Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/691

 CHAP. XT.] CORPORATION AND CREDITORS. [§ 672. bailee is created, but that of debtor and creditor. 1 bank and , depositors. Consequently the bank has the right to apply the money to the payment of any legal demand it may have at the time against the depositor ; and, on the other hand, will be liable to the depositor for any loss of the money, although occurring without any fault on the part of the bank or its servants. 2 When, however, a person deposits drafts in a bank known at the time to its managers to be insolvent, receiving the deposit is a fraud on the depositor, and he may reclaim the drafts or their proceeds, so long as they have not come into the hands of bona fide holders for value ; thus rescinding what would otherwise have been the ordinary contract between a depositor and the bank, i e., that the bank should become the owner of the drafts and debtor for their equivalent. 3 There is no special trust relation between a bank and its de- positors. But the bank is bound to know their signatures, and is liable to them for all moneys paid out on forged checks ; 4 i Phoenix Bank v. Risley, 111 U. S. 125; Davis v. Smith, 29 Minn. 201; Hardy v. Chesapeake Bank, 51 Md. 562; Ward v. Johnson, 5 111. App. 30; Perth Amboy G. L. Co. v. Middle- sex Co. Bank, 60 N. J. Eq. 84; Ilarter v. Mechanics Nat. B'k, 63 N. J. L. 578; Colton v. Drovers Bldg. Assn., 90 Md. 85; Taft v. Quinsi- gamond Nat. Bk., 172 Mass. 363; Pacific Coast Sav. Soc. v. San Fran- cisco, 133 Cal. 14; and cases in fol- lowing notes. Depositors in savings banks stand in the same relation to the assets of the bank as share- holders in banks of discount. Cogs- well v. Rockingham Ten Cents SVgs B'k, 59 N. H. 43; Hallu. Paris, ib. 71. 2 Commercial Bank v. Hughes, 17 Wend. 94; Marsh v. Oneida Central Bank, 34 Barb. 298; ^Etna Nat. B'k v. Fourth Nat. B'k, 46 N. Y. 82; Boy den v. B'k of Cape Fear, 65 N. C. 13; In re B'k of Madison, 5 Biss. 515; Knecht v. United States S'v'gs Ins'n, 2 Mo. App. 563. But a bank when sued by a depos- itor for his deposit cannot show that the deposit really belonged to third persons indebted to the bank, and set off its claim against them. First Nat. B'k v. Mason, 95 Pa. St. 113. Compare Swartwout v. Mechanics' Bank, 5 Denio, 555. Nor can a bank hold the balance of a customer's deposit, to apply it on his indebted- ness to the bank not yet matured. Jordan v. Nat. Shoe and Leather B'k, 74 N. Y. 467. 3Cragie v. Hadley, 99 N. Y. 131; Perth Amboy G. L. Co. v. Middlesex Co. Bank, 60 N. J. Eq. 84; Higgins v. Hayden, 53 Neb. 61. 4 Leavitt v. Stanton, Lalor (N. Y. ), 413; Morgan v. Bank of the State of New York, 11 N. Y. 404; Weisser i>. Denison, 10 N. Y. 68; Commercial and Farmers' Nat. B'k v. First Nat. B'k, 30 Md. 11; Harter v. Mechanics' B'k, 63 N. J. L. 578; First Nat. B'k of Belmont v. First Nat. B'k of Barnesville, 58 Oh. St. 207. Com- pare Neal v. Coburn, 92 Me. 139. That the forger is the confidential 671