2 Paige Ch. 581 | New York Court of Chancery | 1831
There is a natural equity that cross demands should be off-set against each other; and that the balance only should be recovered. This was the rule of the civil law, and it is now adopted and preserved as the law of those countries, where the principles of the civil law prevail.
Where there are mutual demands between the parties Which cannot be set-off under the statute, but which a court of equity may compensate or apply in satisfaction of each other without interfering with the equitable rights of any person, the fact that one of the parties is insolvent has frequently been held a sufficient ground for the exercise of the equitable jurisdiction of the court of chancery. Vide Lord Lanesborough v. Jones, 1 P. Wms. 325.) In Pond v. Smith, (4 Conn. R. 302,) the supreme court of Connecticut held that the insolvency of one of the parties was a sufficient ground for the interference of a court of chancery to off-set mere legal demands against each other, although they
It is true that Judge Story, in the case of Green v. Darling, (5 Mason’s R. 201,) refused a set-off in equity, because, by the law of the state where the contracts were made, one judgment could not be off-set against the other, under the statute. But it must be recollected he was administering the law of a state which had no court of equity ; and as no right of set-off had been declared by the laws of the state, and no court had been organized therein to give a remedy, except in the courts of law, the extent of the remedy showed the extent of the right as it existed in that state. In page 207, of the report, Judge Story says : “I do not speak here of cases where distinct equities arise from other sources, but upon the naked equity of distinct and unconnected debts, and independent of any. statutable regulations.” He subsequently explains what he means by new or-distinct equities. And I think it is pretty evident he does not mean to say that the total insolvency of the defendant might not be a sufficient equity to authorize a court of chancery to interfere, if the contracts had been made in a state where equitable jurisdiction was vested in any of its courts ; although he expresses no definite opinion on that question.
It remains to be seen whether the fact, that the defendants” notes against the complainants have not yet become payable, forms any valid objection to the claim of the latter to have them applied in payment of their debt which is now dye from the defendants. As the notes are not on interest, there can he no injustice in compensating the defendants, for the amount
Under the circumstances of this case, as disclosed in the complainants’ bill, I think it would be inequitable and unjust to permit the defendants to dispose of these notes, (either for their own private purposes, or in payment of their general or favorite creditors, leaving the complainants’ debt unpaid. Although equality among creditors is equity, here is a prior and a paramount equity, which must first be provided for. An equity, which is distinctly recognized by the insolvent acts of this state which have also declared the other principle, and enforced it to a certain extent.