178 A. 141 | Pa. | 1935
This appeal involves the garnishee's right, in attachment execution, to set off a debt due by defendant to the garnishee.1
On August 19, 1932, the garnishee bank held defendant's $25,000 demand note, on which $11,000 was owing. On the same date, defendant had a checking account with a credit of $4,966.55. The net result was that the bank was not indebted to defendant. Such cross demands extinguish each other by operation of the defalcation statute: Com. v. Clarkson, 1 Rawle 291; Fisher v. Davis,
With the accounts between the bank and its customer in that condition, the plaintiff, Aarons, on the same date, August 19, 1932, entered judgment against the defendant and caused attachment execution to be issued and served on the bank as garnishee. To the interrogatories, the garnishee, after stating the accounts summarized above, answered that, "in the exercise of its right of set-off," it *115 had credited the checking account on defendant's note, leaving a balance due the garnishee of $6,033.45. It also pleaded nulla bona. The case came on for trial, when, after the facts stated were shown, the learned trial judge directed a verdict for the plaintiff attaching creditor for $4,966.55, the amount in the checking account when the attachment was served. Subsequently a motion for judgment n. o. v. was made and refused. The garnishee appeals. The judgment cannot be sustained: the bank was entitled to the set-off.
The plaintiff, Aarons, desiring to collect his judgment out of defendant's property, asserted, in effect, that the amount to its credit in the checking account was property liable to execution. If, for the moment, we disregard the fact that the net result of the accounts showed a balance due to the bank, and assume that defendant had a credit in the deposit, because permitted by the bank to draw against it, this debt, or right conditionally to draw on the account, was a chose in action: Gartner v. Cassatt Co.,
The question, then, becomes this: Did the bank, as between it and the customer, have the right to plead, against a suit for the amount in the drawing account, the note due it from defendant? — or, what amounts to the same thing, credit it on the note? The answer must be in the affirmative. The statute did not increase the liabilities of the bank (Knight v. Red Ball Transit Co.,
On August 19, 1932, when the writ was served, it could only attach the deposit or debt, subject to the bank's claim, and, as that claim extinguished defendant depositor's right to draw on the deposit, leaving nothing "belonging to" defendant, plaintiff took nothing by its writ; the larger debt to the bank had extinguished the smaller deposit credit by operation of law. The bank was not required first to make book entries charging one account and crediting the other before asserting its right to priority: Goldstein v. Jefferson Title Trust Co.,
It is at this point that the learned court below erred. "The bank," said the court (apparently treating the deposit as something tangible), "could not make the appropriation after service of the writ of attachment," and relied for that conclusion on Valiant v. Pleasonton et al.,
The interpretation of the statute is well settled. "The service of an attachment execution has the effect of an equitable assignment of the thing attached. It puts the garnishee in the relation to the attaching creditor which he had sustained to his former creditor. He may make the same defense to the attachment by evidence of set-off or of other equities that he might have made if sued by his original creditor": Roig v. Tim,
The right of defalcation is conferred by the Act of 1705, 1 Sm. L. 49, section 1, 12 P. S. 601. The bank could have asserted the right in a suit by the defendant for the deposit: Farmers Dep. N. Bank v. Penn Bank,
Plaintiff's action, as related to the bank, was begun by the writ of attachment execution. "As to the defendant in the judgment on which it issues, it is a species of execution process, but as to the garnishee who becomes a party defendant therein, it is an original process — a summons commanding him to appear and show cause, if any he has, why judgment in favor of the plaintiff should not be levied of the goods and effects of the defendant in his hands. In form as well as in effect, the summons clause of an attachment execution, required to be served on the garnishee, is in every proper sense of the term a 'writ' . . .": Kennedy v. Ins. Co.,
Appellee suggests that the bank has not adequately pleaded its right to set off its claim, that it should have formally set up a "counterclaim" in the answers to the interrogatories. We are not impressed by the contention as presented on this record. The proceeding is, in part, equitable. It was necessary that plaintiff have adequate notice of the issue to be tried, but the phraseology was not material, if the substance was sufficient. The answers fully set forth the accounts, the exercise of the right to credit the deposit on the note-debt, the exercise by the garnishee "of its right of set-off." On that issue the parties went to trial; there was no surprise. We must dispose of the case on its merits.
The judgment is reversed and is here entered for the Integrity Trust Company, as garnishee.