Court Opinion

ID: 3385200
Source: CourtListenerOpinion
Date Created: 2016-07-05 18:38:48.597877+00
Date Added: 2024-06-11T13:52:35.671917
License: Public Domain

I think the decree appealed from should be reversed. The appeal was from a final decree adjudicating the amount due upon a promissory note executed by J. I. Kellums in favor of Charles W. Rinehart for the sum of $2,725.00, dated July 11, 1924, payable five years after date and assigned by Rinehart to Inland Realty Corporation, a foreign corporation, and enforcing a mortgage lien upon certain lands located in St. Lucie County, executed by Kellums to secure the payment of the note.
F. G. McMullen and his wife were made defendants in the foreclosure proceeding and they took the appeal. In the answer which they interposed to the bill it was averred that McMullen acquired the title to the land by deed from J. I. Kellums, the mortgagor, in which it was agreed that McMullen did assume and agree to pay the note executed to Rinehart and secured by the mortgage; that Rinehart was indebted to McMullen in an amount greater than the debt to Rinehart from Kellums which McMullen had assumed to pay in acquiring the land and that such debt of Rinehart to McMullen the latter was entitled to offset against the debt which he had assumed to pay to Rinehart; that Rinehart assigned the note and mortgage to the complainant, *Page 487 
Inland Realty Corporation, after maturity; that the assignment was made by Rinehart to the complainant without consideration and for the purpose of avoiding his debt to McMullen, which latter could setoff against the debt evidenced by the note to Rinehart which McMullen had agreed to pay.
It was also averred that the complainant was a foreign corporation not authorized to do business in this State; that no consideration was paid for the note and mortgage and the complainant merely participated in the transaction to aid Rinehart to avoid his debt to McMullen and that Rinehart was at the time of the institution of the suit the true owner and holder of the mortgage.
This defense by McMullen, if it constituted a defense to the foreclosure proceedings, was upon motion of the complainant's solicitors stricken from the answer. The case then proceeded to the taking of evidence and the chancellor rendered the decree from which the appeal was taken.
Appellants contend that they should have been allowed their setoff against the debt as it was sought to be enforced by the complainant.
The note and mortgage were assigned by a written instrument executed by Rinehart to the complainant on April 9, 1930, nearly seven months after maturity of the note. The complainant is a foreign corporation not authorized to do business in Florida and whose charter purports to authorize it to acquire lands and property in Florida.
The order of the chancellor striking those portions of the answers interposed by Mr. and Mrs. McMullen was equivalent to holding that the facts averred therein constituted no defense because the motion to strike such portions of the answer admitted the facts averred.
While the setoff claimed by McMullen is said not to be *Page 488 
connected with nor to have grown out of the original transaction between Kellums and Rinehart and would not therefore constitute a valid defense in law if Kellum had acquired the claim from McMullen against Rinehart, would not equity permit McMullen, who assumed the Kellum debt to Rinehart, to set off Rinehart's debt to McMullen if Rinehart had sought to enforce the line against McMullen who had acquired the title to the land? And if such a defense would be allowed to McMullen as against Rinehart would it not be available against the complainant, who is not only a holder in due course, according to the averments of the answer, but an instrument merely by which Rinehart seeks to avoid his debt to McMullen.
A foreign corporation, not authorized to do business in Florida, not having complied with the requirements of the statute, Sections 6026, 6027, C. G. L., 1927, is utilized as analter ego by the owner of the note and mortgage to enforce the lien upon property to the owner of which the real owner of the note owes a debt which he refuses to pay. It is a species of fraud which it seems to me a court of chancery will not countenance if upon no other ground than that the complainant does not come into court with clean hands. McMullen by assuming to pay the Kellums debt to Rinehart had assumed the obligation of a principal debtor to Rinehart. See Slottow v. Hull Inv. Co., 100 Fla. 244, 129 South. Rep. 577; Whitfield v. Webb,100 Fla. 1619, 131 South. Rep. 786; Marler v. Parker, 101 Fla. 780, 135 South. Rep. 400; Berns v. Harrison, 100 Fla. 1105, 131 South. Rep. 654; Ackley v. Noggle, 97 Fla. 640, 121 South. Rep. 882; Proctor v. Hearne, 100 Fla. 1180, 131 South. Rep. 173; Brownson v. Hannah, 93 Fla. 223, 111 South. Rep. 731.
The principle of setoff in equity was a recognized doctrine before the statute made setoff available by law. Courts of *Page 489 
chancery sought to adjust in one suit all conflicting demands between the parties which were readily capable of such adjustment where from the relations and situations of the parties and from the nature of their mutual claims equity and justice seemed to require a complete and speedy settlement. Consequently the jurisdiction of equity is not based upon any statute of setoff and would exist as well without any such statutes as it now does and would not be in any sense affected by the repeal of those statutes. Courts of equity, however, in the main follow the same general rules as a court of law in respect to setoff except where there is some element in the situation which brings the case within the general jurisdiction of equity and justifies granting the relief beyond what a court of law would grant. 24 Rawle C. L. 804 and authorities cited; 34 Cyc. 636.
The elements which exist in this case and which would seem to commend themselves to equitable consideration are first, the existence of mutual credits between Rinehart and McMullen — the acknowledged debt of the latter to Rinehart and of Rinehart to McMullen — all liquidated in character; second, Rinehart's agreement with McMullen to extend the due day of the Kellums note after McMullen bought the land and agreed to pay the Kellums note to Rinehart (That averment was contained in the answer.); third, the title to the land being in McMullen who thereby became a necessary party to the foreclosure proceedings and who had expressly assumed the debt to Rinehart; fourth, the use by Rinehart of a foreign corporation not authorized to do business in this State as an agency to enforce the mortgage and debt which was his exclusive property and, fifth, the character of McMullen's claim against Rinehart being in the nature of an accounting for the misapplication by him of *Page 490 
funds intrusted to him by McMullen for a certain purpose but which Rinehart diverted to his own use.
Appellants also contend that the complainant is without standing in the courts of this State because it has refused to comply with the statute requiring it to file in the proper office a copy of its charter and receive a permit to transact business in the State and pay the charter fee required. Secs. 6026-6027, supra. Also Section 6029, C. G. L., 1927, which provides that no action shall be maintained or recovery had in the courts of this State by any such foreign corporation so long as it fails to comply with the provisions of "this Article."
The complainant was not a banking or trust company, therefore does not come within the exceptions covered by Section 6032, C. G. L., 1927.
In this case the corporation's right to bring an action in the courts of this State is specifically challenged; therefore, the cases of Farrell v. Forest Inv. Co., 73 Fla. 191, 74 South. Rep. 216; Ronnoc Grove Co. v. Coe-Mortimer Co., 83 Fla. 370, 91 South. Rep. 265, do not apply, as those cases hold that where the defense is not made it is waived, but they clearly intimate that the defense is a valid one when specially pleaded. In the Farrell case the bill expressly alleged that the corporation was authorized to do business in the State and the answer did not deny the allegation.
I think that as the point was specifically made in the answer it was properly pleaded and should not have been stricken.
For the above reasons I think the decree should be reversed.