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of whether the deposit is in form special or general, but only the questions of ownership, identity, notice, and tracing. The question arises where the legal representatives of the trustee make claim to the fund, or where a creditor of the trustee depositor seeks to claim the fund, or the bank seeks to offset a claim against the trustee. In such cases, where the fund is in any manner designated as not belonging to a depositor, but is a trust fund, it cannot be treated as the depositor's money. Although the relation between the bank and its depositor is that merely of debtor and creditor, and the balance due on the account is only a debt, yet the question is always open, “To whom in equity does it beneficially belong?" If the money deposited belonged to a third person, and was held by the depositor in a fiduciary capacity, its character is not changed by being placed to his credit in his bank account. If the circumstances, and the relations between the depositor and the bank, are such as impart notice to the bank that the beneficial ownership was outside of the legal title the owner may recover. See Vol. VII, Art. 3, §§ 91-94 (24).

§ 19. Deposits by agents. In the absence of equities, the ordinary rules of agency as to undisclosed principals (see Vol. II, Art. 3) do not apply to deposits by agents, and unless there has been some notice and conduct which will operate as an estoppel the banker cannot deny the title of the depositor to the funds deposited by him.

(24) Philadelphia Bank v. Smith, 104 U. S. 54; Hemphill v. Yerkes, 132 Pa. St. 545; Manhattan Bank v. Walker, 130 U. S. 267; Union Stock Yards Nat. Bk. v. Gillespie, 137 U. S. 411.

§ 20. Deposits for collection. A deposit for collection, so-called, is not in its inception, nor, in fact, until its completion, in any sense within the three forms above described, but when the fund is received from the collection it depends upon the contract as to whether it shall become a deposit of any class or be immediately remitted; so that contradictory expressions found in decisions will generally be traced to misconception of distinct things (25); that is, the agency for collection, and the authority to make disposition of the fund collected, are distinct. The former is a distinct branch of the banking business and might well be treated as no part of it.

§ 21. Bankers as collectors. It is a very common practice to indorse checks or drafts to the home bank "for collection," or to draw drafts in favor of banks for the purpose of constituting them collectors of debts. The relation is then that of agency (26). The courts are not in harmony as to whether the correspondent is the agent of the bank or of the depositor (27), or as to the responsibility and care required of the bank in choosing the correspondent (28). The funds collected are, however,

(25) Morse on Banking, sec. 188; Philadelphia Nat. Bk. v. Dowd, 38 Fed. 172; Nonotuck Silk Co. v. Flanders, 87 Wis. 237; Com'l Nat'l Bk. v. Armstrong, 148 U. S. 50; Marine Bank v. Fulton Bank, Note 1, above; St. Louis v. Johnson, 2 Dillon 241, 21 Fed. Cas. 186; National B. & D. Bk. v. Hubbell, 117 N. Y. 384; Indig v. Nat'l City Bk., 80 N. Y. 100; Importers & T. Nat. Bk. v. Peters, 123 N. Y. 272.

(26) Com'l Nat. Bank v. Armstrong, 39 Fed. Rep. 684; St. L. & S. F. Ry. Co. v. Johnston, 133 U. S. 566; Drovers' Nat. Bank v. Provision Co., 117 Ill. 105; White v. National Bank, 102 U. S. 659.

(27) See Wilson v. Carlinville Bank, 187 Ill. 224; Indig v. Nat.

City Bank, Note 25, above.

(28) Second Nat. Bank v. Merchants Bank, 111 Ky. 930.

generally credited to the transmitting bank, and in cases of insolvency of either the question arises as to the right to the fund, and here again arises the question of tracing trust funds. (See § 18, above.) The bank receiving paper for collection acquires a lien on the paper and its proceeds to the extent of the depositor's debts to it (28a).

§ 22. Certificates of deposit. It is customary for bankers when requested to give a depositor a certificate of deposit, which, unlike a check, affects the deposit, being in effect a promissory note payable on demand which may be transferred from hand to hand, or on indorsement, as the case may be. The certificate is an assignment and is charged against the account. In cases of specific deposit the agreement may be evidenced by a receipt or contract or may rest on oral contract (29).

§ 23. Pass-books. Although evidences of the state of account between the parties are not negotiable paper, they may be assigned or constitute means of assigning, or may be the evidence of a gift, but are subject to the equities existing between the original parties (30).

§ 24. Checks. A check is in form an inland bill of exchange (see Vol. VIII, Art. 1, §§ 8a, 169 and Chap. VIII), and may be made payable in every respect as a bill of exchange, except that it must be on demand. If payable in any other way than on demand, it becomes a bill of ex

(28a) Joyce v. Auten, 179 U. S. 591.

(29) Pardee v. Fish, 60 N. Y. 265; Armstrong v. American Ex. Nat. Bank, 133 U. S. 433; Crandall v. Woodhouse, Note 17, above.

(30) Smith v. Brooklyn Sav. Bk., 101 N. Y. 58; McCaskell v. Sav. Bank, Note 5, above; Witte v. Vincent, 43 Calf. 325; Com. v. Reading Sav. Bk., 133 Mass. 16.

change proper, and, as such, entitled to days of grace where these obtain, protest, notice, etc. (31).

Deposits are generally withdrawn by means of checks, and there is a diversity of opinion as to the effect of making and issuing a check. It is held in some jurisdictions that a check amounts to an assignment pro tanto of the deposit at the time of presentation (32), and that privity between the payee and the bank is created by presentation, and the payee may sue the bank for refusal to pay (33). The English doctrine is contrary to this position, and holds that there is no privity until acceptance. The weight of authority in the United States supports the latter rule (34).

The relation being that of debtor and creditor, with the obligation to honor and pay imposed by operation of law, it is difficult to see the want of privity, and the Illinois rule has much of logic and policy to commend it.

The depositor's balance does not at any time exceed the amount which the banker owes him after deducting all reasonable set-offs which are due; but this is not a matter of mere book-keeping-the facts control the books. A banker has a general lien on the funds of

(31)

Boston M. Bank v. Boston State Bank, 77 U. S. 647; Bowen v. Newhall, 8 N. Y. 190; Culter v. Reynolds, 64 Ill. 321; Harrison v. Nicollet Bank, 41 Minn. 488.

(32) It is nowhere pretended that the fund is affected before presentment. Laclede Bank v. Schuler, 120 U. S. 511.

(33) Munn v. Birch, 25 Ill. 21 is the leading case on this doctrine. The law of the place of payment governs the effect in this respect. Abt v. Am. Tr. & S. Bank, 159 Ill. 467; Met. Nat. Bank v. Jones, 137 Ill. 634; 31 Am. Dec. 406.

(34) See notes to Hemphill v. Yerkes, Note 24, above; St. Louis & C. Ry. v. Johnson, Note 26, above.

the customer to secure balances due, but no lien to secure a debt not due which will affect holders of the customer's checks (35). At common law the banker is entitled to the doctrine of set-off, and by statute in some states is established the equitable doctrine of compensation, which recognizes the banker as debtor only to the amount of the balance after deducting credits (36).

A certified check is one which has been presented and marked as good or accepted. When such an acceptance is procured by the payee of the check it is a new contract between the holder and the banker. The original drawer does not contemplate acceptance, but payment; and if, instead, the drawee take the banker's certificate on the check instead of the cash, the drawer is released, and the relations between the banker and the holder are the same as that of depositor and banker (37). When a check has been certified by a bank it is in effect an accepted bill, and the bank becomes primarily liable for it (38). See Vol. VIII, Art. 1, Chap. III, Section 3.

§ 25. Same: Memorandum checks. A memorandum check is in the form of an ordinary bank check, with the word "memorandum" written across its face. It is simply evidence of an indebtedness of the drawer to the

(35) Niblack v. Park Bank, 169 Ill. 517; Mt. Sterling Bank v. Green, 99 Ky. 262; 32 L. R. A. 568; Schuler v. Bank, 27 Fed. Rep. 424. (36) Bank of Marysville v. Brewing Co., 50 Ohio St. 151; Armstrong v. American Ex. Nat. Bank, Note 29, above.

(37) Smiley v. Fry, 100 N. Y. 262; Auten v. Crahan, 81 Ill. App. 502; Met. Nat. Bank v. Jones, 137 Ill. 634; Lynch v. Bank, 107 N. Y. 179. (38) Meade v. Albany M. Bank, 25 N. Y. 143; Born v. Ind. etc. Bank, 123 Ind. 78; Met. Nat. Bank v. Jones, 137 Ill. 634; Garretson v. North Atchison Bank, 39 Fed. 163.

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