Hale v. Holmes

Martin Ch. J.: In January, 1858, the defendants held a mortgage of Wm, H. Russel], upon certain personal property in the Russell House, in Detroit, to secure the payment of $16,-000. This mortgage they agreed to assign to Hale upon his payment to them of $9,000, in four equal installments, at six, twelve, eighteen and twenty-four months; but took no contract from Hale to make such payment. Their obligation to assign the Russell mortgage was dependant upon the prompt payment by Hale of the several installments above mentioned. Hale paid the first installment, but made default upon the second, as the defendants claim; and they are about to take possession of the property and foreclose the mortgage for that reason. Hale files this bill to restrain such foreclosure, and for specific relief; claiming that he holds liabilities of the defendants to a much larger amount than is due them, which, or so much as is necessary, he is entitled in equity to have allowed as payment towards the purchase of the Russell mortgage, and to prevent the threatened forfeiture of his right to purchase it. This claim of right is based upon the alleged insolvency of the defendants. Whether we regard the bill as one filed to relieve against a forfeiture of the agreement, or to secure an equitable set off (and both grounds were taken uj>on the argument), it. can not be sustained. In a variety of cases, as where one is prevented by unavoidable accident, or by the wrongful act of the other party, from making payment, or when the principal amount of the contract price has been paid, and the like, it is true that a court of equity will interfere to relieve against a forfeiture; but never where such relief can only be afforded by compelling a party to receive his own obligations, when the agreement contains no mutual promises, and where such interference would be to vary the terms of the contract forfeited. [42] Nor is this a case in which equity will interfere to compel a set off. No set off can exist at law, because no contract upon the part of Hale exists against which to allow it. There is nothing but the offer of Holmes & Co. to convey, upon the payment of §9,000 in certain fixed installments, the debt and mortgage of Russell for $16,-000. The option remained with Halo to purchase it or not, but if he would, he must do so according to the terms of such offer. There is no mutual credit, and insolvency alone is insufficient, even' in a case of positive indebtedness, to authorize an equitable off set. This we expressly held in Lockwood v. Beckwith, 6 Mich. 167. But the cose itself, as developed by the pleadings and proof, is not one entitling the complainant to any relief. Whether the agreement by Waldo, Barry & Co., with the defendants, for the compromise of the latter’s indebtedness, might have been forfeited by the former or not, is wholly immaterial under the facts now existing, and it is also immaterial whether they agreed or not to extend the time for payment of the compromise note. When the latter note was given, the defendants placed in the hands of Waldo, Barry & Co. the promissory note of this complainant for $2,500, together with a mortgage held as collateral security for its payment, to be held by Waldo, Barry & Co. as collateral security for the payment of such compromise note. This note of the complainants was past due when the compromise note became due. When the second installment under the defendants’ agreement with the complainant was about falling due, and upon which the defendants relied (and this Waldo, Barry & Co. evidently knew) to take up their compromise note, we find Hale in New York negociating for the purchase of the defendants’ paper in Waldo, Barry & Co.’s hands, and obtaining it under what savors very strongly of a threat. He knew that they, as well as the defendants, relied upon his payment of- this installment to take up the compromise note; [43] and the extraordinary benefits offered to huh in the agreement of the defendants, might well induce them to rely confidently upon it. When therefore he told Waldo, Barry & Co. that “he -could keep defendants out of the money two years,” they undoubtedly became satisfied that the most they could hope for was the amount of the compromise note, secured by Iiale’s obligation. They therefore sold to Hale such note, for the sum of $3,000, and transferred to him the four notes which were to be satisfied by its payment, and the securities, viz. Hale’s note and the mortgage held as collateral to it. This was the real transaction as understood by the parties, if we are to believe Waldo, and so the written assignment executed by them must be interpreted. Hale, then, never purchased the notes covered by the compromise note, so as to acquire the right to demand payment of them; as by selling the compromise note and surrendering to him the security dejiosited to ensure its payment only, and not that of the four notes, they confirmed the compromise. The effect of the transaction therefore is simply this: By taking up his own note and security, he cancelled them; and what he claims to be a purchase of the compromise note, is in reality a payment of his note which secured it. If he has any claim upon the defendants, it is only for the difference between the amount due upon his note, and the amount of the compromise note: but with this question we have no concern. He never acquired any claim against the defendants by procuring the four notes transferred with the compromise note, which he can enforce either at law or in equity. They were paid by the payment of his note in the manner indicated. The decree of the court below must be reversed, and the bill dismissed, with costs of this ^ court and of the court below. Manning, and Campbell JJ., concurred. Christianct, J., was absent.