#### DIRNFELD *v.*FOURTEENTH STREET SAVINGS BANK.

Banks and Banking.

Tn the absence of a contrary understanding, when a bank receives from a depositor a check payable to the depositor and indorsed in blank by him, and places the amount to the depositor’s credit, the relation of creditor and debtor between them is created, and not that of principal and agent; and the entry of such deposit in the bank book of the depositor is equivalent in law to a deposit of money.

No. 2164.

Submitted November 3, 1910.

Decided April 3, 1911.

Hearing on an appeal by the plaintiff from a judgment of the Supreme Court of the District of Columbia, on a verdict directed by the Court, in an action for damages against a bank for its failure to pay a note of the plaintiff payable at the bank.

*Reversed.*

*12The Court in the opinion stated the facts as follows:

This is an action for damages for refusal to pay a note drawn by the plaintiff, Sigmund Dirnfeld, and made payable at the Fourteenth Street Savings Bank.

Plaintiff was a clerk in the Postoffice Department, and opened an account with defendant on May 19th, 1908, receiving the ordinary bank book of a depositor. The book showed deposits in May and June, and to July 9, when balanced, amounting to $485. The balance July 9th was $26.91. From July 9th to November 16, when again balanced, the total deposits were $259.91; and the books of the bank showed that the account was overdrawn that day by $0.65. October 26th, 1908, Dirnfeld executed a negotiable note for the sum of $52, payable to A. Herstein, or order, at the Fourteenth Street Savings Bank. November 16th, 1908, plaintiff went to the bank between 5 and 6 o’clock p. m., and deposited $43 in money and a cheek for $10 drawn by N. Stein upon the Columbia National Bank to the order of plaintiff. He made out the usual deposit slip showing the two items, aggregating $53. The money and check indorsed by plaintiff were received by the teller, and a credit was entered in the book for $53. The bank’s ledger showed this deposit under date of November 17th, and the true balance of $52.35, after deducting the overdraft of $0.65. The Herstein note was sent by a Philadelphia bank to the Biggs National Bank for collection, with instructions not to protest for nonpayment. The Biggs National Bank presented the note properly indorsed, at defendant’s bank about 11 a. m. November 17th. Payment was refused by the bank for want of funds of the drawer, and the note was returned. Plaintiff testified that while his account was running with defendant he had sometimes deposited checks. There was m> agreement or understanding concerning his right to draw against checks so deposited, and he had drawn against them at will. Some other testimony relating to damages need not be mentioned.

Defendant’s receiving teller testified that when plaintiff *13opened his account, he was told that he would not be permitted to check against “uncollected items,” which were explained to be checks on other banks than defendant, and that he agreed to the same. The testimony of this witness and the cashier tended to show that the reason that the note was not paid when presented about 11 o’clock a. *m.*on November 17th was that the Stein check had not then gone through the clearing house. That said check had been deposited at the opening of business on that day with the Commercial National Bank, with which defendant did its “clearing house business,” and by that bank had been sent through the clearing house, and that defendant could not possibly hear from it before 2 or 3 r. m. Said check was paid in the usual course of business the same day, and defendant received the money after the note had been refused payment. That deposits received by defendant after 3 p. m. are entered on the ledger the succeeding day in the usual course of business, and this accounted for the slight discrepancy between the bank book and the ledger. That plaintiff did not tell the teller of the note due the next day at the bank, and defendant did not notify plaintiff that payment of the note had been refused.

The duty of the defendant to pay the note on presentation is founded on sec. 1391 of the Code [31 Stat. at L. 1405, chap. 854], which provides that “where the instrument is made payable at a bank, it is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon.”

Upon the conclusion of the evidence, the defendant moved the court to direct a verdict in its favor, on the ground that defendant was under no duty, contractual or otherwise, to honor the note of the plaintiff when presented, as the evidence did not show that the plaintiff had sufficient funds on deposit to pay said note, the Stein check not then having been paid.

The motion was granted, and from the judgment on the verdict, so directed, plaintiff has appealed.

*Mr. Alexander Wolf*and *Mr. Levi H. David*for the appellant.

*14
      *Mr. H. Winship Wheatley*for the appellee.

Mr. Chief Justice

Shepard delivered the opinion of the-Court:

The general contention of the appellant is correct, nor has-it been denied that the verdict cannot have any support in the evidence of the defendant tending to show that plaintiff had agreed to the condition that he was not permitted to draw against uncollected checks received as deposits, as that evidence was disputed. Nor on the other hand, did the plaintiff testify that defendant had agreed that he might draw against such checks as if they were deposits of money. The farthest he-went was to say that occasional checks drawn by him in part against deposited checks had been honored during the period of his account with the hank. It is proper to say, also, that while the natural inference from the simple statement of the plaintiff that the check was indorsed by him when delivered doubtless is that the indorsement was in blank, that is to say, of his name without the prefix “for collection,” or “for credit” even, it is an inference that must necessarily be deduced on the motion to direct a verdict.

The single question presented by the motion to direct the-verdict is whether the receipt of the check, indorsed in blank, as a deposit, and its entry in the bank book of the plaintiff, was equivalent in law to a deposit of money, and therefore made it the duty of defendant to honor the note when presented ? In other words, was it the legal effect of the transaction to vest the ownership of the check in the defendant, or simply to constitute it the agent of the plaintiff, merely, for its collection? If the defendant became the owner of the cheek, the direction of the verdict for the defendant was erroneous. If it became merely the agent for collection, the verdict was right, because the collection had not been made at the time the note was dishonored, and without its inclusion plaintiff did not have sufficient funds in the defendant’s hands to meet it. It is settled law that when money is deposited generally in a *15bank, its ownership passes to the bank, and the relation of debtor and creditor is at once created. But as regards the relations created by the indorsement and deposit of negotiable' paper, there is a great conflict of opinion. Probably many of these apparently conflicting decisions of the courts' of last resort might be reconciled by an analysis of the particular facts respectively involved. In the case at bar, we are not embarrassed by any restrictive indorsement of the check, or by any special form of receipt. The indorsement was in blank, and the deposit was entered in the bank book as cash. Under-such conditions the rule in Maryland is that the bank becomes the owner of the paper by such indorsement. *Tyson*v. *Western Nat.*Bank, *11*Md. 412-417, 23 L.R.A. 161, 26 Atl. 520; *Ditch*v. *Western Nat. Bank,*79 Md. 192, 23 L.R.A. 164, 47 Am. St. Rep. 375, 29 Atl. 72, 138. The court of appeals was divided, and the rule was established by the majority. It may be, as contended by the appellee, that the decisions-establishing the opposite view are in the majority. It would serve no useful purpose, however, to review the cases cited on each side of this vexed question, because we understand that the question has been set at rest in this jurisdiction by a recent decision of the Supreme Court of the United States. *Burton*v. *United States,*196 U. S. 283-302, 49 Atl. 482-488, 25-Sup. Ct. Rep. 243. Although that was a criminal case, the point was directly involved, and it was said: “When a check is taken to a bank, and the bank receives it and places the-amount to the credit of a customer, the relation of creditor and debtor between them subsists, and it is not that of principal and agent.”

-Of course, this relation of creditor and debtor created by the receipt of the indorsed check, and its entry to the credit of the depositor as money, would not subsist in the face of a direct notice and understanding to the contrary. But whether there was such understanding in this case is a disputed fact, which must be submitted to the jury.

Being of the opinion, for the reasons given, that it waa *16error to direct a verdict for the defendant, the judgment will be. reversed, with costs, and the cause remanded for another trial. *jReversed.*