Butler Studley v. Boylston National Bank of Boston
| Decision Date | 09 June 1913 |
| Docket Number | No. 899,899 |
| Citation | 229 U.S. 523,57 L.Ed. 1313,33 S.Ct. 806 |
| Parties | J. BUTLER STUDLEY, Trustee in Bankruptcy of the Collver Tours Company, Appt., v. BOYLSTON NATIONAL BANK OF BOSTON |
| Court | U.S. Supreme Court |
Messrs. J. Butler Studley, William H. Dunbar, and Stewart C. Woodworth for appellant.
Mr. Hollis R. Bailey for appellee.
The Collver Tours Company was engaged in the business of conducting touring parties around the world, charging a lump sum for the tickets, which were paid for in advance. It had expended about $40,000 in advertising, which it carried on its books as an asset, and since the character of its business did not involve the possession of tangible property, it had nothing except cash on hand, good will and its earning capacity as a means of paying debts.
In 1907 the company opened an account with the Boylston National Bank, with which it subsequently did all of its banking business of depositing, checking, and borrowing. It notified the bank in 1909 that it had no other liabilities except what was due to the bank, and it was given a line of credit of $25,000. It borrowed that sum on the promise to repay it that year; but as it used a part of its funds to open a letter-of-credit account in the bank, it was permitted to renew the notes. In December, 1909, it made a statement to the Massachusetts Corporation Commission which showed that the company did not have assets sufficient to pay its liabilities, and an officer of the bank saw this statement, but the representative of the Collver Company went over the matter with the bank officers, made an explanation, and borrowed an additional sum of $5,000 in the spring or summer of 1910. During the year 1910 the debt of $25,000 was reduced to $10,000 went back to $25,000, was reduced again to $15,000, and increased to $30,000,—the Collver Company making to the bank encouraging statements of its prospects and of an anticipated large sale of tickets for round-the-world tours. One note for $5,000 was paid, and the then debt of $25,000 was represented by five notes for $5,000 each, maturing September 12, 20, 30, October 3 and 14th.
The balances in bank to the credit of the Collver Company fluctuated greatly from time to time, varying from almost nothing up to as high as $54,000. As a result of sales of tickets, the company deposited large sums in August and September and smaller sums in October and November. During that period $22,500 was paid to the bank, the three notes due September 12, 20, and 30 being paid by checks on the Boylston National Bank. The note for $5,000, due October 3, was charged to the company's account, and on the same day a renewal note for $2,500 was discounted. The note for $5,000 which fell due on October 14 was also charged to the deposit account, according to the custom of the bank of which the Collver Company had notice, and to which it assented. On the date of the payment by such charging of the last note to the account, the company had $19,000 left to its credit. The Collver Company continued to make deposits and to draw checks, and applied for a new loan, which was refused by the bank. On December 16, 1910, a petition in bankruptcy was filed against the company, and after his election the trustee brought suit against the bank to recover the $22,500, claiming that it had notice of the Collver Company's insolvency and that the payments of $22,500 were transfers which had operated to give the Boylston Bank a preference within four months of filing the petition.
In its answer the bank alleged that it was informed and believed that the company was doing a large and constantly increasing business and was in every way responsible; that the company for a long time kept its general deposit with the bank and was constantly making deposits therein, some large, some small, upon all of which the bank had a lien and a right of set-off, and that 'this right of set-off was not affected by the fact, if it be a fact, that the company was at any of the times of the exercise of said right of set-off insolvent;' and it claimed that the exercise of its right of set-off did not and could not constitute a preference within the meaning of the bankruptcy act or any amendment thereto.
The case was tried by the referee, who sustained the bank's claim of set-off, holding that the payments were not transfers; or, if transfers, that the trustee could not recover the money because the bank had no reasonable cause to believe that the payment of the notes would operate as a preference. On exceptions to the report it was sustained on the ground that the deposits had been honestly made in due course of business, and that the defendant, by virtue of its banker's lien and right of set-off,...
To continue reading
Request your trial
-
In re Rancher's Legacy Meat Co.
...A." Citizens Bank of Maryland v. Strumpf, 516 U.S. 16, 116 S.Ct. 286, 133 L.Ed.2d 258 (1995) (quoting Studley v. Boylston Nat. Bank, 229 U.S. 523, 33 S.Ct. 806, 57 L.Ed. 1313 (1913) ). Black's Law Dictionary defines a setoff as a "debtor's right to reduce the amount of a debt by any sum the......
-
Carn v. Heesung Pmtech Corp.
...A." Citizens Bank of Md. v. Strumpf , 516 U.S. 16, 18, 116 S.Ct. 286, 133 L.Ed.2d 258 (1995) (quoting Studley v. Boylston Nat. Bank , 229 U.S. 523, 33 S.Ct. 806, 57 L.Ed. 1313 (1913) ); See also Dzikowski v. Northern Trust Bank of Florida, N.A. (In re Prudential of Florida Leasing, Inc. ), ......
-
Fletcher v. Rhode Island Hospital Trust National Bank
...practice (once called a "right of stoppage") that has been accepted for years in this country. See Studley v. Boylston Bank, 229 U.S. 523, 527-528, 33 S.Ct. 806, 57 L.Ed. 1313 (1913). A Rhode Island case decided half a century before Westerly makes reference to the practice, Hungerford v. C......
-
DRG Funding Corp. v. Secretary of Housing and Urban Development
...of Maryland v. Strumpf, --- U.S. ----, ----, 116 S.Ct. 286, 289, 133 L.Ed.2d 258 (1995) (quoting Studley v. Boylston Nat'l Bank, 229 U.S. 523, 528, 33 S.Ct. 806, 808, 57 L.Ed. 1313 (1913)). HUD regulations promulgated under the administrative offset provision of the Debt Collection Act of 1......
-
CHAPTER 2 TINKERBELLE, THE CRUDE PEOPLE AND THE BANKRUPTCY CODE
...(In re Tower Envtl., Inc.), 217 B.R. 933, 937 (Bankr. M.D. Fla. 1997). [92] 11 U.S.C. § 553. See, e.g., Studley v. Boylston Nat'l Bank, 229 U.S. 523, 528 (1913) (the right of setoff or "offset" allows entities that owe each other money to apply their mutual debts against each other, thereby......
-
THE ROLE OF OFFSET IN THE COLLECTION OF FEDERAL TAXES.
...emotional hardship as well. (7.)Citizens Bank of Md. v. Strumpf, 516 U.S. 16, 18 (1995) (quoting Studley v. Boylston Nat'l Bank of Bos., 229 U.S. 523, 528-29 (8.)See, e.g., Westinghouse Credit Corp. v. D'Urso, 278 F.3d 138, 149 (2d Cir. 2002) ("[D]ebts are mutual when they are due to and fr......
-
Equal Access to Justice Act cuts off equal access for social security claimants.
...offset avoids "the absurdity of making A pay B when B owes A." 516 U.S. 16, 18 (1995) (quoting Studley v. Boylston Nat'l Bank, 229 U.S. 523, 528 (37) 31 U.S.C. 3716(a). (38) Financial Management Service, http://fms.treas.gov/news/factsheets/benefitoffset.html (Last visited February 17, 2008......
-
Chapter 12 Bankruptcy, [section] 1232 v [section] 553: Setoff as an Effective Veto?
...Peiffer, supra note 78, at 15. (93.) Citizens Bank of Maryland v. Strumpf, 516 U.S. 16, 18 (1995) (quoting Studley v. Boylston Nat'l Bank, 229 U.S. 523, 528 (94.) Susan Schneider, The Family Farmer Bankruptcy Recent Developments in Chapter 12, 3 DRAKE J. AGRIC. L. 161, 170 (1998). (95.) See......