Stow v. Yarwood

Caton, C. J. This case has been here before, and is reported in 14 Ill. R. 424. The' facts are substantially now as there stated, except that it now appears, that after the cause for which this action was brought, and the claim which we then decided might be set up in recoupment of the damages, had accrued, Stow, who offers to recoup his claim for work done on the engine, in reduction of the damages to which Tarwood is entitled for the conversion, has made an assignment in bankruptcy, under the general bankrupt law, and obtained his discharge. This, the court below held, transferred Stow’s claim for repairs to his assignee in bankruptcy, to whom alone Yarwood is bound to make satisfaction for those repairs, and that it cannot now be used in reduction of the plaintiff’s damages. In this we think the court erred. It is true, that everything that was due to Stow, from Yarwood and all others, passed to his assignee; but they passed to him subject to all equities and defenses of every description which existed against them in the hands of Stow. This is a principle recognized everywhere. What, then, was the legal and equitable position of this claim which is now offered in recoupment, at the time the legal title to it passed to the assignee ? It was, in equity, paid and satisfied, or at least liable to be extinguished by reason of the claim for damages which Tarwood then had against Stow, for the conversion of the engine for the repairs of which the claim originated. Had the assignee sued Tarwood for these repairs, the latter could have set up the damages which had accrued to him by reason of the conversion of the engine by Stow, and this right of recoupment must be reciprocal. If this right of set-off or recoupment existed in one, it necessarily existed in the other. And as the assignee in bankruptcy is but a volunteer, it is in no respect changed by the assignment. It would hardly be denied, that if, at the time of the assignment, mutual demands had existed, arising out of contract, which by the ordinary rules of law might be set off, one against the other, such right of set-off would remain unaffected by the bankrupt’s assignment. It is none the less so in this case. The recoupment is allowed on the principle of an equitable set-off. It is an equitable right recognized by and enforced in a court of law. And, as before remarked, all equities remain unaffected by the assignment. We think the court should have allowed the recoupment, notwithstanding the assignment in bankruptcy. The judgment must be reversed and the cause remanded. Judgment reversed.