CHAPTER XXXIV.

CONDUCTING SAFE DEPOSIT.

§ 246. Incidental power.

Where the charter of a bank does not provide for the conducting of a safe deposit department, the business if entered into is an incidental power and one entirely discretionary with the board of directors. The business of conducting a safe deposit and building safe-deposit vaults, for the purpose of preserving property or money, is a discretionary power vested in the directors of the bank.

When a banking corporation conducts such a business in connection with the general business of banking, and receives personal property, including money, from individuals for safekeeping, the general rule of law is, that the bank becomes a bailee, and in case of loss is liable as such.

It should be borne in mind that there is a distinction between the business of conducting a safe deposit and the taking of money or personal property on special deposit.

Where the bank conducts a safe deposit business for the benefit of its customers without compensation, it is liable only for gross negligence; but persons depositing valuable articles in banks for safe-keeping without reward have the right to expect that such measures will be taken as will ordinarily secure them from burglars outside and from thieves within.

Where persons are engaged in the business of banking, and receive for safe-keeping a parcel containing bonds, which was put in their vaults, and they were notified that their assistant cashier who had free access to the vaults where the bonds were deposited and who was a person of scant means and engaged in speculation in stocks, and the directors made no examination as to the securities deposited with them, the assistant. cashier having stolen the bonds so deposited; held, that the directors were guilty of gross negligence and were liable to the owner of the bonds for their value at the time they were stolen.1

1 Preston v. Prather, 137 U. S. 604; Gray et al. v. Merriam, 148 Ill. 179.

In the case of Chaflin et al. v. Meyer, 75 N. Y. 260, the court lays down the rule of negligence to be as follows:

"The cases agree that where a bailee of goods, although liable to their owner for their loss only in case of negligence, fails, nevertheless, upon their being demanded, to deliver them or account for such non-delivery, or, to use the language of Sutherland, J., in Schmidt v. Blood, where there is a total default in delivering or accounting for the goods' (9 Wend. 268), this is to be treated as prima facie evidence of negligence.2

"This rule proceeds either from the assumed necessity of、 the case, it being presumed that the bailee has exclusive knowledge of the facts and that he is able to give the reason for his non-delivery, if any exist, other than his own act or fault, or from a presumption that he actually retains the goods and by his refusal converts them.

"But where the refusal to deliver is explained by the fact appearing that the goods have been lost, either destroyed by fire or stolen by thieves, and the bailee is therefore unable to deliver them, there is no prima facie evidence of his want of care, and the court will not assume, in the absence of proof on the point, that such fire or theft was the result of his negligence.3

"Grover, J., in 46 N. Y., says, in delivering the opinion. of the court, the question is whether the defendant was bound to go further (i. e., than showing the loss by fire) and show that it and its employees were free from negligence in the origin and progress of the fire, or whether it was incumbent upon the plaintiffs to maintain the action to prove that the fire causing the loss resulted from such negligence.' And he proceeds to show that the charge of the judge who tried the cause gave to the jury the former instruction, and that this was contrary to the law and erroneous. So Sutherland, J., in 9 Wend. (supra), in the case of a warehouseman, says the onus of showing the negligence seems to be upon the plaintiff, unless there is a total default in delivery or accounting for the goods.'

2 Fairfax . N. Y. C. & H. R. R. R. Co., 67 N. Y. 11; Steers v. Liverpool Steamship Co., 57 N. Y. 1; Burnell . N. Y. C. R. R. Co., 45 N. Y.

3 Lamb v. Camden & Amboy R. R. Co., 46 N. Y. 271; Schmidt v. Blood, 9 Wend. 268; Platt v. Hibbard, 7 Cow. 497.

"And he cites a note of Judge Cowen to his report of Platt v. Hibbard (7 Cow. 500), in which that very learned author says, criticising and questioning a charge of the circuit judge, 'the distinction would seem to be that when there is a total default to deliver the goods bailed on demand, the onus of accounting for the default lies with the bailee; otherwise he shall be deemed to have converted the goods to his own use, and trover will lie (Anonymous, 2 Salk. 655), but when he has shown a loss, or where the goods are injured, the law will not intend negligence. The onus is then shifted upon the plaintiff.'

"It will be seen, as the result of these authorities, that the burden is ordinarily upon the plaintiff alleging negligence to prove it against a warehouseman who accounts for his failure to deliver by showing a destruction or loss from fire or theft. It is not of course intended to hold that a warehouseman, refusing to deliver goods, can impose any necessity of proof upon the owner by merely alleging as an excuse that they have been stolen or burned. These facts must appear or be proved with reasonable certainty. Nor do we concur in the view that there is in these cases any real shifting' of the burden of proof. The warehouseman in the absence of bad faith is only liable. for negligence. The plaintiff must in all cases, suing him for the loss of goods, allege negligence and prove negligence. This burden is never shifted from him. If he proves the demand. upon the warehouseman and his refusal to deliver, these facts. unexplained are treated by the courts as prima facie evidence of negligence; but if, either in the course of his proof or that of the defendant, it appears that the goods have been lost by theft, the evidence must show that the loss arose from the regligence of the warehouseman."

National banks have no direct legislative authority under the National Banking Act, or by any special provision of the statute, to invest any portion of their capital in the construction of a safe-deposit vault, and equip it with boxes for the conduct of such business; but it is claimed that the Comptroller of the Currency holds that this power or privilege is one largely within the discretion of the board of directors.

Where a State bank organized under a State law does not avail itself by a provision in its charter with the power to conduct, in connection with its business of banking, a safe-deposit

business, it becomes a privilege purely incidental to that of banking, and where the officers of such a banking corporation, without authority vested in the charter of the bank, conducts such a business and establishes a safe-deposit vault and receives property for deposit without the authority or knowledge and consent of the directors, their acts are not within the scope of their authority as agents, and are not binding upon the corporation.

CHAPTER XXXV.

BANKING HOURS.

§ 247. When binding upon the public.

A banking corporation can prescribe by its by-laws reasonable hours of business during which its business with the public shall be conducted.

A by-law enacted to the effect, if the hours prescribed are reasonable, is binding upon the general public.

In the case of Marshall and Others v. The American Express Company (appeal from the Milwaukee Circuit Court), 73 Am. Dec. 381, the court says:

"This term (banking hours) has acquired a meaning among bankers and merchants, but it is by no means uniform. What are banking hours in some places are not in others. In the city of New York banking hours are understood to be from ten o'clock a. m. to three o'clock p. m. In the city of Milwaukee, from 9 a. m. till twelve and a half p. m., and from two till four p. m.

"All we know from the evidence in this case, in regard to banking hours in Madison, is from Mr. Hill, who says 'banks at Madison close at four o'clock.' But, however, the term may vary as to time; what is understood by banking hours,' in a technical sense, is the particular hours of the day within which the banks of a city or town transact the usual banking business with the public over the counter, such as discounting bills, receiving deposits, and paying checks, etc. It is reasonable and proper that there should be a uniform hour at which this kind of business should cease, in order to give the officers and agents of the bank an opportunity to write up the books and adjust its balances for the day.

When these banking hours are uniform and reasonable, the law will regard them in respect to the purposes for which they are established. But these hours only have reference to the intercourse of the bank with the public at large, in relation to the exclusive business of banking. Business quite as important is always transacted after these hours have elapsed- balances