against him for the full amount, less the discount; and the banker has acquired a Right of action against all the parties to the bill On the relation of a Banker to his Customer as Warehouseman of his Plate, Jewels, Specie, Deeds, Securities, &c. 8. Besides receiving money and securities from their customers in the way of banking business, bankers also receive from their customers chests of plate, jewels, specie, deeds, securities, &c., as mere Deposits, for the sake of safe custody in their strong rooms. In this capacity they act simply as Warehousemen for their customers, and no property of any description passes to them in the goods deposited : The banker makes no charge for such a deposit, he is, therefore, a gratuitous Bailee and he is not liable for any loss that may occur by the dishonesty of a clerk or servant, provided that he was not aware of his servant's dishonesty, and that he exercises that degree of care and diligence which men of prudence would do in their own affairs Giblin v. McMullen, L. R., 2 P. C., 317; 38 L. J., P. C., 25 A banker misappropriating any such deposits to his own use would be indictable under the Larceny Act, 24 & 25 Vict. (1861), c. 96, s. 75 On the Appropriation of Payments 9. 1. If a debtor owes several debts to a creditor he may appropriate or impute any payment he makes to whichever of the debts he pleases, if he declares his intention at the time of making the payment (a) And such an appropriation may be implied from circumstances, even though not expressly declared (b) (a) Anon. Cro. Eliz., 68. Pinnel's case, 5 Co., 117b. Peters v. Smith v. Ex parte Young v. English, 7 Beav. Waters v. Tompkins, 2 C. M. Pearl v. Deacon, Newmarch v. & R., 723. Knight v. Bowyer, 4 De G. & J., 619. Clay, 14 East., 239. Taylor v. Kymer, 3 B. & Ad., 320. Wright v. Hickling, L. R., 2 C. P., 199. Nash v. Hodgson, 6 De G. M. & G., 474. Henniker v. Wigg, 4 Q. B., 792. Williamson v. Rawlin son, 10 J. B., Moore, 362. Pease v. Hirst, 10 B. &. C., 122. Wickham v. Wickham, 2 K. & J., 478 2. If the debtor makes no appropriation at the time of the payment, the creditor may appropriate it to whichever debt he pleases (b) The appropriation is not complete until he has notified it to his debtor, but when it is once notified he cannot revoke it (c) The creditor cannot appropriate the payment to an illegal debt (d) But he may do so to one upon which the remedy only is barred by a Statute, or by a legal technicality (e) If one debt be certain, and another doubtful or uncertain, he must appropriate it to the certain debt (ƒ) (a) Goddard v. Cox, 2 Stra., 1194. Bloss v. Cutting, 2 Stra., 1194. Hall v. Wood, 14 East., 243n. Kirby v. Duke of Marlborough, 2 M. & S., 18. Hutchinson v. Bell, 1 Taunt., 558. Dawson v. Remnant, 6 Esp., N. P. C., 24. Peters v. Anderson, 5 Taunt., 596. Grigg v. Cocks, 4 Sim., 438. Bosanquet v. Wray, 6 Taunt 597. Nash v. Hodgson, 6 De G. M. & G., 474 (b) Philpott v. Jones, 2 A. & E., 41. Simson v. Ingham, 2 B. & C. 65. Williams v. Griffith, 5 M. & W., 300. Nash v. Hodgson, 6, De G. M. & G., 474 (c) Fraser v. Birch, 3 Knapp., 380. Bodenham v. Purchas, 2 B. & Ald., 39. Royal Bank of Scotland v. Christie, 8 C. & F., 214. Wickham v. Wickham, 2 K. & J., 478 (d) Wright v. Laing, 3 B. & C., 165. Ex parte Randleson, 2 Dea. & Ch., 534. Ribbans v. Crickett, 1 B. &. P., 264 (e) Mills v. Fowkes, 5 Bing., N. C., 455. Philpott v. Jones, 2 A. & E., 41. Cruikshanks v. Rose, 1 Moo. & R. 100. Arnold v. Mayor of Poole, 4 M. & G., 860. Lamprell v. Billericay Union, 3 Exch., 283. (f) Goddard v. Hodges, 1 C. & M., 33. Burn v. Boulton, 2 C. B., 476. Goddard v. Cox, 2 Str., 1194. James v. Child, 2 Cr. & Jer., 678 3. If neither the debtor nor the creditor appropriates the payment, and none can be presumed from circumstances, the Law will appropriate it to the discharge of the earlier debts Clayton's case, 1 Mer., 608. Bodenham v. Purchas, 2 B. & Ald., 39. Field v. Carr, 5 Bing., 13. Pemberton v. Oakes, 4 Russ., 154. Simson v. Ingham, 2 B. & C., 65. Brooke v. Enderby, 2 B. & B., 70. Sterndale v. Hankinson, 1 Sim., 393. Smith v. Wigley, 3 Mo. & Sc., 174. Beale v. Caddick, 2 H. & N., 326. Hollond v. Teed, 7 Hare, 50. Siebel v. Springfield, 12 W. R. Q. B., 73. Re Medewe's trust, 26 Beav., 588. Merriman v. Ward, 1 J. & H., 371. Scott v. Beale, 6 Jur., N. S., 559 4. An executor cannot alter a previous appropriation of payments so as to revive a liability on the estate which has already been extinguished Merriman v. Ward, 1 J. & H., 371 5. If a customer pays in money to his bankers, specifically appropriated to certain purposes, the banker must appropriate it to those purposes only, and to no other Chartered Bank of India, Australia, and China v. Evan, 21, L. T., N. S.,407. Hill v. Smith, 12 M. & W., 618 Bankers as Agents or Correspondents of other Bankers 10. 1. Bankers not only have their own customers, but they act as agents and correspondents of other bankers. They are, therefore, the agents of an agent A customer frequently requires his banker to perform some duty for him which can only be done by his employing another banker at a distance; and even, sometimes, that agent employing another agent. In these successive agencies losses may happen quite innocently in the course of trade. In all such cases the banker originally employed is liable to his customer, because it was he who chose the agent who made the loss or who chose the agent who chose the agent who made the loss. Therefore, the first banker must bear the loss as regards his customer, and then have recourse against his own agent Lord North's case, Dyer, 161. Matthews v. Haydon, 2 Esp., N. P. C., 509. Mackersy v. Ramsays, 9 Cl. & Fin., 818 2. If a customer pays in a sum of money to his own bankers, with directions to him to remit it to another banker, and the first banker fails before he has done so, the property in it remains with the customer Farley v. Turner, 26 L. J. Chanc., 710 The Bankruptcy of a Customer: Set-off and 11. 1. Directly a customer is bankrupt he is commercially dead, and he has lost all power to deal with his property, which is gone to his creditors Consequently, a banker may receive money on a bankrupt customer's account, because he does so as trustee for the creditors; but he must not pay away any money to his customer's order after notice of his bankruptcy, and if he does so, he will have to refund it to the creditors, and he will not be allowed to prove for it under the fiat Vernon v. Hankey, 2 T. R., 113 2. Where a bank, by special agreement with a customer, retained a sum of money as security for bills discounted, and the customer afterwards becomes bankrupt, it was held entitled to retain this sum against the assignees The Chartered Bank of India, Australia, and China v. Evans, 21 L. T., N. S., 407 3. On the bankruptcy of a customer, each bill of his under discount is to be treated as a separate debt, and the bank cannot recover the full amount of the bill from the other parties, and receive the dividend upon it from the bankrupt's estate as well Ex parte Hornby, De G., 69. Ex parte Holmes, 4 Deac., 82. Ex parte Brook, 2 Rose, 334 4. A banker, knowing that his customer had committed an act of bankruptcy, took from a surety, who did not know of this act of bankruptcy, a guaranty to secure all debts then, or to become, due from the customer to a given amount; which the surety paid without specifying which portion of the debt it should be applied to. Held that it was to be applied to the portion proveable under the fiat, and not that which was not proveable Ex parte Sharp, 3 M. D. & De G., 490 5. A creditor generally may apply any security he holds to discharge whichever debt of the bankrupt debtor he pleases Ex parte Haward: ex parte Arkley, Cooke's Bank. Laws, 147, 148. Ex parte Hunter, 6 Ves., 94. Ex parte Johnson, 3 De G. M. & G., 218 6. The holder of a bill of exchange has no Lien on any securities given by the drawer to the acceptor to protect his acceptance, so long as the parties are solvent: but if they fail, the holder has then a Lien on these securities to discharge the bill 7. But this doctrine does not apply when the drawee has not accepted the bills (a); nor in any case where the creditor has not double rights against both firms (b); nor when either the drawer or acceptor is a Joint Stock Company, which has been ordered to be wound up, unless it can be shewn that the Company is insolvent (c) (a) Ex parte Waring, 19 Ves., 345 (b) Vaughan v. Halliday, L. R., 9 Ch. Ap., 561 (c) Hickie & Co.'s case, L. R., 4 Eq., 226 8. Set-off and Mutual Credit. By the common law of England if two persons were mutually indebted, and one brought an action against the other for payment of his debt, the other could not plead that the first was also indebted to him; he was obliged to pay his debt first; and then, if he chose, he might bring an action to recover payment of his own debt The Courts of Equity, however, adopting the Law of the Pandects of Justinian, recognised the principle that when two parties were mutually indebted, the debt of one should be set-off, or subtracted from the other, and the balance only should be payable. The want of this. practice in law was found, as commerce increased, to be productive of great injustice in the case of bankrupts. Persons who owed debts to bankrupts were obliged to pay their debts in full, and then they received only a dividend on what the bankrupt owed them The principle of set-off was allowed in the case of bankrupts, by Statute 4 Anne, c. 17, and afterwards in the Insolvent Debtors' Act At last two general Statutes were passed, 2 Geo. II., c. 22, s. 13, and 8 Geo. II., c. 24, s. 1, called the Statutes of Set-off, which gave a general right of set-off, or Compensation, in the case of mutual debts: that is, in the case of ascertained money demands But, under these Statutes, the respective claims must be existing legal debts: hence, a debt could not be set-off against damages sought to be recovered in an action: as, if a banker had damaged his customer's credit by his conduct, a debt owed to him by his customer could not be set-off against it. Nor can a debt barred by the Statute of Limitations be set-off against an existing one. Nor by these Statutes could a debt, only to arise at a future time, as on a bill or note not yet due, be set-off against an existing debt VOL. II. EE |