294 N.W. 538 | Wis. | 1940
Liquidation proceedings. The National Warehouse Corporation cited the State Banking Commission March 20, 1940, to show cause why it should not be required to pay petitioner dividends on two claims for bank deposits. From an order requiring payment, the Banking Commission appeals. The Milwaukee Commercial Bank was closed May 25, 1933. The Banking Commission took charge and proceeded to wind up the affairs of the bank. At the time of closing, petitioner had on deposit in a general checking account the sum of $1,520.52 and in a special account the sum of $97.40. But the petitioner had obligations due the bank in the amount of $1,019.63, evidenced by two ordinary promissory notes, and a $500 note which was secured by a mortgage trust indenture dated May 1, 1933, payable to bearer May 1, 1935, and upon which two semiannual interest instalments were due and unpaid at the time of delinquency. By the terms of the mortgage trust indenture which secured $50,000 of first mortgage, six per cent gold notes, including this one, the right to foreclose or to appoint a receiver was vested in the trustee. The first two notes mentioned were promptly set off against the petitioner's deposit, leaving a balance of $500.89 in the general checking account. Claims were filed covering that balance and the special deposit. Because of an indebtedness of the petitioner to the bank for services of its trust department in the sum of $273.92, another note was given. Later dividends were paid *107 and so applied that this latter note was fully paid by December 23, 1938. When further dividends became payable the commission on March 23, 1939, claimed and exercised a right to set off the petitioner's debt on the mortgage note against the balance of the petitioner's claim.
The ruling of the trial court was that the indebtedness on the mortgage note might properly be used as a setoff were it not for a moratorium statute, sec. 269.58, Stats. Sub. (2) of this statute provides that no judgment shall be entered in any proceeding on an evidence of indebtedness secured by a real-estate mortgage except after an application to a court for entry of a judgment and the holding of a hearing. The court has the power under that statute to "direct that no judgment be entered upon the indebtedness secured by said mortgage without foreclosure of the mortgage until the expiration of a reasonable period after hearing not exceeding one year at a time." That statute became effective September 26, 1935, and was to terminate on March 1, 1938, unless earlier repealed. It applied to pending proceedings. To grant an order confirming the action of the Banking Commission in using the note as a setoff would, the trial court said, be tantamount to granting a judgment, and would be "precisely what the statute was designed to prevent."
We do not agree that sec. 269.58, Stats., interferes with the allowance of the setoff just because the note was secured by a mortgage. Moratorium acts relate to proceedings or actions on an evidence of indebtedness. A setoff is not a proceeding or an action. Long Beach Trust Co. v. Warshaw,
We are also of the opinion that petitioner does not state a case preventing the setoff of the respondent's obligation against the amount due it from appellant. In liquidation proceedings the Banking Commissioner is a statutory receiver over whom the court has supervisory control, and the property of the delinquent bank while being liquidated by such officers is in the custody of the law. Wisconsin TrustCo. v. Cousins,
"The case is not within the statute of setoffs; but, as between the original parties, was within the equitable rule requiring cross demands, to be set off against each other, if from the nature of the claim, or the situation of the parties, justice cannot otherwise be done. The insolvency of one of the parties is a sufficient ground for the allowance of a setoff in equity."
This rule has been recognized although more often applied where the depositor in a delinquent bank is to have the amount of his deposits credited against any obligation due *109
the bank from him even though his obligation is not due at the time the bank becomes delinquent. Doyle v. JossmanState Bank,
In the absence of claims arising in favor of any but the immediate parties, there can be no objection of sufficient consequence to prevent the operation of the equitable rule of setoff. No showing is made that the petitioner is insolvent or that this setoff will give the bank a preference over other mortgage noteholders. As has been said, the note now past due has always been the property of the appellant, and nothing has at any time been paid thereon according to the terms thereof. In the case of Smith v. American NationalBank,
Counsel for respondent declares that statement is dictum, and it may be that the case could have turned upon the point of waiver by the depositor because he did not object timely but accepted the notes after they had been set off and canceled. We are, however, not impressed with the soundness of the doctrine that the right of setoff rests only with the depositor. We see no reason why the rule should not be reciprocal where no interests are fairly involved except those of the bank and the depositor. 9 C.J.S. p. 869, § 437. The real net indebtedness is determined by the balance of obligations. Evidence of the mutual debts in possession of the parties when the bank closed governs the adjustment to the end that the balance to be struck shall be true and equitable. We agree with the trial court's conclusion upon this point that some reason other than the maturity of the note must exist to prevent the right of setoff. 7 Am. Jur. p. 529, § 735; p. 530, § 736.
By the Court. — Order reversed, and cause remanded with directions to allow the setoff.
