Huether v. Baird
| Decision Date | 10 August 1932 |
| Docket Number | 6034 |
| Citation | 244 N.W. 125,62 N.D. 434 |
| Court | North Dakota Supreme Court |
Appeal from the District Court of Ransom County, McKenna J.
Affirmed.
Kvello & Adams, for appellant.
Before a corporation can be declared insolvent there must be some active insolvency, such as the filing of a bill to administer its assets or the making of a general assessment or the permanent cessation of business. 14a C.J. 880; Buchanan v. Barnes (Tenn.) 34 S.W. 425; First Nat. Bank v North Alabama Lumber Co. (Tenn.) 18 S.W. 400; Lyons Thomas Hardware Co. v. Perry Store Mfg. Co. (Tex.) 24 S.W. 16; State v. Trumly L. Ins. Soc. 127 S.W. 1174.
When a corporation's assets are insufficient for the payment of its debts, and it has ceased to do business . . . or its embarrassments are such that early suspension and failure must ensue, then such corporation must be pronounced insolvent. Corey v. Wadworth (Ala.) 42 Am. St. Rep 29; Tradesman Pub. Co. v. Knoxville Car Wheel Co. (Tenn.) 49 Am. St. Rep. 943; Delaware etc. R. Co. v. Oxford Iron Co. 33 N.J.Eq. 192.
A receiver takes the estate of an insolvent for the benefit of the creditors; he has the same rights and obligations that the latter had at the moment of insolvency. Tourtelot v. Whithed, 9 N.D. 467, 84 N.W. 8; 7 C.J. 746; Gilbertson v. Northern Trust Co. 53 N.D. 502, 42 L.R.A. 1355, 207 N.W. 42; Lawson v. Warren (Okla.) 124 P. 46; Williams v. Johnson (Mont.) 144 P. 768; Pom. Eq. Jur., §§ 186, 187.
This rule applies as well to receivers of insolvent banks as to receivers of other insolvents. Scott v. Armstrong, 146 U.S. 499.
The right of set-off is to be governed by the state of things existing at the moment of insolvency and not by conditions created thereafter. Cook County Nat. Bank v. United States, 107 U.S. 445, 27 L. ed. 537; National Security Bank v. Butler, 129 U.S. 223, 32 L. ed. 682; Yardley v. Philler, 167 U.S. 344, 42 L. ed. 700; Storing v. Stutsman, 54 N.D. 701, 201 N.W. 653.
Where a receiver has the power to allow or disallow claims, an allowance of a claim by him is not conclusive, and if it afterwards appears that it should not have been allowed, it may be disallowed, unless some right is lost thereby. 34 Cyc. 345; Re United Mut. F. Ins. Co. (R.I.) 46 A. 273; Patterson v. Ward, 8 N.D. 87, 76 N.W. 1046.
The person primarily liable on an instrument is the person who by the terms of the instrument is absolutely required to pay the same. Northern State Bank v. Bellamy, 19 N.D. 509, 125 N.W. 888.
Counterclaim is equivalent of set-off. Cable Flax Mills v. Early, 72 N.Y. App. 213, 76 N.Y.S. 191; Leonard v. Charter Oak L. Ins. Co. 33 A. 511; Merchant v. Humeston, 7 P. 903.
Under the codes it is usually provided that new matter by way of counterclaim may be set up in the answer. 31 Cyc. 222; Christy v. Arnold, 36 P. 918; St. Louis Nat. Bank v. Gay, 35 P. 876.
A judgment by default or on confession is in its nature just as conclusive upon the rights of the parties before the court as a judgment upon demurrer or verdict. Howard v. Huron, 60 N.W. 803; 34 C.J. 781, 856; Rogers v. Bruce, 193 P. 1076; Clark v. Lee (Minn.) 59 N.W. 970; Ubber v. Dunn (Iowa) 119 N.W. 269.
Where a person by concealing facts in his possession, induces another to act in a manner other than he would have acted had he known such facts, he will be estopped to set up such facts to the other's prejudice. 21 C.J., § 173; Milligan v. Miller (Ill.) 97 N.E. 1054; Williams v. Wells (Iowa) 16 N.W. 513; Schultz v. Dennison, 123 N.W. 1094; Mahells Mfg. Co. v. Caney, 5 N.W. 1.
Waiver is essentially a matter of intention and may arise out of the acts done by the party. American Cent. Ins. Co. v. Sinclair (Okla.) 160 P. 60.
Knowledge of the right waived may be constructive knowledge. Pabst Brewing Co. v. Milwaukee (Wis.) 105 N.W. 563; Pierce v. Langdon, 99 U.S. 578, 25 L. ed. 420.
Intention to waive which must coincide with knowledge may be shown by acts and conduct of the parties from which an intention to waive may be reasonably inferred. Hurly v. Farnsworth (Me.) 78 A. 291; Burnham v. Austin, 73 A. 1089; Steward v. Leonard (Me.) 68 A. 638.
Where more than one remedy to deal with a single subject of action exists and they are inconsistent with each other, after the choice of one with knowledge of the other, or reasonable means of knowledge of the facts, the other no longer exists. Rowell v. Smith (Wis.) 102 N.W. 1; J.I. Case Threshing Mach. Co. v. Rice, 139 N.W. 445.
C. G. Bangert and H. P. Remington, for respondents.
Defendant is not required to plead his equitable set-offs at law, but may come into equity after a judgment at law, to establish his set-offs and enjoin the judgment. 34 Cyc. 758.
Judgment upon the same facts to enforce a different demand and obtain another form of relief is conclusive as to what was in fact litigated and decided in such suit. Clark v. Blair, 14 F. 812.
Where one has a demand which is capable of being used by way of recoupment, it is at his option whether he will use it or instead thereof bring a separate action upon it. Baker v. Morehouse, 12 N.W. 170; Pitts v. Oliver, 83 N.W. 590; 25 Am. & Eng. Enc. Law 2d ed. 568; 34 Cyc. 629.
A set-off, as generally considered, consists of a counter demand pleaded by a defendant in an action arising out of a transaction independent of that which is the subject of plaintiff's demand. 25 Am. & Eng. Cyc. Law 2d ed. 542; Clark v. Sullivan, 3 N.D. 280, 13 L.R.A. 233, 55 N.W. 758.
Special favor should be shown to those who, in fact, occupy the position of surety and that the debt sought to be set-off need not be due at the date of adjudication if they are owing. 4 Remington, Bankr., § 1465, p. 167; Scamon v. Kimball, 92 U.S. 362; Carr v. Hamilton, 129 U.S. 252, 32 L. ed. 669; Scott v. Armstrong, 146 U.S. 499, 36 L. ed. 1059; Frank v. Mercantile Nat. Bank, 182 N.Y. 264, 75 N.E. 841.
An indorser for an insolvent's debts is, before the payment of the debt, entitled to prove his claim as such indorser against the estate of the insolvent. Citizens Bank v. Kendrick (Tenn.) 36 Am. St. Rep. 96.
The right of set-off is not affected by the appointment of a receiver of a bank. Re Middle Dist. Bank, 19 Am. Dec. 452.
The trustees of an insolvent debtor stands, in regard to cross-demands, in the same position as the debtor himself. First Nat. Bank v. Barnum Wire Works (Mich.) 55 Am. Rep. 660; Lockwood v. Beckwith (Mich.) 72 Am. Dec. 69.
Insolvency is, of itself, sufficient grounds for the application of equitable set-off, even where the indebtedness of one side is not yet due, and it is immaterial in which party's favor is the unmatured debt. National Trustee Co. v. Fourth Nat. Bank (Tenn.) 15 L.R.A. 710; 24 R.C.L. 843.
An election between two remedies necessarily implies knowledge that there are two remedies, and to constitute a binding election, the party electing must have had such knowledge as is essential to an intelligent choice of proceeding. Graybill v. Corlett (Colo.) 154 P. 730.
In order to constitute a valid election, the act must be done with a full knowledge of the circumstances of the case, and of the right to which the person put to his election was entitled. Standard Oil Co. v. Hawkins, 74 F. 395, 33 L.R.A. 739.
The doctrine of the election of remedies applies only to those cases in which the party has two or more remedies which are inconsistent with each other and has no application to a state of facts where the remedies available to him are concurrent and consistent. 20 C.J. 6, 7.
The Elliott Farmers Co-operative Store Company, a corporation, was organized in 1917. It borrowed of the State Bank of Elliott, on March 5, 1921, the sum of $ 3,000. This indebtedness was last renewed on January 1, 1924, and the plaintiffs in this action, with other stockholders of the co-operative store, guaranteed the payment of the note. The State Bank of Elliott became insolvent and passed into the hands of the defendant, as receiver, on June 11, 1924. The co-operative store company had on deposit in the State Bank at the time $ 400.12, which was credited on the note on July 1, 1924. The store continued in business until September 9, 1925, at which time it entered into a voluntary liquidation by trustee. At the time the bank closed, the guarantors on the note had on deposit in the said bank $ 3,318.44.
Thereafter a 10% dividend was paid by the Guaranty Fund Commission, directly to the holders of the receiver's certificates, except the plaintiff Arnold Stram, whose dividend amounting to $ 250 was endorsed on the $ 3,000 note. The defendant Baird, as receiver of the State Bank of Elliott, brought action against these plaintiffs on their guaranty on the $ 3,000 note. The plaintiff, Stram, appeared and filed an answer in which no attempt was made to counterclaim or set off the deposits against the liability on the guaranty and when the case was called for trial the answer was withdrawn and Baird, as receiver, recovered judgment against the guarantors for $ 3,052.70, principal and interest and the sum of $ 81.55 for costs.
Thereafter these plaintiffs, by leave of court, brought this action in equity, alleging that the Farmers Co-operative Store was insolvent at the time the State Bank of Elliott became insolvent and passed into the hands of Baird, as receiver and praying for judgment, ordering the deposit which the plaintiffs had in the closed bank set off against the judgment of the defendant as receiver. There was a judgment for the plaintiff from...
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