Kolovsky, Bischoff and Botter. The opinion of the court was delivered by Kolovsky, P.J.A.D.
[142 NJSuper Page 306] On October 18, 1971 Scientific Restaurant Management Corp. (Scientific), a corporation which admittedly was then insolvent, assigned and transferred all its property to plaintiff in trust for the benefit of
its creditors. See N.J.S.A. 2A:19-1 et seq. At the same time D.P.D. Inc., Scientific's wholly owned subsidiary, also executed an assignment for the benefit of its creditors.
The controlling facts are undisputed. By the terms of a loan and guaranty agreement signed by D.P.D. Inc. and Scientific, respectively, the making of the assignments for the benefit of creditors matured the obligations of each to pay defendant at least $21,590.10.
Scientific had been a depositor in defendant bank (bank). The credit balance in its bank account when the assignment was executed was $21,590.10. On learning of the assignments the bank, on October 18, 1971, debited Scientific's bank deposit account with $21,590.10 and applied that amount as a payment on account of the debt owed it.
In this action, instituted by Scientific's assignee for the benefit of creditors, he alleged that the bank had no right to apply the credit balance in Scientific's bank account in satisfaction of the debt owed it by Scientific and that its doing so constituted an unlawful preference. The trial court agreed and entered judgment in the assignee's favor for $21,590.10 plus interest. Defendant appeals. We reverse.
Plaintiff does not dispute that:
It is a general rule that a bank has the right to set off or apply the deposit of its debtor to the payment of his matured debts, upon the theory that as the depositor is indebted to the bank upon a demand which is due, the funds in its possession may properly and justly be applied in payment of such debt, and it has therefore a right to retain such funds until payment is actually made. [ Marmon, &c., Co. v. The Peoples, &c., of Elizabeth , 106 N.J. Eq. 170, 173 (E. & A. 1930)]
See also McFarland v. Withers , 122 N.J. Eq. 167, 171-2 (Ch. 1937).
Further, plaintiff concedes that if, by reason of Scientific's insolvency, it had been adjudicated bankrupt or had been adjudicated insolvent under our state Corporation Act, the bank could have applied, as it did here, the corporate funds on deposit with it by way of set-off to the payment
of Scientific's indebtedness to the bank without violating the prohibitions against preferences contained in the federal Bankruptcy Law and the Corporation Act. Rogosin v. City Trust Co. of Passaic , 107 N.J. Eq. 79, 86 (Ch. 1930); Shields v. John Shields Const. Co. , 83 N.J. Eq. 21 (Ch. 1914); Receivers v. The Paterson Gas Light Co. , 23 N.J.L. 283 (Sup. Ct. 1852); Studley v. Boylston Nat. Bank , 229 U.S. 523, 33 S. Ct. 806, 57 L. Ed. 1313 (1913).*fn1
Plaintiff contends, however, that that right of set-off against trustees in bankruptcy and statutory receivers exists only because the Bankruptcy Act and the Corporation Act contain express provisions authorizing the set-off of mutual debts and credits of an insolvent corporation and its creditors. See 11 U.S.C.A. § 108(a) and N.J.S.A. 14A:14-8(1). Plaintiff argues that the absence of a similar statutory provision for set-off in the statutes applicable to assignments for the benefit of creditors establishes that no such right exists and ...