Union National Bank of Oshkosh v. Hicks

Cassoday, J. Upon the death of a person his property, not exempt, at once becomes “ chargeable . . . with the payment of all his . . . debts,” whether he dies testate or intestate. Secs. 2270, 2277,2281, R. S. If he leaves a will, then, subject to the payment of .his debts, the rights of parties under it become vested immediately upon his death. Scott v. West, 63 Wis. 552; Newman v. Waterman, 63 Wis. 616. If he dies intestate, his personal property, not exempt, must be applied and distributed in the manner and in the order prescribed by statute. Sec. 3935, R. S. Out of such personal estate certain allowances are to be made to widow and children, and only the excess is to “ be applied to the payment of the debts of the deceased, with expenses of administration and funeral charges.” Ibid. The same is true, to [192] a certain extent at least, where the deceased dies testate. Ibid.; Baker v. Baker, 57 Wis. 382; Estate of Henry, 65 Wis. 551. Thus it appears that immediately upon the death of Eighme the rights of all his creditors at once became fixed, and the laws of distribution at the same time fastened down upon his entire estate. This being so, the equality of rights among the respective creditors at large is apparent. The estate being largely insolvent, it necessarily follows that such creditors could only receive a certain per cent, upon their respective claims. Thus it appears that at the time of the intestate’s death, S. M. Hay & Bro., who then held the note in question, were only entitled to a certain per cent, of the amount due thereon, and the claims against the bank were assets belonging to the estate and in which all creditors were interested. To say that such per cent, could be increased, after such death, by a transfer of the note to the bank -which was indebted to the estate, is in effect to say that the rights of all the creditors were not equal nor fixed by law on the death of the intestate. This would be-contrary to the well-established rule. Accordingly it has often been held, in effect, at common law and under statutes similar to ours, to be contrary to public policy to allow a person indebted to an insolvent estate to purchase a claim against such estate after the death of the intestate and make it available as a setoff in order to escape payment of. his own debt. Root v. Taylor, 20 Johns. 137; Irons v. Irons, 5 R. I. 264; Haugh v. Seabold, 15 Ind. 343; Cook v. Lovell, 11 Iowa, 81. So it has been hold to be inconsistent with the principles of sound policy to permit an executor to buy up claims against creditors of an estate for the purpose of obtaining a setoff in equity. Mead v. Merritt, 2 Paige, 405; Hill v. Tollman, 21 Wend. 674. The manifest reason for the rule against allowing such setoffs in case of insolvent estates, is that it contravenes the [193] policy of the statutes of distribution, which is equality of rights among general creditors. True, as claimed by counsel for the bank, when a creditor against whom the deceased had claims shall present a claim to the county court, the administrator must exhibit the claims of the deceased in offset to the claims of the creditor, and the court is then to ascertain and allow the balance against or in favor of the estate as the same shall be found; Sec. 3841, R. S.; McLaughlin v. Winner, 63 Wis. 127; Richardson v. Parker, 2 Swan, 529. This is on the theory that in equity, upon the death of the intestate, such mutual indebtedness as then existed is deemed to be adjusted, and the true balance is to be found by the court against or in favor of such estate as the case may be. As indicated in the Ehocle Island case cited, such right of setoff in case of insolvent estates “.grew up under an equitable construction of the statute relating to the distribution of such estates, following the policy of that statute,” and hence the general statute of setoff should not be extended by construction so as to contravene that policy. In furtherance of such equitable construction of the statutes of distribution, and the policy of equality among creditors of such estates, and the adjustment of mutual claims in favor of and against such estates as of the time of the intestate’s death, our statute further provides, in effect, that in actions brought by administrators demands existing against their intestates “ and belonging to the defendant at the time of their death, may be set off by the defendant in the same manner as if the action had been brought by and in the name of the deceased.” Sec. 4260, E. S. This statute goes to the rights of the parties, and it is not merely dependent upon a suit being brought by the administrator. Had S. M; Hay & Bro., at the time of the intestate’s death, been indebted to the estate, as the bank was, and then retained the note, and presented the same as a claim against the [194] estate, such indebtedness would have been a proper setoff, under the statutes and authorities cited. But, as observed, that furnishes no reason for holding that the claim of the estate against the bank was a proper setoff to the note purchased by the bank after the intestate’s death, and then presented against his estate. It is not to be considered on the theory of counterclaims inter partes, but rather as a claim against an estate in which many may be interested, and made up in part by the indebtedness of the bank to the intestate. The mere fact that the administrator improperly interposed the setoff in the county court did not estop or preclude him from withdrawing it after the case was appealed to the circuit court. It would have been unjust to other creditors, not parties to the litigation, for the circuit court to have allowed such setoff. 2. Independent of the payment of April 6,1878, the note would have been barred by the statute of limitations. It is claimed that S. M. Hay, one of the payees of the note, was an incompetent witness to prove such payment under sec. 4069, R. S. Had a proper objection to his competency to testify on that subject been taken in time, it might have presented a serious question, as the law now reads. But no such objection was taken. It was apparent that the bank derived its interest or title to the note through or under Mr. Hay. His name appeared upon the face of the note. He testified, without any objection, that the interest was paid at the time named and while he was the owner of the note personally; and then, without objection, testified “that such payment was made by the intestate himself. Then for the first time the respondent “ objected to the testimony as incompetent and irrelevant.” It was certainly relevant, and in fact competent. If there was any incompetency, it was in the witness to give the testimony and not in the testimony given. Besides, as the estate has not appealed, it may be doubtful whether that question is before us. [195] 3. Upon the whole record, we think it was error not to allow the bank costs against the estate. Such costs are clearly contemplated by the statutes. Sec. 2932, R. S.; Hei v. Heller, 53 Wis. 415; Ladd v. Anderson, 58 Wis. 391. The appeal from the county court was necessitated by the improper interposition of a so-called counterclaim on the part of the estate. After having appealed to the circuit court, and thus subjected the bank to a new trial upon which it obtained judgment for an increased amount, we think the bank was fairly entitled to costs, notwithstanding the withdrawal and disallowance of the counterclaim. The only proper controversy was as to the allowance or disallowance of the claim of the bank, and it succeeded. By the Oourt.— That part of the judgment of the circuit court appealed from is affirmed upon the merits, and reversed as to the costs, and the cause is remanded for further proceedings according to law.- No costs are allowed to either party in this court, except the appellant must pay the clerk’s fees.