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valid and binding. The bank has a lien upon the shares for the amount of its claim, at least as against the shareholder himself or against his assignees under a voluntary assignment for the benefit of creditors.1 But whether or not the lien of the bank would be good as against an assignee in bankruptcy or an attaching or execution creditor is a different question which might perhaps receive a different answer. In Massachusetts the point has been considered doubtful.2
Construction of Transfers.
Where a transfer is made to a cashier the question has been already discussed, of whether or not it can enure to the benefit of the bank and under what circumstances. Whether evidence of usage to transfer to the cashier with the design that the transfer shall operate in fact as a transfer for the use of the bank can be introduced, must be regarded as still unsettled. If introduced it would be for the purpose not of varying the contract, but of interpreting it: not of controlling any rule of law, but of explaining the intention of the parties. On this ground it has been held admissible in Connecticut; but by a divided court.3 In Massachusetts a contrary opinion was intimated, though not directly laid down.4
Construction of Checks, Payable on Future Day certain, as to
In the chapter upon Checks has been discussed the question of whether or not instruments in their general form checks, but made payable on a future day certain, are or are not entitled to grace.
Attempts have been made in some of
1 Morgan v. Bank of North America, 8 Serg. & R. 73 ; McDowell v. Bank of Wilmington, 1 Harr. 369 ; Child v. Hudson's Bay Co., 2 P. Wms. 207.
2 Nesmith v. Washington Bank, 6 Pick. 329; Plymouth Bank v. Bank of-Norfolk, 10 id. 454.
3 Stamford Bank v. Ferris, 17 Conn. 259. 4 New England Mar. Ins. Co.v. Chandler, 16 Mass. 275 (Per Parker, C. J.), p.
the causes in which this point has been raised to introduce evidence of usage. The difficulty in admitting such testimony has been considered to lie in the fact that it is the proper province of the court to declare what is the legal character of such documents, whether they are checks or bills of exchange. The law, it is considered, must make
. them imperatively either the one or the other, and according to the decision must be the equally imperative assertion of whether or not they shall bear grace. Usage therefore has been deemed inadmissible, because its only effect, if it should have any at all, must be to control a rule of law. A few authorities sustain this view. It was certainly the view which the court of New York were inclined to take at the time of the decision of Bowen v. Newell. No one who reads that opinion can fail to gather this conclusion from it; and it was upon the strength of this that the Ohio case was decided. But the latest authority in New York is the decision in the case of Bowen v. Newell as last rendered and revised, published in 3 Kern. 290. Here the court say that the lower court have found that the law in Connecticut, where the paper was payable, gives no days of grace upon it; that this finding of the law was upon evidence derived from the best sources and of the most unquestionable character." By turning to the report of the cause in the lower court 2 we find that this so emphatically excellent evidence, which was allowed so thoroughly to settle the law, was simply evidence of the usage of banks and of persons dealing with banks in Connecticut. The court escape the trouble of reconciling this view with their former contrary one, by the arbitrary assertion that in 4 Selden they only held, that, by the law merchant, the instrument was not entitled to grace. This assertion will satisfy nobody, for it is not true. But its degree of accuracy is a matter of little moment since the last ruling, in 3 Kernan, is too clear and positive to leave any doubt as to the law in New York State.
1 Morrison v. Bailey, 5 Ohio, St. 13; Minturn v. Fisher, 4 Cal. 35. See also Woodruff v. Merchants’ Bank, 25 Wend. 673; Bowen v. Newell, 1 Seld. 190.
2 2 Duer, 584.
The doubt is simply, whether or not the allowance or disallowance of grace upon a certain anomalous description of paper is a proper subject of usage. Why it should not be so, it is difficult to say. It is clear that such paper whether it be called a check or a bill of exchange, is a materially modified form of either. It is in fact an independent species of paper. When therefore it is considered that the entire principle which gives days of grace upon particular species of commercial paper was in its origin wholly a matter of the usage of bankers; there seems no reason why the same usage if actually shown to exist, should not be properly extended to still another species of paper, of comparatively modern origin. Even if the instrument is a check, it is a peculiar alteration of the common form of checks. It is clear that the allowance of grace on business paper is a proper subject of usage since it owes its very existence to usage. Why then are not checks equally a proper subject for usage, and if so why may not usage draw distinctions in this respect between two different descriptions or classes of checks which vary from each other in so important a trait that very many courts are unwilling to apply the common name of check to each of them, but reserve it for the more usual kind, and prefer to describe the others as bills of exchange?
Presumptions established by Course of Dealing. The course of dealing between two banks may be given in evidence for the purpose of raising a presumption from it. This is not precisely a usage ; that is to say, it is not always necessary that it should bind the banks as an arbitrary rule for the conduct of their affairs with each other. Therefore the inference based upon it is not absolutely conclusive, but is capable of being rebutted by proof that the habitual course of dealing had in the particular instance been departed from. It is strictly as a habit, which gives rise to certain natural suppositions, not as a legal usage which imperatively fixes those suppositions as facts, that such evidence is admitted. Thus that two banks are wont to exchange accounts at short intervals, and each promptly to object to the account rendered by the other if it claims any error therein; that such accounts have been rendered, covering a point subsequently disputed but not objected to within the usual time, are acts admissible in evidence as going to show actual correctness and that the correctness has been acknowledged. But the same evidence would be incompetent to establish an usage between the banks of objecting promptly which should have the effect of estopping the bank which had failed so to object from afterwards claiming the correction of the error.1
By-Laws and Usages in Derogation of the Rights of third Parties.
A bank cannot arbitrarily make by-laws or institute usages which shall injuriously affect the rights of third parties. If any person deliberately assents to such by-laws or usages, it becomes a different matter, and thereafter, as a mutual understanding or agreement the bank might doubtless enforce it as towards this individual. But such assent, implying the waiver of valuable rights, will never be presumed simply because the bank has insisted upon laying down the rule for its own conduct. Thus a by-law or usage requiring all errors in payments over the counter, or in receipts or entries in a depositor's bank book, to be corrected by the party before leaving the bankingrooms, are absolutely devoid of any effect whatsoever. That as a matter of fact the party did count his money or did examine the writing or entry before he left the rooms, and that he then made no objection to the accuracy of the transaction, might be admissible in evidence to sustain, so far as it could, the presumption of correctness. But it would be strictly as circumstantial evidence; and the further and independent fact that it was the law or usage of the bank to refuse to make
1 Union Bank v. Planters' Bank, 9 Gill & J. 439.
adjustment unless this process was observed would have nothing whatsoever to do with the matter, and would doubtless not be admitted in evidence, by reason of its entire impertinence. Neither can this power, which the directors could not claim at common law be asserted by virtue of the authority, given them by legislative enactment, to regulate the conduct of the business and affairs of the bank. Such authority does not empower them to make rules which shall wrongfully affect the rights of outside dealers with the corporation."
Usages in contravention of Enacted Laws. It may undoubtedly be laid down as a general principle that no custom or usage among banks, however universal or long established or uniform it may appear to be, can give validity to any transaction upon their part which conflicts with a positive statutory enactment. But though the doctrine in this shape is clearly sound it has been thus far illustrated only by cases arising under the usury laws. Banks have often sought to evade the restrictions of these laws under cover of a customary course of dealing. But all such efforts at evasion have thus far been rigorously defeated by the courts. An apparent exception to this statement might be supposed to be found in the custom of banks, when discounting, to deduct the interest in advance, thereby securing to themselves interest upon this interest for the period for which the discounted paper runs, and so actually receiving a fraction of one per cent more than the regular rate. But this should be regarded rather as an express power conferred by charter or organic law than as an exception based solely upon usage. Power “ to discount” is
1 Farmers' & Mechanics' Bank r. Smith, 19 Johns. 115; Gallatin v. Bradford, 1 Bibb, 209.
2 Niagara County Bank v. Baker, 15 Ohio St. 68; Protection Ins. Co. v. Har. mer, 2 id. 452; New York Firemen's Ins. Co. v. Ely, 2 Cow. at p. 707; Dunham v. Gould (Per Chanc. Kent), 16 Johns. 367.