McGraw v. Pettibone

Campbell J.: This is a bill filed to obtain a reduction of a judgment or decree obtained by Amos Pettibone against complainants, as stockholders in the Novi and White Lake Plank Road Company. * * * As the items which the bill seeks to apply, do not all rest upon the same foundation, they may be considered separately. Are then the complainants entitled to relief by having Harmon Pettibone’s share deducted? This is claimed to be permitted for the reason that Harmon Pettibone is alleged to be the real owner' of the decree. It is not claimed, however, that he has any other interest in it now than when it was rendered. His connection with the controversy is derived, if at all, from the original transactions attending the building of the road. If there is anything in that connection which can authorize the complainants to insist on his contribution in reduction of their own liability under the statute, it formed to that extent a complete defense in the former chancery suit. In that ease, the very object of the suit was to determine their liability to ¡respond as stockholders. Had Harmon Pettibone been the nominal plaintiff in that cause, they could not have been compelled to contribute without an allowance for his proportion. If the real plaintiff, the same [536] rule would apply. The ownership of the claim was a necessary issue, and it was open to them to show the truth concerning it. It is not claimed or shown that Harmon Pettibone’s position was not as well known when that case was begun as it is now. The evidence as well as the allegations in the bill are all based on the original transactions, which were known to the parties in the outset. It would be doing violence to well settled and necessary rules of equity to permit a bill to be filed for relief on grounds of defense which ought to have been relied on in the former controversy. No excuse whatever is shown for the neglect. Complainants upon their own showing have no equity to claim this deduction in this way. The payments made after verdict ought justly to have been applied before judgment was rendered on the verdict. Upon a summary application to the Court where it was rendered, they would unquestionably have been endorsed on the execution. In Smith v. Weeks, 26 Barb. 463, it was held that an action at law would lie in favor of the 'judgment debtor, to recover back such payments. We have no doubt they would have been admissible in the former chancery suit in reduction of the claim. But whether these complainants could under any circumstances file a bill to have them applied upon a judgment against the company, or against themselves, is a question not free from difficulty. No good reason, however, appears, why this defense was not set up before, as some of the complainants knew of the payments at the time, and all of them would have known the true state of the accounts by the exercise of ordinary diligence in preparing for their defense- in the former action. We do not think they can resort now to a bill in equity for this relief, upon the facts as they appear before us. The remaining item which is relied upon as a set-off, is the judgment for damages against John N. Pettibone. This judgment was rendered in favor of the plank road [537] company, more than a year after the former chancery suit was commenced. Without considering the fact that the chancery decree is in favor of Amos and not of John, and assuming John to be the owner of it, there is no ground upon which we have been able to base a decree of set-off. It has never been held that the fact that claims and counter-claims arise from the same transaction so attaches them as to make a right of set-off arise between them in all cases. Unless the one operates as a payment of the other, the right of reduction is not attached to the contract, and whether or not therefore a set-off can be allowed depends upon circumstances, and is merely an incident under those circumstances affecting the remedy. See as illustrating this principle, Chapman v. Derby, 2 Vern. 117; Green v. Darling, 5 Mason, 202; Hackett v. Connett, 2 Edw. Ch. 73; Wolcott v. Sullivan, 1 Edw. Ch. 399; Rawson v. Samuel, Cr. & Ph. 161; Ramney v. Beale, 10 Price, 113; Pettat v. Ellis, 9 Ves. 563. It is a rule to which no case recognizes an exception —so far as we have been able to discover — that the party who seeks to obtain the benefit of a set-off, must be the real owner, and have the control of the counter-claim, so that his creditor who sues him is his debtor as to the claim offered in reduction : — 2 Pars, on Cont. 243. It is plain that the complainants have no claim to the judgment against John N. Pettibone, either at law or in equity. The parties to- that judgment are not the same as. the parties to the decree on which they seek to have it applied. The plank road company might have shown those damages in defense of the original action at law, but they preferred, and probably with reason, to obtain a separate judgment in their own favor. That judgment is corporate property and does not belong to complainants. Although the case is somewhat barren of proof, we have come to our conclusions with some reluctance. But [538] the rules applicable to the case are, clear, and. based upon principles which cannot be disregarded. The decree must be reversed, and the, bill dismissed with costs. Martin Ch. J. and Christiancy J, concurred. Manning J. did not sit in the case, having been of counsel.