Higgins v. Worthington — 35 N.Y.S. 815

Majority

p. 815

HIGGINS v. WORTHINGTON.

(Supreme Court, General Term, First Department.

November 15, 1895.)

Headnote

Set-Off against Liability to Bank—Deposit Accounts Assigned After Suspension—Insolvency.

Where, between suspension by a bank and commencement of an action for and resulting in its dissolution and appointment of a receiver, one liable to it as indorser on notes takes assignments of deposit accounts, he may offset them against his liability, in an action by the receiver, unless it be shown that the bank was insolvent at the time of the assignment of the accounts; and this is not shown by the recital in an agreed statement of facts that, at the commencement of the action to dissolve, the bank “was insolvent, having suspended its business” on a certain day.

Action by Francis Higgins, as receiver of the North River Bank, against Charles C. Worthington, as indorser of certain notes held by said bank at the time plaintiff was appointed receiver. A verdict was rendered in favor of plaintiff, and defendant moves for a new trial on .exceptions ordered to be heard at general term in the first instance. Granted.

Argued before VAN BRUNT, P. J., and FOLLETT and PARKER, JJ.

Durnin & Tates, for plaintiff.

Paul R. Towne, for defendant.

November 12, 1890, the North River Bank suspended its banking business. Six days later, and on the 18th day of November, an action was commenced in the supreme court by the people of the state of New Tork, as plaintiff, against the North River Bank, as defendant, to procure the dissolution of such cor

p. 816

poration. Such proceedings were thereafter had as resulted in a judgment of dissolution on the 25th day of March, 1891, the plaintiff, Higgins, being appointed permanent receiver. Subsequently he duly qualified as such, and entered upon the discharge of his duties. The North River Bank, on the day it suspended its banking business, held certain notes upon which this defendant was liable as indorser, and he had a small deposit to his credit in the bank, which, concededly, he is entitled to have offset against the claim which the bank has against him on the notes. On the 17th of November, the day preceding the commencement of the action by the attorney general for a dissolution of the corporation, he became the assignee, for value, of certain deposit accounts standing on the books of said bank to the credit of the respective owners, amounting to $5,115.26. This sum he also claimed the right to have offset in full against his indebtedness to the bank on the notes, and he made demand of the receiver accordingly.

It is conceded that, if the defendant had taken the assignment of the accounts on or subsequent to the date of the commencement of the action, he would not be entitled to the offset, for not only does the title of the receiver to the assets of the corporation relate back to the date of the commencement of the action, but the effect of the judgment of dissolution is to determine that the North River Bank was insolvent when the suit was begun. In Re Berry, 26 Barb. 55 , it was held that the effect of the statute, authorizing proceedings against insolvent corporations, is to take away the franchise of the corporation, and its powers of action, immediately upon the petition for a receiver being filed, if the prayer of the petition be finally granted; and it would seem that, if the bank was insolvent in fact when it closed its doors and suspended payment, after which defendant obtained an assignment of the accounts, they cannot be set off by him against the demand of the bank. Diven v. Phelps, 34 Barb. 224 . But it was necessary for the plaintiff to prove that it was insolvent at the time of the assignment of the accounts. This was not accomplished by the judgment of dissolution, for that only related back to the 18th of November.

The only other evidence in the record bearing upon the question of insolvency is to be found in the third clause of the agreed statement of facts, and it reads as follows: “That at the time of the commencement of said action the said North River Bank was insolvent, having suspended its banking business on or about the 12th day of November, 1890.” This statement of insolvency it will be observed, is carefully confined to the date of the commencement of the action,—a date subsequent to the assignment of the accounts to the defendant. We may conjecture that the bank was insolvent on the day that it suspended its banking business, and that the plaintiff purchased these accounts with knowledge that such was the fact; but we are certainly not at liberty to treat this as a fact, in view of the stipulation.

The exceptions should be sustained, and a new trial granted, with costs to the defendant to abide the event. All concur.

Cases cited

In re Berry 26 Barb. 55 N.Y. Sup. Ct. 1857-11-02 p. 816
Diven v. Phelps 34 Barb. 224 N.Y. Sup. Ct. 1861-09-02 p. 816