William Usborne Moore.

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This Is an equitable rule, and it is one long since
recommended by the Chamber of Commerce of
this city in all lines of trade where there is not
(as there is in the dry-goods trade, for example)
another rule established by usage. Our corre-
spondents are not entitled to commissions based
upon the price fixed by the owner of the goods,
because they admit that they coeld not have
earned those commissions even if the goods bad
not been taken out of their control.



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654



THE COMMERCIAL YEAR BOOK.



Assignments.



What Passes by an Assignment.

1. A makes a general assignment for the benefit
of his creditors to B. After the assignment he
disposes of a number of promissory notes and se-
curity for the claims assigued to the assignee
Later C bids in the claims at public auction, and
is unable to recover possession ot the noteSjetc.,
so as to prosecme suit for their recovery. What
remedy has C against A or the person having pos-

2. A in making the assignment inadvertently
leaves out of the list of claims due to him a vslid
claim unsatisfied. C bids in all the unpaid claims
from the assignee, as per list. Has C any remedy
to have that claim assigned to him ?

Reply.— 1. When any chose in action is assign-
ed the whole interest of the assignor in the thing
assigned pesses to the assignee, and any security
in possession of the assignor passes also. See 6
Duer, 182, and 40 N. Y., 181. In the case our cor-
respondent puts, the promissory notes and secu-
rities passed by the original assignment to the
assignee for creditors, and from him to the pur-
chaser C. If any of the notes or securities are
now in other hands it is the duty of the assignee
to reclaim them, and if he does not do so of his
own motion he may be compelled to sue for their
recovery and deliver them to C.

2. If C buys certain claims, as specified upon a
list, he is not entitled to any claim not upon the
list. The fact that the seller intended to include
it is of no consequence. It is sufficient that that
particular claim was not included and was not
sold.

Truckmen as Preferred Creditors.

Please inform me if a cartman is a preferred
creditor for cartage work and freight money.

Reply. Truckmen and cartmen are by statute
expressly declared to be preferred creditors under
assignments made in this State. The statute is
chapter 286 of the Laws of 1897, the material part
of which is as follows : " In all assignments made
in pursuance of this Act, the wages or salai ies ac-
tually owing to the employes of the assignor or
assignors at the time of the execution of the as-
signment shall be preferred before any other
debt ; and should the assets of the assignor or as-
signors not be sufficient to pay in full all the claims
pieferred, pursuant to this section, they shall be
applied to the payment of the same pro rata to
the amount of each such claim. All sums due to
truckmen or cartmen for the payment of freight
and for the carriage of goods, wares, and mer-
chandise shall be deemed and treated as wages for
the purposes of this Act." The law was further
amended by chapter 624 of the statutes of the
same year, but the provision declaring truckmen
and cartmen to t»e preferred creditors was not
amended or repealed.



Position of Assenting Creditors When
Assignment is Set Aside.

A becoming deeply in debt makes over unto
trustees all his personal property and a business
In this State, for the benefit of all the creditors
who consent to come under its te» ms. Bach cred-
itor that accepted under the terms of this trust
released the debtor when he had signed the trust
composition deed. At the instance of a judgment



creditor of A the trust deed was declared unlaw-
ful, and a decision of the supreme Court set it
aside; the judgment creditor issued execution
and sold out alfthe assets of the trust business.
The assenting creditors realized nothing. Does
the release executed under those conditions t»till
exist in favor of th debtor? The relea e was
given solely upon the understanding that the
trust deed would run lor three years: does not
the action of the Supreme Court declaring it ille-
gal place all parties back to status quo? Please
cite New York decisions upon the point.

Reply.— If A makes over his property to trus-
tees for the benefit of consenting creditors, and
the trust deed is afterwards set aside as illegal,
we are of opinion that a release executed by the
consenting creditors Is no longer binding upon
them ; the consideration of the release has entire-
ly failed. We do not Know of any case in which
this precise question has come before the courts
of this State, but in other jurisdictions where 't
has arisen the decisions have been as we have in-
dicated. Thus, in Minnesota, in a case in which
the respondents claimed that releases remained
valid though the assignment had been set a- ideas
void, the 8upreme Court refused to take this view
of the case, saying : " The position of the respond-
ents, if correct, would lead to the anomalous re-
sult that if an assignment for the benefit of all
creditors, attempted to be made under the Insol-
vency Law, should for any cause be declared void,
after the large majority of creditors had assented
to and accepted its provisions in good faith, but
under som« mistake of law or fact, believing* it to
be valid, such creditors would be forever after
prevented from instituting any proceedings
under the statute to secure an equal distribution
of the debtor's property among all his creditors,
but would be compelled to sit with their hands
tied, and submissively look on, while the minority
of the creditors should appropriate the entire as-
sets of the common debtor." See 37 Minn., 343.



SET-orr in Case op Assignment.

A and B are merchants in this city. A buys
from B merchandise, say, $5,000 on thirty days'
open account. B buys from A, say, 13,000 on same
terms. In case A fails, can B offset the $3,000 he
owes A against the $5,000 A owes B ?

Reply.— In such a case as our correspondent
puts, B can offset the $3,000 he owes A against an
equal amount of A's debt to him, provided A's
debt to B was due at the time of the assignment,
but not otherwise. It is not necessary that B'a
debt to A should also be due, because B may
waive his right to defer payment until the due
date of his debt ; he may elect to proceed as if his
debt to A was due immediately, and so become
entitled to offset one debt against the other. But
if A's debt to B* was not due at the time of the
assignment there can be no set-off. In that ca.«e
the assignment transfers all of A's property (there
being no matured, enforceable claim against it in
the hands of. B) to the possession of the assignee,
to be used equally for the benefit of all A's credi-
tors. If B was allowed a set-off he would be to
all intents and purposes a preferred creditor, and
this the courts will not allow. But the moment
A's debt to B matures, B's right to claim a set-off
becomes perfect, and this right cannot be defeated
by a subsequent assignment.



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LEGAL DECISIONS.



655



Banks and Banking.



Right to Draw Against a Depositei.
Check.

A is a depositor in B bank in this State, and de-
posits a check for $3,000 on a Texas bank. B bank
enters the same on his pass-book, and A immedi-
ately drawB against this deposit to the amount of
$2,500. B bank refuses to pay the check, and A
claims be has a right to draw against any deposit
credited on his pugs- book, and says the law up-
holds him. Who Is right ?

Reply.— When a check is indorsed in blank, or
by any absolute and unrestrictive indorsement,
and deposited by the payee upon a general ac-
count in a bank in which such payee keeps an
account, and is with the payee's knowledge and
without dissent on his part credited in his pass-
book as so much cash, then the title to the check
vests in the bank, and the depositor is immedi-
ately entitled to draw against it. The transac-
tion amounts, in effect, to a sale of the check, and
if it is not paid the only recourse of the bank
against the depositor lies in his obligation as in-
dorsee If the depositor wishes to retain title to
his check he may do so by indorsing it " for col-
lection." If the bank does not wish to become
liable until the proceeds of the check are actually
in its hands, it may accomplish this end by the
simple device of crediting it as a check and not
as cash. But if they enter into any arrangement
by which the check becomes the property of the
bank, and the bank credits the depositor with an
equivalent amount of cash, the courts will not
relieve either of them of any inconvenience which
may arise out of the transaction. See 90 N. Y.,
5»,andWN.Y.,188.



Bank's Duty to Payee of Check.

On November 10th, 1897, C B bought merchan-
dise of us for which he paid cash, {. e., by check.
He continued buying up to November 29th, all of
bis checks being honored. On November 30th and
December 1st the checks of the latter date, which
he gave in payment of goods bought, were re-
turned by our bank, marked " N. G." by C B's
bank. We received, on December 1st, a C B check
from another party which was paid, though ours
of the same date was not. Has C B's bank the
right to discriminate which of the checks of De-
cember 1st should be paid, though instructed by
C B which to pay; or is the bank compelled to
honor the checks as presented, admitting suffi-
cient funds there ?

Reply.— The bank in which C B keeps a deposit
owes no duty, according to the Now York decis-
ions, to any holder of an ordinary uncertified
check bearing C B's signature. If it certifies one
of his checks it makes i'seif liable to pay the
amount to the bolder. If the bank fails to pay
one of C B's uncertified checks, having received
no orders from C B to that effect, this is a default
of which C B may justly complain, but it gives to
the holder of the check no cause of action against
the bank; he must seek his redress from C B di-
rect. In a recent case (124 N. Y., 824) the New
York Court of Appeals stated the principle thus :
**An ordinary uncertified check upon a general
bank account is neither a legal nor an equitable
assignment of any part of the sum standing to
the credit of the depositor, and confers no riarht
upon the payee which he can enforce against the
bank."



Liability of Collecting Bank.

Mr. John Smith, of Oshkosh, sends us a checKV
and attached to the check is a notice that it will
not be paid through A & B, but only through the
Bank of Oshkosh. We deposited this ch* ck in
due course in our bank, with the notice attached*
and our bank sent it to their Chicago correspond-
ent. The Chicago correspondent sent it to A & B
the Bank of Oshkosh refused payment, and A & R
had the check protested. It is assumed that our
bank forwarded to their correspondent in Chicago
the attached notice along with the check. Who
pays the protest fees? Our bank declares that
they cannot be dictated to as to whom their cor-
respondent shall be. and our claim is that thp ac-
ceptance <*f the notice that the check would not
be paid through A & B makes the notice a part of
the check, and that when they accept the check
they must agree to its provisions.

Reply.— We are of opinion that the bank can'
be compelled to pay these protest fees. The check,
and the notice attached to it are to be construed
as one document in ascertaining the rights of any
person or corporation having knowledge of the
notice. So construed the check becomes an order
on the drawee bank, not for payment generally,
but for payment through any agency except that
of A & B. The collecting bank made present ment
for payment in a way to invite refusal, and the
owner of the paper should not be burdened
with the resulting expense. The question is not
whether a bank will be dictated to, but whether,
having accepted paper for collection, it will at-
tempt to collect it according to its tenor.



Duty of a Bank as to Notes Payable There.

Please give your opinion regarding the enclosed
note. What we wish to know is whether the First
National Bank should have notified Mr. P. that
they had the note for collection, or did they do
right in paying the note, charging same to his
account (be having an account there) and saying
nothing about it? Mr. F. did not know that it
had been paid until he had received his vouchers
from tue bank.

Reply.— The note which our correspondent en-
closes was made payable at the First National
Bank of a town in this State, and was signed by
Mr. F. If it was presented to the bank upon its due
date, and Mr. F. had raonoy enough there upon
deposit to a general account to pay the note, then,
under the decisions of the courts of this State, it
was the duty of the bank to pay it, as it would
have been its duty to pay the depositor's check.
A depositor's signature to a note payable at the
First National Bank is a sufficient order upon,
that bank to pay the amount. See 46 N. Y., 88*
and 80 N. Y., 106. It was no part of the bank's
duty to notify Mr. F. before paying the note, any-
more than it would have been its duty to notify
him if one of his checks had been presented for
payment.



Failure of Bank— Offset op Deposit Against
Depositor's Note.

Suppose a business man carries a balance in his.
bank of $2,000 and the latter has discounted his
note for $5,000. If the bank suspends must the-
business man pay to the receiver $5,000 on the ma-
turity of his note, or may he apply his balance
and pay the difference only ? If the latter course
is legal, would the fact of the insolvent bank:



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656



THE COMMERCIAL YEAR BOOK.



having turned the note over to some other insti-
tution as security for indebtedness make that
course impossible for the maker of the note to
pursue ?

Reply.— If a bank fails, holding the note of a
depositor, the depositor need not pay his note and
take his chances among other creditors for a divi-
dend upon his deposit. He may apply his deposit,
as far as it will go, towards the payment of his
note, and only the balance against him, if any,
need be paid in cash. But if his note is negotiable,
and is not held by the bank at the time of the
failure, but has previously been transferred, then
tho maker cannot offset his note by his claim
against the insolvent bank. If the note has been
sold outright the holder can collect the whole of
it. If it has been transferred as collateral the
holder can collect enough upon It to pay the debt
secured by it, and the maker can use his deposit
as an offset against the remainder.



Insolvent National Bank -Assessment
Against Stockholders.

A stockholder in a bank puts up as collateral
on his note the stock of the bank. The stock is
sold at auction, but has never been presented for
transfer on the stock books of the bank. In case
of an assessment on the shareholders of an insol-
vent bank, should the assessment be made against



the party in whose name it originally stood on
the books, or should the assessment be made on
the oue who purchased the stock at the auction
sale?

Reply.— In such a case as our correspondent
puts, the assessment should be made against tbe
actual owner of the stock and not against the
person who merely appears upon the books as
owuer. In many cases tho stock books of thp
bank are taken as being conclusive as to owner-
ship of stock, and one who appears upon these
books as owner will not be allowed to dispute the
fact. But that is not the rule in any case in which
i the original owner has done all he could reason-
' ably be required to do in order to have the trans-
fer made. In the case under consideration tbe
owner of the Stock has authorized the officers of
the bank to sell his stock and transfer the title
upon their tooks, in a certain contingency. The
contingency has arisen and the stock has been
sold, the bank itself being a party to tbe trans-
action The owner of the stock has no access to
the books, and cannot make the transfer himself.
Ail he can do is to see that the bank has notice of
the change of ownership and authority to make
the transfer upon its books,— and this much be
has done. We may note, in this connection, that
a national bank is expressly forbidden by law to
** make any loan or discount on the security of
the shares of its own capital stock."



Bankruptcy.



Discharges Under the Bankrupt Act.

In 1892 A gave B notes falling due in one, two.
three, and four years; those notes are some time
past due. A has become insolvent. Can he take
advantage of the law, thereby preventing B from
ever collecting the notes should A become able to
pay them ?

Reply.— If a merchant takes advantage of the
new Bankrupt Act he may be released from lia-
bility for debts such as our correspondent de-
scribes which were incurred before the enactment
of the statute.



When the Bankruptcy Law Became
Effective.

Please let us know whether or not the new
Bankrupt Law is in operation, and the day it be-
came effective.

Reply.— The Bankruptcy Bill was approved and
became a law on July 1 of this year. The Act it-
self answers our correspondent's questions as fol-
lows : ** This Act shall go into full force and effect
upon its passage : Provided, however, that no pe-
tition for voluntary bankruptcy shall be filed
within one month of the passage thereof, and no
petition for involuntary bankruptcy shall be filed
within four months of the passage thereof.'*

Who May Take Advantage of the Bank-
rupt Act.

In 1804 A, B, C, and D, doing business in Boston
as a firm, accepted paper of a concern incorpo-
rated in Iowa and doinir business in Iowa and
Nebraska. The Iowa corporation failed, causing
the failure of the Boston firm. The Boston firm



made an assignment and settlement under Massa-
chusetts laws, all creditors joining except four
Western banks. They seized the property of tbe
Western corporation, but did not succeed in sat-
isfying their claim in full. They still bold ttx»
balance of tbe acceptances, and in one instance
have succeeded in getting judgment against an
individual member of the firm who was traveling
in the West. Can the living individuals formerly
composing the firm (one of them is dead) obtain
relief through the National Bankruptcy Act,
either as a firm or as individuals ? There are no
assets, they having been distributed by the as-
signee.

Reply.- The provision of the Bankrupt Act as
to the persons who may become hankrupts under
it is broad enough to include such a case as our
correspondent puts. It is this : ** Any person who
owes debts, except a corporation, shall be entitled
to the benefits of this Act as a voluntary bank-
rupt. 1 ' A partnership cannot take advantage of
the Act except during the continuation of tbe
partnership business, or after its dissolution and
before final settlement ; but a partner may be-
come a bankrupt either before or after the disso-
lution of the firm.



Attachments Under the Bankrupt Act.

Is it feasible to release or cancel recent attach-
ments by the Sheriff airainst the property of an
insolvent corporation, by the unsecured credit-
ors forcing such corporation into bankruptcy,
under the new National Bankruptcy Law ?

Reply.— As to attachments levied upon the
property of an insolvent the Bankrupt Act pro-
vides in section <5Tf that " all levies, judgments,
attachments, or other liens, obtained through
legal proceedings against a person who is in-



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LEGAL DECISIONS.



657



solvent, at any time within four months prior
to the filing of a petition in bankruptcy against
him, shall be deemed null and void in ease he is
adjudged a bankrupt, and the property affected
by the levy, judgment, attachment, or other
lien shall be deemed wholly discharged and re-
leased from the same, and shall pass to the
trustee as a part of the estate of the bank-
rupt, unless the Court shall, on due notice,
order that the right under such levy, judgment,
attachment, or other lien shall be preserved for
the benefit of the estate; and thereupon the same
may pass to and shall be preserved by the trustee
for the benefit of the estate as aforesaid."



Confession or Judgment Under the Bank-
ruptcy Act.



On July 80th a party confessed judgment to sev-
eral of his creditors, the sheriff taking nominal
possession under execution. What remedy have
his unsecured creditors under the new Bankrupt
Law to prevent the preferred creditors from get-
ting possession of his assets?

Reply.— Unpref erred creditors, in such a case
as our correspondent puts, may have the debtor
declared a bankrupt, and his property devoted
equitably to the payment of all of his debts. Sec-
tion 07 of the Bankruptcy Law provides that " all
levies, judgments, attachments, and other liens,
obtained through legal proceedings against a per-
son who is in«*olvent, at any time within four
months prior to the filing of a petition in bank-
ruptcy against him, shall be deemed null and void
in case he is adjudged a bankrupt, and the prop-
erty affected by the levy, judgment, attachment,
or other lien shall be deemed wholly discharged
and released from the same, and shall pass to the
trustee as a part of the estate of the bankrupt,"
etc. ; it is provided in the same section that in
certain cases, including that described by our
correspondent, ** a lien created by or obtained in
or pursuant to any suit or proceeding at law or in
equity, including an attachment upon mesne
process or a judgment by confession, which was
begun against a person within four months before
the filing of a petition in bankruptcy by or against
such person shall be dissolved by the adjudication
of such person to be a bankrupt."



Proof of Claims Under thk Bankrupt Law.

We hold a judgment against a man in St. Louis,
and have to-day received notice from a referee in
bankruptcy that the above-mentioned debtor was
adjudged a bankrupt upon his own petition, and
that there would be a meeting of creditors to

?rove their debts, to choose one trustee, and to
ransact such other business as may be lawfully
transacted. This meeting will be held in St. Louis
on the 29th, and we should like to know whether
we must be represented at the meeting to prove
our claim, or if the judgment is sufficient proof
for us to get our share, if there ever should be
any dividend.

Reply.— The judgment creditor of one who has
become a voluntary bankrupt under the new law
need not appear at the meetings of creditors,
either in person or by proxy, in order to preserve
bis rights. He must prove his claim, however, as



] is required of other creditors, by "a statement
under oath, in writing, signed by the creditor,

I setting forth the claim, the consideration there-
for, and whether any, and if so what, securities
are held' therefor, and whether any, and if so
what, payments have been made thereon, and that
the sum claimed is justly owing from the bank-
rupt to the creditor." This oath may be admin-
istered by any officer authorized to administer
oaths in proceedings before the courts of the
United States or under the laws of the State
where the oath is taken. After providing for
proof of claims in this manner, the statute fur-
ther provides that "claims which have been duly
proved shall be allowed upon receipt by or upon
presentation to the court, unless objection to
their allowance shall be made by parties in in-
terest, or their consideration be continued for
cause by the court upon its own motion."



Bankruptcy Act and Prior Judgments.



1. Please inform an old subscriber if, under the
National Bankruptcy Law, a debtor can now ob-
tain a release from judgments taken out against
him under the estate laws before the passage of
that law.

2. We have a small claim against a concern that
failed In 1894, and we took out judgments against
the partners in 1896. They have never paid a cent
to the general creditors, nut transferred all their
assets to secure some confidential debts. One of
the partners is now in business, using his wife's
name. One of them also admitted to a represent-
ative of our house that the statement they made
to the mercantile agency in January, 1894, was
not a true showing of their condition. We now
see their application for a discharge in bank-
ruptcy under the n«w law. We would- like to
know if a case of this kind has any rights or
privileges under the present National Bankruptcy
Law.

Reply.— 1. The lien of a valid judgment ob-
tained against a debtor more than four months



Online LibraryWilliam Usborne MooreThe Commercial year book → online text (page 111 of 125)