of a bankrupt agent, there must be a specific appropriation of them, as by lodging of bill for bill; or by the deposit of several, in one entire transaction, to answer a particular purpose; for if they be paid in from time to time upon a general running account, they become effects of the person to whom they are so paid, and are not reclaimable.(u) The doctrine is thus generally stated by Lord Hardwicke: "If bills are sent by a correspondent to a merchant here to be received, and the money to be applied to a particular use, and the merchant becomes bankrupt before the money is received on the bills, the correspondent has a special lien in respect of those bills, and the money shall not be divided amongst the creditors at large. But where bills are sent on a general account between the correspondent and the merchant, and as an item in the account, it is otherwise." Ex parte Hournois; 10th August, 1754 (v)

possessed of his customer's property. If it be distinguishable from his own, it does not pass to his creditors, but may be reclaimed by the true owner subject to the liens of the banker upon it." The authorities referred to by the learned commentator, are principally those noticed supra.

So, in Thompson v. Perkins, 3 Mason, 232, 235. Story, J. says:"Nothing is better settled at the present day than the doctrine, that the principal is entitled to recover, whenever he can trace his own property, and distinguish it, or its proceeds, from the mass of the property of his factor. If it has been sold, and notes taken in payment, and these can be specifically ascertained, they remain the property of the principal; and he has a right to receive them, discharging at the same time any lien of the factor." See Veil v. The Adm'rs of Mitchell, 4 Wash. C. C. Rep. 105; Price v. Ralston, 2 Dallas, 60, 67; Hourquebie v. Girard, 2 Wash. C. C. Rep. 212.

(u) Bent v. Buller, 1 East, 551; 5 T. R. 494.

(v) Ex parte Oursell, Ambl. 297. The precise point, as to what is a specific appropriation, so that the bankruptcy of the agent shall not impair the right of the remitter of bills to pursue them in specie, was considered in a later case, in chancery. A merchant abroad sent drafts from time to time to his London correspondent for acceptance, under an authority for that purpose, and upon an understanding that the liabilities of the latter, in respect of all such acceptances, should be covered by means of bills, payable in London, to be remitted to him from time to time. Under such an arrangement, the presumption is, until an agreement to the contrary is shown, that the London correspondent was not intended, or entitled to treat

[*90]

*5. But money which has been actually received

the bills so remitted, as cash, or to discount them before maturity; and, therefore, it was held that two of such bills, that were existing in specie in his hands at the time of his bankruptcy, and were not then due, did not pass to his assignees, but were the property of the party who remitted them. In this case, Lord Cottenham said: "In the transactions between the foreign merchants and the London house, it appears that two bills, viz. one for £1000, and another for £50, were remitted to the London house by the foreign merchants; and the question is, whether these two bills belong to the assignees of the London agent, or to the foreign merchants. The law on this subject is laid down with sufficient clearness in the cases of Thompson v. Giles, (ante, 88,) &c., &c., the result of which is, that unless there be a contract to the contrary, if a person, having an agent elsewhere, remits to him, for a particular purpose, bills not due, and that purpose is not answered, and then the agent carries them to account, and becomes a bankrupt, the property in the bills is not altered, but remains in the party making the remittance. That of course may be regulated by usage; but prima facie, without special contract, the presumption is, that the bills are received by the agent for the purpose of indemnifying him against any eventual loss, and are not to be dealt with as his own, and immediately converted into cash. In Ex parte Smith, in the matter of Power, (Buck. 355,) a bill of exchange was remitted with a direction to do the needful,' which was construed not to give the house to which it was remitted a right to sell the bill, but only a right to keep it until the time arrived, when it was properly payable. Unless, therefore, there is to be found, in the correspondence in this case a special contract authorizing the London agent to deal otherwise with the bills, viz.: to make them immediately his own, he would be bound to keep them until they became due. In order to make good the title of the assignees, and to displace the title of the remitters of the bills, it would be necessary to establish, from the correspondence, a contract entitling the London house to make the bills their own. The cases show, that unless there was such a contract, the London house were agents only for receiving the amount of the bills when due. Instead of containing any authority to the London agent to deal with the bills as his own, the correspondence proves the very reverse to have been the understanding of both parties. The only obligation of the foreign house, was to keep the London agent in cash to meet the bills when due. It was not intended to establish a cash balance in his hands. Another question might have arisen which it is not necessary for me to decide, because there are facts enough to enable me to dispose of the case independently of it. It is obvious that these remittances were made for the purpose of meeting certain obligations; those obligations were not met; so that the condition upon which the bills were remitted has not been performed ; and the London agent, therefore, it may be said, has not done that which was requisite to

by the bankrupt, and mixed with his funds,(A) either by negotiating the securities in his hands,(x) or as the price of goods entrusted to him for sale,(y) or to pay over to some purpose which it has not been applied to,(z) cannot be separated from his estate, and, as to that, the principal must rate with the other creditors, for money has no ear-mark by which it can be distinguished.(a)

complete his title. This, however, is a consideration into which I am not now called upon to enter. Here are the bills not disposed of, not discounted, and the obligation not performed. I think, therefore, that the foreign house have clearly established their title." Jombart v. Woollet, 2 Myl. & Cr. 390.||

(A) | In Robson v. Wilson, 1 Marsh. Ins. 295, Lord Kenyon says; "where a factor has received money belonging to his principal, and it becomes blended with his own estate, and cannot be distinguished from it, the principal must come in with the general creditors." And see Kip v. Bank of New York, 10 Johns. Rep. 65; ante, p. 89, n. 6.||

(a) Scott v. Surman, Willes, 404. This is the reason assigned both by Mr. J. Willes, and in Whitcomb v. Jacob, Salk. 160, why money in the hands of an agent cannot be specifically claimed; and this is confirmed by Lord Kenyon's opinion, that if it be in a condition to be distinguishable, it may be claimed like any other thing. Lord Mansfield indeed, 1 Burr. 457, says, "It has been quaintly said, that the reason why money cannot be followed is because it has no ear-mark; but that is not true, the true reason is on account of the currency of it." But it must be observed, that Lord Mansfield was then considering the case, not of reclaiming money from the person with whom it had been deposited, but of following it into the hands of a third, to whom it had passed in currency. And it is only in that view that he expresses a disapprobation of the reason alluded to. And not only money, but negotiable securities, are subject to the same distinction; for though bills of exchange deposited with a banker are reclaimable in his possession, yet they cannot be followed into other hands to which they have come by the banker's assignment. 1 Bos. & Pul. 640.

[Although if endorsed, and consequently negotiable, bills are deposited with a banker, the latter has the absolute power of disposing of them, yet such an absolute right may, under circumstances, be qualified. As where the banker is agent for his country correspondent, to receive and pay bills for him, with an allowance for so doing; or where, in an annual account stated between them, the banker has entered the bills as the property of

[*91] And *if the factor at the time of the sale agree,

the correspondent; in the one case the right is qualified by considering the banker as a factor, and the bills as remitted for a particular purpose, viz. to be received and carried to account as cash, when due, and his power over them as limited to that object; in the second case, by raising an express declaration of trust, the right may also be considered as qualified. And although the banker enter the bills in his books as cash, or consider them as such, yet that will not extend his qualified right in either case, since his own books are not evidence for him, though they may be against him. Ex parte Pease, 1 Rose's B. C. 232. See also Ex parte The Wakefield Bank, ibid. 243, where a trust by implication was raised, so as to control the general authority of bankers to negotiate bills endorsed to them. Ex parte The Leeds Bank, 1 Rose's B C. 254.]

+ As the subject here treated of is one of great importance to all persons engaged in trade, it may be well to state concisely what is conceived to be the present state of the law affecting it; and

1. A banker is to be considered as the agent of his customer. If property of the customer come into his hands to be dealt with in a particular manner, he is, as to that property, the factor of the customer, having the rights and liabilities belonging to that character.

2. Bills not due, paid in by a customer to his banker, are, in the absence of evidence to the contrary, presumed to be placed with him as an agent to procure the payment of them when due, and in such case the property remains in the customer. Giles v. Perkins, 9 East, 12.

3. If they are endorsed by the customer, the legal property in them is changed. Laing v. Smyth, 7 Bing. 284.

4. And if they are also discounted by the banker for the customer, they become the absolute property of the banker, and of course pass to his assignees as part of his estate; Carstairs v. Bates, 3 Campb. 301; and the endorsement is prima facie evidence of discounting. Ex parte Towgood, 19 Ves. 299.

5. The taking of the banker's acceptances in exchange for bills paid in and endorsed is tantamount to a discounting, and, even though the banker's acceptances be dishonored, the bills will nevertheless pass to his assignees. Hornblower v. Proud, 2 B. & A. 327.

6. But bills may be endorsed by the customer, (and so the legal property be changed,) and may yet remain in the hands of the banker clothed with a trust for the customer, in which case, as has been already said, they do not pass to the assignees of the banker upon his bankruptcy. And the difficulty, in most cases, is to determine whether such a trust exists or not.

7. When the bills are entered short by the banker, that is to say, when they are entered as bills not yet available, and not carried to the general cash account, there is no doubt that they do not pass to the assignees, but must be given up to the customer. 1 Rose, 154.

instead of taking the price in money, to set off a [*92]

8. And even though the banker have entered them in his own books as cash, and allowed his customer credit in account generally upon them, this will not of itself affect the customer, as the banker's books can be no evidence for himself or his assignees. 1 Rose, 239.

9. Much less if the customer have expressly directed the banker to get payment of them when due, or forbidden him to negotiate them; or the course of dealing between them raise an inference of such direction or prohibition. 1 Rose, 243.

10. If the customer have given the banker a limited authority to negotiate them under certain circumstances, as in reduction of the cash balance when unfavorable, or the like, this will of course not extend to other circumstances or to more bills than are sufficient for the purpose, and indeed will of itself negative any general authority to dispose of them. Ibid.

11. But if a general authority to negotiate them had been either expressly given, or is to be inferred from the course of dealing known and assented to by the customer, then, it seems, the customer is to be considered as having abandoned all property in the bills, which consequently pass to the assignees,

12. What circumstances are sufficient to raise the inference of such a general authority is a question of some nicety. Lord Eldon seems to have been of opinion, that if the bills were entered as cash with the knowledge of the customer, and he drew, or were entitled to draw upon the banker as having that credit in cash, he would thereby be precluded from recurring to the bills specifically. Ex parte Sargeant, 1 Rose, 152; Ex parte Sollers, ibid. 155; Ex parte Pease, ibid. 232; Ex parte The Wakefield Bank, ibid. 243; Ex parte The Leeds Bank, ibid. 254; and see 18 Ves. 229, 233; 19 Ves. 25, S. C. However, in all these cases his lordship held the assignees to very strict proof of such a course of dealing, and, in the absence of such proof, decided that there was no such general authority. The opinion of Lord Eldon, as conveyed, in this dictum, has been adopted and acted upon by the present Vice Chancellor in a recent case of Ex parte Thompson, 1 Mont. & M'Arthur, 102, which was certainly a strong case, for there, in an account of four years, there were but three entries of actual cash paid, the rest of the entries being entirely of bills, against which the remitters had been in the habit of drawing very extensively.

On the other hand it is said, that it is immaterial whether such a general authority exists, either expressly or from the course of dealing, if, at the time of the bankruptcy, the bills in fact remained in specie in the hands of the bankers, and the cash balance were in favor of the customer; and at all events, it is insisted, the circumstance of the customer taking credit for the bills, and drawing, or considering himself entitled to draw against them, does not make them the bills of the banker, because, in the actual course of trade, such a privilege is a consequence of paying in bills. The former part of this proposition is the opinion of Mr. Deacon, and is not without the