Mandel v. Koerner , 149 N.Y.S. 455 ( 1914 )

SPIEGELBERG, J.

These proceedings are brought by the superintendent of banks in trust for creditors of the landlord to dispossess the tenant for nonpayment of rent due, respectively, on August 1, 1914, and September 1, 1914. The proceedings are submitted to the court on an agreed statement of facts. The landlord was a private banker doing business in the city of New York. On August 4, 1914, the superintendent of banks of the state of New York took possession of the property and business of Handel, for the purpose of liquidating the same in the interest of all the depositors. Koerner was a tenant in premises owned by Handel, paying an agreed rental of $12 a month, payable on the 1st of the month in advance. The rent due on the first days of August and September was not paid. Koerner, prior to August 4, 1914, was a depositor in Mandel’s bank, and on August 4, 1914, there was to his credit with said banker a sum greatly in excess of the rent involved in these proceedings. The tenant claims that in these proceedings he is entitled to set off the amount of the rent against his deposit.

[1,2] It is difficult to perceive on-what possible theory the landlord can succeed in these proceedings. Section 2244 of the Code of Civil Procedure permits a counterclaim to be set up in a summary proceeding, and "such defense or counterclaim may be set up and established in like manner as though the claim for rent in such proceeding was the subject of an action.” There is no doubt that this section applies to the Municipal Court. Shotland v. Mulligan, 60 Mise. Rep. 58, 111 N. Y. Supp. 642; Hett v. Lange, 139 App. Div. 743, 124 N. Y. Supp. 573. So far as the proceeding in which the August rent is involved is concerned, the right of a tenant to a set-off is undeniable. The debt owing to Handel, as well as the one owing to Koerner, were due on August 4, 1914, and in such cases a set-off will always lie. Fera v. Wickham, 135 _N. Y. 223, 31 N._ E. 1028, 1-7 L. R. A. 456. But although the claim of a party asking a set-off against a demand uppn him held by an insolvent estate must have been due at the time of the insolvency, the debt due to the insolvent estate may have matured after the insolvency. In re Hatch, 155 N. Y. 401, 50 N. E. 49, 40 L. R. A. 664. This rule disposes of the second proceeding involving the September rent in favor of the tenant.

[3] The fact that on August 5, 1914, a petition in involuntary bankruptcy was filed against Handel does not alter the situation. An answer has been interposed to the said petition, but no adjudication of bankruptcy has yet been made; but, even assuming that Handel had been adjudicated a bankrupt, it would not militate against the tenant’s right to set off the rent against his deposit. Section 68 of the Bankruptcy Act provides:

“In all cases of mutual debts or mutual credits between the estate of a bankrupt and a creditor the account shall be stated and one debt shall be set off against the other, and the balance only shall be allowed or paid.”

Collier, in his work on Bankruptcy (10th Ed., p. 575), commenting on this section, says:

“Strictly, the time when the right to set-off is determined is the time the petition is filed. But it makes no difference whether the debts are payable in futuro or in prsesenti.”

The decisions in this state uniformly hold that debts sought to be set off against claims of the bankrupt estate may be payable in the future. Taylor v. Nichols, 134 App. Div. 783, 119 N. Y. Supp. 919; Frank . v. Mercantile National Bank, 182 N. Y. 264, 74 N. E. 841, 108 Am. St. Rep. 805. Of course in this case the indebtedness on account of the September rent was due at the time when the lease was made, but did not become payable until September 1, 1914; but, be this as it may, the federal courts have gone a step further. In Re Philip Semmer Glass Co. (Circuit Court of Appeals, Second Circuit) 135 Fed. 77, 78, 67 C. C. A. 551, the court, in interpreting section 68, holds that the definition of the word “debt” as given in the Bankrupt Act, to wit, “shall include any debt, demand, or claim provable in bankruptcy,” applies to the word when used in section 68, and continues:

“To determine, therefore, whether the holder of a claim is entitled to the benefit of section 68, it is necessary only to inquire whether his claim is one provable in bankruptcy.”

TJiat case was followed in Steinhardt v. National Park Bank, 120 App. Div. 255, 105 N. Y. Supp. 23. That the claim of the tenant is provable in bankruptcy admits, of course, of no doubt, and it is therefore a proper subject for a set-off pro tanto against the bankrupt’s claim.

[4] The relation of the parties is not changed by reason of thé fact that the superintendent of banks took possession of Mandel’s property. He is nothing but a custodian and liquidator of the assets, without acquiring title thereto. Lafayette Trust Co. v. Higginbotham, 136 App. Div. 747,_ 121 N. Y. Supp. 489.

Final order is directed in each case for the tenant.