GIFT OF 
 Mrs. Berton Einstein 
 
NOTES AND ANNOTATIONS TO "THE LAW' OF DEPOSITS," BY 
 FRED W. WE1TZEL, FOR USE IN THE STATE OF CALIFORNIA. 
 
 NOTE. Heavy numbers refer to section numbers of text. 
 
 CHAP. 1. 3. 92 Cal., 14; and this applies to deposits in savings banks. 
 117 Cal., 161. 4. Where trust company is itself the trustee, administrator, 
 etc., the moneys so held by it are trust funds and out of the trust funds 
 claims as such must be paid first; and where deposit is made by an officer 
 appointed by the court, by direction of the court, such deposit is preferred; 
 otherwise the rules as stated in text apply. 7. Purchaser of draft who pays 
 for it by check on his account remains a depositor in case draft is not paid. 
 124 Cal., 90. 12. But where it is merely a receipt for money deposited to be 
 held and the identical money returned, it can be recovered in full, though 
 wrongfully mingled. 112 Cal., 598. In this case there was no proof that 
 the money, or an equivalent amount, did not remain in bank. 
 
 CHAP. 11. 25. No bank can deposit any of its funds in another bank 
 unless such other bank has been designated a depositary, by vote of majority 
 of directors or trustees of depositing bank, exclusive of the vote of any director 
 or trustee who is also an officer, director or trustee of the depositary desig- 
 nated. See note 51. - 
 
 27. Public moneys of the State. Bids are received and from the banks 
 agreeing to pay highest rate -of interest the State Treasurer, with the approval 
 of the Governor and the State Comptroller, selects depositaries of public 
 funds. National banks or banks organized under the laws of California may 
 be selected. Not more than 10 per cent of the aggregate amount of State 
 money, and not more than an amount equal to 25 per cent of the paid 
 up' capital of the bank, exclusive of reserve and surplus, can be deposited in 
 any one bank. The interest, paid or credited on the first day of each manth, 
 belongs to the State. Value of security deposited must be at least 10 per 
 cent in excess of the amount deposited, and must be approved by the 
 Governor and the State Comptroller. An indemnity bond may also be re- 
 quired. Deposits must be payable on demand or on return of certificate of 
 deposit properly endorsed. 
 
 County and Municipal Moneys. May be deposited in licensed national, 
 or in state bank or corporation licensed to do a banking business and organized 
 under the laws of California. Deposit in no bank can exceed 50 per cent 
 of its capital. Not more than 10 per cent of all moneys in his control can 
 be deposited by officer in any one bank while other qualified banks request 
 deposits. However, no deposit need be made outside of county owning the 
 money or outside of county where municipality is located. The rate of 
 interest is fixed annually, in January, for the year, by the Treasurer, Auditor 
 and chairman of the Board of Supervisors of the County, in the case of 
 county funds, and by the Treasurer, Auditor (or, if no auditor, the clerk) 
 and chairman of the council or other governing board, in the case of 
 municipal funds. The rate must be uniform as to all deposits of a county 
 or city. The interest belongs to the county, or city, and must be paid quar- 
 terly. Securities must be approved by officer depositing and by the attorney 
 for the county or city, respectively. 
 
 Generally. Securities must consist of United States bonds, or bonds 
 of the State, or of counties, municipalities or school districts in California. 
 Interest must be at least 2 per cent and calculated on daily balances. All 
 deposits are subject to payment on demand of the officer depositing or his 
 successor. In the case of county and municipal money the bank can return 
 the deposit, with interest to date of return, at any time, and withdraw its 
 securities. While remaining on deposit in accordance with law (and in 
 the case of State funds, with the consent of the Governor and State Comp- 
 troller) the officer is relieved from further responsibility. The officer de- 
 positing the funds is responsible for the safe return and disbursement of 
 securities or their proceeds, and the State, counties and cities, respectively, 
 are liable to the banks for securities deposited with such officers. The banks 
 must pay all expenses of transporting funds to and from the depositary. 
 
 Making a profit out of public moneys, or using them for unauthorized 
 purpose is felony on part of public officer; wrongful receipt subjects bank 
 to a fine and bank officer receiving is guilty of a felony. Act of March 23, 
 
 36. Where deposit is made as "Agent," for a disclosed principal, bank 
 cannot assume that principal is fictitious; and if it pays to the agent it does 
 so at its peril. 73 Cal., 464. Bank can not issue to A a certificate of deposit 
 for money which it knows belongs to A's wife; and payment of the certificate 
 to the husband does not discharge liability of bank to wife. 136 Cal., 499. 
 
 CHAP. III. 37. Depositor who delivers money at counter in savings 
 bank not required to ascertain whether directors have expressly authorized 
 receipt by the one taking same. 136 Cal., 499. 38b. Pass book not negoti- 
 able 43 Cal., 325. Garnishee bank cannot set up that its pass books are 
 tran'sferrable. Same case. 38d. 92 Cal., 14, holds that negligence of depos- 
 itor alone does not relieve bank from liability, where bank has not been 
 deprived of opportunity to save itself. 39. 122 Cal., 19; 2 Cal. App., 377; 
 131 Cal , 321. 39a. In California statute provides that "Whenever any 
 deposit with a bank shall be made by any person, in trust for another, and 
 
no other or further notice of the existence and terms of a regular and valid 
 trust shall have been given, in writing, to such bank, in the event of the death 
 of the trustee, the same, or any part thereof, together with the dividends 
 or interest, if any, thereon, may be paid to .the person for whom the dep'osit 
 was made." 39b.' Bank must pay check though it knows the check was drawn 
 in payment of wager. 96 Cal., 197. 41. But a certificate is assignable, 
 though not negotiable. 101 Pac., 34, even where certificate states: "not 
 transferable." 42. Bank has authority to issue certificates of deposit, though 
 not authorized to issue promissory, notes. 136 Cal., 510. 
 
 45. Where A deposits money and takes certificate in B's name, A can 
 not withdraw the money without B's endorsement. 73 Cal., 464. 
 
 49. Mo interest unless stipulated. 130 Cal., 542. 50. See 130 Cal., 
 542, where certificate to stockholders, for money loaned the bank, was held 
 to create relation of depositor to bank. 51. President or managing officer of 
 every bank must, within 15 days after the first day of January of every odd- 
 numbered year, return to Superintendent of Banks a statement showing names 
 of depositors known to be dead, or who have not made further deposits, or 
 withdrawn moneys, during the preceding ten years. 
 
 Reserve. Every bank (every person, firm, company, partnership or cor- 
 poration which receives money on deposit) except savings banks, must at all 
 times have, in lawful money of the United States, gold and silver coin, gold 
 certificates or silver certificates, an amount equal to 15 per cent of its aggre- 
 gate deposits, exclusive of' state, county and municipal deposits. Three-fifths 
 of this may consist of deposits in banks in California, other than savings 
 banks, subject to call. Bank receiving deposits of other banks must maintain a 
 reserve of at least 20 per cent of its aggregate deposits exclusive of public 
 deposits mentioned. As with a national bank, no dividends can be paid and 
 no new loans or discounts made, other than the discounting of bills of ex- 
 change payable at sight, when reserve is below the minimum. Failure to 
 make reserve good after notice of deficiency subjects bank to being declared 
 insolvent. Savings banks must carry, in cash or its equivalent, an amount 
 equal to 4 per cent of its deposits; 2 per cent of its deposit reliabilities 
 must be in coin or currency of standard value, in its own keeping. No new 
 loan can be made when there is a deficiency in reserve. Deposits with com- 
 mercial banks are not construed as loans by savings banks. Not more than 
 5 per cent of deposits of any savings bank can be deposited in any other one 
 bank. Commercial banks conducting a savings department must keep moneys 
 and accounts separate and carry the reserves required in each department, 
 respectively, and the funds of the savings department, of the commercial 
 department and of the trust company department must be independently 
 treated throughout, and each remains subject to distribution to the creditors 
 of tlie respective departments before any part thereof can be considered 
 general assets. No national bank can be the depositary of any bank organized 
 under the laws of California, unless such national bank, at the request of 
 the Superintendent of Banks, submits to an examination by him or his duly 
 appointed examiner, if the Superintendent deems it necessary for such an 
 examination to be made. Act of March 1, 1909. 
 
 CHAP. IV. 58. 4 Cal. Ap., 429. Though pass book contains by-law, 
 requiring notice, after suspension by the bank no notice is required before 
 suit. 125 Cal., 456. 59. Deposits by married women and minors are subject 
 to their own control and receipt for payment from such discharges the bank. 
 Act March 1, 1909. Where one bank takes an assignment of all the property 
 and accounts of another bank, the assignee bank is liable to the depositors 
 of the assignor bank. 65 Cal., 71. See 96 Cal., 197, holding that bank not 
 concerned with purpose for which check drawn; it must pay when properly 
 drawn. 
 
 CHAP. V. Neg. Ins. Law has not been enacted, as such, in California, 
 but most of the rules of the Law Merchant declared therein are declared 
 by the Code of California to be the law there. 65. The Code defines a 
 check as "A bill of exchange drawn upon a bank or banker, and payable on 
 demand without interest." And it is a check, though drawn by a bank. 
 134 Cal., 237. 85. When a deposit is made by any person in the names of 
 the depositor and another person or persons, and in form to be paid to either 
 or the survivor or survivors of them, such deposit thereupon, and any addi- 
 tions thereto made by either of such persons, upon the making thereof shall 
 become the property of such persons as joint tenants, and the same, together 
 with all interest thereon, shall be held exclusively for the use of the persons 
 so named, and may be p'aid to either, during the lifetime of all, or any, 
 or to the survivor or survivors after the death of one or more of them, and 
 such payments and the receipt or acquittance of the one to whom such pay- 
 ment is made shall be a valid and sufficient release and discharge of such 
 bank for all payment made on account of such deposit. Act March 1, 1909. 
 See note 179. 88. In California one who transfers without endorsement does 
 not warrant that the instrument is genuine. He warrants simply that he 
 has no knowledge of any facts tending to prove it worthless or invalid. Sec. 
 1771 Civil Code; 139 Cal., 564. 90. In California if not presented within 
 10 days the drawer and endorsers are exonerated, but presentment should 
 be promptly made. See 5 Cal. Ap., 39, 42. 101. Bank liable if it pays with 
 , notice of drawer's death. 138 Cal., 169. 
 
CHAP. VI. 111. 124 Cal., 90, and the purchaser remains a dep'ositor, 
 same as before the check was given. 112. In California bank has till close 
 of business day to determine whether check is good or account sufficient, 
 and if not may charge ^back the amount to the depositor; but where the 
 depositor is credited and the drawer charged, which the bank may elect to 
 do, it is payment. 6 Cal. Ap., 678. 114. Erroneous remittance recovered 
 from post-office. 94 Cal., 362. 
 
 CHAP. VII. 132. Check no assignment and deposit subject to attach- 
 ment after check drawn but not presented. 71 Pac., 93. 139. Bank can not 
 recover from innocent holder, 45 Cal., 406; and is bound to know depositor's 
 signature, 92 Cal., 14. Where bank, upon identification by a man of good 
 standing, pays telegraphic order to person to whom telegraph company de- 
 livered the order, the bank is not liable for negligence and the telegraph 
 company must answer for the loss. .52 Cal., 280. 141. Bank can not 
 charge depositor with payment on forged endorsement. 97 Cal., 208. 142. 
 Bank can not recover from agent money paid on a raised check, where 
 agent has paid it to his principal, 139 Cal., 564, where bank had paid to 
 owner amount collected on item; otherwise it may recover even from an 
 innocent holder. Endorser does not guaranty that check has not been raised. 
 Bank should offer to return check and demand return of money. 45 Cal., 46. 
 143. Bank has no right to retain forged instrument. 134 Cal., 237. 145. 
 92 Cal., 14. 14Cc. In California, where bank -merely acts as collecting agent 
 and pays to the depositor the money collected from the drawee bank, where 
 the item was restrictively endorsed, for collection only, the bank which has 
 paid it over to the owner of the item cannot be made to return the amount 
 to the drawee bank. There is no warranty implied in California. 139 Cal., 
 564, and see note 88b. 
 
 CHAP. Vlll. 147. See note 38b. 153. Bank is not exempt from 
 attachment in California; but attachment is vacated if bank becomes insol- 
 vent. See 106 Cal., 64; 39 Pac., 215, 218. Attachment can not issue against 
 national bank, from state court. 127 Cal., 453. 154. Not payment, unless 
 accepted as such, until paid. 5 Cal. Ap., 39; 78 Cal., 15; 124 Cal., 90. 155. 
 In California there is no limitation to actions against banks for deposits. 
 Sec. 348, Code of Civil Procedure. 65 Cal., 71. Demand must be made before 
 suit; until then money is not due. 100 Cal., 18. 163. No interest until 
 demand, unless contracted for. 100 Cal., 18. Entitled to interest from date 
 of suspension, 111 Cal., 57. 165. In California this lien is given by statute. 
 171. Savings bank can not offset deposit against claim on which it has right to 
 foreclose a mortgage. 118 Cal., 334. Where bank has no knowledge that 
 deposit does not belong to depositor it can offset against his note. 141 Cal., 
 508. 174. Claim acquired subsequently can not be offset. 135 Cal., 597. 
 179. The Act of March 1, 1909, provides that a surviving husband or wife 
 of any deceased person, or, if no husband or wife is living, then the children, 
 and if no children are living, then the father or mother of such decedent 
 may, without procuring letters of administration, collect of any bank any 
 sum which decedent may have left on deposit at the time of his or her death, 
 upon making affidavit that the affiant is the surviving husband or wife, or that 
 the decedent left no husband or wife and that affiant is, or affiants are, the 
 childfen, or the father or mother of decedent, and that the whole amount that 
 decedent left on deposit in any and all banks of deposit in California does 
 not exceed $500. The affidavit and receipt of affiant is sufficient acquittance 
 to the bank for the payment. 
 
 CHAP. IX. 183. 154 Cal., 527, 531. 184. 7 Cal. Ap., 642; 154 Cal., 
 527. 189. If book and order for all the funds is deposited in and accepted 
 by the bank, before death of the donor, this is a valid gift. The title has 
 then passed and the money need not itself be transferred or the transfer 
 entered on the bank's books. 6 Cal. Ap., 144. 191. In Hellman v. Mc- 
 Williams, 70 Cal., 499, it was held that the assignment of a deposit to a 
 trustee, for the benefit of the assignor's children upon his death, creates a 
 trust where the trust is accepted by the assignee, though the assignor has 
 the right to withdraw some of the money from the trustee. Alternative 
 account not a gift. 7 Cal. Ap., 642. 
 
 CHAP. X. 194. To wilfully make, draw, deliver or try to deliver check 
 on bank or banker, knowing at the time of drawing it that there are not 
 sufficient funds or credit with the bank to meet the check in full when pre- 
 sented, and with intent to defraud, is punishable by imprisonment for one 
 to fourteen years. "Credit" is construed to be an arrangement or under- 
 standing with the bank or depositary for the payment of such check. 195. 
 4 Cal. Ap., 201. 196. Overdraft may be fraud on part of drawer, or it may 
 be fraud on part of bank officer. 60 Cal., 126. Promise to repay overdraft 
 is implied. 125 Cal., 407. 197. Where president wrongfully allows over- 
 drafts, or directs their allowance, he is liable to bank for loss. 60 Cal., 
 126. In California it is a felony for an officer, director, agent, teller, clerk 
 or employe of any bank to knowingly overdraw his account and thereby obtain 
 the money, notes or funds of the bank. 201. Where deposited only for col- 
 lection, proceeds, when collected, belong to depositor. 106 Cal., 385. In 
 California the custom, by which depositors are bound, is that the bank is 
 not liable for proceeds of items collected until the proceeds are actually re- 
 ceived by the bank. 5 Cal. Ap., 408. 
 
\ 
 
THE LAW OF DEPOSITS 
 
 BY 
 
 FRED W. WEITZEL, LL. M., 
 
 OF THE DISTRICT OF COLUMBIA BAR, 
 
 WASHINGTON, D. C. 
 
 J. D. MILANS & SONS, 
 
 PUBLISHERS, 
 WASHINGTON, D. C. 
 
YKy 
 
 Copyright 1910, 
 By FRED W. WEITZEL. 
 
To HON. FRANCIS Fox OLDHAM, 
 
 This volume is respectfully dedicated, 
 
 as a token of appreciation. 
 
 5561)45 
 
PREFACE. 
 
 This volume is prepared for the special use of bankers 
 and their assistants, the bank clerks, whose sincere and 
 active ambition to improve in efficiency never lags, but whose 
 time is so much occupied with the duties crowded upon 
 them that a general law course is impracticable, while the 
 average law book is incomprehensible. It is hoped that 
 business men will also find it useful. 
 
 The author's purpose has been to make a clear statement 
 of the principles governing the law of deposits, explain stat- 
 utes and, where there is a conflict, indicate to the reader in 
 each state the law in his jurisdiction or the better practice 
 to follow in view of the conflict. Some cases are cited, a 
 reading of which will be profitable; but a general annota- 
 tion has been omitted, as it would confuse more than en- 
 lighten. Most cases cited will be found to be annotated in 
 the reports, and in the National Reporter System the last 
 case is a key to all earlier ones. While the writer has re- 
 ferred to the standard works on the law of banking, such 
 as Morse, Zane, Bolles and others, he has based most of his 
 statements herein on the decisions of the courts as found 
 in the reports of the cases themselves. It is believed that 
 the statements are fully sustained by the authorities. 
 
 If the volume is found practical and useful by the banker 
 the author will be more than satisfied. If the legal profes- 
 sion finds it reliable, he will feel well repaid for his labor. 
 
 FRED W. WEITZEL. 
 
 Washington, March i, 1910. 
 
SEC. 1 
 
 CHAPTER I. 
 DEPOSITS. 
 
 I. Relation of Depositor to Bank Where A delivers 
 to B an article of personal property, which 'B is to keep 
 for A and return to him when the purpose for which the 
 article was delivered has been accomplished, this is in law 
 called a bailment. A, the one who delivers the thing, is 
 called the bailor; B, the one to whom it is delivered, is 
 called the bailee. The thing which is the subject of the bail- 
 ment may be left with the bailee for repairs, it may be that 
 the bailee is borrowing it for his own purpose, or it may be 
 that it is simply for safe keeping for the bailor. Where the 
 bailment is made for the benefit of the bailor and the bailee 
 receives no compensation or benefit for keeping the thing 
 bailed, but must return that very thing to the bailor, we 
 have what is properly called a deposit, and such is the special 
 deposit. 
 
 A general deposit of money in bank differs much from 
 such deposit as is mentioned above. In the case of the 
 bailment the thing deposited remains the property of the 
 bailor and if the bailee use the thing for any purpose other 
 than that for which it was delivered, he will be liable for 
 trespass or conversion. If the thing be destroyed without 
 the gross negligence of the bailee the loss will be on the 
 bailor. With an ordinary deposit in bank, however, a dif- 
 ferent legal relation arises. The depositor does not expect 
 to receive back the identical pieces of money, as in the case 
 of the bailment. He expects to receive money of equal 
 value, or a credit, and the bank becomes indebted to him for 
 the amount of the deposit. While a deposit is, in effect, a 
 
8 SEC. 2 
 
 loan of money to the bank, there are some differences be- 
 tween a loan and a deposit. By various regulations of the 
 business of banks the law places restrictions upon the use 
 which a bank may make of its deposits, while one may make 
 any use he pleases of money he borrows. 
 
 2. Classes of Deposits Bank deposits are usually di- 
 vided into three classes: general, special and specific. 
 
 GENERAL DEPOSITS. 
 
 3. When a party opens an account by depositing money, 
 and when a regular customer makes a deposit, unless there 
 is an agreement to the contrary, the bank mingles the amount 
 received with its other funds, the entire fund is the prop- 
 erty of the bank, and the depositor becomes, not a bailor, 
 but a creditor of the bank. The relationship, therefore, be- 
 tween a bank and its general depositors, is that of debtor 
 and creditor. The bank is indebted to the depositor in the 
 sum of his deposit and the bank is the absolute owner of 
 the money which it has accepted as soon as the same has 
 been passed over the counter. The depositor has no right to 
 any specific money. He has only a claim against the bank 
 as a general creditor. Bank of Blackwell v. Dean, 9 Okla., 
 626; Butcher v. Butler, 114 S. W., 564, a Missouri case; 
 Burton v. U. S., 196 U. S., 283. A deposit will be presumed 
 to be intended as a general deposit unless there is an agree- 
 ment to the contrary, especially where loose money is de- 
 posited. If a sealed box, bag or package, or marked en- 
 velope containing money were deposited it would be rea- 
 sonable to presume that it was intended as a special deposit, 
 but evidence of a custom or of intent would be admissible 
 to show whether it was actually a general deposit. Loose 
 money or paper deposited without any agreement or custom 
 to the contrary will be presumed to be a general deposit. 
 
 4. In Case of Insolvency In case of insolvency of the 
 
SEC. 5 9 
 
 bank, every general depositor is a creditor of the bank. 
 Technically every creditor is a general creditor. If one 
 is entitled to payment in full it is either because the bank 
 holds a special deposit or security, which has always re- 
 mained his property, the bank being a bailee under an agree- 
 ment, or because the bank has violated a trust and by rea- 
 son of the wrong holds a special fund which belongs to the 
 owner. In a national bank all general depositors arid other 
 creditors share alike. In some States the depositors in 
 State banks are by statute preferred over other creditors and 
 are paid in full before other claimants of an insolvent bank. 
 
 5. Frequently when a bank fails attempts are made to 
 establish rights to preferences by showing that certain de- 
 posits were "special deposits." But the ordinary manner 
 in which banks do and in these days must do, their business, 
 to satisfy the demands of commerce, facilitate negotiations 
 and meet the customs which present day business methods 
 require, and the general intentions of those who do ousiness 
 with banks, when sifted out, will show the fallacy of this 
 clamor for preferred payment of claims, as well as the ob- 
 vious injustice of the claims. See Sec. 198 et seq. 
 
 6. Even though money is deposited for a specified time, 
 or upon unusual conditions, if there is no understanding 
 that the money is not to be mingled, the bank will mingle 
 the amount received with the general mass of its property, 
 and in most States, the deposit is a general one, to be repaid 
 out of the general mass of the bank's assets. 
 
 7. One who purchases from a bank a draft drawn on 
 another bank has a claim on the draft only, and not upon 
 the specific money which he paid for the draft, unless the 
 bank official who issued the draft knew when he drew it 
 that there were no funds in the bank upon which drawn to 
 meet it. This of course would be a fraud, and if the pur- 
 chase money could be traced the purchaser would have a 
 right to recover it. Where, however, a customer of the 
 
10 SEC. 8 
 
 bank purchases a draft and pays for it by check on his ac- 
 count in the same bank, if the draft is not paid, even though 
 the officer knew when he issued the draft that it would not 
 be paid, the customer would still remain a general creditor. 
 He has simply failed in an attempt to withdraw from his 
 account the amount of the draft purchased. The bank re- 
 ceived no actual cash from him. It was a bookkeeping tran- 
 saction only. He was a general creditor when he purchased 
 the draft, and the draft being worthless he is still a general 
 creditor. Clark v. Toronto Bank, 82 Pac., 582, a Kansas 
 case. 
 
 8. If A deposit money in bank to be paid to B, upon -a 
 contingency, this is a general deposit unless there is an 
 agreement that the identical money will be kept separate 
 and paid to B. As to whether A or B would be the proper 
 claimant we will discuss hereafter. See Sec. %fr 3QC. 
 
 9. Frequently one who is already a depositor in a bank, 
 for his own convenience, or to prevent confusion, will open 
 another account as "attorney," "agent," or "trustee," etc. 
 It may be that he is treasurer of some organization and 
 wishes to keep the fund as treasurer separate from his own 
 moneys. As to the depositor this is a special fund, but it 
 is not the creation of a special fund as between himself and 
 the bank, except that checks drawn on his personal account 
 cannot be charged against the special account, and vice 
 versa. It represents an account of a general creditor and 
 in case the bank failed there would be a general claim only. 
 
 10. Where an "officer of a State or of the Federal Gov- 
 ernment is not prohibited by law from depositing his money 
 as such officer in bank, and he does deposit it, this is a gen- 
 eral deposit. A case recently decided in Oklahoma holds 
 that where the officer did not have authority, though not 
 prohibited, the deposit was wrongfully made and when the 
 bank failed the fund -was held to be a trust fund and paid 
 prior to other creditors. This case is contrary to the de- 
 
SEC. 11 11 
 
 cisions in other States and was not well considered. Watts 
 v. Board of Com'rs., 95 Pac., 771 ; In re Salmon, 145 Fed., 
 649, and see Par. 27!). Usually security is required to pro- 
 tect the Government and the officer is held personally liable, 
 but as to the assets of the bank there is only a right to share 
 with other creditors. If the law prohibits the deposit by 
 an officer, the bank is guilty of a wrong in receiving such 
 deposit and where the money can be traced it can be re- 
 covered in full. 
 
 11. If money be deposited in bank to A's credit, A intend- 
 ing to use the money for a special purpose, this does not 
 alone make it a special deposit. It is not any special pur- 
 pose, use or trust which A impresses upon the deposit 
 which makes it a special deposit. No matter what A might 
 intend to use the money for, it is a general deposit unless 
 otherwise made special. 
 
 12. One who holds a certificate of deposit is a general 
 creditor, except where he is given preference as a depositor 
 in a State or savings bank under the State law. 
 
 13. Deposit a Debt After the deposit has been made, 
 the indebtedness of the bank is absolute until payment. The 
 title to the money passes to the bank and, though the iden- 
 tical pieces of money be stolen, embezzled or destroyed be- 
 fore the deposit is mingled with the other moneys of the 
 bank, the bank is indebted to the depositor just the same. 
 If the bank be insolvent when the money is received, yet 
 the money becomes the property of the bank and the de- 
 positor becomes a creditor to that extent, unless the officers 
 knew that the bank was actually insolvent at the time the 
 money was received. If a bank receive deposits after busi- 
 ness hours and hold same over till the next day, and the 
 bank fails to open the next day, the deposits should be re- 
 turned, unless the bank was in the habit of receiving depos- 
 its after usual business hours, when they would be regarded 
 as having been accepted on that day. 
 
12 SEC. 14 
 
 14. Forged or Counterfeit Paper. If forged or counter- 
 feit paper or money be deposited, even though the amount 
 purporting to be represented by such deposit has been cred- 
 ited to the depositor, the depositor is entitled to no 
 credit and the amount can be charged back to his ac- 
 count. The paper or money being worthless, no considera- 
 tion passed to the bank for the credit vgiven and the bank is 
 not bound thereby. See Sec. 88e, 112, 138. 
 
 SPECIFIC DEPOSITS. 
 
 15. A specific deposit is where money is deposited with a 
 bank with specific instructions to apply the money in a cer- 
 tain way, as to pay a note of the depositor, or to credit to 
 some one else, or to take up a mortgage, etc. In such cases 
 the bank must follow instructions and use the money for 
 the purpose for which it was deposited, and if it does not 
 do so, or misapplies the fund, the money can be recovered, 
 provided the bank received money, or collected money from 
 paper received and it can be traced. See Sec. 201. 
 
 Where money is deposited in Bank A, to the account of 
 Bank B, with instructions to telegraph the amount to Bank 
 C, this is a specific deposit. It is not a special deposit, for 
 the reason that it is not to keep the money or deliver the 
 identical pieces to C, and it may mingle the money received 
 with its other funds, but it must telegraph a like amount to 
 Bank C. It is not a general deposit because there is a duty 
 to perform, and if it violates this duty it will not be in- 
 debted to the depositing bank, but will be deemed a trustee 
 with a fund of $1,000 in its hands belonging to Bank B by 
 reason of the wrong committed. If the $1,000 remains in 
 Bank A, or there is on hand a like amount which cannot 
 be proved to have come in afterwards and to have some 
 other trust attached, it can be recovered. 
 
 1 6. Items deposited with a bank for "collection only," 
 
SEC. 17 13 
 
 money collected by the bank as agent and money deposited 
 for the purpose of having the bank send, lend or pay the 
 same, also papers delivered to the bank as security, are the 
 property of the depositor, and if the bank violates its duty, 
 or fails before it has had an opportunity to perform the 
 duty, and the items or the proceeds thereof remain in the 
 bank at the time it is closed, or come in after the bank has 
 been closed, they should be returned to the depositor in 
 full. So where a bank, the officers not being certain as to 
 its solvency, keeps out deposits and marks them with the 
 depositors' names, and the bank is found to be insolvent 
 and closes, the deposits so held out should be returned in 
 full. In any case there can be no return, or payment in full 
 before other creditors, unless the item or money can be 
 traced into the hands of the receiver. Commissioners of 
 Crawford Co. v. Strawn, 157 Fed., 49. See Sec. 201. 
 
 17. Change From One Class to Another A general 
 deposit may, by agreement or order, be changed to a special 
 deposit or a specific deposit. Likewise a specific or a special 
 deposit may be changed to a general deposit, a specific de- 
 posit to a special, and a special to a specific. 
 
 Where a general deposit is ordered to be changed to one 
 of the other class, however, the depositor remains a cred- 
 itor until the change has actually been made and the money 
 actually separated in the case of a special deposit, and the 
 appropriaion actually made by the bank in the case of a 
 specific deposit. This is because the bank does not actually 
 receive money, but changes a credit of the general depositor 
 into a fund. 
 
 SPECIAL DEPOSIT. 
 
 1 8. Where bonds, stocks, or other valuables, or money in 
 a separate package (or even loose money where the iden- 
 tical pieces are to be kept) are placed with a bank, to be 
 
14 SEC. 19 
 
 kept and the identical articles returned, we have a special 
 deposit. The owner has the right to have the specific ar- 
 ticles returned, and if the bank has made any profit by a 
 wrongful use of articles, the depositor, who is in this case a 
 bailor, is entitled to receive the profits also. The main 
 function of the bank, in the beginning, was the safe keep- 
 ing of valuables in this way, but in pur times the safe de- 
 posit vaults are used for this purpose. 
 
 19. Power of Bank to Receive A bank has power to 
 receive special deposits. Although the right of a national 
 bank to do so was questioned at one time, the power is now 
 regarded as one of the incidental powers of the bank. The 
 National Bank Act impliedly authorizes the taking of special 
 deposits, for Section 5228 of the Revised Statutes of the 
 United States provides for delivery of special deposits by 
 banks which have defaulted in payment of circulating notes. 
 Some of the States expressly authorize the State banks to 
 receive special deposits. 
 
 20. Liability of Bank For Where there is a special 
 deposit the very thing deposited must be returned to the de- 
 positor, or held for the special purpose for which it was 
 made. In the case of a general deposit we learned that the 
 bank was debtor and the depositor creditor for the amount. 
 Not so here. The bank is bailee and the property remains 
 the property of the depositor, or a trust fund for the pur- 
 pose for which it was made. If the bank use such diligence 
 as a prudent man would use in attending to like affairs the 
 bank will not be liable for a loss. In fact, in some States it 
 is held that only 'such diligence need be exercised as the 
 bank uses in its own affairs. Where the bank uses care in 
 selecting its officers and employees and trusts its own prop- 
 erty to them along with the property of the special depositor, 
 and the officers or employees, outside of their line of duty, 
 steal or embezzle the special deposit, the bank will not be 
 liable. If the bank knew, or ought to have known, that the 
 
SEC. 21 15 
 
 employee or officer was dishonest, or might have known by 
 using such care as a prudent man would use in such cases, 
 I think the bank would be liable. While some cases have 
 held that only such care as the bank uses in its own affairs 
 need be exercised, banks nowadays usually have strong safe 
 deposit vaults and facilities for keeping valuables, and they 
 also usually have men whose reputation for honesty and in- 
 tegrity induces customers to make such deposits. The de- 
 positor having the right to feel secure, the bank ought to be 
 called upon to use more care in the selection of its officers 
 and employees than some banks do, and it ought to be held 
 to the care that a prudent man would exercise. And the 
 decisions are tending in that direction. Of course where 
 the bank is compensated, or receives a direct benefit by ac- 
 cepting the special deposit, it will be held to a greater degree 
 of care than where it performs the service of safe keeping 
 without compensation. 
 
 21. Returning If the bank is negligent and delivers 
 the special deposit to the wrong person the bank will be 
 liable. As where a bank delivers to a depositor's wife a 
 special deposit, without requiring the production of the 
 receipt or an order from the depositor ; and where an or- 
 der calling for coupons from bonds specially deposited is 
 not carefully read and the bonds themselves delivered 
 to the bearer of the order, the bank will be held liable. 
 
 22. Not Assets of Bank As the bank is merely a bailee 
 of property specially deposited, the title remains in 
 the depositor and cannot be counted as assets of the 
 bank for any purpose. 
 
 23. When Is A Deposit Special? In speaking of gen- 
 eral deposits it was pointed out that many deposits ordi- 
 narily termed "special" are really general deposits. An 
 express agreement when special deposits are taken would 
 save trouble for all parties concerned. When there is 
 no agreement or custom, a deposit of loose money or 
 
16 SEC. 24 
 
 paper will be regarded as a general deposit (leaving out 
 the consideration of the question of collections), and a 
 package, box or bag of money, sealed, or of other valu- 
 ables, would be presumed to be a special deposit, to be 
 held separately by the bank. 
 
 24. What May Be Subject of Special Deposit Any- 
 thing which a bank consents to receive on special deposit 
 may be the subject of such deposit. First National Bank 
 of Carlisle v. Graham, 100 U. S., 699. Preston v. Prather, 
 137 U. S., 604. Butcher v. Butler, 114 S. W., 564. 
 
SEC. 25 17 
 
 CHAPTER II. 
 THE DEPOSITORS. 
 
 25. Deposits, when classified according to the deposi- 
 tors for whose accounts they are carried, may be divided 
 into individual, bank and public deposits. 
 
 All deposits by private individuals as such, by in- 
 dividuals as representatives of other individuals or bodies 
 of individuals, by companies, firms, corporations, part- 
 nerships, etc., are individual deposits. 
 
 The general legal status of an individual depositor is 
 no different from that of a bank which deposits in an- 
 other bank, but as the national and state banking laws 
 provide the manner of keeping reserves, public deposits, 
 and deposits in other banks, and the banking authorities 
 of the state and federal governments require separate 
 accounting in regard to these different items in the re- 
 ports made by banks, they are divided into individual 
 deposits, public deposits, deposits in banks which are 
 reserve agents and deposits in banks not reserve agents, 
 etc. A subsequent chapter deals with reserves. 
 
 Except where otherwise noted, the principles stated 
 herein relate to all deposits, whether individual deposits 
 or deposits by banks. 
 
 26. Bank May Select Its Depositors A railroad gen- 
 erally must accept such business as is tendered it ; a hotel 
 keeper admit all comers; i. e., they cannot at their own 
 pleasure accept of refuse to accept passengers or guests. 
 A bank, however, while it is in the nature of a public 
 institution (called quasi-public), need not accept de- 
 posits tendered it unless it wishes to serve the one mak- 
 
18 SEC. 27 
 
 ing the tender, and if a bank does not wish to retain the 
 deposit of one who has been a depositor, it may close 
 the account, tender him the balance due and refuse to 
 receive further deposits from him. Likewise the de- 
 positor may terminate the relation at any time he sees fit, 
 by withdrawing his balance, unless the bank has some 
 lien or right of set-off against it, or there is a contract 
 whereby the money must be left for a specified time. In 
 the latter case, however, it would be a loan and not a 
 deposit. Thatcher v. State Bank, 7 N. Y. Sup. Ct, 121. 
 27. Deposits of Public Moneys The State statutes 
 provide the manner in which deposits of public funds 
 of the State, county or city shall be kept. These statutes 
 should be carefully followed by the officers making de- 
 posits and by the banks receiving them. If the State 
 law gives the county the right to make any regulations, 
 or empowers the city, by its municipal government, to 
 make ordinances regarding the keeping of the funds, all 
 these should be carefully complied with. Be sure that 
 the officer who makes a deposit of public moneys has au- 
 thority to deposit it, and then be sure that he has au- 
 thority to make the deposit in your bank. In some 
 States the officer who holds public money is personally 
 responsible for it, in which event he may, but ought not, 
 treat it the same as his own money. In some States 
 he is neither expressly authorized nor prohibited from 
 depositing funds in banks and is not held liable if he 
 uses care in selecting the bank, and in watching the con- 
 duct of the bank and its condition. If he has no dis- 
 cretion in making the selection, but must deposit in such 
 depositary as is designated, he will not be personally 
 liable if he obeys the law and the designated depositary 
 fails. In case the officer is personally liable and makes 
 good to the government, he will have a claim against 
 the bank for the deposit. In that event, the money being 
 
SEC. 27a 19 
 
 his own, he could offset it against a private debt due 
 the bank. 
 
 27a. Public deposits should always be carried as such, 
 both for the protection of the bank and its creditors, and 
 for the protection of the officer. 
 
 27b. It has been held that where a public officer is 
 prohibited by statute from "loaning" the public funds, 
 he will not be liable for a violation of the statute if he 
 deposits the money in bank, even though at interest, 
 provided the money is always subject to his order. 
 Baker v. Williams & England Banking Co., 70 Pac., 
 711, 42 Oregon, 213. If it is made unlawful by statute 
 for him to deposit the money in bank or in any but 
 designated banks, and a bank not authorized receives 
 a deposit from him, the bank will be liable to the State 
 as a trustee with funds of the public, and the amount 
 can be recovered in full. Brown v. Sheldon State Bank 
 (Iowa) 117, N. W., 289. If the bank be insolvent, how- 
 ever, only so much as can be traced can be recovered in 
 full, and the government is creditor for the balance. Com- 
 missioners of Crawford County v. Strawn, 157 Fed., 49. 
 
 28. There is nothing in the laws relating to national 
 banks which will prevent a national bank from becoming 
 the depositary for State, county or city moneys. The 
 question is whether the laws of the State allow or pre- 
 vent deposits in national banks. Bank v. Ferguson, 48 
 Kan., 732. 
 
 29. Public Moneys of the United States The Revised 
 Statutes of the United States provide as follows: 
 
 Sec. 3620. 
 
 "It shall be the duty of every disbursing officer having any public 
 money intrusted to him for disbursement to deposit the same with 
 the Treasurer or some one of the assistant treasurers of the United 
 States, and to draw from the same only as it may be required for 
 payments to be made by him in pursuance of law; and draw from 
 the same only in favor of the persons to whom payment is made, 
 
20 SEC. 30 
 
 and all transfers from the Treasurer of the United States to a dis- 
 bursing officer shall be by draft or warrant on the Treasurer or 
 assistant treasurer of the United States. In places, however, where 
 there is no Treasurer or assistant treasurer, the Secretary of the 
 Treasury may, when he deems it essential to the public interest, 
 specially authorize in writing the deposit of such public money in 
 any other public depository, or, in writing, authorize the same to 
 be kept in any other manner and under such rules and regulations 
 as he may deem most safe and effectual to facilitate the payments 
 to public creditors." 
 
 It will be noted that the above section permits the 
 Secretary of the Treasury to authorize deposits in other 
 public depositaries in places where there is no Treasurer 
 or Assistant Treasurer. These depositaries must have 
 been previously designated by the Secretary of the 
 Treasury as provided by Sec. 5153 of the Revised 
 Statutes of the United States, as amended by the act of 
 March 4, 1907: 
 
 "All national banking associations, designated for that purpose 
 by the Secretary of the Treasury, shall be depositaries of public 
 money, under such regulations as may be prescribed by the Secre- 
 tary; and they may also be employed as financial agents of the 
 Government; and they shall perform all such reasonable duties, 
 as depositaries of public money and financial agents of the Govern- 
 ment, as may be required of them. The Secretary of the Treasury 
 shall require the associations thus designated to give satisfactory 
 security, by the deposit of United States bonds and otherwise, for 
 the safe-keeping and prompt payment of the public money deposited 
 with them, and for the faithful performance of their duties as 
 financial agents of the Government : Provided, That the Secretary 
 shall, on or before the first of January of each year, make a public 
 statement of the securities required during that year for such 
 deposits. And every association so designated as receiver or deposi- 
 tary of the public money shall take and receive at par all of the 
 national currency bills, by whatever association issued, which have 
 been paid into the Government for internal revenue, or for loans 
 or stocks: Provided, That the Secretary of the Treasury shall dis- 
 tribute the deposits herein provided for, as far as practicable, 
 equitably between the different States and sections." 
 
 30. The regulations of the Treasury Department pro- 
 vide, under the statutes, how public deposits shall be 
 received and kept. Any national bank desiring to be 
 designated should write to the Secretary of the Treasury 
 
SEC. 31 21 
 
 for information as to how it should proceed to be desig- 
 nated and authorized to act as a public depositary. The 
 Treasury Department furnishes no forms for application, 
 but if an application is received by the Department the 
 applicant will be advised whether it is worth while seek- 
 ing designation. Local necessity for such depositary 
 and the political and public backing count for much. If 
 designated full instructions will be furnished. 
 
 31. Since the act of May 30, 1908, national banks act- 
 ing as depositaries must pay at least i% interest on 
 public deposits. 
 
 Sec. 15, Act of May 30, 1908: 
 
 "That all national banking association designated as regular de- 
 positaries of public money shall pay upon all special and additional 
 deposits made by the Secretary of the Treasury in such depositaries, 
 and all such associations designated as temporary depositaries of 
 public money shall pay upon all sums of public money deposited 
 in such associations interest at such rate as the Secretary of the 
 Treasury may prescribe, not less, however, than one per centum 
 per annum upon the average monthly amount of such deposits: 
 Provided, however, That nothing contained in this Act shall be 
 construed to change or modify the obligation of any association or 
 any of its officers for the safe keeping of public money: Provided 
 further, that the rate of interest charged upon such deposits shall 
 be equal and uniform throughout the United States." 
 
 32. Deposits By Certain Postmasters Section 3847 of 
 the Revised Statutes of the United States provides that: 
 
 "Any postmaster, having public money belonging to the Govern- 
 ment, at an office within a county where there are no designated 
 depositaries, treasurers of mints, or Treasurer or assistant treasurers 
 of the United States may deposit the same, at his own risk and 
 in his official capacity, in any national bank in the town, city, or 
 county where the said postmaster resides; but no authority or per- 
 mission is or shall be given for the demand or receipt by the post- 
 master, or any other person, of interest, directly or indirectly, on any 
 deposit made as herein described ; and every postmaster who makes 
 any such deposit shall report quarterly to the Postmaster-General 
 the name of the bank where such deposits have been made, and also 
 state the amount which may stand at the time to his credit." 
 
 33. Where a postmaster has funds thus deposited they 
 
22 SEC. 33 
 
 are at his own risk. If the bank fails the Post Office 
 Department looks to the postmaster for payment, though 
 he must carry the account not as an individual personal 
 account, but as "Postmaster." Neither the United 
 States nor the postmaster can claim payment in full be- 
 fore other creditors are paid by the receiver. While 
 the bank is liable if it permits the postmaster to make 
 an improper use of the money, yet, if the bank fails, there 
 is no "trust fund" which must be paid before other credit- 
 ors, unless the money can be followed into the hands of the 
 receiver. If the bank has given security for the deposit 
 the security can be sold and the Government make a 
 claim also for the amount of the deposit, as a general 
 creditor. It may be that the amount realized from the 
 security, together with pro rata dividends on the full 
 amount of the deposit, will more than pay the claim, in 
 which event any excess must be returned; but if the 
 security does not bring sufficient to pay the claim, for 
 the balance, the Government, like any other creditor, 
 must rely upon the dividends for payment. And the 
 United States is not a preferred creditor on any claim 
 it may have. Cook Co. Nat'l Bank v. U. S., 107 U. S., 
 445. But a lien attaches on all the assets of a national 
 bank until the circulating notes are paid or provided for. 
 
 If the postmaster settles with the government he has 
 himself a claim against the bank and in that event, being 
 himself a creditor of the bank, he could offset this claim 
 against any debt he personally owed the bank. Until 
 he has settled with the Post Office Department, however, 
 the United States has the right to the dividends on the 
 deposit. 
 
 Note that this section deals with postmasters within 
 a county where there are no designated depositaries, 
 treasurers of mints, or Treasurer or assistant treasurers 
 of the United States. On these deposits the postmaster 
 
SEC. 34 23 
 
 and every other person is forbidden to demand or receive 
 interest. 
 
 34. The only other sections of the Revised Statutes 
 which it is necessary for us to notice here, as relating 
 to public moneys of the United States, are Sections 4046, 
 5488 and 5497 : 
 
 Penalty for Misapplication of Money Order Funds 
 Sec. 4046: 
 
 "Every postmaster, assistant, clerk, or other person employed in 
 or connected with the business or operations of any money-order 
 office who converts to his own use, in any way whatever, or loans, 
 or deposits in any bank, except as authorized by this Title, or ex- 
 changes for other funds, any portion of the money-order funds, 
 shall be deemed guilty of embezzlement, and any such person, as 
 well as every other person advising or participating therein, shall, 
 for every such offense, be imprisoned for not less than six months 
 nor more than ten years, and be fined in a sum equal to the amount 
 embezzled ; and any failure to pay over or produce any money-order 
 funds intrusted to such person shall be taken to be prima facie 
 evidence of embezzlement ; and upon the trial of any indictment 
 against any person for such embezzlement it shall be prima facie 
 evidence of a balance against him to produce a transcript from the 
 money-order account books of the Sixth Auditor. But nothing 
 herein contained shall be construed to prohibit any postmaster de- 
 positing, under the direction of the Postmaster-General, in a national 
 bank designated by the Secretary of the Treasury for that purpose, 
 to his own credit as postmaster, any money-order or other funds 
 in his charge, nor prevent his negotiating drafts or other evidences 
 of debt through such bank, or through United States disbursing 
 officer, or otherwise, when instructed or required to do so by the 
 Postmaster-General for the purpose of remitting surplus money- 
 order funds from one post-office to another, to be used in payment 
 of money-orders. Disbursing officers of the United States shall issue, 
 under regulations to be prescribed by the Secretary of the Treasury, 
 duplicates of lost checks drawn by them in favor of any postmaster 
 on account of money-order or other public funds received by them 
 from some other postmaster." 
 
 35. Unauthorized Deposit of Public Money Sec. 5488. 
 
 "Every disbursing officer of the United States who deposits any 
 public money intrusted to him in any place or in any man- 
 ner, except as authorized by law, or converts to his own use in 
 any way whatever, or loans with or without interest, or for any 
 purpose not prescribed by law withdraws from the Treasurer or 
 any assistant treasurer, or any authorized depositary, or for any 
 
24 SEC. 35a 
 
 purpose not prescribed by law transfers or applies any portion of 
 the public money intrusted to him, is, in every such act, deemed 
 guilty of an embezzlement of the money so deposited, converted, 
 loaned, withdrawn, transferred, or applied; and shall be punished 
 by imprisonment with hard labor for a term not less than one year 
 nor more than ten years, or by a fine of not more than the amount 
 embezzled or less than one thousand dollars, or by both such fine 
 and imprisonment. 
 
 35a. Unauthorized Receipt or Use of Public Money 
 Sec. 5497: 
 
 "Every banker, broker, or other person not an authorized depositary 
 of public moneys, who knowingly receives from any disbursing 
 officer, or collector of internal revenue, or other agent of the United 
 States, any public money on deposit, or by way of loan or accom- 
 modation, with or without interest, or otherwise than in payment 
 of a debt against the United States, or who uses, transfers, con- 
 verts, appropriates, or applies any portion of the public money for 
 any purpose not prescribed by law, and every president, cashier, 
 teller, director, or other officer of any bank or banking association, 
 who violates any of the provisions of this section, is guilty of an 
 act of embezzlement of the public money so deposited, loaned, 
 transferred, used, converted, appropriated, or applied, and shall be 
 punished as prescribed in section fifty-four hundred and eighty- 
 eight." 
 
 36. Trust Funds Generally an executor, administra- 
 tor, guardian, etc., has authority to deposit funds in bank, 
 temporarily, awaiting investment or order of court, and 
 if he uses care in selecting the bank he will not be per- 
 sonally liable in case the bank fails. Statutes relating 
 to the particular office should always be examined and 
 closely followed. Where a bank rightfully received 
 such deposits, as has been said before, while the depositor 
 may be a trustee, as between the bank and the depositor 
 the fund is not a trust fund but simply an amount due 
 a general creditor. No one has a legal right to the de- 
 posit but the trustee, administrator, executor, guardian, 
 etc., who rightfully deposited same. These hold the 
 legal title for the benefit of those whom they represent. 
 Where an administrator, executor, guardian, trustee, or 
 any person acting in a representative capacity, deposits 
 
SEC. 36 25 
 
 funds which are not his own, but which belong to the 
 person, or body of persons whom, or the estate which he 
 represents, he should, to protect himself (and the bank 
 should require for its protection that he do so), deposit 
 the money, not in his individual account, but in an ac- 
 count designated as the account of the person, body of 
 persons or estate represented. For example, if John 
 Smith is executor of the Estate of James Smith, the 
 money should be deposited in an account designated 
 "Estate of James Smith, John Smith Ex." "John Smith 
 Ex. of the Estate of James Smith" would do, but the 
 other is better. If John Smith represent James Smith as 
 trustee, guardian, agent, attorney, receiver, or otherwise, 
 the same rule should be followed. 
 
 While it has been held that the addition of the word 
 trustee, agent, etc., would not in itself give a bank notice, 
 upon receiving a deposit for credit to such account, that 
 the money is a trust fund, it is a general principle of the 
 law of trusts that a trust fund, if misappropriated, can be 
 traced and followed into the hands of another. In Mis- 
 souri it is held that the addition is simply a description 
 of the person. In better considered cases, however, it 
 is held that the word "trustee" is not meaningless, and 
 that the bank is put upon notice that the deposit is not 
 individual money of the depositor, especially where the 
 depositor keeps an individual account also. One case 
 holds that the word is a description of the fund deposited. 
 The bank should require information which will enable 
 it to determine whether the money is the property of the 
 person deposited or of some one whom he represents. 
 Having received the deposit it must pay to the one whom 
 and upon order drawn in accordance with, the under- 
 standing had when the deposit was made. This, how- 
 ever, will not relieve the bank from liability where it 
 should have used reasonable care at least to ascertain the 
 
26 SEC. 36 
 
 facts. Where an executor, administrator, guardian or 
 committee, etc., is appointed, evidence of the appoint- 
 ment should be submitted to the bank. Where the au- 
 thority is given by a court, the appointment or a copy, 
 certified by the clerk of the court, is the best evidence. 
 Where it is an officer of a corporation or committee of 
 some kind, some official, written direction from the cor- 
 poration or society represented should be filed with the 
 bank, showing to whom the money belongs and who has 
 authority to withdraw the same. The bank is still more 
 in peril when making payment on such accounts. See 
 Sec. 179. It should not pay from such account on the in- 
 dividual check of the depositor, with the understanding 
 that he will make it good; for, even though he owe the 
 bank on his individual account, any deposit he may make 
 thereafter will have to be applied in restoring the amount 
 wrongfully withdrawn and cannot be applied against his 
 debt. If A have an account under his name, A, and an- 
 other account "A, Trustee," and he give a check to C 
 drawn against account "A, Trustee," the bank must pay 
 the check, even if it be drawn for payment of an indi- 
 vidual debt of A's, if the bank does not know it is an in- 
 dividual debt ; but if the bank paid directly to A when it 
 knew A was using funds of his trust for his private pur- 
 pose, or accepted a check for A's indebtedness to the 
 bank, the bank would be liable. If "A, Trustee," draw a 
 check against the account, payable to "A," transferring 
 the amount of the check to A's individual account, with- 
 out the bank's having knowledge of a wrong, the bank 
 would have to honor the check. While a mere reason to 
 believe depositor is misapplying trust funds cannot make 
 a bank liable, the trend of decisions is toward demanding 
 of the bank more care in informing itself when suspicious 
 circumstances attend checking against funds of which the 
 depositor is trustee. Union Stock Yards Nat'l Bank v. Gil- 
 
SEC. 36 27 
 
 lespie, 137 U. S., 411; Nat'l Bank v. Insurance Co., 104 
 U. S, 54- 
 
 A late case is Havana Central R. R. Co. v. Knicker- 
 bocker Trust Co., 119 N. Y. S., 1035. The treasurer had 
 drawn a check against the account as treasurer, payable 
 to his own order, and deposited it in his individual ac- 
 count. The bank was held to have notice that he was 
 using the company's money. 
 
28 SEC. 37 
 
 CHAPTER III. 
 
 MAKING, RECEIVING AND KEEPING THE 
 
 DEPOSITS. 
 
 
 
 37. To Whom Made Care should be exercised by de- 
 positors when leaving their money at the bank. The 
 broad statement is made in one of the books that money 
 paid to anyone behind the counter will bind the bank. 
 While it is true that money deposited with one to whom 
 it has been the custom to pay is payment to the bank, 
 and while the president and cashier are generally au- 
 thorized to receive deposits, and acceptance by them 
 would bind the bank, yet where there is a receiving teller 
 it is safest to deposit with no one else. If a deposit is 
 made with one not authorized to receive it, the person to 
 whom it is paid will be regarded as the agent of the de- 
 positor and not as the agent of the bank, and if the 
 money is misappropriated it will be the depositor's loss. 
 Of course if the party to whom it is paid sees that it 
 reaches the proper place in the bank, then the bank is 
 bound. Deposits should always be made in the banking 
 room. 
 
 38. Pass Books Entries The bank usually furnishes 
 depositors with a book, called a bank book, or pass book. 
 On making a deposit the depositor enters upon a slip 
 the various items and hands the deposit, the slip and the 
 book to the officer, who, after verifying the deposit, en- 
 ters the amount in the pass book. 
 
 38a. The rule once was that the entry made by the 
 officer of the bank was binding upon the bank, but not on 
 the depositor, if made at the same time that the deposit 
 
SEC. 38b 29 
 
 was made. It was not binding upon the bank if the book 
 was afterwards written up. Now, however, the general 
 rule seems to be that it is the amount actually deposited 
 that the bank is liable for and the fact as to what the 
 actual amount was may be proved by evidence other than 
 the pass book and deposit slip, though these would be 
 evidence of a high character. It is not even necessary 
 that there should be a ticket made out or an entry in the 
 pass book, if it can be proved that the deposit was actual- 
 ly made ; but the bank should always require the deposit 
 slip and make the entry. No by-law of the bank can 
 bind a depositor to accept as correct the amount entered 
 by the teller, or relieve the bank from liability for a de- 
 posit actually received by the bank without a deposit slip 
 or entry in the pass book. The amount shown by a de- 
 posit slip and by an entry in the pass book would be pre- 
 sumed to be correct until shown to be incorrect, but evi- 
 dence can be introduced to show that either the bank or 
 the depositor has made an error. First Nat'l Bank v. 
 Whitman, 94 U. S., 343; Schwartz v. Bank, 116 N. Y. S., 
 701. 
 
 38b. The pass book held by a depositor is evidence of 
 his deposit, but it is not negotiable. The amount as 
 shown by the pass book cannot be transferred to another 
 by endorsement (the writing of depositor's name on) 
 and delivery of the book merely. 
 
 And the assignment of a deposit slip does not in itself 
 give the one to whom it is assigned the property in the 
 deposit. Talcot v. First Nat'l Bank, 53 Kansas, 480. 
 
 38c. When a deposit is made by a depositor who has 
 not his pass book, a duplicate deposit slip should be made 
 out, marked "Duplicate," signed by the teller and de- 
 livered to the depositor as evidence of the deposit made. 
 This slip is not negotiable. If the amount is raised the 
 alteration constitutes a forgery. 
 
30 SEC. 38d 
 
 38d. Balance and Return of Pass Book Where a pass 
 book has been balanced by the bank and returned, with 
 paid checks, to the depositor, the rule as to how soon 
 after the return the depositor must report any error or 
 forgery to the bank is not settled, except that the error 
 must be reported "within a reasonable time." In New 
 York, where there has been a forgery the statute gives 
 the depositor one year, after return of the paid check to 
 him, within which to notify the bank; in South Dakota 
 three months is the limit. What is a reasonable time 
 within the balance as stated by the bank, upon the return 
 of the pass book, must be objected to, will depend upon 
 all the circumstances surrounding the return of the book 
 and the discovery of the error. Ten days, a month, and 
 under some circumstances even six months would not be 
 unreasonable. The question is whether there has been 
 diligent and careful verification made of the book and 
 vouchers when returned. In New York and in Missouri 
 it has been held that unless the bank has been damaged 
 by the depositor's delay in discovering the error the de- 
 positor ought not to have to suffer the loss, even if the 
 discovery is made a long time after, and it might seem to 
 be justice that the depositor should not be punished for 
 not discovering the error, so long as the bank has not 
 lost by his delay. In the United States Courts, however, 
 the rule is that the bank will be presumed to have been 
 damaged by the depositor's delay. But the presumption 
 can be proved to be wrong. Where a depositor is prompt 
 in verifying the bank's statement of account it is gen- 
 erally possible to correct an error. On the other hand, 
 if circumstances require a speedy verification, the de- 
 positor certainly ought to be held for any loss caused by 
 his delay. 
 
 If A, being a depositor in bank, entrusts the matter of 
 verifying the bank's statement as to his balance to his 
 
SEC. 38d 31 
 
 clerk, X, and X, who has himself forged or raised checks 
 of A's, fails to report the difference in the balance as 
 stated by the bank and the true amount due, should the 
 depositor be bound by the bank's statement of account? 
 A might not look into the matter of his bank balance, or 
 examine the paid checks, for years, and perhaps might 
 learn by some other incident, that X at one time forged 
 or raised checks. The general law of agency, that the 
 knowledge of the agent is imputed to the principal would 
 require a holding that X knowing of the forgery, A 
 should be bound by X's knowledge. It could hardly be 
 expected that X would report his own crime. In such 
 cases in Pennsylvania, Massachusetts, Alabama and, it 
 seems, in New York, the depositor will be bound unless 
 the bank is notified of the forgery within a reasonable 
 time. In Missouri and Maryland the rule is that the 
 principal can recover from the bank, in such case, even a 
 long time after the forgery, where the examination of 
 the book upon its return by the bank was made by the 
 one who committed the forgery. No reason appears 
 why the principal should not stand the loss for such a 
 wrongful act of his agent the same as he would for any 
 other wrongful act of the agent performed in the scope 
 of his authority, and the bank should not be called upon 
 to stand a loss where not notified within a reasonable 
 time. And doubtless the reasonable time allowed the de- 
 positor would be extended a little in view of the circum- 
 stances. In Illinois six months was held a reasonable 
 time, and the principal was allowed to recover where his 
 agent acquiesced in the bank's statement of account, 
 which included payment of forged check, even though 
 the book had been several times balanced. The Court 
 said the account was stated for the depositor's protec- 
 tion, not for the bank's. A recent case is National Dredg- 
 
32 SEC. 38e 
 
 ing Co. v. President, etc., Farmers Bank, 69 Atlantic Re- 
 porter, 607. A Delaware case. 
 
 386. Examination of Books of Bank It has been held 
 that the officers of the bank, having charge of the books, 
 are considered the agents of both parties the bank and 
 the depositor and that the depositor is entitled to 
 examine and the bank bound to produce the books of the 
 institution on all proper occasions. While there seem 
 to be a proper occasion for a depositor to request an 
 examination of his own account upon any controversy 
 arising over his account with the bank, the courts would 
 doubtless deny a depositor the right to examine into the 
 books of the bank generally. While it would probably 
 be just, both to the depositor and the holder of a check, 
 for the bank to give the state of the depositor's account 
 when a check for more than his balance is presented, and 
 payment refused because there are not sufficient funds, 
 it is doubtful whether a bank has the right to disclose to 
 any third party the condition of a depositor's account, 
 without making itself liable to the depositor, though in 
 Kansas the court has held that the bank must give in- 
 formation as to the state of a depositor's account when 
 testifying before the grand jury. In re Davis, 68 Kansas, 
 791. Of course, if a creditor of the depositor brings at- 
 tachment proceedings, the bank must disclose the amount 
 due the depositor. And if summoned as a witness, an 
 officer of the bank would have to disclose the state of a 
 depositor's account, if the fact were otherwise relevant 
 to the issue. He could not refuse to disclose it on the 
 ground that it was a confidential communication. See 
 Sec. 109. 
 
 39. Who is Entitled to Deposit When A deposits 
 money in bank to his account the law will presume that 
 it is A's money and the bank cannot deny his ownership 
 and appropriate the money to the payment of the obliga- 
 
SEC. 39a 33 
 
 tion of some one else to it, or transfer it to another ac- 
 count because it claims the money belongs to somebody 
 else. As between the depositor and the bank the former 
 is the true owner until the bank has legal authority to 
 pay to someone else. If a third party claims the money, 
 such claimant should use the proper legal method of en- 
 forcing his right, and after notice that the money is ad- 
 versely claimed the bank should not use any wrongful 
 method to prevent the rightful owner from recovering 
 his money, but if the claimant does not use reasonable 
 diligence in proving his right, the bank would be justified 
 in paying the money upon the order of the depositor. Of 
 course, if the bank has actual knowledge that the money 
 belongs to someone else it will be liable to the true owner 
 if it pays to the depositor. If X deposits money in bank 
 and before X draws it out A notifies the bank that the 
 money belongs to him (A) and offers to indemnify the 
 bank if it loses anything by refusing to pay X, the bank 
 will be liable to A if it pays to X and A establishes his 
 right to the money. The true owner of a deposit is 
 always entitled to it. Stair v. York Nat'l Bank, 55 Pa. 
 St., 364. 
 
 3Qa. If A deposits money in bank under the name B, 
 under an agreement with the bank that it will pay out 
 the money on his checks signed "B," he can withdraw 
 it on checks so signed. The bank will be discharged so 
 long as it pays checks according to the contract and so 
 long as it has no knowledge that the money belongs to 
 some one else. Davis v. Lenawee Co. Sav. Bk., 53 
 Mich., at 166. 
 
 If A, without any agreement with the bank, deposits 
 money in B's name, and it is for a legal purpose and for 
 the benefit of B, even though B had no knowledge that 
 the deposit was being made, B would have the right in 
 most States to claim it, when he learned of it. If the 
 
34 SEC. 39b 
 
 bank paid to A or any one other than B so long as it 
 stood in B's name, payment would be at its peril. If the 
 bank paid B under such circumstances it would be dis- 
 charged. In some states notice must be given to B to 
 entitle him to the deposit, as between B and A or A's 
 representatives or creditors. If, however, A deposits in 
 B's name, in order to hide his assets from' his creditors, 
 or to escape taxation, or for any other illegal purpose, 
 B would not have any right to it. See chapter on Gifts. 
 39b. If A deposits in bank money belonging to B, no 
 matter under what name, B is entitled to the deposit and 
 can recover same, and if A is indebted to the bank it can- 
 not use B's money to pay A's debt. If, however, B knows 
 that A has so deposited the money and consents, B 
 would be a general creditor in case the bank failed. If 
 A so deposits without the consent of B a trust fund is 
 created. There is a trust relationship between A and B. 
 If the bank does not know of A's wrong, the money 
 cannot be recovered by B unless it can be traced. If 
 the bank knew of A's wrong it will be liable to B whether 
 the money can be traced or not, in full. If the bank is 
 insolvent, however, the money cannot be recovered by B, 
 even though the bank knew of A's wrong, unless the 
 money can be traced. It would be an injustice to other 
 creditors. A would be liable personally to B. If A 
 steals from B any article which can be identified, B can 
 recover the stolen goods in the hands of any person. 
 Money, however, cannot be identified and, therefore, if 
 it passes out of the hands of the thief it is gone. In 
 case of a bank deposit, so long as it has no notice of 
 a wrong the bank is not concerned as to where the de- 
 positor obtained the money and is liable to him only 
 until the true owner proves his right, but when he does 
 prove that it was his money the bank owes it to him and 
 not to A. If it pays it out to A before it has any notice 
 
SEC. 39c 35 
 
 of A's wrong it is discharged and is not liable to B. In 
 some states money won at gambling, if deposited by the 
 winner, can be recovered by the loser as his money and a 
 check given for a gambling debt in those states is void, 
 and if paid by the bank the bank can be called upon to 
 make good to the depositor. In most states, however, 
 the bank is not held to the same responsibility, is not 
 concerned with the source of the deposit or the object 
 of the order drawn on it, so long as it receives and pays 
 without notice. Wright v. Stewart, 130 Fed., 914; Arm- 
 strong v. Bank, 133 U. S., 433- 
 
 39c. Deposit on Condition. Where money is deposited 
 under an agreement that it is to be paid only on fulfill- 
 ment of a condition, the bank cannot pay until that con- 
 dition has been complied with. Insurance Co. v. Trust 
 Co., 115 N. Y. S., 503. If A makes the deposit to be paid 
 to B when B has complied with a condition , if B fails to 
 comply with the condition, the money should be re- 
 turned to A upon his demand. Bank v. Harding, I Kan. 
 App., 389. And payment to A discharges the bank from 
 further liability. McGorray v. Loan Society, 131 Cal., 
 321 ; 63 Pac., 479. But where B has met the condition the 
 money becomes his and, in the absence of a different un- 
 derstanding, B stands in the relation of a depositor to 
 the bank. (Mo.) in S. W., 574. 
 
 40. Certificates of Deposit Where it is desired to 
 make a time deposit or only a single deposit the bank 
 usually, in consideration of being assured that it will 
 have the use of the money for a stated period, will allow 
 interest. Such deposits are not entered on the general 
 or checking account of the customer and are carried in a 
 "Certificate of deposit" account. As evidence of such 
 deposit a certificate is issued. This certificate is called 
 a certificate of deposit. A certificate pf deposit, there- 
 fore, is a paper issued by a bank acknowledging receipt 
 
36 SEC. 41 
 
 of money deposited. A certificate of deposit can be 
 used as collateral, or it can be transferred in most in- 
 stances by endorsement, while a pass book cannot. 
 
 Most certificates of deposit contain a promise to repay, 
 on demand, or at a certain future date, or upon return of 
 the certificate properly endorsed. A common clause in 
 the certificates is that interest will be paid at a certain 
 rate, if the money is left a specificed time. 
 
 41. A Negotiable Instrument In their usual form, 
 acknowledging receipt and promising to repay to the de- 
 positor "or order," or some other person "or order," "or 
 bearer," these certificates have generally been regarded 
 as the negotiable promissory notes of the issuing bank. 
 In some states, including Pennsylvania and Massachu- 
 setts, a certificate of deposit is not regarded as negotiable. 
 
 To be negotiable an instrument must comply with the 
 requisites for negotiability as provided by the laws of 
 the state. It must contain an unconditional promise to 
 repay, to bearer, or to order, a sum certain in money, on 
 demand or at a time certain, the same as any other 
 negotiable instrument. Therefore, if a bank issues to 
 A a certificate stating that "This is to certify that A has 
 to his credit $500," this is not a certificate of deposit. It 
 is evidence of the bank's indebtedness to A. 
 
 42. In those states where a certificate of deposit is re- 
 garded as the negotiable promissory note of the bank, 
 the bank cannot issue such certificate if it is prohibited 
 from issuing promissory notes. 
 
 43. As the certificate usually recites that it will pay 
 "on return" of the certificate, it is generally held that the 
 certificate must be presented at the bank, though in one 
 or two instances it has been held that the bank must 
 find the holder and pay him. It is a general principle of 
 law that the debtor must seek the creditor. But it would 
 seem that the certificate ought to be interpreted to mean 
 
SEC. 44 37 
 
 what it says on its face, and as the bank promises to pay 
 "on return," the bank is the place where the certificate 
 should be payable. The certificate should be sur- 
 rendered upon payment. 
 
 44. The statement in the books that a certificate of de- 
 posit need not be endorsed to be negotiated is misleading 
 and is based on a case which decided that if A deposits 
 $100 belonging to B, and the bank, knowing it is B's 
 money, issues a certificate in A's name, B can recover the 
 money from the bank, by suit, without A's endorsement 
 on the certificate. As we have seen before, the true 
 owner of the money has the best right to it, no matter 
 in whose name it stands, and a note, check or other evi- 
 dence of indebtedness can be transferred without being 
 endorsed, but where a certificate is properly issued pay- 
 able to A or order, if any one other than A presented the 
 certificate to the bank without the endorsement of A 
 thereon, or some other order of A and a surrender of the 
 certificate, the bank would run the risk of being still 
 liable to A if it paid without A's endorsement. The 
 same rules are applicable to negotiable certificates of 
 deposit as apply to other negotiable instruments. 
 
 45. If A, to whom a certificate of deposit for $100 has 
 been issued, endorses the certificate and then loses it, 
 B finds it and transfers it to C, for $100, C not knowing 
 of B's wrongful possession, C will be a bona fide holder 
 for value and the bank and A will be liable to C. If A 
 proves his loss of the certificate the bank must pay what 
 it owes to him, but it can require that A give a bond to 
 indemnify the bank in case the certificate is presented by 
 anyone who is a bona fide holder for value without 
 notice. If A knows that B has found the certificate and 
 B refuses to return it, A should sue the bank for pay- 
 ment and make B a party to the suit, to compel him to 
 surrender the certificate to the bank and to pay damages 
 
38 SEC. 46 
 
 for detaining the certificate. The amount of damages 
 would be interest at the legal rate from time demand was 
 made until judgment is obtained and paid. If the cer- 
 tificate has not been endorsed by A, or is past due, or if 
 it is in a state where such certificate is non-negotiable, 
 B or C would acquire no right against the bank and the 
 bank could not require a bond from A, as the bank could 
 not be harmed. Citizens National Bank v. Brown, 45 
 Ohio State Reports, 39. If B found it and forged A's 
 endorsement and the bank paid, it would be the bank's 
 loss. Honig v. Pacific Bank, 73 California, 464. See 
 Sec. 135. 
 
 46. When Due In some states a certificate of deposit 
 payable "on demand," or "on return of certificate," is 
 treated as due as soon as issued and no demand need be 
 made before suit can be brought, (California, Georgia, 
 Michigan, Wisconsin and Texas), and the statute of lim- 
 itations begins to run immediately upon its issue. 
 
 In some states a bona fide holder for value (one who 
 gives value for it without knowing or having notice of 
 any rights of others) is given a reasonable time to 
 present the certificate at the bank for payment. If he 
 does not present it in a reasonable time he will be 
 presumed to have notice that the certificate, be- 
 ing payable on demand, is overdue. Meador v. Dollar 
 Savings Bank, 56 Ga., 605. But in most states the cer- 
 tificate payable on demand is not due until it has been 
 presented with demand for payment. Suit cannot be 
 brought until demand has been made. Therefore the 
 statute of limitations does not commence to run until 
 demand, and where the certificate is regarded as negotia- 
 ble, and has been negotiated, the same steps should be 
 taken to protest and give notice, after demand, as in the 
 case of a note. 
 
 47. When payable on a fixed date or, "day certain," it is 
 
SEC. 48 39 
 
 not due until that date. When due, the certificate should 
 be presented and payment demanded, as the certificate 
 usually states that it will be paid "on return of cer- 
 tificate." 
 
 48. In New York it has been held that if a certificate 
 of deposit does not contain a promise to pay it is only a 
 receipt. In other states it is held that a promise to repay 
 is implied. Where the certificate complies with all the 
 requirements of negotiable instruments, nothing outside 
 of what is shown in the certificate can be introduced to 
 deny the bank's liability to one to whom it has been en- 
 dorsed, unless he is not a holder in good faith, for value, 
 before maturity, but as between the bank and the one 
 to whom the certificate is issued, the certificate, like the 
 entries in the pass book, is only evidence of the deposit. 
 
 49. Interest Where the certificate bears interest, "if 
 left for" a certain time, the depositor is not entitled to in- 
 terest if he presents the certificate and receives payment 
 before that time has expired. Where payable on demand 
 with interest it bears interest till paid. Where payable 
 after a certain time and that time has expired, and the 
 bank has not paid, the interest continues. It has been 
 held in North Dakota that where the certificate contains 
 the words "No interest after that time," the bank will 
 still be liable for interest until paid, where payment has 
 been demanded when due and refused. This of course 
 should be so, but where payment has not been demanded, 
 the bank can insist upon payment when due and can 
 reduce the rate of interest after maturity by giving 
 proper notice. Bank v. Harrison, 66 Pac., 460 (N. M.). 
 
 49a. Payment A certificate of deposit, if accepted by 
 a creditor of the holder, is not payment until the cer- 
 tificate has been paid, unless the creditor agrees that it 
 is to be regarded as absolute payment. It will be re- 
 
40 SEC. 50 
 
 garded as payment of a debt due the bank issuing it. 
 
 If bank A sends to bank B, for collection, a draft drawn 
 on C, with instructions to send its draft for proceeds, 
 and bank B receives from C, in payment of the draft, a 
 certificate issued by it to C, this will be a payment. If 
 bank B, after collection, sends to bank A its draft and 
 then bank B fails, bank A will be a general creditor of 
 bank B, on the draft. As to C, the draft will have been 
 paid. 
 
 If bank A sends to bank B draft on C and requests 
 bank B to collect and remit, and bank B, being insolvent, 
 accepts a certificate of deposit from C, issued by itself, 
 this is a fraud, and it has been held that in such case 
 bank A would be a preferred creditor entitled to pay- 
 ment in full from bank B when bank B fails. Bank B 
 should have accepted cash only and remitted it. That 
 this was a fraud on the part of bank B is undoubted. If 
 C was not a party to the fraud this was a payment by C. 
 But, as no money passed to bank B, there was no trust 
 fund created to which bank A could be entitled. There 
 was no money to trace. If bank A traced what was 
 given in payment for the draft, it found the certificate, 
 which was an obligation of the bank on which the holder 
 could be entitled to no rights superior to those of a gen- 
 eral creditor. 
 
 50. Loan While money for which a certificate of de- 
 posit has been issued is for most purposes considered as a 
 deposit, yet, where it is not subject to being demanded 
 or checked out at will by the depositor, but he is bound 
 to leave it for a certain length of time, does it become a 
 loan of money to the bank? If the depositor has the 
 right to draw the money out when he pleases it is a de- 
 posit, notwithstanding the fact that he will lose interest 
 if he does not leave it for a specified time. If he has no 
 
SEC. a 41 
 
 legal right to withdraw before a stated time is it a loan? 
 It is true every deposit is in effect a loan to the bank, 
 but not every loan is a deposit. 
 
 There is conflict in the authorities, but it can be 
 gathered from the decisions that the mere fact that an 
 account draws interest does not make it a loan. If the 
 depositor has the right to check against the account it is 
 a deposit. See cases cited following Sec. 27. Where 
 a certificate of deposit is payable on demand the holder 
 has the right to the money at any time that he demands 
 it, and where it states that the deposit has been received 
 and is subject to "interest at % if left for" a stated 
 time, this does not take away the depositor's right to 
 withdraw it at his pleasure, but cuts off any interest if 
 he withdraws it before the time stated. When it is 
 payable at a fixed time it is the same as the promissory 
 note of the bank; the depositor has no control over the 
 fund and this is a loan of money to the bank. The dis- 
 tinction between a loan and deposit is of importance for 
 several reasons: 
 
 a. By some statutes public officers, and by others trus- 
 tees, executors, etc., are forbidden to loan the funds in 
 their custody. The courts of Wisconsin, South Dakota, 
 Oregon and Nebraska have held that when a public 
 officer deposits money in bank, even though he receives 
 interest on the deposit, this is not a loan so long as he 
 has the right to check out the money at will. See Sec. 27 
 
 b. The national bank act and most of the state banking 
 laws prohibit national and state banks, respectively, from 
 incurring indebtedness exceeding their respective capi- 
 tals, but in calculating this indebtedness the liability for 
 deposits is not included. Any amount due to a national 
 bank not a reserve agent, or to a state bank, private bank, 
 savings bank or trust company, which the depositing 
 
42 SEC. c 
 
 bank is obliged to leave for a specified time (i. e. which 
 is not subject to payment on demand) if in excess of the 
 capital of the bank, would be a violation of the law. As 
 to national banks, Section 5202 of the Revised Statutes 
 of the United States applies. 
 
 c. In some states depositors are preferred over other 
 creditors in case of the failure of the bank. Therefore, if 
 bank A has a balance in bank B, if the balance is a de- 
 posit it can participate with depositors before other credi- 
 tors, while if it is a loan it cannot receive any dividends 
 from the assets of the failed bank until the depositors 
 have all been paid. Of course if a transaction is really 
 a loan, and a certificate of deposit is issued by the bor- 
 rower merely to make it appear as a deposit, this is a 
 loan, and in states where depositors have priority over 
 other creditors, the bank holding such a certificate would 
 not be entitled to share with depositors. Brown v. Shel- 
 don State Bank, 117 N. W., 289 (an Iowa case). And 
 where shareholders are liable for deposits they cannot be 
 held liable on such a transaction, w r hich is a loan in the 
 guise of a deposit. State Savings Bank v. Foster, 118 
 Mich., 268. 
 
 It has been held that the prohibition against a na- 
 tional bank loaning money on the shares of its own capi- 
 tal stock as security likewise prohibits the bank from 
 depositing money permanently in another bank and tak- 
 ing shares of its own stock to secure the deposit. See 
 National Bank of South Bend v. Lanier, n Wallace, (U. 
 
 so, 369. 
 
 51. Keeping the Deposit As we have seen, a bank is 
 indebted to the depositor for money he deposits. The 
 money becomes the property of the bank. If stolen or 
 lost after delivery to the bank officer, the loss falls upon 
 the bank. Therefore the bank must employ proper 
 
SEC. 52 43 
 
 means to safeguard as its own property the moneys de- 
 posited. In consideration of the liability assumed it has 
 the use of the money so long as the depositor leaves it 
 with the bank. The bank's business of loaning money 
 produces the profit which compensates it for the accom- 
 modation afforded the depositor. But while the money 
 is its own, the law protects those who give the banks 
 the use of their money without pecuniary compensation, 
 by certain regulations of the banking business, by causing 
 periodical examinations of condition of the banks, by 
 providing a general supervision of the banks' affairs and, 
 what concerns us mostly just now, by requiring the 
 banks to maintain a reserve of actual cash in their vaults, 
 to meet any contingency which might arise. This is 
 called "Lawful Money Reserve," or "Reserve." If a 
 bank which has loans paying high rates of interest has 
 only a small portion of its deposits on hand in cash and 
 a run is started on the bank, if the loans are not as 
 liquidable as they were thought to be profitable it will 
 mean ruin to both the bank and the depositors. Some 
 of the reserve the banks are allowed to carry on deposit 
 in other banks, where the law doubtless "presumes" it 
 can be readily obtained in an emergency. I say "pre- 
 sumes," because during the "Bankers' Panic" in 1907 the 
 reserves in Central Reserve Cities, especially New York, 
 where the money was piled up, were not very "readily 
 obtainable" by the depositing banks when they needed 
 the "Lawful Money" and quite a few had to close their 
 doors for lack of cash, though not actually insolvent. 
 
 52. Lawful Money Reserve of National Banks Sec- 
 tion 5191 of the Revised Statutes of the United States 
 provides that every national banking association in any 
 of the following cities: Albany, Baltimore, Boston, Cin- 
 cinnati, Chicago, Cleveland, Detroit, Louisville, Mil- 
 
44 SEC. 53 
 
 waukee, New Orleans, New York, Philadelphia, Pitts- 
 burgh, St. Louis, San Francisco and Washington, shall 
 at all times have on hand, in lawful money of the United 
 States, an amount equal to at least twenty-five per 
 centum (25%) of the aggregate amount of its deposits. 
 
 Every national banking association other than those 
 in the cities mentioned must at all times have on hand, 
 in lawful money of the United States, an amount equal 
 to at least fifteen per centum (15%) of the aggregate 
 amount of its deposits. 
 
 53. Formerly national banks were required to keep 
 reserve against circulating notes of the bank outstand- 
 ing, but this requirement was abolished by an amend- 
 ment of the law in 1874. Each national bank is required 
 to keep on deposit with the Treasurer of the United 
 States a fund equal to 5% of circulating notes of the 
 bank, and the amount so deposited with the Treasurer, 
 can be counted, not exceeding 5% of circulation, as part 
 of the 25% or 15%, respectively, which the banks must 
 carry as reserve. 
 
 54. Section 14 of the Act of Congress of May 30, 1908, 
 enacts that no reserve need be carried as against "de- 
 posits of public moneys by the United States in desig- 
 nated depositories." The banks must furnish security 
 for the moneys of the United States thus received and 
 as the money is deposited by the Treasury Department 
 to place it in circulation where required to meet demands 
 of business, to compel keeping part of it on hand in cash 
 would defeat the object for which the money was placed 
 in the banks. 
 
 55. Reserve Cities It is convenient for all banks to 
 have correspondents in the larger cities, to facilitate the 
 transfer of funds and for other beneficial reasons. All 
 national banks, therefore, keep part of their funds in 
 
SEC. 56 45 
 
 national banks in the cities heretofore mentioned. These 
 cities are known as "Reserve Cities." See Sec. 52. Of 
 the 15% which every national banking association is 
 required to keep in lawful money reserve, three-fifths 
 (9% of its deposits) may consist of balances due the 
 bank from national banks in Reserve Cities. New York, 
 Chicago and St. Louis are "Central Reserve Cities." Of 
 the 25% reserve required to be kept by national banks in 
 Reserve Cities; i. e., Albany, Baltimore, Boston, Cin- 
 cinnati, Cleveland, Detroit, Louisville, Milwaukee, New 
 Orleans, Philadelphia, Pittsburg, San Francisco and 
 Washington, one-half may be kept in cash deposits in na- 
 tional banks in "Central Reserve Cities," New York, 
 Chicago and St. Louis. 
 
 56. Reserve Agents Each bank must select the bank 
 or banks in the reserve city wherein it desires to keep 
 its reserve and this reserve city bank, called a "Reserve 
 Agent," must be approved by the Comptroller of the 
 Currency. Form of making application for appointment 
 of, or change in, a reserve agent will be furnished by the 
 Comptroller of the Currency. All national banks in 
 "Central Reserve Cities" must keep on hand in lawful 
 money the full amount of 25% required to be kept by 
 them. 
 
 57. What May be Counted as Reserve "Clearing 
 House Certificates, representing specie or lawful money 
 specially deposited for the purpose (i. e. for the purpose 
 of receiving the clearing house certificate), of any clear- 
 ing house association, shall also be deemed to be lawful 
 money in the possession of any association belonging to 
 such clearing house, holding and owning such cer- 
 tificate." Sec. 5192 Revised Statutes U. S. 
 
 It has been noted that part of the "Lawful Money 
 Reserve" may consist of balances due from reserve 
 
46 SEC. 57 
 
 agents ; that clearing house certificates issued for money 
 deposited can be counted as reserve, as can the five per 
 cent, redemption fund with the Treasurer of the United 
 States. Otherwise the "Lawful money reserve" must 
 be in gold coin, gold certificates, gold certificates pay- 
 able to order, legal tender notes, silver dollars, silver 
 certificates and fractional silver coin. Nickels and cents 
 cannot be counted, nor can national bank notes. 
 
SEC. 58 47 
 
 CHAPTER IV. 
 PAYMENT OF DEPOSITS. 
 
 58. Contract Existing Between Bank and Depositor. 
 
 As has been seen, the relation of the bank to the depos- 
 itor is that of debtor to creditor, and that there exists 
 between the bank and the depositor a contract. 
 
 Unless there has been some other agreement or under- 
 standing, the contract existing between the bank and a 
 general depositor is that the bank, having received de- 
 posits, will honor the checks or orders of the depositor 
 on presentation, if there is a balance to his credit large 
 enough to meet each order as presented, provided the 
 bank has no right of lien or set-off against the amount. 
 
 Sometimes the pass book given the depositor contains 
 the by-laws of the bank relating to the receipt of deposits 
 and their payment, and so far as these rules or by-laws 
 are reasonable and not contrary to law the depositor is 
 bound by them. No secret arrangement between the 
 depositor and the bank can be shown to establish a right 
 to preference by one depositor over others, in case of 
 failure of the bank. Of course, there must be an agree- 
 ment, express or implied, before the relationship of bank 
 and depositor can arise, and unless one who owns the 
 money consents to its being deposited the relation does 
 not exist. 
 
 59. Before there can be a binding contract of any kind 
 there must be an agreement between two or more par- 
 ties. The agreement may be presumed from the actions 
 of the parties or it may be expressed by spoken words 
 or by written instruments. A depositor may make an 
 
48 SEC. 59 
 
 express agreement with the bank, in which case that 
 agreement will control the relationship. By his action 
 in simply opening an account in bank, or depositing 
 money to the credit of an account, we saw in the first 
 chapter of this work, that the contract of depositor and 
 depositee is established. It is an implied contract: The 
 law makes the contract which the conduct of the parties 
 shows they intend shall subsist between them. But to 
 make an agreement, either express or implied, a binding 
 contract the parties who make the agreement must be 
 competent, in law, to contract. In most States now a 
 married woman can contract the same as if she were un- 
 married. An infant is not competent to bind himself by 
 a contract except for necessaries, but the disability is for 
 the benefit of the infant and the other party, if an adult, 
 is bound, while the infant can avoid if he chooses. Where 
 the infant is not taken advantage of, and he has re- 
 ceived all that is due him under a transaction which has 
 been for his benefit, the other party cannot be further 
 held. In most of the States the law provides that de- 
 posits, when made by an infant in savings banks, can be 
 repaid to the infant and the receipt of such infant will 
 discharge the bank. In some States savings accounts in 
 savings or State banks can be thus treated. Under gen- 
 eral laws where an infant owns property he has no right 
 to transfer or deal with that property, but a guardian 
 must be appointed to manage his estate until he arrives 
 at the age of 21. It is believed that where the State law 
 provides that an infant may control his savings de- 
 posited in a savings bank, the state or national banks in 
 such State would be safe in paying out to an infant 
 money deposited by himself as small savings, as the banks 
 cannot deny the right of the infant to it where the 
 money was taken from him; but where the money has 
 been deposited by another for the infant, or the amount 
 
SEC. 60 49 
 
 is large enough to justify the appointment of a guardian, 
 a guardian should be appointed. A male is an infant 
 until 21 years of age. In some States a female becomes 
 of age, at least for some purposes, at 18. 
 
 60. An insane person is not generally capable of en- 
 tering into a binding contract. The question is whether 
 the party has sufficient mind to know the meaning of the 
 contract he is entering into. If not he can avoid the con- 
 tract. The deposit of money by a person of unsound 
 mind, where the bank does not know that he is of un- 
 sound mind, would establish the relation of bank and 
 depositor. If, without having notice of his condition, the 
 bank paid money from his account on his orders, the 
 bank would be discharged. After a bank has learned 
 that it has the deposit of a person non compos mentis, it 
 should not pay except upon the order of a committee or 
 guardian appointed to take charge of the incompetent's 
 property. If the party has been declared insane by a 
 competent court, or a committee or guardian has been 
 appointed, the bank is presumed to have notice of his 
 insanity. See Sec. 179. But as the bank usually per- 
 forms the functions of a depositary without compen- 
 sation, it will usually be discharged when it performs 
 the duty ordinarily required of it, in paying on orders of 
 a depositor without notice of his insanity. 
 
 61. A contract entered into by one who is under the 
 influence of liquor is not binding upon him if he was so 
 drunk that he did not know what he was doing. As 
 orders by the depositor must be promptly paid by the 
 bank when presented, and the bank oftentimes pays them 
 to persons other than the depositor himself, it is obvious 
 that the bank would run a great risk in paying checks of 
 a depositor who is known to indulge too freely in intoxi- 
 cants if it were held liable to pay again or credit back 
 the amount upon a showing that the drawer of the 
 
50 SEC. 61 
 
 check was drunk when he signed the check. Of course 
 such customers are undesirable. But where a contract 
 is made by one who is insane or so drunk that he does 
 not know what he is doing and is as good as insane, he 
 can avoid the contract on his part. However, the 
 signing of a check is not in itself the making of a con- 
 tract with the bank. It is an order upon the bank pur- 
 suant to a contract already made. The bank has agreed 
 to honor orders signed by the depositor. Therefore, 
 where the bank does not know the circumstances under 
 which the order was signed it should be discharged upon 
 payment of such order. When the depositor signs and 
 delivers a check to the bank himself the bank can at 
 least see his condition; but where the depositor delivers 
 the check to a third party the making of a contract is 
 attempted between the depositor and the said third party. 
 If the one to whom the check is delivered knows the 
 condition of the drawer, he knows that he has no power 
 to make a contract by delivering a check, and when he 
 takes the check to the bank or negotiates it, he commits 
 a fraud. Now the question is does he commit a fraud 
 upon the depositor or upon the bank or the one to whom 
 he negotiates the check? If drunk, the depositor has 
 made it possible for the fraud to be committed and he 
 should stand the loss, or if innocent, and the payee of the 
 check has imposed upon the drawer by taking advantage 
 of his insanity or by making him drunk, the wrong still 
 has been done to the drawer first. His contract with 
 the payee, who has wronged him, is voidable and he can 
 recover (if such a thing is possible) what the payee ob- 
 tains under the check ; but surely, where the bank knows 
 nothing of the circumstances attending the making of 
 the check, it would seem that the contract which the 
 bank entered into when it received the deposit justifies it 
 in paying any orders the appearance or presentation of 
 
SEC. 62 51 
 
 which do not raise suspicion, where it has no other no- 
 tice. Reed v. Mattapan Deposit & Trust Co., 84 N. E., 
 469 (Mass.). 
 
 62. Where Payable The deposit is payable on demand 
 during business hours, at the bank, unless some other 
 agreement has been made with reference to its payment. 
 
 63. Form of Order to Pay If the depositor verbally 
 orders the bank to pay, or to transfer to some other ac- 
 count, his deposit or any part, and the bank carries out 
 the instruction, the bank will be discharged and the de- 
 positor will be bound. Whitsett v. Peoples Nat. Bank 
 of Warrensburg, 119 S. W., 999. It. is the custom, how- 
 ever, to require that the order for payment be in the form 
 of a check drawn upon the bank, or that a receipt or some 
 other written instrument be given to evidence the pay- 
 ment by the bank. And the bank can and should insist 
 upon some written evidence being given. If the de- 
 positor orders the payment verbally the bank is under 
 no obligation to the party to whom it was ordered to 
 pay. 
 
 64. As we have noted before, while it is a general 
 principle of law that the debtor must seek the creditor, 
 the bank need not hunt up the depositor; its contract is 
 to pay the deposit on demand at the bank. 
 
 As it is the universal custom of banks to pay out the 
 depositor's money on checks, the laws relating to checks, 
 their form, and the rights and obligations attached to 
 them will now be considered. 
 
52 SEC. 65 
 
 CHAPTER V. 
 CHECKS. 
 
 65. What is There has been much discussion and 
 diversity of opinion as to whether a check is an order 
 merely or whether it is a bill of exchange ; whether it is 
 an assignment of the depositor's funds or not, etc. The 
 Negotiable Instruments Law, which has now become law 
 in most of the States defines a check : "A check is a bill 
 of exchange drawn upon a bank, payable on demand." 
 
 When A gives to B a check reading: 
 
 "A B C Bank" (Drawee) 
 
 "Washington, D. C., Feb. i, 1910 
 "Pay to the order of B (Payee) (or B or order) $1,000 
 
 One Thousand Dollars 
 
 (and charge to account of) 
 
 A (Drawer) Depositor." 
 
 This is the same as if A handed to B a writing as fol- 
 lows: "There is in the hands of A B C Bank one thou- 
 sand dollars belonging to me, which ABC Bank will 
 pay to you, or to any one you order ABC Bank to pay 
 it to, upon prompt presentation of this paper, and if the 
 bank does not so pay to you or any one to whom you 
 endorse this check, I will pay the same." The law reads 
 into the check substantially these words. The one to 
 whom the check is made payable (B) can transfer it to 
 another by simply endorsing it (i. e., writing his name 
 upon it, usually on the back). And so it may be passed 
 along from one to another. If the check is payable to B 
 
SEC. 66 53 
 
 or order, or to the order of B, and B endorses it by simply 
 writing his name, this is an endorsement in blank and the 
 check can then be transferred by the one to whom B en- 
 dorsed it without any additional endorsement. And 
 where a check is payable to "Bearer," or to "A or bearer," 
 it can be transferred without endorsement. Where pay- 
 able to bearer, or payable to order and endorsed by the 
 payee, no further endorsement is required in law to 
 transfer title, but the bank is not buying the check when 
 presented for payment. It is paying the order, and the 
 custom is to require the holder to endorse it, and the 
 bank should require the one to whom it pays to endorse, 
 as this is evidence in the nature of a receipt for the 
 payment. In can not be insisted upon, however. 
 
 Where payable simply to the drawer and presented by 
 himself no endorsement on back is necessary. The de- 
 positor's order to pay must be honored and when sur- 
 rendered is evidence of payment. 
 
 66. Drawing the Check Care should be taken in 
 drawing a check. It should be properly dated. There 
 should be no blank space left before or after the written 
 statement of the amount or before or after the figures in- 
 dicating the amount. The drawer should begin writing 
 the amount at the extreme left end of the line, so that 
 there may be no opportunity to fill in additional words. 
 The figures should be accurately made and in such a 
 clear manner that they cannot be easily changed. If the 
 bank makes a mistake in paying a check, or pays a forged 
 check, or an amount in excess of what the check was 
 drawn for, the bank must stand the loss. But while the 
 depositor is not called upon to insure the bank against 
 his checks being forged or raised, he should use such 
 care in preparing his checks as will at least not make it 
 easy for one getting possession of the check to commit 
 a fraud on the bank. And if the depositor is negligent 
 
54 - SEC. 67 
 
 he may have to bear the loss himself. If he leaves a 
 space which can be easily filled in to raise the amount, 
 he will have to bear the loss occasioned by his own 
 negligence. If he signs checks in blank and leaves them 
 with an agent, through whose negligence a blank signed 
 check is stolen and filled in, or if through his own negli- 
 gence someone gets hold of the check, and fills it in and 
 passes it to an innocent person who gives value for it 
 without notice, the depositor must stand the loss for 
 which his negligence is responsible. 
 
 67. Date The check should be dated. If not dated, 
 any holder can fill in the date. If dated on Sunday the 
 check will not be invalid, but a check cannot be delivered 
 or paid on Sunday without the risk of its being declared 
 invalid. The date of delivery is the date on which any 
 contract takes effect. Where the date on which any act 
 is to be done under a negotiable instrument falls on Sun- 
 day or a legal holiday, in most States the act may be done 
 on the next succeeding secular or business day. In some 
 States the day before is designated, and in some States 
 Saturday or part of Saturday is a holiday. 
 
 68. Change of Date Where the check is properly 
 dated and any holder changes the date without the con- 
 sent of all parties on the check it would seem that the 
 check would be void under the Negotiable Instruments 
 Law, which provides that "Where a negotiable instru- 
 ment is materially altered without the assent of all par- 
 ties liable thereon, it is avoided, except as against a party 
 who has himself made, authorized, or assented to the al- 
 teration and subsequent endorsers." "Any alteration 
 which changes: i. The date ; * * * is a material alter- 
 ation." "But when an instrument has been materially 
 altered and is in the hands of a holder in due course, not 
 a party to the alteration, he may enforce payment thereof 
 according to its original tenor." 
 
SEC. 69 55 
 
 69. Post Dated Where a post-dated check is changed 
 in date the depositor cannot be held liable thereon and if 
 the bank pays before its original date it will have to 
 stand the loss, but can recover from the one it paid it 
 to. Otherwise, where the date is changed, the depositor 
 will be liable to a bona fide holder to the same extent 
 that he could be held if the date had not been changed. 
 See Sec. 98. 
 
 6o,a. A contract made on a holiday is valid. The holi- 
 day suspends performance of some acts. See Sec. 67. 
 
 70. Form The blanks provided by the bank should 
 be used whenever possible, but a check on one bank, 
 written upon the blank form of another bank, with the 
 name of the bank changed, is valid, and where one bank 
 pays such a check the bank on which it is drawn cannot 
 charge the paying bank with negligence. 
 
 There is no particular form required by law. Any 
 sufficient demand upon the bank would make the bank 
 liable to the depositor, but where a check is used and is 
 intended to pass as money in a transaction between the 
 depositor and parties other than the bank, the essentials 
 necessary to make it a negotiable check must be present. 
 
 71. There must be an unconditional order upon the 
 bank, to pay a sum certain, in money, upon demand, to 
 a specified person or his order, or to such person or 
 bearer, or to bearer. If no person is named to whom it 
 is payable, it is not a check. But where the name of a fic- 
 titious person or a name of an account, or a number, as 
 "Cash," "No. 583," etc., is designated as payee, such check 
 is payable to bearer. 
 
 If the check is payable at a future date, i. e., at a later 
 date than the date of issue, and not on demand, it is a 
 bill of exchange, and where the Negotiable Instruments 
 Law is not in force a bill of exchange is entitled to grace, 
 and the holder can present for acceptance, and protest if 
 
56 SEC. 72 
 
 not accepted, whereas a holder of a check can present for 
 payment only on the due date, without grace, and not for 
 acceptance. 
 
 72. The number on a check, memoranda as to what the 
 payment is for, etc., are simply for the benefit or informa- 
 tion of the drawer, and to the bank are the same as if 
 they were not present on the instrument. "December 
 taxes." "For rent," "B. P. No. 2," etc., are phrases which 
 the bank need pay no attention to. All the bank looks to 
 is the date, amount, order to pay, the signatures and the 
 identity of the person presenting the check. Care must 
 of course be exercised in identifying the one to whom 
 money is paid on a check. In order that the holder may 
 be identified there must be a specified person. 
 
 73. Writing in Body of Check The fact that the hand- 
 writing in the body of the check is not the writing of the 
 depositor whose signature the check bears, is not in it- 
 self notice that the check is wrongfully drawn. It may 
 be written, stamped, typewritten or printed. Of course, 
 it might be, in some instances, enough to give the bank 
 warning of something being wrong. A bank cannot re- 
 fuse to honor checks rightfully drawn, and at the same 
 time is liable if it pays a check which is forged or raised, 
 so that the bank must bear the responsibility of deciding 
 in each particular case whether there is sufficient irregu- 
 larity to warrant dishonoring a check and taking the con- 
 sequences of refusing to pay if the check is valid. 
 
 74. The Negotiable Instruments Law provides that 
 where the sum payable is expressed in words and also in 
 figures, and there is a discrepancy between the two, the 
 sum denoted by the words is the sum payable ; but if the 
 words are ambiguous or uncertain, reference may be had 
 to the figures to fix the amount. When there is conflict 
 between the written and printed provisions of the instru- 
 ment, the written provisions prevail. 
 
SEC. 75 57 
 
 75. Amount of Checks One of the general principles 
 of equity is that if A owes B, B cannot split up his right 
 against A and assign different parts of it to C, D, and E, 
 etc. And partly on this principle is based the theory 
 that a check for only a part of the fund is not an assign- 
 ment of the fund, but that it belongs to the depositor 
 until the bank has actually paid the check. In banking 
 business, however, the custom of paying and the right to 
 demand payment of checks in any amount has become so 
 well established that the rule mentioned does not apply 
 to a deposit in bank; and unless there is an agreement 
 to the contrary with the bank, the depositor can draw 
 checks against his account (so long as he has the funds 
 in bank) in such amounts as he sees fit. He cannot, how- 
 ever, draw innumerable small checks merely for the pur- 
 pose of annoying the bank, or, where checks give the 
 holder the right to sue, give many small checks simply 
 to vex the bank with many suits. 
 
 76. By an act of Congress of March 4, 1909, the crim- 
 inal laws of the United States were codified. Section 179 
 of that act reads as follows : 
 
 "No person shall make, issue, circulate, or pay out any 
 note, check, memorandum, token or other obligation for 
 a less sum than one dollar, intended to circulate as money 
 or to be received or used in lieu of lawful money of the 
 United States; and every person so offending shall be 
 fined not more than five hundred dollars or imprisoned 
 not more than six months, or both, at the discretion of 
 the court." 
 
 This is not a new law, but its codification without any 
 explanation has raised a doubt in the minds of many 
 whether a check for less than one dollar can be given. 
 The law was passed in 1862, being a part of the act of 
 July 17, 1862, and afterwards became Section 3583 of the 
 Revised Statutes of the United States and, together with 
 
58 SEC. 77. 
 
 the other sections of the Revised Statutes relating to 
 legal tender and money, provides a punishment for the 
 issuing of any paper to circulate as money where there 
 is no authority of law for its issue. Where A gives B a 
 check in payment of a debt, it is true that in a sense it 
 takes the place of money, but A does not intend that the 
 check shall circulate in the hands of any holder as money. 
 He intends, primarily, that B shall present the check at 
 the bank and obtain the money. 
 
 Some of the States provide by statute that no paper 
 shall be issued to "circulate as money," other than law- 
 ful money of the United States and bank notes, where 
 authorized, and some likewise prohibit the issue of 
 checks for less than one dollar "to circulate as money." 
 
 77. Signature Having been carefully drawn, the 
 check must be signed by the depositor in the name under 
 which he has deposited the money, or under which the 
 bank has agreed to pay out the money. A signature in 
 pencil is valid. A printed signature or a rubber stamp 
 impression of a signature is valid, where it has been 
 agreed that such signature is to be used. But where a 
 party brings suit on a check so signed he must show that 
 the stamp or printed signature has been adopted. Where 
 a stamp is used, care should be taken to avoid its im- 
 proper use by another. If through the depositor's negli- 
 gence the stamp is wrongfully used on a check, the de- 
 positor will have to stand the loss. If the depositor can- 
 not write, he must have someone else write his name for 
 him, make a mark "x," and have witnesses to his having 
 made the mark as an acknowledgment of the signature 
 as his. Some one should be authorized to sign for him. 
 See Sec. 79. 
 
 78. Corporation Where a check is drawn by a cor- 
 poration, the bank should require evidence of authority 
 
SEC. 79 59 
 
 of those who sign for the company, and having agreed 
 upon the signature to be honored, should pay no checks 
 unless so signed. Only such officers of a corporation can 
 sign as are given authority by the charter or by-laws of 
 the corporation. A corporation can only act through its 
 officers and agents, and such officers or agents can bind 
 the corporation only so far as they have authority. But 
 where a corporation holds out an officer as having au- 
 thority, the corporation will be bound where by the exer- 
 cise of such authority the corporation has received bene- 
 fits. So a corporation will be bound by the acts of its 
 officer where upon his signature to checks the corpora- 
 tion receives the deposit. The proper signature is the 
 name of the company, followed by the name of the officer 
 and his title, but where the name of the company appears 
 elsewhere in the check the same need not appear again in 
 the signature, and frequently does not ; and the signature 
 is presumed to be the signature of the company. 
 
 79. Power of Attorney Where one person has been 
 authorized to draw checks on another's account, checks so 
 drawn can be paid by the bank so long as it has no notice 
 that the agency has been revoked or the authority with- 
 drawn. It must not pay a check drawn after expiration 
 of the time for which the authority was granted, nor after 
 the revocation of authority, where it has notice. If a 
 check has been drawn after revocation, but before the 
 bank has notice, the party for whom the agent had been 
 acting and against whose account the check was drawn 
 cannot hold the bank liable unless he can show that the 
 one to whom the bank paid the money was not a bona 
 fide holder for value. 
 
 80. The mere fact that an agent has authority to de- 
 posit money for his principal does not in itself emppwer 
 him to withdraw the money or sign checks. Bank v. Gib- 
 boney, (Ind.) 87 N. E., 1064. 
 
60 SEC. 81 
 
 A written power of attorney from the principal to the 
 agent should be filed with the bank. 
 
 81. Partnership Funds. Where a partnership depos- 
 its money, each partner has authority to sign the partner- 
 ship name. Each partner is agent for all. But no one 
 can use the partnership money to pay a private debt, and 
 the account should be in the name of the partnership, 
 and checks so signed. The bank should not pay on the 
 individual signature of one partner. If it does, and the 
 money is not used for partnership purposes, the bank 
 will be liable. 
 
 82. When one partner dies, his death, in most States, 
 dissolves the partnership, and the survivor, or survivors, 
 become vested with title to the assets for the purpose of 
 winding up the affairs of the partnership. In such case 
 the survivor can draw out the money in his own name. 
 
 83. Joint Deposits. Where money is the joint fund of 
 persons not partners in trade, generally each one must 
 sign checks or orders withdrawing the fund, though there 
 may be an agreement between the parties and the bank, 
 that checks are to be signed by one, in which case checks 
 so signed must be honored. 
 
 84. When a deposit is made by husband and wife, pay- 
 able to both or either, checks signed by either one alone 
 or by both must be honored, but the question as to whose 
 money it is depends upon all the facts. 
 
 85. On the death of one of several persons in whose 
 names the deposit is made, the question as to what dis- 
 position the bank should make of the money depends 
 upon all the facts and circumstances. In one case where 
 a certificate of deposit was issued in the name of A and 
 B, his wife, and payable to A and B or A or B, on the 
 death of A it was held by a Maryland court that B was 
 only the agent of A, and A's death revoked her author- 
 ity to draw the money. If the money was actually the 
 
SEC. 86 61 
 
 joint property of all, the death of one would leave the 
 title in the survivor or suvivors. If the property of one, 
 but deposited merely with the understanding that others 
 could draw it out, of course, then the death of the owner 
 would revoke the right of the others to draw. All the 
 facts and circumstances must be considered. If the one 
 who deposits it has full control over the money during 
 his life, his death will revoke authority given to others 
 to check against it ; but where all control and jointly own 
 the fund, the survivors are entitled to it. In any event, 
 if there is an agreement between the parties and the 
 bank, the agreement controls. If the bank, on the death 
 of one, pays the money to the wrong person, it will be 
 liable to the rightful owner. See sec. 177. When such 
 deposits are made the bank should have an understand- 
 ing with all parties interested, as to the ownership of the 
 money, not merely the right to withdraw. Where par- 
 ties agree the agreement will control. 
 
 86. When more than one executor or administrator is 
 appointed, usually the act of one binds all ; and so if one 
 draws a check the bank will be discharged if it pays the 
 check. De Haven v. Williams, 89 Pa. St., 480. 
 
 87. The law relating to trustees, however, is different; 
 all must join in making contracts, and so all must sign 
 checks. 
 
 87a. Signature File. The bank should keep a proper 
 file of its customers* signatures. It is bound to pay 
 checks when properly signed ; but as the bank pays checks 
 at its peril, the individual, corporate and partnership 
 names and authorized signatures should be well known 
 to the officers who pay the checks. 
 
 88. Delivery. A check is not binding upon the maker, 
 or drawer, until he has delivered it to the payee or the 
 payee's agent, or at least parted with it with the inten- 
 tion that the payee should become entitled thereto. So, 
 
62 SEC. 88a 
 
 when the payee endorses it, the transfer to the endorsee 
 is not complete until delivery. However, where a check 
 has been signed, or endorsed, but not delivered, if it is 
 stolen and comes into the hands of a bona fide holder for 
 value, without notice, the maker or endorser will be 
 liable to such holder in good faith, for value, without 
 notice. Voss v. Chamberlain (Iowa), 117 N. W., 269. 
 And in such case a payment to the bona fide holder 
 would release the bank. But if forged, no one could ac- 
 quire any right against the one whose name was forged. 
 
 88a. Endorsements. We have seen that a check pay- 
 able to bearer, or payable to order and endorsed in blank, 
 is negotiable by delivery. See Sec. 65. 
 
 If the holder desires, to prevent further negotiation, ex- 
 cept by B, he may endorse it "Pay to B or order," and sign 
 his name "Holder," or "Pay to the order of B, Holder." 
 This is a special endorsement. The check is now pay- 
 able to B only; until B has endorsed it no one can get 
 title to it as to B. B, however, takes absolute title and 
 can further negotiate it, by endorsing as he sees fit. 
 
 If the holder, say A, received the check endorsed in 
 blank, i. e., by the payee merely having written his name 
 on back, A, if he wishes to prevent negotiation of the 
 check, can write over the blank endorsement "Pay to A 
 or order," when the check, as stated in the preceding par- 
 agraph, cannot be negotiated until A has endorsed it. 
 
 If the holder (A) desires to endorse it to another 
 merely to collect for him, or to give the transferee title 
 only for a special purpose, he can endorse it "Pay to B 
 Bank, for collection;" "Pay to B only;" "A, for Deposit 
 only," etc., signing his name, in which cases the endorse- 
 ment would be restrictive. The one to whom endorsed, 
 B, would take title only for the purpose of collection, or 
 for use as may be stated in the endorsement. He would 
 have no right to negotiate the instrument, but to collect 
 
SEC. 88b 63 
 
 or use it for the special purpose only, and anyone who 
 took it from B would have notice that the proceeds be- 
 longed to A, and would take no better title to it than B 
 himself had. If endorsed to the "order" of the endorsee, 
 though restrictive, he obtains full title and a bona fide 
 holder would take title by endorsement from B. 
 
 88b. Whether the holder transfers a negotiable instru- 
 ment by endorsement or by delivery, he warrants to the 
 one he transfers to. "That the instrument is genuine and 
 in all respects what it purports to be; that he has good 
 title to it ; that all prior parties had capacity to contract ; 
 and that he has no knowledge of any fact which would 
 impair the validity of the instrument or render it value- 
 less." 
 
 When he endorses, however, he also warrants to all 
 subsequent holders in due course, that the instrument 
 is at the time of his endorsement valid and subsisting 
 and that it will be accepted or paid, or both, on due pre- 
 sentment, according to its tenor, and that if it be dis- 
 honored, and the necessary proceedings on dishonor be 
 duly taken, he will pay the amount thereof to the holder, 
 or to any subsequent endorser who may be compelled to 
 pay it. The "necessary proceedings on dishonor" are 
 protest, and notice of dishonor. A local check need not 
 be protested, but where there are endorsers it is better 
 to protest. See Sec. 89 et seq. 
 
 Where a check is drawn in one state on a bank in an- 
 other state, it is a foreign bill of exchange, and should 
 be protested. Where protested, the protest should be 
 made on the day of dishonor at the place where it is dis- 
 honored. We have seen that a check is usually presented 
 for payment and not for acceptance; and that the en- 
 dorser does not warrant to the bank on which drawn 
 the signature of the drawer. See Sec. 141. 
 
 88c. Without Recourse. Where any holder wishes to 
 
64 SEC. 88d 
 
 transfer title, but avoid liability if the drawee or a prior 
 endorser does not pay, he can do so by endorsing "with- 
 out recourse," and signing his name. Such an endorse- 
 ment is called a qualified endorsement. It passes title 
 to the instrument and the endorser makes the same 
 warranties as stated in Sec. 88b, but to the person to 
 whom he transfers only. He does not agree to pay if 
 the drawer or maker does not pay; and he does no* be- 
 come in any way liable to anybody but his immediate 
 transferee. 
 
 88d. Signature. The signature in an endorsement 
 must correspond exactly with the name on the face of 
 the check. If the name is misspelled, the endorsement 
 can be written first as appears on the face and then in 
 the proper name of the endorser. 
 
 88e. Bank. When a bank becomes the holder of a 
 check drawn on another bank, by cashing or giving credit 
 for same, or by transfer by delivery or endorsement from 
 the holder, the bank becomes entitled to the same rights 
 and assumes the same liabilities as any other endorsee 
 or transferee. It does not guaranty the signature of the 
 maker of the check, by paying. The guaranty of de- 
 positor's signature is only by bank on which check is 
 drawn. 
 
 89. Presentment. When A gives a check to B, A is 
 not discharged until the check is paid, unless there is a 
 distinct understanding that the check shall be payment. 
 See Sec. 154. Otherwise, if a worthless check were given, 
 the original debt could not be sued on and the debtor would 
 escape payment. However, when A gives a check, it must 
 be presented at the bank, during banking hours, within a 
 reasonable time. If it is not, and any loss arises which 
 either A or the holder must bear, the burden of the loss 
 will fall upon the holder. A would have no right to draw 
 a check if he had not sufficient funds in bank to meet it, 
 
SEC. 90 65 
 
 and no right to draw out all his funds to prevent the holder 
 from collecting the check, no matter how long it might be 
 outstanding. But if the bank should fail, and the facts be 
 such that the check, drawn in good faith, would have been 
 paid if there had been no delay, the one who delayed must 
 bear the loss. A should not be held to bear a loss which 
 would not have occurred if the check had been presented 
 in a reasonable time. 
 
 90. If the payee lives at the place where the bank on 
 which the check is drawn is located, the check should be 
 presented on the same day it is received or on the day 
 following the day of its receipt. If the payee is at a 
 different place he must send it, the same day or the day 
 following the day of its receipt, for presentment, in a 
 reasonably direct way. If the one who takes the check 
 knows that the bank on which it is drawn is in a failing 
 condition, he should immediately make presentment, to 
 save any loss to the drawer, the endorser, and possibly to 
 himself. If the check is presented through a clearing 
 house, generally another day is given to make present- 
 ment, to bind endorsers. 
 
 91. If presentation is delayed beyond the time men- 
 tioned and a loss is incurred, as by the bank's failing, the 
 holder of the check must stand any actual loss as between 
 holder and drawer. As between holder and a prior party, 
 the one at fault must suffer the loss. If the maker had 
 no funds in the bank when the check was drawn, or drew 
 the money out before the check was presented, this would 
 not be a loss, but if intentional might be a fraud. 
 
 92. The Negotiable Instruments Law provides that a 
 check must be presented for payment "within a reasonable 
 time after its issue, or the drawer will be discharged from 
 liability thereon to the extent of the loss caused by the 
 delay." When A gives a check he has the right to have it 
 presented for payment. And the fact that the check is 
 
66 SEC. 93 
 
 endorsed by the payee and negotiated, does not extend the 
 time within which it much be presented as against the 
 drawer, A. Dehoust v. Lewis, 112 N. Y. S., 559. As 
 stated above, the rule adopted in most states is that the 
 check must be presented not later than the close of business 
 on the day following the day of its receipt by the payee- or 
 holder. If the party receiving it is not in the same place 
 where the bank is located, he must forward it, before the 
 end of the day following the day of its receipt, in a rea- 
 sonably direct way, for presentment. 
 
 However, the payee may negotiate the check, by endorse- 
 ment, or otherwise transfer his rights therein. Where he 
 does it by endorsement, in order to bind the endorsers the 
 holder must present it within the same reasonable time after 
 he receives it (the same day or the day following), and 
 the Negotiable Instruments Law provides that when an 
 instrument has been negotiated it must be presented "within 
 a reasonable time after the last negotiation thereof," to 
 bind endorsers. So that under this law, if the payee en- 
 dorses the check to C, C endorses it to D, etc., the last one 
 to whom it is endorsed has until the close of business on 
 the day following the day of its receipt by him, to present 
 or forward it for presentation. Columbian Banking Co. v. 
 Bowen (Wis.), 114 N. W., 451 ; Plover Sav. Bk. v. Moodie, 
 no N. W., 29 (Iowa). If it is not presented then, the 
 endorsers are absolutely discharged in some states (Aebi v. 
 Bank of Evansville, 124 Wis., 73), while in other states 
 they are discharged only to the extent that the delay in 
 presentation has caused a loss which would not have been 
 suffered if the instrument had been promptly presented 
 (Small v. Franklin Mining Co., 99 Mass., 277). 
 
 93. Where Drawer Has Lost Nothing. Where the 
 drawer has lost nothing or suffered no injury by reason 
 of the delay, he is liable on the check no matter how long 
 presentation may have been delayed; but if, after a long 
 
SEC. 93a 67 
 
 delay, the check is presented and not paid, the claim on the 
 original debt may be barred, though the check itself might 
 not be. 
 
 93a. Delay in making presentment is excused when 
 caused by circumstances "beyond the control of the holder 
 and not imputable to his default, misconduct or negligence." 
 
 93b. If the maker has no funds in the bank when he 
 gives the check, or if he directs the bank not to pay, no 
 presentment need be made ; and where the check was given 
 the payee for his accommodation and he has endorsed it, 
 no presentment need be made to bind him as an endorser, as 
 "he has no reason to expect that the instrument will be 
 paid if presented." 
 
 93c. To be on the safe side, prompt presentment should 
 always be made by every holder of a check, unless a prompt 
 negotiation thereof is made. 
 
 94. Notice. Presentation having been properly made, 
 if payment is refused the holder must notify the drawer 
 and endorsers. Notice should be given the same day or 
 the day following the day of dishonor. A check need not 
 be protested, but it is customary to protest nevertheless, as 
 in proving presentation and dishonor the notary's certificate 
 of protest furnishes prima facie evidence. No protest is 
 required where the payee himself presents the check at the 
 bank and payment is refused, as prompt presentment for 
 payment is all that need be made to protect the payee 
 against the maker. But he should be notified, in order that 
 he may protect himself if the bank has made a mistake. 
 Cassel v. Regierer, 114 N. Y. S., 601. See Sec. 88b. 
 
 95. The payee of a check, or the holder thereof, should 
 not mail it direct to the drawee bank for payment. If 
 presentation cannot be made at the bank, it should be sent 
 to some other bank for presentation. A negotiable instru- 
 ment should not be surrendered until paid, and sending 
 direct to the drawee is generally held to be negligence. R. 
 
68 SEC. 96 
 
 H. Herron Co. v. Mawby, 89 Pac., 872 (Cal.) ; Win- 
 chester Milling Co. v. Bank of Winchester (Tenn.), in 
 S. W., 248. 
 
 96. Stale Checks. When a check is presented at a 
 bank or offered by a payee or holder to a creditor long 
 after its issue, the bank or the creditor must determine 
 whether there are sufficient circumstances to warrant an 
 inquiry from the maker as to whether the check is still 
 good, before paying or accepting same; for, if the check 
 is stale, and the drawer has equities which he can set up as 
 a defense to the check, the bank might not be allowed to 
 charge the payment to the depositor, or the one who takes 
 it might be unable to recover on it from the maker. A few 
 days would not be sufficient to give notice of any equities. 
 Whether the bank has been negligent in paying a stale 
 check, or whether it has been justified in refusing to pay a 
 check long outstanding is a question of fact for the jury. 
 This is another case where the bank is between two fires. 
 The bank is bound to pay all valid orders and must stand 
 the loss if it pays one wrongfully. It has been held that a 
 check six months old was not sufficiently old to warrant a 
 bank's refusal to pay. The account of the depositor as of 
 the date the check was given and at the time the check is 
 presented should be examined; and, of course, if there is 
 not sufficient to the credit of the maker, the bank assumes 
 the risk in paying such a check, for if the drawer has dis- 
 charged the debt for which the check was given, the bank 
 could not recover for payment made. 
 
 97. As between the maker of the check and one who 
 becomes holder, the holder assumes the risk in accepting a 
 check when it is stale. All the circumstances must be con- 
 sidered in determining whether it is stale. In one case 
 twenty-six days has been held to make it stale. At least 
 four or five days usually would not be deemed an unrea- 
 sonable time to give a check to circulate to the drawee bank. 
 
SEC. 98 69 
 
 Lancaster Bank v. Woodward, 18 Pa., 357; First N. B. v. 
 Needham, 29 Iowa, 249. 
 
 98. Post Dated Checks. Ordinarily a check is pre- 
 sumed to be drawn against funds which the depositor has 
 in bank. If he issues a check when he knows he has no 
 funds to meet it at the time, he may do it either because 
 he has an arrangement with the bank allowing him to over- 
 draw, or he commits a wrong. See Sec. 195. He is not 
 guilty of a wrong, however, when he issues a post-dated 
 check (a check dated ahead). It is not presumed that he 
 has funds in bank to meet such check when drawn, but 
 that he will have funds there to meet it when it is presented 
 in the ordinary course of business at the time of its date. 
 Before that time he has the right to draw other checks 
 against his deposit. Even though the bank knows of the 
 post-dated check outstanding, it cannot refuse to pay proper 
 checks on demand. The bank cannot pay or certify a 
 post-dated check before the day of its date. Clark N. B. 
 v. Albion N. B., 52 Barb. (N. Y.), 592. If it does, it cannot 
 charge the amount to the depositor if he countermands or 
 stops payment before the day of its date. 
 
 99. Countermanding or Stopping Payment. It is the 
 law in nearly all the states that the depositor has the right 
 to countermand checks, or stop payment. The bank must 
 pay only on the order of the depositor, but must pay every 
 valid order presented so long as unincumbered funds are to 
 the credit of the depositor. If a dispute arise between the 
 depositor and one to whom he has given a check, these two 
 must settle their dispute themselves and the bank should 
 not be dragged into their difficulty, and, therefore, the bank 
 is not concerned as to how many checks are outstanding, 
 but only as to the validity of the check as it is .presented, 
 unrevoked, and the state of the depositor's account. Where 
 payment is stopped on a check the bank must not pay such 
 check or it will be liable to the depositor. Elder v. Bank, 
 
70 SEC. 100 
 
 55 N. Y. S., 576. Of course, where the bank has certified 
 a check it is presumed that the depositor has been charged 
 with the amount, and on such a check the bank is liable 
 itself to the holder. It cannot be countermanded. But see 
 Sec. I3ib. 
 
 100. In Illinois it has been held that a check cannot be 
 countermanded, on the ground that it is a fraud for the 
 depositor, after issuing a check, to withdraw the money 
 so that there will not be sufficient to meet the check, and 
 that it is likewise a fraud to tell the bank not to pay. But 
 suppose the bank does not know of an outstanding check 
 and the depositor himself demands payment of his entire 
 balance? The bank cannot refuse to pay him. In Illinois 
 it was the rule that where A drew a check to B, B could 
 sue the bank, as the check was regarded as an assignment 
 of the fund to the one to whom the check was given. 
 This has been changed by the Negotiable Instruments Law 
 and, as was the rule in most states before, and is the rule 
 now where the Negotiable Instruments Law is in force, a 
 check is not an assignment of the fund, and the money in 
 bank belongs to the depositor until the bank has paid it 
 out on his orders. The bank owes no duty, and is under 
 no legal obligation, to the holder of the check, unless the 
 bank has certified it. If the depositor has the check certified 
 he can countermand it before he delivers the check, but if he 
 has delivered it, or if the bank certifies it at the request of 
 the holder, it cannot be countermanded, as the bank has 
 promised to pay it is now the obligation of the bank. But 
 see Sec. I3ib. 
 
 rooa. A cashier's check cannot be countermanded. 
 Drinkall v. Movius State Bank, n N. D., 10; 88 N. W, 
 724. 
 
 101. Revocation by Death. It is generally held that 
 the death of the depositor revokes checks drawn by him 
 and delivered but not paid. On the death of the depositor 
 
SEC. 102 71 
 
 the money in bank passes to his executor or administrator 
 at the instant of his death, for distributon under the law of 
 the state where he is domiciled, subject to the rights of 
 creditors. If the bank knows of his death it will certainly 
 be liable to the estate if it pays a check thereafter, unless it 
 has, by certifying, become debtor to the holder and not to 
 the depositor; and it has been held in most cases that the 
 death of the drawer revokes all unaccepted checks. If the 
 money in bank is the depositor's money until the bank has 
 actually paid it out, and the death of the depositor itself 
 passes the title of his property to his representative, it 
 follows that the effect must be the same on the deposit as 
 on any other personal property. See Sees. 177, 178. 
 
 Where the check operates as an assignment, the money 
 represented passes at the time of the assignment and is no 
 longer the depositor's ; but checks are generally not regarded 
 as asisgnments now. In some states a certain time after 
 death of drawer is given in which to present checks. Natl. 
 Com. Bk. v. Miller & Co., 77 Alabama, 168. 
 
 1 02. Revocation by Insolvency. Insolvency of the 
 drawer revokes all checks not paid, in those states where a 
 check is not regarded as an assignment, and also under the 
 United States Bankruptcy Law. Bowker v. Haight & 
 Freeze Co., 146 Fed., 257, and see 146 Fed., 761. 
 
72 SEC. 103 
 
 CHAPTER VI. 
 PAYMENT OF CHECKS. 
 
 103. Payment When Presented. A bank must pay the 
 checks in the order in which they are presented, regardless 
 of the dates. If A, having $100 in bank, gives B a check 
 for $100 on the ist of the month, and on the 2d A goes 
 to the bank and presents his check for the $100, even 
 though the bank knows of the outstanding check in B's 
 hands, it must pay to A, except where a check operates as 
 an assignment. Bank v. Ingersoll, 2 Neb., 617; Dykers v. 
 Bank, n Paige (N. Y.), 612. 
 
 104. No matter how many hands a check passes through, 
 the bank must pay it. 
 
 105. When the check is presented at the bank and the 
 money is passed over the counter, to one other than the 
 maker (or depositor who drew it) and accepted by him, 
 the holder is absolute owner of the money. If the bank 
 afterwards finds the depositor's balance was not large 
 enough to meet it, and cannot recover from the maker on 
 the overdraft, it is the bank's loss, unless there is fraud 
 or collusion on the part of the payee, or holder, as where 
 he presents a check when he knows that the drawer has no 
 funds. Bank v. Burns, 68 Ala., 600. Where payment is 
 made and accepted in good faith the money becomes the 
 property of the payee or holder. Bank v. Berrall, 70 N. J. 
 Law, 757, where check was paid after revocation. See 
 Sec. 113. It could not be attached as the depositor's. 
 
 106. If a check is presented for more than the depositor 
 has to his credit the bank is not bound to pay what it has, 
 
SEC. 107 73 
 
 but if it does it should indorse on the check the amount 
 paid, if check is not surrendered. See Sec. 137. 
 
 107. The fact that the bank has previously allowed over- 
 drafts will not obligate it to pay a check in full when the 
 drawer has not sufficient funds. If several checks are pre- 
 sented at the same time, as through a clearing house, and 
 there are sufficient funds to pay one but not all, in some 
 places it is the custom to refuse all, and upon a second 
 presentation pay the first presented; in others the custom 
 is to pay the first in date; and in still others to pay the 
 smaller ones, though the bank is not bound to pay any when 
 they aggregate more than the balance to the credit of the 
 depositor. 
 
 1 08. If a check is presented and payment refused for 
 lack of sufficient funds, the bank may in most jurisdictions 
 disregard the check, and can treat funds deposited or checks 
 presented afterwards without reference to the order re- 
 fused. Gilliam v. Merchants Nat. Bank, 70 111. App, 592. 
 
 109. The only duty the bank owes is to pay, upon pre- 
 sentation, all checks properly drawn against an unencum- 
 bered balance. It need do nothing else. So it is not bound 
 to certify, or to promise that it will keep out funds when 
 received. It need not answer questions regarding the de- 
 positor's account. Though it has been held in Kansas that 
 the bank can be made to disclose the state of the depositor's 
 account, this was in a case where the disclosure was to the 
 grand jury in considering an indictment. Of course, if a 
 bank does accept a check, or certifies, or promises to do 
 something beyond merely making immediate payment, it 
 may become bound, but it is not otherwise under obliga- 
 tions to do more than pay it. 
 
 no. A payment in forged or counterfeit paper or money 
 would be no payment at all; payment must be in legal ten- 
 der, in the absence of any special contract between the 
 depositor and the bank. See Sec. 203. 
 
74 SEC. Ill 
 
 in. If a bank pays a check by issuing its own draft, 
 which is not paid, this is no payment of the check, unless 
 expressly accepted as payment. 
 
 112. Generally when a bank receives as a deposit by A a 
 check drawn on itself by B, and credits the depositor (A) 
 with the amount, this is payment of the check, the same 
 as if the money had been handed out and immediately 
 deposited again by the one to whom paid (A). Bryan v. 
 First N. B., 205 Pa., 7 ; Consolidated N. B. v. First N. B., 
 114 N. Y. S., 308. It certainly is payment where the draw- 
 er's account is charged and the depositor's account credited, 
 and in some states, charging it to the drawer operates as 
 payment. O. A. Smith Co. v. Mitchell (Ga.), 45 S. E., 47. 
 
 113. Mistake. It is a general principle of law that 
 money paid out under a mistake of fact can be recovered. 
 But a bank knows, or can ascertain, the state of a depos- 
 itor's account, and if it pays out, on his check, more than 
 he has to his credit, it cannot recover from the bona fide 
 holder to whom it has paid. Mfrs. Bank v. Swift, 70 Md., 
 575. While it may recover from the depositor whose ac- 
 count it has allowed to become overdrawn, this recourse will 
 not be allowed it where the mistake was the bank's, and no 
 fault or neglect of the depositor, if the depositor by being 
 held would suffer a loss which he would not have sustained 
 if the bank had not made the mistake. Of course, if any 
 fraud or concealment on the part of any one could be 
 shown, the payee, the bank, or the depositor, as the case 
 might be, could enforce a correction of the mistake. 
 
 In some states it is held that the money can be recovered 
 in any case where the bank was not required to pay and the 
 payee has not altered his position. Northampton N. B. v. 
 Smith, 169 Mass., 281. 
 
 114. If a bank by mistake credits as a deposit an item 
 taken only for collection, or by the error of a correspondent 
 bank, or of one of its clerks, credits as paid an item not 
 
SEC. 115 75 
 
 actually paid, such a mistake can be corrected if the de- 
 positor would not be placed in a worse position than if the 
 mistake had not been made. 
 
 115. We have noted before that a bank should not pay a 
 post-dated check until the day of its date. Sec. 98. 
 
 116. The check must be paid to the rightful owner, other- 
 wise the bank may suffer the loss, whether it can recover 
 from the one who received the money or not. Where the 
 depositor has been negligent and a bona fide holder has 
 received the money, the depositor must stand the loss. 
 
 A bank can not intentionally allow an overdraft, or falsely 
 certify a check, and then claim it was a mistake. 
 
 117. It has been held that when payment is made, it will 
 not be presumed that such payment was a mistake, but 
 rather that the bank meant to pay it on the credit of the 
 maker. If the bank paid it trusting that he would make his 
 account good, it was not a mistake at all. Whiting v. City 
 Bank, 77 N. Y., at 367. 
 
 It has been held in Pennsylvania that where money is 
 paid under a bona fide forgetfulness of facts, it can be 
 recovered even though the facts were in the knowledge of 
 the bank, as where it could satisfy itself as to the depositor's 
 account before it paid a note made by him. Meredith v. 
 Haines, 14 Pa. Weekly Notes, 364. 
 
 Whether there has actually been a mistake must in most 
 cases be a question of fact for the jury. Where the facts 
 are known, a payment made under a mistake of law cannot 
 be recovered, as where a bank pays money to A, an execu- 
 tor, thinking A is entitled to it, when legally it belongs to 
 someone else. In such case if it pays to A, and A believes 
 he is entitled to it and has altered his position, as by paying 
 the money to the creditors of the estate, it cannot be recov- 
 ered back from A, though by reason of its mistake the bank 
 may be liable to the true owner also. If an actual mistake 
 is made, not involving any negligence of the bank, or any 
 
76 SEC. 118 
 
 omission to inform itself when it is in a better position to 
 learn the facts than the other party, the mistake can be 
 corrected. And it has been held that even where the bank 
 is negligent, if the payee was negligent equally with the 
 bank, or more so, the bank can recover. All the facts of 
 each particular case must be considered. The bank must 
 pay to the right person. If it pays the wrong one it can 
 recover back from one who has committed a fraud or for- 
 gery, if there is anything to recover, but not from an inno- 
 cent holder who has changed his position by. having had a 
 check honored ; and it will always be still liable to the depos- 
 itor if he has not by his own fault brought about a mistaken 
 or wrongful payment. 
 
 CERTIFICATION. 
 
 1 1 8. Purpose of Certification. If A owes B a debt, 
 B is entitled to receive in payment of his debt money. He 
 need not accept a check. But the check is such convenient 
 medium of payment that it would be considered a hardship 
 if all payments had to be made in money, and the confidence 
 which one man has in another induces the acceptance of a 
 check as payment in most transactions. Sometimes, how- 
 ever, the party who takes the check desires to be certain as 
 to whether the drawer has funds in the bank, and requests 
 the drawer to have the check certified. Or it may be that, 
 having received a check, he desires to use it as cash, and to 
 make it pass more readily as money, he himself has it cer- 
 tified by the bank on which it is drawn. Certification is the 
 acceptance, by the bank, of the check. 
 
 119. Must Be in Writing. The Negotiable Instru- 
 ments Law provides that an acceptance must be in writing, 
 and when it is in a separate writing no liability arises in 
 favor of anyone except those to whom the acceptance is 
 shown, and who, on the faith thereof, receive the check or 
 bill for value. 
 
SEC. 120 77 
 
 And in States where the Negotiable Instruments Law 
 has not been enacted there are usually statutes which pro- 
 vide that the acceptance shall be in writing. Otherwise it 
 may be verbally made. 
 
 120. Generally certification is merely the marking, stamp- 
 ing, or writing on the check "Good," or "Certified," or any 
 words indicating that it is "certified as good," and the sig- 
 nature of the bank, by the officer certifying. 
 
 121. Who May Certify. The power to certify will be 
 in such officer or officers as the directors appoint for that 
 purpose, but when a check is certified by any officer of a 
 bank whom the customers have a right to believe has the 
 power to certify, the bank will be bound. 
 
 If customers deal with the president, cashier, or paying 
 teller, and any one of these officers certifies, and the party 
 procuring the certification knows of no limitation on the 
 power of the officer, the bank will be liable. In Massachu- 
 setts, in an early case, it was held that the teller of a bank 
 had no authority to certify simply because he was a teller, 
 even though it had been the custom for Massachusetts 
 bank tellers to certify. It is generally regarded as a pow- 
 er inherent in the cashier, and as the paying teller has 
 charge of the payment of checks, it would doubtless bind 
 the bank were he to certify, in the absence of proof that 
 the party procuring certification knew of his lack of 
 power. Generally the paying teller has such authority. 
 
 122. What Checks. Only such checks can be certified 
 as are drawn in the ordinary course of business. A post- 
 dated check, or a check drawn simply for the one named 
 as payee to hold as collateral, could not render the bank 
 liable by the unauthorized certification of the cashier. But 
 a check bearing no notice of being irregular, when certified, 
 becomes the obligation of the bank to the holder. 
 
 123. An officer of the bank cannot certify his own check, 
 unless he has been given authority to do so, and one who 
 
78 SEC. 124 
 
 takes such a check would do well to inquire as to his au- 
 thority; for if the certification is false the bank cannot be 
 bound by such unauthorized act. Of course, if the officer's 
 acts in so certifying are ratified, or not objected to by the 
 directors when they know he is exceeding his authority, 
 their acquiescence will make the bank liable when the ques- 
 tion is whether the bank or an innocent holder, who had 
 reason to believe the officer had such authority, should 
 suffer. An officer of a bank should not certify the check 
 of another officer on his bank. 
 
 124. Effect of Certification. The certification is equiv- 
 alent to the bank's saying that the signature of the drawer 
 is genuine; that the drawer has on deposit funds sufficient 
 to meet the check; that the amount of the check has been 
 set apart by the bank and that this fund will be used to 
 satisfy the check whenever it is presented. Bank v. Baird, 
 1 60 Fed., 642. 
 
 125. Certification Procured by Drawer. When a de- 
 positor draws a check and has it certified by the bank before 
 he delivers it, the depositor and the bank are liable on the 
 check, but the depositor is liable only to the same extent 
 as on an ordinary check. The effect is the additional lia- 
 bility of the bank on the check. A case decided by the 
 Supreme Court of the United States contains a statement 
 to the effect that whether the certification is procured by 
 the maker, before delivery, or by the holder, is "of no im- 
 portance." First Nat. Bank v. Whitman, 94 U. S., 343. 
 Whether merely of no importance to the case under con- 
 sideration or whether the court meant to say that as a gen- 
 eral rule it is of no importance, is not clear, but as this 
 point was not really before the court for decision, this state- 
 ment was only dictum. The New York court has followed 
 this case in one of its later decisions, but there also the 
 question was not itself involved and the distinction not 
 referred to. It would seem that unless the holder requested 
 
SEC. 126 79 
 
 the certification, he ought not to be bound to a release of 
 the maker just because the maker has requested the certifica- 
 tion to add to the credit which will be given on the check. If 
 the bank fails before the check can be duly presented, the 
 holder in such case has less recourse than he would have 
 if the check had not been certified ; for in the latter event 
 the check not being payment until actually paid, the 
 holder could go against the drawer. Should he be de- 
 prived of this right simply because the maker has pro- 
 cured a certification which was more for his benefit than 
 that of the holder? 
 
 126. Certification Procured by Holder. The Negoti- 
 able Instruments Law now provides that where a check 
 has been delivered by the depositor, and its certification is 
 afterward procured by the holder, the drawer and endorsers 
 then on the check are released from all liability and the 
 bank becomes debtor for the amount to any holder in due 
 course, on the theory, if not in consequence of the actual 
 fact, of the bank's having set aside from the depositor's 
 funds the amount of the check, for the holder. The de- 
 positor's right is to have the check presented for payment 
 and not for acceptance or certification. Usually the amount 
 is charged to the depositor and credited to a "Certified 
 Check Account," or in some other way carried in a sepa- 
 rate account on the books. 
 
 127. Bank Debtor for Amount. As between the holder 
 of the certified check and the bank, the bank is liable to him 
 as to an ordinary depositor. It is debtor for the amount. 
 People v. St. Nicholas Bank, 58 N. Y. St., 712. And it is 
 liable on its certification whether the transfer has actually 
 been made on the books or not. The holder is not con- 
 cerned with the bookkeeping of the bank. 
 
 128. Statute of Limitations. The statute of limita- 
 tions is generally held not to run against the amount until 
 
80 SEC. 129 
 
 the payment of the certified check is refused by the bank. 
 Bank v. Bank, 39 Penn. State, 92. 
 
 129. Certifying. Care should be exercised by the bank 
 in certifying checks. If a mistake is made and a check 
 certified for more than the depositor has to his credit, while 
 the mistake can be corrected if no one has been injured, 
 the bank will be liable to an innocent holder; and so if it 
 certifies a forged check it will have to answer to an innocent 
 holder. Adam v. Mfrs. & Tr. Nat. Bank, 116 N. Y. S., 
 595. When it certifies it guarantees the genuineness of the 
 drawer's signature but not endorsements. Even though an 
 officer falsely certify a check the bank will be liable. But 
 where a national bank promises that it will pay all checks 
 presented, regardless of the date or amount, this is a guar- 
 anty of the debt of a third party, which a national bank 
 has no power to make, and which, therefore, cannot bind 
 the bank, as the one to whom the promise was made must 
 know that the bank has not the power. 
 
 130. Raised Checks. If a check is raised after it has 
 been certified, the bank will not be liable to a bona fide 
 holder for more than the amount certified, and if it pays the 
 excess it can recover it, provided an innocent party to whom 
 it paid has not been placed in a position, by its payment, 
 which would impose a loss upon him which he would not 
 have incurred had payment been refused when demanded. 
 The bank does not guarantee, when it certifies, that the 
 writing in the body of the check is genuine. And when a 
 bank certifies a check the amount of which has been raised 
 since the check was made, but before certification, the bank, 
 if not negligent, should not be held liable to the holder; and 
 if it pays on the instrument, should be allowed to recover 
 the amount in excess of the original sum. Of course, if the 
 bank is negligent, it must answer to the holder, and cannot 
 recover if the mistaken payment is due to its own fault. 
 Where payment of a raised certified check has been made 
 
SEC. 131 81 
 
 by another bank and paid to that bank by the certifying 
 bank, the certifying bank, upon discovering that the check 
 has been raised, can proceed for a return of the money 
 paid, either against the bank which paid it or the holder 
 who received the money. Before bringing an action the 
 bank should tender the instrument and demand a return 
 of the money. See Sec. 138. 
 
 131. Promise to Accept in Future. It has been held 
 that if a bank promises to accept checks at a future day, 
 such acceptance is valid, but it must be for acceptance 
 within a reasonable time. What is a reasonable time is a 
 question of fact to be determined in view of all the circum- 
 stances of each particular case. It has been held in Iowa 
 that seventy days was not unreasonable. 
 
 I3ia. Inquiry Regarding Checks. If Bank A certifies 
 a check drawn by X, and subsequently the bank is asked 
 whether a certain check drawn by X and certified by it is 
 all right, what is the liability of the bank to the holder? 
 The courts differ on this question, but from the facts of 
 each particular case they cannot be said to conflict. As the 
 bank can ascertain whether the amount of the check is the 
 same as when it certified, and it is held to know the state 
 of the depositor's account and his signature, if care is ex- 
 ercised by the one making the inquiry, and due diligence on 
 the part of the bank, liability and hardship can be avoided. 
 The question will be one of fact as to whether the bank 
 simply meant that a certification had actually been made, or 
 whether it meant that the amount shown at the time inquiry 
 was made was correct. Where an inquiry is made by tele- 
 graph or telephone, and the officer who answers the inquiry 
 does not see the check, his statement that it is all right has 
 been held to refer merely to the genuineness of the signa- 
 ture and the sufficiency of the fund to the credit of the 
 depositor to meet the amount stated in the check at the 
 time it was certified. 
 
82 SEC. 131b 
 
 If a check is left with, or sent to, a bank, with an inquiry 
 as to whether it is good, the mere retention of the check 
 by the bank will not in itself operate as a certification or 
 acceptance. Matteson v. Moulton, 79 N. Y., 627; Craw- 
 ford's Annotated Neg. Ins. Law., p. 155. A recent Penn- 
 sylvania case holds that where a bank delayed for two days 
 before refusing check it was equivalent to an acceptance 
 under the Negotiable Instruments Law, which provides that 
 where acceptance is not made within twenty-four hours or 
 refused, the drawer will be held to have accepted. Wisner 
 v. Bank, 68a, 955. But a check is usually not presented to 
 a bank for acceptance, but for payment. As the bank has 
 a right to investigate the depositor's account and the gen- 
 uineness of the signature, it should have a reasonable time 
 to ascertain these facts. But due diligence should be ex- 
 ercised in answering such inquiries when made by letter or 
 telegraph. If a check is simply left with the bank, the one 
 who has left it should be diligent in applying for the bank's 
 answer to his inquiry. After a reasonable time the bank 
 should either pay the check or advise him of its worthless- 
 ness. But the bank is under no obligation to put itself out 
 for the purpose of conducting an information bureau. 
 
 I3ib. After a certified check has been delivered, it cannot 
 be countermanded ; but before delivery the maker can have 
 the check canceled and the amount again placed to his 
 credit. And the bank can countermand, or cancel, the cer- 
 tification, if the one for whom it was certified has not de- 
 livered the check or has not acted to his detriment by reason 
 of the certification ; but where in the hands of a bona fide 
 holder it can not be countermanded. First N. B. v. Union 
 Trust Co. (Mich.), 122 N. W., 547. 
 
 No matter what position the bank may be in, it cannot 
 charge the depositor for any certification where it could not 
 charge him with payment. See Sec. 142. 
 
SEC. 131c 83 
 
 1310. False Certification. Section 5208 of the Revised 
 Statutes of the United States provides as follows: 
 
 "It shall be unlawful for any officer, clerk, or .agent of any 
 national banking association to certify any check drawn upon the 
 association unless the person or company drawing the check has on 
 deposit with the association, at the time such check is certified, an 
 amount of money equal to the amount specified in such check. Any 
 check so certified by duly authorized officers shall be a good and 
 valid obligation against the association; but the act of any officer, 
 clerk, or agent of any association, in violation of this section, shall 
 subject such bank to the liabilities and proceedings on the part of 
 the Comptroller as provided for in section fifty-two hundred and 
 thirty-four." 
 
 Section 5234 provides that the Comptroller of the Cur- 
 rency may appoint a receiver to wind up the affairs of the 
 bank. 
 
 It will be noted that, while false certification is punished, 
 if the officer has authority to certify, but wrongfully certi- 
 fies, the bank becomes liable on the check. The Act of 
 Congress of July 12, 1882, provides as follows : 
 
 "Sec. 13. That any officer, clerk, or agent of any national banking 
 association who shall willfully violate the provisions of an act en- 
 titled 'An act in reference to certifying checks by national banks,' 
 approved March third, eighteen hundred and sixty-nine, being 
 section fifty-two hundred and eight of the Revised Statutes of the 
 United States, or who shall resort to any device, or receive any 
 fictitious obligation, direct or collateral, in order to evade the pro- 
 visions thereof, or who shall certify checks before the amount thereof 
 shall have been regularly entered to the credit of the dealer upon 
 the books of the banking association, shall be deemed guilty of a 
 misdemeanor, and shall, on conviction thereof in any circuit or 
 district court of the United States, be fined not more than five 
 thousand dollars, or shall be imprisoned not more than five years, or 
 both, in the discretion of the court." 
 
 Most of the states also have statutes making it a crime 
 to falsely certify checks. 
 
 See Thompson v. St. Nicholas Natl. Bank, 146 U. S., 
 240; Chadwick v. U. S., 141 Fed., 225; U. S. v. Heinze, 
 161 Fed., 425. 
 
 13 id. But where a holder procures certification with no- 
 
84 SEC. 131e 
 
 tice of facts which make the certification dishonest, he is not 
 a bona fide holder. First Natl. Bank v. Union Trust Co. 
 (Mich.), 122 N. W., 547. 
 
 1316. Memorandum Check. A memorandum check is a 
 check given by the drawer to the payee named therein, 
 not to be presented at the bank for payment, but as evi- 
 dence of an obligation of the drawer to the payee, or as 
 a memorandum of the indebtedness. It may be marked 
 "Memorandum," or "Memo," and so marking it makes it 
 a memorandum check. The payee can proceed against 
 the drawer as on a note, and need not present it at the 
 bank. But if he does present it and the bank pays it 
 the maker will be liable to the bank. The words "Memo- 
 randum," or "Memo" the bank need pay no attention to. 
 As between the drawer and the bank it is the same as any 
 other check. As between the drawer and the payee it 
 is a "due bill," and if the payee uses it contrary to his 
 agreement with the drawer, he becomes liable to the 
 drawer. As to other parties to whom it is negotiated 
 the drawer is liable as on a note, and presentation at the 
 bank is not necessary to bind him, as he did not intend 
 that it should be presented. Franklin Bank v. Free- 
 man (Mass.), 16 Pick., 535; Cushing v. Gore, 15 Mass., 
 68; Dykers v. Bank, 11 Paige (N. Y.), 612. 
 
SEC. 132 85 
 
 CHAPTER VII. 
 NONPAYMENT AND MISPAYMENT. 
 
 132. Refusal to Pay. When a depositor draws a check 
 against an account actually sufficient to meet it, the bank 
 must pay. If it dishonors a check, it makes itself liable: 
 in some states to the depositor only ; in others to the holder 
 of the check. As in most states a check is not an assign- 
 ment, the majority of courts hold that no one has a right 
 against the bank except the maker of the check, unless the 
 bank has accepted or certified. It has been held in some 
 states that where a check is paid to the wrongful holder, 
 this is equivalent to an acceptance of the check of the draw- 
 er and gives the real owner a right against the bank; but 
 this is not the rule in most states; and the Negotiable In- 
 struments Law provides that an acceptance must be in writ- 
 ing, so that a wrongful payment might not now be held to 
 be an acceptance under that law. 
 
 133. Must Answer to Depositor. But to the depositor 
 the bank must answer, if it refuses to pay his orders so 
 long as it has funds of his sufficient to meet the orders. 
 As we have seen, there is an implied contract that the bank 
 will honor his orders. A bank may have just reason to re- 
 fuse to pay, as where it has a lien or right to set off the 
 depositor's balance against a debt which he owes the bank. 
 See Sec. 165. But where he actually has sufficient unin- 
 cumbered funds, the bank must pay. If the deposit has 
 been attached, or the bank enjoined from paying, it can 
 of course refuse to pay. Zimmerman v. Murphy, 131 111. 
 App., 56. 
 
 134. Amount of Damages A refusal to pay gives the 
 
86 SEC. 134 
 
 depositor a right of action against the bank, for damages. 
 In what amount the damages will be laid depends upon all 
 the facts and circumstances. If there is anything to in- 
 dicate that the conduct of the bank was wilful, or that it 
 delayed to make reparation, the bank would be liable not 
 only for the amount involved in the dishonored paper and 
 interest thereon, for which it will always be liable, but 
 also for such damages as a jury might find were suffered 
 by the party in the harm done his credit, his reputation, 
 business, etc. 
 
 An innocent mistake on the part of a clerk has been held 
 to give no ground for the jury to "mulct the bank," though 
 in that case $600 damages was awarded for refusal to pay 
 checks aggregating $318. Though no actual damage is 
 shown, usually nominal damages, i. e., in an amount to 
 give the depositor at least something, perhaps only the 
 interest on the amount, for the wrong done him, can be 
 recovered. Sometimes a jury might be warranted in find- 
 ing one dollar, one cent, etc. All the circumstances must 
 be weighed. 
 
 When no real loss is incurred, no wilful refusal on the 
 part of the bank is shown, and the check is finally paid, 
 only nominal damages can be recovered. However, a de- 
 positor will usually be given substantial damages, over and 
 above the actual amount of the checks unpaid and interest, 
 when a bank without just cause refuses to pay his checks, 
 even though no special damage is shown. Clark v. Bank, 
 83 N. Y. S., 447. Such a refusal is bound to work harm to 
 the one whose check is dishonored. Some cases have held 
 that where the check of one engaged in trade is wrongfully 
 dishonored the bank is liable, but later cases make the bank 
 liable even where the depositor is not engaged in trade. His 
 credit, reputation, and standing are as susceptible to injury 
 through a refusal to pay as the character of one engaged 
 in commercial pursuits. Sometimes the smaller the check, 
 
SEC. 135 87 
 
 the greater the injury done. The jury must determine 
 from all the circumstances what damages have been in- 
 curred. The wrong done is in the nature of a slander, 
 besides being a breach of contract, and any special damages 
 suffered can always be recovered when proved. Generally 
 nominal damages only can be recovered in an action on the 
 contract, unless special damages can be proved, but in a 
 tort action for the wrong done, substantial damages can be 
 recovered in any event. Where the bank has not been neg- 
 ligent, and where upon discovering its mistake it imme- 
 diately takes steps to correct same, the court will not allow 
 an excessive verdict. The check must have been presented 
 at the bank, during business hours, and payment actually 
 refused. The mere privilege given a depositor, to draw 
 against items deposited for collection, does not give him 
 an absolute right to draw, and if items are not paid the 
 bank can charge them back, and if by so doing the account 
 is insufficient to meet a check, the bank can refuse to pay. 
 
 When a check is presented which bears notice of any 
 irregularity, the bank might save itself from liability for 
 a refusal by making a qualified refusal, or requesting a 
 short time to investigate, and thus prevent a loss in case 
 its suspicion should be well founded. 
 
 135. Lost Checks. Usually when a check is lost the 
 drawer stops payment of the lost check and issues a dupli- 
 cate, marking it "Duplicate." The same rights and lia- 
 bilities attach to the duplicate as existed in or under the lost 
 check. If one who endorsed the original also endorses the 
 duplicate, he is liable only to the same extent as on the 
 original, and time in which presentment must be made to 
 bind him is reckoned from the time of the delivery of the 
 original. 
 
 136. Lost After Endorsement. If a check has been 
 lost after endorsement and comes into the hands of a bona 
 fide holder to whom the bank pays, the money cannot be 
 
88 SEC. 136a 
 
 recovered back from him ; and if the bank has been ordered 
 to stop payment, such bona fide holder can recover from 
 the maker and prior endorsers. Where the check has been 
 lost after endorsement, or is payable to bearer, the drawer 
 may demand a bond of indemnity before issuing a duplicate, 
 as he will be liable to a bona fide holder, and the bank can 
 safely pay to a bona fide holder when a check has been 
 lost after endorsement in blank by the payee, and pay- 
 ment not stopped. 
 
 I36a. Where the check is not payable to bearer, and if 
 payable to order has not been endorsed, the drawer will not 
 be liable on it. He can stop payment at the bank and should 
 immediately do so. 
 
 137. Paid Checks. The bank, upon making payment, 
 should require a surrender of the order, as a voucher of 
 payment to the holder. The surrendered checks should be 
 held by the bank until the customer's pass-book is balanced, 
 when a return of the check with the balanced book, and an 
 acceptance without objection made by the customer, if not 
 binding on him, is at least good evidence toward proving 
 payment by the bank for him. Where the check is an 
 overdraft, the bank should hold it as evidence of the in- 
 debtedness of the drawer. Paid checks also serve as evi- 
 dence of payment by the drawer to the payee. 
 
 FORGERY. 
 
 138. Forged Signature of Drawer. The bank must 
 follow strictly the orders of the depositor, and where it 
 pays on a forged or altered check it cannot charge the cus- 
 tomer. Under the Negotiable Instruments Law a forged 
 signature is declared to be wholly inoperative against any 
 person whose name is forged, and a material alteration vi- 
 tiates the instrument as against any person whose name 
 appeared thereon when altered, except that a bona fide 
 
SEC. 139 89 
 
 holder may recover not to exceed the amount for which the 
 instrument originally stood. But besides this enactment, a 
 bank has generally always been held to a knowledge of its 
 customer's signature. In this most courts have agreed, 
 but the difficulty appears to be upon the question of the 
 right of the bank which has paid to a bona fide holder of a 
 forged instrument to recover back the money from him. 
 
 139. The bank is under no obligation to pay a void order. 
 If it does, and the question is as to whether the bank or 
 an innocent holder should suffer, it would seem that where 
 the bank alone has been at fault, being held to know the 
 drawer's signature, the money ought not to be recovered, 
 and so the cases have held. But if the one who presents 
 the check is at fault, as where he ought to know, from the 
 circumstances under which he took the check, that it might 
 be invalid, and he leads the bank into a belief that the 
 check is genuine, the bank should be allowed to recover. 
 If the drawer directs a bank to pay without requiring proper 
 identification or assuring itself of the genuineness of the 
 signature, the drawer must suffer the loss. See Sec. 88e. 
 
 140. Bank Guarantees Drawers' Signature. In a re- 
 cent New York case, under the Negotiable Instruments 
 Law, it has been held that where a bank pays a check it guar- 
 antees the signature of the drawer, and therefore cannot 
 recover the money paid on a forged check to an innocent 
 holder in any event. Trust Co. v. Haven, HI N. Y. S., 
 305. The earlier cases held that the money could not be 
 recovered where the party who received the money had not 
 been negligent and where to make him return it would place 
 him in a worse position than if the payment had been re- 
 fused in the first instance, and in some states recovery can 
 be had. See Sec. 112. 
 
 141. Forged Endorsement. Where a check validly 
 drawn, but bearing a forged endorsement comes into the 
 hands of a bona fide holder to whom the drawee bank pays 
 
90 SEC. 142 
 
 upon his endorsing the check, the bank is not presumed to 
 know, and does not guarantee, the endorsements, and it can 
 recover the money paid to the holder, but cannot charge 
 the depositor. Jordan Marsh Co. v. Bank, 87 N. E., 740. 
 By endorsing to the bank the holder guarantees the prior 
 endorsements, but does not guarantee the signature of the 
 drawer. This the bank is presumed to know. Farmers 
 & Merchants Bank v. Bank of Rutherford (Term.), 88 
 S. W., 939; 
 
 142. Raised Checks. So, as the bank is not presumed 
 to know and does not guarantee the writing in the body of 
 the check, it can recover money paid on a raised check. Of 
 course, as between the bank and the depositor, it can charge 
 the depositor only the amount paid on his valid orders, ex- 
 cept where he by his negligence causes the loss, and it 
 cannot charge more than the original amount of the 
 check to him. 
 
 143. Wrongful Payment an Acceptance. It has been 
 held that where a bank pays a check on a forged endorse- 
 ment and charges the amount to the drawer and settles 
 with him on that basis, this is equivalent to an acceptance 
 by the bank and gives the rightful owner of the check a 
 cause of action against the bank on the check. Other cases 
 have denied the right against the bank on the check but 
 allow a recovery by the holder on the ground that, having 
 charged the money to the drawer and not paid it to the 
 right party, the bank holds money which in equity and good 
 faith it ought to pay to the holder. In still other cases the 
 holder is given no right against the bank unless a check 
 has actually been accepted, and he must recover from the 
 maker, the maker having the right to go against the bank 
 for wrongfully paying on a forged endorsement. 
 
 144. Depositor Not Bound to Know Signature of En- 
 dorser. A depositor is not presumed to know the sig- 
 
SEC. 145 91 
 
 natures of payees of checks and is not bound to examine 
 endorsements on returned checks. 
 
 145. Adoption of Forged Signature. If A himself is- 
 sues an instrument on which his signature has been forged, 
 he is liable on it. Anyone who holds out a signature as his 
 own will be bound thereby to any bona fide holder. Where 
 a forged check has already been paid by the bank and the 
 bank asks the customer whether it is genuine, the customer 
 is not estopped, if he acknowledges the signature, to after- 
 wards deny it if he discovers it to be a forgery. The bank 
 has not been led into paying the check on his statement. 
 But where the bank states its suspicions and that it cannot 
 save itself unless it acts promptly, the customer should 
 make a very careful examination before admitting the sig- 
 nature, or he will be bound. 
 
 146. Diligence in Discovering. We have already dis- 
 cussed the matter of diligence which a depositor must ex- 
 ercise upon a return of paid checks by the bank. What is 
 negligence in delaying to discover a forgery depends upon 
 the facts and circumstances in each particular case. Some- 
 times a day's delay might be negligence, while in other 
 cases six months might be justified. See Sec. 43*88^ 
 
 The government is held to the same degree of diligence in 
 discovering forgeries and giving notice thereof as is an in- 
 dividual. U. S. v. Bank, 28 Fed., 357. 
 
 A few cases are here given of the numerous complica- 
 tions brought about by the rascality of forgers and crim- 
 inals. 
 
 a. A made an arrangement with a bank whereby the 
 bank was to cash checks drawn by A's agent. From time 
 to time the bank was to draw on A for the amount of 
 checks cashed, forwarding the paid checks with the draft. 
 The checks were supposed to be given by the agent for corn 
 purchased for A. The agent, instead of issuing checks for 
 corn, issued checks in the names of different persons and 
 
92 SEC. b 
 
 then himself endorsed these names on the checks, and also 
 his own name, and had the bank cash them. The court held 
 that A could not recover the money which he had paid on 
 the bank's drafts, as the bank was not negligent in receiv- 
 ing and paying such checks of the agent so long as A, upon 
 receiving the paid checks, did not discover and notify the 
 bank of the fraud. Armour v. Greene County State Bank, 
 112 Fed., 631. 
 
 b. A was bookkeeper for X. Having made up and pro- 
 cured X's signature to pay roll checks, A raised and cashed 
 them, keeping the amount in excess of what they were 
 signed for. When the checks were returned as vouchers 
 A reduced the amounts in them to correspond with the 
 amount for which they were originally drawn and also re- 
 duced the amounts in the bank's statement to correspond 
 with the amounts shown by the checks. A then notified 
 his employer, X, that the statement of the bank and paid 
 checks as reported were correct. X had the accounts of A 
 audited monthly. The court held in this case that A was 
 not negligent in leaving the examination of the accounts to 
 the auditor and that the auditor's failure to examine the 
 statements was not negligence. Under all the circumstances 
 X was diligent. Clark v. National Shoe and Leather Bank, 
 52 N. Y. S., 1064. 
 
 c. Where A presents to the X bank a check drawn 
 on Y bank and the X bank pays it to A, without inquiry or 
 identification of A, the X bank then endorses it and collects 
 the money from the Y bank, the Y bank relying on the en- 
 dorsement of the X bank and therefore not making a rigid 
 examination of the signature, and subsequently the Y bank 
 learns that the check was a forgery, the Y bank upon 
 promptly notifying the X bank can recover the money. 
 Having already paid the check to A, the X bank is in no 
 worse position than it would have been if the Y bank had 
 refused payment upon presentation. While it might have 
 
SEC. d 93 
 
 been better able to recover from A, it had parted with the 
 money before it asked payment of the Y bank and besides, 
 by its endorsement it would, under the Negotiable Instru- 
 ments Law, be liable. 
 
 d. A had an account in bank B in the name of "A, Execu- 
 tor," but no individual account. X forged A's individual 
 signature to a check, which was paid by the bank and the 
 check charged to the account of "A, Executor." By reason 
 of this mistake it was three months before A was made 
 aware of the forgery and the bank notified. The court held 
 that it was the bank's negligence, and not A's. Bank v, 
 Bank, 58 Ohio S., 207. 
 
 e. H, under the name D, secured a loan from X, giving 
 a note and mortgage in the name of D, representing that he 
 was D and that he owned the land standing in D's name. 
 The loan was made and a check given payable to D, drawn 
 on the Y bank. H endorsed the check in the name of D 
 and again as H. The court held that H was the intended 
 payee, and not D ; that as between the bank and H, H was 
 entitled to payment, and the bank, having no notice of the 
 fraud, was not liable to X for the amount of the check. 
 Meyer et al v. Indiana National Bank, 61 N. E., 596. In 
 this case, while H represented that he was D, it was the 
 person of H to whom X intended to make the loan. While 
 it is true that it was made in the name of D, it was a ques- 
 tion of identity of the person, and while H forged the 
 mortgage and the note, the check on which he obtained the 
 money was intended for H, though in the name of D. 
 Where the loss lies between the bank, who paid to the iden- 
 tical person to whom X made the loan, and X, who should 
 have been primarily held to ascertain the identity of H, it 
 seems proper that X should lose. The check was intended 
 for the person not the name. Canadian Bank of Com- 
 merce v. Bingham (Washington State), 71 Pac., 43. 
 
 f. In Rhode Island, where the Negotiable Instruments 
 
94 SEC. g 
 
 Law is in force, it has been held that a signature made 
 under circumstances similar to those stated in the preceding 
 paragraph was a signature made without authority, and 
 therefore "wholly inoperative," under the law. Tolman v. 
 American National Bank, 22 R. L, 462. 
 
 g. But where the check is delivered to the person in- 
 tended, though under a different name, and he forges the 
 name and transfers it to a bona fide holder, the bank would 
 not be liable, as the mistake should be laid to the drawer. 
 
 Attention is called to the holdings in the states where 
 the Negotiable Instruments Law is in force, as the decisions 
 under this law in one state are likely to be followed in other 
 states (though not necessarily so) to bring about the uni- 
 formity which the Negotiable Instruments Law was meant 
 to effect. 
 
SEC. 147 95 
 
 CHAPTER VIII. 
 
 RIGHTS OF THIRD PARTIES AND INCIDENTS 
 OF DEPOSITS. 
 
 147. Attachment and Garnishment. When B owes A 
 a debt, if A sues and gets judgment against B, B's prop- 
 erty is subject to attachment for payment of the judg- 
 ment. In some states an attachment may be had in any 
 case before judgment; and in most states it can be had 
 before judgment against the property of one who is not 
 a resident of the state, or who is about to take his goods 
 out of the state, or leave the state, to defraud creditors. 
 By attachment the property is usually placed in pos- 
 session or under control of the sheriff, marshal or other 
 officer, until the judgment is rendered, when the property 
 is sold and judgment paid out of the proceeds, and in 
 case of money, out of the fund attached, unless judgment 
 is for the defendant, B. 
 
 Now, if Bank C owes B, or has property belonging to 
 B, A can attach this debt or property in C's hands. This 
 attachment of property in possession of a third party is 
 called garnishment. The bank would be the garnishee. 
 If B has a deposit in bank C, which is actually B's, or for 
 which the bank is indebted to B, A can have the deposit 
 attached, whether it be a credit balance, special deposit, 
 or money on general deposit which B has borrowed, so 
 long as it is B's money as between B and the bank. If 
 it is B's money, though standing in the name of X, it can 
 be attached for B's debt, if A can prove that it is really 
 B's. Des Moines Cotton Mills Co. v. Cooper, 93 Iowa, 
 654. The bank must hold all funds actually belonging 
 
96 SEC. 148 
 
 to B, even though they may stand in another's name at 
 the time service of the attachment is made, and in some 
 states any subsequently received, until the attachment is 
 discharged. It must not pay any checks after service of 
 the attachment, even though the checks were drawn be- 
 fore service (Banking Co. v. So. Pac. Co. [Cal.], 71 Pac., 
 93), except in those states where the drawing of a check 
 is an assignment of the money to the payee of the check. 
 
 148. Where Check Certified. Where the bank has cer- 
 tified a check before the attachment, which check has 
 been delivered to the holder, as the amount of the cer- 
 tified check has been set aside, the bank now being debtor 
 to the holder of the check, this amount can not be at- 
 tached. Of course, the one who attaches secures a lien 
 only on that which the depositor himself could have 
 taken; and where B deposits in his name money belong- 
 ing really to X, the money cannot be attached as B's. The 
 question is, is it B's property? If so, it can be attached 
 for B's debt. If X's it can be attached as X's. 
 
 149. Items for Collection. If A deposits items for col- 
 lection, the amount represented by such items can not be 
 attached until they are collected until A would have an 
 absolute right against the bank for the amount. The 
 fact that he may have the privilege of drawing checks 
 against credit given would not give him an absolute right 
 to do it. 
 
 150. Money Assigned. We have noted that a check is 
 not an assignment of the fund. It is merely an order to 
 the bank to pay, and until paid the money does not be- 
 come the property of the payee of the check. But the 
 depositor can part with his interest in the fund by trans- 
 ferring it by an assignment instead of by check. And 
 where he does so, the assignee having the superior equity 
 in the fund, it can not be attached as property of the as- 
 signor, the depositor. 
 
SEC. 151 97 
 
 It should also be noted here that in some states, even 
 where a check for a part of a deposit has not been re- 
 garded as an assignment, a check for the entire balance 
 has been regarded as an assignment. The reason for the 
 distinction is not very satisfactory, but as the Negotiable 
 Instruments Law provides that a check shall not operate 
 as an assignment of "any part" of the fund, it is probable 
 that the courts in those states where the distinction was 
 formerly made will wipe out the distinction, even though 
 to some the words "any part" may seem ambiguous. The 
 act having been passed to bring about a uniformity in 
 the law, this end will be facilitated by holding that no 
 check is an assignment. 
 
 151. Particular Fund. It has been held that where a 
 check is drawn against a particular fund, as in payment 
 for wages, out of money set apart for that purpose, the 
 check is an assignment, and the holder is entitled to take 
 the money rather than an assignee for the benefit of 
 creditors. This works no hardship on anyone, as the 
 wage-earners are usually entitled to preference over other 
 creditors, and an order drawn against a particular fund 
 is not a negotiable check. Neg. Ins. Law. 
 
 152. Presumed to Belong to One in Whose Name De- 
 posited. If a deposit stands in the name of A, and the 
 bank has no notice that it is not A's, the bank cannot be 
 held liable for paying the money on attachment for A's 
 debt. 
 
 153. Property in Bank Subject to. Property of a na- 
 tional bank, and in some states that of a state bank, can- 
 not be attached for a debt of the bank, no matter in 
 whose hands. Pacific Nat'l Bank v. Mixter, 124 U. $., 
 721 ; Van Reed v. Bank, 198 U. S., 554, and a state court 
 cannot issue an injunction against a national bank before 
 final judgment. Nat'l Bank v Mixter. But the property 
 which the bank holds, belonging to another (not such 
 
98 SEC. 154 
 
 bank or national bank) can be attached in the hands of 
 the bank for the debt of the depositor or creditor of the 
 bank. Earle v. Pennsylvania, 178 U. S., 449, and see 
 page 456. 
 
 154. Is a Check Payment. If A owes B and gives B 
 a check for the amount of the debt, this is not a payment 
 of the debt until the check is paidT i. e., the original debt 
 can be sued on if the check for any reason is not paid, 
 unless it is the intention of the parties that the debt 
 should be extinguished by the check. Of course, if the 
 one who receives the check is negligent in presenting it 
 for payment, the loss is his. See Sec. 89. And it is pay- 
 ment if taken for a debt by the bank on which drawn. 
 
 But, while a check is not an assignment, and even 
 though the check is not an absolute payment of the debt 
 to B until the check is paid, when A delivers to B a check 
 for his debt, it is so far considered payment that A can 
 not be garnished by creditors of B. 
 
 155. Statutes of Limitations. Where A owes B, B 
 should be diligent in enforcing his rights against A. If 
 he let the debt run on for years, both B and A may forget 
 the circumstances connected with the incurring of the 
 debt. If either should die after the debt has been due for 
 some years it would be difficult for the estate to prove or 
 disprove, respectively, the debt. For this reason statutes 
 are enacted to prevent litigation founded on claims so old 
 that there might be questions as to their origin or validity 
 and difficulty in establishing just claims where they ex- 
 ist. These statutes are termed Statutes of Limitations. 
 They generally provide that after a certain time subse- 
 quent to the date on which the right accrues, no suit can 
 be brought. The creditor still has his right against the 
 debtor, but the law will not allow him to enforce the 
 right. His remedy is gone. This is the substance of the 
 statutes, though in some states it has been held that the 
 
SEC. 156 99 
 
 right itself is barred. We need not discuss here the effect 
 of a statute which bars the right as well as the remedy for 
 enforcing that right. When the creditor has the right to 
 sue, from that date the time is reckoned; then the Stat- 
 ute of Limitations commences to run. 
 
 156. Demand Must be Made Before Statute Will Run. 
 As the contract by the bank is that it will pay on de- 
 mand, it is generally held that a demand upon the bank, 
 for payment, is necessary before suit can be brought 
 against the bank. And until a demand is made the Stat- 
 ute of Limitations does not begin to run. In some states 
 it is held, however, that where a statement of account is 
 rendered by the bank (and return of pass book balanced 
 is regarded as such statement) the depositor has a right 
 against the bank from that date for that amount, and 
 that at that time the statute begins to run. As the de- 
 positor has not demanded payment by leaving his book 
 for balance, and as the money is not due until a demand 
 of payment, no action could be brought before demand 
 against the bank, and the statute ought not to be held to 
 run until there has been a demand. The return of pass 
 books balanced is in no sense a refusal by the bank to 
 pay the balance ; and the courts in the majority of states 
 hold that there must be a demand upon and refusal by 
 the bank before the statute commences to run. When 
 the depositor does not object to the amount as shown 
 by his pass book when balanced, of course, it would be 
 reasonable to hold that he could not bring suit for the 
 difference between that amount and what he claims it 
 should be after several years, where he has been negligent. 
 
 157. No Demand Necessary Where Bank Commits 
 Wrong. Of course, if the bank commits a wrong it is 
 liable to suit as soon as the wrong is perpetrated, and the 
 statute begins to run at once, without demand. Having 
 done a wrong, the bank has waived the demand. If the 
 
100 SEC. 158 
 
 bank notifies the depositor that it claims the money, or 
 that it will not pay his checks, or if it fails, no demand is 
 necessary. Otherwise demand should always be made 
 upon a bank before suit is brought for recovery of a de- 
 posit. 
 
 158. Against Drawer of Check. Where a drawer has 
 no .funds in bank and gives a check, he commits a wrong, 
 and no demand need be made on him before the right to 
 bring an action accrues, and therefore the Statute of 
 Limitations commences to run as against him as of the 
 time payment is refused. See Sec. 194. 
 
 159. Where Bank Refuses Payment. The right to sue 
 a bank for dishonoring a check accrues as soon as the 
 refusal has been made upon demand or presentation of a 
 proper order, and the statute commences to run from 
 the date of the refusal. 
 
 As against Certificates of Deposit, see Sec. 49; certi- 
 fied check, 128. 
 
 160. Payment by Mail. If A requests the bank to send 
 him a check, currency, exchange, etc., by mail, A makes 
 the mail his agent, and if the bank sends it in the man- 
 ner requested, the bank will be discharged as soon as the 
 item is deposited in the mail addressed aa A directed. So 
 if A requests that it be sent by express, or in any other 
 manner, strict compliance with directions releases the 
 bank as soon as the item is delivered to the carrier desig- 
 nated or his agent. The bank's duty is to pay the de- 
 positor at the bank. If the depositor asks for transmis- 
 sion of money without naming the carrier to be used, 
 any safe method used by the bank will discharge it from 
 further liability. Currency, paper negotiable by delivery, 
 or coin should be registered or sent by express. The 
 bank must always exercise care in receiving or paying 
 deposits. 
 
 161. Deposit Made by Mail. When a deposit is mailed 
 
SEC. 162 101 
 
 to the bank the depositor makes the mail his agent. The 
 bank is in no case liable until the money is delivered to 
 the officer of the bank, and a deposit dates from the re- 
 ceipt of the money. 
 
 162. Check. If A mails a check to B, the title remains 
 in A until the check has been delivered to B, unless B 
 has requested it sent by mail, in which case B makes the 
 mail his agent and delivery to the mail is delivery to B. 
 As the debtor must seek the creditor, unless the creditor 
 has designated an agent to act in accepting payment, 
 payment is not made until there is a delivery to B him- 
 self. Garthwaite v. Bank of Tulare, 134 Cal., 237. See 
 Sec. 64. 
 
 163. Interest on Deposits. Unless there is a contract 
 for the payment of interest, a depositor is not entitled to 
 interest. When demand is made for a deposit, however, 
 the money immediately becomes due and if the bank fails 
 to pay, it is liable for interest at the legal rate. Lowndes 
 v. City Nat. Bk., 72 Atlantic Rep., 150. When a bank 
 fails, the suspension renders it impossible to perform its 
 duty to pay if demand is thereafter made, and no demand 
 need be made. The suspension is equivalent to a de- 
 mand and refusal to pay and the depositor is entitled to 
 interest from the date of failure. Nat'l Bank of Com- 
 monwealth v. Nat'l Bank, 94 U. S., 437. If the bank re- 
 sumes business he is entitled to interest at the legal rate. 
 However, depositors are usually anxious to assist the bank 
 and its officers in putting the bank on its feet again and 
 they will generally waive their right to interest under the 
 circumstances. If the bank does not resume, interest is 
 usually paid creditors from the date of the failure until 
 final payment, if the estate is sufficient, but otherwise a 
 claim is entitled to no interest as against the receiver, 
 unless it would be entitled to it as against the bank at 
 date of failure. 
 
102 SEC. 164 
 
 164. Where a bank wrongfully pays out the money of 
 a depositor, he is entitled to interest, even though he 
 would have let the money remain in the bank and was 
 not being allowed interest. Savings Bank v. Nat'l Bank 
 (Iowa), 70 N. W., 769. Where he is drawing interest at 
 a less rate, but is at liberty to withdraw at any time, 
 refusal to pay gives him the right to interest at the legal 
 rate from the date of the demand and refusal or the 
 wrongful payment. As to interest on certificates of de- 
 posit, see Sec. 49. 
 
 165. Lien. In most states when a debt of the depos- 
 itor to the bank matures, any securities which the bank 
 holds for the depositor, in the regular course of business, 
 may be held until payment of the debt. The right to 
 hold the property to secure the debt is called a banker's 
 lien. 
 
 166. If a bank holds negotiable paper for collection for 
 the depositor, or the proceeds of collections, although re- 
 ceived by the bank before the debt to it became due, the 
 banker's lien attaches when the debt is due, but not be- 
 fore. Nat. Bank of Phoenixville v. Bonsor, 38 Pa. Super. 
 Ct, 275. 
 
 167. Collateral and Special Deposit. Where security 
 is given to a bank under an express agreement that it is 
 collateral to a specific indebtedness, then no part of that 
 security, or the proceeds thereof, can be applied except 
 in payment of the debt expressly secured. A special de- 
 posit or a deposit of money or property made for any 
 specific purpose cannot be diverted from that purpose 
 and applied by virtue of such lien or right of set off. 
 Under such circumstances no lien arises except such as 
 is expressly contracted for. Furber v. Dane (Mass.), 
 89 N. E., 227; Van Zandt v. Hanover Nat'l Bank, 149 
 Fed., 127. Affirmed in U. S. Supreme Ct., not yet re- 
 ported. 
 
SEC. 168 103 
 
 1 68. Notes Presented for Discount. Where a deposi- 
 tor is indebted to the bank and he presents notes for dis- 
 count, the bank cannot discount the notes and imme- 
 diately use the proceeds of the discount to extinguish 
 other debts past due; but when the notes so discounted 
 fall due the lien of the bank attaches as to his general 
 deposit or securities held by the bank which it obtained 
 in the regular course of business. And where notes are 
 sent to a bank for discount, and the bank refuses to dis- 
 count them, it must return them to the sender, and can- 
 not acquire a lien in this way. Hanover Natl. Bank v. 
 Van Zandt, U. S., . 
 
 169. Set Off. Akin to the banker's lien is the right of 
 set off. If A owes B, and B owes A, an action by A 
 against B, at law, formerly would give B no right to set 
 up A's debt to him as a defense. His only remedy was 
 to also sue A. Thus there would be two actions. Courts 
 of equity, however, afterwards allowed what is called a 
 set off, permitting the one claimant to set off his claim 
 against the claim of the other, adjusting the two claims 
 in one suit, to prevent a useless multiplicity of suits. So 
 where A owes the bank and the bank owes A, in the reg- 
 ular course of business, the bank can offset what it owes 
 A against his debt to the bank. 
 
 170. When Right Attaches. The fact that the debt is 
 due gives the bank the right to the lien, regardless of 
 whether the bank has actually made the application and, 
 therefore, a check presented after the lien has attached 
 will not have any rights prior to the right of the bank, 
 even though the application has not been made and the 
 bank's books show a balance due the depositor. The 
 question is whether the lien has attached, not whether 
 the money has been applied by the bank. In a few States 
 there is no lien without an express contract to that ef- 
 fect, and in some States the bank must notify the de- 
 
104 SEC. 171 
 
 positor before it will have a prior right to apply the de- 
 positor's property on his debt. 
 
 171. What May Be Subject of. Property belonging to 
 two persons jointly cannot, as a rule, be applied on the 
 indebtedness of one of them, or vice versa. The debtor 
 on the obligation must be identical, in law, with the 
 creditor to whom the property or deposit in the hands 
 of the bank actually belongs. 
 
 A deposit by an agent, of his principal's money, does 
 not give the bank a right to set off the deposit against a 
 debt of the agent. Shawnee Natl. Bank v. Wootten 
 & Potts, 103 Pac., 714. 
 
 I7ia. A deposit of a partnership could not be offset 
 against a debt of an individual member of the partner- 
 ship to the bank, and vice versa. Scammon v. Kimball, 
 92 U. S., 362. A debt of A cannot be offset against a de- 
 posit of A as executor or trustee of B. In re Hauenstein, 
 101 N. Y. S., 917. The property of one person cannot be 
 offset against the debt of another. Mingus v. Bank of 
 Ethel, 117 S. W., 683 (Mo.) We have considered who is 
 the real owner of a deposit. See Sec. 39. But where a 
 bank receives the money not knowing that it is not the 
 depositor's, applies it on his note and surrenders the note, 
 the true owner of the money cannot follow it into the 
 hands of the bank. 78 N. W., 238 (Iowa). 
 
 I7ib. Statutes. In most states the right of set off is 
 regulated by statute. The right to set off depends upon 
 the law of the state where the deposit or property is 
 held by the bank, that being the place where the bank 
 would have to be sued, and the right depends upon the 
 law of the place where suit would have to be brought to 
 determine the controversy. 
 
 172. In Case of Insolvency of Depositor. Generally 
 when a depositor becomes insolvent the bank may make 
 the application of his deposit against any debt due to 
 
SEC. 173 105 
 
 the bank. In some states the bank can set off the deposit 
 though the note is not yet due. Assignee v. Bank (Ky.), 
 13 S. W., 910. In others the debt must be due. Bank v. 
 Bank, 56 Nebraska, 803. If a depositor becomes in- 
 solvent and his estate is adjusted under the bankruptcy 
 laws of the United States, "In all cases of mutual debts 
 or mutual credits between the estate of a bankrupt and a 
 cheditor the account shall be stated and one debt shall 
 be set off against the other, and the balance only shall 
 be allowed or paid." Tomlinson v. Bank of Lexington, 145 
 Fed., 824; N. Y. Co. Bank v. Massey, 192 U. S., 138. It 
 must be an indebtedness that is due at the time of the 
 filing of the petition in bankruptcy. 
 
 173. Instrument Payable at Bank. The Negotiable 
 Instruments Law provides that where an instrument is 
 "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." Except in one or two states, the bank 
 is under no obligation to use a deposit which is smaller 
 than the amount of the note. 
 
 I73a. And the better rule is that the bank cannot 
 make the application before the paper is due, without the 
 depositor's consent. When due the application should 
 be made. 
 
 174. Insolvency of Bank National. When a national 
 bank fails, the deposit balance of a depositor can be off- 
 set against any debt of the depositor, whether due or not. 
 Scott v. Armstrong, 146 U. S., 499. This, in effect, gives 
 the debtor to the bank a preference. In some states this 
 rule is followed. In others the debt must be due. But 
 the claim against the bank must be held at time of fail- 
 ure. If acquired subsequently it cannot be offset. 
 
 175. Preference in Bankruptcy. Where one who is 
 insolvent deposits money in bank within four months 
 
106 SEC. 176 
 
 prior to his bankruptcy, and the money is subject to 
 check, this does not constitute a preference, although the 
 bank may be a creditor and have the right, under Sec- 
 tion 68a of Bankruptcy Act of July I, 1898, to set off the 
 bank's claim against the balance of the deposit. But 
 where the bank holds a claim against an insolvent, which 
 it has acquired from some one else, and the insolvent 
 pays the claim to the bank, this is a payment which con- 
 stitutes a preference under the said act, and the bank 
 must surrender the preference before it can prove any 
 Geo. M. Hill Co., 130 Fed., 315; In re W. W. Mills Co., 
 162 Fed., 42. 
 
 176. Right to Set-off May Be Waived. When the 
 right to set-off exists it must be demanded at time of pay- 
 ment of counterclaim, otherwise the right is lost and 
 the money paid cannot be recovered. 
 
 177. Death of Depositor. Upon the death of a de- 
 positor, or any other person to whom the bank is in any 
 way indebted, no payment should be made except to a 
 duly appointed administrator or executor. Death re- 
 vokes all checks, in most states, and the bank should 
 certainly not pay any checks after it has notice of the 
 death. See Sec. 101. Any bona fide holder of a check 
 will have a claim against the estate. If the estate is 
 solvent he will get his money, but if the estate should 
 be insolvent he is entitled to receive only his pro rata 
 share of the estate, along with other creditors, and a 
 payment by the bank after the death of the depositor 
 would give the party who received payment a preference 
 over other creditors. The balance of the deposit be- 
 comes the property of the estate. In some states a 
 specified time after death of depositor is allowed, in 
 which checks may be presented and paid at the bank. 
 
 178. Upon the death of a depositor, his executor or 
 
SEC. 179 107 
 
 administrator is alone entitled to withdraw any balance 
 to the depositor's credit. Sometimes, when the estate 
 is very small and the money in bank is practically the 
 only asset not in possession of the next of kin, the bank 
 may safely pay the money to the undertaker who buries 
 the deceased, where the state statute gives the under- 
 taker priority of payment over all other creditors. If 
 there is more than sufficient for this purpose, other prior 
 claims might be paid ; but when any such further pay- 
 ments are made by the bank they are made at the bank's 
 peril. 
 
 179. It is safest to pay money of a deceased depositor 
 only to the executor or administrator; that of an insane 
 person, to the guardian or committee ; that of an infant, 
 only to the guardian, except in some cases where the 
 infant has himself deposited the money in a savings 
 account (see Sec. 59) ; and that of an insolvent or 
 bankrupt depositor, only to the receiver or trustee in 
 bankruptcy. These representatives of the respective 
 estates are appointed by the court, and when vested by 
 the court of your own state, territory or district with 
 jurisdiction, your bank will have to pay to such repre- 
 sentative when proper demand is made by him. It is 
 usual for the representative to file with the bank a copy 
 of his appointment, certified by the clerk of the court; 
 but if no copy is filed, the original should be exhibited 
 and the bank made sure of his authority. See Sec. 36. 
 
 1 80. Local Court Should Appoint Legal Representa- 
 tive. The representatives named usually have no power 
 to act beyond the limits of the jurisdiction of the court 
 which made the appointment, and the payment should 
 be made only upon the order of a representative duly 
 appointed by the court of the state, territory or jurisdic- 
 tion where the bank is located. 
 
108 SEC. 180 
 
 Usually where the primary administrator, etc., has 
 been appointed in one state, another state will reap- 
 point the same person or persons as ancillary adminis- 
 trators, etc., if rights of creditors or citizens of the latter 
 state will not be prejudiced thereby. But an ancillary 
 representative should be appointed. Minor on the Con- 
 flict of Laws, Sees. 104, 113. 
 
SEC. 181 109 
 
 CHAPTER IX. 
 GIFTS OF DEPOSITS. 
 
 181. There is much seeming and a good deal of real 
 conflict in the decisions of the courts of the different 
 states concerning gifts and gifts in trust of bank de- 
 posits, checks, etc., Therefore, only the general prin- 
 ciples underlying the law of gifts will be here stated. 
 
 We have seen that one in whose name a deposit stands 
 is presumed to be the owner until title in another is 
 shown; but when ownership is proved the true owner is 
 entitled to the money and to him the bank will be liable. 
 So long as the bank has no notice, and in some instances 
 no reason to believe, that the money belongs to another, 
 it can pay to the one who, between the bank and him- 
 self, is the depositor and owner. But when there is a 
 disputed ownership the bank must be careful to pay to 
 the right one. When gifts are made, therefore, while 
 the bank is made no better nor worse by the mere giving 
 of the thing, it is frequently put into a position where it 
 does not know just what to do. In most such cases the 
 better thing to do is to refuse to pay to any claimant 
 without the consent of all, and if suit is brought by 
 one, to pay the money into court and let the court 
 determine the rights of the parties, taking a bond of in- 
 demnity from the plaintiff before paying over the money. 
 Or it may pay to the one appearing to have title to the 
 money upon his giving bond. If the bank wishes to have 
 the question of ownership determined, and neither party 
 takes the step to have the question settled, the bank 
 may be permitted to bring a bill of inter-pleader, asking 
 
110 SEC. 182 
 
 the court that these parties be brought in and have an 
 adjudication of their rights. In such case the bank will 
 not suffer any loss by way of expense, etc. Whether 
 such bill can be brought is a question of local practice. 
 The bank could not ask the parties to interplead if it 
 had any interest in the money itself; but where upon the 
 death of a depositor there is money in bank, the owner- 
 ship of which the bank wishes determined, the right 
 may be given. Where the parties can agree upon a set- 
 tlement the bank can pay under such an agreement, but 
 should always require a written release from all parties 
 concerned, and as an agreement to do something which 
 is contrary to law could not bind one, great care should 
 be taken. 
 
 182. Gifts. Upon the death of a person having money 
 in bank claims are apt to be made by various persons 
 that the decedent made a gift of the deposit. If a valid 
 gift can be proved, the donee is entitled to it. There 
 may be several claiming as a gift. At the same time the 
 administrator or executor might claim it. The bank 
 must pay the rightful owner or it will be called upon to 
 pay again. 
 
 A gift is, generally speaking, a voluntary, gratuitous 
 transfer of the title and possession of personal property 
 by one to another. Gifts are of two kinds; gifts inter 
 vivos and gifts causa mortis. 
 
 183. Gifts Inter Vivos. A gift inter vivos is a gift made 
 to take effect during the lifetime of the giver (called the 
 donor). To be valid, there must be an intent on the 
 part of the donor to vest the title in the donee (the one to 
 whom given) and a delivery of the thing to the donee, 
 or to another for him, though the delivery need not neces- 
 sarily be made at the same time the intention is ex- 
 pressed, so long as there be a delivery to complete it. 
 There must also be an acceptance by the donee, though 
 
SEC. 183a 111 
 
 this is usually implied from the conduct of the donee, 
 and in some states it is held that the donee need not 
 even know of the gift. 
 
 The intent must be clearly shown as a gift will not 
 be presumed. There must be something more than mere 
 words. There must be a delivery of the thing. If it 
 is not capable of actual delivery at the time, there must 
 be such conduct on the part of the donor as can be con- 
 strued as a clear intention to part with the dominion 
 over the property. The delivery of a written instru- 
 ment which is evidence of property, when executed by 
 the donor, would be sufficient delivery. Contract rights 
 can be delivered only by a delivery of the written evi- 
 dences of those rights. And where circumstances make 
 a manual delivery impossible, as where one is ill and 
 wishes to deliver a box, trunk, etc., which he cannot 
 reach, or which is too large, a symbolical delivery, as the 
 delivery of a key, will suffice. There must be some act 
 manifesting a clear intent on the part of the donor to 
 surrender dominion over the thing. The health, condi- 
 tions, surroundings, and all the circumstances must be 
 considered in determining whether the donor parted 
 with the ownership. Where the donee is already in 
 possession, it is not necessary that there be a delivery 
 by him to the donor and a redelivery by the donor to 
 the donee. A clear indication of an intent to vest the 
 title in the donee will suffice. 
 
 i83a. Where delivery is made to an agent for de- 
 livery to the donee the question sometimes arises as to 
 whether the one to whom the article was delivered was 
 agent for the donor or the donee. If the delivery is 
 made to the agent of the donor, until there has been a 
 delivery by the agent to the donee the gift can be re- 
 voked, or recalled, and the death of the donor before 
 delivery by the agent would operate as a revocation 
 
112 SEC. 184 
 
 of the agency, causing the gift to be invalid. Where 
 the delivery is made to an agent or trustee of the donee 
 (and in some cases it is held that delivery to a third 
 person is delivery to a trustee of the donee) the delivery 
 is complete. A gift once perfected cannot be revoked, 
 and no subsequent possession by the donor can give 
 him title merely by virtue of his having been the original 
 owner. 
 
 184. Gifts to Take Effect in Future. A gift to take 
 effect in the future, or upon a contingency, is generally 
 held to be of no effect as a gift inter vivos ; though where 
 a gift is absolute, the donor parting with the ownership 
 as a present gift, the fact that the donor is entitled to 
 use the thing, or that the donee is to perform some act 
 in regard thereto, does not invalidate the gift otherwise 
 perfected. Such is a gift where A gives to B a deposit 
 in bank, but with the understanding that A is to have 
 the interest during his life, provided there is a surrender 
 of ownership. If A has thg right to withdraw any of the 
 money there is no gift. A gift which is not to take 
 effect until the donor's death is a testamentary disposi- 
 tion of property, and unless it is made in conformity with 
 the law of wills, or other testamentary law, is invalid. 
 
 185. Donatio Causa Mortis. A donatio causa mortis 
 is a gift made in contemplation of death, revokable at 
 any time before death and taking effect absolutely only 
 in case the decease of the donor results from causes 
 which led him to believe death was impending when he 
 made the gift. As in a gift inter vivos, there must be an 
 intention to give and a delivery of the thing, actual, con- 
 structive, or symbolical, showing a complete surrender 
 of dominion over the thing; but the title in the donee is 
 subject to being divested and reverting to the donor if 
 death does not ensue as expected. Where property is 
 given by will the thing is not delivered during the life 
 
SEC. 186 113 
 
 of the donor. Both a will and a gift causa mortis can be 
 revoked at any time before the donor's death, but in a 
 gift causa mortis there must be a complete surrender of 
 ownership so far as such surrender is possible, during 
 the life of the donor. 
 
 186. Almost any personal property can be the subject 
 of a gift, but the gifts with which a banker is concerned 
 and the phases of the law of gifts which are apt to arise 
 in his business we desire more particularly to note. Just 
 now, therefore, we are interested in gifts of deposits in 
 bank, bank checks, etc. 
 
 187. The law of the place where a gift is made deter- 
 mines its validity. 
 
 188. Gifts can be made of funds on deposit in bank, 
 whether represented by pass-books or certificates of de- 
 posit. Tucker v. Tucker (Iowa), 116 N. W., 119. 
 
 189. What Constitutes. Where a desire to make a 
 gift of a deposit is accompanied by such acts as the donor 
 believes a complete transfer of the power and dominion 
 over the fund, even though the money has not been 
 transferred on the books of the bank, the intent to give, 
 coupled with the complete surrender of the right to con- 
 trol the money, constitutes a valid gift. A intended to 
 give to B money on deposit in A's name. A went with 
 B to the bank and told the cashier of her desire to give 
 B the money. The cashier advised A that her wishes 
 could be carried out by giving B a power of attorney to 
 draw out the money in A's name. This was done, and 
 B withdrew part of the money. Creditors of A then 
 sought to attach the balance standing in A's name, but 
 it was held that, under all the circumstances, there was 
 a sufficient transfer of dominion over the property, 
 coupled with the intent to make the gift, to constitute a 
 valid gift. Murphy v. Bordwell, 89 Minn., 54. 
 
 If A delivers money to a bank as a deposit for B, in- 
 
114 SEC. 190 
 
 tending to make a present gift of it to B, this is a suf- 
 ficient delivery. A delivery of the pass-book to the 
 donee is sufficient delivery, and a delivery of the pass- 
 book with an order for the full amount of a deposit in 
 a savings bank is generally held to be a valid gift, when 
 coupled with the intent to make the gift, even though 
 the donor dies before presentation of the order. So it 
 has been held that if a depositor surrenders his book to 
 the bank, asks the bank to transfer the account on its 
 books to another, and takes a new book in the donee's 
 name, this, coupled with the intent that it should vest 
 in the donee, would in some states be held a valid gift; 
 in others perhaps a delivery of the book to the donee 
 would be required; while in Pennsylvania it is held that 
 the mere delivery of a pass-book will not work a trans- 
 fer; being mere evidence of an account, the delivery is 
 not a delivery of the money. And in any event if the 
 donor did not deliver the book because he did not mean 
 to make it a gift during his lifetime there would be no 
 valid gift. If the donor gives the deposit book and an 
 order to the donee and the donee notifies the bank, this 
 would be a valid gift in those states where the delivery 
 of the book is construed as a delivery of the money rep- 
 resented. In the case of savings banks the by-laws of 
 the bank should be complied with wherever possible, 
 but if a gift is otherwise established, the mere fact that 
 the assignment has not been made as required by the by- 
 laws will not in itself defeat the gift. The omission of 
 the assignment, when taken with other facts and cir- 
 cumstances, might be held to show the intention of the 
 alleged donor. Such rules are for the protection of the 
 bank and its depositors against fraud and mistakes, but 
 cannot defeat the rights of parties. 
 
 190. Check. As we noted before, death is held to re- 
 voke all unaccepted checks. And cases have held that 
 
SEC. 191 115 
 
 the donee of a check must have it turned into money be- 
 fore the donor's death or transfer it to a bona fide holder 
 for value. But where a valid gift otherwise established 
 has been completed during the life of the donor, his death 
 before transfer will not invalidate the gift merely be- 
 cause one of the evidences of the gift is a check. If a 
 check delivered as a gift has been transferred by the 
 donee to a bona fide holder, the estate would be liable 
 on the check, and the bank could not be held for paying 
 same without notice. 
 
 191. What the Courts Have Held. In a recent case 
 in New York a depositor in a savings bank delivered her 
 pass-book to the donee, with an order upon the bank to 
 pay the donee "on producing my deposit book No. ," 
 the full balance. It was held that this was a sufficient 
 delivery to constitute a valid gift, though the depositor 
 died before the book and order were presented. The 
 bank having paid upon presentation of the book and 
 order, it could not be held by the administrator of the 
 deceased depositor. McGuire v. Murphy, 94 N. Y. $., 
 1005. It will be noted that there is not absolute harmony 
 in the decisions in the different states. In some cases 
 savings bank deposits are treated differently, but this 
 appears to be because the bank had paid upon an order 
 presented with the book, and the bank was entitled, 
 under its by-laws, to a discharge upon such payment. 
 In other cases the distinction between savings bank ac- 
 counts and accounts in other banks is not drawn. 
 
 In Virginia it has been held that if A, being indebted 
 to his son, -B, makes a deposit in bank in B's name, the 
 law will presume, in the absence of clear evidence to the 
 contrary, that the deposit was made in payment of the 
 debt to B, and not as a gift. If the deposit could be re- 
 garded as a gift to B, B would have a claim on the debt 
 against the estate. It has also been held that if A owes 
 
116 SEC. 191 
 
 B and makes a deposit in B's account this is not a pay- 
 ment unless B consents, one case holding that where A 
 deposits for B the bank is merely the agent of A to pay B. 
 
 If A deposits money in bank and has an entry made in 
 the book to the effect that the money is to be paid to X 
 upon her death, this is not a gift, as the owner did not 
 part with the control during her lifetime. Jones v. Crisp, 
 71 Atlantic, 515. Merely adding the name of another 
 person whose signature the bank shall pay on does not 
 constitute a gift. Schipper v. Kempkes, (N. J.) 67 Atlantic, 
 1042. In a Connecticut case, where A intended to give B a 
 deposit in bank, but, having lost her book, drew an order for 
 the money as required by the by-laws, and in delivering 
 the order to B said it was subject to her use during her 
 lifetime, the court held that there was a sufficient trans- 
 fer of ownership, notwithstanding the right of the "use" 
 of the money during her lifetime. The court found that 
 she was to have the profit on the money, but the gift was 
 complete. It was B's, subject only to her right to have 
 the interest. Candee v. Conn. Savings Bank, 71 Atl., 551. 
 
 A delivery of a certificate of deposit with the intention 
 that the donee should have title thereto, is a valid gift, 
 though the one to whom delivered for the donee retains 
 possession until after donor's death, the donor having 
 intended delivery. Nelson v. Olson (Minn.), 121 N. W., 
 609. But a certificate procured by A in B's name, and 
 never delivered, may be returned by A and the money 
 recovered. In Basket v. Hassall, 107 U. S., 602, the 
 United States Supreme Court held that where A de- 
 livered to B a certificate of deposit endorsed by the payee 
 to B, but to be paid "not until my death," this was not a 
 valid gift causa mortis because, in stating that it was 
 not to be paid until after his death the donor did not sur- 
 render control over the money or deliver it to the donee. 
 In a gift causa mortis, while the property reverts to the 
 
SEC. 191 117 
 
 donor in case he recovers, yet there must be complete 
 surrender of ownership, power or control over the thing 
 in so far as, and to the extent that, it is possible for the 
 donor to relinquish his present ownership. Here the 
 donor stated that it was not to be paid until after his 
 death. A case which seems in conflict with this, but 
 which really is not, is the case of Phinney v. State, 36 
 Wash., 236. A, in a dying condition, desired to give a 
 friend who had remained with him in his sickness his 
 deposit in bank, in another state. The only possible 
 way was by ordering the bank to pay to the donee, B. 
 He did not know his exact balance, but thought it was 
 more than $4,000. He had the doctor draw a check 
 payable to B, and delivered same to B, saying, "If I don't 
 get over this I want Frank to get my money." He was 
 to get the money back if he lived, but there was no 
 string tied to the gift. B could go at once and 
 get the money. But he could make immediate collec- 
 tion only by mail. A also wrote the bank, sending his 
 book to have it balanced. The book reached the bank, 
 but the letter with the check was delayed in reaching the 
 bank until after the bank had been notified of A's death. 
 A had no heirs, no next of kin, no creditors, and the 
 state would be entitled to the money if the gift were not 
 held valid. The court held that, under all the circum- 
 stances, this was a valid gift causa mortis. A intended 
 that B should receive the money; the intention was 
 clearly proved ; there were no adverse claimants except 
 one who claimed the money because no other did, and A 
 had done everything possible to transfer the money to 
 B in his lifetime. It is true that this is contrary to the 
 law that death revokes a check. In Pullen v. Placer 
 County Bank, 138 Cal., 169, the donor gave the donee a 
 check, requesting that it be not presented until after his 
 death. The Code in that state provides that a gift to be 
 
118 SEC. 192 
 
 valid must be accompanied by a delivery of the thing if 
 it is capable of delivery. And besides, the donor re- 
 quested that the check be not presented until his death, 
 so there was no delivery. Where the donor retains con- 
 trol of the thing it is generally held that there is no gift. 
 In the Washington case the control was surrendered as 
 completely as the circumstances of the case would per- 
 mit. 
 
 192. With these conflicting cases you will doubtless still 
 wonder what the law is, but a careful study of the main 
 principles that there must be an intent and a delivery 
 will help to make the reconcilement less difficult. The 
 relationship of the parties, the age, physical and mentaT 
 condition of the donor, the circumstances under which 
 the gift is made and the conduct evincing the donor's 
 intent should all be taken into consideration. While the 
 court will seek to protect rightful owners against fraud, 
 in the absence of fraud it will endeavor to carry out the 
 intention of the donor where that intent can be proved. 
 
 I92a. Gift to Save Administration on Estate. If a 
 person desires his property, upon his death, to go to one 
 other than those to whom the law would give it, he can 
 provide therefor by will. If he wishes to "fix" his prop- 
 erty so that a will and administration can be prevented, 
 the only way he can do it is by giving the property dur- 
 ing his lifetime. He can give it to another, to be owned 
 jointly with himself. Kelly v. Beers (N. Y.), 86 N. E., 
 980. But if there is any string tied to it, so that he can 
 revoke it during his lifetime, it is not a gift. Where it 
 can be done, the bank, the donee and everybody inter- 
 ested should be made fully aware of the gift and a com- 
 plete understanding had, that the title to the property is 
 vested in the donee, absolutely, to be owned jointly by 
 him with the donor, and that the survivor shall take all 
 not withdrawn on the death of either. As such gifts, 
 
SEC. 193 119 
 
 however, are likely to be contested anyhow, a will is 
 recommended where the amount justifies it. 
 
 193. Check of a Third Party. A check drawn by A, 
 payable to B, may be the subject of a valid gift by B to 
 his donee, if the requirements of intent and delivery, are 
 present; and if otherwise valid, the fact that the check 
 was not endorsed will not invalidate the gift. And this 
 is the law in Pennsylvania. Rhodes et al. v. Childs, 64 
 Pa., 18. And so a note of A to B can be made the subject 
 of a gift by B, but a donor cannot give his own note, as 
 this is merely a promise to give something and there is 
 no consideration upon which the promise could be en- 
 forced. 
 
120 SEC. 194 
 
 CHAPTER X. MISCELLANEOUS. 
 
 194. False Pretenses. When a check is given by one 
 who has not funds in the bank upon which it is drawn, 
 and knows he has no funds, whether or not his act con- 
 stitutes an offense for which he can be criminally prose- 
 cuted depends upon the law of the state. Generally the 
 mere giving of a check without sufficient funds to meet it 
 is not in itself a crime. It may be that the drawer has made 
 an innocent mistake, or he may have an arrangement with 
 the bank by which the check will be paid, as where he 
 has given security for overdrafts. But where one know- 
 ingly issues a worthless check to one who, on the strength 
 of the check, parts with money or property, he is, in most 
 states, guilty of obtaining money or property under 
 false pretenses. If he obtained no money or property, 
 but gave the worthless check for an existing indebted- 
 ness, he would not be "obtaining" money or property. 
 And it has been held that obtaining credit at a bank for 
 a worthless check is not punishable under a statute pun- 
 ishing the obtaining of money under false pretenses. 
 Maxey v. State (Arkansas), 108 S. W., 1135. There must 
 be a false representation an inducement to part with 
 something which would not have been parted with but 
 for the inducement offered by the giving of the worth- 
 less check and something obtained, the obtaining of 
 which, in such manner, is made an offense by the laws of 
 the state. 
 
 195. Overdrafts. Where a financially responsible de- 
 positor innocently draws a check for an amount in excess 
 of what the bank owes him, or where he has made ar- 
 rangements with the bank, by depositing collateral or 
 
SEC. 196 121 
 
 satisfying the bank as to his financial responsibility, to 
 overdraw, the payment of a check in excess of the de- 
 positor's credit is justified. City N. B. v. Burns, 68 Ala., 
 267; 44 Am. Reports, 138. The bank is not under any 
 duty to pay an overdraft. Merchants National Bank v. 
 National Bank of Commerce, 139 Mass., 513. 
 
 196. A Loan. An overdraft is a loan of money to the 
 depositor who overdraws, and is payable on demand. If 
 the officers of a corporation, or an agent, be authorized 
 to make overdrafts, they will have implied authority to 
 give a note for such overdrafts. Hennesy Bros, etc., v. 
 Bank, 129 Fed., 557. The depositor who overdraws is 
 liable to the bank, and where he subsequently makes a 
 deposit without an agreement to the contrary, the de- 
 posit can be applied in payment of the overdraft. Nichols 
 v. State, 46 Neb., 715 ; 65 N. W., 774. But no interest can 
 be charged on an overdraft, unless there has been an 
 agreement for interest, until payment thereof has been 
 demanded, when interest can be recovered from the date 
 of demand. Casey v. Carver, 42 111., 225. 
 
 197. Care in Allowing. While it may be justified, no 
 overdraft should be allowed unless the board of directors, 
 or an officer whom they have authorized, sanctions it. 
 An agent does not derive any authority to overdraw by 
 simply being empowered to withdraw a deposit. Mer- 
 chants N. B. v. Nichols & Shepard Co., 79 N. E., 38 (111.). 
 Where an overdraft is allowed without the exercise of 
 prudence in ascertaining the financial standing of the 
 person overdrawing, or where an officer of the bank 
 permits another officer to withdraw, directors and officers 
 will be held to the same responsibility as in the case 
 of any other loans. And an overdraft may be criminal 
 misapplication of the bank's money. U. S. v. Heinze, 
 161 Fed., 425. 
 
 198. Receiving Deposits When Bank Is Insolvent 
 
122 SEC. 199 
 
 Some states have statutes which make it a criminal of- 
 fense for officers of banks to receive deposits when the 
 bank is known to be hopelessly insolvent. The wording 
 of the statute is different in the various states, and the 
 courts of each jurisdiction have construed the respec- 
 tive statutes differently. Where such statute is in force 
 the officers of a national bank are not amenable thereto. 
 Easton v. Iowa, 188 U. S., 220. 
 
 199. National Banks. There is no statute of the 
 United States making it a crime for a national bank to 
 receive deposits when insolvent, but if deposits are received 
 by any bank, state or national, when the bank is known 
 by its officers to be hopelessly insolvent, the officers may 
 be personally liable, and the deposits can be recovered 
 by the depositors, provided the money can be traced into 
 the hands of the receiver. 
 
 200. Tracing Trust Funds. If the bank has in its 
 vaults $200, at the opening of business, then A deposits 
 $1,000, after which the bank pays to B $700, this would 
 leave $500 in the bank. If there were no other transac- 
 tions, and the bank was closed on account of insolvency, 
 the $500 coming into the receiver's hands could be re- 
 covered by A. It would be presumed that the bank 
 paid out its own money first. For the remaining $500 
 A would have a claim as a general creditor. But where 
 a bank has apparently been insolvent for a long time, the 
 matter of tracing funds is a difficult one, and the claim- 
 ant on any transaction, whether deposit, collection item 
 or "trust fund," must show that his money, or an amount 
 equal thereto, has remained in the bank at all times since 
 he deposited it, or since the bank received it, until the 
 closing, and that it passed into the receiver's hands, who 
 holds so much more money by reason of that transac- 
 tion. In the illustration given above, if C had deposited 
 $100 after B withdrew the $700, there would be $600 in 
 
SEC. 201 123 
 
 the bank at the time of closing, but only $500 would re- 
 main of the amount A deposited. If C does not claim his 
 $100 in full, this does not give A the right to the $600, 
 because he can only trace $500 of his money as swelling 
 the amount in the receiver's hands. Lowe v. Jones, 192 
 Mass., 94; Commissioners v. Lowe, 192 Mass., 94; Com- 
 missioners v. Strawn, 157 Fed., 49. 
 
 The question next arises, if $600 is traced into the 
 receiver's hands, but there are many whose deposits or 
 moneys have been received when their receipt was 
 wrongful, and none can affirmatively show that his par- 
 ticular money is still in the bank, how shall the fund 
 be divided? The $600 remains in the bank, but no one of 
 the claimants can trace and identify it as his money. In 
 such cases it has been held in some states that the last 
 deposit made is to be paid first, etc., the deposits and re- 
 ceipts being returned in the reverse order of their re- 
 ceipt, and this seems the more logical deduction if trac- 
 ing is to be required. Cherry v. Oklahoma Territory, 89 
 Pac., 190, 192. In one or two states it has been held 
 that the fund should be ratably distributed among all 
 those who claim a preference. Piano Co. v. Auld (N. D)., 
 86 N. W., 21. As there must be, first, a fund to trace, and 
 secondly a tracing of that fund, it would seem that those 
 claiming priority over other creditors should be required 
 to follow their money into the hands of the receiver, or 
 share, not in a distribution of an unidentified fund, but 
 in the general distribution with all creditors; otherwise 
 the money of the general creditor, who may have par- 
 ticipated in increasing the fund in the bank, is used to 
 pay, in full, one who has not established his right to a 
 preference. In re North River Bank, 60 Hun. (N. Y.), 
 91 ; Bayor v. Tr. & Sav. Bank. 157 111., 62. 
 
 201. Where checks or other items have been deposited, 
 if they are in the bank when the receiver takes charge, 
 
124 - SEC. 202 
 
 they should be returned to the depositors, if under the 
 same circumstances money would have to be returned; 
 but unless the bank was hopelessly insolvent and known 
 by the officers to be so, (See Easton v. Iowa, 188 U. S., 
 220), the depositors have become creditors of the bank 
 and are not entitled to a return of the money or the 
 items. Quin v. Earle, 95 Fed., 728. If the items would 
 be returnable, but have been sent on the way to collec- 
 tion, then the proceeds when received should be turned 
 over to the owner of the item. Showater v. Cox (Tenn.), 
 
 37 S. W. 286; 97 Tenn., 547. 
 
 If there be no actual cash proceeds, or no actual re- 
 mittance of the amount collected, but the item was col- 
 lected by a change of credits, or by checks on the same 
 bank, the owner must prove his claim with all other 
 creditors. Beard v. District, 88 Fed., 375 ; Bank v. Dowd, 
 
 38 Fed., 172. He cannot be paid in full with money that 
 depositors have put in, or other creditors, who are no 
 more to blame for the failure of the bank than he is. 
 The better considered cases hold that parties who deal 
 with banks are presumed to know and assent to the 
 customs which banks resort to to make collections, etc. 
 Freemans N. B. v. Natl. Tube Works, 151 Mass., 413; 
 Aebi v. Bk. of Evansville (Wis.), 102 N. W., 329. It is 
 not the intention of the writer to deal with collections in 
 this volume, but the matter is adverted to here, as many 
 items deposited, while received by the banks as deposits, 
 must be collected by them before they are real deposits. 
 The courts have wrangled with the question of "tracing" 
 of trust funds, and there is still much conflict, but the 
 statement made above is in accord with the principles 
 which the federal courts have established and which are 
 gradually becoming the law and the justice in the states. 
 
 202. The "Insolvent Bank" of Tightville, being hope- 
 lessly insolvent and known by its officers to be so, ac- 
 
SEC. 202 125 
 
 cepts from A a check drawn payable to A, by B, on the 
 First National Bank of Moneyville, and gives A credit 
 on his account. A has endorsed the check in blank. "In- 
 solvent Bank" transmits the item to its New York Corre- 
 spondent, endorsing it in the ordinary manner, "Insol- 
 vent Bank, Tightville, All prior endorsements guaran- 
 teed," etc. The New York Correspondent presents it at 
 the National Bank of Moneyville and either receives the 
 cash or credit to its account for the amount. The New 
 York Correspondent in turn credits the account of the 
 "Insolvent Bank" for the amount and notifies the "Insol- 
 vent Bank" that the item has been paid. Now there has 
 been no money passed to the "Insolvent Bank" in the 
 transaction and there is no "fund" which has come into 
 the "Insolvent Bank" which can be traced. In the ordi- 
 nary course of events the depositor, A, would have 
 checked against the credit given him when he deposited 
 the item. If it had been returned unpaid the "Insolvent 
 Bank" could have charged it back to his account. Had 
 the item been endorsed by A "for collection only," and 
 with the understanding that no credit would be given 
 until actually paid, or had there been other evidence 
 that the item remained A's, the New York Correspond- 
 ent Bank could not have treated it as "Insolvent Bank's" 
 property, but A could follow it and recover the proceeds. 
 But as there was no mark of title in any other than the 
 "Insolvent Bank," upon being notified of the closing of 
 "Insolvent Bank," the Correspondent Bank can off- 
 set the credit balance of "Insolvent Bank," in- 
 cluding the amount of items sent for collection, 
 unless the item shows on its face that title 
 thereto remains in the depositor, or there is some other 
 notice to the Correspondent Bank that the item is not 
 the property of "Insolvent Bank," against any balance 
 
126 SEC. 203 
 
 the Correspondent Bank had in the "Insolvent Bank," 
 or on any indebtedness owing by the "Insolvent Bank" 
 to the Correspondent Bank in the ordinary course of 
 business. And, while the depositor of checks on other 
 banks usually can be charged back with the amount if the 
 item is not collected, and he usually has only the priv- 
 ilege, and not the absolute right, to check against it be- 
 fore collected, he is, nevertheless, generally regarded as 
 creditor of the bank until the item is charged back. Natl. 
 Commercial Bank v. Miller, 77 Ala., 168; Balbach v. Fre- 
 linghuysen, 15 Fed., 675; Bank v. Theummler (111.), 62 
 N. E., 932; and cases cited in Sec. 201. 
 
 MONEY. 
 
 203. Legal Tender. Gold coin is legal tender for its 
 nominal value when not below the limit of tolerance in 
 weight; when below that limit it is legal tender in pro- 
 portion to its weight; standard silver dollars and Treas- 
 ury Notes of 1890 are legal tender for all debts, public 
 and private, except where otherwise expressly stipulated 
 in the contract; subsidiary silver (silver coins of smaller 
 denominations than $i) is legal tender to the extent of 
 $10; minor coins (nickels and cents) to the extent of 
 twenty-five cents in any one payment, and United States 
 notes for all debts, public and private, except duties on 
 imports and interest on the public debt. Gold certifi- 
 cates, silver certificates and national bank notes are not 
 legal tender money. Gold and silver certificates are re- 
 ceivable for all public dues, and national bank notes are 
 receivable for all public dues except duties on imports, 
 and may be paid out for all public dues, except interest 
 on the public debt. 
 
 204. Fraudulent Notes. The act of June 30, 1876, Sec. 5, 
 provides that all United States officers charged with the 
 
SEC. 204 
 
 127 
 
 receipt or disbursement of public moneys, and all officers 
 of national banks, shall stamp or write in plain letters 
 the word "counterfeit," "altered," or "worthless," upon 
 all fraudulent notes issued in the form of and intended to 
 circulate as money which shall be presented at their 
 places of business; and if such officer shall wrongfully 
 stamp any genuine note of the United States, or of the 
 national banks, they shall, upon presentation, redeem 
 such notes at the face value thereof. 
 
INDEX. 
 
 (All references are to sections.) 
 
 ACCEPTANCE 
 
 see CERTIFICATION 
 ADMINISTRATOR 
 
 act of one binds all, 86 
 
 authority of, to deposit, 36 
 
 deposit of, 36 
 
 payment to, 179 
 
 should be appointed by local court, 180 
 AGENT 
 
 account of, 9, 36 
 ALTERATION 
 
 avoids instrument, 138 
 
 in date of check, 138 
 
 of check before certification, 130, 
 after, 130 
 
 AMOUNT 
 
 deposited, 38a 
 
 for which check may be drawn, 75 
 
 of check, 75 
 
 not guaranteed by bank, 142 
 written words prevail as to, 74 
 
 ASSIGNMENT 
 
 check generally not, 75, 150 
 
 against particular fund, 151 
 of deposit, 150 
 
 ATTACHMENT, 147; see GARNISHMENT 
 
 bank not subject to, 153 
 
 before judgment, 147 
 
 depositor's property, 153 
 
 items for collection, 149 
 
 money assigned by depositor, 150 
 
 money in depositor's name, 152 
 
 paid to holder of check, 105 
 belonging to another, 148 
 set aside on certification, 148 
 
 ATTORNEY 
 
 deposit of, 36 
 BAILMENT, i 
 
 BALANCE AND RETURN OF PASS BOOK 
 Balance and return of pass book 
 
 see PASS BOOK 
 
 BANK 
 
 books, examination of, 3p-88 6 
 
 can not deny ownership of aepositor, 39 
 
 issue certificate of deposit, when, 42 
 relation of, to depositor, I 
 under no duty but to pay, 100 
 
(All references are to sections.) 
 
 BANKRUPTCY 
 
 preference in, 175 
 
 right of set-off in, 172 
 BEARER 
 
 check payable to, 65, 88 
 
 BY-LAW 
 
 can not bind depositor on mistake, 38a 
 valid when reasonable, 58 
 
 CASHIER'S CHECK 
 
 can not be countermanded, rooa 
 
 CASHING CHECK 
 on other bank, 88e 
 
 CERTIFICATE OF DEPOSIT, 40 
 bank can not issue when, 42 
 demand must be made on when, 46 
 due when, 46 
 evidence only, 48 
 holder of is general creditor, 12 
 
 except by statute, 12 
 interest on, 49 
 is not payment until itself paid, 4Qa 
 
 except to issuing bank, 4Qa 
 is payable at bank, 43 
 lost, 45 
 
 negotiable when, 41 
 payment of 
 
 on forged endorsement, 45 
 
 without endorsement, 44 
 statute of limitations runs when, 49 
 stolen (see STOLEN CHECK), 88 
 surrender should be required on payment, 43 
 when a loan, soc 
 
 CERTIFICATION OF CHECK 
 acceptance of bank, 118 
 alteration of check before, 130 
 
 after, 130 
 
 attachment of deposit after, 148 
 bank not bound to make, 109 
 binding on bank when made, 122 
 
 though bank made mistake, 129 
 
 though not entered on books, 127 
 by whom made, 121 
 
 officer, of his own check, 123 
 
 other officer's check, 123 
 care in making, 129 
 countermand after, 99, 100, I3ib 
 not binding on depositor when, I3ib, 142 
 effect of, 124 
 false, binds bank, 13 ic 
 
 criminal, 131 
 
 penalty for, I3ic 
 
(All references are to sections.) Ill 
 
 CERTIFICATION OF CHECK Continued, 
 forged check, 129 
 for drawer, 125 
 
 holder, 126 
 
 more than drawer has to his credit, 13 ic 
 guarantees signature of drawer, 129 
 
 but not endorsements, 129 
 in writing but not on check, 119 
 makes bank debtor to holder, 122 
 must be in writing, 119 
 post dated check, 122 
 promise of bank to make in future, 131 
 raised, 130 
 verbal, 119 
 what checks, 122 
 what is, 120 
 CHECK 
 
 acceptance of see CERTIFICATION 
 
 altered, see ALTERATION, RAISED CHECKS 
 
 amount of, 74, 75 
 
 assignment of fund when, 100 
 
 binding only when delivered, 88 
 
 body of, 73 
 
 cashing, on other bank, 88e 
 
 certification of, see CERTIFICATION 
 
 certified, liability of bank on, 125 
 
 contract contained in, 65 
 
 corporation, 78 
 
 countermand of, 99 
 
 date, 67 
 
 deposit of, in bank on which drawn, 112 
 
 in other bank, 88e, 201 
 debtor need not accept, 118 
 dishonor of, proceedings on, 88b 
 
 liability for, see REFUSAL TO PAY 
 deposited for collection, 201 
 
 should not be sent direct to drawee, 95 
 drawer should be notified when not paid, 94 
 signature of, bank guarantees, 138, 140 
 drawn when no funds, 98 
 
 excuses presentment, 91 
 
 fraudulent when, 194 
 duplicate, 135 
 essentials of, 71 
 for less than one dollar, 76 
 
 more than deposit, 106 
 form, 70 
 
 gift of, see GIFTS 
 in payment of gambling debt, 39b 
 knowledge of outstanding, by bank, 99, 103, 108 
 
 post dated, 98 
 
 liability for refusal to pay, see REFUSAL TO PAY 
 lost, 135 
 
W (All references are to sections.) 
 
 CHECK Continued, 
 memoranda on, 72 
 memorandum check, 1316 
 must contain name of payee, 71 
 not binding until delivered, 88 
 number on, 72 
 
 outstanding, bank can disregard, 108, 98 
 paid, 137 
 partnership, 81 
 payable after date, 71 
 
 out of particular fund, 151 
 on demand, 62 
 in order presented, 107 
 
 payment only when accepted as such, 89, 154 
 post dated, 98, see POST DATED CHECK 
 presentment, see PRESENTMENT 
 presumed drawn against funds, 98 
 promise to accept in future, 131 
 protest of, see PROTEST 
 revocation of, by countermand, 99 
 
 by death, 101 
 
 by insolvency, 102 
 stale, 96-97 
 
 stolen, 88 and see LOST CHECK, 135 
 surrender of when paid, 137 
 
 not until paid, 95 
 transfer of, warrants, by delivery, 88b 
 
 by endorsement, 88b 
 
 CLEARING HOUSE CERTIFICATE 
 may be counted as reserve, 57 
 
 COLLECTION 
 
 deposit for, 16, 201, 202 
 
 CONDITIONAL DEPOSIT, see DEPOSIT, conditional 
 
 CONTRACT 
 
 between bank and depositor, 3, 58 
 made by drunken person, 61 
 infant, 59 
 
 insane person, 60, 61 
 on holiday, 6ga 
 parties to, 59 
 
 COUNTERFEIT 
 
 money or paper, deposited, 14 
 
 payment in, no 
 COUNTERMAND 
 
 bank must not pay after, 99 
 check subject to, 99, 100 
 cashier's, looa 
 when certified, I3ib 
 
 DAMAGES 
 
 see REFUSAL TO PAY, 134 
 
(All references are to sections.) 
 
 DATE 
 
 alteration in, 68 
 check without, 67 
 of check, 67 
 
 disregarded when, 103 
 
 DEATH 
 
 of depositor, 177, 178 
 
 duty of bank upon, 179 
 revokes checks, 101 
 joint owner of deposit, 85 
 partner, 81, 82 
 DEBTOR 
 
 banlf is, to depositor, 3 
 must generally seek creditor, 43 
 but bank need not, 43, 64 
 
 DELAY in presentment, see PRESENTMENT 
 
 DELIVERY 
 
 necessary to complete contract, 88 
 
 DEMAND 
 
 check is payable on, 62 
 
 failure of bank equivalent to, 163 
 
 not necessary when bank commits wrong, 157 
 
 should be made before statute of limitations runs 
 
 on certificate of deposit, 46 
 
 check, general deposit, 156 
 
 payment on raised check, 130 
 
 DEPOSITOR 
 
 bank may choose, 26 
 
 terminate relation with, 26 
 banks as, 25 
 
 bankruptcy of, see BANKRUPTCY 
 contract between bank and, 58 
 death of, see DEATH 
 government, see PUBLIC MONEYS 
 insolvency, see INSOLVENCY 
 presumed to own money in his name, 39 
 right of, to examine bank's books, 38e 
 status of on failure of bank, 5, and see INSOLVENCY 
 
 DEPOSITS 
 
 attachment of, see ATTACHMENT, also GARNISHMENT 
 
 bank, 25 
 
 become bank's property, I 
 
 as soon as passed over counter, 3 
 by check on same bank, 112 
 
 other bank, 88e, 201, 202 
 
 infant, 59 
 
 joint owners, 85 
 
 officer, see PUBLIC MONEYS 
 
 postmasters, 32 and PUBLIC MONEYS 
 
 one, payable to another, 8 
 
VI (All references are to sections.) 
 
 DEPOSITS Continued. 
 
 (see) administrator, guardian, husband and wife, infant, 
 
 insane, trustee, etc. 
 classification of, 2 
 conditional, 3Qc 
 
 cannot be paid until condition fulfilled, 3Qc 
 
 if not complied with, money remains depositor's, 3Qc 
 but compliance gives right to the deposit, 39c 
 as general depositor, 3Qc 
 control of determines ownership, 85 
 distinction between loan and, 50 
 for collection, 16, 201, 202 
 
 special purpose of depositor, n 
 general, 3 
 
 may be changed to specific or special, 117 
 gift of, see GIFTS 
 in another's name, 3Qa 
 individual, 25 
 
 interest on, see INTEREST 
 joint, 83 
 keeping, 51 
 loan, when, 50 
 loose money, 3 
 made without pass book, 38c 
 making, 37 et seq. 
 not a loan when, 50 
 of decedent, 179 
 
 infant, 179 
 
 insolvent, 179 
 
 insane, 179 
 
 public moneys, see PUBIC MONEYS 
 source of, 39b 
 received after banking hours, 13 
 
 when bank insolvent, 199 
 
 where kept separate, 13, 16 
 receiving, when bank insolvent, 108 
 
 by national bank not criminal, 199 
 
 criminal in some states, 198 
 
 liability of officers for, 199 
 
 bank must be hopelessly insolvent, 201 
 sealed package of money 
 
 may be special deposit, 3 
 slip, see DEPOSIT SLIP 
 special, see SPECIAL DEPOSIT 
 specific, 15 
 state, city and county funds, 
 
 see PUBLIC MONEYS 
 to whom should be made, 37 
 United States, see PUBLIC MONEYS 
 where made, 37 
 who entitled to, 39 
 DEPOSIT SLIP 
 
 deposit made without binds bank, 38a 
 
(All references are to sections.) VII 
 
 DEPOSIT SUP Continued, 
 duplicate, 380 
 
 not negotiable, 380 
 raising constitutes forgery, 38c 
 should always be required, 383 
 DRAFT 
 
 holder of a general creditor, 7 
 
 unless fraudulently issued, 7 
 not payment until itself paid, in 
 DRAWER OF CHECK, see CHECK, DRAWER 
 DRAWING CHECK, 66 
 
 DUPLICATE 
 
 check, 135 
 
 deposit slip, 38c 
 DUTY OF BANK 
 
 only to pay, 100, 103, 109 
 
 ENDORSEMENT, 65, 88a 
 by bank, 88e 
 
 can not be insisted upon when, 65 
 certificate of deposit, 44 
 in blank, 65, 88a 
 
 makes instrument payable to bearer, 88a 
 restrictive, 88a 
 signature in, 88d 
 special, 88a 
 
 warranties made by, 88b, 141 
 without recourse, 88c 
 
 ENTRY IN PASS BOOK, see PASS BOOK 
 ERROR 
 
 diligence required after discovery of, 38d 
 
 evidence can be introduced to show, 38a 
 
 and see MISTAKE 
 ESTATE 
 
 representative of, see 179 
 EXECUTOR 
 
 act of one binds all, 86 
 
 authority of, to deposit, 36 
 
 should be appointed by local court, 180 
 
 EXPRESS 
 
 money sent by, 160 
 
 FAILURE OF BANK, see INSOLVENCY 
 
 FALSE CERTIFICATION, see CERTIFICATION, false, 1310 
 
 FALSE PRETENSES 
 
 giving worthless check, 194 
 
 FIVE PER CENT REDEMPTION FUND 
 
 see- RESERVE, 53 
 FORGED 
 
 check, bank cannot charge depositor with, 138 
 certification of, 129 
 
VIII (All references are to sections.) 
 
 FO RGED Continued. 
 
 paper, deposited, 14, 112 
 
 payment in, no 
 FORGERY 
 
 diligence in discovering, 146 
 
 and reporting, 38d 
 gives no right against person whose name forged, 88, 138 
 
 but he may adopt the signature, 145 
 money paid on may be recovered when, 138, 139 
 of signature of drawer, 138-140 
 endorser, 141 
 
 on certificate of deposit, 45 
 of bank on deposit slip, 38c 
 payment on is no payment, 142 
 see RAISED CHECKS 
 FRAUD 
 
 in concealing mistake, 113 
 issuing check where no funds, 194 
 
 post dated check is not, 98 
 FRAUDULENT notes, 204 
 
 GAMBLING 
 
 debt, check for, 39b 
 money won at, 396 
 
 GARNISHMENT 
 
 bank subject to, 147 
 
 see ATTACHMENT 
 of creditor after he has given check, 154 
 
 holder of check, after payment, 105 
 what is, 147 
 
 GENERAL DEPOSIT, see DEPOSIT, general 
 GIFT 
 
 by check of depositor, 190 
 
 of third party, 193 
 causa mortis, 185 
 in contemplation of death, 185 
 inter vivos, 183 
 of deposit, 188, 189 
 position of bank regarding, 181 
 to save administration, I92a 
 take effect immediately, 183 
 
 in future, 184 
 
 validity of depends upon what law, 187 
 what is, 182 
 
 can be subject of, 186 
 courts have held, 191 
 
 GOVERNMENT 
 
 claim of, 33 
 
 deposits, see PUBLIC MONEYS, 27 
 GUARANTY 
 
 national bank can not make, 129 
 
(All references are to sections.) IX 
 
 GUARDIAN 
 
 authority of to deposit, 36 
 
 should be appointed by local court, 179 
 HOLIDAY, contract made on, 6ga 
 
 instrument due on, 67 
 HUSBAND AND WIFE 
 
 deposit of, 84 
 
 gifts between, see GIFTS 
 IDENTIFICATION 
 
 bank must make, 139 
 INFANT 
 
 deposit by, 59; and see 179, 180 
 INJUNCTION 
 
 against national bank, 153 
 
 INQUIRIES 
 
 answering, i3ia 
 
 regarding certified check, 131 
 
 depositor's account, 386 
 no part of bank's duty, 109 
 INSANE PERSON 
 contract of, 60 
 deposit by, 60, see 179, 180 
 
 INSOLVENCY 
 
 checks revoked by, 102 
 
 of bank, equivalent to demand and refusal, 163 
 
 loss upon check on, 89 
 
 renders depositor creditor of bank, 4 et seq. 
 
 INSOLVENT 
 
 receiving deposits when, 198, see DEPOSITS, receiving 
 right to offset against, see SET OFF 
 
 INTEREST 
 
 due from time of demand, 163 
 
 none payable unless contracted for, 163 
 
 on certificate of deposit, 49 
 
 general deposit, 163 
 
 overdraft, 196 
 
 public moneys of U. S., 31 
 when bank fails, 163 
 
 commits wrong, 164 
 
 JOINT DEPOSITS, 83 
 
 LAWFUL MONEY RESERVE, see RESERVE 
 
 LEGAL TENDER 
 
 payment must be in, no 
 what is, 203 
 
 LIABILITY OF BANK 
 
 does not attach until deposit received 161 
 on certified check, see CERTIFICATION 
 
 certificate of deposit, see CERTIFICATE of DEPOSIT 
 
X (All references are to sections.) 
 
 LIABILITY OF BANK Continued, 
 check, see CHECKS 
 deposits, see DEPOSITS 
 
 not limited in amount, Sob 
 refusal to pay check, see REFUSAL TO PAY 
 special deposit, 20 
 
 LIEN AND SET OFF, see also SET OFF 
 attaches when debt is due, 166, 170 
 bank entitled to when, 165 
 of U. S. on circulating notes, 33 
 on collections, 166 
 
 notes presented for discount, 168 
 securities obtained for special purpose, 167 
 in regular course of business, 165 
 pledged as collateral, 167 
 special deposit, 167 
 right to attaches when, 170 
 in some states under contract only, 170 
 
 not until notice given, 170 
 what may be subject to, 171 
 
 LIMITATIONS, see STATUTE OF LIMITATIONS 
 LOAN 
 
 distinguished from deposit, 50 
 
 when statute prohibiting does not prevent deposit, 50 
 
 LOSS 
 
 on account of failure to present check, 89, 91, 93 
 
 failure of bank, see INSOLVENCY 
 LOST 
 
 certificate of deposit, 45 
 check, 135 
 
 duplicate issued for, 135 
 
 rights and liabilities under, 135 
 payable to bearer or endorsed, 136 
 when not, 1363 
 
 MAIL 
 
 deposit made by, 161 
 
 remittance made by, 160, 162 
 MARRIED WOMAN 
 
 can contract in most states, 59 
 MEMORANDUM CHECK, 1316 
 
 MISTAKE 
 
 by-law can not bind depositor to, 38a 
 can not be claimed when, 116 
 fraud or concealment of, 113 
 in crediting item, 114, 3&a 
 making payment, 113 
 
 can be recovered when, 113 
 not when mistake of law, 117 
 not presumed, 117 
 of post dated check, 115 
 money paid by, 113, 117 
 
(All references are to sections.) XI 
 
 MISTAKE Continued. 
 
 question of fact whether there has been, 117 
 
 should be promptly reported, 38d 
 
 when checkholder should have discovered, 117 
 MONEY 
 
 counterfeit is no payment, no 
 
 debtor entitled to receive in payment, 118 
 
 fraudulent notes, 204 
 
 legal tender, 203 
 MONEY ORDER FUNDS, 34 
 NAME, see SIGNATURE 
 
 in which deposit stands, see DEPOSITS 
 endorsement, see SIGNATURE 
 
 NATIONAL BANK 
 
 depositors in, general creditors, 4 
 
 false certification of check by, 131 
 
 may become public depositary, see PUBLIC MONEYS 
 NEGOTIABLE INSTRUMENT 
 
 certificate of deposit is when, 41 
 
 deposit slip is not, 38c 
 
 pass book is not, 38b 
 
 NOTE PAYABLE AT BANK 
 
 equivalent to order to bank to pay, 173 
 
 NOTICE 
 
 of refusal to pay check, 94, see REFUSAL TO PAY 
 NUMBER ON CHECK, 72, see CHECKS 
 
 OFFICER 
 
 deposit of, see DEPOSITS and PUBLIC MONEYS 
 OFFSET, see SET OFF 
 
 ORDER 
 
 to pay deposit, form of, 63 
 may be verbal, 63 
 should be in writing, 63 
 
 and see CHECKS 
 OVERDRAFT 
 
 bank under no duty to allow, 195 
 
 though it has previously done so, 107 
 
 care in allowing, 197 
 
 deposit made after may be applied in payment, 196 
 
 drawer liable to bank on, 196 
 
 interest on, 196 
 
 is loan payable on demand, 196 
 
 justified when, 195 
 
 may be criminal, 197 
 
 note given in payment of valid, 196 
 OWNERSHIP OF DEPOSIT 
 
 see DEPOSIT, who entitled to, 39 
 PARTNERSHIP 
 
 death of partner dissolves, 82 
 
XII (All references are to sections.) 
 
 PARTNERSHIP Continued. 
 
 each partner in is agent for all, 81 
 has authority to draw checks, 81 
 in name of partnership, 81 
 not for individual debt, 81 
 funds of, 81 
 
 surviving partner of has authority to withdraw, 82 
 PASS BOOK 
 
 balance and return of, 38d 
 
 diligence in discovering error upon, 38d 
 deposit made without, 38c 
 entries in, 38 
 
 evidence only, 38a 
 not binding when, 38a 
 is not negotiable, 38b 
 
 PAYEE 
 
 the one to whom check is payable 
 
 must be named in check, 71 
 PAYMENT 
 
 certificate of deposit is, when, 4Qa 
 
 check is not until itself paid, 89, 154 
 
 but is payment to bank on which drawn, 154 
 
 draft is not until paid, in 
 
 money only need be accepted in, 118 
 
 PAYMENT OF CHECKS, 103 
 by draft, in 
 
 mistake, 113, and see MISTAKE 
 can be required at bank only, 62 
 completed when money passed over counter, 105 
 drawn by one holding power of attorney, 79 
 duty of bank to make, 103 et seq. 
 for more than deposit, 106, 107 
 in forged or counterfeit paper, no 
 made by bank at its peril, 87a 
 must be in legal tender, no 
 
 in order checks are presented, 103, 107 
 of deceased depositor, see DEATH of depositor 
 
 DRUNKEN, INSANE, INSOLVENT persons, 
 
 see these titles and CHECKS 
 on forgery, see FORGERY 
 post dated, 115 
 raised, 142 
 
 refusal to make, see REFUSAL TO PAY 
 to wrong person, 116, 117, 142 
 
 deemed acceptance by bank when, 132 
 wrongful, makes bank liable to depositor, 117, 143 
 
 usually gives holder no right against bank, 143 
 PAYMENT OF DEPOSITS 
 
 after death of depositor, see DEATH 
 agreement regarding controls, 85 
 bank makes at its peril, 85 
 must be on order of owner only, 39 
 
(All references are to sections.) XIII 
 
 PAYMENT OF DEPOSITS Continued, 
 order for, see ORDER 
 
 usually by check, see CHECKS 
 POSTMASTER, deposit by, see PUBLIC MONEYS 
 POST DATED CHECK 
 
 can not be certified, 98, 122 
 
 paid before its date, 69, 98 
 change in date of, 69 
 is valid, 69, 98 
 POWER OF ATTORNEY 
 payment of checks on, 79 
 to draw deposit of another, 80 
 
 deposit does not authorize withdrawal, 80 
 written should be required, 80 
 
 PREFERENCE 
 
 in bankruptcy, see BANKRUPTCY 
 
 PRESENTMENT 
 
 certificate of deposit, 47 
 check, 89 
 delay in, 89, 91 
 
 excused when, 93a 
 throws loss upon whom, 91-93 
 excused when, 91, 93b 
 failure to make, 91, 92 
 must be made at bank, 89 
 during banking hours, 89 
 within reasonable time, 89 
 of more than one check at a time, 107 
 should always be made promptly 
 what is reasonable time for, 90, 92 
 
 when collected through clearing house, 90 
 holder knows bank is failing, 90 
 negotiated, 92 
 
 when drawer loses nothing, 93 
 PROTEST 
 
 not necessary, 88b 
 
 except where check drawn in another state, 88b 
 when payee is refused payment, 94 
 usually made however, 94 
 PUBLIC DEPOSITARY 
 
 see PUBLIC MONEYS 
 PUBLIC MONEYS 
 deposits of, 27 
 
 authority of officer to make, 10, 27 
 
 of bank to receive, 27 
 how kept, 27 
 liability of bank for, 10, 27, 27b 
 
 when unauthorized, 27b 
 of officer making, 10, 27 
 officer may make when, 27, 27b, 50 
 should always be carried as such, 27a 
 
XIV (All references are to sections.) 
 
 PUBLIC MONEYS Continued, 
 government a creditor for, 10 
 
 unless wrongfully deposited, 27 
 of City, County and State, 27 
 
 national bank may receive when, 28 
 of the United States, 29 
 
 application to become public depositary, 30 
 banks must pay interest on deposits of, 31 
 deposits of, how kept, 30 
 
 unauthorized, 35 
 penalty for, 35 
 by certain postmasters, 32 
 at postmaster's risk, 33 
 do not give government preference, 33 
 unauthorized receipt of, 353 
 security required for, 29 
 statutes relating to should be carefully followed, 27 
 
 of the United States relating to, 27 et seq. 
 RAISED CHECK 
 certified, 130, 13 ib 
 
 money paid on can be recovered, 130, 142 
 depositor can not be charged with payment of, I3ib, 142 
 RECEIVING DEPOSITS 
 
 see DEPOSITS, receiving 
 RECEIVER 
 
 account of, 36 
 
 should be appointed by local court, 179 
 
 REFUSAL TO PAY CHECK (same rules apply to any proper 
 
 order) 
 
 damages against bank for, 134 
 justified when not sufficient funds, 106 
 
 by reason of setoff against debt, 133, 170 
 attachment of deposit, 133 
 items charged back, 134 
 
 though books show otherwise, 38a, 170 
 liability of bank for, 132 
 to depositor, 133 
 holder of check, 132 
 
 conditional upon presentment and actual refusal, 134 
 notice of should be given, 94, and see PROTEST 
 qualified, 134 
 
 who liable for loss upon, see PRESENTMENT, 89 
 RELATION OF BANK TO DEPOSITOR, i, 3 
 REMITTANCE 
 
 by express, mail, etc., 160 
 REPRESENTATIVE OF ESTATE, 179, 180 
 RESERVE, 51 
 agent, 56 
 city, 55 
 
 central, 55 
 purpose of, 51 
 
(All references are to sections.) XV 
 
 RESERVE Continued. 
 
 required by national banks, 52 
 in reserve cities, 52, 55 
 
 central reserve cities, 52, 55 
 all other banks, 52 
 none against circulating notes, 53 
 
 public moneys on deposit, 54 
 what may be counted as, 55, 57 
 by reserve city banks, 55 
 
 central reserve city banks, 56 
 RESERVE CITY, see RESERVE 
 REVOCATION, see CHECK, revocation of 
 
 SET OFF and see LIEN 
 
 against claim acquired after insolvency, 174 
 allowed against owner of deposit only, I7ia 
 cannot be made before debt is due, I73a 
 in case of insolvency of bank, 175 
 
 depositor, 172 
 
 bankruptcy of depositor, 175 
 may be waived, 176 
 of deposit balance, 165 
 
 of partnership against individual debt, I7ia 
 public officer, 33 
 
 who has settled his accounts, 27 
 proceeds of collection, 166 
 what is, 169 
 see NOTE PAYABLE AT BANK 
 
 SIGNATURE, 77 
 
 may be made by pencil, 77 
 stamp, 77 
 printed, 77 
 of corporation, 78 
 
 depositor, bank must know, 138 
 guaranties, 140 
 record of should be kept, 87a 
 who can not write, 77 
 drawer not guaranteed 
 
 when cashing check on other bank, 88e 
 endorser not guaranteed by bank, 141 
 prior party guaranteed by endorsement when, 141 
 power of attorney to make, 79 
 should be made how, 88d 
 unauthorized, see FORGERY 
 
 SPECIAL DEPOSIT, 18 
 
 agreement should be made regarding, 23 
 care required of bank in keeping, 20 
 
 without compensation, 20 
 liability of bank for, 20 
 may be changed to general or specific, 17 
 not assets of bank, 22 
 power of bank to receive, 19 
 returning, 21 
 
XVI (All references are to sections.) 
 
 SPECIAL DEPOSIT Continued, 
 what is not, 5, II 
 
 may be subject of, 24 
 when is deposit special, 23 
 SPECIFIC DEPOSIT, 15 
 
 can be used for specific purpose only, 15 
 remains property of depositor, 16 
 recovery can be had when, 16 
 what is, 15 
 
 STALE CHECK, 96, 97 
 STATUTE OF LIMITATIONS 
 begins to run when, 155 
 on certificate of deposit, 46 
 certified check, 128 
 deposit, 156 
 
 unpaid check against drawer, 158 
 refusal of bank to pay, 156 
 wrong committed by bank, 157 
 what is, 156 
 STOLEN 
 
 certificate of deposit, see 45 and 88 
 check, 88 
 deposit, 13 
 
 money received on deposit, 3Qb 
 SUIT 
 
 demand should be made before, 156, see DEMAND 
 SUM PAYABLE, 74 
 SUNDAY, see 67 
 
 TRUSTEE 
 
 account as, 9 
 
 how kept, 36 
 one can not make contract for several, 87 
 
 TRUST FUNDS, 36, 39b 
 
 tracing, 200 
 UNITED STATES 
 
 not a preferred creditor on deposits, 33 
 
 statutes of are given under proper headings 
 
 VERBAL 
 
 certification of check, see CERTIFICATION 
 
 order to pay deposits, see ORDER 
 WORTHLESS CHECK, 194 
 WRITING 
 
 in body of check, 73 
 
 not guaranteed by bank, 142 
 
 order for payment of deposit should be in, 63 
 
THIS BOOK IS DUE ON THE LAST DATE 
 STAMPED BELOW 
 
 AN INITIAL FINE OF 25 CENTS 
 
 WILL BE ASSESSED FOR FAILURE TO RETURN 
 THIS BOOK ON THE DATE DUE. THE PENALTY 
 WILL INCREASE TO SO CENTS ON THE FOURTH 
 DAY AND TO $1.OO ON THE SEVENTH DAY 
 OVERDUE. 
 
 MAR 27 1938 
 
 LD 21-95m-7,'37 
 
YB 18145 
 
 ' 
 
 A <P[ 
 
 4 
 
 UNIVERSITY OF CALIFORNIA LIBRARY