Platts v. Metropolitan National Bank

Action by the plaintiff, as assignee of four different persons, to recover the sum of $2,000 received by the defendant bank under the circumstances hereafter stated. There were findings for the plain-' tiff. The defendant appeals from the order denying its motion for a new trial.

1. The rule is general that a bank, holding a not yet due note of a debtor who is a depositor, has, upon the debtor’s insolvency, an equitable right of set-off of the note against the deposit. Wunderlich v. Merchants Nat. Bank, 109 Minn. 468, 124 N. W. 223, 27 L.R.A.(N.S.) 811, 134 Am. St. 788, 18 Ann. Cas. 212. This case discusses at some length the basis and application of the doctrine of equitable set-off, and reviews the earlier cases. It leaves no present need of further discussion.

2. The defendant bank seeks to retain the $2,000 by the application of the doctrine of equitable set-off to the facts now to be stated.

In April, 1913, the Citizens State Bank of Fort Pierre, South Dakota, borrowed of the Metropolitan National Bank of Minneapolis the sum of $4,500 on its 90-day note. The sum was credited to the Fort Pierre bank on the books of the Metropolitan Bank on April 18, 1913.

One John Hayes was the president of the Fort Pierre, bank and negotiated the loan for it.

Hayes was engaged in the farm loan business. Four farmers living in South Dakota employed him in April, 1913, to get them loans of $500 each on their farms. He was their agent. His loan business was a private business unconnected with that of the bank.' *221He negotiated these loans through Barnes Brothers of Minneapolis. He was authorized to receive the .proceeds. The money which he got belonged to the four farmers. He directed Barnes Brothers to put the money in the defendant Metropolitan Bank to the credit of the Fort Pierre bank. Barnes Brothers drew four separate checks of $500 each on their own bank, the Northwestern National, in favor of the Metropolitan bank “c/o Citizens State Bank, Fort Pierre, S. D.” In each letter of transmittal Barnes Brothers instructed the Metropolitan Bank to place the check enclosed to the credit of the Fort Pierre bank and advise it accordingly. Two of the checks were dated on April 25, and were deposited April 26. Two were dated April 28, certified for the defendant bank on April 29, and on that day deposited. All the checks were drawn on the Northwestern National Bank payable to the defendant bank and none were indorsed by the Fort Pierre bank or were ever in its possession. On April 29, 1913, the Fort Pierre bank became insolvent and the Metropolitan bank credited the $2,000 belonging to the South Dakota people, then intact in the bank, together with the Fort Pierre bank’s own money on deposit, against the non-due note of the Fort Pierre bank.

This action is by the plaintiff, as assignee of the four farmers, in substance for money had and received. Hayes never claimed the money to be his. The Fort Pierre bank never claimed it, never had it, never heard of it. It was the money of the four farmers and was impressed with a trust in their favor. It was put in the defendant bank in the name of the Fort Pierre bank for the evident purpose of transmission to South Dakota.

There is no finding that the defendant bank knew that the checks deposited by Barnes Brothers were impressed with a trust.

Some cases hold that the right of set-off exists against money deposited, though it is impressed with a trust in favor of a third person, if the bank is in ignorance of the trust. We do not find that the question of notice of the trust has been made the controlling test in this state or that the precise question has been met. There are authorities both ways. Whatever the proper rule is, with the natural equities all in favor of the four men who owned the money *222and a total lack of natural equity in favor of tbe bank, for tbe $2,000 was a total loss to tbe four men wbo bad mortgaged their farms to raise it and a “find” by tbe bank, we cannot bold that money received as this money was, hardly in tbe regular course of banking business, should be used to pay a Fort Pierre bank debt to tbe defendant bank. Tbe court was right in denying tbe off-set. If necessary to sustain its decision it could easily be held that it conclusively appeared that tbe bank was charged with notice.

A number of other assignments of error are made. We have examined them all but we do not find their discussion necessary.

Order affirmed.