1. Deposits Are General And Special

One of the most important duties of a bank of discount and deposit is to receive and keep deposits. They are divided into two kinds, - general and special. General deposits always consist of money; special deposits may consist of money or other valuable things, bonds and the like. Before the days of safe-deposit companies large quantities of bonds and other valuables were kept in bank vaults, and even now in the country, where no other places equally safe exist, millions in the aggregate are confided to banks for safe keeping.

2. Liability For Special Deposits

Many losses have occurred, principally from theft, of special deposits, and the losers have often sought to hold the depositary responsible. What rule must be applied to banks for the safe keeping of such deposits? As they usually receive no reward for this service, rendering it purely to accommodate their patrons, they are bound to exercise only reasonable care - the same care as in keeping their own securities. A depositor could not expect they would be kept in a safer place; and if a thief should get inside and happen to take the securities of the depositor instead of those belonging to the bank, it would not be responsible for the loss.

Many years ago a depositor made a special deposit of gold in a Boston bank. It was to be kept specifically for the owner and returned to him when demanded. Parker, the cashier, saw his chance, took the gold and fled. The bank was sued for the loss. The facts were clearly proved, nevertheless the bank was not held liable, although the thief was one of its officers. The court declared that the bank did not employ the cashier to steal; if it had, it would have been clearly liable. This was an act wholly outside his official sphere, and the bank was no more responsible for what he did than it would have been had the robbery been committed by an outsider.

Had the bank suspected his honesty, a very different question would have been presented. In several cases banks have been held liable for losses occurring through the negligence of their cashiers - cases in which the directors knew that they were speculating and using funds not belonging to themselves. A case like Parker's occurred not many years ago in Pennsylvania, in which the teller took some bonds belonging to a depositor. The court remarked that as the bailment was merely for safe keeping, and gratuitous, the dishonest act of the teller was in no way connected with his employment."Under these circumstances the only ground of liability must arise in a knowledge of the bank that the teller was an unfit person to be appointed or to be retained in its employment. So long as the bank was ignorant of the dishonesty of the teller, and trusted him with its own funds, confiding in his character for integrity, it would be a harsh rule that would hold it liable for an act not in the course of business of the bank, or of the employment of the officer."

The facts in almost all cases differ; the rule is well understood ; but its application is not always easy. When a loss occurs a depositor is very apt to try to recover from the bank, because ii he fails in his attempt, he is no worse off except the cost of his venture, and he may succeed.

1 Scott v. National bank, 72 pa 471 ;smith v, First National Bank, 99

Mass 605; First National Bank v. Ocean National Bank 60 N.Y. 278.

Consequently, only in a small number of cases has the depositor ever shown that the bank was so negligent that he was justly entitled to recover the value of his loss.

Banks seek to relieve themselves as much as possible from this responsibility, and the rapid formation of safe-deposit companies is a great boon to them. These have been established for several reasons: first, to make more secure places for depositing valuables; second, to earn a profit from the business. In many cases they belong to banks and form a part of their business.