As we have already seen, certain transactions with a bank create special or specific deposits,1 the essence of the transaction being that the relation created is that of bailor and bailee. The characteristic of the relation of bailment is that the title in the thing bailed remains in the bailor, although the bailee can assert ownership against every one but the bailor. The relation has been sometimes called a common-law trust, and, as we shall hereafter point out,2 the origin of the relation is precisely the same in the history of which is called the common law. While the bailor has his remedy at law, he also has a remedy in equity, wherever his property in violation of the terms of the bailment has been converted by the bailee, the equitable remedy arising out of the trust character of the relation. The essence of this relation, judged from the equitable standpoint, is that the property came rightfully into the possession of the bailee, but without any authority or right in the bailee to mingle the thing bailed with his own property, and thus convert his bailor into his general creditor. If the bailee, the bank, does mingle the money bailed by a special or specific deposit, the bank at once commits a breach of trust and becomes responsible as trustee, and the case is one merely of a mingling by the trustee of his beneficiary's funds with his own, such as was spoken of in the last section, and the bailor, the special depositor, gains a priority over the general creditors for the amount of his property improperly mingled with the fund.8 The following are illustrative cases: Money paid into a bank for a specific and special purpose becomes a special deposit,4 and if mingled with the funds of the bank to be a sale,1 and as to the proceeds the bank's liability as upon a general or a special deposit must be ascertained in accordance with the rules stated in the preceding section and the sections to which it refers. But where the deposit is actually a deposit of the paper and not a sale, the rights of the parties are determined by the nature of the transaction. The deposit may be simply for credit, or it may be simply for collection, or for collection and credit. If for collection solely, the proceeding is a bailment, and upon receipt of the proceeds the bank may credit the proceeds to the depositor,2 if there be no special contract requiring another action.3 If the bank is bound by an understanding either to hold the proceeds as the property of the depositor, if it does credit them the depositor has a priority in the assets to the extent of the proceeds.4 If the bank is not bound by such an understanding arising either from the express agreement of the parties or a general course of dealing between them, the bank may credit the proceeds to the depositor and he becomes merely a general creditor.5 Until the proceeds are so received and credited, the proceeds as between the collecting bank and the depositor are still the property of the depositor,6 and if the bank receiving the deposit becomes insolvent, the proceeds not having been received and credited, the power of collection in that bank ceases, and the depositor has a priority for the funds if they come into the custody of the insolvent bank or its representative,7 or he may recover them from the correspondent bank,8 or if no collection is made from the party liable that party still remains liable.9 If it be a correspondent bank, which becomes liable by reason of having the proceeds of the collection in its custody, he may claim a priority in the funds of that bank if it has received money,10 or he may claim the particular thing which it has received,11 provided that bank has no lien upon the proceeds by reason of advances upon it,12 or credit given upon it,13 or by reason of a set-off which it has against the transmitting bank by a course of dealing.14 But in those jurisdictions which recognize that the correspondent bank is the agent of the transmitting or primary bank, he may hold the latter liable for its agent's default;15 but if the latter bank is also insolvent, he has only the claim against the latter bank of a general creditor,16 where that bank has not received the proceeds either by credit to it or set-off against it.17 But in those states which maintain that the correspondent or secondary bank is not the agent of the transmitting bank, but the agent of the owner of the collection,18 the rights of the owner over the collection, where the proceeds are in the hands of a secondary bank, insolvent, can be secured for a priority, if the transmitting bank can claim a priority, which it can do where it has indorsed the paper for collection,19 or the owner himself can claim a priority in the funds of the secondary bank, where his indorsement to the primary bank was merely for collection.20 But while the true rule is that the owner of the collection indorsed merely for collection21 can insist upon his priority whenever the proceeds have come to and remain in the hands of an insolvent bank,22 still some jurisdictions maintain the mistaken doctrine that if those funds have been mingled with the general assets of the bank there can be no priority.23 The incorrectness of this doctrine has already been pointed out.24 The third case is a collection indorsed to a bank for credit of the depositor or for collection and credit; the two cases do not differ. The relation established by such a transaction is a bailment to collect the money and deposit it to the credit of the depositor.25 As soon as that collection is made and the proceeds credited, the depositor is a general creditor of the bank which received the paper for collection.26 But until that time he is zaphila. Nat Bank v. Dowd, 38 Fed. R 172; State v. State Bank, 5 Baxt. 1; 111. Trust & Sav. Bank v. First Nat Bank, 15 Fed. R 858; Burnham v. Barth, 89 Wis. 362; St Louis Brew. Ass'n v. Austin, 100 Ala. 313. Some courts limit the priority to the bank's cash. Nat Bank v. Lattimer, 67 Fed. R 27.

"That codeless myriad of precedent,"

1 See Sec. Sec. 162,163, ante, and Sec. 136, ante, notes 14 and 15.

2 See the next section.

3 Every case that gives a special depositor a priority is an authority for giving the owner of a trust fund illegally put into the bank a priority. See note 12, Sec. 341, ante,

4 See Sec. Sec. 162, 163, ante, and Sec. 136, ante, notes 14 and 15; and Moreland v. Brown, 86 Fed. R 257; Montague v. Pacifio Bank, 81 Fed. R. 602; In the whole of the assets become impressed with a trust in favor of the special depositor;5 yet this proposition has been denied in some cases,6 and in another case has been limited to the cash on hand.7 But if the bank makes a purchase for a customer, and the customer pays money into the bank for the purchase, no priority results.8 Money received by a bank for the purpose of transmitting it is a special deposit, and the special depositor has a priority.9 Money deposited in a bank to secure the bank for becoming surety upon a bond gives a priority.10 It is needless to say that the special depositor may waive his right to claim that he had a special deposit, but he does not do so by taking a draft for a part of it, when he was induced to do so by false representations by the bank.11 If the special deposit is actually kept separate, the depositor has, of course, the right to the particular thing,12 but he has no priority where the banker has promised to put his deposit in a separated condition but has not done so.13