Bachrach v. Commissioner of Banks

• Decision Date: 29 June 1921
• Citation: 239 Mass. 272
• Parties: ISAAC BACHRACH v. COMMISSIONER OF BANKS.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

239 Mass. 272

ISAAC BACHRACH v. COMMISSIONER OF BANKS.

Supreme Judicial Court of Massachusetts, Suffolk.

June 29, 1921

May 23, 1921.

Present: RUGG, C.

J., DE COURCY CROSBY, CARROLL, & JENNEY, JJ.

Bills and Notes Indorser. Equity Jurisdiction, Equitable set-off. Set-off.

A note made by a corporation was payable to a Massachusetts trust company, was indorsed by one who owned all the shares of the corporation maker, was secured by a mortgage of real estate owned by the corporation and was held among the assets of the savings department of the trust company as an investment of the deposits therein. After the note became due and after the commissioner of banks had taken possession of the trust company under G.L.c. 167, Sections 22, 36, the indorser by a suit in equity against the commissioner, sought to compel the application of a deposit made by the indorser in the savings department of the trust company to the satisfaction of the note and mortgage. Held, that

(1) The provisions of G.L.c. 168, Sections 1, 35, in substance that any person indebted to "a savings bank and an institution for savings incorporated as such in this Commonwealth" may set off the amount of his deposit in the bank in a proceeding for the collection of the debt due from him, are not applicable to savings departments of trust companies;

(2) The statute of set-off, G.L.c. 232, did not afford the plaintiff relief;

(3) The plaintiff's right of set-off being regulated by statute the doctrine of equitable set-off was not applicable;

(4) The suit must be dismissed.

BILL IN EQUITY filed in the Supreme Judicial Court on April 6, 1921, and afterwards amended, by a debtor to and creditor of the Tremont Trust Company in Boston against the commissioner of banks of the Commonwealth in possession of the said trust company, to compel him to apply a deposit made by the plaintiff in the savings department of the trust company to the satisfaction of a mortgage note, made by a corporation, of which the plaintiff was the treasurer and owner of all the shares, and indorsed by the plaintiff, and thereupon to cancel and discharge the note and mortgage secured thereby.

The suit came on to be heard before Braley, J., upon the pleadings and an agreed statement of facts, material portions of which are described in the opinion, and was reserved by him for the determination of the full court.

The case was submitted on briefs. F. L. Norton, for the plaintiff.

D. L. Smith, for the defendant.

DE COURCY, J. The defendant, commissioner of banks of the Commonwealth, on February 17, 1921, took possession of the property and business of the Tremont Trust Company under St. 1910, c. 399, as amended (now G.L.c. 167, Sections 22, 36), and has since retained such possession. Among the assets of its savings department, and held as an investment of the deposits therein, was a note of the Bachrach Lumber Company for $4,000 secured by a first mortgage of its real estate. The note was dated November 15, 1917, payable in two years, and interest thereon had been paid in advance to May 15, 1921. Among the liabilities of the trust company was an account, in its savings department, to the credit of I. Bachrach, the plaintiff, for $5,065. The plaintiff owns all the stock of the Bachrach Lumber Company; and said mortgage note was indorsed by him, waiving demand and notice. He brings this bill to compel the defendant to apply $4,000 of this savings account in payment of said mortgage note.

In ordinary commercial banks the legal relation between the bank and a general depositor is that of debtor and creditor; and where the depositor owes the bank he may set off his deposit against the indebtedness, even though the bank has become insolvent. Demmon v. Boylston Bank, 5 Cush. 194. Colt v. Brown, 12 Gray, 233. National Mahaiwe Bank v. Peck, 127 Mass. 298. Deposits in the savings department of a Massachusetts trust company have in general the incidents of a deposit in a savings bank. J. S. Lang Engineering Co. v. Commonwealth, 231 Mass. 367 . They are made "special" deposits, and all loans or investments thereof must be made in accordance with the law governing the investment of deposits in savings banks. G.L.c. 172, Section 61.

Section 62 of that act provides: "Such deposits and the investments or loans thereof shall be appropriated solely to the security and payment of such deposits, shall not be mingled with the investments of the capital stock or other money or property belonging to or controlled by such corporation, or be liable for the debts or obligations thereof until after the deposits in said savings department have been paid in full. The accounts...