Court Opinion

ID: 6233972
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:28:15.192661+00
Date Added: 2024-06-11T08:57:58.767248
License: Public Domain

The opinion of the court was delivered, January 3d 1871, by
Sharswood, J.
— The 1st and 2d errors assigned are to the rulings of the learned judge below in excluding the offer of the defendants to prove a set-off, consisting of promissory notes of the plaintiffs, past due and originally drawn in favor of third persons, and by them endorsed to the defendants. Waiving the consideration of other objections made to the admission of this evidence, we think that it was rightly rejected because clearly precluded by' the terms of the lease sued upon. That a party may be debarred from availing himself of the Act of Assembly about defalcation by an agreement not to plead it, either express or implied, has been adjudged by this court in Henniss v. Page, 3 Whart. 275; Bank of the United States v. Macalister, 9 Barr 475; Reed v. Penrose, 12 Casey 214. So far as this question is concerned, the court in the case last cited may be stated to have been unanimous, for, although Mr. Justice Strong thought that the contract in that case did not, by implication, prevent the defendant garnishee from setting up his claims against the company as an answer to the attachment of another of their creditors laid upon the money in his hands, yet he admitted, in clear and distinct terms, the general principle as stated. “This right of defalcation,” said he, “is a legal right, secured to a defendant in all cases where he holds demands against a plaintiff, due in the same right and due at the time when the suit was commenced against him. I agree that he may, by express contract, preclude himself from pleading -a set-off. Such a contract, founded on consideration,- would bind'him. *380This I understand to he the principle of Henniss v. Page, 3 Whart. 275, and, I think, a defendant may also debar himself from using a set-off by a contract not express. Thus, if he receives money delivered to him for his application to a particular use, his receipt may amount to an agreement not to apply it to any other use, and, of course, not to his own, by pleading a set-off.” The example thus stated of an agreement necessarily implied is in effect the very case now before us. The defendants bound themselves to apply the consideration they were to pay for the grant of the lease to a particular use, and they cannot apply it to any other use, and, of course, not to their own in payment of the promissory notes which they have bought up and hold. The covenant contained 'in the lease was that the consideration should be paid to certain creditors of the lessors who held encumbrances upon the leased premises. It was for the purpose of relieving it from these liens. Had a. clause been added that it should not be applied to any other debts, it would not have been stronger by such express agreement than that which was thus necessarily implied. The covenant being under seal, the action could only be brought in the name of the covenantees, as was held in De Bollé v. The Penna. Ins. Co., 4 Whart. 68; yet it may be sued and recovered upon to the use of the parties to whom the money was to be paid, and the court will so control the execution upon the judgment as that it shall be eventually appropriated as agreed upon.
The 3d error assigned is to the refusal of the learned judge to charge as requested in the defendants’ 2d point, that this suit had been prematurely brought, because the obligation to pay by the defendants did not accrue and become due until the expiration of the term granted by the lease. This proposition proceeds upon the idea that the payments stipulated to be made were in the nature of rent, and no time being expressly fixed were not payable until the land had been enjoyed. But it is very evident that the covenant to pay these debts was an immediate one, for they were then already due, and the very object of the stipulation was to save the property from being proceeded against and thus lost to the lessors. The covenant was the consideration for the grant of the lease and not for the enjoyment of the property. When a lease is granted with the reservation of only a pepper-corn or nominal rent or with no rent at all, the consideration may lawfully be and usually is a sum of money paid in cash. There is nothing to prevent it from being to be paid at a certain time in the future, or as here without any time, which is either that it shall be paid forthwith or in a reasonable time — it matters not which, so far as this case is concerned. It was not reserved as rent, and it is very plain that the parties did not so intend it.
The 4th, 8th, 9th, 10th and 11th assignments of error may be *381considered together. They are all grounded upon the position that the covenant sued upon was one of indemnity merely, and the plaintiffs not having shown that the encumbrances had been enforced against the property or that they had been compelled to pay them, they had suffered no actual damage, and therefore could recover at most but a nominal sum. The answer to this position is twofold. The covenant in its terms was a direct and absolute engagement to pay at once or within a reasonable time, and the^ lessees not having done so it was broken, and the covenantees as the legal plaintiffs could recover the whole amount to the use of the creditors to whom the amount had been specially appropriated by the agreement. But even supposing it to be an indemnity merely, we must regard the lessees by their absolute engagement to pay as assuming the place of principals while the plaintiffs became sureties merely. Though as to the creditors the plaintiffs remained principals, as between them and the defendants they were sureties. Then it is well settled that as soon as the surety’s obligation to pay becomes absolute he is entitled in equity to require the principal debtor to exonerate him, and he may at once file a bill to compel an exoneration, although the creditor has not demanded payment from him: Beaver v. Beaver, 11 Harris 167. Equity is part of the law of Pennsylvania, and is administered through common-law forms; for the greater period of her history could only be so administered. The vesting of separate equity jurisdiction in the courts has not changed the law in this respect. Hence on a bond or covenant to indemnify against claims the obligee is entitled to sue as soon as a claim is made and need not wait until judgment is recovered against him or even until an action is commenced: Miller v. Howry, 3 Penna. R. 374; Bank v. Douglass, 4 Watts 95; Stroh v. Kimmel, 8 Watts 157; Leber v. Kauffelt, 5 W. & S. 440; Carman v. Noble, 9 Barr 366.
The 5th assignment of error complains of the refusal of, the court to affirm the defendants’ 4th point, which was “ that the equitable plaintiffs held the lease subject to all equities between the legal plaintiffs and defendants at the time of bringing this suit.” In the abstract this proposition was certainly true, but it was entirely irrelevant to any question before the jury. No evidence had been given of any equities, unless the defendants considered their alleged set-off to be. such, and that as we have seen was no equity at all; for the defendants had precluded themselves by their own agreement from setting it up against the legal plaintiffs.
The remaining errors complained of in the 6th and 7th assignments may be considered together: namely, that the directors of the corporation, plaintiffs, had no power to make the lease sued on. It is supposed that a company chartered for the purpose of manufacturing and refining oil cannot lease its entire property *382and so defeat the very purpose for which its charter was granted. But corporations, unless expressly restrained by the act which establishes -them or some other Act of Assembly, have and always have had an unlimited power over their respective properties, and may alienate and dispose of the same as fully as any individual may do in respect to his own property. Hence an insolvent corporation may make a general assignment for the benefit of its creditors, and this power may be exercised by the directors, unless special provision to the contrary is made in the charter : Dana v. The Bank of the United States, 5 W. & S. 223. If they can alienate absolutely, they may lease, which is but a partial or temporary alienation. Omne majus continet in se minus.
Judgment affirmed.