Printable Format9-1206. Set off. Any bank shall have the right to set off any obligation or claim which it has, when the same is matured against any depositor.
History: L. 1947, ch. 102, § 55; June 30.
Law Review and Bar Journal References:
"Creditor Setoffs in Business Reorganization and Relief Cases Under the Bankruptcy Act," Robert B. Morton, 45 J.B.A.K. 163, 165 (1976).
"Commercial Transactions Under the New Bankruptcy Act," Paul B. Rasor, 48 J.B.A.K. 199, 206 (1979).
"Bank's Right of Setoff—Iola State Bank v. Bolan," SueAnn S. Bradford, 33 K.L.R. 569, 575 (1985).
CASE ANNOTATIONS
1. Bank held to have right to set off balance in depositor's account against what he owed bank. First National Bank in Dodge City v. Keller, 193 Kan. 581, 588, 396 P.2d 304.
2. Applied; cashier's check payable to bank and insurance company; bank entitled to endorse and apply proceeds. Scharz v. Twin City State Bank, 201 Kan. 539, 541, 441 P.2d 897.
3. Cited in case concerning the sufficiency of note or memorandum under statute of frauds. Walton v. Piqua State Bank, 204 Kan. 741, 759, 466 P.2d 316.
4. Mentioned; oral agreement between depositors and bank created joint tenancy. Edwards v. Ledford, 201 Kan. 518, 526, 441 P.2d 834.
5. Section designed for protection of banks inapplicable to ownership of funds as between parties; instruments construed. Bowen, Administrator v. Hathaway, 202 Kan. 107, 113, 446 P.2d 723.
6. Bank's application of funds in debtor's account to antecedent debt should not be considered transaction in ordinary course of business (dissenting opinion). Tuloka Affiliates, Inc. v. Security State Bank, 229 Kan. 544, 551, 553, 627 P.2d 816.
7. Bank cannot set off debt until maturity or debtor insolvency. First Nat'l Bank of Gaylord v. Autrey, 9 Kan. App. 2d 96, 99, 673 P.2d 448 (1984).
8. Where bank knows sums deposited in debtor's account belong to third person, it cannot apply such funds to the indebtedness. Iola State Bank v. Bolan, 235 Kan. 175, 191, 675 P.2d 917 (1984).
9. Acceleration to maturity (K.S.A. 84-1-208) discussed; good faith required means honesty in fact (K.S.A. 84-1-201(19)). Karner v. Willis, 10 Kan. App. 2d 432, 433, 700 P.2d 582 (1985).
10. Cited; setoffs, conversion, tort of outrage, fraud and deceit, punitive damages examined. Moore v. State Bank of Burden, 240 Kan. 382, 387, 729 P.2d 1205 (1986).
11. Setoff improper where bank knows funds in account of one of its debtors belong to a third person. In re Bucyrus Grain Co., Inc., 67 B.R. 336, 341 (1986).
12. Legal right of bank to setoff to appropriate deposit upon customer's default on debt to institution; knowledge that deposits belong to third person. Four Circle Co-op v. Kansas State Bank & Trust Co., 771 F. Supp. 1144 (1991).