Lead Opinion
The appellant makes three claims of error: The first is that the Court of Appeals was Avithout authority to render final judgment against the plaintiffs below — particularly against Bridget McGovern. The second and third are basically the same. They challenge the decision of the Court of Appeals that the outlawed note can be set off against the distributive share of the heir, Bridget McGovern. That is the real question at issue. The McGovern note was executed on June 6, 1930. The payee, Patrick Connolly, died August 22, 1948. It is conceded that the 15-year statute of limitations had run against the note
The first statutes limiting the time for bringing personal actions, as distinguished from actions involving real estate, were enacted during the reign of James I of England. Laws of such general character, but in a variety of forms, have been enacted in all the states of the United States. The courts of England and of America have decided many cases construing those statutes and defining rights of litigants thereunder but surprisingly little harmony of decision has resulted. In 53 Corpus Juris Secundum, 900, is the following pertinent statement based on an early decision of a Maryland court:
“It has been remarked that on almost every question connected with the statute of limitations there has been a most embarrassing conflict of judicial opinion.”
A fair approximation of accord has been reached among our courts that basically such statutes are statutes of repose and not of presumption. The original English theory of presumption of payment or discharge of a debt long overdue is no longer generally relied upon to justify such statutes. As statutes of repose, they are considered as designed to secure the peace of society and to protect the individual from being prosecuted upon stale claims. Townsend v. Eichelberger,
The practical effect of the theory of “repose” is that the debtor has the option to assert the statute and defeat recovery (except in states where by statute the debt itself is extinguished by the running of the
In some states statutes of limitation specifically provide that the right of recovery as well as the right to bring the action is extinguished by the running of the statute. The statutes of Ohio do not so provide but it has long been the law of Ohio that the debtor may defeat recovery by asserting the running of the statute of limitations. This right of the debtor to defeat recovery by pleading the statute of limitations must be kept in mind when the courts assert, as is said in Taylor v. Thorn, Admr.,
When considering the effect of the running of the statutes of limitation, an important principle is frequently involved, which is usually stated as “the running of the statute of limitations does not bar defenses.” This cryptic statement of law must be analyzed and understood to avoid erroneous application of it. Such analysis and understanding are particularly important in the instant case Avhere a note against which the statute of limitations had run is pleaded as a “setoff.” Is such setoff a “defense” and, therefore, not barred by the running of the statute?
In 17 Ruling Case Law, 745, Section 112, we find the folloAving:
“The general rule is that statutes of limitation are not applicable to defenses. * * * It should be noted, however, that the rule under consideration applies only in the case of strict defenses, and has no application to and does not govern cases of setoff or counterclaim.” (Emphasis supplied.)
Then follows, in Section 113, ibid.:
A discussion of this rule as of a more recent date appears in 34 American Jurisprudence, 57, Section 63, as follows:
“The purpose of statutes of limitation is to bar actions and not to suppress or deny matters of defense, whether legal or equitable; and it is a general rule that such statutes are not applicable to defenses, biit only where affirmative relief is sought. Thus, so long as the courts will hear the plaintiff’s case, time will not bar the defense which might be urged thereto, and which grew out of the transaction connected with the plaintiff’s claim * * *. It frequently has been applied in actions on notes, in actions for the possession of property, and in cases where the statute of limitations was pleaded to the defense of fraud. It should be noted, however, that the rule under consideration applies only in the case of strict defenses, and, in the absence of statute, does not apply to cases of setoff or counterclaim.” (Emphasis supplied.)
And, at page 59, Section 65, ibid., it is stated:
“Inasmuch as the purpose of statutes of limitation to compel claimants to seek enforcement of their claims promptly would be frustrated if the possessor of a disputed claim may remain inactive for the statutory period or even longer and then attempt to enforce his demand in whole or part, it is the established rule, which has been applied in a great variety of cases, including, actions on bills and notes and for breach of warranty, that in the absence of express statute, a demand of a defendant, whether pleaded by way of setoff, counterclaim, or cross-bill, is regarded as an
53 Corpus Juris Secundum, 1090, Section 106, states the rule as follows:
“Accordingly, as a general rule, in the absence of a statute to the contrary, the statute of limitations may be pleaded to a setoff, and, likewise, the statute of limitations may be pleaded to a counterclaim, cross-action or cross-bill, or plea in reconvention.
“The general rule does not apply, however, if a plea denominated by defendant as a setoff, or denominated as a counterclaim * * * does not have the nature and characteristics of an independent suit or action, but is essentially a defensive plea, unless defensive matters are by statute subject to limitations.”
In the instant case the Court of Appeals appears to have adopted the argument of the administrator and to have considered it necessary to overrule the demurrer of the plaintiff to the setoff on the authority of In re Estate of Butler,
The portion of the Butler case so relied upon is the first clause of the fifth paragraph of the syllabus which reads: “Defenses are not barred by the statute of limitations, * * The decision in the Butler case was not predicated upon a factual situation similar to that here involved. In that case there were offsetting items in a running account for a period of over ten years. The Court of Appeals found that cross-demands had existed which would have prevented the running of the statute. This court merely affirmed the holding of the Court of Appeals without discus
The authorities cited in the opinion in the Butter case in connection with the statement which was carried into the syllabus are entirely consistent with the above discussion of the rule and especially is this true of 25 Ohio Jurisprudence, 573, Section 230, which was cited and which reads:
In accord with these statements is the second paragraph of the syllabus in the case of Kocsorak v. Cleveland Trust Co.,
“Where an obligation is not enforceable in an action at law, it cannot be set off against an opposing claim. ’ ’
Thus it clearly appears that in litigation not involving the rights of an heir or legatee, a note against which the statute of limitations has run is not a “defense” which can be pleaded and enforced as a setoff, if the maker chooses to rely upon the statute of limitations. Is the rule different if the note against which the statute of limitations has run was executed by an heir or legatee of a decedent?
In the instant case the statute had run on the note of McGovern. The payee of that note could not have brought an action to collect on the note, but, when the maker of the note brings an action against the administrator of the estate of the payee to compel distribution to her of a share of the estate of the payee, can the administrator claim the obligation of the outlawed note as a setoff?
Many years ago the English courts set a precedent by answering this question, “yes.” Some American courts follow the English precedents on the theory that the debt is not extinguished but remains as a
One of the early decisions which adopted the reasoning followed and generally applied ,in Ohio is Allen, Exr., v. Edwards (1883),
“We are left therefore to determine the inquiry by considering what is the proper construction of the statutes under which the Probate Court acted in refusing to direct this reduction, and ordering the legacy to be paid in full.”
The court then quoted the applicable statute which, it will be observed, was strikingly similar to Section 10509-186 of the General Code of Ohio. The Massachusetts statute read:
“A debt due to the estate of a deceased person from a legatee shall be set off against and deducted from the claim of such legatee, and the Probate Court shall hear and determined as to the validity and amount of any such debt, and may make all decrees and orders necessary or proper to carry-into effect such setoff or deduction.”
There, it was contended by the administrator that the only possible reason for the enactment of such a law was to allow the estate of the testator the benefit of any claim justly due from the legatee, but for which no right of action existed. This argument was rejected by the Supreme Judicial Court. The court said in part:
“The language of the. statute does not favor the contention of the appellant. The debt due is to be ‘set off against and deducted’ from the claim of the legatee. The phrase ‘set off’ is technical, and is ordinarily to be applied to claims which could be used in setoff in an action of contract. The Probate Court is also to determine the ‘validity’ of the debt. It would not be within the ordinary meaning of legal language
The Massachusetts court then discussed as follows the basis for the rule applied in England:
“It is further urged, that, as the English Court of Chancery has held, on general principles of equity, that an executor has a right to retain from a legacy a debt due to the testator from a legatee, even though the debt is barred by the statute of limitations, it must have been intended by the Legislature, in enacting the statute we are considering, that the Probate Court, acting on the general principles of equity, would allow the same right of retaining from a legacy the amount of debts barred by the statute of limitations. Apparently the law is held in England as contended by the appellant. Courtenay v. Williams, 3 Hare, 539, 15 L. J. (N. S.), Ch. 204. Coates v. Coates, 33 Beav., 249. In re Cordwell's Estate, L. R. 20 Eq., 644. There is but slight force in the argument, when we observe the difference which exists under our law in regard to legacies. In England, no action at law can be maintained for a legacy, and the courts of equity have always assumed the right to impose the terms on which the beneficiary shall receive it. Lord Kenyon, in refusing to entertain an action at law for a legacy, says: ‘If an action will lie for a legacy, no terms can be imposed on the party who is entitled to recover; and therefore when the legacy is given to a wife, the husband would recover at law, and no provision could be made for the wife or family; whereas a court of equity will take care to make some provision for the wife in such a case. But the whole of this admirable system, which has been founded in a court of equity, will fall to the ground, if a court of law can enforce
Another early and interesting decision was rendered by the Supreme Court of Maine in 1888 in the case of Holt v. Libby, 80 Me., 329,
“It is a general rule, in the settlement of legacies by an executor, that he may retain the legacy, the whole or a sufficient portion, in satisfaction of the legatee’s debt to the estate, if the testator does not indicate, either in the terms of the bequest or in other parts of the will, that it shall be otherwise. This is the rule both in law and equity.
“The English practice goes further, and allows the rule to prevail, on the idea of lien, as to debts which have become barred by the statute of limitations. The leading case maintaining the English rule seems to be Courtney v. Williams, 3 Hare, 539. Subsequent English cases follow in the same line. Rose v. Scales, 15 Beav., 189; Coates v. Coates, 33 Beav., 249; 1 Redf. Wills, 489, and cases cited in note. One or two of the American state courts may have practiced on the English rule.
“But a legacy was recoverable in England, in the day of the authorities cited, only in chancery. The
“This doctrine cannot be applicable in this state, and in most of the states, where a legacy is made by statute, if not by ancient practice, a legal claim. With us it is a distinct and independent legal claim. The estate is just as much of a debtor to the indebted legatee as the legatee is to the estate. Each has a legal right and remedy. And a statute-barred debt is no more recoverable by an estate than by any other creditor. To our minds, this is the better doctrine. Observati.on leads us to believe that a testator is more likely to intend to remit than to collect such debts, when nothing is declared of them by him in his will, especially debts against his children and relatives. In many instances such claims are covered by the dust of time and forgotten, though found by executors after the death of the testators. In many other instances the advances are intended as benefactions and gifts, conditioned upon some unforeseen circumstances arising to make it expedient to regard them as debts. ’ ’
In a more recent case, that of Luscher v. Security Trust Co. (1918),
“Having no statute in this state making any ex
In the case of Harrod v. Carder’s Admr., 3 C. C., 479, above referred to, which'was decided by a Circuit Court of Ohio in 1888, the court adopted reasoning quite similar to that set forth in- the cases above discussed and relied heavily upon early decisions of the courts of Pennsylvania. The question in the Earrod case, as stated by the court, was:
“The only question presented by the record is whether a debt due to an intestate from his legal representative may be retained out of, or set off against, the distributive share of the latter, where such debt was barred by the statute of limitations in the lifetime of the decedent.”
In discussing the early English authorities, the court said that they “seem to be based upon the idea that equity requires that one who would take the bounty of his ancestor ought in good conscience to pay what he morally owes his estate.”
The court then made the following significant statement: “But the weight of authority in the United States is opposed to this, and more on consonance, we think, with justice.”
“Public policy requires that debtors shall not be vexed concerning demands which have become stale; and that creditors who delay collection beyond the statutory period shall lose their remedy. Nor is there any reason apparent why the rule inter vivos should not apply against the estate of a deceased person.
“We hold, therefore, that the right of action upon the notes set out in the answer having been barred in the lifetime of defendant in error’s intestate, such notes are not available by way of setoff, the plea of which is in the nature of a cross-action.”
That decision of a Circuit Court of Ohio rendered some 65 years ago has never been overruled or modified by any decision of this court. On the other hand, it has been considered as stating the law of Ohio on the subject, and many other decisions of the Circuit Courts and Courts of Appeals of this state have recognized that decision as the law of Ohio. See Nasby Building Co. v. Walbridge Building Co.,
The reasoning of the courts of Maine and Massachusetts in the early decisions above discussed, of the Court of Appeals of Kentucky and of the Circuit Court of Ohio in the early case of Harrod v. Carder’s Admr., supra, impresses this court as sound and preferable to the theories under which some courts
It is urged in some eases and announced by some courts that it is inequitable and unfair to permit one heir to receive more than the other heirs by relieving such heir of payment of an outlawed debt due the decedent and, likewise, unfair and inequitable to permit a legatee to receive the full amount of a legacy without payment of an outlawed debt. We agree with those courts which refuse to indulge in such solicitude for the heirs or legatees when the decedent felt no such concern and took no steps either to collect the debt or to direct by will that it be deducted from a bequest. It is certainly logical to assume, as is done by many courts, that the decedent, whether he died testate or intestate, evidenced an intent not to enforce the debt when he failed for many years to make any effort to collect it or to provide in his will for its deduction from a legacy. When moré than 15 years have elapsed and the decedent is no longer present to be consulted, the presumption may well be indulged that the debt was paid or specifically forgiven. In any event, it does not seem incumbent upon this court to do now what the decedent purposely or carelessly failed to do. We see no reason for applying the statute of limitations against an heir or legatee in a different manner from that in which it would be applied with respect to other debtors.
If a decedent at death held two notes, each for $5,000 and each 20 years past due; one note having been executed by a son, daughter or other close relative of decedent and the other by a stranger to the family, why should those notes be affected differently by the statute of limitations Í Unquestionably the note
Two statutes are further to be considered. The one is Section 11321, General Code, which reads:
“When cross-demands have existed between persons under such circumstances that if one had brought an action against the other a counterclaim could have been set up, neither can be deprived of the benefit thereof by assignment by the other, or by his death. The two demands must be deemed compensated so far as they equal each other.”
Patrick Connolly was never indebted to McGovern. Her claim was against his estate and came into existence only at his death. At the time of his death the note was unenforceable. The statute had run against it more than three years previously. No valid cross-demands had existed as contemplated by Section 11321.
The other statute is Section 10509-186, General Code, which reads:
“When a beneficiary of an estate is indebted to such estate, the amount of the indebtedness if due, or the
This statute has an historical background. In the settling of many estates it has been urged that a bequest in a will in favor of a debtor of the testator evidenced an intent to forgive the debt and that consequently the debt could not be set off against the bequest. Likewise, the right of an administrator to collect a debt from an heir of an intestate decedent has been questioned. To clarify that situation, as we have shown above, the Legislature of Massachusetts passed an act somewhat similar to the Ohio statute prior to 1883. In the case of Allen v. Edwards, supra, the Massachusetts court construed that statute and held that the statute did not authorize offsetting of outlawed debts against an inheritance. We are constrained to hold likewise.
In construing Section 10509-186, General Code, the statute of limitations must be taken into account. It would not be logical to determine the law of Ohio to be that an outlawed note which is not a true ‘ ‘ defense ’ ’ cannot be pleaded as a setoff and then construe this section of the statutes as authorizing that very thing to be done. We, therefore, construe Section 10509-186 as authorizing the setoff or counterclaim only of debts which are valid — in the sense that they could be collected by court action. In view of this conclusion the administrator is not authorized by Section 10509-186 to deduct the indebtedness of the plaintiff from his share of the decedent’s estate. This statute serves a useful purpose in that it settles questions long disputed and it simplifies administration of estates but it does not authorize the action here undertaken by the administrator.
In view of the conclusion reached by us that the Court of Appeals erred in holding that the demurrer should have been overruled, it is not necessary to rule upon the first assignment of error, which is that the Court of Appeals was without' authority to render final judgment against Bridget McGovern. However, since the question was raised and briefed we will state our conclusion that the Court of Appeals was without authority to render final judgment. Upon reversal of the judgment of the Probate Court, the cause should have been remanded to the trial court so that McGovern could exercise the right accorded in Section 11362, General. Code, and, with consent of the trial court, file an answer to the setoff. Even if the Court of Appeals was right in holding that the demurrer should have been overruled and in holding the alleged setoff available, notwithstanding the statute of limitations, McGovern may have been able to plead facts which, if established, would nullify the setoff.
The judgment of the Court of Appeals is reversed and that of the Probate Court affirmed.
Judgment reversed.
Concurrence in Part
dissenting in part. Probably, most of the conflict of judicial opinion connected with the statute of limitations, which is mentioned in the majority opinion, is due either to differences in the applicable statutory provisions or a failure to consider and apply the applicable statutory provisions in accordance with their terms.
“In some states statutes of limitation specifically provide that the right of recovery as well as the right to bring the action is extinguished by the running of the statute. The statutes of Ohio do not so provide but it has long been the law of Ohio that the debtor may defeat recovery by asserting the running of the statute of limitations. This right of the debtor to defeat recovery by pleading the statute of limitations must be kept in mind when the courts assert, as is said in Taylor v. Thorn, Admr.,
That this is a correct statement of the law of Ohio, as it existed heretofore, is apparent on an examination of our statutes.
Section 11218, General Code, reads so far as pertinent :
“A civil action, unless a different limitation is prescribed by statute, can be commenced only within the period prescribed in this chapter. When interposed by proper plea by a party to an action mentioned in this chapter, lapse of time shall be a bar thereto as herein provided.”
In the same chapter, Section 11221 provides:
“An action upon a specialty or an agreement, contract or promise in writing shall be brought within fifteen years after the cause thereof accrued.”
In the subsequent chapter of the Code of Civil Procedure relating to pleading, Section 11309 provides so far as pertinent:
“The defendant may demur to the petition only when it appears on its face either:
‘ ‘ 9. That the action was not brought within the time limited for the commencement of such actions * * *”
“The demurrer shall specify the grounds of objection to the petition. Unless it does so, it shall be regarded as objecting only that the court has no jurisdiction of the subject of the action, or that the petition does not state facts which show a cause of action.”
Section 11311 provides:
“When, on the face of a petition, no ground of demurrer appears, the objection may be taken by answer. If the objection is not made in either way, the defendant shall be deemed to have waived it, except only that the court has no jurisdiction of the subject of the action and that the petition does not state facts which show a cause of action.” •
In accordance with Section 11311, General Code, and the prior similar statutory provisions upon which it is based, this court has always held that the defense of the statute of limitations is waived if not raised by demurrer or answer. See, for example, Lockwood v. Wildman, 13 Ohio, 430; Sturges v. Burton,
Therefore, it is apparent from the foregoing that, after the statutory period of limitations has elapsed, the statute of limitations operates merely as a bar against the commencement of a civil action and does not destroy the right of action. Thus, after the prescribed statutory period has elapsed, the right of action still exists although, if the statute of limitations is pleaded by demurrer or answer, that right of action cannot be the basis for a civil action.
The administrator bases his right of setoff on Section 10509-186, which is a part of the Probate Code and no part of the Code of Civil Procedure relating to civil actions.
“When a beneficiary of an estate is indebted to such estate, the amount of the indebtedness if due, or the present worth of the indebtedness, if not due, may be set off by the executor or administrator against any testate or intestate share of the estate to Avhicb such beneficiary is entitled.”
Notwithstanding the fact that the statutory period of limitations may have elapsed, there was still a right of action on behalf of the administrator in the instant case against Bridget McGovern on the indebtedness evidenced by the note which she and her husband executed and delivered to Patrick Connolly, even though that right of action might have been defeated in a civil action brought by the administrator against Bridget McGovern, if the statute of limitations had been properly pleaded by demurrer or answer. No statute can be referred to which would justify the conclusion that, after the statutory period of limitations for an action on that indebtedness, Bridget McGovern, to use the language of Section 1050.9-186, General Code, was no longer “indebted” thereon or that her “indebtedness” was not “due.”
That statutory section provides generally that the amount of such indebtedness “may be set off by the * * * administrator against any testate or intestate share of the estate to which such beneficiary is entitled.” There is no statutory provision that it may not he set off after the expiration of the statutory period within which a civil action thereon might have been commenced.
Dissenting Opinion
dissenting. In my judgment, the more equitable rule is that setoff of a debt due an ancestor should be allowed, especially against the distributive share of his heir at law who owes the debt. See annotation in 164 A. L. R., 717 et seq.