructions 1245-1248 Notes payable at bank 1249-1252 Notice holds good indefinitely 1253-1254 Oral notice 1255-1258 Practice of stamping "payment stopped" 1259-1261 Recovery by drawee 1262-1265 Rights of holder in due course 1266-1282 When drawer's right ceases 301 Where instrument an assignment 1283-1285 Where instrument not an assignment 1286-1289 SURETIES Liability of surety 985 Married woman as surety 834-843 National bank as surety 885-886 Surety company bond 822 Surety-maker not entitled to protest 967 Surety not released by extension of time 963-968 xxiv TAXATION Opinion Numbcra Canadian bank notes and currency 1290-1292 Compulsory disclosure of customer's balance 173-17G Corporation tax law 1293-1295 Deduction of government bonds 129G Deduction of real estate . 1297-1300 Deduction of taxes , 1301-1303 Discrimination in assessment 1304-1305 Erroneous return 130G Federal income tax law 1307 Occupation tax 1309-1310 Penalty of delayed return 1312-1313 Savings deposits not exempted 1314-1315 Secured Debts Tax Law of New York 1316 Stamp tax 1317-1320 State taxation of national banks 1321-1325 Tax for fraction of year 1308 Taxation of clioses in action 1311 Transfer tax of decedent 1320 Treasury notes subject to taxation 1327 TRADE ACCEPTANCE Acceptance payable at bank in another locality 132S Completing signature of drawer after acceptance 1329 Mechanic's lien rights, effect of 1330 Negotiability 1331-1333 Overdue trade acceptance payable at Invnk 1335-1336 Payment by acceptor's bank 1337 Seller's right of replevin 1338 Trade acceptance propaganda not in restraint of trade 1334 TRANSFER OF STOCK Duplicates for lost stock certificates 820-823 Liability of transferor to assessment 220 Bank stock 240-241 Book transfers 1339-1342 Negotiability of certificate SOS, 823, 894-895 Right of bank as lienor to refuse transfer of stock 228-236 Stock of decedent 463-464 Transfer by delivery 1339-1340 Transfer for protection of collateral 1008 TRUST COMI'AMlvS As executor and guardian 498, 887 Deposits of national l)ank with trust company 871 Investigation of private iiffnirs l)y Congressional committee 184 Power to guarantee dclit of another 874 TRUST FUNDS Trust funds J'.lS-.-ni ULTRA VIHF>? ACTS Ultra Vires Acts ... .177-178, 823, 874, 884 VOTING Opinion Numbers By executor in name of testator 243 By trustee in bankruptcy 242 Power of American Bankers Association dck^gate 1346 Rights of stockholders not voting 225 Single sliare as voting unit 439 Voting power of stoc'khokk>r 440 WAIVER OF PROTEST Waiver of protest 1 170-1 17t) WAREHOUSE RECEIPTS Delivery of goods without taking up receipt 032 Negotiability 905 Validity as pledge 1078-1081 Date Due PRINTED IN U.S. o. CAT. NO 24 161 Kw UC SOUTHERN '^EG"-"' .^,,E^iPY'iC'L'- AA 001 264 378