Lee v. Lee

By the Court.

Jenkins, J.,

delivering the opinion.

The judgment of the Court below is placed upon the ground that the complainant’s demands are of a strictly legal character, and may be proven as well in a Court of La,w as in a Court of Equity. The real question is, whether they may be established, by plea of set-off to the action pending- at law, as well as by a proceeding in equity, engrafted upon that action. We regard the proposition of the Court below as an affirmation that they may.

There ¿ire two classes of these demands, amounting in the aggregate to a large sum, the consideration of which will furnish a test of the correctness of this proposition.

1. These are simple contract debts, barred by the Statute of Limitations at the time defendant commenced his action at law against complainant, but revived pending that action by a new promise.

The rule, strictly enforced at law, is, that the right of set-off has reference to the situation of the parties at the time of the commencement of the suit, 9th Geo. Rep. 594, sec. 4.

The action at law between these parties was commenced after the bar of the Statute of Limitations had attached to complainant’s simple contract demands, and before its removal by the new promise. Consequently, at the commencement of the suit at law, complainant had no- existing cause of action— no right of set-off quo ad these simple contract debts.

2. These are judgments against defendant, purchased for complainant by an agent, with the agent’s money (afterwards refunded by complainant), the agent having in the first place taken an assignment of those judgments to himself, and having neglected, when reimbursed his- advances, to- assign them to complainant, though regarding them as complainant’s property.

To entitle him to set-off judgments, in an action at law, the defendant must' show, first, That the judgments were in existence at the commencement of the action; and, secondly, That he was either the plaintiff of record, or the assignee at that time; in other words, that he had a legal title to the judgments at the commencement of the action. The averment is, that he had, then, only an equitable interest in them. The conclusion is, that he had not, as to this class of demands, an adequate remedy at law.

3. Has complainant a remedy in equity? It is correctly insisted that equity, in matters of set-off, follows the law, unless there be peculiar equities between the parties. Such equities will always induce its active interference.

“Courts of Equity will extend the doctrine of set-off, and claims in the nature of set-off, beyond the law, in all cases where peculiar equities intervene between the parties. These are so various as to admit of no comprehensive enumeration.” 2d Story’s Equity, §1437 a.

“Courts of Equity, in virtue of their general jurisdiction, will grant relief in all cases where, although there are mutual and independent debts, yet there is a mutual credit between the parties, founded, at the time, upon the existence of some debt, due by the crediting party to the other. By mutual credit, in the sense in which the terms are here used, we are to understand a knowledge, on both sides, of an existing debt due to one party, and a credit given by the other party, founded on and trusting to such debts as the means of discharging it.” 2d Story’s Equity, §1435.

The averments in the bill, disclose the following peculiar equities between the parties :

1. That complainant interposed for defendant’s relief, when he was powerless to meet pressing demands, both parties understanding that complainant, thus becoming the creditor of defendant, must necessarily wait long for repayment.

2. The sums of money, from time to time advanced by defendant to complainant (being the consideration of the note sued on at law), were so advanced, in consequence of defendant’s indebtedness to complainant, with the understanding* that the note in question was to be cancelled on a future settlement of such previous indebtedness, Indeed, equity may well regard those advances as partial payments on account of defendant’s indebtedness.

3. The insolvency of the defendant, and the utter hopelessness of complainant’s demand, unless set-off against defendant’s if not an independent and peculiar equity, in itself, greatly fortifies the other equities arising* between the parties.

4. If the averments in complainant’s bill be true, defeñdant is attempting to perpetrate a fraud, and that attempt it is the province of equity to thwart.

Believing, therefore, that complainant has no> adequate remedy at law, and that equity is competent to release him, we hold that the Court below erred in sustaining' the demurrer and dismissing the bill.

JUDGMENT.

Whereupon, it is considered and adjudged by the Court, thát the judgment of the Court below be reversed, upon the ground, that the Court erred in sustaining the demurrer and dismissing the bill, on the ground that the claims of the complainant were of a strictly legal character, and might have been insisted on at law as well as in equity.