Case ID: serg-rawl_11/html/0075-01.html
Source: Caselaw Access Project
Author: {"author": "Gibson, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

[Philadelphia,
    April 5, 1824.]
    MANN against DUNGAN, Assignee of MORRIS.
    IN ERROR.
    In an action by the assignee of a bond, the defendant may give in evidence, by way of set-off, articles of agreement between himself and the obligee, for the sale of real estate, by the former to the latter, in'which the parties bind themselves in a sum certain, to be paid by the party failing to the party complying with the contract; whether such sum be considered as a penalty, or in the nature of stipulated damages.
    On -the return of the record of this case, accompanying a writ of error to the Common Pleas of Bucks county, it appeared, that it was an action of debt on a bond bearing date the 15th of April, 1814, given by John Mann, the defendant below, to Elizabeth Morris, by whom it was assigned on the 29th of March, 1822, to 
      Thomas Dungan, the plaintiff. The defendant, having pleaded payment and set-off, gave notice that he should offer in evidence on the trial, the demand and bargain embraced in a certain article of agreement, entered into between the said John Mann and the said Elizabeth Morris, on the 11th of December, 1821;- and further, that he should prove, that by the express promise of the said Elizabeth Morris, the money demanded by the plaintiff was to make part of the purchase money of the house and lot, for the sale of which the said article was entered into. By this article, John Mann agreed to sell to Elizabeth Morris,'a house and lot in Doylestown, for which she agreed to pay him eleven hundred dollars on the 1st of Jlpril, 1822, and to secure the remainder of the purchase money by bond. A deed was to be executed and possession delivered on the first or second of the same month. For the performance of this agreement, the parties bound themselves “ in the sum of two hundred dollars, to be paid by the party failing to the party observant.” This article of agreement was offered in evidence under the notice of set-off, unconnected, so far as appeared from the bill of exceptions, with an offer to prove the promise alleged in the notice to have been made by Elizabeth Morris, that the bond on which suit was brought, should constitute part of the purchase money. The counsel for the plaintiff objected to its being given in evidence, and the court sustained the objection; upon which the defendant’s counsel tendered a bill of exceptions.
    On the argument in this court, Brinton and Condy assigned for error,
    1st, The refusal of the Court of Common Pleas to admitía evidence the article of agreement above-mentioned, which, had they been permitted to give it in evidence, and to show performance on the part of the plaintiff in error, and failure of performance on the part of Elizabeth Morris, would, they contended, have been evidence that two hundred dollars were due by virtue of the said article, to the plaintiff in error, as liquidated damages, or that the whole amount of the consideration money, mentioned in the said article, was due to him, provided he chose to insist on its performance. In support of this exception they cited 2 Pathier, 93,98. Evans's Ed. referred to 3 Johns. Cas. 299, note. Loxüe v. Peers, 4 Burr. 2225. Esp. N. P. 239. Ray v. Duke of Beaufort4 2 Atk. 190. 1 Eonb, 141. Hobson v. Trevor, 2 P. Wms. 191. 2 Fes. 528. 2 Pow. on Cont. 136. Howard v. Hopkins, 2 Atk. 371. Wheeler v. Hughes, 1 Dali. 23. M-Collough v. Houston, 1 Dali. 441. Gourdon v. Ins. Co. of N. A. 1 Binn. 432, note. 3 Yeates, 331. S. C. Bury v. Hartman, 4 Serg. Rawle, 177,178.
    2dl The refusal of the court below to admit the said articles in evidence* was erroneous, also, because the defendant below was thereby prevented from showing to the court and jury, the equitable defence mentioned in the notice of special matter and set-off; viz. that by the express agreement of the obligee, the bond upon which this suit was brought, was to be considered a part of the purchase money of the house and lot, agreed to be sold by the said article of' agreement.
    
      Morris, for the defendant in error,
    cited Nedriffe v. Hogan, 2 Burr. 1024. Howlet v. Strikland., C'owfi. 56 Dunlop v. Speer, 3 Binn, 169, Gogel v. Jacoby, 5 Serg. Razvle, 117.
   The opinion of the court'was delivered by

Gibson, J.

Whatever may be due under the articles, might clearly have been set off against the bond, while it remained in the hands of the obligee. The sum of two hundred dollars, agreed to be paid by the party failing to the party complying, is in the nature of stipulated damages, or it is not. If it be the former, either party might have rescinded the contract, without incurring any liability but the payment of the two hundred dollars, which, being a sum certain, might undoubtedly be set off; but, if it be a penalty, it may be relieved against, by decreeing a compensation, to be liquidated by a jury. But this construction, while it would render Mrs. Morris, the vendee, liable to the recovery of uncertain damages in an action at law, would, at the same time, place her in the. predicament of a party who is compellable, at the option of the vendor, to execute the contract in specie, by paying the purchase money; for which, in this state, an action might be maintained at law. Whether the two hundred dollars ought to be considered as stipulated damages, or as-a penalty, it is unnecessary to decide, as under either construction, the liability of the vendee might be set up against herself under the plea of set-off. It does not appear, nor is it necessary that we should know, in which of these two ways the vendor intended to avail himself of this supposed liability. But it is contended, that, however this may be with respect to the obligee, her assignee stands in superior equity, and that the set-off cannot be urged against-him. To this it is answered, that it was agreed at the execution of the articles, that this bond should be deducted from whatever might be due under the articles, and that the defendant intended to follow the introduction of the articles, with evidence of that fact. Such an agreement would undoubtedly operate as an extinguishment of the bond; at least pro tanio. But no offer of such evidence, in connexion with the articles, appears in the record; and we are therefore to consider, whether without evidénce of such an agreement, the articles were competent, as affording a> substantive ground of set-off; against the assignee. A debt due, but not payable at the time of the assignment, may be set off, although a debt, which became due afterwards, cannot. If, then, the two hundred dollars be considered as a penalty, the case is clear of doubt; the purchase money would be a debt presently due, but payable in future: but, if stipulated damages, then such damages take the place of the purchase money, for which they are an equivalent, and thus by relation, become a debt which was due at the. time of the assignment. It is the business of the assignee to call on the obligor previously to the assignment, to ascertain whether he has an existing defence ; and, although he might not be affected by notice of a state of things, that might, by the happening of a contingency, end in a state of indebtedness, yet such a case is very different from the present, where it was certain, from the beginning, that the vendor would have a valid claim against the vendee, for the purchase money, or for at least a part of the two hundred dollars, either as .a penalty or as stipulated damages. I am of opinion, therefore, that the set-off is available against the plaintiff as assignee, and that the court erred in rejecting the articles.

Judgment reversed and a venire facias de novo awarded.