Duff v. Hobbs

Norton, J. delivered the opinion of the Court Field, C. J. concurring. This is an action on an appeal bond in which the defendants claim the right to offset the balance of a decree in a foreclosure suit, which they have purchased and now hold, against James R. Duff and James T. Ryan, and eleven other defendants in that foreclosure suit, upon the ground that James R. Duff and James T. Ryan are the parties beneficially interested in the claim in suit in this action, and that they and all the other eleven defendants in the decree sought to be offset are insolvent. [658] The statute of this State applicable to this subject provides that a counter claim, which may be set up in answer, shall be one existing in favor of the defendant against a plaintiff, between whom a several judgment might be had in the action, and (hat if the counter claim exceeds the amount of the plaintiff’s claim, the jury shall find the amount of the recovery, and judgment shall be given for the defendant for the excess. (Civil Prac. Act, secs. 46, 47, 176, 199.) Under these provisions of the statute, the set-off proposed in this case cannot be allowed; as well by reason of the provision of section forty-seven, which requires it to be between the parties to the record, as of the provisions of sections one hundred and seventy-six and one hundred and ninety-nine, which would require a judgment for the excess to be given against the plaintiff, although as against him it is not claimed that the defendants have any demand. The cases of Wheeler v. Raymond, (5 Cowen, 231) Warner v. Barker (3 Wend. 400) and Spencer v. Babcock (22 Barb. 326) are to this effect. By section five of the Civil Practice Act it is provided, that in the case of an assignment of a thing in action, the action by the assignee shall be without prejudice to any set-off or other defense existing at the time of or before notice of the assignment. In such a case if a set-off should be allowed, it would be in conflict with the provisions of section forty-seven, and hence it has been decided that in such a case the set-off cannot be pleaded as a counter claim, but must be set up as an equitable defense, on the ground that the assignee takes the demand subject to an existing equity. (Ferreira v. Depew, 4 Abbott’s Pr. R. 131.) Whether this be the proper answer to what otherwise might appear to be a conflict between these sections, or whether section forty-seven must be considered as subject to an exception in the case mentioned in section five, is not important in this case, because this case is not one falling within the provisions of section five. The plaintiff is not an assignee, and at the time his interest in. the bond in suit accrued —that is, at the time the bond was executed, as well as at the time when the defendants’ liability on it became fixed, the defendants had no defense, or counter claim against it, whether considered as the property of the plaintiff or of James R. Duff and James T. Ryan, the defendants at that time not having become the owners of the demand now sought to be offset. [659] It is insisted, however, that the insolvency of the beneficial owners of the demand in suit, and against whom the defendants have their claim, is an equitable ground, independent of and beyond the right given by the statute upon which this offset may be allowed. Under .the old system by which legal and equitable rights were administered by different tribunals, Courts of Equity did in some cases allow or enforce an offset which was not within the provisions of the statute, and under our present system an equitable defense may be interposed by answer to a legal action. But the matter set up in the answer in this case is not a defense equitable or legal, in any other sense than as being purely an offset, and as such it meets an insuperable obstacle in the provisions of the statute which require offsets to be between parties to the record. Those statutory provisions which have introduced the new system of proceedings under which equitable defenses are allowed to be made in legal actions, are portions of the same law which defines the conditions under which alone an offset can be made. They are the different sections of the Civil Practice Act, and there is no authority for holding that the sections regulating counter claims were not intended to apply, as by their terms they do apply to all actions that can be prosecuted under that Act. No exceptions are contained in the statute in favor of offsets affected by equitable circumstances. It may be that in providing but one mode of proceeding, and in taking its provisions partly from each of the old systems, some of the provisions taken from statutes regulating proceedings at law are, from inadvertence, left too restricted to embrace all the cases to which they might properly have extended, and on the other hand it may be that it was deemed expedient to leave the proper relief in some cases of a complicated character to be obtained by a distinct action. But whatever the reason, the statute as the Legislature have enacted it must control the proceedings of the Court. The two cases cited by the defendants, decided by this Court, (Naglee v. Palmer, 7 Cal. 543, and Russell v. Conway, 11 Cal. 93) do not stand in the way of this view of the law. In deciding the case of Naglee v. Palmer, the Court say: “ It may be granted, that if this were an action at law, and not a proceeding in chancery, the defendant would not be entitled to his set-off. But this is a proceeding in [660] equity; the defendants have been brought in by the plaintiff, and it is competent for the Court to administer that substantial relief to which the parties show themselves entitled.” The case before us is what would be called an action at law. If it should be said that there is no proper foundation under our present system for the distinction here taken between an action at law and a proceeding in equity, then it may be said that the case was wrongly decided and is not authority on this point. In the case of Russell v. Conway, the offset was not brought forward by way of answer to a complaint, but by a distinct action, and thus was not obnoxious to the objection arising from the restrictions of the statute. The view we have taken of this point renders it unnecessary to decide whether the insolvency stated in this case creates such an equity as is claimed, or whether the other facts stated show that the plaintiff is not the real party in interest. Judgment affirmed.