Opinion
July Term, 1901.
J. Woolsey Shepard, for the appellant.
George A. Strong, for the respondent.
The firm of William Campbell Co., on the 13th of December, 1895, made a general assignment for the benefit of creditors. At that time it had on deposit with the defendant $1,138.08, and the defendant then held two unmatured promissory notes of such firm in the sum of $10,000, each, one dated the 4th of September, 1895, and maturing the 4th of January, 1896, and the other dated the 25th of October, 1895, and maturing the 25th of February, 1896. Subsequent to the making of the assignment, just when does not appear, H.C. Bennett Co., creditors of Campbell Co., commenced a judgment creditor's action, which was prosecuted to, and on the 24th of February, 1897, resulted in a judgment in favor of the plaintiffs, setting aside the assignment as fraudulent and void as to Bennett Co., and appointing the plaintiff in this action receiver of the property of Campbell Co. The receiver gave the bond required and entered upon the discharge of his duties. He thereafter demanded from the defendant the $1,138.08 which Campbell Co. had on deposit at the time the assignment was made, and the defendant having neglected and refused to comply with his demand, this action was brought to recover that sum, together with interest thereon. The defendant by its answer denied the right of the plaintiff to recover, substantially upon the ground that it had a banker's lien upon this fund and also because it had applied the same prior to the time the plaintiff was appointed receiver, towards the payment of the indebtedness of Campbell Co., represented by the notes referred to.
There have been two trials of the action. Upon the first trial a nonsuit was granted upon the ground that a sufficient demand had not been made upon the defendant prior to the commencement of the action, but on appeal the judgment was reversed and a new trial ordered. ( Delahunty v. Central National Bank, 37 App. Div. 434. ) On the second trial, at the close of the testimony, each of the parties having moved for a verdict, the learned trial justice directed a verdict in favor of the defendant and from the judgment thereafter entered the plaintiff has appealed. There is no dispute as to the facts. The judgment by which the plaintiff was appointed receiver was not recovered until the 24th of February, 1897. The receiver's right to or claim upon the fund in question, therefore, must be determined as of that date, inasmuch as it is not claimed that he acquired as receiver a lien prior to that time. In this connection it is to be noted there is nothing to indicate when the action in which he was appointed receiver was commenced. The assignment having been set aside, his interest in or to the fund, or his right to recover against the defendant by reason of its withholding the same from him, is precisely the same as Campbell's Co.'s would have been had no assignment been made. He occupies the place of Campbell Co. His claim is their claim, with nothing added to or taken from it. The real question then is, could Campbell Co., on the date the judgment was recovered, February 24, 1897, have successfully maintained an action against this defendant to recover the fund in question? Manifestly not, and for this reason, when the judgment was recovered the two notes referred to were due and the defendant by reason thereof had a lien upon all moneys in its possession belonging to them. The existence of a lien of this character is well recognized. It is, says Judge MILLER in Falkland v. St. Nicholas Nat. Bank ( 84 N.Y. 145), "part of the law merchant and well established in commercial transactions. It rests upon the principle that, as the depositor is indebted to the bank upon a demand which is due, the funds in its possession may properly and justly be applied in payment of such debt, and it has, therefore, a right to retain such funds until payment is actually made." The defendant, when the judgment was recovered as against Campbell Co., unquestionably had the right of set-off, and the same right existed against the plaintiff, who, simply by operation of law and not otherwise, had taken Campbell Co.'s place. But the appellant seeks to escape the force of this conclusion by asserting that the assignment, while not binding upon him or Bennett Co., is, nevertheless, binding upon the bank, and that inasmuch as the assignment was made before the notes fell due, the bank neither has a lien nor the right to set off its claim against Campbell Co. against the money which it held to their credit. The fallacy of the contention is this, when Bennett Co. succeeded in setting aside the assignment, that moment its relation to Campbell Co. was precisely the same as though no assignment had been made. If this be true, then, when the plaintiff was appointed receiver, the defendant not only had what is termed a banker's lien upon this fund, but it also had the right to apply the fund which it held towards the payment of the notes which had then matured. It does not require argument to demonstrate that the plaintiff, as receiver, could not treat the assignment as void, so far as it affected the claim of Bennett Co., and then, for the purpose of securing that claim, insist that it was valid so far as the bank was concerned. Bennett Co. procured a decree of the court which destroyed the assignment, and having done that, it was thereafter precluded from asserting that the assignment was valid for the purpose of giving it a preference over other creditors. If the assignment were bad for the purpose of giving Bennett Co. the right to a receiver, it was bad for all purposes so far as they were concerned. The receiver owes his existence to the fact that the assignment was void, and he is, therefore, like Campbell Co., precluded from asserting its validity for the purpose of reaching the fund in question. As already indicated, he stands in the same position that Campbell Co. would have stood had the assignment not been made, and if the assignment had not been made at the time the receiver was appointed, no one would seriously contend but what the bank had a legal right then to hold the money in question and apply it towards the payment of the notes of Campbell Co.
For these reasons we are of the opinion that the judgment is right and should be affirmed, with costs.
VAN BRUNT, P.J., PATTERSON, HATCH and LAUGHLIN, JJ., concurred.
Judgment affirmed, with costs.