Studley v. Boylston National Bank, 229 U.S. 523 (1913)

APPEAL FROM THE CIRCUIT COURT OF APPEALS

FOR THE FIRST CIRCUIT

Syllabus

Nothing in the Bankruptcy Act deprives a bank with which the insolvent is doing business of the rights of any other creditor taking money without reasonable cause to believe that a preference will result.

In this case, it having been found that the deposits and payments of notes were not made to enable the bank to secure a preference by the right of setoff, the bank had a right under its agreement to set off the deposits against the notes within four months of the bankruptcy. New York County Bank v. Massey, 192 U.S. 138.

Section 68a of the Bankruptcy Act did not create the right of setoff, but recognized its existence and provided a method for its enforcement even after bankruptcy.

The right of setoff is recognized by the Bankruptcy Act, and it cannot be taken away by construction because of possibility of its abuse; nor will the act be so construed by denying such right as to make banks hesitate to carry on business, and thus produce evils of serious consequence.

200 F. 249 affirmed.

The facts, which involve the right of a bank to accept in good faith payments from an insolvent, are stated in the opinion.