Case ID: nj-eq_17/html/0219-01.html
Source: Caselaw Access Project
Author: {"author": "The Chancellor.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Edmund Brewer vs. Uriah Norcross.
    1. Tlio general rule in equity, as well as at law, is that joint and separate debts, or debts accruing in different rights, cannot be set off against each other. But, wherever it is necessary to effect a clear equity, or to prevent irremediable injustice, the set-off will be allowed, though the debts are not mutual.
    2. In cases of insolvency, or of joint credit given on account of individual indebtedness, qr where the joint debt is a mere security for the separate debt of th,e principal, the equity is obvious, and the set-off will be allowed.
    3. Upon a hill between partners for an account of the partnership transactions, an allegation of the answer that a third party is a joint partner with tlie complainant and 4efendant, and therefore a necessary party to the suit, can not be assumed to be true, at the hearing upon exceptions to the answer.
    4. Upon a bill filed to settle the accounts of one partnership, a settlement of the accounts of another and different partnership cannot be effected upon the defendant’s answer. The remedy is by cross-bill.
    This case came before the court upon an appeal by the defendant from a report of the master on exceptions to the answer.
    
      Mr. Wilson, for defendant, in support, of the answer.
    The defendant sets up in his answer, farming transactions and an individual account between the parties. The exception is that these matters cannot be introduced. The decision in the cause should be a final settlement, on examination of all accounts between them. The firm was really closed when the mail contracts terminated. There is no alr legation of debts due from the firm. No suggestion in be- , half of creditors. No charge of concealment of funds. It is not a bill by or against the partnership, but by an individual partner against a co-partner, for the settlement of cross demands, which being settled, he prays that the balance ..found ,due may be paid over to him. The decree will be to pay over the debt found due by one partner to the other. What the defendant wishes is, that if a balance is found due from him on the partnership account, he may at the same , time show individual indebtedness from the complainant to him.
    Assumpsit would lie at common law, by one partner against another, for a balance admitted on an express promise to. pay it. Gulick v. Gulick, 2 Green's R. 578; Jessup v. Cook, 1 Halst. R. 434; Gow on Part. 74. In that action,, individual acoonnts may be set off.
    Equity exercises its jurisdiction and powers in such a way as will-best attain the ends of justice. It does not derive its jurisdiction from the statutes of set-off. It proceeds on different principles, and in different forms, from a court of law. 2 Story’s Eq. Jur., § 1435-7. In cases of insolvency it will allow a set-off when not otherwise admissible. Simpson v. Hart, 14 Johns. R. 63; Nelson v. Hill, 5 Howard 127.
    Where one partner dies, neither his representatives nor the survivor may go into equity for an account, and join the surviving partner and the representatives of the deceased partner. The creditors of both firms may unite. Blake v. Langdon, 19 Vt. 485, 492-4.
    - ■ - As to- the partnership respecting the farm. The panties owned the farm all the time that the partnership in the stages continued; the farming and staging were connected. The produce of the farm was taken to feed the stage horses; the manure from the stable was taken to the farm. These are the allegations of the answer, and they must be taken as true. It may be objected that the relief should be by cross-bill, but we should then be met by the objection that there was no equity in our bill. Is it not just as well to bring the matter before the court by our answer ? It is more matter of form. Ayliffe v. Murray, 2 Atk. 59; Story’s Eq. Pl., § 389, 393-5.
    Recent legislation has rendered a cross-bill unnecessary. The defendant himself may be a witness, and may exhibit interrogatories to the complainant. All the ends of justice may be fully attained as the pleadings now stand. "Why resort either to a cross-bill, or to a suit at law ? Ames v. N. J. Franklinite Co., 1 Beas. 66.
    The court ought not to encourage the filing of cross-bills; it increases expense and involves delay.
    
      Mr. G. M. Robeson, for complainant, contra.
    The complainant’s bill is simply a bill for an account of partnership transactions. The complainant is entitled to come into equity, because he is a partner. He annexes to his bill a detailed account of the partnership transactions.
    The answer alleges that about eleven years ago, i. e., two years before the commencement of the partnership set out in the bill, that there were other transactions between the parties; that they owned a farm in Delaware, not where the stage routes are. It is not pretended that it was bought in reference to the stage business, or that it was kept or carried on for the benefit of the staging. All the allegation is that the defendant is informed and believes that the manure from the stage stables was used on the farm. JSlo connection is shown, nor is the prooess described by which the operations of the farm and the staging become united.
    This is in no way responsive to the bill. It is no answer to any allegation contained in the bill. If true, it is impertinent.- -.The matter set up by the answer should be such as should be taken into consideration in the original case, or proper to be taken into account in making a settlement of the-matter contained in the bill. It is entirely unnecessary to a-full settlement and understanding of the affairs of the partnership.
    So far as appears upon the answer, the investigation of the affairs of the firm is totally irrelevant to the matter of the bill, and in no way material to the investigation of the matters charged in the bill. 2 Daniell’s Ch. Pr. 838, note 1; Hood v. Inman, 4 Johns. Ch. R. 437; Woods v. Morrell, 1 Johns. Ch. R. 103. The test of its relevancy is whether the subject of the allegation can be put in issue, and given in testimony between the parties in the cause. Story’s Eq. Pl., § 268; Wood v. Mann, 1 Sumner’s R. 578.
    These matters could not have been joined together or set up in connection in a bill of complaint. It would have made the bill multifarious. Whatever would make a bill multifa? rious would be impertinent in an answer, unless upon some special ground of equity. 1 Daniell’s Ch. Pr. 384, note ; Story’s Eq. Pl., § 271; Swift v. Eckford, 6 Paige 22; Boyd v. Hoyt, 5 Ibid. 65.
    The subject matter, the 4nature of the interest, and -the parties, are all different and incapable of being united. No reason is found in the answer why these different matters should be united. 3 Daniell’s Ch. Pr. 1742; Troup V. Haight, Hopk. Ch. R. 270.
    These matters, if at all material or relevant to the mattey .in issue, should be. introduced by cross-bill. The equity should be-spread out upon the face of the bill. If the complainant is found indebted on the individual account, how is the defendant to recover ? But how can matters so totally distinct be set up, even by cross-bill? Story’s Eq. Pl., § 389, 401; Daniel v. Morrison's Ex’r, 6 Dana 182.
    . The matters are set up in the answer as an equitable set-off. The mere existence of cross demands is not a sufficient ground of set-off. 2 Story’s Eq. Jur., § 1436, 1437 a; Blake v. Langdon, 19 Vt. 485.
    
      Every case cited by Judge Redfield in Blake v. Langdon, is a case of bankruptcy.
    The fifth exception relates to an individual account barfed by the statute of limitations. It so appears on the face bf the schedule. This has no relation to the partnérship accounts. It is a mere claim at law having no equity. We can take no issue on the matter. It clearly should be set up by bill. Story's Eq. Pl., § 280; 1 Daniell's Ch Pr. 386.
    I have proceeded on the ground that George Brewer is in fact a partner; upon that, the whole case rests. For the purposes of this case and upon this issue, that fact does not judicially appear. They may show by their answer that George Brewer is a necessary party, but they can have no benefit from that till the right is established. If they want the benefit of it before hearing, it must be set up by plea. Affirmative matter set up in answer will not be presumed to be true. 1 Barb. Ch. Pr. 109; Dodge v. Perkins, 4 Mason 435; Wood v. Mann, 1 Sumner 578.
    
      Mr. A. Browning, on the same side.
    The bill is for the settlement of a partnership account. The answer is purely defensive, either by way of denial or óf avoidance. Outside of matters of denial or of avoidance, matters, to give the court jurisdiction, must be set up by way of cross-bill, in order that the plaintiff may have an opportunity of answering. Blending different matters in the samé suit, is as objectionable in equity as at law. Story’s Eq. Pl., § 863; 2 Daniell’s Ch. Pr. 838.
    The two matters of the mail contract and the farming business are essentially distinct and separate, unless by agreement they have been so mingled as of necessity to be settled together, or by transactions which imply an agreement, are so blended that they cannot be settled separately. But the fact of their being so blended or complicated cannot be set up in the answer. It must be by cross-bill, in order that the complainant may have an opportunity of answering. Story's Eq. Pl., § 389, 390; 3 Daniell’s Ch. Pr. 1742; White v. Buloid, 2 Paige 164.
    
      If the want of proper parties appear upon the face of the bill, the objection should be by demurrer. If it does not •appear, it may be brought out by plea or answer, or upon, the facts stated in a cross-bill. Story’s Eq. Pl., § 237.
    
      Mr, Carpenter, in reply.
    It is clear that the objection for want of proper parties may he made by answer. If the facts stated in the answer show dearly that the brother of the complainant is a necessary party to a full investigation and settlement of the matters involved in the bill, the court will cause him to be made a defendant.
    All matters necessary to the investigation of the whole subject matter of controversy are proper to be stated in the answer. If the statements of the answer blending different transactions, however distinct and separate in themselves, are pertinent and material to the defense, they are properly united in the answer. The question is not whether they must necessarily be examined together, but whether they are so 'related that they may be properly, and without confusion or embarrassment, examined in the same suit.
    No discovery is sought, which alone renders a cross-bill necessary. As to the individual accounts of the parties, which are introduced by the answer, they may or may not prove to be material and pertinent to the defense. They should not be stricken out summarily upou exceptions, but should stand till the evidence is taken.
   The Chancellor.

The bill is filed by one partner against his co-partner, for an account of the partnership transactions in the business of running stages and carrying the mail, under contracts with the government of the United States, from the first of July, 1852, to the 30th of June, 1856.

The defendant, by his answer, claims that there are monies due to him from the complainant on various accounts, of which he asks a settlement; and that the amounts found due may be allowed by way of set-off to the demand of the complainant, if anything shall be found due to him.

The complainant excepts to the answer. The exceptions relate to so much of the answer as asks to set off the amounts claimed to be due from the complainant to the defendant.

1. On account of a farm of which the complainant, the •defendant, and one George Brower were joint and equal owners, and which was occupied and managed by the complainant for the use and benefit of the joint owners.

2. For mules and harness belonging jointly to the parties, complainant and defendant, and the said George Brewer, which were sold, and the price therefor received by the complainant.

3. For an account of the defendant against the complainant in his individual capacity.

4. For an individual account of the defendant against George Brewer.

The several matters thus set up by way of defense, have no natural or necessary connection with the subject matter of the bill. They are in themselves entirely distinct and unconnected. If they were united in the same bill, it would constitute the vice of multifariousness. A claim against two or more defendants cannot be properly united in the same bill, with a separate claim against one only. Uor can distinct claims against two or more defendants, upon individual accounts, be thus joined. 1 Daniell’s Ch. Pr. 383; Story’s Eq. Pl., § 271.

The bill is filed for the sole purpose of effecting a settlement of the partnership accounts of the complainant and defendant in a specified business. The allegation that the parties were engaged in other transactions with third persons, or with each other, either as partners, or oil their individual accounts, is impertinent to the matter of the suit.

The general rule in equity, as well as at law, is, that joint and separate debts, or debts accruing in different rights, cannot be set off against each other. At law, under the statutes of set-off, the rule is inflexible; but in equity, special circumstances give rise to exceptions. Courts of equity exercise a jurisdiction in matters of set-off, independent of the statutes upon the subject. They look beyond the form of the contract, to its real character; and beyond the nominal parties, to the parties to be affected by the decree. Wherever it is necessary to effect a clear equity, or to prevent irremediable injustice, the set-off will be allowed, though the debts are not mutual. Vulliamy v. Noble, 3 Mer. 618 ; Dale v. Cooke, 4 Johns. Ch. R. 13; Blake v. Langdon, 19 Vt. 494; 2 Story’s Eq. Jur., § 1437; Receivers v. Paterson Gas light Co., 3 Zab. 283.

In cases of insolvency, or of joint credit given on account of individual indebtedness, or where the joint debt is a mere security for the separate debt of the principal, the equity is obvious, and the set-off will be allowed.

I do not perceive that any equitable ground for allowing the set-off is disclosed by the answer. Insolvency or danger of irremediable loss is not suggested.

One of the allegations of the answer is, that George Brewer was a joint partner with the complainant and the defendant in the staging business as well as in the farm, and that he is, therefore, a necessary party to the suit. It is clear, that at this stage of the cause, the court cannot act on the assumption that this allegation is true. If the fact should be established in evidence, the bill is clearly defective. If' the bill should be amended, the defendant will have a right to answer the amended bill, and to avail himself of any equitable defence to which such new state of facts may entitle him. A set-off of the individual account against George Brewer can have po possible foundation, if he be not a necessary party to the bill. Nor is there ground suggested for a set-off of the individual indebtedness of the complainant to the defendant.

The only plausible grounds stated in the itnsvyer, upon which the right of equitable set-off can be made to rest, are, that the same parties were interested as partners ip both partnerships, &pd that the defendant believes that the business of both firms was so connected and blended, that justice requires that the accounts of both partnerships should bo inquired into and settled at one and the same time. The only reason assigned for this belief of the defendant is his hearing and belief, that the products of the farm were taken for the use of the horses upon the stage route, and that manure from the stables of the stage company was used upon the farm. How the facts alleged create no necessity for the settlement of the accounts of both firms at the same time. Nor can the court act upon the general allegation on the part of the defendant, of his belief in the existence of such necessity. The facts upon which such allegation is founded, should be clearly and distinctly set forth.

Nor can the defendant have this relief by way of answer. It must be, if at all, by original bill. He is not asking, upon equitable grounds, the mere right of setting off one indebtedness against another. But, upon a bill filed to settle the accounts of one partnership, he asks that there should at the same time be a settlement of the account of another and different partnership. If the balance upon the settlement of the account, in respect to which the bill is filed, should prove to be in favor of the complainant, but upon the settlement of both accounts, the balance should bo in favor of the defendant, what remedy could he have, or what decree could be pronounced upon the pleadings as they stand? If, in this aspect of the case, the defendant has any equity, he can have relief only by way of cross-bill.

I think all the exceptions to the answer are well taken, and must be sustained.