North Bridgewater Savings Bank v. Soule

| Mass. | Oct 22, 1880

Lord, J.

The first question presented is as to the liability of the defendant on the three notes signed by him as surety for the firm of Porter & Southworth. The defendant contends that the plaintiff bank is bound by the action of its treasurer, and is estopped to deny that the notes have been paid to the bank, or that the defendant now lawfully holds them.

This depends upon the decision of several different questions; for if, in point of fact or by operation of law, these notes were paid, then they are discharged, not by way of estoppel, but by satisfaction. If, upon the other hand, they have not been paid, but the legal custodian of them had accepted from the maker something which he had the right to accept in lieu of payment, and had actually delivered the notes to the defendant as paid, and this was done in a course of proceeding authorized by the plaintiff, or subsequently ratified by the plaintiff, the plaintiff would be estopped from denying the payment. If the settlement were made without the plaintiff’s authority, and by it any property of value came into possession of the plaintiff, or the defendant was put in a worse situation than before, the plaintiff could not disaffirm the contract, without repaying to the defendant the money paid by him, or restoring him to his former condition.

A careful examination of the facts as reported does not disclose either of these conditions. In point of fact, the notes were not paid. The evidence reported would not have warranted a jury in finding that the defendant changed his condition to his prejudice. The arrangement was apparently a personal arrangement between himself and Edward Southworth. It does not appear that either of them understood that his own liabilities upon the various contracts were in any manner to be affected; but, on the other hand, their respective liabilities were to remain the same, except that, in the subsequent settlement between the defendant and Edward Southworth, Southworth was to be permitted to set off his liability for contribution on the note held by the Randolph National Bank against his claim against the defendant upon the disputed notes. If this arrangement had been actually consummated, a different question would have been presented. As it is, the whole agreement was executory, and still remains so. The delivery of the notes in suit to the defendant was merely for the purpose of enabling him to prove them in bankruptcy, and not for the purpose of discharging the defendant from his liability upon them; that was to remain. The giving up to Southworth the note which the defendant paid at the Randolph Bank did not discharge Bouthworth’s liability to the defendant upon such note, and was not understood by either of the parties to be such discharge, but the full amount of his liability was to remain and be accounted for between the parties. The mere fact that the defendant did not know that the notes had been taken from the register’s office is a wholly immaterial fact, and can in no mode affect any one’s title to them.

If we could see that from any or all these facts a jury would be warranted in finding a discharge of the defendant, in law or in fact, by reason of payment or by estoppel, or if we could see any evidence of fraud upon the part of the plaintiff or it’s authorized agent, such as would relieve the defendant from his liability upon the notes, we should direct the case to stand for trial, so far as those notes are concerned. But, seeing nothing which would warrant a jury in finding the defendant to be discharged, we think the plaintiff is entitled to judgment upon them.

The only remaining question is whether the defendant is entitled to set off the deposit in the plaintiff bank assigned to him by Patrick Fitzgerald in March 1877. This claim for set-off is made under the St. of 1878, c. 261, which enacts that “any person indebted to a savings bank in this Commonwealth, whether his indebtedness is secured or not, may in any proceeding for the collection thereof, or for the enforcement of any security therefor, set off the amount of any deposit in said bank held and owned by him at the time of the commencement of such proceeding, and of the interest due thereon: provided, however, that this act shall not authorize the set-off of any deposit purchased or acquired from another after the commencement of proceedings in equity to restrain such bank from doing its usual business, or after the issuing of an order under the provisions of chapter seventy-three of the acts of the year eighteen hundred and seventy-eight.”

It is not contended by the plaintiff that the interest of the defendant in the deposit in question is not included under the words “held and owned by him,” in the St. of 1878, o. 261; and a consideration of the proviso, by which a particular class of assignments is excluded from the operation of the statute, shows very clearly that the Legislature regarded the words “ held and owned by him” as including an ownership acquired by assignment. The objections urged by the plaintiff are two: first, that the defendant, in order to maintain his claim, ought to have given notice to the bank of his acquisition of Fitzgerald’s deposit; and, second, that the St. of 1878, c. 261, is unconstitutional.

The latter of these objections is first to be considered, for, if it be sustained, the whole proceeding for set-off falls to the ground.

No argument is made upon the question, and the making of the objection appears to have followed a suggestion coming from the attorney general’s office to the receivers of the North Bridgewater Savings Bank, in May 1878, that there were grave doubts as to the constitutionality of the law as applied to insolvent savings banks. In what respect the grave doubts have arisen is left quite indefinite.

On a careful consideration of the statute, we have been unable to perceive in it any element of unconstitutionality. The only ground on which an apparent objection to the statute might rest is the fact that a creditor of the bank, who is also a debtor of it, is entitled, in the case of the insolvency of the bank, to recover, up to the limit of his indebtedness to the bank, a larger proportion of his claim against the bank than one who is merely a creditor. But such an objection is only an apparent one. Upon examination, the provision of the statute in this regard is found to be really an equitable provision. The right of set-off is originally an equitable right, and is based upon equitable principles. It is obvious that, at any time before the commencement of proceedings in equity to restrain a bank from doing business, or before the issuing of an order under the St. of 1878, c. 73, the amount equitably due to the bank from any debtor of the bank who was also a creditor would be simply the balance of his debt, after deducting all credits due him from the bank. If, as the result of such proceedings or order, the demand of the debtor against the bank were to be reduced while his debt remained unchanged, it would follow that by the insolvency of the bank his equitable indebtedness to the bank would be increased. It was to remedy such a liability that the statute was passed; and its provisions are similar in effect to those of the insolvent law, which permit demands against the insolvent debtor to be set off in actions by the assignee in insolvency, unless they" have been acquired within six months, and with reasonable cause to believe the debtor insolvent. Gen. Sts. c. 118, § 48. The limitation of six months was in this case deemed by the Legislature unnecessary, perhaps on account of the improbability of speculation upon the approaching insolvency of a savings bank, and the restriction in the St. of 1878, c. 261, is laid only upon claims acquired after proceedings actually begun or order issued.

As to the want of notice, there is nothing in the statute that requires notice as betweeen the parties. If the right of set-off had been given subject to the provisions of the Gen. Sts. e. 130, or any part thereof, the question would be a different one; but we are clearly of opinion that, to maintain a set-off under this statute, no notice of assignment to the bank is necessary. The amount of the deposit assigned to the defendant by Patrick Fitzgerald, and of the interest due thereon, must therefore be set off against the amount due from the defendant.

Judgment accordingly.