Penn Bank's Assigned Estate

Opinion by Mb. Justice Mitchell, The facts are mainly undisputed, the only difference as to them between the parties being whether the appellant’s agreement to discount the four notes for the Penn Bank was conditional on the paymeut of the latter’s check for $88,000. But if we look at the substance of the agreement, and what took place under it, the question whether it was conditional or not becomes immaterial. Taking its own version, the appellant was to be paid the check of eighty eight thousand dollars, and, to enable the Penn Bank to pay it, appellant was to lend the Penn forty thousand dollars the proceeds of the discount of the four notes made by the directors of the Penn, and look to the makers of the notes for payment. In effect this agreement was nothing more or less than a division by appellant of its claim against the Penn Bank into two portions—one of which was to be paid by the Penn itself at once, and the other by the makers of the notes as the latter matured. If the agreement had been carried out as made, the appellant would have received eightj? eight thousand dollars at once for payment in full, and would have paid out forty thousand for which it would have held the four notes of ten thousand each, made by the guaranteeing directors of the Penn. Instead of going through however the plan failed, the Penn was unable to pay its eighty eight thousand dollar check, but the appellant got the four notes, and when it stopped payment of the checks it had drawn in favor of the cashier of the Penn for the proceeds, it had thus got or kept the notes for nothing. The whole consideration to the directors of the Penn for making the notes was to obtain the loan of forty thousand dollars, to help, with other loans, the Penn to open its doors again and resume payment. The appellant got those notes on the promise to make the loan, but in fact never made it, and never parted [557] with a dollar of money in return for them. Stripped of immaterial details and the complications of mere book-keeping, this is the whole case. It is too late for appellant to say that these notes should not be deducted from its claim on the Penn Bank’s check. Conceding that when that check was not paid on May 26,1884, the agreement was broken and it had a right to stop payment of its own checks in favor of Penn’s cashier, none the less, it had by the transaction received forty thousand dollars for which it had given nothing.- Its duty was, on stopping its own checks, to have returned the notes to their makers thus rescinding the agreement altogether and restoring the status quo. But it did not do so, on the contrary it kept the notes and exacted payment from their makers. To this it had not the shadow of a claim except as a payment on account of the eighty eight thousand dollar check. It is not worth while to discuss whether this is a technical set-off, or a defalcation under our statute, because it is entirely clear that it was in equity a partial payment. Appellant’s own dealings with these forty thousand dollars show that it treated them as a partial payment. As already said, there was no other justification for enforcing payment of the notes, or retaining a single dollar of the proceeds. The case of Warner v. Hare, 154 Pa. 548, decides nothing that affects this matter. That case was between other parties, and the issue was not the amount of the Penn Bank’s debt to the present appellant but the right of the makers of the notes to a credit for payment of them in an account for collaterals received from the Penn Bank. The amount of the appellant’s judgment was not in controversy there, and the decision is not an adjudication of such amount that is conclusive upon the other creditors here. Nor is there any place here for the application of Miller’s Appeal, 35 Pa. 481, and other cases which hold that a creditor of an insolvent estate is entitled to a dividend on his whole claim at the time of the assignment although he may have received subsequently a partial payment from collaterals or another fund. The directors’ notes for forty thousand dollars received by the appellant were not collaterals for or on account of the present claim on the eighty eight thousand dollar check, but for the forty thousand loan to the Penh Bank which was [558] never made, and as already said the retention of the notes and enforcing payment can only be sustained as a direct partial payment in reduction of the claim. The directors making it were protected by the transfer of securities of the Penn Bank, which thus diminished the assets going to the other creditors. It was not therefore a dividend received by appellant from another fund but a diminution of the same fund as that to which th.e creditors in this proceeding had to look, and as against those creditors a dividend now on the full sum of eighty eight thousand dollars would, as well said by the learned auditor, be a “ payment a second time on those notes.” Decree affirmed with costs.