This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 595.— A bank gives credit to a grain buyer, and arranges, for his convenience, to cash his grain tickets, taking a note and security under section 74 covering the grain, whenever the amount paid reaches a certain sum. Would it be best for the bank to open two accounts, one for the grain tickets paid, to be credited with the proceeds of notes when security is taken, the other for credits for proceeds of grain sold, and debits showing the application of the proceeds of the grain on the notes? Would the security in such a case be valid?
Answer.—There might be some advantage, in the way of keeping a fuller record of transactions, in having two such accounts, but we do not think that the validity of the security would be affected thereby, one way or the other. That depends on all the facts in connection with the account, and the mere division of the entries could not make any difference.
The payment of the customer's grain tickets, assuming that he has not provided money in advance for the purpose, constitutes the loan, which is afterwards to be secured by assignments under section 74. It is therefore essential that before paying any grain tickets the bank should hold from the customer a written promise to give security.