Court Opinion

ID: 6240154
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:42:30.552782+00
Date Added: 2024-06-11T08:58:10.457863
License: Public Domain

OPINION,
Mr. Chief Justice Paxson :
The plaintiff bank had discounted the note in controversy, and was therefore the holder. At the time the note matured, John Shoup, the maker, had on deposit with the bank more than sufficient to pay it; but Shoup, conceiving that he had a defence as against the payee, notified the bank not to charge it off against his account at maturity, and at the same time gave the bank a bond of indemnity to secure it in case it failed to recover against the indorser. Being thus indemnified, the bank did not charge the note to Shoup’s account, and brought this suit against the payee, who was of course indorser. The latter defended upon the ground that he was discharged as in-dorser, by reason of the failure of the bank to collect the note from the funds of the maker in its hands. The court below held that the indorser was liable, and entered judgment against him for the amount of the note.
The case is ruled by Commercial N. Bank v. Henninger, 105 Pa. 496. It was there held that “ where a bank is the holder of a note payable at the banking house, and upon its maturity the maker has a cash deposit in said bank exceeding the amount of the note, which deposit is not specially applicable to a particular purpose, the bank is bound to charge up the amount of the note against the deposit. In such case, the note is in effect a draft on the bank in favor of the holder, and in discharge of the indorsor.” The case in hand comes directly within this ruling. The money was there to the credit of the maker; it was not a special deposit, nor had it been specifically appropriated to any other purpose. The maker could have drawn his money out the day before the note matured; he might have turned it into a special deposit, or he might have appropriated it to the payment of some other note. As was said *480in Commercial N. Bank v. Henninger, supra: “ There is no doubt as to the right of the depositor to control his deposit up to the point where the rights of others attach. He may draw it out by his check ; he may apply it to a particular purpose, by making it a special deposit, or by special directions communicated to the bank.”
The learned judge below appears to have been misled by the following passage from the opinion in the ease referred to: “ It must be conceded that if the deposit had been special, or, if previous to the maturitjr of the note, any arrangement had been made between the depositor and the bank, by which the bank had been forbidden to apply the money in its hands to the payment of these notes, the indorser would not be discharged.” The learned judge below has omitted the sentence immediately following, which explains what was meant by this language: “ As was held in Bank v. Speight, 4T N. Y. 668, ‘if before the maturity of the paper held by a bank against a depositor, an arrangement is made by which the bank agrees to hold the deposit for a specific purpose, and not to charge the note against it, the bank may be regarded as a trustee, and the deposit special. In such a case, in the absence of fraud or collusion, an indorser upon such paper has no right to require the application of the deposit towards the payment of the paper upon its maturity.’ ” Considering the above paragraph as a whole, it will be seen that it means merely that where a depositor has made a special application or appropriation of his balance, and so notifies the bank, the latter cannot charge off the note against his deposit. This arises from the fact that a man may do what he will with his own so long as he retains control of it. Here, the depositor retained full control over his deposit; made no appropriation of it, but retained it subject to his check; then, by a collusive arrangement with the bank, which was the holder, induced the latter to violate its duty to the indorser. It was an arrangement which the bank had no right to make. That the deposit did not, in any sense, become a special one, is shown by the fact that it remained in the bank subject to Shoup’s check. Being so subject, it was the duty of the bank to charge off the note against it, and by its failure to do so the indorser is discharged.
Judgment reversed.