Chipman & Holt v. Ninth N. Bank , 120 Pa. 86 ( 1888 )

Opinion,

Me. Justice Steeeett :

On September 3, 1887, when Chipman & Holt assigned all their property to the use plaintiff, in trust for the benefit of their creditors, they had on deposit in defendant bank a cash balance of $3,069.61, subject to their check. Formal demand on the bank for that amount was made by the assignee on the second day thereafter, and payment being refused he brought this suit on November 5th, following. At the time of the assignment, the bank held several pieces of the assignors’ unmatured commercial paper, some of which, amounting to over $7,000, matured after demand and before suit by the assignee, and the bank now seeks to avail itself of that amount as a set-off in this action. Whether it has a right to do so or not is the question presented by the affidavit of defence.

It is clear that at the date of the assignment the bank had no lien on or set-off against the amount then on deposit to the credit of Chipman & Holt, the assignors; and, as was held in Marks’s Appeal, 85 Pa. 231, the assignee, in virtue of the assignment, and as trustee for the creditors, was then entitled “to assert his and their right to any property of the assignors which passed by the assignment, against any person claiming by subsequent transfer, attachment, judgment, execution, or any other lien.” The reason of this is that the status of the assignors’ debtors as well as their creditors is fixed by the assignment in trust for the latter. Their creditors can neither attach nor levy on any of the assigned assets; nor can their debtors buy up claims against them and set off the same against their indebtedness to the assigned estate; but, as was held in Jordan v. Sharlock, 84 Pa. 366, in a suit by the assignee upon a note to his assignor, matured after the assignment, the defendant may set off a debt due to him by the assignor at the time of the assignment, for the reason that when the note in suit passed to the assignee by virtue of the assignment, the defendant had a demand against the assignor on which he had an immediate right of action. The defendant bank in this case had no such right at the date of the assignment, and, as a creditor of the assignor, holding notes that matured after all his property, including the money on deposit, had passed to the beneficial plaintiff in trust for all the creditors, the bank is in no better condition than they are.

The general principle, as stated in Burrill on Assignments, § 403, appears to be that “a claim acquired after the assignment cannot be set off against 'the assignee, nor a liability existing but not due at the time of the assignment, even if it becomes due before suit commenced.” Beckwith v. The Union Bank, 9 N. Y. 211, recognizes the same principle, and it appears to be a reasonable one. In that case an insolvent firm, having money 'on deposit in bank, made a general assignment for the benefit of creditors. Shortly thereafter, but before notice of the assignment, a bill against the firm, held by the bank, exceeding the sum on deposit, matured and was charged by the bank to the account of the firm. In a suit brought by the assignee for the deposit, it was held that, as against him, the bank had no right to apply the money on deposit to the payment of the dishonored bill, notwithstanding the fact that it was the holder of the bill at the date of the assignment. The reason given is, that at the time of the assignment the bank had no lien on the deposit that would have interfered with the right of the assignors to draw the same, and that by virtue of the assignment their right to do so passed to the assignee in trust for the creditors. It was also held that to perfect that right, notice of the assignment was unnecessary, save only that in default of notice the bank might have so dealt as to have affected his rights by its subsequent acts.

We are therefore of opinion that the affidavit of defence is insufficient, and the rule for judgment should have been made absolute.

It is now ordered that the record be remitted to the court below, with instructions to enter judgment against defendant for such sum as to right and justice may belong, unless other legal or equitable cause be shown why such judgment should not be so entered.