Case ID: ny-super-ct_9/html/0295-01.html
Source: Caselaw Access Project
Author: {"author": "By the Court.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Hicks & another v. McGrorty.
    (Before Oakley, Ch. J., Campbell and Emmet, J.J.)
    June 8;
    June 11, 1853.
    In an action by the voluntary assignees of an insolvent, to recover the price of goods sold by the debtor to the defendant, the latter cannot set-off a promissory note from the insolvent to himself, which was not due at the time of the assignment, although it became so before the suit was commenced.
    This action was brought by the plaintiffs, as the assignees of the firm of Thompson and Co., to recover the sum of $228.87, with interest, for goods sold and delivered by T. & Co. to the defendant. The answer did not deny the sale, but claimed to set-off a promissory note from Thompson & Co. to the defendant, for $653.70, dated May 16th, 1851, payable seven months after date. The credit for the goods expired on or before the 18th of December, 1851. The promissory note fell due on the day following.
    The action was tried before Mr. Justice Paute and a jury, on the 12th October, 1852.
    The plaintiffs gave in evidence a deed of assignment, bearing date September 20, 1851, made by Henry G. Thompson and Joseph A. Dean, composing the firm of Thompson & Co., transferring all their property and effects to the plaintiffs upon trust, to convert the assigned estate into money, and to apply the proceeds, after defraying the expenses of the trust, First, to satisfy the indebtedness of the assignors to the firms of Brown, Brothers, & Co., and Hicks & Co.; Second, to pay the liabilities of the assignees to F. S. & D. Lathrop & Co., and F. S. Lathrop & Co., and the debts for which those houses were responsible for the said assignors; Third, to pay all the other debts of said assignors, paying the respective creditors ratably in case of a deficiency to pay in full; and, lastly, to return the surplus, if any, to the assignors. The plaintiffs then proved that the interest on the items of indebtedness mentioned in the complaint, amounted to thirteen dollars and eighty-one cents, and rested their case.
    The defendant then gave in evidence the promissory note of Thompson & Co., for six hundred and fifty-three dollars and seventy cents, mentioned in his answer, and called as a witness,
    
      John Jaoksm, who testified as follows: I was,'in 1851, and am now, a clerk of the defendant. The note of Thompson & Co. for six hundred and fifty-three dollars and seventy cents, now produced, was given for goods purchased by them of the defendant. The goods had been previously purchased at different times, and the note was given for the aggregate amount of the bills. The witness further testified as follows—(the plaintiffs’ counsel objecting to the evidence as inadmissible under the pleadings, and the court reserving the objection)— Previous to the first item in the account for which this note was given, there had been frequent dealings between Thompson & Co. and the defendant—buying of goods by Thompson & Co. of McGrorty, and by McGrorty of Thompson & Co. The items for which this note was given were in continuation of that account. Subsequent to the date of the note, I think there were purchases by Thompson & Co., of McGrorty, which formed the subject of book account.
    Cross-examined.—I feel well satisfied there were such purchases as mentioned at the close of my direct examination, but will not swear positively that there were., I cannot recollect the amount or date. Such purchases, if any there were, were settled for by deducting the amount of them from some indebtedness of McGrorty to Thompson & Co. for goods purchased of them, a note being given to Thompson & Co. for the balance-.
    The defendant then rested, and the plaintiffs called .Renne Martin, who testified as follows: I was the clerk and bookkeeper of Thompson & Co., and am acquainted with the value of their assets, and the amount of their indebtedness at the time of their assignment to the plaintiffs. The assets embraced in the assignment are not sufficient to pay the indebtedness to Brown, Brothers, & Co., and Hicks & Co.
    Cross-examined.—I am not prepared at present to state the amount of the assets, nor of the debts of the first class of creditors; but they are large, and the assets will not pay the first class. The assets passed into the hands of the assignees, and I suppose they hold them. I cannot state what proportion of the debt to Brown, Brothers, & Co., nor what proportion of the whole indebtedness of Thompson & Co., fell due prior to the 19th of December, 1851. I cannot state the amount of assets—cannot state the amount due to the preferred creditors. I cannot tell what proportion of all the claims were due, or to become due, at the date of the assignment; cannot tell what was due, or to become due, on the 19th December, 1851.
    The testimony being closed, the jury, by consent of the parties, found a verdict for the plaintiffs for two hundred and forty-two dollars and forty-eight cents, subject to the opinion of the court upon a case to he made, with liberty to either party to turn the case into a bill of exceptions.
    
      W. M. Evarts, for the plaintiffs,
    now moved for judgment upon the verdict, and supported the motion as follows.
    I. The debt from the assignors of plaintiffs not being presently due and payable at or before the time of the assignment, cannot be set off in this action. (2 R. S. 354? § 18, sub. 8; Watt v. The Mayor, &c., 1 Sandf. S. C. R. 23.)
    II. The fact that plaintiffs are .assignees for the benefit of creditors does not enlarge the defendant’s right of set-off. The right is created by statute, and in terms defined, and no extension or variation of the rule is prescribed in the case of suits by voluntary assignees for the benefit of creditors. (Spencer v. Barber, 5 Hill, 568.) The proof shows that the assignors’ right is extinguished, the debt exceeding the assets. The plaintiffs’ right is that of the preferred creditors, who, in respect of equity, stand in the same position as if the defendant’s debt had been assigned to them directly. (Johnson v. Bloodgood, 1 Johns, case 51; Kent J., p. 54.)
    
      
      J. Cochrane, for defendant,
    opposed the motion, and claimed judgment for the defendant upon the following grounds.
    I. The note claimed by defendant to be set off against the plaintiff’s claim, grew out of an account, of which the claim of the plaintiffs was a part. The equities, therefore, between the parties, are superior to those of the creditors.
    H. The evidence does not disclose that there were not sufficient assets to pay all the indebtedness of Thompson & Co. actually due on the 19th day of December, 1851. Therefore, the equities of creditors are shown to exist.
   By the Court.

The proof is satisfactory, if not conclusive, that the assets of Thompson & Co. will be wholly insufficient to satisfy their debts, and we therefore think that the plaintiffs are entitled to the same protection as assignees for value against the set-off which is claimed. The defendant, as against them, had no subsisting equity when the assignment was made; not only was the note held by him, not due at that time, but it did not become due until he had become liable to the plaintiff.

Judgment for the plaintiffs, with costs. (Vide Keep v. Lord, ante p, 78.