M. R. Johnston Coffee Co. v. Page

Sloan, J., delivered the opinion of the Court. The question in this case is as to the right of an indorser to set off its deposit in an insolvent bank against its liability on notes held by the bank, maturing after the receivership; the makers having signed for the accommodation of the indorser. The appeal is from a decree dismissing the petition, all of the facts of which were admitted by the answer except the charge of insolvency of the makers, which, by agreement, was abandoned. On December 10th, 1930, George W. Page, bank commissioner of Maryland, was appointed receiver of the Chesapeake Bank of Baltimore. At the time of his appointment there were among the assets of the bank two notes made by M. R. Johnston and M. Grace Johnston, indorsed by the M. R. Johnston Coffee Company, Inc., one of the notes, for $1,100, dated September 9th, 1930, maturing January 9th, 1931, the other, for $500, dated November 22nd, 1930, ma- *505 taring December 22nd, 1930. Tbe loans were applied for by the appellant, tbe M. E. Johnston Coffee Company, wbicb was credited witb tbe proceeds, the makers receiving none of tbe money advanced. Tbe bank required tbe notes so to be made and indorsed. Tbe appellant bas on deposit in tbe insolvent bank $1,041.06, wbicb it bas requested tbe receiver to apply to tbe notes so indorsed by it, and, upon tbe refusal of tbe appellee to credit tbe appellant’s deposit against tbe notes, a petition was filed praying an order directing tbe credit to be made. The question raised by tbe petition bas not been before tbis court, the nearest approach to it being tbe case of Colton v. Drovers’ Bldg. Assn., 90 Md. 85, 45 A. 23, wherein it was decided that a depositor is entitled to set off bis deposit against bis promissory note held by a bank, even tbougb tbe note does not mature until after tbe bank bas gone into a receivership. In tbe opinion (page 92 of 90 Md., 45 A. 23, 25) it was said that tbe note “was a debt already incurred by tbe appellee, and payable to tbe bank when due.” An indorser is not indebted on tbe obligation until tbe note matures, so that tbe relation of debtor and creditor did not run concurrently with tbe note, as in tbe case just cited. Tbe appellant insists in tbis case that, because tbe indorser is tbe real party in interest, tbe same rule should be applied to it as to tbe maker of tbe note in tbe Golton case, even tbougb tbe Uniform Negotiable Instruments Law (Code, art. 13, sec. 48) makes no distinction between an accommodation maker and one for value so far as tbe bolder is concerned. In support of this contention, it urges tbis court to accept tbe authority of tbe decision in Building & Engineering Co. v. Northern Bank of New York, 206 N. Y. 400, 99 N. E. 1044, 1045, in wbicb tbe facts and procedure are identical witb those of tbis case. In that case tbe court, in distinguishing between tbe facts of tbe case and the provisions of tbe Uniform Negotiable Instruments Law, wbicb was in force in New York, said: “It nowhere appears from tbe Negotiable Instruments Law, or from anything that can be considered in determining tbe *506 intention of the Legislature, that said sections 3 and 55 (sections 15 and 48, article 13 of the Maryland Code) were intended to prevent the courts from determining, in equity, all questions between an insolvent holder of a note and the one primarily liable for the indebtedness on the instrument as a matter of fact, whether maker or endorser”; and: “If we assume that in an action at law the makers of the note must arbitrarily be treated as primarily liable thereon, and the plaintiff as secondarily liable thereon, it does not prevent the court, in an action in equity, from determining and enforcing the rights of the parties as the same are found as a matter of fact.” See also Winne v. Winne, 166 N. Y. 263, 271, 59 N. E. 832; note, 25 A. L. R. 950. Compare Curtis v. Davidson, 215 N. Y. 395, 109 N. E. 481. But, while this court has never had before it the precise question which this case presents, it has had occasion to express its opinion and to declare its position on the proposition that a court of equity may be appealed to to give relief where the real relations of the parties to a note are not what, from the instrument, they appear to be. In Jamesson v. Citizens’ National Bank, 130 Md. 75, 81, 90 A. 994, 996, quoting with approval from Union Trust Co. v. McGinty, 212 Mass. 205, 98 N. E. 679, it is said: “Care should be taken to adhere as closely as possible to the obvious meaning of the act, without resort to that which had theretofore been the law of this commonwealth, unless necessary to dissolve obscurity or doubt, especially in instances where there was a difference in the law in the different states. Approaching the act from this point of view, it is apparent that no relation of principal and surety is established or contemplated by any of its sections. It determines the liability of the various parties to the negotiable instrument on the basis of that which is written on the paper. The obligation of all makers, whether for accommodation or otherwise, is to pay to the holder for value according to the terms of the bill or note. Their obligation is primary and absolute. * * * The act makes no provision for the proof of another and different relation than that expressly undertaken and defined by the tenor of the instru *507 ment signed. The fact that one is an accommodation maker gives rise to a duty no less or greater or different to the holder for value than that imposed upon a maker who received value. This is expressly provided by the act, even though such holder knew at the time * * * that the maker was an accommodation maker.” ■ And this court (page 86 of 130 Md., 99 A. 994, 998), in expressing its opinion, said: “It would be a very unreasonable appeal to a court of equity, if one, who was primarily liable under a statute1, asked that the judgment be declared invalid, because at common law the defendant would have been a surety, while under the statute he is treated as a principal, just as the maker who got the money is. It would, in effect, permit a court of equity to repeal a statute which had been passed for the purpose of changing’ the common law in respect to this and other matters, as well as to have uniformity in this branch of the law, in which so many people of the country are interested.” See also Vanderford v. Farmers’ & Mechanics’ National Bank, 105 Md. 164, 167, 168, 66 A. 47. It will thus be seen that this court has disapproved any efforts to assert any other relationship or to put liability on any other basis than appears from the plain language of the act, and from the instrument itself. As between the parties to the paper, their relationship to it, and their liability on it, they all have their remedies. Under the law the appellee, receiver, can proceed against the maker, the indorser, or both. If we were to entertain the petition, it would take away this right, at least to the extent of the indorser’s deposit, and thus the remedy to be applied or denied would depend on the speed with which the respective parties got into court. If the receiver wefe to sue the indorser at law, we would have the situation presented in Curtis v. Davidson, supra, and the question might there arise as to whether the appellant could set off his deposit against his liability as indorser, but that would be another and a different case, as to which we express no opinion. The appellant suggests that, because a negotiable instrument may be discharged “by payment in due course by the *508 party accommodated, where the instrument is made or accepted for accommodation” (section 138 [2], article 13 of the Code), the appellant should he permitted to do' what the maker could do, that is, pay the note and receive credit for its deposit. Of course, payment by the accommodated indorser would discharge the accommodation maker, hut unless the notes are paid by the indorser, the receiver still has and should have recourse against the makers of the notes who are primarily liable under the 48th section of the act. The parties themselves cannot by their own acts affect the rights of the holder; they remain as they appear from the face of the notes and the indorsements thereon. In our opinion, the indorser (appellant) cannot invoke the aid of a court of equity to establish a relationship or liability different from that appearing on the notes, and in this proceeding is not entitled to an order for the set-off claimed. Decree affirmed, with costs.