Steelman v. Atchley

Kirby, J.,

(after stating the facts). Did the court err in denying appellant the right to set off the amount of his deposit in said bank at the time of its failure against his said note held by the receiver of the insolvent bank? The bank became the debtor of appellant upon his general deposit of funds therein to the amount thereof, and bound by an implied contract to repay same upon his demand or order. Carroll County Bank v. Rhodes, 69 Ark. 47; Himstedt v. German Bank, 46 Ark. 537; Warren v. Nix, 97 Ark. 374.

He was the bank’s debtor upon the note executed to it for the sum thereof, and the bank was his debtor for the sum of his deposits therein; and if a suit had -been brought for the collection of his note before the bank’s failure, there is no question but that he could have set off against such demand the amount of his said deposits due him by the bank. Kirby’s Digest, § § 6098, 6101.

Did the appointment of a receiver deprive him of such right? We think not. Assignees and receivers of insolvents are not regarded as purchasers for value without notice, but rather as personal representatives of the insolvents and standing in their shoes so far as their assets are concerned, and take same subject to setoffs, liens and incumbrances as they existed at the time of their appointment. Scott v. Armstrong, 146 U. S. 499; Nashville Trust Co. v. Bank, 91 Tenn. 336; Green v. Conrad, 114 Mo. 651.

“Ghoses in action pass to a receiver subject to the equitable right of setoff then existing, so that a debtor of the insolvent who has such a right is not 'bound to pay what he owes and take his chances with the other creditors, but is bound to pay only the balance.” 34 Cyc. 195-6.

“Mutual claims that are due bank and depositor may be set off against each other. The bank’s authority to do this is transmitted to the receiver, while the depositor’s defenses are not impaired by the bank’s insolvency.” 2 Bolles, Banking, p. 854. See also Scott v. Armstrong, supra; Booth v. Prete, 81 Conn. 636, 20 L. R. A. (N. S.), 863; St. Paul & Minnesota Trust Co. v. Leck, 57 Minn. 87, 47 Am. St. Rep. 576 and note; State v. Brobston, 94 Ga. 95, 47 Am. St. Rep. 138; Nix v. Ellis, 118 Ga. 404, 98 Am. St. Rep. 111.

It is not shown in this case whether the appellant’s note to the bank was due at the time of the insolvency or not, but this would not prevent his right to setoff.

“A depositor may have his deposit set off against papet; that has not matured at the time of the bank’s insolvency, whether State or National, because the deposit was due at the time of the assignment,” etc. 2 Bolles on Banicing, p. 858.

There is no question in this case but that the transaction was bona ñde, the loan having been procured long before the bank’s insolvency and secured by a deed of trust, and it could not in any event be regarded as having been obtained by appellant in contemplation of its insolvency. Under the doctrine of these cases and the right to setoff, the receiver of the insolvent bank was only entitled to collect from appellant the amount of'his note to it after deducting the amount due by the bank to him on his general deposit at the time of the receiver’s appointment; and since the amount due appellant from the bank exceeded the amount which was due from him to the bank at that time by 31 cents, he was entitled to a decree allowing his setoff in the sum claimed and for the said sum of 31 cents against the receiver. Such allowance of the setoff does not operate as a preference obtained by him within the meaning of the insolvency act. Sec. 951, Kirby’s Digest.

The chancellor erred in denying intervener’s right to the setoff, and the decree is reversed and the cause remanded with directions to enter a decree in accordance with this opinion.