Seymour v. Dunham

Learned, P. J.:

Pratt, a private banker, held a note of Dunham which was passed due. Afterwards Dunham made a deposit with Pratt of $600, and took a certificate therefor; the deposit being payable on the return of the certificate. Subsequently Pratt, being still the holder of Dunham’s passed due note, and having still Dunham’s money on deposit, made a general assignment to the plaintiffs, for the benefit of creditors, under the general assignment act. The question is whether Dunham’s deposit should be set-off against his note.

The argument for the plaintiffs is that such a deposit is not due until demand; that, as no demand had been made before the assignment, the deposit was not then due; while the note was due, and therefore that the deposit is not a set-off.

There is no doubt of the general principle that an auction cannot be maintained for moneys thus deposited until after demand. And the reason for this is that a right of action does not arise, until there has been a breach of contract. And in cases of such a deposit a breach of contract does not take place, until a refusal of payment.

But the plaintiffs, as I think, err in arguing that, because a demand is necessary before an action can be brought, therefore the indebtedness is not presently payable. The depositary may lawfully pay the debt at any time. He could not do this, if it were a debt payable in the future. The depositor may lawfully demand the debt at any time. He could not do this, if it were a debt payable in the future.

A debt payable in the future is one which neither the debtor has a right to pay, nor the creditor has a right to demand instantly. That is not the case with such a deposit. There is no future day, till which the respective rights of the parties are postponed. The creditor may demand payment at any time, and, therefore, the deposit is a debt payable in presentí.

Let us suppose that Pratt, instead of making an assignment, had sued D.unham on the passed due note. Can it be doubted that Dun-ham might have set-off in such an action the deposit, producing and surrendering the certificate? Could Pratt have objected in opposition to such a set-off that Dunham had not made a demand for the deposited money before the day when Pratt commenced his action ? The reply to such an objection would have been that a demand was only for the depository’s protection, when called upon to pay; but that no demand was needed when the deposit was to be used only as a set-off or defense.

In Jordan v. National S. and L. Bank (74 N. Y., 467) the notes on which the defendant claimed to apply the deposit were not payable at the death of the intestate. But- it is remarked in the opinion that, after the paper fell due, unless other rights have intervened, the bank may hold the balance of deposits and apply it on the paper. This confirms what is above shown, that deposits are debts payable in presenti, although a demand is necessary before action brought. Of course it is not meant that Pratt could have safely applied this deposit to the overdue note. Because he had given the certificate and, therefore, he could not know that other rights had not intervened by the assignment of the certificate. The remark is cited only t'o show that deposits are not debts payable in futuro, within the meaning of the matter now under consideration.

But, again, aside from the statute, equity requires that the deposit should be applied on the notes. (Lindsay v. Jackson, 2 Paige, 581.) The banker has become insolvent and made an assignment. This shows that no demand of the deposit is needed for his protection. He owed Dunham and justice requires that the mutual credits should be adjusted, one against the other. This principle is recognized. (Smith v. Felton, 43 N. Y., 419.) The plaintiffs were assignees of Rich, a private banker, and as such had come into possession of a note of the defendants which had been discounted by Rich. The defendants, at the time of Rich’s failure, had on deposit with him more than enough to meet the note. The note was not due at the time of the failure, and was made by one defendant to the order of the other, while the deposit was to the credit of defendants’ firm. It is true that, in that case, it appears that on the day the bank was closed the defendants applied to the teller and said that they wanted to draw out their deposits, and then that they wanted to apply them on the note. But the decision is placed on “the equitable rule requiring cross demands to be set-off against each other, if from the nature of the claim or the situation of the parties justice cannot otherwise be done.” The only reason why in that case this act of the defendants was important was, that their note was not yet payable; and therefore it was for them to elect to apply the deposit to a debt payable in the future. If, as in the present case, their note had been passed due, no request to apply the deposit to it would have been of any consequence. “ Technical objections which would be valid at law will not avail to defeat equitable set-off.”

Judgment should be rendered for the defendant, with costs.