6 Paige Ch. 220 | New York Court of Chancery | 1836
The following is the vice chancellor’s opinion:
The only important point in controversy
in this case is, with respect to the right of set off. In another case, against the receivers of the Globe Insurance Company, I have just had occasion to examine the question
But the great obstacles in the way of setoff in the present case are these: 1st, that with respect to one of the bond debts, it is the joint debt of Holbrook and Ferme, and the demand claimed to be set off belongs to Holbrook individually ; and 2dly, that the set off claimed upon the policy of insurance is of an unliquidated demand in point of amount, and not capable of being ascertained by calculation, and therefore not admissible under the statute. (2 R. S. 354.)
The first of these objections may be obviated perhaps by a reference to ascertain how the first loan was made, whether to Holbrook alone, he procuring Ferme to unite, with him
If in point of fact Holbrook was the borrower on his own account exclusively, and the other executed the bond as surety only, then upon the authority of Ex parte Hanson, before Lord Erskine, (12 Vesey, 346,) and S. C. subsequently before Lord Eldon, (18 Vesey, 232,) a set off in favor of Holbrook may possibly be allowed in equity, though not at law. (See 4 John. CL Rep. 15.) A decisive opinion on this point ought not, however, to be expressed, until the fact alleged in the petition, and controverted in the answering affidavit of the receivers, is ascertained; and if the other objection to the set off", viz. the unliquidated nature of the demand, is got over, then, before denying the set off against the first bond on account of its being the joint debt of the two obligors, I should feel warranted at least in handing the matter over to a master for inquiry. As to the nature of the debt or demand offered by way of set off, it appears to be well established, that a court of equity is governed by the same general rules as a court of law.
A claim or demand arising from tort or upon contract, sounding in damages not ascertained, uncertain, unliquidated in amount, and from its nature in these respects not the subject of a set off at law under the statute, is equally inadmissible as such in this court. (Duncan v. Lyon, 3 John. CL Rep. 351.) The demand to be set off" must be one arising upon judgment, or upon contract express or implied, either for real estate or personal property sold, or for money paid or services done ; or if it be not such a demand, the amount must be liquidated or be capable of being ascertained by calculation. (2 R. S. 354, § 18, sub. I, 3.) As the demand in the present case upon the policy of insurance is one arising upon contract, it so far comes within the statute, but it is neither for real or personal property sold, nor for money paid or services rendered ; it must be, therefore, a demand, the amount of which is liquidated, or ascertainable by calculation.
The term liquidated in the statute, must be understood in its popular sense settled, adjusted, reduced to a certainty in-
The case of Osborne v. Etheridge, (13 Wendell. 339,) I think settles this point; for the opinion of the court by Chief Justice Savage, gives to that phrase of the statute a construction which restricts the operation of ascertaining or calculating the amount of the demand to be setoff, to the use of figures, to a mere arithmetical calculation; and that where resort must necessarily be had to the testimony of witnesses or evidence of any kind, to be weighed and passed upon by the court and jury in order to ascertain the amount of the claim or demand, the party must be left to pursue his remedy for it in a distinct action. The amount of the claim upon the policy of insurance in question, cannot be ascertained by the above method of calculation. If the sum mentioned in the policy, like that of a bill, a note or a bond, was the amount payable upon the happening of a loss by fire, without regard to the extent of such loss, then indeed it would be a liquidated amount, or one ascertainable by mere calculation, for nothing would remain except to compute the interest, if any, and add the principal and interest together. But more remains tó be done— proofs are to be gone into to establish the fact of loss of goods, and the assured’s ownership of such goods and their value—the exhibition of preliminary proofs and a particular compliance with all the terms and conditions of the policy. Under these circumstances the demand cannot be the subject of a set-off at law; and this court can go no further than a court of law in enforcing such a right. The receivers appear to have a legal advantage, and the equity of the creditors generally, in whose behalf they act, is equal at
From this decision Holbrook and Ferme appealed to the-chancellor.
There can be no doubt as to the right of this court, upon a summary application, to direct the receivers to make the set off claimed in this case, if it is just and equitable that such set off should be allowed; and to stay the proceedings in any suits at law which may have been commenced upon the bonds given to the company. Independent of the general jurisdiction of this court over the receivers as officers of the court, a general power to direct and control receivers, of insolvent corporations in reference to the dsicharge of their duties, is expressly given to the court by the provisions of the revised statutes. (2 R. S. 464, § 41. Idem, 472, § 85.) And by the act of January, 1836, under which these receivers were appointed, they are made subject to all the obligations and duties which are imposed upon receivers under any law of this state; and the same jurisdiction is given to this court over them as over receivers in other cases. The sixth section of that act, which authorizes the court of chancery to restrain all proceedings against the corporation, either at law or in equity, shows also that the legislature intended that the legal and equitable rights of the creditors of the corporation should be adjusted in a summary manner under the direction of this court. If the vice chancellor has erred in relation to the legal or equitable rights of these petitioners, they are right, therefore, in supposing that their proper remedy was by an appeal to the chancellor.
The vice chancellor arrived at a correct conclusion that in ordinary cases, an unliquidated claim for loss upon an
In the case under consideration, however, even if Holbrook’s right of set-off depended upon the general provisions of the revised statutes on this subject, I think he has shown sufficient to authorize and require the equitable interference of this court to compel the receivers to adjust and liquidate the amount due to him from the insurance company under Ms policy, and to apply by way of set-off, so much of that amount as may be necessary to satisfy the last bond and mortgage executed by himself alone. It is a natural equity, where there are cross demands, that one debt should compensate the other, and that the balance alone should be paid by the party who owes the largest debt; and it is a rule of convenience merely which limits the legal offset to liquidated debts, or to those which are capable of liquidation by computation only. It would, therefore, in an ordinary case, be not only inequitable but unconscientious for an insolvent debtor to refuse to liquidate an honest debt due to one of his creditors, as to which there was in fact no doubt or dispute, for the sole purpose of depriving such creditor of the benefit of his legal right of set-off; and thus to enable the insolvent to collect a liquidated debt due to himself from such creditor, for the purpose of paying other creditors with the money thus collected. And that which would be unjust and unconscientious if done by the insolvent himself, cer
Independent, however, of the general proivsions of the revised statutes relative to set-off, I think this was a case of mutual credits, which made it the duty of the receivers to allow the offset under certain special provisions of the revised statutes, which are made applicable to this case by the act of January, 1836, under which these receivers were appointed. The 36th section of the article of the revised statutes relative to the powers, duties and obligations of trustees and assignees of the estates of non-resident, absconding, insolvent or imprisoned debtors, (2 R. S. 47,) authorizes a set-off of cross demands, where mutual credits had been given, as well as where mutual debts existed, between the absent, insolvent, or absconding debtor and any other person -, and where the debt or claim of such other
Whether this case, therefore, be considered as coming under the general law of set-off, except for the improper and unconscientious refusal of the receivers to adjust the loss as it was their duty to do, or as coming within the more ex-.tended principle of the revised statutes relative to the adjustment of cross demands between the trustees of insolvent debtors and other persons, there cannot be any reasonable doubt that the amount of the last bond and mortgage, which was executed by the assured only, should be offset against the claim of Holbrook under the policy. The decision of the vice, chancellor against the right of Holbrook to offset a portion of his loss against the amount due from him on that bond and mortgage, was therefore erroneous and must be reversed. The receivers must adjust the loss under the policy, and cancel that bond and mortgage, upon receiving from Holbrook a written acknowledgment that the amount
The claim of the appellants to offset the residue of the loss due upon the policy against the bond in which Ferme was jointly holden with the assured, does not come within either of the statutory provisions in relation to the right of set-off; and if the loss had been adjusted by the receivers according to the directions of the act of January, 1836, it could not have been offset in the suit subsequently brought upon the bond against Holbrook and Ferme jointly. The only way, therefore, in which an offset could be compelled, even if the receivers had done their duty in relation to the adjustment of the loss, would have been by an application to the equitable powers of this court, upon the ground that the loan was in fact made to Holbrook only, and that Ferme joined therein merely as his surety. If such was the real nature of the transaction, it would, in an ordinary case of insolvency, be a sufficient ground for the exercise of the equitable power of this court in granting relief beyond the strict letter of the statutes of set-off. But to entitle a party to such equitable relief in a case not provided for by the statute, he must either have an equity arising out of the contracts or dealings between the parties, from their connection with each other, or his natural equity to have one unconnected claim compensate or discharge another must be superior to any equitable claim which can be urged in favor of those for whose benefit his claim to an equitable offset is resisted. The natural equity to have mutual but unconnected demands between two parties who have been dealing with each other is, as a general rule, superior to the claim of any other creditor who has not dealt with the insolvent upon the faith of the specific fund against which the right of offset is claimed. In the case under consideration, however, as the petitioners had no right under either of the statutory provisions on this subject, to offset the loss which belonged to Holbrook alone against the bond upon which he