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cover the amount from the collecting bank," subject to its lien, if any.78

Bank's Lien

It has already been seen that a bank has a right of set-off, sometimes called a lien, by virtue of which it may apply a general deposit to the payment of a debt of the depositor." In addition to this, in the absence of anything to show a contrary intention, a bank has a general lien,so strictly speaking, upon all securities deposited with it by a customer in the usual course of business, including paper deposited for collection, and its proceeds, for any balance due the bank on general account. The lien arises from the implied understanding of

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77 Armstrong v. National Bank of Boyertown, 90 Ky. 431, 14 S. W. 411, 9 L. R. A. 553; Manufacturers' Nat. Bank v. Continental Bank, 148 Mass. 553, 20 N. E. 193, 2 L. R. A. 699, 12 Am. St. Rep. 598; Importers' & Traders' Bank v. Peters, 123 N. Y. 272, 25 N. E. 319; Nash v. Second Nat. Bank, 67 N. J. Law, 265, 51 Atl. 727. See "Banks and Banking," Dec. Dig. (Key No.) §§ 166, 167; Cent. Dig. 88 574-586.

78 Post, p. 220.

79 Ante, p. 222.

80 The right of the bank in respect to paper negotiated to and deposited with it is greater than a mere possessory lien, since the bank may sue and recover thereon at least to the amount of the balance due. Scott v. Franklin, 15 East, 428; Percival v. Frempton, 2 C., M. & R. 180; Russell v. Hadduck, 8 Ill. 233, 44 Am. Dec. 693. See "Banks and Banking," Dec. Dig. (Key No.) § 159; Cent. Dig. §§ 547-553.

81 Miser v. Currie, 1 App. Cas. 554; London Chartered Bank v. White, 4 App. Cas. 413; Brandao v. Barnett, 12 C. & F. 786; Joyce v. Cockrill, 179 U. S. 591, 21 Sup. Ct. 227, 45 L. Ed. 332; Bank of the Metropolis v. New England Bank, 1 How. 234, 11 L. Ed. 115; Kelly v. Phelan, Fed. Cas. No. 7,673; Cockrill v. Joyce, 62 Ark. 216, 35 S. W. 221; Wood v. Boylston Nat. Bank, 129 Mass. 358, 37 Am. Rep. 366; Gibbons v. Hecox, 105 Mich. 509, 63 N. W. 519, 55 Am. St. Rep. 463; Greene v. Jackson Bank, 18 R. I. 779, 30 Atl. 963.

Under an Idaho statute, declaring that a banker has a general lien dependent on possession on all property in his hands belonging to a customer for the balance due in the course of the business, the lien does not include stocks of merchandise, etc., which cannot con

the parties that credit is to be given in the course of dealings between them by the bank to the customer upon the faith of the securities; and, therefore, the lien does not arise where a particular course of dealing or special circumstances are inconsistent with such a lien, as where the deposit is for a specific purpose,82 or where securities are accidentally left in the possession of the bank after its refusal to discount or loan upon them, or where securities are pledged for the payment of a particular loan or to protect the bank in particular transactions.84

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veniently pass into the actual possession of the banker. In re Gesas, 146 Fed. 734, 77 C. C. A. 291.

Under a similar statute, it was held that a banker, in addition to rights granted by assignment of a life policy, had a lien for the insured's overdraft on a paid-up policy issued to the banker in lieu of the assigned policy. Crane v. Cameron, 71 Kan. 880, 81 Pac. 480, 87 Pac. 466. See "Banks and Banking," Dec. Dig. (Key No.) § 159; Cent. Dig. §§ 547-553.

82 Reynes v. Dumont, 130 U. S. 354, 9 Sup. Ct. 486, 32 L. Ed. 934; Fitzgerald v. State Bank, 64 Minn. 469, 67 N. W. 361; Loyd v. Lynchburg Nat. Bank, 86 Va. 690, 11 S. E. 104. See "Banks and Banking,” Dec. Dig. (Key No.) § 159; Cent. Dig. §§ 547-553.

83 Lucas v. Dorrien, 7 Taunt. 278; Bank of Montreal v. White, 154 U. S. 660, 14 Sup. Ct. 1191, 26 L. Ed. 307; Hanover Nat. Bank of New York v. Suddath, 215 U. S. 110, 30 Sup. Ct. 58, 54 L. Ed. 115; Continental Nat. Bank v. Weems, 69 Tex. 489, 6 S. W. 802, 5 Am. St. Rep. 85. See "Banks and Banking," Dec. Dig. (Key No.) § 159; Cent. Dig. §§ 547-553.

84 Reynes v. Dumont, 130 U. S. 354, 9 Sup. Ct. 486, 32 L. Ed. 934; Biebinger v. Continental Bank, 99 U. S. 143, 25 L. Ed. 271; Armstrong v. Chemical Nat. Bank, 41 Fed. 234, 6 L. R. A. 226; Masonic Sav. Bank v. Bangs' Adm'r, 84 Ky. 135, 4 Am. St. Rep. 197; Teutonia Nat. Bank v. Loeb, 27 La. Ann. 110; President, etc., of Neponset Bank v. Leland, 5 Metc. (Mass.) 259; Brown v. New Bedford Inst. for Sav., 137 Mass. 262; Furber v. Dane, 203 Mass. 108, 89 N. E. 227; Duncan v. Brennan, 83 N. Y. 487; Wyckoff v. Anthony, 90 N. Y. 442; Bacon's Adm'r v. Bacon's Trustees, 94 Va. 686, 27 S. E.

In such case an additional general lien may be expressly created.

COLLECTION BY CORRESPONDENT BANK

55. RELATION BETWEEN DEPOSITOR AND DEPOSITARY AND COLLECTING BANKSWhere paper is to be collected at a different place from that in which the depositary bank is situated, and it forwards the paper to a correspondent to make the collection, in the absence of an express agreement between the depositor and the depositary bank in respect to its undertaking, different rules prevail in different jurisdictions as the relations created between the depositor and the banks. By some courts it is held that the depositary bank is responsible to the depositor for the acts of its correspondent in making the collection, and for the proceeds of the paper if it be collected by the correspondent, and that the correspondent is responsible directly to the depositary bank, subject to the exception that if the depositor revokes the agency, or the depositary bank becomes insolvent, the correspondent is responsible for moneys which it has collected directly to the depositor. By other courts it is held that the

Merchants' Nat. Bank of Savannah v. Demere, 92 Ga. 735, 19 S. E. 38.

Notes sent to a bank by its correspondent for discount and credit, which such bank refuses to rediscount, cannot be held by it as collateral to the payment of a loan voluntarily made to cover an overdraft, by virtue of an agreement embodied in a printed form prepared by such bank, and in general use by it, which gives it power. to appropriate any securities "deposited with said bank, or which may be in any wise in said bank or under its control, as collateral security for loans or advances already made or hereafter to be made to or for account of" its said correspondent by said bank, "or otherwise." Hanover Nat. Bank of New York v. Suddath, 215 U. S. 110, 30 Sup. Ct. 58, 54 L. Ed. 115. See "Banks and Banking," Dec. Dig. (Key No.) §§ 159, 179; Cent. Dig. §§ 547-553, 667–683.

depositary bank is responsible to the depositor only for due care in selecting a collecting bank and in forwarding the paper, and for the proceeds of the collection when it has received them by remittance or proper credit from its correspondent, and that the collecting bank is responsible directly to the depositor for its acts in making the collection, and for the proceeds when collected until it has duly accounted therefor to the forwarding bank.

56. SET-OFF OF COLLECTING BANK AGAINST FORWARDING BANK-In the absence of directions to the contrary, a bank to which paper was forwarded by an agent bank for collection may pay the proceeds to the forwarding bank, if it be solvent, by setting off the amount collected against a debt to it from that bank and giving it credit in account, but if the forwarding bank be insolvent, the collecting bank must pay the proceeds to the depositor, unless it has a lien thereon.

57. LIEN OF COLLECTING BANK-When paper is forwarded by one bank to another for collection, unless the collecting bank has notice, by the form of the indorsement or otherwise, that the forwarding bank is not the owner of the paper, the collecting bank has a lien thereon, and on the proceeds, not only for any advances made upon the paper, but, in most jurisdictions, for any general balance against the forwarding bank which has been allowed to remain to be met by the proceeds of paper to be transmitted for collection in the usual course of business.

Collection by Correspondent Bank-In General

Where a bank receives from a correspondent for collection paper payable at a distant place, the parties necessarily contemplate that the bank shall send the paper to the place where

it is payable, and shall employ some bank or other agent there to collect and remit the proceeds of the collection. So far as the debtor or drawee is concerned, such agent is the agent of the customer, and payment to the agent is binding upon him. The courts are divided, however, upon the question whether privity of contract is created between the principal—that is, the customer- and the collecting bank, or subagent, so that the collecting bank is directly responsible to the customer, and the depositary bank, or agent, is responsible only for due care in selecting the subagent, or whether the subagent is agent of and directly responsible to the depositary bank, and it is responsible to the customer for the neglects and defaults of the collecting bank.

No difficulty arises if the parties have expressed their intention in this regard, as where it is agreed that the depositary bank, in receiving the paper for collection, assumes no responsibility beyond care in selecting agents at other points, and in forwarding to them.85 Frequently a notice to this effect is contained in the customer's passbook in which the deposit for collection is entered.86 In the absence of any express or implied agreement, the answer to the question is made to depend upon the understanding to be implied from the deposit of the paper for collection, and in their interpretation of this transaction the courts have taken opposite views, and are about equally divided. By some courts, including the Supreme Court

85 McBride v. Illinois State Bank, 138 App. Div. 339, 121 N. Y. Supp. 1041; San Francisco Nat. Bank v. American Nat. Bank of Los Angeles, 5 Cal. App. 408, 90 Pac. 558 (local usage). See, also, Holder v. Western German Bank (C. C.) 132 Fed. 187. Cf. First Nat. Bank of Omaha v. First Nat. Bank, 55 Neb. 303, 75 N. W. 843. See "Banks and Banking," Dec. Dig (Key No.) §§ 156, 171, 172; Cent. Dig. §§ 539-546, 597-628.

26 In re State Bank, 56 Minn. 119, 57 N. W. 336, 45 Am. St. Rep. 454. See "Banks and Banking," Dec. Dig. (Key No.) §§ 156, 171, 172; Cent. Dig. §§ 539-546, 597–628.

87 Where a bank in Illinois sent for collection to a North Carolina bank a draft drawn on a bank of that state, the liability of the

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