Sim Banking-Law-Journal 1923-08 40 8

THE BANKING LAW JOURNAL
DEVOTED TO THE LAW OF BANKING AND

NEGOTIABLE PAPER
JOHN EDSON BRADY, EDITOR
Vou. XL AUGUST, 1923 No. 8
CANCELLATION OF BANK DRAFT AT REQUEST OF

PURCHASER
When a person purchases from a bank a draft, payable to the
order of a third person, and returns later to the bank with the draft,
unindorsed by the payee, requesting that the draft be canceled and
the money paid for it refunded, what course should the bank pursue?
The answer depends upon whether the draft has, in the meantime,
been delivered to the payee. Before canceling the draft and returning
the money, the bank should ascertain whether such delivery has been
made. It is possible in a ease of this kind for the purchaser to
deliver the draft to the payee and thereafter wrongfully regain pos-
session of it. If the bank finds this to be the situation, it should
refuse to cancel the draft. By paying the draft in such circumstances
the bank would render itself liable to the payee. But if the bank
finds that the draft has never been delivered to the payee, or his
authorized agent, it will incur no liability in canceling the draft as
requested. If it can get no satisfactory information on the point it
should, for its own protection, refuse to cancel.
The above statements apply also in a case where the purchaser of
a draft dies before delivery to the payee and the request for can-
cellation comes from the executor or administrator of the purchaser.
A question of this character arose in a case recently decided by
the Supreme Court of Oregon, Gellert v. Bank of California, National
Association, 214 Pac. Rep. 377. In this case it appeared that one
Jennie Posner purchased two drafts from the defendant bank. The
drafts were drawn on J. P. Morgan & Co., the New York corre-
spondent of the defendant bank. One of the drafts was made payable
to the order of Flora Levor, and the other to the order of Mrs.
E. W. Posner. The drafts were drawn in this manner because they
were intended by the purchaser to be gifts to the payees named in
them.
Jennie Posner did not transmit the drafts to the payees, but re-
mained in possession of them until the time of her death, which
occurred eight days after the drafts were drawn and issued. After
527
528 THE BANKING LAW JOURNAL
the death of Jennie Posner the drafts came into the possession of the
plaintiff, Sarah Gellert, who was executrix under the will of the
deceased. She tendered the drafts to the bank for the purpose of
cancellation, and requested that the account of Jennie Posner be
credited with the amount of the drafts or that the bank pay that
amount to the plaintiff as executrix. The bank refused to grant the
plaintiff’s request, and she then brought an action against the bank
to recover the amount of the drafts with interest.
It was held that the plaintiff was entitled to recover. The, in-
tended gift of the drafts to the payees had never been completed by
the delivery of the drafts to the payees. When a person, who intends
to make a gift, dies without accomplishing everything that must be
done to make the gift complete, the intended donee acquires no interest
in the subject matter of the gift. A draft drawn in favor of a
specified payee but never delivered to the payee is an incomplete gift.
If.the purchaser of such a draft dies without making delivery of it
to the payee, the latter has no interest in the draft. It belongs to the
estate of the purchaser.
The first question discussed by the court pertained to the ownership
of the drafts. It was held that the estate of the decedent owned them.
Although the decedent intended to give the drafts to the payees named
in them, she was prevented by death from completing the gift. It
‘ then became impossible to give the drafts or the money represented
by them to the intended donees.
Since the estate owned the drafts, the plaintiff as executrix was
entitled to receive the money represented by them. The question
then arose as to whether the defendant or J. P. Morgan & Co. should
pay the amount of the drafts.
It was held that J. P. Morgan & Co., the drawee, could not be
required.to pay, since the drafts had never been accepted by the
drawee. A draft is in the nature of a bill of exchange and is subject
to the rules governing that species of negotiable paper. The rule
applicable in this instance, as stated by the court, is that ‘‘the liability
of the drawee to the payee begins with acceptance of a bill of exchange
by the drawee and until a bill of exchange is accepted the drawer is
the primary debtor.’’ Under this rule the drawee of the drafts in
question could never become liable thereon, since the payees named in
the drafts were prevented by the death of Jennie Posner from ever
acquiring the right to present them for acceptance or payment. The
plaintiff could never demand payment of the drawee because she was
not named as payee in either of the drafts. A suit by her against
J. P. Morgan & Co. would therefore be futile.
The impression must not be gained that the refusal of the defend-
ant. bank to cancel the drafts was due to any desire on the part of the
THE BANKING LAW JOURNAL 529
bank to retain the money received from the decedent. Nor was it
due to a desire to make it difficult for the plaintiff executrix to
recover the money paid for the drafts.
On the contrary, it is apparent that the bank was acting for its
own protection and for the purpose of secruing an authoritative state-
ment as to the duties and liabilities of a bank in a situation of this
kind. The defendant, Bank of California, has rendered a distinct
service to banks throughout the country in carrying this case to the
Supreme Court of Oregon. The question presented is one which has
undoubtedly arisen often in the past and one which is bound to come
up again from time to time. And, so far as our knowledge goes, the
question, in the form in which it was here presented, is now decided
for the first time.
In the argument in behalf of the defendant bank, it was con-
tended that any conclusion which would permit the plaintiff to recover
the money involved, without requiring her to go to New York and
there attempt to recover money from J. P. Morgan & Co., would
‘‘ereate confusion in banking eircles and make it necessary for a bank
selling drafts to keep two reserves to meet them; one at its own place
of business and another with the drawee bank.’’ The court answered
this contention in the followign words:
‘“*In our view such a result would not follow. If at the

time of selling a draft a drawer actually sent the money to the
drawee to enable the latter to meet that draft, the drawer could
certainly be entitled to say to the purchaser demanding a return
of his money and the cancellation of the draft: ‘You must wait
until the money can be returned by the drawee.’ And, further-
more, the purchaser would in the very nature of things be
required to pay the reasonable costs of procuring the return
of the money. In the instant case, however, the process thus
far has been nothing more than a matter of bookkeeping. The
defendant bank had on deposit with J. P. Morgan & Co. ‘a sum
of money largely in excess of’ the amount of the two drafts
applicable to the payment of any drafts or demands that might
have been made by the defendant bank upon J. P. Morgan &
Co. The defendant bank, it is true, notified J. P. Morgan & Co.
of the drawing of the drafts, and ‘credited J. P. Morgan & Co.
upon its books for the amount of the drafts; but his book entry
was only provisional and did not forever preclude the defendant
bank from countermanding the drafts or of itself irrevocably
reduce pro tanto the amount of the debt owing from the
drawee to the drawer on account of the funds deposited with the
drawee for meeting drafts. The entry was only conditional; it
was not beyond recall. The bank was not and it is not pre-
eluded from canceling the entry. American Exchange National
Bank v. Loretta Gold & Silver Mining Co., 165 Ill. 103, 112, 46
N. E. 202, 56 Am. St. Rep. 233. If the moneys are to be re-
turned to the drawer by the same process which was employed

in transmitting them to the drawee, then it will be a mere
matter of bookkeeping; but whether the moneys are actually
returned in specie to the drawer or an adjustment is made by
means of bookkeeping, the drawer is entitled to reimbursement
from the plaintiff for whatever loss or damage it has sustained.’’
The court rendered a conditional judgment in favor of the plain-

tiff, directing that the money should be payable upon the surrender
of the drafts in court for the use of the defendant.
The judgment included interest from June 2, 1920, the date when
the plaintiff tendered the drafts to the bank for cancellation and
demanded a return of the money paid for the drafts. This was
allowed despite the bank’s contention that, when the right to recover
money is in good faith denied, interest should not be allowed on the
demand prior to judgment.
BEEREEE
COLLECTING BANK LIABLE FOR NEGLIGENCE OF ITS

CORRESPONDENT IN MAKING COLLECTION
A bank is required by law to use due diligence in collecting checks
deposited with it for collection. What due diligence is depends upon
the particular circumstances in each case.
In Perry State Bank v. Myers, 251 8S. W. Rep. 685, a case decided by
the Supreme Court of Arkansas, a bank was held to have failed to use
due diligence in collecting a check deposited with it for collection.
The facts were these. On December 14, 1920, Myers, the plaintiff,
drew a check for $240 on the Bigelow State Bank. At that time he had
on deposit in that bank sufficient funds with which to meet the check.
On the same day, Myers deposited the check for collection with the
Perry State Bank, the defendant in this action. That afternoon, the de-
fendant bank mailed the check to its correspondent bank at Little Rock
for collection. The correspondent bank received the check on the 16th,
and on the same day mailed it to the drawee, the Bigelow State Bank.
The check should have been received by the Bigelow Bank on the 17th
during banking hours. The Bigelow Bank did not acknowledge the re-
ceipt of the check or pay it, and the correspondent bank failed to de-
mand the return of the check. On December 21st, five days after the
check was mailed at Little Rock, the correspondent bank sent a tracer
after it. On December 22nd, the Bigelow State Bank became insolvent
and was taken over by the bank commissioner of Arkansas. The insolvent
bank paid all checks presented to it over the counter until the commis-
sioner took charge, and all checks which were mailed to it until two or
three days before it failed. The check was found in the Bigelow Bank
and returned to the bank in Little Rock on December 23rd. That bank
promptly returned the check to the defendant bank, which immediately ’
returned the check to the plaintiff and charged it back to his account.
The plaintiff then brought action against the Perry State Bank to
recover the amount of the check. He contended that the defendant had
been negligent and careless in not collecting the check before the Bigelow
Bank failed. .
The defendant denied that there had been any negligence or care-
lessness on its part. The verdict, nevertheless, was in favor of the plain-
tiff for the amount claimed.
The Supreme Court in reviewing the case found that there was suf-
ficient evidence to warrant a jury finding that the defendant was negli-
gent. It based its decision on the fact that the corresponding bank failed
to press the drawee for payment until payment was refused.
The unexplained delay of the correspondent bank in tracing the
check, and in pressing the drawee for payment was evidence of negligence
on the part of the correspondent bank. The negligence of the correspond-
ent bank, however, was held, in this case, to be the negligence of the for-
warding bank which selected the corresponding bank as its agent.
The court in finding that there was evidence of negligence on the
part of the defendant bank said:
‘‘The record is silent as-‘to why no inquiry was made concerning the
non-payment of the check. The jury might have concluded that it was
negligence on the part of the corresponding bank not to inquire concern-
ing the check when it failed to receive a response by return mail from
the Bigelow State Bank. The negligence of the corresponding bank was
necessarily the negligence of the sending bank. It had selected the cor-
responding bank as its agent for the collection of the check. The unex-
plained silence of four or five days was a matter for the jury to consider
in determining whether the corresponding bank used due diligence in
attempting to collect the check.
‘‘The corresponding bank not only owed the drawer the duty of pre-
senting the check for payment within a reasonable time, but also the
duty of pressing payment upon the drawee until payment was refused,
and to promptly notify the sending bank, and through it the drawer, of
the refusal to pay on the part of the drawee. The failure to do these
things was a matter to be considered by the jury in determining whether
due diligence had been used in attempting to collect the check. It can-
not be said, as a matter of law, that the failure to collect the check was
not due to appellant’s (defendant bank’s) negligence. This was the only
issue arising out of the pleadings and evidence, and the court submitted
that issue to the jury under correct instructions.’’
FAILURE OF BANK TO RETURN DISHONORED CHECK

WITHIN TWENTY-FOUR HOURS CONSTITUTES
A CERTIFICATION
It has been held in a recent Texas decision that, where a drawee
bank retains a check which has been presented to it for payment for more
‘than twenty-four hours after delivery, without giving notice of dishonor
to the payee, and thereafter returns the check unpaid for lack of funds,
the bank is liable to the payee for the amount of the check. The decision
is Commercial State Bank of Forth Worth v. Harkrider-Keith-Cooke
Company, 250 S. W. Rep. 1069.
In this ease Harkrider-Keith-Cooke Company, the plaintiff, held a
check for $157.90 drawn on the defendant Commercial State Bank of
Fort Worth, Texas. On April 19, 1920, the plaintiff placed the check
with the Fort Worth National Bank for collection. About noon on that
day the check was delivered to the defendant bank through the clearing
house. The following day was a bank holiday. The bank held the check
without acting upon it until April 23rd at 11 o’clock, when the check
was returned through the clearing house to the Forth Worth National
Bank marked ‘‘insufficient funds.’’ The plaintiff had no notice of this
until Saturday, April 24th. The following Monday the drawer of the
check made an assignment for the benefit of creditors. By the failure of
the bank to return the check accepted or non-accepted within twenty-four
hours after delivery the plaintiff was prevented from protecting himself.
The plaintiff brought this action against the bank to recover the
amount of the check. It was held that the bank was liable.
This decision rests upon section 137 of the Negotiable Instruments
Law, which provides that ‘‘where a drawee to whom a bill is delivered
for acceptance destroys the same, or refuses within twenty-four hours
after such delivery, or within such other period as the holder may allow,
to return the bill accepted or non-accepted to the holder, he will be
deemed to have accepted the same.”’
A check is regarded as a bill of exchange payable on demand, and is
subject to the rule that the drawee will be deemed to have accepted
a bill which he refuses to return within twenty-four hours after its de-
livery for acceptance. In other words, such action on the part of a
drawee bank constitutes a certification of the check.
In this connection the question arises as to what constitutes a refusal
to return the bill. It has been held in New York that where a bank
merely holds the bill and no demand is made for its return, there
is no refusal, and, consequently, no certification.
The Texas decision under consideration holds, however, that mere
-retention of the bill by the drawee bank is sufficient to constitute a re-
fusal. The following quotation is taken from the court’s opinion:
‘It follows that, upon the deposit of the check in question by the
Harkrider-Keith-Cooke Company in the Fort Worth. National Bank, the
latter was at least the agent of the former for its collection and that had
the defendant, the Commercial State Bank, in due course, returned the
check as contemplated by the rules of the clearing house association and
the spirit of the Negotiable Instruments Act, the Harkrider-Keith-Cooke
Company would have had notice of its dishonor and been enabled to avail
itself of the remedies for the collection of the check against the drawer,
which, as shown by the findings and evidence, made an assignment of all
of its property prior to any opportunity on the part of the payee, the
Harkrider-Keith-Cooke Company, to protect itself, and we see no reason
why the failure of the appellant bank to so return the check and so give
notice of its dishonor does not make it liable to the appellee.’’
Another Texas decision, involving a question of the same character,
is Bull v. Novice State Bank, 250 S. W. Rep. 232.
In that case the plaintiff, R. C. Bull, deposited a check in the Novice
State Bank on November 18, 1920. The check was drawn to the plain-
tiff’s order by F. C. Behrend on the First National Bank of Coleman,
Texas. The Novice State Bank credited Bull’s account with the amount
of the check and forwarded the check through a correspondent bank to
the drawee. Several days later the check was returned dishonored to the
defendant bank, which charged back the amount of the check, .$154.84, to
the plaintiff’s account. On the back, the check was marked paid. It
also bore the notation ‘‘Payment stopped, R. C. Bull. Marked paid in
error. Canceled in error.’’ On November 29th, the amount of the check
was charged to the account of the drawer by the drawee bank. On De-
cember 4th, his account was credited with the same amount. Between
these dates, the check had been mailed to the drawer, who returned it to
drawee with the request that it be returned with payment refused.
The case presents this question: Did the action of the drawee, First
National Bank of Coleman, constitute an acceptance or certification of
the check? The court decided that it did. Since the check had been
certified, the defendant bank had no right to charge the plaintiff’s ac-
count with the amount of the check. By the drawee’s certification of
the check, the plaintiff was discharged from liability on his indorsement.
This is by virtue of § 188 of the Negotiable Instruments Law which pro-
vides that where the holder of a check procures it to be accepted or
certified, the drawer and all indorsers are discharged from liability
thereon.
While there was evidence that the drawee bank had certified the
check, the court also based its opinion on the fact that the bank retained
the check for more than twenty-four hours. There was no actual re-
fusal within that period to return the check certified or not certified.
The court, nevertheless, says that by retaining the check for more than
twenty-four hours, the bank is presumed to have accepted it.
The following paragraphs are taken from the opinion of the court:
‘* We are also of the opinion that the First National Bank of Coleman,
drawee of said check or bill, is presumed to have accepted said bill of ex-
change under the provisions of sections 136 and 137 of the Negotiable
Instruments Act above quoted. A drawee of a check or bill of exchange
has 24 hours after presentment to accept or refuse the same, and, if it
fails or refuses to accept or return same within such time, it will be pre-
sumed to have accepted said check or bill, and thereby becomes primarily
liable for its payment, and the indorsers are discharged from further
liability thereon. So in this case, aside from the fact that the evidence
clearly shows that the drawee, First National Bank of Coleman, ac-
cepted said check or bill when it was presented, and thereby became
primarily liable for its payment, it is further liable under said sections
136 and 137, above quoted, by reason of having retained possession of the
check for more than 24 hours after it was presented and received by it.
The testimony shows that the check was presented to the First National
Bank of Coleman, the drawee, on the 29th of November, 1920, and that
it was in its possession, or in the possession of the drawer, to whom said
drawee delivered it, until December 4, 1920, when it was returned
through the bank presenting same, with the notations above indicated,
and by such retention for more than 24 hours it is presumed to have ac-
cepted the check and thereby became primarily liable for its payment.
‘*We do not hold that this presumption might not be overcome, but
the record does not disclose any effort on the part of drawee bank to
overcome such presumption ; but it is disclosed that it-aeccepted the check,
charged it to the account of the drawer, mailed it to the drawer after
having marked the same ‘‘Paid,’’ and at least seven days thereafter the
drawer testifies that he returned the check to the drawee bank, and re-
quested that it be returned, payment being refused, which clearly
establishes the fact that appellant had accepted said check, and became
primarily liable for its payment.”’
SEER
PRESENTMENT OF POSTDATED CHECK UNNECESSARY
WHEN PAYMENT STOPPED BEFORE MATURITY
Ordinarily, presentment of a bill of exchange for payment is neces-
sary in order to charge the drawer. A situation may arise, however,
where no presentment is required.
A ease of this kind is discussed in a recent decision of the Supreme
Court of South Carolina, Manos v. Eassy, 117 8. E. Rep. 223.
In that case the defendant, Eassy, issued his check, payable to the
THE BANKING LAW JOURNAI .535
order of one Mavidone. The check bore a date ten days later than
the day on which it was issued. Five days before maturity Manos, the
plaintiff, cashed the check for value, and on the same day deposited the
check with the bank upon which it was drawn. Prior to its maturity,
Eassy stopped payment on it.
Manos sued to recover the amount of the check. Eassy defended on
the ground that he was not liable since the check had not been presented
for payment on or after the date of maturity.
The court decided that this was a case where presentment was un-
necessary. A check, even though postdated, is a bill of exchange, and in
the usual course of events, presentment of the check for payment would
be required in order to charge the drawer.
The Negotiable Instruments Law, § 139, modifies the general rule as
follows: ‘‘ Presentment for payment is not required in order to charge the
drawer where he has no right to expect or require that the drawee or
acceptor will pay the instrument.”’ .
Eassy had no right to expect or demand payment by the bank, since
he himself had requested the bank not to pay. Presentment of the check,
therefore, was not required, and the holder of the check was entitled to
recover,
SEEGER
BANK STOCKHOLDERS IN IDAHO NOT SUBJECT TO DOUBLE

LIABILITY
It has been decided that the Idaho statute, making the stockholders.
of banks and trust companies liable to creditors in an amount equal to
the amount of their stock, in addition to the stock, ordinarily known
as the stockholder’s double liability, is unconstitutional. Fralick, Com-
missioner of Finance v. Guyer, Supreme Court of Idaho, 213 Pace.
Rep. 337.
The statute in question reads as follows: ‘‘The stockholders of every
incorporated bank or trust company doing a banking business shall be
liable to the creditors of such bank or trust company to the amount of
their stock at the par value thereof, in addition to the stock held
by them.’’
This statute was enacted under authority supposed to have been
granted by section 17 of article 11 of the State Constitution, which reads:
‘‘Dues from private corporations shall be secured by such means as may
be preseribed by law, but in no ease shall any stockholder be individu-
ally liable in any amount over or above the amount of stock owned by
him.”’
The court held that this provision does not authorize the enactment
of a statute imposing the double liability upon bank stockholders.
536 © THE BANKING LAW JOURNAL
On the contrary, it limits liability of the stockholders of all corpora-

tions to the stock held by them.
It appears that this provision of the Idaho Constitution was eopied
from a similar provision in the Constitution of the state of Missouri.
The court referred to the fact that the same question presented here
came up in a Missouri ease, Schricker v. Ridings, 65 Mo. 208. In that
ease, the court in discussing the contention that the expression ‘‘the
amount of stock owned by him,’’ as used in the Missouri Constitution,
means an amount equal to and in addition to his stock, said:
‘The language of the amendment * * * should be construed with
reference to the language of the section which it superseded, and when
so considered all doubt as to its true construction will vanish. The in-
dividual liability created by the original provision was expressed to be a
liability to an amount named ‘over and above the stock owned, and any
amount unpaid thereon.’ Now the phrase ‘over and above the stock
owned,’ as there used, clearly meant in addition to the stock owned. The
prohibition contained in the amendment was ‘in no ease shall any stock-
holder be individually liable in any amount, over or above the amount of
stock owned by him or her’; that is, in addition to the amount owned
by him or her.’’
In reaching its conclusion that the Idaho statute imposing double
liability was unconstitutional, the Idaho Supreme Court said:
‘*We concede the desirability of giving the public greater security by
way of individual liability of the stockholders for the debts of a banking
corporation in an amount at least equal to the stock they hold over and
above the amount of such stock; but neither the Legislature nor the
courts ean give the public this particular kind of security in the face of
the limitation imposed by said section 17 of article 11 of our state
Constitution.’’
Banking Decisions
° ee |
In this department are published each month all of the important decisions of the
Federal and State Courts, involving questions pertaining to the
law of banking and negotiable instruments
PAYMENT OF FORGED CHECKS WHERE

DEPOSITOR NEGLECTS TO CALL FOR
MONTHLY STATEMENTS
Coleman Drilling Co. v. First National Bank of Burkburnett, Court

of Civil Appeals of Texas, 252 S. W. Rep. 215
The Coleman Drilling Company deposited a large amount of

money with the First National Bank of Burkburnett. In handling
the company’s account the bank followed its custom of making up
monthly statements of its accounts with its customers. These state-
ments were delivered when called for by the customers. The plain-
tiff company knew of the bank’s custom but failed to call for
statements for a period of eight months.
When the statements were obtained by the plaintiff, it was
discovered that at various times during the eight months covered
by them, the bank had paid out and charged to the plaintiff’s
account forged checks amounting to about $4,011. Had the state-
ment for the first month been examined these forgeries would have
been discovered.
The plaintiff sued the bank for the amount paid out on the
forged checks, alleging that the bank’s officers and employees had
been guilty of negligence in the payment of the checks, and could
have discovered the forgeries before payment by ‘‘exercising
ordinary care and skill.”’ The defendant alleged negligence on
the part of the plaintiff in failing to secure and examine its
monthly statements. It was held that the plaintiff was entitled to
recover.
Action by the Coleman Drilling Company, a copartnership, against

the First National Bank of Burkburnett. From judgment for plain-
tiff in amount less than petitioned for, it appeals. Reformed and
rendered.
Davenport & Thornton, of Wichita Falls, for appellant.
Jos. H. Aynesworth, of Wichita Falls, for appellee.
BOYCE, J.—This suit was brought by the Coleman Drilling Com-

pany, a partnership, against the First National Bank of Burkburnett,
to recover funds deposited with the bank and paid out by it on
forged checks. The bank pleaded negligence and estoppel on the part
of the plaintiffs in that they failed to examine the monthly statements
made up by it, which were accompanied by checks charged against
the account, thus permitting the continuance of the forgeries, which
would have been otherwise detected. To this the plaintiffs in turn
answered that the bank was negligent in not detecting, the forgeries
in the first instance.
The plaintiffs deposited a large amount of money with the bank,
and drew checks against their account from time to time. It was the
bank’s custom to make up monthly statements of its accounts with its
customers, and place these in charge of a special clerk in the bank for
delivery when called for by the customers. The bank followed this
eustom in handling the plaintiff’s account. The plaintiffs knew of
the custom, and that they could get their statements by calling for
them, but neglected to do this for a period of eight months. When
they did get the statements plaintiff Coleman, who was managing the
business, discovered at once that forged checks amounting to some-
thing over $4,000 had been paid by the bank and charged to plaintiff’s
account. These forgeries were easily detected, and would have been
discovered upon examination of the first monthly statement. The
forgeries continued through the entire period of eight months, and
were committed by an employee of plaintiffs. This employee dis-
appeared, and became a fugitive from justice when the forgeries were
exposed. The forged checks paid and appearing in the first monthly
statement amounted to the sum of $268.80.
The jury found, and there is no attack on their findings, that
forged checks to the amount of $4,011 had been paid by the bank;
that the officers and employees of the bank were guilty of negligence
in the payment of such checks, and could have discovered the forgeries
before payment by ‘‘exercising ordinary care and skill’’; that the
plaintiff Coleman was ‘‘guilty of negligence in failing to call for and
secure his monthly statements and examine the same and discover the
forgeries among his canceled checks.’’ The court rendered judgment
for the plaintiffs for $268.80, the amount of forged checks included
in the first statement. The only question on appeal is whether on
the verdict the plaintiffs were entitled to judgment for $4,011 instead
of the amount awarded them.
The Supreme Court of this state held in the case of Weinstein v.
National Bank, 69 Tex. 38, 6 S. W. 171, 5 Am. St. Rep. 23, that it
is the duty of the depositor to examine statements of accounts with
vouchers furnished him by the bank ‘‘to the end that he may verify
it, if it be correct, or detect the errors if it be found erroneous,’’ and

that, should the depositor ‘‘negligently fail to make the examination
and consequent discovery where he could have discovered it,’’ he is
estopped from denying the correctness of the account, where to permit
him to do so would entail loss on the bank that it would not otherwise
have sustained. The court cites with approval the case of Bank v.
Morgan, 117 U. 8S. 96, 6 Sup. Ct. 657, 29 L. Ed. 811, where the
question is elaborately considered. There is a fact in this case now
for decision that was not discussed and probably did not appear in
the ease of Weinstein v. Bank, supra, to wit, that the bank’s employees
were guilty of negligence in failing to discover the forgery before
payment of the checks. As to the law with this additional fact
shown, the Supreme Court of the United States said, in the case of
Bank vy. Morgan, supra:
‘‘Of course, if the defendant’s officers, before paying the altered

checks, could by proper care and skill have detected the forgeries,
then it cannot receive a credit for the amount of those checks, even
if the depositor omitted all examination of his account.”’
In this connection, see, also, New York Produce Exchange Bank v.

Houston, 169 Fed. 785, 95 C. C. A. 251; National Dredging Co. v.
Bank, 6 Pennewill, 580, 69 Atl. 607, 16 L. R. A. (N. 8.) 599, 130
Am. St. Rep. 158; Merchants’ National Bank vy. Nichols & Shepard
Co., 223 Ill. 41, 79 N. E. 41, 7 L. R. A. (N. 8S.) 752; Critten v.
Chemical National Bank, 171 N. Y. 219, 68 N. E. 969, 57 L. R. A.
529; First National Bank vy. Allen, 100 Ala. 476, 14 South. 335; 27
L. R. A. 426, 46 Am. St. Rep. 80; 3 R. C. L. pp. 538, 539, § 168; note,
17 Ann. Cas. 125; note, L. R. A. 1915D, 753. In Weinstein v. Bank,
and Bank y. Morgan, supra, the right of the banks to defend on
account of the failure of the customer to examine his account and
report to the bank was allowed on application of the principles of
estoppel. Now one principle of estoppel, as stated by Pomeroy in his
work on Equity Jurisprudence (section 813), is that—
‘‘The party who claims the benefit of an estoppel must not only
have been free from fraud in the transaction, but must have acted
with good faith and reasonable diligence; otherwise no equity will
arise in his favor.”’
We assume that the recognition of this principle led the Supreme

Court of the United States to announce the law as above quoted.
The New York Court of Appeals, in the case of Critten v. Chemical
National Bank, supra, denied the applicability of the principles of
estoppel to a case such as we have been discussing, but held, in effect,
that the depositor would be liable to the bank for the damages sus-
tained by it for his negligence in failing to detect the forgeries and
give notice to the bank. But the rule announced by the New York
court will lead to the same result in this case, as will appear from
the following quotation from that decision:
‘*Since * * * the liability of the plaintiffs [the depositors] to the
bank was solely for the loss caused by their negligence, it is a com-
plete answer to the defendant’s claim that its own negligence con-
tributed to the loss. * * * The action unquestionably was brought on
contract, and it remained such. The plaintiffs sue for a debt to which
the defendant answers: We have paid the money, true, not according
to your directions, but in compliance with what we believed to be your
directions, and your negligent conduct and your duty towards us led
us into that error. To which the plaintiffs rejoined: Your own
negligence contributed to the loss. All this may be true yet the plain-
tiffs recovered not in tort but on contract, for the allegation of negli-
gence on the part of the defendant is used only to defeat its claim
for relief on account of the plaintiffs’ negligence.’’
Several of the other cases cited, to wit, National Dredging Co. v.
Bank, Merchants’ National Bank v. Nichols, and First National Bank
v. Allen, follow the reasoning of the New York court. But, as we
have already stated, the result in this case will be the same whether
we accept the reasoning in the case of Bank v. Morgan, supra, or that
announced in the other cases. In either event, the plaintiff was, in our
opinion, entitled under the verdict of the jury to recover the $4,011;
and judgment will be rendered accordingly.
BANK SECURING INDORSEMENT OF CHECK

BY PAYEE BEFORE NOTICE OF INFIRMITY
HELD A HOLDER IN DUE COURSE
National Mechanics’ Bank v. Schmelz National Bank, Supreme Court

of Appeals of Virginia, 116 S. E. Rep. 380
As a guaranty for the performance of a contract with the

United States Government the Virginia Salvage Company made its
check for $1,000, drawn on the defendant bank, payable to the order
of Col. F. M. Hinkle and had it certified by the bank. The check
was deposited with Col. Hinkle. The salvage company, having
performed the contract, the check was returned unindorsed. It
was then deposited by the Newport News Lumber Company in the
NOTE—For similar decisions see Banking Law Journal Digest (Second
Edition § 194.
plaintiff bank, which paid value for it. At the time of the deposit,
it was indorsed by the salvage company and the lumber company
but not by Col. Hinkle. Subsequently, the indorsement of Col.
Hinkle was obtained. Payment of the check was refused, the rea-
son assigned being ‘‘Indorsement not authorized.’’ At the time
of the presentment the salvage company was in debt to the defend-
ant bank in an amount in excess of the check, but the plaintiff
bank was not aware of this until the trial of the action.
In an action on the check the defendant bank claimed to be en-
titled to set off the debt of the salvage company to it against its
liability on the check.
It was held that the defendant was liable on the check. There
was nothing unusual in the manner of securing Col. Hinkle’s in-
dorsement. Such indorsement having been secured before the
plaintiff bank had notice of any infirmity in the check the bank
was a holder in due course.
It was further held that the certifying bank obligated itself,
without condition, to hold sufficient funds of the drawer to cover
the check whenever presented for payment and that no equities
between the drawer and the certifying bank could be set off against
the plaintiff bank. ,
Error to Cireuit Court of City of Newport News.

Action by the Schmelz National Bank against the National Me-
chanics’ Bank. Judgment for plaintiff, and defendant brings error.
Affirmed.
W. C. Stuart, of Newport News, and E. A. Bilisoly, of Norfolk, for
plaintiff in error.
J. Winston Read, of Newport News, for defendant in error.
WEST, J.—In 1919 Virginia Salvage Company entered into a con-

tract with the United States government for the purchase of certain
firewood at Camp Eustis. The government required the company to
_ deposit a certified check for $1,000 as a guaranty that it would faith-
fully perform the contract on its part. This check dated December
6, 1919, signed by Virginia Salvage Company, drawn on the National
Mechanics’ Bank of Newport News, Va., payable to the order of Lieut.
Col. F. M. Hinkle, for the sum of $1,000, was duly certified by the
cashier of said bank on December 6, 1919, and delivered by the drawer
to Col. Hinkle.
The Virginia Salvage Company having in all respects fully per-
formed its contract, the certified check was returned unindorsed on
May 22, 1920, by Col. Francis H. Lincoln, successor to Col. F. M.
Hinkle, as army supply officer at Camp Eustis.
On May 22, 1920, this check was deposited by the Newport News
Lumber Yards, Ine., in the Schmelz National Bank, which paid face
value for it. While not indorsed by Col. Hinkle, it was indorsed by
Virginia Salvage Company and: Newport News Lumber Yards, Ince.

The Schmelz National Bank presented said check to the National
Mechanics’ Bank through the clearing house of the banks of Newport
News, and it was returned unpaid, ‘‘For indorsement.’’
At the time this check was first presented and at each subsequent
presentation Virginia Salvage Company was indebted to National
Mechanics’ Bank in a sum far in excess of $1,000.
The return of the check was brought to the attention of the officers
of the salvage company, and the check was later returned to the
Schmelz Bank with the name of of Col. Hinkle thereon, but it was
afterwards ascertained that this was not his signature, and when the
check was presented the second time payment was again refused. The
Schmelz National Bank then requested the salvage company to do what
was necessary to secure the indorsement of Col. Hinkle.
The indorsement of Col. Hinkle was secured in due course and
with reasonable promptness, and the check again presented to the Na-
tional Mechanics’ Bank for payment, and payment was again refused,
the only reason assigned being, ‘‘Indorsement not authorized.’’ Prior
to the trial of the case the only reason given by the National Mechanics’
Bank for the non-payment of the check was that the proper indorse-
ment of Col. Hinkle had not been secured. The Schmelz National
Bank had no notice of the alleged indebtedness of the Virginia Sal-
vage Company to the National Mechanics’ Bank until the trial of this
ease. This action was brought by the Schmelz National Bank upon the
certified check aforesaid. The defendant, National Mechanics’ Bank,
pleaded the general issue, and filed its six several special pleas in writ-
ing, the substance of its defense being that the Virginia Salvage Com-
pany, the drawer of the check, was indebted to it in a sum largely in
excess of the $1,000, which should be allowed it as an offset against the
plaintiff’s claim. Upon the issues, a jury heard the evidence and re-
turned a verdict in favor of the plaintiff in the sum of $1,000. This
verdict was sustained by the judgment of the trial court to which this
writ of error was awarded.
The plaintiff moves to dismiss this writ of error for the reason that
the petition does not comply with section 6346 of the Code.
Several of the errors relied on in the petition are insufficiently as-
signed. A petition for a writ of error is in the nature of a pleading,
and must state clearly and distinctly the errors relied on to reverse
the judgment. Counsel should lay his finger on the error. A. & D.
Ry. Co. v. Reiger; 95 Va. 418, 28 S. E. 590; N. & W. Ry. Co. v. Per-
row, 101 Va. 345, 43 8S. E. 614; Amusement Co. v. Pine Beach Co., 109
Va. 325, 63 S. E. 1002, 16 Ann. Cas. 1120; Bank v. Trigg Co., 106 Va.
327, 56 S. E. 158; Puckett v. Commonwealth, 134 Va. , 113 S. E.
853; Deitz v. High, 131 Va. 7, 109 S. E. 215.
THE BANKING LAW JOURNAL | 543
We consider it unnecessary to point out the defective assignments

of error in detail, since in our view we can properly dispose of the
ease under the assignment which challenges the action of the court in
refusing to set aside the, verdict of the jury as contrary to the law
and the evidence.
There was nothing peculiar or unusual in the manner of secur-
ing Col. Hinkle’s indorsement. The Schmelz Bank was a bona fide
holder of the check for value and without notice of equities or set-offs
between any of the parties, and on June 7, 1920, the date Col. Hinkle
actually indorsed the check, became a holder in due course, without
such notice, and such equities or set-offs cannot be afterwards asserted
against it.
Where a holder of a check has no knowledge of defenses that would
be good against prior holders, and is an innocent purchaser for value,
he is a holder in due course. Benedict v. Kress, 97 App. Div. 65, 89
N. Y. Supp. 607.
Section 5611 of the Code provides as follows:
‘‘Where the holder of an instrument payable to his order transfers

it for value without indorsing it the transfer vests in the transferee
such title as the transferor had therein, and the transferee acquires
in addition the right to have the indorsement of the transferor. But
for the purpose of determining whether the transferee is a holder in
due course the negotiation takes effect as of the time when the in-
dorsement is actually made.’’
Since the Schmelz Bank had no notice of any infirmity in the

check, or any equities or set-offs between the parties, at the time Col.
Hinkle actually indorsed it, the contention that said bank was not a
holder in due course on and after that date is without merit. There
is nothing in seetion 5611, supra, or in the case of Goshen National
Bank v. Bingham, 118 N. Y. 349, 23 N. E. 180, 7 L. R. A. 595, 16 Am.
St. Rep. 765, so strongly relied on by the Mechanics’ Bank in con-
flict with these views. The New York court simply holds that the sub-
sequent indorsement, made after notice to the holder of the defenses
which the bank would have had against the payee, does not relate back
to the original delivery of the paper, so as to destroy the intervening
rights and remedies of a third party.
We find nothing in the record to sustain the suggestion that the
name of Col. Hinkle was first placed on the check by some one who
did not believe it would meet with his approval, or that the Schmelz
Bank was in any way a party to the transaction. Its right to recover
could not be defeated even by suspicious circumstances, in the absence
of proof of facts amounting to fraud on its part. Fleshman v. Bibb,
118 Va. 582, 88 S. E. 64.
Besides, Col. Hinkle having subsequently indorsed the check, it is

manifest that the placing of his name thereon did not prejudice the
rights of any of the parties.
Section 5615, Code of 1919, reads as follows:
‘*Where an instrument payable on demand, other than bank notes

and certificates of deposit, is negotiated an unreasonable length of
time after its issue, the holder is not deemed a holder in due course.’’
In construing one part of a statute resort should be had to every

other part. In construing section 5615, supra, we should do so in the
light of section 5754, which is as follows:
‘‘In determining what is a ‘reasonable time’ or an ‘unreasonable

time’ regard is to be had to the nature of the instrument, the usage
of trade or business (if any) with respect to such instruments, and the
facts of the particular case.”’
The check being a certified check, it being understood by the origi-

nal parties that it would be held pending the performance of the wood
contract, aforesaid, and being negotiated immediately after the per-
formance of said contract, it cannot be said that the check was ne-
gotiated an unreasonable length of time after its issue.
A certified check stands on a different footing from any ordinary
check, as will appear from section 5749 of the Code, which reads as
follows:
‘“Where a check is certified by the bank on which it is drawn the

certificate is equivalent to an acceptance, and the check shall be
charged to the drawer’s account.’’
Section 5751 of the Code is in these words:
‘‘A check of itself does not operate as an assignment-of any part of

the funds to the credit of the drawer with the bank, and the bank is
not liable to the holder unless and until it accepts or certifies the
check.”’ .
When a bank certifies a check it obligates itself, without condition,

to hold sufficient funds of the drawer to cover the check whenever it
is presented for payment. The holder of the check is placed on the
same footing and has the same rights as a depositor.
The bank cannot complain of any delay within the statute of limita-
tions, as it is benefited by such delay.
The law applicable to certified checks, as laid down by the author,
may be found in 2 Daniel on Negotiable Instruments, §§ 1603, 1605,
1607a, as follows:
Section 1603. ‘‘Let us consider more at length the effect of the

certification of checks. In the first place, the bank becomes at once
the principal debtor. When the holder presents the check to the bank,
the latter can only respond to the demand for payment by making
payment. But if it be agreed to between them, the check is certified
to be ‘good’; and, thus, in contemplation and by operation of law, it is
the same as if the funds had been actually paid out by the bank to
the holder, by him redeposited to his own eredit, and a certificate of
deposit issued to him therefor. In other words, a certified check is a
shorthand certificate of deposit in favor of the holder, and payable to
him, or to him or order, or to bearer, according to its terms.
‘‘Thus the bank ceases to be the debtor of the original depositor,
and becomes the debtor of the holder of the check, who may demand
the amount, and sue the bank for its recovery at any time even after
the lapse of many years. It will be too late after the bank has certi-
fied the cheek for the drawer to revoke it, and the bank will be bound
to pay it though notified by the drawer not to do so. It will also be
too late for the bank to say that the check was forged, and was not in
fact the drawer’s, unless it be still in the hands of one who was guilty
of the forgery, or had knowledge of or complicity in it, for it has eon-
ceded its genuineness, and indeed asserted it by certification. Nor can
it say that there were in fact no funds of the drawer to meet the check,
for its certificate is an assurance that there were such funds, and that
it will apply them to that purpose. These doctrines are now univer-
sally settled. * * *”’
Section 1605. ‘‘In the third place, the cheek when certified cir-
culates as the representative of so much cash in bank, payable when-
ever demanded, to the holder. It is then like cash, but still it is not
the same as cash, for ‘nullum simile est idem.’ Frequently a depositor
procures his own check to be certified before he offers it in payment.
In such eases it does not lose its character as a check in any particular
—it only has the additional credit imparted to it by the certificate.’’
Section 1607a. ‘‘Sometimes a check payable to order is certified
without the indorsement of the payee being upon it, and when it is
already in the hands of a third party. In such eases it is understood
that the proper indorsement will be obtained before the amount is
withdrawn, and that the amount will be held by the bank to meet it.
But if in fact the holder be the assignee by delivery of the check for
a valid consideration and entitled to receive the money, although not
an indorser, the bank, it has been held, would be protected in paying
him, where the check was drawn for accommodation.”’
In Merchants’ Bank v. State Bank, 10 Wall. 648, 19 L. Ed. 1008,

Justice Swayne, discussing the certification of checks, and speaking
for the court, says:
‘‘It is an undertaking that the checks is good then and shall con-
tinue good, and this agreement is as binding on the bank as its notes
of cireulation, a certificate of deposit payable to the order of the de-
positor, or any other obligation it can assume. The object of certify-
ing a check, as regards both parties, is to enable the holder to use it as
money.’’
Even though a check is forged, if the drawee bank certified it, it

is bound to pay it when presented by a bona fide holder on the prin-
ciple that as between two innocent parties the loss must fall on the
one by whom it was made possible. 10 Corpus Juris, p. 710, § 440.
If there be virtue in the law, it is clear that the moment the check
was certified, the money to meet it was by operation of law assigned to
and placed to the credit of the holder of the check, and in fact charged
against the drawee thereof. The money thus transferred was beyond
the control of the drawer and its creditors, and no equities that existed
between the National Mechanics’ Bank and the Virginia Salvage Com-
pany, the drawer, could be set off as against said company; and, a
fortiori, they could not be set off as against the plaintiff.
To sustain the contention of the plaintiff in error that the drawer
of a certified check can, by getting in debt to the bank, defeat the
right of the bona fide holder for value to recover against the bank
the amount for which the check is drawn would be to administer a
severe blow to the commerce and business of the country. Under such
a ruling, the business world would be ‘‘deprived of the opportunity
of passing large sums of money from hand to hand without risk or
delay.’’
The case was fairly tried by an impartial jury, and the verdict in
favor of the plaintiff is amply supported by the evidence. In fact,
upon the evidence no other proper verdict could have been rendered.
This being true, the rulings of the court, in granting and refusing in-
stuctions, are immaterial, and will not be considered.
The judgment complained of is plainly right, and must be affirmed.
Affirmed.
IN FORGERY PROSECUTION BANK TELLER

MAY NOT STATE MEANING OF “NO
ACCOUNT” ON PROTESTED CHECKS
State v. Dixon, Supreme Court of North Carolina, 117 S. E. Rep. 170
In a prosecution for forgery it was shown that the defendant

made checks on'a certain bank, drawn to the order of R. M. Dixon
and purporting to be signed by A. C. Corbett. He indorsed them
R. M. Dixon, and deposited them for collection with the Greens-
boro National Bank. The checks were returned, unpaid and pro-
tested, to the Greensboro Bank with the statement ‘‘no account,’’
Edition) § 358.
The teller of the Greensboro Bank was permitted to testify that

‘‘no account’’ on the protest meant that no account in the name of
A. C. Corbett was carried at the bank which returned them.
It was held that the evidence should not have been received in
a crimnial prosecution. The defendant had the constitutional right
to be confronted by a witness who could testify of his own knowl-
edge as to the reason for protesting the check.
It was also held that if the purported maker of the checks were
a real person, the prosecution would have to show not only that the
signatures were not genuine, but also that they were made by the
defendant without authority.
Appeal from Superior Court, Guilford County; Harding, Judge.

R. M. Dixon, alias Ellis Nassar, was convicted of forgery and
fraudulently uttering and publishing two forged checks, and he
appeals. Reversed, and new trial ordered.
Criminal prosecution tried upon an indictment charging the
defendant with forgery and with fraudulently uttering and publishing
two forged checks, one drawn on the Merchants’ Bank & Trust Com-
pany of Winston-Salem, N. C., for $210, payable to the order of R. M.
Dixon, and signed A. C. Corbett, and the other drawn on the same
bank for $198, payable to the order of R. M. Dixon, and signed A. C.
Corbett. These two checks were ‘presented by the defendant at the
Greensboro National Bank for deposit, and were left there by him for
collection, he being told at the time by the teller that it was contrary
to the rules of the bank to allow strangers to draw money against un-
collected funds, and that he would send the checks to Winston-Salem
for collection, and, when collected, would place the proceeds to the
defendant’s credit. The defendant gave his name to the teller as
R. M. Dixon, and indorsed that name upon the back of the checks
at the time of their delivery to the teller.
The checks were forwarded in due course of mail to the bank at
Winston-Salem for collection, and, according to the testimony of the
teller of the Greensboro Bank, were returned unpaid and _ protested,
with the reason of the protest stated thereon as ‘‘No account.’’
Defendant objected to this evidence, and duly noted an exception.
The defendant did not procure from the Greensboro Bank any
money by reason of his deposit of the checks, but, as testified to by the
teller, he simply deposited them for collection, with the understanding
that they were so deposited, and that he would not be permitted to
draw any funds from the Greensboro Bank unless and until the said
checks had been reported by the bank at Winston-Salem as paid.
His honor charged the jury that it could make no difference
whether A. C. Corbett was a real or fictitious person if the state had
satisfied them beyond a reasonable doubt that the defendant was the
real maker of the checks; they would convict him if they further
found the checks were made and executed with the requisite intent
to defraud. Defendant excepted. From an adverse verdict, and
judgment of two years in the state prison, the defendant appealed.
Louis W. Gaylord, of Greenville, and Wm. P. Byoum, of Greens-
boro, for appellant.
James §. Manning, Atty. Gen., and Frank Nash, Asst. Atty. Gen.,
for the State.
STACY, J.—For the purpose of showing that the checks in ques-

tion were made out in the name of a fictitious person, or that they
were forged by the defendant, the teller of the Greensboro bank, over
objection, was allowed to give the reason for their non-payment by the
Winston-Salem bank, as shown by the protest, to be ‘‘No account’’—
meaning that no account was carried at said bank in the name of
A. C. Corbett. It was permissible for the witness to state that the
checks had been sent to the Winston-Salem bank for collection, and
that they had been protested for non-payment and returned. In
corroboration of this testimony we see no reason why the checks them-
selves, together with the notary’s certificate, should not have been
offered in evidence. State v. McCormick, 57 Kan. 440, 46 Pace. 777,
57 Am. St. Rep. 341; 3 R. C. L. 1328. But this was not done, and the
objection is based upon other grounds. The prosecution was seeking
to accomplish quite a different end. In the admission of the evidence,
as offered, we think there was error. The reason for the protest of the
present checks, as stated by the notary, considering the purpose for
which it was used, if not hearsay on his part, was a mere ipse dixit of
a third person who was not offered as a witness at the trial, so that
such memorandum could be considered as supporting or in corrobora-
tion of his evidenee. Farrington v. State, 10 Ohio, 354; State v.
Behrman, 114 N. C. 797, 19 S. E. 220, 25 L. R. A. 449; State v.
Dowdy, 145 N. C. 432, 58 S. E. 1002; 26 C. J. 963.
While doubtless the same conclusion would be reached in the case of
a foreign bill of exchange, which is required by our law to be
protested for non-acceptance or non-payment (C. 8. 3134 and 3135),
yet it may be observed that, in the case at bar, no protest of the
instant checks was necessary (C. 8. 3134), though it was permissible
under C. S. 3100. 3 R. C. L. 1327. However, as to this last proposi-
tion, we make no present decision, because it is not before us, and what
we have said must be understood as being confined to the questions
raised by the defendant’s appeal. This is a criminal prosecution, not
a civil action involving a construction of the law merchant, and the
state is seeking to prove by the evidence now in question more than
THE BANKING LAW JOURNAL 549°
presentment, demand and protest of the checks for non-payment or

dishonor. 3 R. C. L. 1328; State v. Behrman, supra. For these
purposes the evidence may be competent (Gordon v. Price, 32 N. C.
385; C. S. 2979) ; but in a criminal action it must be remembered that
the defendant is clothed with a constitutional right of confrontation
(3 R. C. L. 1328). This may not be taken away, even by statute, and
assuredly not when the legislative enactment purports to deal only
with negotiable instruments and the civil law of evidence. Dakin v.
Graves, 48 N. H. 45, 96 Am. Dec. 606, note. In this connection, it
may be well to note that section 10, ec. 13, of the Revised Statutes of
North Carolina 1837, making the notary’s certificate of protest prima
facie evidence against the drawer of a demand on the drawee and
notice to the drawer, apparently has not been brought forward and
made a part of our present uniform negotiable instruments law
(adopted in 1899). But back to the subject in hand.
‘*In all criminal prosecutions every man has the right to be in-
formed of the accusation against him and to confront the accusers
and witnesses with other testimony.’’ Const. art. 1, § 11. ‘‘We take
it that the word confront does not simply secure to the accused the
privilege of examining witnesses in his behalf, but is an affirmance of the
rule of the common law, that in trials by jury, the witness must be
present before the jury and accused, so that he may be confronted,
that is, put face to face.’’? Pearson, C. J., in State v. Thomas, 64
N. C. 74. And, further, the defendant is entitled to have the testimony,
offered against him, given under the sanction of an oath and to require
the witnesses to speak of their own knowledge and to be subjected to
the test of a competent cross-examination.
The defendant also assigns as error the charge of his honor that
it could make no difference whether A. C. Corbett, the purported
maker of the checks, was a real or fictitious person, if the defendant
actually signed such name to the checks with intent to defraud the
officers of the bank or any other person. If the drawer had no exist-
ence, of necessity the name must have been affixed by some one with-
out authority, and, if this were done by the defendant with the pur-
pose and intent to defraud—the instruments being sufficient in form to
import legal liability—an indictable forgery would have been com-
mitted. Barnes v. Crawford, 115 N. C. 76, 20 S. E. 386; Williams v.
State, 126 Ala. 50, 28 South. 632; Maloney v. State, 91 Ark. 485, 121
S. W. 728, 134 Am. St. Rep. 83, 18 Ann. Cas. 480; 2 Words and
Phrases, Second Series, 614. ‘‘Forgery may be committed of any
writing which, if genuine, would operate as the foundation of another
man’s liability, or evidence of his right. It is sufficient if the in-
strument forged, supposing it to be genuine, might have been preju-
dicial.’’ 19 Cye. 1880; Stat® v. Webster, 88 S. C. 56, 70 S. E. 422,
"550 THE BANKING LAW JOURNAL
32 L. R. A. (N. 8.) 337. Three elements are necessary to constitute
the offense: (1) There must be a false making or other alteration of
some instrument in writing; (2) there must be a fraudulent intent;
and (3) the instrument must be apparently capable of effecting a
fraud. 19 Cye. 1373. But, if A. C. Corbett, the purported maker,
were a real person, and actually existing, the state would be required to
show not only that the signatures in question were not genuine, but
that they were made by the defendant without authority. People v.
Lundin. 117 Cal. 124, 48 Pac. 1024; State v. Swan, 60 Kan. 461, 56
Pae. 750; 19 Cye. 1411. To show that the defendant signed the name
of some other person to an instrument, and that he passed such in-
strument as genuine, is not sufficient to establish the commission of a
crime. It must still be shown that it was a false instrument, and this
is not established until it is shown that the person who signed another’s
name did so without authority. People v. Whiteman, 114 Cal. 338, 46
Pace. 99. In this respect we think his honor’s charge was prejudicial
to the defendant.
For the errors as indicated, there must be a new trial or a venire
de novo; and it is so ordered.
New trial.
EVIDENCE OF AGREEMENT TO HONOR

CHECKS HELD ADMISSIBLE
Webster v. First State Bank of Peever, Supreme Court of South

Dakota, 193 N. W. Rep. 675
The plaintiffs sold cattle to the defendant Douglas. He gave

them a statement of the weights of the cattle and instructed them
to take it to the defendant bank and get the money. On present-
ing the statement, the plaintiff received from the bank a check
signed by the assistant cashier in the name of Douglas. The bank
knew that it was given for the purchase price of the cattle.
After the making of the check, a large number of checks were
paid out of the account of Douglas and, when the plaintiffs
presented their check, they were told that there were no funds to
pay it. The proceeds from the sale of the cattle sold to Douglas by
the plaintiffs were received by the bank.
The plaintiffs offered evidence that, at the time Douglas pur-
chased the cattle, there was an arrangement between him and the
Edition) § 893.
bank that he should purchase and ship cattle, that the bank would
draw a sight draft on shipments and deposit it to his account; and
that all checks given by Douglas for the purchase price of cattle
would be honored by the bank. This evidence was objected to by
the defendant bank and excluded, and judgment rendered for the
defendants.
On appeal it was held that it was error to exclude the testimony,
and that the judgment should be reversed and the case sent back
for a new trial.
Appeal from Circuit Court, Roberts County; B. A. Walton, Judge.

Action by John Webster and another against the First State Bank
of Peever and another. From judgment for defendants and an order
denying a motion for new trial, plaintiffs appeal. Reversed and
remanded.
D. J. Leary, of Brown Valley, Minn., and Jorgenson & Anderberg,
of Sisseton, for appellants.
Howard Babcock, of Sisseton, for respondents.
ANDERSON, P. J.—This is an appeal from a judgment for

defendant bank and an order denying appellants’ motion for new
trial. The action is brought to recover $514.65, being the purchase
price of a bunch of cattle sold by appellants to respondent, Frank
Douglas. On October 7, 1920, and for some time prior thereto, Douglas
had been engaged in buying live stock in the vicinity of Peever, this
state. On said October 7th appellants sold and delivered at Peever to
said Douglas a number of cattle for consideration aforesaid. After
cattle had been weighed Douglas gave appellants a statement of the
weights and instructed them to take same to respondent bank and get
the money. Appellants went to the bank and. presented said book to
one Norberg, assistant cashier of the bank, and Norberg made out a
check, which is known herein as Exhibit 55, signed the name of Douglas
to it, and put his initials under the name. Appellants asked Norberg
if this check could be cashed at the First National Bank of Wilmot,
and the cashier replied that it could be cashed anywhere, and that it
would be paid when it came back. At the time this check was made
by Norberg and delivered, the cattle had not been shipped from Peever.
The cattle in payment of which the check was made were shipped, and
the proceeds thereof came back to defendant bank. After the cattle
had been shipped and proceeds received by the bank, it refused pay-
ment on said check, giving as its reasons that Douglas had no money
in the bank with which to pay the same.
It appears that a large number of checks had been paid out of the
account of Douglas between the time of the making of the check and
the presentation of it for payment. It appears that nearly all checks
drawn on the Douglas account were drawn by the cashier of the bank,
and that very few checks were ever drawn against the account by
Douglas, and that the cashier, Hodgson, had full charge and control
of the Douglas account. At the time the cattle were delivered, Nor-
berg, knew that Exhibit 55 was given as purchase price of these cattle,
and that appellants at the time of delivering the cattle and receiving
Exhibit 55 relied upon the statement made by assistant cashier to the
effect that the check was good and would be paid when presented.
From the record it appears that the transaction in question occurred
on October 7, 1920. It also appears that, when appellants came to the
bank for the purpose of receiving the proceeds of the sale, they were
asked by the cashier or assistant cashier as to whether they ‘‘wanted
a check or the money’’; that appellants’ reply was to the effect that
they would prefer a check. From that time and up to and including
the 30th day of October of the same year appellants did not present
their check to be cashed. It is claimed that when appellants did so
bring the check to defendant bank to be cashed there were no funds in
Douglas’ account with which to pay it, and they were so advised by
the personnel of the bank; that at the time the cattle were delivered the
assistant cashier of defendant bank, who wrote out Exhibit 55, knew
that the same was given for the purchase price of the Webster cattle,
and the plaintiffs at the time of delivering the same and receiving the
check relied upon the statement made by the assistant cashier to the
effect that said check was good and would be paid when presented. It
appears that the proceeds of the Webster cattle were received by the
bank.
The plaintiffs in their complaint allege that for months prior to
October 7, 1920, and for some time thereafter, there existed between
defendant bank and Douglas an arrangement and agreement whereby
Douglas should purchase cattle and hogs from farmers in the vicinity
of Peever for delivery at said point; that defendant bank should
furnish the necessary money to pay therefor, and that such live stock
were to be shipped to South St. Paul or other cattle and hog markets
consigned to commission firms located at such markets and doing a
regular business of selling cattle and hogs on commission; that it was
customary when consigning stock to commission firms to draw sight
draft on such firm for the major portion of the value of such stock
and hogs, and the proceeds of such draft be deposited in the bank of
the purchaser from the farmers; that cattle delivered by plaintiffs as
hereinbefore stated were so handled by defendant bank and such
commission firms, and that defendant bank has received the entire
proceeds from the sale of the cattle so delivered by plaintiffs, and that
plaintiffs have never received pay for any of such live stock. Pursuant
to such pleadings plaintiffs offered to prove by the witness Frank
Douglas, one of the defendants, that prior to the time he purchased

the cattle of plaintiffs herein involved there was an arrangement and
agreement existing by the cashier, Hodgson, of defendant bank, where-
by it was agreed that defendant Douglas should purchase cattle; that
the bank should draw a sight draft on shipments, and that the same
should be deposited to the account of Douglas, and all checks given by
Douglas for purchase of cattle should be honored and taken care of
by the bank, and pursuant to such agreement Douglas purchased a
number of cattle, including those of plaintiffs; that the proceeds of the
cattle so purchased were all deposited in defendant bank of which said
Hodgson was the cashier. This offer was objected to by defendants as
incompetent, without foundation, being a conclusion of the witness not
binding on the defendants, and that any such agreement, if made, would
be contrary to law, without authority, and that the bank had no author-
ity to pledge the bank in such speculative enterprise. This objection
was sustained. Goeken v. Bank, 100 Kan. 177, 163 Pac. 636. This is
a case practically on all fours with the case at bar. In this case one
Schuette agreed with defendant bank that he was to purchase live stock,
giving his checks on the bank to the sellers from whom he might pur-
chase, depositing the proceeds of the sale in the bank, and that out of
the funds so derived the bank would pay the checks and expenses
incidental to the transaction. In this case (104 Kan. 370, 179 Pace. 321)
it was decided :
‘* “When Schuette sold the plaintiff’s hogs, for which he had given
only an unprotected check, the money which he received really be-
longed to the plaintiff and was subject to be claimed by him. And
his right was not lost by the deposit of the money with the bank which
knew of its origin and was co-operating with Schuette. The rules that
a bank is not bound by its oral acceptance of a check, and that it is
not liable to the payee of an unaccepted check, have no application to
this situation.” * * * On the last trial the jury found * * *
that the alleged contract between the bank and Schuette had been
made; that it did not appear from the evidence that there was any
lack of funds in the bank to the credit of Schuette with which to pay
the check when it was presented. It was also found that Schuette had
never expressly directed the bank to set apart’’ the money ‘‘to be used
in payment of this particular check. * * * The first contention is
that the court erred in refusing to instruct the jury to return a
verdict for defendant. In view of the testimony showing the existence
of the alleged agreement and that in pursuance of it the live stock was
sold to Schuette, who gave the plaintiff a check therefor, and * * *
upon a resale of the stock the proceeds, which exceeded the amount of
the check and incidental expenses, were deposited in the bank, and
* * * that the bank refused to pay the check when * * *
presented. A directed verdict’’ for ‘‘defendant was not warranted.

The facts of the case brought it fairly within the rules laid down in
previous decisions.’’
See Ballard v. Bank, 91 Kan. 97, 136 Pac. 935, L. R. A. 1910C,

161; Saylors v. Bank, 99 Kan. 515, 163 Pac. 454.
The court then goes on and states:
‘‘Although plaintiff was not a party to the agreement between

Schuette and the bank, it was made in part for his benefit and he was
entitled to avail himself of the promise of the bank, although he may
not have known that it was made.”’
See Harrison v. Simpson, 17 Kan. 508; Railway Co. v. Hopkins, 18

Kan. 494; Griffith v. Stucker, 91 Kan. 47, 1386 Pac. 937. In this
Harrison Case, as in the instant case, the question was raised that there
were no funds in the bank to meet the demands of plaintiff. The
purchase of the hogs by Schuette was conceded; also that they were
sent to the general market, sold as the agreement contemplated, and
the proceeds of the sale, ample to pay the purchase price of the
hogs, were received by the bank. Plaintiff by proof traced the funds
derived from the sale of the hogs into the bank and it then devolved
upon defendant bank to show that there were no funds in the bank
with which to pay the check given for the hogs pursuant to the agree-
ment. This, according to the findings of the jury, the bank failed to
do. Thus it failed to maintain the burden of proof on that phase of
the case and hence defense of the bank fails. Leach v. Hill, 106 Iowa,
171, 76 N. W. 667; Falls City State Bank v. Wehril, 68 Neb. 75, 93
N. W. 994.
In this case the evidence clearly shows that the moneys, the
proceeds from the sale of the stock, all found its way into the defend-
ant bank. The burden was therefore upon the defendant bank to, by
competent evidence, affirmatively show that there was no money in
the bank available for the purpose of paying for the stock. The action
of the trial court in sustaining the objection to the offer to prove was
clearly an invasion of plaintiffs’ rights, and such action on the part of
the court was prejudicial error. The court’s action in directing a
verdict for defendant bank was also prejudicial to the rights of the
plaintiffs.
The judgment and the order denying plaintiffs’ motion for a new
trial are reversed, and cause remanded for further proceedings consist-
ent with the views as expressed in this opinion.
RIGHTS OF PURCHASER OF NOTE GIVEN FOR

GOODS SOLD WITH GUARANTY
Martel v. Lafayette Sugar Refining Company, Supreme Court of

Louisiana, 95 So. Rep. 706
The defendant signed and delivered a note to the payee in pay-

ment for certain sugar filters.
The plaintiff purchased the note from the payee for value and
before maturity. The filters were sold with a guaranty. The ev-
idence tended to show that the plaintiff had knowledge of this
guaranty when he received the note. It was held that the plaintiff
could enforce the note against the defendant. Evidence was in-
admissible to show an alleged failure of consideration based on the
fact that the filters did not fulfill the guaranty. The plaintiff’s
knowledge of the guaranty in no way affected his right to recover
on the note, since the consideration for the note had not failed at
the time of its transfer to him. The negotiability of a note
acquired for value before maturity cannot be affected by the fact
that its consideration is thereafter to be realized, or that some
contingeney may prevent its enforcement by the payee.
Action by J. Sully Martel against the Lafayette Sugar Refining

Company. Judgment for plaintiff, and defendant appeals. Affirmed.
Monroe & Lemann and Walter J. Suthon, Jr., both of New
Orleans, for appellant.
Caffery & Brumby, of Franklin, and Herman Winsberg, for
appellee.
ST. PAUL, J.—This is a suit on a promissory note, and the defense
is failure of consideration, and denial that plaintiff is a holder in due
course.
I
Defendant purchased from the Martel Apparatus Company certain
sugar filters for the price of $20,000, of which $5,000 was paid when
the order was given, $5,000 was to be paid on delivery, and the balance
after 30 days’ satisfactory operation. The contract guaranteed that
the filters would handle satisfactorily the juice of 1,000 tons of cane
daily, and the vendor agreed to refund the amount paid if the filters
should not accomplish the guaranty.
When the filters were delivered the defendant was unable to pay
the installment which then became due; whereupon the Apparatus
Edition) § 412.
556 TUE BANKING LAW JOURNAL
Company agreed to take $2,000 in cash and defendant’s note for

$3,000, payable in (say) 90 days, drawn to its own order and by itself
indorsed in blank, which note it was agreed at the time would be
taken by plaintiff or plaintiff’s wife, and for which plaintiff at once
paid its face value in cash to the Apparatus Company. This is abun-
dantly shown by the evidence, and the trial judge so found.
II
Thereupon the trial judge excluded all evidence going to show
the alleged failure of consideration, to wit, that the filters did not
fulfill the guaranty aforesaid, which ruling was correct.
For, conceding that plaintiff knew of said guaranty (and the
evidence tends to show that he did), nevertheless:
‘‘If it were known to the transferee of a negotiable * * * note,

acquired for value before maturity, on taking it, that the considera-
tion was future and contingent, and that there might be offsets against
it, this would not make him liable for the equities between the original
parties. * * * It cannot affect the negotiability of a note that its con-
sideration it to be thereafter realized, or that from some contingency
it may never be enjoyed.’’ Bank v. Cason, 39 La. Ann. 865, 2 South.
881.
And again:
‘‘If the consideration of the note had not failed at the time of its
transfer, the maker cannot set up as a defense that the holder knew
that there might be offsets against it.’’ Sadler v. White, 14 La. Ann.
177.
This doctrine was affirmed in Pavey v. Stauffer, 45 La. Ann. 353,

12 South. 512, 19 L. R. A. 716, and again in Marx v. Frey, 137 La.
948, 958, 69 South. 757, and is in accord with the general law of
Negotiable Instruments. See 8 Corpus Juris, 509, § 718, and 3 Ruling
Case Law, 1067, § 273.
The holder of a negotiable rent note has been held entitled to
recovery thereon, even where circumstances have obliged the tenant to
pay the rent a second time. Marinoni v. Levy, 9 Orleans Appeals,
254, citing Barelli v. Szymanski, 14 La. Ann. 47, and Tulane Improve-
ment Co. v. Green Photo Co., 124 La. 619, 50 South. 601.
III
Plaintiff has asked for damages for a frivolous appeal. But these
will not be allowed, as we do not feel assured that this appeal was
taken solely for delay or that plaintiff has suffered any damage by
reason thereof. The note and judgment bear the highest rate of
conventional interest allowed by law, 8 per cent. C. P. art. 907; Saloy

v. Gubernator, 17 La. Ann. 169; Bank v. Magee, 128 La. 1008, 55
South. 656.
DECREE
The judgment appealed from is therefore affirmed.
MAILING OF NOTICE OF PROTEST SUFFI-

CIENT WITHOUT PROOF OF RECEIPT
Bittenbender Company v. Bergen, Supreme Court of Pennsylvania,

120 Atl. Rep. 658
The defendant, when sued as indorser upon a promissory note,

claimed that he had not been advised of the protest of the note.
In order to prove that notice of protest was given the plaintiff
produced the notary’s certificate which asserted ‘‘I duly notified
the indorsers.’’ The plaintiff also proved that a formal notice of
protest, correctly addressed to the defendant, was posted at the
proper time. The defendant denied the receipt of the notice but
offered no evidence to support such denial.
The court held that while evidence tending to show that notice
of protest has not been sent can always be offered to meet
a notary’s certificate and proof of mailing, a bare denial of receipt
of protest is not sufficient to overcome direct, positive testimony of
actual mailing.
It was further held that under the Negotiable Instruments Act, 2
notary’s certificate of protest is prima facie evidence of the facts
stated therein, and that due notice of dishonor is deemed to have
been given when it is shown that the notice was properly addressed
and deposited in the post office, whether such notice was or was not
received.
Action by the Bittenbender Company against Thomas D. Bergen.

Judgment for plaintiff, and defendant appeals. Affirmed.
Argued before MOSCHZISKER, C. J., and FRAZER, WALLING,
KEPHART, and SCHAFFER, JJ.
J. F. Mahoney and John F. Whalen, both of Pottsville, for
appellant.
Roseoe R. Koch and Wells, Leach & Davis, all of Pottsville, for
appellee.
Edition) § 748.
MOSCHZISKER, C. J.—In this suit against an indorser on a

promissory note, judgment was entered on a verdict for plaintiff, and
defendant has appealed.
The note, failure to pay, and protest were not questioned, but
defendant claimed he had not been advised of the protest. To show
such advice, plaintiff offered in evidence the notary’s certificate, which
asserted, inter alia, ‘‘I duly notified the indorsers.’’ After showing
defendant’s record admission that he had a regular address in Potts-
ville where mail was delivered, plaintiff also proved the due posting,
at a proper time, of a formal protest notice, correctly addressed to
defendant.
Defendant offered a series of bald denials that he had received any
notice of protest. The trial court’s refusal to receive testimony to this
effect is specified in several assignments. In the first place, appellant
contends his offers contain more than a mere denial of receipt of notice;
but, after studying them, we think they comprehend nothing of mate-
rial force beyond such denial. Next, appellant contends, even if the
conclusion just stated be true, nevertheless, proof that no protest notice
was received is relevant evidence from which the jury might conclude
no such notice had been sent, and his offers should have been accepted
on this theory, if on no other.
Under our law, a notary’s certificate of protest is prima facie
evidence of the facts stated therein; and, since Act May 16, 1901 (P. L.
194) § 105 (Pa. St. 1920, § 16095):
‘* “Where notice of dishonor is duly addressed and deposited in the

post office, the sender is deemed to have given due notice, notwith-
standing any miscarriage in the mails’; under this section, due notice
of dishonor is deemed to have been given when it is shown that the
notice is properly addressed and deposited in the post office, whether
it has been received or not.’’ First Nat. Bk. of Hanover v. Delone,
254 Pa. 409, 412, 98 Atl. 1042, 1044.
Of course, evidence showing, or tending to show, that notice of

protest had not been sent, can always be offered to meet a notary’s
certificate and proof of mailing, or either of them (Delone Case, supra),
but a bare denial of receipt of notice is negative evidence, not of
sufficient probative value to overcome direct, positive testimony of
actual mailing (Delone Case, supra; Zollner v. Moffitt, 222 Pa. 644, 652,
72 Atl. 285) ; such negative proof could, at most, serve only as a make-
weight to help with other, positive, proofs, none of which appears in
defendant’s case.
The only evidence offered by defendant, aside from that already
discussed, was a letter to him from plaintiff, written some months
after the date of protest, which appellant urges contained a virtual
admission that no notice of protest had been sent. This letter was
fairly submitted to the jury for what it was worth, and the verdict
indicates they did not ascribe to it the meaning contended for by
defendant.
Defendant cannot succeed in this appeal, for the evidence received
proved insufficient to show a failure on plaintiff’s part to send notice
of protest, and there was no error in the rejection of the offers to
prove non-receipt of such a notification. True, in Zollner v. Moffitt,
supra (222 Pa. 648, 72 Atl. 286): ‘‘Defendant testified that he never
received any notice of dishonor,’’ but, so far as that case is concerned,
it is sufficient to say the testimony does not appear to have been
objected to, and the question raised here was not made a point of there.
In the Zollner Case, 222 Pa. 651, 72 Atl. 285, we said that, albeit
the notary’s certificate showed he had notified the indorsers, the court
could not declare as ‘‘a matter of law’’ how the notice had been given.
Relying on this, appellant complains the trial judge, in the instant
ease, referred to the certificate of protest as ‘‘prima facie evidence’’
that the notice was properly mailed. Of course, this statement of the
court was ineorrect; but, in view of the manner in which the ease
was tried, we conceive the mistake could have done defendant no harm.
Moreover, no special exception was taken, and when the trial judge,
at the end of the charge, asked counsel if they desired any further
instructions, this misinstruction was not called to his attention. The
matter under consideration does not show reversible error.
Certain correspondence was put in evidence to prove an admission
by defendant that he had in fact received the notice of protest. It is
objected these letters do not tend to show the admission claimed, and
hence they should not have been received; but it might well be held
the evidence objected to had some such probative force, because of
defendant’s omission to say anything therein about a defense to plain-
tiff’s demand, neither a failure to notify defendant of the protest nor
any other reason why he should not eventually pay being mentioned
in the letters. Whether or not the correspondence in question, of
itself, should be viewed as having the force just suggested, is not con-
trolling, however, since the letters were received under an offer tc
accompany them by certain oral testimony, ‘‘for the purpose of show-
ing [defendant’s alleged] admission’’ through this combined evidence.
The promised oral testimony, subsequently tendered by plaintiff, was
not received, because objected to by defendant. When his objection
was sustained, defendant should then have moved to strike out the
previously admitted correspondence, if he thought it, standing alone,
lacked probative force; having failed to do this, he is not in a position
to complain. In addition, the letters in question did not play any
material part in the trial, and, in all reasonable probability, their
admission did defendant no harm, which is sufficient reason in itself

for not sustaining the present assignment. It and all others are over-
ruled.
The judgment is affirmed.
FUNDS DEPOSITED FOR SPECIAL PURPOSE

CANNOT BE SET OFF AGAINST
DEPOSITOR’S DEBT
Wimberley v. Bank of Portia, Supreme Court of Arkansas, 250 S. W.

Rep. 334
One A. L. Pickens, who was engaged in the general mercantile

business, became insolvent. He arranged to continue the business
under the direction of Z. C. Wimberley as trustee for his creditors.
Pickens had an account with the Bank of Portia. It appeared that
he notified the cashier of the bank of his new business arrange-
ments and opened a new account with the bank. The sum of
$1,245 was thereafter deposited by Pickens. According to the
testimony of several witnesses it was understood that the amounts
deposited in the new account should constitute a trust fund to be
used by Wimberley in paying the creditors of A. L. Pickens pro
rata.
At the suggestion of the president of the bank, the amount
standing to the credit of Pickens under the new account was
charged off the books and the amount credited on a note which
Pickens owed the bank. Pickens then filed a petition in bankruptcy.
The trustee filed a petition to require the Bank of Portia to pay
over the amount which it had charged off its books to the trustee
as the property of the bankrupt estate.
It was held that the bank was liable for the amount on deposit
under the new account, since the money was deposited for a special
purpose known to the bank and, therefore, could not be withheld
from that purpose in order that it might be set off by the bank
against a debt due it from the depositor.
Suit by Z. C. Wimberley, as trustee in bankruptey for the estate

of A. L. Pickens, bankrupt, against the Bank of Portia. Decree of
dismissal and plaintiff appeals. Reversed and remanded with direc-
tions.
NOTE—fFor similar decisions see Banking Law Journal Digest (Second
Edition) § 515
Z. C. Wimberley, as trustee in bankruptcy for the estate of A. L.

Pickens, bankrupt, brought this suit in equity against the Bank of
Portia to recover the sum of $1,245 alleged to be due the bankrupt.
The complaint and, proof show that at the time Z. C. Wimberley
was appointed trustee in bankruptcy of the estate of A. L. Pickens,
the Bank of Portia had on deposit $1,245 belonging to said A. L.
Pickens.
It appears from the record that A. L. Pickens was engaged in
the general mercantile business at Portia, Ark., and did business with
the Bank of Portia, which was running a bank there. In December,
1920, A. L. Pickens discovered that he was insolvent, and after talking
with the cashier of the Bank of Portia, he went to Jonesboro and
consulted Z. C. Wimberley, of the Wimberley Grocer Company, which
was engaged in the wholesale grocery business and was one of the
creditors of A. L. Pickens, in the sum of $900. A. L. Pickens went
to Jonesboro on the 23d day of December, 1920, and at the time
intended to file a voluntary petition in bankruptcy. After consulting
with Z. C. Wimberley, who called other creditors over the long distance
telephone, it was agreed that a contract should be drawn up providing
for the continuance of the business by A. L. Pickens under the diree-
tion of Z. C. Wimberley as trustee for all the creditors. The contract
provided that Wimberley as trustee should assume the responsibility
for the control and management of the business and should pay all the
creditors pro rata from the amount which should be realized there-
from. The agreement contemplated that the business should be wound
up in this way and the proceeds divided ratably among the creditors
in order to avoid the expenses of bankruptcy proceedings. The agree-
ment was conditioned upon the acceptance of the other creditors, or
of a sufficient majority thereof in point of numbers and amount of
indebtedness, to prevent the said A. L. Pickens from being forced into
bankruptey. The sum in controversy was realized from the conduct
of the business of A. L. Pickens under this agreement, and the deposit
of it by him in the Bank of Portia.
According to the testimony of Z. C. Wimberley and A. L. Pickens,
Wimberley called up the Bank of Portia before the agreement in ques-
tion was entered into, and the cashier of the bank understood the
purport of the agreement and said that he thought that it was the best
way to wind up the business. A. L. Pickens then started a new
account with the bank, and the sum in controversy in this case was
deposited by him under the agreement above referred to.
Mrs. A. L. Pickens worked in the store for her husband and
testified that she obtained a new bank book from the bank which was
labeled ‘‘new account.’’
According to the testimony of all these, witnesses, it was under-

stood by the bank that the amounts deposited there on the new
account should constitute a trust fund to be used by Wimberley in
paying the creditors of A. L. Pickens pro rata.
The cashier of the Bank of Portia was a witness for it. He
denied that the Bank of Portia was a party to the agreement that
Wimberley should act as trustee for all the creditors and that the
amounts deposited in the bank by A. L. Pickens should be treated as
a trust fund to be paid ratably to all the ereditors of A. L. Pickens.
He stated positively that the money was deposited by A. L. Pickens
thereafter in the ordinary course of business. He admitted that he
gave Mrs. A. L. Pickens a new bank book and that it might have been
marked ‘‘new account.’’ He stated, however, that he gave her the
new book because the old one was about filled up or practically worn
out. On the 5th day of January, 1921, the president of the Bank of
Portia suggested that the balance of A. L. Pickens in the bank should
be charged off the books and the amount entered as credit on the note
which Pickens owed the bank. The witness then credited the note of
A. L. Pickens to the Bank of Portia with the $1,245 which A. L.
Pickens had deposited there since the 23d day of December, 1920.
A. L. Pickens then filed a petition in bankruptcy, because, as he ex-
pressed it, there was nothing else to do. He stated that he in good
faith had endeavored to carry out his agreement with his creditors, but
had been prevented from doing so by the bank’s applying the money
which he derived from the conduct of his business to the payment of
its own note to the exclusion of his other creditors.
The trustee in bankruptcy filed a petition with the referee in
bankruptcy to require the Bank of Portia to pay over the money in
controversy to the trustee as the property of the bankrupt estate.
This summary proceeding was denied by the referee on the ground
that the bank had an adverse claim to the fund and that it could only
be prosecuted in a plenary proceeding. Upon review the judge of the
bankruptey court sustained the conclusion of the referee in bankruptcy.
The chancellor found that A. L. Pickens owed the Bank of Portia
a note which was due it, and that it had the right to credit the amount
he had on deposit in the bank on that note.
A decree was entered dismissing the complaint of the trustee for
want of equity, and the case is here on appeal.
A. P. Patton, of Jonesboro, for appellant.
Ponder & Gibson, of Walnut Ridge, for appellee.
HART, J. (after stating the facts as above).—It is first sought to

uphold the decree on the ground that the matter is res adjudicata. In
making this contention, counsel rely upon the decision of the bank-
ruptey court sustaining the conclusion of the referee in denying the

petition of the trustee in bankruptcy to require the Bank of Portia
to pay over the money in controversy to the trustee as the property
of the bankrupt estate.
The court of bankruptcy may by summary proceedings compel @.
person who is in possession of the property of the bankrupt, but who~
claims no adverse title thereto, to restore such property to the trustee. .
On the other hand, where the party in possession of the property”
asserts an adverse claim thereto, the bankruptcy court cannot act:
summarily and make an order to return it to the trustee, without the-
formality of litigation. In such cases there must be a suit brought i
the proper forum by the trustee in bankruptcy against the adverse
claimant to adjudicate his claim of title to the property. Collier on
Bankruptey (12th Ed.) vol. 1, pp. 523-529; Hiscock v. Varick Bank
of New York, 206 U. S. 28, 27 Sup. Ct. 681, 51 L. Ed. 945; Frank v.
Vollkommer, 205 U. 8. 521, 27 Sup. Ct. 596, 51 L. Ed. 911; Babbitt
v. Dutcher, 216 U. S. 102, 30 Sup. Ct. 372, 54 L. Ed. 402, 17 Ann. Cas.
969; and Harris, Trustee, v. First National Bank of Mt. Pleasant, 216
U. S. 382, 30 Sup. Ct. 296, 54 L. Ed. 528.
Having denied the plea of res adjudicata of the defendant, we are
brought to a consideration of the case on. its merits. It is a general
rule that funds deposited in the bank for a special purpose known to
the bank cannot be withheld from that purpose to the end that they
may be set off by the bank against a debt due it from the depositor.
In other words, while it is true that a general deposit by a merchant of
money in a bank creates the relation of debtor and creditor and
authorizes the bank to use the money as its own, such result does not
obtain when the deposit is made for a special purpose; as, for example,
to be paid to creditors. Wagner v. Citizens’ Bank, ete., Co., 122 Tenn.
164, 122 S. W. 245, 28 L. R. A. (N. S.) 484, 135 Ann. St. Rep. 869,
19 Ann. Cas. 483, and cases cited; Van Zandt v. Hanover Nat. Bank,
149 Fed. 127, 79 C. C. A. 23; Bank of United States v. Macalester, 9
Pa. 475; National Bank v. Insurance Co., 104 U. S. 54, 26 L. Ed. 693;
Reynes v. Dumont, 130 U. S. 354, 9 Sup. Ct. 486, 32 L. Ed. 934; and
Union Stock Yards Bank v. Gillespie, 137 U. S. 411, 11 Sup. Ct. 118,
34 L. Ed. 724.
Tested by this rule, we think that the learned chancellor erred in
finding in favor of the defendant in this case. We recited the
substance of the testimony in our statement of facts and do not deem
it necessary to repeat it here. A preponderance of the evidence shows
that the money was deposited in the bank by A. L. Pickens as a trust
fund to be used by Z. C. Wimberley as his trustee in paying off all of
his creditors pro rata. This is testified to, not only by Pickens him-
self, but by his wife and Z. C. Wimberley. They are corroborated by

the fact that a new bank book was given to Pickens at the time the
agreement was entered into, and this book was marked ‘‘new account.”’
This indicates that the new account was different from the old one.
It is true that the argreement under which they operated was
conditioned upon its acceptance by other creditors of A. L. Pickens
sufficient in number and amount of indebtedness to prevent his being
forced into bankruptcy. It does not make any difference, however,
that the formal consent of all these creditors was never obtained. The
evidence shows that the parties operated under it from the time it
was drawn up and signed by a part of the creditors. The bank so
understood it, and on this account the money thereafter deposited by
Pickens in the Bank of Portia constituted a trust fund to be applied
ratably towards the payment of all his debts, and the bank had no
right to apply the funds towards the payment of a past-due note which
Pickens owed it.
It follows that the decree will be reversed, and the cause remanded,
with directions to grant the prayer of the complaint, and for further
proceedings in accordance with the principles of equity and not in-
consistent with this opinion.
RECOVERY ON NOTE DEFEATED BY ALTERA-

TION
Barnes v. Thomas, Supreme Court of Iowa, 193 N. W. Rep 409
The defendant, William Thomas, made a note payable to his own

order. It appeared that the note, as executed by Thomas, provided
for interest at six per cent. A week after the execution of the note, the
holder requested the wife of Thomas to indorse the note. In order
to secure her indorsement the holder erased the provision for
interest. Mrs. Thomas then indorsed the note. Thereafter without
her authority or consent a provision for interest at eight per cent.
was inserted in the note. This provision was written in ink of a
different color from that originally used, so that the alteration was
apparent on the face of the instrument. The plaintiff, to whom
the note was subsequently transferred, brought suit upon it.
It was held that the defense was complete. Proof of the altera-
tion in the note cast upon the plaintiff the burden of explaining
the change and of showing affirmatively that she was a holder in
Edition) § 417.
due course without notice of the defect in the title of the person
from whom she purchased the paper. The plaintiff’s testimony to
the effect that the note was in its altered condition when she bought
it, and that she did not know how it happened to be written in
ink of two colors was insufficient to prove her lack of knowledge
of the unauthorized alteration.
Action at law to recover upon a promissory note. Trial to the court

without jury. Judgment for defendants. Plaintiff appeals. Affirmed
Geo. S. Wright and Addison G. Kistle, both of Council Bluffs, for
appellant.
Riley Clark, of Neola, for appellees. *
PER CURIAM.—tThe note sued upon was made by the defendant

William Thomas payable to his own order, and the same appears to
be indorsed by himself and the codefendant, his wife. The defense
pleaded by the wife is that the note was executed and delivered by
William Thomas alone and that the wife’s name was indorsed thereon
after such delivery and without any consideration therefor. She
further pleads that since such delivery and indorsement of the note the
instrument has been fraudulently and materially altered and thereby
rendered void and uncollectible. William Thomas also answers, setting
up the alleged spoliation of the note. The court having heard the
evidence made special findings of fact, to the effect that the note as
executed by William Thomas was drawn to bear interest at six per
cent.; that a week later the instrument was presented to the wife with
request that she indorse it, and thereupon in response to her objection
the holder erased the provision for interest and in that condition the
wife indorsed it; that thereafter and without her authority or consent
the note was altered by making it appear to draw interest at eight
per cent., the change being made in a different colored ink, and that
such alteration is apparent on the face of the instrument; and that
the change made therein is a material one and plaintiff is not entitled
to recover.
The answers were not attacked by motion or demurrer, and upon
proof of the matters so pleaded the defense was complete. Bank v.
Zeims, 93 Iowa, 140, 61 N. W. 483. The findings by the court have all
the force and effect of a verdict by the jury. There was no error in
denying the plaintiff’s motion for judgment. It is to be further noted
that proof of the alleged alteration in the note had the effect to cast
the burden upon plaintiff to explain such change and to show affirm-
atively that she was a holder in due course without notice of the
defect in the title of the person from whom she purchased the paper.
The most she says is that when she bought the note it was in the same
self, but by his wife and Z. C. Wimberley. They are corroborated by

the fact that a new bank book was given to Pickens at the time the
agreement was entered into, and this book was marked ‘‘new account.’’
This indicates that the new account was different from the old one.
It is true that the argreement under which they operated was
conditioned upon its acceptance by other creditors of A. L. Pickens
sufficient in number and amount of indebtedness to prevent his being
forced into bankruptey. It does not make any difference, however,
that the formal consent of all these creditors was never obtained. The
evidence shows that the parties operated under it from the time it
was drawn up and signed by a part of the creditors. The bank so
understood it, and on this account the money thereafter deposited by
Pickens in the Bank of Portia constituted a trust fund to be applied
ratably towards the payment of all his debts, and the bank had no
right to apply the funds towards the payment of a past-due note which
Pickens owed it.
It follows that the decree will be reversed, and the cause remanded,
with directions to grant the prayer of the complaint, and for further
proceedings in accordance with the principles of equity and not in-
consistent with this opinion.
RECOVERY ON NOTE DEFEATED BY ALTERA-

TION
Barnes v. Thomas, Supreme Court of Iowa, 193 N. W. Rep 409
The defendant, William Thomas, made a note payable to his own

order. It appeared that the note, as executed by Thomas, provided
for interest at six per cent. A week after the execution of the note, the
holder requested the wife of Thomas to indorse the note. In order
to secure her indorsement the holder erased the provision for
interest. Mrs. Thomas then indorsed the note. Thereafter without
her authority or consent a provision for interest at eight per cent.
was inserted in the note. This provision was written in ink of a
different color from that originally used, so that the alteration was
apparent on the face of the instrument. The plaintiff, to whom
the note was subsequently transferred, brought suit upon it.
It was held that the defense was complete. Proof of the altera-
tion in the note cast upon the plaintiff the burden of explaining
the change and of showing affirmatively that she was a holder in
Edition) § 417.
due course without notice of the defect in the title of the person
from whom she purchased the paper. The plaintiff’s testimony to
the effect that the note was in its altered condition when she bought
it, and that she did not know how it happened to be written in
ink of two colors was insufficient to prove her lack of knowledge
of the unauthorized alteration.
Action at law to recover upon a promissory note. Trial to the court

without jury. Judgment for defendants. Plaintiff appeals. Affirmed
Geo. S. Wright and Addison G. Kistle, both of Council Bluffs, for
appellant.
Riley Clark, of Neola, for appellees. ~*
PER CURIAM.—tThe note sued upon was made by the defendant

William Thomas payable to his own order, and the same appears to
be indorsed by himself and the codefendant, his wife. The defense
pleaded by the wife is that the note was executed and delivered by
William Thomas alone and that the wife’s name was indorsed thereon
after such delivery and without any consideration therefor. She
further pleads that since such delivery and indorsement of the note the
instrument has been fraudulently and materially altered and thereby
rendered void and uncollectible. William Thomas also answers, setting
up the alleged spoliation of the note. The court having heard the
evidence made special findings of fact, to the effect that the note as
executed by William Thomas was drawn to bear interest at six per
cent.; that a week later the instrument was presented to the wife with
request that she indorse it, and thereupon in response to her objection
the holder erased the provision for interest and in that condition the
wife indorsed it; that thereafter and without her authority or consent
the note was altered by making it appear to draw interest at eight
per cent., the change being made in a different colored ink, and that
such alteration is apparent on the face of the instrument; and that
the change made therein is a material one and plaintiff is not entitled
to recover.
The answers were not attacked by motion or demurrer, and upon
proof of the matters so pleaded the defense was complete. Bank v.
Zeims, 93 Iowa, 140, 61 N. W. 483. The findings by the court have all
the force and effect of a verdict by the jury. There was no error in
denying the plaintiff’s motion for judgment. It is to be further noted
that proof of the alleged alteration in the note had the effect to cast
the burden upon plaintiff to explain such change and to show affirm-
atively that she was a holder in due course without notice of the
defect in the title of the person from whom she purchased the paper.
The most she says is that when she bought the note it was in the same
condition as now and that she does not know how it happens to be
written in two colors of ink. This falls far short of testimony that
she had no notice or knowledge of the fact of the unauthorized altera-
tion.
The judgment appealed from is affirmed.
AGREEMENT MAKING ACCOMMODATION IN-

DORSERS @O-SURETIES UPHELD
Blumberg v. Speilberger, Supreme Court of Alabama, 96 So. Rep 191
The plaintiff sued the defendant as a prior indorser of three

promissory notes payable to the defendant’s order and signed by
the Joe Patterson Grocery Company. The defense was that both
the plaintiff and the defendant were accommodation indorsers of
the notes. It was understood between the parties that the plaintiff
and defendant indorsed the notes as co-sureties. The defendant
had paid one of the notes, and he tendered in court the money to
satisfy his half of the aggregate amount of the notes.
The jury rendered a verdict for the defendant. Upon appeal
the judgment was affirmed. The appellate court held that § 5023
Code 1917 applies to accommodation as well as to regular indorsers.
The section provides that while indorsers, as respects one another,
are liable prima facie in the order in which they indorse, evidence
is admissible, nevertheless, to show that as between or among them-
selves they have agreed otherwise.
Action by J. Blumberg against Jacob Speilberger. Judgment for

defendant, and plaintiff appeals. Transferred from Court of Appeals
under section 6, p. 449, Acts 1911. Affirmed.
Plaintiff sues defendant as indorser of three certain promissory
notes made by the Joe Patterson Grocery Company, payable to the
order of defendant.
Besides a denial of indebtedness, defendant pleaded specially in
substanee as follows: That said grocery company was in need of
financial accommodation, and this condition was explained to both
plaintiff and defendant at Sheffield, Ala., ‘‘and it was then and there
agreed that the said Jacob Speilberger and the said J. Bloomberg
would extend assistance to the said * * * grocery company by
NOTE—For similar decisions see Banking Law Journal Digest (Second.
Edition) § 451.
lending their respective indorsements to the paper of * * * gro-

cery company’’; that such notes were executed to the amount of
$2,250, ‘‘indorsed both by the plaintiff and by the defendant as
guarantors or sureties of the said * * * grocery company,’’ which
were afterwards renewed for $1,250, the latter (the notes sued on)
being executed by said grocery company payable to defendant ‘‘and .
being indorsed (by plaintiff and by defendant) as guarantors or
sureties of the said * * * grocery company’’; that defendant paid
one of the notes, and paid and tendered the money in court to satisfy
his half of the aggregate amount of the notes.
Plaintiff objected to the filing of this plea because it contained
immaterial and irrelevant matters; moved to strike it from the files;
and moved to strike various parts of it because of their irrelevancy
and illegality.
These several objections and motions were overruled by the court,
with exceptions by plaintiff.
The evidence tended to support the allegations of the plea. Defend-
ant testified to an agreement between him and plaintiff that plaintiff
would pay half of the notes in case the grocery company should fail,
and the evidence shows that that event had happened. Plaintiff
denied the making of any such agreement. It appeared without dispute
that defendant’s indorsements on the notes preceded those of plaintiff,
and were made before the notes reached plaintiff’s hands.
At plaintiff’s request the trial judge instructed the jury that Speil-
berger, as first indorser, was prima facie liable to plaintiff on the
notes, and that the burden was on defendant to reasonably satisfy them
that before the first series of notes were made plaintiff agreed to be
jointly liable with defendant for any default on the part of the Pat-
terson Grocery Company.
The jury found for defendant, and there was judgment accordingly.
Nathan & Nathan, of Sheffield, for appellant.
Andrews & Peach, of: Sheffield, for appellee.
SOMERVILLE, J. Section 5023 of the Code provides that—
‘‘As respects one another, indorsers are liable prima facie in the
order in which they indorse; but evidence is admissible to show that
as between or among themselves they have agreed otherwise.”’
This rule, of course, applies to accommodation as well as to regular

indorsers. In Braham v. Atwood, 3 Stew. 247, and later in Sherrod v.
Rhodes, 5 Ala. 683, 691, it was held that—
‘‘The fact merely that two or more persons were successive accom-
modation indorsers for another did not make them co-sureties, but
that to constitute that relation there must be an agreement between

them to that effect, or some fact or circumstance must exist from which
it may be inferred that they intended to be bound as co-sureties, al-
though they have not signed the instrument jointly, but successively.’’
This has always been the law. * * *

The issue of joint or successive indorsement and suretyship was
clearly submitted to the jury as the decisive issue in the case, and we
find no erroneous ruling of the trial court which could justify a
reversal of the judgment.
Affirmed.
CHECK ISSUED WITHOUT FUNDS
Commonwealth v. Hammock, Court of Appeals of Kentucky, 250 S. W.

Rep. 85
The defendant gave a check drawn on the Farmers’ Bank of

Turner’s Station, Ky., to satisfy a loan of money obtained 20 or 30
days before the check was issued. When the defendant delivered
the check he knew that he had no money in the bank with which to
pay it.
The defendant was indicted under section 1213a, Kentucky
Statutes, which provides that a person who issues a check for the
payment of money drawn on a bank, knowing at the time he issues
the check that he has not sufficient funds in the bank for the pay-
ment of the check in full is guilty of a felony.
It was held that the defendant had not committed the offense
charged in the indictment. The court said that the crime is not
committed unless the check is issued with intent to defraud. It
found that the defendant had not issued the check with intent to
defraud, since he obtained no money by reason of the check. He
did not issue the check with the intent to obtain money, but only
in payment of a past due obligation.
J. C. Hammock was convicted for fraudulently delivering a check

knowing he had not sufficient funds for its payment. From a judg-
ment sustaining a general demurrer to the indictment, the Common-
wealth appeals. Law certified that the demurrer was correctly sus-
tained.
Edition) § $32.
Chas. I. Dawson, Atty. Gen., T. B. MeGregor, Asst. Atty. Gen..

H. B. Kinsolving, Jr., of Bedford, for the Commonwealth.
W. B. Moody, of New Castle, for appellee.
SAMPSON, C. J.—The trial court sustained a general demurrer to

an indictment accusing Henry Hammock of the crime ‘‘of unlawfully
and fraudulently delivering a check for the payment of money upon
a bank, knowing at the time of such delivery that the maker had not
sufficient funds in such bank for the payment of such check in full
upon its presentation.’’ The specifications of the indictment read:
‘‘The said defendant, J. C. Hammock, in the county of Henry, on
the 30th day of December, A. D. 1922, and before the finding of this
indictment, did unlawfully, willfully, feloniously, and fraudulently
deliver to Wilson Bros. a check for $76.07, drawn on the Farmers’
Bank of Turner’s Station, Ky., and the said defendant did receive for
said check lawful United States money currency from the said Wilson
Bros., which had been advanced to the said Hammock some 20 or 30
days prior to the giving of said check, and he, the said J. C. Hammock,
did know at the time of delivering said check that he did not have
sufficient funds in said bank for the payment of said check in full
upon its presentation.’’
Following this the indictment sets forth the check, and charges that
the bank is a corporation existing under the laws of Kentucky, and
authorized to do banking business, and that Wilson Bros. is a partner-
ship, trading, ete. ;
The indictment was prepared under and pursuant to section 1213a,
Kentuey Statutes, which reads in part:
‘‘That any person who with intent to defraud shall make, or draw
or utter or deliver any check, draft or order for the payment of money
upon any bank or other depository, knowing at the time of such mak-
ing, drawing, uttering or delivery, that the maker or drawer has not
sufficient funds in such bank or other depository for the payment of
such check, draft or order in full upon its presentation, * * * he
shall be guilty of a felony and confined in the penitentiary,’’ ete.
The crime is not committed unless the issuing of the check, draft
or order was with intent to defraud. If it were not issued with intent
to defraud, and its issual could not have been, under the facts, a fraud,
no violation of the statute results. Evidently the statute was intended
to prevent persons issuing what is commonly known as ‘‘cold checks,’’
and simultaneously obtaining thereon money or property. It could
be nothing less than fraud to obtain money or property on or through
a check or draft issued at a time when the drawer or maker knew he
did not have sufficient money in the bank to meet the payment thereof.
This purpose of the statute is manifested by one of its provisions:
‘*Provided, however, that if the person who makes, issues, utters

or delivers any such check, draft or order, shall pay the same within
twenty days from the time he receives actual notice, verbal or written,
of the dishonor of such check, draft or order, he shall not be prose-
cuted under this section, and any prosecution that.may have been in-
stituted within the time above mentioned, shall, if payment of said
check be made as aforesaid, be dismissed at the cost of defendant.”’
A case dealing somewhat with this subject is Commonwealth v.

McCall, 186 Ky. 306, 217 S. W. 109.
The indictment in this case accuses appellee, Hancock, of the of-
fense of issuing a check knowing that he had no money in bank with
which to pay the same, in satisfaction of a loan of money obtained
some 20 or 30 days previous to the issual of the check. In other words,
Hammock had obtained the money 20 or 30 days before the check
was given. There was no money passed to him simultaneously with
the issual of the check. He did not, therefore, obtain the money, or
any part thereof, by reason of the check or its issual or delivery, and
did not issue and deliver the check with the intent to obtain such money,
but only in payment of a past-due obligation. Appellee Hammock
could not, therefore, have issued the check with intent to defraud.
Such intention is of the essence of the offense—the gravamen. Without
intent to defraud no offense is committed.. It follows, therefore, that
the indictment did not sufficiently charge the offense denounced by
section 1213a, Kentucky Statutes.
The trial court properly sustained the demurrer to the indictment,
and the law is so certified.
PROMISE IN TELEGRAM TO PAY CHECK HELD

AN ACCEPTANCE
Texas State Bank of Fort Worth v. Press Publishing Co., Court of

Civil Appeals of Texas, 250 S. W. Rep. 464
The Fort Worth Advertising Agency requested the plaintiff,

Press Publishing Company, to undertake certain advertising for it.
In payment for this advertising, the advertising agency offered to
the plaintiff two checks drawn on the Texas State Bank of Fort
Worth.
The plaintiff sent a telegram to the bank inquiring whether the
checks were good. In reply it received a telegram stating that
Edition) §$ 197.
‘‘We will pay’’ the checks. The plaintiff then did the advertising
requested by the drawer of the checks, and took the checks in pay-
ment thereof. When the checks were presented to the bank for
payment, payment was refused.
It was held that the bank was obliged to pay the checks. The
telegram sent in reply to the plaintiff’s telegram was a promise
to pay the checks and, therefore, an acceptance or certification of
them.
Appeal from Tarrant County Court; P. W. Seward, Judge.

Action by the Press Publishing Company against the Texas State
Bank of Fort Worth. Judgment for plaintiff, and defendant appeals.
Affirmed.
Samuels & Brown, of Fort Worth, for appellant.
Wray & Mayer, of Fort Worth, for appellee.
DUNKLIN, J.—The Texas State Bank of Forth Worth has ap-

pealed from a.judgment in favor the Press Publishing Company for
the amount of two checks aggregating $262.41, less a credit of 41 cents
entered thereon by plaintiff’s attorney before the trial. The checks
were as follows:
Fort Worth Advertising Agency, No. 963.

R. H. Bowles, President, Westbrook Building.
Hold bal. Forth Worth, Texas, Sept. 29, 1919.
Pay to the order of Pittsburgh Press $174.94
One hundred seventy-four dollars ninety-four cents. 41
$174.53
Fort Worth Advertising Agency,
Raymond H. Bowles.
To Texas State Bank, Fort Worth, Texas.
Guaranty Fund Bank.
Forth Worth Advertising Agency, No. 962.

R. H. Bowles, President, Westbrook Building.
Fort Worth, Texas, Sept. 29, 1919.
Pay to the order of Pittsburgh Press $87.47,
eighty-seven dollars forty-seven cents. Dollars.
Fort Worth Advertising Agency,
Raymond H. Bowles.
To Texas State Bank, Fort Worth, Texas.
The plaintiff was doing business in Pittsburgh, Pa., and the checks
were offered to it in payment of certain advertising which the Fort
Worth Advertising Agency desired, but before accepting the same, and
before performing the services solicited, plaintiff sent the following

telegram to defendant in Fort Worth:
‘*Pittsburgh, Pa., Oct. 2, 1919.

““Texas State Bank, Fort Worth, Texas.
‘‘Are Fort Worth Advertising Company Agency checks to sixty-
two dollars good? Wire collect. The Pittsburgh Press.’’
And in reply thereto received the following telegram:
‘Fort Worth, Texas, Oct. 2, 1919.

‘“‘The Pittsburgh Press, Pittsburgh, Pa.
‘*We will pay Fort Worth Advertising Agency check to sixty-two
dollars.
‘‘Texas State Bank.’’
After receipt of the latter telegram, plaintiff did the advertising

requested by the drawer of the checks and took those checks in pay-
ment thereof. On October 29, 1922, the checks were presented to de-
fendant for payment and payment was refused. Under the rules of
evidence governing in such cases as this, the telegram received by the
defendant bank in Fort Worth from the plaintiff and that received
by the plaintiff in Pittsburgh, Pa., from the defendant, were originals.
Jones on Evidence, § 210, p. 1020. And the defendant having been
notified in plaintiff’s pleading to produce upon the trial the original
of the one received by it, and having failed so to do, and the plain-
tiff’s cause of action being predicated upon that telegram, read in the
light of the one to which it was a reply, the copy of the telegram
received by defendant which was attached to the deposition of witness
Millholland was admissible as secondary evidence. Reliance Lumber
Co. v. W. U. Tel. Co., 58 Tex. 394, 44 Am. Rep. 620; Jones on Evi-
dence, supra; Smith v. Traders’ National Bank, 82 Tex. 386, 17 S. W.
779; Burton v. Driggs, 20 Wall, 134, 22 L. Ed. 299.
A copy of the original telegram received by the plaintiff in Pitts-
burgh, Pa., was admissible, since the original was beyond the jurisdic-
tion of the trial court. W. U. Tel. Co. v. Smith (Tex. Civ. App.) 26
S. W. 216.
The bill of exception to the introduction of the checks purporting
to have been signed ‘‘Fort Worth Advertising Agency, Raymond H.
Bowles,’’ shows that the objection urged was to the absence of proof
that those checks were executed by any one having lawful authority
from the Fort Worth Advertising Agency to execute the same. While
that was the objection urged, the bill of exception does not state as a
fact that no such proof had been made, and in the absence of such
showing, we cannot say that it appears from the bill of exception itself
that the checks were improperly admitted in evidence, nor are we

required to examine the entire statement of facts to determine whether
or not there was such absence of proof.
Appellant insists that its telegram sent in reply to that received
from plaintiff did not amount to an acceptance or promise to accept
under the law governing in such cases, and hence would not sustain
a recovery. We are inclined to overrule that contention in view of
the following provisions of our Negotiable Instruments Statutes which
was in effect at the time of the transaction.
Subdivisions 132 to 135 of article 6001, V. S. Tex. Civ. Statutes
Supplement of 1922, read as follows:
132. ‘‘The acceptance of a bill is the signification by the drawee

of his assent to the order of the drawer. The acceptance must be
in writing and signed by the drawee. It must not express that the
drawee w il perform his promise by any other means than the payment
of money.’
133. ‘‘The holder of a bill presenting the same for acceptance may
require that the acceptance be written on the bill and, if such request
is refused, may treat the bill as dishonored.”’
134. ‘‘Where an acceptance is written on a paper other than the
bill itself, it does not bind the acceptor except in favor of a person
to whom it is shown and who, on the faith thereof, receives the bill
for value.’’
135. ‘‘An unconditiontional promise in writing to accept a bill
before it is drawn is deemed an actual acceptance in favor of every
person who upon the faith thereof, receives the bill for value.’’
But aside from those statutory provisions, the two telegrams read
together showed a contract on the part of the defendant to pay checks
, aggregating the principal sum of $262, and the proof is undisputed
that upon the faith of that contract the plaintiff parted with a valu-
able consideration. The fact that the two checks presented to the
defendant were 41 cents in excess of the amount which defendant
promised to pay did not defeat plaintiff’s right of recovery, since the
41 cents was later entered as a credit on the check, and since the de-
fendant did not refuse payment by reason of such excess, nor by
reason of any objection to the identity of the checks which it had
agreed to pay. Henrietta National Bank v. State National Bank, 30
Tex. 648, 16 S. W. 321, 26 Am. St. Rep. 773; State Bank of Fox Lake
v. Citizens’ National Bank of King Co., 114 Mo. App. 663, 90 S. W.
123; Seudder v. Union National Bank, 91 U. S. 406, 23 L. Ed. 245;
3 R. C. L. pp. 1306, 1307.
For the reasons noted, all assignments of error are overruled, axl
the judgment is affirmed.
INDORSEE OF CHECK FRAUDULENTLY NEGO-

TIATED NOT PRESUMED TO BE
HOLDER IN DUE COURSE
Greenwood Trust Co. v. Speiller, Oneida, New York, County Court,

200 N. Y. Supp. 317
On June 9, 1922, the defendants mailed to one Vandenburg a

check for $840. Vandenburg, on June 16th, notified the defendants
that he had not received the check and requested them to send a
duplicate. This the defendants agreed to do on condition that, if
Vandenburg should receive the first check, he would return it to
the defendants. The defendants stopped payment on the first
check, and, on the 16th of June, mailed a second check to Vanden-
burg. On the following day Vandenburg transferred the first
check to the Greenwood Trust Company.
The trust company, claiming to be a holder for value of the
check, brought an action upon it. The only evidence which was
offered to support the plaintiff’s claim was the proof of the in-
dorsement of J. T. Vandenburg on the back of the check in question.
The court dismissed the complaint because of the plaintiff’s
failure to show that it was an innocent holder for value. It was
held that the circumstances surrounding the negotiation of the
eheck deprived the plaintiff of the presumption which the pos-
session of negotiable paper ordinarily affords, and placed upon
the plaintiff the burden of proving that it was a bona fide holder
for value.
Action by the Greenwood Trust Company against Morris Speiller

and others. Complaint dismissed.
Willis & Guile, of Utica, for plaintiff.
Searle & Searle, of Rome, for defendants.
HAZARD, J.—The facts in this case are undisputed. Some time

in June, 1922, one J. T. Vandenburg, who lives in Bridgeville, Del.,
sold a carload of strawberries to defendants’ firm in Utica. On June
9th of that year the defendants mailed to Vandenburg a check for
$840 in payment therefor. On the 16th of June Vandenburg called
defendants on the telephone and said he had not received the check,
that he was hard up, and asked them to send a duplicate. It was
agreed over the telephone that a duplicate check should be sent, and
that payment of the first check would be stopped by defendants, and
Edition) § 437. .
that if Vandenburg should receive the first check he would return it

to the defendants. The second check was mailed on that day. On the
day following Vandenburg transferred the first check to the plaintiff
herein, which is a banking concern at Greenwood, which is five miles
from Bridgeville. Shortly after the second check went through the
bank in the usual course and was paid.
Plaintiff brings this action upon the first check, claiming to be the
holder for value. At the end of the case the court discharged the
jury and directed that briefs be filed, and the case has been submitted
to me for a decision. The answer of the defendants sets up the fore-
going facts and puts in issue all of the material allegations of the
complaint. Plaintiff simply proved the indorsement of J. T. Vanden-
burg on the back of the check in question and offered no other evi-
dence. The making of the check was admitted by the defendants.
The defendants in their case proved the facts as outlined above and
rested.
It is claimed by the defendants that under section 322 of the
Negotiable Instruments Law, the check on the date it was discounted,
June 16th, was then seven days old; that it therefore was ‘‘stale,’’
and did not have the status of negotiable paper; that the assignee,
the plaintiff here, took the check subject to all of the equities that
existed between the parties. Of course, if that is so, the plaintiff can-
not possibly sueceed, because, manifestly, Vandenburg could not en-
force payment of this first check against the defendants. I refrain
from passing upon this claim, because I am convinced that upon the
proofs made in this case the burden of proof was shifted to the plain-
tiff, and it could no longer rely upon the presumptions which accrue
to it from possession of the instrument. I have reached the conclusion
that the plaintiff was, after defendants’ showing, called upon to prove
that it was an innocent holder and for value.
I base this decision largely upon the case of Mitchell v. Baldwin,
88 App. Div. 265, 268, 84 N. Y. Supp. 1048. The evidence in this case
clearly shows that the check was ‘‘fradulently put in cireulation,”’
and, as stated in that case, upon such a showing, ‘‘the holder will then
be required to show under what circumstances and for what value he
acquired the instrument.’’ There is no hardship in applying this rule
to the plaintiff’s case. The plaintiff’s cashier was in court, and after
listening to defendants’ testimony he remained silent. If his bank did
pay real value for the check, and was in fact a bona fide holder for
value, it was easily within his power to so testify.
I am further convinced of the correctness of this rule by the case
of Canajoharie Nat. Bank v. Diefendorf, 123 N. Y. 191, 25 N. E. 402,
10 L. R. A. 676. Paragraph 3 of the syllabus reads:
‘‘The holder may make out his title by presumption, until it is

impeached by evidence showing the paper had a fraudulent or illegal
inception. When this is done, he can no longer rest upon presump-
tion; but it is incumbent upon him to show the circumstances under
which it came into his possession, and that he has acted in good faith.’’
This is in line with the opinion of the court (123 N. Y. at page 202
25 N. E. 404, 10 L. R. A. 676) where it is said:
‘‘But where it further appears that such property has been fraudu-
lently or illegally obtained from its owner or maker, and under such
circumstances that the person putting it in circulation could not main-
tain an action thereon, it is incumbent upon the holder in order to
succeed to go farther and show the circumstances under which it came
into his possession, and that he has acted in good faith in the
transaction.’’
The ease of Citizens’ State Bank v. Cowles is, I think, also in point.
This case is reported first in 39 Mise. Rep. 571, 80 N. Y. Supp. 598.
It next appears in 89 App. Div. 281, 86 N. Y. Supp. 38. The plaintiff
won in both courts, but the judgment was reversed by the Court of
Appeals (180 N. Y. 346, 73 N. E. 33, 105 Am. St. Rep. 765) for the
reason that there was some evidence in the case from which it might
be inferred that the plaintiff was not in fact a bona fide holder for
value. This is in line with the other cases cited, and it seems to me
to be an authority on the proposition that in a ease like this the plain-
tiff must, after such facts as are shown here are approved, establish his
status by some competent proof, and that he cannot rest upon the mere
presumption which possession of commercial paper affords.
I must therefore decide that the defendants are entitled to judg-
ment dismissing the complaint.
Judgment accordingly.
DEPOSITOR MUST OBJECT TO BANK’S STATE-

MENT WITHIN REASONABLE TIME
Bank of Hatfield v. Clayton, Supreme Court of Arkansas,

250 S. W. Rep 347
The plaintiff had on deposit in the Bank of Hatfield $1,475.83.

One Johnson, who was vice-president of the bank, requested her to
permit him to withdraw $1,000 from her account and lend it out
at the rate of 10 per cent. per annum. The plaintiff refused his
request.
Subsequently, Johnson drew a check on the bank for $1,000

and signed the plaintiff’s name to it. The money was withdrawn
on this check by Johnson and used in a loan to himself. On June
8, 1921, the plaintiff’s account was charged with the amount with-
drawn by Johnson. On June 11th, Johnson notified the plaintiff
that he had placed $1,000 for her at 10 per cent. On June 30,
1921, the bank delivered to the plaintiff an itemized statement of
her account, with the canceled checks. The plaintiff made no ob-
jection to the loan until more than two months after receiving the
statement. Later the plaintiff sued the bank to recover the $1,000.
It was held that the furnishing of a statement by a bank to a
depositor, where the items are sufficiently shown to put, the de-
positor upon notice, constitutes an account stated, to which objec-
tion must be made within a reasonable time, otherwise the account
is final. It was further held that objection was not made within
a reasonable time, since it was not made until two or three months
after the statement was furnished. Such delay upon the part of
the plaintiff was held to preclude a recovery by her on the theory
that the loan was unauthorized.
Action by Nancy Clayton against the Bank of Hatfield. From a

judgment for plaintiff, defendant appeals. Reversed and rendered
against plaintiff.
Norwood & Alley, of Mena, for appellant.
Van Hoy & Frederick, of Mena, for appellee.
McCULLOUGH, C. J.—The plaintiff, Mrs. Naney Clayton, insti-

tuted this action against the defendant, Bank of Hatfield, to recover
the sum of $1,000 held on deposit in the bank to the credit of plain-
tiff, for which a check had been issued and payment refused. The
bank defended on the ground that the deposit had been previously
withdrawn by check, and that plaintiff had no funds on deposit at
the time the last check was drawn. Upon the issues the jury returned
a verdict in favor of the plaintiff, and the defendant has appealed.
The defendant is a banking institution doing business at the town
of Hatfield, in Polk county and the plaintiff, Mrs. Clayton, is the wife
of a farmer residing about a mile and a half distant from that town.
In May, 1921, Mrs. Clayton had on deposit in the bank the sum of
$1,475.83, and Lewis Johnson, who was vice-president of the bank, and,
according to the evidence, was more or less active in assisting in the
management of the affairs of the bank, made a visit to the home of the
plaintiff and proposed to plaintiff that, if she would permit him to
withdraw $1,000 of the funds from the bank and lend it out, he could
secure a loan for her at the interest rate of 10 per cent. per annum.
Johnson testified that the plaintiff consented to that arrangement, but
the plaintiff testified that she declined to go into the plan, for the rea-
son that she needed the money for another purpose. The verdict of
the jury must be treated as having settled this issue of fact in favor
of plaintiff.
However, Johnson disregarded the expressed will of the plaintiff,
and on June 5, 1921, he drew a check on the bank for $1,000 and
signed plaintiff’s name to it. The money was withdrawn from the .
bank on this check by Johnson and used in a loan to himself. He
executed a note to the plaintiff, with C. H. Johnson as surety, and
this note was laid away in the vaults of the bank, presumably to be
kept for the plaintiff. The check was in form as follows:
‘*Hatfield, Ark., June 5, 1921.

‘‘The Bank of Hatfield:
‘*Pay to the order of loan 90 days, $1,000.00, one thousand dollars
and no—dollars.
[Signed] ‘‘Naney Clayton. ‘L.’”’
The money was withdrawn on this check June 8, 1921, and a

charge was made against the plaintiff’s account on the books of the
bank, together with another item of $6.08, covered by a check which
the plaintiff had drawn herself. On June 11, 1921, Johnson wrote
the following letter to plaintiff, which was received by her:
‘‘Hatfield, June 11, 1921.

‘*Mrs. W. S. Clayton: I have placed a thousand dollars for you at
ten per cent., and if you should happen to need it, let me know a
couple of weeks before you need it, and will place it back, but just’ as
long as you don’t need it it will draw you ten per cent. interest, and
this will help you out. You have been good to us, and we want to do
all we can to help you.
‘Your friend,
“*L. H. Johnson, V. President.’’
Plaintiff testified that she received this letter, but made no response
thereto.
On July 30, 1921, the bank delivered to the plaintiff an itemized
statement of her account, with the canceled checks. The statement had
a proper caption, showing what its nature was, and it had printed
thereon notice to the depositor in the following form:
“‘This statement is furnished you, instead of balancing your pass

book. It saves you the trouble of bringing your pass book to the bank
and waiting for it to be balanced. These statements will be found very
convenient to check up and file. All items are credited, subject to
final payment. Use your pass book only as a receipt book when making
deposits.”’
THE BANKING LAW JOURNAL aT9
This statement covered the plaintiff’s account for the months of

June and July, and she admitted on the witness stand that she reeeived
the statement, and also that she thereafter received similar statements
each month as to the condition of her account and the items thereon.
On October 1 the plaintiff wrote a letter to Johnson as follows:
‘‘T will write you a few lines in regard to my money. Will you be
so kind as to place it back in the bank by the 1st of November, as I will
need it bad by that time.’’
Plaintiff drew a check for $1,000 in favor of her husband, W. S.

Clayton, and gave it to him for presentation to the bank. The plain-
tiff’s husband went to the bank and presented the check, and, accord-
ing to his testimony, the clerk, or official, in the bank, without paying
the check, told him about the note and gave him a receipt in the
following form:
‘To Nancy Clayton: 10/6/21.

‘For note of L. H. J., amount $1,000.00. O. K.
‘‘Nancy Clayton,
“By W. S. Clayton.’”
4
According to the testimony, plaintiff made no objections to the

use made of the funds until some time in November. She testified that
she did not understand that the money was to be handled or used by”
Johnson individually, but that the bank was to handle the money for’
her. The court submitted the case upon instructions which told the-
jury that plaintiff was entitled to recover the funds on deposit in the-
bank, unless it was found from a preponderance of the evidemee that:
she authorized the loan of her funds, ‘‘or that thereafter, beime fully~
informed of all material facts with respect thereto, plaintiff expressly
ratified said transaction, either orally or in writing, or by her conduet,
to said defendant.’’
The court refused to give the following instruction requested by the
defendant:
‘‘No. 5. The court tells you as a matter of law that a reasonable

time for the plaintiff to object to the stated account furnished her, if
she had objection, was such time as a reasonable person under all the
circumstances would have required to investigate the account, and if
plaintiff failed in this, and failed to object within this time, then as a
matter of law she would be estopped and you should find for
defendant.’’
The statement of plaintiff that she understood that Johnson was

acting for the bank, and that the bank, instead of Johnson individually,
was to lend out her money, or had;done so, may as well be disregarded
as an issue in the case, further than it may throw light upon the
reasonableness of the time for objection to be made by plaintiff against
the items of her account presented in the statement furnished by the
bank; for there is no issue made by the pleadings or submitted to the
jury as to the negligence or wrongdoing of the bank in lending the
money to Johnson on insufficient security. The case was tried solely
on the theory that the withdrawal of the funds from the bank was
without authority from plaintiff, and that she had a right to recover
the amount of the balance of the deposit on the ground that the bank
was her debtor to that extent.
We are of the opinion that the court not only erred in refusing to
give the fifth instruction requested by defendant, for it is a correct
statement of the law, but that there was really no evidence upon which
to submit the question to the jury whether or not plaintiff had objected
to the statement of her account within a reasonable time. The state-
ment rendered to the plaintiff by the defendant on July 30, 1921,
constituted, according to the undisputed evidence, an account stated
within the meaning of the law applicable to that term. Citizens’ Bank
& Trust Co. v. Hinkle, Adm’r. 126 Ark. 266, 189 S. W. 679. In the
ease just cited we quoted with approval a decision of the Supreme
Court of the United States in Leather Mfg. Co. Nat. Bank v. Morgan,
117 U. 8. 96, 6 Sup. Ct. 657, 29 L. Ed. 811, where the court said that
the furnishing of such a statement by a bank ‘‘in effect imports a
request by the bank that the depositor will, in proper time, examine
the account so rendered, and either sanction or repudiate it.’’
The rule seems to be universal that tha furnishing of a statement by
a bank to a depositor, where the items are sufficiently shown to put the
depositor upon notice, constitutes an account stated, to which objection
must be made within a reasonable time; otherwise, the account is final.
In the case quoted above (117 U. 8. 96, 6,Sup. Ct. 657, 29 L. Ed. 811)
it was said:
‘While no rule can be laid down that will cover every transaction
between a bank and its depositor, it is sufficient to say that the latter’s
duty is discharged when he exercises such diligence as is required by
the circumstances of the particular case, including the relations of the
parties, and the established or known usages of banking business.’’
There are many decisions which establish the rule that it is the duty
of a depositor to examine the statement of account thus presented
within a reasonable time and to immediately make objections thereto,
if any be found. Cases which may be examined with profit on the
subject are collated in the following case notes: 27 L. R. A. 823; 29
L. R. A. (N. S.) 342; 1 R. C. L. 216. The following cases specially
bear upon the question as to what will be considered a reasonable time:

Standard Oil Co. v. Van Etten, 107 U. S. 329, 1 Sup. Ct. 178, 27 L.
Ed. 319; Brown v. Vandyke, 8 N. J. Eq. 795, 55 Am. Dee. 250;
Knickerbocker v. Gould, 115 N. Y. 533, 22 N. E. 573; Hawkins v.
Long, 74 N. C. 781; Freas v. Truitt, 2 Colo., 489; Kenneth Investment
Co. v. National Bank, 103 Mo. App. 613, 77 S. W. 1002.
The facts in the present case are undisputed, and it presents merely
a question of law as to whether or not objection was made within a
reasonable time. The statement expressly called for an examination
of the account and objection to any incorrect items. The account, not
only set forth the items but was accompanied by the canceled checks.
There was a delay of between two and three months before any objec-
tion was made, and it was more than three months before it was
insisted that the money had been wrongfully withdrawn. There were
no undisclosed facts which might or might not have affected plaintiff’s
decision in repudiating the withdrawal of the fund. She says that she
thought that Johnson was acting for the bank in making the loan; but
she knew to a certainty that the money had been withdrawn from the
bank, which had the effect of changing the status of the bank as her
debtor, and the only fact which she claimed to misunderstand was that
the money had been loaned out by Johnson, instead of the bank. But
she was aware of the precise method in which her money had been
withdrawn from the bank, and it was her duty to object to this if it
was unauthorized.
Counsel rely on the case of Robinson v. Security Bank & Trust Co.,
141 Ark. 414, 216 8. W.'717, as supporting their contention that plain-
tiff’s repudiation of the withdrawal of the funds was within a reason-
able time, or that it was a question for the jury. The difference, how-
ever, between that case and the present one, is that there was no
account rendered in that case, and there was merely a withdrawal. of
funds on a forged or unauthorized check, and the depositor waited a
considerable length of time before he made demand for the money,
after receiving information that the money had been withdrawn. No
such strict rule is required where the bank does not furnish a state-
ment, which constitutes an account stated and is tantamount to an
express request on the part of the bank to examine the account and
make objection, if any exists. The case referred to above merely
involved an instance of silence under circumstances where no express
demand was made for an answer, whereas in the present case there was
an account which called for objection within a reasonable time.
We are of the opinion that the evidence in the present case
presents no uncertainty as to the plaintiff’s legal duty with respect to
the statement of her account furnished to her, and as a matter of law
it should be said that she waited too long before making objections.
The judgment is therefore reversed, and, the case having been fully
developed, judgment will be rendered here against the plaintiff. It is
so ordered.
On Rehearing
Counsel for appellee call our attention to the fact, shown by the
record, that instruction No. 5 requested by appellant was given by the
court, instead of refused, as erroneously stated in the original opinion.
We recede, therefore, from that part of the opinion which erroneously
held that error was committed in refusing to give that instruction.
We have, however, carefully reconsidered the evidence in the case, and
now adhere to the conclusion announced that the evidence is not legally
sufficient to sustain the verdict.
It is further insisted by counsel that appellant, by requesting the
court to give instructions submitting the issues to the jury, not only
waived the error in submitting the issues at the request of appellee,
but waived the right to assign as error the insufficiency of the evidence
to support the verdict. Counsel is correct in the first contention, for
we have often held that a request for an instruction submitting an
issue operates as a waiver of the error in giving an abstract instruc-
tion on the same issue. St. L., I. M. & S. Ry. Co. v. Jacobs, 70 Ark.
401, 68 S. W. 248; Greenwich Ins. Co. v. State, 74 Ark. 72, 84 S. W.
1025; Western Union Tel. Co. v. Arant, 88 Ark. 499, 115 S. W. 136;
Berman v. Shelby, 93 Ark. 472, 125 S. W. 124; Prairie Creek Coal
Mining Co. v. Kittrell, 106 Ark. 138, 153 8. W. 89; Morris v. Ray-
mond, 132 Ark. 449, 201 S. W. 116; Patterson v. Risher, 143 Ark. 376,
221 S. W. 468. It does not follow, though, that the question of the in-
sufficiency of the evidence is waived by requesting an instruction sub-
mitting the issues to the jury. Nor does a party waive that question
by failing to request a peremptory instruction.
The statute makes the insufficiency of the evidence a ground for a
new trial, which may be raised in the motion. Crawford & Moses’
Digest, § 1311, subd. 6. <A party is not required to raise that question
prior to the motion for new trial, and it is not waived by either raising
it or failing to raise it prior to that step in the proceedings. The
distinction lies between the error in submitting an issue and the error
in the unsupported verdict, and the first only is waived by joining in
the request for submission.
Rehearing denied.
WOOD, J., dissenting.
LIABILITY OF BANK FOR MISAPPROPRIATED

BONDS
Nelson v. Paxton, Supreme Court of Kansas, 214 Pac. Rep. 784
The plaintiff purchased four government bonds from the

Farmers’ State Bank of Spring Hill. The bonds were left with the
bank for safe-keeping. Bonds were also left with the bank by
other customers.
From time to time, the bank sold some of its customers’ bonds
together with bonds of its own. The proceeds of these sales were
used by the bank for various purposes. Finally an investigation
was made and a receiver appointed. He found at the bank some of
the customers’ bonds but was unable to determine who were the
owners of them.
The plaintiff brought an action against the receiver of the
bank to have the amount due him from the bonds decreed to be a
trust fund and a lien upon the assets in the hands of the receiver.
The trial court granted the decree requested by the plaintiff.
Upon appeal, the case was remanded for a new trial upon the
question whether the proceeds arising from the misappropria-
tion of the plaintiff’s bonds became a part of the assets of the
bank, and were a part of the assets in the hands of the receiver.
The court held that the determination of this issue was necessary
because one having a claim arising from a misappropriation of his
property cannot have it decreed to be a trust fund, and a first lien
upon the assets in the hands of the receiver, unless he shows that
the proceeds arising from the unauthorized appropriation were a
part, in some form, of the assets which came into the hands of the
receiver,
Action by S. A. Nelson against W. A. Paxton, receiver of the

Farmers’ State Bank of Spring Hill. Judgment for plaintiff, and
defendant appeals. Reversed and remanded for new trial on one issue.
Alpheus Lane, of Paola, for appellant.
Parker & Roberds and H. L. Burgess, all of Olathe, for appellee.
HARVEY, J.—This is a suit by the owner of government bonds

left with a bank for safe-keeping, and wrongfully converted by the
bank, against the receiver of the bank, for their value, and that the
proceeds be held to be a trust fund and a first lien upon the assets
in the hands of the receiver. There was a trial to the court, and
judgment for plaintiff as prayed for. .The defendant appealed, and
Edition) § 314.
concedes that the claim should have been allowed as a general claim
against the receiver, but contends there was not evidence to support
that part of the judgment decreeing the amount to be a trust fund and
a first lien upon the assets in the hands of the receiver.
The Farmers’ State Bank of Spring Hill was managed for about
ten years almost entirely by its cashier, Irwin Williams, who appears
to have had the confidence of the people of the community. The plain-
tiff and many others bought government bonds, and left them with the
bank for safe-keeping at the invitation or request of the cashier. In
August, 1921, an investigation was made, and it was found that the
bonds were not at the bank, except a few; that many of them had
been sold at Kansas City, and the proceeds used; and that the affairs
of the bank were in bad shape. A receiver was appointed and further
investigations made. The plaintiff brought this suit; other persons in
similar situations brought similar suits. This suit was tried in hope
that it would settle the questions in controversy as to this and other
similar actions. We examine the record only as it pertains to the
bonds sued for.
In April, 1918, plaintiff purchased from the bank three bonds, two
of the denomination of $500 each, and one of $100, and in September,
1918, he purchased another $100 bond. Receipts of the bank signed
by its cashier were given plaintiff for the bonds, showing their
denomination and number, and the bonds were left at the;bank for safe-
keeping. A record was made upon a book kept by the bank for that
purpose, showing that the bonds belonged to plaintiff. Interest was
collected on the bonds as it became due up until April, 1921, or at least
was so noted on the record, and credited to plaintiff on his account at
the bank.
When the receiver took charge of the bank in August, 1921, the
records showed customers’ bonds to the amount of about $50,000 that
were missing. The books also showed $1,950 customers’ bonds that
were on hand. Of these two $50 bonds were identified and delivered to
their owners; the balance, $1,850, was not identified.
The evidence shows ;that customers’ bonds, and also bonds belonging
to the bank, were sold from time to time in lots of $10,000 to $15,000
at Kansas City banks, and credit there given the Farmers’ State Bank
at Spring Hill, and the amounts of such credit were drawn out from
time to time by the Farmers’ State Bank or by Williams, its cashier.
The proceeds from one of these bond sales appear to have been placed
first in the Farmers’ State Bank at Spring Hill, and then transferred
to the Miami County National Bank at Paola. There is not a very
clear showing as to how this money was used. A part of it was used
to charge off worthless notes held by the bank; part of it was used in
balancing business of the bank from day to day through the clearing
house; some of it was used by customers of the Farmers’ State Bank

buying drafts which were drawn on the Paola or Kansas City bank;
some of it was drawn by the cashier and placed in a fictitious account,
which was later used by him, and possibly some of it was abstracted
by him in other ways for his personal use.
Though appellant makes an extended argument concerning it, there
is no question about the law applying to this case, nor is the in-
consistency which he points out in the earlier and later decisions of
this court as pronounced as he maintains. In some of the cases before
the court certain details to be considered were not specifically men-
tioned, possibly because they did not arise in those cases, or were
conceded, and this may well account for the supposed discrepancy
which he and others have attempted to point out. It is well settled
that, before one having a claim arising from a misappropriation such as
this can have it decreed to be a trust fund, and a first lien upon the
assets in the hands of the receiver, he must show that the proceeds
arising from the unauthorized appropriation of his property were a
part, in some form, of the assets which came into the hands of ‘the
receiver. Peak v. Ellicott, 30 Kan. 156, 1 Pac. 499, 46 Am. Rep. 90;
Myers v. Board of Education, 51 Kan. 87, 32 Pac. 658, 37 Am. St. Rep.
263; Hubbard v. Alamo I. & M. Co., 53 Kan. 637, 36 Pac. 1053, 37
Pace. 625; Burrows v. Johntz, 57 Kan. 778, 48 Pae. 27; Insurance Co.
v. Caldwell, 59 Kan. 156, 52 Pace. 440;.Bank v. Bank, 62 Kan. 788, 64
Pac. 634; Investment Co. v. Bank, 98 Kan. 412, 158 Pae. 68, L. R. A.
1916F, 822; Tire & Rubber Co. v. Bank, 109 Kan. 772, 204 Pac. 992,
21 A. L. R. 677; Secrest v. Ladd, 112 Kan. 23, 209 Pac. 824. The
trial court correctly stated the law applicable to the question as fol-
lows:
‘‘As I understand the law, if the proceeds of the bonds went into
the assets of the bank so as to increase the assets of the bank and con-
sequently increase the assets going into the hands of the receiver, the
plaintiff should have a preference.”’
The difficulty in this ease is that the trial court did not find the
proceeds of plaintiff’s bonds were so used. After some discussion of
the use of the proceeds of the bonds sold, the court said:
‘‘As indicated, it is impossible to say definitely that all of the

proceeds of these bonds passed into the assets of the bank, but certainly
a very large portion of the proceeds of the bonds did pass into the
assets of the bank.’’
From our examination of the record before us, we are unable to say
definitely whether the proceeds from plaintiff’s bonds passed into the
assets of the bank and thus were a part of those assets at the time the
receiver took charge. The result is that this question has not been
fully tried or determined by the court below, and we are unable to
determine it from the record presented.
Appellant concedes that the evidence shows two of these bonds
were sold with other bonds April 23, 1921, but the amount so sold is
not shown. The proceeds from this particular sale of bonds were placed
to the credit of the Farmers’ State Bank of Spring Hill at one of the
banks in Kansas City, and appear to have been drawn from the
Kansas City bank by the Farmers’ State Bank, and transferred to the
Miami County National Bank of Paola, and to have been used to pay
drafts purchased of the Farmers’ State Bank by its customers, and
drawn on the Miami County National Bank, and by the balancing of
accounts between the banks in the ordinary course of business. If so,
this money went into the assets of the Farmers’ State Bank.
The proceeds of some of the other sales of bonds made at Kansas City
were transferred to the Farmers’ State Bank, and used by it in
charging off worthless notes held by the bank. It would seem to
require no argument to establish the fact that, if the bank held notes
that were valueless, though carried on their books as valuable, money
placed in the bank for those notes increased the live and valuable
assets of the bank by the amount of the money so deposited.
That part of the judgment of the court below allowing plaintiff’s
claim against the receiver will stand, but the cause is reversed, with
instructions to grant a new trial upon the sole question of whether the
proceeds arising from the misappropriation of plaintiff’s bonds became
a part of the assets of the bank, and were in some form a part “ the
assets that came into the hands of the receiver.
All the Justices concurring.
STATUTE OF LIMITATIONS NOT AVOIDED BY

UNSIGNED INDORSEMENT ON NOTE
Konz v. Pratt, Court of Civil Appeals of Texas, 249 S. W. Rep. 258
The plaintiff sued the defendant to recover upon two promissory

notes dated March 20, 1917. One note was due two years after
date, and the other was due six months after date. The defendant
claimed that the latter note was barred by the statute of limitations.
It appeared that the defendant on September 8, 1920, indorsed
NOTE—fFor similar decisions see Banking Law Journal Digest (Second
Edition) §§ 1000-1017.
a credit of $34 upon the back of the note against which he now
interposed the plea of limitation. The plaintiff claimed that this
indorsement constituted an acknowledgment of the debt which
removed the bar of the statute of limitations.
It was held that since it did not appear that the defendant
signed the indorsement, it was insufficient to constitute a renewal
of the note and remove the bar of the statute.
Suit by Mrs. Florence Konz against 8. W. Pratt. Judgment for

defendant, and plaintiff appeals. Affirmed.
J. M. Caldwell, of Midland, for appellant.
B. Frank Haag, of Midland, for appellee.
HIGGINS, J.—Appellant sued appellee to recover upon two

promissory notes and to foreclose a deed of trust upon realty securing
their payment. The notes were dated March 20, 1917, one being in
the sum of $414.56, due two years after date, the other bemg in the
sum of $190.38, due six months after date.
Appellee pleaded limitation in bar of the latter note and also set
up a counterclaim for legal services rendered to appellant.
Upon trial without a jury the court sustained the plea of limitation
and sustained the counterclaim in part and offset the same against the
amount due upon the note payable in two years. After allowing this
offset, there remained a balance upon the note of $365.79, for which
amount judgment was rendered in appellant’s favor with foreclosure
of len.
Appellant presents but two propositions, the first relating to the
action of the court in sustaining appellee’s plea of limitation.
In reply to the plea of limitation, appellant set up in her sup-
plemental petition the following: ,
‘‘This plaintiff, further replying to the plea of limitation interposed

by the defendant against the note for $190.38 hereinbefore sued on,
would with respect show to the court that on or about September 8,
1920, the plaintiff herein received from the defendant herein certain ~
moneys which discharged the remainder of the note for $153 due on
demand, referred to in plaintiff’s original petition, principal and inter-
est, and left a residue of $34, and that the defendant herein indorsed
the credit upon the back of said note September 8, 1920, $34 in his
own handwriting, and of his own volition and accord, and that the
same constituted an acknowledgment of said debt, and that he is there-
by now estopped to claim limitation upon said paper or the remainder
due thereon.”’
Appellee admitted that he indorsed the credit upon the note as

pleaded by appellant. It does not appear that such indorsement was
signed by appellee. Such indorsement was wholly insufficient to

constitute a renewal of the note and remove the bar of limitation.
Article 5705, R. S.; Wade v. Sheehan (Tex. Civ. App.) 226 S. W. 446,
and cases there cited.
In bar of appellee’s counterclaim appellant pleaded the two years’
statute of limitation.
Appellee pleaded:
‘‘That he was led to believe by plaintiff, and did believe, that the
notes described in plaintiff’s pleadings had been credited by plaintiff
with his fees and had been completely paid and discharged by such
credits; and that said notes were to have been and should have been
so eredited and discharged, and that the credits should now be placed
on said notes and declared paid and discharged. Defenant further
alleges that it was not until early in the present year that he learned
said eredits had not been made and that plaintiff was claiming upon
the notes sued upon.’’
Upon the trial he testified that when appellant employed him he

told her he wanted his fees applied upon his indebtedness, and the
understanding at that time was that his notes were to be credited with
his fees.
The appellant’s second proposition complains of the court’s action
in not sustaining her plea of limitation against the counterclaim.
This matter presents no error in view of appellee’s testimony that
it was agreed that the items of his counterclaim should be credited
upon his note. Baird v. Ratcliff, 10 Tex. 81; Vernor v. D. Sullivan &
Co. (Tex. Civ. App.) 126 S. W. 641.
Affirmed.
Management of Decedents’ Estates
Banks and Trust Companies as Executor, Administrator and Trustee
Under Will
By JOHN EDSON BRADY
INVESTMENTS (Continued)
§77. Effect of Failure to Follow Court’s Order.
§ 78. Failure to Observe Provision in Will Requiring Court’s
Approval.
§ 79. Objection to Court Order Authorizing Investment Must Be

Taken Promptly.
§ 80. Mingling Trust Funds.
§ 77. Effect of Failure to Follow Court’s Order. Where the court

has made an order, directing the investment of trust funds in a par-
ticular manner, it is a serious violation of duty on the part of the
fiduciary not to comply strictly with the terms of the order. The
fiduciary, who sets up his own judgment in opposition to that of the
court, is not only paving the way for personal liability but is in addi-
tion guilty of a contempt of court. This is illustrated in a Virginia
decision, Whitehead v. Whitehead, 85 Va. 870, 9 S. E. Rep. 10.
In this ease it appeared that the will of William B. Whitehead
gave the bulk of his large estate to John R. Whitehead and John R.
Kilby, as trustees, creating thereby a trust fund to accumulate for
the benefit of his infant grandchildren. The will directed that the
trustees should apply to the circuit court for all necessary decrees,
powers or orders. John R. Kilby died and John R. Whitehead con-
tinued in possession of the assets of the estate as sole trustee.
He never applied to the court for instruction, aid or direction.
But about five years after his appointment the guardian for some of
the minor beneficiaries brought suit for the purpose of obtaining a
deeree authorizing the sale of the unproductive portion of the estate
and the investment of the proceeds in United States bonds, ‘‘or in
such other good securities as the court should direct.’’ A decree was
made responsive to the prayer of the guardian, and, it appearing that
the trustee had a large amount of money on deposit in the Exchange
National Bank of Norfolk, the trustee was directed to invest at least
$50,000 of such deposit in United States four per cent. registered
589
bonds. Subsequently he was directed to invest the further sum of

$50,000 in like securities.
He did not make the investment of the $50,000 first ordered until
about a year after the making of the order, and just a week before
the failure of the Exchange National Bank, in which the trust fund
was deposited. And, in making this investment, he borrowed money
from a bank in New York City instead of using the trust funds,
although he had a deposit in the Exchange National Bank as trustee
of more than $100,000. It appeared that Whitehead was the presi-
dent of this bank as well as one of its large stockholders.
The further investment of $50,000 was never made. He loaned a
sum in excess of $12,000 of the trust fund in his hands to himself
and the cashier of his bank. The only reason which he gave for allow-
ing so large a sum of money to remain on deposit in the bank was
that ‘‘he thought this a better investment than which the beneficiaries
preferred and which the court had ordered.’’ ‘“‘If the court had ever
been informed of his failure to obey its decrees,’’ it is stated in the
opinion, ‘‘and he had assigned the foregoing reason for his neglect or
defiance of its authority, he would have been in open contempt; and
now surely, when the trust estate has been lost, by reason of his
failure to obey the decrees of the court, it is utterly insufficient to
relieve him from a responsibility which he deliberately and contuma-
ciously assumed. When a court having competent and actual jurisdic-
tion of the fund and the fiduciary has instructed or authorized a par-
ticular investment, it is the imperative duty of the fiduciary to obey,
and to strictly conform; and for the loss occasioned by his failure,
neglect or disobedience to make the investment indicated by the court,
the fiduciary is personally responsible.’’
A deeree of personal liability in the sum of $77,358.10 was pro-
nounced against the trustee. In affirming the decree the appellate
court said:
‘*Particular inquiry may fail to disclose to an outsider the true
condition of a bank reputed to be solvent; but John B. Whitehead
cannot be heard to plead ignorance of the financial condition and man-
agement of a bank of which he was president, with daily and hourly
opportunities and duty to look and see and inform himself, and in
which he kept a large trust estate in open defiance of the express direc-
tions of the court, and whose cashier he was apprised, was borrowing
money from it, and lending money in unknown amounts to a firm of
which that cashier was a member. * * *
‘‘The appellant (Whitehead) need not to have taken the slightest
risk; and he was relieved even of the labor of seeking investments.
The object of the suit was to have the funds of the estate invested in
United States bonds. The beneficiaries had asked it and the court had
so decreed; and the record does not disclose any reasonable or legal
excuse for John B. Whitehead’s failure to respect the wishes of the
beneficiaries and the expressed will of the court.
‘‘When the aid of the court has been invoked and freely and
positively given, and the appellant (Whitehead) deliberately disre-
garded and disobeyed the decrees of the court upon the ground or as-
sumption that the policy of the court was, in his judgment, unwise,
there is no legal or equitable ground for him to claim excuse or im-
munity from the consequences of his own unwarranted action, resulting
in the loss of the trust estate, committed to his legal and moral re-
sponsibility.’’
§ 78. Failure to Observe Provision of Will Requiring Court’s

Approval. The fact that the will, creating a trust, directs the trustee
to obtain the court’s approval of his investments and the trustee’s
failure to obtain such approval do not necessarily subject the trustee
to personal liability. Much may depend upon the nature of the in-
vestment made.
In a Pennsylvania decision, Cridland’s Estate, 132 Pa. St. 479, 19
Atl. Rep. 362, it appeared that the will under consideration appointed
the Pennsylvania Company for Insurance on Lives and Granting
Annuities to act as trustee of the trust created by the will.
A clause of the will, after providing that the residuary estate be
converted into cash, directed that ‘‘the said corporation, my executor
hereinafter named, shall and will invest the same separately in the
purchase of preductive real estate, well secured ground rents, or upon
mortgages of unencumbered real estate situated in the city of Phila-
delphia, or otherwise place out the same separately at interest,’’ ete.
And another clause provided: ‘‘It is my will and I hereby ordain
and direct that any and all investments to be so as aforesaid made
for the use and benefit of said trust estates respectively, shall be first
duly approved of by the Orphans’ Court for the city and county of
Philadelphia.’’
Acting upon the advice of counsel, the trust estate was invested in
United States bonds, payable at the option of the Government at the
end of five years, but not at the pleasure of the holder until the end
of twenty years. For these bonds a premium was paid. The approval
of the Orphans’ Court, however, was not obtained before making the
investment.
At the time the purchase was made, it was believed by capitalists
that the option of the government would not be exercised; but at the
end of five years the bonds were called in and paid off by the govern-
ment at their par value.
The question arose whether, by reason of the trustee’s failure to

have the investment approved by the Orphans’ Court, as provided in
the will, the trustee’s account should be surcharged with the amount
of the principal lost by the investment in the bonds at a premium.
It was held that the trustee was not responsible and that it should
not be surcharged.
The following is quoted from the opinion: ‘‘The acts of assembly
provide for the investment of trust funds in government, state or
municipal loans; and, as no inquiry is required with regard to the
security thus accredited, an application, which would have been granted
as of course, would have been purely a matter of form, productive only
of expense to the estate.’’
The court also said: ‘‘ While the approval of the court if asked for
in advance would have effectually protected the trustee in case of sub-
sequent loss, it by no means follows that the failure to apply to the
eourt is in itself sufficient to cause such liability. The only effect, in
the opinion of the auditing judge, of such failure, was to throw upon
the trustee the burden of showing that the investment was such as the
law permits, and that in the light of cireumstances existing at the
time it was made, there was no imprudence in making it. This has
been shown beyond all question.
‘‘Trrespective of these considerations, the fact that the accountant
acted under the advice of counsel is, in itself, enough to free it from
liability, the matter being one as to which the client had the right to
rely upon such advice.’’
§ 79. Objection to Court Order Authorizing Investment Must Be

Taken Promptly. If the beneficiaries of a trust desire to object to a
court order, authorizing a particular investment, they should proceed
without undue delay. Too long a delay may be treated as an ac-
quiescence on their part. An example is found in a Pennsylvania de-
cision, In re Derr’s Estate, 203 Pa. St. 96, 52 Atl. Rep. 27.
It here appeared that, in 1886 the trustees under the will of Thomp-
son Derr presented their petition to the Orphans’ Court of Luzerne
County, Pennsylvania, asking the court to make an order, permitting
them to invest trust funds in their hands in three undivided fourths of
certain farm property known as Dunecan’s Island. The court referred
the matter to an examiner and he filed his report to the. effect that the
investment prayed for was a safe and desirable one and was not
contrary to any of the provisions contained in the will. The court
thereupon made the order authorizing the investment.
At the time of the application for authority to make the purchase
Harriet Richter, one of the three beneficiaries of the trust, was fifteen
years old and, under the provisions of the will, the trust was to con-
tinue until her thirtieth year. Her guardian concurred in the trustee’s
petition and she herself joined in it along with the other beneficiaries.
Sixteen years later, at which time one of the trustees had been dead
for fourteen years, Harriet Richter brought a proceeding to have the
purchase set aside on the ground that the trustees had been guilty of
fraud in making the purchase. The allegations of fraud were very
general in their character. It seems that the island in question formed
a part of the residuary estate of Thompson Derr, the decedent. The
petition alleged that the trustees ‘‘conceived the fraudulent plan to
sell’’ their interest in the island to themselves as trustees; that, ‘‘in
furtherance of said preconceived fraudulent intent,’’ they presented
their petition to the Orphans’ Court and that ‘‘they very cunningly
and fraudulently withheld and concealed from the said court’’ the fact
that the income from the farm did not pay the expenses incurred in
running it.
It was held that, under the circumstances recited, the beneficiary
of the trust was not entitled to have the purchase set aside. One
of the principal reasons given by the court for so deciding was the
laches, or delay, of the beneficiary in seeking relief.
As stated by the court: ‘‘When the trustees presented their peti-
tion to make the investment, the appellant (Harriet Richter), as
already stated was in her fifteenth year and was duly represented by
a guardian. When she attained her majority, six years later, and
could have acted for herself, she raised no question about the conduct
of the trustees in asking for a decree authorizing them to make the in-
vestment of which she now complains, nor did she take any steps to
have that decree set aside for nine years after she had attained her
majority. Though her estate was to be held by the trustees for her
until she was thirty years of age, it was her right at any time after
she reached her majority, to call the trustees to account for any
alleged misconduct, just as her guardian could have done during her
minority. No excuse is attempted for this great delay. Her petition,
unconscionable on its face, ought not to have been entertained by the
court below without regard to her laches (delay), which, however, was
another controlling reason for dismissing it.
‘**A person who is injured by fraud must be prompt in seeking
redress, and he must prosecute his suit with diligence. Laches and
neglect are always discountenanced. Nothing can call a court of
chancery into activity but conscience, good faith and reasonable dili-
gence, and where these are wanting, the court is passive and does
nothing. A court of equity does not encourage stale claims, and a
party may lose his right to complain of a fraud by his delay.’ Bis-
pham’s Principles of Equity, 6th Ed. sec. 260.’’
§80. Mingling Trust Funds. When a trustee holds several distinet

trust funds, each should be kept separate from the others, so that it
may not, through investment, be complicated with the rights of
strangers. It has been held in a New Jersey case that, where a testator
bequeathes to his executors several sums of money in trust for different
beneficiaries, the executors are required to keep each trust fund distinet
from the others. The case is McCullough v. McCullough, 44 N. J. Eq.
313, 14 Atl. Rep. 123.
Here it appeared that William McCullough, by his will, directed
his executors to hold several sums of money in trust for certain
beneficiaries named in the will.
At the time of the testator’s death, the funds from which the sums
of money constituting the trusts were directed to be taken were invested
in mortgages on lands in the state of Minnesota. After the testator’s
death the Minnesota investments were continued by the executors
until, from time to time, they were paid in. As mortgages were thus
paid off, the trustees reinvested the moneys received in other mort-
gages on lands in Minnesota. No attempt was made to separate the
trust funds from each other or from the body of the estate, or
to keep the investments of the several funds distinct. The mortgages
bore various rates of interest, ranging from seven to twelve per centum
per annum, and the executors, to determine what interest each fund
was entitled to, apportioned the aggregate interest received among
the various funds in the proportions that those funds severally bore
to the whole principal invested.
The trustees asked the court for instruction as to whether the
several trust funds should be separately invested. The court held
that the trustees were required to keep the several funds separately
invested. It said:
‘‘EKach fund is a distinet trust for the benefit of distinct cestuis
que trustent.
**It must be kept separate from all.other funds, so that every step
in its management may be distinctly traceable in the accounts of the
trustees and in the investments they make. The trust must not, through
investment, be complicated with the rights of strangers, or required to
share in the losses of other funds.’’
A similar conclusion was reached by the court in a Maine ease,
Moore v. McKenzie, 112 Me. 356, 92 Atl. Rep. 296. In this ease it
appeared that two trust funds were created by the will of Moses W.
Webber. One trust fund of $15,000 was for the benefit of Stella R.
McKenzie. The other fund was for the benefit of the Webber Hospital
Association. The trustees of the estate of Webber requested the court
to construe the will.
The question presented was whether the trust funds for both
beneficiaries might be invested together and the net income paid to
each pro rata, or whether there should be two distinct funds set apart.
The court held that the two funds should be kept separate and distinct.
In its opinion the court wrote:
‘We know of no authority of law for the mingling of trust funds
proposed by this inquiry. Not for a moment could it be considered
if the two trusts were to be administered by distinct trustees. That
the trustees were or are the same, or that the corpus of each fund
finally is to be paid to the same person, can make no difference. Each
trust must stand alone, otherwise losses legitimately to be borne, with
corresponding loss of income by one, could be imposed in part upon
the other.’’
A trustee must also refrain from mingling trust funds with his own
funds. In a New York ease the court stated that it is the law that a
trustee shall not invest fiduciary funds in his own name, and that he
shall not mingle the funds of a trust with his own funds or with those
of another trust. In fact under § 231 of the Surrogate’s Court Act
such an act is criminal. This section provides as follows: ‘‘Every
executor, administrator, guardian or testamentary trustee shall keep the
funds and property received from the estate of any deceased person
separate and distinct from his own personal fund and property. He
shall not invest the same or deposit the same with any person, associa—
tion or corporation doing business under the banking law or other
person or institution, in his own name, but all transactions had andl
done by him shall be in his name as such executor, administrator,.
guardian or testamentary trustee.
‘‘Any person violating any of the provisions of this seetion shalit
be guilty of a misdemeanor.”’
The New York ease referred to is entitled In re Early’s Estate, 182?
N. Y. Supp. 537. In this ease it appeared that John Early, who died
in 1891, left one-third of his residuary estate to his exeeutors and
trustees in trust to pay the income to his wife during her life, and
upon her death to pay the principal to his children. He directed his
executors to divide the remaining two-thirds into as many shares as
there were children surviving him, to hold one of the shares for each
of his children, and to pay the income from such share for the support
and education of each child until he or she arrived at the age of 25
years, when the principal was to be paid over to such child.
Early was survived by his widow and three children, aged
respectively twelve, sixteen, and seventeen years. The widow qualified
as executrix and trustee under the will, and proceeded to administer
the estate. As executrix, she received $80,000 from her husband’s
estate, but never filed an account. She died in 1917.
Between 1891 and 1904, when the trust terminated, Mrs. Early
purchased in her own name certain parcels of real estate worth about
$80,000. During the following thirteen years, she invested the further
sum of $125,000 in real estate. Profits amounting to $125,000 were
realized on her real estate investments. Upon her death, one of the
administrators of her estate, who was also a legatee under the will of
John Early, claimed that she had invested funds belonging to John
Early’s estate in the real property purchased by her and that, there-
fore, the profits realized by her in her real estate operations belonged
to the estate of John Early.
It appeared that Mrs. Early possessed a large amount of cash in
1891 when she took over the management of her husband’s estate. She
also had a separate income from property owned by her at the time of
his death. The surplus income of Mrs. Early from her share of John
Early’s estate, and her other funds, went with any moneys that might
have been used from the trust estate into the properties held by her at
the time of her death.
The court held that Mrs. Early’s conduct in mingling trust funds
with her own funds in her investments was improper and illegal. The
court further found, however, that she had acted with good intentions
and for the welfare of her family. In view of all the facts, the court
held that Mrs. Early’s estate was liable for the principal of her
husband’s estate. Her estate was not liable, however, for the profits
arising from her real estate operations.
On the other hand there is a New York ease in which it was held
that the funds of a trust estate may, under certain conditions, be
mingled with other funds. In Barry v. Lambert, 98 N. Y. 300, the
court held that, where a will directs the, executors to keep the funds
of the estate invested, it is within their power, if a profitable invest-
ment is offered larger in amount than the available assets of the estate,
to supplement them with funds of other parties, if such funds can be
legitimately obtained. In this case the following facts appeared:
By the will of Thomas Lambert his wife, Maria Lambert, was given
a life estate in all of his property, both real and personal, and his
executors were directed to keep it invested during her life, and to pay
to her the income thereof as long as she should live. The executors,
wishing to make a loan of $8,000, and having in their possession only
$6,000, belonging to the estate, borrowed from another party $2,000.
The loan was made, and a bond and mortgage for $8,000 were taken
as security for it.
The court held that it was within the power of the trustees to
combine the funds of the plaintiff with those of the trust fund in the
investment in question. In its opinion, the court said:
‘‘The duties of their office required the executors to seek for

advantageous investments, and keep the moneys of the estate employed.
It was entirely within their power, if it was not their duty, in case
a profitable investment offered itself larger in amount than the avail-
able assets of the estate, to supplement them with other funds, if they
could be legitimately obtained from other parties. These moneys were
received by Mrs. Lambert under such a contingency, and she was
engaged in the lawful and legitimate performance of her duties as an
exeeutrix when she received and invested them.’’
Another exception to the general rule that a trustee may not
mingle trust funds with other funds is set forth in a New York case
entitled In re Union Trust Company of New York, 219 N. Y. 514, 114
N. E. Rep. 1057. In this ease objection was made to the trust com-
pany’s method of investing trust funds. It was the custom of the
trust company to invest portions of various trust funds in a single
mortgage, commonly known as a participation mortgage. In making
investments of this nature, the company first took a mortgage upon
real estate in its own name. Later, when it became the duty of the
company to invest funds which it held as trustee, the company
divided the mortgage into several shares and allotted the shares to
various trusts, the result being that the funds of several distinct trusts
were invested together in the same mortgage, standing in the name of
the trust company. The allotment was accomplished entirely upon
the books of the company, its records clearly showing in just what
manner the investment was distributed. Immediately upon allotting a
share to any particular trust, the beneficiaries of that trust were
notified as to the manner in which their funds had been invested. The
mortgage in the meantime remained recorded in the name of the trust
company and there was no public record of any declaration of trust.
It was held that the investments made by the trust company were
legal and proper. The court, though reluctant to give its approval to
the investment of trust funds in a participation mortgage, found that
the acts of the company in this instance were justified by the fact that
the company kept accurate records of the trust allotments in its books,
and by the further fact that the beneficiaries were immediately notified
when an investment was made.
Since this case was decided a statute has been passed in New York
with reference to the investment of trust funds in participation mort-
gages. This statute is contained in § 111 Decedent Estate Law. It
authorizes a trustee to invest trust funds in bonds and mortgages on
unincumbered real property in New York State worth fifty per cent.
more than the amount loaned thereon, and in shares or parts of such
bonds and mortgages, provided that any share or part of a bond and
mortgage so held shall not be subordinate to any other shares thereof
and shall not be subject to any prior interest therein. It is further
provided that a bond and mortgage, in parts of which a trustee may
invest trust funds, together with any guaranties of payment, insurance
policies and other instruments and evidences of title relating to the
mortgage, must be held for the benefit of the trustee and of any other
persons interested in such bond or mortgage by a trust company or
title guaranty corporation organized under the laws of New York
State. And the corporation, holding such instruments for the benefit of
the trustee and of any other interested persons, must execute and
deliver to each person who becomes interested in such bond and mort-
gage a certificate, setting forth that the instruments are so held. The
corporation may be named in the certificate as one of the persons inter-
ested in the bond and mortgage. Every corporation issuing such a
certificate must keep a record in proper books of account of all
certificates issued pursuant to the provisions of the statute.
(To be continued)
Questions Based on Banking Decisions Published
in the July Issue of this Magazine
The questions given below are based on the decisions and

articles published in the July issue of The Banking Law Jour-
nal. After each question is given the page of the July issue
where the answer to the question may be found.
Checks and Drafts

1. <A bank certifies a check for the drawer. Is it obliged to pay
the check if it is presented without the payee’s indorsement? (See
July issue, page 524, for answer.)
2. <A bank certifies a check for the holder, to whom the payee had
transferred it without indorsement. Is the bank obliged to pay the
check if it is presented without proper indorsement? (See July issue,
page 524, for answer.)
3.
9
The drawer of a check, given in payment for mules, writes
thereon ‘‘for 3 sound mules.’’ A bank cashes the check for the payee.
The drawer stops payment. Do the words quoted put the bank upon
notice, so as to deprive it of the character of a holder in due course?
Can it enforce the check against the drawer? (See July issue, page
461, for answer.)
4. <A person, through an agent, obtains two cashier’s checks from
a bank. The checks are payable to a corporation, to which the person
is indebted. The agent, instead of delivering the checks to the payee
company, wrongfully indorses them and collects the proceeds. Is the
bank issuing the checks liable to the payee company for their amount?
(See July issue, page 475, for answer.)
5. Where a bank pays a draft drawn upon it and afterwards dis-
covers that the draft had been raised in amount, can the bank recover
the money paid from one who received the same in good faith? Can it
recover if the draft is non-negotiable? (See July issue, page 470, for
answer. )
Deposits
6. The banking committee of a church deposits money belonging
to the church in a bank, with instructions that it is to be paid out on
checks signed by the pastor. Is the bank protected in paying checks
signed by the pastor? (See July issue, page 494, for answer.)
7. A bank receives for deposit a check drawn on a bank in another

state. The deposit slip recites that items on out-of-town banks are
taken subject to actual payment. Nevertheless the bank permits the
depositor to withdraw the entire amount of the check before collection.
Is the bank a holder for value of the check? Can it enforce the check
against the drawer, notwithstanding a defense which he has against
the payee? (See July issue, page 488, for answer.)
8. Money is deposited in a bank and the bank is told that the

deposit is for the purpose of paying a certain check. If the depositor
is indebted, or becomes indebted, to the bank, can the bank apply the
deposit to the satisfaction of the debt? (See July issue, page 464, for
answer. )
9. Is it within the power of a state to pass a law providing that
bank deposits, which remain unclaimed and dormant for 20 years,
shall escheat and pass to the state? (See July issue, page 453, for
answer. )
10. Is it within the power of a state to pass a law providing that

deposits in national banks, which remain unclaimed and dormant for
20 years, shall escheat and pass to the state? (See July issue, page
453, for answer.)
Promissory Notes
11. A person indorses a note for the accommodation of the payee.
Can the payee enforce the note against such indorser? (See July
issue, page 497, for answer.)
12. A depositor transfers to a bank a promissory note, payable

to his own order. The bank credits the depositor’s account with the
amount of the note. The account is constantly in exeess of the amount
of the note with accrued interest. Is the bank a holder in due course?
13. At the time when a note was executed it provided for in-
terest at 8 per cent. before maturity and 12 per cent. after maturity.
Thereafter the note was altered, without the knowledge or consent of
the surety, by changing the 12 per cent. rate to 10 per cent. Can the
holder of the note enforce it against the surety? (See July issue,
14. The body on a note recites that it is payable on demand, but

the note contains this marginal notation: ‘‘Due 3/1/19.’’ When does
the note become due? (See July issue, page 481, for answer.)
15. Where a note contains a provision which makes the amount
to be paid at maturity uncertain, is it negotiable? (See July issue,

page 466, for answer. )
16. Where a note and a mortgage securing it are executed as part
of a single transaction, is it possible for the mortgage to contain pro-
visions which will render the note non-negotiable? (See July issue,
17. A person executes a note and mortgage securing it. The

mortgage provides that the mortgagor will pay the taxes on the
mortgage. <A statute provides that in such case the taxes shall be
"assessed against the mortgagor and become a lien upon his land. Is
the note negotiable? (See July issue, page 466, for answer.)
18. The maker of a note gave it to the payee in connection with

an order for talking machines. The note was attached to the order,
which provided that no part of the purchase price should be due until
the first machine was sold. The payee detached the note and _trans-
ferred it to a bank for value. In the absence of evidence that the
bank had notice of these cireumstances can it enforce the note as a
holder in due course? (See July issue, page 478, for answer. )
Investment of Trust Funds

19. Does the failure of a trustee to obtain the ecourt’s approval
before making an investment of trust funds render him liable for a
subsequent loss? (See July issue, page 517, for answer.)
20. <A trustee, acting under a court order, invests trust funds in
the stock of an incorporated bank, of which he is president. Is he
personally liable for a loss resulting from the invsetment? (See July
issue, page 519, for answer.)
21. A will directs a trustee to pay the income of certain property
to a named beneficiary for life. The beneficiary requests the court
to direct the trustee to invest part of the principal of the trust fund
in furniture, farm implements and horses. Is the court justified in
granting the petition? (See July issue, page 522, for answer.)
22. Will the courts ordinarily give their approval in advance to
an investment of trust funds? (See July issue, pages 518-520, for
answer. )
23. A statute authorizes a trustee to make loans on such securities
‘‘as may be approved by the chancellor.’’ Relying on this statute a
trustee petitions the court for approval in advance to a loan of trust
funds secured by a judgment bond. Is he entitled to the court’s
approval? (See July issue, page 520, for answer.)
‘602 THE BANKING LAW JOURNAL
24. <A will creating a trust does not authorize the trustee to. in-
vest in real estate. The trustee bids in property at a foreclosure
sale, under a mortgage held by him. Has the court power to sanction
such an investment? (See July issue, page 521, for answer.)
Bank Officers
.25. Is a bank chargeable with representations made by its cashier
in connection with transactions within the scope of the bank’s busi-
ness? (See July issue, page 451, for answer.)
26. Is a bank chargeable with representations made by its cashier
in connection with a transaction, in which the cashier is acting in his
own interest? (See July issue, page 451, for answer.)
27. The directors of a bank permit the cashier to take complete
charge of its business. The cashier applies to a surety company for
a fidelity bond, covering his own defaleations. In obtaining the bond,
he makes misrepresentations. Are such misrepresentations binding on
the bank so as to prevent it from recovering on the bond in an action
against the surety company? (See July issue, page 451, for answer.)
Collections
28. Is a Federal Reserve Bank within its rights in presenting
checks, held by it for collection, over the counters of the drawee banks?
29. <A state statute authorizes state banks to charge an exchange

fee on remittances covering checks. The statute also provides that
«checks presented over the bank’s counter by a Federal Reserve Bank,
post office or express company, may be paid by means of a draft upon
its reserve deposit. Is such statute constitutional? Is it objectionable
on the ground that it makes something other than gold and silver a
tender in payment of debts? (See July issue, page 457, for answer.}
Insurance
30. A policy of burglary insurance covering the contents of a
safe provides that only 10 per cent. of the amount of a loss will be
paid on property placed in the safe but not in the inner steel chest.
The safe contains an inner chest within which there is a steel cash
box. Does the 10 per cent. clause apply to property placed within
the inner chest, but not within the cash box? (See July issue, page
459, for answer.)
: t
HS
&“4
”
1
12
;
HIS new building for the Texas Bank and Trust Company of Galveston
will be the tallest in the city, and will be a conspicuous addition to the sky-
line. It will provide the trust company with every modern facility. This is
another addition to the Southern bank buildings designed and erected by
ALFRED C. BOSSOM
BANK ARCHITECT $ EQVIPMENT ENGINEER.
680 FIFTH AVENVE, NEW YORK
A Statement of
Facilities
Commercial Banking, since 1812
( Authorized depository for federal, state and municipal funds )
.
Direct Foreign Banking, since 1814

( Correspondents in all principal cities of the World )
Trust Department, Organized 1888

( Acquired through consolidation With Franklin Trust Co. in 1920)
Seven offices in the principal financial, wholesale and retail

districts of Manhattan and Brooklyn
OF AMERICA
ESTABLISHED 1812
NEW YORK CITY
BANK AND INVESTMENT ITEMS

THE GIRARD NATIONAL BANK OF best fiscal shape which they have been in
PHILADELPHIA in its “Economic Re- at any time since they were turned back
view,” dated August 16, writes as follows to private management from the period
of general conditions: of federal control. More than this, the
“Further slowing down has come in mass of the people are in easy and free
various lines of industry. The outstand- living condition.
ing exceptions are railroad, retail and dis- “All this is important. The country is
tributing operations, which are showing now verv rich, consequently able to meet
high record activity. In a word, the halt und sustain a period of industrial and busi-
and regression are not in consumption, « ness reaction, without distress or suffering,
which runs on at huge proportions, but in for a considerable time. The financial situ-
production, and there primarily in manu- ation is sound, Where business is bor-
factures, and mainly as to forward opera- rowing it is not doing so in extended way,
tions. The agricultural activities of the but within safe lines, so that the banks
eountry are now in fullest swing for the are in liquid shape and experiencing ‘not
year, with harvesting generally under way, the slightest difficulty in supplying funds
and shortly to begin with the later matur- needed at this season to move the crops.
ing crops. Rediscounting at the Federal Reserve
“Economie conditions in the United Banks has kept along, little changed in
States are strongly based on the general the aggregate for several weeks. Their
and large earnings which were made dur- rediscounts, ete., now stand at just $1,-
ing more than a year. As a result, indus- 000,000,000, and while this is nearly double
trial corporations, outside of comparatively what it was a year ago, the total earning
few lines, are now in not only healthy, but assets of the twelve reserve banks at $1,-
actually strong financial position. They 091,000,000 are only ¥£70,000,000 more.
are borrowing little, while their inven- Their combined reserve is above 77 per
tories are safely in hand and they are rich cent. None of such favorable factors Te-
in cash and quick assets. The railroads, lieve responsible business men from watch-
with few exceptions, are also in far the ing inventories and callections, and home
A Thrifty Cross-Section
apes the occupations of the holders

of the American Telephone & Tele-
graph Co. securities and you see a
striking cross-section of America’s
thrifty workers.
You will find almost every industry
represented. Bankers, of course—for
these securities are favorite holdings
of the men who so often are sought
“The People’s
Messenger”’
for investment counsel. Also ar-
chitects and merchants, blacksmiths
and butchers, clerks and farmers,
salesmen and lawyers, doctors and
housewives—these and thrifty folk
in a hundred other classifications
hold A. T. and T. securities. It is a
true test of their appeal as the
great American investment for prudent
Americans.
This very wide-spread holding of the
securities (there are over 250,000
stockholders, with an average of
twenty-six shares each) is an assur-
ance of the stability of the invest-
ment as well as an indication of its
quality.
A. T. and T. pays 9% dividends on the stock
outstanding. Today the stock can be bought in
the open market to yield approximately 7%.
Full information sent on request.
SECURITIES CO. he
D.F. Houston, President
195 Broadway NEW YORK
iS HUUGUUENUEQUEAUGUOANOONOOQEOOOGNEOAEOUGACEAUCAOAUANEENOONOONOGLEQO0ONNONEUUSONSOSSEUNAEUEGCADSAUEAGAUUAAUGAU
AGUEAAAAGAAUUSANANAALAANNUATEAEUENTE eS
ITALIAN DISCOUNT
AND TRUST COMPANY
399 BROADWAY NEW YORK
Capital and Surplus $1,500,000
Our Foreign Services

Directors Accepts drafts for financing shipments of
LUIGI BERIZZI merchandise to and from Italy and the
Berizzi Bros. Co.
VINCENZO DE LUCA United States—and all other parts of
V. De Luca & Co.
A. PORTFOLIO the world.
A. Portfolio Co.
RICHARD E. DWIGHT Domestic and foreign acceptances.
Rounds, Schurman & Dwight
HON. JOHN J. FRESCHI Commercial and travelers letters of credit
EMANUEL GERLI
E. Gerli & Co. available in every part of the world.
JOSEPH GERLI
E. Gerli & Co. Domestic and foreign bills of exchange.
GIOVANNI GIRARDON
Vice-President Buys and sells exchange on all countries,
HECTOR GRASSI
L. Gandolfi & Co. specializing in Italian exchange.
ALESSANDRO OLIVOTTI
A. Olivotti & Co. Affiliated Banks
LUIGI PODESTA
Natl. Inst. of Exchange ROME-—Banca Nazionale di Credito
JOSEPH DI GEORGIO Capital Paid up Lit. 250,000,000
Di Georgio Fruit Co.
J. M. POTTS PARIS Banque Italo-Francaise de Credit
E. Gerli & Co. Capital Paid up Frs. 15,000,000
y =AAMUNAUUNVANATQUNAUAUOADUGDUGOUGAU
1
NAO
Se
AddbOAOOOONN
and foreign political developments, nor ing department of the company, where he
from realizing that labor costs and taxes will supervise all loans on staple eom-
are extreme.” modities.
Z. B. Curtis, vice-president and eashier
NEW COAL AND IRON TRUST OF- of. the Union Trust Co. of Little Roek,
FICER—On September 1 Mr. Harold C. Arkansas, has been appointed a vice-presi-
Knapp, formerly of the Irving’ Bank- dent of the Guaranty Trust Co. of New
Columbia Trust Co., assumed the position York, and will assume his duties with the
of trust officer of the Coal and Iron Na- Guaranty on September 1.
tional Bank of the City of New York, Mr. Curtis is well known throughout the
succeeding Arthur A. G. Luders, resigned. Southwest. For many years he ‘was asso-
Mr. Knapp was graduated from the New ciated as an officer of the Union Trust
York University Law School in 1908 and, Co. when that institution was in charge
being admitted to the bar, practiced Jaw of Samuel W. Reyburn, who is now presi-
until 1918. He then joined the Irving dent of the Associated Dry Goods Cor-
Trust Co., which became successively the poration of New York, a director of the
Irving National Bank and the Irving Guaranty Trust Co. and other large eor-
Bank-Columbia Trust Co. porations. '
Mr. Knapp is a member of the faculty William H. Hamilton has been appointed
of the New York University School of an assistant vice-president of the company,
Commerce and Finance, and the co-author to serve at the Fifth avenue office. Mr.
of a volume entitled “Wills, Estates & Hamilton was formerly an assistant see-
Trusts.” retary of the company at the Brussels
He is a member of the University Club office and in the foreign department of
of Brooklyn, the Lawyers’ Club of Brook- the main office.
lyn, and the Phi Delta Phi Club of New
York. CENTRAL TRUST CO. OF ILLINOIS
PROMOTIONS—At «a meeting of the
THE GUARANTY TRUST CO. OF hoard of directors of the Central Trust
NEW YORK announces the appointment Co. of Illinois, Chicago, held July 24,
of John J. Sample as a vice-president of the following elections were made:
the company. Mr. Sample will continue George B. Cortelyou, Jr., formerly as-
REPRESENTATIVE ATTORNEYS
To facilitate the operations of Bankers, Investors, Capitalists and other readers
ef BANKING LAW JOURNAL who may be obliged to seek legal advice in matters
pertaining to banking transactions, or require other legal services, we append the
following list of Attorneys, who will be found prompt and reliable in the dis-
eharge of any business entrusted to them.
DISTRICT OF COLUMBIA PENNSYLVANIA

Washington Philadelphia
RUBY R. VALE
WILLIAM L. SYMONS.
ATTORNEY-AT-LAW
ATTORNEY-AT-LAW 1542-3-4 Land Title Bldg.
700 Tenth Street Attorney for Northwestern National Bank and
Appears before the Courts, Government Depart- Fox Chase Bank. Refer to any Federal or State
ments and Commissions. Special attention to Judge of Pennsylvania.
Patent, Trade-Mark, Copyright and Corporation Telephone Cable Address
Causes. Spruce 4961, 4962 Ruvale
IDAHO SOUTH CAROLINA

‘Boise ¥ Columbia
RICHARD H. JOHNSON
ATTORNEY-AT-LAW BARRON, McKAY, FRIERSON
112 North Sixth Street & MOFFAT
Attorney for Boise City National Bank, Boise, ATTORNEYS-AT-LAW
Idaho.
10th Floor Unior National Bank Building
Chas. H. Barron, Douglas McKay, J. Nelson
MICHIGAN Frierson, Thos.
W. B. Marion.
H. Moffatt, M. G. McDonald
General Practice in State
and
and
Battle Creek Federal Courts.
SOUTH DAKOTA |
H. C. VAN AKEN
ATTORNEY-AT-LAW
390 Post Building Pierre
Law Collections, Probate Matters and Real Estate JOHNSON & JOHNSON
Law. Reference, any bank in Battle Creek. ATTORNEYS-AT-LAW
Blunt, S. D.
Detroit Attorneys for Dakota State Bank and Security
Bank.
MILLIS, GRIFFIN, SEELEY & STREETER
ATTORNEYS-AT-LAW
Fort Pierre, S. D.
Attorneys for Fort Pierre National Bank.
Wade Millis, William J. Griffin, Clark C. Seeley,
Howard Streeter. 1403-7 Ford Building. Com- Midland, S. D.
mercial, corporation and general civil practice. Attorneys for Midland State Bank.
References: National Grocer Company, Employ-
————
ers’ Association, Credit Men’s Association, Hemi-
meter Cigar Company and any Detroit Bank or Sioux Falls
Trust Company.
BAILEY & VOORHEES
ATTORNEYS-AT-LAW
MISSOURI (Cc. O. Bailey, J. H. Voorhees, P. G. Honegger,
St. Louis T. M. Bailey, C. O. Bailey, Jr.). Bailey-Gliddee
Building. Attorneys for R. G. Dun & Co., West-
BERNARD GREENSFELDER ern Union Telegraph Co., Illinois Central R. R.
Co., American Ry. Express Co., American Surety
ATTORNEY-AT-LAW Co., and Sioux Falls Savings Bank.
Central 2181 Suite 1212
Olive 2874 Central Nat. Bk. Bldg.
NEW YORK Ogden City

DAVID JENSON
New York City ATTORNEY-AT-LAW
LOUIS F. DOYLE Suite 313, Col. Hudson Bldg.
ATTORNEY-AT-LAW Attorney for Security State Bank, Ogden, Utah.
111
Broadway
ae
Attorney for National Park Bank, New York City.
WEST VIRGINIA
FRANK P. WOGLOM Williamson
ATTORNEY-AT-LAW SHEPPARD, GOODYKOONTZ & SCHERR
280 Broadway
ATTORNEYS-AT-LAW
Attorney for Twenty Third Ward Bank of the
‘City of New York. Corporation, Real Estate and Commercial Law.
CHATHAM
EST 1850
EST 1812
PHENIX
Narronal we
<.
eT
BANK.
OF THE
CITY OF NEW YORK
200 Million Dollars Resources

CITT TC SCO COCO...
OR Oe CU SC
sistant vice-president, who has been with in Kentucky not quite forty-five years ago
the bank four and a half years, and who and received his early education in that
is the son of former Secretary of the state. He later went to Texas, where he
Treasury Cortelyou, was elected secretary was admitted to the bar in 1901. He
and assistant trust officer. Geary V. Stib- left the practice of the law for banking,
gen was elected trust officer and assistant becoming cashier of the Bank of Malone
secretary, and William M. Otis, assistant in 1905. In 1907 he was elected cashier
trust officer and assistant secretary. Wil- of the Citizens Bank of Ballinger, Texas,
liam J. Kellough, who for a number of and when that bank merged with the First
years has filled the position of chief clerk, National Bank of the same city he _ be-
was elected assistant cashier. Richard W. came president of the consolidated institu-
Gratton, who has been manager of the tion. Mr. Traylor removed to Illinois in
bookkeeping department for a number of 1911 and became vice-president of the
years, was also elected assistant cashier. National Stock Yards National Bank of
George D. Bushnell was appointed assistant Sast St. Louis. His first Chicago connec-
vice-president. tion was with the Live Stock Exchange
The above promotions have enabled the National Bank, where he served success-
Central Trust Co. to advance a number of fully as vice-president and president. He
men all along the line, including E. E. achieved a remarkable record as director
Graham and Charles G. Clark, who have in the Seventh Federal Reserve District
been advanced to important positions in for United States certificates of indebted-
the credit department. ness during the war and in the period
immediately following. He beeame presi-
dent of the First Trust and Savings Bank
MELVIN A. TRAYLOR, president of the
and vice-president of the First National
First Trust and Savings Bank, Chicago,
Bank of Chicago in January, 1919. He is
who was elected president of the Illinois also a director of both banks as well as
Bankers’ Association at Rockford on June a number of other financial and com-
27, was also endorsed for second vice- mercial institutions. He is chairman of
president of the American Bankers’ As- the economic policy commission of the
sociation for 1924-25. American Bankers’ Association and a mem-
Mr. Traylor’s rise in the financial world ber of a considerable number of clubs
has been quite remarkable. He was born and associations, both in Chieago and -
New York. Mr. Traylor is’a golf en-
thusiast, and is vice-president of the West-
ern Golf Association.
JOSEPH H. PORTER has been elected

to sueceed Mr. August C. Streitwolf as
president of The Middlesex Title Guar-
antee and Trust Co. of New Brunswick,
N. J. The new president assumed his
duties as such under date of August 1.
Mr. Porter was formerly trust officer
and assistant eashier of the National Bank ORLD-WIDE distribu-
£ New Jersey, New Brunswick, N. J. tors of high-grade securi-
ties: Bonds, Short Term Notes
THE FIRST NATIONAL BANK OF and Acceptances. Correspon-
BOSTON in its “New England Letter,”
dated August 15th, writes as follows of
dent Offices in more than 50
general conditions: leading cities.
“With the approach of fall, attention Bankers of this section are
is focused on the probable trend of busi-
ness during the balance of the year. invited to use National City
Granting a reasonable allowance for sea- Company service through one
sonal dullness, there has clearly been a of our following conveniently
halting and hesitaney in many industries.
A situation, marked by idle cotton spindle-
located correspondent offices.
age estimated to be 50 per cent. of all
British spindles and 25 per cent. of Ameri- NEW YORK PHILADELPHIA MONTREAL
can spindles, cannot be explained away CHICAGO NEW ORLEANS LONDON
aus normal nor seasonal. Last spring, busi- BOSTON SAN FRANCISCO TOKYO
ness was recognized as too active to be
long sustained and fears of a runaway
market were freely expressed. A reaction
has fortunately taken place, but business balaneing factor, but a number of coun-
is actually fairly good, taking industry as tries, primarily pastoral or agricultural,
a whole. In New England, cotton manu- including Canada, Australia and a large
facturing is flat and orders are few and part of South America, are making steady
far between. There is no accumulation of and marked improvement. In the United
stock, however, and consumption continues States, practically full employment and
heavy. A revival in the next few weeks a sound eredit situation constitute a firm
is looked for by the cotton mills with foundation for good business throughout
considerable confidence. Already, shoe the year.”
manufaeturing is improving and_ the
woolen mills are busily employed. Retail
UNION TRUST CO. TO OPEN
trade is good, but everywhere the deter-
BRANCH—Another forward step in the
mination not to accumulate and speculate
in stocks of merchandise is evident. expansion and service of the Union Trust
“While contracts for new building con- Co., of Rochester, N. Y., was taken re-
struction have fallen off about 15 per cently at a meeting of the board of
cent., the volume on new contracts and directors, which ratified the leasing from
uncompleted work is enormous and a Charles J. and Gustave Veltz of the prop-
tremendous sustaining influence making for erty at Joseph and Clifford avenues for a
active business for months to come. The new branch bank, which, after extensive
steel industry, although widely heralded alterations to the building, will open
aus deelining, has in reality shown but about September 1.
little falling off in production. Pur- Evidence of the steady growth of the
chasers to a remarkable degree are specify- Union Trust Co. is shown in the fact that
ing and cancellations have been con- since the main office moved into the Union
spicuously lacking. Orders have decreased Trust building at 19 Main street west, one
but perhaps the most hopeful indication year ago, deposits: have increased over
in the whole industrial situation is a bet- $2,000,000.
ter inquiry and a slight increase in orders The resources of the Union Trust Co.
for steel for a wide variety of uses. The are over $23,000,000, and these resources
decline in many raw materials and farm are behind the new branch as also back
products, reducing the purchasing power of of the East avenue office and the Char-
the farmer, is an unfavorable and un- lotte branch.
BIG LITTLE
Porto Rico as an island isn’t very big, but in her industrial
PORTO RICO
and business growth
under American stimulus has shown wonderful progress.
Since 1900 Porto Rico’s commerce has increased over two hundred million dollars
a year. More than ninety per cent. of this business is transacted with the United
States, of which the island and its citizens are a part.
As the pioneer American banking institution in Porto Rico we have given every
aid to the island’s commercial development and we have shared in its growth.
We have gained the reputation for handling all business entrusted to us with
promptness and economy. Send us your bills of exchange, drafts and collec-
tions direct.
AMERICAN COLONIAL BANK

OF PORTO RICO
SAN JUAN
Branches: Arecibo, Mayaguez. Caguas
The first of the year the Union Trust This is particularly true when a bond as
Co. purchased the Triangle building in large as this one is considered.
which is located the East avenue office of An underwriter is now confronted with
the company. This real estate transaction so many cross-currents, such as the labor
involved one of the largest deals recently market, the rise and fall of the material
consummated in Rochester. Eventually, market, that he necessarily must be more
the East avenue office will occupy the en- than merely posted in the technical forms
tire ground floor of the Triangle building. of coverage and in fact is required to be
The officers of the bank are: a student of economic conditions, finance,
President, Frederick W. Zoller; vice- local and national politics as well as a
presidents, John C. Frankland, Allan B. student of human nature.
Fraser, James L. Hotchkiss; vice-president This bond was originated, developed and
and trust officer, Charles H. Moore; sec- finally secured by Mr. Arthur W. Rankin,
retary, Deloss M. Rose; treasurer, M. G. senior member of the firm of Rankin and
Palmateer; assistant secretary and audi- Barrett, representing the National Surety
tor, Charles H. Eshelman; assistant secre- Co. in New York City.
taries, Carl R. Snider, Edward J. Meyer, Thompson & Starrett Co. are the con-
Arthur J. Meyer, William J. Hauser. tractors.
Another point brought out in transae-
GROWTH IN SURETY BUSINESS— tions similar to this is the very important
position occupied in the world of finance
As indicative of the vast proportions into
and the development of the country by
which the surety business of this country
the surety companies.
has grown, the $4,500,000 bond recently
written by the National Surety Co. and
GUARANTY CO. OF NEW YORK and
its co-insuring companies for G. Maurice
Lee, Higginson & Co. are offering $4,-
Heckscher’s No. 277 Park Avenue Corpora-
275,000 The New York, Chicago and
tion, financed by S. W. Strauss bonds, is
St. Louis Railroad Equipment Trust of
an example. The bond itself required
1923, 5 per cent. gold certificates. The
eight closely typewritten sheets of legal
certificates are to mature $285,000 each
sized paper in order to cover all of the
August 1, 1924 to 1938, and are being
essential points.
offered at prices to yield 5.25 per cent.
The days are past when certain forms
of bonds can be taken care of in the for the 1924 maturity, 5.30 per cent. for
usual fixed way as formerly practiced. the 1925 maturity, 5.35 per cent. for the
During the past ten years the demands 1926 maturity and 5.40 per cent. for the
incident to underwriting surety bonds remaining maturities. Accrued dividends
have been most exacting. from August 1 are to be added in each
An expert surety underwriter now must case. The certificates are to be issued
be able to clearly and concisely analyze against not to exceed 80 per cent. of the
the possible future liability of his com- cost of new standard railroad equipment,
pany in such a manner as to eliminate the total purchase price of which is to
to the greatest extent all possible loss. be approximately $5,345,280.
LONDON JOINT CITY AND
MIDLAND BANK LIMITED CHAIRMAN:
The Right Hon. R. McKENNA
JOINT MANAGING DIRECTORS:
FREDERICK HYDE EDGAR W. WOOLLEY
Subscribed Capital - £38,117,103

Paid-up Capital - - 10,860,852
Reserve Fund- - - 10,860,852
Deposits (June 30th, 1923) - 347,900,203
HEAD OFFICE: 5, THREADNEEDLE STREET, LONDON, E.C.2
OVERSEAS BRANCH: 65 & 66, OLD BROAD STREET, LONDON, E.C.2
, Atlantic Offices: ‘‘ Aquitania ’’ «Berengaria’’ ‘‘ Mauretania”
BELFAST BANKING CO. LTD. THE CLYDESDALE BANK LTD.

THE THREE BANKS HAVE OVER
2,000 OFFICES IN GREAT BRITAIN & IRELAND
The New York, Chicago and St. Louis in progress during the summer months and
Railroad Co., better known as the “Nickel have resulted in providing much more ex-
Plate,” is a consolidation of the New tensive floor space for the executive staff.
York, Chicago and St. Louis Railroad The floor, now given over to the officers,
Co., Toledo, St. Louis and Western Rail- contains approximately 5,000 square feet.
road Co., The Lake Erie and Western As a result
of the changes, enlarged ac-
Railroad Co., and two subsidiaries, effected commodations for the loan and _ tellers’
April 11, 1923. The company owns half departments are provided on the first
the capital stock of the Detroit & Toledo floor, and the foreign department and
Shore Line Railroad Co., and a substantial various other departments of the bank
interest in the common stock of the Chesa- have enlarged accommodations on the third |
peake & Ohio Railway Co., with which floor, mezzanine and other floors of the
mutually advantageous traffic arrangements building. In all, some 16,000 square feet
have been effected. of additional space now is utilized for the
Combined income of the consolidated bank’s purposes through the changes just
companies available for fixed charges for completed.
the seven years ended December 31, 1922, The furnishings for the new quarters
averaged more than twice average annual for the officers include an entrance of
charges for that period, and for the first bronze and marble. The banking room is
six months of 1923 such income was more in marble and walnut, with the board
than 3} times fixed charges for the period. room adjoining paneled in walnut. Spe-
cial attention has been paid to noise-
ENLARGED QUARTERS FOR OFFI- reducing features and to ventilation, as
CERS OPENED BY SEABOARD NA- well as to lighting, such artificial light
TIONAL BANK—New and enlarged quar- as may be required being provided by
ters for its officers were opened recently a new system,
by the Seaboard National Bank of New The Seaboard’s building received the.
York on the second floor of its building, Downtown League’s prize for the finest
Broad and Beaver streets. building constructed in 1920 in the busi-
The renovations, necessitated by the de- ness section of Manhattan, south of City
veloping business of the bank, have been Hall. The bank moved into, it in 1921,
Shop View of Vault Door Installed in Cleveland Federal Reserve Bank—
Absolutely Impregnable
World’s largest and strongest bank vaults ever built

Factory: York, Penna,
YORK SAFE & LOCK Co.

55 Maiden Lane New York
Branches
Boston Philadelphia Baltimore Cleveland Chicago

Sim Banking-Law-Journal 1923-08 40 8

Uploaded by

Copyright:

Available Formats

You might also like

Sim Banking-Law-Journal 1923-08 40 8

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Sim Banking-Law-Journal 1923-08 40 8

Uploaded by

Copyright:

Available Formats

THE BANKING LAW JOURNAL

DEVOTED TO THE LAW OF BANKING AND

Vou. XL AUGUST, 1923 No. 8

CANCELLATION OF BANK DRAFT AT REQUEST OF

‘“*In our view such a result would not follow. If at the

turned to the drawer by the same process which was employed

The court rendered a conditional judgment in favor of the plain-

COLLECTING BANK LIABLE FOR NEGLIGENCE OF ITS

FAILURE OF BANK TO RETURN DISHONORED CHECK

BANK STOCKHOLDERS IN IDAHO NOT SUBJECT TO DOUBLE

On the contrary, it limits liability of the stockholders of all corpora-

PAYMENT OF FORGED CHECKS WHERE

Coleman Drilling Co. v. First National Bank of Burkburnett, Court

The Coleman Drilling Company deposited a large amount of

Action by the Coleman Drilling Company, a copartnership, against

BOYCE, J.—This suit was brought by the Coleman Drilling Com-

it, if it be correct, or detect the errors if it be found erroneous,’’ and

‘‘Of course, if the defendant’s officers, before paying the altered

In this connection, see, also, New York Produce Exchange Bank v.

We assume that the recognition of this principle led the Supreme

BANK SECURING INDORSEMENT OF CHECK

National Mechanics’ Bank v. Schmelz National Bank, Supreme Court

As a guaranty for the performance of a contract with the

Error to Cireuit Court of City of Newport News.

WEST, J.—In 1919 Virginia Salvage Company entered into a con-

Virginia Salvage Company and: Newport News Lumber Yards, Ince.

We consider it unnecessary to point out the defective assignments

‘‘Where the holder of an instrument payable to his order transfers

Since the Schmelz Bank had no notice of any infirmity in the

Besides, Col. Hinkle having subsequently indorsed the check, it is

‘*Where an instrument payable on demand, other than bank notes

In construing one part of a statute resort should be had to every

‘‘In determining what is a ‘reasonable time’ or an ‘unreasonable

The check being a certified check, it being understood by the origi-

‘“Where a check is certified by the bank on which it is drawn the

Section 5751 of the Code is in these words:

‘‘A check of itself does not operate as an assignment-of any part of

When a bank certifies a check it obligates itself, without condition,

Section 1603. ‘‘Let us consider more at length the effect of the

In Merchants’ Bank v. State Bank, 10 Wall. 648, 19 L. Ed. 1008,

Even though a check is forged, if the drawee bank certified it, it

IN FORGERY PROSECUTION BANK TELLER

State v. Dixon, Supreme Court of North Carolina, 117 S. E. Rep. 170

In a prosecution for forgery it was shown that the defendant

The teller of the Greensboro Bank was permitted to testify that

Appeal from Superior Court, Guilford County; Harding, Judge.

STACY, J.—For the purpose of showing that the checks in ques-

presentment, demand and protest of the checks for non-payment or

EVIDENCE OF AGREEMENT TO HONOR

Webster v. First State Bank of Peever, Supreme Court of South

The plaintiffs sold cattle to the defendant Douglas. He gave

Appeal from Circuit Court, Roberts County; B. A. Walton, Judge.

ANDERSON, P. J.—This is an appeal from a judgment for

Douglas, one of the defendants, that prior to the time he purchased

presented. A directed verdict’’ for ‘‘defendant was not warranted.

See Ballard v. Bank, 91 Kan. 97, 136 Pac. 935, L. R. A. 1910C,

‘‘Although plaintiff was not a party to the agreement between

See Harrison v. Simpson, 17 Kan. 508; Railway Co. v. Hopkins, 18