In re Voetter
| Decision Date | 23 November 1880 |
| Citation | 4 F. 632 |
| Parties | In re VOETTER, Bankrupt. |
| Court | U.S. District Court — Western District of Pennsylvania |
Thomas C. Lazear, for exceptions.
Geo. W Guthrie, contra.
ACHESON D.J.
This case comes before the court upon exceptions to the register's report in the matter of the claim of Ira F Brainard. The question involved is one of set-off. The bankrupt and Brainard, at and prior to the time of the filing of Voetter's petition to be adjudged a bankrupt, were copartners in the cattle or live-stock business. Upon a settlement of the partnership business, since the bankruptcy of Voetter, it appears that a balance is due from Brainard to the bankrupt on the partnership accounts.
At the commencement of the bankruptcy proceedings Brainard held two notes of the bankrupt; one for $1,000, then past due, and one for $5,000, maturing in 30 days,-- the consideration of each note being money loaned by Brainard to Voetter. Brainard was also surety for Voetter upon another note not then due. After the bankruptcy Brainard paid on this latter note $3,950.
The learned counsel for Brainard has, I think, fairly stated the question for decision thus: Has Ira F. Brainard the right to set off against the amount due from him to the bankrupt, on a settlement of the partnership business of Voetter & Brainard the debts due from the bankrupt to himself in transactions not connected with the partnership? The register decided against the right of set-off in an opinion which is characterized by ability and research. But I am not persuaded, either by the reasoning of the register or the authorities cited by him, of the correctness of his conclusion. What is this case? It is one of mutual dealings-- of cross-demands arising ex contractu; and, in my judgment, the right of set-off here claimed has its foundation in natural equity. Upon what just principle can Brainard be compelled to pay to the bankrupt's estate the balance in his hands arising from the partnership transactions, and come in with the other creditors for a mere pro rata dividend? It is said in Holbrook v. The Receivers, etc., 6 Paige, 220, 231, that the natural equity to have mutual but unconnected demands between two parties who have been dealing with each other set off, is, as a general rule, superior to the claims of any other creditor who has not dealt with the insolvent upon the faith of the specific fund against which the right of set-off is claimed.
In Gay v. Gay, 10 Paige, 369, where one of two copartners in a mercantile firm filed a bill against his copartner for an account and settlement of the partnership transactions and to obtain his share of the profits of the firm in the hands of the defendant, and the defendant at the time of the commencement of the suit was an indorser for the complainant upon notes on which the holders afterwards recovered judgments against such complainant, and the defendant, who was liable as such indorser, paid the judgments and took an assignment...
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