Street v. Old Town Bank

• Decision Date: 22 June 1887
• Parties: STREET v. OLD TOWN BANK OF BALTIMORE.
• Court: Maryland Court of Appeals

10 A. 319

67 Md. 421

STREET v. OLD TOWN BANK OF BALTIMORE.

Court of Appeals of Maryland

June 22, 1887

Appeal from circuit court, Cecil county.

H W. Archer, for appellant.

Wm. A. Hammond, for appellee.

MILLER J.

The Maryland Central Railroad Company had for several years made its deposits in the Old Town Bank. These were checked out by the company's checks, from time to time, signed by its treasurer, and the usual depositor's account was kept by the bank. The company needed money to pay the interest on its bonds, which fell due on the first of May, 1884, and applied to the bank for a loan of $5,000. The bank refused to discount the company's note for that sum unless each of its 12 directors would give his individual note for $500 as collateral security therefor. This was agreed to, and the company's note for $5,000, payable at 30 days, and dated the first of May, 1884, was accordingly discounted, and the proceeds placed to the company's credit in its account. The individual notes of the directors (one of whom was the defendant) all bear the same date, first of May, 1884, and are all in the same form. Street's note is as follows:

"BEL AIR, May 1, 1884.

The Maryland Central Railroad Company having given its note of even date herewith to the Old Town Bank of Baltimore for the sum of $5,000, payable thirty days from date, and pledged its receipts for the month of May in payment of the same, I hereby agree and promise, in case of default in the payment of said note at maturity, to pay the Old Town Bank of Baltimore, thirty days from this date, the sum of five hundred dollars.

J. M. STREET."

Just prior to the giving of these notes on the twenty-fifth of April, the board of directors of the company passed a resolution to the effect "that all funds accruing in the treasury of this company during the month of May next shall be set apart and applied to the payment of the interest of the first mortgage bonds of this company falling due on the first day of said month, or so much of said funds as shall be necessary to pay said interest," and we shall assume that the bank had knowledge of this resolution at the time it discounted the company's note, and received the collateral notes from the directors. The receipts were duly paid into the bank; and the latter, by order of the company paid the interest coupons on their bonds. The aggregate amount of the receipts, including the proceeds of the $5,000 note, was more than sufficient to pay the interest and this note, if the company had permitted it to be so applied. But during the running of the note the company checked out from the bank more than $25,000, so that, at its maturity, the bank had no funds in hand to apply to the note. In fact, the company's account was overdrawn on the first of May about $2,000, and on and after the maturity of the note was always overchecked. The authority of the treasurer to draw checks upon the bank was never countermanded by the company, save by the resolution above cited, which related merely to the payment of the interest; and no...