Court Opinion

ID: 3405934
Source: CourtListenerOpinion
Date Created: 2016-07-05 19:20:46.152035+00
Date Added: 2024-06-11T14:03:13.539951
License: Public Domain

I do not think that the principle announced in the case of Backer v. City Bank  Trust Co.,
supra, is applicable in this case. The two fundamental and controlling reasons underlying that ruling are (1) that an automatic offset occurs when the demands are strictly mutual, and (2) that the depositor could not, for the above reason, have recovered his deposit in his lifetime while he owed the bank an amount equal to or larger than his deposit. Neither one of these factors is present in this case. A surviving partner takes title to certain assets of the partnership as trustee and not in his individual right. He can not legally apply such assets to the payment of his own debts or to those of his deceased partner. Before the death of either partner the partnership could have recovered the assets from the bank. After the death of one partner the surviving partner as such could have recovered them unless, of course, a court ordered some kind of offset upon equitable principles. It would not have been an automatic offset. Upon the death of one partner the title to certain assets passes to the surviving partner as trustee, and upon his death the title passes to his personal representative as a substitute trustee. The title to each partner's share does not pass to the partner or the estate of deceased partners until a division has been made under Code, § 75-208, or by an agreement by parties having the right to enter into it, or by authority of judicial decree. There may be other ways of division but none has been pursued in this case.
As I see the case, there was no recognized division of the partnership assets prior to the death of the surviving partner which put the title into him individually. It therefore follows that if the title to the deposit was not in him individually at his death the title necessarily had to go into his estate, and when it did the superior right of a year's support attached. I do not think that Code, § 20-1303, changes the contention here made. A claim against a partnership may be set off against a surviving partner in a suit brought in his own right by virtue of Code, § 75-208, but if this can be done as against creditors having a superior claim to his individual assets it can not be done without positive judicial decree. If the surviving partner had a deposit in a bank and a creditor of *Page 291 
his garnisheed the bank it does not seem that the bank could set off against the deposit a claim it had against a surviving partner on a partnership obligation. To permit such automatic set-offs as are involved here in any judgment will revolutionize the law of priorities in ways almost too numerous to mention. In this case there was a surplus over partnership debts to which the right of year's support attached. The bank, by paying out Maxwell's share, could not retroactively put title to Roberts' share in him as of a time before his death.
The majority opinion says "Roberts died before the receivers were paid the amount of H. R. Maxwell's share, but, in respect to the claim of Roberts' widow, Roberts' right to claim the balance of $372.30 as his own was the same as if Maxwell's share had been paid to the proper parties before Roberts died." This statement is correct so far as Roberts' right to claim his share of the fund is concerned, but it is not accurate, in my judgment, as stating the correct situation as to the title to the claim for Roberts' share when it was not divided before the death of Roberts. If the title to the claim to Roberts' share had passed to him individually before his death then of course the bank could have applied his deposit to its judgment. But the title did not go into Roberts individually before he died, and consequently it necessarily had to come into his estate before it could be in a place where the bank could even reach for it, so to speak. The bank's payment of Maxwell's share did not affect the title to the claim for Roberts' share. To hold otherwise would be to hold that a party by its act and design can "manipulate the law" and destroy the most favored of its priorities and rights, the right of a year's support. It will be a dangerous precedent to declare that parties themselves may set off demands which are not strictly mutual or that such a set-off is automatic. The meaning of Code, § 20-1303, seems to me to be that a court may decree a set-off where the circumstances at the beginning of a suit put the demands upon a mutual basis upon equitable principles. A court, in considering whether to grant such a set-off, must necessarily be bound by intervening priorities and liens. Equity follows the law. It does not destroy it. *Page 292