M. R. Johnston Coffee Co. v. Page

Sloan, J., delivered the opinion of the Court. The question in this case is as to the right of an indorser to set off its deposit in an insolvent bank against its liability on notes held by the bank, maturing after the receivership; the makers having signed for the accommodation of the indorser. The appeal is from a decree dismissing the petition, all of the facts of which were admitted by the answer except the charge of insolvency of the makers, which, by agreement, was abandoned. On December 10th, 1930, George W. Page, bank commissioner of Maryland, was appointed receiver of the Chesapeake Bank of Baltimore.

At the time of his appointment there were among the assets of the bank two notes made by M. R. Johnston and M. Grace Johnston, indorsed by the M. R. Johnston Coffee Company, Inc., one of the notes, for $1,100, dated September 9th, 1930, maturing January 9th, 1931, the other, for $500, dated November 22nd, 1930, ma- ⁵⁰⁵ taring December 22nd, 1930. Tbe loans were applied for by the appellant, tbe M. E. Johnston Coffee Company, wbicb was credited witb tbe proceeds, the makers receiving none of tbe money advanced. Tbe bank required tbe notes so to be made and indorsed. Tbe appellant bas on deposit in tbe insolvent bank $1,041.06, wbicb it bas requested tbe receiver to apply to tbe notes so indorsed by it, and, upon tbe refusal of tbe appellee to credit tbe appellant’s deposit against tbe notes, a petition was filed praying an order directing tbe credit to be made.

The question raised by tbe petition bas not been before tbis court, the nearest approach to it being tbe case of Colton v. Drovers’ Bldg. Assn., 90 Md. 85 , 45 A. 23 , wherein it was decided that a depositor is entitled to set off bis deposit against bis promissory note held by a bank, even tbougb tbe note does not mature until after tbe bank bas gone into a receivership. In tbe opinion (page 92 of 90 Md., 45 A. 23, 25) it was said that tbe note “was a debt already incurred by tbe appellee, and payable to tbe bank when due.” An indorser is not indebted on tbe obligation until tbe note matures, so that tbe relation of debtor and creditor did not run concurrently with tbe note, as in tbe case just cited. Tbe appellant insists in tbis case that, because tbe indorser is tbe real party in interest, tbe same rule should be applied to it as to tbe maker of tbe note in tbe Golton case, even tbougb tbe Uniform Negotiable Instruments Law (Code, art. 13, sec. 48) makes no distinction between an accommodation maker and one for value so far as tbe bolder is concerned.

In support of this contention, it urges tbis court to accept tbe authority of tbe decision in Building & Engineering Co. v. Northern Bank of New York, 206 N. Y. 400 , 99 N. E. 1044, 1045 , in wbicb tbe facts and procedure are identical witb those of tbis case. In that case tbe court, in distinguishing between tbe facts of tbe case and the provisions of tbe Uniform Negotiable Instruments Law, wbicb was in force in New York, said: “It nowhere appears from tbe Negotiable Instruments Law, or from anything that can be considered in determining tbe ⁵⁰⁶ intention of the Legislature, that said sections 3 and 55 (sections 15 and 48, article 13 of the Maryland Code) were intended to prevent the courts from determining, in equity, all questions between an insolvent holder of a note and the one primarily liable for the indebtedness on the instrument as a matter of fact, whether maker or endorser”; and: “If we assume that in an action at law the makers of the note must arbitrarily be treated as primarily liable thereon, and the plaintiff as secondarily liable thereon, it does not prevent the court, in an action in equity, from determining and enforcing the rights of the parties as the same are found as a matter of fact.” See also Winne v. Winne, 166 N. Y. 263, 271 , 59 N. E. 832 ; note, 25 A. L. R. 950. Compare Curtis v. Davidson, 215 N. Y. 395 , 109 N. E. 481 . But, while this court has never had before it the precise question which this case presents, it has had occasion to express its opinion and to declare its position on the proposition that a court of equity may be appealed to to give relief where the real relations of the parties to a note are not what, from the instrument, they appear to