Hammons v. Grant

• Citation: 26 Ariz. 344,225 P. 485
• Decision Date: 01 May 1924
• Docket Number: Civil 2282
• Parties: A. T. HAMMONS, Superintendent of Banks, Appellant, v. J. C. GRANT and STEWART GRANT, Copartners Doing Business Under the Firm Name and Style of GRANT BROTHERS, Appellees
• Court: Arizona Supreme Court

225 P. 485

26 Ariz. 344

A. T. HAMMONS, Superintendent of Banks, Appellant, v. J. C. GRANT and STEWART GRANT, Copartners Doing Business Under the Firm Name and Style of GRANT BROTHERS, Appellees

Civil No. 2282

Supreme Court of Arizona

May 1, 1924

APPEAL from a judgment of the Superior Court of the County of Cochise. Albert M. Sames, Judge. Affirmed.

Mr. M I. McKelligon and Mr. D. L. Cunningham, for Appellant.

Mr Fred Suttter and Mr. Walter Roche, For Appellees.

OPINION

ROSS, J.

It appears that on the date of taking over the Citizens' Bank & Trust Company, August 27, 1923, by the superintendent of banks, the bank held Grant Bros.' promissory note upon which was due a balance of $720.62, and that there was no deposit in said bank, subject to the general checking account of Grant Bros., $1,331.42.

The superintendent of banks, acting under the Banking Code (chapter 31, Acts Special Session of the Fifth Legislature 1922), took charge of the property and business of the Citizens' Bank & Trust Company as a failing and insolvent institution, and thereafter brought this action to collect Grant Bros.' note. The latter admitted the indebtedness to the bank, and claimed the right to offset it with their deposit. This right of offset was sustained by the lower court, and the superintendent of banks, being dissatisfied, has appealed the case.

The question is, may a depositor who is also a borrower of a commercial bank, upon its becoming insolvent, offset his note with his deposit?

The superintendent of banks, like any ordinary receiver of an insolvent estate, simply steps into the shoes of the insolvent. He has no better or different right or title to the property of the insolvent than the latter had. This rule is not in any way changed by the Banking Code, supra. Indeed, the method of liquidating an insolvent bank by the superintendent of banks is that of any ordinary receiver appointed by the court, except as otherwise provided. Section 46, Banking Code. He take the receivership in trust for the creditors of the bank, and it is made his duty to collect what is owing the bank, and to that end he is authorized to bring suits. The statute providing the method to wind up the affairs of the insolvent bank has not undertaken to change the rights of the depositors or the liabilities of the bank as they existed under the law at the time of the receivership. The same rule with reference to the right to offset debts as between individuals is applicable to the bank and depositor. It is settled by our statute, paragraph 480, Civil Code 1913, that one contract may be offset against another contract.

It is a well-settled rule that a bank may credit deposits upon the overdue paper of the depositor. Up to the very minute when the Citizens' Bank & Trust Company was taken over, Grant Bros. could have directed the cancellation of their note by charging the same against their deposit. Thus the rights of the depositor and the bank are reciprocal. The general rule is stated in Tiffany on Banks and Banking, at page 73, section 22, as follows:

"A depositor may any time require the bank to apply a deposit to the payment of his debt: and in an action by the bank on his note, or for money otherwise due, he may set off his deposit against the demand. This right of set-off is usually exercised when the bank is insolvent, and the depositor is called upon to pay his debt to it, and in such case he is entitled by way of set-off to the full amount of his debt, less such dividend as may be payable to the other general creditors. The right may therefore be exercised as against a receiver or other representative of the insolvent or bankrupt bank."

See, also 3 R.C.L. 647, section 276; 14 R.C.L. 665, section 30; 7 C.J. 746, section 537; Morse, Banks and Banking (5th ed.), sections 338, 560; In re Hatch, 155 N.Y. 401, 40 L.R.A. 664, 50 N.E. 49; Gallagher v. Brewing Co., 53 Minn. 214, 54 N.W. 115; Bailey v. State, 72 Okl. 203, 179 P. 615; Upham v. Bramwell, 105 Or. 597, 25 A.L.R. 919, 209 P. 100, 210 P. 706; Colton v. Drover's Perpetual B. & L. Assn., 90 Md. 85, 78 Am. St. Rep. 431, 46 L.R.A. 388, 45 A. 23.

It is contended by appellant that this rule destroys equality; that it is advantageous to the borrower as against the depositor who does not borrow from the bank. We are somewhat impressed with this contention,...