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Timberlake, 74 Ala. 259, 264 (1883), a case between individuals,
for the general proposition that “When parties have cross-demands
against each other, the real indebtedness is the excess of one
debt over the other.” This rule of setoff is most often applied
in the bank/depositor context to hold that the bank is entitled,
when its loan to the depositor matures, to apply the amount in
the depositor’s bank account to the bank’s loan to the depositor.
In re Patterson, 967 F.2d 505 (11th Cir. 1992) (applying Alabama
law); Rainsville Bank v. Willingham, 485 So. 2d 319 (Ala. 1986);
Norris v. Commercial Natl. Bank, supra.
For the setoff to be valid, the cross-demands must be
mutual; that is, “due from one party to the other in the same
right.” In re Patterson, supra at 510; Atkinson v. Fed. Deposit
Ins. Corp., 635 F.2d 508, 510-511 (5th Cir. 1981); King v.
Porter, 160 So. 101, 104 (Ala. 1935). Whether the cross-demands
are mutual is an issue of Alabama local law, which requires that
the cross-demands are mature at the time of setoff and are
between parties of like capacity. In re Patterson, supra.
Mutuality of obligation was present between ATV and Mr.
Cutts at all relevant times. There is no evidence in the record
the loans had a definite maturity date or that loans to one party
would mature before loans to the other, which suggests the cross-
loans were payable in full at any time on demand of either ATV or
Mr. Cutts. See sec. 7872(f)(5); KTA-Tator, Inc. v. Commissioner,
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