Court Opinion

ID: 6502587
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:15:13.26859+00
Date Added: 2024-06-11T15:54:39.041313
License: Public Domain

ORMOND, J.
In dissenting from the opinion of the majority of the Court, I do not propose to enter upon an elaborate examination of the question. I have done so in the opinion previously delivered, and after an anxious reconsideration of it, I feel myself constrained to adhere to it.
I am thoroughly satisfied, that the principle which is made to govern this case, cannot be derived from the equity of our statute of set off, and has no foundation whatever in the «natural equity” to which the doctrine of stoppage, or compensation, owes its existence. On the contrary, I think it is demonstrable, that the rule which is made to govern this case, has its origin in the bankrupt law of England, by a liberal and equitable interpretation of the term « mutual credit,” to be found in that act, though wanting in the statutes of set off, which speak only of « mutual debts,” By an equitable interpretation of the bankrupt law, when debts exist between two persons, they are each supposed to give the other a credit, on the faith of the debt each owes the other, and this has been carried so far, as to be held applicable, when one of the parties was ignorant, that the other held a security upon him. [Hankey v. Smith, 3 Term, 507, in note.]
Lord Hafdwicke, who can’t very well be presumed tobe ignorant upon this subject, says, that before the passage of the act of the 5 Geo. 2, no such right existed. He commences his judg*228ment, by saying, “ No case has been cited to me, either on one side, or the other, and therefore I must make a precedent,” and after stating the case, to be, that of a debt not due, which was offered against the assignee of a bankrupt, as a set off, and after reciting the act of 5 Geo. 2, proceeds to say: “ Before the making of this act, if a person was a creditor, he was obliged to prove his debt under the commission, and to receive perhaps only a dividend of2s. 6d. in the pound, from the bankrupt’s estate, and at the same time pay the whole to the assignee, of what he owed to the bankrupt; to remedy this very great inconvenience, and hardship, the act was made.” He concludes, that it is a case of «mutüal credit,” within the equity of the statute.
Since that time, the construction of the statute has been generally in accordance with the rule thus established. But it appears to me, it can admit of no controversy, that without the aid of the statute, no such decision could have been made. Such a consummate master of equity, as Lord Hardwick, certainly knew what had previously been the rule of decision, and if he was ignorant, the able counsel practising before him were equally so, as they could cite no case in point. Some few, straggling, badly reported cases, there were to be sure, not referrable to any established head of equity. These remarks do not apply to Lanes-borough v. Jones, 1 P. Will. 326, which is put by Lord Chancellor Cowper, expressly upon the term mutual credit,” in the 4th Anne, c. 17, and in that case the debts appear to have been due on both sides.
So in Jeff v. Wood, 2 P. Will. 1291, the stoppage was allowed, because there were « mutual debts,” and the balance was decreed ; the Master of the Rolls agreeing, that in the absence of any agreement to that effect, there could be no stoppage, unless the debts were due, when the balance only would be the true debt. The later English authorities confirm this doctrine, and I will merely refer to the cases cited by Judge Story, 2d Com. on Eq. 658, 664.
The case Ex parte Deeze, 1 Atk. 228, was evidently determined upon the usage of trade, by which the « packer” of the goods, retained a lien upon them, for the payment of the price of the packing. Such being the case, Lord Hardwicke asks, « what right has a Court of Equity to say, that if he has another debt due to him from the same person, that the .goods shall be ta*229ken from him, without having the whole paid ?” He concludes by admitting, that if there had been no bankruptcy, in an action for these goods, the debt could not have been set off, yet that it might come within the extended meaning of the term mutual credit.
The case Ex parte Hale, cited from 3 Vesey, 304, was only cited by me to show, that even under the bankrupt law of England, a set off in bankruptcy, must be an absolute, and not a contingent liability. The argument then made, did not rest on that case for support. We have no bankrupt law here, under which such an off set can be made, whether contingent or absolute! That .case was adduced, as fortifying the point, not as essential to the proposition maintained. •
Insolvency, is doubtless a sufficient reason in many cases for the interposition of a Court of Chancery, and as such, has been frequently recognized in this Court — as, where an insolvent man, is seeking to coerce a debt from one, to whom he is indebted, but which, from some cause, cannot be set off at law. As between the debtor, and creditor, there can be no doubt of the power, and the duty of Chancery, in such a case to interpose. But where third persons have acquired rights, different considerations arise, and according to my notions of equity, it would be unjust in a Court of Chancery to interpose, and deprive an assignee of his legal rights, unless there is a natural equity growing out of the transaction itself, of which it is just that the debtor should be permitted to avail himself,
I can see none such in this case. The debts are not mutual in any sense of the term, nor can there be any pretence of an agreement for stoppage; nor is there any equity inherent in, or growing out afthe debt, due from Rhodes to the Rail Road, which a Court of Equity can give effect to. It is the naked case of a set off, allowed against the assignee, which had no existence until long after the debt matured, which the debtor owed the Company, and which had been before assigned.
I do not deny that the Virginia, and Kentucky cases, do support the opinion pronounced. With all respect for those enlightened tribunals, I would insist, that they are not based upon the rules of equity, as administered in England, independent of the statute of bankruptcy; but are founded, as is shown by the cases *230themselves, upon decisions growing out of the bankrupt acts-That these acts introduced a principle, únknown before to the English Chancery, can, I think, neither admit of doubt or controversy.