Davidson v. Alfaro , 23 N.Y. Sup. Ct. 353 ( 1878 )

Davis, P. J.:

On the decision of this case the learned court below pronounced the following opinion:

Barrett, J. A statutory set-off on bill filed is a matter of strict right. Where the demands on both sides are liquidated by judgment, the case is brought within the provision of the statute, and no other equity is needed. That is not this case, for when the present action was commenced the plaintiff’s demand, although matured, was not liquidated by judgment. There is a class of cases, however, not specially provided for in the statute, in which equity affords relief. Even before the statute, courts of chancery were accustomed to allow set-offs where there were mutual credits, or whore the demands were connected. (Story Equity Jur., §§ 1434, 1435.) This was upon the ground either of the presumed intention of the parties, or of what is called a natural equity. (Id.) In this State it is settled by a long line of decisions that, ichere the defendant is insolvent, cross-demands, although independent, will be enforced; where that element (insolvency) comes in, it is not necessary that the plaintiff’s demand should be liquidated by judgment. (Gay v. Gay, 10 Paige, 369; Barber v. Spencer, 11 id., 517; Knapp v. Burnham, 11 id., 333; Pignolet v. Geer, 19 Abb. Pr. R., 264.) Nor that the defendants’ demand should ever have matured. It is sufficient if the plaintiff’s demand be due. (Lindsay v. Jackson, 2 Paige, 581; Bradley v. Angel, 3 Comstock, 475; Smith v. Felton, 43 N. Y., 419; Smith v. Fox, 48 N. Y., 674.)

The contention that if the demand bo not reduced to judgment, it must at least be undisputed or liquidated by a note or similar obligation is inadmissible. In Knapp v. Burnham (ubi. supra), there was an open account as well as promissory notes, yet the chancellor observed “that the defendants were not without remedy if they could establish the fact that the complainant was insolvent, so that they could not recover these demands against him by an ordinary suit at law.” In Smith v. Felton, and Smith v. Fox, the demands sought to be set-off were moneys on deposit with bankers.

Again, to require an undisputed claim would practically put an end to the right of equitable set-off. Why should a defendant admit, when mere questioning would throw the plaintiff out of court. The line is really drawn at uncertain damages, such as rest in the sound discretion of a jury. (Duncan v. Lyon, 3 Johns. Ch., 358; Livingston v. Livingston, 4 id., 292; Hepburn v. Hoag, 6 Cow., 613.) The set-off against a judgment, of a demand which has not been thus liquidated, will only be allowed on bill filed. It will not be allowed on motion in a court either of law or equity. The reasons are obvious, and if this distinction is kept in mind, the cases will be found to be entirely harmonious. It is quite clear, both upon principle and authority, that when the Messrs. Coudert took the assignment of the verdict, the plaintiffs’ right of equitable set-off had already attached. The cross-demands grew out of the same contract, and Alfaro was insolvent. The Messrs. Coudert knew these facts, and they took, therefore, subject to the equity in question. Indeed, without such knowledge the result must have been the same on general principles applicable to the assignment of a non-negotiable chose in action. The assignment was not in consummation of an original agreement between attorneys and client, by which the former were to have the verdict in payment for their services. Unfortunately no such agreement was made. The case, therefore, is not brought within the principle of Zogbaum v. Parker (55 N. Y., 120), and like cases.

But quite independent of the assignment, there is the attorneys’1 lien for the costs. That at least can be protected. In Nicoll v. Nicoll (16 Wend., 446), the bill was filed to enforce a statutory set-off., and it was held that the lien could not be let in to obstruct the legal right. “ On motion,” said CoweN, J., “ the courts proceed without the statute, on bill filed or trial at law they are within it, and must obey it.” That doctrine has since been repeatedly followed; but we have seen that the present case is not within the statute of set-oils, and that the plaintiffs’ rights flow from the inherent- powers of a court of equity, “ to put a stop to proceedings injurious or inconscientious.” (Stimson v. Hart, 14 Johns R., 74.) And to do what equity and justice demand. (Smith v. Felton (ubi. supra). It was only where courts of equity were called upon to apply the statute of set-off, that the power to tect the attorney’s lien was denied. Where the appeal is to inherent equity, Dunkin v. Vanderbergh (1 Paige, 622), and Gridley v. Garrison (4 id., 653), asserting such power, are still applicable.

As assignee of the verdict, the attorneys’ equity is inferior to that of the plaintiffs; but their equitable lien for the costs is superior and paramount. The payment of the judgment is no bar to relief; such payment was involuntary ; it was compelled after suit brought. It is a familar principle that when a court of equity has acquired jurisdiction for one purpose it may retain it generally; also, that when the whole merits are before the court, it will proceed and do complete justice between the parties by disposing of all questions between them. “The jurisdiction having once rightfully attached,” says Stoev, “shall be made effectual for the purpose of complete relief.

It may be added that the injunction to restrain the enforcement of the judgment, pendente lite, was properly granted and its dissolution ex parte must have been inadvertent or without careful consideration. There must be judgment for the plaintiffs, declaring them entitled to an equitable set-off to the extent of tha verdict and interest, and decreeing payment to that amount; but under all the circumstances of the case, and as the plaintiffs succeed only m part, without costs.”

In all of the views of this opinion, necessary to the disposition

of the case, we concur. The mutual demands between the parties arose out of the same contract and the business done thereunder. There was an inherent equity in favor of the plaintiffs, entitling them to ask the interference of a court of equity ex debito justitia.-This material fact distinguished the case from Zogbaum v. Parker (55 N. Y., 120).

While this is true in respect of the damages recovered by the defendant in his judgment against the plaintiffs, it is not true as regards the costs. The distinction in respect of costs where a party seeks to enforce a statutory right of set-off in a court of equity, and where he relies upon inherent equities independent of the statute, is well shown by the learned court in the opinion above cited. In the latter case the court of equity is at liberty to protect the attorneys’ lien. The costs of the action awarded upon a recovery are no part of the judgment to which the purely equitable set-off attaches, and hence there seems to be no difficulty in upholding in this case the equitable lien of the attorneys for the costs recovered by the defendant.

The assignment of the judgment by the defendant to his attorneys was subject, for two reasons, to the equities of the plaintiffs: First. Because the attorneys had notice of the several facts upon which those equities depend, or out of which they spring; and, Second. Because the nature of the claim for which the verdict was recovered was such that the assignee was bound to take it subject to all existing equities.

Upon careful examination we see no reason to interfere with the judgment in any respect. Costs were in the discretion of the court below. Under the circumstances, the discretion seems to us to have been properly exercised.

The result is that the judgment should be affirmed on both appeals, without costs to either party as against the other.

Beady and Iygalls, JJ., concurred.

Judgment affirmed on both appeals, without costs to either party on the appeal.