Humphrey v. County National Bank

Mr. Justice Paxson delivered the opinion of the court, This was an action of assumpsit brought to recover the amount of two promissory notes discounted by the County National Bank of Clearfield, plaintiff below, one of said notes amounting to $1,975 ; the other to $169.04. The defence set up was that the notes in suit were renewals of notes discounted by the bank as early as 1866 ; that prior to the discount of the original note the defendant left with the bank certain notes of one A. C. Finney, indorsed by Samuel Mitchell, to the amount of $4,000, the longest of which notes had thirty months to run; that these notes were left with the bank by an arrangement made between the defendant below and James T. Leonard, president of the said bank, by which arrangement the bank was to hold these Finney notes as collateral security for [421] discounts which the bank was to give the defendant. Shortly afterwards the bank discounted notes of the defendant, and continued so to discount notes from time to time. The- notes generally were discounted without an indorser. It was contended that the notes in suit were but renewals of this long series of discounts. It is to be observed, however, that each of the notes in suit has upon it as indorser the name of William A. Wallace, a gentleman of well known pecuniary responsibility. It is a singular circumstance that notwithstanding the notes alleged to have been deposited as collateral were made and indorsed by responsible parties, no trace of them appears upon the books of the bank; there is no very clear proof as to their payment; nor is there any evidence that the defendant, who was evidently in a position to need the money, ever made any demand upon the bank for the proceeds, or even any inquiry about them. There was evidence sufficient, however, of the deposit of the collaterals to carry the ease to the jury. Upon the trial the defendant claimed not only that the notes in suit were paid by the collateral, but that lie was entitled to a certificate for the balance due him upon the collateral, after the payment of his notes. The Court below allowed the claim so far as it was a defence to the notes, but held that the surplus was barred by the Statute of Limitations. The jury found a verdict in favor of the defendant, who sued out this writ, and has assigned for error the instructions of the Court upon the Statute of Limitations. We are of opinion that it was error to apply the Statute. It is a settled rule of law that when a deposit is made in a bank the Statute does not begin to run until after demand is made. It is sufficient to refer to two of the later cases, viz. : Finkbone’s Appeal, 86 Pa. St., 868, and McGough v. Jamison, 107 Id., 386. It is true the defendant was not technically a depositor of money to be drawn out on his cheek, but we are unable to see any substantial difference between sueh case and the one in hand. He was a customer or dealer with the bank; was having a line of discounts, and the notes in controversy were deposited as collateral to such discounts. What was the duty of the bank when the collateral notes were paid ? It was to deposit or carry the proceeds to the credit of the defendant’s account. He would then occupy the position of any other depositor. The theory of the defence was that the collateral notes were paid ; indeed it is only upon this theory that he would have any defence to the notes in suit, or claim to a certificate. If then the notes were paid, and the bank did its [422] duty bv carrying the proceeds to his credit, in what respect is his position different from that of any other depositor? If on the other hand the bank committed a breach of duty by not applying the proceeds of the collateral notes to the defendant’s account or to his credit, what is the result? The bank cannot take advantage of its own wrong. It was the pledgee of the collateral notes. The latter were pledged for the payment of the notes discounted and to be discounted by the bank. If the collateral notes have been paid, the proceeds are and must be held for the same purposes that the notes themselves had been previously held. The change in the nature of the collateral by their conversion into money can make no essential difference. It is well settled that mutual demands do not of themselves extinguish each other. The notes discounted by the bank for Humphreys have not been paid in point of fact. The bank might have applied the proceeds of the collateral notes to their payment, but it did not. It might have called upon Humphreys to redeem the pledge, but it did not. Not having exercised any such right, it holds the collateral, whether it be notes or money, as pledgee for Humphrey’s jiotes discounted. Those notes are still unpaid. Can it be doubted that had Humphrey tendered the amount of his notes to the bank instead of waiting to be sued, he could h'ave demanded the return of his collateral? The Statute of Limitations would have been no answer to such a demand. “ If the pawnee does Jiot choose to exercise his acknowledged right to sell, he still retains the property as a pledge, and upon tender of the debt he may, at any time, be compelled to restore it; for prescriptioji, or the Statute-of Limitations, does not run against it”: Kemp v. Westbrooke, 1 Vesey, 278; Jones on Bailments, 84. We are of opinion that it was ei'ror to apply the Statute in this case, and for this reason the judgment must be reversed. The verdict was in favor of the defendant, which of course defeated a recovery upon his notes discounted by the bank. He may, upon another trial, get a certificate for the balance he claims to be due on the collaterals, or he may fail in this and have to pay his notes besides. But he has a right to take this risk. Judgment revei'sed and a venire facias de novo awarded.