67 Miss. 60 | Miss. | 1889
delivered the opinion of the court.
The Capital State Bank exhibited the bill in this cause in the chancery court of Hinds county, in which court administration of
Rogers made no defense and decree was rendered against him for the sum claimed. Eyrich, administrator, admitted the execution of the note and his liability to pay so much of the sum named therein as remains unpaid, subject to a set-off of five hundred dollars, but objected that suit could not be brought against him until after the lapse of twelve months from the grant of administration to him of said estate, which time had not elapsed when the bill was filed. The twelve months permitted to an administrator before distribution, refers not to distribution in payment of debts, but to the parcelling of the estate to the distributees.
The administrator claimed as a set-off the sum of five hundred dollars which his intestate had deposited in said bank to his individual credit, and which sum he contends has never been properly accounted for by the bank. The bank admits that such sum had been held by it to the credit of the intestate, but shows that before the maturity of the note here sued on, the firm of W. C. Rogers, composed of said intestate and W. C. Rogers, was indebted to the bank in the sum of five hundred dollars, evidenced by an overdue promissory note, executed by said firm for money loaned by the bank ; that this note was presented to Baley and payment demanded, which he refused to make, whereupon the bank (there being no credit on its books for said firm) applied the credit standing in the name of the intestate to the payment of said note. The bank contends in limine that since its bill is against the administrator of Baley and Rogers, a demand in favor of Baley alone cannot be set off, the demands not being mutual.
This position is not maintainable; this is not a suit at law, nor is it one which could be maintained in equity upon general princi
The next question presented arises from the objection made by the administrator to the act of the bank in applying the individual deposit of Baley to the payment of the $500 note it held against the firm of W. C. Eogers, of which firm Baley was a partner. This note was due and unpaid, and months before the maturity of the note now sued on, the bank, against the objection of Baley, charged it up to his private account, thus absorbing his individual deposit.
Counsel for the administrator insist that the right of set-off by the bank exists only where the individual who is depositor and debtor, stands in both these characters in precisely the same relation and on precisely the same footing toward the bank. In support of this position they rely upon the text of Morse on Banks and Banking, vol. I, sect. 326, and the authorities there cited. The question was
We have examined the text of Morse and the authorities cited by him (except Ex parte McKenna, 30 L. J. Bank. 20, to which we have not access), and do not think either the text or the authorities cited support the view advanced by counsel. Section 334 of the same volume deals with the right of set-off by the bank, but there is no suggestion that a bank may not avail itself of the right in any case in which another might do so. We have found no case in which a different rule has been applied to banks, and we are aware of no principle upon which it could rest. Morse but asserts as applicable to bankers the rule which is of general application, that to warrant set-off there, must be mutuality in the character of the demands. The cases cited by him are Watts v. Christie, 11 Beav. 546; Ex parte McKenna, 30 L. J. Bank. 20; Dawson v. Bank, 5 Pike (Ark.), 283 ; Liggett Spring Axle Co.’s Appeal, 111 Pa. St. 291, and International Bank v. Jones, 119 Ill. 407.
In Watts v. Christie, after insolvency of the'bank, an individual depositor directed the bank to apply his deposit to the credit of his firm which was indebted to the bank. This the bank refused to do, and the firm sought to obtain the benefit of the individual deposit. Other arrangements of similar character had been acquiesced in by the bank, and the master of rolls very strongly intimated that an unfair preference had been thus given to those securing transfers, which could be set aside by creditors of the bank. The authority seems to proceed to the extent that even by the consent of the depositor and the bank, the transfer could not have been made. In Dawson v. Bank, 5 Pike, 283, it was held that a bank could not apply the deposit of an individual to the payment of a debt due by a firm of which he was a member. This was put upon two grounds, one that the charter of the bank prohibited such set-off, the other because the debts were not mutual. On the latter ground this decision followed and was based upon Trammell v. Harrell, 4 Pike, 602, in which it had been held that under the statute of that state controlling set-off, a defen
In International Bank v. Jones, 119 Ill. 409 ; Coates v. Preston, 105 Ib. 473; Gregg v. James, Breese, 143; Burgwyn v. Babcock, 11 Ill. 28 ; and Hilliard v. Walker, Ib. 64, it is settled that partnership contracts are not joint and several under the statutes of Illinois so as to permit a defendant sued by a single partner on his own demand to set off the debt due him by the firm. Liggett Spring Axle Co.’s Appeal, 111 Pa. 291, does not touch the question involved. In none of these cases is there anything said indicating that a bank if sued would be controlled by any other rule than would apply to other defendants. But it is settled in this state that a demand in favor of the defendant against the plaintiff and another, jointly and severally bound, may be set off against the plaintiff suing alone. Moody v. Willis, 41 Miss. 347. If the bank had been sued by Baley it might have set off any demand it had against the firm of which Baley was a member, and might, because it could, apply his credit to the debt due by said firm.
The next objection taken by the administrator to the appropriation of the sum due to the intestate to the $500 note of the firm is that Rogers had drawn checks on the firm account in favor of third persons and in satisfaction of his individual debts, and that the bank had with knowledge of such misappropriation, or with sufficient notice to put it on inquiry, paid out the firm deposit on such checks and thus participated in the misapplication, by reason of which it should be made to replace such sums and apply them to the satisfaction of the said note.
It appears from the evidence that Rogers, who was the son-in-law of Baley, was introduced by him to the bank, and information given that Baley was a member of the firm of ~W. C. Rogers, and that he wanted Rogers to keep his account with said bank. It is not positively shown that Baley knew the account was after-wards so kept, but on one occasion he received a check from Rogers on the bank in payment of a private debt due by Rogers to himself, which check was paid by the bank.
There is no suggestion that the bank derived any benefit from any of these payments, or had any sort of interest in them, or procured them to be made. The broad proposition is announced that it was the duty of the bauk to protect the interest of Baley by scrutinizing cheeks drawn by Rogers, and by declining to pay such as it suspected were drawn in favor of his individual creditors.
It is not suggested either by the argument or the evidence that the bank knew that Rogers was appropriating the firm’s money to the payment of his own debts, otherwise than from the fact that the checks sometimes bore private memoranda, presumably put there for his own information and not as directory to the bank. Neither our own researches nor the result of the labor of counsel has disclosed a case in which, under such circumstances, liability has been fixed upon the bank for checks so paid. True it is that a bank may not participate in the misapplication of the deposit left with it by a firm by accepting checks drawn on it in payment of the individual debt of the partner to the bank. But ordinarily the bank has no concern in the destination of a fund for which a proper check is presented at its counter. The confidence that Rogei’S would apply the funds of the firm only to firm purposes was one reposed in him, not by the bank but by Baley, his partner: It had a right to assume, in the absence of strong proof to the contrary, that this confidence was not being abused, and to act with reference to such presumption. Banks are not trustees of their depositors in that sense that they must see to the application of funds drawn by those entitled to check against them. In the multiplicity of business transactions innumerable instances must occur in which circumstances known to the bank, or- some of its officers, would suggest doubts as to the destination of funds cheeked against, which circumstances, if investigated, would disclose to
There is no pretense of privity on the part of complainant in any misapplication of the funds of the firm of W. C. Rogers by the managing partner; the argument is, that if investigation had been made by the bank, the contemplated misappropriation would have been discovered, and that the bank had such notice as made it its duty to refuse payment of the checks drawn until investigation could be made.
The remaining objection taken by the administrator to the note of $500, paid by the application of the intestate’s private credit, is that it was not given for a partnership debt, nor for money loaned to the partner (Rogers) in the partnership affairs.
As to $400 of the sum represented by the note, it appears to have been borrowed by Rogers, and actually applied to the payment of commercial debts contracted by the firm in the due course of business. But as to the remaining $100, the objection is well taken. This sum was borrowed by Rogers from the bank to be applied to the payment of the interest then due on the $1500 note executed by himself and Baley, and payable to the bank. The bank knew this to be not a partnership debt, and as the money borrowed was to this extent at once applied to the payment of interest on this note, it was in legal contemplation a loan to Rogers for his own use, and being such the bank was chargeable with knowledge of his want of power to bind his partner. It knew all the facts, and the legal consequences which flowed from them it is conclusively presumed to have known.
The decree is erroneous, in so far as it allowed credit to the bank for this sum,
And for this reason must be reversed. A decree may be entered here for the proper sum. The costs of the appeal to be taxed against appellee; the costs of the court below against appellant.