Foot v. Ketchum

The opinion of the court was delivered by Bennett, J. This case has come before us by an appeal from' a decree of the chancellor of the third judicial circuit, and we are called upon to revise his proceedings. In February, 1836, the oratrix was indebted to Ketchum & Shaw, in about the sum of four hundred dollars, and gave them her note payable to their order on demand. The note has been prosecuted to final judgment, and the object of this bill is to procure a set-off of a claim which the oratrix has [267] against Joseph C. Ketchum, in payment of the judgment on the note. The first question which presents itself, is, whether the oratrix is entitled to the prayer of her bill, as against Ketchum & Shaw. We think it is well established by the testimony, that when the note was given, it was understood by the parties that it should become the private property of Joseph C. Ketchum. The testimony of Chas. K. Foot is full that such was the previous understanding between the oratrix and Mr. Shaw, and that it was expected that her claims against Joseph C. Ketchum would be applied on the note. The evidence is very ample that the note did, in fact, become the private property of Ketchum; and no question is made upon the evidence as to his insolvency, and indeed none can be made; and the note remained in the possession of Ketchum, up to the time he absconded in November, 1837. Though the rule in chancery, as well as at law, to authorize a set-off requires the debts to be between the same parties, yet, if the demands are, in reality, mutual, though not nominally so, and equity requires a set-off to be made, chancery will make it. It was so done in the case of Ferris v. Burton, 1 Vt. 439. This is according to the usual course of chancery proceeding; and it is too clear to admit of debate, that, as between the parties to the original bill, this is a proper case for a set-off.' But the important question arises on the cross bill of Alien Ketchum, who claims to come in as the assignee of Joseph C. Ketchum. Has he an equal, or a superior equity to the oratrix, which will enable him to defeat the set-off? There seems, from the testimony, to be some uncertainty as to the manner, the object, and conditions, upon which the note of Mrs. Foot went into the possession of Allen Ketchum. It was not included with the other demands in the written assignment of Joseph C. Ketchum. It is not endorsed; neither is its transfer evidenced by any note or memorandum in writing. If Joseph C. Ketchum, as it is claimed, on the eve of his leaving the state, passed the note over to Mr. Drury for the benefit of the orator in the cross bill, yet it was to indemnify him against liabilities which he had previously incurred, and not upon any new consideration advanced at the time. It was long after the note had ceased to be current, and in violation of all good faith between Joseph C. [268] Ketchum and his mother-in-law, Mrs. Foot. No legal title to this note passed to Allen Ketchum, but, at most, only an equitable one ; and, standing upon his equity, he cannot be in a better condition than Joseph C. Ketchum himself, and no new equity is created by force of the assignment. It is a well settled doctrine that the assignee of a chose in action takes it, subject to all the equity existing at the time, in the original obligor or debtor. Turton v. Benson, 1 Peere Wms. 496; Coles v. Jones, 2 Vernon, 692; Murry v. Lylburn, 2 Johns. Chan. 442; Norton v. Rose, 2 Wash. R. 233, 254. Though the note was negotiable, yet, as it was not negotiated, and passed after it ceased to be current, the law merchant, as applicable to commercial paper, cannot aid the orator in the cross bill. All the claims of Mrs. Foot against Joseph C. Ketchum accrued before he parted with the note. When she consented to give the note, running to Ketchum & Shaw, she was assured the note was to become the private property of Ketchum ; that any claims which she might have against Ketchum might be brought in in payment of it; and, after the settlement between Ketch-um & Shaw, by which this note became the pi-operty of the former, and while he was renting the store of Mrs. Foot, and was the owner and holder of this note, there was an express agreement between them, that her claims should be set-off on the note, and that the balance, if any, should be paid out of the sale of her house, which Ketchum, at that time, contemplated buying. But the house was not sold ; and Ketchum rented the same up to the time he left the country. In addition to this, Ketchum is insolvent. Here, then, wo think there is an equity in Mrs. Foot to have the set-off made, superior to any which attaches to Allen Ketchum, and of which she ought not to be defeated by force of the assignment. It has been said, in argument, that while the note was in the hands of Allen Ketchum, Mrs. Foot promised to pay it; and that she has thus precluded herself from the set-off. But from all the testimony in the case, and the circumstances attending the transaction, the fact of such promise being understandingly made rests in doubt. If such promise was made, it most probably had relation to the payment of such balance as, in the end, might be found due. It is evident [269] that Mrs. Foot was not in a situation to liquidate her claims against Joseph C. Ketchum, at any of the interviews between her and Mr. Drury; and, it is quite probable, was not advised as to what the precise standing of their relative claims in justice should be. But if there had been an absolute promise to pay the note, still it would not operate as an estoppel to this claim for the set-off. It was without consideration, made after Allen Ketchum had taken the note, and while J. C. Ketchum was insolvent, and out of the country, and was, in no way, made a ground of action by Allen Ketchum. If he had been induced to act upon it to his prejudice, it might have merited a different consideration. Such evidence, when investigating the standing and amount of her account, could be urged with propriety upon the consideration of the triers ; and probably it might have been, in this very matter, before the auditors. Before a set-off can be made, it is necessary that the account should have been liquidated by a master, or by some other means. In the present case, Allen Ketchum, claiming to be the assignee of the note, commenced his action on the note, and, as matter of defence, Mrs. Foot filed her declaration on book against Joseph C. Ketchum, in off-set. The counsel for Allen Ketchum, who appear upon the record for Ketchum & Shaw, appeared, and submitted, in the declaration on book, to a judgment to account, and the matter went to auditors. The counsel for Allen Ketchum appeared before the auditors with the private account of Joseph C. Ketchum; and there was a full, and, for aught that appears, an impartial trial; and the allegation that the account allowed by the auditors was unjust and fraudulent is without evidence to support it. All the evidence relative to the accounts now before us was, or might have been, before the auditors. Mr. Drury might as well have been examined as a witness then as now, and, for aught that appears, was examined. The auditors were competent men, whose impartiality and integrity is not to be questioned. The claims of Mrs. Foot were defended against by the same counsel' who now appear to contest them, and who then had the same means of knowledge relative to them which they now have. In regard to the account of Mrs. Foot, which accrued be [270] fore the settlement of Ketchum & Shaw’s account by the giving of the note, and about which much has been said, the auditors find it was not included in that settlement. The settlement was made by Shaw, and it is quite reasonable to suppose that he might not settle the private accounts of his partner. ’ The auditors allowed to Mrs. Foot, for washing, over two years, for lamps, wood, making fires, and for watching and nursing, one hundred fifty-six dollars. Though this might seem to be a large sum, yet, whether reasonable or not, must depend upon the circumstances of the case. The physicians who attended Mr. Ketchum in his sickness, and who testified before the auditors, and whose testimony was taken in the chancery court, did not think it an unreasonable sum. They probably have as good a knowledge about it as any one. The report of the auditors, when returned to the county court, was accepted without objection. The auditors did, no doubt, what they thought right, though their proceedings are now strongly called in question ; but if we are not to consider the proceedings upon the declaration on book as conclusive — as res adjudicata — but that it is within the power of the court to open the accounts to further litigation before a master, still there would be no good reason to suppose that better justice would be done by the master, in this respect, than has been already done by the auditors. Indeed, considering there has been the lapse of about five years, since the accounts have been adjusted by the auditors, there is the less probability of a just result. On the whole, though it is possible injustice has been done, the court see no good reason for sending these accounts to a master ; and we are disposed to adopt the liquidation by the auditors. Nothing should be allowed to Mrs. Foot on the Perry note ; but she is entitled to have allowed her the small amount collected of Dunning. The amount, and the time of its receipt, are given in the testimony of Mr. Barber. This, added to the amount reported by the auditors, with the interest, exceeds the amount due on the note in controversy. The set-off was properly made by the chancellor; and as Allen Ketchum has resisted it against equity, he should pay costs upon his cross bill. The decree of the chancellor should be affirmed, with additional costs, and the cause is remitted to the court of chancery, to be proceeded with accordingly.