Bennett v. North Philadelphia Trust Co.

Opinion bt Williams, J., Edgar T. Hill and H. W. Thomas were copartners, trading under the firm name of Edgar T. Hill & Co. August 26, 1914, Thomas 'borrowed $1,900 from defendant and gave a collateral note, pledging securities therefor, which.contained the usual clause that the securities “shall be applicable......to secure the payment of any past or of any future obligation of the undersigned held by the holders of this obligation.” About the same time Edgar T. Hill & Co., for a consideration, endorsed and delivered to defendant a note for $200, of which W. C. [264] Brady was the maker, and on September 8, 1915, borrowed from defendant $225, and gave its note therefor. November 1, 1915, the firm and its individual members became involuntary bankrupts, and default was made on both of the notes which represented the partnership obligation. Plaintiff became trustee for the individuals and the firm. December 15, 1915, defendant sold the collateral on the $1,900 note realizing $2,368, and, after applying part to the payment of the note, there remained a balance of $431, which was set off by defendant against a balance of $413.03 due on the two firm obligations. Did the defendant properly use the balance, belonging of right to H. W. Thomas as an individual, as a set-off against the amount of the two notes which was due from the firm? Where property is held in pledge as against a bankrupt, his trustee has no higher right to the property than the bankrupt unless some reason of law or public policy provides otherwise: Davis v. Billings, 254 Pa. 574; see also, Hewit v. Berlin Machine Works, 194 U. S. 296. Unless the bankruptcy law otherwise provides, the validity of a claim is to be determined in accordance with the principles of the local law: Humphrey v. Tatman, 198 U. S. 91. The liability of a partner in this State is joint and several: Hallstead v. Coleman, 143 Pa. 352. As Thomas was liable as an individual to pay the amount of the firm’s indebtedness, the set-off was properly made unless there is something in the bankruptcy act forbidding it. Section 68b of the act provides, inter alia: “A set-off or counterclaim shall not be allowed in favor of any debtor of the bankrupt which is not provable against the estate.......” A set-off under this section includes any debt provable in bankruptcy: Germania, Etc., Co. v. Loeb (C. C. A.), 188 Fed. 285; and where the liability of a partner is joint and several, a partnership debt is provable against a partner’s individual estate: Matter of L. Hee, 13 Am. B. R. 8. It is not a preference under the act: In re Searles, 200 Fed. 893. The distinction be [265] tween this and the cases cited by appellant is shown by In re Shults, 132 Fed. 573, at page 575. Under the terms of the pledge the collateral was to stand as security for any obligation of Thomas held by the defendant. He was liable on the firm notes as well as his own. The only trust attached to the balance under the collateral agreement was the' duty to apply it to satisfy any “obligation” due the bank from Thomas. The judgment -is affirmed.