Rossi Bros., Inc. v. Comm'r of Banks in Possession of Highland Trust Co.

• Decision Date: 25 May 1933
• Parties: ROSSI BROS., Inc., v. COMMISSIONER OF BANKS IN POSSESSION OF HIGHLAND TRUST CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

283 Mass. 114

186 N.E. 234

ROSSI BROS., Inc.,

v.COMMISSIONER OF BANKS IN POSSESSION OF HIGHLAND TRUST CO.

Supreme Judicial Court of Massachusetts, Suffolk.

May 25, 1933.

Petition for Review from Supreme Judicial Court; Pierce, Justice.

Petition for instructions by Rossi Brothers, Incorporated, against the Commissioner of Banks in Possession of Highland Trust Company.

Final decree reversed, and new final decree entered.

G. Gruzen, of Boston, for petitioner.

F. G. Moulton, of Boston, for respondent.

RUGG, Chief Justice.

The plaintiff seeks to have the defendant instructed to apply certain deposits to its credit in the Highland Trust Company, of which the defendant is in possession under G. L. (Ter. Ed.) c. 167, §§ 22-36, for purposes of liquidation, to the payment in part of promissory notes held by the defendant, signed by the plaintiff as maker, and indorsed by two other persons. The defendant seeks by way of affirmative relief that the indebtedness of the plaintiff to the bank be determined and that the plaintiff be ordered to pay the same.

When the defendant took possession of the bank of October 13, 1931, the plaintiff owed the bank $4,438.05 as maker of four promissory notes, all bearing the indorsements of two other persons, and had on deposit to its credit in the bank $2,064.28. The controversy is whether the plaintiff is entitled to have the whole or any part of its deposit set off against the amount due from it on the notes. It was agreed in open court at the argument that the Highland Trust Company is insolvent and that the notes of the plaintiff are held in its commercial department.

The relevant facts are that the plaintiff in 1930 opened an account with the bank upon the understanding that a certain line of credit be extended to it. Divers sums of money were borrowed by the plaintiff of the bank on comparatively short term notes, all of them bearing two indorsements. At first, the treasurer of the plaintiff came in person to the bank on each due date with its check drawn on its account in the bank and paid the note Later, it was suggested by the treasurer of the bank that as matter of convenience the account of the plaintiff might be charged with the amounts of the various notes as they became due and the notes returned to the plaintiff with its statement on the first of each month following. This suggestion was accepted and the plaintiff agreed that it might be done. Thereafter, numerous notes of the plaintiff were paid in that way. The physical act of thus charging the account of the plaintiff was performed by a note teller of the bank whenever he had time, generally in the forenoon of the respective due dates. On October 13, 1931, a note of the plaintiff for $1,174.13 became due and payable at the bank. On that day, by reason of apprehension that the bank commissioner might take possession of the bank, there was uneasiness and commotion among officers and employees of the bank, and the note teller did not charge the note of the plaintiff against its account before 1:22 o'clock in the afternoon, at which time the defendant took possession of the bank. The deposit to the credit of the plaintiff at that time was $2,064.28. The defendant did not charge the note against the account but caused the note to be protested for nonpayment and gave notice to the indorsers. On November 6, December 1 and December 11, 1931, other notes of the plaintiff bearing the same indorsements fell due, which were not charged against its account but were protested for nonpayment on their respective due dates and notices sent to the indorsers. The defendant has made no agreement that the deposit of the plaintiff might be credited on the notes.

It is plain that there was no contract between the plaintiff and the bank whereby the latter was required to charge the account of the plaintiff with the amount of each of its notes as it became due. The arrangement made was simply one of convenience to accommodate the plaintiff. The plaintiff gave nothing to the bank. The plaintiff did not even agree to maintain a deposit in the bank. The bank received no consideration. It already had the legal right to charge the account of the plaintiff with the amount of each note as it became due. Laighton v. Brookline Trust Co., 225 Mass. 558, 559, 560, 114 N. E. 671, L. R. A. 1917C, 129. No assent of the depositor to this course was required. The bank suffered no impairment of its legal rights by reason of the arrangement. Tremont Trust Co. v. Baker, 243 Mass. 530, 137 N. E. 915,Tremont Trust Co. v. Graham Furniture Co., 244 Mass. 134, 138 N. E. 330. The circumstance that commonly the note teller had made the charge during the forenoon of each due date of a note and failed to do so with respect to the note falling due on October 13, 1931, when the defendant took possession of the bank, gives the plaintiff no additional rights. It does not appear that the plaintiff knew during what part of the due date the amount of the note had been charged to its account. It was done whenever convenient to the note teller. The bank in any event had all of the banking day in which to make the charge. There was no obligation that it be done before 1:22 in the afternoon, when the defendant took possession of the bank. The indorsers had all of that day in which to discharge their liability on the notes, if they so desired. The rights of the parties with respect to the note falling due on October 13, 1931, stand on the same footing as those with respect to the notes falling due on subsequent dates.

The precise situation is that the defendant holds notes of which the plaintiff is maker and that the plaintiff has a debt due to it as depositor in the bank. The question is whether the deposit can be set off against the notes. This question has never arisen for adjudication with respect to banks in the hands of the commissioner for liquidation under the present statute. Cases where the note was held by the savings department of a trust company in process of liquidation and it was sought to set off against that obligation a credit in the commercial or in the savings department are not controlling. Those decisions denied any right of set-off because of the special statutory guards thrown about deposits in such savings departments and the investments in which such deposits are made. Bachrach v. Commissioner of Banks, 239 Mass. 272, 131 N. E. 857;Kelly v. Commissioner of Banks, 239 Mass. 298, 131 N. E. 855;Cosmopolitan Trust Co. v. Rosenbush, 239 Mass. 305, 131 N. E. 858, 16 A. L. R. 1484;Tremont Trust Co. v. Baker, 243 Mass. 530, 137 N. E. 915;Tremont Trust Co. v. Graham Furniture Co., 244 Mass. 134, 138 N. E. 330;Bailey v. Commissioner of Banks, 244 Mass. 499, 138 N. E. 915;Bieringer-Hanauer Co. v. Cosmopolitan Trust Co., 247 Mass. 73, 141 N. E. 566;Cosmopolitan Trust Co. v. Suffolk Knitting Mills, 247 Mass. 530, 537, 143 N. E. 138. The savings department is not involved in the case at bar.

Cases like Cosmopolitan Trust Co. v. S. Vorenberg Co., 245 Mass. 317, 139 N. E. 482;Cosmopolitan Trust Co. v. Lyons, 244 Mass. 115, 138 N. E. 325;Cosmopolitan Trust Co. v. Wasserman, 251 Mass. 514, 146 N. E. 772;Cosmopolitan Trust Co. v. Golub, 252 Mass. 574, 147 N. E. 847; Commissioner of Banks v. Abramson, 245 Mass. 321, 139 N. E. 648; and Bates v. Cosmopolitan Trust Co., 240 Mass. 162, 133 N. E. 758, all related to facts where, in the main, persons not primarily liable, or not liable at all, attempted in vain to secure a set-off of an individual deposit in the commercial department of a bank in liquidation against the liability of one primarily liable on a note. Th...