Citizens' Bank v. Kretschmar

Mayes, J., delivered the opinion of the court. There was, in truth, no indebtedness on the part of the Citizens’ Bank to the Merchants’ & Planters’ Bank at the date of the insolvency of the latter. It is true that it was stated by the [615] Citizens’ Bank that there was a balance of $964.59, and this sum was passed to the credit of the receiver on the books of the Citizens’ Bank; but the Citizens’ Bank was at that time ignorant of the fact that the draft executed hy the Merchants’ & Planters’ Bank to cover a balance of $1,560.66 due on June 6th settlement had not been paid. The cheek given by the Merchants’ & Planters’ Bank to pay this balance due by it to the Citizens’ Bank on June 6, 1905, was a worthless check and did not extinguish the debt; but the $1,560.66 was a continuing, subsisting debt, due from the Merchants’ & Planters’ Bank to the Citizens’ Bank on the 6th day of June, after the draft was given to the Citizens’ Bank to settle this amount, and it was a valid, continuing, and subsisting debt at the time that the credit of $964.59 was entered to the credit of the receiver of the Merchants’ & Planters’ Bank, although the Citizens’ Bank was unaware of it at the time. A cheek is not payment, unless the check is paid, unless it is specially agreed by the parties that the check, whether good or not, shall have that effect; and the burden of proof always rests on the party asserting it to show that the check was to have that effect. The presumption is against‘its being so received, and this presumption can only be overcome by clear proof to the contrary. If there was any ultimate liability on the part of the Merchants’. & Planters’ Bank in ease this check had not been paid and the bank was a going bank, then it cannot be said that it operated as a payment of the $1,560.66, so as to extinguish the debt. There is no proof to establish the fact that the Citizens’ Bank did accept this New York draft in payment, so that there would be no ultimate liability on the part of the Merchants’ & Planters’ Bank in event of nonpayment. In 22 Am. & Eng Ency. of Law (2d ed.) p. 569, it is said: “ It is well-settled and universally recognized rule that, when a debtor has given his check for the amount of his indebtedness, the prima facie presumption arises that the check was taken merely as conditional, not absolute, payment, and in case the check is not honored upon due presentation the [616] original indebtedness for which it was given continues to exist, and recovery may be had by the creditor without resorting to the debtor’s liabilityon the check.” Taylor v. Conner, 41 Miss., 722; 97 Am. Dec. 419; Wadlington v. Covert, 51 Miss., 631; In the case of Fleig v. Sleet, 43 Ohio St. 53; 1 N. E. 24; 54 Am. Rep. 800, it is said that, “where a debtor makes and delivers a check to his creditor in payment of an account upon a bank where the debtor has neither funds nor credit, it is not a payment of the account, although the creditor receives it as such. In such cases there is no satisfaction of the indebtedness. Such check is valueless. By its delivery it is impliedly represented that there are funds in the hands of the drawee subject to its payment. Relying upon this representation, it is accepted as payment. Its falsity relieves the creditor from his agreement, no matter whether the act of the debtor is fraudulent or bona fide. The agreement is without consideration and void. The account remains an existing and continuing cause of action.” Weddigan v. Boston Elastic Fabric Co., 100 Mass., 422. If there was no payment of this debt on June 6th by the New York draft, on which payment was refused on the 9th of June, then the Citizens’ Bank held the claim at the date of the insolvency of the Merchants’ & Planters’ Bank, and all the equities that existed as against the Merchants’ & Planters’ Bank existed against its assignee at the time he took charge of their property. The mistake in the argument of counsel for appellee, in our view of it, is in the attempt to distinguish the right of the assignee of the bank from the bank itself. If the Merchants’ & Planters’ Bank itself was trying to defeat the Citizens’ Bank in the attempt to offset the $1,560.66 due it by reason of the nonpayment of this New York draft on June 6th, as against a credit placed on its books in favor of the Merchants’ & Planters’ Bank on June 9th, we do not think it would be seriously contended that the Citizens’ Bank could not do this. If, then, it would be good as against the bank, it is good as against the assignee of the bank. Why was this money placed to the credit [617] of tlie assignee? Certainly it cannot be claimed, in view of this record, that the assignee took in any other way than as the representative of the bank and because of its insolvency. In § 186, vol. 1, of Pomeroy’s Equitable Remedies, it is held: “ It is generally held that a receiver can occupy no better position than those for whom he acts and is appointed, that he is in the place of the ones he represents, and has only such rights as they had, so that the rights and liabilities of third parties are not increased, diminished, or varied by his appointment. There passes to the receiver the property and the rights of the one from whom he takes, precisely in the same condition and subject to the same equities as before his appointment, and any defense good against the original party is good against the receiver.” Von Wagoner v. Gas-Light Co., 23 N. J. Law, 285; Falkenbach v. Patterson, 43 Ohio St., 359; 1 N. E., 757; Coope v. Bowles, 42 Barb. (N. Y.), 87; Paine v. Sykes, 72 Miss., 351; 16 South., 903; Paine v. Hotel Co., 60 Miss., 360; Eyrich v. Capital State Bank, 67 Miss., 60; 6 South., 615. In the case of Yardley v. Clothier, 51 Fed., 506; 2 C. C. A., 349; 17 L. R. A., 462, it is said: “ The rule of set-off is well understood to be that in all cases of mutual credit only the balance that shall appear to be due upon the adjudication of the mutual accounts should be paid, and it is that balance only which is the debt and is recoverable, that’ mutual obligations for the payment of money cancel each other, and that the death or insolvency of either party will make no difference in the adjustment of their mutual accounts. This rule may be modified by exceptional circumstances or by statute, but is generally applied as here stated. The allowance of set-off has been frequently objected to in the distribution of insolvents’ assets and in the settlement of decedents’ estates, for the reason that it would create preferences among creditors; but the controlling weight of authority has established the doctrine that, in the absence of express statutory prohibition, a set-off of a debt owing to the defendant will be allowed, if it was due when [618] the creditor’s rights attached, whether the debt sued on was due at the same time or matured subsequently.” The trend of all modern authority leans toward liberality in the allowance of set-offs, and particularly is this true in the case of the insolvency of the party against whom the set-off is claimed, to. the end that only the true balance may be required to be paid to the representative of the estate of the insolvent. Reversed and remanded.