Goldthwaite v. National Bank , 67 Ala. 549 ( 1880 )

BRICKELL, O. J.

— It is very certain the demands now attempted to be set-off were not available in a court of law, because they were not subsisting at the commencement of the action. A demand, available as a set-off in a court of law, must be such as the defendant could, at the commencement of suit, have made the foundation of a separate, independent action against the plaintiff. A surety, therefore, paying the debt of the principal for which he was bound, after the commencement of suit against him on a debt due the principal, whatever may be the merits of his de'mand, has not a set-off available at law. — Cox v. Cooper, 3 Ala. 256; Franklin v. McGuire, 10 Ala. 557. Nor would the set-off have been available at law, if, at the time the action was commenced, it had been a subsisting demand. Sets-off have never been carried further than to put the assignee in the place of the payee or obligee, or of the party having the real, beneficial interest, though not expressly named as the payee or obligee. Unless there is an agreement, founded on a new consideration, made between the parties, a set-off by the maker of a promissory note, against an intermediate holder, has been uniformly disallowed. — Stocking v. Toulmin, 3 St. & Port. 35; Kennedy v. Manship, 1 Ala. 43; Pitts v. Shortridge, 7 Ala. 494; Sykes v. Lewis, 17 Ala. 261; McKenzie v. Hunt, 32 Ala. 494; Bostick v. Scruggs, 50 Ala. 10.

In the absence of all intervening equities, courts of equity put the same construction on statutes of set-off as do courts of law — they follow the law. The only intervening equity which can be supposed to withdraw the demands of appellant from the operation of the rule at law, is the insolvency of the Tallassee Manufacturing Company at the time of his indorsement of the bills of exchange for the accommodation of the company. Insolvency is recognized as a distinct equitable ground for the allowance of the set-off of demands which at law could not be made available.— T. C. & D. R. R. Co. v. Rhodes, 8 Ala. 206; Donelson v. Posey, 13 Ala. 752 ; Wray v. Furniss, 27 Ala. 471; Carroll v. Malone, 28 Ala. 521. But it is the insolvency of the original creditor against whom the set-off is preferred. No case in this court has, as yet, gone so far as to declare that the insolvency of an intermediate assignee, against whom a set-off is preferred, will justify the interference of a court of equity, and a departure from the fixed construction of the statute in courts of law.

Upon what principle can the court interfere, and vary the construction of the statute ? While it is true that the assignee of a paper, not negotiable, takes it subject to all the equities to which it was subject in the hands of the assignor, this is here understood to mean the equities existing between the original parties, and not equities which may arise as to other parties in the course of the transfer of the paper. Tison v. People’s Saving & Loan Association, 57 Ala. 323. It is these equities only the assignee risks ; and if the risk of others were devolved upon him, as is said in Blair v. Mathiott, 46 Penn. St. 265, it would put an end to the transmission of such choses in action altogether, a thing which the law has no policy in discouraging. — Downey v. Thoup, 63 Penn. St. 322. If equity should intervene, and embarrass the assignee with the settlement of all matters which may be the proper subjects of sets-off as between the maker or obligor and intermediate assignees or holders, it would involve him in litigation, and, it may be, loss, because of dealings between parties of which the paper can give him no notice, nor information of any fact to put him on inquiry. The paper, of itself, furnishes the assignee evidence that the original transaction was between the maker and payee; and there is good reason for subjecting him to all the equities existing between them. The transfer, or assignment, is a transaction between the successive assignors and assignees, to which the maker is not a privy or a party, and cannot excite inquiry whether there have been any transactions between him and either or all of the assignors. It would be a departure from the general principle, that the assignee of a chose in action risks only the equities existing between the original parties, and not equities which may exist against an assignor, and would embarrass their transfer, diminishing their value, if, in a court of equity, there was a departure from the settled construction of the statutes of set-off, subjecting the assignee to loss, because they may have existed against any or all the assignors.

The appellee became the holder'of the note on a valuable consideration, whether it was taken as a mere pledge for the payment of pre-existing debts, or upon a new consideration— the giving of further time for the payment of such debts — subject to no other equities than such as, before notice of the assignment, existed between the appellant and the original payees, not subject to such mere equities or rights as set-off, as may have arisen between the appellant and the Tallassee Manufacturing Company. If, before notice of the assignment, the appellant had paid the note to the company, or if, when the bills were indorsed, or at any time before notice of the assignment, there had been, upon a new consideration, an agreement between him and the company, that he should pay the bills in satisfaction of the note, it may be he would have an equity superior to that of the appellee. That is not the ease now presented.

Affirmed.

Stone, J., not sitting.