'YARDLEY
v.
CLOTHIER.
337
erroneous to hold that the plaintiff ought not to be allowed to amend the affidavit, ):>ecatise, if that was put into proper and sufficient form, the court, trom its recollection of the evidence adduced on the trial before the jury, of the opinion that the plaintiff would be beaten on the issue of fact.. Such a .modEl of disposing of the case effectually cut off the plaintiff from add.ucing any additional evidence he might have at hand on the issue of fact, and debarred him from saving any exceptions he might have to the Fillings of the court; or, to state the case shortly, it gave judgment against the plaintiff without a hearing, and without opportunity to preserve his right to be heard before the appellate court. " For the reasons assigned, the order and judgment appealed from are reven>ed,and the CaUBa is remanded, with instructions to permit the plaintiff to amend the attltchment proceedings by the affidavit within the limit by the statute, and by substituting a sufficient bond if :objection is mllde'on that ground; the plaintiff to recover the <losts of this writ of
YARDLEY fl. Cl'mHmR.·
(Cfrcuit Court"E. D. pennsybvan/la: J"nua1'1 II, 1899.) I:NSOLVEN'l' BA;n-RIGHTS OJ' DEPOSITORS-SET-OFF.
AdepQllitor in an inllolvent bank, who had indorsed a note that was subsequenl>ly discoU,nted by said bank,. ClIn, in a suit by the blink to recover the amount of the note. set off his deposit against this amount, when the note matured after the in1lO1vency oBhe blink. Refusing to follow Armstrong v. Scott. 36Fed. Stephens v. Schuchmann, 82 Mo. App. 333. Bank v. Price, 22 Fed. Rep. 69'1, dis.
At Law. Motion for juqgment on case stated· ..4.B8umpB'it by Richard Yardley, receiver oithe Keystone National Bank, against George W. Clothier; to recover the amount of a note indorsed by said defendant and discounted by said bank. Rule John ;E. .Read and. Silas. W. Pettit, for plaintiff. ' ?Jeo. W. Harkins, for defendant. Before ACIlESON, Circuit Judge, and BUTLER, District Judge. BUTLER, District Judge. The facts, (presented in a case stated,) so far as material; are that the plaintiff is receiver of the Keystone National Bank; that, a.tthe time of its insolvency, it was indebted to the defendant in the sumo'f $1,127.96; that, at the same time, it held three notes indorsed by him, not then due, aggregating in amount $390; that the notes were not paid by .the maker, and were duly protested, of which notice was given; that the plaintiff sues on these notes, and the defendant sets up the indebtedness to him as.8 defense. J
Mllrk Wilks.
Esq., of the PhUlldelphia bar.
v.49F.no.5-22
388
FEDEltAL REPORTER,
vol. '49.
·iTbe' doctrine 'of set-off is founded tin the prineiples'of. equity, and, limits, is universallyreoognized andapplfud.Where parties' dealing together become mutually indebted, the appearing on their accounts is, generally,'aione recoverable. .Well-defined an'd 'ensy of comprehension as the doctrine is, however, its applicathe varying state offacts which arise, is attended with the same difficulty that attends the administration of other plain legal I*i*iplesj under unusual circumstances. ' In the distribution OfibsolveOts'! iu!sets-whether under voluntary trusts for creditors, insolvElDtlaws, 'in bankruptcy, or proceedings on decedetl'ts'estates-its <application has frequently been resisted on the ground that its allowance would create among creditors. To enter upon an of ihe quesraised and,the distinctions drawn would be ubpllofi.table. It issuffi6ierii to say thatin everyinstanoein which this objection has been niade.;' {in!ith:e'absenceof controlling statutory provisioll,) where the proposed "S6t:''bffwas due when the oreditorstrights attaehed, ;the courts have overruled it-whether the defendant's debt, in suit, was;dueatthetime or matured subsequently. In Skile.s v. Huston, 110 Pa. St. 254, [2 Atl. Rep. 30,] which was a suit by the administrator of an insolvent estate, on a note which matured after the insolvent's death, the defendant set up a debt due him in the insolvent's life-time; and the defense was resisted on the ground tllat its'allowanee'Would create preference. The opinio,n" the,. In Van court, in a Wagoner v. Paterson 00., 23 N. J.u.w, 283, the colitt' Of appeals applied the principle under precisely .circumstapc\¥l:", except tpat was by the receiver ,ofaniusolvent state bank.. The language':.l;!phe court'in that case is so pettitientand forcible nato be worthy Said the chief justi(le: " ,}n ': ".: .. ..: :'
"1 am of opinion, both upon principle and authority, thai the/debtor of an insolvent corporation loses none of his rights ,by the act.of jl)solvency; that he has the same equitable riglltof set-off agaiosttherecelver that he had against: the,corporation at the:Ume ofinsolvency, that the debtOr 9f 8; bank, whether bill indebtedness has .ncctlledornot at the time of may in eqUity /let off against his debt, :elther a deposit in the banK, or the bills of the. bank bonafide recei ved . by him. before the failure occurred. It is said the object the act is to doequal'Justice to the creditors, and . equality is equity·. But equality of wllat:and among whom? Clearly of 'the assets of the bank, among thecreditOrB of·the·bank. In cases of cross-indebtedness the assets of the bank consist only of the balance of the accounts; 'thl\t is, all the'fundwhich the bankltself wduWhav&tosatisfy its ,crt'ditofilliin case no recefver :118d been ,l\ppointed.., And isno. equality, aDd no equity. in putting of the bank, who has 'a just and legal setina worse position; and ,the ina better off against the position. by the bank's failure and the appointment ot a receiver."
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In re &ceiver of District Bank, 1 Paige, 585, and HawkinB, 5 R. L 224,[al'&,to the same effect; . ' The suggestion that the rule in bankruptcy is referable to the language of the statute governing such cases is not, we think,well founded. This language is general, referring in'tenns tom,utual debts and credits,
YARDLEYf'. CLOTHIER.
839
whether due or not. It cannot be doubted, we think, that the provision is simply a declaration of the previouSly existing. rule, universally applicable to the settlement of insolvent estates; and that it would as certainly have been applied in bankruptcy proceedings without the provision as with. In Van Wagoner v. Paterson .co. the court well says: "It seems to be assumed by the plaintiff's counsel that the eqnitable doctri.ne of sel?otf flS applied in bankruptcy is founded on the express provisions of the statute; and it is true that all modern bankrupt laws contain a provision that in cases of mutual debts and credits the balance only shall be deemed the true debt; and the fact thl,tt all well-considered bankrupt laws ,do containlluch a prOVision in favor of set-off. is of itself a strong authority in SUI ,port ()f till! natural equity and justice of the provision. It is equally true. however. that the jurisdictiun of equity over set-off in cases of bankruptcy, and the practICe of allowing them. was not derived frum the statute, but was exercised by the courts long prior to the introduction of the prOVision into the statute."
The plaintiff contends, however-and this seems to be his chief reliance-thattbe language of sections 5234, 5236, and 5242, of the Revised Statutes, relating to national banks, forbids the application of the principle here. He invites our attention to the following quotations from, and sumDiary of, these sections. The l'eceiver shall" take possession of the books, records and assets of every description of said association, collect all debts, demands and claims belonj:ting to them, and may if neoessary,to. pay the debts of such association, enforce the individual liability of stockholders." Section 5242 provides that "all transfers of notes, bonds or other evidences of debt." etc., "and payments of money to its shareholders or creditors, made a,fter the commission of an act of insolvency, or in contemplation thereof, with a view to prevent the application of its assets in the manner prescribed by this chapter, or with a view to the preference of one creditor over another * * * shall be void." These sections further provide, in effect, that the receiver shall pay over all money. made to the treasurer of the United States, subject to the order of the comptroller of the currency, to whom he is directed to make report of his acts and proceedings. And the comptroller is directed, after making full provision for the redemption of the notes of the insolvent banking assotiation, to make a ratable dividend on all cl!1ims against said association, which may be proved to his satisfaction. The foregoing quotations and summary are the plaintiff's. Except in the quotation from section 5242 we do not find anything And this in terms relating directly to the subject of only applies to translers of assets after insolvency" with intent" to is not llpplicable to the facts before us. They prefer.. ' show no· trii1181er nor proposition to transfer assets with intent to create preference. There is, of course, no room· to doubt that congress contemplated the equal distribution of assets, without preference, among creditlll-s,just as the assets of all insolvent C011Ce1'l1S and individuals; are distributed.· If,therefore, allowance of the set-off pl'Oposedhere would Tesult in it is prohibited; not more especially, howe\'er, by the statute than by the general. rule of law applicable· to all similar
340
FEDERAL REPORTER ,
vol. ,49.
cases. But as we have a1readysei'm, it will not. .The defendant will receive only what he is legally entitled to. His right of set-off was perfect. before the creditors' rights attached. The latter stand on no higher plane than the bank occupied. Eveb an assignee for value would have taken the note subject to this defense. That the bank might have defeated it by indorsement, is immaterial. That results .from considerations not involved here. If the note had matured when the insolvency occurred it would not be pretended that the set-off would confer a preference-that the defendant should pay his debt,Rs other debtors are required to do, and take,a dividend un his credit, as other. creditors must. .yet the circumstance that it was not due is obviously immaterial to the equities involved. The plaintiff finds support, however, for his position. that the statute forbids the set-off inA1"m8trongv. Scbtt,B6Fed; Rep.BBi, decided by the United States circuit court in Ohio. The question was there decided as he asks usto.decide it. Ordinarily the circuit oourts l:lhould,and do', :follow eaoh other's rulings; they do so always when they can, conscientiously; and we would cheerfully follow this case if our sense of,duty That .it, does, not is manifest from what we' have aJready!said. It is proper,however, that the case should receive The judge who delivered the opinion, bases his conclusion on the language of the statute, and the cases of Hade v. Me;Vay, B1.0hioSt. 231, and Bank v. Taylor,c56 Pa. St. 14. Our views of the statute have been stated. Hade v. Me Vay, is not l as we understand it, pertinent to the question. Hade, receiver ,of a national bank, brought suit'on the de-fendant's note. TheJatter set up a claim for the 'penalty inflicted by the statute, for taking illegal interest,-the bank having incurred the penalty in discounting the note, in suit. The set,.;offwas disallowed, solely, because the Civil Code of Ohio confines set-off to claims arising out of oontract,-the court saying: " , "A right of set-off perfect and available against the bank when the receiver was appointed is not affected by the bank's insolvency. ,The receiver 8uc,ceeda only to the rights of the bank at the time it goes into liquidation." The fact that the proposed set-off does not arise out ofcontract is then pointed out I and the court proceeds: set-off can only be pleaded here in actions founded on contract, arid must be ofa cause of action arising upon contract.'" Bankv. Taylor seems equally inapplicable. The proposed was a claim acquired after the bank h!!.d become insolvent, and closed its doors. This was plainly forbidden, not more especially by the statute than by the general rule governing the administration of all insolvent preference.-The estates. Its allowance would have worked an report ofA1"m8trong v. Scott, says: "The circuit judge concurs in the conclusions of the opinion. which is in accordance with his opinion in Bung 00. v· .Armstrong. 34 Fl:'d. ltep.94." Turning to this case we find it to be a proceeding in equity to obtain set-offl in, which the facts are stated as follows:
YARDLEY". CLOTHIER.
341
"The Bung Company, as maker, pal4 Armstrong, receiver of the bank, a certain promissory note, and afterwards filed their bill..in equity to secure the right of set-off to which bill the defendant demurred." The !!yllabus is as follows: "The voluntary payment by the maker of a promissory note with full knowledge of all the facts, operates as an abandonment and waiver of all right to set off cross-demands, or independent debts; and a bill disclosing such facts presents no case for equitable relief by way of set-off. " This. case does not seem to bear any resemblance to Armstrong v. Scott. The plaintiff also cites Steph(fit8 Schuchmann, 32 Mo. App. 333, as sustaining his view of the statute., This case adopts the ruling in Arm.strong V . Scott. The court, however, .refers to numerous authorities, not cited in the latter case. A careful examination has failed to satisfy us that they support the.conclusion reached. They appearto ,be readily c distinguishable from the case before the court. In Bank v. Colby, Wall. 609, a creditor of the bank attached itS assetS' after it became insolvent and clos6d. its dool1l., That this was a violation of the statute is clear;' bui the facts bear no resemblance' to tho,Sebefore theC,QUl;t. '; Jordan v. Bank, 74 N. Y. 467; Balch v. Wilson, 25 Minn. 299; Trust Co. 'v( Hains, 2 Bosw. 75,-decidesimply that the.debtor of an ent bank, ,or estate, whose obligation matures before'the insolvency cannot set off a counter-claim maturing subsequently. 'These cases are: .analogous to Bosler'8 Adm't3v. Bank. 4 Pa. St. 32; and rest on the f,1ame foundation'-that the rights of other creditors attached and became fixed,: before the right of set-offaroBej that the defendant,having no such right at the time his obligationmatnl'ed, conld not acquire it by disregarding his duty to make prompt payment. As said in Balch v. Wilson, supra: "If the defendant had paid his note when due, the money would have 'Passed into the receiver's hands for the benefit of all the creditors: and the failure to pay as he ought, should not place him in a better position than he would haveoccilpied if he had discharged his That these cases are inapplicable to the facts before the court in Stephens v. Schuchmann, and here,-where th'e defendant's right was per-' feet when the creditor's right attached, has, as we have already seen, been repeatedly decided. In .Jordan v. Sharlock. 84 Pa. St. 366, and .skiles v. Huston, 110 Pa. St. 254, [2 Atl. Rep. 30,] the snpremecourt of Pennsylvania, by which Bosler's Adm'T8 v.1JtLnk, 4 Pa.St. 32, was decided, held that set-ofl'is allowable in all cases,whel'e the defendant's right is perfect the insolvency oc.curs-reviewingthe subject, generally, and 'pointing out the difference between such cases and that of Boaler'8 Admr'8 v. Bank. It may be remarked, in passiJ)g, that what is said in .Jordqn v. Bharlock, respecting the nature and effect .of voluntary assignments in trust for creditors is immaterial to the question involved. as fnlly appears by'the subsequent decision of court, in Skile8 v. BOn. The insolvent deed, in the former case,fixed the rights of credit-ors llS,efi'ectually as did the insolvent's in the latter. The two cases reston the same founGl)ltion,that the right of set-off was perfect ,before the creditors'rights attached. Bank v. waU, J)6. Me. 167jGJlt
JEDERALREPORTER,
vol. 49.
v.1Jrrmim, "1 2Gray,233j Olaf1e::v. Br()ckway, *42 Y. 13,7decide no nlt:irethanthat a defendant canJ;lpt"set oft's the insolvency, against his debt which'matured before. Merritt v; Seaman, () N. Y. 1(}8, and Fry v. Et'ans, 8 Wend. 530i decide simply, that a defendant cannot set off his claim llgainst an insolvent, in suit against him for a debt contracted, not with the insolvent, but his legal representative. This review of the casescited in Stephens v. Schuchmann, seems to justify a belief that they do not support the decision in that case. The plaintiff also appeals to Bank v. Price, 22 Fed. Rep. 697, and Smith, Fleming 00.'8 Oase-'-In re GOlmnercial Bank-L. R.:1 eh. App. 538. In the first of these cases the suit was by the receiver of a nathmal bank to recover money paids. creditor after it had become insolvent. The court held the paymt>llt tb be a violation of the terms of the statute-Q transfer ofassets "with intent" to preter, saying:. "One. Is presumlld to. intend consequences of bis own acts, the bank and go into Jiql1idation, any and after the directorsYote to transfer· of assets to a creditor, wherl'by he secures a prefel'enee, must be presumed to be made With intent to prefer." . does not s.ee.m to shed any light' on the question before us. Co. '8. Caas, if applicable, here, Seems to be against the plaintiB,:', . !'!ltber than for him. The bank having failed, a liquidator was appp,inted, under the Britillh, statute governing such cases. Among were drafts acceptec;l Smit\l, Fleming & Co., not yet due. ThisQrnl, having a claim presently due, proceeded by: bill to restrain the ;liquiclatol' from negotiating the drafts,-and thus defeating their right ·of set-off. The master of the rolls.beld that complainants bad a valid rigM of set-off,-provideu the drafts ,remained with the liquidator until maturity. That it would be inequitable to allow 11im to negotiate them,.....as the statute authorized, under certain circumstances,-and therefore restrained him. On appeal, the court agreed with the master that the riKht of set-off existed, and might be exercised if the drafts remained with the liquidator, but held that, as they carried the right of negotiation, and the statute authorized its exercise, there was nothing in the cirCumlitances to justi(y the restraint. This case, as belore stated, seems to be against the plaintiff. Here the defendant's obligation remainedwith the receiver, alld is the of hIs. suit. The question before us was considered by the circuit cOllrt, sitting in New BalbnchY.,f"rolinghuysen; 15 Fed. Rep. 6:8.5, where itis said by Judge NIXON, (after considering other questions which arose:) .
Smith,
"I less diftlculty wlth regard to the other qtiestions raised by the pleadings and the evidence, to-wit: theriglJt of the cumplainants to oft'. set the aml/unt of their oredit on the bQoks of tile lJankatthetime of the failure. :promissory nottJ$for 815.000 each, which the bank had rect'ived t'romtbem July and August prllceding ttll' failure [imd not'due at {lie ditteof1nsoIve!lcy.J l,t is unquesl''xm. amy true that it the Newa,-k Niltional B-dnk Mid these notes at the time of failure, and was entitll'dtOreceivethe amotints' 'due tbereon:'when Ithel matured, 6uchoJIset might:bemade." . ' , '" ;,
UNlON PAC. BY. CO. 11. JCNES.
843
It appeared, however,that the bank had -indorsed ,and parted with the notes before maturity.: We do not consider it important that the defendan,t's obligation is that of an indorser simply. ,·His undertaking waS complete and his tion absolute when he placed his name on tb.enote.NothinK remained for bim to do. His situation was /limilar to, that of a of a bill of exchange. The factthathe. migbtbe discharged by act oithe maker, or failure to,protestandgive,notice, is TPlil; supreme court of Pennsyhrania so decic:led under similar circumstances, 10 Arnold v. Nei88, 36 Leg, Int. 436. Whatever character, however, maybe ascribed to the defendant's obligation the receiver took· it suoh as it W8ll, subject to the right of;set-Off which the'defendll.ht then had. Judgment must, therefor the d.efendant,' provided for in case stated. · ' " " I
as
I,
, ,
i
UNION-PAC. ; CO'lIIrt 01
Ry. CO. Eight"
".JONEI. ,
Fe1>J'llal7, 1, 1892.)
01' ,A.<lriod....;r.. Where .. ,tbillt three again!lt it memo ,bars of family, for personal injuries receiVed in tbe derailing 0 a car, sbaU'beeonsoliilated, and tbllitf if a verdict i8 found there IIball be but one verdiCt, ,It the oourt, against ttl " ruled that,there should be a IIeparate verdict for plaintiff. .. B.un. . . ., ' . ' . In such a cue, there lII:DO error in requiring eeparate veJ:CUct& L
bl
ber, it:appeared that plaintiff was still.uffering to lOme extent, but would probably could be giviln for reaspuably certain future recover; ',,HeW, that sUffering'ahd disability, tliough then\ was no evidence .. to the lengthot time the laDle wolild probably contllRue. . " .,
III an action tried in March for personal injuriel lustalned the previous Septem.
Bl/FlI'ElWfG.
In Error, to the Circuit'Court ,of the United for the District of Colorado. Action by Gladys Jones against the Union Pacific Railway Company for personQl injuries. Verdict and judgment Jorplaintiff. Defendant brings error,·,Affirmed. , , c: John M.Th'I.U:8Um. Willard Teller, and H. M. OraJwod, for plaintif1 in ... . ., , /C.T. Wdls,R.T. McNeal, and Jo1il. G. Taylor, fo;, ,defendant in error. ; Before CirC9it Judge, and SHIRAS and'l'HAYEB, Distriot J'ldgell. :Distriot JQ.dge. ,',rhis 'action "8ll circuit of the, ofCplorad() fQr thepurp,ose of daUlages ,for per,sona! iJ;ljuries alleged to be '19 plirlntiffwhUe ',Vas a
lm