Shuman v. Citizens State Bank

Bruce, J. (after stating the facts as above). There are only two matters to be decided upon this appeal. First, as against the maker of a demand note which draws interest and is made payable at no particular place, is a demand necessary to mature' such a note, or is it due at once and upon delivery ? Second, has a bank the right to apply to the payment of an overdue note held by it a general deposit of the maker, when part of the moneys in such deposit are owned by some other party, but the bank has no notice or knowledge, actual or constructive, of such claim of ownership until after the application ? There can now be no longer any question under the authorities that a bank will be protected in applying a deposit of money to the payment of an antecedent debt of the depositor, where, though the money is in fact trust moneyj it is deposited without any knowledge of the trust on the part of the bank, and the application to the debt is consented to by the trustee or depositor. Tough v. Citizens’ State Bank, 89 Kan. 583, 132 Pac. 174; McStay Supply Co. v. Stoddard, 35 Nev. 284, 132 Pac. 545; Pom. Eq. Jur. § 1048; Miller v. Race, 1 Burr. 452; School Dist. v. First Nat. Bank, 102 Mass. 174; Marsh v. Oneida Cent. Bank, 3 Barb. 298. It seems also to be generally conceded that if a deposit of money is made in the face of an overdraft or of a past-due obligation, such consent will be implied from the mere fact of the deposit. Kimmel v. [604] Bean, 68 Kan. 598, 64 L.R.A. 785, 104 Am. St. Rep. 415, 75 Pac. 1118; First Denton Nat. Bank v. Kenney, 116 Md. 24, 81 Atl. 227, Ann. Cas. 1913B, 1337; 5 Cyc. 550, and notes; Pom. Eq. Jur. § 1048. The question now before this court is whether a demand note occupies the same place as an overdraft or a past-due obligation; that is to say, is the depositor required to look upon it as an ever present and immediate liability, so that a deposit of money will be deemed to be accepted and made with the implied permission to apply the deposit to the payment of the debt. That a demand note may be thus offset is, we believe, the only logical conclusion which can be reached if we once accept the premise that a demand note, even though drawing interest, is due at the time of its delivery, and as between the original makers needs no presentment or demand. This premise, although it is seemingly illogical, and although we believe opposed to the original intention of the law merchant, is supported by an overwhelming weight of authority, and was so supported at the time of the drafting of the so-called uniform negotiable instruments act, its approval by the commission on uniform state laws, and its adoption by over thirty states of the Union, including North Dakota. Brooks v. Mitchell, 9 Mees. & W. 15, 11 L. J. Exch. N. S. 51, 4 Eng. Rul. Cas. 399; Church v. Stevens, 56 Misc. 572, 107 N. Y. Supp. 310; Kraft v. Thomas, 123 Ind. 513, 18 Am. St. Rep. 345, 24 N. E. 346; Fankboner v. Fankboner, 20 Ind. 62; Burnham v. Allen, 1 Gray, 496; Curran v. Witter, 68 Wis. 16, 60 Am. Rep. 827, 31 N. W. 705; Cousins v. Partridge, 79 Cal. 224, 21 Pac. 745; 7 Cyc. 848, and notes; Palmer v. Palmer, 36 Mich. 489; O’Neil v. Magner, 81 Cal. 631, 15 Am. St. Rep. 88, 22 Pac. 876; Darling v. Wooster, 9 Ohio St. 517; Hitchings v. Edmands, 132 Mass. 338. That act makes no effort to change this then almost universal rule, and in terms requires the presentment or demand only in cases where the rights and liabilities of indorsers and of holders in due course are concerned. See §§ 6355, 6372-6376 and 6548, Rev. Codes 1905. We must presume from these facts that the then almost universal rule of construction was intended to be adopted and adhered to, and that it was the intention of the framers of the negotiable instrument law and of the legislatures that adopted it, that a demand note should, [605] as between the original makers, be deemed to be due and payable from the very time of its delivery. If a change in the rule is now to be made, it should be made by the legislature, and not by the courts. If the debt was due at the time of the delivery of the note, the situation was practically the same as if the deposit had been made in the face of an overdraft, the rule of the application of payments would apply, and the right to the offset would exist. We are not unmindful of § 6288, Rev. Codes 1905, which provides that a banker has a general lien, dependent upon possession, upon all property in his hands belonging to a customer, and may apply such funds to the balance due to him from such customer in the course of business, nor of the argument of counsel for appellant that this section seems to expressly limit the lien of the banker to property belonging to the customer, while his claim in this case is that the money or deposit belonged to the cestui que trust. We doubt, however, whether the statute in question has any application to a general deposit. When a general deposit is made, the bank has not thereafter “property belonging to the depositor” in its possession. The title to and the ownership in the money deposited has passed. The bank is not a bailee of such money; it is a debtor of the depositor merely. Commercial Bank v. Hughes, 11 Wend. 94; Marsh v. Oneida Cent. Bank, 34 Barb. 298. The right to apply a past-due note or debt owing to a bank against the claim of a depositor or debt due the depositor from the bank is not indeed, based upon the theory of a lien at all, but upon the theory of offset and application of payments. 5 Cyc. 550. Sec. 6288, Rev. Codes 1905, in our opinion was merely intended to give, and merely gives, to the bank a lien on papers and securities and special deposits similar to that of the general attorneys’ retaining lien. We do not believe that it has any application to a situation such as that before us. The judgment of the District Court is affirmed.