## Facts

- Ritzer of Austria, Inc. maintained a commercial checking account with The National City Bank of Cleveland.
- By March 31, 1971, Ritzer was insolvent as shown on its balance sheet.
- On April 14, 1971, Ritzer executed a 90-day promissory note to the bank for $3,600; the note had a fixed maturity and was not payable on demand.
- On May 11, 1971, Robert A. Walter obtained a judgment against Ritzer for $6,831.95.
- On May 12, 1971, the bank was served as garnishee under an order in aid of execution directed to Ritzer’s account; Ritzer had $3,651.75 on deposit, and the note (with interest) was not yet due (about $3,626.25 outstanding).
- The bank asserted a setoff and applied the deposit to the unmatured note, remitting only a small remainder to the court later.
- The bank relied on its account rules stating it could apply deposits to any indebtedness “due or to become due.”
- Walter sued the bank for conversion, alleging the bank wrongfully defeated his garnishment by setting off an unmatured obligation.

## Issues

1. Whether a bank may set off a depositor’s account against an unmatured fixed-term promissory note to defeat a judgment creditor’s garnishment.
2. Whether generalized account rules authorizing setoff for debts “due or to become due” permit pre-maturity setoff inconsistent with a note’s stated maturity.
3. Whether the depositor’s insolvency creates an equitable basis for allowing pre-maturity setoff when the bank extended credit with knowledge of that insolvency.

## Decision

- The Supreme Court of Ohio affirmed summary judgment for Walter.
- The court held the bank had no right to set off the unmatured 90-day note against the garnished deposit.
- The bank’s appropriation of the garnished funds to satisfy its unmatured claim constituted conversion.

## Legal Principles

- A bank’s setoff right generally applies to mutual debts that are due and payable; a matured indebtedness may be set off even after garnishment.
- A bank may not set off an unmatured debt evidenced by a fixed-term note absent a valid contractual device consistent with the note (e.g., an agreed acceleration term or enforceable security arrangement).
- General deposit-account rules allowing setoff of debts “due or to become due” do not, by themselves, override a promissory note’s specific maturity date or convert a term note into a demand obligation.
- Insolvency does not automatically justify equitable setoff where the bank voluntarily extended credit to an already insolvent depositor; in that circumstance the bank lacks a distinct equity to obtain priority over other creditors on an unmatured claim.
- A garnishment reaches the depositor’s account balance subject only to valid, presently enforceable setoff rights; when no such right exists, the garnishing creditor’s claim prevails.

## Conclusion

Because the promissory note was not yet due when garnishment was served, and neither the bank’s general account rules nor equitable considerations based on insolvency supplied a basis to accelerate or offset the debt, the bank could not defeat the judgment creditor’s garnishment and was liable for conversion for taking the garnished funds.


Walter v. Nat'l City Bank, 42 Ohio St. 2d 524, 330 N.E.2d 425 (Ohio 1975)