This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 53.— A bill accepted by the manager of Bank B under power of attorney from drawee is returned to Bank A unpaid, Bank B retaining the power of attorney. Bank A being compelled to sue, requests Bank B to forward the power of attorney to attach to the acceptance. Bank B refuses, on the ground that they must retain it for their protection, to prove the authority of their manager to accept the bill, but admits it may have to be produced in court. Bank A contends that they, being compelled to recover the amount, should be in possession of the proof of acceptance, and that the power of attorney should naturally accompany the bill. Is Bank A entitled to receive it?
Answer.—We think it is quite clear that the bank which has acted on the power of attorney to accept is within its strict rights in retaining the document, but we also think that in adhering to its strict rights in such a case as you mention, when the other party concerned is a chartered bank, it is adopting a course which gives both banks needless trouble. We are not aware what the general practice is, but will invite information on this subject from the Associates.
The attorney would of course have to appear in court if necessary to prove his right to accept, and as the collecting bank would probably be liable for the bill if the regularity of the acceptance were not provable, they are of course as much interested in proving it as the bank which owns the bill.
We think that as a matter of practice it is best that the power of attorney should be filed at the bank at which the bill is accepted, but that it should at once send this document to the bank owning the bill if it ever has to take legal proceedings, and a copy certified by the official custodian, under his seal of office, furnished instead.
The bank is not ordinarily bound to pay its customer's acceptances, although it may do so and charge the customer. If, therefore, the acceptance is signed by an attorney whose authority is not signed by the bank, the bank has the remedy in its own hands.
If there should be a case where the bank has assumed the duty and obligation of paying the customer's acceptances when it has funds, then difficulty might arise. The acceptance might be made by an attorney who declines, for causes, which may be quite reasonable, to lodge the power with the bank. The bank in such cases would probably be bound to pay the acceptance and preserve such evidence of the existence of the power in the attorney's hands which might be necessary. No doubt a bank which had this responsibility imposed upon it would decline to continue the account.
As regards the necessity for the attorney to retain for his own protection the evidence that he was entitled to sign, while there may be something in this the point does not seem to us important. The existence of the authority is likely to be known to several persons and its loss would therefore not entail serious consequences. On the other hand, if the paying bank is not in a position to prove its existence, it is in case of dispute in a very unsatisfactory position. It cannot charge its customer with an unauthorized payment, nor can it recover the amount back from the bank to which the item was paid, unless it could be set up that the bank obtained payment on a representation as to the attorney's authority.
On the whole, the practice of attaching a power to the draft seems the proper one to follow.