Citizens' Savings Bank v. Vaughan

Grant, J.

(after stating the facts). 1. Did the bank have the right to offset the deposit of the mortgage company? If the note was due, the offset was properly allowed. It is conceded that banks have a lien upon deposits for debts due from their depositors. No lien, however, attaches until the maturity of the debt. Bolles, Banks, § 374; Gibbons v. Hecox, 105 Mich. 513 . The *159 learned counsel for the receivers cite several authorities upon the question of reasonable time to be allowed before a demand note becomes overdue and dishonored. Those cases affect solely the liability of indorsers. They have no application in suits upon a note between the promisor and the promisee. In such a case the universal rule is that the note is due at once, and that no demand is necessary before bringing suit. Palmer v. Palmer, 36 Mich. 487 ( 24 Am. Rep. 605 ); Beardsley v. Webber, 104 Mich. 88 ; Peninsular Sav. Bank v. Hosie, 112 Mich. 351 . If the note be due so that suit may be brought without demand, it is also due, for the purposes of offset, when the promisor sues the bank to recover claims against it.

The receivers introduced evidence from which they argue that these demand notes were not intended as temporary loans, and would not become due until some future time. The - plain terms of the contract cannot be thus changed. The paper is a demand note, pure and simple, and is to be controlled by the rules applicable to such paper. The circuit judge rightly held that the deposit is an offset.

2. The statute governing partnership associations- provides as follows (1 How. Stat. § 2369):

“And no debts shall be contracted nor liability incurred for said association except by one or more of said managers, and no liability for an amount exceeding $500, except against the person incurring it, shall bind the said association, unless reduced to writing, and signed by at least two managers.”

Undoubtedly both parties acted in ignorance of this statute, but the statute must control. The liability, being for more than $500, required the signatures of two of its managers to make it valid. Is the mortgage company liable on each note to the extent of $500 ?. Counsel for the bank contend that the indorsement is good for $500, and void for the excess. We cannot concur in this view. The words of the statute are, “no liability for an amount exceeding $500,” etc. We think the statute contemplates *160 that the invalidity should attach to every contract in its entirety where the amount exceeds $500.

3. The bank was entitled to its money at the time the dividend was declared. The receivers saw fit to appeal. The bank has thus been deprived of the use of its money. We think it equitably entitled to interest from the date of the order directing a dividend.

4. While this proceeding is in chancery, and ,a petition was filed, answer made, issue joined, and proofs taken, yet we think the petitioning bank was not entitled to full costs, as in a contested suit in chancery. These proceedings are in the nature of special motions, and costs are in the" discretion of the court, under Chancery Rule 22.

Decree will be modified in accordance with this opinion, and costs of this court awarded to the bank.

The other Justices concurred.