Summary
In Jordan v. Nat. Bank (74 N.Y. 467), commenting on 59 N.Y., supra, this court said: "It was shown there that the rule was established in England that none but mutual debts could be set off against each other, and that by mutual debts was meant those which were on each side at the same time due and payable; it was deduced from the weight of authority in this State, that the same rule existed here.
Summary of this case from Taylor et al. v. Mayor, Etc., City of New YorkOpinion
Argued September 18, 1878
Decided October 1, 1878
Henry N. Beach, for appellant. Wellesley W. Gage, for respondent.
The point is not well taken, that the answer sets up a counter-claim, and that as there is no reply thereto, the counter-claim is admitted.
In the first place, that position was not taken at the circuit. The trial proceeded as if every matter contested by the parties was fairly and fully at issue. Had the point now taken been raised there, non constat but that an amendment of the pleadings, if the same was necessary, would have been asked for and made.
Again: If it be granted that the allegation of new matter, in this respect, in the answer, be taken as admitted, what is that new matter? It is that the intestate made his note, that the defendant discounted it, that the proceeds were duly credited to him and afterwards paid out, save the balance now in contest, that the note was not paid when due and payable, and that the defendant applied to the payment thereof that balance and charged it against the moneys standing to the credit of the intestate. These are the facts alleged. Upon them the defendant insists in its answer that it is entitled to set-off that sum. The facts alleged were all proven on the trial. The defendant still insisted there that it was entitled to a set-off. Granted, that by reason of no reply, those allegations are admitted to be true, the claim of the defendant, that it is entitled to set-off that sum, is but an averment of what the defendant contends is the legal result from their existence. The lack of a reply does no more than admit that averment, that is, that the defendant so claims. Whether its claim is well founded still remains to be determined by the court. In other words; though the matter set up in the answer be admitted to be true by not replying thereto, or be proven to be true, as it was on the trial; there is still to be determined, whether the courts will accede to the claim of the defendant, that that matter constitutes a right of set-off in the defendant. It is the matter of law arising from those facts which is not yet finally disposed of in this case. A party is not estopped, by not taking issue upon a matter of law averred in his adversary's pleadings. ( Bonnell v. Griswold, 68 N.Y., 298; Dillon v. Brainard, 21 Wall., 430; The People ex rel. v. Commrs. of Highways, 54 N Y, 276.)
The defendant further contends, that it had and continues to have, a banker's lien on the balance of deposit sued for. There is spoken of in the books, what is termed a banker's lien, but it is not a right to retain the balance of a customer's deposit, to pay or apply upon an indebtedness of his to the bank, not yet matured. The passage quoted by the defendant from Morse on Banks: "The rule may be broadly stated, that the bank has a general lien on all moneys and funds of a depositor in its possession, for the balance of the general account," is too broadly stated, and needs the limitation, that the balance of that account must be then due and payable. A lien, is a right of one to retain property in his possession belonging to another, until certain demands of him in possession are satisfied. ( Hammonds v. Barclay, 2 East, 227-235.) But mere possession does not give the right. It must arise from contract or operation of law. There was no contract for a lien, in this case. Nor did the law operate to give one. It would be in complete hostility to the whole purport and contemplation of the contract of discount. The purpose, existing and understood by the parties in that act, is, that the customer of the bank may draw out at his pleasure the avails of the discount. After the paper discounted falls due and payable and remains unpaid, unless other rights have intervened, the bank may hold a balance of deposits and apply it towards the payment of the paper. But these deposits in a bank, create between it and the depositor, the relation of debtor and creditor. ( Commercial Bk. of Albany v. Hughes, 17 Wend., 100; Ætna National Bk. v. Fourth National Bk., 46 N Y, 82.) Now a debtor in one sum, has no lien upon it in his hands, for the payment of a debt owned by him, which has not yet matured; nor has a bank, more than any other debtor. Both hold, as debtors, the moneys of their creditors, and may set up no claim to them not given by the law of set-off, counter-claim, recoupment, or kindred rules. ( Beckwith v. Union Bank, 4 Sandf. Sup. Ct., 604; S.C. affirmed, 9 N.Y., 211; Giles v. Perkins, 9 East, 37.)
It is also contended, that equity will permit and enforce a set-off of a debt not yet due, in cases where by the statute and at law, it cannot be claimed. Doubtless the power to compel a set-off of debts, was exercised by equity, prior to, and independent of, any statute on the subject. ( Ex parte Stephens, 11 Ves., 24; Ex parte Flint, 1 Swanston, 30.) But equity follows the statute and the law, unless there are peculiar circumstances presented. (11 Ves., supra; Bathgate v. Haskin, 59 N.Y., 537.) Insolvency of a party sometimes moves equity to grant a set-off, which would not be allowed at law; and that consideration much moved the court in Ford's Executor v. Thornton (3 Leigh, 695), cited for the defendant. But no equitable case is made in this action, at the trial, nor is any fact averred in the answer, on which to found equitable jurisdiction.
The case finds a bottom then, on our statute of set-off. (2 R.S., 355, § 23.) It is, in the relation of the claims of the parties, the reverse of Patterson v. Patterson ( 59 N.Y., 574). An executrix was plaintiff there, as an administratrix is here, but there the plaintiff's cause of action arose on a claim which was not due and payable until after the death of the testator; while the demand of the defendant there, which he sought to set-off, was owned by him in the lifetime of the testator and was due and payable before the testator's death. In the case in hand, the plaintiff's cause of action arises on a demand owned by the intestate in his lifetime, and due and payable to him then; while the promissory note which the defendant seeks to set-off, though owned by it in the lifetime of the intestate, was not due and payable until after his death. But we do not think that this difference, makes the rule laid down in that case, any the less applicable here. It was shown there, that the right to set-off at law did not exist before the English statute of 2 George II, chapter 22, which was amended somewhat by 8 George II, chapter 24; and that the law of set-off prescribed in our Revised Statutes (2 R.S., 354, et seq.) is, in substance, the same as the statutes of England. ( Fry v. Evans, 8 Wend., 530; Hills v. Tallman's admr., 21 id., 674.) It was shown there, that the rule was established in England, that none but mutual debts could be set-off against one another, and that by mutual debts was meant, those which, on each side, were, at the time, due and payable; it was deduced from the weight of authority in this State, that the same rule exists here. Impressed by the earnest argument of the learned counsel for the appellant, we have revised our reasoning in Patterson v. Patterson ( supra), but are unable to come to a different conclusion. We think that the statute (2 R.S., 355, § 24), means that for a demand to be set-off against an executor or administrator, in an action brought by him, it must have been due and payable from the decedent in his lifetime.
We have examined the books cited for the appellant from the New Hampshire and Massachusetts reports. Matthewson, admr. v. Strafford Bank ( 45 N.H., 108), is in accord with the position of the appellant. The opinion in that case, compares the statute of set-off of New Hampshire with that of Massachusetts, and finds them substantially alike; and citing some of the cases from the reports of the latter State, which are cited for the appellant here, declares that the right of set-off would be clear under the Massachusetts statute. But there does not seem to have been enough effect given to the fact, that of the Massachusetts cases it was stated by SHAW, Ch. J., in Bigelow v. Folger (2 Metc., 255); that they did "not stand upon the law regulating set-off generally, but upon the law respecting the settlement of insolvent estates." And it may be remarked, that the New Hampshire case is also, in another part of the opinion, put upon the insolvent laws of that State, which, it is there said, "extend much farther to claims not due at the time of set-off."
Nor do the late amendments to the Code of Procedure affect the case. It is claimed that section 506 has made a change in the law. It is plain that it has, in words. We are not called upon to say whether or not it has, in substance. This action must be decided upon the law of set-off as it stood when the action was commenced. ( Palmer v. Conly, 4 Denio, 374; affirmed, 2 N.Y., 182.) The action seems to have been begun and issue joined in January, 1877; the amendments to the Code did not take effect until May first in that year. The appellant's claim, that this court may determine this right of set-off, in accordance with the statute of set-off as it now stands, if it be found that it differs from the Revised Statutes, is not to be allowed. The decision in Brown v. Holyoak, cited in Hutchinson v. Sturges (Willes' Reps., 263), is said by the appellant, to have been governed by a statute passed the day before the judgment in that case was given. It was, indeed, decided the day after the statute was passed, and it gave the same right of set-off as that statute declared. But the judgment construed a former statute to have given that right. "The day after the last act was passed, Lord HARDWICKE, Ch. J., delivered the opinion of the court of Common Pleas that a debt of simple contract might by the former act have been set-off against a specialty debt." (Buller's N.P., 179.)
We are constrained to affirm the order appealed from.
The rule we maintain will not work hardship. If the estate of the decedent is solvent, the creditor has only to await distribution or bring his cross action. If there are any circumstances existing which render it inequitable to deny him a set-off, he may set them up in the action on the demand against himself, and invoke the equity power of the court.
The order should be affirmed, and judgment absolute rendered for plaintiff on stipulation with costs.
All concur, except MILLER and EARL, JJ., absent.
HAND, J., concurs on the ground of stare decisis.
Order affirmed, and judgment accordingly.