First National Bank v. Peltz ( 1896 )

Opinion by

Mr. Justice Mitchell,

The first assignment of error cannot be sustained. Wliile a bank which is the holder of a note, and has on deposit at the time of maturity a sum to the credit of any party liable to it on the note sufficient to pay it, and not previously appropriated by the depositor to be held for a different purpose, may apply the deposit to the payment of the note, yet it is not in general bound to do so. The cases where the right becomes a duty on the part of the bank rest on the special equity of the party, usually the indorser, to have the payment enforced against the depositor as the one primarily liable: Commercial Nat. Bk. v. Henninger, 105 Pa. 496. And even in these cases all the cireum-stances enumerated must exist. Thus the deposit must be sufficient at the time of maturity of the note. Subsequent deposits will not raise the duty: People’s Bank v. Legrand, 103 Pa. 309; First Nat. Bk. v. Shreiner, 110 Pa. 188. And the deposit must not have been previously appropriated to any other use: cases cited supra, and German Nat. Bank v. Foreman, 138 Pa. 474, where the principle was conceded though an exception of doubtful correctness was made against a mere notice from the depositor not to pay, unaccompanied by a specific appropriation to a different purpose. And lastly the deposit must be to the credit of the party primarily liable. The rule is thus stated by our Brother Williams in the latest case on the subject: Mechanics’ Bank v. Seitz, 150 Pa. 632, “ The general rule is well settled that, while the bank may appropriate funds in its hands belonging to any previous party to the note, to the payment of it, . . . yet it is not bound to do so. The note may be treated as, in effect, an order or check authorizing the bank to apply the deposit to the payment, but the deposit is not payment in law. . . . But where the bank holds funds of the maker when the note matures, it is bound to consider the interests of the indorsers or sureties, and if it allows the maker to withdraw his funds after protest, and the indorsers are losers thereby, the bank is liable to them. The reason of this rule is, that the maker is the principal debtor, and liable to all the indorsers, whose undertaking is to pay if he does not.”

The appellant’s offer was defective in two respects, it was not to show the state of Kreamer’s account at the maturity of the note, but some days after, and Kreamer was not the maker of the note but an indorser. It is true that it is claimed by appellant that this was an accommodation note and known by the bank to be so, and that Kreamer was in fact the principal debtor, even as regards the maker. But, if this was so, it was by the arrangement among the parties. On the face of rhe note the maker was primarily liable, and although, the bank may have supposed, as tbe cashier testified, from the presentation of the note for discount by the first indorser, that the second and third indorsements were for his accommodation, it was under no obligation to draw that inference as to the maker. But if it had been, the duty of the bank to appropriate has not been carried by any case beyond the deposit of the maker. Nor is it desirable that it should be. On the face of the paper the maker is the party to pay, and while the bank may upon dishonor secure payment from the deposit of any party liable to it, yet there is great force in the reasons for limiting its duty to do so to the party legally answerable in the first instance on the face of the paper. The rule thus rests on a liability fixed by law and capable of immediate and conclusive determination by the evidence of the note itself. Otherwise it is thrown open to contest on the private arrangements of parties, to questions of notice and proof, and to all the uncertainties of the final ascertainment of the facts. While money deposited becomes the property of the bank, yet that result flows from the nature of money, which is to be measured by amount and not by physical identity. Hence a deposit of $100 is returned by another $100 without regard to the identity of the notes, or the coin, because legally they are the same. Except for this characteristic a deposit of money to be returned on demand would be like the deposit of any other article a mere bailment. But though for this reason the title to money deposited passes to the bank, yet the whole business of banking is founded on the faith of the immediate availability of the deposit, as money, for the use of the depositor, and any rule that interfered with the freedom of action of either bank or customer, by compelling a stop of their dealings with each other to examine the relations of other parties to the deposit would go far towards destroying that instant convertibility which is the essence of the business. We do not think it desirable to go beyond the line already clearly marked by the authorities.

The second assignment of error cannot be sustained. The giving of a judgment or other security by the maker or a prior indorser does not discharge a subsequent indorser: Guarantee Co. v. Craig, 155 Pa. 343.

The third assignment however is well founded. The offer of defendant was in substance to show that he had been indemnified against the present liability on the note in suit by a judgment against the prior indorser Kreamer, and that he had satisfied that judgment on the procurement of the plaintiff bank, whereby he not only lost his security for indemnity in regard to the present claim, but the plaintiff advanced its own judgment against Kreamer to the position of a prior lien. This offer was entirely competent. It was to prove facts which tended to raise an estoppel against the plaintiff in favor of the defendant. It is- argued by the appellee that the certificate of liens presentee! was- not such as was admissible in evidence, but the objection made and sustained was to the offer as a whole, which was of the- certificate, etc., to-be followed by proof, etc. How the facts were to be proved, and whether when proved they were sufficient to-raise an estoppel,, were questions not yet reached in the case. It is sufficient that the offer was a general one to prove relevant facts. As such it was competent and should have been admitted. Further-objections to the mode of proof, or the- sufficiency of the facts when proved could be raised later.

Judgment reversed and; venire-de novo awarded.