Opinion
10-21-1815
Anderson v. Bullock and Marshall. [*]
Submitted without argument October 20, 1815
David Bullock and William Marshall, " assignees of William Austin," brought suit in the Superior Court of Caroline County, against William Anderson, on a bond executed by the defendant to William Austin, under the name and description of acting partner of the late House of Austin and Anderson. The declaration charged that Austin made the assignment to the plaintiffs, " by his certain deed in writing, sealed with his seal, and to the court shewn," bearing date the 5th of August 1802.
The defendant, after craving oyer of the bond and deed of assignment, pleaded a setoff, in part, before the assignment; payment in part, in like manner; and payment in full to Austin and Anderson.
The set-off was described as an obligation, commonly called a single bill, executed on the 10th of October, 1801, by Austin and Anderson to Thomas and Amos Ladd, and by them assigned to the defendant, June 22d, 1802.
At the trial, the plaintiffs produced in evidence a deed purporting to be a deed of assignment, executed the 5th of August 1802, between William Austin of the first part, the plaintiffs of the second part; sundry creditors of the said Austin, in his private and individual character, of the third part; and sundry persons, denominated, " creditors of the said William Austin as one of the house of Austin and Anderson," of the fourth part; by which deed, William Austin conveyed the whole of his own real and personal estate, contained in a schedule thereto annexed, to the plaintiffs in trust, for the purpose of paying, in the first place, all the debts due from himself in his individual character, and, afterwards, certain debts due from Austin and Anderson: --but nothing was said in the deed or schedule, about the outstanding debts belonging to the firm, except that, in the schedule, there was an item of " cash, book debts and bonds (after deducting some bad and suspicious debts,) amounting to 13,183l. 1s. 3d.; " without saying that any of those debts were due to Austin and Anderson. To which deed the defendant objected, as variant from the assignment set forth in the declaration; but the court over-ruled the objection, and suffered said deed to go as evidence to the jury; after which, the defendant offered in evidence a paper writing, in the words and figures following:
" $ 2364.81. Richmond, October 10th 1801.
" On or before the first day of February next, we bind ourselves, our heirs, executors, or administrators, to pay Thomas and Amos Ladd, or order, two thousand three hundred and sixty-four dollars and eighty-one cents, for value received in thirty hhds tobacco. Witness our hands.
" Austin & Anderson. [L. S.]
" Teste N. Anderson, jr."
With an assignment thereon from Thomas and Amos Ladds, to him the defendant, dated June 22d, 1802; which paper writing was proved to have been executed by Armistead Anderson of the house of Austin and Anderson: --to the admission of which last paper, the plaintiffs objected, and the court sustained the objection; whereupon the defendant filed a bill of exceptions.
A verdict being found, and judgment rendered for the plaintiffs, the defendant obtained a writ of supersedeas.
The president pronounced the following opinion of this court.
OPINION
The declaration in this case is upon a bond executed to Austin, as acting partner to the late house of Austin and Anderson. The deed, which is alleged in the declaration to be an assignment of that bond to the appellees, is executed by Austin in his own right, and, though it may include debts due to Austin in that character, cannot be considered as including debts due him as acting partner aforesaid. The court is therefore of opinion, that, though it was proper to admit it to be given in evidence to the jury, it being the deed set out in the declaration, yet the judgment on the verdict ought to have been for the defendant, for the reasons aforesaid.
The court is farther of opinion, that the note, which is set forth in the bill of exceptions, not being acknowledged to be under the seal of the parties, but under their hands, and being also expressed to be for valuable consideration, (a circumstance not necessary, and unusual, in a bond under seal,) though a scroll is annexed to it, ought to have been received as evidence of payment, to the amount thereof, on the third general plea of payment in the pleadings set out; and therefore the court also erred in refusing to admit it to go to the jury. The judgment is therefore reversed with, costs, and the suit dismissed.
SET-OFF, RECOUPMENT AND COUNTERCLAIM.
I. Set-Off.
A. At Law.
1. Origin and Nature.
a. Of Statutory Origin.
b. Distinguished from Payment.
c. Statute Not Compulsory.
2. Essentials of a Valid Set-Off.
a. Both Demands Must Be Debts.
(1) In General.
(2) Plaintiff's Demand.
(a) In a " Suit for Any Debt."
(b) Replevin.
(c) Forthcoming Bonds.
(d) Salary of Public Officers.
(3) Defendant's Set-Off.
(a) Unliquidated Damages.
(b) Value of Services Rendered.
b. Requirement as to Mutuality.
(1) In General.
(a) Set-Off Must Be Due Defendant.
(b) Set-Off Must Be Due from Plaintiff.
(2) Joint against Several Demands.
(a) General Rule.
(b) Partnership Debts.
(c) Where One of Several Joint Defendants Is Principal.
(d) Effect of Agreement.
(e) Joint and Several against Several Demands.
(3) Assignment as Affecting Set-Off.
(a) Set-Off against Assignee.
(b) Set-Off by Assignee.
(4) Debts Due in Same Right.
(a) Public Officers.
(b) Fiduciaries.
c. Set-Off Must Be a Subsisting Cause of Action.
3. Statute of Limitations.
a. When Statute Ceases to Run.
b. When Special Plea Necessary.
c. Assignee May Plead Statute.
4. Effect of Claiming Set-Off.
a. Defendant Becomes Plaintiff as to Set-Off.
b. Judgment on Set-Off Bars Subsequent Action.
5. Procedure.
a. Specification of Set-Off.
(1) Necessity.
(2) Sufficiency.
b. Inability to Prove Counter Set-Off as a Defense.
c. Recovery Over against Plaintiff.
B. Set-Off in Equity.
1. In General.
2. When Equity Will Enforce Set-Off.
a. Agreement to Set-Off.
b. Insolvency.
(1) In General.
(2) Mere Insolvency Insufficient.
(3) Where Debt Is Not Due.
c. Where Equity Has Jurisdiction on Other Grounds.
d. Funds in Court.
e. Set-Off of Unliquidated Damages.
f. Joint against Several Demands.
g. Laches.
(1) Where Set-Off Might Have Been Pleaded at Law.
(a) Necessity for Excusing Failure to Plead.
(b) Sufficiency of Excuse.
(2) Set-Off Existing before Execution of Contract.
II. Recoupment.
A. Definition and General Principles.
1. Definition.
2. Distinguished from Set-Off.
3. Common-Law Recoupment Unimpaired by § 3299.
B. Essentials of Valid Recoupment.
1. Damages Need Not Be Liquidated.
2. Must Arise Out of Contract in Suit.
3. Not Available against a Deed.
4. No Recovery Over against Plaintiff.
C. Who May Recoup Damages.
D. Recoupment Provable under General Issue.
1. In General.
2. No Special Plea Allowed.
3. Notice of Recoupment.
III. Special Plea of Set-Off.
A. Extension of Common-Law Recoupment.
1. Common-Law Recoupment Unimpaired.
2. Set-Off Must Grow Out of Contract in Suit.
B. Rules of Equity Applicable.
C. In What Actions Plea May Be Filed.
1. In Any Action on a Contract.
a. Contracts by Deed or Parol.
b. Contracts Relating to Realty or Personality.
2. Where Relief Peculiar to Equity Is Necessary.
D. Grounds for Plea.
1. Fraud in the Procurement of the Contract.
2. Failure of Consideration.
3. Want of Consideration.
4. Breach of Warranty.
a. In General.
b. Of Title to Real Property.
5. Matter Entitling Defendant to Relief in Equity.
E. By Whom Plea May Be Filed.
F. Special Plea as Affecting Right to Equitable Relief.
1. Effect of Failure to File Plea.
2. Effect of Judgment on Plea.
G. Defendant Deemed to Have Brought Action against Plaintiff.
1. In General.
2. Judgment on Plea Bars Subsequent Action.
3. Where Defendant's Set-Off Exceeds Plaintiff's Demand.
H. Procedure.
1. The Plea.
a. Setting Out Ground of Defense.
b. Formal Requisites.
(1) Must Allege Amount to Which Defendant Entitled.
(2) Verification by Affidavit.
2. Replication to Plea.
a. General Replication.
b. Statute of Limitations.
IV. Set-Off of Judgments.
A. In General.
B. Requisites of Set-Off.
1. Demand Not Reduced to Judgment.
2. Judgment Annulled on Appeal.
C. When Set-Off allowed.
1. Discretion of Court.
2. Where Injustice Would Be Done by Allowing Set-Off.
3. Set-Off against Assignee of Judgment.
Cross References to Monographic Notes.
Appeal and Error, appended to Hill v. Salem, etc., Turnpike Co., 1 Rob. 263.
Assignments, appended to Ragsdale v. Hagy, 9 Gratt. 409.
Assignments for the Benefit of Creditors, appended to French v. Townes, 10 Gratt. 513.
Banks and Banking, appended to Bank v. Marshall, 25 Gratt. 378.
Bills, Notes and Checks, appended to Archer v. Ward, 9 Gratt. 622.
Bonds, appended to Ward v. Churn, 18 Gratt. 801.
Consideration, appended to Jones v. Obenchain, 10 Gratt. 259.
Contribution and Exoneration.
Contracts, appended to Enders v. Board of Public Works, 1 Gratt. 364.
Creditors' Bills, appended to Suckley v. Rotchford, 12 Gratt. 60.
Debts of Decedents, appended to Shores v. Wares, 1 Rob. 1.
Deeds, appended to Fiott v. Commonwealth, 12 Gratt. 564.
Executors and Administrators, appended to Rosser v. Depriest, 5 Gratt. 6.
Injunctions, appended to Claytor v. Anthony, 15 Gratt. 518.
Judgments, appended to Smith v. Charlton, 7 Gratt. 425.
Partnership, appended to Scott v. Trent, 1 Wash. (VA) 77.Payments.
I. SET-OFF.
A. AT LAW.
1. Origin and Nature.
a. Of Statutory Origin. --The plea of set-off is a creation of statute law. At common law, a defendant was in no case allowed to recover a judgment for damages for a positive claim against the plaintiff. At common law, when there were mutual cross demands unconnected with each other, arising upon contract express or implied, though the demands of each party were liquidated or capable of being ascertained by simple calculation, they could not be settled in one suit; but the defendant in such case was compelled to resort to a cross action. Baltimore, etc., R. Co. v. Jameson, 13 W.Va. 833; Gilliat v. LynchLeigh 493, 504.
The oldest statutes of set-off are those passed by the legislature of Virginia. The first statute of this character was passed in 1645 (Hen. Stat., vol. 1, p. 296), and after subsequent amendments is as follows: " In a suit for any debt, the defendant may at the trial prove, and have allowed against such debt, any payment or set-off which is so described in his plea, or in an account filed therewith, as to give the plaintiff notice of its nature, but not otherwise." Code Va., § 3298. Code of W. Va., ch. 126, § 4. Baltimore, etc., R. Co. v. Jameson, 13 W.Va. 833.
Statute of Set-Off Liberally Construed.--The policy of the statute of set-off is to prevent multiplicity of suits; and, as far as conveniently can be done, to effectuate in one action complete justice between the parties. And with the view to the furtherance of this policy, the statutes of set-off have been very liberally construed. Allen v. Hart, 18 Gratt. 722; Baltimore, etc., R. v. Jameson, 13 W.Va. 833.
b. Distinguished from Payment. --The distinction between a payment and a set-off is this: A payment is by consent of the parties, express or implied, appropriated to the discharge of the debt; while a set-off is an independent demand, the subject of a cross action, which the parties have not applied on the debt. Gilliat v. LynchLeigh 493; Kennedy v. Davisson, 46 W.Va. 433, 33 S.E. 291. And see Hill v. Southerland, 1 Wash. (VA) 128.
Agreement to Apply Set-Off to Debt.--What was at first a set-off, may, by agreement of the parties applying it, be transformed into a payment. Kennedy v. Davisson, 46 W.Va. 433, 33 S.E. 291.
c. Statute Not Compulsory. --The defendant has his election either to avail himself of his demand against the plaintiff by way of set-off, or to reserve it for a separate suit. That is, the statutes of set-off are not compulsory. Kennedy v. Davisson, 46 W.Va. 433, 33 S.E. 291; Morgan v. Carson, 7 Leigh 238. See Lewis v. Long, 3 Munf. 136, 146.
2. Essentials of a Valid Set-Off.
a. Both Demands Must Be Debts.
(1) In General.--Set-off is allowed only where the demands on both sides are in the nature of debts. A demand for unliquidated damages cannot be set off against an ascertained demand, nor can cross demands for unliquidated damages be set off against each other. Christian v. Miller, 3 Leigh 78; Bunting v. Cochran, 99 Va. 558, 39 S.E. 229; Webster v. Couch, 6 519.
One Trespass Cannot Be Set Off against Another.--One trespass cannot be set off in bar of another; but where the damage alleged by the plaintiff is caused in part by the wrongful act of the plaintiff, the defendant may by way of defense under the plea of not guilty prove such wrongful act of the plaintiff in mitigation of damages. Hargreaves v. Kimberly, 26 W.Va. 787; Knight v. Brown, 25 W.Va. 808.
(2) Plaintiff's Demand.
(a) In a " Suit for Any Debt." --The statute expressly requires that the plaintiff's demand be in the nature of a debt. It provides for the allowance of set-offs " in a suit for any debt. " Va. Code, § 3298. W.Va. Code, ch. 126, § 4. Baltimore, etc., R. Co. v. Jameson, 13 W.Va. 833.
Demand in Substance a Debt--Form of Action Immaterial.--No matter what the form of the suit or proceeding may be, if it is in substance for the recovery of a debt, set-offs should be allowed. Thus, in an action on a penal bond for the faithful and honest discharge of the obligor's duty as agent, though the breach as laid in the declaration, is that the defendant did not compensate the plaintiff for the loss sustained by the defendant's making way with $ 395 received by him for the plaintiff; it was held that, as the precise sum thus made way with by the defendant, would compensate the plaintiff for its loss, and it would necessarily recover neither more nor less than this sum, the breach thus laid is obviously the same in substance, as though the breach had been the nonpayment of the sum. Baltimore, etc., R. Co. v. Jameson, 13 W.Va. 833.
(b) Replevin.--Under the liberal construction which was given the Va. statute of set-off the plaintiff in replevin was allowed to avail himself of a set-off on the same principle that the defendant was allowed to prove his set-off in other actions. The action of replevin was, after the defendant's avowry for rent, in substance an action of debt by the defendant against the plaintiff for the rent, and therefore it came within the true intent and meaning of the statute of set-off. Nicolson v. Hancock, 4 Hen. & M. 491; Turberville v. Self, 4 Call 580; S. C.Wash. (VA) 71.
(c) Forthcoming Bonds.
Taken under Distress Warrant.--It was well settled in this state, that a set-off was a good defense to an avowry for rent in an action of replevin before the abolition of this action. And the defense which a tenant may make to an action or motion on a forthcoming bond taken under a distress warrant, was intended by the legislature to be a substitute for the common-law remedy by an action of replevin. Hence, the defense of set-off is admissible in an action upon a forthcoming bond taken under a distress warrant. Allen v. Hart, 18 Gratt. 722; Wartman v. Yost, 22 Gratt. 595; Hancock v. Whitehall Tobacco Co., 100 Va. 443, 41 S.E. 860.
Forfeited Forthcoming Bond--Set-Off--Jurisdiction of County Court.--Forfeited forthcoming bonds taken on distress warrants issued for rent by justices of the peace of a county are returnable to the county courts, and when motion is made for judgment in such courts, the tenant may make any defense which shows that the rent is not due in whole or in part. The tenant has the right to rely upon set-offs in said court to the extent to which it is necessary to make complete defense to the landlord's demand, regardless of the amount of such set-off. There is no pecuniary limit to the jurisdiction of said courts in this respect. Hancock v. Whitehall Tobacco Co., 100 Va. 443, 41 S.E. 860.
Taken under Execution.--The defense of set-off is not admissible in a motion upon a forthcoming bond taken under an execution. The forthcoming bond taken under an execution is a part of the process of the execution of the judgment, and hence partakes of all of the finality which belongs to the judgment. Allen v. Hart, 18 Gratt. 722.
(d) Salary of Public Officers.
Attorney General.--The salary of the attorney general is of constitutional grant and of public official right; and the doctrine of set-off cannot be applied to it. It is not liable to attachment, nor to garnishment; nor to assignment in bankruptcy, and upon principles of public policy, it has absolute immunity from detention for debt or counter claim. An act of the assembly attempting to make it liable to offsets is unconstitutional and void. Blair v. Marye, 80 Va. 485.
(3) Defendant's Set-Off.
(a) Unliquidated Damages.--It is well settled that the demand proposed to be used as a set-off by the defendant must be in the nature of a debt; and a claim for unliquidated damages cannot be used as a set-off. Harrison v. Wortham, 8 Leigh 296; Case Mfg. Co. v. Sweeny, 47 W.Va. 638, 35 S.E. 853; McSmithee v. Feamster, 4 W.Va. 673; Clark's Cove Guano Co. v. Appling, 33 W.Va. 470, 10 S.E. 809.
Damages for Breach of Warranty.--Damages for breach of warranty cannot be claimed by way of set-off under the provisions of § 3298 of the Code of Virginia, because the provisions of that section apply only where the set-off is a debt or liquidated demand. Kinzie v. Riely, 100 Va. 709, 42 S.E. 872.
Breach of Contract for Future Delivery.--Where the defendant's demand arises out of the breach of a contract to deliver a quantity of corn at a future day, it is strictly a demand for unliquidated damages and therefore not a proper set-off. Christian v. Miller, 3 Leigh 78.
Liability of Creditor for Delay in Collecting Draft Given on Account.--Where a debtor drew and delivered to his creditors an order on a third person, payable at sight, and directed the amount, when received, to be placed to the credit of his account, and the creditor, without the knowledge or assent of the drawer, took the drawee's acceptance payable at sixty days, and before the expiration thereof the acceptor died insolvent, the drawer's claim against his creditors on account of the draft is a claim to unliquidated and uncertain damages for their failure to promptly collect it, and cannot be allowed as a set-off in a suit brought by the creditor to recover his original demand against the drawer. Harrison v. Wortham, 8 Leigh 296.
(b) Value of Services Rendered.--In an action of debt on a penal bond conditioned that if the plaintiff should incur loss because the obligor in the bond, the plaintiff's agent, made way with the plaintiff's money, received by him as such agent, then if the obligor should recompense the plaintiff for such loss, the obligation should be void, or else remain in full force, the defendant may plead, as a set-off, his services rendered as such agent. Baltimore, etc., R. Co. v. Jameson, 13 W.Va. 833.
In an action of debt on a bond executed by a deputy sheriff to his principal, where the breach alleged is that the defendant has failed to comply with the conditions of the bond by paying over and accounting for all money which may have come into his hands by virtue of his office, the defendant may prove and have allowed as a set-off against such claim the amount to which he may be entitled for services as such deputy, if the same is set forth and described in the bill of particulars filed with the plea. Davis v. Baker, 45 W.Va. 455, 32 S.E. 239.
b. Requirement as to Mutuality.
(1) In General.
(a) Set-Off Must Be Due Defendant.--A debt offered as a set-off must be due to the defendant. Little Kanawha Nav. Co. v. Rice, 9 W.Va. 636; Magarity v. Succup, 90 Va. 561, 19 S.E. 260. And see, post, this section, " Set-Off by Assignee."
The defendant, when sued in his individual capacity, to recover his subscription to stock in certain company, cannot set-off a claim belonging to another company of which he is president. Little Kanawha Nav. Co. v. Rice, 9 W.Va. 636.
The defendant cannot set off notes placed in his hands for collection, to be returned to the owner if not collected, and which never became the defendant's property. Magarity v. Succup, 90 Va. 561, 19 S.E. 260.
Where Defendant Has Equitable Title Only.--According to the English statute, a defendant cannot avail himself of a set-off unless he has the legal title thereto, so that he can bring an action thereon in his own name. This statute requires that there be mutual debts " between the plaintiff and the defendant," in order to enable them to be set off against each other. But there is no such requirement in the Virginia statute; and under the liberal construction which has been given to the Virginia statute, the court will look to the real and not to the nominal parties to the suit. Hence under the Virginia statute, a set-off, if valid in other respects, will not be rejected merely because the defendant has only an equitable title thereto. Wartman v. Yost, 22 Gratt. 595; Edmunds' v. Harper, 31 Gratt. 637.
(b) Set-Off Must Be Due from Plaintiff.--The debt which is offered as a set-off, must be due from the plaintiff in the action. May v. Boisseau, 12 Leigh 512; Perkins v. Clements, 1 Patton & H. 141; Nolting v. Bank, 99 Va. 54, 37 S.E. 804. See Board v. Cain, 28 W.Va. 758.
A bank which has received money on deposit for an agent who has a beneficial interest therein, cannot disregard that interest and set-off against such deposit a debt due to it by the principal of such agent. Nolting v. Bank, 99 Va. 54, 37 S.E. 804.
As a married woman may have money separate or distinct from all right or control on her husband's part, a writing which acknowledges that a certain sum was borrowed from her, imports, prima facie, that the money was hers, and when her interest is not disaffirmed by the husband nor the presumption in her favor otherwise repelled, there cannot, in an action brought by her after her husband's death, be set off a debt due from him. May v. Boisseau, 12 Leigh 512; Perkins v. Clements, 1 Patton & H. 141.
(2) Joint against Several Demands.
(a) General Rule.--It is a well settled rule that joint and several demands cannot be set off against each other. Porter v. Nekervis, 4 359; Arnolds v. Jacksons, 6 Munf. 106; Christian v. Miller, 3 Leigh 78; Glazebrook v. Ragland, 8 Gratt. 332; Choen v. Guthrie, 15 W.Va. 100; Elliott v. Bell, 37 W.Va. 834, 17 S.E. 399.
Nor does § 19 of ch. 131 of the Code of W. Va., which provides that " in an action founded on contract, against two or more defendants, although the plaintiff may be barred as to one or more of them, yet he may have judgment against any other or others of the defendants against whom he would have been entitled to recover, if he had sued them only, on the contract alleged in the declaration," authorize one defendant to plead, in a suit against him and others on a joint contract, a several offset due to him from the plaintiff. Choen v. Guthrie, 15 W.Va. 100.
Debt Due by Husband against Debt Due Husband and Wife.--In an action of debt on a bond in which a husband and wife are jointly interested, a debt due by the husband alone cannot be used as a setoff. It is a general rule that debts which are not mutual cannot be set off at law, nor in equity. Glazebrook v. Ragland, 8 Gratt. 332.
Where land conveyed by a husband in trust for himself and wife by deed not duly recorded, was subsequently sold by the trustee under a decree of the court in a friendly suit by the cestuis que trust against the trustee; and years afterwards, but before all the purchase money was paid, the purchaser became the surety of the husband on a forthcoming bond, and was compelled to pay the money, it was held that the purchaser could not set off against his liability for the purchase price, the amount paid by him as surety on such forthcoming bond. The demands in such case were not mutual, the husband's interest in the trust land being a joint interest. Glazebrook v. Ragland, 8 Gratt. 332.
(b) Partnership Debts.--The general rule, above stated, which prohibits the set-off of joint against several demands, applies equally well to partnership demands; and it is well settled that partnership and individual demands cannot be set-off against each other. Scott v. Trent, 1 Wash. (VA) 77; Ritchie v. Moore, 5 Munf. 388; Armistead v. Butler, 1 Hen. & M. 176. See Rose v. MurchieCall 409.
The delivery of goods to one partner cannot be set off against a partnership demand, although such goods, by direction of the partner receiving them, were entered as a credit against the partnership demand. Armistead v. Butler, 1 Hen. & M. 176.
(c) Where One of Several Joint Defendants Is Principal.--The general rule, as stated above, is modified by the Code of Va., § 3298 (Code of W. Va., chap. 126, § 4), which provides, that " although the claim of the plaintiff be jointly against several persons, and the set-off is of a debt not to all but only to a part of them, this section shall extend to such set-off, if it appear that the persons, against whom such claim is, stand in the relation of principal and surety, and the person entitled to the set-off is the principal." Under this provision it has been held, that in an action on a bond against three defendants, one of whom was the principal, and the other two sureties, the defendants may set off a judgment against the plaintiff which has been assigned to the principal alone. Edmunds' v. Harper, 31 Gratt. 637; Wartman v. Yost, 22 Gratt. 595; Choen v. Guthrie, 15 W.Va. 100; Kinzie v. Riely, 100 Va. 709, 42 S.E. 872. See Hupp v. Hupp, 6 Gratt. 310.
Surety on Joint Bond Sued Alone.--In an action on a bond by the assignee in bankruptcy of the obligee, against the surety alone (the principal obligor being a bankrupt) the surety may plead as a set-off an account due by the obligee, which has been assigned to the principal obligor. In such case if the principal obligor had been sued it is very clear that he might have relied upon the account as a proper offset against the bond under ch. 168, § 4 of the Code of 1873. And although by reason of his bankruptcy, the principal is not sued, his surety on the bond may rely upon any set-off which his principal might have claimed had the suit been brought against him. Edmunds' v. Harper, 31 Gratt. 637.
Party Offering Set-Off Must Allege That He Is Principal in Claim Sued on.--If the person who files a plea of set-off, claims the benefit of the exception in Code W. Va., ch. 126, § 4, his plea of set-off must allege that he is principal and the other defendants sureties in the claim sought to be enforced. And if he does not file a plea, but merely a specification of set-off under this statute, he must allege in the specification that he is the principal in the claim sued on by the plaintiff. Choen v. Guthrie, 15 W.Va. 100.
(d) Effect of Agreement.--Although joint demands cannot be set-off against several demands, yet the parties by agreement may place the joint demands on the same footing as mutual debts due it the same right-that is, they may constitute the joint demands valid set-offs against the several demands. Perkins' v. Hawkins', 9 Gratt. 649. See Perkins v. Clements, 1 Patton & H. 141.
(e) Joint and Several against Several Demands.--While it is true that joint demands cannot be set-off against several demands, yet a demand that is both joint and several may be set-off against one that is several. Where the parties enter into a joint and several undertaking, it becomes the separate debt of each as well as the joint debt of them all. Elliott v. Bell, 37 W.Va. 834, 17 S.E. 399.
Joint and Several Bonds--Surety Sued Alone--Set-Off Due Principal.--When two persons execute a joint and several bond, one as principal and the other as surety, and the creditor elects to sue the surety alone, such surety cannot plead, as a set-off, a demand due from the plaintiff to his principal in the bond. If this were allowed, it would result in great injustice to the principal, by disposing of his rights in a suit to which he is not a party. Nor can ch. 126, § 4, of the Code of W.Va. have any application to such a case as this. This statute applies only to the case where the demand set out in the declaration is a joint demand against the principal and surety, and the principal has an offset against the plaintiff. Baltimore, etc., R. Co. v. Bitner, 15 W.Va. 455.
(3) Assignment as Affecting Set-Off.
(a) Set-Off against Assignee.--The assignee of a chose in action must allow all just offsets, not only against himself, but against the assignor before notice of the assignment was given to the defendant. Clopton v. Morris, 6 Leigh 278; Ragsdale v. Hagy, 9 Gratt. 409; Commercial Bank v. Cabell, 96 Va. 552, 32 S.E. 53; Armentrout v. Gibbons, 30 Gratt. 632; Gordon v. Rixey, 86 Va. 853, 11 S.E. 562. See monographic note on " Assignments" appended to Ragsdale v. Hagy, 9 Gratt. 409.
Set-Off Must Be Acquired before Knowledge of the Assignment.--When, in a suit on a chose in action, brought by the assignee thereof, the debtor pleads, as a set-off thereto, a claim against the assignor, such set-off will not be allowed if it appears that, before he acquired the claim, the defendant had notice of the assignment, or had knowledge of such facts as were sufficient to have put him upon inquiry as to it. Ritchie v. Moore, 5 Munf. 388; Cochrane v. Hyre, 49 W.Va. 315, 38 S.E. 554. See Spilman v. Payne, 84 Va. 435, 4 S.E. 749.
When a bank of circulation has assigned all its property to a trustee for the benefit of its creditors, a debtor of such bank cannot set-off against his indebtedness, notes of the bank acquired after notice of such assignment. And the same is true where the notes are acquired after such debtor has been summoned as a garnishee, to answer the amount of his indebtedness to such a bank, or after there has been a decree for an account in a creditor's bill against such a bank. Exchange Bank v. Knox, 19 Gratt. 739; Saunders v. White, 20 Gratt. 327; Finney v. Bennett, 27 Gratt. 365; Seamon v. Bank, 4 W.Va. 339; Farmer's Bank v. Gettinger, 4 W.Va. 305; Farmer's Bank v. Willis, 7 W.Va. 31.
Waiver of Set-Off.--S being indebted to M, afterwards obtains, by assignment, the bond of M, to an equal amount. He offers a discount, which M declines, supposing he had an equitable objection to the payment of his bond in the possession of S. S assigns over that bond to P for valuable consideration, and without notice. Under such circumstances, the conduct of M was not a waiver of his right to discount, and he was at liberty to offset the bond of S against his bond assigned to P. Picket v. MorrisWash. (VA) 255.
Pleading Set-Off Held against Assignor.--In debt on an assigned bond, the assignee being plaintiff, if the defendant pleads that he has paid the debt to the plaintiff (without pleading payment to the assignor before notice of the assignment), it is not allowable to give in evidence any set-off against, or payment to the assignor. Hatcher v. Cabell, 6 353.
Set-Off against the Indorsee of an Overdue Note.--In Davis v. Miller, 14 Gratt. 1, the court left it unsettled whether a set-off is an equity to which an overdue note is subject in the hands of an indorsee. But whatever doubt there may be on this question, a set-off between the maker and the payee, acquired after the transfer of such overdue note, though acquired without notice of the transfer, cannot be set-off against the holder. See also, Smith v. Lawson, 18 W.Va. 212, 224.
(b) Set-Off by Assignee.--The defendant's set-off may consist not only of counter demands of the defendant himself against the obligor, but also of demands of third persons against the obligor which the defendant may have acquired by assignment. In order to enable the defendant to set up these claims of third persons against the obligor, he must show that he is the owner thereof. But if he can do this, the fact that he acquired his title knowing that the obligor was insolvent, and with the express purpose of using the demand as a set-off, is immaterial. Clopton v. Morris, 6 Leigh 278; Dickey v. Smith, 42 W.Va. 805, 26 S.E. 373; Wartman v. Yost, 22 Gratt. 595.
Thus, where the obligor in a bond enters into an agreement with a third person, whereby such third person assigns to him a bond of his obligee, and said obligor gives his note to this third person for the amount of the bond; and at the time of this agreement both parties know that the obligee in the first-mentioned bond is insolvent, and their express purpose is to use the assigned bond as an offset; and it is agreed between them that if, by reason of any law unknown to them, the assignment should turn out to be illegal, and said obligor should be unable to use it as an offset, the agreement is to be of no effect; and previous to this agreement the bond against which the assigned bond was to be used as an offset had been assigned to a third party but the above agreement is made without knowledge of this assignment. Held, that the assigned bond is a valid offset. Clopton v. Morris, 6 Leigh 278.
Consideration for Assignment.--Where a defendant offers as an offset, a claim against the plaintiff, which he has obtained by assignment, the amount paid therefor, if anything, is a matter between the defendant and his assignor, with which the plaintiff has nothing to do if he justly owes the claim. Dickey v. Smith, 42 W.Va. 805, 26 S.E. 373.
At What Time Assignment Must Be Obtained.--The rule under the Virginia statute, is to allow offsets acquired at any time before the trial, but not so as to destroy the plaintiff's right of action and entitle the defendant to costs. If, therefore, after suit brought, the defendant buys bonds due by the plaintiff, though he may use them as an offset on the trial, there will be a judgment for costs against him. Hudson v. Johnson, 1 Wash. (VA) 10; Allen v. Hart, 18 Gratt. 722. See Ritchie v. Moore, 5 Munf. 388.
But see Alexander v. Morris, 3 Call 89, and Dangerfield v. Rootes, 1 Munf. 529, where it is held that it is improper for a debtor after suit brought against him, to buy up claims against his creditor in order to discount them, especially when purchased at an underrate.
In Dickey v. Smith, 42 W.Va. 805, 26 S.E. 373, it was held that the defendant was entitled to set-off a bona fide claim, assigned to him at any time before the commencement of the suit. But this case was decided under ch. 50, § 52 of the Code of West Virginia which expressly requires that in a proceeding before a justice of the peace, set-offs must have belonged to the defendant at the time the plaintiff's suit was commenced.
(4) Debts Due in Same Right.--In order to enable debts to be set off against each other, they must be due in the same right. 4 Min. Inst. 789; 1 Bart. Law Pr. 509, and cases cited below.
(a) Public Officers.--A taxpayer will not be allowed to set-off the sheriff's personal indebtedness to him, against the taxes due the city, county or district. Humphreys v. Patton, 21 W.Va. 220; Miller v. Wisener, 45 W.Va. 59, 30 S.E. 237.
If a suit be brought on the special bond of the sheriff as a collector of school taxes, and the only breach of the bond alleged by the plaintiff is the failure of the sheriff to pay over the amount which he was indebted to the teacher's fund, the defendants cannot set-off a balance which they claim is due to the sheriff from the building fund; the statute requiring the two funds to be kept entirely distinct, and prohibiting the sheriff from making overpayments from the building fund. Board v. Cain, 28 W.Va. 758.
(b) Fiduciaries.
Guardians.--Where a court of competent jurisdiction has confirmed the final account of an administrator, and by its decree directed a certain sum of money to be paid to a guardian as the estate of his ward, the administrator cannot set off against the amount so decreed to such guardian a debt due to him from such guardian in his individual capacity. Shriver v. Garrison, 30 W.Va. 456, 4 S.E. 660.
The court will not allow, much less aid, a guardian to apply the estate of his ward to the discharge of his own individual indebtedness. Dobyns v. Rawley, 76 Va. 537.
Administrators and Executors.--A bond taken by an administrator for the proceeds of his sales of his intestate's estate is to be looked upon in equity, as the property of the estate; at least, until the administrator's accounts are settled, and he is found in advance to the estate. An obligor in such a bond cannot set off debts due him from the administrator individually, against the demand on the bond, either at law or in equity. Pulliam v. Winston, 5 Leigh 324.
In an action brought by an administrator upon a contract made with him, as such, the defendant cannot set off a demand which he holds against the decedent. To allow such set-off would involve the taking of an account of the assets of the estate in every case in which the personal representative asserts a demand on behalf of the estate; and it might subject such personal representative to a devastavit if he made a mistake. White v. Bannister, 1 Wash. (VA) 166; Brown v. Garland, 1 Wash. (VA) 221; Pulliam v. Winston, 5 Leigh 324; Washington v. Castleman, 31 W.Va. 832, 8 S.E. 603.
This same reason would prevent the allowance as a set-off, in an action by an administrator, of a claim by the defendant as one of the distributees of the intestate's estate. Pulliam v. Winston, 5 Leigh 324.
And so, in an action of assumpsit by an administrator for a debt due to him as administrator, the defendant will not be allowed to set off a debt due to him for money paid as surety for the intestate since his death. Minor v. Minor, 8 Gratt. 1.
But in an action by a personal representative, if the contract out of which the debt sued on arose, was made with the decedent and the set-off was acquired before his death, they may be set off against each other. Washington v. Castleman, 31 W.Va. 832, 8 S.E. 603.
Upon a contract for the lease of land, made by the lessor in his lifetime, for a term of years, the rent accruing upon such lease, after the death of the lessor, cannot be set off by a debt due to the tenant from the lessor at the time of his death, although the estate of the lessor is insolvent. Washington v. Castleman, 31 W.Va. 832, 8 S.E. 603.
Where an executor as surety for a distributee has paid a judgment against the latter, the former is entitled to set off in equity the amount so paid, against the distributive share of said distributee. Boyd v. Townes', 79 Va. 118.
c. Set-Off Must Be a Subsisting Cause of Action.
Set-Off Must Be Due and Payable.--In order for a demand offered by the defendant to constitute a valid set-off at law, it must be actually due and payable. The rule in England is, that set-offs relied on as defense must have been due to the defendant at the time of the commencement of the suit; but the uniform practice under the Virginia and West Virginia statutes, is to allow all offsets up to the time of trial. Trimyer v. Pollard, 5 Gratt. 460; Allen v. Hart, 18 Gratt. 722; Wheeling Bridge, etc., Co. v. Cochran, 68 F. 141.
Set-Off of Note by Assignee against Assignor--Necessity for Reasonable Diligence.--It has been held that the assignee of a note cannot offer it as a set-off in a suit brought against him upon an independent transaction by the assignor thereof, until he has used reasonable diligence to collect the amount thereof from the maker of the note. Mandeville v. Patton, 3 Call 9.
Purchase-Money Bond--Failure of Vendor to Give Title.--A grantor conveyed land whereon there was a mortgage which the grantee received credit for and which he promised in writing to satisfy. Later the grantor repurchased part of the land and gave his bond for the price of the part repurchased. The grantee died without having paid the mortgage and his property, which was ample to pay all his debts including the mortgage assumed by him, descended to a surety for the mortgage debt. In a suit to recover a deficiency in the mortgage debt, the court held that as the grantee had not paid the mortgage debt and could not therefore give good title to the land repurchased by the grantor, the bond given by the grantor on said repurchase never became due and the surety was not entitled to set off the amount thereof against the vendees undertaking to pay the mortgage debt. Francisco v. Shelton, 85 Va. 779, 8 S.E. 789.
Set-Off Formerly Adjudicated.--After a final decree in a chancery suit brought in a court of competent jurisdiction in another state, decreeing to the several members of a partnership the amounts due to each of them respectively, the rights of the said parties in regard to the matters embraced in said suit, are concluded by such decree. And if one of the partners collect the amount decreed to one of his copartners, and be sued by such copartner in this state to recover the same, such defendant will not be permitted to set off against said demand any debt or claim held by him before such final decree arising out of such partnership, which was or might have been settled thereby. Hunter v. Stewart, 23 W.Va. 549.
3. Statute of Limitations.
a. When Statute Ceases to Run. --The statute of limitations ceases to run against an offset from the time of filing the plea or account thereof. The Code now provides, that " a defendant who files a plea or account under this chapter, shall be deemed to have brought an action, at the time of filing such plea or account, against the plaintiff," etc. Va. Code, § 3303. W.Va. Code, ch. 126, § 9. Moore v. Luckess', 23 Gratt. 160; 1 Bart. Law Pr. 513.
Formerly it was held that in those cases where the set-off accrued before the action was brought, the period of limitation was five years before the commencement of the action; but, if the set-off accrued after the action was brought, the period of limitation was five years before the filing of the plea or the filing of the account of set-off. Trimyer v. Pollard, 5 Gratt. 460 (Daniel, J., dissenting in a strong opinion). And see Bantz v. Basnett, 12 W.Va. 772, 832.
b. When Special Plea Necessary. --It is a general rule that the statute of limitations must be specially pleaded. If the set-off relied on is not an equitable set-off under § 3299, the defendant may either plead the set-off, or he may give notice of the set-off by filing an account. And if he pleads it, then the plaintiff, if he rely upon the statute of limitations, must reply it specially; but if the defendant does not plead his set-off, but gives notice thereof, accompanied by an account, the plaintiff has had no opportunity to plead the statute, and he may rely on it at the trial without pleading it. Trimyer v. Pollard, 5 Gratt. 460; Sexton v. Aultman, 92 Va. 20, 22 S.E. 838; 4 Min. Inst. (3d Ed.) 791.
c. Assignee May Plead Statute. --An assignee of a note, suing on it, may plead the statute of limitations against a set-off, based upon a demand against the assignor. Walker v. Burgess, 44 W.Va. 399, 30 S.E. 99.
4. Effect of Claiming Set-Off.
a. Defendant Becomes Plaintiff as to Set-Off. --A defendant who files a plea or account of set-off is deemed to have brought an action at the time of filing such plea or account, against the plaintiff. Code Va., § 3303. Craigen v. Lobb, 12 Leigh 627; Black v. Thomas, 21 W.Va. 709; Botetourt County v. Burger, 86 Va. 530, 10 S.E. 264; Swann v. Deem, 4 W.Va. 368.
Set-Off in Action by County--When Allowed.--When one is sued by a county he cannot set off a claim against the county which has not been presented to the board of supervisors and allowed by them or by the county court on appeal, in accordance with § § 838, 843, 844 of the Code. The county, as a political subdivision of the state, can only be sued in the manner prescribed by law, and the filing of a set-off is (by § 3303 of the Code) equivalent to bringing a suit for the amount thereof. Botetourt Co. v. Burger, 86 Va. 530, 10 S.E. 264.
Clerk's Fees Used as Set-Off Though No Action Maintainable.--Though no action lies for clerk's fees till they have been put into an officer's hands for collection, and he has returned that they cannot be levied by distress, yet the clerk may set them off against an action on his bond by the party from whom they are due. Craigen v. Lobb, 12 Leigh 627.
No Account of Set-Off Filed--Not Deemed to Have Brought Action.--When no specification of set-offs is filed by the defendant with his plea, he cannot be held to have brought an action against the plaintiff for any demand; and the plaintiff's demand as described in his declaration and bill of particulars, is the only matter of dispute arising in the cause. Consequently on a submission of such case to arbitration the only matter submitted is the plaintiff's demand. Swann v. Deem, 4 W.Va. 368.
Defendant Occupies Position of Plaintiff.--A defendant who claims damages by way of set-off to the plaintiff's demand occupies the attitude of a plaintiff, and must either prove directly the items of damage claimed, or establish facts from which the court can deduce, with reasonable certainty, the amount of damage sustained. Bristol, etc., R. Co. v. Bullock Elec. Mfg. Co. (Va.), 44 S.E. 892.
And if a discount or set-off be claimed in such manner that part only can with propriety be allowed, it is incumbent upou the claimant to separate the admissible from the objectionable parts; otherwise the whole should be rejected. Rootes v. Wellford, 4 Munf. 215.
b. Judgment on Set-Off Bars Subsequent Action. --If the defendant plead his set-off the judgment is conclusive upon it. And when a defendant is prevented by accident, surprise or other cause from proving his set-off, the proper practice is for him to withdraw it in order that the judgment may not be a bar to an action for the amount. And the defendant who, under such circumstances, should suffer a judgment to be obtained against him without withdrawing his set-off would be no more entitled to relief in equity against the judgment on the ground of accident or surprise, than a plaintiff would be entitled to like relief on a like ground, who had failed to suffer a nonsuit. Hudson v. Kline, Gratt. 379; Kennedy v. Davisson, 46 W.Va. 433, 33 S.E. 291.
5. Procedure.
a. Specification of Set-Off.
(1) Necessity.--Va. Code, § 3298 provides: " In a suit for any debt the defendant may at the trial prove, and have allowed against such debt, any payment or set-off which is so described in his plea or in an account filed therewith, as to give the plaintiff notice of its nature, but not otherwise." Code W. Va., ch. 126, § 4. Rice v. Annatt, 8 Gratt. 557; Johnson v. Jennings', 10 Gratt. 1; Botetourt County v. Burger, 86 Va. 530, 10 S.E. 264; Richmond City, etc., R. Co. v. Johnson, 90 Va. 775, 20 S.E. 148.
No Account Filed--Evidence of Set-Off Inadmissible.--If a case is tried by a jury on issues joined and a plea of set-off not in writing has been entered on the record as filed, to which there does not appear to be any replication, and no bill of particulars is filed with the plea of set-off at any time before the trial, the failure to make up the issue on the plea of set-off is no ground for setting aside the verdict, as no evidence could have been offered on such plea in the absence of a bill of particulars even if issue had been joined on the plea. First Nat. Bank v. Kimberlands, 16 W.Va. 555.
Plea of Conditions Performed.--In an action on a bond with collateral conditions, where the only plea is " conditions performed" the defendant is not entitled to prove a set-off. He must either plead specially his set-off or file an account thereof with his plea. Botetourt County v. Burger, 86 Va. 530, 10 S.E. 264.
Nil Debet.--Under a plea of nil debet the defendant cannot introduce evidence of payment or set-off, unless such payment or set-off be so plainly and particularly described in an account filed therewith, as to give the plaintiff notice of its nature. Richmond City, etc., R. Co. v. Johnson, 90 Va. 775, 20 S.E. 148.
Proof That Part of Debt Was Not Owing--No Necessity for Account.--In an action of assumpsit for various sums of money lent to or paid for the plaintiff's intestate, though payments or set-offs cannot be proved without an account of such payments or set-offs filed, yet the defendant may prove that the money sued for or any part of it was not lent to or advanced for the intestate, but was paid out of money of the intestate in the hands of the plaintiff. Johnson v. Jennings', 10 Gratt. 1. And see Rice v. Annatt, 8 Gratt. 557.
Prior to Revisal of 1819.--Under the law as it stood prior to the revisal of 1819 it was the practice to allow set-offs to be given in evidence under the pleas of nil debet and non assumpsit without previous notice. Jones v. Logwood, 1 Wash. (VA) 42. See Lewis v. Long, 3 Munf. 136; 5 Rob. Pr. 1000; 2 Tuc. Com. 108.
General Plea of Payment.--If a defendant plead, as a set-off, an obligation of the plaintiff, commonly called a single bill, assigned to him by a third person, and also a general plea of payment, and the writing produced appear not to be an obligation, but a promissory note, which is proved to have been executed by the plaintiff; it ought to be received as evidence on the second, though not on the first plea. Anderson v. Bullock, 4 Munf. 442.
(2) Sufficiency.
Must Give Plaintiff Notice of Nature of Set-Off.--The purpose of the law in permitting specifications of set-off to be filed was not to afford the defendant an opportunity to surprise the plaintiff by failing to give the plaintiff as full notice of the nature of the set-off as would have been done in a plea of set-off, but only to dispense with the filing of a formal plea. This section, ch. 126, § 4, of the Code of W. Va., requires that the specification of the set-off shall be so described in the account as to give the plaintiff notice of its nature; and if this be not done, the statute forbids the set-off insufficiently described to be proven at the trial. Choen v. Guthrie, 15 W.Va. 100.
Promissory Note Filed with Plea.--In an action of assumpsit the defendant pleaded nonassumpsit, and wishing to avail himself of a set-off, he filed with his plea the note in writing which was the subject of the set-off This was held to be a substantial if not a literal compliance with the statute, which requires that, where a set-off is not specially pleaded an account be filed " stating distinctly the nature of the set-off and the several items thereof." The object of this requisition is to give the plaintiff full notice of the character of the set-off; and in cases where the set-off consists of a single item such as a promissory note, to file the note itself with the plea, is to give the best notice that can be given. Bell v. Crawford, 8 Gratt. 110.
Additional Account of Offsets.--The defendant may have leave to file an additional account of setoffs whenever justice requires it, if delay be not thereby occasioned, or a good reason be shown for not having done so sooner. And if the plaintiff obtains leave to amend his declaration, as defendant is entitled to a continuance, there can be no objection to the filing of the additional account on the ground of delay. Perkins' v. Hawkins', 9 Gratt. 649.
How Sufficiency Questioned.--The proper method of raising the question whether a specification of set-off is sufficient, is by moving to exclude from the jury the evidence offered thereunder, and it is irregular to demur to such a specification of set-off. But if a formal plea of set-off is filed the proper method of testing its sufficiency is by demurrer. Choen v. Guthrie, 15 W.Va. 100.
b. Inability to Prove Counter Set-Off as a Defense. --The inability of a plaintiff to prove as counter set-offs credits against the defendant's set-off, is no ground for rejecting the latter. Armstrong v. Henderson, 99 Va. 234, 37 S.E. 839.
c. Recovery Over against Plaintiff. --Where the defendant has filed an account of set-off " the jury shall ascertain the amount to which the defendant is entitled and apply it as a set-off against the plaintiff's demand, and if the said amount be more than the plaintiff is entitled to, shall ascertain the amount of the excess, including principal and interest. Judgment in such case shall be for the defendant against the plaintiff for said excess, with interest from the date of the judgment till payment." Code W. Va., ch. 126, § 9. Black v. Thomas, 21 W.Va. 709; Swann v. Deem, 4 W.Va. 368. Code Va., § 3304.
Recovery Over by Defendant--Form of Verdict.--In an action of assumpsit, where the defendant pleads payment and files with his plea a specification of set-off, exceeding in amount the demand of the plaintiff, the form of the verdict should be; that the jury find for the plaintiff the amount of his claim, and find for the defendant the amount of his set-off; and if the latter exceed the former, the jury should specify that the verdict found for the defendant was the amount to which he was entitled in excess of the plaintiff's demand. But, where the jury by its verdict finds simply a gross sum for the defendant, such verdict must be interpreted as a finding that the set-offs of the defendant exceeded the amount to which the plaintiff was entitled by the sum so found; and such verdict is not ambiguous or uncertain. Black v. Thomas, 21 W.Va. 709. Code of W. Va., ch. 126, § 9. 2 Bart. Law Pr. 706.
B. SET-OFF IN EQUITY.
1. In General. --The mere existence of mutual demands, distinct and independent in their nature, is no ground for a bill in equity to compel a set-off. In order to justify the intervention of a court of equity, some peculiar equity, such as the insolvency of one of the parties, must intervene. Hudson v. Kline, 9 Gratt. 379; Morgan v. Carson, 7 Leigh 238; Jarrett v. Goodnow, 39 W.Va. 602, 20 S.E. 575.
2. When Equity Will Enforce Set Off.
a. Agreement to Set Off.
Express Agreement.--If there be an express agreement to set off the debts against each other, a court of equity will enforce the agreement, although at law the party may be remediless. Thus, where the defendant did not plead his set-offs at law, because the plaintiff promised to have a settlement and allow against such sum as he might recover the amount of the set-offs, the defendant is entitled to maintain a bill in equity to compel a compliance with this agreement. Kennedy v. Davisson, 46 W.Va. 433, 33 S.E. 291.
Bill Accepted against Funds in Acceptor's Hands.--Where a bill of exchange is drawn on one who accepts it on the faith of funds of the drawer in his hands, he acquires an equitable interest in those funds and is entitled to set off his liability on the acceptances against his obligation to pay those funds. Lambert v. JonesPatton & H. 144.
b. Insolvency.
(1) In General.--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. Mattingly v. Sutton, 19 W.Va. 19.
In Franklin v. Commercial BankVa. Dec. 391, it is said: " That insolvency may so affect the rights of parties to a transaction as to give rise to equities which will be considered and enforced in a court of chancery, even though a court of law has taken jurisdiction and rendered a judgment, is true; and this source of equitable relief has received frequent illustration in cases before this court, and examples of it abound in the text books."
Injunction against Judgment.--Though generally an injunction does not lie against a judgment to let in set-offs, yet it will lie where the judgment creditor is insolvent. Jarrett v. Goodnow, 39 W.Va. 602, 20 S.E. 575; Beard v. Beard, 25 W.Va. 486.
Thus in M'Clellan v. Kinnaird, 6 Gratt. 352, a judgment on a forthcoming bond was enjoined at the suit of the surety on the ground that he had an action pending against the plaintiff in the judgment for a larger amount and that the plaintiff was insolvent.
Equity will enjoin the collection of a judgment of an insolvent plaintiff, who is a judgment debtor to the defendant, to the extent of such indebtedness. Beard v. Beard, 25 W.Va. 486.
Set-Off of Balance Due on Settlement of Partnership Account.--Ordinarily a court of equity will not enjoin an action at law at the instance of the defendant to enable him to set off an alleged balance due him on a partnership account, as a settlement may show a balance against him instead of in his favor. But where it is certain that the balance will be in favor of the complainant, though the amount thereof is unascertained, and the debtor partner is insolvent, and the complainant would be otherwise without remedy to get the benefit of his offsets, equity will stay the proceedings at law and afford relief. In such case equity is the proper forum to settle the accounts, and the remedy at law is not adequate. Commercial Bank v. Cabell, 96 Va. 552, 32 S.E. 53.
Surety Has Rights of Creditor.--A surety generally in equity, has in respect to his liability the rights of a creditor; and upon the insolvency of the principal debtor he may retain any funds belonging to such debtor by way of indemnity against his liability. Therefore where a surety owes the principal debtor a debt which has been reduced to judgment by such principal, a court of equity, when the principal is insolvent, will award an injunction to restrain the collection of such judgment, on the application of the surety, though the surety has not paid the debt for which he is liable. And in such case, if it appears to the court that the surety has paid and discharged his liability as surety, the court will allow the surety to set off the amount so paid by him against the judgment of his principal against him. Mattingly v. Sutton, 19 W.Va. 19.
Injunction against Enforcement of Lien.--In general, the insolvency of a creditor who is pressing the foreclosure or enforcement of a lien, and against whom offsets are claimed by the debtor, constitutes good ground for an injunction; but when this is the only ground for equitable interference, and the plaintiff fails to prove the insolvency, the injunction should be dissolved. Farland v. Wood, 35 W.Va. 458, 14 S.E. 140.
Where Defendant Secured by Deed of Trust.--Where the plaintiff filed his bill for an injunction against a judgment recovered against him by the assignee of a chose in action, alleging the insolvency of the assignor, and claiming a set-off against the judgment, and the defendant in the bill resisted the set-off alleging that the demands which the plaintiff sought to set off were secured by deed of trust and that the assignor of the chose in action was insolvent, it was held that the set-off was properly allowed because the plaintiff could not be delayed in the collection of his debt. Hudkins v. Ward, 30 W.Va. 204, 3 S.E. 600.
(2) Mere Insolvency Insufficient.--The mere insolvency of the judgment creditor will not, of itself, justify an injunction against the enforcement of a judgment at law upon the ground of the existence of a set-off, which might have been pleaded at law at the time such judgment was recovered. To entitle the party to relief in equity he must show that he was prevented from using his set-off at law by fraud, accident, surprise or some adventitious circumstances beyond his control. Sayre v. Harpold, 33 W.Va. 553, 11 S.E. 16; Zinn v. Dawson, 47 W.Va. 45, 34 S.E. 784. See Linke v. Fleming, 25 Gratt. 704.
A court of equity will not enjoin an insolvent landlord from issuing a distress warrant for rent merely because the tenant has large set-offs against the landlord's demands. In such case the tenant has an adequate remedy at law by setting off the demands against the rent. Hancock v. Whitehall Tobacco, etc., Co., 100 Va. 443, 41 S.E. 860.
(3) Where Debt Is Not Due.--A debt not due cannot be used as a set-off at law, nor can such a debt be set off in equity in the absence of special circumstances giving equity jurisdiction. The insolvency of the plaintiff at law, however, constitutes a new ingredient in the case, and when the plaintiff at law is insolvent and is debtor to the defendant, although the debt be not due, a court of equity will allow the set-off. Ford v. Thornton, 3 Leigh 695; Feazle v. Dillard, 5 Leigh 30.
The case is not materially different from the above when the plaintiff in a bill for an injunction against a judgment at law is surety on a bond to a third person for the plaintiff at law; for, upon the supposition of the insolvency of the latter the former is in equal danger of loss. In both cases the court proceeds upon the same principle, that is, to protect the party from the payment of money to one to whom in justice in equity he owes nothing. Feazle v. Dillard, 5 Leigh 30. See Mattingly v. Sutton, 19 W.Va. 19.
c. Where Equity Has Jurisdiction on Other Grounds.
Equitable Offsets--Failure to Plead at Law.--A defendant is not required to plead his equitable offsets at law; but he may come into equity after a judgment at law and establish his offsets and enjoin the judgment. Terry v. WoodingPatton & H. 178.
Right of Vendee to Subrogation.--The rights of a vendee of land who has been decreed to pay the amount of a judgment against his vendor which was a lien upon the land, to be substituted to the rights of the judgment creditor and to set off the amount of the judgment against a bond given for the purchase price are equitable rights. In such case, after judgment at law on the bond, the defendant may file a bill to enjoin the judgment in order to let in the amount of his set-offs. Terry v. WoodingPatton & H. 178.
Right of Surety to Enforce Contribution.--The principal and two of the three sureties on a bond became insolvent and the other surety was compelled to pay the debt. Previous to this payment the solvent surety had executed his bond to one of his co-sureties who had conveyed it in trust for his creditors. After payment of the first mentioned bond by the solvent surety, judgment was recovered against him on his own bond by the assignee of his co-surety. On a bill filed by the defendant to enjoin the judgment, claiming as an offset his co-surety's liability to contribute for his relief a portion of the debt he had paid, it was held that he was entitled to the injunction. The failure of the defendant in this case to rely on his set-off at law was held not to preclude him from applying to a court of equity for relief. The right to enforce contribution originally belonged to equity and the jurisdiction now assumed by courts of law to enforce contribution in some cases does not affect the jurisdiction originally belonging to a court of equity. Wayland v. Tucker, 4 Gratt. 267. See monographic note on " Contribution and Exoneration."
Where Vendee Entitled to Enjoin Judgment Because of Defect in Title.--When a vendee of land is entitled to come into equity to enjoin a judgment recovered by an assignee on a bond given for the purchase money, on the ground of difficulties in the title; and it being doubtful whether he can get a title though the title is decreed to him in his suit, he is entitled to set up in equity offsets he held against his vendor prior to the assignment. In such case the defendant was not bound to plead his set-offs at law; and this especially as one of the offsets arose out of the contract of sale, and another was only an equitable offset at the time of the assignment. Here the title being uncertain, it would have been improper to have relied upon the set-offs at law, for it would have been an admission by the defendant that there was a valid debt, against him to the extent of the set-offs, whereas he owed nothing until he could get the land. A court of equity was the proper forum to decide upon the validity of the debt--whether anything was due--and then as an incident to the principal subject of which it clearly had jurisdiction and to avoid multiplicity of suits to pass upon the set-offs regardless of their character. Ragsdale v. Hagy, 9 Gratt. 409.
d. Funds in Court.
Defendant's Interest in Fund in Another Court.--A judgment debtor may set off in equity against the creditor's judgment the beneficial interest of such debtor in a decree in favor of a receiver of another court against such creditor, although the receiver be not made a party to the suit in which the set-off is allowed. A copy of the decree allowing the set-off, filed in the receiver's suit will furnish sufficient protection to the creditor. Stuart v. Peyton, 97 Va. 796, 34 S.E. 696.
Agreement Not to Draw Dividends from Fund.--Where the plaintiff was notoriously insolvent and had been adjudged indebted to a trust in which decedent had an interest, decedent's estate being insolvent, decedent's executor should not be refused the right to set off decedent's interest in the fund against plaintiff's claim against the estate, because of an agreement by decedent with his creditors for their benefit, by which he agreed not to draw his dividends from such fund until his indebtedness thereto was extinguished, since the interests of the creditors are better served by allowing the set-off. Stuart v. Peyton, 97 Va. 796, 34 S.E. 696.
e. Set-Off of Unliquidated Damages. --The general rule is uncontrovertible that unliquidated damages cannot be pleaded by way of set-off, either at law or in equity, unless there is some understanding between the parties, express or implied, under which the defense can be let in, or some special case can be made, such as insolvency or nonresidence. Webster v. Couch, 6 519; Bunting v. Cochran, 99 Va. 558, 39 S.E. 229; Clark's Cove Guano Co. v. Appling, 33 W.Va. 470, 10 S.E. 809; Dangerfield v. Rootes, 1 Munf. 529.
f. Joint against Several Demands. --Joint debts cannot be set off in equity any more than at law, against several debts, unless there be some other circumstances calling for equitable interference. Gilliat v. LynchLeigh 493; Glazebrook v. Ragland, 8 Gratt. 332.
In Dunbar v. Buck, 6 Munf. 34, it was held that although a person having a claim against a partnership cannot set off such claim against a debt due from himself to one of the partners, yet it is competent for him to charge that partner in equity, in extinguishment of said debt for so much of the surplus of the partnership property as may be due to such partner on a settlement of the partnership accounts; for the purpose of which settlement and also for that of ascertaining and adjusting his own claim against the company, all the partners should be made defendants to the bill. But this case was criticized in Gilliat v. LynchLeigh 493. See supra, " Joint against Several Demands," I, A, b, 2.
Equity Will Look to Parties Ultimately Liable.--The general doctrine as to set-off is the same in equity as at law; and joint debts cannot be set off in equity, any more than at law, against separate debts. There is, however, one well-defined exception to this rule, in that a court of equity will look beyond the nominal parties to those upon whom the burden of paying the plaintiff's demand will ultimately fall. This exception is well stated in the following language: " That where two persons are sued, and one of them is principal and the other surety, and the principal offers to set off a debt due to him from the plaintiff, he cannot do it at law, because the one is a joint and the other is a several debt, the law court not enquiring which is principal and which is surety. But in a court of equity, which does enquire who is principal and who is surety, the set-off is allowed, because a court of equity regards the principal as the debtor; for if the surety paid any part of the debt, he would recover it back from the principal, so that at last the principal must pay the whole debt." Hupp v. Hupp, 6 Gratt. 310; 1 Bart. Ch. Pr. (2d Ed.) p. 26.
And see the provisions of the Va. Code, § 3298, which are as follows: Although the claim of the plaintiff be jointly against several persons, and the set-off is of a debt not to all but only to a part of them, this section shall extend to such set-off, if it appear that the persons, against whom such claim is, stand in the relation of principal and surety, and the person entitled to the set-off is the principal. See also, Code of W. Va., ch. 126, § 4. See Hudson v. Kline, 9 Gratt. 379; Edmunds' v. Harper, 31 Gratt. 637.
g. Laches.
(1) Where Set-Off Might Have Been Pleaded at Law.
(a) Necessity for Excusing Failure to Plead.--Unless the plaintiff can show, that from some peculiar circumstances not within his control, he could not have availed himself of the set-off at law, a court of equity will refuse to enjoin the judgment in order to let in the set-off. Nicolson v. Hancock, 4 Hen. & M. 491; Perkins v. Clements, 1 Patton & H. 141; Morgan v. Carson, 7 Leigh 238; George v. Strange, 10 Gratt. 499; Sayre v. Harpold, 33 W.Va. 553, 11 S.E. 16. See Hancock v. Whitehall Tobacco, etc., Co., 100 Va. 443, 41 S.E. 860.
It is not the province of a court of equity to see that justice in the abstract is done in all possible cases, but only to lend its aid when, from any cause, without his own default or negligence, a party cannot have justice done him in the courts of law. Nor does the circumstance, that the discounts, or abatements, or damages, claimed to be set off in equity, arose out of a breach of the same contract, upon which the judgment at law is founded, form an exception to the general rule, unless there be also some circumstance in the case, which, without the default or negligence of the party, prevented him from availing himself of such breach by way of defense, or in an action at law. Cabell v. Roberts', 6 580.
(b) Sufficiency of Excuse.
Sickness at Time of Trial.--The plaintiff in an action at law recovered a judgment, which the defendant sought to enjoin on the ground that he was prevented from setting up certain set-offs by reason of his sickness at the time of the trial, and the refusal of the court to continue the action. It appeared that his set-offs were in no way connected with the debts sued on, and that the plaintiff in the action at law was perfectly solvent, and that there was nothing to prevent the defendant at law from maintaining an action at law for the recovery of the claims sought to be set off. The court refused the injunction, holding that although the defendant, without his fault, had lost one of his concurrent legal remedies he must resort to his remaining legal remedy, and could have no relief in a court of equity. Hudson v. Kline, 9 Gratt. 379.
An action was brought in 1835, and tried in 1839, upon an issue made up on the plea of nonassumpsit, and there was a judgment for plaintiff. Defendant then applied for an injunction to the judgment, on the ground that he had offsets which he had intended to plead; but that owing to the sickness of his family at the time when the court sat, and for some time before, he was not able to attend the court or prepare for trial, and that his counsel to whom he had communicated his defense was also absent. It appeared that the offsets were neither pleaded or filed, and though one of defendant's counsel was present, no application for a continuance was made, nor was any affidavit filed upon which such an application could have been based. Held, there was no cause for an injunction and new trial. Griffith v. Thompson, 4 Gratt. 147.
Where Discovery Necessary.--The rule that a court of equity will not enjoin the enforcement of judgment in order to allow the defendant at law to set up offsets which he might have pleaded at law, applies, although a discovery may be necessary to enable the defendant to prove his offsets at law. In such case the defendant should file his bill of discovery in aid of his defense at law, or he should file interrogatories to the plaintiff under the statute. George v. Strange, 10 Gratt. 499.
(2) Set-Off Existing before Execution of Contract.--A party who has given his notes for property purchased under a contract, and deliberately executed a deed of trust to secure them, will not be readily entertained in a court of chancery when he seeks to escape their entire obligation by setting up counter claims, arising out of the same contract, which existed when he executed the notes and deed of trust, and about which he was then silent. A court of chancery will not look with favor on such transaction, nor will it ordinarily lend its aid to a plaintiff who has placed himself in this situation, but will leave him to such remedies as a court of law will afford. Farland v. Wood, 35 W.Va. 458, 14 S.E. 140.
II. RECOUPMENT.
A. DEFINITION AND GENERAL PRINCIPLES.
1. Definition. --Recoupment is said to be " that right of the defendant in the same action to claim damages from the plaintiff either because he has not complied with some cross obligation of the contract upon which he sues, or because he has violated some duty which the law imposes upon him in the making or performance of that contract." Dillon Beebe's Son v. Eakle, 43 W.Va. 502, 27 S.E. 214.
2. Distinguished from Set-Off. --The defense of recoupment differs from set-off in several important particulars. First, it is confined to matters arising out of, and connected with, the transaction or contract upon which the suit is brought; secondly, it has no regard to whether the claim be liquidated or unliquidated; thirdly, if the defendant's claim exceeds the plaintiff's he cannot in that action recover the balance due to him. Baltimore, etc., R. Co. v. Jameson, 13 W.Va. 833.
3. Common Law Recoupment Unimpaired by § 3299. --The provisions of § 3299 of the Code, as originally enacted in 1831, allowing a special plea of equitable set-off, were intended to enlarge the right of recoupment theretofore existing at common law, and not to impair any previous right or take away any defenses previously allowed by the common law. Columbia Accident Ass'n v. Rockey, 93 Va. 678, 25 S.E. 1009 (overruling dictum in Keckley v. Union Bank, 79 Va. 458); Davis v. BaxterPatton & H. 133. See post, III, A, 1, " Common Law Recoupment Unimpaired."
B. ESSENTIALS OF VALID RECOUPMENT.
1. Damages Need Not Be Liquidated. --In order to be available by way of recoupment the damages sought to be set up by the defendant need not be liquidated. Baltimore, etc., R. Co. v. Jameson, 13 W.Va. 833.
2. Must Arise Out of Contract in Suit. --The damages sought to be recouped by the defendant must be for a breach of the same contract as that upon which suit is brought by the plaintiff. Dillon Beebe's Son v. Eakle, 43 W.Va. 502, 27 S.E. 214; Clark's Cove Guano Co. v. Appling, 33 W.Va. 470, 10 S.E. 809; Bunting v. Cochran, 99 Va. 558, 39 S.E. 229.
" At common law, a defendant had the right to reduce the plaintiff's damages, in a few instances when the reduction claimed sprang immediately from the claim relied on by the plaintiff." Baltimore, etc., R. Co. v. Jameson, 13 W.Va. 833.
The right of recoupment arises when the basis of the plaintiff's action is a contract by the defendant, who may, if he chooses, recoup any damages which may have resulted to him by breach of another portion of the same contract, or of a contract made at the same time, and constituting a part and parcel of the same transaction, whether contained in one writing, or one in a writing and the other parol, provided, however, they are all one transaction. Bunting v. Cochran, 99 Va. 558, 39 S.E. 229; Logie v. Black, 24 W.Va. 1.
Delay in Execution of Contract Caused by Plaintiff.--Recoupment for delay in the execution of a contract cannot be allowed where the delay is owing to the act or fault of the defendant himself. McDonald v. Cole, 46 W.Va. 186, 32 S.E. 1033.
Fraud and Misrepresentation Going to Defeat of Whole Action.--In an action of assumpsit based upon a written contract, the defense to which is that the same was procured by fraud and misrepresentation going to the whole action, the doctrine of recoupment of damages is not applicable. Dillon Beebe's Son v. Eakle, 43 W.Va. 502, 27 S.E. 214.
3. Not Available against a Deed. --No damages were allowed the defendant by way of common law recoupment against the plaintiff's demand, when that demand was based on an instrument under seal. Kinzie v. Riely, 100 Va. 709, 42 S.E. 872; Columbia Accident Ass'n v. Rockey, 93 Va. 678, 25 S.E. 1009; Baltimore, etc., R. Co. v. Jameson, 13 W.Va. 833.
It was not competent at common law " as against sealed contracts, to prove a failure in the consideration of the contract, or fraud in its procurement, or breach of warranty of the title, or soundness of personal property, but the defendant was driven as when he proposed to recover against the plaintiff any excess of damages, to his independent action at law to recover the damages he had sustained." Columbia Accident Ass'n v. Rockey, 93 Va. 678, 25 S.E. 1009.
4. No Recovery Over against Plaintiff. --While a defendant under the plea of nonassumpsit may give in evidence matter by way of recoupment, or in diminution of the damages claimed by the plaintiff, even to the entire defeat of his action, yet it is not competent for the defendant in that suit to recover any damages he may have shown in excess of the plaintiff's demand. If he wishes to recover such excess he must bring an independent action against the plaintiff. Baltimore, etc., R. Co. v. Bitner, 15 W.Va. 455; Natural Gas Co. v. Healy, 33 W.Va. 102, 10 S.E. 56; Columbia Accident Ass'n v. Rockey, 93 Va. 678, 25 S.E. 1009.
Where a defendant seeks to recoup the plaintiff's claim by showing that the plaintiff had failed to comply with his contract in performing the work charged for in his claim sued on, and the defendant had been thereby compelled to pay out money to make good the defects in the plaintiff's work, said defendant cannot, by way of recoupment, recover a judgment against the plaintiff, by showing that his damage thus sustained exceeded the plaintiff's demand. Natural Gas Co. v. Healy, 33 W.Va. 102, 10 S.E. 56.
C. WHO MAY RECOUP DAMAGES.
Surety on Joint and Several Bond.--In an action of debt against a security alone on a joint and several bond, conditioned that the principal would faithfully pay over certain money which would be collected by him as agent for the plaintiff, the defendant cannot recoup a debt due to the principal by the plaintiff for services of such agent when receiving the money. Baltimore, etc., R. Co. v. Bitner, 15 W.Va. 455.
D. RECOUPMENT PROVABLE UNDER GENERAL ISSUE.
1. In General. --It is well settled that a defendant may prove matters of recoupment under the general issue. Sterling Organ Co. v. House, 25 W.Va. 64; Davis v. BaxterPatton & H. 133; Columbia Accident Ass'n v. Rockey, 93 Va. 678, 25 S.E. 1009. See Todd v. SummersGratt. 167.
In Keckley v. Union Bank, 79 Va. 458, it was suggested that, since the act of 1831, Va. Code, § 3299, the defenses of fraud in the procurement of a contract, or failure of consideration, or breach of warranty of the title or soundness of personal property, cannot be proven under the general issue, but only under a special plea of set-off sworn to according to the statute. But this suggestion was overruled in Columbia Accident Ass'n v. Rockey, 93 Va. 678, 25 S.E. 1009.
And in Sterling Organ Co. v. House, 25 W.Va. 64, Green, J., says on page 88: " I do not understand this act of 1831 allowing special pleas in certain cases, where the defense is recoupment, to exclude the defendant from making this defense under the general issue accompanied by notice."
2. No Special Plea Allowed. --The defendant cannot, independently of § 5, ch. 126 of the Code of W. Va., file in an action at common law, a special plea to have the damages which he has sustained by breach of the agreement sued on recouped against the amount due the plaintiff on such agreement. Sterling Organ Co. v. House, 25 W.Va. 64.
3. Notice of Recoupment.
Necessity for.--Under the general issue of nonassumpsit the defendant may have any damages he has sustained recouped against the plaintiff's claim, provided he file with his plea a notice that on the trial of the case he will claim to have such damages recouped. This notice is required not only to prevent surprise, but in order to show, in case a subsequent suit should be brought by the defendant against the plaintiff, that in fact the damages claimed by the defendant were really recouped by him in the first suit. Sterling Organ Co. v. House, 25 W.Va. 64.
Sufficiency of Notice.--As notice of recoupment is not a plea, less formality is required than in the case of pleas. But such definiteness and certainty is required as will prevent the other party from being surprised as to the nature of the claim. Powell v. Love, 36 W.Va. 96, 14 S.E. 405; Sterling Organ Co. v. House, 25 W.Va. 64.
Amendment of Notice.--Where there has not been a total neglect to give notice of recoupment but a well meant effort to do so, and the notice has been held insufficient to allow the admission of evidence of recoupment, the defendant may amend his notice under proper terms as to continuance, etc. Powell v. Love, 36 W.Va. 96, 14 S.E. 405.
III. SPECIAL PLEA OF SET-OFF.
A. EXTENSION OF COMMON-LAW RECOUPMENT.
1. Common-Law Recoupment Unimpaired. --The provisions of § 3299 of the Code, as originally enacted in 1831, allowing a special plea of equitable set-off, were intended to enlarge the right of defense theretofore existing at common law, and not to impair any previous right, or to take away defenses previously allowed by law. The common-law right of recoupment was not impaired, but, in addition thereto, the statute permitted the defendant to recover any damages he could prove in excess of the damages claimed by the plaintiff, and in an action upon a sealed contract to prove a failure of consideration, or fraud in its procurement, or breach of warranty of the title or soundness of personal property, for the price or value whereof he had entered into the contract. Columbia Accident Ass'n v. Rockey, 93 Va. 678, 25 S.E. 1009. The suggestion to the contrary in Keckley v. Union Bank, 79 Va. 458, overruled.
And in Davis v. BaxterPatton & H. 133, Judge Thompson says of this statute: " Its leading object was to allow defendants to go behind and enquire into the consideration of specialties upon equitable pleas of offsets; and, if you choose, to enable defendants to make such defenses in case of parol contracts, where, by the rules of common law, the defense could not be made in a legal forum. What those cases of parol contracts were, which were in the legislative mind, I will not stop to enquire or enumerate, because most certain it is that the act was not intended to take from a defendant a single legal right of defense, but to enlarge the right of defense in a court of law." And see also, Sterling Organ Co. v. House, 25 W.Va. 64.
2. Set-Off Must Grow Out of Contract in Suit. --Under § 3299 of the Code, allowing special pleas of set-off to be filed, the defendant cannot set up a claim for unliquidated damages founded on a contract other than the contract sued on by the plaintiff. This section of the Code provides that the defendant may plead " any other matter, as would entitle him either to recover damages at law from the plaintiff or the person under whom the plaintiff claims, or to relief in equity in whole or in part, against the obligation of the contract; " but these general words, by the application of the rule of ejusdem generis, are restricted by the enumerated defenses which precede them, all of which are based upon matters directly connected with the contract sued on. Hence no set-off can be pleaded which does not grow out of the contract in suit. These general words were added so as to allow not only the defenses particularly named in the preceding part of the section, but all others of the same kind based upon such contract, or for injuries growing out of it, to be disposed of in one case. Am. Mang. Co. v. Va. Mang. Co., 91 Va. 272, 21 S.E. 466.
B. RULES OF EQUITY APPLICABLE.
Same Evidence Admissible as in Equity.--Where the plaintiff sues the defendant at law on bond given for the purchase money of land, and the defendant sets up the defense of equitable set-off (under § 3299 of the Code of Va.) for the value of a deficiency in the quantity of the land sold, the rules governing in an equitable forum are applicable, and the plaintiff may rebut the claim of the defendant by any evidence which would have been appropriate to his defense had the defendant elected to proceed by bill in equity. Caldwell v. Craig, 21 Gratt. 132.
In an action for the purchase money of land the vendee may (under § 3299 of the Code of Va.) plead by way of set-off, and prove by parol that the vendor falsely represented that there was a spring upon the tract of land sold, although in the written contract there is no mention of such spring. If a bill in equity had been brought to reform the contract, alleging mistake on one side accompanied by a fraud on the other, parol evidence would have been admissible to show the true contract and relief would have been granted. And so likewise, where in an action at law for the price the same defense is made by a special plea, the defendant is entitled to the same relief. Grayson v. Buchanan, 88 Va. 251, 13 S.E. 457.
Equitable Plea Need Not Allege the Scienter.--In an action at law upon a contract, a plea which presents the defense of fraud in the procurement of the contract must allege the scienter. But in equity no such averment is necessary, and an equitable plea filed under C. V., § 3299, is good without the averment. This section of the Code was enacted for the purpose of allowing certain equitable defenses to be made at law, and the defendant, on the issue tendered by the plea has the right to make the same defense as in equity. The defense is equitable though made at law, and the same rules apply in each form. Guarantee Co. v. Bank, 95 Va. 480, 28 S.E. 909.
Ignorance or Mistake of Law.--When in a court of law the defendant makes an equitable defense under the statute, the rules of equity prevail, and he is entitled to the same relief as in a court of equity. Hence an instruction that ignorance or mistake of law cannot be considered as a defense because the suit is in a court of law, is erroneous. Brown v. Rice, 76 Va. 629. See also, Brown v. Rice, 26 Gratt. 467.
C. IN WHAT ACTIONS PLEA MAY BE FILED.
1. In Any Action on a Contract.
a. Contracts by Deed or Parol. --Under the provisions of § 5 of ch. 126, Code of W. Va., in any action on a contract, whether the contract be by deed or by parol, the defendant may file a plea alleging any such failure in the consideration of such contract, or fraud in its procurement, as would entitle him either to recover damages at law from the plaintiff, or to relief in equity in whole or in part against the obligation of the contract. The plain purpose of this statute was to give the same measure of relief, by a plea under it, that could be obtained by the defendant in an independent action brought at law for the same cause, or in equity, for relief growing out of the same transaction. And to give effect to this plain purpose it is essential that it should be construed to include contracts under seal as well as contracts by parol. Fisher v. Burdett, 21 W.Va. 626.
b. Contracts Relating to Realty or Personalty. --There is nothing in the terms of the statute to restrict the plea of equitable set-off to contracts in relation to personalty. The terms of the act are general, " in any action on a contract," and it includes contracts by deed, as well as by parol, and there can be no reason for excluding all contracts relating to the sale and purchase of real property from the operation of the statute. Watkins v. Hopkins', 13 Gratt. 743; Watkins v. West Wytheville Land, etc., Co., 92 Va. 1, 22 S.E. 554.
2. Where Relief Peculiar to Equity Is Necessary.
Rescission of Contract.--Where the equitable grounds relied on require a rescission of the contract, and a reinvestment of the vendor with the title, a special plea under § 3299 of the Code is not available; because in such case a court of law is incompetent to do complete justice between the parties, and recourse must, in the nature of things, be had to a court of equity. Shiflett v. Orange Humane Soc., 7 Gratt. 297; Watkins v. Hopkins', 13 Gratt. 743; Watkins v. West Wytheville Land, etc., Co., 92 Va. 1, 22 S.E. 554; Mangus v. McClelland, 93 Va. 786, 22 S.E. 364; Tyson v. Williamson, 96 Va. 636, 32 S.E. 42.
Where, in an action against the vendee of land on a note given for the purchase price thereof, the defendant filed a special plea under the statute alleging fraud in the procurement, claiming damages to the full amount of the purchase money, and accompanying his plea with a deed reconveying the land to the vendor, the court held that the plea was improper, because it appeared that its object was not only the recovery of damages for the fraud, but also to have the contract rescinded and to reinvest the vendor to the title. Mangus v. McClelland, 93 Va. 786, 22 S.E. 364; 4 Min. (3d Ed.) 796.
Waiver of Right to Specific Performance.--In an action on a bond for $ 500, given for the last installment of the purchase money of land, a plea that the plaintiff was to make defendant a good title to the land upon the payment of the bond, and that defendant had offered to pay the bond upon the making of the title, and that the plaintiff had failed and refused to make the title, by reason whereof the consideration of the bond had failed to the extent of $ 250, is not a good plea in substance. Inasmuch as the bond was the last installment of the purchase money and the plea claimed only $ 250 compensation for the breach of the contract in failing to make title, the defendant, by such plea, must be regarded as claiming both the right to have the contract specifically executed by conveyance of the title, and also compensation for the breach of the contract in failing to make title. And the act of 1831 does not authorize a plea that the consideration has failed because of the plaintiff's refusal or neglect to make the title according to the contract, which shows at the same time that the vendee is entitled to the specific performance of the contract, without a plain election on the part of the defendant to waive the right to specific performance and to claim merely damages for the breach. Watkins v. Hopkins', 13 Gratt. 743.
D. GROUNDS FOR PLEA.
1. Fraud in the Procurement of the Contract.
In the Case of Deeds.--In a court of common law fraud may be given in evidence to vacate a deed on the plea of non est factum, if such fraud relate to the execution of the instrument, as if it be misread to the party, or if his signature be obtained to an instrument which he did not intend to sign. Taylor v. King, 6 Munf. 358; Burtners v. Keran, 24 Gratt. 42; Hayes v. Virginia Mut. Prot. Ass'n, 76 Va. 225. But if the fraud related merely to the procurement of the deed, as where the deed was obtained by fraudulent misrepresentation, it could not be relied on as a defense in an action at law on the deed, the only remedy in such case being in equity. Taylor v. King, 6 Munf. 358; Burtners v. Keran, 24 Gratt. 42; Tyson v. Williamson, 96 Va. 636, 32 S.E. 42. To enable fraud in the procurement of a deed to be set up as a defense in an action at law was one of the objects of the act of 1831, now constituting as subsequently amended § 3299 of the Code. And under this statute a defendant may now make this defense by a sworn plea in an action at law. Burtners v. Keran, 24 Gratt. 42; Hayes v. Virginia Mut. Prot. Ass'n, 76 Va. 225; Guarantee Co. v. Bank, 95 Va. 480, 28 S.E. 909; Tyson v. Williamson, 96 Va. 636, 32 S.E. 42.
Fraud in Sale of Real Estate.--A party claiming to have been damaged by fraud and misrepresentation in the sale and purchase of real estate, may, at his election, file a bill in equity to rescind the contract and reinvest the vendor with the title; or he may retain the land and proceed at law to recover damages; or if sued at law on a bond given for the deferred payments of the purchase money, he may file a special plea under § 3299 of the Code, and set off against the plaintiff's demand the damages he may have sustained by reason of the plaintiff's fraud and misrepresentation. Watkins v. West Wytheville Land & Imp. Co., 92 Va. 1, 22 S.E. 554.
Misrepresentation of Law.--The defendant in an action of debt on a bond, filed a special plea to the following effect; that the bond was given to pay notes, which were barred by the statute of limitation at the time the bond was so given; and that the plaintiff knowing that the notes were so barred and in order to induce the defendant to execute the bond, fraudulently represented that they were still valid and binding. The court held that if this was a misrepresentation of law, still it was a case in which equity would relieve the defendant; and the defense might be made at law by a special plea under the statute, setting out the facts. Brown v. Rice, 26 Gratt. 467; Brown v. Rice, 76 Va. 629.
Plea Need Not Allege the Scienter.--An equitable plea filed under § 3299 of the Code, alleging fraud in the procurement of the contract in suit, is good without alleging the scienter. The defense is equitable though made at law, and the same rules apply in each forum. Guarantee Co. v. Bank, 95 Va. 480, 28 S.E. 909; Strickland v. Graybill, 97 Va. 602, 34 S.E. 475.
A plea under § 3299 is sufficient which avers that the statements of fact were falsely and fraudulently made for the purpose of procuring the contract; that they were material; that they were untrue; and that the defendant to whom they were made relied upon them, and was by them induced to enter into the contract. Strickland v. Graybill, 97 Va. 602, 34 S.E. 475.
2. Failure of Consideration.
In an Action on a Bond.--While failure of consideration could not be shown in defense of an action on a bond at common law ( Christian v. Miller, 3 Leigh 78), yet this defense may now be made by a sworn plea under the statute. Code of Va., § 3299. Code of W. Va., ch. 126, § 5. Williamson v. Cline, 40 W.Va. 194, 20 S.E. 917. See Isbell v. Norvell, 4 Gratt. 176.
Failure to Deliver Land at Time and in Condition Agreed.--The possession of all the land sold, at the time and in the condition stipulated for in the contract, may fairly and legitimately be considered as part of the consideration of the contract; and a plea setting up a failure to deliver the land at the time and in condition so stipulated for, is a good plea, as setting up a partial failure of the consideration. No objection can be raised in such case upon the idea that the act of 1831 does not authorize the plea in the case of a breach of warranty of the title to real property as the claim here is based on an executory contract of sale stipulating for the possession of the premises at a certain time and in a certain condition, and the alleged breach relates only to the possession and not in any manner to the title. Watkins v. Hopkins', 13 Gratt. 743.
Failure to Deliver One of Two Slaves Hired.--In an action on a bond given for the hire of two slaves, the obligor is entitled, under a special plea filed under the act of April 16, 1831, to show a failure of the consideration of the bond, in that one of the slaves was never in his possession but always remained in the possession of the obligee. Isbell v. Norvell, 4 Gratt. 176.
Failure of Lessor to Repair, as Agreed.--A lessor covenanted to put certain repairs upon the demised premises, which he failed to do. In an action of replevin upon a distress for rent, the tenant may set off the damages accrued by the failure of the lessor to make the repairs, under § 62 of the Act, Sup. R. C. 157. Caldwell v. Penngton, 3 Gratt. 91.
There Must Be Failure of Consideration of Particular Contract Sued on.--Section 5, ch. 126, of the Code of W. Va., authorizes the defendant to file a special plea only when there has been a failure of the consideration of the particular contract sued on. And under this statute the defendant cannot set up the failure of the plaintiff to comply with another obligation on his part which was not the immediate consideration of the contract sued on, but was only an inducement for the defendant to enter into that contract, and the consideration of which has not failed in whole or in part. Sterling Organ Co. v. House, 25 W.Va. 64. The plaintiff, in consideration that the defendant would incur the expense of introducing in a certain territory certain goods manufactured by the plaintiff, agreed to sell these goods to the defendant at fixed prices, the arrangement to continue as long as either party chose, and till the party desiring to put an end thereto should give the other party reasonable notice of his purpose to terminate it. The plaintiff broke this agreement by refusing to continue to sell goods to the defendant, without having first given him reasonable notice, and brought an action against the defendant for the price of the goods already sold him. It was held that the defendant could not file a special plea, under ch. 126, § 5 of the Code, alleging the above fact as showing a failure in the consideration of the contract sued on, because the suit was brought upon the contract made in the purchase of the goods which had not been paid for. Sterling Organ Co. v. House, 25 W.Va. 64.
3. Want of Consideration. --A defense to an action on a bond showing that the bond was originally without consideration cannot be made at common law. Taylor v. King, 6 Munf. 358. Nor can such defense be made by special plea under the statute (Code of Va., § 3299) allowing equitable defenses to be made at law. The words " failure in the consideration," as used in this section of the Code, refer to contracts originally founded on a valuable consideration, which has failed, and not to contracts originally voluntary. Harris v. Harris, 23 Gratt. 737; Williamson v. Cline, 40 W.Va. 194, 20 S.E. 917.
And see Va. Code, § 3301, which declares: " Nothing in this chapter shall impair or affect the obligation of any bond or other deed deemed voluntary in law upon any party thereto, or his representative." See also, Code W. Va., ch. 126, § 7.
4. Breach of Warranty.
a. In General. --Damages for breach of warranty can only be claimed against sealed instruments, under § 3299 of the Code, and in the manner therein prescribed. Such damages could not be claimed at common law by way of recoupment against a sealed instrument, nor can they be claimed by way of set-off under the provisions of § 3298 of the Code, as the provisions of that section apply only where the set-off is a debt or liquidated demand. Kinzie v. Riely, 100 Va. 709, 42 S.E. 872.
b. Of Title to Real Property. --A grantee of real estate, when sued at law by his grantor for the purchase price, may under Code, § 3299, file a special plea claiming damages for a breach of warranty or covenant of title by his grantor unless the defense would require the contract to be rescinded, and the grantor to be reinvested with the title conveyed. Kinzie v. Riely, 100 Va. 709, 42 S.E. 872. 4 Min. Inst. (3d Ed.) 956. And the Code of W. Va., ch. 126, § 5, expressly provides that in any action on a contract the defendant may file a plea alleging " any such breach of any warranty to him of the title to real property."
In Watkins v. Hopkins', 13 Gratt. 743, Judge Lee seemed to intimate that the act of 1831 (now § 3299 of the Code) did not authorize a plea setting up a breach of warranty of title to real property. He says, " And upon the terms of the statute which authorize the plea in case of a breach of warranty of the title or soundness of personal property, it may be argued that such a plea is inferentially excluded in case of a breach of warranty of the title to real estate." But the act of 1831 as amended by the act of March 26, 1873 (Acts 1872-3, p. 196) and found in § 3299 of the present Code, is clearly sufficiently broad to authorize the grantee to file a special plea for breach of warranty or covenant of title to realty. See Kinzie v. Riely, 100 Va. 709, 42 S.E. 872.
In Pence v. Huston, 6 Gratt. 304, the court left it unsettled whether a breach of a covenant of warranty in a deed conveying real estate, may be set up as a defense to an action, under the act of April 16, 1831 (Code § 3299). The case was an action of debt on a bond, and the defendant filed a special plea, under the above act, in which he alleged that the bond was executed for part of the purchase money of a tract of land, which the obligee in the bond had conveyed to the defendant with a covenant to warrant the title free from the claims of all persons whatsoever, and that a valid claim had been set up to the land by a purchaser from the defendant's vendor; and that the defendant had been compelled to give up the land; and that he had purchased it again from such claimant at an advanced price. The plaintiff took issue on the plea, and there was a verdict for the defendant. The court held that although the plea did not set up a defense which was authorized by the statute, yet it asserted a substantial claim against the plaintiff, and after verdict was cured by the statute of jeofails.
5. Matter Entitling Defendant to Relief in Equity.
Mistake.--Where a plea averred that the note in suit was made for the balance of a note given for the aggregate of sundry notes, and that in that aggregate there was, by mistake, included a note which had been paid, and that the mistake had been continued on into the note in suit and was only recently discovered by the defendant, it was held that if such be a defense it should have been made by the sworn plea under the statute. Keckley v. Union Bank, 79 Ga. 458.
Plea Based on Defendant's Own Fraud.--In an action on a bond the defendant filed a special plea alleging that he voluntarily executed the bond for the express purpose of defeating certain claimants who had sued him for damages; because in the excitement prevailing just after the war the court and the jury would not have done him justice in those suits. He attempted to sustain this plea on the ground that it alleged such matter existing before the execution of the bond as entitled him to relief in equity against the obligation thereof. It was held that he was, in effect, asking the court to relieve him from the consequences of his own fraud and that the court must presume that no injustice would have been perpetrated in the regular course of legal proceedings. Harris v. Harris, 23 Gratt. 737.
E. BY WHOM PLEA MAY BE FILED.
Plea Personal to Principal.--If in an action by a grantor against the grantee and his surety on a bond given for the purchase price of real estate, a joint plea be filed by principal and surety under § 3299 of the Code, claiming damages for a breach of warranty of title, and the plea be found against the defendants, the surety cannot alone prosecute a writ of error. The defense allowed by this section of the Code is personal to the principal though if successfully made, it would redound to the benefit of the surety. The surety has no claim for damages against the grantor for a breach of covenant in a deed to which he is not a party and under which he has acquired no interest. He could not under any view of the subject, make the plea available to effect more than the extinguishment of the plaintiff's claim, and he would not be at liberty to so limit the rights of the vendee, and possibly preclude his obtaining full compensation for his damages, for the plaintiff could not be compelled to litigate the matter twice. And if it were held otherwise the principal would be deprived of his election, and be compelled to assert his demand by way of set-off when he might prefer, and it might better subserve his interest, to bring an independent action for its recovery. Kinzie v. Riely, 100 Va. 709, 42 S.E. 872.
F. SPECIAL PLEA AS AFFECTING RIGHT TO EQUITABLE RELIEF.
1. Effect of Failure to File Plea.
Defendant Still Entitled to Relief in Equity.--The statute which gives the defendant in an action on a contract the right to file a plea alleging fraud in the procurement of the contract or any other matter which would entitle him to relief in equity, further provides that if the defendant who is entitled to such plea, shall not tender it, or although he tender it, if it be rejected for not being offered in due time, he shall not be precluded from such relief in equity as he would have been entitled to if the statute had not been passed. Barnett v. Barnett, 83 Va. 504S.E. 733; Ludington v. Tiffany, 6 W.Va. 11; Jarrett v. Goodnow, 39 W.Va. 602, 20 S.E. 575; Bias v. Vickers, 27 W.Va. 456; Kinzie v. Riely, 100 Va. 709, 42 S.E. 872. C. V., 3300, Code W. Va., ch. 126, § 6.
Need Allege No Excuse for Failure to Make Defense at Law.--When a defendant in an action on a contract fails to avail himself of an equitable plea to which he is entitled, and allows judgment to go against him, it is not necessary in order to enable him to make his defense in equity against the judgment, that he should aver in his bill any excuse for not making such defense in the action at law. Ludington v. Tiffany, 6 W.Va. 11; Bias v. Vickers, 27 W.Va. 456; Jarrett v. Goodnow, 39 W.Va. 602, 20 S.E. 575.
2. Effect of Judgment on Plea. --If the defendant file his special plea in the action at law, and an issue in fact is joined thereon, and such issue is found against the defendant, he shall be barred from relief in equity upon the matters alleged in the plea, unless upon such ground as would entitle a party to relief against a judgment. in other cases. Code Va., § 3300. Code W. Va., ch. 126, § 6. Knott v. Seamands, 25 W.Va. 99; Bias v. Vickers, 27 W.Va. 456.
Issue of Law or Fact.--If, under the provisions of ch. 126, § 5 of the Code of W. Va., a defendant avails himself of an equitable defense in an action at law, and the same is fairly tested on its merits by issue on the plea setting forth the matters of such defense, and such issue is found against the defendant, whether such issue was one of law, raised by a demurrer to the plea, or one of fact submitted to a jury, he will thereby be precluded from setting up the same matters in a court of equity on a bill for relief against the judgment at law. Bias v. Vickers, 27 W.Va. 456.
When Verdict Set Aside Because Not Responsive to Issues.--When a defendant files his equitable plea at law, and issue is taken thereon, and trial had, and a verdict given against him, which is set aside by the court as not being responsive to the issues, he may still resort to equity for relief. Knott v. Seamands, 25 W.Va. 99.
G. DEFENDANT DEEMED TO HAVE BROUGHT ACTION AGAINST PLAINTIFF.
1. In General. --A defendant who files a special plea of set-off is deemed to have brought an action against the plaintiff at the time of filing such plea, for the matters mentioned therein. Huff v. Broyles, 26 Gratt. 283; Kinzie v. Riely, 100 Va. 709, 42 S.E. 872.
Same Measure of Relief Allowed as in Independent Action.--In an action brought for the price of an animal sold, the defendant may file a special plea under the Code of 1873, chap. 168, § 5 (Code 1888 § 3299 and he may claim and recover all the damages he has sustained by reason of the breach of the warranty of said animal, which he could have recovered if he had brought a separate action for the breach of warranty. The plain purpose of this statute is, to give precisely the same measure of relief on the plea filed under the same, as could be obtained in an independent action brought for the same cause. Huff v. Broyles, 26 Gratt. 283.
Plaintiff's Representatives May Revive on Motion Although Plea Filed.--The filing of a special plea of set-off under § 3299 of the Code of Va. does not deprive the personal representatives of the plaintiff, who dies pending the action, of the right to have the action revived in their names on motion, without notice, as provided by § 3308 of the Code, notwithstanding the provisions of § 3303, declaring that the defendant shall be deemed to have brought an action against the plaintiff for the amount of the set-off, and that the plaintiff shall not dismiss the action without defendant's consent. Kinzie v. Riely, 100 Va. 709, 42 S.E. 872.
2. Judgment on Plea Bars Subsequent Action.
Splitting Claim--Using Part as Set-Off and Bringing Action for Balance.--Where the defendant in an action of debt, filed a special plea under the statute (V. C., § 3299) for the breach of a warranty of an animal for the price of which the suit was brought, and succeeded in being relieved to the extent of the price paid for the animal, such defendant cannot afterwards maintain another action for damage and expense incurred in keeping the animal. If he brings such separate action a plea of the former judgment is good in bar thereof. From this statute there can be no doubt that it was the intention of the legislature to place the plea upon the same footing as an independent action for the same cause; so that the same objection exists to the claiming of part of the damage for the same breach of contract under the statutory plea, and another part in an independent action, as to the claim of part in one action and another part in another action. Huff v. Broyles, 26 Gratt. 283.
When Nominal Damage Only Allowed by Way of Set-Off.--If in an action on a bond for the purchase price of land the defendant files a plea setting up a breach of a covenant by the plaintiff that he had " the right to convey the land," he is deemed to have brought an action on the covenant and cannot again present a demand for its breach. In an action on such a covenant, if there had been neither eviction, nor special damages arising from the breach thereof, the judgment would be for only nominal damages, but such judgment would, nevertheless, bar a subsequent action on the covenant, although the grantee were subsequently evicted. And the same result would follow if the damages though nominal, were claimed by way of set-off. Kinzie v. Riely, 100 Va. 709, 42 S.E. 872.
3. Where Defendant's Set-Off Exceeds Plaintiff's Demand.
Judgment against Plaintiff for Excess.--If the jury find that the defendant's claim exceeds the plaintiff's demand, the defendant shall have judgment against the plaintiff for the excess. Code Va., § 3304. Code W. Va., ch. 126, § 9. Thornton v. Thompson, 4 Gratt. 121. See Huff v. Broyles, 26 Gratt. 283.
H. PROCEDURE.
1. The Plea.
a. Setting Out Ground of Defense.
In General.--A plea under the act of 1831 (V. C., § 3299) must show that the offset is such as may be set up under the statute. Watkins v. Hopkins', 13 Gratt. 743.
Grounds of Defense Set Forth with Certainty. --The defendant, in order to avail himself of the defenses provided by the statute (Code of Va. § 3299) should file a special plea averring the fraud or special circumstances which entitle him to relief in equity. And the facts should be set forth with sufficient precision and certainty to apprise the plaintiff of the character of the defense intended to be made; and to enable the court to decide whether the matter relied on constitutes a valid claim to an equitable relief. Burtners v. Keran, 24 Gratt. 42; Richardson v. Insurance Co., 27 Gratt. 749.
In an action of debt on a note, the defendant filed a special plea alleging that he had deposited certain shares of stock as collateral security for the note, and that this stock had " remained in the exclusive management, custody and control of the plaintiff, from the date of said obligation hitherto, and that during this period, the plaintiff had so carelessly and improvidently managed and controlled said stock as that same had become utterly worthless, unavailing and lost to the defendant as property." And the defendant claimed to have sustained loss to a certain amount which he offered to set off against the plaintiff's demand. It was held that the plea was bad, because it did not set forth and show what acts the plaintiff had done, or omitted to do, in regard to the stock, which acts were intended to be complained of in the plea. Because of this failure it did not sufficiently appear whether such acts and omissions constituted a good defense to the action. Richardson v. Insurance Co., 27 Gratt. 749.
Allegation of Fraud or Breach of Warranty.--In an action of debt on a bond, a special plea is defective and is properly rejected which alleges that the bond was given for the price of goods which defendant bought of plaintiff, who represented that they were sound and marketable, when in fact they were unsound and damaged, and by means thereof unsalable; but which does not aver a warranty of the quality of the goods, or that the plaintiff knew that the said representations made by him were untrue; or that he used any fraud or art to disguise or conceal their true condition or quality. But in such case a plea is good, which avers that the representations were untrue, and that the plaintiff at the time of making them knew them to be untrue, and knowingly made them with the intent to defraud the defendant; and which proceeds to set out the unsoundness of numerous articles purchased, and to detail particulars in which the representations had turned out to be untrue. Cunningham v. Smith, 10 Gratt. 255.
In an action on a bond given for the price of a slave, a special plea under the act of 1831 is good, which avers in general terms that the slave was unsound at the time of the sale, and that the plaintiff knew the fact and fraudulently concealed it from the defendant, and that upon discovering the fact the defendant offered to return the slave and demanded a rescission of the contract, which plaintiff refused, and laying the damages to the whole amount of the price, or not laying any damages, and praying for judgment in bar of the action. And if such plea avers in general terms the unsoundness of the slave, and then adds a specific unsoundness, the defendant may under the plea. prove any unsoundness, and he is not confined to the specific unsoundness mentioned in the plea, Fleming v. Toler, 7 Gratt. 310.
In an action of debt on a bond for the hire of slaves, if the obligor files a special plea under the statute, and relies on the contract of hiring as furnishing him with an equitable defense, he should set forth the contract of hiring according to its terms or legal effect, and he must allege distinctly any fraud or warranty in regard to it, upon which he founds his defense. Neither fraud nor a breach of warranty can properly be left by the plea to conjecture or inference. Howell v. Cowles, 6 Gratt. 393.
Must Allege Worthlessness of Property at Time Contract Made.--A plea of special set-off under § 3299 of the Code, which sets up the worthlessness of property which formed the consideration of the contract in suit, must aver worthlessness at the time of the contract, and not at the date of the plea. So. Roanoke Land Co. v. Roberts, 99 Va. 487, 39 S.E. 133; Tyson v. Williamson, 96 Va. 636, 32 S.E. 42.
b. Formal Requisites.
(1) Must Allege Amount to Which Defendant Entitled.--A special plea under § 3299 of the Code must allege the amount to which the defendant is entitled by reason of the matters contained in the plea. Richmond Ice Co. v. Crystal Ice Co., 99 Va. 239, 37 S.E. 851; Tyson v. Williamson, 96 Va. 636, 32 S.E. 42.
(2) Verification by Affidavit.--A special plea filed under § 3299 must be verified by affidavit. C. V., § 3299. Watkins v. Hopkins', 13 Gratt. 743; Grayson v. Buchanan, 88 Va. 251, 13 S.E. 457.
Judgment Substantially Correct--Effect of Want of Affidavit.--Where a plea in the nature of set-off sufficiently conforms to the statute in other respects, but is not sworn to, such defect is not one for which judgment will be reversed, when upon a survey of the entire record the judgment appears to be substantially right. Grayson v. Buchanan, 88 Va. 251, 13 S.E. 457.
2. Replication to Plea.
a. General Replication. --Every issue of fact upon a special plea of set-off under § 3299 must be upon a general replication that the plea is not true. C. V., § 3300. Code W. Va., ch. 126, § 6. Briggs v. Cook, 99 Va. 273, 38 S.E. 148; Quaker City Nat. Bank v. Showacre, 26 W.Va. 48.
Where Defendant Not Prejudiced by Allowing Special Replication.--A defendant filed a special plea under the provisions of the 5th section of chap. 126 of the Code of W. Va., and the plaintiff filed a special replication thereto, in which he alleged facts, which if true would have entitled him to a verdict, and the defendant rejoined generally, and a trial was had on this issue and a verdict was found for the plaintiff. The court held that although the Code provides that every issue of fact upon such special plea shall be upon a general replication, yet if the defendant could not have been prejudiced by the allowance of the special replication, the appellate court will not reverse the judgment on the ground that it was improperly allowed. Quaker City Nat. Bank v. Showacre, 26 W.Va. 48.
Statute of Jeofails Inapplicable.--Inasmuch as issue upon a special plea under § 3299 of the Code of Va. can only be taken by way of replication that " the plea is not true," the statute of jeofails, which cures the omission of a similiter, does not apply to the omission of such replication. Briggs v. Cook, 99 Va. 273, 38 S.E. 148.
Going to Trial without Replication--Waiver.--In a proceeding by motion to recover a judgment for money, the defendant pleaded nonassumpsit and a special plea of set-off under § 3299 of the Code. Issue was taken on the plea of nonassumpsit, but no replication was filed to the special plea, and no evidence offered thereunder. The jury was sworn to try the issues joined. After verdict for the plaintiff, the defendant moved to set it aside because no issue had been joined on the special plea, but the court held that the motion came too late; that although the defendant had the right to demand a replication, yet having failed to do so, he is deemed to have consented to a trial on the pleadings as they were. Briggs v. Cook, 99 Va. 273, 38 S.E. 148.
b. Statute of Limitations. --The general rule is that the statute of limitations must be specially pleaded; but this rule can have no application to the plea of equitable set-off, under § 3299 of the Code. The only replication which is allowed to such pleas (by § 3300) is a general replication that the plea is not true, and under this replication the plaintiff may give in evidence any matter which he could have given in evidence under a special replication, if such replication had been allowed. Hence under this general replication the plaintiff may rely on the statute of limitations. Sexton v. Aultman, 92 Va. 20, 22 S.E. 838.
IV. SET-OFF OF JUDGMENTS.
A. IN GENERAL. --" Whatever may have been its origin, the law authorizing the court to set off one judgment against another, where they are due to and from the plaintiff and defendant therein in their own right, is now too well settled to be called in question. This equitable practice of setting off one judgment against another under such circumstances, has been permitted even in the common-law courts of England for more than one hundred years." This authority of the court to set off opposite judgments does not depend on the statutes of set-off, but on the general jurisdiction of a court over suitors in it. Nuzum v. Morris, 25 W.Va. 559.
B. REQUISITES OF SET-OFF.
1. Demand Not Reduced to Judgment. --While a judgment may be set off against a judgment, a demand not reduced to judgment cannot be set off against a judgment. Faulconer v. Stinson, 44 W.Va. 546, 29 S.E. 1011.
In some instances, as in cases of the insolvency of the judgment creditor, a court of equity will enjoin a judgment so as to enable the judgment debtor to recover judgment on a claim not already in judgment, and allow him to use it as a set-off. Griffith v. Thompson, 4 Gratt. 147; Hudson v. Kline, 9 Gratt. 379; M'Clellan v. Kinnaird, 6 Gratt. 352; George v. Strange, 10 Gratt. 499; Sayre v. Harpold, 33 W.Va. 553, 11 S.E. 16. See supra, " Set-Off in Equity," II, B.
2. Judgment Annulled on Appeal. --A debtor cannot set off a judgment which has been annulled on appeal. Magarity v. Succop, 90 Va. 561, 19 S.E. 260.
C. WHEN SET-OFF ALLOWED.
1. Discretion of Court. --Opposite demands arising out of judgments or decrees between the same parties, and in the same right, may be set off against each other whenever it is equitable to do so. On an application for this purpose, however, the court is not bound by legal rules to set off such judgments in all cases; but such application is addressed to the discretion of the court. Nuzum v. Morris, 25 W.Va. 559; Payne v. Webb, 29 W.Va. 627S.E. 330.
2. Where Injustice Would Be Done by Allowing Set-Off. --The court, in the exercise of its discretion in allowing judgments to be set off against each other, will not grant the order if the application has been delayed until the interests of third persons have become involved, and injustice would be done by the allowance of the set-off. Nuzum v. Morris, 25 W.Va. 559; Payne v. Webb, 29 W.Va. 627S.E. 330.
A party entitled to such set-off having subject to his control a special fund primarily applicable to the satisfaction of his judgment, will not be permitted to avail himself of his right of set-off against the assignee of an opposite judgment, until such special fund is exhausted, and then only for any balance of his demand which may remain unsatisfied. Nuzum v. Morris, 25 W.Va. 559; Payne v. Webb, 29 W.Va. 627S.E. 330.
When a suit in chancery was pending to subject land to the payment of liens charged thereon, and decree of sale, and decree confirming sale, were on petition of the debtor reversed in the appellate court, and a judgment there entered for the debtor against the first lien creditors for the costs in the appellate court, which judgment the creditor assigned to his attorney in part payment of his attorney's fee, and the cause was remanded, and it appeared that the property was sufficient to pay the first lien, and the court refused to allow the assignee and attorney to be paid out of the fund, but set off the judgment for costs against a part of the judgment against the assignor, it was held, under the circumstances, that the allowance of the set-off was inequitable, and should not have been made; but a decree should have been entered for the whole amount of the plaintiff's claim against the debtor, and then the decree should have required the creditor, out of the money realized, to pay the assignee and attorney the amount of his claim. Payne v. Webb, 29 W.Va. 627S.E. 330.
3. Set-Off against Assignee of Judgment. --An assignee of a judgment takes subject to all existing equities between his assignor and the debtor, and a judgment debtor may set off a judgment recovered by him against the assignor at the time of the assignment. Gordon v. Rixey, 86 Va. 853, 11 S.E. 562.
A judgment was recovered on an official bond, against the principal and sureties therein, and subsequently the principal in the bond recovered a judgment against one of his sureties on a personal account between them. This last judgment, without the knowledge of the defendant therein, had been assigned to a trustee to indemnify the sureties against any loss they might incur on the official bond, but notwithstanding such assignment the surety on the official bond was held to be entitled in equity to set-off against the judgment recovered against him by the assignee of his principal, the amount of his liability on the judgment recovered on the official bond. Gordon v. Rixey, 86 Va. 853, 11 S.E. 562.
[*]For monographic note on Set-Off, Recoupment and Counterclaim, see end of case.