Hackett v. Connett

| New York Court of Chancery | Apr 30, 1833

The Vice-Chancellor:

The defendants insist upon the result of the motion in the Superior Court as conclusive upon the complainant. The grounds of denying the motion there do not distinctly appear. As far as the views of the court at law have been ascertained, the merits were not passed upon. The judges considered it a case more proper for a chancery suit. They declined interfering, although they had the matter fully before them upon affidavits, and were competent, in the exercise of their equity powers over judgments in their own court, to determine the question. Still, whatever they may have intended and whether they did or did not pass upon the merits of the application, it would not be a matter res judicata so as to preclude an inquiry in this court, which has a concurrent jurisdiction. This point was expressly decided in Arden v. Patterson, 5. J. C. R. 44.; and by the Court of Errors in Simpson v. Hart, 14 J. R. 63. I must, consequently, endeavour to decide the question.

As the suit at law by the defendant Matthew W. Connett against the complainant James H. Hackett was for uncertain and unliquidated damages arising from a breach of covenant—and not for any thing in the nature of a debt or demand capable of being reduced to a certainty by calculation —-there was no right of set off in such action at law. This is perfectly well settled: Gordon v. Bowne, 2. J. R. 150.; Hepburn v. Hoag, 6. Cow. 613. The courts of Chancery follow the rule of law in this respect: Duncan v. Lyon, 3. J. C. R. 351. Nor do I perceive the rule to have been altered by the Revised Statutes, which have undertaken to regulate the subject by pointing out in what cases a set oft' may be made: 2. R. S. 354. § 18.

Another difficulty existed in relation to a set off in the suit at law: Hackett’s right to costs in the chancery suits had not then become perfect by decree so as to form debts in his favour until after the commencement of the suit at law against him. In order to make a debt or demand a set off, it must have existed at the time when the suit was commenced. Here, then, are two reasons why a set off was inadmissible in a suit at law. But the moment a judgment was obtained in the action, a right to a set off, founded upon the equity of the statute, attached: unless the assignment to Aleock, of which notice had been given, prevented it.

The chose in action was capable of being assigned. It appears to have been made over on the fourteenth day of October, one thousand eight hundred and thirty—there is no-evidence to the contrary. The consideration for the assignment, as expressed in the body of the instrument, was a prior indebtedness to the defendants Messrs. Price and Sears, for costs and professional services rendered to the assignor Con-nett, and an old debt to the defendant George Alcock for goods sold and money advanced or paid for him; and the avowed object of the assignment was to secure and pay these debts, giving to Price and Sears the preference.

Even although we assume the assignment to have been made in good faith, yet it must be admitted that the assignee could only take, subject to whatever rights or equities then existed in favour of Hackett against Connett- What, then, were those rights and equities ? The defendant at law was at liberty to make the same defence to the action as he could have made if no assignment had been executed; and the same evidence could have been used. But he could make no set off. The right had not attached. Although, by this time, the costs in chancery, under the decrees of dismissal, might have ripened into a debt, still the forms of law did not permit him to make it a set off upon the trial. Nor did it operate pro tanto as payment or compensation for the damages claimed in the suit. Neither had he, then, any right in equity to a set off. The court of chancery extends the principle no further than a court of law under the statute of set off: Duncan v. Lyon, supra. Although chancery has sometimes exercised the power of decreeing a set off, before or independently of the statute, it has only done so where mutual debts existed and where there was either an express or implied agreement of stoppage fro tanto or mutual credit. Here, at the time of the assignment, there were not mutual * ' debts—-much less a mutual credit. There was only a debt on one side; and on the other, a claim sounding in damages, which, when it became liquidated by a verdict and judgment so as to admit of set off, belonged to another person. There is no such thing as an inherent quality or right of set off in the creation or origin of a debt or demand. It can only arise or attach when there is a mutuality of debts of such a certain and ascertained character as to be capable of set off or of being applied in compensation of each other. Hence, there was no equity of this sort to which the assignment in question could be subjected. The whole doctrine of set off was critically examined by Judge Story in Greene v. Darling, 5. Mason’s R. 202.; and I had occasion to apply the principles laid down by him to the case, recently before me, of Wolcott v. Sullivan, (see 1. vol. 399.)

I am of opinion the right of set off does not exist, provided the assignment is a valid one and debts not yet paid are really due to the defendants Messrs. Price and Sears and George Aleock.

The assignment makes no mention of the amount of these debts. Nor is there any evidence of it before me. Possibly the assigned claim may be more than sufficient to satisfy them or the parties may have obtained satisfaction elsewhere. If the complainant requires it, I will direct an inquiry to be had before a master in order to ascertain the amounts of the debts against Connett which the assignment professes to secure, and whether the same remain unsatisfied and unsecured by other property which may have come to the hands of George Alcock. There may yet be room for allowing a set off or compensation in part, if not for the whole of the balance due on the judgment against Hackett. But I shall leave it to his election to have a reference on the subject: at the peril of costs in case he fails; and this election is to be made in twenty days. If the complainant do not elect to take this course, the bill must be dismissed with costs.