Wunderlich v. Merchants National Bank
| Decision Date | 14 January 1910 |
| Docket Number | 16,326 - (82) |
| Citation | 124 N.W. 223,109 Minn. 468 |
| Parties | ALBERT WUNDERLICH v. MERCHANTS NATIONAL BANK |
| Court | Minnesota Supreme Court |
In an action in the district court for Ramsey county between Armitage-Herschel Company, as plaintiff, and Jacob Barnet Amusement Company and Jacob Barnet, as defendants, the plaintiff garnisheed the Merchants National Bank. Albert Wunderlich, having been appointed trustee in bankruptcy of the defendants, and having succeeded to all the rights of the plaintiff in the proceedings, was made a party to the litigation and filed his complaint in intervention to enforce the lien created by the garnishment proceedings therein. The garnishee answered and claimed the right to set off against the moneys in its hands the two promissory notes mentioned in the opinion, and alleged it had paid to the receiver in bankruptcy of the defendants the balance due from it after payment of said notes. The matter was heard before Brill, J who found that intervener was not entitled to any relief. From an order denying intervener's motion for a new trial, he appealed. Affirmed.
Garnishment -- Set-Off.
The equitable doctrine of set-off may be applied by a court of equity in garnishment proceedings in all cases where the plaintiff presents no superior right.
Garnishment -- Lien Subject to Equities.
A lien acquired by garnishment is, in the absence of some special and superior right in plaintiff, subject to all equities existing between the garnishee and the defendant.
Garnishment -- Insolvent Depositor's Unmatured Notes.
A bank summoned as garnishee in an action against one of its depositors, may set off against the depositor's general account unmatured notes held by it at the time of the service of the garnishee summons, when it appears that the depositor is insolvent.
Garnishment -- Proof of Insolvency.
It need not be shown that the depositor had at the time of the service of the summons been formally adjudged an insolvent in insolvency or bankruptcy proceedings. Insolvency in fact is all that is necessary to entitle the garnishee to the remedy.
Charles J. Andre and E. H. Morphy, for appellant.
John F. Fitzpatrick, for respondent.
In June, 1908, the Armitage-Herschel Company duly commenced an action against Jacob Barnet and Jacob Barnet Amusement Company to recover the sum of $900. At the commencement of the action garnishment proceedings were instituted against the Merchants National Bank, respondent on this appeal. The garnishee summons was served on June 30, and the date for disclosure set for July 23, 1908. On that day the garnishee appeared and disclosed that on the date the summons was served defendants had on deposit with it, subject to check, the sum of $1,138.99. At the same time, and as a part of the disclosure, the garnishee asserted and claimed the right to set off against this deposit account the amount of two promissory notes, of $500 each, which the bank then held against defendants, but which were not then due. One of the notes matured July 15, before the disclosure, and the other thereafter, on July 30, 1908. No actual application of the deposit account had at the time the summons was served been made towards the payment of the notes, nor entries to that effect been made on the books of the bank. At the time the garnishee summons was served both defendants were insolvent, but had not been formally so adjudged in bankruptcy or insolvency proceedings. On August 15, 1908, defendant Jacob Barnet was duly adjudged a bankrupt, and a like adjudication was made against the Amusement Company on September 1, 1908, and the intervener herein was duly commissioned as trustee in bankruptcy for both. Judgment was rendered in the main action against the defendants on October 17, 1908, for the sum of $1,001.45.
The lien of the garnishment, having been acquired within four months from the time defendants were adjudged bankrupts, was, as to plaintiff, their trustee in the bankruptcy proceedings, an unlawful preference, and on the theory that it survived for the benefit of defendant's creditors, the intervener, as trustee, was by order of the court made a party to the action for the purpose of enforcing it. Plaintiff took no further part in the action. After being so made a party, intervener applied to the court below, upon the record and files in the cause, including the disclosure of the garnishee, for judgment against the garnishee for the amount of the judgment against defendants in the main action. At the hearing on this application, which was presented upon appropriate supplemental pleadings, the garnishee again insisted on its right to set off the amount of the promissory notes held by it against defendants' deposit account. The trial court sustained this right, denying intervener's application for judgment, and the latter appealed from an order denying a new trial.
The only question presented is tersely stated by appellant, as follows: May a bank summoned as garnishee in an action against an insolvent depositor, brought by a creditor of the latter, set off against the general deposit impounded by the garnishment a note held by the bank against the depositor which was not due when the garnishee summons was served?
The equitable doctrine of set-off had its origin in a very early day, and has always been applied by courts of equity, either with or without statutory authority, in all cases of mutual demands where the dictates of natural justice rendered it appropriate; no superior rights of third persons having intervened before suit. Waterman, Set-Off, § 17; Hawkins v. Freeman, 2 Eq. Cas. Abr. 10; Jeffries v. Evans, 6 B. Mon. 119, 43 Am. Dec. 158; Nashville v. Fourth Nat. Bank, 91 Tenn. 336, 18 S.W. 822, 15 L.R.A. 710. Insolvency of one of the mutual debtors is the foundation for this relief, to the exclusion of the demands of third persons, except in those cases where by special circumstances their rights are superior to those of the debtor invoking the remedy. "The natural equity," says Waterman, Set-Off, § 438, "to have mutual but unconnected demands between two parties who...
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