CHAPTER XV. CLEARING-HOUSES. § 366. Nature of the clearing-house. A clearing-house is a voluntary association1 of banks for the purpose of facilitating exchanges and settlements between them. Each bank in the clearing-house has a representative there at a certain hour. He sits at a desk and receives all paper against his bank and delivers to the representative of each other bank the paper which his bank holds against that particular bank. If the bank delivers more paper than it receives it is entitled to a credit against the other bank; if it delivers less than it receives, it is debited in favor of the other bank. Settlements between banks are made either by clearinghouse certificates or in cash. If made in clearing-house certificates the manager issues to the bank entitled to a credit a certificate for the amount and charges it against the bank from which the credit is owing in favor of the other bank. Each bank has until a certain hour to return any paper upon it as not good, but those settlements are outside of the clearing-house and between the banks; yet the settlement is governed by the rules of the clearing-house. Each bank in the clearing-house is required to deposit with the clearinghouse either money or securities to secure the clearing-house certificates charged against it; or, if this be not done, certain restrictions are put upon the members as to the balances in cash which they must carry. In times of financial distress 1 Crane v. Fourth St. Bank, 173 Pa. 566. But it is not a bank, says this case. Yet it may sue. Philler v. Patterson, 168 Pa. 468. It may be sued. Yardley v. Philler, 58 Fed. R. 746. It may issue certificates or due-bills which are negotiable like bank-notes (Dutton v. Merchants' Nat. Bank, 16 Phila. 94), yet they are not currency, says the opinion in Crane v. Bank, supra. It remains for the Pennsylvania courts to unravel this tangle. banks have received assistance in further certificates from the clearing-house upon the deposit of securities with it. Those banks in a city which are not in the clearing-house, generally do their clearing through a member of the associa tion. -- § 367. Clearing-house certificates. The status of these documents has not been settled. They are issued by a voluntary association and pass between the banks as money. There is no reason why they should not pass among individuals as money, because they are supported by the joint credit of all the banks in the clearing-house. If the veracious daily press may be believed, on one occasion in New York city the banks would pay their depositors nothing but such certificates. They do not seem to differ in any respect, when so used, from the notes of a private banker, since the clearinghouse is simply a voluntary association. The only bearing this question has is: Would they be a violation of laws inhibiting a private banker from issuing notes, and therefore void because unlawful, and secondly, would they be taxable as the note issues of a private banker? The further question as to who would be responsible upon the certificates if a crash should come would need to be determined after wise cogitations by courts as to whether or not a bank, national or state, has the implied power to enter a partnership which issues its obligations, when the justification presented is that it is an incalculable facilitation to the transaction of a vast volume of business which could hardly be transacted in any other way. Some zealous official might find occupation for 1 See Crane v. Fourth St. Bank, 173 Pa. 566. It is not a bank; but if it is a voluntary association that issues paper and performs many of the functions of a bank, what is it? The case says that it does not violate the currency laws of the United States. That is certainly true, because those laws only prevent pri vate issues by means of the statebank tax. This case says the certificates are not currency, yet they are negotiable. Dutton v. Merchants' Nat. Bánk, 16 Phila. 94. But the whole utterance in the case first above cited is a mass of illy considered dictum. his leisure in attempting to collect the state-bank tax, but he would probably resign upon an urgent request. 3 § 368. Rules of the clearing-house. The rules of the clearing-house are binding only upon the members. They are not binding upon the depositors in the various banks;' nor can customers claim the benefit of them or be injuriously affected by them. A rule does not apply in favor of a bank not a member of the clearing-house; nor can the rule be called a general custom when it is observed only by the banks in the clearing-house. It has been seen that the clearing-houses allow mutual credits to be recalled between the banks within a certain time; and on the theory that this rule is binding upon the members of the clearing-house, it has been held that mutual credits could be recalled only in accordance with this rule; in other words, that the payment by the bank of paper upon it, provisionally made, becomes absolute if not objected to within the time allowed by the rule. But the courts of Massachusetts deny this effect to the rule and say that the rule simply compels the clearing banks to allow the recall of the credit within that time, but otherwise the parties are left in the situation they are placed by the general rules of law. So it is held that as to a mistake by a messenger, or a mistake as to the depositor's account, or a mistake as to the signature of the depositor, or even where there was no mistake, the credit may be recalled, provided the other bank has not altered its position to its disadvantage. But as we have seen, a bank 8 1 Louisiana Ice Co. v. State Nat. Bank, 1 McGloin, 181. 6 Merchants' Nat. Bank v. National Eagle Bank, 101 Mass. 281; 2 Merchants' Nat. Bank v. Na- National Bank of North America tional Bank, 139 Mass. 513. 3 Oberman v. Hoboken City Bank, 30 N. J. Law, 61. v. Bangs, 106 Mass. 441. 7 National Ex. Bank v. National Bank of North America, 132 Mass 4 First Nat. Bank v. Fourth Nat. 147; Manufacturers' Nat. Bank v. Bank, 89 N. Y. 412. 5 Blaffer v. Louisiana Nat. Bank, 35 La. Ann. 251; Preston v. Canadian Bank, 23 Fed. R. 179. Thompson, 129 Mass. 438. 8 Merchants' Nat. Bank v. National Bank, 139 Mass. 513. 9 can always recover upon paper paid by it forged as to the amount or as to an indorsement, and the clearing-house rule could have no effect as to such paper; and as to paper where the drawer's name is forged, the bank paying may sometimes recover where the other party has not altered his position to his injury.10 But a payment made upon a mistake as to the drawer's account is final and cannot be rescinded" except under and in accordance with this clearing-house rule. The doctrine of the Massachusetts court is singular in this respect, unless it can be said that the recovery is based upon the other bank's indorsement. A rule of the clearing-house may be waived by refunding,13 12 § 369. Bank as clearing agent. The rule of the clearinghouse as to a clearing agent generally requires notice to be given before the agent can withdraw, and therefore the clearing agent must keep on receiving and paying the paper on the bank for which it acts until the expiration of that period, although the bank for which it is acting has become insolvent. The agent could hold the securities deposited with it by the bank whose paper it paid. This decision, in effect, permits a clearing-house rule to annul the statute against preferences, because it allows claims against the bank to be paid after insolvency, and the bank's assets to be impressed with a lien therefor, excused by the court on the ground that the lien already existed. The decision is a complete and signal judicial error, for the lien existed only as to payments up to that time made, and it cannot be reconciled with the spirit of the opinion in Yardley v. Philler, 167 U. S. 344. In another case it was said that a clearing agent's agreement to pay checks on another bank did not impose upon it the same liabilities that were imposed upon 9 See § 154, ante. 10 See § 154, ante. 11 See § 158, ante. 12 See § 155, ante. 13 Stuyvesant Bank v. National Mechanics' Bank, 7 Lans. 197. 1 O'Brien v. Grant, 146 N. Y. 163. Compare Nat. Security Bank v. Butler, 129 U. S. 223. the bank on which the paper was drawn. But the latter bank would be bound by the act of its clearing agent in waiving the rule of the clearing-house as to a revocation of credit. The agent is not negligent for failure to anticipate that a bank suspended on one day would resume business on the next day.* § 370. Clearing-house settlements.- It has been said that a settlement through the clearing-house upon balances presented does not become an account stated, where made in time of great public excitement, when there was no chance to investigate.1 The settlements made through the clear ing-house do not inure to the benefit of customers of the various banks. Thus, a man deposited a draft with a bank and the draft was paid to the first bank by a second bank, leaving upon the settlement for the day both banks indebted to the clearing-house. The second bank paid its balance to the clearing-house, but the first bank failed before doing so, and it failed having the proceeds of the depositor's collection. Thereupon the clearing-house collected from the different banks the total amount of credits which had been permitted to such banks on items which they had presented against the first bank which had failed. Thus, it will be 2 Grant v. McNutt, 33 N. Y. Supp. a good transfer by receipt of pay62. It was held in Zenner v. Nat. ment. Zenner v. National Bank, 54 Bank of Illinois, 54 Ill. App. 602, Ill. App. 602. A bank having paid that the clearing agent, which had a check through the clearing-house paid a check drawn upon its prin- for another bank, the latter bank cipal, could sue the drawer where having failed without paying the the drawee, its principal, failed check drawn on it, the bank paywithout paying the check. The ing was held entitled to recover opinion is not at all satisfactory. from drawer. Why? The obvious conclusion would be that the clearing agent paid the check for its 3 Stuyvesant Bank v. Nat. Me chanics' Bank, 7 Lans. 197. 4 Farmers' Bank v. Third Nat. principal, not as agent of the Bank, 165 Pa. 500. 1 Nat. City Bank v. N. Y. Gold Exchange Bank, 101 N. Y. 595. The stamp of the clearing-house is drawer. By some wild theory it might sue the payee, but where it obtained its right to sue the drawer is a mystery. |