Potter v. Burd

The opinion of the Court was delivered by Sergeant, J. —With every disposition to sustain the rights of defalcation and set-off, as calculated to prevent multiplicity of suits, and to do justice between parties, care must be taken not to lose sight of all rules and forms of proceeding, and thereby produce uncertainty and confusion. Our defalcation act of 1705 is a just and liberal one: its provisions are sufficiently broad to enable the courts to effect every desirable object; but it does not enable a defendant who is sued as administrator to acquire by purchase or otherwise, a claim against the plaintiff, and defalk that from the plaintiff’s demand. In Darrach’s Executors v. Hay’s Administrators, 2 Yeates 208, the defendant’s administrator purchased from the holder a check drawn by the plaintiff’s testator, and attempted to set it off against the plaintiff’s claim on the defendant’s intestate; but it was not allowed. The court said it could not be declared on as a debt due to the intestate, and could not be pleaded as such in this suit. It became the private debt of the administrators. It was clearly settled that the debts which can be set off must be such as are due in the same right. If the defendants, who are now sued as the administrators of M’Gregor, had obtained an absolute assignment of the recognizance given by the plaintiff to secure the payment of money to Rose Conner and Alexander M’Gregor, it would have been a private debt of their own, due to them in a different right from that for which they were sued, and therefore not a subject of set-off or defalcation in this suit; but the defendants have in fact obtained no legal or equitable assignment of the recognizance; they paid no consideration for it, nor could they do so as administrators: they could not acquire it as assets, nor part with the money of the estate in such a traffic. The transaction is stated to be, that Mr Penrose, who was administrator of Alexander M’Gregor and also of Rose Conner, acting under authority from their heirs, gave notice to one of the defendants not to pay the plaintiff, and agreed with that defendant that he should have the use of this recognizance for the purpose of making a defence, and verbally assigned it to him for this purpose only; [19] the defendant to account with the owners of the recognizance for whatever amount he should succeed in defalking from the plaintiff’s demand. So that the case is of an authority or power given by the creditors to the defendant to set off the debt in this suit: if he succeeded, to account to them for so much; if not, the recognizance to remain the property of the recognizees. It would be carrying the doctrine of set-off a great deal further than it has yet been, if the defendant, without acquiring a right in the debt due by the plaintiff could thus, under a power from the plaintiff’s creditor, defeat the present claim on the ground that the plaintiff owed that creditor a sum of money. The rights and claims of third persons, not parties to the suit, cannot be tried in this way, under a mere power to the defendant. There ought at least to have been somé definite transfer, otherwise the defendant acts only as the agent or servant of another. In Wolf v. Beales, 6 Serg. & Rawle 244, in a suit on a bond given by the defendant W. to the plaintiff B., W. was not allowed to set off a bond previously given by B. and another to J. P., conditioned to pay a sum of money to J. P. for the use of E. B., the defendant not having the legal right to the bond (not being given to assignees), and the equitable property being in another, viz. E. B. So here, the defendant has no legal assignment of the recognizance, but a mere authority to use it, and the equitable right is in others. It is true it is sufficient for a set-off when debts are in the same right, that the defendant is either legal or equitable assignee ; Murray v. Williamson, 3 Binn. 135: but he must be one or the other; not a mere agent or trustee authorized to collect the money or use the chose in action for the benefit of third persons. It is conceived by the court below, that there was such an equity in the defendant’s claim, that chancery would enjoin the plaintiff from recovering in this suit: that the real and personal estate formed one fund, of which the plaintiff had received his one-third, and therefore he ought to recover no more; that he and his sureties were insolvent, and the land much depreciated in value, so that the security of the two other heirs'was likely to prove insufficient. But I know of no rule by which a court of equity would enjoin a plaintiff from recovering his debt because he had not paid, or is presumed to be unable to pay a debt due by him to third persons. It would strip him of the very means of paying his debts. Nor can I perceive how the proceeds of the real and personal estate can be said to have constituted one common fund, of which the plaintiff has already received his third or more. The plaintiff did not receive the land as heir, executor or trustee, he took two-thirds as purchaser; the remaining one-third was taken in the right of his wife, who was one of the heirs, and it remained hers, not bound by the recognizance. The land was taken in 1817, and it is said it is now much depreciated ; but whether by the fault of the plaintiff or by the fall of real estate generally, does not appear. If the latter is the cause, the equity of the plaintiff is equal to that of the recognizees, though in law he [20] would be bound to pay the full amount of the purchase money. The equity of the wife and her representatives is in no respect inferior to that of the other heirs; the land retained by her has equally depreciated in the hands of her representatives: her children would in equity be entitled to support from it after the death of the husband ; and if the other heirs are to be compensated for their loss by recurring to the personal fund, the children would also be entitled to a compensation out of it. How are these respective equities to be adjusted 1 As to the rents and profits, if the plaintiff has received them, it must have been by the laches of the recognizee in not proceeding to sell the land for the debt and interest. There is no equity in these creditors lying by for years, and then urging against the plaintiff the depreciation of the land, and his receipt of the rents: nor in the recognizees abandoning the land, which was the main security, and, on vague evidence of its value, and of the insolvency of the plaintiff and his sureties, seeking indemnification out of a fund never contemplated by any party when the land was taken at the valuation. The recognizees stand in no different relation from any other creditor to whom,a debt has been incurred on the strength of securities which may prove doubtful or insufficient.: they cannot, on that ground, prevent the plaintiff from recovering his lawful debt; nor would equity interpose to prevent him. If such an interposition is countenanced on behalf of one creditor, a second or a third may claim it, and who shall settle their respective equities'? What court can unravel the intricacies of such complex litigation, or afterwards ascertain what has been decided ? The only other error contended for, or sufficiently set out in the record, is, the admission by the court below of Mr Penrose as a witness for the defendant. Mr Penrose states in his evidence, that the agreement he made with the defendants was, that the defendants, if the defalcation succeeded, were to account to the heirs. If so, he was not to receive it as administrator, and had no interest in it. If he were entitled to receive it as administrator, and therefore had an interest in the commissions in case of success, he would also, in case of failure in the defence, Have a claim on the recognizance: so that he is interested in either event, and it is impossible to weigh the preponderance on one side or the other: that goes to the credit of a witness. Judgment reversed, and a venire facias de novo awarded.