ment, would prima facie amount to such election. Though the bank might be allowed to prove, if it were able, that it undertook to act only as agent for the customer, and to the end of serving interests of his which, but for this action, must have been imperilled or lost.

Where a Check is Deposited by the Holder in the Bank on which it is Drawn.

It will often happen that the holder and the drawer of a check are customers at the same bank, and therefore that the check is deposited in the bank against which it is drawn. Slight dif ferences in the circumstances in such cases as these may make very considerable differences in the rights and liabilities of the parties. But the abstract doctrines of the law in the premises seem to be quite plain. If the bank credits the depositor with the amount of the check, and the transaction is in perfect good faith on the part of the depositor, the act of crediting is equivalent to, and for all legal purposes is identical with, an ordinary cash payment.1 If the deposit was not tainted with fraud, the bank cannot subsequently revoke the credit, because it finds that it was erroneously given, when the drawer had not funds enough.2 But if there has been any fraudulent or improper conduct on the part of the depositor, as if he knew at the time of deposit that the check was an overdraft, the bank may afterward revoke the transfer of credit to him upon the same principle upon which it has been already stated that it could revoke and recover a payment made under the same circumstances.

If the bank, as probably happens in the great majority of cases, simply takes the check without especial remark, and notes it in the depositor's bank-book, thus treating it in every respect as if it were a check upon any other bank instead of upon itself, these facts do not create a payment or render 1 Bolton v. Richard, 6 Term, 139.

2 Levy v. The Bank, 4 Dall. 236; 1 Binn. 36.

3 Peterson v. Union National Bank, 52 Penn. St. 206.

the bank liable for the amount to the depositor. The officers having dealt with the check in the ordinary form have placed the bank only under the ordinary obligation, to wit: that of collecting the check in due course of business for the benefit of the depositor. The collection is not complete and the bank does not become indebted to the depositor for the amount until the credit has been actually transferred.1 But nevertheless the depositor enjoys one advantage in this case which he would not enjoy if the check were upon another bank. The duty of applying the funds of the drawer to meet it accrues as soon as the bank receives it. If there are then, or if there are subsequently deposited, while the bank holds possession of the check, funds to the credit of the drawer, the bank is bound to apply them to the payment of this in preference over any other check which shall be presented or any other claim or lien which shall accrue after the deposit of this check. Liens already fastened upon the drawer's balance will still have precedence. Though where the drawer was indebted to the bank at the time, and the bank without mentioning this fact simply promised the depositor to hold the check for the purpose of applying upon it any deposits that might be thereafter made, it was held that such subsequent deposits must be first devoted to the payment of the check, although the indebtedness still remained undischarged and unsecured.2 But if at the time the holder hands in the check, he demands to have it placed to his credit, and is informed that it shall be done; or if he holds any other species of conversation which practically amounts to demanding and receiving the promise of a transfer of credit, as equivalent to an actual payment, the effect will be the same as if he had received his money in cash, and the bank's indebtedness to him for the amount will be equally fixed and irrevocable.3

1 Peterson v. Union National Bank, 52 Penn. St. 206; Boyd v. Emmerson, 2 Ad. & E. 184; Kilsby v. Williams, 5 Barn. & Ald. 815.

2 Boyd v. Emmerson, supra.

3 Ibid. (per Lord Denman, C. J.).

21

CHAPTER VI.

COLLECTION.

The Undertaking generally.

COLLECTION upon notes, drafts, bills of exchange, and in short upon every species of business paper, is a duty very commonly undertaken by banks on behalf of their customers. Collection upon checks is probably a universal necessity of the business. Specific power to assume this duty is not usually conferred in the charter of a banking corporation. It is not necessary that it should be so, since the courts regard it as a part of the banking business. After the collection is made the bank becomes a simple contract debtor for the amount, less the commission, if any has been charged. If the party for whom the collection was made is a regular depositor, the sum will be properly placed to his credit upon his general deposit account, unless a peculiar usage or special instructions demand some different course of dealing. If the party has no deposit account the bank simply owes him the amount on demand. But it would seem that if it chooses the bank may credit him with it as if it were an ordinary payment on deposit and thus initiate and establish the relation of banker and depositor between itself and him. For though this may operate to place the bank under obligations and duties towards him which would not otherwise have existed, yet these are all for his advantage, and his own right to withdraw the whole sum instantly upon demand is in

1 Tyson v. State Bank, 6 Blackf. 225.

2 Marine Bank v. Rushmore, 28 Ill. 463.

no respect altered, if he does not wish to ratify the option of the bank and to become an ordinary depositor.1

Sometimes barks charge a commission for collection where the business is required to be done in distant places. Sometimes they do it without charge, trusting to the indirect profits and advantages which may be expected to accrue by reason of the chance of the money being left uncalled for during a few days following its actual receipt, and their consequent use of it for that time; or from the hope of attracting customers and increasing their business by offering such facilities without extra charges. These motives of self-interest, which must always be supposed to influence the bank when it consents to collect without direct compensation, are regarded as a sufficient and valuable inducement for the undertaking to collect; and prevent the bank from availing itself of the plea that its contract was without consideration.2

A bank receiving paper for collection is generally the agent of the party from whom it receives it; sometimes of the real owner, if he stands further removed in the chain of title. But in no case and in no sense is it the agent or trustee for the maker of the paper, or for the party who is indebted thereon. If the debtor simply pays into the bank the amount due and takes up his paper, he is thereby fully acquitted and absolved. He is not responsible for the subsequent fate of the sum and is not bound to inquire whether it comes to the hands of the person entitled to it, or is lost, wasted, or embezzled in the bank. As he is under no liability of this description, so it follows that he has no right of action against the bank if it fails to pay over properly. The whole business is completed, so far as he is concerned, by his payment and the contem

1 Tinkham v. Hayworth, 31 Ill. 519.

2 See remarks per Lord Loughborough in Shiells v. Blackburne, 1 H. Bl. 158 ; the analogy is sufficiently strong to make this case an authority for the doctrine of the text.

The question who may, as principal, hold the bank, as agent is discussed hereafter, pp. 326, 341.

poraneous surrender, cancellation, or destruction of the evidence of his debt.1

The only method which suggests itself by which the collecting bank can become in some sort the apparent agent of the debtor upon the paper is one which occurred in New York, and there led to a lawsuit. It was as follows: A. made his promissory note, payable at the C. bank on July 12. Shortly before this date he procured from the G. bank, which had a credit on account with the C. bank, a check upon the C. bank, which he forwarded to that bank for the purpose of meeting his note. The check came to the hands of the cashier at the C. bank, July 8. The C. bank failed, July 10. The note was presented there for payment, July 12, when payment was refused. The court held that the cashier of the C. bank was the agent of A. for the purpose of procuring the payment of his note by means of this check: that the circumstances of its receipt by the cashier operated to effect no assignment of funds in the C. bank in favor of A., and that he had no preferred claim against its assets. In this case not strictly the bank, but the cashier, was the agent of A. The loss fell wholly upon A. For having bought a check from the G. bank which was still good when it reached the C. bank, he could not of course look to the G. bank for any reimbursement. He took the risk of the solvency of the C. bank during the interval which must elapse before his note ought to have been presented, and also of the accuracy and honesty of the conduct of that bank, or of its cashier, in appropriating the check, or the credit or proceeds which he was entitled to thereupon, to the payment of his note. A miscarriage in any of these risks was his individual loss.

A note given in charge to a bank for collection, and so indorsed as to place the apparent and technical title in the bank, if not withdrawn after non-payment and protest, may be sued upon by the bank in its own name. But unless specially so

1 Smith v. Essex County Bank, 22 Barb. 627.

2 Chapman v. White, 2 Seld. 412.