Allen v. Holleman

• Citation: 156 S.E. 446,159 S.C. 200
• Decision Date: 16 January 1931
• Docket Number: 13055.
• Parties: ALLEN v. HOLLEMAN et al.
• Court: United States State Supreme Court of South Carolina

156 S.E. 446

159 S.C. 200

ALLEN v. HOLLEMAN et al.

No. 13055.

Supreme Court of South Carolina

January 16, 1931

Appeal from Common Pleas Circuit Court of Anderson County; C. C Featherstone, Judge.

Suit by T. Allen, as administrator de bonis non cum testamento annexo of the estate of Lee G. Holleman, deceased, against Mrs Jennie C. Holleman and others. From the decree rendered plaintiff appeals.

Affirmed.

The decree of Circuit Judge Featherstone, directed to be reported, is as follows:

This matter came on for hearing before me under an agreed statement of facts, and involves the determination of the proper basis of settlement between the plaintiff as Administrator cum testamento annexo de bonis non of the estate of Lee G. Holleman, deceased, and People's Bank of Anderson. There is no occasion for the court to restate the facts, other than to say that the bank is a creditor of the estate and is indebted to the plaintiff as administrator on account of a deposit made by the plaintiff of funds collected from the assets of the estate, which deposit stands in the name of the plaintiff as administrator, and that both the estate and the bank are insolvent. All the other facts necessary for a proper determination of the question are set out in the agreed statement.

It is conceded by both parties that the bank cannot set off against the deposit its claim against the estate, and that interest on an unsecured interest-bearing claim is to be computed only to the time of the testate's death.

The sole question, therefore, presented for determination is that made by the plaintiff's contention that he has the right to set off the deposits pro tanto against the bank's distributive share of the estate. The bank contends that the proper settlement will be for it to pay to the plaintiff his distributive share of the bank's assets and for the plaintiff to pay to it its distributive share of the estate, and that the only right of set-off is the right to set off one distributive share against the other.

Both the estate and the bank being insolvent, the question is to be determined by those principles of equity relating to the administration of insolvent estates, and in the opinion of the court the governing principle here is that laid down by our Supreme Court in the case of Livingstain v. Columbia Banking & Trust Co., 77 S.C. 305, 57 S.E. 182, 184, 22 L. R. A. (N. S.) 442, 122 Am. St. Rep. 568, that "no rule of equity appeals more to the judicial conscience than that which requires the assets of an insolvent corporation to be distributed ratably among creditors," which principle was reaffirmed by the court in Citizens' Bank v Bradley, 136 S.C. 511, 134 S.E. 510, and which is laid down by statute as the principle to govern the administration both of insolvent banks (section 4286, Code 1922) and insolvent decedent's estates (section 5409, Id.). This principle, if here applicable, requires the plaintiff to pay to the bank its distributive share of the estate and the bank to pay to the plaintiff his distributive share of the bank's assets, and sustains the bank's contention. The plaintiff claims a departure from the principle in his favor, and it is therefore incumbent upon him to establish his right clearly. Bank v. Bradley, supra. This he seeks to do by saying that his rights are determined by the status existing at the time the bank became insolvent and that at that time he could have offset the deposit against the bank's distributive share of the estate. Could he? Prior to the bank's closing the plaintiff had brought action to marshal the assets of the estate, to require creditors to prove their claims to convert assets into money, and to wind up the estate, and creditors were restrained from proceeding except in the pending action. That action is still pending and the amount available for distribution among creditors of the estate has not yet been ascertained. At the time the bank closed, neither the plaintiff nor the bank knew what the bank's share of the estate was, nor do they yet know. The bank's only right at that time was to receive its distributive share when ascertained, and the plaintiff's only duty was to pay to the bank its share when ascertained and when the estate was ready for settlement. The plaintiff could not then have offset the deposit against the bank's share of the estate for he did not know what the share was, and it could not then have been ascertained, for the estate was not ready to be settled. Had the plaintiff presented his check for the full amount of the deposit, the bank would not have been justified in refusing payment on the ground that the plaintiff owed it its distributive share of the estate and that it could offset its share against the deposit, and had it attempted to do so, the court would not have permitted it. Had the plaintiff applied the whole or such part of the deposit as he thought represented the bank's share to the payment of the bank's claim and later events proved him wrong, he would have committed a devastavit and made himself personally liable. He did not make the application; the bank never received a dollar by way of payment; its claim was against the estate; it was indebted to the plaintiff. The right of a depositor to offset his deposit is reciprocal to the bank's right to charge the depositor's indebtedness to his deposit account. McColl v. Cottingham, 124 S.C. 380, 117 S.E. 415.

The present situation arises only because of the insolvency both of the estate and of the bank. The bank, as a creditor, receives only its pro rata share of the estate. Why should the estate receive more than its pro rata share of the assets of the bank? The court is concerned with protecting the creditors of the insolvents and in seeing that the assets of the insolvents are ratably distributed in accordance with the principles of equity. The court is confronted with a condition, not a theory. That condition is the insolvency of the estate and of the bank at the time for settlement of the estate. And that, I apprehend, is the time that determines. To illustrate, suppose the estate had been solvent at the time the bank closed and later became insolvent due to losses sustained in the course of administration. Could the bank have set off against the deposit its claim against the estate determined on the assets of the estate as of the time it was solvent? Certainly not. The bank would be required to share ratably with other creditors in the assets of the estate as of the time of settlement and would be required to share ratably with other creditors all losses sustained during the course of administration. To hold otherwise would be to give the bank a preference. If therefore the bank's only right is to share ratably with other creditors in the assets of the estate as of the time of settlement, how can it be successfully maintained that the plaintiff can now require it to make settlement with him as of the date it closed? It could not then have compelled the plaintiff to settle with it as of that date.

It appears to the court that the plaintiff's contention cannot be sustained, and that the proper basis of settlement is that contended for by the bank. This conclusion is supported by the rule laid down in 32 C.J. 885, that "in the case of two insolvent estates, each indebted to the other, a dividend to one should be set-off as against the dividend to the other," citing Rue v. Miller (C. C. A.) 124 F. 208, and Markell v. Ray, 75 Minn. 138, 77 N.W. 788. See also Akin v. Williamson (Ch.) 35 S.W. 569, a Tennessee Case squarely in point.

It is therefore ordered, adjudged, and decreed that the plaintiff as administrator c. t. a. d. b. n. of the estate of Lee G. Holleman, deceased, has adjudged claim against the People's Bank of Anderson for the sum of $24,645.51 being the full amount of his deposit account therein, and that the said People's Bank of Anderson forthwith pay to the plaintiff on the said claim such liquidating dividends as have heretofore been paid by the bank on similar claims against it, and that it thereafter pay to the plaintiff or his assignee such liquidating dividend or dividends on the said claim as may thereafter be paid by the said bank on similar claims against it.

It is further ordered, adjudged, and decreed that the said People's Bank of Anderson has an adjudged claim against the estate of Lee G. Holleman, deceased, for the sum of $77,305.38, and that the plaintiff, as the administrator of the said estate, pay to the said People's Bank of Anderson on the said claim such pro rata part of the assets of the said estate as may be paid by him on similar claims against the estate.

It is further ordered that the payments herein directed to be made are to be without any right of offset, save that the parties may for convenience offset one payment against the other.

It is further ordered that the plaintiff have leave to sell his adjudged claim against the said People's Bank of Anderson on said deposit account, credited with such liquidating dividends as may have been paid to him, at public outcry before the courthouse door at Anderson, S. C., in the manner and after the notice prescribed for judicial sales of personal property, if his is so advised.

It is further ordered, adjudged, and decreed that the parties hereto shall have the right on four days' notice to apply to me at my chambers, either within or without the Tenth judicial circuit, for such further order or orders as may be deemed necessary to effectually carry out the provisions hereof.

The receiver of People's Bank of Anderson has requested that the court determine the compensation to be paid to the receiver's attorneys for their services in this matter and on mature consideration, it is ordered that D. O. Browne,...