for any default in the performance of its contract, and such responsibility it cannot escape by claiming that the service was rendered as a gratuity." Whether the paper is to be collected in the place where the bank is situated, or at a distance, the contract is, in like manner, to use the proper means to collect the paper, and the bank by employing subagents to perform a part of what it has contracted to do becomes responsible to its customer.

When a bank has placed an instrument in the hands of a notary for the purposes of presentment and demand, and of protest and notice of dishonor to the indorser, in case of default of payment, the bank, in most jurisdictions, is not liable for the manner in which the notary performs his duty, its only liability being in the selection of a reputable notary in whose hands to place the instrument for protest, the notary being regarded as a public officer, who, upon receiving the instrument, becomes the agent of the holder, and alone is liable to him for failure to discharge his duties." In some states, however, the notary is held to be the agent of the bank and not of the holder, and the bank is held to be liable for his negligence or default."5

27. The bank which forwards paper for collection must exercise due care in the selection of its correspondent, and it will be liable for its negligence in choosing an unsuitable correspondent." The bank which has issued a certificate of deposit, bond, or promissory note, or upon which a bill of exchange has been drawn, is not a suitable correspondent to whom another bank, with which the instrument has been deposited for collection, may forward it for the purpose of being collected; and, if it be so forwarded, and the debt be lost in consequence thereof, the bank so transmitting the check must bear the loss." It is not reasonable care in selecting an agent to collect a debt to select the debtor himself and place the evidence of the debt in his hands; the debtor cannot be a disinterested agent of the creditor."

But where the receiving bank has been guilty of no negligence in the selection of its correspondent bank, there is a conflict of authority as to whether the receiving bank shall, nevertheless, be held liable for the default of its correspondent. In some jurisdictions, the correspondent is held to be the mere subagent of the receiving bank, there being no privity between the depositor and the correspondent or collecting bank;"" therefore, if the correspondent bank be guilty of any negligence in making collection of paper, or, after having received payment thereof, become insolvent, the receiving bank, in the absence of express agreement or an established usage to the contrary, is liable to the depositor for such damages as he may sustain by the negligence of its agent, or for the money so received by its agent; the correspondent or collecting bank is under no liability to the depositor for its default, but is only responsible to the bank from which it has received the paper." This is perhaps the most reasonable doctrine, and prevails in the courts of England, the United States, and those of New York, New Jersey, Ohio, and various other states. But in other jurisdictions, the contrary doctrine prevails, the correspondent bank being held to be the agent, not of the receiving or forwarding bank, but of the depositor;" the forwarding bank, therefore, cannot be held liable to the depositor for the default of the correspondent bank, but the correspondent bank is directly liable to him." This is the rule in Connecticut, Illinois, Massachusetts, and other states.

28. When the maker of a note, or acceptor of a bill, payable at a particular bank, has funds on deposit at that bank at the time of the maturity of the instrument, and the same is presented there for payment at maturity, the bank may pay the instrument out of the deposit, the making or accepting of the instrument payable there being regarded as equivalent to a request upon the bank to do so, and the bank is liable to the depositor for its failure to so apply his

697 Biss. (U. S.) 156 (1876).

709 Cl. & Fin. (Eng.) 818 (1843); 112 U. S.

276 (1884).

716 Conn. 521 (1827).

72 23 Pick. (Mass.) 330 (1839).

deposit. This is the rule in England," and most of the United States. But, in some states, the contrary is held, and it is denied that the bank has the right to apply the money deposited in the bank by the maker of an instrument to its payment, except by the special direction of the maker and depositor, either verbally or by check or draft or some other writing."

Where a note or other security is made payable at a bank, the bank is not thereby made the agent of the payee or holder to receive payment, and any payment which it receives from the maker on such a security it receives as the maker's agent and not the payee's."

Money collected by one bank for another, placed by the collecting bank with the bulk of its ordinary banking funds, and credited to the transmitting bank in account, becomes the money of the former. Hence, any depreciation in the specific bank bills received by the collecting bank, which may happen between the date of the collecting bank's receiving them and the other bank's drawing for the amount collected, falls upon the former."

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As a general rule, the collecting bank cannot take anything else than money in payment of a collection, except by agreement with the apparent owner.' If it take anything but money, such as a certificate of deposit upon the bank where the paper is payable, it takes the risk of the payment of it." And a collecting bank has no authority to accept a partial payment," or to accept payment in exchange on New York, unless such authority have been. specially conferred.

As the receiving of the paper for collection makes the collecting bank the agent of the holder to receive payment,"" the agency may be revoked at any time before the collection has been made, unless the bank have acquired a lien on the proceeds; but revocation cannot cut off the bank's lien.

73 18 L. J. Q. B. (Eng.) 218 (1849).

74 41 Ill. 267 (1866).

757 Wall. (U. S.) 447 (1868).

762 Wall. (U. S.) 252 (1864).

772 Thomp. & C. (N Y.) 456 (1873).

787 Biss. (U. S.) 193 (1876); Zane B. & B.. Sec. 176.

79 109 Ala. 326 (1895).

807 Wall. (U. S.) 447 (1868).

29. Paper deposited with a bank for the purpose of collection is indorsed "for collection," and this is the safest course for the depositor to pursue, for by such an indorsement, or by a qualified or special indorsement to the bank, he prevents any third person from receiving the paper from the bank as a bona-fide holder for value, and thus acquiring rights enforceable against him, the depositor. If paper received for collection be placed to the credit of the depositor by the bank which receives it, and afterwards prove worthless, the bank may protect itself by canceling the credit which has been given to the depositor."1

We have seen that the bank with which paper has been deposited for collection becomes the agent of the depositor for the purposes of collection. But when collection of the paper has been made, and the money collected is commingled with the general funds of the bank, being held by it as a deposit subject to be paid at any time upon demand of the depositor of the paper, the bank having the right to make use of such money while remaining in its possession, the relation of principal and agent between the depositor and the bank ceases and becomes a relation merely of creditor and debtor; in other words, the bank holds a sum of money of which it is making use in its business transactions, and for such sum it is indebted to the depositor who has the rights merely of a general creditor of the bank.""

This distinction, in a case where the bank becomes insolvent before the funds have been paid over to the depositor, or paid out on his check, amounts to this: If the relation continued to be one of principal and agent, the bank would be regarded as holding the funds in trust for the depositor, and he would be entitled to take the whole amount thereof out of the assets of the insolvent bank before they became a fund for a pro-rata distribution among the general creditors; but, inasmuch as the relation between the depositor and the bank is not that of principal and agent, but becomes one of creditor and debtor, the depositor is entitled to no such preference, and is merely allowed to come in with the

815 Dill. (U. S.) 104 (1878).

82 148 U. S. 50 (1892).

832 Wall. (U. S.) 252 (1864).

deposit. This is the rule in England," and most of the United States. But, in some states, the contrary is held, and it is denied that the bank has the right to apply the money deposited in the bank by the maker of an instrument to its payment, except by the special direction of the maker. and depositor, either verbally or by check or draft or some other writing."

Where a note or other security is made payable at a bank, the bank is not thereby made the agent of the payee or holder to receive payment, and any payment which it receives from the maker on such a security it receives as the maker's agent and not the payee's."

Money collected by one bank for another, placed by the collecting bank with the bulk of its ordinary banking funds, and credited to the transmitting bank in account, becomes the money of the former. Hence, any depreciation in the specific bank bills received by the collecting bank, which may happen between the date of the collecting bank's receiving them and the other bank's drawing for the amount collected, falls upon the former."

As a general rule, the collecting bank cannot take anything else than money in payment of a collection, except by agreement with the apparent owner." If it take anything but money, such as a certificate of deposit upon the bank where the paper is payable, it takes the risk of the payment of it." And a collecting bank has no authority to accept a partial payment," or to accept payment in exchange on New York, unless such authority have been specially conferred.

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As the receiving of the paper for collection makes the collecting bank the agent of the holder to receive payment,' the agency may be revoked at any time before the collection has been made, unless the bank have acquired a lien on the proceeds; but revocation cannot cut off the bank's lien.