The appropriation is not complete until he has notified it to his debtor, but when it is once notified he cannot revoke it (c). The creditor cannot appropriate the payment to an illegal debt (d). But he may do so to one upon which the remedy only is barred by a Statute, or by a legal technicality (e). If one debt be certain, and another doubtful or uncertain, he must appropriate it to the certain debt (ƒ). (a) Goddard v. Cox, 2 Stra., 1194. Bloss v. Cutting, 2 Stra., 1194. Hall v. Wood, 14 East., 243n. Kirby v. Duke of Marlborough, 2 M. & S., 18. Hutchinson v. Bell, 1 Taunt., 564. Dawson v. Remnant, 6 Esp., N. P. C., 26. Peters v. Anderson, 5 Taunt., 596. Cocks, 4 Sim., 438. Bosanquet v. Wray, 6 Taunt., 597. Hodgson, 6 De G. M. & G., 474. Grigg v. (b) Philpott v. Jones, 2 A. & E., 44. Simson v. Ingham, 2 B. & C., 65. Williams v. Griffith, 5 M. & W., 300. Nash v. Hodgson, 6 De G. M. & G., 474. (c) Fraser v. Birch, 3 Knapp., 380. Bodenham v. Purchas, 2 B. & Ald., 39. Bank of Scotland v. Christie, 8 C. & F., 214. Wickham v. Wickham, 2 K. & J., 478. (d) Wright v. Laing, 3 B. & C., 165. Ex parte Randleson, 2 Dea. & Ch., 534. Ribbans v. Crichett, 1 B. & P., 264. (e) Mills v. Fowkes, 5 Bing., N. C., 455. Philpott v. Jones, 2 A. & E., 41. Cruikshanks v. Rose, 1 Moo. & R., 100. Arnold v. Mayor of Poole, 4 M. & G., 860. Lamprell v. Billericay Union, 3 Exch., 283. (f) Goddard v. Hodges, 1 C. & M., 33. Burn v. Boulton, 2 C. B., 476. Goddard v. Cox, 2 Str., 1194. James v. Child, 2 Cr. & Jer., 678. If neither the debtor nor the creditor appropriates the payment, and none can be presumed from circumstances, the Law will appropriate it to the discharge of the earlier debts. Clayton's case, 1 Mer., 608. Bodenham v. Purchas, 2 B. & Ald., 39. Field v. Carr, 5 Bing., 13. Pemberton v. Oakes, 4 Russ., 154. Simson v. Ingham, 2 B. & C., 65. Brooke v. Enderby, 2 B. & B., 70, Sterndale v. Hankinson, 1 Sim., 393. Smith v. Wigley, 3 Mo. & Sc., 174. Beale v. Caddick, 2 H. & N., 326. Hollond v. Teed, 7 Hare, 50. Siebel v. Springfield, 12 W. R. Q. B., 73. Re Medewe's trust, 26 Beav., 592. Merriman v. Ward, 1 J. & H., 371. Scott v. Beale, 6 Jur., N. S., 559. An executor cannot alter a previous appropriation of payments so as to revive a liability on the estate which has already been extinguished. Merriman v. Ward, 1 J. & H., 371. Bankers as Agents or Correspondents of other Bankers. 13. Bankers not only have their own customers, but they act as agents and correspondents of other bankers. They are therefore the agents of an agent. A customer frequently requires his banker to perform some duty for him which can only be done by his employing another banker at a distance; and even sometimes that agent employing another agent. In these successive agencies losses may happen quite innocently in the course of trade. In all such cases the banker originally employed is liable to his customer, because it was he who chose the agent who made the loss or who chose the agent who chose the agent who made the loss. Therefore, the first banker must bear the loss as regards his customer, and then have recourse against his own agent. Lord North's case, Dyer, 161. Matthews v. Haydon, 2 Esp., N. P. C., 509. Mackersy v. Ramsays, 9 Cl. & Fin., 818. If a customer pays in a sum of money to his own banker, with directions to him to remit it to another banker, and the first banker fails before he has done so, the property in it remains with the customer. Farley v. Turner, 26 L. J., Chanc., 710. On BANKING INVESTMENTS. 14. Though a banker is bound theoretically to repay every one of his customers instantly on demand, yet, as no man whatever would spend all his money if it were in his own possession, but would keep a store of it, and spend it gradually, so, when he keeps it at his banker's, he will not be likely to require it all at once, but will keep a store of it there, just as he would have done if he had kept it at home; and the banker is able to trade with it in a variety of ways, if he takes care to keep by him sufficient to meet any demand his customers are likely to make on him. The different methods in which a banker trades with the money left with him by his customers, depend very much on the class of his customers and their occupations, and the general business of the locality he lives in. He must adapt his business in such a way as may be most suitable for the class of customers he has to deal with; so that he may never fail, for an instant, to meet any demand. If his customers are chiefly country gentlemen, whose rents are remitted regularly, and who draw them only for family expenditure, he may calculate pretty accurately on the demand likely to be made on him, and he may lend out his funds on more distant securities than are proper in other cases. Such are chiefly country bankers in agricultural districts, and those at the West End of London. But when a banker does business in a trading community, who are in constant want of their money, and whose demands are much more frequent and unexpected, he must adopt a very different line of business. He must then have his funds within reach at a very short notice, and he ought to have them invested in such property as he can re-sell on a very short notice, to meet any unexpected pressure upon him. The business of such a banker will chiefly consist in discounting bills of exchange, and is of a distinct nature from that of lending money on mortgage. We must now consider the various methods in which bankers trade. They are-1st, by discounting bills of exchange; 2ndly, by advancing to their customers on their own promissory notes, with or without collateral security; 3rdly, by means of cash credits, or, as they are sometimes called, overdrawn accounts; 4thly, by lending money on mortgage; 5thly, by purchasing public securities, such as stock or Exchequer bills. On Discounting Bills of Exchange. 15. In Chap. IV., sect. 3 we have fully explained the nature and origin of bills of exchange-in the present Chapter we have only to make some practical observations on the subject. If an abundant supply of perfectly good bills of exchange were always to be had, they are, no doubt, the most eligible of banking investments, for their date is fixed, and the banker always knows the precise day when his money will come back to him. He charges the profit at the time of the advance, and he gains it, whether the customer draws out the money or not; and, in a large bank, it must often happen that drawers, acceptors, and payees, are all customers of the same bank, so that when the drawer has his account credited with the proceeds of the bill, and draws out the money, so far as he is concerned, in many cases it must happen that the cheque finds its way to some one who is a customer to the same bank, and, therefore, the bank has reaped a profit on creating a credit, which is simply transferred from one account to another. And the same results take place much more frequently by means of the system of clearing, explained in the next Section, by which all the banks that join in it, are, in fact, but one great banking institution. If it should happen that a customer of one of the great banks draws a cheque in favour of the customer of another, the chances are, that some customer of that other bank has done precisely the same in favour of a customer of the first bank, and these claims are settled by means of the Clearing House, by being set off one against the other, without any demand whatever for coin. The more perfect, of course, the clearing system, the less coin will be required. Consequently, the greater part of banking profits are now made simply by creating credits, and these credits are paid, not in cash, but by exchanging them for other credits. When a banker discounts a bill for a customer, he buys it, or purchases it, out and out from him, and acquires all his customer's rights in it, that is, of bringing an action against all the parties to it, and also of reselling it again if he pleases, or re-discounting it, and this is one of the great advantages of discounting bills, that if there be an unusual pressure for cash on the banker, he can resell the bills he has bought. The bills a banker, then, has bought, are his stock-in-trade. He buys them from his own customer at a certain price, and sells them again to the acceptor, just as a hosier may buy stockings from the manufacturer, and sell them to a customer. When a banker discounts a bill he writes down the full amount of the bill to the credit of his customer, and at the same time he debits him with the discount on it. We have observed that this method of trading is more profitable than interest, and the profit rapidly increases the higher discount is. A very slight consideration will shew this. Suppose a money lender advances money at 50 per cent. interest. He would advance his customer £100, and at the end of the year receive his £100 back, together with the £50. His profits, therefore, would be 50 per cent. But suppose he discounts a bill for £100 at 50 per cent. He would only actually advance £50, and at the end of the year he would receive £100, consequently he would make a profit of 100 per cent. If the lender lent the money at 100 per cent. interest, he would advance £100, and receive £200 at the end of the year. If he discounted a bill at 100 per cent., he would advance nothing, and receive £100 at the end of the year, or his profits would be infinite! Now, without incumbering ourselves with mathematical formulæ, we may give a table shewing the difference in profit between Interest and Discount : Table shewing the profits per cent. and per annum at Interest and Discount. A consideration of this table will explain the enormous profits made by bankers when discount is high, and also shew what discounting a bill at 50 and 60 per cent.-which we occasionally hear of in courts of law-means. The system of discounting bills is intended to be the sale of bonâ fide debts for work done, or for property actually transferred from one party to another, and there is nothing that requires more sleepless vigilance on the part of a banker than to take care that the debts he buys are genuine and not fictitious ones. When bills are offered for sale, he ought to know whose 2 G VOL. II. |