Eyrich v. Capital State Bank

• Citation: 6 So. 615,67 Miss. 60
• Court: United States State Supreme Court of Mississippi
• Decision Date: 28 October 1889
• Parties: GEORGE C. EYRICH, ADMR. v. CAPITAL STATE BANK

6 So. 615

67 Miss. 60

GEORGE C. EYRICH, ADMR. v. CAPITAL STATE BANK

Supreme Court of Mississippi

October 28, 1889

October 1889

FROM the chancery court of Hinds county, first district, HON WARREN COWAN, Chancellor.

As will be seen from the statement of facts in the opinion, the controversy arises mainly over the action of the appellee the Capital State Bank, in applying the funds on deposit to the credit of P. T. Baley to the payment of the $ 500 note given in the firm-name of W. C. Rogers to the bank. It is not denied that Baley and Rogers were partners as druggists under the firm-name of W. C. Rogers, and that Rogers borrowed the $ 500 from appellee, stating that it was for the benefit of the firm. Of the money borrowed $ 400 was at once paid to the bank to settle sundry drafts held against the firm and $ 100 was retained by the bank, by the direction of Rogers, to pay the interest due on the $ 1500 note now in suit, and as to this note the bank knew that Rogers was principal and Baley merely a surety.

After this Baley purchased from Rogers his interest in the firm and assumed in writing to pay all the firm liabilities. He caused a circular letter to be sent to the creditors of the firm, advising them of his purchase and assumption of the debts, and the bank received one of these notices, after which, as Baley refused to pay the $ 500 note, it charged it to his individual account.

It appeared in evidence that the partnership was conducted in the name of W. C. Rogers, one of the partners; that Rogers had the exclusive management of the business and received also a salary for his services; that the account at the bank was opened when the firm began business, and that Rogers had no credit or account with the bank separate from the firm account. Many of the checks drawn against this fired were for debts due by Rogers individually, and many of these contained memoranda, which, if noticed and understood by the bank might have shown that they had reference to the individual business of Rogers, and were drawn in payment of his private accounts. No objection to this course of dealing had ever been made by Baley, but he had on one or two occasions himself presented to the bank and collected checks thus drawn by Rogers in payment of debts due to him individually by Rogers.

Upon final hearing the court rendered a decree in favor of complainant against the appellant and Rogers for the amount of the note sued on, interest, and attorney's fees, fixing the latter at ten per cent. upon the $ 1000 admitted to be due and fifteen per cent. upon the litigated sum of $ 500. The other facts are stated in the opinion.

Reversed.

Calhoon & Green, for appellant.

1. While a bank has a lien on moneys on deposit to secure debts due by the same person and in the same right, this right is merely defensive. "The opposing claim and property must be due to and from the same two funds. The lien and right of set-off only exist when the individual who is both depositor and debtor stands in both these characters in precisely the same relation and on precisely the same footing towards the bank." 1 Morse Banking, § 326. The bank then had no lien upon the individual deposit of Baley and no right to apply his deposit to the debt of the firm of W. C. Rogers & Co.

A customer can upon making a deposit direct to which of several accounts it must be applied. A bank must preserve the distinction between accounts. 1 Morse Banking, § 327. Hence the bank had no right to transfer any firm debt to Baby's individual account; a fortiori, not against his instructions, and especially not a disputed firm debt.

The right of the creditor to appropriate arises only where the debtor does not manifest his intention as to the application of the payment. Munger Appl. Pay'ts, 32. The application cannot be made to a disputed debt. Stone v. Talbot, 4 Wis. 463.

2. It is claimed that the answer pleads a set-off and that this is not available for want of mutuality. But this is not a question of set-off, but of the application of payments. The bank applied the deposit one way while appellant claims it was its duty to apply it another way. Again, if the mutual accounts between the parties cannot be settled in this suit, but such settlement is to be defeated by the presence of Rogers as a co-defendant, the court is without jurisdiction. Jurisdiction was defeated by petitioner's own election, for it could have sued the administrator alone. Code 1880, § 1134. Jurisdiction was conferred on the chancery court in suits against estates in order that there should be a full settlement of the administration, and this will not be defeated by the joinder of another defendant. The rule announced in Bullard v. Dorsey, and Moody v. Willis, 41 Miss. 347, will not be applied under the present code, in view of § 1733, which permits judgments to be rendered for or against one or more of several plaintiffs or defendants, and authorizes as many judgments in one suit as may be necessary to settle the rights of the parties.

3. the real merits of this suit depend upon whether the $ 500 note charged to the account of Baley was the partnership note and debt of W. C. Rogers and P. T. Baley or the individual debt of Rogers. As the individual and partnership name was the same, the presumption is that the debt was that of the partner alone. "Prima facie a note, and a fortiori, an account in the name common to the individual and the firm, is that of the individual. 1 Bates Part., § 443.

A partner cannot check against firm funds to pay his individual debts without express authority, and, if he does, it is a fraud for which the other partners can hold the bank responsible in equity. Homer v. Wood, 11 Cush. [Mass.] 62; Church v. Bank, 87 Ill. 69; 1 Lindley Part. [Rapalje Ed.] 194, note.

The individual accounts of the partner should be kept as separate as individual accounts between a partner and a stranger to the firm. Honore v. Colemesnill, 1 J. J. Marsh. 517.

Where the signature of a note is that of a member which is also that of the firm, in order to bind the firm it is necessary not only to prove the signature, but that it was used as the partnership signature and for partnership purposes. U. S. Bank v. Bunney, 5 Story 184; Winship v. U. S. Bank, 5 Peters 565. See also Lindley Part. 184. The true rule is laid down in Rogers v. Batchlor, 12 Peters 232, where it is held that one partner cannot apply partnership funds or securities to private debts so as to bind the firm, and the right of the creditor depends not on his knowledge that it was partnership property, but upon the fact whether the other partners consented to such disposition. Buck v. Mosley, 24 Miss. 172. See, also, Stegall v. Coney, 48 Ib. 768; Minor v. McGraw, 11 S. & M. 326.

4. The proof shows that Rogers carried his private funds as well as firm moneys into the same bank account kept in his name. This was at least a mingling of trust funds and the account as against him, and the account will be deemed his private account. Perry on Trusts, § 463. As to the power of Rogers to bind the firm by this loan, see, also, Pickles v. McPherson, 59 Miss. 217; Robinson v. Aldridge, 34 Ib. 352. The bank knew that Rogers was applying the money to his own uses. This appeared from the memoranda on the checks; in many instances, and the checks were not drawn in the due course of trade. In any event the bank had knowledge of enough facts to put it upon inquiry. As $ 100 of the money borrowed was at once applied by Rogers to the payment of the interest due by him on the $ 1500 note to the bank, the latter of course knew this much of the loan was not for partnership purposes.

5. It was error to allow attorney's fees. The clause in the note pertaining to fees cannot be enforced in equity. Defendant was entitled to a trial by jury on the amount of damages. But especially in this case, because this suit was brought before the expiration of twelve months after letters of administration and before the administrator could be compelled to pay debts or make distribution. Code 1880, §§ 2026, 2076. Besides, the administrator has never refused to pay as to the $ 1000 balance, but was always willing, and in his answer offered to pay if the bank would apply the amount to the credit of the intestate to the note sued on instead of the note for $ 500 claimed to be due by the firm. Complainant cannot, to get the attorney's fees, litigate for the whole when only a part is in dispute.

Argued orally by M. Green, for appellant.

Brame & Alexander, for appellee.

1. The fact that another party jointly liable with the estate was joined as a defendant, does not affect the jurisdiction of the chancery court. If Rogers was improperly joined he alone could object, and if there was error as to him, appellant cannot avail of it. Code 1880, § 1440. The jurisdiction was complete; Hunt v. Potter, 58 Miss. 96; and as no objection was made as to this in the lower court it cannot be urged here, notwithstanding an administrator is not bound to plead specially. Prewitt v. Coopwood, 30 Miss. 385; Black v. Washington, 65 Ib. 60; Duncan v. Scott, 64 Ib. 38; Code 1880, § 1512. The fact that the note calls for attorney's fees does not affect the jurisdiction. This stipulation, like that for interest, arises ex contractu. If a jury trial were proper the court would award it, but no such trial was asked.

2. As to the application of payments. Long before the note in suit fell due Dr. Baley had bought out the firm of W. C. Rogers [W. C. Rogers and P. T. Baley], and in writing assumed to pay all the firm debts, and had mailed to the bank a letter to that effect. Among these firm debts was the note for $ 500 past due, and in accordance with this letter the bank charged the note to the individual...