Homer v. National Bank of Commerce in St. Louis

• Decision Date: 22 June 1897
• Parties: Homer, Assignee, v. National Bank of Commerce in St. Louis, Appellant
• Court: Missouri Supreme Court

41 S.W. 790

140 Mo. 225

Homer, Assignee, v. National Bank of Commerce in St. Louis, Appellant

Supreme Court of Missouri, Second Division

June 22, 1897

Appeal from St. Louis City Circuit Court. -- Hon. James E. Withrow Judge.

Affirmed.

Albert Arnstein for appellant.

(1) An assignee for the benefit of creditors takes the assigned estate subject to all the equities existing at the time of the assignment; his rights are no greater than were those of the assignor. Peet v. Spencer, 90 Mo. 388; State v. Rowse, 49 Mo. 593; Jacobi v. Jacobi, 101 Mo 507; Green v. Conrad, 114 Mo. 664. (2) Insolvency creates an equitable right of set off where it would not otherwise exist. Foote v. Clark, 102 Mo. 394; Field v. Oliver, 43 Mo. 200; Fulkerson v Davenport, 70 Mo. 417; Barnes v. McMullins, 78 Mo. 260; Ellis v. Kerr, 23 S.W. 1050; Jones v. Shaw, 67 Mo. 667; Leabo v. Renshaw, 61 Mo. 292. (3) Upon the insolvency of the debtor, an equitable right of set-off arises in favor of the creditor, as to all demands owing by the debtor to the creditor at the time of the assignment, whether said demands have or have not matured, provided the liability has become fixed before the assignment. Rubey v. Watson, 22 Mo.App. 428; Smith v. Spengler, 83 Mo. 411; Carr v. Hamilton, 129 U.S. 252; Scammon v. Kimball, 2 Otto, 362; Trust Co. v. Leck, 58 N.W. 826; Darby v. Friedman Savings Co., 3 McArthur, 349; Nashville Trust Co. v. Bank (91 Tenn.), 7 Pick. 336; Georgia Seed Co. v. Talmadge, 22 S.E. 1001; Mathewson v. Bank, 45 N.H. 104; Dennon v. Bank, 5 Cush. 194; Tuscombia v. Rhodes, 8 Ala. 206; Thrall v. Hotel Co., 5 Neb. 295. (4) Where a bank extends a line of discount to a customer upon the faith of the general balances which he has and is to carry in said bank, upon the insolvency of the depositor equity will apply the balance so in the hands of the bank, in liquidation of the liability contracted upon the faith thereof, and will permit an equitable set-off based upon the implied agreement that said balance shall be used for the purpose of liquidating, though unmatured, any indebtedness so existing. Morse on Banking, sec. 329, p. 564.

Rowell & Ferriss and J. H. Zumbalen for respondent.

(1) A creditor of an insolvent estate in the hands of an assignee for benefit of creditors, has no right in equity, any more than at law, to have his unmatured demand set-off against his own debt to the estate, which was due at the date of the assignment. Reppy v. Reppy, 46 Mo. 571; Huse v. Ames, 104 Mo. 91; Kortjohn v. Bank, 63 Mo.App. 166; Keep v. Lord, 2 Duer, 78; Bradley v. Angel, 3 N.Y. 475; Myers v. Davis, 22 N.Y. 489; Martin v. Kunzemiller, 37 N.Y. 396; Fera v. Wickham, 135 N.Y. 223; Spaulding v. Backus, 122 Mass. 553; Dougherty v. Bank, 95 Pa. St. 227; Chipman v. Bank, 120 Pa. St. 86; Bank v. Jones, 2 Pennypacker, 377; Bosler v. Bank, 4 Pa. St. 32; Appeal of Farmers, Etc. v. Bank, 48 Pa. St. 57; Lockwood v. Beckwith, 6 Mich. 168; Oatman v. Bank, 77 Wis. 501; Kinsey v. Ring, 83 Wis. 536; Fuller v. Steiglitz, 27 Ohio St. 355; Balch v. Wilson, 25 Minn. 299; Jackson v. Bell, 31 N.J.Eq. 554, 556; Hayes v. Hayes, 2 Del. Chan. 191; Jeffryes v. Bank, L. R. 2 Eq. Cases, 673; In Re Commercial Bank Corp., L. R. 1 Chan. App. 536; Pomeroy's Code Remedies [3 Ed.], secs. 163, 164; 2 Story's Equity Jur. [13 Ed.], sec. 1441; 1 Evan's Pothier on Obligations, side p. 591. (2) No agreement will be implied that a bank may set off unmatured demands against a customer's current deposit upon his insolvency, from the fact that the bank discounted the paper on the faith of the depositor's general balances. Beckwith v. Bank, 4 Sandf. 604; Jordan v. Bank, 76 N.Y. 472; Bank v. Bank, 68 Ill. 398; Dougherty v. Bank, 93 Pa. St. 227; State Bank v. Bank, 11 Mo.App. 292.

Burgess, J. Gantt, P. J., and Sherwood, J., concur.

OPINION

Burgess, J.

This action is prosecuted by plaintiff, as the assignee of Ripley & Bronson, to recover the sum of $ 5,691.52 which amount the assignors had on deposit to their credit with the defendant bank upon the day when said firm executed a deed of assignment to plaintiff for the benefit of creditors, to wit, July 24, 1893.

The answer admits that at the time of the assignment by Ripley & Bronson they had on deposit with defendant to their credit, $ 5,691.52; but by way of defense, sets up that at the time of said assignment Ripley & Bronson were grossly insolvent and in an embarrassed condition; that the defendant transacted a general banking business; that the firm of Ripley & Bronson deposited its funds with the defendant, and that upon the faith of the general balances so carried by Ripley & Bronson with defendant, defendant extended to said firm a credit in this, that it discounted notes of and acceptances belonging to said firm, and placed the proceeds thereof to said Ripley & Bronson's credit in said account. That on the twenty-fourth day of July, 1893, the balance to the credit of Ripley & Bronson was a result of discounts so made by defendant for them and of general deposits; that on said day two notes which had heretofore been discounted for Ripley & Bronson by defendant were protested for nonpayment and the amount thereof and protest thereon, to wit: the sum of $ 735.90 was charged against Ripley & Bronson's account on defendant's books; that the assignment made by Ripley & Bronson to the plaintiff was not executed until after the close of banking hours on said twenty-fourth day of July, 1893, and after default had been made in the payment of the said notes, and that the defendant had a banker's lien upon the amount to the credit of said Ripley & Bronson, and had a right to set off and did set off, as against said balance, the amount of the said two protested notes; that the assignee was duly notified of such default and acquiesced in the charge so made and consented that the amount thereof constituted a proper credit upon said account, and accepted the return of and retained said protested notes.

For a further defense, the defendant pleaded an equitable set off as follows: "That on the said 24th day of July, 1893, the firm of Ripley & Bronson was indebted to it upon a note of $ 2,000 to mature August 28, 1893; one of $ 2,000 to mature September 28, 1893; and one of $ 800 to mature September 13, 1893; that said last three mentioned notes were made by said Ripley & Bronson, and discounted by this defendant for said Ripley & Bronson, and the proceeds of the discount placed to the credit of said Ripley & Bronson in their said general bank account with this defendant, and said discount was so made by this defendant for said Ripley & Bronson upon the faith of the general balance which said Ripley & Bronson had and were to have with this defendant based upon an agreement made prior thereto to that effect, and that the proceeds of the discount of the above described notes in part constituted the balance to the credit of said Ripley & Bronson on said 24th day of July, 1893; that by reason of the insolvency of said Ripley & Bronson, this defendant had the right to and did set off against the deposit so to the credit of Ripley & Bronson on said 24th day of July, 1893, the sum of $ 4,800 represented by the said notes last above mentioned, and defendant herewith tenders said notes into court for cancellation.

"This defendant further answering, admits that it now has to the credit of said Ripley & Bronson, the sum of $ 155.62, which said amount it herewith pays into court for the benefit of the plaintiff, also $ 10.85 the costs accrued to date."

The case was tried upon the following agreed statement of facts:

"Now comes the parties to the above entitled cause, by their respective attorneys, and submit to the court the following agreed statement of facts, to wit:

"On the 24th day of July, 1893, Lyman B. Ripley and Edward P Bronson, composing the firm of Ripley & Bronson, and doing a wholesale iron supply business in the city of St. Louis, Missouri, made a general assignment of their firm property to the plaintiff for the benefit of their creditors under the statutes of Missouri. Such assignment was executed after banking hours on said 24th day of July, between the hours of 5 and 6 o'clock of that day; that plaintiff duly qualified as assignee and has ever since been and is now the duly qualified and acting assignee of said firm; that the defendant is and was during the times herein mentioned, a banking corporation organized under the laws of the United States; that at the time of making such assignment said firm of Ripley & Bronson was insolvent, its liabilities exceeding its assets; that on the said 24th day of July said firm had on deposit to their credit, at the banking house of defendant the sum of $ 5,691.52, which was payable to said firm as in the ordinary case of bank deposits; that on the 27th day of July, 1893, plaintiff having duly qualified as assignee, made demand on defendant for the said sum of $ 5,691.52 and defendant refused to pay said sum to plaintiff; that thereupon plaintiff threatened to bring suit against defendant to recover such deposit, but at the request of defendant, deferred bringing such suit and said bank, in consideration that the bringing of such suit should be deferred, executed and delivered to plaintiff the following agreement in writing, to wit:

"'St. Louis, July 27, 1893.

"'Whereas W. B. Homer, assignee of Ripley & Bronson, has this day demanded of the bank of commerce the amount of the deposit in this bank belonging to Ripley & Bronson at the time the assignment to him was made, less matured obligations owing at such time by Ripley & Bronson to said bank, which demand has been refused and said assignee threatens immediate suit; said bank hereby agrees, in consideration that said assignee defers bringing suit against it until ...