This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 543.— A bank's customer dies leaving a balance at credit of his account, which is believed to be his own money. Can the bank set off against this balance the amount of two notes on which he is promissor or endorser, one of which had matured at the time of his death, and the other matured shortly afterwards?
How would it be if it were shown that although the account was in his own name the money was trust money ?
Answer.—If the facts are as indicated in the first question above, the bank has the right to set off the liability as promissor or endorser on matured paper against its customer's deposit.
As to the second question, if the account stood in the customer's name simply, although the moneys were trust funds, the rule would seem to be that unless the bank had knowledge of the trust it could still exercise the right of set-off.