Court Opinion

ID: 8034638
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:19:22.088866+00
Date Added: 2024-06-11T16:37:05.263088
License: Public Domain

Rose, J.,
dissenting.
Defendant as administrator of the estate of Isaac S. Platt, deceased, had $3,680.65 on deposit in the Bank of Crab-Orchard when it was- closed- on account of insolvency December 10, 1928. Consequently he could not withdraw the deposit and pay the proceeds to the persons entitled to- them. Instead of allowing the Platt estate to lose a portion of the money entrusted to him as administrator, he . remained loyal to his trust, preferring to risk an individual loss rather than allow it to fall upon the innocent persons for whom he acted as fiduciary. In his individual capacity, therefore, he paid the beneficiaries of -the trust the full amount of his obligations to them as administrator and took in his own name an assignment of their deposit. The county court adjudicated this assignment to be a valid- transaction. The insolvent bank then owed defendant as- an individual the remainder of the deposit belonging to the Platt estate, after paying a dividend of $736.13. Though the insolvent bank is still owing defendant $2,944.52 on his unpaid deposit, it is demanding from him in this -action at law $3,059.25 on his promissory notes in suit, without allowing him credit, for -any part of its unpaid indebtedness to him. The effect of the decision is to deprive defendant of his unpaid deposit. *90to the extent of $2,944.52. Under the decision he loses the deposit the insolvent bank owes him and in addition is required to pay the insolvent bank the full amount of his notes, though it owes the Platt estate nothing and all interested parties are before the court.
In my judgment the answer to. the petition states, facts constituting an equitable set-off to the extent of $2,944.52— a defense established by undisputed evidence.
The opinion of the majority disallowsi the equitable set-off on the grounds that defendant in his individual right did not own the deposit of the Platt estate when plaintiff sued him at law on his notes; that mutuality of demands essential to a set-off is not shown; that an administrator, in absence of negligence, is not liable to the estate for the loss of funds deposited in a bank. These holdings are in harmony with general rules created by statute and with technical principles enforced in courts of law. They do not apply to the peculiar facts constituting the equitable set-off pleaded in the answer and established by the undisputed evidence.
The district court in allowing the equitable set-off pleaded by defendant exercised higher authority than legislative set-off or principles technically enforced in courts of law. To prevent- the injustice of such general laws in unusual instances the people in the exercise of sovereign power said in their Constitution:
“The district courts shall have both chancery and common law jurisdiction.” Const, art. V, sec. 9.
This equitable jurisdiction is beyond the power of the legislature to limit or control. Lacey v. Zeigler, 98 Neb. 380. The common law is likewise futile for that purpose. The constitutional provision is self-executing. Matteson v. Creighton University, 105 Neb. 219. A proper exercise of chancery jurisdiction in exceptional cases may require a court of equity to depart from the strict terms, of the statutory set-off and from the exacting rules enforced in courts of law.
Unliquidated claims for damages are not involved in the present controversy. There is no dispute over the exact amount each claimant owes the other. The amount of each *91claim is definitely shown. In the original contracts each relied on the solvency and integrity of the other. Defendant as administrator trusted plaintiff with a deposit. Plaintiff, as hanker, trusted defendant for the purposes of loans evidenced by his notes. In 'both personal and representative capacities, defendant was interested morally and financially in the deposit. Under the assignment approved by the county court defendant personally acquired the estate’s rights to the deposit. In equity insolvency does not stand on a better footing than solvency and integrity. While a court of equity follows the same general rules as a court of law in considering a plea for a set-off, and1 while there must generally be mutual debts to authorize a set-off, there are exceptions to these general rules. Exceptions were recognized by Chancellor Kent in Duncan v. Lyon, 3 Johns. Ch. (N. Y.) 351. Special circumstances may create an equity calling for the allowance of a set-off not grantable in a court of law. Hughes v. Trahern, 64 Ill. 48, wherein the court said:
“At law there can be no set-off except as to mutual debts between parties to the record, but the doctrine is that a court of equity, in cases of insolvency, will regard the real parties in interest, and allow a set-off of demands in reality mutual, although prosecuted in the name of others nominally interested.”
To give effect to a clear equity and to prevent irremiedial injustice a set-off may be allowed, though the debts are not mutual. Vulliamy v. Noble, 3 Mer. Eng. Ch. 592, 620; Brewer v. Norcross, 17 N. J. Eq. 219.
The equity of defendant herein is perfectly clear. He did not lose his equitable right to a set-off by the insolvency of plaintiff or by his consequent failure, before he was sued, -to acquire as an individual his deposit as administrator. His set-off was pleaded in his answer and plaintiff had timely notice of it. In my view of the facts and of the rules of equity and justice, the district court properly allowed the set-off.