4. In the first of the relations between the banker and his customer above described, the banker was the absolute purchaser of the Money and Securities of his customer, so that he might do what he pleased with them: in the second he was merely his customer's Agent, and it is highly penal for him to appropriate to his own use any of his customer's securities. A relation between these two is frequently created in which Securities are deposited by a customer with a banker: the absolute Property in them remains with the customer: but he obtains a loan, or advance of money from his banker on their security: which when he pays off, the full Property and Possession of his Securities reverts to himself. The banker thus becomes the Pawnee of his customer's securities, and while he is so he acquires certain Rights over them, though not exactly a Property in them; and it is out of such cases as these that the most difficult and abstruse questions arise between bankers and their customers.

It has always been the custom that if a banker makes a loan to a customer on the security of bills etc. deposited with him, he has the right to repledge, or sell so much of these securities as is necessary to satisfy his own claim. And this custom is expressly sanctioned in the same clause as has been already quoted -

It says that nothing in the section shall restrain any banker "from selling, transferring or otherwise disposing of any Securities or Effects in his possession upon which he shall have any Lien, Claim, or Demand entitling him by Law so to do, unless such Sale, Transfer, or other Disposal shall extend to a greater number or part of such Securities or Effects than shall be requisite for satisfying such Lien, Claim, or Demand."

This principle has always been held to apply when a banker makes a loan on the pledge of these securities. It is also held to apply when a customer having an ordinary account with his banker has overdrawn it, and become indebted to him: the banker has a lien or a right to retain all banking securities deposited with him by his customers.

But he has no lien against a customer for a balance of account upon valuable property, such as a chest of plate deposited with him for safe custody, not in his capacity of banker.

And if a customer being indebted to his banker on an overdrawn account, brings fresh securities to him, and directs him to appropriate them to some specific purpose, the banker has no lien upon them for his debt. He must either fulfil his express instructions, or return the securities to his customer.

Nor has he any lien upon securities which his customer may deposit with him merely in his character as Trustee. Even though the customer may have fraudulently obtained an advance on them from the banker, the Trust will override the lien.

But a banker's lien on securities which come into his hands without being appropriated to any specific purpose, or entrusted to him for safe custody, or the like, is so strong that it applies to Bills or Notes payable to bearer, to Exchequer Bills which pass by delivery, even though the customer were not the real owner of them, and had no right to pledge them.

Questions of great nicety frequently occur between bankers and their customers; and in the event of the bankruptcy of either or both of them, their assignees, respecting the Property of bills placed by customers in the hands of their bankers for various purposes.

It is very common for customers to place in the hands of their bankers the bills they receive in business for the purpose of collection.

This is very convenient for the customer. By placing the bill in the hands of his banker he frees himself from all anxiety and trouble regarding its loss, or presentation for payment. The banker is bound as his customer's Agent to present it for payment, and place the amount to his customer's credit as soon as it is paid. And if he fails to do so and any loss occurs through his neglect of the usages of trade, he must make good the loss to his customer.

For the sake of convenience, it is usual to note down the amount of such bills on the proper day, in the customer's account in a column "short of" or before the column for cash. Hence these bills are said to be entered "short" and the banker is said to hold such bills "short."

The entry is a mere memorandum to remind the banker that he has such bills to collect for his customer, on a certain day. The sum is in no way placed to his customer's credit: and the bills "held short" are the exclusive property of his customer, which he is entitled to demand back at any time previous to hi3 bankruptcy.

As the banker has acquired no Property in them, in the case of his bankruptcy, the customer is entitled to demand them back immediately.

But in the case of the customer's bankruptcy, the banker must not deliver up his short bills to him, as all his Property has vested in his assignees.

As "short" bills are not the Property of the banker he would be indictable if he used them for his own profit.

London bankers act as Agents and correspondents for country bankers. Therefore they are in many cases, as regards country customers, the agents of an agent.

A country customer frequently requires his banker to perform some duty for him which can only be done by his London agent: and perhaps sometimes that can only be done by that London agent employing a foreign agent. In these successive agencies losses may happen quite innocently in the course of trade. But in all such cases the country banker is liable to his customer because it was he who chose the agent who made the loss; or he chose the agent who chose the agent who made the loss. Therefore it was the country banker's conduct that led to the loss, and he must bear it, so far as regards his own customer, and then have recourse against his own agent.

Hence in all cases when a banker undertakes to get payment of a bill, or anything else, for any party, he is liable to him, if any loss occurs through him or his agents.

If a banker takes Goods as a security for an advance, he ought to satisfy himself that his customer is entitled to them: for by common law the real owner will be able to recover them, or their value from him, if unlawfully pledged. That is they have no "currency."

BANKER AS WAREHOUSEMAN OF JEWELS, &C.

A banker sometimes takes a Policy of Life Insurance as a security for a debt. In such a case he should give notice to the office of the assignment: as in the event of his customer's bankruptcy, the policy would vest in his assignees.

It is a well established principle that a debt due to a trader, though assigned by him, is in his order and disposition in the event of his bankruptcy, even though the instrument of the debt has been delivered over, unless notice of the assignment has been duly given.

He must also have actual possession of the policy; as if the debtor holds it it would pass to his assignees.

Policies of Life Insurance are most undesirable securities for a banker to hold: as he may become liable to pay the premium for a long series of years, and may thus make a loss.

But more undesirable still if possible, are Shares in public companies. To complete his right to them, he must have them transferred to himself, and thus become liable for calls, and even worse, in the event of the failure of the company. A banker, therefore, should never make advances on shares, except of companies of a very high standing: for instead of buying a security he may very probably find he has bought a liability.

Dock Warrants and Bills of Lading are Negotiable Instruments; and being duly indorsed the Property in the goods they represent passes by the simple delivery of the instrument, so as to empower the holder to obtain possession of them.

A banker sometimes takes a deposit of Title Deeds, by way of equitable mortgage. In all such cases he should have a written memorandum stating distinctly the purpose for which the deposit is made: for it is laid down that in doubtful cases, where there is no memorandum, the Court leans against considering the deposit as a security for antecedent debts.

On the Relation of a Banker to his Customer as Warehouseman of his plate, jewels, specie, deeds, etc.

5. Besides buying money and securities from their customers in the way of banking business, bankers also receive from their customers chests of plate, jewels, specie, deeds, and policies, of all sorts for the sake of safe custody in their strong rooms. In this capacity they act simply as Warehousemen for their customers, and no Property of any description passes to them in the goods deposited: and they have no lien over these deposits for balances due to them from their customers on their accounts.

And as these goods are only placed with them on trust, the Statute of Limitations does not apply, for the Statute never operates against a Trust. It is said that several London bankers have plate and jewels deposited with them by the refugees in the French revolution. The real owners perhaps perished in the revolution, and their heirs have never claimed their valuables.