144 Iowa 53 | Iowa | 1909
Lead Opinion
The defendant gave his promissory note to the plaintiff February 1, 1898, for $291.15. It was payable on demand and bore interest at the rate of eight percent per annum, payable . annually, and provided that “should any of the interest not be paid when due it shall bear interest at the rate of eight percent per annum.” The action was begun August 9, 1907, up to which time nothing had been credited on the note. The “answer and counterclaim” averred that the note had been fully paid, that defendant had rendered services for plaintiff as set out in an itemized account extending from December 20, 1897, to October 30, 1906, of the reasonable value of the several items, and prayed for judgment thereon, and that.“the account be ascertained that is due this defendant over and above the amount of the note sued on, and that the charges as they appear in defendant’s bill of particulars be deducted from the note as held by the plaintiff as of the date of the items, and for all other legal and equitable relief in the premises, and that an accounting be had between plaintiff and defendant.” By way of reply, plaintiff admitted the correctness of the account, but asserted that, as the account was continuous and open, defendant was entitled to interest thereon from six months after the last item only and then at 6 percent per annum, that he was not entitled to have the items applied as payments. on the -note until the filing of the an
“The conclusion which seems deducible from the general current of the English decisions (although most of them have arisen in bankruptcy) is that courts of equity will set off distinct debts, where there has been a mutual*57 credit, upon the principles of natural justice, to avoid circuity of suits, following the doctrine of compensation of the civil law to a limited extent. That law went further than ours, deeming each debt sub jure, set off, or extinguished pro tanto; whereas, our law gives the party an election to set off, if he chooses to exercise it; but if he does not, the debt is left in full force, to be recovered in an adversary -suit. Since the statutes of setoff of mutual debts and credits, courts of equity have generally followed the course adopted in the construction of the statutes by courts of law, and have applied the doctrine to equitable debts. They have rarely, if ever, broken in upon the decisions at law, unless some other equity intervened, which justified them in granting relief beyond the rules of law, such as has been already alluded to; and, on the other hand, courts of law sometimes set off equitable against legal debts, as in Bottomley v. Brooke (cited 1 T. R. 619). The American courts have generally adopted the same principles, as far as the statutes of setoff of the respective States have enabled them to act.”
Equity will intervene to effect a' setoff ofily when under the strict rules of the law justice can not be effectuated, and we are of opinion that the record presents such a cáse. Deeisiobs to the contrary may be found, but in all to which our attention has been directed the defenses or counterclaims were at law, and equitable relief was not prayed. The rule adopted will effectuate justice, and is supported by authority. — Affirmed.
Dissenting Opinion
(dissenting). — In order to reach a proper conclusion in this case, it seems to me that the issues as presented by the pleadings should be carefully considered. The action is upon an ordinary promissory note given by defendant to plaintiff on February 1, 1898, due on demand. The defendant in answer admitted the note, but denied any indebtedness thereon, and asserted that the note had been fully paid and satisfied. The second division of his answer, which contained the prayer,' read in this wise: “Further answering plaintiff’s petition, and by way of counterclaim, the defendant states: That he did work and labor for the plaintiff at plaintiff’s special instance and request; that a correct account of such work and labor was always kept by this defendant, a copy of'which account for work and labor is hereto attached, made a part thereof and marked ‘Exhibit A’; that said account is still the property of this defendant; that no part of the same has ever been paid; that the charges made for the items of work done and material furnished as evidenced by said bill of particulars are reasonable; and that said work and labor per
As the record recites that the jury was waived and the trial was had to the court as a law action, we should, in my opinion, so consider it here. This is the entire record in the case; no testimony of any kind being received, and no- documentary evidence being adduced save in introduction of the note in suit. I do not believe that these
Our statute as it now stands does not expressly recognize what was at one time known as a “setoff.” In Crookshank v. Mallory, 2 G. Greene, 257, it is said: “A setoff must be predicated upon an independent demand which a defendant has against the plaintiff.” And quoting from Chitty on Contracts, page 656, it'is said: “A setoff means a cross-claim for which an action might be maintained by the defendant against the plaintiff,, and is very different from a mere right to a reduction of his demand, or claim to defeat it, on account of some matter connected therewith.” Even if we were to treat this as an equitable suit, there is. lacking a showing which would justify the making of the credits, as defendant prays, for the reason that there is no showing of such mutual credits as to bring the case within the equitable principle announced in the majority opinion. In 2 Story’s Equity it is said that “by ‘mutual credit’ we are to understand a knowledge on both sides of an existing debt due to one party founded on’and trusting such debt as a means of discharging it.” In Zugg v. Turner, 8 Iowa, 223, it is said: “The mere existence of distinct debts, without mutual .credit, will not give a right of setoff in equity.” In Davis v. Milburn, 3 Iowa, 165, it is said: “The known rule of courts of equity is that they follow the law in regard to matters of setoff, unless there is some intervening equity going beyond the statute of setoff which constitutes the basis of setoff at law. Such natural equity arises where there are mutual credits between the parties, or where there is an existing debt on one side which constitutes the ground of a credit on the other, or where there is an express or implied understanding that the mutual debts shall be a satisfaction or setoff, pro tanto, between the parties. Howe v. Shepperd, 2 Sumn. 412, Fed. Cas. No. 6,773. It is said by Judge Story (2 Story, Equity Jurisprudence, par. 1435) that by ‘mutual
Finding then, -as I think we must, that the case is not properly in equity, it seems to me that defendant is entitled to nothing more than the statutory interest, upon his counterclaim, for there is no showing that defendant sold his goods, or gave his services, trusting thereby to discharge the plaintiff’s note. Indeed, the testimony shows that defendant sold plaintiff nearly $20 worth of his goods before he made his note to the plaintiff. Defendant’s account is, as we have seen, an open one, and never became an account stated at any time. There is no showing that he ever called upon plaintiff for the purpose of having any credits made upon the note, or that he relied upon plaintiff’s making any such credits. Upon facts quite similar to those in the case at bar, the Supreme Court of South Carolina, in Morse v. Ellerbe, 4 Rich. Law, 600, held that the items of open account should not be applied so as to stop interest upon notes given by the party furnishing the goods. See, also, Rogers v. Russel, 1 Nott & McC. (S. C.) 24. In Stephens v. Burgess, 69 Mo. 168, defendant interposed a counterclaim as against a note, but the court held the plaintiff was - entitled to interest on the full amount of the note down to the day of trial; the items of counterclaim being credited as of that date. In Tucker v. Jewett, 32 Conn. 563, the Supreme Court of Connecticut held that the interest on an interest-bearing claim should be computed down to the time the action was brought, and the defendant’s claim upon open account not drawing interest should be credited as of that day. See, also, Henry v. Butler, 32 Conn. 140. In McFarland v. McCormick, 114 Iowa, 368, we held, quoting from the syllabus, that
If the majority are right in their reasoning, the separate items of account should be credited as of the dates when the work was done or material furnished. The trial court applied the totals of items of each year as credits on the note as of the last day of each year. The opinion approves of this accounting which, to my mind, is improper, even under the view taken by the majority. That it was not the intent or purpose of the parties that the items should be credited in the manner approved by the majority is clear to my mind from a consideration of the account itself, which was not closed or even balanced at the end of each year, or at any other time; and that it was not the intent of the parties that the items of defendant’s account should be credited as of the date rendered or supplied is indicated by the fact that many of them were small, amounting to but ten or fifteen or twenty cents. There are approximately one hundred and eighty items of this account. Defendant at no time presented his claim or any part thereof to the plaintiff that it might be credited upon the note. When the note was given, no part of defendant’s account, which then amounted to more than $20, was taken into consideration. It seems to me that the defendant elected to treat his account purely as a counterclaim, and not as a bar to plaintiff’s action, even could he have pleaded this account in bar.
I think the judgment should be reversed.