Williams v. Johnson
| Decision Date | 21 November 1914 |
| Docket Number | 3559. |
| Citation | 144 P. 768,50 Mont. 7 |
| Parties | WILLIAMS v. JOHNSON. |
| Court | Montana Supreme Court |
Appeal from District Court, Silver Bow County; Jeremiah J. Lynch Judge.
Action by F. D. Williams, as receiver of the State Savings Bank of Butte, against E. T. Johnson. From a judgment granting relief, plaintiff appeals. Affirmed.
Kremer Sanders & Kremer, of Butte, for appellant.
Earl N Genzberger, of Butte, for respondent.
This action was brought by plaintiff, as receiver of the Butte Savings Bank, to recover the sum of $1,000 due from defendant to the bank upon a demand note for borrowed money, dated May 5, 1914, together with interest at the rate of 8 per cent. per annum. Though formal pleadings were filed, the cause was submitted to the trial court upon an agreed statement of facts, which may be epitomized as follows: The bank is a corporation organized under the laws of Montana as a savings trust deposit and security association, and, at the date of the execution of the note in controversy, was engaged at Butte, Mont., in conducting the business such corporations are authorized to conduct under the provisions of section 3937 of the Revised Codes, including the holding of money on deposit payable on time or on demand, as well as in trust to accumulate at an agreed rate of interest. On August 5, 1914, it having become insolvent, the state examiner, by the order of the Governor and Attorney General of the state, took possession of it and all its assets and closed its doors. Thereafter the state, through the Attorney General, brought an action to have its business adjusted and wound up and distribution of its assets made through the agency of a receiver. By agreement between the Attorney General and the bank, plaintiff was appointed receiver. He at once qualified, took over all the assets from the examiner, and proceeded to perform his duties. Among the assets he found the note in question. When the examiner took possession, the defendant had on deposit subject to check, a balance of $479.09. He also had a savings account for which he held a passbook, showing a balance due him of $215.33. Under the rules adopted by the bank, balances on savings accounts remaining on deposit for three months or more drew interest at the rate of 4 per cent. per annum; the accruing interest being capitalized on the 1st days of January and July. The bank at its option could require notice of withdrawals of savings deposits as follows: Thirty days' notice for sums not exceeding $100; 60 days' for sums exceeding $100 and less than $500; 90 days' for sums of $500 and less than $1,000, etc. The sum due defendant on his savings account consisted of his balance, with interest added up to July 1, 1914. On August 20th the plaintiff demanded of defendant payment of the full amount of his note. The defendant demanded that the plaintiff apply, as a part payment of the amount of the note, the balance on his check account, and also the balance shown by his passbook on July 1st, with interest at the rate of 4 per cent. per annum from that date. He accompanied this demand with an offer to pay the balance remaining due on the note. The demand and offer were refused, on the ground that the defendant was entitled to such proportion of these amounts only as will be found due ratably to all other creditors of the bank upon the final distribution of its assets. On August 3, 1914, the bank had notified all its customers having savings accounts with it that it would thereafter require notice of withdrawals as provided by its rules. Defendant did not at any time give notice that he intended to make withdrawal of his account or any part of it. At the trial, defendant contended that he was entitled to have credited upon the amount of the note the balance of his check account, with legal interest from August 20th, when he demanded a settlement with the plaintiff, together with the balance on his savings account, with interest at the rate of 4 per cent. from July 1st. The court sustained both contentions, except that it disallowed interest on the first balance, and rendered judgment for the plaintiff for $335.96, balance of principal and interest. The plaintiff has appealed.
At the hearing in this court, counsel for the plaintiff made the concession that, when the bank ceased to do business, all balances on savings accounts became due without previous notice to the bank or the receiver, thus eliminating this feature of the case. They submitted the question whether, upon the facts disclosed by the statement, the decision of the trial court allowing defendant credit, by way of counterclaims, for the amounts of his deposits, does not give him an unlawful preference over other depositors of the bank. Incidentally they also presented the inquiry whether the defendant is entitled to interest on either or both of his balances.
By a practically unanimous line of decisions, the courts have held that, when a receiver takes charge of the estate of an insolvent, he occupies a position in no respect different from that of the insolvent prior to the appointment. He becomes merely the assignee of the insolvent, and has exactly the same rights. He is not an innocent purchaser in any sense of that term. An ordinary assignee takes an assignment of a thing in action "without prejudice to any set-off or other defense existing at the time of, or before, notice of the assignment." Rev. Codes, § 6478; Stadler v. First Nat. Bank, 22 Mont. 190, 56 P. 111, 74 Am. St. Rep. 582; Cornish v. Woolverton, 32 Mont. 456, 81 P. 4, 108 Am. St. Rep. 598. The fact that the receiver becomes the assignee by virtue of his appointment does not put him upon any higher ground than when the assignment is the result of private contract. He is the arm of the court to accomplish the distribution of the assets of the insolvent. Colton et al., Receivers, v. Dover, etc., Ass'n, 90 Md. 85, 45 A. 23, 46 L. R. A. 388, 78 Am. St. Rep. 431; People v. Safe Deposit & Trust Co. (Cal.) 141 P. 1181; People's Bank v. Paterson Gas L. Co., 23 N. J. Law, 283; Farmers' Deposit Nat. Bank v. Penn Bank, 123 Pa. 283, 16 A. 761, 2 L. R. A. 273; 23 Am. & Eng. Ency. of Law (2d Ed.) 1074. On this subject Mr. Pomeroy says:
"The general rule is that a receiver acquires no greater interest in an estate than the one from whom he takes; and it follows that choses in action pass to him subject to any right of set-off existing at the time of his appointment." Pomeroy Eq. Remedies, §§ 186, 187.
The rule applies to a receiver of an insolvent bank, and the rights of those indebted to the bank are to be determined by their relations to it as they existed at the time the receiver was appointed. It is as much his duty to recognize and allow the right of set-off when it exists as it would have been if the bank itself had sought to enforce the collection of the particular claim. It was so held by this court in the case of Mercer v. Dyer, 15 Mont. 317 39 P. 314, following the authority of Scott v. Armstrong, 146 U.S. 499, 13 S.Ct. 148, 36 L.Ed. 1059; Yardley v. Clothier (C. C.) 49 F. 337; Id., 51 F. 506, 2 C. C. A. 349, 17 L. R. A. 462; and Van Wagoner v. Paterson, 23 N. J. Law, 283. Further discussion of the subject in this jurisdiction, we think, ought to be foreclosed by this case. Counsel insist that the case is not decisive, for the reason that the claim involved was a trust fund when deposited in the bank; that it retained this attribute in the hands of the receiver; and that, being for this reason recoverable from him as a preferred claim, it was properly pleadable as a set-off. As we understand the case, the court decided these propositions: (1) That the right of set-off was not impaired by the insolvency of the bank; and (2) that it was not prohibited by the National Bank Law. U.S. Rev. St. § 5242; U.S. Comp. St. 1913, § 9834. The mention of the character of the fund in the latter part of the opinion was made incidentally in discussing the question whether the warrant held by the bank at the time it became insolvent was due, and it and the deposit claimed as a set-off constituted mutual claims between the bank and the county. The case of Stadler v. First Nat. Bank recognized the rule as established by this case. Were it not decisive, we should nevertheless feel bound to yield our judgment to the overwhelming weight of authority on the subject. To the citations made above we may add the following: Thompson v. Union Trust Co., 130 Mich. 508, 90 N.W. 294, 97 Am. St. Rep. 494; Jack v. Klepser, 196 Pa. 187, 46 A. 479, 79 Am. St. Rep. 699; Balbach v. Frelinghuysen (C. C.) 15 F. 675; Salladin v. Mitchell, 42 Neb. 859, 61 N.W. 127; State v. Brobston, 94 Ga. 95, 21 S.E. 146, 47 Am. St. Rep. 138; Miller v. Franklin Bank (N. Y.) 1 Paige, 444; Fort v. McCully (N. Y.) 59 Barb. 87; Davis v. Industrial Mfg. Co., 114 N.C. 321, 19 S.E. 371, 23 L. R. A. 322; Jones v. Piening, 85 Wis. 264, 55 N.W. 413; Adams v. Spokane Drug Co. (C. C.) 57 F. 888, 23 L. R. A. 334; Hade v. McVay, 31 Ohio St. 231; McCagg v. Woodman, 28 Ill. 84; Assignment of Hamilton, 26 Or. 579, 38 P. 1088; Steelman v. Atchley, 98 Ark. 294, 135 S.W. 902, 32 L. R. A. (N. S.) 1060; Osborn v. Byrne,...
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