Source: https://www.legalcrystal.com/case/89815/new-york-county-national-bank-vs-massey
Timestamp: 2018-02-21 03:43:52
Document Index: 758695316

Matched Legal Cases: ['§ 68', '§ 20', '§ 60', '§ 1', '§ 68', '§ 68', '§ 60']

New York County National Bank Vs Massey - Citation 89815 - Court Judgment | LegalCrystal
New York County National Bank Vs. Massey - Court Judgment
LegalCrystal Citation legalcrystal.com/89815
Case Number 192 U.S. 138
Appellant New York County National Bank
Respondent Massey
.....deposit of money upon general account with a bank creates the relation of debtor and creditor. the money deposited becomes a part of the general fund of the bank, to be dealt with by it as other moneys, to be lent to customers, and parted with at the will of the bank, and the right of the depositor is to have this debt repaid in whole or in part by honoring checks drawn against the deposits. it creates an ordinary debt, not a privilege or right of a fiduciary character. national bank v. millard, 10 wall. 152. or, as defined by mr. justice white in the case of davis v. elmira savings bank, 161 u. s. 288 : "the deposit of money by a customer with his banker is one of loan, with the superadded obligation that the money is to be paid, when demanded, by a check." .....
New York County National Bank v. Massey - 192 U.S. 138 (1904)
U.S. Supreme Court New York County National Bank v. Massey, 192 U.S. 138 (1904)
The balance of a regular bank account at the time of filing the petition is a debt due to the bankrupt from the bank, and, in the absence of fraud or collusion between the bank and the bankrupt with the view of creating a preferential transfer, the bank need not surrender such balance, but may set it off against notes of the bankrupt held by it and prove its claim for the amount remaining due on the notes. Pirie v. Chicago Title & Trust Co., 182 U. S. 438 , distinguished.
"( a ) 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."
"( b ) A set-off or counterclaim shall not be allowed in favor of any debtor of the bankrupt which (1) is not provable against the estate, or (2) was purchased by or transferred to him after the filing of the petition or within four months before such filing, with a view to such use and with knowledge or notice that such bankrupt was insolvent or had committed an act of bankruptcy."
"SEC. 60. Preferred creditors: a . A person shall be deemed to have given a preference if, being insolvent, he has . . . made a transfer of any of his property, and the effect of the . . . transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class."
Section 57 g provides (prior to amendment of February 5, 1903): "Claims of creditors who have received preferences shall not be allowed unless such creditors shall surrender their preferences."
Considering, for the moment, section 68, apart from the other sections, subdivisions a contemplates a set-off of mutual debts or credits between the estate of the bankrupt and the creditor, with an account to be stated and the balance only to be allowed and paid. Subdivision b makes certain specific exceptions to this allowance of set-off, and provides that it shall not be allowed in favor of the debtor of the bankrupt upon an unproved claim or one transferred to the debtor after the filing of the petition in bankruptcy, or within four months before the filing thereof, with a view to its use for the purpose of set-off, with knowledge or notice that the bankrupt was insolvent or had committed an act of bankruptcy. Obviously the present case does not come within the exceptions to the general rule made by subdivision b . It cannot be doubted that, except under special circumstances or where there is a statute to the contrary, a deposit of money upon general account with a bank creates the relation of debtor and creditor. The money deposited becomes a part of the general fund of the bank, to be dealt with by it as other moneys, to be lent to customers, and parted with at the will of the bank, and the right of the depositor is to have this debt repaid in whole or in part by honoring checks drawn against the deposits. It creates an ordinary debt, not a privilege or right of a fiduciary character. National Bank v. Millard, 10 Wall. 152. Or, as defined by MR. JUSTICE WHITE in the case of Davis v. Elmira Savings Bank, 161 U. S. 288 :
Scammon v. Kimball, 92 U. S. 369 . It is true that the findings of fact in this case establish that, at the time these deposits were made, the assets of the depositors were considerably less than their liabilities and that they were insolvent, but there is nothing in the findings to show that the deposit created other than the ordinary relation between the bank and its depositor. The check of the depositor was honored after this deposit was made, and, for aught that appears, Stege Brothers
We are to interpret statutes, not to make them. Unless other sections of the law are controlling, or, in order to give a harmonious construction to the whole act, a different interpretation is required, it would seem clear that the parties stood in the relation defined in § 68 a , with the right to set off mutual debts, the creditor being allowed to prove but the balance of the debt.
Section 68 a of the Bankruptcy Act of 1898 is almost a literal reproduction of § 20 of the act of 1867. So far as we have been able to discover, the holdings were uniform under that act that set-off should be allowed as between a bank and a depositor becoming bankrupt. In re Petrie, 7 N.B.R. 332, Fed.Cas. No. 11,040; Blair v. Allen, 3 Dill. 101, Fed.Cas. No. 1,483; Scammon v. Kimball, 92 U. S. 362 . In Traders' Bank v. Campbell, 14 Wall. 87, the right of set-off was not relied upon, but a deposit was seized on a judgment which was a preference.
But it is urged that, under § 60 a , this transaction amounts to giving a preference to the bank by enabling it to receive a greater percentage of its debts than other creditors of the same class. A transfer is defined in § 1(25) of the act to include the sale and every other and different method of disposing of or parting with property, or the possession of property, absolutely or conditionally, as a payment, pledge, mortgage, gift, or security. While these sections are not to be narrowly construed so as to defeat their purpose, no more can they be enlarged by judicial construction to include transactions not within the scope and purpose of the act. This section, 1(25), read with sections 57 g and 60 a , requires the surrender of preferences having the effect of transfers of property "as payment, pledge, mortgage, gift, or security which operate to diminish the estate of the bankrupt and prefer one creditor over another."
As we have seen, a deposit of money to one's credit in a bank does not operate to diminish the estate of the depositor, for when he parts with the money, he creates, at the same time, on the part of the bank, an obligation to pay the amount of the deposit as soon as the depositor may see fit to draw a check against it. It is not a transfer of property as a payment, pledge, mortgage, gift, or security. It is true that it creates a debt which, if the creditor may set it off under § 68, amounts to permitting a creditor of that class to obtain more from the bankrupt's estate than creditors who are not in the same situation and do not hold any debts of the bankrupt subject to set-off. But this does not, in our opinion, operate to enlarge the scope of the statute defining preferences so as to prevent set-off in cases coming within the terms of § 68 a . If this argument were to prevail, it would, in cases of insolvency, defeat the right of set-off recognized and enforced in the law, as every creditor of the bankrupt holding a claim against the estate subject to reduction to the full amount of a debt due the bankrupt receives a preference in the fact that, to the extent of the set-off, he is paid in full.
It is insisted that this Court, in the case of Pirie v. Chicago Title & Trust Co., 182 U. S. 438 , held a payment of money to be a transfer of property within the terms of the Bankrupt Act, and when made by an insolvent within four months of the filing of the petition in bankruptcy, to amount to a preference, and that case is claimed to be decisive of this. In the Pirie case, the turning question was whether the payment of money was a transfer within the meaning of the law, and it was held
that it was. There, the payment of the money within the time named in the Bankrupt Law was a parting with so much of the bankrupt's estate, for which he received no obligation of the debtor but a credit for the amount on his debt. This was held to be a transfer of property within the meaning of the law. It is not necessary to depart from the ruling made in that case that such payment was within the operation of the law, while a deposit of money upon an open account subject to check, not amounting to a payment, but creating an obligation upon the part of the bank to repay upon the order of the depositor, would not be. Of the case of Pirie v. Chicago Title & Trust Co. it was said in Jaquith v. Alden, 189 U. S. 78 , 189 U. S. 82 :
"The judgment below was affirmed by this Court, and it was held that a payment of money was a transfer of property, and when made on an antecedent debt by an insolvent was a preference within § 60 a , although the creditor was ignorant of the insolvency, and had no reasonable cause to believe that a preference was intended. The estate of the insolvent, as it existed at the date of the insolvency, was diminished by the payment, and the creditor who received it was enabled to obtain a greater percentage of his debt than any other of the creditors of the same class."