Wilson v. Citizens' Trust Co.

• Decision Date: 28 June 1916
• Citation: 233 F. 697
• Parties: WILSON v. CITIZENS' TRUST CO.
• Court: U.S. District Court — Southern District of Georgia

233 F. 697

WILSON v. CITIZENS' TRUST CO.

United States District Court, S.D. Georgia.

June 28, 1916

W. R Hewlett, of Savannah, Ga., for complainant.

Anderson Cann, Cann & Walsh, of Savannah, Ga., for defendant.

LAMBDIN District Judge (after stating the facts as above).

This matter is before me on the motion which the defendant filed as above stated, to dismiss the plaintiff's equitable petition. On the hearing before me, plaintiff's counsel admitted that he had no cause of action under section 67e of the Bankruptcy Act, but was proceeding entirely under section 60b; and he further admitted that the bill should be considered as a suit at law, rather than a suit in equity and should therefore be transferred to the law docket, and such direction is given to the case.

1. The first question in the case is one of jurisdiction. Defendant's counsel contend that the action brought in this case would not lie under section 60b, because of the fact that the bankrupts did not make any transfer of the funds in question to the bank, and consequently, under section 23b of the Bankruptcy Act, a District Court of the United States has no jurisdiction to entertain the suit without the consent of the defendant. Counsel for neither side have been able to cite any decision exactly in point. However, I find that many such suits have been brought in the District Courts of the United States. Some of these suits have been carried to the different Circuit Courts of Appeals, and have also eventually found their way to the Supreme Court of the United States. Possibly the question of jurisdiction was waived in all of these reported cases, but it is somewhat singular that, if the United States courts had no jurisdiction of such suits, the question was never raised.

It is alleged in the petition that all of the deposits made by the bankrupts in the defendant bank were made within four months prior to the filing of the petition in bankruptcy. The petition alleges that a preferential payment was made to the bank as the result of these deposits under section 60b. The question of the court's jurisdiction depends upon the allegations of the plaintiff's petition, and not by facts set up in the defendant's answer. It is the view of the court that, if any preference was secured in this manner, it was made by the various deposits that were thus made by the bankrupts in the defendant bank, and not by the subsequent act of the bank in crediting these deposits, upon the filing of the petition in bankruptcy, upon the indebtedness which it claimed against the bankrupts. These deposits thus made were made by the bankrupts by their consent, and by an arrangement entered into by them, and therefore constituted their act and deed, and if they were preferential payments, within the meaning of the statute, they manifestly come under the provisions of section 60b of the Bankruptcy Act. The petition has enough in it to be sustained on this theory.

It is well settled as a general proposition that a bank has the right to set off any indebtedness it may hold against the bankrupt against a general deposit standing to the credit of such bankrupt. This is expressly allowed by section 68 of the Bankruptcy Act. See Collier on Bankruptcy (10th Ed.) p. 976 et seq. Whether the bank charges off the deposit of its customer and applies it on the indebtedness which it holds against the customer, or whether it draws a check in the name of the customer covering his deposit and applies it as a credit on the indebtedness, or whether it does neither of these things, but appeals to the law to do the same thing in effect, makes no difference as a legal proposition. Toof v. City National Bank (C.C.A. 6th Circuit) 30 Am.Bankr.Rep. 79, 206 F. 250, 124 C.C.A. 118; Studley v Boylston National Bank (U.S. Sup. Ct.) 30 Am.Bank.R. 161, 229 U.S. 523, ...