Thorp v. Wegefarth

The opinion of the court was delivered, January 7th 1868, by Agnew, J. Under the Enabling Act of this State, in conjunction with the permissive feature of the National Bank Law, it may well be conceded that the national banking association became liable for the existing debts and liabilities of the state bank, when the latter passed into the fotmer, carrying with it all its asset's. Had the defendant then been the debtor of the state bank, a¡nd also its creditor by possession of its notes of circulation, doubtless the mutual obligation would have remained, and he could have compelled the national bank association to receive the notes of the state bank in payment of his debts, whether the former were insolvent or not. But two important elements in the logic of the defendant’s .argument are wanting. The defendant was the debtor, not of the state bank, but of the national association, and judgment was obtained for this liability. The defendant was not then the holder of the state bank notes, and even when judgment was obtained, was not the creditor of the national bank by their possession. He therefore had no right of set-off. To a judgment there can be no set-off of a debt not in judgment. One judgment may be set off against another, through the equitable powers of the court, but to a judgment ripe for execution, there can be but one answer, to wit, payment pure [86] and simple. The very issue ordered by the court corrects the argument. The judgment was not opened to let the defendant into a pre-existing defence, but the court directed a feigned issue to “ try the question whether said judgment has been equitably paid since the rendition of the same.” Another fact, important to defendant’s argument, is that he gave no evidence to show that he was a holder of the state bank notes previous to the closing of the doors of the national association; nor indeed for any length of time before his tender in payment. The closing of its doors was on the 27th March 1866, and it was not until the following December he made his tender, and then founded his right to make the tender to the president at his private residence on the fact that he had found the doors of the bank closed in the previous October, when he went to make a tender. Thus after the national bank association had committed an act of insolvency, he-purchased its indebtedness, and seeks to pay off his own debt with it. It is understood that the national association was responsible for these notes of the state bank, and when he purchased its notes, he bought only the indebtedness of the national association in becoming its creditor. It is true its obligation to pay was derivative by operation of the united action of the state and national laws, but its obligation to the defendant was but a cause of action enforceable only by writ. The state bank issues were not money under the National Banking Act, and the national association was not bound to receive them as such in its own proper business. Had the defendant held them when sued for the proper claim of the national association against him, he might have set them off as any other cause of action could be defalked, but then he had no cause of action against it. The case therefore actually stood thus : — The defendant was debtor to the national association for a judgment ripe for execution when the stay expired, and he then stood as a holder of choses in action against the national association, to wit, the notes of the state bank, for which the former was liable at law. In this state of the case there were several reasons why his tender of the notes was not good. First, there is no such thing as a right to tender a mere chose in action in payment of a judgment or execution. The debts are not of the same quality, and the right to recover the chose has not been judicially determined which must precede a legal right to use it as payment or set-off to a judgment. Second, the notes themselves were not a legal tender, and capable of performing the functions of a legal satisfaction, unless accepted by the creditor. Third, the insolvency of the bank, evidenced by its closing its doors in the preceding March, fixed the status of its debts, and the rights of its creditors, preventing them from obtaining a preference in payment. [87] The 52d section forbids all transfers and payments with a view to give a preference. Now, as the purchase of the state bank notes after the act of insolvency gave no regular equitable right of set-off against the judgment, and as those notes could not per se perform the office of legal tenders, the only way in which they could be rendered efficacious in payment of the judgment would be by a mutual act of application of the notes to the judgment, and the judgment to the notes. But this is clearly forbidden by the Act of Congress, as shown in the case of The Venango National Bank v. C. E. Taylor, decided at this term (ante, p. 14). The judgment is therefore reversed, and a venire facias de novo awarded.