Court Opinion

ID: 7897397
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:53:19.975143+00
Date Added: 2024-06-11T16:32:08.161636
License: Public Domain

Miller, J.,
delivered the opinion of the Court.
The Maryland Central Railroad Company had for several years made its deposits in the Old Town Bank. These were checked out by the company’s checks, from time to time, signed by its treasurer, and the usual depositor’s account was kept by the bank. The company needed money to pay the interest on its bonds,^hich fell due the 1st of May, 1884, and applied to the. bank for a loan of $5000. The bank refused to discount the company’s note for that sum, unless each of its twelve directors would give his individual note for $500 as collateral security therefor. This was agreed to, and the company’s note for $5000, *427payable at thirty days, and dated the 1st of May, 1884, was accordingly discounted, and the proceeds placed to the company’s credit in its account. The individual notes of the directors (one of whom was the defendant,) all bear the same date, 1st of May, 1884, and are all in the same form. Street’s note is as follows :
“Bel Air, May 1st, 1884.
“The Maryland Central Railroad Company having given its note of even date herewith to the Old Town Bank of Baltimore^ for the sum of, $5000, payable thirty days from date, and pledged its receipts for the month of May in payment of the same, I hereby agree and promise, in case of default in the payment of said note at maturity, to pay the Old Town Bank of Baltimore, thirty days from this date, the sum of five hundred dollars.”
“J. M. Street.”
Just prior to the giving of these notes, on the 25th of April, the Board of Directors of the Company passed a resolution to the effect “that all funds accruing in the treasury of this Company during the month of May next, shall be set apart and applied to the payment of the interest of the first mortgage bonds of this Company falling due on the first day of said month, or so much of said funds as shall be necessary to pay said interestand we shall assume that the bank had knowledge of this resolution at the time it discounted the Company’s note and received the collateral notes from the directors.
The receipts were duly paid into the bank, and the latter by order of the Company paid the interest coupons on their bonds. The aggregate amount of the receipts, including the proceeds of the $5000 note, was more than sufficient to pay the interest, and this note if the company had permitted it to be so applied. But during the running of the note, the Company checked out from the bank *428more than $25,000, so that at its maturity the hank had no funds in hand to apply to the note. In fact, the company’s account was overdrawn on the 1st of May about $2000, and on and after the maturity of the note was always overchecked. The authority of the 'treasurer to draw checks upon the bank was never countermanded by the Company, save by the resolution above cited, which related merely to the payment of the interest, and no notice of any countermand was ever given to the hank except as conveyed by that resolution. In the following autumn of 1884, the company passed jnto the hands of a receiver, and its note not having been paid, the bank brought suit against those of the directors, (including the appellant), who had refused to pay their individual collateral notes.
The action is defended upon the theory that the resolution and the agreement between the Company and Street, recited in the latter’s collateral note, constituted an irrevocable pledge of the receipts for the payment .of the $5000 note, and neither the company nor the bank, had any right to apply the money to any other purpose until that note and the unpaid coupons were provided for and paid, and as the receipts were sufficient for that purpose, the note was, in fact, paid before its maturity.
But we think it clear that this position is not tenable. The resolution simply set apart so much of the funds accruing in the company’s treasury as might be necessary for that purpose, to pay the interest on its bonded debt, and this was carried out by the company by directing the bank to pay and take up the interest coupons which the bank accordingly did, and it still holds these coupons. As between the company and the directors who gave these collateral notes, the relation of principal and surety existed, and the bank was the creditor to whom the security was given. One of these notes was given by the appellant, Street, and it is before us for construction. It *429recites that the company had “pledged” its receipts for the month of May for the payment of its $5000 note, and it is true that the bank, when it received his note, had notice by this recital of that pledge or promise, but by his note his promise to the bank was to pay to it in thirty days the sum of $500 “in case of default in the payment of the company’s note at maturity.” That note was not paid at maturity, and Street’s obligation to the bank became absolute. This, as it seems to us, is the obvious construction and effect of this instrument.
The bank was no party to any agreement between the company and its sureties, entered into no obligation to carry out any pledge the former had made to the latter, nor did it agree or assent to receive the money and apply it in accordance with such pledge. Mei’e notice or knowledge that such a pledge or promise had been given by the company to the sureties, clearly would not have justified the bank in refusing to pay the checks afterwards drawn upon it by the company. The case is quite different from that of Baugher vs. Duphorn, 9 Gill, 314, which was specially relied on by the appellant’s counsel. In that case a vendee of lands gave to the vendor bonds with sureties for the payment of the purchase money, and at the same time agreed with his sureties that he would deliver bark taken from the land to a certain firm and apply the proceeds to the payment of the bonds. The vendee assigned the bonds to one of the firm, who were not parties to this contract, but who afterwards assented that the proceeds of the bark should be so applied, and the bark was then delivered to them in accordance with this arrangement, and they sold it and received the proceeds. In this state of facts, the Court very properly held that it was not competent for the obligor in the bonds and the firm to apply the proceeds of the bark to any other purpose without the consent of the sureties, and that these proceeds constituted a fund dedicated to the payment of the bonds, and the as*430signee of the bonds having had notice of this fact and having assented to such dedication, the fund in his hands was applicable to the bonds in the first instance, and as soon as he received it the law applied it to their payment.
(Decided 22nd June, 1887.)
But here there was no such assent on the part of the bank, nor any such tripartite agreement between the bank, the sureties, and the' company. The bank simply received'the moneys of the company on deposit, and was bound to pay them out on the depositor’s checks. When, asked to discount the company’s note, it refused to do so without receiving these individual notes as security, and they were given. Street, no doubt, gave his note upon the assurance by the company that its receipts for the month of May were pledged, or should be applied to the payment of the note for which he became surety, but the company failed to keep this promise or pledge, and for this failure it is’ neither reasonable nor just that the bank should be held responsible.
From this view of the cáse it follows that there was no error in the rulings of the Court nelow upon the prayers to which alone exception was taken, and the judgment must be affirmed. ' '

Judgment affirmed.