Opinion
No. 45
Filed 1 December 1981
Banks and Banking 3 — assignment of saving accounts — lack of consent by bank A rule under the heading "Bankbooks" in a savings account passbook providing that "No assignment or transfer of the Bank Book need be recognized by the Bank unless it consents thereto, and a memorandum thereof entered in said Book" restricted only the assignment of the passbooks and not the accounts. Therefore, savings accounts in defendant bank were validly assigned by the depositors to plaintiffs although the bank did not consent to the assignments.
PLAINTIFFS appeal as a matter of right under G.S. 7A-30 (2) from a split decision of the North Carolina Court of Appeals, 51 N.C. App. 437, 276 S.E.2d 710 (1981).
Nye, Mitchell, Jarvis Bugg by Charles B. Nye; and Mount, White, King, Hutson, Walker Carden, by Richard M. Hutson, II, for plaintiff appellants.
James B. Craven, III, for defendant appellee.
Justice MEYER concurring in the result.
Justice CARLTON dissenting.
Justice EXUM joins in the dissenting opinion.
In the spring of 1975, C. Paul Roberts and wife, Becky M. Roberts, had on deposit with defendant Mechanics and Farmers Bank the sum of $138,339.84 in two savings accounts of $88,620.83 and $49,719.01, respectively. The accounts were comprised of funds deposited by Mr. and Mrs. Roberts as additional security for forty-five home mortgage loans made by the bank. The funds were not subject to immediate withdrawal. The deposits would be released by the bank and could be withdrawn when the principal balances of the mortgage loans were reduced to certain levels. In the event of foreclosure of any mortgage loan prior to the principal's reduction to the requisite level, the cash collateral deposited in the accounts for that specific loan would be applied to any deficiency.
On 22 May 1975, Mr. and Mrs. Roberts assigned the savings account with a balance of $49,719.01 to plaintiffs Wilma C. Rosenstein and her son, Dr. Robert N. Rosenstein, for the sum of $29,476.80. Mr. and Mrs. Roberts assigned the account containing $88,620.83 to Mrs. Rosenstein for $47,800.00 on 18 June 1975. These transactions were effected through written instruments under seal.
The defendant bank received a copy of both assignments in early July 1975. On 7 July 1975, John H. Wheeler, president of defendant bank, notified counsel for the plaintiffs that the bank refused to accept the assignments because, in defendant's opinion, the accounts were not "negotiable."
Defendant bank uses a standard passbook for its savings accounts. Throughout the passbook appears the printed language: "IT IS AGREED THAT THIS ACCOUNT IS OPENED SUBJECT TO THE RULES AND REGULATIONS OF THE BANK." The rules and regulations enumerated in the passbook are divided into six categories: GENERAL, "DEPOSITS," "BANKBOOKS," "WITHDRAWALS," "INTEREST" and "TRANSFERS." Rule 11 under "BANKBOOKS" provides that: "No assignment or transfer of the Bank Book need be recognized by the Bank unless it consents thereto, and a memorandum thereof entered in said Book."
After refusing to accept the assignment, defendant permitted Mr. and Mrs. Roberts and various third persons to withdraw funds from the accounts over a period of two and a half years, until the accounts were almost totally depleted. Three disbursements, totaling $10,700, were made to cover deficiencies resulting from foreclosure of three of the home mortgage loans.
Plaintiffs brought this action for recovery of the funds in the two savings accounts, less setoffs for foreclosure deficiencies. The trial court, sitting without a jury, made findings of fact and conclusions of law and awarded judgments to plaintiffs for the original amount of the accounts, plus accrued interest and less offsets paid out on the foreclosed notes and mortgages.
The Court of Appeals, with Judge Hedrick dissenting, reversed on grounds that the accounts were never validly assigned to the Rosensteins. Plaintiffs appealed under G.S. 7A-30 (2).
The dispositive question posed by this appeal is whether the savings accounts were validly assigned to plaintiffs.
Bank deposits are assignable. Lipe v. Bank 236 N.C. 328, 72 S.E.2d 759 (1952). When an individual deposits money in a bank account, a debtor-creditor relationship is established between the bank and the depositor. "The debt thus created is subject to the rule that ordinary business contracts for money due or to become due are assignable." Id. at 331, 72 S.E.2d at 761.
Defendant contends that this principle of assignability is subject to contrary agreement by the bank and the original depositor. The Court of Appeals agreed that a depositor cannot assign a bank account when his contract with the bank forbids transfer without the bank's consent. The court further held that the contract between defendant bank and Mr. and Mrs. Roberts did in fact bar assignment without the bank's consent.
The contention that the accounts in this case were not assignable is based upon Rule 11 of defendant's passbook, which provides that: "No assignment or transfer of the Bank Book need be recognized by the Bank unless it consents thereto, and a memorandum thereof entered in said Book." The rule makes no mention of assignability of accounts. Rule 11 is listed in defendant's rules and regulations under the heading "BANKBOOKS." Defendant's rules and regulations have a separate category entitled "DEPOSITS." None of the rules listed under "DEPOSITS" restricts the assignability of deposits or accounts.
A straightforward reading of defendant's rules and regulations impels the conclusion that defendant has restricted the assignment of passbooks, but not accounts. Had defendant wished to restrict assignability of accounts, it could have done so in the same manner it reserved the right to refuse deposits. Rule 7 under "DEPOSITS" states: "The Bank may refuse any deposits and require any depositor to withdraw the whole, or any part of the same, upon 30 days' written notice mailed to the depositor at his or their address as same appears on the signature card; interest to be allowed only to the time of the expiration of such notice." Defendant need only to have included a rule, properly adopted by the board of directors, making assignment of accounts contingent upon the bank's consent. Defendant failed to do so.
The rule restricting the assignment of passbooks does not restrict the assignment of the underlying accounts themselves. The Court of Appeals found the distinction between accounts and passbooks to be "illusory" on grounds that a passbook is worthless other than as a record of the contract between the bank and the depositor. Apparently, no one would want a passbook by itself.
Such reasoning mischaracterizes the transaction at hand. Instead of the assignment of a passbook without an account, this situation involves the assignment of an account without necessarily delivering a passbook. This latter form of transaction, perhaps unlike the former, is not meaningless. A deposit may be validly assigned without the delivery of a passbook. McCabe v. Union Dime Sav. Bank 150 Misc. 157, 268 N.Y.S. 449 (1934). Mr. and Mrs. Roberts validly assigned their accounts to plaintiffs. The rule restricting assignment of passbooks was immaterial.
The question why parties would agree to the assignment of a passbook without assigning the underlying account is not before this Court. Neither is the question why a bank would wish to prevent such a transfer. Defendant in this case restricted such apparently meaningless transactions. "When the language of a contract is clear and unambiguous, effect must be given to its terms, and the court, under the guise of construction, cannot reject what the parties inserted or insert what the parties elected to omit." Weyerhaeuser Co. v. Light Co., 257 N.C. 717, 719, 127 S.E.2d 539, 541 (1962). Defendant bank itself drafted this contract to become binding upon depositors without negotiation or bargaining on their part. The provisions of such a contract must be construed against the drawer. We will not interpret the purported restriction of assignment of passbooks to apply to assignment of accounts. "Courts do not make contracts . . . . [T]he law does not permit inquiry as to whether the contract was good or bad, whether it was wise or foolish." Knutton v. Cofield, 273 N.C. 355, 363, 160 S.E.2d 29, 36 (1968).
We hold, as did the trial court, that plaintiffs are entitled to the funds in the two savings accounts at the time of the assignment plus interest as specified in the judgment of the trial court, less the $10,700 offset to cover deficiencies resulting from foreclosure of three home mortgage loans.
The decision of the Court of Appeals is reversed and the case remanded to that court for further remand to Durham Superior Court for reinstatement of the judgment of the trial court.
Reversed and remanded.