Case Name: Miller & Co. v. Nathan M. Florer
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1869-12
Citations: 19 Ohio St. 356
Docket Number: 
Parties: Miller & Co. v. Nathan M. Florer.
Judges: Beinkeehorr, C.J., and Scott, Welch, and Day, JJ., concurred.
Reporter: Ohio State Reports, New Service
Volume: 19
Pages: 356–362

Head Matter:
Miller & Co. v. Nathan M. Florer.
1. Where M., a creditor of an insolvent firm, received from S., one of its members, the note of a third person, the property of the firm, and gave to S. an obligation to apply a specified part of the proceeds, when collected, on the firm debt, and “ to pay the balance to B. in cash” — Held: That in a suit by the assignee of the obligation to recover such balance, M. is estopped by his agreement from applying it by way of set-off to the indebtedness remaining due him from the firm.
2. The non-performance of promises made by S. to M. for the payment of the balance of the firm indebtedness due him, which neither involves bad faith, nor qualifies nor varies the agreement between the parties, will not defeat the estoppel.
Motion for leave to file a petition in error to reverse tbe judgment of the superior court of Cincinnati.
This case has heretofore been in this court on error, and is reported in 15 Ohio St. 149. At that time the judgment of the court below was reversed, and the case remanded for a new trial. On the last trial, the existence of the verbal agreement which formed the ground of reversal was negatived by the finding of the jury. The case is now presented on the question, which was left undecided at the former term, whether Miller & Co. have the right of set-off claimed, independent of the verbal agreement they set up.
The firm of Ellis & Sturges, bankers doing business.in Cincinnati, having become insolvent, dissolved their copartnership. Ellis removed to Chicago, leaving the assets in the possession and control of Sturges, who proceeded to settle the affairs of the firm. At the time of their failure, Ellis & Sturges were indebted to Miller & Co., the defendants below, in the sum of $2100, and to Florer, the plaintiff below, in the sum of $2050, which was subsequently increased by $629.75, advanced by Florer to Sturges, to assist him in his efforts at settlement.
On the 22d of November, 1856, Miller & Co. received from Sturges the note of Pickett, McMurdo & Co., part of the assets left with Stnrges, upon an agreement (called in the record paper A), of which the following is a copy:
“ Cincinnati, Ohio, Nbv&rriber 22, 1856.
“Received of W. Stnrges, note of Pickett, McMurdo & Co., for nineteen hundred and seventeen dollars and sixty . cents ($1,917.60), dated New Orleans, February 1,1855, and payable nine months from date, and when same is collected we are to credit Ellis & Sturges with five hundred dollars, and pay over balance to W. Sturges in cash.
“Miller & Co.”
In April, 1859, Sturges assigned this balance to Florer on his claim, by delivering to him the agreement with this indorsement thereon:
“ Messrs. Miller & Co., please pay over to N. M. Elorer the balance of the within, after reserving the five hundred dollars mentioned therein.
W. Sturges.”
Elorer’s action below was to recever this balance.
Miller & Co. received from Pickett, McMurdo & Co., in payment of' the note obtained from Sturges, the note of Belcher & Co. for a larger amount, they, Miller & Co., paying the difference in cash. This note of Belcher & Co., at the time of its receipt by Miller & Co., the evidence tended to show, was not worth in the market over seventy cents on the dollar; but it appears that they indorsed it without recourse to one of their creditors, who received it in payment of his demand at par.
On the trial, Miller & Co. insisted on their right to apply the indebtedness from Ellis & Sturges to them by way of set-off against their liability on the agreement for the amount realized from the note of Pickett, McMurdo & Co. over and above the $500 which, by the terms of the agreement, they were to credit on such indebtedness.
In this view they asked the following instructions to be given to the jury:
1. “If at the time the note of Pickett, McMurdo & Co. wag received by the defendants, and at the time of settlement thereof by the defendants it was held by Sturges for Ellis & Sturges as the assets of Ellis & Sturges, then the defendants can set off their debt against Ellis & Sturges to the instrument sued upon in this action.”
2. “ If at the time the note of Pickett, McMurdo & Co was received by the defendants, and the time of settlement thereof by the defendants, the firm of Ellis & Sturges had been dissolved and the assets given over to Sturges, who was to pay the debts, and he held this note of Pickett, McMurdo & Co. as a part of the assets of the firm, then the defendants can set off their debt against Ellis & Sturges to the instrument sued upon in this action.”
These instructions were refused, and exception taken.
In respect to the evidence offered, tending to prove the verbal agreement set up by the defendants, and which, if established, it has been held would require the set-off to be allowed, the defendants’ counsel asked the following instruction to be given to the jury:
3. If the jury “believe that the note of Pickett, McMurdo & Co. was received by the defendants upon promises of payment of the indebtedness of Ellis & Sturges to the defendants, $1000 in November, and $500 out of the said note when collected, and the balance in the following spring, and the defendants relying upon these promises did not proceed to collect the same, because of such promises, and received the note under the same, then the paper A does not estop them from setting off this debt against Ellis & Sturges, even if these promises did not amov/nt to an agreement, provided the jury find the note was the property of Ellis & Sturges, or held by Sturges for their benefit, and the agreement A was for their benefit.”
This instruction was also refused, and exception taken.
The verdict and judgment were for Florer, the plaintiff below. That judgment was affirmed on error by the court in general term. Miller & Co. now ask leave to file a petition in error in this court, to reverse these judgments
Lincoln, Smith, c6 Wa/rnock, for the motion:
1. The defendants below were entitled to the set off, and the paper A did not create an estoppel. Elorer stood in no better position than Sturges did.
(1) It is a clear statutory right, over which the court has no discretion. One money demand may be set-off against another.
The statute creating the right of set-off, as recognized by the code, is found in Swan's Stat. of 1841, p. 850, sec. 1; see also 15 Ohio St. 151, 152.
(2) There cannot be an estoppel under the circumstances of this case. The essential elements of an estoppel in'pais are wanting. There must be something in the nature of fraud or wrong done to, or imposed npon the party, before the doctrine of estoppel can have any place to deprive a party of the assertion of a clear» statutory right. McKinzie v. Steele, 18 Ohio St. 41; Martin v. Angell, 4 Barb. 409; Biddle Boggs v. Merced Mining Co., 14 Cal. 367; Copeland v. Copeland, 2 Maine, 539; Pickard v. Sears & Barrett, 6 Ad. & El. 469; Patterson v. Lytle, 11 Penn. St. 56.
But it is said that here is a bailment, and that there is always a trust where there is a bailment. Now it is not true that there is a certain trust in such a case. It is rather an agency than a bailment or trust, and is so generally treated. Chapman v. Forsyth et al., 2 How. (U. S.) 208; Strader et al. v. Baldwin, 9 How. (U. S.) 261.
It is no more a trust than where a bank is employed to collect a note. Reeves, Stevens & Co. v. State Bank of Ohio, 8 Ohio St. 470. Or where a commission merchant is employed to sell goods. Chapman v. Forsyth et al., 2 How. (U. S.) 208. All these are cases of agency, and not of trusts.
Suppose it be called a bailment, or trust in this general sense, what of it % Whatever it was, it was an agency for the benefit of Miller & Co., and to enable them to collect or obtain this very debt.
But it is no trust, and if it were, the defendants’ right of set-off cannot, under the circumstances of this case, be met by the doctrine of equitable estoppel in pais. If that doctrine is to be applied in the case, it should be to the plaintiff and in favor of the defence. McGillivray v. Simson, 9 Dow. & Ryl. 35 (12 E. C. L. 146); Cornforth v. Rivett, 5 M. & S. 510; Mayer v. Nears, 1 Bing. 311; Eland v. Karr, 1 East, 375; Lovett v. King, 16 Ind. 464; Lime Rock Bank v. Plimpton, 18 Pick. 159; Hogan & Wilson v. Shorb, 24 Wend. 458; id. 564.
2. But the money never was collected in fact. It may be so held, inasmuch as Miller & Co. credited it to their deposit account; but it is by a fiction of law, which can never work an estoppel. If that view of the case is taken, all the equitable circumstances connected with its being received will be considered, and among them will be that the defendant, by the use of money and a risk, have in fact created a fund, and they therefore have not only possession and legal title, but the greater equity. Certainly Florer has no such equity. Except upon the ground above stated, the defendants were liable for a conversion of the note, and are therefore bound to pay, not the face of it, but its value at the time of the conversion, which was not half its face. It was only by putting other money with it that anything could be got for it; and then only a note worth but about seventy cents on the dollar, with long time to run. Treating it as a conversion of the note, there could be no recovery in this suit. Certainly (were the suit framed for that) not the full face of the note. This is settled. Mitchell v. Shuert, 16 Mich. 445; Gellatly v. Lowery, 6 Bosw. R. 122, 123.
And then the suit must be by Ellis & Stages, and not by Florer, for no such claim has been assigned, or could be at common law.
The long' acquiescence, by Ellis & Stages, in the course taken by the defendants amounts to a confirmation of it, and strengthens their equity. Story on Agency, sec. 90; Brigham v. Peters, 1 Gray, 139; Norris v. Cook, 1 Curt. C. C. Rep. 469.
King, Thompson & Avery, contra.

Opinion:
White, J.
At law a joint demand cannot be set off'against one that is separate, and this is the general rule in equity as well as at law. Addes v. Knight, 2 Merivale's Rep. 122.
The defendants below could not set off the joint liability of Ellis & Sturges against a separate demand of Sturges upon them. Prima facie this is the character of the respective claims in this case. The defendants below sought to prove, aliunde the writing, and such appears to be the fact, that the obligation, though in the name of Sturges alone,- is in fact for the benefit of Ellis & Sturges, and that it is not the case of a separate demand on the one side and a joint one on the other, but that the debts are in fact reciprocal, and thus, if no other objection exists, the proper subjects of set-off.
The fact that the firm of Ellis & Sturges were insolvent, is undisputed; and, discarding the question whether there had been an actual assignment of the assets to Sturges, it is clear that Ellis had put the assets in the sole possession and control of Sturges, who undertook to and was engaged in adjusting and liquidating the indebtedness of the firm.
Under these circumstances the defendants below received the note of Pickett, McMurdo & Co., expressly stipulating, that, when the same should be collected, they were to credit Ellis & Sturges with five hundred dollars, and fay over the balance to Stwrges in cash.
Sturges, in the voluntary appropriation of the assets to the payment of the firm creditors, had the right to apportion them among the creditors fro rata, or even to prefer one to another, if he saw fit to do so.
In the light of this principle and of the admitted facts, the writing sued on was, in effect, an agreement between Sturges and the defendants that he, on his part, in the exercise of this right, would deliver to the defendants the note described, giving them the right to apply five hundred dollars thereof, when collected, to the payment of their claim against the insolvent firm, and that they, on their part, would pay the balance to him in cash, and thus enable him to use it in settling with other creditors.
But for their argreement to return the excess over five hun drecl dollars, the defendants, it is to be -presumed, would not- Have obtained the note; and it would be a fraud upon the other creditors of the firm, and virtually so upon Sturges who has the right to see that the assets of the firm are apportioned equitably among the creditors, if the agreement should not now be enforced. To allow the set-off, would be to make the defendants preferred creditors of the insolvent firm, without the consent of Sturges, and in violation of their express agreement, by which they acquired the right to the 'five hundred dollars. Henniss v. Page, 3 Wharton, 275; Hill v. Smith, 12 Mees. & Welsb. 617.
We are unanimous in the opinion that, under the circumstances of the case, the court was right in ruling that, in the absence of any other agreement altering the rights of the parties, the defendants were estopped by the terms of the writing from applying the balance received by them on the note over the five hundred dollars, to the indebtedness remaining due from Ellis & Sturges.
2. In regard to the third instruction asked, and set forth in the statement, it is sufficient to say, the promises of Sturges, therein referred to, are not supposed to involve any ele-' ment of bad faith, and they are expressly characterized in the instruction as not amowitmg to an agreement. If they neither involve bad faith nor amount to an agreement, it is not perceived how they can qualify, or -vary the agreement actually entered into by the parties, or affect their rights arising from it. Indeed, the instruction might have been refused on account of its ambiguity. It seems to be self-contradictory, the first part of it assuming a state of fact which would constitute an agreement between the parties, and the latter part of it assuming that the same- state of fact would not amount to an agreement.
Leme refused.
Beinkeehorr, C.J., and Scott, Welch, and Day, JJ., concurred.