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Initiation of Suits and Rights of Action.

debtor upon commercial
Indeed it is conceivable

The scope of a collecting bank's agency does not extend to the initiation of suits against the paper of which payment is refused. that the bank might be seriously prejudiced by the institution of such proceedings; for the fact might, under some circumstances, be evidence going to show that the bank had itself adopted the paper, and therefore, whether it were paid or not, owed the amount of it to the original holder.2 But in New York (in which State it will be remembered that it is held that the first bank which receives paper for collection is responsible for the conduct and doings of all subsequent banks and agents through whose hands the paper must pass in the process of collection) it has been ruled that this first bank has such an interest in the paper as to give it a right of action to recover full damages for any injury resulting by reason of any default on the part of any subsequent agent, in a suit against such agent, although no steps have been taken by its own principal to hold itself liable to respond to him for his loss. Whether or not this principle would be sustained in States which do not hold the first bank to that liability to which it is held in New York is perhaps doubtful, though certainly very improbable.

In case of any default on the part of any bank engaged in conducting the collection whereby it would ordinarily lay itself open to a suit by the party who deposited the paper for collection, suit may also be brought, instead, by any real party in interest, though his name was not mentioned and the fact of his interest was entirely unknown to the bank at the time of its receiving the paper. The naked fact that such person had a real beneficial interest in having the bank do its duty in the premises, and must therefore be an actual loser in some shape by its failure to do so, gives the right of action.*

In New York, where the collecting bank is held liable for

1 Crow v. Mechanics' & Traders' Bank, 12 La. An. 692.

2 Wetherill Bank of Pennsylvania, 1 Miles, 399.

3 Commercial Bank v. Union Bank, 19 Barb. 391; 1 Kern. 203.
McKinster v. Bank of Utica, 9 Wend. 46; 11 id. 473.

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the default of a notary employed by it, the measure of damages which the holder of the paper can recover from the bank on the ground of such default of the notary is the amount of the note and interest. If the holder has sued an indorser and has failed to recover by reason of the default of the notary, he cannot increase the damages by adding the expenses of the suit. For the action against the bank is based upon the implied undertaking of the bank to give the notice and not upon any false representation that the notice has been duly given.1

Discretion of the Bank in Doubtful Cases.

If any point of law concerning any act in the business of collection is in doubt by reason of having never been adjudicated upon, if the bank using its best discretion should pursue the course which the courts subsequently declare to be improper and illegal, it will nevertheless be absolved from all liability for the results of its mistake.2 But if the bank makes a mistake for which it has no such excuse, as simply a mistake of misreading, it will not be discharged from its liability to make good the consequent loss. Though of course in this case of a misinterpretation it is to be supposed that if the writing. really appeared so illegible that the mistake was reasonably excusable, and, which is essential, the bank by reason of distance and want of time was actually unable to obtain directions or explanations from competent authority, it would be acquitted if it pursued its own best discretion. In the cited case there was obvious negligence on the part of the bank in the reading of the note.

In what Currency Bank may collect and account to Principal.

When a bank is employed to make a collection, it has no authority to take payment in any description of depreciated currency, even though the same may constitute the principal

Downer v. Madison City Bank, 6 Hill, 648.

2 Mechanics' Bank v. Merchants' Bank, 6 Met. 13; National Bank of Commerce v. Merchants' National Bank, 91 U. S. (1 Otto) 92.

* Bank of Delaware County v. Broomhall, 38 Penn. St. 135.

currency in which the ordinary transactions of business are conducted at the place. If it accepts such depreciated currency, it is nevertheless liable to pay the full face amount to its principal in good money. The only description of money which the bank is justified in receiving is either that which is legal tender, or bank-bills which are actually redeemed on presentment at the counter of the bank issuing them for their full face value in legal tender. But if any especial circumstances should exempt a bank from the operation of this rule, and should justify it in receiving current funds, though depreciated, then, if the bank returns these specific and identical funds actually received by it to the principal, it is thereby acquitted. If, however, it gives the principal credit for them generally on account, then any subsequent depreciation in them which may take place before the bank makes actual payment to the prin cipal will be the loss of the bank. Its duty is to account to the principal, in such a case, for the full real value of the funds received by it for the collection as that value was at the date of the collection.2

1 Ward v. Smith, 7 Wall. 447.

2 Marine Bank v. Fulton Bank, 2 Wall. 252.

CHAPTER VII.

USAGES AND CUSTOMS.

THE banking business is peculiarly a business of routine. To an unusual degree it requires and admits of a thorough and perfect organization even in the most minute matters. Hence it naturally results that bankers and banks, much more than any other class either of individuals or corporations in the business community, are wont to institute many rules, usages, and customs whereby they seek to regulate the conduct of their daily affairs. These rules, usages, and customs assume various forms; thus there are those which are recognized by all, or by the vast majority of, the banks doing business in a single city; there are those which are peculiar to a small minority; there are those which have been adopted by a single bank either in the shape of by-laws or only as practices habitually observed by it; there are the laws or articles of clearinghouse associations. These are of various degrees of authority according to their nature. But the usages of banks, it has been generally said, being proved, must have effect given to them.1

Banking-Hours.

Only one banking usage has ever been judicially taken notice of by the courts, and that is the usage of "banking-hours." All banks are wont to establish certain hours of the day within which only they will undertake to transact business with the public and with their own customers. The "day" in banking parlance means simply these few hours. In large cities the

1 Warren Bank v. Suffolk Bank, 10 Cush. 582.

banks are wont to agree upon and adopt the same hours. Whether or not the courts will take judicial cognizance of what are banking-hours in any particular place is, of course, a question which must be decided specially concerning that particular place. Undoubtedly no court would take judicial cognizance of the banking-hours of any place not lying within the area of the jurisdiction of the court. The English courts take judicial notice of what are banking-hours in the "city," so called, of London; but in other parts of London, and in other cities and towns, the hours must be proved.2 The fact of what was the hour for closing a certain bank in the city of New York was also found, as an essential fact, by the court, in reporting a case for decision of questions of law.3

"Banking-hours" are so far recognized by the courts that any transaction in the ordinary course of banking business, which is to be had with the bank upon any day, must be had within "banking-hours" upon that day. Thus, a notice left with a bank after expiration of such hours on any day is operative as notice only at and from such later time as, in the ordinary course of business, it is opened and read.1

Essential Elements of a Legal Banking Usage.

What lapse of time, or how many instances actually occurring, are requisite to establish a custom, is one of those questions attended with such an intrinsic and essential indefiniteness as prevents the possibility of any accurate answer. Certainly an usage must have a beginning. But, in its early stages, it is no more a complete usage in the eye of the law, having the legal attributes thereof, than a boy in his nonage is a man, having the legal rights of a man. Twenty-one years is the arbitrary limit which distinguishes the legal infant from the legal man. But no number, either of years or of recurrent acts and instances, can be arbitrarily set to mark accurately

1 Parker v. Gordon, 7 East, 385; Jameson v. Swinton, 2 Taunt. 225.
Hare v. Henty, 10 C. B. N. s. 65.

3 Salt Springs National Bank v. Burton, 58 N. Y. 430.

4 Calisher v. Forbes, 41 L. J. Ch. 56.

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