Smith v. National Life Insurance Company. surance Co., 79 Ky. 403; and Montgomery v. Insurance Co., 14 Bush, 51; were not similar in their provisions to that in suit. In each of these cases it was plainly stipulated that if after payment of a certain number of the premiums those subsequently accruing were not paid when due, and forfeiture ensued, the company would still be liable for such part thereof as is proportionate to the annual payments made. These cases are therefore not in point, they are distinguished in this, that they were on policies which were non-forfeitable and which had an acknowledged value after a failure to pay a premium. The case of Bussing v. Insurance Co., 34 Ohio St. 226, is however in all respects similar to this. The policy in that case contained substantially the same provisions for a paid-up policy, followed by a condition, "that if the amount of any annual premium, herein provided for, is not fully paid, with interest due thereon, on the day and in the manner so provided for, then this policy shall be null and void and wholly forfeited;" and in case the policy "becomes null and void, all payments made thereon, and all dividends and credits accruing therefrom, and remaining unpaid, shall be forfeited to the company;" it was held that the right of the policyholder to make the exchange was required to be exercised during the life of the policy. "It was not the intention of the parties, in the event of the policy becoming void, on default in the payment of premiums, that it should still remain good as a policy pro tanto, for the premiums which had been paid." To the same effect is the case of People v. Widows' Insurance Co., 15 Hun, 8. In the case of Winchell v. Insurance Co. (U. S. C. C. Mass.), 8 Ins. L. J. 651, relied upon by plaintiff in error, the provision for a paid-up policy, and the conditions upon which the original was issued and accepted, are in most respects similar to the provisions and conditions of the policy in suit, but that case is distinguishable from this, in the fact that the condition was expressly "subject to the provisions of chapter 186 of the acts of the legislature of Massachusetts, in the year 1861, entitled 'An act to regulate the forfeiture of policies of life insurance."" The statute, referred to, continued in force all life policies for a time reckoned according to their net value, notwithstanding a failure to pay the premiums, provided that notice of the claim and proof of the death should be submitted to the company within Smith v. National Life Insurance Company. ninety days after the decease of the assured. The assured had paid eight annual premiums, including that due June 1, 1873; he died December 17, 1877. The bill alleged that the payments upon the policy were sufficient, under the statute of Massachusetts, referred to in the policy, to continue it in force until after the death of the assured. The defendants maintained that the two clauses taken together meant that the option must be exercised before there was a forfeiture. The learned court, LowELL, J., although admitting the case of Bussing's Ex'rs v. Union Mutual Life Insurance Co., supra, was an authority for this construction, and that it seemed to reconcile the apparent discrepancies in the two clauses, and to be consistent with all the words used, "after much doubt" adopts the plaintiff's construction, assigning as a reason for so doing, that "the assured in reading his policy would suppose that he need give himself no uneasiness about the premiums, for that he could always be sure of a policy, as large as those he had paid would warrant." We are inclined to adopt the construction, which is "consistent with all the words used," and "reconciles all apparent discrepancies rather than one which results from the belief of what the defendant might "suppose " on the reading of the paper. But the court adds "even if we supplied the words, while the policy is in force,' the policy was in full force, for the whole amount, when the assured died. It was in force in all respects and to all intents and purposes, and subject to be forfeited if the assured did any act prohibited by the conditions, such as travelling in certain countries, and engaging in certain occupations. In other words, up to this time, it was not forfeited at all, except as to the right of extending it beyond the time to which the statute extended it." We are of opinion therefore that the court below was right in entering judgment for the defendant, on the demurrer to the defendant's special plea. [Minor matters omitted.] Affirmed. Peoples' Bank of Wilkesbarre v. Legrand. PEOPLES' Bank of WILKESBARRE V. Legrand. (103 Penn. St. 309.) Bank — application of deposit to note. A bank holding the note of a depositor, his deposit being insufficient to pay it at maturity, is not bound to apply his subsequent deposits, for the benefit of the indorser, although sufficient. A CTION on a promissory note. The head-note shows the case. The defendant had judgment below. Henry W. Palmer and Dewitt & Fuller, for plaintiff in error. Garrick M. Harding and John McGahren for defendant in error. GREEN, J. [Omitting minor matters. ] Another point was made however, though not determined by the court, notwithstanding it was reserved, which, if sound, would still defeat the plaintiff's right of recovery. It grew out of the fact that Lowenstein continued to do business with the bank, and had at various times sums on deposit with the plaintiff sufficient to pay the note. It is contended that these funds being within the power of the plaintiff, an obligation arose to appropriate them to the payment of the note as in favor of the indorser, and this not being done, the latter was discharged. We do not think so. While it is true that a bank is a mere debtor to its depositor for the amount of his deposit, and therefore in an action by the bank against the depositor, on a note upon which he is liable, the latter may set off his deposit, yet we do not think the bank is bound to hold a deposit for the protection of an indorser of the depositor. A bank deposit is different from an ordinary debt in this, that from its very nature it is constantly subject to the check of the depositor, and is always payable on demand. The convenience of the commercial world, the enormous amount of transactions by means of bank checks, occurring on every business day in all parts of the country, require that the greatest facilities should be afforded for the use of bank deposits by means of checks drawn against them. The free use of checks for commercial purposes would be greatly impaired, if the banks could only honor them on peril of relieving indorsers without an investigation of the state of the depositor's liabilities upon dis Peoples' Bank of Wilkesbarre v Legrand. counted paper. This question does not seem to have frequently arisen in the courts, but in three cases out of four, to which we have been referred, the right of the bank to pay out the deposit of the party in default on his paper, without relieving the indorser, has been affirmed. Thus in Maryland, in the case of Martin v. Mechanics' Bank, 6 Harr. & Johns. 235, in an action on an inland bill of exchange by an incorporated bank, as the holder of the bill which they had discounted before it became due, against the payee, evidence was given that the acceptors of the bill, on the day it became due and for a long time before, and for several months thereafter, kept an account at the said bank, by depositing, and from time to time checking out money, and that on the day the bill became due they had no money in bank, but that about a month afterward a balance was struck between the bank and the acceptors, when they had a sum of money sufficient to have discharged the bill. Held, that the bank was entitled to recover the amount of the bill from the payee, that the conduct of the holders of the bill with regard to the acceptors was not a waiver of their right against the indorsers. nor a release as to them. And as between the holders and the acceptors, there was no payment. The case was elaborately argued by counsel and fully considered by the court. It was held that a deposit of money in a bank by a regular depositor is not to be regarded as an appropriation by him of the money deposited to the payment of an existing indebtedness of his, but rather for the mutual benefit and convenience of the bank and the depositor, "according to the common course of business in our moneyed institutions. On page 247, the chief justice said: "The mere placing money in bank on deposit by the Messrs. Woods had not of itself the effect to discharge the appellant from his liability as indorser of the bill: and not the diverting, by the plaintiffs, the money from the purpose for which it was so placed and received by them in bank, and applying it to the payment of the bill was not more to the prejudice of the indorsers than their forbearing to sue the acceptors, and did not amount in law to a waiver of their right of action against either of the parties." In Voss v. German American Bank, 83 Ill. 599, it was held that where the principal on a note payable to a bank has funds on deposit in the bank after maturity, more than sufficient to pay it, the omission of the bank to appropriate the deposit to the payment of the note will not dis Peoples' Bank of Wilkesbarre v. Legrand. charge the surety. In New York, in the case of National Bank of Newburgh v. Smith, 66 N. Y. 271; s. c., 23 Am. Rep. 48, it was held, that where after the maturity of a promissory note held by a bank, and due protest and notice thereof, the maker makes a general deposit in the bank of an amount sufficient to pay the note, this does not of itself as between the bank and an indorser, operate as a payment. In the absence of any express agreement or directions it is optional with the bank whether or not to apply the money in payment; it is under no obligation to do so. The case of McDowell v. Bank of Wilmington, 1 Harring. 369, in the State of Delaware, holds the contrary doctrine, but we think the better reason is with the three preceding cases above cited. It is beyond question that the bank, in the absence of any special appropriation of the deposit by the depositor, would have the right to apply a general deposit to the payment of any existing, matured indebtedness of the depositor. But that privilege is a right which the bank may or may not exercise in its discretion. As before stated, a bank deposit creates a form of indebtedness of a peculiar and exceptional character. It is thus stated in Morse on Banks and Banking, 35: "The bank is under the obligation of honoring the customer's drafts and checks whenever the same are presented for payment, provided that at the time of such presentment the balance of the account, if then struck, would show a credit in favor of the customer of funds on which the bank has no lien sufficient to meet the sum called for by the check or draft. The contract so to honor the depositor's orders is implied from the usual course of business. The deposit is made with the tacit understanding that the bank shall respond to the depositor's orders, so long as there is sufficient balance to his credit." It may well be that special circumstances may exist in particular cases, which will convert into an obligation or legal duty, as to indorsers and others contingently liable, that which would otherwise be a mere privilege of the bank. Thus an original direction by the maker, or an agreement between the maker and indorser on the one hand and the bank on the other, that general deposits of the maker should be applied in discharge of the indorsed paper after maturity, or possibly a course of dealing to that effect might suffice to create such an obligation. But in the absence of such circumstances and of special directions, we think that general deposits, made after maturity of the depositor's obligation, are to be treated in the same manner, subject of course to |