This section is from the "Practical Banking" book, by Albert S. Bolles.
The peculiarity of Anglo-Saxon law with regard to its arbitrary distinctions between real and personal property is well illustrated by the fact that a Savings bank can safely effect investments of millions in securities and valuables with only a layman's knowledge, while it is impracticable or inadvisable to stir in the most unimportant transaction which regards real estate, without a lawyer at one's elbow. Yet the property in the latter case is more readily identified than any other in the world. It is impossible to counterfeit it; it is the most visible, most tangible, most impossible to secrete, and most exposed to the public eye of all property. Nothing but the barbarous state of our laws, borrowed from a form of government whose policy it is, of set purpose, to prevent transfers and diffusion of titles in land, has caused this.
The attorney of a Savings bank is not usually a salaried officer. The greater part of his services consists in the examination of titles to real estate, upon which it is proposed to loan on bond and mortgage. The law prescribes that the charges for such services shall be paid by the borrower. It would in many cases be to the interest of the bank to pay them voluntarily, in order to secure a desirable investment or a greater rate of interest, but the law, as construed by most Savings banks, prevents this.
When an application for loan on bond and mortgage has been accepted by the board of trustees, the fact of this acceptance is endorsed upon it by the secretary and the paper forwarded to the attorney. The proposed borrower is notified to wait upon the attorney with the papers which he may have in support of his title. The amount charged by the attorney for his services in making the examination are on a scale fixed by the customs of the profession, but subject to varying through negotiation. Frequently the borrower, especially of late years, goes to the attorney and says, "I will take this money of your institution provided you do not charge me more than such a sum." Generally the disbursements, that is, amounts paid to public officials for searches, constitute one portion of the charge, and the fee of the attorney for the labor and responsibility of certificate form another portion, and this latter is a fixed or sliding percentage upon the amount of loan. In many cases the labor is very slight, as there may be an abstract giving the chain of title to a very recent date, which has only to be copied. Still there is a responsibility on the part of the attorney for its correctness, and theoretically, at least, he is supposed to be liable for damages in case he has not properly performed his duty. The writer knows of one case in which the attorney assumed the burden of a defect in a case where he was really careful, but where a second person, of the same name as the owner, had personated him. It is proper, in the letter of instructions which accompanies the check sent to the attorney to complete the loan not to direct him to pay to a certain person, but to pay to the owner of such property.
From the amount of this check the attorney deducts the expenses and charges, and pays over the net proceeds to the borrower, taking his receipt, of course, for the full amount, and giving him a receipt for fees. The borrower's receipt is endorsed, as already stated, on the back of the application. When a mortgage is satisfied or assigned, the necessary papers for that purpose are drawn up by the attorney, and he is responsible for their correctness, the officer signing whatever he advises. A payment on account, not being a matter of record, is effected without the assistance of the attorney.
In case of foreclosure, the matter is placed entirely in the hands of the attorney up to the time of the sale. When it comes to the amount to be paid, this is a business matter which is decided by the officers of "the bank. If bid in, it is the duty of the attorney to see that the title is perfected in the bank, and the judgment is regularly entered for the deficiency, if any, a transcript of which judgment should be delivered to the bank. It is also his duty, if advisable, to institute supplementary proceedings in order to execute this judgment. If a purchaser be found for the property held by the bank, it is the duty of the attorney to draw up a contract of sale, which generally stipulates that the final delivery of the deed shall be at his office, and here, again, he is responsible for the correctness of the paper.
Very few cases occur in which the bank requires the aid of counsel in regard to its money or deposits. Advice is sometimes requisite as to the construction of the statute law, and there is sometimes litigation arising from adverse claimants to moneys deposited, or from alleged errors on the part of the bank. A certain by-law which has been adopted by most of the Savings banks, and which has in the main been sustained as reasonable by our Court of Appeals, has been a fruitful source of litigation. This by-law is usually to the following effect—that the bank will endeavor to prevent fraud, but any payment made to a person producing the proper pass-book shall be valid. Sometimes the expression is "will use their best endeavors," and this has been construed to require a much higher degree of care than demanded by the other phraseology. What constitutes a proper amount of diligence on the part of the bank is the turning point of many cases, and the question of fact is usually submitted to a jury, who, in the vast majority of cases, find against the corporation. In the cases of trust accounts, of associate accounts, of insolvent depositors, and depositors deceased or supposed to have deceased, there are frequently adverse claims, and the bank is usually secured by having the amount nominally paid into court to abide the result of the action between the other parties; but if paid over to one of the claimants, there is danger of litigation and possibility of loss. This has been the case even where money was paid over on genuine letters of administration granted upon the effects of a per son believed to be dead, but who inopportunely appeared and has to be paid a second time.