This was an action on the common counts and on an account stated brought in the United States District Court for Northern Florida by the receiver of First National Bank of St. Petersburg, Fla., against the People's Bank of Clearwater, Fla., a state bank. In addition to pleas of the general issue, the defendant pleaded specially that the St. Petersburg bank was indebted to the defendant in a sum in excess of plaintiff's claim, by virtue of the delivery to defendant of four drafts drawn by plaintiff on the Chase National Bank of New York to the defendant's order which had been dishonored.
The plaintiff replied that certain checks or drafts drawn on the St. Petersburg bank or other banks in St. Petersburg were deposited for collection with the Clearwater bank; were forwarded by the Clearwater bank to the St. Petersburg bank for collection; the St. Petersburg bank collected the items drawn on it by charging the accounts of its depositors and those on other local banks by settlement of balances with them; the four drafts in question were sent to the Clearwater bank as remittances of the amounts so collected, pursuant to the collection letters accompanying the checks; neither bank carried an account or deposit in the other, and for a long period each bank had been sending checks and drafts to the other for collection and remittance; and averred that, by reason of the facts stated, there was no mutuality in the debts or demands existing between the parties at the time the action was brought, and the defendant was not entitled to the set-off sought in its pleas. The District Court sustained a demurrer to the replication, and, as plaintiff refused to plead further, entered judgment for the defendant for the excess of its demand. The plaintiff appealed to the Circuit Court of Appeals, where the present respondent was substituted as appellee; the Clearwater bank having gone into liquidation. That court affirmed the judgment (63 F.(2d) 592), and, upon the plaintiff's petition, we granted certiorari.
The statute of Florida permits set-off of 'demands mutually existing * * * at the commencement of the action.' The question is whether the debts were mutual. The Circuit Court of Appeals answered in the affirmative, basing the decision on the section of the Florida statutes which provides: 'The holder of a negotiable instrument may sue thereon in his own name; and payment to him in due course discharges the instrument,' saying that since the Clearwater bank might maintain a suit in its own name for the amount due by the petitioner, the demand might be set off; and that it was a matter of no concern to the petitioner whether the Clearwater bank held the checks for collection or for value. The petitioner urges that this holding bases the right of set-off upon a rule of procedure and ignores the substantive requirement that the demands must be mutual in quality; and says that the debt of the St. Petersburg bank was not to the Clearwater bank, which was a mere collecting agent, but to the depositors. The conclusion is that, while the Clearwater bank individually owed the receiver of the St. Petersburg bank, the latter did not own the former, but at best the claim was made as an agent. If this be true, set-off may not be allowed, for a defendant sued upon his individual debt may not avail himself for this purpose of a demand against the plaintiff held in a fiduciary capacity. Central National Bank v. Connecticut Mutual Life Ins. Co., 104 U.S. 54, 26 L.Ed. 693; Libby v. Hopkins, 104 U.S. 303, 26 L.Ed. 769; Western Tie & Timber Co. v. Brown, 196 U.S. 502, 25 S.Ct. 339, 49 L.Ed. 571; United States v. Butterworth-Judson Corp., 267 U.S. 387, 394-395, 45 S.Ct. 338, 69 L.Ed. 672; Thomas v. Potter Title & Trust Co. (D.C.) 2 F.Supp. 12.