them. Whether the bank be a national bank, a state bank, an individual, or a firm is a subordinate matter. The business done by all may be exactly the same, and it is done in substantially the same way. The legal questions arising out of such business constitute the great bulk of the law of banking, and are but little affected by special regulations, restrictions, and considerations applicable to particular kinds of banks. This fundamental part of the law will, therefore, be first discussed. The law in its particular application to banking corporations will be made the subject of later chapters. CHAPTER II DEPOSITS 4. Kinds of Deposits-General Deposit. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. Special Deposit. Deposit for Specific Purpose. Receipt and Entry of General Deposits-By Whom Received. Deposit of Paper-Deposit for Collection. Sale or Deposit for Collection. Check on Depository. Title to and Disposition of General Deposits-In General. Deposit by Trustee. Deposit by Agent. Deposit in Name of Third Person. Assignment, Attachment, etc. Payment-In General. Interest. 19. Bank's Lien or Right of Set-Off-In General. 20. 21. 22. 23. 24. Deposit Made and Debt Owing in Different Capacities. Set-Off by Depositor. Certificate of Deposit-Definition and Effect. Necessity of Demand. 28. Action for Deposit-Demand and Limitation. KINDS OF DEPOSITS 4. GENERAL DEPOSIT-Where money is received by a bank from a customer upon an agreement, express or implied, that the bank may mingle the money with its own funds and shall repay upon demand or order an equivalent amount, the transaction is termed a "general deposit." In such case the relation between the bank and its customer is that of debtor and creditor. 5. SPECIAL DEPOSIT-Where money or any other thing is received by a bank for safe-keeping and return of the identical money or thing, the transaction is termed a "special deposit." In such case the relation between the bank and the depositor is that of bailee and bailor. Where the bailment is gratuitous, the bank is liable only for such loss as results from its gross negligence. 6. DEPOSIT FOR SPECIFIC PURPOSE-Where money is received by a bank, not for deposit on general account or for safe-keeping and return, but to apply to a specific purpose, the transaction is often termed a "specific deposit." In such case, although the money is to be mingled with the bank's own funds, it is generally, but not universally, held that the bank holds the deposit or fund as a trustee. General Deposit-Relation, Between Bank and Depositor As has already been explained, the receiving of general deposits is an essential function of modern banking. The deposits, indeed, furnish the principal fund with which the business is carried on, even in the case of banks that issue bank notes. From the nature of banking, which contemplates the employment by the bank of the funds of many persons in the making of loans and discounts and the other activities of the bank, it must have the right to mingle the general deposits in a common fund, together with the moneys it may derive from its capital and other sources. Moneys received by the bank on general deposit, therefore, pass into its ownership, and the relation created thereby between the bank and the depositor is in no sense fiduciary, but is merely that of debtor and creditor. The depositor has the right to demand, not the specific coins or notes deposited, but an equivalent amount of money.2 1 Ante, p. 4. 2 Foley v. Hill, 2 H. L. Cas. 278; Marine Bank v. Fulton County Bank, 2 Wall. 252, 17 L. Ed. 785; National Bank of the Republic v. "Money, when paid into a bank," it was said in a leading case, "ceases altogether to be the money of the principal. It is then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it. The money paid in to the banker is money known by the principal to be placed there for the purpose of being under the control of the banker. It is then the banker's money. He makes what profit of it he can, which profit he retains to himself, paying back only the principal, according to the custom of bankers in some places, or the principal and a small rate of interest, according to the custom of bankers in other places. The money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with as he pleases. He is guilty of no breach of trust in employing it. He is not answerable to the principal if he puts it in jeopardy. If he engages in a hazardous speculation, he is not bound to keep it or deal with it as the property of his principal; but he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands. That being established to be the relative situation of the banker and customer, the banker is not an agent or factor, but a debtor." 3 * * * Millard, 10 Wall. 152, 19 L. Ed. 897; Balbach v. Frelinghuysen (C. C.) 15 Fed. 675; In re Salmon (D. C.) 145 Fed. 649; Collins v. State, 33 Fla. 429, 15 South. 214; McGregor v. Battle, 128 Ga. 577, 58 S. E. 28, 13 L. R. A. (N. S.) 185; Union Nat. Bank v. Citizens' Bank, 153 Ind. 44, 54 N. E. 97; Taft v. Quinsigamond Nat. Bank, 172 Mass. 363, 52 N. E. 387; Neely v.. Rood, 54 Mich. 134, 19 N. W. 920, 52 Am. Rep. 802; Bank of Marysville v. Windish-Muhlhauser Brewing Co., 50 Ohio St. 151, 33 N. E. 1054, 40 Am. St. Rep. 660; Bank of Blackwell v. Dean, 9 Okl. 626, 60 Pac. 227; In re Prudential Trust Co.'s Assignment, 223 Pa. 409, 72 Atl. 798; Pendleton v. Commonwealth, 110 Va. 229, 65 S. E. 536; Killen v. Barnes, 106 Wis. 546, 82 N. W. 536. See "Banks and Banking,” Dec. Dig. (Key No.) § 119; Cent. Dig. §§ 289-292. 3 Foley v. Hill, 2 H. L. Cas. 278, per Lord Cottenham. See "Banks and Banking," Dec. Dig. (Key No.) § 119; Cent. Dig. §§ 289-292. Same-Payment of Deposits 5 It is the right of the depositor to receive payment upon demand, unless the agreement to that effect which is otherwise implied is varied by special agreement. Usually the depositor's demand is made by drawing an order upon the bank, in the form of a check, for the payment of the whole or a part of the amount to himself, or to some other designated person, or to the order of such person, or to bearer; and the bank's honor of the check is a payment of its indebtedness to that amount. The indebtedness of a bank to a customer is thus a constantly varying amount, from time to time increased by fresh deposits, and decreased by payment of his checks. Sometimes, however, the implied agreement may be varied by the issue by the bank to the depositor of a certificate of deposit, making the entire amount payable either on demand or at a designated time, to the depositor or to his order. In this case the amount due is payable only upon surrender of the certificate to the bank, and the deposit is not subject to check." The rights of the depositor are merely those of a creditor. If the bank without his authorization pays out money and charges it to his account, he cannot follow the money and reclaim it in the hands of the person to whom it was paid, even if the latter had notice that the payment was unauthorized, since the bank has a right to pay its own money to whomsoever it may choose, and its indebtedness to the depositor is not discharged by an unauthorized payment. So, in the event of the bank's failure, the depositor is entitled to no preference over the other general creditors; although if the bank received the deposit with knowledge of its insolvency it holds 4 Post, p. 75. Post, p. 96. Post, p. 75. 8 Davis v. Smith, 29 Minn. 201, 12 N. W. 531; post, p. 148. See "Banks and Banking," Dec. Dig. (Key No.) §§ 129, 133; Cent. Dig. §§ 312, 339-352. Post, p. 349. |