Reichert v. Farmers State Savings Bank

Fead, J. Petitioner appeals from an order denying its petition to direct the receiver of defendant bank to transfer back to petitioner certain promissory notes and charge them to petitioner’s commercial deposit account. The matter was heard on petition and answer. In the course of its business, petitioner took short-time promissory notes from its customers. It indorsed to the order of, and discounted them at, defendant bank. The proceeds, at face, were credited to petitioner’s checking account. It was the practice of the bank to charge the notes back to such account if they were not paid by the makers in due course. When the bank closed it held $2,090.46 of the notes and the deposit account was $3,086.01. *307 The receiver is obliged to set off the amount of the notes against the respective deposit accounts of the makers if they are depositors. Reichert v. Fidelity Bank & Trust Co., 257 Mich. 535. Without an express agreement a receiver may not set off one man’s deposit against another man’s note. Bromfield v. Trinidad National Investment Co. (C. C. A.), 36 Fed. (2d) 646 (71 A. L. R. 542). No such tripartite express agreement was alleged as appears in the Bromfield Case. , To justify set-off, the accounts must be mutual. The liability of petitioner to the bank on the notes was contingent, by reason of indorsement. That of the bank to the petitioner on the deposit was direct. Consequently the accounts were not mutual and set-off could not be permitted. Mechanics’ Bank of Detroit v. Stone, 115 Mich. 648, is in point. Order affirmed, with costs. McDonald, C. J., and Clark,’ Potter, Sharpe, North, Wiest, and Butzel, JJ., concurred.