Court Opinion

ID: 7809820
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:11:28.639219+00
Date Added: 2024-06-11T16:30:26.356322
License: Public Domain

HART, J., (after stating the facts). The court erred in sustaining the plaintiff’s demurrer to the defendants’ answer and cross-complaint and in rendering judgment in favor of the plaintiff against the defendants for the amount sued for. In Steelman v. Atchley, 98 Ark. 294, the court held that the relation between a bank and a general depositor being that of debtor and creditor, if a bank becomes insolvent, a depositor who is also indebted to the bank may set off the amount of his deposit in an action by the receiver or assignee of the bank to recover on the indebtedness due the bank. The trend of all modern decisions is toward liberality in the allowance of set-offs in the case of insolvency of the party against whom the set-off is claimed to the end that only the true balance may be required to be paid to the representative of the estate of the insolvent. In such cases a receiver is not an assignee for a valuable consideration in the ordinary sense of that term and by operation of law the rights and property of the bank pass to him precisely in the same condition and subject to the same equities as the corporation held them. So it is the well established rule that a receiver takes the claims in favor of the bank subject to all the equities between the bank and its depositors. See case note to Ann. Cas. 1917 C at p. 1188 and note to Ann. Cas. 1916 D at p. 599. Under our statutes the Bank Commissioner takes the place of a receiver of an insolvent bank. Section 51 of Act 113 of the Acts of Arkansas, 1913, p. 462. It is also deducible from the authorities cited above that the assignee of the receiver is entitled to no greater rights than were possessed by the receiver. The reason is that he only purchases the rights of the bank and a note or demand held by an insolvent bank against a third person is an asset of the bank only so far as there may be a balance due upon the same after deducting whatever the bank may be owing the person against whom the demand is held. Our statute, Kirby’s Digest, section 6098, provides that the defendant may set forth in his answer as many grounds of defense, counter-claim and set-off, whether legal or equitable, as he shall have. Sections 6099 and 6101 of Kirby’s Digest defining, respectively, counter - claims and set - offs have been amended by Act No. 267 of the Acts 1917, p. 1441. As amended the counter-claim may be a cause of action in favor of the defendants or some of them against the plaintiffs or some of them. A set-off may be pleaded in any action for the recovery of money and may be a cause of action arising either upon contract or tort. So the court has held that in a suit on a promissory note the parties may settle all matters in dispute between them whether the respective causes of action grew out of the same or different contracts or whether they arise upon contract or arise out of some tort. Coats v. Milner, 134 Ark. 311. In the application of this statute to the facts of the present case, it is readily apparent that Erwin C. Funk had the right to set off against the' claim of the plaintiff the sum of $25.06, which he had on deposit in the bank at the time of its failure and that the firm of Funk & Son had a right to set off the sum of $7.87, which the firm had on deposit in the bank at the time it became insolvent. It therefore follows from the principles of law above announced that the court erred in sustaining the demurrer to the answer and cross-complaint of the defendants and in not allowing the set-offs above referred to as claimed by the defendants. For this reason alone the judgment must be reversed and the cause remanded for a new trial. In the fourth paragraph of the answer the defendant, E. M. Funk, further answering for himself avers that at the time the bank became insolvent there was due and owing him as trustee from the bank the sum of $300; that he had deposited this sum in the bank as trustee for S. C. Walters and that he was personally responsible to Walters for said sum. In Dickerson v. Hamby, 96 Ark. 163, the court held that where the averments of an answer are incomplete, ambiguous or defective, the remedy is a motion to make them more definite and certain. The court further held that in determining the sufficiency of any pleading, every fair and reasonable intendment must be indulged in to support such pleading, and an answer is not demurrable if the facts stated, with every reasonable inference to be drawn therefrom constitute a good defense. See also Jonesboro, L. C. & E. Rd. Co. v. Board of Directors of St. Francis Levee Dist., 80 Ark. 316. Tested by this rule we think that the demands of the plaintiff and of the defendants were mutual demands and that the assignee of the insolvent bank having sued the defendant for the collection of the debt due to the insolvent estate, the defendants may set-off the debt due to them or either of them from the insolvent estate and account for the balance only. In other words, we think it fairly inferable that the language of the paragraph of the answer just referred to was merely descriptive of the person of the defendant, Funk, and did not alter the right of the depositor to have mutual claims that are due the bank and himself set off against each other. This view is strengthened by the averment that the defendant is personally liable for the amount so deposited by him. Michie on Banks and Banking, vol. 2, p. 1060, sec. 135 (lb) and cases cited; Laubach v. Leibert, 87 Pa. 55, and Miller v. Franklin Bank (N. Y.), 1 Paige 444. In the last mentioned case it was held that the public administrator of the city of New York is entitled to offset against a debt due from him to the bank a demand for deposits in the bank, whether made in his own name or as public administrator. The court said that as between him and the bank he stood in the same situation that an attorney would, who had deposited in the bank for safe keeping the moneys collected for different clients, in one general account in his name as attorney, to be drawn out on his own check when called for. The court further said that in neither case could the bank object to paying the money to the depositor, or to allow it to be offset against a demand in favor of the bank, unless they had notice from the persons having an equitable claim thereon not to pay it. We think this principle was recognized in the Bank of Hartford v. McDonald, 107 Ark. 232, where the court held that a trustee with full control over the trust funds in a bank may draw them out at his will, and the bank incurs no liability in permitting this to be-done so long as it does not participate in any breach of trust resulting in any misapplication of the funds. It follows that the judgment must be reversed and the cause will be remanded for further proceedings according to law and not inconsistent with this opinion.