Sanford v. Pike

Mr. Justice McCamant delivered the opinion of the court. It clearly appears that the debt for the security of which the deed of trust was given was owing individually by the defendant W. E. Pike and that the defendant Hannah P. Pike consented that the note of .the partnership should be given for it. Both of said defendants executed the deed of trust covering their individual property, to secure this debt. It also appears that the defendant W. E. Pike was guardian of five minor heirs of the Kinnicutt Estate and was trustee of the funds of four of the heirs who were of age. Moneys which he held in this fiduciary capacity to the amount of $34,613.30 were deposited by him in the defendant bank. The fiduciary character of the funds was disclosed to the bank when the deposit was made; the deposit was carried to the credit of' “ W. E. Pike, Trustee of the Kinnicutt Estate of [619] Myrtle Point.” The disputed questions of fact have to do with the condition of this account, the defendants Pike contending that there is a large credit balance therein. Plaintiff contends that the doctrine of Dove v. Hayden, 5 Or. 501, Burrage v. Bonanza G. & Q. Min. Co., 12 Or. 169 (6 Pac. 766), and Le Clare v. Thibault, 41 Or. 601 (69 Pac. 552), forbids the assertion in this suit of the counterclaim alleged in the answer. The defendants Pike disclaim the intention to set up a counterclaim; they contend that their pleading avers want of consideration for the note sued on. 1, 2. The defendant W. E. Pike testified that he had settled with his cestuis que trustent from time to time and that on June 29,1915, when he testified, there was due to the beneficiaries only the sum of $3,220.32. There is no testimony as to the state of his account with his beneficiaries at the time when the note was given or when the deed of trust was executed, or when the answer was filed. "When the account was opened, all of the funds belonged to the beneficiaries and the presumption is that this continued to be the situation. If the defendant W. E. Pike is to treat these funds as his own, he must establish his right to them by unequivocal proof. The testimony fails to show that there was ever a segregation of the moneys on deposit, those belonging to W. E. Pike being separated from those belonging to the Kinnicutt heirs. 3. Waiving the questions of procedure pressed upon our attention by appellants, we think the facts above recited are fatal to the defense set up in the answer. A lawful setoff must be based on a claim held by defendant in the same right as that in which he is sued: Dray v. Bloch, 29 Or. 347, 353 (45 Pac. 772). The defendant W. E. Pike cannot pay his debt with the money of his wards. “The court will not allow, much less [620] aid, a guardian to apply the estate of his wards to the discharge of his individual indebtedness”: Dobyns v. Rawley, 76 Va. 537, 542; Gansner v. Franks, 75 Mo. 64; Gallagher v. David Stevenson Brewing Co., 13 Misc. 40 (34 N. Y. Supp. 94); Robertson v. Garshwiler, 81 Ind. 463, 464. If this defendant is to be treated as a trustee, the rule is the same; Lewis v. Pickering, 58 Neb. 63 (78 N. W. 368). This case closely resembles the instant case in its facts. 4. If the answer be construed as alleging an agreement between Pike and the bank that one claim was to be set off against the other, the allegations are not sustained by the proof. In the absence of consent by the cestuis que trustent such an agreement would be unlawful: Dobyns v. Rawley, 76 Va. 537, 542; Jeffray v. Towar, 63 N. J. Eq. 530, 540 (53 Atl. 182). 5. The deed of trust was given to secure a partnership note. If the claim against the defendant bank be treated as the sole property of W. E. Pike, he is not entitled to allege it by way of setoff or recoupment in this suit. A claim in favor of one partner cannot be set off against a partnership obligation: 25 Am. & Eng. Enc. Law (2 ed.), 578, 579; Rogers v. McMillen, 6 Colo. App. 14 (39 Pac. 891); Olive v. Morgan, 8 Tex. Civ. App. 654, 656 (28 S. W. 572); Pope Mfg. Co. v. Charleston Cycle Co., 55 S. C. 528 (33 S. E. 787); in the absence of an agreement by all parties that the setoff shall be available; McDonald v. Mackenzie, 24 Or. 573, 575 (14 Pac. 866). See, also, Schade v. Muller, 75 Or. 225, 230 (146 Pac. 144). It follows that the decree of the lower court is reversed and a decree will be entered here foreclosing the deed of trust. Plaintiff will have judgment for the face of the note and taxes paid as alleged in the twelfth paragraph of the complaint, with interest. The de [621] fendants Pike will have credit for the amount of the Hammitte note and also for the payments admitted in paragraphs 11 and 12 of the complaint. (171 Pac. 394.) Mr. A. 8. Hammond and Mr. E. D. Sperry, for the petition. Mr. Oliver P. Coshow, contra. The parties stipulated for an attorneys’ fee of $750 in case plaintiff should recover the full amount demanded. This stipulation will be followed. The decree will be without prejudice to the claim of W. E. Pike, Trustee, against the defendant bank, and the claim of W. B. Hammitte against W. E. Pike and P. L. Phelan. Reversed and Decree Rendered. Rehearing Denied. Mr. Justice Moore, Mr. Justice Burnett and Mr. Justice Benson concur.