
    John A. Clute, Respondent, v. John W. Warner, as Receiver of The First National Bank of Watkins, Appellant.
    Bet-off— right to offset a deposit in a bank against a note of the depositor held by the bank— not affected by the fact that the bank has pledged the note as collateral to its own obligation to another party.
    
    Where the payee of a note, made for his benefit by accommodation makers, procures the same to be discounted by a bank, which subsequently pledges the note to another bank as collateral to a note of its own, and the pledgor becomes insolvent before the maturity of the accommodation paper so pledged, the payee may elect to have the note, upon which he is liable, become due at once, and may offset the claim of the bank upon that note (then returned to and held by the receiver of the bank) against the amount of the deposit which the payee had in the bank at the time when the receiver was appointed.
    Appeal by the defendant, John W. Warner, as receiver of the First National Bank of Watkins, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Schuyler on the 22d day of July, 1895, upon the decision of the court rendered after a trial at the Schuyler Special Term.
    
      S. D. Halliday, for the appellant.
    
      C. M. Woodward and John B. Stanchfield, for the respondent.
   Herrick, J.:

On the 18th day of January, 1894, W. W. Clute and Smith G. Clute, as accommodation makers, and for his accommodation, gave the plaintiff their note for the sum of $2,500, payable in ninety days after date, to the First National Bank of Watkins, N. Y.

On that day the plaintiff procured said note to be discounted by the First National Bank of Watkins, N. Y., and the avails thereof were placed to his credit. On the 31st day of January, 1894, the First National Bank of Watkins, N. Y., made its note for $5,000, dated that day, payable to the Third National Bank of New York, two months after date, and as collateral security for the payment of such note it gave to the Third National Bank of New York the note of plaintiff, above referred to, together with a number of others.

The First National Bank of Watkins became insolvent and the defendant was appointed receiver thereof February 24, 1894. At the time of such insolvency there was deposited in said bank to the credit of plaintiff the sum of §1,381.16.

Before the commencement of this action the note given by the First National Bank of Watkins to the Third National Bank of New York had been paid, and the plaintiff’s note had been returned to the receiver. The plaintiff seeks to have the deposit in the bank to his credit set off against the amount remaining due upon the note. Without further statement of facts I think the judgment herein should be affirmed.

By transferring the note in question to the Third National Bank of New York as collateral to its own note, the Watkins National Bank did not cease to be the owner thereof, and was such owner at the time it became insolvent and the receiver was appointed. ( Wheeler v. Newbould, 16 N. Y. 392; Farwell v. Importers’ etc., National Bank, 90 id. 483; Smith v. Savin, 141 id. 315.)

The plaintiff ivas primarily liable to the Watkins National Bank upon the note made by W. W. Clute and Smith G. Clute for his benefit.

While that note was not due when the bank became insolvent, and its collection could not be enforced before maturity, the plaintiff had the right to waive the additional time and elect to have it become due at that time, and to make payment thereof by applying the amount of his money in the possession of the bank to such payment. There is under such circumstances an equitable right to offset one claim against the other. (Fera v. Wickham, 135 N. Y. 223; Hughitt v. Hayes, 136 id. 163 Scott v. Armstrong, 146 U. S. 499.)

The cases last referred to contain a very thorough discussion of the principles involved, and .under circumstances similar to those in this case, together with a review of previous cases, and it seems to me that it is useless to attempt a restatement here.

Judgment should be affirmed, with costs.

All concurred.

Judgment affirmed, with costs.  