Evening star., 1933-10-23
SET-0FF QUESTION
IN NSUPREME COURT
Florida Banks Dispute In
voIving Liquidation Points,
First Up in Years.

A matter Of vital Importance to de-
positors and creditors OF insolvent ma
tional and State banks involving the
right to set.oft 1 was presented ,s to the the
In litigation between the insolvent
First National Bank of St. Petersburg,
Fla, and the Peoples Bank Of Clear
water, Fla, the latter in liquidation.
The case was presented to the Su-
preme Court on certiorari to the
United States Circuit Court of Appeals
for the Fifth Circuit, having arisen in
Florida. The court below held as
matter Of law that the right to bring
an action, without regard to the real
ownership of the items upon which q
set-off was claimed, gave the bank
claiming the set-off such set-of right.
The facts in the case disclosed that
the Clearwater bank, q State bank
In liquidation, was indebted to the ma
tional bank, in receivership. When the
national bank receiver brought suit on
this debt, the State bank answered by
pleading the right to set-of drafts
issued by the st. Petersburg Bank, and
held by the Clearwater bank, at the
suspension Of the former bank. against
its debt to the former bank. The ma
tional bank asserted beneficial owner
ship Of such drafts did not exist in the
Clearwater bank, but vested as mat
ter Of law in the customers of the
Clearwater bank.
Dispute Over Seton.
The position of the Clearwater bank
was that it could apply the obliga-
tion Of the st. Petersburg bank on the
drafts as a set-of for money the
Clearwater bank owed the ST. Peters
burg bank. The st. Petersburg receiver
contended that, by reason OF the
hduciary character Of the collection
items, for which its drafts were issued.
sct-od was not available.
In the argument before the Supreme
Court IL further developed that the
Clearwater bank now asserts owner
ship Of the drafts in question, in an
swer to which contention the st.
position Of ownership @ now taken b. by the the
respondent Clearwater bank was
fheretofoTe there taken S by that the banF that
the pleadings failed to afford a basis
for such argument, hence that ques-
ton was not before the court. Donald
c. McMullen of Tampa, Fla, appeared
as counsel in the argument for the st.
Petersburg bank, while his nephew.
Melvin A. McMullen, appeared as coun-
sci for the Clearwater bank. George
B. SpringSton appeared in the argu-
ment on behalf of the controller of the
currency.
Importance Of Issue.
Emphasizing the importance Of the
controversy by reason of more than
1150 national banks in the hands of
receivers and more than TOO national
banks In the hands of conservators,
the controller of the currency of the
United States, as friend of the court,
stated that a decision on the ruling
of the Fifth Circuit Court of Appeals,
which had permitted the Clearwater
bank to avail itself of the right Of set
of against the st. Petersburg bank. in
volving fiduciary funds, would mate
rally assist the Treasury Department
and the controller in expediting the
liquidation Of national banks either in
receivership or conservatorShip through
out the country
The Importance of the case, it Is OBJ
served by Treasury officials. lies in the
fact that for the first time in more
than 40 years the Supreme Court Of
the United States has before it for
consideration the important class ques-
ton OF set-oH in the administration OF
the liquidation of inSolvent national
banks, the last time that court con-
sidered set-of in national banks beings
in the case of Scott VS.. Armstrong, 146
United States 499, decided in 1892.