The opinion of the court was delivered by: MARIS
This is a bill in equity brought against the receiver of an insolvent national bank to compel the allowance of a set-off. From the evidence I make the following special
The Sixth National Bank of Philadelphia, a national banking association (hereinafter called the Bank), on February 28, 1933, at 3:30 o'clock p.m., suspended ordinary banking operations and never thereafter resumed business in normal course. On March 14, 1933, the Comptroller of the Currency appointed Norman C. Ives as conservator of the Bank, and on September 29, 1934, the Comptroller appointed Leonard B. Botfield as receiver. Upon his death Joseph K. Willing, the defendant, was appointed receiver on July 3, 1936.
On Ebruary 16, 1928, plaintiff opened savings fund account No. 13,982 in the bank. On the signature card the account was described as "Robert Kardon, M. Kardon Trustee," and on the passbook as "M. Kardon, in trust for Robert Kardon." Robert Kardon is the minor son of the plaintiff.
When he opened this account, plaintiff deposited therein the sum of $7,179 of his own money and thereafter deposited additional sums from his own funds. Under the rules of the bank plaintiff alone was entitled to make withdrawals from the account. His intention in opening the account was to create a tentative or revocable trust in favor of his son, reserving full power at any time to withdraw funds from the trust for his own purposes. From the time of the opening of the account until the closing of the Bank, he exercised complete control over the account, retaining the passbook in his possession and withdrawing from time to time numerous sums of money which he devoted to his own purposes.
At the time of the closing of the Bank, the balance on deposit in this savings account was $11,268.75. At the same time the plaintiff had a balance in a checking account in the Bank in his own individual name amounting to $895.39.
At the time of the closing of the Bank, plaintiff was indebted to it in the sum of $7,603.20 by reason of his indorsement of various notes held by the Bank and drawn by various persons on the dates and in the amounts appearing in the schedule annexed to the bill of complaint.
The makers of certain of the said notes aggregating $7,238.20 were and are financially embarrassed and unable to pay and discharge their indebtedness, and plaintiff, if called upon to pay said notes by reason of his indorsement, will not have any recourse against the makers.
The plaintiff made no demand for the set-off of the said savings account against his indebtedness as indorser until some time after the closing of the Bank.
Plaintiff seeks in this case to compel the defendant receiver to set off a sufficient amount of the balance in the savings account which he opened as trustee for his son against the notes upon which he is liable as indorser to satisfy those notes in full. His right to this relief he bases upon the fact, as he alleges, that the savings account in question was his own individual property and not a trust fund for his son. This, however, is strongly denied by the defendant. The underlying question in the case thus arises.
There is no doubt as to the right of a depositor in a closed bank to set off the amount of his deposit against his liability as indorser upon a note held by the bank, provided the maker of the note is insolvent. Shannon v. Sutherland (C.C.A.) 74 F.2d 530, 97 A.L.R. 583. It is equally well settled that it is only his own deposit or claim which he may thus set off, and not that of any other person. In every case the question is: Whose money or claim is proposed to be used as a set-off? Gordon, Secretary of Banking, v. Union Trust Co., 308 Pa. 493, 162 A. 293. This question is to be determined at the moment of insolvency of the bank by the state of things then existing, not by any conditions thereafter arising or by any subsequent action taken by any party. First National Bank of Indianola, Iowa, v. Malone (C.C.A.) 76 F.2d 251; Dakin v. Bayly, 290 U.S. 143, 54 S. Ct. 113, 78 L. Ed. 229, 90 A.L.R. 999. For this purpose the Bank is to be deemed, in the absence of evidence to the contrary, to have become insolvent on the day it ceased to make payments in regular course and closed never to reopen. Willing v. Argosy Building & ...