Whether a note taken for a loan be legal or illegal, the loan itself being a good ground of recovery the collaterals therefor may be enforced.1 It makes little difference in the result upon what principle this relief is granted. A consistent ground would be to say that the depositor of the collaterals cannot object so long as he does not perform his legal and moral duty by paying the loan.

8 Statutes which forbids loans to directors, or to individuals, or upon certain security.

Dak. 295; Bond v. Central Bank, 2 Kelly, 92; St Joseph Ins. Co. v. Hauck, 71 Mo. 465; Van Atta v. State Bank, 9 Ohio St. 27; Smith v. First Nat Bank, 45 Neb. 444; Rome Sav. Bank v. Kramer, 102 N. Y. 331; Richmond Bank v. Robinson. 42 Me. 589; and see Sec. 33, ante.

11 Mills v. Rice, 6 Gray, 458; Work-in gmen's Banking Co. v. Rauten-berg, 103 111. 460. This last case is wrong. The note was a claim presented to the probate court The loan, at least, was good, and the bank's claim was not forfeited. The dissenting opinion by Judge Dickey, which is correct upon the law, contained an interesting dictum that the Scriptures are not always good law - a statement that would have been exceedingly shocking to Lord Ellesmere.

12 Sec. 196 et seq., post.

13 St Louis Nat Bank v. Flanagan, 129 Mo. 178

1 Real-estate mortgages by national banks are instances. The same result is arrived at by denying the debtor relief. Elder v. Ottawa First Nat. Bank, 12 Kan. 238. But the court in this opinion does not see the distinction between a provision which is for the benefit of the bank and a provision in usury laws which is for the protection of the borrower.

The power to take collateral security is one incidental to the banking business.2 The nature of what may be taken as collateral has been already discussed.3 But the fact that deposits may be made collateral security for a loan is now settled by competent authority.4 A common form of collateral is a guaranty of the loan. Such a guaranty requires not only a consideration to the party primarily liable, but a consideration to the guarantor as well.5 Whether the guaranty is a continuing one or not often causes difficult questions to arise.6 No species of collateral requires a closer scrutiny upon the part of the banker.7 Bills of lading accompanying a draft give the bank a lien upon the property to the amount of its advance,8 even though the bill of lading be not indorsed.9 This lien has been called the legal title to the goods mentioned in the bill of lading.10 The duty of the bank collecting the draft has been noticed.11 A bank which holds collaterals may deal with them as it is permitted to do by law,12 but the fact that the debtor is the president of

2 Comm. Bank v. Nolan, 7 How. (Miss.) 508.

3 See Sec. Sec. 113, 114, 115, 116, ante.

4 Fisher v. Continental Nat. Bank, 64 Fed. R 707, 26 U. S. App. 382. In those states which do not recognize the banker's lien, and some have denied it, the bank can protect itself in this way as to a deposit in its own bank. It is difficult to see how such a lien can be made useful upon a deposit in another bank, without a notice and appropriation of the deposit

5 Cutter v. Everett, 33 Me. 201; Deseret Nat. Bank v. Dinwoodey, 53 Pac. R. 215. And see 6 Am. & Eng. Encyc. (2d ed.), 692, note 3, 691, note 1. If the guaranty is for a loan contemporaneous with the making of the guaranty and for a future indebtedness, there is a consideration to the guarantor.

6Agawam Bank v. Steever, 18

N. Y. 502; Deseret Nat. Bank v. Dinwoodey, 53 Pac. R. 215.

7 It should be specifically drawn to cover past advances and obligations (see Deseret Nat. Bank v. Dinwoodey, 53 Pac. R 215), and must show a consideration.

8 Commercial Bank v. Pfeiffer, 108 N. Y. 242; In re Watch Co., 89 Hun, 196. This lien it may assert against an attaching creditor, though it have the right to charge the draft back to the holder. Am. T. & S. Bank v. Austin, 55 N. Y. Supp 561.

9 Moss v. Chicago, etc. Ry. Co., 73 Iowa. 226. See Addendum.

10 In re Watch Co., 89 Hun, 196.

11 See Sec. 3 176,177, ante the bank gives no implied power of sale without notice to the bank.13 The bank is liable as bailee for ordinary care in the custody of the collaterals,14 and the giving of a receipt for the return of the collateral upon payment of the loan does not vary the relation of the parties.15 If collaterals are lost by the bank, the giving of a new note for the whole amount, without any claim for deduction on account of the collaterals, known to the debtor to be lost, has been held to be a waiver of any claim therefor.16

12 The general rules as to collateral securities or pledges govern banks. They are not considered germane to this work.

Sec. 193. Bank's General Lien Upon Collaterals

A bank has a general lien upon all collaterals deposited with it, unless they are taken under an express agreement;1 yet the deposit for a special purpose or upon a particular loan rebuts any claim for a general lien.2 And where a bank refuses to discount a note sent to it for that purpose, it cannot hold the note as security for an overdraft.3 Where a deed is deposited as collateral security for a certain debt, an equitable lien for another debt, even in those states or jurisdictions which recognize such a lien, will not be created, unless that other debt was created or the money loaned upon the credit of the deed.4