Spencer v. Almoney

Magruder, J., delivered the opinion of the Court. The bill was filed by the appellants, to restrain the appellee, trustee of the estate of Mary Meredith, now deceased, from selling certain real estate, the separate estate of the wife, under a power of sale in a mortgage, executed by her husband and herself, to one A. J. B. Almoney, to secure a loan of $500, and which was assigned to Mary Meredith, after being reduced by a payment, to the sum of $350, as of December 12th, 1868. The ground for the relief prayed, was that the appellant, Edward N. Spencer, has a claim against the estate of the said Mary Meredith, which was in course of settlement in the Circuit Court for Baltimore County, in equity, amounting to the sum of $405, as of September, 1875, and which had been.allowed him by the auditor's account, and which the complainants ask to have allowed as a set-off against the mortgage debt; and that there was also — 559 — due said Spencer, the sum of $56, with interest, from July 1st, 1871, for a medical hill paid Dr. Alan P. Smith, for the -said Mary Meredith, which is also claimed as a set-off; and that by making these applications, there remained only the sum of $11.11, due on the mortgage debt, which is offered to be brought in to be paid; upon which being done, it is claimed the mortgage should be declared satisfied and released. The answer admits the allowance of the claim of $405, against the estate of Mary Meredith, in the Circuit Court for Baltimore County, in equity, that the medical bill was filed with the claim of the said Spencer, and was disallowed by the auditor, and is now barred by the order of the Court passed upon the said account; denies the right to have the $405 set off as against the mortgage debt, on the ground that the latter is the debt of the wife alone, and the claim is due the husband, and therefore, in different rights ; and that the defendant holds the note of the said Spencer for $600, givén to Mary Meredith, and claims the right to have the $405 applied to that note. The complainants in order to maintain the right to have the $405 applied as a set-off to the mortgage debt, undertake to show that the mortgage debt while purporting on its face to be a loan to the wife, Rosalba Spencer, was in fact a loan for the use and benefit of the husband Edward ; and that, therefore, he being the principal, and she but a surety, he is entitled to have this claim set off, as both debts stand in the same right. It is objected that Edward hi. Spencer, by whom it is sought to show that the mortgage debt was his debt, being for money borrowed to be put in his business, his wife having no interest in it, is not a competent witness, Mary Meredith being dead. But the person from whom the money was borrowed, the original mortgagee, was A. J. B. Almoney, and not Mary Meredith, and therefore the question does not come within the exception contained in the statute — 560 — excluding the survivor from testifying where the other party to the contract is dead; and the witness therefore was not incompetent, and as the fact is testified to by him without any attempt at contradiction, it must be taken as true. But it is claimed this is an attempt to contradict the terms of the mortgage, which states the debt to be that of the wife. It is to be observed however'that this is not an effort to defeat the effect of the mortgage as such, or to impair its validity as to the parties thereto, and as a security for the mortgage debt, for which full effect is to be given to it for all the purposes for which it was designed. It does not contradict the terms of the mortgage to show that although the money was lent to. the wife by the mortgagee, yet as between her and her husband he was the one beneficially interested in securing the money, and she therefore was but his surety, and that an equity therefore arises, to have his money applied in payment of the mortgage debt. This is entirely collateral to, and independent of, the contract made by the mortgage, and in no way impairs or contradict it, and is therefore admissible. Carpenter vs. King, 9 Metcalf, 515. Treated therefore as the debt of Edward N. Spencer, the right to have the debt due by his creditor set off against the debt due by him and his surety, is well settled. Ex parte Hanson, 12 Vesey, Jr., 346; Concord vs. Pillsbury, 33 N. H., 310; Mahurin vs. Pearson, 8 N. H, 541; Bechervaise vs. Lewis, 7 L. R., (Com. Pl.,) 372; Hollister vs. Davis, 54 Penn., 508; Winston vs. Metcalf, 6 Ala., 760; Waterman on Set-off, 287, (sec. 237.) This is so even at law; but in equity especially will the principle be applied. Smith & Talbott vs. Donnell, 9 Gill, 89; Lane vs. Fallen, 16 Md., 352. The point presented by the appellee, that this application of set-off is in conflict with the law protecting the property of the wife from the debts of the husband, is untenable. It is not a case of applying the property of — 561 — the wife to the debt of the husband. On the contrary, if the mortgage debt were in fact the debt of the wife, the application of the set-off would be to relieve her estate, by applying the husband’s property (the debt due him) to the discharge of her debt, which, so far from being to her prejudice, would be for her benefit. If the position were reversed, and the husband (sued upon his own debt) should attempt 'to set off a debt due to the wife, then the objection would have force, for that would be an attempt to apply the wife’s property to the husband’s debt. But the case here is, a claim to apply to a debt due by the husband and wife, in which as between themselves he is the principal, and she but surety, a debt due to the husband in his own right, and it is certainly equitable that her estate should be relieved by having his property ■applied in payment of a debt incurred for bis own benefit. The bills paid Dr. Smith stand on the same footing. They are not proven however. The only evidence is the testimony of Edward N. Spencer. But he is not a competent witness, the party against whose estate the claim is made being dead. The rejection of these claims by the ■auditor is not conclusive. There does not appear to have been an order of Court rejecting them. They were simply omitted from the account by the auditor, for want of proof. The practice is to allow further time for proof before final rejection. And that we are to presume the Court would allow if applied to. That being so, the claim is still a subsisting and valid cause of action, and therefore capable of being pleaded as a set-off, and if sustained by proof should be allowed; and the complainants should therefore be allowed to. take further proof in support of the claim. In regard to the right insisted on by the defendant to have Spencer’s claim set off as against his note for $600, held by the defendant as trustee of Mary Meredith, rather than against the mortgage debt, it is only necessary to — 562 — say that the note for $600 is not the subject-matter of a suit in this cause, and the principle of set-off is only applied where a suit is brought to recover the debt to-which the set-off is to be applied. Erom the very nature and definition of set-off, it is a mode of defence made by the defendant against the plaintiff in the suit, for the purpose of liquidating the whole or a part of his claim. ( Waterman onSet-off, 1.) This offer of the defendant is a complete reversal of the conditions requisite for the application of the principle of set-off. The original suit is the proceeding for the sale of the land to pay the mortgage debt. As a defence to that, the complainants here ask to have a set-off allowed ; and in so doing they really occupy the'position of defendants in regard to the proceeding to enforce the mortgage debt, to which this bill is but ancillary, just as if made by way of answer to a bill filed for the sale of mortgaged premises. The proper place to ask the benefit of the set-off of the $600 note was in the equity suit where Spencer’s claim was filed and allowed. If made there as a defence to that claim, the claim might have been thereby liquidated and discharged. But that, was not done, and the claim was actually allowed as a subsisting cause of action. There is no suit here upon the $600 note, to which the set-off can be applied, and there is no such thing as a set-off to a set-off. We have .no right to refuse the set-off asked, simply because in another case it might have been made the subject-matter of a set-off to another claim. We deal only with the case before us, of which alone we have control. This point was decided in the case of Concord vs. Pillsbury, 33 N. H., 317, where the Court say: “ It is contended, that the defendant’s set-off should be made in the action in favor of the plaintiff against him personally, and not in this suit against him and his sureties. The Court may look to considerations of this kind, where an appeal is made to their discretionary power, as in cases of set-off of judg — 563 — ments. But the Court has no power to refuse a set-off in any case where the party had by law a right to offer it. It is a legal defence, of which a party has a right to avail himself in any proper action. The power he has to make an application of his claim of set-off to any debt in suit, is like his power to apply the payments he makes to any debt he chooses, and it has never been thought censurable for a principal to apply his payments first to the relief of his sureties.” (Decided 30th June, 1881.) The claim of $405 is therefore to be. allowed as a proper set-off to the mortgage debt; and the bills of Dr. Smith are to be so allowed if sustained by proper proof; for the purpose of allowing which to be taken, and of having a proper adjustment of the account between the parties, the cause should go to the auditor, and upon the ascertainment of the amount due upon the mortgage debt, and the bringing in of the same by the complainants, they will he entitled to a decree discharging and releasing the mortgage. It follows that the order below must be reversed, and the cause remanded in order that further proceedings may be had in accordance with the views here expressed. Order reversed with costs, and cause remanded.