Sellers v. . Bryan , 17 N.C. 358 ( 1833 )

The plaintiff sought to extinguish the judgment against him by applying its amount to the payment, pro tanto, of his unsatisfied decree against Bryan. In support of this prayer, it is urged that as Bryan, at the time of the assignment, was insolvent, and as the assignment was made not in consideration of value, but as a mere security for preexisting debts, the assignees have succeeded to no other rights than those which belong to Bryan, and the judgment is yet (359) subject to every equity which attached to the claim while it was his property. Admitting this argument to be correct, it becomes necessary to inquire whether the plaintiff had a right to set off the decree against this claim while it remained the property of Bryan. The Court is of opinion that by the law of a court of equity the plaintiff was not entitled to the set-off against Bryan. It is true that before any statute was ever enacted for setting off mutual debts chancellors had adopted the rue of natural justice which obtained in the civil law, under the title of "compensation," and according to which, where the same person was both the creditor and the debtor of another person, the mutual obligations to the extent of their concurrence extinguished each other. But in the civil law "compensation" did not obtain except between debtors and creditors in their own right, and a debt in one right was not permitted to be set off against a debt in another right. See Whitaker v.Bush, Ambler, 407, citing Digest L. 16, sec. 3, L. 23, and L. 16 Tit. 2 L. 14. See, also, 1 Pothier on Obligations, 373. Nor since the adoption of the doctrine of "compensation," or set-off, have I been able to find any case of acknowledged authority in which, except under very peculiar circumstances, the rule of mutuality has been departed from. The general principle has been repeatedly and expressly asserted that in equity, as at law, there can be no set-off where either of the debts is in auter droit.Medlicott v. Bowes, 1 Ves., 207; Chapman v. Derby, 2 Ves., 117; Ex parte Oxenden, 1 Atks., 237; Bishop v. Church, 3 Atks., 691. Harvey v. Wood, 5 Mad., 409; Gale v. Luttrell, 1 Young Jarvis, 180. There are cases, indeed, in which the rule is departed from in appearance, but it is upheld in its spirit. Where a connection can be traced between the demands; where there is an agreement that one should liquidate the other, either expressly proved or implied from mutual credits; where the set-off has been prevented by fraud, as inEx parte Stephens, 11 Vesey, 24, explained in Ex parte Blagden, 19 Ves., 467, these are sometimes spoken of as instances of a more extended application of the doctrine of set-off in equity than is permitted at law; but if so, such application (360) prevails because the jurisdiction of a court of equity is not so trammeled with forms as that of a court of law. These are not cases of exception to the principle of mutuality, but of assertions of the principle, so made as to operate upon the truth of the transaction. It has been said (and how this may be is not material to the present question) that exceptions do exist in the peculiar jurisdiction which the English chancellors administer under the bankrupt laws. Lord Rosslyn has so decided in Ex parte Quinten, 3 Ves., 248, but this decision was disapproved by LordEldon in Ex parte Twogood, 11 Ves., 517, and in Ex parte Flint, 1 Swans., 33. The general law of a court of equity certainly is that the debts or credits which are the subjects of set-off must be mutual, and due to and from the same persons in the same capacity. Dale v. Cook, 4 Johns., ch. 17 Rep. 11. The debts here sought to be set off were not due to and between the same persons. The plaintiff owed the defendant Bryan, but the defendant did not owe the plaintiff. His debt was to the estate of Josiah Blackman and the estate of Esther Blackman, of which estates Sellers is but the legal curator or administrator. On the death of the plaintiff the interest in the decree will not pass to his representatives, but he confided to the keeping of another curator. It could not be pretended that the defendant might insist that his personal demand against the plaintiff should be applied as a set-off to the decree which the plaintiff obtained in his capacity of administrator. And there must be something very peculiar in the case which would nevertheless authorize the plaintiff to require that such a decree should be set off against such a demand.

The only circumstance relied upon to take this case out of the operation of the rule requiring mutuality as essential to the set-off is the insolvency of Bryan. I am unable to discover any satisfactory reason why this circumstance ought to produce such a result. Insolvency (361) may deprive a debtor of the right to assign or dispose of his property so as to defeat any equitable liens upon it, but insolvency does not of itself create a lien which did not before exist.

It has also been insisted that as the plaintiff's wife is entitled to a distributive share of the estates of Josiah and Esther Blackman, the plaintiff, to the extent of this share in the decree, should be regarded in equity as the creditor of the defendant Bryan, and thus there is the necessary mutuality. This position cannot be maintained. In the first place, the plaintiff's wife is not entitled to a specific part of this decree, but to a share in the net amount of personal assets to be divided among the next of kin. This cannot be ascertained without an account between the administrator and next of kin, and that account cannot be taken in a suit to which the next of kin are not parties. Nor do I apprehend the court will restrain a creditor from the collection of his debt "until all these accounts are cleared, in order to see what rights of set-off there may be in the result." Ex parte Twogood, 11 Ves., 518. In the next place, the plaintiff's wife is not a party to this suit, as she necessarily must be in every case where her rights are to be asserted; and, finally, were she a party, there would be a fatal want of mutuality. The debt which Bryan owes her cannot be set off against a debt which her husband owed Bryan. This point, if any authority were needed to establish it, was expressly adjudged in Ex parte Blagden, 19 Ves., 465.

If these views be correct, it would seem necessarily to follow that the plaintiff cannot have the relief which he prays for unless he can set aside the assignment to Thomson and others as fraudulent and void. If it be fraudulent, then the judgment which was rendered against the plaintiff is to be regarded as a judgment obtained by Bryan, and the plaintiff's case may be brought within the operation of another principle of equity, or rather of the same principle somewhat modified in its application, which allows judgments to extinguish each other when the money to be paid by one of the parties can be reclaimed by him from the party who is to receive it. The principle has been asserted to a greater extent than that which is more generally termed set-off. (362) It was allowed in Mitchell v. Oldfield, 4 Term, 123, and in Simpsonv. Hart, 14 Johns., 62, where a judgment recovered by C. against A. and B. was set off by a judgment recovered by A. against C., because, notwithstanding C.'s judgment was joint, the whole liability of it might be pressed against A. only. This deviation from a rule of strict mutuality, which ordinarily forbids joint debts to be opposed to separate debts by way of set-off, instead of inducing either courts of equity or courts of law, in the exercise of their equitable jurisdiction over their suitors, to deviate yet further, and to disregard still more the analogies furnished by the legislative rules of set-off, has lately had the effect of rendering them more observant of such analogies. It becomes unnecessary to examine, however, whether, in the case supposed, this principle of natural equity can be invoked by the plaintiff. There is no pretense for treating the assignment as fraudulent unless it be bad faith for an insolvent debtor to prefer one set of creditors to another, where the law has not attached a specific lien on the property by the conveyance of which the preference is given. The assignees here were bona fide assignees, and by the assignment of Bryan took his claim, such as it then was, and do not require for their protection higher rights than those which followed on an honest transfer of the debt. When the judgment was rendered against which the plaintiff asks this relief it was in law the judgment of Fellows, and, in equity, the judgment of the assignees. The money to be collected upon it is not to be received by Bryan, but by his codefendants, and their property cannot be taken for the satisfaction of his debts. No case has been produced which will warrant a creditor in demanding that a judgment obtained against him by the assignee of his debtor shall be deducted out of his judgment against such debtor. Doe v. Darnton, 3 East, 149, is an authority in point that the judgment of the legal assignees of an insolvent debtor cannot be thus appropriated, and we see no (363) reason which calls for a different rule as to the judgment of assignees in fact.

It is the opinion of the Court that the plaintiff's bill must be dismissed, with costs.

PER CURIAM. Bill dismissed.

Cited: Cotton v. Evans, 21 N.C. 306; Elliott v. Pool, 59 N.C. 46;March v. Thomas, 63 N.C. 88; Sloan v. McDowell, 71 N.C. 386.