291 Mass. 191 | Mass. | 1935
Each of these cases is an action of contract against the maker and indorser of a promissory note. The commissioner of banks took possession of the Lowell Trust Company on December 16, 1931, for the purpose of liquidation under the statutes. On that date the defendant T. C. Lee & Co., Inc., had a deposit in the commercial department of the trust company amounting to $2,138.72. On that date the trust company in its commercial department was the owner of three notes each indorsed by T. C. Lee & Co., Inc., aggregating $2,138.72, and each payable on a date after December 16, 1931. On that date the maker of each of these notes was insolvent and one of them has since been adjudicated a bankrupt. Nothing has been paid on any of the three notes.
The fourth action is brought in the name of the Inman Trust Company by the commissioner of banks in possession of that company for purposes of liquidation under the statute on a note for $1,000 held in the commercial department against both maker and indorser. The evidence in this case as to the points now in issue was agreed on by
The defendant in the first three cases contends that the plaintiff failed to comply with Rule 27 of the District Courts (1932). That question is not properly raised on the record, does not appear to have been presented hitherto, and need not be considered. See Almeida v. Alsdorf, ante 115.
The main question in each case is whether an indorser of a negotiable instrument held in the commercial department of a trust company in process of liquidation under the statute can set off his deposit in the commercial department of such trust company against his liability as indorser where the note had not become due on the date when the trust company was closed, where on that date the maker was either insolvent or not affirmatively shown to be solvent, and where the indorser has no other security against his liability. The trust companies involved in these cases were closed before St. 1932, c. 295, became effective. Therefore the provisions of G. L. (Ter. Ed.) c. 232, as to set-off, are applicable. That chapter in general permits a set-off in cases like the present. The circumstance that the trust companies are insolvent makes no difference on this point. The fact that the notes did not mature until after the trust companies went into liquidation does not prevent a set-off. The deposit was due at that time. In general, the rights of parties are adjusted as of the date when the commissioner took possession of the trust company for purposes of liquidation. Gerold v. Cosmopolitan Trust Co. 245 Mass. 259, 262. Commissioner of Banks v. Hanover Trust Co. 247 Mass. 347, 349. This point is covered by the decision in Rossi Bros. Inc. v. Commissioner of Banks, 283 Mass. 114. See also Cosmopolitan
The precise question here presented has not been decided in this Commonwealth. Somewhat analogous cases have arisen. In Bachrach v. Commissioner of Banks, 239 Mass. 272, 273, it was stated: “In ordinary commercial banks the legal relation between the bank and a general depositor is that of debtor and creditor; and where the depositor owes the bank he may set off his deposit against the indebtedness, even though the bank has become insolvent.” In Rossi Bros. Inc. v. Commissioner of Banks, 283 Mass. 114, a set-off of its deposit in the commercial department of a closed trust company was allowed in favor of the maker of notes maturing after the closing of the bank and held by its commercial department, where the maker was a party to the litigation. It is equally well established that, in such an action against the maker, an indorser cannot appear and demand a set-off of his deposit against the maker’s liability. Cosmopolitan Trust Co. v. S. Vorenberg Co. 245 Mass. 317. This is true even where the indorser concedes his own liability. If the holder looks to the maker for payment, the indorser cannot secure preferred treatment over the other general creditors of the bank by obtaining a set-off of his deposit against the liability of the maker. Cosmopolitan Trust Co. v. Lyons, 244 Mass. 115.
In the first three of the cases at bar, the maker of the
The solvency of the maker is a decisive and essential factor against the right of the indorser to claim a set-off. The reason is this: The maker is primarily liable, and the indorser secondarily liable, on the note; payment of the note by one secondarily liable does not discharge the obligation of the maker; if the maker is solvent, the indorser will be indemnified by him for any loss sustained on ac
The fourth case raises a slightly different question from that in the other three cases, because in it there was no direct evidence and no express finding whether the maker of the note was solvent or insolvent. The record is silent on that subject. No request was made as to the burden of proof on that point. Therefore it is not open. No answer was filed to the declaration in set-off. G. L. (Ter. Ed.) c. 232, § 8. Barnstable Savings Bank v. Snow, 128 Mass. 512, 513. The underlying principle is that the relation between a commercial bank and its general depositor is that of debtor and creditor, and that in general set-off in favor of the depositor exists under the statute in an action at law brought against him by or in behalf of the insolvent bank. That underlying principle is applicable unless special circumstances appear which call a different principle into operation. Such special circumstances arise when the debtor seeking to establish a set-off against an insolvent bank has security which would make it inequitable for him to receive
In each case the entry may be
Order of Appellate Division affirmed.