Opinion
Opinion filed December 4, 1934.
Banks and Banking — Set-off of Claims, Held by Depositors in Capacity of Natural Guardian of His Children Against Bank Allowable on Depositors' Notes Held by Bank. In an equitable proceeding initiated by certain depositors against the Commissioner of Finance in charge of an insolvent bank for a set-off, depositors in their capacity as natural guardians of their children, are entitled to set-off against depositors' individual notes held by bank, the amount of deposits in the bank to the credit of their children (Mo. St. Ann. Sec. 375, p. 241).
Appeal from Circuit Court of Cape Girardeau County. — Hon. Frank Kelly, Judge.
REVERSED AND REMANDED ( with directions).
Dearmont, Spradling Dalton for appellant.
(1) The Banking Act is a separate code, scheme, or plan, independent and complete or sufficient within itself, as to the liquidation of insolvent banks. Miller v. Farmers Exchange Bank of Gallatin, 67 S.W.2d 528, 532, 533. (2) The liquidation of an insolvent bank is, under the statutes, subject to the supervision of the circuit court. The circuit court determines priorities and the payment of claims. Secs. 5330, 5336, 5339, R.S. Mo. 1929. (3) The question of priorities and settlement of claims in the liquidation of insolvent banks is naturally an informal matter and the power to determine priorities includes priorities of an equitable nature. State ex rel. Gentry v. Page Bank of St. Louis County (Mo.), 14 S.W.2d 597, 600; Evans v. Peoples Bank (Mo. App.), 6 S.W.2d 655, 657, 658. (4) Appellants as natural guardians and curators of their infant children had absolute control over their estates, when derived from them, and without the necessity of bond, court order, or accounting. Secs. 375, 1362, 1364, R.S. Mo. 1929; Brandon v. Carter, 119 Mo. 572, 583. (5) Appellants having absolute control of the property of their infant children and without the necessity of appointment, bond, court order or accounting, where the property was derived from them, are the real parties in interest, and, therefore, are entitled to set-off the deposits made by them in the names of their children and against their personal debts. Sec. 698, R.S. Mo. 1929; 57 C.J. 450, sec. 99; Rubey v. Watson, 22 Mo. App. 428, 433; Advance Exchange Bank v. Baldwin, 224 Mo. App. 616, 31 S.W.2d 96; Bank v. Ragsdale, 158 Mo. 668, 678, 679. (6) Appellants are entitled to set-off the deposits made by them in the names of their infant children and against their own personal notes, both at law and in equity. (a) "If any two or more persons mutually indebted in any manner whatsoever, and one of them commences an action against the other, one debt may be set-off against the other, although such debts are of a different nature. Sec. 837, R.S. Mo. 1929. (b) The doctrine of set-off, whether legal or equitable, is essentially a doctrine of equity. The jurisdiction of equity to allow an equitable set-off is not based upon the statutes of set-off but exists independently of them. Strong v. Gordon, 203 Mo. App. 470, 221 S.W. 770, 771; Ford v. Stevens Motor Car Co., 209 Mo. App. 144, 232 S.W. 222, 223, 224; 57 C.J. 361, sec. 4. (7) The mere fact that money is deposited in a bank in the name of a particular individual does not necessarily mean that such individual is the real party in interest and entitled to sue for and recover such funds. Williams v. Whitlock, 14 Mo. 552, 560; Johnson v. City of Aberdeen (Wash.), 266 Pac-707. (8) The proceedings for the liquidation of an insolvent bank is informal. The court has power to determine priorities of an equitable nature and pass on credits and claims. Appellants placed their own money in this bank in the names of their infant children. Appellants are the real parties in interest and should be entitled to the set-off requested. There should be no distinction between appellant's right to the deposits as natural guardians of their infant children and their right to it as their own money. In either case they have the entire beneficial interest and absolute control of its disposition. There is no trust or fiduciary relationship between a natural guardian and his ward. Nickerson v. Gilliam, 29 Mo. 456; Barnes v. McMullen, 78 Mo. 260, 271; Gemmel v. Heuben, 71 Mo. App. 291, 297; Field v. Oliver, 43 Mo. 200, 202-203; Strong v. Gordon, supra; 57 C.J. 450, sec. 99; 57 C.J. 446, sec. 96. (9) Where the proceeding is before the court, mere absence of mutuality does not operate to bar a set-off where to deny it will work an injustice. The mere fact that a court of law would not be authorized to allow a set-off, is not conclusive, where its allowance would promote substantial justice. 57 C.J. 446, sec. 96; Ford v. Stevens Motor Car Company, 209 Mo. App. 144, 232 S.W. 222, 223, 224; Barnes v. McMullens, supra; Strong v. Gordon, supra; Turner v. Mt. View Bank, 19 S.W.2d 19, 20.
John A. Ferguson and Sharp Baynes for respondent.
(1) The court properly disallowed the deposits of appellant's children as an off-set on appellant's notes. (a) The deposits in the Sturdivant Bank, being property acquired by the children other than by their own labor or service is the property of the children and not the parents. 46 C.J. 1314, sec. 138. (b) The deposit having been made in the name of the children by the parents constituted a sufficient delivery for a gift. 46 C.J. 1320, sec. 146. (c) There is no presumption against a valid gift. 46 C.J. 1322, sec. 152. (d) The gift having been fully executed by delivery is irrevocable by parents. 46 C.J. 1321, sec. 150. (e) An infant can make a deposit and withdraw same. 31 C.J. 1012, sec. 51. (f) Infant is capable of being donee of property and in the case of a gift to an infant no formal acceptance is necessary. 31 C.J. 1024, sec. 78. (g) Appellant cannot in a proceeding of this nature acquire the property of the children individually but only can proceed in the proper kind of proceedings as natural guardians. Rhoades v. McNulty, 52 Mo. App. 301; Oehmen v. Portman et al., 153 Mo. App. l.c. 245. (h) Appellants as natural guardians of their children do not have a right to off-set a deposit of their children on the notes of appellants. Sec. 375, R.S. Mo. 1929.
The Sturdivant Bank is a corporation organized and existing under the laws of the State of Missouri, and was doing a banking business at Cape Girardeau until November 7, 1932, when it was placed in the hands of the Commissioner of Finance for liquidation. This is an equitable proceeding, whereby plaintiffs seek to have certain deposits allowed as set-offs against the notes of the plaintiffs held by said bank. At the time the bank was put in charge of the finance commissioner the bank held the plaintiffs' notes in the aggregate amount of $2,165, and had to their credit on deposit in the bank $201.25. There was on deposit to the credit of Jane Dalton, Ruth Dalton, and James Poage Dalton, minor children of plaintiffs, $128.23. The plaintiffs seek to have these deposits allowed as set-offs against their notes held by the bank. The court gave judgment allowing as set-offs the deposits in the bank to the credit of the plaintiffs and disallowing as set-offs the deposits in the bank to the credit of their minor children. From this judgment plaintiffs appeal.
The deposits in the bank to the credit of the minor children were derived from their parents, the plaintiffs, who made the deposits as gifts to the children. Plaintiffs contend that as the natural guardians of their children they are entitled to have set off against their individual notes the deposits in the bank to the credit of the children. Defendant contends that for want of mutuality in the demands this may not be done.
It is a general rule of practically universal application at law that to warrant a set-off the demands must be mutual and subsisting between the same parties and must be due in the same capacity or right. Equity usually follows the law, and it is held as a general rule that in equity as at law the right of set-off is reciprocal, and only mutual claims and such as are in the same capacity or right can be set off, but this doctrine of mutuality is not permitted to work an injustice, for whenever it is necessary to effect a clear equity or to prevent an irremediable injustice, the set-off will be allowed in equity although the debts are not mutual and the set-off therefore one which a court of law would not be authorized to make. Thus, upon a showing of insolvency equity will set-off a debt without regard to strict mutuality or whether the debts are due in the same capacity or right, and so in cases of nonresidence or of joint or separate demands. In accordance with the general rule requiring mutuality of the debts or demands, a claim against the plaintiff in a representative capacity cannot, in the absence of any special equities, be set off in a suit brought in his individual capacity, and vice versa, but in case of the insolvency of the plaintiff a debt due the defendant in a representative capacity may be set off against an individual debt, and the same rule applies where plaintiff is a married woman against whom a personal judgment cannot be rendered. [57 C.J. 361, 364, 365, 444, 446, 451, and 453; Smith v. Perry, 197 Mo. 438, 95 S.W. 337; Barnes v. McMullins, 78 Mo. 260; Rubey v. Watson, 22 Mo. App. 428; Strong v. Gordon, 203 Mo. App. 470, 221 S.W. 770; Black v. Whitall, 9 N.J. Eq. 572; Farris McCurdy v. Houston, 78 Ala. 250; Falconer v. Rowe, 1 S.C. Eq. 156; March v. Thomas, 63 N.C. 87; Harwood v. Andrews, 71 Ga. 784; Renfroe v. Yarbrough, 144 Ala. 487; Scott v. Armstrong; 146 U.S. 499.]
It is well settled law in this State the Commissioner of Finance in taking over the assets of an insolvent bank for the purpose of liquidation takes the assets subject to all equities existing with respect thereto at the time the assets are taken over. Accordingly, it is held that where a right of set-off exists at the time of taking over the assets, the act of taking over the assets does not destroy or disturb such right. [Brown v. Stotts City Bank (Mo.), 38 S.W.2d 722; Advance Exchange Bank v. Baldwin (Mo. App.), 31 S.W.2d 96; Homer v. National Bank of Commerce, 140 Mo. 225, 41 S.W. 790; Field v. Oliver, 43 Mo. 200; Merchants' Ice Fuel Co. v. Holland Banking Co. (Mo. App.), 8 S.W.2d 1030; Aab v. French (Mo. App.), 279 S.W. 435; Smith v. Spengler, 83 Mo. 408; Huse v. Ames, 104 Mo. 91, 15 S.W. 965; Storts v. Mills, 93 Mo. App. 201.]
It follows, we think, that plaintiffs here are entitled in equity as the natural guardians of their minor children to have the fund deposited to the credit of such children in the bank allowed as a set-off against plaintiffs' notes held by the bank. We agree with the defendant that the deposit of the fund by the parents to the credit of the children in the bank as a gift to the children, vested the fund in the children as their own, and that the parents have no right or power to revoke the gift and take back the fund as their own; but this is not what the plaintiffs seek to do in this action. They do not seek to apply the fund as their own in payment of their individual indebtedness, but seek to conserve the fund for the use and benefit of the children. In other words, they seek to apply their individual indebtedness, to the extent of the set-off, as an asset in their hands as the natural guardians of the children, in lieu of a claim against an insolvent bank. The right and power of the plaintiffs to do this in equity as the natural guardians of the children can hardly be questioned, in the light of the statute. [Sec. 375, R.S. 1929, Mo. Stat. Ann., sec. 375, p. 241.] Their powers as natural guardians, respecting the management, control, investment, and disposal of the fund derived from them, to the end that the fund be conserved and applied for the use and benefit of the children, is well nigh absolute. As such guardians they act without the necessity of giving bond, or accounting to the probate court, and without being subject to the orders or directions of such court. They must, however, account to the children for the fund, and are personally liable to them for it, unless it is expended for their own proper use and benefit, or is lost under circumstances relieving them from liability. [28 C.J. 1145.]
The Commissioner recommends that the judgment of the circuit court be reversed and the cause remanded with directions to that court to enter judgment in accordance with the views herein expressed.
The foregoing opinion of SUTTON, C., is adopted as the opinion of the court.
The judgment of the circuit court is accordingly reversed and the cause remanded with directions as recommended by the Commissioner. Hostetter, P.J., and Becker and McCullen, JJ., concur.