Clarkson v. Peurifoy, Receiver

November 15, 1927. The opinion of the Court was delivered by The appeal in this case presents but one question: Is a person who made a $2,000.00 loan to a bank at 4 per cent. on a certificate of deposit, which induced the bank to make a loan of $2,000.00 at 8 per cent. to another person, entitled, the bank having subsequently failed, to an equitable set-off of the two claims, one against the other?

A statement of the agreed facts is set out in full in the decree of the Circuit Court, which will be reported.

It is admitted that the loan (deposit?) made by Mrs. deJersey to the bank was a condition required by the bank for its making the loan to Clarkson Bros.; but Mrs. deJersey did not place her certificate of deposit with the bank as security for the Clarkson loan, nor did she become in any way responsible for its payment, and if the Clarksons had become insolvent and unable to meet their note, the bank would have been the sole loser. Mrs. deJersey could have at any time assigned her certificate of deposit to another, without reference to the Clarkson loan.

The fact that the bank received 4 per cent. more on the loan made by it than it was paying Mrs. deJersey does not avail her. Although her attorney and agent was also acting for Clarkson Bros., she did not make a loan direct to them at 8 per cent., the inference being that she considered a loan to the bank at 4 per cent. the more desirable.

Under the arrangements made, the bank took whatever risk there was in making the loan to Clarkson Bros., charging 8 per cent. interest as it had a right to do; and in case of failure of the Clarksons to pay their note, Mrs. deJersey's loan to the bank would be in no way affected, as she would have the right to call upon the bank for payment in full and the bank would be compelled to respond.

In the face of these facts — it being stated by the appellants that Clarkson Bros. can and will pay the whole amount due on their note — Mrs. deJersey argues that she is entitled to reach the bank's asset, the Clarkson note, under the doctrine of equitable set-off.

We think the contention is without merit. It is not claimed that there could be a legal set-off, as the debts are not mutual ones existing between the same parties in the same right (Scott v. Armstrong, 146 U.S. 507;13 S.Ct., 150; 36 L.Ed. 1062); it is equally clear to the Court that, in equity, the set-off should not be allowed, for the reason that the facts show that the rights of Mrs. deJersey were in no way affected by the liability of the Clarkson Bros., and that she had no such equitable rights in the loan made by the bank to them as would entitle her to the set-off claimed.

The decree of the Circuit Court is affirmed.

MR. CHIEF JUSTICE WATTS and MESSRS. JUSTICES COTHRAN and CARTER concur.

MR. JUSTICE BLEASE disqualified.