note was taken conditionally, and, if paid, and when paid, it should be treated as a payment' of the draft, would not change the effect. The note being sent for a special purpose, the bank could not, without the debtor's consent, receive, discount, and retain it for any other purpose, not without giving it the legal effect resulting from the use intended by the debtors. The same principle here applies as where a person having controversy with another concerning an open and unliquidated claim, sends him a check or order on a third person for a certain sum in full payment or in full settlement of the claim in dispute. If the check or order is accepted by the creditor, he takes it under the conditions. attached to it by the debtor, notwithstanding he does not intend to give it that effect, and so declares in receiving it. McGlynn v. Billings, 16 Vt. 329; McDaniels v. Lapham, 21 Vt. 222; Lumber Co. v. Brown, 68 Vt. 239, 35 Atl. 56. If the draft was thus paid, there was no error in its disallowance, and a decree should be rendered accordingly. But if C. P. Stevens & Co., of Troy, agreed that the bank might accept and hold the note, not as an absolute payment of the draft, but in the manner named by the president in his letters to Buck, and the bank did thus accept and hold it, the draft was not paid thereby. Whether C. P. Stevens & Co. did so agree is a question of fact, which should have been determined by the master, and, if necessary in the diposition of the case, the decree will be reversed pro forma that the report may be recommitted for such purpose."

(See Decision No. 605.)

Deposit: Executor: Trustee.

The Supreme Court of Iowa hold, reversing the lower court, that where an executor deposits money of the estate in a bank, that the money is a trust fund in the custody of the banker, and if it is mingled with other funds of the bank it can be recovered as a preference if it can be traced. The court further holds that such deposits can only be received by a bank as a special deposit and that it is unlawful for the bank to receive such funds and mingle them with the general funds of the bank. Court in this case said in part:

The

The money was deposited by the appellant in his name as executor, and the bank knew that it was a trust fund. There is no question but what the deposit was made by the appellant in good faith for the purpose of safely keeping the fund, and that at the time the bank was reputed solvent. It is conceded that an executor is the trustee of funds reaching his hands, and that the general rules governing the preservation of trust property apply to him. The appellees contend that this was a general deposit, lawfully made by the executor for the preservation of the fund, and because thereof he became a general creditor of the bank, and hence entitled to no preference. We are cited to many cases which hold that a trustee who deals with trust property honestly, and with ordinary careand prudence, discharges the full measure of his responsibility, and is not hable for losses which then occur. This seems to be an elementary rule which has long been recognized by text writers, as deducibi from the authorities. And we believe the general rule is that a trustee who has deposited funds to a trust account in a responsible bank or banking

house, if in so doing he exercised ordinary care, will not be liable for its loss. Perry, Trusts (4th Ed.), 443; 2 Story, Eq. Jur. (13th Ed.), 1269; In re Law's Estate (Pa.), 22 Atl. 831, 14 L. R. A. 103; People v. Faulkner (N. Y.), 14 N. E. 415; In re Kohler's Estate (Wash.), 47 Pac. 30, 55 Am. St. Rep. 904. But all of the cases which we have examined, as well as the text-books, lay down the rule that this exemption from liability only obtains when the money has been deposited as a trust fund. Judge Story says: In cases, however, in which a trustee places money in the hands of a banker, he should take care to keep it separate, and not mix it with his own in a common account; for if he should so mix it he would be deemed to have treated the whole as his own, and he be held liable to the cestui que trust for any loss sustained by the banker's insolvency.' 2 Story, Eq. Jur. (13th Ed.), 1270. In re Law's Estate, supra, it is said: If the subject of the trust be money, if may be deposited for temporary purposes in some responsible banking house, but in such manner that the cestui que trust may follow the fund into the hands of the bankers. If the trustee put the money to his own credit, and not to the separate account of the trust estate, . . . the trustee will be personally liable for the consequences.' In none of the cases to which we are cited is a question raised or discussed as to the nature of the deposit, — whether special or general; but, from the fact that it is the universal holding that the deposit must be to the trust account, it seems to logically follow that it must be in the nature of a special deposit, which may be reached by the cestui que trust. What reason is there for the rule that the money must be deposited to the trust account, if when it is so deposited the title passes from the trustee and it becomes mingled with the general funds of the bank? None at all, in our opinion; for, if such were the result, the trustee would then simply be mingling the trust money with that of others, instead of with his own, but with the same result, that it could not be followed in the hands of the banker by the cestui que trust. To secure protection against loss, the trustee must at all times treat the money in his hands as trust money. When he deposits it in his own name or mingles it with his own funds, he is no longer protected, because he has done an unlawful act; and it must follow that, when he makes such a deposit as will pass the title from him and into the hands of the banker, he has also done an unlawful act, and, if the banker has knowledge of it, he is in no better situation than the trustee. It cannot be said that the transaction amounted to a loan; and treated as a general deposit, the rule undoubtedly is that it would create the relation of debtor and creditor, for the money would be under the exclusive control of the banker, and would in fact be his money. In re Hunt (Mass.), 6 N. E. 554. It is clear, then, that deposit of trust money, and, such being the case, it is conceded that the judgment below is wrong. That a special deposit may be lawfully made by a trustee, we do not doubt; and where money is deposited to a trust account, and it is so understood by the banker, it should be treated by him as a special deposit, and if he mingles it with his general funds he is liable therefor, and it may be followed, and a trust impressed thereon, if it can be identified, or if it has swelled the funds of the bank. Independent Dist. of Boyer v. King, 80 Iowa, 498, 45 N. W. 908; Houghton v. Davenport, 74 Me. 590. We do not here determine whether a trustee or other person acting in a fiduciary capacity may recover in a case of this kind, where it is sought purely for his own protection and benefit, for no question of this kind is before us." (See Decision No. 606.)

Certification of Note: Rescission of Certification: Payment: Protest.

The El Capitan Cattle Company was the owner of a note for $11, 315 50-100 made by one Bradley.

Through its officers it guaranteed and assigned the note to the Zeb. F. Crider Commission Co., as collateral for a debt due from M. E. Richardson the president of the cattle company.

The cattle company was sued as guarantor of the note and was beaten in the trial court, but won on appeal. The court said in part:

"This statement of facts is sufficient to present the single legal question involved. It is this: May the officers of a corporation make a contract, binding on the company, by which its property is diverted from the use and benefit of the corporation, and applied to the payment of the individual debt of its president? It is a fundamental principle that the officers and directors of a corporation are trustees for its stockholders. Sargent v. Railroad Co. 48 Kan. 672, 29 Pac. 1063. This fiduciary relation forbids the doing of any act by them by which the corporate assets are applied to any use except such as may serve the purpose of the corporation. It is as much beyond the power of the officers or directors of a corporation to pledge its property to secure the personal debt for the payment of the obligation of a total stranger. In either case, the stockholders are equally wronged. Section 1285 of the general statutes of 1901 provides: 'No corporation created under the provisions of this act shall employ its stock, means, assets or other property, directly or indirectly, for any other purpose whatever than to accomplish the legitimate objects of its creation.' The El Capitan Cattle Company, at the time it turned over the Bradley note to the Crider Commissioner Company, did not owe the latter anything. The transaction was had purely for the accommodation of M. E. Richardson, president of the plaintiff in error company, and, in legal effect, did not differ from a lending of the credit of the corporation by an indorsement or guaranty, by plaintiff in error, of Richardson's personal note. In Am. & Eng. Enc. Law, p. 793, it is said: 'A corporation, as has been seen, may issue and indorse negotiable bills and notes whenever it is necessary or usual in the course of its authorized business; but, by the overwhelming weight of authority, a corporation has no power to issue or indorse, for the accommodation of others, bills or notes in which it has no interest, unless, as is seldom if ever the case, such power is expressly conferred.' See, also, Rahm v. Bridge Manufactory, 16 Kan. 277; Ryan v. Railway Co., 21 Kan. 365; Thomp. Corp 4637, 5739. Counsel for plaintiff in error tendered to the court requests. for instructions to the jury, in effect, that a pledge of notes belonging to the company to secure the payment of Richardson's debt did not bind the corporation, which requests were refused. In this the court erred." (See Decision No. 607.

Bill of Lading: Draft: Bank Held as Warrantor of Goods.

The Supreme Court of Mississippi have, in reversing the decision of the lower court, held that the bank that purchases and collects a draft with bill of lading attached, warrants to the payer that the goods mentioned in the bill of lading are of the quantity, kind and quality bargained

for. This is in accordance with Decisions Nos. 180, 383. (North Carolina; Texas.) The highest courts of Iowa and of Kansas hold to the contrary. (Decision No. 463, 112a, April, 1902.)

(See Decision No. 608.)

Bankruptcy: Indorser: Preference.

The Fourth National Bank of St. Louis held a note of $25,000 made the Siegel-Hillman Dry Goods Company and indorsed by Siegel & Bro. It also held out, an unindorsed note made by the Siegel-Hiliman Dry Goods Company, for $35,000. The dry goods company went into bankruptcy, and within four months prior to that time it had paid $14,600 to the bank on the indorsed note, and the indorsers had paid the balance.

The bank filed a claim in the bankruptcy proceedings for its $35,000, and the indorsers filed a claim for the $10,400 that they had paid as sureties for the bankrupt. It was held on appeal that the bank's claim for the $35,000 could not be allowed unless the $14,600 was surrendered, and it was also held that the claim of the indorsers who had paid the $10,400 could not be allowed until they or the bank returned the $14,600. (Decision No. 609-610.)

Consideration.

Daniel Butters bought and sold grain on the Chicago Board of Trade through one Congdon and another. At the close of his transactions Butters was indebted to the brokers in the sum of $3,248.19 for which he gave them his notes. Included in these notes was a charge of $31.25 for services as brokers. The city of Chicago had provided by ordinance. that no person should carry on a brokerage business in that city without first obtaining a license therefor. This firm of brokers had not obtained such a license, and the charge of $31.25 was therefore illegal. The owners of the notes sued for a balance due on them, and it was held on appeal that the charge of $31.25 which was included in the notes made them void.

The court said in part:

"The ordinance in the case at bar denounced as unlawful the prosecution of the business of a broker in grain without a license, and also provided for the infliction of a fine as a punishment or penalty for each transaction of a broker in violation of the ordinance. The particular transaction for which the sum of $31.25 was charged and included in these notes was an unlawful act, and subjected the said brokers to punishment by way of a fine. It. was illegal, and entered into and formed a part of the consideration for the promise contained in each of the notes. The rule has long been established that, if any part of an entire consideration for a promise or any part of an entire promise be illegal, the whole con

tract is vo'd. Henderson v. Palmer, 71 Ill. 579, 22 Am. Rep. 117; Tenney v. Foote, 92 Ill. 99; Metc. Cont. 246; Add. Cont. 905; Chit. Cont. 730; 1 Pars. Cont. 456; 1 Pars. Notes & B. 217; Story, Prom. Notes, 190; Byles, Bills. 211; Chit. Bills, 94; 4 Am. & Eng. Enc. Law (2d Ed.) 192; 17 Am. & Eng. Enc. Law (2d Ed.) 308; Widoe v. Webb, 20 Ohio St. 431. 5 Am. Rep. 664. The view expressed by Mr. Parsons in his work on Notes and Bills, supra, is that, if the consideration is in part illegal the whole promise is void; that an action might be brought on the original transaction on so much as was legal, but could not be maintained upon a note given for the entire consideration. This question has frequently arisen in actions on promissory notes in which the consideration was in part for groceries or other articles of merchandise and in part for intoxicating liquors sold without license, or otherwise in violation of law. In such cases it has been uniformly held that such notes are wholly void, and that no recovery could be had on them, even for the groceries or merchandise. 17 Am. & Eng. Enc. Law (3d Ed.) 308. A partial want or a partial failure of consideration avoids a note only pro tanto, but illegality in a part of the consideration upon which the promise contained in the note is founded avoids the entire promise, and tenders the entire note uncollectible. The whole consideration is the basis of the whole promise. The parts of the consideration are inseparable. Such is the doctrine of the text-boks.' This principl of law was correctly stated in the propositions of law presented by the executor, and the refusal of the Circuit Court to hold them to be correct manifests that the court did not entertain and apply correct principles of law in the determination of the controversy.'

(See Decision No. 611.)

Wrongful Dishonor of Check: Damages.

Decision No. 612 states the measure of damages where a bank wrongfully refuses to pay the check of a depositor.

The following quotation is from the opinion:

66

The depositor, by proving special loss, is always entitled to recover substantial damages. But if unable to show any special loss or injury, the better opinion seems to be that he would still be entitled to recover such moderate damages as the jury should judge to be a fair and reasonable compensation for the injury which he must have sustained, for it is almost impossible for a check to be dishonored without reflecting upon the character and credit of the drawer; the extent of the injury being within the peculiar province of the jury to determine.' This is taken from the language of Lord Campbell, C. J., in Rolin v. Steward, 14 C. B. 595, and seems to be supported by the later cases in England and in this country. In Patterson v. Bank, 130 Pa. 419, 18 Atl. 632, 17 Am. St. Rep. 778, a judgment for $300 for dishonoring a check was affirmed. The trial court charged the jury that the plaintiff was entitled to recover substantial damages, and that they might find punitive damages, 'If, under all the circumstances in the case, the defendant unnecessarily and unreasonably acted in disregard of the rights of the plaintiff, and with partiality agaginst him.' The court said: 'A bank is an institution. of a quasi-public character. It is chartered by the government for the