him, may be applied to the discharge of his indebtedness to the bank; and this is true not only of the general deposit of the customer, but the rule applies to any commercial paper belonging to the depositor in his own right and placed by him with the bank for collection."

A corresponding bank receiving a collection with the statement that the collection belongs to "A." and not to the bank remitting the same, the correspondent bank cannot acquire a lien against the collection for a debt which the forwarding bank may owe to it.16

But if the correspondent bank has no notice, but receives the collection as the property of the remitting bank, the correspondent bank has a lien for a debt that may exist between them, the rule may then be safely stated that a bank holding a collection as between the owner and itself, it cannot acquire a lien upon the collection or proceeds unless the debt existing from the owner of the security to the bank was, at the time the collection was made, a matured debt.

And, as between the correspondent bank and its agent, the agent cannot acquire a lien where the collection is sent and indorsed" for collection."

A letter accompanying a collection (which collection bears a general indorsement) which explains a blank indorsement, would also be held as notice to the collecting bank.

The rule may be again stated that a bank cannot acquire a lien against a collection in any instance where the title of the paper remains in the owner.

$270. Authority of bank to make collections.

When a collection is received by a bank, it not only has the implied authority to collect which is granted to it in the general power to do a general banking business, but it may be said that it becomes a duty.

The principle that the power is implied requires no dis

cussion.

The character of the business of a commercial bank suggests and requires it to perform the business of making collections.

The National Banking Law does not specifically designate

16 Bank of Metropolis v. New England Bank, 1 How. 234.

the business of making collections a provision of the statute, but the business itself forms a large branch of the banking business and its power is not denied.

Held, in case of First Nat. Bank of Fort Worth, Texas v. Payne, 42 S. W. 736, that plaintiff bank can not recover upon a note assigned to it merely for the purpose of collection. But see First Nat. Bank v. Hughes (Cal.), 46 Pac. 272.

The rule as laid down by the Supreme Court of the United States as to the liability and duty of the collecting bank where it receives drafts and other collections from its customers and for defaults of its agents, the court after discussing the decisions of the various States presents the rule to be as follows:

"The question involves a rule of law of general application. Whatever be the proper rule it is one of commercial law. It concerns trade between different and distant places, and, in the absence of statutory regulations or special contract or usage having the force of law, it is not to be determined according to the views or interests of any particular individuals, classes, or localities, but according to those principles which will best promote the general welfare of the commercial community. Especially is this so when the question is presented to this tribunal, whose decisions are controlling in all cases in the Federal courts.

The agreement of the defendant in this case was to collect the drafts, not merely to transmit them to the Newark bank for collection. This distinction is manifest; and the question presented is, whether the Newark bank, first receiving these drafts for collection, is responsible for the loss or damage resulting from the default of its Newark agent. There is no statute or usage or special contract in this case, to qualify or vary the obligation resulting from the deposit of the drafts with the New York bank for collection. On its receipt of the drafts, under these circumstances, an implied undertaking by it arose, to take all necessary measures to make the demands of acceptance necessary to protect the rights of the holder against previous parties to the paper. From the facts found, it is to be inferred that the New York bank took the drafts from the plaintiff, as a customer, in the usual course of busiThere are eleven drafts in the case, running through

ness.

a period of over three months, and the defendant had previously received from the plaintiff two other drafts, acceptances of which it had procured from Conger, at Newark, through the Newark bank. The taking by a bank, from a customer, in the usual course of business, of paper for collection, is sufficient evidence of a valuable consideration for the service. The general profits of the receiving bank from the business between the parties, and the accommodation to the customer, must all be considered together, and form a consideration, in the absence of any controlling facts to the contrary, so that the collection of the paper cannot be regarded as a gratuitous favor. Bank of Utica v. Smeads, 20 Johns. 372, and 3 Cowen, 662; McKinster v. Bank of Utica, 9 Wend. 46; affirmed in Bank of Utica v. McKinster, 11 Wend. 473.

"The contract, then, becomes one to perform certain duties necessary for the collection of the paper and the protection of the holder. The bank is not merely appointed an attorney, authorized to select other agents to collect the paper. Its undertaking is to do the thing, and not merely to procure it to be done. In such case, the bank is held to agree to answer for any default in the performance of its contract; and, whether the paper is to be collected in the place where the bank is situated, or at a distance, the contract is to use the proper means to collect the paper, and the bank, by employing sub-agents to perform a part of what it has contracted to do, becomes responsible to its customer. This general principle applies to all who contract to perform a service. It is illustrated by the decision of the Court of King's Bench, in Ellis v. Turner, 8 T. R. 531, where the owners of a vessel carried goods to be delivered at a certain place, but the vessel passed it by without delivering the goods, and the vessel was sunk and the goods were lost. In a suit against the owners for the value of the goods, based on the contract, it was contended for the defendants that they were not liable for the misconduct of the master of the vessel in carrying the goods beyond the place. But the plaintiff had judgment, Lord Kenyon saying that the defendants were answerable on their contract, although the misconduct was that of their servant, and adding: The defendants are responsible for the acts of their servant in those things that respect his duty under them, though they are not

answerable for his misconduct in those things that do not respect his duty to them.'

"The distinction between the liability of one who contracts to do a thing and that of one who merely receives a delegation of authority to act for another is a fundamental one, applicable to the present case. If the agency is an undertaking to do the business the original principal may look to the immediate contractor with himself, and is not obliged to look to inferior or distant under contractors or sub-agents, when defaults occur injurious to his interest.

"Whether a draft is payable in the place where the bank receiving it for collection is situated, or in another place, the holder is aware that the collection must be made by a competent agent. In either case, there is an implied contract of the bank that the proper measures shall be used to collect the draft, and a right, on the part of its owner, to presume that proper agents will be employed, he having no knowledge of the agents. There is, therefore, no reason for liability or exemption from liability in the one case which does not apply to the other. And, while the rule of law is thus general, the liability of the bank may be varied by consent, or the bank may refuse to undertake the collection. It may agree to receive the paper only for transmission to its correspondent, and thus make a different contract, and become responsible only for the good faith and due discretion in the choice of an agent. If this is not done, or there is no implied understanding to that effect, the same responsibility is assumed in the undertaking to collect foreign paper and in that to collect paper payable at home. On any other rule, no principal contractor would be liable for the default of his own agent, where from the nature of the business, it was evident he must employ subagents. The distinction recurs, between the rule of merely personal representative agency and the responsibility imposed by the law of commercial contracts. This solves the difficulty and reconciles the apparent conflict of decision in many cases. The nature of the contract is the test. If the contract be only for the immediate services of the agent, and for his faithful conduct as representing his principal, the responsibility ceases with the limits of the personal services undertaken. But where the contract looks mainly to the thing to be done, and the undertak

ing is for the due use of all proper means to performance, the responsibility extends to all necessary and proper means to accomplish the object, by whomsoever used.

"We regard as the proper rule of law applicable to this case, that declared in Van Wart v. Woolley, 3 B. & C. 439, where the defendants, at Birmingham, received from the plaintiff a bill on London, to procure its acceptance. They forwarded it to their London banker, and acceptance was refused, but he did not protest it for non-acceptance or give notice of the refusal to accept. Chief Justice Abbott said: 'Upon this state of facts it is evident that the defendants (who cannot be distinguished from, but are answerable for, their London correspondent) have been guilty of a neglect of the duty which they owed to the plaintiff, their employer, and from whom they received a pecuniary reward for their services. The plaintiff is, therefore, entitled to maintain his action against them, to the extent of any damage he may have sustained by their neglect.' In that case there was a special pecuniary reward for the service. But, upon the principles we have stated, we are of opinion that, by the receipt by the defendant of the drafts in the present case for collection, it became, upon general principles of law, and independently of any evidence of usage, or of any express agreement to that effect, liable for a neglect of duty occurring in that collection, from the default of its correspondent in Newark.

"What was the duty of the defendant, and what neglect of duty was there? An agent receiving for collection, before maturity, a draft payable on a particular day after date, is held to due diligence in making presentment for acceptance, and, if chargeable with negligence therein, is liable to the owner for all damages he has sustained by such negligence. Allen v. Suydam, 20 Wend. 321; Walker v. Bank of the State of New York, 5 Seld. 582. The drawer or indorser of such a draft is, indeed, not discharged by the neglect of the holder to present it for acceptance before it becomes due. Bank of Washington v. Triplett, 1 Pet. 25, 35; Townsley v. Sumrall, 2 Pet. 170, 178. But if the draft is presented for acceptance and dishonored before it becomes due, notice of such dishonor must be given to the drawer or indorser, or he will be discharged. 3 Kent's Com. 82; Bank of Washington v. Triplett, 1 Pet. 25,