Opinion
(June Term, 1830.)
1. Where the plaintiff and defendant have mutual judgments in different courts, and the defendant is insolvent, a set-off will be allowed in equity.
2. S.C., by his will, gave legacies to the children of J. C. The children died intestate, leaving their father the next of kin. The executor of S.C. having obtained a decree against J. C. for a mortgage debt, died, and appointed the plaintiffs his executors. J. C. died, also insolvent, leaving the debt unpaid; and the defendant having administered on the estates of the children of J. C., upon a petition in the county court obtained a decree for their legacies against the plaintiffs, who thereupon brought their bill to set off the decree in favor of their testator against that for the legacies, alleging that there were no debts due from the estates of the children of J. C., and that his estate was beneficially entitled to the whole of the legacies: Held, that the plaintiffs were entitled to the relief sought, which was nothing more than subjecting the funds of an insolvent cestui que trust, in the hands of his trustee, to the payment of his debts.
(393) From CHOWAN. The plaintiffs alleged that their testator was the executor of Stephen Cabarrus; that John Charrier was a legatee of the said Cabarrus, and made large purchases at a sale of his effects, to secure which he executed two bonds to their testator for $2,000 each; that Cabarrus, by his will, also gave legacies to John B. and Justina Charrier, children of John Charrier; that their testator, in his lifetime, procured a decree of foreclosure upon a mortgage given by John Charrier to secure the payment of the two bonds of $2,000, and a sale of the mortgaged premises was made, under an order of the court of equity; that, after deducting costs and discounts, there remained due of the original debt, after applying to it the net proceeds of the sale, the sum of $634.11; that John B. and Justina Charrier died intestate, without issue and unmarried, and not indebted, leaving their father, John Charrier, surviving them, who afterwards died intestate and insolvent; that the defendant had taken out letters of administration upon all their estates, and had recovered a judgment against the plaintiffs, upon a petition in the county court, for the sum of $946.37, the amount of the legacies given to his intestates, John B. and Justina Charrier, by Cabarrus, of which the plaintiffs paid all but a sum equal to that due them by the intestate, John Charrier. And the plaintiffs prayed that the debt due them by John Charrier might be set off against the residue of the judgment recovered against them by the defendant.
Hogg for plaintiffs.
Kinney for defendants.
The defendant admitted all the allegations of the plaintiff's bill, but denied their equity, averring that the intestates, John B. and Justina Charrier, owed him, the defendant, as did John Charrier, the father, to whom the defendant had also made advances after the death of his children.
The case was heard upon the bill and answer.
It appears to us (394) that the plaintiffs have a very plain equity. It is nothing more than subjecting the funds of an insolvent cestui que trust, in the hands of his trustee, to the payment of his debts. Nor does the case of Bishop v. Church, 3 Atk., 691, relied on in the argument for the defendant, touch the question. There the assignees of the bankrupt did not hold the estate in trust for the bankrupt, but for his creditors, of whom the plaintiff was one. It was not pretended that whatever money he was entitled to receive as his dividend of the bankrupt's estate was in jeopardy. It was a mere attempt to induce a court of equity to set off debts at law, where the law afforded complete relief. The very basis of equity was wanting, viz., the insolvency of his debtor. As the debt, which was due the bankrupt, was not going into the hands of the bankrupt, as here it is to John Charrier's administrator, but into the hands of the assignees, who held in trust, not for him, but for his creditors: whatever clear sum, therefore, belonged to John Charrier in the hands of the defendants, this Court will apply to the payment of the plaintiff's decree. An account must therefore be taken of the estates of the infants, and what debts are chargeable upon them, regardless of their dignity; for Charrier could only claim the surplus after all the debts are paid. As to the debts due from Charrier himself to the administrator, since he became administrator, I am inclined to think that he will be entitled to retain; for I look upon them as advances made upon the credit of the funds in his hands, rather than as debts. I feel more difficulty as to the debts which John Charrier owed to the administrator, contracted prior to that time. I doubt whether a creditor can call the fund out of the hands of the trustee without paying all the debts of the cestui que trust to the trustee. Whether this case presents a more favorable aspect for the plaintiff, I cannot now say. Let an account be taken of the sums due upon the two decrees; also of the estates of the intestates, and of their debts; of the debts due from John Charrier to the administrator (395) and of the advances by the administrator to him, distinguishing between those contracted or advanced before and after administration upon the estates of his children was committed to the defendant. If the parties wish, although I think it of no importance, the nature and dignity of the debts will be stated by the master.
It was contended in argument that if the subject-matter of this bill forms any ground of relief, it also afforded matter of defense to the administrator's suit, by way of petition; for that petitions are on the equity side of the Court quoad hoc, Holding v. Holding, 5 N.C. 1, was relied on. That case is law. There the matter set forth in the bill was properly a defense, suo vigore. It was in opposition to the cause of action, and should have been made wherever the action was brought. It was like payment in an action on a bond, or any other discharge of the obligation. The ground on which this application is made admits the demand. It does not resist the right of recovery. It only goes to extinguish the debt when recovered, by means of a separate and distinct demand. It is even stronger than the case of a set-off, for the demands are in different rights. But if it was no stronger, a person is not obliged to set off a debt. He may do so, or he may sue upon it. The case of setting off one recovery against another is common in courts of law. Here the plaintiffs were obliged to come into this Court to show the real creditor in the petition. And, besides, it is the case of judgments in different courts.
PER CURIAM. Decree accordingly.
Cited: Benzein v. Robinett, 17 N.C. 69; Elliott v. Pool, 59 N.C. 468; Eborn v. Waldo, ibid., 114; March v. Thomas, 63 N.C. 88; Ransom v. Thomas, 65 N.C. 630.
(396)