Coates's Appeal , 7 Watts & Serg. 99 ( 1844 )

The opinion of 'the Court was delivered by

Kennedy, J.

In order to determine the matter in contest between the parties, little more seems to be necessary than to state their relative position to each other ,in regard to their mutual claims. Nathan Baker had a judgment, against Coates and Pennock for $300, in which Pennock was the surety merely of Coates, which bound the real estate .of Pennock., Coates had a judgment also against Pennock, of a subsequent date, which bound the same estate. On the 20th April 1839, Pennock anterior to those judgments being obtained against him, acquired his real estate from Coates by purchase, subject to certain incumbrances, which he bound himself to Coates to pay off within one month from that date;'among which incumbrances was a judgment in favour of Dorothy Vastine against Coates for $200, dated the 5lh July 1835. This judgment, however, Pennock never paid, and the plaintiff in it suffered the lien of it on the real estate purchased by Pennock of Coates to expire, by her neglect to continue it as directed by the Acts of Assembly passed in this behalf. ’ Other judgments, beside those of Baker and Coates, existed against Pennock, of a subsequent date, which also bound hjs real estate. Under this state of things Coates sued out an execution upon his judgment, by virtue whereof the real estate of Pennock was seized, condemned to sale, and sold afterwards under a writ of venditioni exponas by the sheriff, and the money arising therefrom brought by him into court, out of which the amount of the judgmént in favour of Baker was paid. Upon this being done, Pennock and his subsequent judgment creditors, claiming that he had thereby become the creditor of Coates to the amount paid out of the proceeds of the sale of his real estate in discharge of the Baker judgment, applied to the court below, into which the money was brought by the sheriff, to have the same amount deducted from the amount of the judgment which Coates had against him. This application was opposed by Coates; but the court, conceiving that Pennock and his subsequent judgment creditors were entitled to have it done, accordingly decreed it to be so. Coates, however, considering himself thereby aggrieved, appealed to this court for redress.

Having now stated the facts of the case, it is proper, in the first place, to observe that the application of Pennock and his subsequent judgment creditors to the court below could only be entertained and acted on in their favour upon equitable principles, for we have no statute authorizing it; and consequently, without a clear equity being shown on their part to have the deduction asked for allowed, they had no right thereto, and could not claim it. That an application for a set-off under such circumstances does not come within the provisions of our Defalcation Act, is very clear, but must, as was said by Lord Kenyon in Mitchell v. Oldfield, (4 T R. 123), depend on the general jurisdiction of the court over the suitors in it, and was an equitable part of their jurisdiction which had been frequently exercised. No doubt, as Lord Mansfield says, equity requires that cross demands should be made to compensate each other, by deducting the less sum from the greater, and the difference is the only sum which can be justly due. Green v. Farmer, (4 Burr. 2220). And courts of equity accordingly exercised jurisdiction for the purpose of effecting this end, in cases of cross demands, before any statutory provision was made authorizing the courts of common law to interpose their authority for a like purpose. Collins v. Collins, (2 Burr. 820). In Ramsey’s Appeal, (2 Watts 230), Mr Chief Justice Gibson, in delivering the opinion of the court, recognises the equitable jurisdiction of the courts of law to set-off cross judgments, by declaring that “judgments are set against each other, not by force of the statute, but by the inherent powers of the courts immemorially exercised, being almost the only equitable jurisdiction originally appertaining to them as courts of law. An equitable right of setting off judgments, therefore, is permitted only where it will infringe on no other right of equal grade; consequently, it is not to affect an equitable assignee for value.” Strictly speaking, however, Pennock is not a judgment creditor here of Coates, as he has no judgment against Coates, unless by having paid the Baker judgment as the surety merely of Coates he can claim to be subrogated to the right of the plaintiff therein, and thus be put on the same footing of a judgment creditor of Coates, so as to have the amount paid on the Baker judgment set-off against an equal amount of the judgment in favour of Coates against him.

But the right of subrogation rests on principles of pure equity, and ought never to be granted to a party where it appears that he is indebted, on any account, in an equal, less or greater amount, to the person against whom the judgment exists to which he asks to be substituted as plaintiff, without first satisfying such indebtedness; but more especially ought it not to be granted where it appears, as in this case, that Pennock is indebted to Coates for not having paid the Vastine judgment, which he bound himself to Coates to pay as part of the consideration upon which he originally obtained the very estate from Coates, from which the money in question has been raised by the sheriff’s sale. The effect of the decree of the court below, thérefore, was not only to prevent Coates from receiving so much of the purchase money which Pennock had bound himself to pay for him for the estate, from the sale of which by the sheriff the money in court was raised, but to deprive him of so much of his judgment against Pennock, for which he had let Pennock have other property or money; thus making the loss to Coates, as Pennock is insolvent, twice as much at least as it ought to be, under any rational or equitable view that can possibly be taken of the case. It appearing, therefore, that Pennock is not entitled to be subrogated to the rights of Baker, the plaintiff in the judgment paid off, it is clear that he at most can only be considered as a simple contract creditor of Coates for so much money paid for him as was applied to the discharge of the Baker judgment, for which at law he has no remedy except that of bringing his action of assumpsit against Coates for money paid out to nis use; but if he were to bring such action, it is perfectly clear that Coates, under our Defalcation Act, would defeat his recovery to the extent of the Vastine judgment, by defalcating the amount thereof, which Pennock obligated himself to Coates to pay, and ought to have paid long before he could be said to have paid the Baker judgment. Having now shown that Pennock has no right either in law or equity to have the set-off or deduction allowed, which was made by the decree of the court below, it is difficult, if not impossible, to conceive any rational ground upon which his subsequent judgment creditors can claim it; for the equity of Coates is at least equal,, if not superior to theirs, and his legal right to or lien upon the fund in court being prior in point of time to theirs, must prevail and give him a preference.

Decree of the court below reversed, and the money in contest decreed to be paid to Coates, the appellant.