In connection with the criminal liability of officers, we have already discussed to some extent the question of overdraft.1 In connection with the bank's right to refuse payment of a check, the question was incidentally considered. It should be noted that the officer of the bank has no right to permit an overdraft, unless the board of directors give him that authority, either expressly or by permitting him to allow it by a course of dealing. But the board of directors can permit an overdraft if they please. The rule is that the state, of the depositor's account is to be determined by its true condition, not necessarily by what is shown on the books.2 An overdraft arises whenever the bank pays upon a depositor's checks more money than the amount of his deposit.3 It makes no difference whether this overpayment is guaranteed or not,4 or whether an indorsement be required by the bank upon the check.5 But if the depositor is given a credit at the bank in such a form, whether it be entered upon the books or not, that the depositor could sue the bank for dishonoring a check drawn upon the credit, then such a credit ought not to be called an overdraft, because there is no overdrawing of the account.6 The depositor has so much credit given to him at the bank, and the result is precisely the same as if he went to the bank and made a deposit of so much money, although it may very well be that if the bank should promise the holder of a check to accept it, the promise would be a nudum pactum, if the drawer had no funds.7 The promise to the depositor, in the case we are considering, is performed by loaning him the money, and the reciprocal promise of the depositor to pay the loan makes a perfectly good contract. Therefore the term "overdraft" cannot with any propriety be applied to such a credit.8 Every man who overdraws his

4 Morse v. Rice, 36 Neb. 212; Citizens' Nat. Bank v. Brown, 45 Ohio St. 39.

5 If the liability is dependent on a condition, default after condition performed determines the liability for interest. Cooper v. Townsend, 13 N. Y. Supp. 760. A refusal to pay on a garnishment will create a liability to pay interest. Jones v. Manufacturers' Bank, 10 AVkly. Notes Cas. 102. But see Coram. Bank v. Jones, 18 Tex. 81.

6McGowan v. McDonald, 111 Cal. 57.

7 Watson v. Phoenix Bank, 8 Met. 217. Even though bank enjoined afterwards.

8 Sickles v. Herold, 149 N. Y. 332.

1 See Sec. 92, ante, especially notes 14-18.

2 Merchants' Nat. Bank v. Nat. Bank of Com., 139 Mass. 513; Am. Ex. Nat. Bank v. Gregg, 138 I11 596; McLean Co. Bank v. Mitchell, 88 III 52. If Munn v. Burch, 25 111. 35, had recognized this ruling, there would have been no necessity for a ruling which has produced so much error.

3 United States v. Allis, 73 Fed. R. 65. There is no division as to the definition. The difficulty is in determining the amount of the deposit.

4 Low v. Taylor, 41 Mo. App. 517.

5 Marine Bank v. Butler Colliery Co., 5 N. Y. Supp. 291, 125 N. Y. 695.

6 See Sec. 92, ante. This is the result implied from the language of the court in Graves v. United States, 165 U. S. 323. If a bank makes a naked agreement with a depositor to pay his overdrafts in consideration of the depositor agreeing to pay thereon a certain rate of interest, there is simply a verbal permission to overdraw. If the depositor executes a demand note for a certain sum, and the bank agrees to let the depositor overdraw up to the amount of the demand note, there is also a loan, but it is a loan which goes to the credit of the depositor, and he does not overdraw his account. The transaction does not differ in the least from one where the depositor discounts his note and deposits the amount realized in the bank.

7 Morse v. Mass. Nat. Bank, 1 Holmes, 209. But it has been held that a promise to pay checks made to drawer communicated to the seller is binding upon the bank. Nelson v. First Nat. Bank, 48 III 36. See Sec. 146, ante, note 10, and Kol-lock v. Enmert, 43 Mo. App. 566.

8 But United States v. Allis, 73 Fed. R. 165, holds quite confused language upon this point, and Bacon v. United States, 97 Fed. R. 35, is hopelessly confused. This late case holds that though a depositor account at the bank, by the fact of overdrawing agrees to repay the amount upon demand.9 But when a check is paid by a bank it is prima facie proof of a previous deposit to that amount,10 and other proof than the checks is needed to show the fact of overdraft.11 If the overdraft, or rather the right to overdraw, is granted by competent authority, to wit, by the board of directors or by some officer to whom the board by express authority or by acquiescence has granted the right to allow an overdraft, the overdrawing is not a fraud. But if the overdrawing be done without authority it is fraudulent, and no title in the money drawn passes except to a payee who is in good faith. If the overdraft is obtained by fraud from the bank, if it be a fraud in which the payee of the check can be held to have participated, the bank does not lose title to the money paid out, but may follow it into a credit in another bank.12 But a person who merely acted in cashing a check without any participation in the overdraft or any interest in the check is not liable to the bank.13 If the overdrawn depositor makes a general deposit it will be supposed to be in payment pro tanto of the overdrawn account;14 yet government deposits for particular purposes known to the bank cannot be applied upon other who has executed a demand note and had received a credit to the amount of the demand note, up to which he has the right to draw, is nevertheless overdrawing his account, because his note is not discounted. But the apparent state of the account is a mere matter of book-keeping. The books do not and cannot show the credit, yet the depositor undoubtedly had it. This opinion represents the judicial superstition that the only way in which a bank can loan money is by discounting.

9 Thomas v. Intern. Bank, 46 111. App. 461; Franklin Bank v. Byram,

39 Ma 489. Compare Lancaster Bank v. Woodward, 18 Pa. 357.

10 Bank of U. S. v. Wilson,3 Cranch, C. C. 213.

11 State Bank v. Clark, 8 N. C. 36.

12 Tradesmen's Bank v. Merritt, 1 Paige, 302.

13 Savings Bank v. Hubbard, 58 N. H. 167.

14 Nichols v. State, 46 Neb. 715. It seems that the bank may agree to receive what it knows is public money to pay the officer's private overdraft, and be bound by the agreement. Hale v. Richards, 80 Iowa, 164 But if the public sued the bank for the money it would have no defensa accounts.15 This same rule has been applied in the case of a private depositor with two different accounts, but both belonging to him.16 But in the nature of things this rule cannot be correct, unless the deposits were held by the depositor in different rights, one for himself and the other for some one else.17 In other cases if a deposit is made to a particular account it is really immaterial whether the bank places the deposit to the particular account indicated and immediately charges it to balance another account, or places it to the credit of the second account in the first instance. If the overdraft is obtained, the depositor cannot refuse to pay because the cashier had no power to allow it.18 An overdraft once permitted to be made cannot be revoked by the bank as to another bank, the payee of a check, except under a clearing-house rule.19 An overdraft does not draw interest except by agreement20 or custom,21 or after demand for payment or rendition of an account,22 or where the overdraft was wrongfully obtained.23