author: BRADBURY, J.

text:
    Bank v. Bank.

      Promissory notes — Duty of bank that holds for collection — How endorsers bound — Notice to — When released — When subsequent promise to pay by discharged endorser, does not bind — Defenses by endorser.

    1. 'Where a promissorj’- note, in the hands of an agent’ for collection, is dishonored at maturity by the maker, it is the duty of the agent to take the usual and proper action required to charge the endorsers, and if by reason of his neglect in this respect an endorser is discharged, the agent becomes liable to his principal for the resulting damages.

      2. Where a promissory note, successively endorsed by more than one, is dishonored by the maker, the holder thereof may select any one of the endorsers whom he may wish to charge with liability and notify him only; but if he passes by one or more of the later endorsers, and gives notice to an earlier -one, he is not for that reason entitled to any longer time, within which to give the notice, than he would have had to -notify his immediate endorser.
    3. Where an endorser of a promissory note has been discharged by the laches of the holder, a subsequent promise by him to pay the note will not be binding unless shown to have been made with knowledge of the laches.
    4. Where a bank, the holder for collection of a promissory note, by its negligence discharges an endorser, the latter is not estopped to set up his discharge, though the bank had at the time on deposit funds of the makers, which it afterwards paid out on the faith of an extension of time granted to the makers by the endorser, if, at the time the extension is granted, the endorser was ignorant of his discharge, and that the bank had indemnity within its control.
    (Decided April 26, 1892.)
    ERROR, to the Circuit Court of Clinton county.
    The plaintiff in error, on the 3rd day of December, A. D. 1888, filed in the Court of Common Pleas of Clinton county a petition, wherein, after averring the corporate character of the plaintiff and defendant, it sets forth as the grounds for the relief which it sought against the defendant in error: That in the due course of its business it purchased before due, of S. J. Patterson, the payee thereof, a certain promissory note, which was payable at the banking house of the defendant in error; that said S. J. Patterson endorsed the same; that after said purchase and before the note became due, the plaintiff in error forwarded it to the defendant in error for collection; that defendant in error undertook to collect the same, or if not collected, to take such steps as were necessary to fix the liability of the endorser; that the note was not paid when due; that the defendant in error did not protest the same so as to fix the liability of the endorser; that the makers were insolvent, and praying damages for the amount of the note with interest.

      The defendant in error answered the petition, denying that the note was purchased by the plaintiff in error in the due course of its business, but on the contrary alleging that the plaintiff in error was merely the agent of' the endorser, S. J. Patterson, for its collection. It also set up as a defense: “That if in fact said plaintiff, in the due course of its business, did purchase from the payee and become, before due, the owner and holder of said note, the said S. J. Patterson as an endorser thereof has not been released and discharged from his liability to the plaintiff as such endorser for the following reasons of fact:

      “First. — This defendant duly presented to, and made demand for payment of said note by the makers, Fulton & Peters, of all which said plaintiff and said endorser, S. J. Patterson, had due notice; and on said presentation and demand this defendant made arrangement for the payment of said note, and the same would have been paid but for the reasons hereinafter stated.
    “ Second. — Said S. J. Patterson, after receiving notice that said note had deen duly presented to said makers, Fulton & Peters, and demand of payment duly made by this defendant, assumed to and did extend the time of payment thereof for a-fixed and definite time, to-wit: to October 25, 1887; said endorser, S. 'J. Patterson, thereby waived formal protest and notice by a notary public, all of which said plaintiff then well knew.
    “ Third. — After the assignment of said makers, Fulton & Peters, the said endorser, S. J. Patterson, admitted to this defendant his liability on said note, and made no claim of release by reason of any negligence on the part of this defendant in not formally protesting said note by and through a notary public.
    “This defendant denies that it has been guilty of any negligence whatever, and on the contrary avers that it used due diligence for the collection of said note, and that the same would have been collected but for the reasons herein before stated.”
    The affirmative matters of the answer were denied by the reply.

      The cause was tried to the court without the intervention of a jury, and, a judgment rendered for the defendant in error. The evidence, and the rulings of the court in admitting and rejecting evidence, were embodied in a bill of exceptions. The cause was taken to the circuit court by the plaintiff in error where the judgment of the court of common pleas was affirmed; whereupon proceedings were instituted in this court to obtain a reversal of both of said judgments.

      Gunckel & Rowe, and Mills & Van Pelt, for plaintiff in error.
    1. The extension was not by the agreement of all parties. Plaintiff (the owner) never consented to, nor authorized, an extension. There was no protest, or notice to it, of the nonpayment. Patterson was released. Defendant seemed to rely wholly on Fulton and Patterson, as the arrangement was made independent of the banks. Defendant took the risk; it could have insisted upon payment. Fulton & Peters would have paid, if it had been demanded. A large balance was then to their account in the bank of defendant. The bank was in a position to protect the plaintiff and itself, and it was bound to perform its duty; but it did neither, and yet the courts below say that defendant should not be held liable. What fault, or wrong, did the plaintiff commit, that it should suffer and pay the penalty ? Why should the defendant, who permitted and did wrong, and failed to perform its duty, be free ? A proper reason or answer would be impossible.
    Again, the time had gone by when the letter of Fulton was written, and no protest was made. Patterson had the right to assume that he had been legally charged and upon that condition wrote his letter agreeing to extend the time to October 25. He did not agree before the paper was due to waive protest, nor did he do anything to induce defendant to dispense with the necessity of it. The bank was not thrown off its guard, for the time had gone by, three or four days before Fulton presented the letter of October 20. The case is not like Boyd v. Bank, 32 Ohio St., 526.
    There was no mutual agreement beforehand for the extension as in the case of McMonigal v. Brown, 45 Ohio St., 499.

      Patterson bound himself, by his sale and indorsement (in blank) of this note, to the City National Bank, to pay same if on presentment the maker did not, and due notice of such non-payment should he given him. Farr v. Ricker, 46 Ohio St, 265.
    Again, the holder never gave its consent to an extension— in fact, knew nothing of the action of the other parties nor of the defendant, to whom the holder sent the note for collection, for some time thereafter. The case differs from He-man v. Franch, 2 Cin. Sup. Ct., 561, for the reason that the holder — the owner- — did not consent. Even if there had been legal extension to October 25, the defendant again neglected its duty — it having failed to protest same for non-payment and failed to give notice. Sec 3176, Revised Statutes.
    2. This note was placed in the bank of defendant for collection, and it then became defendant’s duty to take the necessary measures to charge the indorsers upon default. Huff v. Hatch, 2 Dis., 63; Blam v. Bank, 26 A. Rept., 120,121.
    The duty of the defendant, in-this case, was plain. Lawson v. Bank, 1 Ohio St., 206; Bank v. McGwire, 33 Ohio St., 295, 303, 304; Dan’l Neg. Inst., Sec 1039 and note.'
    The letter of Fulton cannot be regarded as a notice to the indorser. Townsend v. Bank\ 2 Ohio St., 345, 360. It only asked for an extension, and the endorser might well regard that he had already been charged and his liability fixed. He never received any other notice of non-payment on October 17, or October 25, (28). If the letter was a proper notice, then it was not within time. But if within time, then there was no presentment and notice of dishonor on October 25 (October 28), the time of the alleged extension.
    In McMonigal v. Brown, 45 Ohio St., 499, 504, 505, the extension was not definite. The decision would have been otherwise if a time certain had been agreed upon, as in Mich- and v. Laogarde, 4 Minn.; 43.
    If Patterson is to be held by his letter of extension, and charged as an endorser, the court must find from the evidence that he was fully advised of all the facts; that he had full knowledge of what had been done; that Fulton & Peters had funds; that the note would have been paid, if insisted upon; and that be bad knowledge of the neglect of the bank, and its failure to protest the note. His consent, under such circumstances, could alone make him liable as an endorser (if again protested for non-payment on October 25). Patterson bad no advices, no information, or knowledge, except the letter of October 19. The authorities are numerous upon this question. See 2 Dan’l Neg. Inst., Sec. 1147, 1149 and note; 2 Dan’l Neg. Inst., Sec. 1157, 1163; Abb. Trial Ev., pp. 434-5; Ross v. Hurd, 71 N. Y., 14; Freeman v. O’Brien, 38 Iowa, 406; Lardy v. Boyd, 26 Gratt (Va.) 631; Lilly v. Petteway, 73 N. C., 358; Wade on Notice, Sec. 974.
    Patterson, under such a state of facts, could not be held as endorser; and if not liable, plaintiff ought to have had a recovery, instead of a judgment against it. Hunter v. Hook, 64 Barb., 469; Bank v. Crittenden, 2 Thompson (N. Y.), 86; Williams v. Bank, 9 Heisk. (Tenn.), 441.
    It was incumbent upon defendent to prove the endorser’s consent with knowledge in order to hold him. There was no such proof, and no intimation that he had any information whatever of the circumstances or facts. Johnson v. Am-gan, 5 Oreg., 485.
    Such promise, without, knowledge, was not obligatory on Patterson. Lilly v. Petteway, 73 N. C., 358.
    Again, plaintiff never made any agreement with the endorser for a waiver. Nor did it consent to an extension. Defendant had no authority to extend payment, and if it acted injuriously to plaintiff, it should pay the penalty. Jac-card v. Anderson, 37 Mo.

      Smith & Savage, for defendant in error.
    1. Was formal protest of this paper necessary? We claim that this being an inland bill no formal protest was necessary, and the facts to charge the indorser may be shown by evidence other than a protest. Protest is only necessary upon foreign bills. -Edwards on Bills and Notes, 550, 564; Am. and Eng. Encyc. of Law, vol. 2, p. 405 (note 3); Union Bank v. Plyde, 6 Wheat. (U. S.) 372; Smith v. Curlee, 59 Ill. 221; Ocean Nat. Bank v. Williams, 102 Mass., 141; Bank of U S. v. Leathers, 10 B. Mon. (Ky.) 64.

      Though it may be proper, or even .customary, to protest both promissory notes and inland bills it is not necessary, and the cost of protest can only be recovered upon foreign bills. Am. and Eng. Encyc. of Raw, Vol. 2, p. 405, (Note 8); 1 Parsons, N. & B. 646; Johnson v. Bank of Fulton, 29 Ga. 260.
    2. We further maintain that in this case formal demand of payment was not necessary. Woodbridge v. Brigham, 13 Mass., 558; Nichols v. Goldsmith, 7 Wend., 160.
    That, as a matter of fact, there was a proper presentment and demand of payment made, we think the plaintiff in error will hardly deny. The next inquiry then is, did the letter of Eulton to Patterson of date October 19, 1887, sufficiently apprise Patterson in what it “ positively expressed,” or in what it fairly implied, of: 1. The identity of the note. 2. That it had been fully presented (if presentation were necessary) to the maker and dishonored. If it did, then the notice was sufficient and a substantial protest was made. Townsend v. Bank, 2 Ohio St., 360-61.
    3. We maintain as a next proposition: That even if protest in all its rigor were necessary in this case, and that no steps whatever were taken by the defendant bank in that direction, still Patterson is not discharged, but is still liable as indorser, for the reason that protest was waived by Patterson; or if, technically speaking, Patterson could not waive protest he at least clearly consented to his further and continued liability on said note. Protest and notice could have effected no one but Patterson. 2 Daniels on Neg. Inst., Sec. 1090, 1103, 1104, 1105, 1106: Spencer v. Harvey, 17 Wend., 489; Boyd v. Bank of Toledo, .32 Ohio St., 526; 5 Johnson, 249.
    This waiver may be made after the maturity of the note as well as before its maturity. Brandt on Suretyship and Guaranty, Sec. 300; 2 Daniels on Neg. Inst., Secs. 1147, 1148,1150 and notes 1152 and 1153.
    We further maintain that knowledge’of the fact that formal protest had not been made is not essential to be shown a~> against Patterson; it is sufficient if he knew the makers had failed to pay. 2 Daniels on Neg. Inst., Sec. 1108; Yeager
      v. Farwell, 13 Wallace, 12, per Davis, J.; 2 Daniels’ Neg. Inst., Secs. 1147, 1156,1159.
   BRADBURY, J.

There is no conflict in the evidence relating to any material fact in this case. The petition avers that the plaintiff in error had purchased the note, which is the subject of controversy between the parties hereto, in due course of business before it became due. This, it is true, the answer of the defendant in error denies, but the cashier of the plaintiff in error, G. B. Harman, states directly and unequivocally in his deposition, that his bank purchased the paper of the payee, S. J. Patterson, on August 20, 1888, five days after its date, at a discount of seven per cent.; that the discount amounted to $5.07, all which he says is shown by the books of the bank. Mr. Eichelbérger, book-keeper for Mr. Patterson, is equally explicit. No attempt is made by the cross-examination or otherwise, to cast a suspicion upon, or to discredit these two witnesses, or impeach the correctness of the books of the bank; nor is any evidence adduced that in the slightest degree contradicts their statements. Under these circumstances it cannot be presumed, even to support the judgment rendered, that the court of common pleas found this evidence to be false and totally disregarded it in making up its judgment.

The real contention between the parties was whether Patterson, the endorser of the promissory note, had been discharged from liability to the plaintiff in error by reason of the negligence of the defendant in error. The note had been transmitted to defendent in error for collection and was not paid at maturity. If defendant in error, by its negligence, had discharged the endorser, then it should be held liable for the damages it thereby caused; but if, notwithstanding this alleged negligence, Patterson remained liable, it should be exonerated, for all the duty it owed to the plaintiff in error, in case the note was not paid, was to take such action as would charge the endorser.

When the note matured the defendant in error notified the makers and one of them came to its banking house. A plain and simple duty then confronted the defendant in error; either to require payment of the note, or in default thereof, to take such action, as by the law merchant, was necessary to charge the endorser. It did neither. That the note was conditionally paid, is suggested; what that may mean in this connection is not clear. No doubt, that, as between the holder and the maker of a promisory note, a conditional payment may be made; but the rules of the commercial law require a holder, who intends to hold an endorser liable, to give notice to the latter of the default of the maker. Anything less than a full and absolute payment is a default, for nothing less than that measures the duty of the maker. In this case, however, there was no conditional payment made. True, the defendant in error had in its hands the means of enforcing .payment but did nothing; it simply accepted the maker’s' promise that, if Patterson did not give further time, they would pay the note. If the defendant in error had given notice to the plaintiff in error of the default of the maker, it would have discharged its duty, for it would have afforded the latter an opportunity to give notice to Patterson. Lawson et al. v. Bank, 1 Ohio St. 206.

Where, however, a holder of a promissory note passes by an immediate endorser, and serves notice of non-payment upon one more remote, he cannot avail himself of the time the immediate endorser would have had to serve the remote one, if the holder had given notice to the former; but the holder in that case must give notice to the remote endorser within the same time that he is required to give it to the immediate endorser. 1 Parsons on N. & B. 514; Dobree v. Eastwood, 3 Car. & P. 250; Simpson v. Turney, 5 Hump. 419; Rowe v. Tipper, 13 C. B. 249; Marsh v. Maxwell, 2 Camp. 210. Therefore, if the letter of Fulton & Peters, had been sufficient in form and substance to fix the liability of Patterson, it was mailed too late, and for that reason he was discharged.

This release of Patterson was an-accomplished fact before the makers of the note applied to him to extend the time of payment. The omission of the bank to require payment, or in default therof to give the necessary notice to charge Patterson was caused by tlie solicitations of the makers, Fulton & Peters. The most careful scrutiny of the record fails to disclose that Patterson, up to this time, said or did anything' to mislead the bank or to induce it to relax its •vigilence, or omit any step necessary in law to charge him as endorser.

Patterson, therefore, had a perfect defense against any .action to charge him as an endorser, unless, by his subsequent conduct, he has forfeited his right to set up this discharge.

A subsequent promise to pay, when made with full ^knowledge of the facts, has been held to be evidence of a •demand and notipe, or to imply a previous waiver thereof. Myers et al. v. Standart et al, 11 Ohio St. 29; Hibbard v. Russell, 16 N. H. 410; Robbins et al. v. Pinckard et al., 5 Sm. & M. (Miss.) 51; Lewis et al. v. Brehme, 33 Md. 412; McPhetres v. Plalley's Executor, 82 Me. 72; Mense v. Osbern, 5 Mo. 544; Loose v. Loose, 36 Penn. St. 538; Kilby v. Rochussen, 18 C. B. (N. S.) 357.

In the case under consideration, however, no promise to pay was made by Patterson, unless the following letter written by him to Fulton & Peters in reply to theirs of the 19th of October, asking for an extension of the time of payment can be construed into such promise:

Dayton, O., October 20, 1887.
'“Messrs. Fueton & Peters, Wilmington, Ohio.
“Gentlemen: — -Yours of 19th at hand, and we have instructed our bank (to whom the note belongs, we having-discounted same) to grant extension to October 25th. Please honor it at that time, and much oblige,
“Yours truly,
“S. J. PATTERSON.”

If this letter should be construed to contain an implied promise to pay the note, yet as it was written without any knowledge on the part of the writer that he had been discharged from liability it does hot fall within the principles upon which a subsequent promise to pay has been held to bind an indorser. Tibbetts et al. v. Dowd, 23 Wendell, 379.

Is Patterson estopped to set up bis discharge by reason of his letter of the 20th of October, 1888, granting an extension to the makers of the note?

It is true that the defendant in error could have passed by the plaintiff in error, and given notice of the maker’s default directly to the endorser, Patterson, and thus fixed the latter’s liability; this the defendant in error also failed to do. It is suggested that this failure was on account'of ignorance of the residence or address of Patterson. If this, was true it constitutes ho excuse; for (1.) the defendant in error, in that contingency, not being able to discharge its-duty in any other way than by a notice to the plaintiff in error was bound the more strongly to notify the latter.. And (2.) the means of knowledge were at hand. Fulton, one of the makers of the note, was at the bank, and announced his intention to write to Patterson to obtain an extension of the time of payment. It was apparant from the conversation that he had with the officers of defendant in error, that he knew Patterson’s address, and an enquiry of him would have enlightened those officers, but the en-quiry was not made.

The makers of the note, Fulton and Peters, in fact wrote to Patterson for an extension in the following terms:

“Wiemington, O., October 19, 1887.
“Me. S. J. Patterson, Dayton, O.
“Dear Sir — We wish you would advise the Clinton County Bank to hold our note until November 5th, or if you cannot do that, anyhow until the 25th inst. We cannot possibly meet it until at least that time, and oblige,
“Yours,
“Fueton & Peters.”

This is the only notice that Patterson received.

Whether a notice of the non-payment of a promissory note, given by the maker to the endorser, is sufficient to fix the liability of the latter has not been determined by this court. The authorities upon the question are in conflict. The cases of Johnson v. Harth, 1 Bail. (S. Car.) 482; Rosher v. Kieran, 4 Camp. 87; and Chitty on Bills, 495,. note u, with, some other authorities, seem to support the doctrine of the sufficiency of such notice, while the following cases deny it. Stanton et al. v. Blossom et al., 14 Mass. 116; Tindal et. al. v. Brown, 1 D. & E. 167, per WiRKES’ opinion 169, and Buller, J., 170; Stewart v. Kennett, 2 Camp. 177. Nor is the determination of this queston necessary now; for if a notice given by- the maker to an endorser should be held sufficient to charge the latter, yet this letter of the maker, is faulty in that it neither states that any demand of payment had been made, that the note had been forwarded to and was at the place of payment, or that it was due. If the court should go to the extent of holding that the endorser is bound to carry in his memory the due date of a note that he endorses, and must presume that its payment has been demanded at the proper time and place, all which is necessary to make this letter sufficient notice, was due diligence shown in giving the notice? The last day of grace was October 17, and the letter was not written until the 19, two days later. To constitute due diligence it should have been deposited in the post office in time to have departed in the earliest mail to the residence of Patterson that departed after business hours on the 18. Lawson et al. v. Bank, 1 Ohio St. 206. It is true that if the defendant in error had chosen to give notice of non-payment to the plaintiff in error, that the plaintiff in error would have had one day after it received notice within which to give notice to Patterson, and in that case a notice given to the plaintiff in error to Patterson on the 19th of October would have been in time. 1 Par. on N. & B. 513; Lawson et. al v. Bank, 1 Ohio St. 206.

On October 17, 1888, the day the note matured, one of the makers, Fulton, was called into the bank and his attention directed to it; the makers then had funds in the bank which could have been applied to its payment, but upon Mr. Fulton’s representation, that his firm was pressed for means it was induced to indulge them until they could apply to Patterson for a short extension of the time of payment, promising to pay it if Patterson refused to extend the time. After two day’s delay, they wrote the letter of October 19, to which they received, in answer, Patterson’s letter of the 20, granting the favor, of which the bank was at once advised; it thereupon continued to receive and pay out for the makers large sums of money until November 1, 1888, on which day the makers assigned their property in trust for their creditors, having assets sufficient to pay only a few .cents on the dollar of their indebtedness. No doubt, but for this letter of Patterson’s, the bank would have charged this note against the maker’s deposits, and in that way secured its payment.

If Patterson had been informed of these facts, and chose to grant an extension to the makers, and the bank relying thereon had paid out all the funds of the makers before the assignment was made and thus lost its means of indemnity, he should be held to abide the consequences. But he had no such knowledge. He neither knew that he had been discharged by the bank’s neglect, nor that the bank had indemnity within its control. His granting the extension was an innocent act in itself, and he should not be charged with consequences that he had no reason to suspect would flow from it. On the contrary, the bank, defendant in error, was an actor in the entire transaction. With means of payment in its hands it chose to indulge the makers in direct violation of its duty to the plaintiff in error. ' It knew this-indulgence was granted to the makers of the note, expressly, to enable them to apply for an extension of payment to one, who, upon the face of the paper was only liable in case it did the very duty that it must of necessity violate to grant, the indulgence. And when the letter from Patterson was. made known to it, and it proceeded to act upon the extension granted, it had no reason to believe that he had granted the extension with knowledge of the facts, and it took no action to advise him of their existence.

Under these circumstances, the defendant in error must be held to have assumed the risks that naturally flowed from its actions, one of which was that Patterson might avail himself of a defense thus afforded to him by its own negligence. As upon the undisputed facts the judgment should have been for the plaintiff in error, it becomes unnecessary to consider the other questions that arise upon the record.

Judgment reversed and cause remanded for further proceedings.


source: Caselaw Access Project

author: Spear, C. J.

license: Public Domain

text:
    Tipton v. Tipton’s Adm’r.

      Offer to confess judgment — Effect of when made before answer— Practice — Pleading.
    1. An offer to confess judgment by a defendant, in a cause pending in the court of common pleas, made before the filing of an answer, which, specifies that the offer is to be “in full of all claims included in the petition of plaintiff,” will be held to apply to the amount found due on the entire claim of plaintiff and not to the amount found due after reduction by set-off. And if, in such case, the jury find for the plaintiff upon the cause stated in the petition, a sum greater than the amount of the offer and interest to the time of trial, the plaintiff will not be liable for defendant’s costs, notwithstanding the sum adjudged due him by the court, when reduced'by set-off of the defendant, is less than the amount named in the offer.
    2. It is not good practice to allege in an answer the making of an offer to confess judgment. Such allegation tenders no proper issue calling for proof at the trial, and hence is out of place in the pleadings.
    (Decided April 28, 1892)
    Eeros, to the Circuit Court of Holmes county.
    The plaintiff in error brought suit in the court of common pleas of Holmes county, against the defendant in error, to recover the sum of $1,351.22,' for services, boarding, lodging, articles furnished and money paid out for Samuel Tipton in his lifetime. Answer was filed by the defendant in error making issue with the petition, and setting up divers items of set-off. Defendant also alleged that on August 29, 1888, he tendered counsel for plaintiff $190, and payment of costs, which was refused; arid that on the same date he filed, in writing, a tender offering to confess a judgment in favor of plaintiff, which was duly filed by the clerk, for said sum of $190, and costs that had accrued, of which plaintiff’s counsel was notified, but refused to accept judgment so tendered. Reply was filed admitting one of the items of set-off and admiting that on August 29, 1888, defendant offered in writing to confess judgment in favor of plaintiff for $190, with costs, but denying evéry other allegation. At the November term, 1888, the cause was tried to a jury, and a verdict rendered finding for the plaintiff in the sum of $411.55, and for the defendant in the sum of $237.75,and finding a balance for the plaintiff in the sum of $179.44. Judgment was rendered for the plaintiff for that amount and for costs amounting to $440.40. To the judgment against him for costs the defendant in error excepted, and took his bill of exceptions, and filed his petition in error in the circuit court of said county. As to the judgment for costs, the circuit court reversed the judgment of the court of common pleas, and the plaintiff in error now files his petition in error in this court to reverse the judgment of the circuit court.

      Critchfield & Huston and N. Stilwell, for plaintiff n error.

      W. Stilwell and Church & Sullivan, for defendant in error.
   Spear, C. J.

The circuit court found error in the judgment of the common pleas “in adjudging that the defendant should pay the costs in the said action made after the 29th day of August, 1888, the day on which the court finds from the evidence and records in the case, that an offer was made by defendant to allow judgment to be taken against him for one hundred and ninty ($190.00) dollars and costs, which offer so made was more than the recovery on trial.”

This raises the question of the legal effect of the offer, is in form following:

“In Holmes Common Pleas Court-.
“David TiptoN, plaintiff, against James W. Cross, Administrator of the Estate of Samuel Tipton, deceased) defendant.
“ Oeeer to CONFESS Judgment.
“This 29th day of August, A. D. 1888, came the defendant, James W. Cross, as administrator of the estate of Samuel Tipton, deceased, and offers to confess judgment for the sum of one hundred and ninty ($190.00) dollars and costs, as provided in sections 514‘0 and 5141 of the Revised Statutes of Ohio. The said offer being in full of all claims-included in the petition of plaintiff for boarding, lodging, care and attention, expenses, etc., furnished by plaintiff to said Samuel Tipton, deceased.
“James Cross,
“Administrator of the estate of Samuel Tipton, deceased¡ by his attorneys, W. Stilwell and Church & Sullivan.
“Filed August 29, 1888.
“J. J. Strome, Clerk.”

Section 5140, referred to, provides that “the defendant in an action for the recovery of money only, may, at any time before trial, serve upon the plaintiff or his attorney, an offer in writing, to allow judgment to be taken against him for the sum specified therein; * * * * and if the plaintiff fail to obtain judgment for more than was offered by the defendant, he shall pay the defendant’s costs from the time of the offer.” Section 5141 provides that “ the defendant in an action for the recovery of money may offer in court to confess judgment for part of the amount claimed, or part of the-causes involved in the action; whereupon, if the plaintiff being present, refuses to accept such confession of judgment, in full of his demands against the defendant in the ’action, * * * * and on the trial do not recover more than was so offered to be confessed, and the interest thereon from the date of the offer, such plaintiff shall pay all the costs of the defendant incurred after the offer was made.”

It is insisted by the plaintiff that the offer to confess was ineffectual for three reasons: 1. The record does not show compliance with section 5140, because the evidence fails to prove that the offer to confess was served upon plaintiff’s attorney. 2. The attempted offer to confess judgment in open court was a failure because the plaintiff was not present, nor had he notice that the offer would be made, and the mere filing with the clerk could avail nothing. 3. The amount recovered by the plaintiff was in fact more than the amount of the offer.

Passing the first two grounds, without holding for or against either, we think the case may, without difficulty, be disposed of upon the third.

Was the recovery more than the offer? It is important to note that at the time of the offer no answer had been filed. That pleading was filed several months after the offer was made. By it issue was taken upon plaintiff’s claim set out in the petition, and several items of set-off pleaded an4 a recovery asked upon them. To this reply was filed, taking issue upon the items of set-off, save one, which was admitted. So that, as a result, there were two separate causes to be tried in the' case, one upon the claim of plaintiff, denied by defendant, and the other upon the independent claims of defendant, denied by the plaintiff. Either party could have disposed of his own case by a dismissal, but could not have disposed of his adversary’s case without a .confession or trial. It is further important to note that defendant’s offer was in terms, an offer of judgment “in full of all claims included in the petition of plaintiff.” So that if the issue had been confined to the claim of plaintiff and the trial proceeded to ascertain only what plaintiff was entitled to recover upon his account, no one would insist that the result, as to costs, could be affected by defendant’s offer, for the verdict of the jury was “for the plaintiff on his cause of action, and assess his damages at $411.55,” a sum largely in excess of the amount of the offer.

Can the result be changed because of the further issue made subsequently by the set-off and the reply? We think not. True, the jury found, upon the further issue, for the defendant on his defense, i. e. his set-off, $237.75, and for the plaintiff for the balance, and, in that way, reduced his damages to $179.44, a sum less than the offer, and for that amount judgment was entered. But we think the.word “judgment,” as last used in section 5140, and the word “recover,” as used in section 5141, should be given a broad, and not a restricted, meaning. Judgment is the conclusion of law upon facts found, or admitted. It may be upon the main question, or on all of the questions, if there are several. This implies that there may be a judgment for plaintiff upon an issue of fact found in his favor, and a judgment for defendant, in the same proceeding upon an issue of fact found in his favor. In this case, there being a finding on the claim to which the offer to confess was directed, i. e. the claim set up in the petition, as well as a finding upon the set-off of defendant, in legal effect, the judgment was that the plaintiff recover on his account $411.55, and the defendant on his set-off $237.75. This construction confines the effect of defendant’s offer to the purpose apparently intended by the party, and contemplated by the statute. It also harmonizes the two sections referred to with section 5143 and section 5349. These sections, and those hereinbefore cited, being in pari materia, should be considered together, and such construction given as will, if practicable, harmonize all the provisions. By the terms of section 5143 the provisions of the subdivision are to be applied, so far as applicable, to one of several causes of action, and to a tender or offer made by plaintiff to one or more of several causes of counterclaim or set-off, warranting the inference that, within the purpose of the entire subdivision, (the one relating to “tender and offer to confess judgment),” the offer is to be treated as applicable to such cause or causes of action, or to such cause or causes of counterclaim or set-off, as the party offering may, by the terms of the offer, designate, and excluding the inference that the effect of the offer is to be extended by implication, to causes, other than those coming fairly within its terms. Section 5349 is also consistent with this view. It provides that where it appears in a case that a justice of the peace has jurisdiction of an action brought in any other court, and the judgment is less than one hundred dollars, unless the recovery be reduced below that sum by counterclaim or set-off, each party shall pay his own costs.

Running through all this legislation we find a clear recognition of the distinction between the affirmative case of the plaintiff and the affirmative case of the defendant, and a purpose to regulate liability for costs by rules just and equitable to both parties.

The contrary construction would work manifest injustice. Upon learning of the defendant’s offer the plaintiff was, by force of tbe statute, called upon to accept or refuse tbe amount named in full of his demand against tbe defendant. He bad a right to infer that tbe offer related solely to the claim made in tbe petition, and that if upon that claim, be should recover more than the offer and interest, be was in no danger of having costs adjudged against him. He was not bound to anticipate set-offs of which he had no notice and no reason to presume would be pleaded in the case. Had he accepted the offer, it would but have satisfied his own claim, and yet he would still have been liable to an action by defendant upon his set-offs and to a recovery thereon to a larger amount than he had consented to receive as satisfaction of his own claim. This, as the result shows, would have been rank injustice. The provisions of our remedial statutes should be construed with a view to promote justice, not to defeat it. A proper construction of the statutes, and justice as well, require that the offer, couched in the language in which it appears, and tendered before answer, should not be held to include or apply to, set-off subsequently pleaded, but should be confined in its application to the actual condition of the pleading and claim at the time the offer was made.

The record shows an entry December 1, 1888, of an offer in court, by defendant, to confess judgment for $193.00, and' cost. This offer was also made prior to the filing of the answer, and was “upon the causes of action stated in the petition.” It can avail nothing for reasons already stated. -The alleged tender is, also, for obvious reasons, of no effect.

In passing we add what is but a repetition of that which this court has before said (Armstrong v. Spear, 18 Ohio St. 373), that the allegation of offer to confess was improperly in the answer. Such averment tenders no proper issue-calling for proof at the trial. Indeed, evidence respecting; it, or even mention of it at the trial, is forbidden by section; 5142. Hence the averment is out of place in the pleadings.

The judgment of the circuit court will be reversed, and that of the common pleas affirmed.

Jttdgment reversed..


author: By the; Court.

text:
    Niles v. Parks et al.

      fridicial sales — Confirmation of — Motion to set aside such sale and entry of confirmation, addressed to the discretion of the court and the evidence introduced in support thereof, will not be considered by this court — Discretionary power not lost by continuance of motion to next term.

    (Decided April 26, 1892.)
    Error to the Circuit Court of Rucas county.
    The defendant in error, Rysander Parks, bid off certain land offered for sale by the sheriff under an order issued for that purpose in an action to foreclose a mortgage on the land. At the sale, and before Parks made his bid,’ it was announced, as he claims, by the sheriff, “that there were 301 acres in the tract of land that he was then offering for sale, and the sheriff further said that the land had been several times before offered for sale, and that if any person bidding on the land who' had not examined the land or the title to the same, found either the title or quantity and character of the land to be unsatisfactory, he would not be compelled to take the property. Whereupon Parks said, ‘ I have not seen the land and do not know its value, but judging from the number of acres I should think the land cheap, and I will bid on it on the conditions you offer it and on no other,’ and his bid was made and accepted expressly on the conditions above named, and said conditions were a part of his bid on said property.”
    The land, which was sold as a tract containing 301 acres, was struck off to Parks, and return made of the sale by the sheriff, which was confirmed bjr the court before Parks saw the land, or had ascertained the quantity contained in the tract. It was represented to the court at the time the sale was confirmed, that Parks had given consent to the confirmation, which, he says, was not true. Soon afterward he examined the land and caused it to be surveyed, whereby he discovered that the tract contained but 241 acres, and, on that account, was not as valuable as it would have been if it had contained the quantity represented,

      At the same term of the court, at which the sale was confirmed, Parks filed his motion to set aside the order of confirmation and the sale, which motion was continued to the next term, when the court heard the evidence and sustained the motion, setting aside both the order of confirmation and the sale.
    The defendants in the foreclosure suit, plantiffs in error here, excepted, and the evidence submitted on the hearing of the motion was embodied in a bill of exceptions, upon which error was prosecuted to the circuit court, and thence to this court.

      Clayton W. Everett, for plantiff in error.

      Parks & Barber, for defendant in error.
   By the; Court.

This court will not consider the evidence introduced on the hearing of the motion, for the purpose of determining whether it is sufficient to sustain the judgment of the court on the motion.

The court of common pleas had complete control over its own orders during the term at which they were entered, and might set aside the sale and entry of confirmation, at its discretion. Huntington v. Finch, 3 Ohio St. 445.

The discretionary power of the court in this respect was not lost by the continuance -of the motion to the next term, and when decided at that term, it was the same, in legal contemplation, as if the decision had been made at the term at which the motion was filed. Bank v. Doty, 9 Ohio St. 508.

The case of Ralston v. Wells, decided at this term, ante page 298, is distinguished from this case, in the essential feature, that there, the motion was filed at a term subsequent to that at which the judgment was rendered.

Judgment affirmed.


author: By The Court:

text:
    McGuire et al. v. Ranney.

      Petition in error — Waiver of process and entry of appearance upon, prior to filing— When takes ejfect — Effect of death of aefenaaut in error before filing.

    The waiver of process and entry of appearance upon a petition in error prior to the filing of. the same, by attorneys of record of the defendant in error, takes effect as of the filing of the petition. And where, after such indorsement of appearance is made and before ihe petition is filed, the defendant in error dies, the waiver" and entry oí appearance is of no legal effect. If no other service io had, or attempted, within six months after the rendition of the judgment of the court below, the petition in error will be dismissed for want of jurisdiction of this court to hear and determine the cause.
    (Decided April 26, 1892.)
    .MOTION by the executors of Rufus P. Ranney, deceased, to dismiss the case.

      Oviatt, Allen <$f Cobbs, for the motion.

      Tibbals & Frank, contra.

   By The Court:

The ground of the motion is that this court is without jurisdiction to hear and determine the proceeding in error, because more than six months have elapsed since the rendition of the judgment of the circuit court, and no service of process in error has been had.

Judgment of the circuit court was rendered September 22, 1891. Petition in error was filed December 22, 1891. Upon the petition is written a waiver of process and entry of appearance, without date, duly signed by the attorneys of record for the defendant in error in the action - below. This paper was, in fact, signed sometime prior to December 6, 1891. On this last named date the defendant in error deceased. No summons in error hás issued, nor is there service of any kind unless the waiver and acknowledgment of service by the attorneys of record in the original cause upon the petition prior to the decease of the defendant in error can have that effect.

We think it cannot. It would not be possible, in any manner, to bring a party into court prior to the filing of the petition. The waiver and appearance by counsel speaks, therefore, as of the date of the filing of the petition in error, December 22,1891. The decease of the defendant in error December 6, terminated the authority of the attorneys of record in the original case, and hence the entry of appearance on the petition in error is without legal effect.

No service having been made, therefore, within six months from the date of the judgment of the circuit court, this court is without jurisdiction, and the petition in error must be dismissed. Cisna's Adm'r v. Beach, 15 Ohio, 300.

Motion sustained.


author: By the Court:

text:
    Commissioners v. State ex rel.

      Sheriffs — Fees in criminal cases, when state fails to convict— When change of venue had, county where indictment found not liable for fees of sheriff of cotmty where trial had, when state fails. Compensation in stick cases.

    (Decided May 3, 1892.)
    Error to the Court of Common Pleas of Jloss county.

      Marcus G. Evans, prosecuting attorney, for plaintiff.

      Carpenter & Logan, for defendant.
   By the Court:

Where in a criminal case the venue is changed and the state fails to convict or the defendant proves insolvent, the county in which the indictment is found is not liable for. the fees of the sheriff of .the county in which the trial was had. Section 7264, Revised Statutes, prescribing a course of procedure in such cases does not affect the right of that officer to compensation. The only compensation which sheriffs are entitled to receive in cases where the state fails to convict or the defendant proves insolvent, is the allowance, not exceeding three hundred dollars, provided for by section 1281 of the Revised Statutes.

Judgment reversed and petition dismissed at the costs of the defendant in error.


author: By the CoüRT.

text:
    McRoberts v. Lockwood et al.

      Partition — Character of Action for — What judgment in, may be appealed from.

    1. A proceeding for partition of real estate, brought under chapter 9, of Division 7, of Title 1, of the Code of Civil Procedure, is a civil action, although the petition states no equitable grounds for relief; and being within the original jurisdiction of the court of common pleas, and the parties not being entitled to a trial by-jury, the cause may be appealed to the circuit court, under the provisions of section 5226 Revised Statutes.
    2. In such case the final judgment from which an appeal may be taken, is not an order of the court made in confirming or setting aside the proceedings of the commissioners, or of the sheriff in aparting or selling the premises, but, is that which finds the parties to be entitled to partition, ascertains and declares the portion of each and orders the share of each to be aparted to their several owners.
    (Decided May 3, 1892.)
    Error to the Circuit Court of Erie county.
    On November 4, 1887, the defendants in error filed in the court of common pleas of Erie county a petition for the partition of certain lands and tenements in the petition described, making the plaintiff in. error a defendant to the proceedings. The plaintiff in error, defendant in the court of common pleas, interposed no answer, and at the ensuing term of the court a judgment was rendered, finding that the defendants in error and the plaintiff in error owned the premises described in the petition in fee simple as tenants in common, finding the share owned by each party and ordering the share of each to be set off to each of them insever-alty. At the February term, 1888, the judgment was modified by including certain lands that had been omitted in filing the petition. Upon a writ of partition being issued the-lands were aparted by the commissioners named therein, who reported their proceedings to the May term, 1888, of said court of common pleas, at which term they were approved and confirmed. The plaintiff in error being dissatisfied with, the division made by the commissioners, appealed the case to the circuit court. The latter court upon the motion of defendants in error, dismissed the appeal, whereupon the plaintiff in error instituted proceedings in this court to reverse the judgment of the circuit court in dismissing the appeal.

      U. T. Curran, for plaintiff in error.

      Goodwin, Goodwin & Hull, for defendants in error.
   By the CoüRT.

A proceeding to obtain the partition of real estate, instituted and conducted under Title 1, Division 7, Chapter 9, of the Code of Civil Procedure, is a civil action. Whether the petition states facts of a character to invoke the equitable jurisdiction of the court or not, the action is one in which the parties are not entitled to a jury trial, and of which the court of common pleas had original jurisdiction, and therefore-may'be appealed to the circuit court under the general right of appeal provided for by section 5226, of the Revised Statutes. The judgment, or decree, from which an appeal may be taken, is that which finally determines the rights of the parties. In an action to obtain the partition of real estate, the judgment that finds the parties to be tenants in common, ascertains and declares the share of each and orders the shares so found to be aparted to their several owners, is the one that determines the rights of the parties, and it is from this decree that an appeal in this class of actions may be taken. Whatever the law may be elsewhere, it has not been the policy of this state to allow appeals from orders of the court of common pleas in proceedings, after judgment, such as confirmations of, or setting aside sales of real estate and the like. The action of the court of common pleas in such cases, is reviewable only by proceedings in error. Reeves et al. v. Skenett, Jr. et al. 13 Ohio St. 574.

An order of partition partakes of the nature of an execution, or order of s^le. Proceedings under it may result in aparting the premises, or if they cannot be divided without injury, in their sale. Whether the commissioners apart the premises, or report tbat they are not susceptible to division without injury, and a sale of them is made by the sheriff, the orders of the court of common pleas in approving and confirming, or setting aside the proceedings at their several stages of progress, are not appealable.

Section 5227, Revised Statutes, provides that a party desiring to appeal his cause to the circuit court, shall, at the term the order or judgment is made, give notice of such intention, and, within thirty days after the rising of the court, give an undertaking as prescribed by that section. Notice of his intention to appeal the cause was not given by the plaintiff in error at the term of court at which the final judgment was rendered, nor was his undertaking filed within thirty days thereafter; for which reasons the appeal was properly dimissed.

Judgment affirmed.


author: Williams, J.

text:
    Armstrong, Rec’r v. Warner et al.

      Set-off — When right of debtor to, preserved against assignee — Right of surety of debtor to — Equitable set-off — When enforced — National Banks — Receivers of — When right of set-off will be enforced against — Section 624%, Revised Statutes of the United States, construed.

    1. When the holder of a claim not yet due, arising upon contract, becomes insolvent and transfers the same before maturity, and the debtor, at the time of the transfer, holds a similar claim then due against the assignor, his right of set-off is preserved against the assignee, when the latter’s cause of action arises. And a surety on the obligation so transferred, may enforce the set-off for his own protection, if the principal debtor be insolvent. The rule does not apply where the thing transferred is commercial paper and the assignee becomes the bona fide holder thereof for value.
    2. Equity will, in general, enforce the right of set-off, by decreeing the compensation of mutual demands, so far as they equal each other, where they have grown out of the same, or connected transactions, or the one has formed, in whole or in part, the consideration of the other,, and the party against whom the set-off is asserted, is insolvent.

      3. Section 5242, of the Revised Statutes of the United States, prohibits any National bank when insolvent, or in contemplation of insolvency, from so disposing of its assets as to prevent their proper application to the redemption of its circulating notes, and the ratable distribution of the remainder among its creditors. But it does not prohibit the allowance of any valid set-off, legal or equitable, which a debtor of the bank may have against any obligation owing by him to it, at the time of its insolvency.
    4. The allowance of such set-off, is not the creation of a preference by the bank, but an ascertainment merely of the just amount due on the debtor’s obligation, and may be enforced against a receiver of the bank. It is the balance due after deducting the set-off, which constitutes assets in the receiver’s hands for disposition in accordance with the provisions of the federal statutes.
    5. A National bank received on deposit, a check drawn by the plaintiff on another bank, and carried the amount to the credit of his agent, upon the agreement that he would take for part of the sum, a draft drawn on a distant bank, and would not immediately check out the balance. The draft was accordingly issued, but before presentment, the drawer bank, which was insolvent, passed into the hands of a receiver, without having provided any funds with which to pay the draft. The check, (payment of which had been stopped) came to the possession of the receiver, and the draft belonged to the plaintiff.

      Held: the plaintiff is entitled in equity to have the amount of the draft set-off against his liability on the check.
    6. The same National bank, at the time of its insolvency, held a draft which it had discounted for, and carried the proceeds to the credit of the drawer, for whose accommodation it had been accepted by the plaintiff The draft was protested for non-payment, and the liability of the drawer made absolute. As between the drawer and the plaintiff, the former was the principal debtor, and the latter his surety, only. When the bank passed into the control of the receiver, the drawer of the draft, who afterwards became insolvent, had standing to his credit on his deposit account-with the bank, a sum less than the amount of the draft.

      Held: the plaintiff, as surety, is entitled in equity to have set-off against his liability as acceptor of the draft, the amount due his principal on the deposit account with the bank.
    (Decided May 10, 1892.)
    Error to the Superior Court of Cincinnati.
    The original action was brought in the Superior Court of Cincinnati, by^Hulhert H. Warner, doing business as H. H. Warner & Co.y against David Armstrong, Receiver of The Fidelity National Bank of Cincinnati, William J. M. Gordon, and David M. Hyman trustee for the benefit of Gordon’s creditors.
    The object of the suit was to establish certain set-offs against obligations which the bank held against Warner. Upon the trial, at special term, the plaintiff obtained judgment allowing the set-offs, which was affirmed at general term; and to reverse those judgments, the present proceeding in error is prosecuted by Armstrong, the receiver of the bank. A statement of the facts necessary to a proper understanding of the questions in the case, will be found in the opinion.

      W. B. Burnet, Joseph Wilby and Kittredge & Wilby, for plaintiff in error.
    I. Warner’s liability.to the bank not being due at the date of the failure' of the Fidelity Bank (June 21,) the legal or statutory right of offset did not exist; nor did the necessary conditions exist for their allowance as equitable set-offs.
    The four thousand 'and forty-nine dollar acceptance was, by its terms, not due’until June 24; nor had Warner’s liability on the Rochester check, for four thousand and sixty-seven dollars, accrued until after the presentation thereof for payment, which was after the failure of the Fidelity bank. Bull v. Bank of Kasson, 123 U. S.,’105. Therefore, at the date of the failure of the bank (June 21,) the bank could not have brought an action against Warner either on the four thousand and sixty-seven dollar Rochester' check, or the four thousand and forty-nine dollar acceptance. Consequently section 5077, of the Revised Statutes of Ohio, does not apply, and no legal or statutory set-off ca\n avail Warner. Fuller v. Steiglitz, 27 Ohio St., 355. Norman equitable set-off be maintained, for equitable set-off clepends on the mutual credit between the parties, which lujis been defined by Judge Story to be “a knowledge on.both jbides of an existing debt due to one party and the credit by the other party founded on and trusting to said debt/ as a means of discharging it.” Story’s Equity Juris. §14$5. Bung Com
      pany v. Armstrong, 84 Fed. Rep., 94; Green v. Darling, 2 Mason, 201; Howe v. Shepherd, 2 Sumner, 410.
    The indebtedness upon the Rochester check was distinct from the indebtedness upon the New York draft; and the indebtedness upon the acceptance was distinct from the indebtedness on the deposit of Gordon.
    It is not a case'of mutual credits, and the equitable set-off cannot be allowed.
    II. That even if they were allowable as equitable set-offs, yet being asserted against thé assets of a national bank in the hands of a receiver, they could not be allowed without violating section 5242, of the Revised Statutes of the United States.
    Section 5242 of the Revised Statutes of the United States prohibits the set-off, which evidently would result in the preference of the claims of Warner at the’ expense of the general creditors.
    The Rochester check, and the acceptance, on each oi which Warner was liable, were not due at the date of the failure. Consequently, they came into the hands of the receiver of The Fidelity National Bank as assets unimpaired by any right of set-off. To allow a set-off on them after their subsequent maturity, would be to destroy the inexorable rule of equality of-distribution of the assets of a national bank prescribed by section 5242, which has been clearly and strictly interpreted in the case of National Bank v. Colby, 21 Wall., 609.
    In the decision of that case, a radical distinction was announced between the rights of creditors of a national bank as distinguished from any other class of creditors, in the application of assets. And a peculiar limitation was placed upon the rights of those dealing with, and pursuing their remedies against, a national bank whose assets were in the hands of a receiver; a limitation which fully reaches the case at bar, and denies the right of Warner to disturb the quality of distribution directed in section 5242, by the allowance of the set-offs he claims. For it was decided in that case that the national bank law recognized only the government, and the bank-note hoíders as preferred creditors.

      This doctrine has been followed by the Circuit Court of the United States for the Southern District of Ohio. Armstrong v. Scott, 36 Fed. Rep. 63.
    In the case of the Citizens’ National Bank v. Dowd, 35 Fed. Rep., 340-342, it is stated in the opinion of the court, that section 5242 of the Revised Statutes of the United States, forbids preferences among the creditors of a national bank. See, also, Easton v. Capron, 22 Conn., 639, 644; Paxton v. Bishop, 3 Wend., 13.

      Bateman & Harper, for defendants in error.
    I. Was a set-off of the draft against the check allowable ?
    We do not propose to go into a discussion of the origin and nature of the doctrine of set-off. Fundamentally it rests upon the principle' that where two individuals are each owing the other, the real debt is only the balance due to one after adjusting the accounts between the two. The right in equity here, is so clear that we will not discuss the question of whether it existed in law or under the statute. Equity is not confined to the legal or statutory right and may proceed to afford relief in a variety of other cases. Mutual credit between the parties, a connection between the demands, insolvency of one of the parties, are all well recognized grounds whereon equity predicates relief.. 2 Story’s Eq. Jur., §1435; Scammon v. Kimball, 92 U. S.,262; Carrv. Hamilton, 129 U. S., 252; 2 Story’s. Eq. Jur., §1434; Whit-taker v. Bush, Ambler 407; Blount sr: Windley, 95 U. S., 177; Baker v. Kinsey, 41 Ohio St., 403 ; Bank v. Hemingray, 34 Ohio St., 381; Wanser v. Truly, 17 Howard (U. S.) 584; 2 Smith’s Reading Cases, 355.
    There is another aspect of the question. This draft as we have called it, was, in law, not a bill of exchange but a check. Bull v. Bank of Kasson, 123 U. S., 105; Stewart v. Smith, 17 Ohio St., 82; Morrison v. Bailey, 5 Ohio St., 13.
    The drawer of a check is regarded as the principal debtor, and his liability is not dependent upon presentment and notice of dishonor; and it is only when he has suffered loss by the want of timely presentation that he can complain.
      Stewart v. Smith, 17 Obio St., 82, 85. In fact, no right of action was maintainable against the First National Bank of New York for refusing to accept' and honor the check. Florence Mining Co. v. Brown, 124 U. S., 385; Bank of the Republic v. Millard, 10 Wallace 152, and cases cited. North-umberland Bank v. McMichael, 106 Pa. St., 460; Resley v. Phoenix Bank, 83 N. Y., 324; Coates v. Doran, 83 Mo., 337; Fl’eig v. Sleet, 43 Ohio St., 53.
    II. Was Warner entitled to set-off Gordon’s deposit balance against his acceptance?
    This question arises upon the second cause of action and grows out of this situation. When the Fidelity Bank closed it held a bill of exchange due four days later, whereon Warner appeared as acceptor and Gordon as drawer, but in reality Gordon was the principal debtor and Warner only surety. Gordon had discounted this bill' and the proceeds had been credited to him, and when the bank closed there was a balance due him on his deposit account.
    Two questions are presented. Under these circumstances, was Gordon entitled to set-off his deposit-balance against his liability on the acceptance; and, upon his becoming insolvent, was Warner, as his surety, entitled to the same relief ?
    1. Gordon was entitled to assert this set-off.
    The considerations discussed as to the first cause of action, to-wit, mutual credit, the connection between the Two clauses, and the insolvency of the party against whom the set-off is asserted, are all present in this instance also, and would entitle Gordon to set off his deposit balance against the bill of exchange.
    The precedents for allowing an equitable set-off under the precise state of facts recited above are numerous.
    The deposit of Gordon was due to him at the time The Fidelity National Bank failed; no demand was necessary. Receivers v. Patterson Gas Light Company, 3 Zabriskie (N. J.) 283, 295; Richards v. La Tourette, 119 N. Y., 54, 61; Lindsay v. Jackson, 2 Paige Ch., 581; Smith v. Felton, 43 N. Y., 419; Sidles v. Houston, 110 Pa. St., 254; Pomeroy, Remedies & Remedial Rights, §163; Skunk v. Merchants

      National Bank, 16 Raw Bull., 353; Ford v. Thornton, 3 Reigh (Va.) 695.
    2. Warner, as surety for Gordon, is entitled in equity to the benefit of the set-off existing in favor of his principal, Gordon. Wagner v. Stocking, 22 Ohio St., 297; Field v. Oliver, 43 Mo., 200; Reppy v. Reppy, 46 Mo., 571; Downer v. Dana, 17 Vt., 518; Smith v. Felton, 43 N. Y., 419; Brewer v. Nor cross, 17 N. J. Eq., 219; Barbour on set-off, 191, 197.
    III. Does section 5242 United States Revised Statutes, prohibit the allowance of these set-offs as against the receiver of a national bank?
    The section inhibits acts of the bank. The prohibited things are transfers, assignments, deposits and payments made by the bank after the commission of an act of insolvency or in contemplation thereof, with a view of preventing the application of its assets in the manner prescribed by that chapter or with a view to the preference of one creditor to another. It does not prevent the assertion of rights arising by operation of law, nor does it attempt to deal with the subject of set-off or of equities existing against the bank at the time of committing an act of insolvency.
    This statute undoubtedly has for its object the equal distribution of the assets of a national bank among its creditors. Such also was the object of the various bankruptcy laws which we have had, and of the insolvent laws of the several states. The right of set-off has never been thought to conflict with the principle of equality; in fact, the doctrine of set-off proceeds upon the theory that the debt really owing is only the balance remaining after one claim has been applied by way of compensation or set-off against the other. The assets of a bank, as has been well said, are only the balances remaining over after such an adjustment of its accounts. Receivers v. Patterson Gas Light Company, 3 Zabriskie, (N. J.) 283, 294; Bank v. Hemingray, 34 Ohio St., 381; Scammon v. Kimball, 92 U. S., 362; Carr v. Hamilton, 129 U. S., 252 256; Bump on Bankruptcy, 10 Ed. 91; Smith v. Mosby, 9 Heisk, (Tenn.) 501, 503; Burrill on Assignments, 5th Ed. 616; High on Receivers, §247; Beach on Receivers, §702; Hade v. McVay, 31 Ohio St., 231;

      Since tbe decision of Armstrong v. Scott, Supra, the question of the right of equitable set-off as affected by section 5242, has been considered by Judge HamMOND in the case of Snyder v. Armstrong, 37 Fed. Rep., 18; We commend his discussion of the question. It is a clear, forcible, and, to our minds, unanswerable argument against the constuction of this section which the plaintiff in error asserts.
    IV. Was Warner entitled to the surrender of his check by reason af the fraud perpetrated in obtaining it, and the failure of the consideration given therefor?
    The facts are these: The deposit of Warner’s check was received a few minutes before the Fidelity Bank closed; at a time when “the bank was hopelessly insolvent and known to be so by its officers; the only consideration given was a draft, which was dishonored, drawn on a New York bank where it had no funds; promptly this draft is tendered back to the receiver of the Fidelity Bank and the cancellation of the deposit and surrender of the check demanded. Under these circumstances, has the receiver any right to the check? Has not the whole consideration for it failed? Is not Warner entitled to the surrender of the check?
    The law is now well settled that a bank acquires no title to a deposit received after its officers know it to be hopelessly insolvent. The receipt of a deposit under such circumstances is a fraud which entitles a depositor to rescind and receive back the deposit as long as the identity of the deposit can be shown and before the rights of third parties have intervened. Such right exists against the receiver of a National bank and its creditors. St. Louis, &c., Railway Co. v. Johnston, 133 U. S., 566, 576, 578; Anonymous, 67 N. Y., 598; Craigie v. Hadley, 99 N. Y., 131; Furber v. Stevens, 35 Fed. Rep., 17; hisse v. Dietrich, 3 Mo* Ap., 584; Bolles on Banks, §28.
    The facts of this case would bring it within the rule as to merchants, laid down by this court in Talcott v. Henderson, 31 Ohio St., 162, and a stricter rule is applied to banks. In merchandising, chances are taken which are never dreamed of in making a deposit in a bank. 67 N. Y., 598; 133 U. S., 576, 577.

      The .consideration for which the title to the check passed to The Fidelity National Bank has wholly failed. The receiver is in this respect, certainly, in no better situation than the bank. This defect was inherent in the title which passed to the receiver and the creditors rights attached subject thereto. To now enforce this check as against Warner is to compel him, without consideration, to contribute so much to the payment of the debts of the bank. We submit that the case falls within the principal of Fleig v. Sleet, 43 Ohio St., 53. See also Reed v. Burns, 13 Ohio St., 49; 2 Chi tty on Contracts, 89; 1 Story Eq. Jur. (12 Ed.) §695 and notes.
    As to the right to equitable relief: In New York, where the receiver proposed to sue our client, the court could not have obtained jurisdiction over Gordon and his assignee, who were necessary parties. Gildersleeve v. Burrows, 24 Ohio St., 204; Gillespie v. Torrence, 25 N. Y., 306; Brant on Suretyship, §203. Equity has jurisdiction to compel the surrender of instruments fraudulently obtained and to enjoin suit thereon. 1 Story Eq. Jur., §694, 698, 700; High on Injunctions, §66, 67 and 106. And as to remedy in equity to obtain set-off, see 2 Story Eq. Jur., §1436, N. 2; Brant on Suretyship, §203; Downer v. Dana, 17 Vt., 518.
   Williams, J.

The general ground upon which the reversal of the judgments below is sought, and the only one advanced by counsel in the argument, is, that the facts established by the evidence do not entitle the plaintiff to the set-offs allowed him. The evidence is embodied in a bill of exceptions which was properly taken; and there appears to be neither substantial conflict in the evidence, nor material controversy about the facts of the case. The facts are substantially as follows: The plaintiff, Warner, was indebted in the sum of $4,067.82, on a draft drawn by him February 19, 1887, on the defendant Gordon, and accepted by the latter for Warner’s accomodation, payable four months after date, at The American Exchange National Bank, New York. Qn the 18th of June, 1887, being a few days before the maturity of the draft, Warner drew bis check on The Bank of Monroe, of Rochester, New York, where he had funds, for $4,067.82, the precise amount of the draft, and forwarded the same to Gordon, to enable him to meet the draft at its maturity. The check was received by Gordon, in Cincinnati, and on the afternoon of June 20, 1887, was presented by him at the counter of The Fidelity National Bank of that city, which declined to cash it, but carried the amount to the credit of Gordon on his deposit account with the bank, upon the agreement that Gordon should accept New York exchange to the amount of $3,200, and the balance should remain to his credit and not be immediately drawn out.' Thereupon The Fidelity National Bank, on Gordon’s check, issued its draft to him on The First National Bank of New York City, for $3,200, leaving a balance of $867.82 of the Warner check, standing to the credit of Gordon. The Fidelity Bank had no funds in The First National Bank of New York City, and when the draft for $3,200, was presented, payment was, on that account, refused; and the draft has since remained in the hands of Gordon, and the trustee for the benefit of his creditors. At the time the Fidelity Bank received the Warner check, and issued the draft for $3,200, it was insolvent; which fact was known to the managing officers of the bank, and to those who transacted the business with Gordon, but was unknown to him. On the same day, and soon after the business with Gordon was completed, the bank closed its doors, ceased to do business, and passed into the hands of a bank examiner. A few days afterwards Armstrong was appointed receiver. Warner, upon learning of the failure of the bank, stopped the payment of his check which Gordon had deposited with it as before stated, and the check came to Armstrong’s posession upon his appointment as receiver, in which capacity it is now held by him. Gordon, who was in fact the agent of Warner in the transaction referred to with the Fidelity Bank, became insolvent shortly after the failure of that bank, and made an assignment of his property in trust for the benefit of his creditors; and the trustee having custody of the draft for $3,200, was made a party to the action below. One of the objects of the plaintiff’s action was to have the liability of the bank to him on that draft, issued for his benefit, set off against his liability to the bank on the check for $4,067.82, which Gordon deposited with the bank, under the agreement already stated.

The additional facts peculiar to the other set-off claimed are, in substance, these:

On the 21st of February, 1887, Warner accepted a draft drawn on him by Gordon, for the latter’s accommodation, for the sum of $4,249.26, payable to the order of Gordon, four months after date. This acceptance the Fidelity Bank discounted for Gordon, and carried the amount to the credit of his deposit account. On its maturity the acceptance was protested for non-payment, and Gordon’s liability made absolute. The draft passed into the hands of Armstrong, upon his appointment as receiver, and is still held by him. At the time of the failure of the bank, and the appointment of the receiver, there was a balance due Gordon on his deposit account, of $1,190.57, which the plaintiff seeks to have set off against the draft.

The trial court adjudged that the plaintiff was entitled to have the set-offs allowed, but required, as a condition to the entry of the judgment, that he pay the balance remaining due on his obligations in the hands of the receiver, which the record shows, was deposited with the clerk, and judgment was accordingly entered. The plaintiff in error resisted the set-offs, as stated by his counsel in their briefs:

“First — Upon the ground that Warner’s liabilities to the bank not being due at the date of its failure (June 21), the legal or statutory right of offset did not exist; nor did the necessary conditions exist for their allowance as equitable set-offs:
Second — That even if they were allowable as equitable set-offs, yet, being asserted against the assets of a National Bank in the hands of a receiver, they could not be allowed without violating section 5242 of the Revised Statutes of the United States.”

And it is upon these specific grounds that counsel contend the judgments below should be reversed. We will consider them in the order stated; and while the set-offs-allowed do not both stand upon precisely the same footing, they may, for convenience, be considered together.

It is undoubtedly true, that under the statute, cross demands are not “deemed compensated, so far as they equal each other,” unless they have existed under such circumstances that if the holder of one of the demands had brought an action upon it against the holder of the other, the latter could have set up his demand by way of set-off or counterclaim; and, as a general rule, to entitle a set-off to be made at law, a. present right of action must exist in favor of the holder of each demand against the other, at the same time; and consequently, the assignment of one of the demands before it becomes due, will in general defeat the set-off. This was held in Fuller v. Steiglitz, 27 Ohio St. 355, where there were no equitable considerations for applying the principle of compensation to cross demands. Rut, “if an insolvent holder of a claim not yet matured assigns the same before maturity, and the debtor at the time of the transfer, holds a similar claim against the assignor, which is then due and payable, his right of set-off against the assignee, when the latter’s cause of action arises, is-preserved and protected.” Pomeroy on Remedies, section 168, This rule, it is said, is based upon considerations of equity, and is adopted to prevent one party from losing his own demand on account of the insolvency of his immediate debtor, and from being at the same time compelled to pay the debt originally owing by himself to the insolvent assignor. It can, of course, have no proper application when the thing transferred is commercial paper, and the assignee becomes the bona fide holder thereof, for value.

The rule was approved and applied in the case of Bank v. Hemingray, 34 Ohio St. 381, where the balance due a co-partnership on its deposit account with a banking house which had become insolvent, was set, off against the individual notes executed by one of the co-partners to the bank, notwithstanding the notes had been transferred before their maturity, to the assignee of the bank for the benefit of its creditors; and, under the rule, the fact that Warner’s liability to the Fidelity Bank bad not matured wben it failed, either on the check drawn by him on the Rochester Bank for $4,067.82, or on his acceptance of the Gordon draft for $4,249.26, did not,.of itself, defeat his right to the set-offs which were awarded him by the judgment below, unless the position of the receiver, with respect to his rights against those indebted to the bank, is a more favorable one than that of an assignee in insolvency; and that it is not, is well settled. The receiver is not a bona fide holder for value, of the assets of the bank, in the sense that its commercial paper in his hands is protected against defences which might have been set up against the bank. He succeeded only to the rights of the bank at the time of its failure; and a set-off available against the bank at that time, is equally available against him. Hade v. Mc Vay, 31 Ohio St. 231, and cases cited on page 238.

The remedy of set-off has been much enlarged in equity, and is there administered in cases, where, under the strict rules at law, it would not be available. Thus, at law, a joint demand cannot be set off against a several one, nor a several demand against a joint one; but equity adopts a different rule where, on account of the insolvency of one of the parties, the other is in danger of losing his claim. Sarchet v. Sarchet, 2 Ohio 320; Baker v. Kinsey. 41 Ohio St., 403. And, generally, equity will enforce the right of set-off, by decreeing the compensation of mutual demands, so far as they equal each other, where they have grown out of the same or connected transactions, or the one has formed, in whole or in part, the consideration of the other, and the party against whom the set-off is asserted is insolvent. These equitable grounds for the allowance of the set-offs claimed by the plaintiff, are present in the case under consideration. The fund against which the check on the Rochester Bank was drawn, was the property of the plaintiff; and the check was put in the hands of Gordon to meet the maturing obligation of the plaintiff. In transferring the check to the Fidelity Bank, and obtaining from it the draft for $3,200.00 on The First National Bank of New York, Gordon was the agent of tbe plaintiff, a:nd the transaction was for the latter’s benefit. The check was deposited upon the agreement that the draft should be issued for the specified sum, and the deposit, and, draft, were each the consideration for the other. It is not to be supposed that the transaction would have occurred, if the pláintiff or his agent had known, at the time, of the bank’s insolvency. No funds were in the hands of the drawee at the time the draft was issued, nor was any provided with which to meet it on presentation ; and, therefore, presentment and protest were not required in order to fix the liability of the drawer. The failure of the .bank to provide the requisite fund to meet the draft, made it necessary, for the plaintiffs protection, to stop the payment of the check; and thps, the liability of the plaintiff to the bank on the check, which the receiver seeks to enforce against him, arose from the bank’s breach of its obligation, incurred as the consideration, in part, of the deposit of the check. There is nothing lacking here, that is essential to a complete equitable right of set-off. And the same is true as 'to the other set-off allowed. The draft drawn by Gordon on Warner for $4,249.26, was accepted by the latter solely for the accommodation and benefit of the former. They are each liable thereon, it is true; but their relation to each other is that of principal and surety. If an action were brought by the bank against Gordon, as the drawer of the draft, he would be entitled to set-off against his liability, the balance standing to his credit on his deposit account with the bank; and he being insolvent, his surety has the right to have the set-off allowed against his liability, which is but a mode of compelling the application of the principal’s property to the payment of his own debt, for the relief of his surety. The objection made to this set-off, on the ground that the liability on the draft had not matured when the bank failed, has already beeü disposed of; for, in that respect, it does not differ from the one previously considered.

Does section 5242, of the Revised Statutes of the United States, forbid the allowance of the set-offs? That section reads as follows:

Sec. 5242. All transfers of the notes, bonds, bills of exchange, or other evidences of debt owing to any National banking association, or of deposits to its credit; all assignments of mortgages, sureties on real estate, or of judgments or decrees in its favor; all deposits of money, bullion, or other valuable thing for its' use, or for the use of any ot its shareholders or creditors; and all payments of money to either, made after the commission of an act of insolvency, or in contemplation thereof, made with a view to prevent the application of its assets in the manner prescribed by this chapter, or with a view to the preference of one creditor to another, except in payment of its circulating notes, shall be utterly null and void; and no attachment, injunction or execution, shall be issued against such association or its property before final judgment in any suit, action, or proceeding, in any state, county, or municipal court.”

The right of set-off existed, as has been shown, and the receiver took the claims which the bank held against Warner, subject to that right, unless the section operates to defeat it. The claim of the plaintiff' in error is, that, as the liabilities of Warner passed to the receiver before they matured, to allow the set-offs, would interfere with the equal distribution of the bank’s assets amongst its creditors, which it was the design of th.e section to secure. Under other provisions of the United States statutes, the comptroller of the currency may appoint a receiver of a National bank, when he is satisfied it is insolvent, or is in default in the payment of its fcirculating notes; and it is the duty of the receiver to take possession of the assets of the bank, and collect or otherwise convert them into money, and pay the same into the United States treasury, subject to the order of the comptroller, who, after redeeming the outstanding notes of the bank, is required to make a ratable dividend of the balance among its creditors. The purpose of section 5242, no doubt, was to prevent a National bank, when insolvent or in contemplation of insolvency, from so disposing of its assets as to prevent their proper application to the redemption of its notes in circulation, and the ratable distribution of the remainder among its creditors; and its provisions extend no farther than to declare void, any disposition by the bank, of its choses in action, securities, or other assets, made with the view of preventing their application to the payment of its circulating notes, or with a view to prefer one creditor to another; and to prohibit attachments, injunctions or executions, against such bank or its property, before final judgment. The section, as we understand it, does not prohibit the allowance of any valid set-off, legal or equitable, which a debtor of a bank may have against any obligation owing to it by him, at the time of its insolvency, The allowance of such a set-off is not the creation of a preference, but an ascertainment of the just amount due. To exact the payment of more than that, would be unjust, and the section, we think, does not require that to be done. Warner’s equitable rightof set-off existing, as it did, at the time of the failure of the Fidelity Bank, and his obligations having passed to the receiver subject to that right, only the balance due on those obligations, after deducting the set-offs, constituted assets of the bank in the receiver’s hands for disposition in accordance with the provisions of the Federal statutes.

Counsel for plaintiff in error cite the case of Armstrong v. Scott, 36 Fed. Rep. 63, as maintaining a contrary doctrine. But the later cases, of Snyders. Armstrong, 37 Fed. Rep. 18, and Yardley, Receiver v. Clothier, 49 Fed. Rep. 337, after a full review and discussion of many authorities, and a careful consideration of the statutes, decline to follow Armstrong v. Scott. Those decisions are in accord with the views we have expressed, and render it unnecessary to enlarge the discussion here.

We find no error in the record, and the

Judgment is affirmed.