Nuzum v. Morris

Woods, Judge : Three questions are presented for our consideration : 1. Had the plaintiff the equitable right to set off against the judgment and decree recovered against him by Simpson — 563 — and assigned to Rawley Morris the amount of his decree against Simpson ? 2. If the plaintiff had such right and exercised it, is the defendant Morris entitled to be substituted to the rights of the plaintiff against the proceeds of the sale of the real estate of Simpson, sold and specially decreed to satisfy the same ? 8. Has the petitioner, M. B. Davis, the right to charge the proceeds of such sale with the amount of the judgment recovered by said Cotts against Simpson, in preference to the equitable right of Morris acquired by substitution to the rights of the plaintiffs against the proceeds of the sale of Simpson’s property ? Before considering these questions let us enquire whether the plaintiff’s bill in its present form can be sustained. The appellant’s counsel insists in argument that the bill, if it had been demurred to, was fatally defective, and that although no demurrer was interposed, the circuit court on the hearing thereof should for that cause dismiss it. The alleged defect in the bill is a matter of form rather than of substance. Its allegations set out a state of facts, which, if true, entitles the plaintiff to the aid of a court of equity to set off the amount of his decree of $256.06 obtained against Simpson in satisfaction pro tanto of Simpson’s decree and judgment against the plaintiff, but it does not in fact pray for this specific relief, and instead of doing so the plaintiff contents himself with averring in general terms that the same was in fact done, and that the said judgment and decree of Simpson against him were thereby fully paid and satisfied ; whereas it clearly appears from the bill itself and from the exhibits therewith filed, that no such set-off’ was in fact made, but the whole matter, so far as the amount of the plaintifPs decree is concerned, rested upon an agreement to do so, made by the counsel of Simpson, without the authority or consent of the defendant Morris, which without his consent could not be performed and which never was performed; and praying that because of the matters alleged in the bill the defendants from all further proceedings to collect the balance apparently remaining unsatisfied upon said executions might be forever enjoined. It is insisted by appellant’s counsel, that the bill — 564 — only shows a state of facts, in which he might have all the relief prayed for upon a motion to quash the executions by proving the facts alleged. It does not follow that, because an execution may be quashed, the deiondant may not in many cases upon the same state of facts also have the aid of a court of equity to prevent great loss or injury which might result from a forced sale of his property, before his motion co.uld be heard and determined. Admitting for the sake of the argument only, that the facts alleged in the bill are true as stated, and that upon a motion to quash said executions they could be proved, it is by no means certain that they would be sufficient to authorize this Court to sustain the motion to quash. While the executions issued in the name of Simpson alone, he never had any lawful control over them. The debts specified therein were assigned to Morris long before any of the executions issued, and no agreement made or executed could operate to discharge the same without his consent. The equitable title to the debts mentioned in the executions belongs to Morris, while the naked legal title thereto continued in Simpson, and this fact was well known to the plaintiff. So far from the balance of said debts having been paid as stated in the bill, it is certain that the matters between the plaintiff and the defendants remained precisely as they were before the alleged settlement was made. Regarding the substance rather than the form of the bill we find that, courts of equity are authorized to set off a judgment or decree rendered against one defendant in favor of a plaintiff against another decree rendered in favor of such defendant against such plaiutiff, when the plaintiff’s bill sets out such a state of facts, as would entitle him to pray that such set-offs should be made, and that such defendant be enjoined from all further proceedings to collect from such plaintiff the amount of his decree against him. If having clearly shown himself entitled to this relief and he has failed in the prayer of his bill to specifically ask for it, the Court will, if the proofs warrant it in doing so, grant this under the prayer for general relief. The defendant Morris obtained his assignment January 24, 1882, on which day the plaintiff had notice thereof. . The plaintiff’s decree against Simpson obtained on May 31, 1881, under which his real estate was sold on December 13, — 565 — 1881, lor $602.00, was rendered in a suit in which said Morris was a co-defendant. By the decree confirming said sale the court directed the commissioners, who made the same, to collect and apply the proceeds thereof to pay the expenses oí the sale amounting to $50.55 and the costs of the suit, the amount of which does not appear, and the residue to apply ratably to the satisfaction of the said amounts decreed to the plaintiff and said Eakin, and then to pay Cotts the amount of his judgment. Assuming that the down payment of $150.50 will be more than sufficient to pay said costs and expenses, there remains of said proceeds $451.50 with interest from December 13, 1881, applicable to the payment of the sums decreed to be paid to said Eakiu and the plaintiff, amounting on February 4,1882, when the sale was confirmed, to the sum of $266.64 each, which will leave unpaid upon the plaintiff’s decree against Simpson only the sum of $39.00 with interest from February 4,1882, until paid, and whatever right of set-off the plaintiff may have for his whole decree, will equally apply for the security of the said sum of $39.00 and its interest. Why this purchase-money has not been collected and applied as directed by the decree confirming the said sale does not appear. The order suspending the execution of the decree of May 31, 1881, expired by its own limitation at the next term of the circuit court, and was never enlarged nor reversed, and if there ever was any doubt on that subject it was removed by the decree confirming the sale and directing the commissioners to collect and disburse the proceeds thereof. Had the plaintiff the right to set off the amount of his decree against Simpson against the amounts due from him on said judgment and decree assigned to the defendant Hawley Morris? Whatever may-have been its origin, the law. authorizing the court to set off one judgment against another, where they are due to and from the plaintiff and defendant therein in their own right, is now too well settled to be called .in question. This equitable practice of setting off one judgment against another under such circumstances has been permitted even in the common law courts of England for more than a hundred years. Since 23 G-eo. IT. nearly all the cases have uniformly allowed demands arising upon opposite judgments to be set off one against — 566 — the other. Bull. Nisi Prius 356; Wills v. Crabb, E. 24 Geo. II, Ibid. A plaintiff being non-suited the defendant took out a fi. fa. and levied part of the costs, and at the same time took out a ca. sa. for the restand took the plaintiff in execution which being irregular the court set it aside with costs, the defendant moved that the proceedings against him on account of these costs should be stayed upon his entering up satisfaction upon the judgment obtained by him for the sum, at which the costs for the irregularity were taxed, and upon showing cause the rule was made absolute. The same was done in Scoffin v. Robinson, at E. T. 26 Geo. II. 2 Blackst. 826, and also in Thrustout on demise of Barnes v. Crafter, 2 Blackst. 826, T. T. 12 Geo. III. See Glaister v. Heuer, 8 T. R. 69; Barker, administrator v. Braham, 2 Blackst. 896; Talbert executor v. Harrison, 1 Baily 599; Mitchell v. Oldfield, 4 T. R. 123; Nunez v. Modigliani, 1 H. Blackst. 217; Montague Law of Set Off 5, 6 and 7; Burns v. Thornburg, 3 Watts. 78; Tucker’s Com’s, Book 3 chap. 7 p. 110; 1 Esp. 241. In Mitchell v. Oldfield, supra, it is said that the authority of the court to set off opposite judgments did not depend on the statutes of set off but on the general jurisdiction of the court over the suitors in it; that it was an equitable part of this jurisdiction and had been frequently exercised. The same doctrine is strongly and clearly announced in Williams v. Evans, 2 McCord, and in 3 Watts, in Tuck. Corn’s, and in Montague on Set-Off, supra. The courts have been gradually extending this equitable remedy. (.Barker v. Braham, supra); and opposite demands arising upon judgments may on motion be set off against each other, whenever such set-off is equitable, though the judgments are in different courts, and though all the parties to the different records are not the same. Montague on Law of Set Off, Tucker’s Com’s, supra. Justice Nott, delivering the opinion of the court in Williams v. Evans, 2 McCord, said : “This is a common law power, and is not derived from the act authorizing parties to set off mutual debts, and as it is an equitable part of its jurisdiction it ought to be so exercised as to do equity, and not sanction fraud, and a person who wishes to have the benefit of it ought to avail himself of the earliest opportunity to make his application, and not delay until the interest of third persons have — 567 — become involved. In Tolbert, executor v. Harrison, O’Neal, Justice, delivering the opinion ot the court, said, that the “court is not bound by legal rules to set oft judgments in all cases where they are in the same right, that it is an equitable part of their jurisdiction, and ought to be so exercised as to do equity, and not to sanction fraud,” that all applications of this kind, as they are founded on no positive statute or any fixed rule which compels the court to grant them, are addressed to the discretion of the court; and in the exercise of this discretion, even when the set-off might be legally made, yet if the court sees that injustice will be done by granting the order of set-ofi it is uniformly refused. What we have thus far said applies to, and the cases cited arose in the common law courts. The subject of set-ofi is classed by Judge Story as an original source of equity jurisdiction; and chancellor Eldon, in Stephens ex parte, 11 Vesey 27, said: “ This court” (that is, the court of chancery as a court of equity,) “was in possession of it” (that is, the doctrine of set-ofi,) “as grounded on principles of equity long before the law interfered.” It has been the constant practice of courts of equity to allow equitable set-off against the plaintiff’s demands, which could not be made in a court of law, and indeed where the set-off is properly an equitable and not a legal demand, it can ordinarily be successfully made only in a court of equity. 2 Story Eq. Jur §§ 1431, 1436; Ex parte Blagden,19 Vesey 467. Since the statutes of set-off, of mutual debts and credits, courts of equity have generally followed the course adopted in the construction of the statutes by courts of law, and have applied the doctrine to equitable debts. As a court of equity has the same control over its decrees and the parties thereto, as has a court of law, it would seem upon reason and analogy, that it necessarily possesses authority to set oft opposite decrees between the same parties, wherever it will be equitable to do so, and where no injustice will be done by doing so. We conclude, therefore, that the plaintiff had the right to set off his decree against the judgment and decree of Simpson against him. The defendant Monis obtained his assignment of these claims with full knowledge of the plaintiff’s decree against Simpson, and by the assignment he obtained only such rights — 568 — as were vested in Simpson, and therefore tbe plaintiffs right to set-off his decree against these claims in the hands of Morris is not impaired by the assignment. But as the assignment was made in good faith the assignee acquired valuable rights of which the plaintiff cannot deprive him. The plaintiff has two remedies for the collection of his decree, or for nearly the whole of it. The first was the right to obtain satisfaction of the lands of Simpson, so far as the proceeds thereof extend, which we have already shown is sufficient to pay his whole demand except $40.00 or $50.00. This sale was made on the 13th of December, 1881, one month before Simpson obtained his decree against the plaintiff,- and before Simpson assigned said claims to Morris, who doubtless took the assignment in view of the fact that the proceeds of the sale decreed to the plaintiff would nearly if not quite pay off his demand. If then the plaintiff should elect to obtain satisfaction of his demand by setting it off against so much of the claims assigned to Morris, the latter would stand in the situation of a surety for and legally bound to pay the debt of another,-which was wholly or in part secured to the creditor by a lien on the debtor’s lands, and having paid the debt he will be substituted to all the rights of the creditor, and to the benefit of all securities held by him for the security of the debt. Rawley Morris in this event, would be entitled to receive such part of the proceeds of the sale of Simpson’s real estate, as under the decree in that cause is applicable to the plaintiff’s decree, and the same being first in order and entitled to be fully paid, before any part of such proceeds can he applied upon the said judgment of Cotts, it follows that it is wholly immaterial whether the plaintiff’s demand is paid out of the proceeds of said sale, or whether it be satisfied by setting off the same against the amounts due from him on said judgment and recovered against him by Simpson; for in the latter case the proceeds would be taken by Rawley Morris to the exclusion of Cotts and his assignee. Story Eq. Jur. section 1,237; 2 Tucker’s Com. 492, and cases cited; 1 Bart. Chancery Pr. section 4. But if this set-off be made, Morris would for another reason be entitled to be substituted to the right of the plaintiff to said proceeds. ' For the plaintiff has in effect two funds to — 569 — which he may resort for the satisfaction of his demand, while the plaintiff has but one, that is to say, the liability of the plaintiff upon said judgment and decree; and the doctrine is well settled that where a creditor has two funds, to which he may resort for the satisfaction of his debt, one of which is primarily liable, and the other only secondarily liable for the payment thereof, the person having the right to resort to the latter fund for the payment of his demand stands in the situation of a surety to the owner of the primary fund in the application of the equitable principle of substitution in behalf of sureties, and if the fund secondarily liable be applied by the creditor to the satisfaction of his demand the person -who stands in the situation of such surety is entitled to be subro-gated to all the rights and remedies held by such creditor for his imdemnity. Story’s Eq. Juris, section 633; Bart. Ch’y Pr. section 328; White & Tudor’s L. C. in Eq. 149-151; 2 Tuck. Com. 492; Morrill v. Morrill 53 Vt. 74; Minor’s Inst. Vol. 2, 173; M. Clurg v. Beirne, 10 Leigh. 394; Kent v. Matthews, 12 Leigh. 273; Eddy v. Traver, 6 Paige 521; Hays v. Ward, 4 Johns. Ch’y 130; Neely v. Jones, 16 W. Va. 625. Erom what has been said it is evident that Michael B. Davis is not entitled to the relief asked for in his petition filed in this cause, nor had the circuit court under the proceedings in this cause any authority whatever to order or direct that the proceeds of the sale of Simpson’s real estate, made in another cause, in which there has been a-final decree, shall be otherwise applied than as therein directed. While the plaintiff in this cause before and on ’February 4, 1882, when the sale of Simpson’s real estate was confirmed, had the light to have satisfaction' of his decree against Simpson by having the same sot off against the said judgment and decree obtained by Simpson against him, he still has this right to the extent of any portion of his decree which may remain unsatisfied by the proceeds of said sale. Not then having elected to do so, and having in effect elected to accept such proceeds in satisfaction pro tanto of his demand, it would now be inequitable to the defendant Hawley Morris, to permit him to do so to any greater extent than that portion of his decree, which may remain unsatisfied, after the proceeds — 570 — of such sale shall have been collected and applied as directed by the decree confirming said sale. But as such proceeds may not have been collected, and the exact amount of the plaintiff’s decree, which will remain unsatisfied after the same has been collected and applied, cannot now be ascertained, the preliminary injunction awarded the plaintiff in this cause must be continued in force, until the amount of this deficiency can be ascertained and set off against said judgment and decree or either of them, the injunction as to the amount of such deficiency so to bo set off as aforesaid shall be made perpetual, and as to the residue of said iudgment and decree shall be dissolved. The decree of the circuit court of Wetzel county rendered herein January 30, 1883, must be reversed with costs to the appellant against the appellees, John IT. Nuzum and Michael B. Davis, and the cause remanded to said circuit court to dismiss the petition of said Davis, and to cancel and surrender to said Nuzum the release mentioned in said decree as “Exhibit X.” executed by him and dated January 29, 1883, and for further proceedings therein to be had according to the principles settled in this opinion, and according to the rules and principles governing courts of equity. REVERSED. REMANDED.