Georgia Seed Co. v. Talmadge

• Decision Date: 15 May 1895
• Citation: 22 S.E. 1001,96 Ga. 254
• Parties: GEORGIA SEED CO. et al. v. TALMADGE et al.
• Court: Georgia Supreme Court

22 S.E. 1001

96 Ga. 254

GEORGIA SEED CO. et al. v. TALMADGE et al.

Supreme Court of Georgia

May 15, 1895

Syllabus by the Court.

1. Where a bank, having money on deposit with another, failed in business and became insolvent, being at the time indebted to the depositary upon promissory notes, the sum total of which exceeded the amount of the deposit, it was the right of the depositary, by way of equitable set-off, to appropriate the money on deposit, as far as it would go, to the satisfaction of such notes, although they had not yet become due.

2. In such case, ordinary checks payable to the order of named persons, drawn upon the depositary by the first bank before its failure, but not made payable specifically out of the fund on deposit, were neither assignments, nor appropriations pro tanto, of that fund, so as to bind the drawee to pay the same nothwithstanding the drawer's failure.

3. It was the right of the depositary, after crediting the deposit upon the notes it held against the failing bank, to share upon the balance still due, pro rata with the depositors of that bank, in a general distribution of its assets in the hands of a receiver who had been appointed to take charge of and administer the same.

Error from superior court, Bibb county; J. M. Griggs, Judge.

In insolvency proceedings against the Capital Bank of Macon, the Georgia Seed Company and others bring error to review the order of distribution, in relation to the claim of Henry Talmadge & Bro. Brought forward from the last term. Code, §§ 4271a-4271c. Affirmed.

Nottingham & Brunson, for plaintiffs in error.

Dessau & Hodges and C. L. Bartlett, for defendants in error.

LUMPKIN J.

The Capital Bank of Macon failed, and its assets were placed in the hands of a receiver. Before the failure occurred, this bank had dealt extensively with Talmadge & Co., a banking firm of New York City. At the time of the failure, the Macon bank was indebted to the New York bankers a considerable sum upon promissory notes which had not then matured and were partially secured by collaterals. The Macon bank also had to its credit with these bankers, on open account, a considerable sum of money, but less in amount than the aggregate of the notes. Before the failure, this bank had drawn upon the New York bankers a number of ordinary checks payable to the order of named persons. These checks were general in their nature, and not made payable specifically out of the fund on deposit to the credit of the drawer, or any other particular fund. After the failure of the Macon bank, these checks were presented to the drawees, who declined to pay the same, but, on the contrary, appropriated the entire fund on deposit with them, as far as it would go to the payment of the notes they held upon the Macon bank, although the notes had not yet become due. Talmadge & Co. accounted fully for all collections made by them upon the collaterals above mentioned, and, in their intervention filed in the present case, offered to surrender to the receiver the collaterals upon which they had been unable to realize. After allowing full credit for all amounts they had received, there still remained a large balance in favor of Talmadge & Co. upon their notes against the Macon bank, and they prayed to be allowed to share pro rata upon this balance with the depositors of the Macon bank in the distribution of its assets by the receiver. At the trial in the court below, the case turned upon three questions, which will now be briefly stated and discussed.

1. Was it the right of Talmadge & Co. to appropriate the money of the Macon bank on deposit with them, and credit the same upon the notes they held against that bank before their maturity? The doctrine is thus stated in Waterman on Set-Off (2d Ed., § 432): "It is deducible from the general scope of the authorities that insolvency has long been recognized as a distinct equitable ground of set-off." The cases there cited abundantly support the text. In Kentucky Flour Co.'s Assignee v. Merchants' Nat. Bank (Ky.) 13 S.W. 910, it was held that a bank could set off deposits made by one who subsequently made an assignment for the benefit of creditors, against a debt owing to it by the insolvent, but which had not matured at the time of the assignment. The opinion of Holt, J., in that case, though short, is strong and pointed, and well sustains the conclusion announced. The same rule is laid down in Nashville Trust Co. v. Fourth Nat. Bank (Tenn.) 18 S.W. 822, in...