Bd. of President & Dirs. of St. Louis Pub. Sch. v. Estate of Broadway Sav. Bank

• Citation: 12 Mo.App. 104
• Parties: BOARD OF PRESIDENT AND DIRECTORS OF ST. LOUIS PUBLIC SCHOOLS, Respondent, v. ESTATE OF BROADWAY SAVINGS BANK, Appellant.
• Decision Date: 18 April 1882
• Court: Court of Appeal of Missouri (US)

12 Mo.App. 104

BOARD OF PRESIDENT AND DIRECTORS OF ST. LOUIS PUBLIC SCHOOLS, Respondent,

v.ESTATE OF BROADWAY SAVINGS BANK, Appellant.

St. Louis Court of Appeals, Missouri.

Apr. 18, 1882.

1. The cause of action accruing to a bank against its cashier for wrongfully permitting an overdraft arises on contract, within the meaning of the statute relating to counter-claims.

2. The pendency of a suit by the bank against the cashier for this breach of his bond, does not affect the bank's right to set up the overdraft as a counter-claim to a demand by the cashier's assignee.

3. A counter-claim may be made to a claim by the debtor's assignee in the circuit court, though it has not been pleaded before the assignee.

4. An assignee's statutory power to adjust and allow claims confers no larger power in relation to counter-claims than that given to the courts.

APPEAL from the St. Louis Circuit Court, LINDLEY, J.

Reversed and remanded.

JOHN D. DAVIS, for the appellant: “Demands ascertained, or depending upon mere computation, may be setoff.”--Waterman on Set-off, sect. 304. “Damages arising from the non-fulfilment of a contract to make the demand, and give the notice requisite to fix the liability of the indorser of a note, may be set-off in an action brought against the owner of the note upon another note of which he is the maker.”--Waterman on Set-off, sect. 307; Bidwell v. Madison, 10 Minn. 13. If the claim of the bank against Krieger, Jr., could by any possibility be considered unliquidated damages, the assignee could, nevertheless, use it as a counter-claim, and if it was in excess of the plaintiff's demand, as in the case at bar, could thereupon disallow plaintiff's claim.-- Gordon v. Bruner, 49 Mo. 570; Hay v. Short, 49 Mo. 139; McAdow v. Ross, 53 Mo. 199; Empire Transp. Co. v. Boggiano, 52 Mo. 294; Life Assn. of America v. Cravens, 60 Mo. 388.

BROADHEAD, SLAYBACK & HAEUSSLER, for the respondent: A claim for unliquidated damages cannot be the subject of a set-off, and especially not in the case as made, but must be wholly disregarded.-- Johnson v. Jones, 16 Mo. 494; Mahan v. Ross, 18 Mo. 121; Pratt v. Jenkins, 18 Mo. 158; Baker v. Corning, 19 Mo. 125; May v. Kellon, 1 Mo. 381; Hembrock v. Stark, 53 Mo. 588; McAdow v. Ross, 53 Mo. 199; Zelle v. German Savings Instn., 4 Mo. App. 401.

THOMPSON, J., delivered the opinion of the court.

On May 22, 1879, the Broadway Savings Bank suspended payment, and thereafter the defendant became its assignee, under the statute relating to assignments. At the time of its suspension J. Philip Krieger, Jr., was, and had been since its organization in 1869, its cashier. When the bank suspended there was standing to the credit of Krieger, Jr., as a depositor, on the books of the bank, the sum of $2,618.01. On the 28th of May, six days after the bank had suspended, Krieger assigned this indebtedness to the plaintiffs. The plaintiffs preferred a claim for the amount before the assignee, the present defendant, who disallowed the same, and the plaintiffs appealed to the circuit court.

In the circuit court the defendant offered to prove by way of set-off that Krieger, the plaintiffs' assignor, before the assignment of the claim to the plaintiffs, while acting as cashier of the bank, had, without the knowledge and consent of the directors of the bank, allowed one Goldsoll to overdraw his current account as a depositor of the bank, to the amount of $3,000, whereby the bank had sustained a loss of that amount. The plaintiffs admitted that exactly $3,000 went out of the bank on a worthless piece of paper, that Krieger had allowed Goldsoll to overdraw his account to the amount of $3,000, and that the bank had thereby lost $3,000. But the plaintiffs, nevertheless, objected that the court could not receive and consider this testimony, which objection the court sustained, and the propriety of this ruling is the only question before us.

The question involves the construction of the second branch of the statute relating to counter-claims. The statute (Rev. Stats., sect. 3522), referring to the preceding section, which provides that an answer may consist of any new matter constituting a defence or counter-claim, reads as follows: “The counter-claim mentioned in the last section must be one existing in favor of a defendant and against a plaintiff, between whom a several judgment might be had in an action, and arising out of one of the following causes of action: * * * Second. In an action arising on contract any other cause of action arising also on contract and existing at the commencement of the action.”

The question, then, is, whether the cause of action which a bank has against its cashier for wrongfully permitting a customer to overdraw his account, whereby the bank has lost the amount of the overdraft, is a cause of action arising on contract within the meaning of this statute. Our first impression was that it is not; but after further reflection, and after considering the decision of the supreme court in the case of the Empire Transportation Company v. Boggiano (52 Mo. 294), we have come to a different conclusion. In that case a carrier brought an action against a shipper for freight. The shipper pleaded as a counterclaim that the carrier, by negligent delay in the transportation of fruit belonging to the shipper, had inflicted a loss upon him; and this was held a good counter-claim under the statute. In so holding, Adams, J., used the following language: “Although the plaintiff's liability in this case is for a tort growing out of the negligence and delay as a common carrier in the transportation of the defendant's goods, the cause of action, so far as the defendant is concerned, arises out of the contract of affreightment, and hence, in declaring at common law for the tort, the contract was always alleged in the declaration by way of inducement. So, under our statute, the contract must be alleged as the inducement to the cause of action and as showing the parties' connection with the case. In this light the contract is looked to as the origin of the cause of action. The statute contemplated that where suit is founded on a cause of action connected in any manner with a contract, a counter-claim arising out of any other contract between the same parties may be set up. The old doctrine of set-offs has no analogy to counter-claims of this nature under our statutes. Under the old system, set-offs sounding in damages for breaches of contract were not allowed, but this objection cannot be maintained in regard to counter-claims under our present code of practice. It is sufficient if the defendant's right to the damages relied on as a counter-claim grows out of a contract between him and the plaintiff.”

The reasoning of this case certainly goes much further than what the case really decides. At common law the liability of...