Case Name: Black, Respondent, vs. Whitewater Commercial & Savings Bank, Appellant
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1925-10-20
Citations: 188 Wis. 24
Docket Number: 
Parties: Black, Respondent, vs. Whitewater Commercial & Savings Bank, Appellant.
Judges: 
Reporter: Wisconsin Reports
Volume: 188
Pages: 24–30

Head Matter:
Black, Respondent, vs. Whitewater Commercial & Savings Bank, Appellant.
September 25
October 20, 1925.
Easton Johnson of Whitewater, for the appellant.
C. A. Enslow of Janesville, for the respondent.

Opinion:
Owen, J.
The bank defended the action which Black brought against it for the recovery of the proceeds of the auction sale upon the ground that Black had consented to the deposit of the money in the name of Black and Kyle and that Black agreed that said proceeds should be used by the bank toward the payment of the Patrick note in case said Patrick did not pay said note to the defendant. Upon this issue the jury found in favor of the plaintiff, and judgment was rendered on such verdict. It is rather mildly contended here that the verdict is not supported by the evidence. This contention cannot be sustained. Mr. Black testified positively that he made no such agreement and that the money was retained by the bank against his protest and in spite of his demand that it be paid to him.
It is argued that the bank had a right to retain the money because it appears that Black was insolvent. The contention that Black was insolvent is based upon a statement made in his cross-examination to the effect that the money withheld by the bank was all the money he had in the world. The issue of insolvency was not tendered by the pleadings and was at no time asserted as a reason for the withholding of the money. The fact that Black testified that he had no other ready cash by no means established his insolvency. While it is a rale of law that the de posit of a depositor becomes security for the payment of his debt to the bank in case of his insolvency (1 Morse, Banks & Banking (4th ed.) § 337; Curry v. Wisconsin Nat. Bank, 149 Wis. 413, 418, 136 N. W. 549), the relation of bank and depositor did not exist between Black and the bank so far as this money was concerned. This money came into the hands of the bank as the agent of Black, and it was its duty to pay the money over to Black. Its failure to do so constituted a conversion of the money. Wells v. Collins, 74 Wis. 341, 43 N. W. 160. The jury having found that the bank withheld the money without the consent of Black, its liability to Black is in tort and not on contract. The relation of bank and depositor does not exist, and the rule which permits a bank to retain the deposit of an insolvent depositor to apply on a debt not yet due has no application. It is plain that the judgment appealed from must be affirmed.
The appellant, seeks a reversal of the order denying its motion to offset the judgment. The power to offset judgments has been exercised by courts from an early day and is said to be inherent in courts and to depend upon no statute. No absolute right of setoff exists, but is a matter of grace, and the question whether a setoff should or should not be decreed rests in the sound discretion of the court to which the application is made. 15 Ruling Case Law, 823. It has been held that the discretion exercised by a lower court upon such application cannot be reviewed upon appeal. However, our statute expressly authorizes an appeal from an order made "upon a summary application in an action after judgment" (sec. 3069, Stats.), and such appeals have been heretofore entertained by this court. Lundgreen v. Stratton, 79 Wis. 227, 48 N. W. 426; Gauche v. Milbrath, 105 Wis. 355, 81 N. W. 487. We conclude, therefore, that, whatever may be the practice elsewhere, the settled practice of this jurisdiction permits an appeal from such an order. The discretion of the court is a judicial and not an arbitrary discretion and should be the subject of review. This is especially true where the granting of the setoff works inequity.
We now come to the question of whether the denial of the application to set off the judgment was such an abuse of discretion as to require a reversal. The lower court refused to grant the application because the conduct of the bank in withholding the money was a palpable violation of its duty as the agent of Black and constituted conduct so shocking to the conscience of the chancellor that relief should not be extended. The policy of this court to set off mutual judgments in the absence of countervailing rights or equities has frequently been declared. Welsher v. Libby, McNeil & Libby, 107 Wis. 47, 48, 82 N. W. 693, and cases there cited. As a general rule it may be said that the countervailing equities to be considered should be equities existing at the time the application is made. It has been sometimes questioned, if not held, that a judgment in tort should not be set off against a judgment on contract, because the conduct of the party against whom the judgment in tort exists was wrongful, and is necessarily repulsive to a court of equity. All judgments, however, when rendered are on an equal footing. They are conclusive evidence of a claim or demand which one party holds against another. They are in a sense contractual relations, even though one judgment may grow out of the wrongful conduct of another. The damages sustained by reason of such wrongful conduct are deemed to be fully requited by the judgment which is recovered for money damages. The party's wrongful conduct was taken into consideration by the court and jury which rendered the judgment against him, and whatever wrong was perpetrated is fully compensated by the amount of the judgment. It has been said that "all the peculiar features which may have characterized a claim are at once lost sight of, and merged when judgment is perfected on it, and the demand takes rank equally among all other judg ments." Barbour v. Nat. Exch. Bank, 50 Ohio St. 90, 99, 33 N. E. 542, 20 L. R. A. 192. This court virtually gave expression to the same view in Welsher v. Libby, McNeil & Libby, 107 Wis. 47, 82 N. W. 693. In Leitz v. Hohman, 207 Pa. St. 289, 56 Atl. 868, the court refused to set off "a judgment recovered in an action for slander against a judgment recovered on contract. While recognizing that there is no fixed rule which prevents a setoff of such judgments, the court said:
"But if one judgment is in contract and the other in tort, which implies intent to injure, though there is no fixed rule which prevents a setoff, yet the presumption is against it, and the party asking for it, especially if the tortfeasor, should show some equity in its favor. In such cases, as also where both judgments are in tort, the element of priority in time is generally of importance. And all of these rules and presumptions are subservient to the fundamental principle that each case is to be determined on its own circumstances and merits viewed with the eyes of a chancellor in equity."
In this case the bank probably breached its duty as the agent of Black. By this breach of duty the bank was enabled to retain in its possession moneys to which Black was entitled, and, if this application for setoff be granted, to apply the very money which it wrongfully withheld in satisfaction of a debt which was not due at the time of the wrongful withholding and for which the liability of Black was only that of an accommodation maker. Such conduct on the part of an agent cannot be viewed complacently by this court. This court on more than one occasion, but notably in Weinhagen v. Hayes, 174 Wis. 233, 178 N. W. 780, 183 N. W. 162, 187 N. W. 756, held that unfaithful and disloyal conduct on the part of an ag'ent is abhorrent to the letter and spirit of the law. A refusal to set off these judgments simply leaves the bank where it would have been had it turned the money over to Black in accordance with its legal obligations. To reverse the order by which in the discretion of the lower court it refused to grant the setoff would not only come well-nigh holding that the right of setoff is a legal right, but it would permit the bank to profit by its unfaithful and disloyal conduct. It should not be forgotten that judgments are set off as a matter of judicial policy and not as a matter of legal right. Judicial favor extended as a matter of grace' should not compensate breach of responsible duty or reward conduct abhorrent to the court whose favor is sought. We cannot say that the trial court abused its discretion in leaving the bank exactly where it would have been had it performed the duty devolving upon it as the agent of Black.
By the Court. — The judgment and the order appealed from are affirmed.