Court Opinion

ID: 8633538
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:41:26.66739+00
Date Added: 2024-06-11T16:55:51.213607
License: Public Domain

LOWELL, District Judge.
[The vexed question upon which able and learned judges have differed, whether a note or other debt bought after the insolvency of the debtor is known, though before bankruptcy, can be set off by the purchaser against a debt due by him to the bankrupt, does not demand our attention in this case, and I shall not review the decisions, because I consider that the prevarications of the holder of the note, in his sworn examination, and the other evidence which has been produced, warrant and require me to draw all reasonable inferences against his title. And this is hardly denied.] 2
The evidence in this case is of a character to satisfy me that the bare legal title to the note was transferred to Dreyfus & Co. If the indorsement were made under any definite and complete arrangement by which the purchasers were to own the note absolutely for a consideration paid down, or even lor a credit to Weil & Co., if the latter were their debtors, for precisely what they received in dividends, then the set-off might be made, provided the purchase of the note-was not at so late a period as to bring it within some prohibition of the statute. On this last question, that is to say, whether a purchase made after the known insolvency but before the technical bankruptcy of the debtor can be the subject of set-off, the authorities are divided; but I shall not consider it, for all that I can ascertain of the facts is that there was a legal transfer; and I feel bound to say the note was held by Dreyfus & Co., simply as trustees for Weil & Co.
Under such circumstances a set-off is not allowed, either by the general statutes of Massachusetts applying to solvent persons, or by the bankrupt law. [Gen. St. Mass. c. 130, § 11.] 2 The whole law of this matter is admirably stated in Forster v. Wilson, 12 Mees. & W. 191, in which the earlier cases are discussed. And it has been repeatedly held in this country that when a trustee is party to an action or to a proof in bankruptcy in his representative character, the only debts which can be set off on either side are those .of the persons for whom he is representative, and not his own personal debts.
So here, if Weil & Co. are equitable owners of this note, Dreyfus & Co., holding the legal title, cannot use in set-off, to diminish their claim as such trustee against the bankrupts, a debt they themselves owe him for goods bought. To do this, they must have acquired the true as well as the nominal property in the note.
The true objection, then, to the proof of this debt by Dreyfus & Co., is that they have proved too little; that, instead of proving the whole note as trustees for Weil & Co., they have only proved part of it, assuming to diminish it by an inadmissible set-off. As, however, the assignees appear to fear some embarrassment in collecting the $500 due them from Dreyfus & Co., if the proof stands in its present form, the order will be:
Proof expunged, without prejudice to a new proof by Weil & Co. or by Dreyfus & Co. as trustees, for the full amount of the note [and interest].2

 [From 13 N. B. R. 43.]

 [From 13 N. B. R. 43.]