Hodgin v. Peoples' National Bank

Olaeic, J.

A bank has the right to apply the debt due by it for deposits to any indebtedness by the depositor, in the same right, to the bank, provided, such indebtedness to the bank has matured. Bank v. Hill, 76 Ind., 223; Knapp v. Cowell, 77 Iowa, 528; Coates v. Preston, 105 Ill., 470; Bank v. Bowen, 21 Kansas, 354; Clark v. Bank, 160 Mass., 26; Bank v. Armstrong, 15 N. C., 519; Muench v. Bank, 11 Mo. App., 144; Morse on Banks, Section 324; Bank v. Hughes, 17 Wend., 94; Eyrich v. Bank, 67 Miss., 60. Even if the indebtedness to the bank has not matured, if the depositor becomes insolvent, the bank by virtue of the right of equitable set-off may apply the deposits with it of such debtor to his indebtedness. Dammon v. Bank, 50 Mass., 194; Flour Co. v. Bank, 90 ky., 225; Trust Co. v. Bank, 91 Tenn., 336; Seed Co. v. Talmage, 96 Ga., 254; Waterman on Set-off, 432.

The money deposited by Hodgin as surviving partner, was kept under the same heading in the bank’s book, “Hod-gin, Bros. & Bunn,” as before the death of Bunn, and was merely a continuation of the old line of deposits. This would have been equally true if the deposits after the death of Bunn had been made in the name of “Hodgin, surviving partner.” In either event the deposits were in behalf of the firm, and were in the same right as the note held by the bank against said firm, and on the insolvency of the firm the banle had the right to apply the deposit made by the surviving partner in behalf of the firm to the indebtedness of the firm, whether matured or not. If the surviving partner had made the deposit a special deposit, or if there had been an agreement with the bank that these deposits should not be applied to the indebtedness of the firm to the bank, then the bank’s right of set-off would have been tolled. Morse on Banks, Section 325. But there was no evidence to that effect.

It is true that deposits made by an executor or administrator in a bank can not be applied to the indebtedness to the bank of tbe deceased. Jordan v. Bank, 74 N. Y., 467; Appeal of Bank, 48 Pa. St., 57. But that is because the personal representative holds the funds of the estate for the payment of the debts in the order prescribed by statute, and then pro rata in each class, which would be disturbed if the bank could apply the funds deposited by the executor or administrator to the indebtedness dire to it by the deceased, though the deposits at the death of the testator could be applied to any indebtedness of his, then due. Jordan v. Bank, supra. It is otherwise as to the surviving partner, who merely continues the business for the purpose of winding it np, and of whom the law does not require the application of the funds in his hands to the debts, in any prescribed order.

The bank had no right, however, - to apply the deposits on behalf of the firm, whether made during its existence or by the surviving partner, to the indebtedness held by it against one of the partners, and it could make no difference that this was the note of one partner endorsed by the other. It was an individual indebtedness, and partnership deposits could not be applied to it. A partnership is not liable for the debts of the members. Straus v. Frederick, 91 N. C., 121. Though each partner (except inlimited partnerships) is severally responsible for the entire indebtedness of the firm, yet notwithstanding that fact, the individual deposits of a partner can not be applied to the indebtedness of the firm to the bank. Adams v. Bank, 113 N. C., 332—S. C. 23 L. R. A., and notes; Bank v. Jones, 119 Ill., 407; Raymond v. Palmer, 41 La. Ann., 425; Dawson v. Pike, 5 Pike, 283.

Upon the issues as found, the judgment might have been corrected to accord with the above opinion but for the finding upon the 8th issue. The plaintiff is entitled to recover the excess of tbe deposits above the indebtedness of the firm, with interest from date of demand.

New trial.