Court Opinion

ID: 6314751
Source: CourtListenerOpinion
Date Created: 2022-02-18 20:24:06.046783+00
Date Added: 2024-06-11T08:59:13.037329
License: Public Domain

The opinion of the court was delivered by
Gibson, C. J.
Evidence of the agreement between Frantz and Brown,' at the time of executing their bonds to Brechthill, was excluded against the bent of the judge’s inclination, on the authority of Davis v. Barr, 9 Serg. & Rawle, 137, by which he thought his judgment was controlled. It is there stated, that as regards transactions between the original parties, the assignee is to be affected only by defalcation or want of consideration: a construction which is found to be too narrow for the spirit of the act on which the question turns. ^ In that case the agreement did not touch the question of liability; and as tbe assignee is restrained by the terms of the act, np further than from recovering more than was due at the timé of the assignment, it was properly held on principles of *261general equity, that being a purchaser for a valuable consideration, he is protected, by want of notice, from all acts of the original parties that do not affect either the existence or the quantum of the debt. But it was supposed, that all acts that can affect the existence, or ■the quantum of the debt, are necessarily referable to failure of consideration, or. set off; the fallacy of which is shown by the present •case. The defendant offered to prove that he became surety for ' Frantz to Brechtbill, on the faith of an assurance, that whatever he might be compelled to pay in consequence, should be credited on his own bonds to Frantz. Here there was something more than a •contingent liability at the time of the assignment: so that- it is obvious the question turns not on set off, but an equity distinct from' it. Set off, itself, was originally nothing more than an equitable defence, which the legislature has thought fit, in plain and simple ■cases, to subject to the jurisdiction of the courts of common law, reserving to chancery, its original jurisdiction of cross demands, which do not fall within the statute. That such a statute should have been thought necessary here, where the jurisdiction of the courts is compounded of law and equity, is attributable to the unsettled state of the practice at the time. As their equitable jurisdiction is now settled, and universally understood, the courts would be competent to do complete justice, without the statute, as is shown by their having frequently gone beyond it; an instance of ■which is found in Childerston v. Hammon, 9 Serg. & Rawle, 68, where the defendants were permitted to defalcate a debt due to one. of them, although the terms of the act are applicable only to cases, where a balance may be found in favour of the party pleading the set off, and viewing/such a plea as across action, it certainly ought not to be maintained, so far as to produce a balance, by two for a debt due but to one. Set off then being out of the question, was there an equity arising from something in additioh to a contingent liability, at the time of the assignment! There was an express appropriation of the money to become due on the defendant’s bonds to indemnify him from loss, as surety for Frantz, which might undoubtedly be set up against Frantz, or an assignee having .notice of the fact. But the assignee is bound to take notice of every thing, as well a secret trust as want of consideration or set off, which may affect the existence of the debt between the original parties, unless the obligor, after inquiry made, has withheld the requisite information. What would have been the answer to the proper inquiry, here 1 Certainly not, that the bonds were payable at all events, but that the obligee held them subject to an agreement to indemnify the obligor for whatever he should be'compelled to pay for the obligee. In Davis v. Barr, the agreement being collateral to the existence of the debt, and there being nothing in the enquiry which the assignee was bound to make, to lead the obligor to the subject, the latter might with good faith, have admitted the *262debt, and yet been silent on the subject of the agreement; so that an enquiry about the only thing which the assignée is bound by the terms of the act of assembly to suspect, not being necessarily productive of information, in regard to the fact with which it was attempted to affect him, it was held that for neglecting to make the usual enquiry, he was not to be visited with notice of circumstances, to which it would not have led. Perhaps there will-be rarely, if ever, a case to which the principle of that decision will be applicable. In the case at bar, the assignee was bound to enquire into every circumstance that might be set up against payment of any part of the debt, and having failed to do so, he stands exactly in the place of the obligee. As therefore chancery would enjoin Frantz, or his assignee, from proceeding at law, while the defendant remains a loser, or in jeopardy ,as a surety, the evidence is admissible to enable a jury to produce the same result, by means pf a conditional verdict.
Judgment reversed, and a new trial awarded.
Rogers J. and Ross J, took no part in the decision,' not having heard the argument.