Union Properties v. Baldwin Bros. Co.
| Decision Date | 31 March 1943 |
| Docket Number | 29307. |
| Parties | UNION PROPERTIES, Inc., v. BALDWIN BROS. CO. |
| Court | Ohio Supreme Court |
Syllabus by the Court.
1. A bank deposit is presumed to be a general deposit creating the relationship of debtor and creditor and the burden of proof is upon him who asserts the contrary. Squire, Supt. of Banks, v. Oxenreiter, 130 Ohio St. 475, 200 N.E. 503 approved and followed.
2. A special deposit in a bank creates a bailment and title does not pass to the bank.
3. A deposit for a specific purpose creates a trust wherein the bank is trustee.
4. Whether it is a special deposit or a deposit made for a specific purpose depends upon the contract between the bank and depositor.
5. A depositor may assign his interest in a special deposit or a deposit made for a specific purpose to the bank before any right of a third party becomes fixed. Such assignment may be made subject to the rights of third parties.
6. The balance between the debits and credits of a depositor in an insolvent bank is to be ascertained as of the date when the Superintendent of Banks takes charge.
7. The sum due an insolvent is merged into the sum due from him and whoever is thereby determined to be the debtor is held only for the balance. The balance is the claim, not the off-set which is merely the means of arriving at a balance.
8. An insolvent cannot be heard to say that his contract is violated where it is apparent that he cannot perform his contract.
9. Where insolvency has intervened, a court will not be limited to a strict application of statutory set-off but will apply the doctrines of equity.
10. Where a bank has become insolvent, equity will credit one indebted to such bank with a deposit account made by the debtor for the benefit of another when the solvent debtor remains liable to such third party.
11. The holder of a promissory note who took it after maturity holds it subject to every objection, including equitable set-off, to which it was subject in the hands of his assignor. Baker v. Kinsey, 41 Ohio St. 403, approved and followed.
Appellant is a paving contractor and at the time here in question was a borrower from The Union Trust Company on two notes aggregating $45,000. In addition to a commercial account appellant carried a number of savings accounts with the trust company. These savings accounts were the result of deposits made by appellant in appellant's name but subject to withdrawal only (until the expiration of the guaranty period) by the various municipalities for which appellant had built or repaired streets and were pledged as guaranties to the respective municipalities that appellant would make good any defects in workmanship or material which developed within a limited time.
On February 27, 1933, The Union Trust Company failed to meet its obligations in the ordinary course of business and a conservator was appointed by the Superintendent of Banks. One of appellant's notes matured on March 15, 1933, and the other on March 22, 1933.
On June 15, 1933, the Superintendent of Banks took charge of The Union Trust Company for liquidation and credited upon the notes only the sum of $26,209.32 which represented appellant's commercial account and one savings account but did not include eight savings accounts which stood in appellant's name subject to withdrawals by the several municipalities in the event of failure of appellant to repair or replace. Had these savings accounts been included as credits there would have been no balance due on the notes.
For the purpose of inducing the trust company to make additional loans to appellant, appellant under date of March 1, 1931, assigned to the trust company all of the guaranty funds then in the hands of the trust company as well as all future guaranty funds thereafter to be deposited.
Appellee acquired the notes after maturity and brought an action seeking to recover an amount representing interest on the balance of the notes after crediting (a) the $26,209.32 and (b) the savings accounts at the ends of the guaranty periods. The accrual of the interest was the result of calculating interest on the balance of the notes above the amount of recognized credits until the expiration of the time limits for the various guaranties and releases had been obtained by appellant from the municipalities and presented to the superintendent. Credits for all of these savings accounts were allowed over a period of approximately six years.
Appellant answered claiming that it was entitled to have all of these savings accounts set off as of June 15, 1933, and that had such credits been given there would have been no balance due on the notes of either principal or interest.
Upon the issues joined the Court of Common Pleas found in favor of the defendant-appellant. The plaintiff-appellee then appealed to the Court of Appeals which reversed the judgment of the Court of Common Pleas and rendered final judgment for plaintiff-appellee.
None of the municipalities for whose benefits the guaranties had been deposited ever made any claim to any of the savings accounts.
The cause is here following the allowance of a motion to certify the record.
Harry A. Hanna, of Cleveland, for appellant.
Lindemann & Ziegler, of Cleveland, for appellee.
The decision in this case depends upon whether there were sufficient available credits on the books of The Union Trust Company in favor of appellant when the Superintendent of Banks took charge to offset completely appellant's two notes. Stated differently: Was the superintendent required to credit the savings deposits standing in the name of appellant at the time he took charge or did he have the right to wait until the expiration of the guaranty periods and the presentation of releases or waivers from the municipalities before crediting the various savings accounts on the appellant's notes, in the meantime accruing interest on the amount of the uncredited savings accounts. Appellee states the question: 'Were the deposits about which we are here concerned available to the defendant-appellant for set-off purposes in June of 1933?'
Appellant was engaged in the paving business and had entered into contracts with various municipalities which provided that appellant should deposit in a bank selected by it (appellant) a sum of money which together with the accrued interest thereon should remain in pledge as a guaranty that the workmanship and materials furnished were up to specifications and that the improvement would remain in good and sound condition for a certain length of time.
On March 31, 1931, for the stated purpose of inducing the trust company to make additional loans from time to time, appellant made an assignment to the trust company of all present and future guaranty funds. This assignment contained the following provision: 'It is understood and agreed that this assignment is made as security for payment of all obligations and liabilities of the undersigned to the trust company now existing or hereafter incurred * * *.'
The fact that these savings accounts had been assigned by appellant to the trust company for the purpose of making them available as set-offs to be applied by the trust company to appellant's indebtedness makes it unnecessary to discuss the large number of cases cited by counsel.
The fact that appellant delivered the savings account pass books to the municipalities is not significant. As the trust company was insolvent and in the hands of a conservator and later in the hands of the Superintendent of Banks no withdrawal from these savings accounts could be honored. Even where the savings bank is solvent, the officers may waive production of the pass books. See Section 710-143, General Code.
We are not here dealing with any asserted right of any third party. No municipality had made any claim to any part of these savings accounts at or since the 15th day of June 1933. Since then the full amounts of these savings accounts have been credited on appellant's notes as the guaranty periods expired and releases were presented. Interest subsequent to the date on which the Superintendent of Banks took charge is the sole matter in dispute.
Section 11315, General Code, provides: Section 11320, General Code, provides: 'When it appears that a new party is necessary to a final decision on a set-off, the court shall permit the new party to be made by a summons to answer the set-off, if, owing to the insolvency or non-residence of the plaintiff, or other cause, the defendant will be in danger of losing his claim, unless permitted to use it as a set-off.'
As stated in Bates' Pleading, Practice Parties and Forms, 4th Ed., 303, Section 346a:
Was the superintendent justified in charging interest while holding appellant's savings accounts or should not these credits already assigned to the trust company for the purpose of security have been considered in striking a balance?
App...
To continue reading
Request your trial