Court Opinion

ID: 6573194
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:31:54.054233+00
Date Added: 2024-06-11T15:56:58.975253
License: Public Domain

The opinion of the court was delivered by
Redfield, J.
The object of this bill is to obtain a set off of the separate debt of Dana against a judgment, which he has recovered against the orator and Baxter. The fact that the claim, out of which the judgment arose, was the joint debt of Downer and Baxter, is conclusively settled, as to these parties, by the judgment itself. The parties being the game here as in the suit at law, their different position, as to being plaintiffs and defendants, will not enable them again to litigate that question.
The facts in the case, which are admitted substantially in the answer, are, that Downer and Baxter borrowed the money of Dana, for which the judgment is rendered, upon their joint credit, but for their separate use; and that the money was applied to their separate use in the same proportion set forth in the bill. So that now, in fact, that portion of the judgment, which the orator prays to have set off against his private demand upon Dana, is his own separate debt to pay, for which Baxter is merely surety, as between them, — and if Baxter is compelled to pay it, he will immediately recover it of Downer. In addition to this, Dana is, confessedly, wholly insolvent; so that, if Downer is compelled to pay the judgment, or if Baxter is compelled to pay it, that portion of it, which belongs to Downer to pay, becomes a dead loss to Downer, and a net gain to Dan.a, This is a result which a court of equity, acting upon principles of natural justice, would desire to prevent, if it could be done without trenching upon established principles of law. *522These debts are, in fact, mutual, so far as Downer’s portion of the judgment is concerned, although not so inform.
I have no disposition to go much into detail into the principles, which have governed courts of equity in decreeing a set off of debts, which could not be set off at law. It is certain that such a department of the jurisdiction of courts of equity has been known, long anterior to the English statutes of set off, and that, since the passing of those statutes, it has not wholly ceased. Before the existence of those statutes, it seems to have been confined to the setting off of debts, when there was supposed to have been some mutual credit, some understanding that the one debt should go against the other. This was adopted from the rule of the civil law, called compensation, by which, whatever might be the extent of the dealings between the parties, only the final balance was treated as a debt. The same rule always obtained at law, in regard to a current account between parties. If one party sued for any portion of the account, the other was at liberty to go into the examination of the whole account, and show that nothing was due; and this might be done without the necessity of a plea of set off. Dale v. Sollet, 4 Burr. 2133. Green v. Farmer, Ib. 2214.
Since the statutes of set off, and those of bankruptcy, courts of equity, it is admitted, have, in decreeing a set off, usually followed the same rules adopted in courts of law. But there have been some deviations, in order to prevent gross injustice. The doctrine of compensation, of the civil law, is one of absolute justice, that there should be a final settlement of all dealing between the parties, and the one finally in arrear should only be considered debtor, and to the amount of the balance only. But this has never been attempted to be enforced to the full extent; for if that were to be done, the entire litigation of matters of debt would be superseded in courts of law, and be transferred to courts of equity. All that has been attempted has been, to effect this, when manifest injustice would otherwise ensue. Accordingly courts of equity have decreed a set off,
1. When there is some connection between the demands, as by mutual debt, or credit, each looking to the debt of the other for compensation. The set off has often been decreed, in such cases, when the only evidence of this mutual credit resulted from the *523course of dealing between the parties. Hankey v. Smith, 3 T. R. 507, and note. Olive v. Smith, 5 Taunt. 60, [1 E. C. L. 16.] These last are decisions under the bankrupt laws;' but those acts only go to the extent always recognized in courts of equity. 2 Story’s Eq. 659, 660. Lanesborough v. Jones, 1 P. Wms. 326. When there, is an express agreement to set off debts, courts of equity will always enforce a specific performance of such agreement.
2. Although a court of equity will not, any more than a court of law, allow a set off of joint debts against separate debts, yet there are many exceptions. One important exception is; where the debts are in reality mutual, although not so in form ; as where one of the joint debtors is a mere surety. That we consider to be the present case, to the extent the set off is asked. Dale v. Cook, 4 Johns. Ch. Rep. 15, on the amended bill. 2 Story’s Eq. 664.
It is not necessary to discuss the question how far the insolvency of one of the debtors may affect the equity of the set off. For one, as at present impressed, I cannot avoid the conviction that insolvency itself may be, in some cases, a very urgent ground' of interference by courts of equity to decree a set off, when such an interference does not lead into the settlement of Complicated dealings between the joint debtors. Simpson v. Hart, 14 Johns. 63. Peters v. Soames, 2 Vern. 428.
The rule adopted in this case is not so broad, in favor of equitable interference in decreeing a set off, as that laid down in Ferris v. Burton, 1 Vt. 439.
The .decree of the chancellor is affirmed, with costs.