McDaniel Nat. Bank v. Bridwell

• Decision Date: 16 May 1933
• Docket Number: No. 9640.,9640.
• Citation: 65 F.2d 428
• Parties: McDANIEL NAT. BANK v. BRIDWELL.
• Court: U.S. Court of Appeals — Eighth Circuit

65 F.2d 428 (1933)

McDANIEL NAT. BANK v. BRIDWELL.

No. 9640.

Circuit Court of Appeals, Eighth Circuit.

May 16, 1933.

William D. Tatlow, of Springfield, Mo. (Arch A. Johnson, of Springfield, Mo., on the brief), for appellant.

Frank B. Williams, of Springfield, Mo. (John S. Farrington, of Springfield, Mo., and J. E. Haymes, of Marshfield, Mo., on the brief), for appellee.

Before STONE, GARDNER, and SANBORN, Circuit Judges.

SANBORN, Circuit Judge.

John H. Case was adjudged a bankrupt in 1927, and the appellee was appointed his trustee in bankruptcy. Conceiving that a deposit of $6,361.60 in the McDaniel National Bank, evidenced by a certificate of deposit issued to Hattie Winslow, was created with money belonging to the bankrupt and transferred by him to Mrs. Winslow in fraud of his creditors, and was an asset of his estate, the trustee brought a plenary suit in equity in the court below against Mrs. Winslow and the bank to recover this asset. Mrs. Winslow denied that the deposit belonged to the bankrupt or constituted any part of his estate. The bank took the position that it was a stakeholder and asserted no interest in the deposit. The court found that the deposit was an asset of the bankrupt's estate, and that neither Mrs. Winslow nor the bank had any right, title, or interest in it, and decreed that the bank and Mrs. Winslow pay the amount of the deposit, less costs and an attorney's fee allowed counsel for the bank, to the trustee. From this decree, entered October 17, 1930, no appeal was taken. On December 2, 1930, the bank filed a bill in equity in the same court, reciting the entry of the decree, alleging that the bankrupt was indebted to the bank, at the time he was adjudicated, for an unpaid balance of more than $4,000 upon a promissory note, which it was entitled to offset against the deposit which the court had decreed belonged to the trustee, and asking that the bank be permitted to deduct this indebtedness from the amount it was required to pay the trustee. The court stayed the execution of the decree, and on July 1, 1931, ordered the bank to pay into the registry of the court the amount of the deposit in question to abide the further order of the court. On motion of the trustee, the court, in September, 1931, dismissed the suit of the bank, upon the ground that the court sitting in equity had no jurisdiction to determine the rights of the bank with reference to this deposit, that being a matter for the court of bankruptcy. From the decree of dismissal of its suit, the bank has appealed.

It is conceded that the court below had no jurisdiction of the bank's suit, unless, as the bank asserts, it was a dependent suit, and hence a continuation of the one brought by the trustee.

It is plain that the bank was at liberty, under Equity Rule 30 (28 USCA § 723), to assert in its answer in the original suit its right of offset based upon the indebtedness of the bankrupt to it; it is equally apparent, however, that is was not compelled to do so.

Equity Rule 30 provides: "The answer must state in short and simple form any counterclaim arising out of the transaction which is the subject-matter of the suit, and may, without cross-bill, set up any set-off or counterclaim against the plaintiff which might be the subject of an independent suit in equity against him, and such set-off or counterclaim, so set up, shall have the same effect as a cross-suit, so as to enable the court to pronounce a final decree in the same suit on both the original and the cross-claims."

Referring to rule 30, the Supreme Court of the United States, in American Mills Co. v. American Surety Co. of New York, 260 U. S. 360, 365, 43 S. Ct. 149, 151, 67 L. Ed. 306, said: "The counterclaim referred to in the first part of the paragraph must therefore be an equitable counterclaim, one which like the set-off or counterclaim referred to in the next clause could be made the subject of an independent bill in equity. The counterclaim and the set-off and counterclaim in the two clauses are in pari materia, except that the first grows out of the subject-matter of the bill and the other does not. That which grows out of the subject-matter of the bill must be set up in the interest of an end of litigation. That which does not may be set up if the defendant wishes in one proceeding in equity quickly to settle all equitable issues capable of trial between them in such a proceeding, even though they are not related."

The subject-matter of the suit of the trustee was the ownership of the deposit. The claim which the bank now seeks to offset is upon the note of the bankrupt. This note did not arise out of the same transaction as the deposit. The bank elected not to assert its right of set-off against the trustee in the original suit. It permitted that suit to be finally determined.

A decree is final when it terminates the litigation on the merits of the case and leaves nothing to be done but to enforce, by execution, what has been determined. St. Louis, I. M. & S. R. R. Co....