National Mahaiwe Bank v. Peck

• Decision Date: 05 September 1879
• Citation: 127 Mass. 298
• Parties: National Mahaiwe Bank v. Walter B. Peck
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

127 Mass. 298

National Mahaiwe Bank v. Walter B. Peck

Supreme Court of Massachusetts

September 5, 1879

Argued September 10, 1878

Berkshire. Contract on a promissory note for $ 500, dated December 29, 1875, signed "Jos. A. Benjamin Treas.," payable to the order of the defendant in forty-five days after date at the plaintiff bank, and indorsed by the defendant. Trial at June term 1878 of the Superior Court, without a jury, before Rockwell, J., who reported the case for the determination of this court in substance as follows:

Benjamin kept an ordinary banking account with the plaintiff bank. At the time of giving the note in suit, he was treasurer of the town of Egremont, and the bank gave him for this note a draft to be used for the payment of a tax due from the town. The note and the proceeds of it were not made a part of his account with the bank, and the bank regarded the note as an official or town matter.

On February 15, 1876, when this note matured, all things necessary to charge the defendant as indorser were done. On that day, and ever since, the bank held a note, made by Benjamin, which it had discounted, signed "Jos. A Benjamin," dated November 13, 1875, for $ 1500, payable in three months after date at the plaintiff bank to one Callender, and indorsed by Callender. And on said February 15, there stood to the credit of Benjamin, as his balance of account, the sum of $ 381.10, and the same continued so to stand on the books of the bank until about six weeks before the trial, when it was indorsed as of February 16, 1876, on the note for $ 1500.

On February 16, 1876, the day of the maturity of the note for $ 1500, the president of the plaintiff bank and its principal financial manager, during business hours, told the cashier, if the $ 381.10 standing to Benjamin's credit was not drawn out by his checks before the close of business hours, to apply it on the $ 1500 note; and at the close of the bank for that day, it being found that Benjamin had drawn no checks on said balance, he again directed the cashier to apply it on the $ 1500 note.

On February 19, 1876, during business hours, the defendant brought to the bank a check of Benjamin, made and handed to defendant on that day, and which was as follows: "South Egremont, Mass., Feb. 15, 1876. $ 381. National Mahaiwe Bank pay to the order of J. A. B. Treas. note 15 inst., three hundred and eighty-one dollars. Jos. A. Benjamin."

The defendant at the same time, acting at the request of Benjamin, tendered to the cashier of the plaintiff bank this check and $ 120 in money in payment of the note in suit, and demanded the note. The money had been furnished the defendant by Benjamin, but it did not appear that he informed the cashier or the bank of this fact. The cashier declined to receive the check and money, and told the defendant he could not accept the check, because he had been directed to apply the balance of Benjamin's account on another claim held by the bank, meaning the $ 1500 note. After this refusal, the cashier did, at the request of the defendant, receive the $ 120 and indorse the same on the note in suit, it being at the time understood that neither party intended thereby to waive his rights in reference to the check. The $ 120 have been retained by the bank.

It is not the practice of the bank to charge over-due notes held by it to the account of a depositor until he has sufficient credits to pay the note. Benjamin became a bankrupt in the spring of 1876, and died in July or August of that year.

Upon the foregoing facts, the defendant contended, as a matter of law, that the plaintiff was not entitled to recover; and the judge so ruled, and found for the defendant. If this ruling was correct, judgment was to be entered for the defendant; but if the plaintiff was entitled to recover, judgment was to be entered for him for the sum of $ 381.10, and interest from February 16, 1876.

Judgment for the plaintiff.

J. Dewey, for the plaintiff.

M. Wilcox, for the defendant.

Gray C. J. Ames & Soule, JJ., absent.

OPINION

Gray C. J.

Money deposited in a bank does not remain the property of the depositor, upon which the bank has a lien only; but it becomes the absolute property of the bank, and the bank is merely a debtor to the depositor in an equal amount. Foley v. Hill, 1 Phillips 399, and 2 H. L. Cas. 28. Bank of Republic v. Millard, 10 Wall. 152. Carr v. National Security Bank, 107 Mass. 45. So long as the balance of account to the credit of the depositor exceeds the amount of any debts due and payable by him to the bank, the bank is bound to honor his checks, and liable to an action by him if it does not. When he owes to the bank independent debts, already due and payable, the bank has the right to apply the balance of his general account to the satisfaction of any such debts of his. But if the bank, instead of so applying the balance, sees fit to allow him to draw it out, neither the depositor nor any other person can afterwards insist that it should have been so applied. The bank, being the absolute owner of the money deposited, and being a mere debtor to the depositor for his balance of account, holds no property in which the depositor has any title or right of which a surety on an independent debt from him to the bank can avail himself by way of subrogation, as in Baker v. Briggs, 8 Pick. 122, and American Bank v. Baker, 4 Met. 164, cited for the defendant. The right of the bank to apply the balance of account to the satisfaction of such a debt is rather in the nature of a set-off, or of an application of payments, neither of which, in the absence of express agreement or appropriation, will be required by the law to be so made as to benefit the surety. Glazier v. Douglass, 32 Conn. 393. Field v. Holland, 6 Cranch 8, 28. Brewer v. Knapp, 1 Pick. 332. Upham v. Lefavour, 11 Met. 174. Bank of Bengal v. Radakissen Mitter, 4 Moore P. C. 140, 162.

The general rule accordingly is, that where moneys drawn out and moneys paid in, or other debts and credits, are entered, by the consent of both parties, in the general banking account of a depositor, a balance may be considered as struck at the date of each payment or entry on either side of the account but where by express agreement, or by a course of dealing, between the depositor and the banker, a certain note or bond of the depositor is not included in the general account, any balance...