Bond v. Farmers & Merchants National Bank

MOORE, P. J. The question for decision is whether a bank as executor of an estate may cause a debtor’s obligation to [844]the estate to be reduced to judgment by the residuary legatee and assigned to the bank individually and thereafter be pleaded as a counterclaim to the action of the debtor against the bank individually for money which the bank as trustee had held for the debtor during the lifetime of the testator.

Plaintiff filed his action for declaratory relief alleging that he was the beneficiary of a trust established by his niece, defendant Doris Bond Sherman, December 31, 1935. The basic instrument provided that in the event that Seth Bond, the father of Doris, should predecease her the bank as trustee should at Seth’s demise pay to plaintiff the sum of $1,000. Seth Bond deceased June 16, 1940, whereupon defendant bank qualified as the executor of his will. Plaintiff had no beneficial interest in decedent’s estate but he was indebted thereto in the sum of $3,500 on three promissory notes executed to his brother in 1929 and which had been appraised at $1,000. Upon discovering the indebtedness of plaintiff to the Bond estate the bank insisted that the $1,000 due plaintiff be applied pro tanto to the extinction of his debt, leaving plaintiff still indebted to the estate in the sum of $2,500. Following the bank’s refusal to pay him the $1,000 plaintiff instituted this action August 4,1942, alleging the controversy, and as consequent relief demanded judgment for the $1,000.

By her answer filed September 9, 1942, Doris alleges the establishment of the trust, admits its provision of $1,000 for plaintiff and alleges that at the time the trust was created she was unaware of his debt to her father in the sum of $3,500. By its answer filed September 29, 1942, the bank alleges the subsisting indebtedness of plaintiff to the Bond estate and that as executor it has applied the $1,000 due plaintiff upon his $3,500 debt.

Subsequent to the filing of its answer the bank as such executor without order of court assigned the three promissory notes to Doris, who was the residuary legatee under the will of her father. In turn she caused suit to be instituted in Ohio, the domiciliary state of plaintiff, in order to obtain judgment upon the debt. Pursuant to cognovit clauses in the three notes, without personal service judgment was obtained against the debtor in the aggregate sum of $5,101.10. Subsequently Doris assigned the Ohio judgment to the bank individually and on November 19, 1942, the court below authorized the filing of a supplemental answer. The supple