Opinion
(April Term, 1797.)
Unliquidated damages cannot be set off, but when they are reduced in rem judicatam they may be. In an action brought by two partners, a debt due from one of them cannot be set off, but if one of the partners, dies, then in a suit by the survivor a debt due from him may be set off. When a chose in action is assigned for value received, no debt contracted subsequently shall be allowed even at law as a set-off against the assignee, especially if there be an act of the Legislature taking notice of the assignment and enabling the assignee to sue in his own name.
DEBT upon bond. Please, general issue, notice of set-off, payment at and after the day. And now upon the trial it appeared on the part of the plaintiffs that prior to 1778, Robert Hogg, now deceased, and Campbell, were partners in trade; that Hogg died, and in 1778 the defendant, being indebted to the firm of that company, gave the bond in question to Campbell, the survivor; that in 1780 Campbell for valuable (472) consideration, by deed, assigned all his share and interest in the partnership effects and debts to James Hogg, the principal legatee in the will of Robert, and some time after joined the enemy, and was thereby rendered incapable of carrying on suits at law; and in 1786 the Legislature passed an act taking notice of the assignment, and of Campbell's disability, and that it was injurious to the creditors, and vested the right of suing for the partnership debts in the executors of Robert Hogg, making them also liable to actions on account of debts due from the partnership. In 1789 the defendant recovered against Campbell £ 500 for negroes of the defendant, carried away by Campbell when he joined the enemy. The plaintiff produced the bond, the deed of assignment, and the act of Assembly, and there rested his case. The defendant then offered the judgment recovered by him against Campbell as a set-off, which was objected to by Williams for the plaintiff.
Davie for defendant.
Williams in reply.
Davie for the defendant: The opinion of the Court proceeds entirely upon the effect of the act of Assembly. I did not foresee this, and hope I shall be indulged with another argument. I can show very clearly that the act has not the meaning given it by the Court.
Davie for the defendant.
Williams in reply.
In 1778 the bond was executed upon which this action is founded; in 1780 the surviving partner assigned all his interest in the partnership effects; in 1786 the act of Assembly passed, and in 1789 the defendant recovered this judgment, which he now offers to set off.
The best way of ascertaining whether a demand may be set off is to consider, in the first place, whether it is such a demand in itself, and of its own nature, as may be set off; secondly, against whom it may be set off. A demand for unliquidated damages cannot be set off. The Legislature never could intend to introduce so much confusion as that of trying actions of trover, trespass, or the like, by way of set-off in an action of debt. Had the defendant's demand been for damages, or any unliquidated sum, I should have been very clearly of opinion it could not be set off; but it is not for unliquidated damages; it is for a sum certain, reduced in rem judicatam by the judgment. It is, therefore, in itself and of its own nature, capable of being set off, whatever may have been its origin, and although before the judgment it might have sounded only in damages. The true question is, Can debt or indebitatus assumpsit be brought upon the demand offered to be set off? If it may, then the sum is such an one as may be set off. Here debt would lie upon the judgment, and therefore it is capable in itself of being set off. With regard to the party against whom it may be set off, I take the distinction to be this: where the debt offered to be set off is recoverable and payable out of the same fund that the debt to be recovered in the action goes to increase, it may be set off. Where two plaintiffs sue, and the sum offered to be set off can be recovered of one of them only, it cannot be set off; or where one sues, and the sum offered to be set off is due from that one and another, it cannot be set off; because, in either case, the two actions cannot be reduced to one by a set-off without doing an injury to a third person by subjecting him to the effects of an action to which before the act of set-offs he would not have been subject. The act did not mean to extend the action of the defendant to a person not liable (477) to it without the act but only to give him the effect of an action against the plaintiff to which the plaintiff was liable without the act, but not subject to by way of set-off. The law is so with respect to a partnership dealing. The defendant cannot, by execution upon a judgment against one partner in his private capacity, seize and sell the whole partnership effects; he can only sell the share of the partner against whom he has judgment, and the vendee becomes tenant in common with the other. If he cannot affect the other's share by judgment and execution, surely he cannot do it by set-off, which is in lieu of an action. The law is so stated in Salk and several other books, and this is the meaning of the case cited by Mr. Williams from Term Re., but all this goes upon the supposition that the two partners are alive, and both sue. The case is widely different where one dies, for then the survivor has all the partnership effects in jure proprio. He may release the debts, give away the effects, sell and dispose of them to whom he pleases; he alone can take possession of all the effects. The executors of the deceased cannot object to any disposition he may think proper to make; they cannot lay claim to any particular article; they cannot sue as vendee or donee, and recover the effects. When an action is brought for the partnership debts and effects, he sues in jure proprio, naming himself by his proper name without the addition of surviving partner, and states his right in the declaration. The maxim cited by Mr. Williams is a true one, but it is not to be understood as he understands it. It means that the interest and property of the deceased does not cease as to him, and become vested in the survivor, as in the case of other joint tenants; but that there survives to the representatives of the deceased a right to demand the deceased's share of the clear balance that shall remain after the debts due to and from the partnership shall be collected and paid by the survivor. Their claim is to an account, and for the balance in money, not to any specific articles or debts of the partnership. The survivor is their debtor and they his creditors to the amount of the balance; therefore, when he sues a partnership debtor he sued in jure proprio; and that debtor, if he has a demand against him in his private right, may set it off; and that is the reason of the case in 5 Term, 493. If Campbell were the plaintiff here, and the assignment had not been made, this debt might be set off. Then what effect has the assignment? In this Court, by the rules of the old common law, it has no effect. A chose in action cannot be assigned; it vests no legal interest in the assignee; but then the act of Assembly comes in and legalizes (478) the assignment, and gives it the effect of legally vesting the whole interest the assignor had in the assignee; and that assignment having been prior to the defendant's recovery, exempts the effects in the assignee's hands from the after incumbrances of the assignor. From the time of this act Campbell had neither an interest in nor a remedy for this debt; he could not now sue for it were he in the country, and if his interest has so completely departed from him that he has no control over the debt, nor can institute nor release any suit for it, then he and his property is liable to the defendant's action upon the judgment, and the defendant is liable for the bond to the action of other persons, whose recovery will go to increase the fund of the assignee, which is not liable to pay the debt due to the defendant; and, consequently, the plaintiffs are not such persons against whom the defendant's demand can be set off.
I am of the same opinion with HAYWOOD, J., as to the principal point, that this set-off ought not to be allowed.
Let the case be specially stated. We will hear another argument.
It was so stated, and afterwards, at another day in the term, the cause was again argued.
A few days afterwards STONE, J., delivered the final opinion of the Court that the set-off was not allowable, and added he would give his reasons. The idea, he said, of the unassignability of choses in action is much altered now from what it was formerly. Courts of equity for a long time have protected such assignments when for valuable consideration. Courts of law also have lately come into the resolution of taking notice of them, and very properly, for why should a court of law refuse to do what is really just and proper to be done, and what is usually and every day done in court of equity? Many of the ancient common-law rules have been changed merely because they would not do that which courts of equity would. Accordingly courts of law now view the assignor of a chose in action for a valuable consideration as a trustee for the assignee, and the thing assigned is really and substantially belonging to the assignee. One consequence resulting from this is that a chose in action actually assigned for value is not liable to the after charge of the assignor, especially where the third person has notice of the assignment, and of course not to a set-off of a sum subsequently becoming due from the assignor. My opinion is founded not only on the reason and propriety of the thing, but also upon a case in 1 Term, 619, and the cases there cited, where the doctrine I am treating of is fully established. The law of these cases has been recognized by several decisions in our own courts — Smith v. Powell, decided (481) at Halifax, on the last circuit, ante, 452, and McDaniel v. Tate, decided at Morganton, some years ago.
It is said, however, that these cases proceeded upon fraud; but is not every case of a fair assignment for value, attempted to be defeated by the assignor to the prejudice of the assignee, a case of fraud? I think this modern doctrine respecting choses in action assigned more peculiarly proper here because our courts of law and courts of equity are united, and both jurisdictions to be exercised by the same judges. It seems very idle to give a judgment at law merely for the purpose of setting it aside or correcting it in a court of equity. It is more proper, because much less expensive and dilatory, for the court of law at once to make the same decision that is attainable by an application to the court of equity. I am also of opinion the act of Assembly meant to give efficacy to the assignment. It has certainly given the right of using to the present plaintiffs; and if they are only plaintiffs in form, as there is no instance of pleading a set-off against a person who is not plaintiff on record, I think that circumstance alone, independent of any consideration respecting the interest, sufficient to oust the defendant of the set-off he proposes to make. As to the doctrine of set-offs, with respect to the quality of the demands capable in themselves of being set off, and the persons against whom they may be set off, I am of opinion the law was accurately stated the other day from the bench.
The set-off was disallowed. Then Williams moved for a new trial, the jury having not allowed interest enough, and being not opposed, it was granted.
Cited: Norment v. Johnston, 32 N.C. 90.