Opinion
35969.
DECIDED FEBRUARY 15, 1956. REHEARING DENIED MARCH 5, 1956.
Action on account. Before Judge Fort. Taylor Superior Court. September 9, 1955.
H. Thad Cawley, for plaintiff in error.
Garland T. Byrd, Kyle Yancey, contra.
1. Only demands which will support an independent action for their collection can be pleaded by way of set-off.
2. Every debt is an obligation but not every obligation is a debt for the collection of which a suit may be maintained. Pennsylvania Company c. v. Scott, 346 Pa. 13 ( 29 A.2d 328, 144 A.L.R. 849).
3. A "debt" has been defined to be a sum of money due by a certain and express agreement. A debt in its general sense is a specific sum of money which is due or owing from one person to another, and denotes not only the obligation of one person to pay, but the right of the other party to receive and enforce payment by judicial action; it is that which one is bound to pay to or perform for another; that which one is obliged to do or suffer. A demand payable only upon the choice of the obligor is not in legal contemplation a debt for the collection of which an action may be maintained. Dewey v. Denson, 31 Ga. App. 352 (1, 2) ( 120 S.E. 805).
4. An instrument, such as the one upon which the defendant predicates the plea of set-off in this case, of a hybrid nature having features both of a certificate of preferred stock and a debenture, and payable on at the option of its maker does not evince an enforceable debt. O'Neal v. Automobile Piston Parts Co., 188 Ga. 380 ( 4 S.E.2d 40, 123 A.L.R. 850); Board of Trustees of Bessie Tift College v. Barrow County Cotton Mills, 39 Ga. App. 261 ( 146 S.E. 637) and many other similar holdings found in Georgia Reports and those of various other States. For exhaustive annotations on the subject see Words and Phrases, Vol. 11, page 210 and pocket parts of same volume.
5. Unless otherwise stipulated the situs of a debt follows the domicile of the creditor and is construed according to the laws of the State in which he resides. Birdseye v. Underhill, 82 Ga. 142 ( 7 S.E. 863), 2 L.R.A. 99, 14 Am. St. R. 142). Where an instrument like the one upon which the defendant predicates his plea of set-off in the instant case does not evince a debt for any principal amount, but does obligate its maker to periodically pay certain amounts of interest it is an evidence of debt to that extent, and in construing it the rule pronounced in the preceding headnote is applicable.
6. We conclude that only the interest accruing on the instrument set up in the plea of set-off in this case was the legitimate subject matter of a plea of that nature. Accordingly the trial court passing upon the law and facts of the case without intervention of a jury erred in entering a judgment allowing the defendant to recover the principal amount of such instrument.
7. No question is now before this court as to whether the defendant by appropriate equitable plea in bar of the non-resident plaintiff corporation's action can set up his right to collect the future interest which will mature periodically under the terms of the discussed instrument until the corporation elects to pay the principal or is legally dissolved.
8. The trial judge erred in denying the motion for a new trial.
9. The defendant's plea of set-off undertook to recover both the principal and interest evinced by the instrument referred to in the foregoing headnote. Under the rulings contained in those headnotes he could recover the interest but not the principal. Consequently, the defendant's demurrers directed against the plea as a whole were properly overruled by the trial judge.
Judgment reversed. Felton, C. J., and Nichols, J., concur.
DECIDED FEBRUARY 15, 1956 — REHEARING DENIED MARCH 5, 1956.
Chavala Cooperative, Inc., instituted an action on open account against T. J. Hortman (also known as T. J. Hartman) in the Superior Court of Taylor County. The defendant in his answer and plea of set-off admitted an indebtedness of $1,140.75 to the plaintiff but pleaded in his set-off three counts of alleged indebtedness of the plaintiff to him in the sum of $1,000 as principal and five per centum per annum since July 1, 1952, on the amount, and attached the following exhibit: "No. 1089; Amount $1,000; Farmers Exchange of Russell County, Phenix City, Alabama. Certificate of indebtedness. This certifies that the Farmers Exchange of Russell County, of Phenix City is indebted to T. J. Hartman in the sum of one thousand and no/100 dollars ($1,000), representing funds advanced to the association for the purpose of assisting it in carrying on its operations. The indebtedness evidenced hereby is subject to the following conditions: 1. The indebtedness evidenced by this and similar certificates is retirable solely in the discretion of the board of directors of the association, either in full or on a pro rata basis. 2. This certificate is transferable only on the books of the association and subject to the approval of the board of directors. 3. This certificate of indebtedness bears interest at the rate of five (5 percent) per centum, per annum, from July 11, 1950, due and payable June 30th of each year, provided however, that the board of directors may, in its discretion, increase the interest to eight (8 percent) per centum, per annum. 4. The indebtedness represented hereby is junior and subordinate to all other debts of the association both secured and unsecured, but the amount represented by this and similar certificates shall prime any earned equity account of the patrons of the association and shall be preferred to such equity accounts upon retirement and upon retirement and upon dissolution or liquidation of the association. In witness whereof, the Farmers Exchange of Russell County, has caused this certificate to be signed by its duly authorized officers this 3rd day of June, 1950; W. O. Patterson, President; W. McCoy, Secretary, by J. C. Chisholm."
To the plea of set-off, the plaintiff filed its demurrer and after an amendment by the defendant the plaintiff renewed its demurrer which was overruled. To this ruling the plaintiff excepted together with the ruling denying the plaintiff's motion for a new trial. After an additional amendment by the defendant striking one count of the set-off based on rescission, the case was tried. At the trial the plaintiff and the defendant stipulated in open court to the effect that the presiding judge could render a verdict and judgment on the agreed set of facts which facts allowed the plaintiff's suit for $1,140.75 and the defendant's set-off for interest in the sum of $104.16; that the plaintiff was a non-resident of the State of Georgia; that the plaintiff was insolvent; that the obligor in the certificate attached is the same corporation as the plaintiff; that the interest due was as agreed.
The plaintiff and the defendant further stipulated and agreed that the issue to be decided which was submitted to the court was whether or not the principal sum of $1,000 claimed by the defendant by virtue of the certificate was to be allowed as a set-off. At the same time the defendant introduced the certificate, the plaintiff interposed its objection to its introduction on the grounds: "That it was irrelevant and immaterial as a subject matter of a set-off for the principal sum of $1,000 and for the purpose to show that the defendant was a creditor of the plaintiff for said sum contrary to its own terms and conditions, and that it did not show the existence of a debt by the plaintiff to the defendant for said principal sum." And further, "that its admission should be limited to show the interest due only in the set-off," and both parties agreed that the certificate was to be admitted in evidence for the purpose of showing the agreed accrued interest due the defendant.
Upon conclusion of the trial the judge overruled the objections made by the plaintiff to the introduction of the certificate and allowed recovery of the plaintiff but struck all of the set-off, principal and interest, which verdict in favor of the plaintiff in the sum of $36.59 was duly entered and published. The plaintiff filed its motion for a new trial which was denied. The plaintiff excepted to this ruling and the case is here for review.