South Side Bank & Trust Co. v. United States

• Decision Date: 19 April 1955
• Docket Number: No. 11271.,11271.
• Citation: 221 F.2d 813
• Parties: SOUTH SIDE BANK & TRUST CO., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

221 F.2d 813 (1955)

SOUTH SIDE BANK & TRUST CO., Plaintiff-Appellant, v.UNITED STATES of America, Defendant-Appellee.

No. 11271.

United States Court of Appeals, Seventh Circuit.

April 19, 1955.

Harold J. Green, Chicago, Ill., for appellant.

Robert Tieken, U. S. Atty., John Peter Lulinski, Asst. U. S. Atty., Chicago, Ill., for appellee.

Before DUFFY, Chief Judge, and FINNEGAN and SCHNACKENBERG, Circuit Judges.

SCHNACKENBERG, Circuit Judge.

Plaintiff, a banking corporation (sometimes hereinafter referred to as the "bank"), appeals from a judgment entered by the district court in favor of the defendant(sometimes hereinafter referred to as the "government"), in a suit brought by plaintiff for $10,000 plus attorney's fees, under 28 U.S.C.A. § 1346.

The case was submitted to the district court on the complaint and an answer filed by the government, together with a stipulation of facts.

It appears that the government through the Public Housing Administration ordered seven house trailers from Streamlite Corporation, agreeing to pay about $17,000.Streamlite, in order to build the trailers, borrowed $11,000 from the bank, and as security for that loan entered into a trust receipt arrangement under the Illinois Uniform Trust Receipts act¹, and assigned to the bank its rights to any money due under the purchase order.The government accepted delivery of the trailers and referred the matter to its General Accounting Office.Thereafter the government refused to pay plaintiff, stating that Streamlite was indebted to it in excess of $17,000 for past due taxes (not arising out of this contract).Plaintiff had no notice of this tax indebtedness when it advanced money to Streamlite.To give the district court jurisdiction of the subject matter of this suit, plaintiff reduced its claim to $10,000.

The district court, in entering judgment for the government, did so on the theory that the government had a right to set off the past due taxes against the purchase price of the trailers, as against the bank.Whether this right of set-off exists under the circumstances is the contested issue here.

28 U.S.C.A. § 1346(c), under which this suit is brought, expressly recognizes that:

"The jurisdiction conferred by this section includes jurisdiction of any set-off, counterclaim, or other claim or demand whatever on the part of the United States against any plaintiff commencing an action under this section."(Emphasis supplied.)

This is statutory recognition that the government has a right to present a set-off against a plaintiff commencing an action under this section.The statute does not limit such set-off to the subject matter of the claim sued on.Under a prior statute² which required a United States district attorney to file in suits against the government, "a notice of any counter-claim, set-off, claim for damages, or other demand or defense whatsoever of the Government in the premises"(which language insofar as it differs from the present statute, is somewhat limited as to the scope of a set-off), we held in United States v. Harris, 7 Cir., 77 F. 821, at page 825, that...