140 A. 517 | Pa. | 1927
Argued December 1, 1927. The claims in this proceeding, one of which was held to be a general claim and the other altogether rejected by the court below, were made by Schwartz, receiver in bankruptcy of Brown Stevens, against funds in the hands of the State Banking Department realized from the assets of the Cosmopolitan State Bank which had become insolvent and has been taken over and liquidated.
Brown and Stevens were private bankers and the Cosmopolitan State Bank, as its name indicates, a state banking institution. The two banks were closely affiliated, Brown being president and Stevens vice-president of the Cosmopolitan. On October 20, 1924, the Cosmopolitan Bank delivered to Brown Stevens a certificate reciting that they had deposited in the bank $10,000 payable to the order of themselves on demand on the return of the certificate properly endorsed, with interest at 4%. The certificate was marked not subject to check. The purpose of Brown Stevens in obtaining the *467 certificate was to substitute it with the commissioner of banking for certain securities which they had placed in his hands, as required by the Act of June 19, 1911, P. L. 1060, in order to conduct a private bank. They endorsed the certificate to the commissioner of banking and he turned over to them the securities which, as the record indicates, temporarily aided their credit and assisted in making it possible for them to continue business. Brown Stevens became bankrupt and the certificate passed into the hands of their trustee in bankruptcy, who claims that he has on it the preferential standing of a depositor in the insolvent Cosmopolitan Bank under the provisions of the Act of May 13, 1876, P. L. 161, 170. The court below determined that appellant was a general creditor only.
On behalf of the secretary of banking it is contended that, since Brown Stevens at the time they became bankrupt owed the Cosmopolitan Bank as depositor in excess of $39,000, the amount due Brown Stevens, on the certificate of deposit, should properly be applied on account of the bank's larger claim. The appellant says there can be no set-off because the debts are not mutual and that he is entitled to distribution from the funds of the Cosmopolitan Bank irrespective of the fact that Brown Stevens owe it the larger sum; he relies largely upon Wooden v. Reese,
We are quite unable to follow appellant's reasoning. As between the Cosmopolitan Bank and Brown Stevens, the $10,000 for which the certificate of deposit was given was not a trust fund. If the case were not complicated by the insolvency of the state bank and the claim of the bank against Brown Stevens, it is clear beyond doubt that the latter could not recover the $10,000 under the certificate of deposit as a trust fund for the reason that it could not be traced: Webb v. Newhall,
Another claim made by the trustee in bankruptcy of Brown
Stevens against the funds of the Cosmopolitan Bank is that the payment by Brown Stevens of $10,000 to the bank within twelve days of the filing of a petition in bankruptcy against them was an unlawful preference. At the time this payment was made, the Cosmopolitan Bank had on deposit with Brown Stevens over $49,000 and this payment, for anything that the record discloses, was simply the usual payment by a bank to a depositor of part of his funds. It was never intended that such transactions, without a showing of fraudulent intent in the payment, should constitute a preference. To hold otherwise would make the relations of depositors with their banks, in the event of the latter's insolvency, precarious in the extreme. In *470
disposing of this claim the court below said, "As to the second claim for $10,000 paid by Brown Stevens to the Cosmopolitan State Bank, alleged to have been given as a preference, with the knowledge that Brown Stevens were insolvent, and known to be at the time of payment, from the testimony it appears that a bank examiner in the course of his duties was making an examination of the Cosmopolitan Bank, that said bank had on deposit with Brown Stevens $49,538.10 and the examiner requested a reduction of this deposit; it further appeared that a demand upon Brown Stevens for the entire amount would have caused them financial embarrassment, and it was agreed the amount should be withdrawn in sums of $10,000, the first of which was paid and is the subject of this claim. The proof falls far short of the allegations of the claim" as to an illegal preference, and, we may add, to the test thereof which was laid down in Rudisill's Trustee v. Wildasin,
The assignments of error are overruled and the order of the court below approving the distribution is affirmed at the cost of appellant.