19 W. Va. 19 | W. Va. | 1881
announced the opinion of the Court:
A case of the application of the remedial justice of courts of equity is by bill quia timet in cases of sureties of debtors and others. If a surety, after the debt has become due, has any apprehension of loss or injury from the delay of the creditor to enforce the debt against the principal debtor, he may file a bill of this sort to compel the debtor to discharge the debt or other obligation, for which the surety is responsible. 2 Story Eq. Jur. §§ 730, 849. The insolvency of one of the parties is a ground, upon which a bill may sometimes be maintained for a set-off, when it clearly appears, that in consequence of such insolvency the complainant can have no adequate remedy at law. 2 Rob. (old) Pr. 144; Simson v. Hart, 14 Johns. 63; Lindsay v. Jackson et at., 2 Paige 581. In the last named case it was held by the court, that equity requires, that cross-demands should be set-off against each other; and in a case not within the statute of set-off chancery will permit an equitable set-off, if from the nature of the claim or the situation of the parties justice cannot be obtained by cross-action ; also that insolvency of one of the parties is a sufficient ground for the court to exercise its equitable jurisdiction in allowing an equitable set-off'; and also that a set-off will be allowed on the application of the complainant, where the defendant is insolvent, although the debt of the complainant to the defendant is not due.
In the first named case it is said, the fact, that the notes due from the complainant to the defendants had not become payable, could form no objection to the relief sought; for there could be no injustice in compensating the defendants at once the whole amount to become due to them at a future day. The question is somewhat different where the claim of the complainants against the defendants is payable at a future day, and they seek to make this claim compensate a debt already payable from the defendants; then a court of law cannot allow a set-off. Young v. Gye et al., 10 J. B. Moore 198, (17 Eng. Com. Law Rep. 139.) Yet even in a case of that kind equity will give relief. 2 Rob. (old) Pr. 144.
In the case of Ford’s adm’r v. Thornton, 3 Leigh 695, it appeared, that Eord and Thornton were endorsers of a note at
In the case of Hupp v. Hupp, 6 Gratt. 310, according to the syllabus it was held : “ H. and N. are merchants and partners. H. sells out to M.; and the new firm undertake to pay the debts of the first. H. becomes indebted to the new firm, for which he executes his bond with two sureties; and this bond is assigned for value to A. The new firm afterwards fails, and the partners are insolvent, leaving debts of the old firm unpaid to a larger amount than the bond of H.; and H. pays them. Held: H. is entitled in equity to set off against his bond in the hands of the assignee the debt of the old concern of H. & N., which M. & N. were bound to pay, and which H. had paid.”
In the case of Beaver v. Beaver, 23 Pa. St. 167, it was held:
In Thompson v. McClelland, 29 Pa. St. 475, it was held : “ An action on a due-bill not negotiable assigned to a third party long after its date is to be regarded as between the original parties without reference to the use-man, and subject to every legal set-off the maker may have against the payee. In such case he may set off the amount paid on a judgment as surety of the legal plaintiff, who was insolvent, although such payment was made after suit brought, the judgment having been entered and being due before the commencement of the action.”
In Brittain v. Quiet, 1 Jones Eq. (N. C.) 328, it was held : “ The rule, that a party must establish his claim at law, before he can come into equity, is confined to cases, where a creditor seeks the aid of a court of equity in the collection of his debt on the ground of imposing on an equitable interest the liability, which would attach at law on a corresponding legal interest. It does not apply to the case, where a surety has paid money for his principal and seeks to enjoin an execution on a judgment against him in favor of such surety, the latter being out of the State and insolvent. In such a case the surety is entitled to relief, though he did not pay the money, until after the suit against him had been commenced, and therefore could not have pleaded it at law as a set-off.
In the case of Williams's Adm’r v. Helme et al., 1 Dev. 151 it was held: “ A surety has in respect to his liability the rights of a creditor, and upon the insolvency of the principal debtor may retain any funds belonging to him in his hands. Therefore when the surety owed the principal debtor, who became insolvent and assigned for value the debt due by the surety, it was held, that the latter might retain the amount of his subsequent payment against the assignee. In this case the judge, who delivered the opinion of the court, at pp. 159, 160 says: “Ido not know a plainer equity. Indeed it was admitted in the argument, that if Williams had before the as
A present equitable demand may be set off, although it is not a legal cause of action; and as a surety may equitably require the principal to pay the debt, as soon as it matures, so he may file a bill to compel the appropriation of an amount, which he owes the principal, to discharge the obligation to the creditor. For like reasons a payment by the surety to the creditors may be set off in an action by the principal against the surety, although not made until after suit brought. Thompson v. McClelland, 29 Pa. St. 475; Beaver v. Beaver, 23
In the case of Abbey v. Van Campen, administrator, 1 Freeman’s Chancery R. 273, it was held : “A court of equity will not permit a plaintiff at law to enforce against the defendant the collection of a debt, when the defendant stands as surety for the plaintiff to an amount greater than that sued for, unless the plaintiff will fully indemnify the defendant against his liability as his surety, more especially if the plaintiff is shown to be insolvent. A surety has in respect of his liability the right of a creditor as against his principal, and upon the insolvency of the principal debtor he may retain any funds belonging to such debtor by way of indemnity against his liability.” In this case the surety filed his bill in chancery to restrain the collection of a judgment at law against him in favor of the administrator of his principal, until the notes, on which he was surety, were paid.” The injunction was granted. The Chancellor in his opinion in the case on pp. 274, 275, says: “This case was submitted on a motion to dissolve the injunction therein. The answer does not deny the agreement, upon which, I conceive, the equity of the bill rests. Here there is an express agreement, by which Abbey was at liberty to withhold the payment of the note for one thousand dollars, upon which he is sued, until Dickinson should release him from his liability on notes made by Dickinson and endorsed' for his accommodation by Abbey. This is certainly such an agreement between principal and surety, as a court of equity would enforce for the protection of the latter. The allegation of the bill on this subject is not denied and therefore stands
In the case last referred to (2 Dev. Eq. 31,) it was held, that “ upon the insolvency of the principal debtor a surety is considered in equity as a creditor, and may retain against an assignee for value and without notice any funds of the principal, which he has in his hands.”
As we have seen, in the case at bar the debt, for which the defendant Sutton obtained judgment against the plaintiff, was owing from the plaintiff to Sutton, at the time when the plaintiff became surety for Sutton in the appeal-bond made to enable the plaintiff to obtain an appeal from the judgment of the justice in the case of Barret v. Sutton, and by means of said appeal-bond Sutton did obtain an appeal from the judgment of the justice to the county court of said county of Wood. The condition of that appeal bond is, that “ whereas the above bound Hiram Sutton has appealed from the decision of William Cook, a justice of the peace of Wood county, West Virginia, in a certain action before him, in which
The plaintiff in his own deposition taken in his own behalf fully sustains the allegations of his bill in relation to an agreement or understanding between him and said Sutton made by them, before plaintiff signed said appeal-bond, if he is to be believed. It is proper to remark, that the deposition of said Sutton was not taken in the cause for some reason. If the statements of the plaintiff contained in his deposition in re
It seems to me upon well settled principles of equity, which are fully supported by authorities cited supra, that the circuit court erred to the prejudice of the plaintiff in dissolving said injunction as well as in dismissing the plaintiff’s bill. I think it was clearly right and proper to grant the injunction upon the facts stated in the bill, and that after the injunction was granted, it would have been error upon the facts appearing to dissolve the injunction before the county court entered judgment upon the award in favor of Barrett against said Sutton and plaintiff as his surety without indemnity to the plaintiff against any judgment, which might thereafter be rendered against him in said appeal-case as the
It seems to me further, that it was the right of the plaintiff as the surety of Sutton in said appeal in equity and upon principles settled in courts of equity under the circumstances and facts appearing in this case to withhold the amount of the said judgment of Sutton against him, including principal, interest and costs, for his indemnity against the said Barrett judgment against said Sutton and plaintiff as his security, as far as it would go, and to apply the same to the payment of the said Barrett judgment; and that when it shall be made to appear to the court, that the plaintiff has paid the amount of the said judgment of Barrett against Sutton and him including the principal, interest and costs, the circuit court should perpetuate the injunction heretofore allowed at the costs of the defendants. Under the facts appearing in this case the defendants, who are assignees of said Sutton, stand in no better situation than Sutton would, if he had made no assignment, the debt assigned not being negotiable in its nature or character, the assignees respectively took their assignments subject to the equities of the plaintiff as the surety of Sutton as aforesaid.
Entertaining the foregoing views, the said decree of the circuit court of the county of Wood rendered in this cause on the 13th day of April, 1878, must be reversed with costs to the appellant, William H. Mattingly, against the appellees, Hiram Sutton, John G. McLuer and James M. Jackson; and this cause must be remanded to the said circuit court for such
Debree Reversed. Cause Remanded.