Hogg's Executors v. Ashe, 2 N.C. 544, 1 Hayw. 544 (1797)

April 1797 · North Carolina Superior Court

2 N.C. 544, 1 Hayw. 544

Hogg’s Executors v. Ashe.

Unliquidated damages cannot be set off, but when they are reduced in rem judicaium, 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. Pleas, general issue, notice of set off, payment at and after the day : and now upon the (rial it appeared on (he part of the Plaintiffs, that prior to the year 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 jn 1780, Campbell for valuable consideration, by deed assigned all bis 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, tiie Legislature passed an act, taking notice. of the assignment, and of Campbell’s disability, and that it was injurious to the creditors, and vested ihe right <>f 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 flic 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; winch was objected to, by Williams, for the Plaintiff. He argued, that all uncertain damages, ail unliquidated demands which are sound ttt damages only, are in their nature incapable of being set off — only such demands for which debt, or indebitatus assumpsit, will lie, can be set off. One principal requisite to a debt in order to its being set off, is, that it should bo mutual. Cow. 56.— Iredell 172, and these debts are not mutual ; the judgment offered to be setoff, is obtained against Campbell, in jure propria, for a transad ¡on no ways relative to the partnership concerns, and which arose after the death of the other partner, and the consequent dissolution of the part-nersiiip ; whereas the debt sued for, is a debt contracted with toe partners as joint merchants. Mutuality of debts is so absolutely essential to a set off, that no instance can be produced, of a set off having been allowed, where the debt demanded is not due to tine same persons precisely as the. debt to be set off is due from. Even a debt due to a man in right of his wife, cannot be set off in an action against him for his own debt, Bull. 179, because not precisely mutual 5 the debt sued for being due from himself alone, and that offered to be set off to him and another— the reason of the rule is, lest the interests of third persons might be affemed. If the husband in i he case cited, is compelled to sue for the debt due in right of his wife, that debt would survive to her in case of his death before the recovery ; that reason extends to the case before us. Were this judgment allowed to beset off, the interest, of the representatives of the deceased partner who remained here, would he subjected to pay a judgtnc.nl recovered against Campbell, for a tort of his own. If one man receive rents for another after his death, by appointment in his lifetime, and then he sued by the executors, he cannot set off a debt due from the deceased, because the deceased never had any cause of action against him. Bull. 180. So here, the Defendant never had any cause of action against the Plaintiffs, and ought not to be allowed to set off the judgment against them. It is true indeed, that by tito deaiii of Robert Hogg, the remedy to recover the partnership debts survived to Campbell; but it was the remedy only that did so — (he interest of the deceased did not. It is a rule in lite law merchant, that jus accrescendi inter mercal ores locum non habet. 4 Term 123. 5 Bac. Ab. 580, 589. Thai interest which Robert Hogg had survived upon his death to his executors, though the right to recover them, and get them in from the partnersiiip debtors, survived to Campbell, who could not, by any 'transactions of his, onerate the share of his deceased partner with any other incumbrances than it was subject to at the time of his death. As to the share of Campbell, though that might have been liable had no assignment been made, yet seeing his share was assigned, and diat assignment confirmed by act of Assembly before the judgment against him, it passed to the assignee (being for valuable consideration) not subject in tiis hands, tu this demand ; and this set off is not proper to be allowed.,

fla-vifi for Defendant —

r-1, shall not deny the law as laid Dy Mr. Williams, that unliquidated damages cannot he set off; hut my answer to that part of his argument is, that the debt we off-r to set off, is not unliquida-ted, but reduced to a certainty by the judgment. It is needless to consider particularly, the cases adduced by Mr. Williams in support of this position, they are all of them cases of uncertain demands, and do not apply to the present case. If if be said, that before the judgment .the demand was for damages uncertain ; the answer is, whatever may have been the origin of a judgment, whether trespasser any other injury to be compensated in damages,' when .the damages are once ascertained by the verdict of a jury, and a judgment given for them, they become from thenceforward a debt, as much as if a bond .bad been given for them ; and may be sued for and recovered in an action of debt. Espin. Montel v. Strickland. And wherever the sum offered to he set off, is properly recoverable in an action of debt, it may be set off: every set off being in lieu of an anion. As to the mutuality of debts in order to a set off, that also is necessary -: but then as we are in a court nflaw, the legal interest is only to be conshh'red. The assignment at most, only vests an equitable interest in the assignee and that is such an one as diis court will not take notice of. The interest assigned in the hands of the assignee, is legally subject to all the. incumbranc'-s, it was -subject«to, or would have been subject to in the hands of the assignor, had the assignment not been made. The share of debts assigned, .is still legally considered as debts due to the assignor. — r TUd Campbell after the assignment, committed high trea-.soti, the debts assigned were subject to forfeiture. In phqrtp the assignment as to third persons, operates nothing — the ¡aw wiii not recognize it. Notwithstanding .the assignment, suits must still he brought in the name of Campbell; the law deeming it a mere nullity. The assignment therefore, so far as regards the legal interest of the parties, leaves them exactly in the same situation they were in before the assignment: and then a,judgment vecovctvd against Campbell, may be set off agaiost a debt to be recovered by himself; and laying aside the act ol Assembly, that is the present case. That act for the furtherance of justice, has vested the right of suing in the executors of the deceased partner; but still the debts when received, do in contemplation oflaw belong to Camp-hell. The executors are the representatives of the partnership by Legislative creation, and in the. place of the surviving partner acting for the partnership, and are subject to all such actions as the person in whose place they stood was; and of course to an action for this debt, and consequently to the set off offered ; which is no more than a cross action by the Defendant against the Plaintiff.— In this view' of the case, both the interest of Campbell, and Campbell himself, by his. representatives the executors, are now before the court. This is substantially and properly to be considered as the action of Campbell, to recover a debt the law deems due and payable to himself, both now and when recovered -, and therefore, the debt sued for, and that offered to be set off, are reciprocal and mutual debts within the meaning of our act of Assembly, and are perfectly clear of the objection endeavored to be raised by Mr. Williams for want of mutuality, it is not so universally true as is stated by Mr. Williams, that the debt to be set off, mast be a debt recoverable by the Defendant against the Plaintiff. Esp. 240. 1 Term 112* 115. I much doubt whether (he case cited from Duller 179, would be so adjudged at this day. It certainly could not llave been so adjudged to save the right of survivor-ship to the wife. 5 Term-493, proves that a debt due from a surviving partner, may be set off in an action brought by him for a'deb1 due to the partnership — there was not such precise mutuality as Mr. If'illiams contends for — that, was the very same case a-, this now before the court. In the present case,, the whole partnership interest is yet in Campbell the survivor, and the suit for his benefit ; at the, same time that the- debt sought to be set off, is reduced to certainty by a judgment against that very surviving partner. The assignment operates nothing, the act of Assembly appoints a substitute for Campbell, with respect to the remedy. It these two latter circumstances create no difference, as l think they do not, the present case is precisely similar to that, last cited, and ought to be governed by it; for as, to the origin of debt, that, is of no consequence whatever. ,3 Term Rep. 507. The law only requires mutuality of action', and certainty as to the amount of the debt to be set off. If this set off is not allowable, a general inconvenience will follow, for then a partner may coutract debts, commit trespass> and before a recovery can be bad against him, assign bis share to tiie legatees or executors of his deceased partner, and pul it out of the power of his creditors to obtain a farthing.

Williams in reply.

3 Bac. Jib. 589, proves that the right of survivorship does not take, place amongst merchants ; and from thence it follows, that the share of Robert Mogg could not be affected by this judgment. And then surely it follows, that it cannot be affected by setting off this judgment against its debts. If the set off con-tendí d lor be allowed, it will defeat his interest or share of this d- bl ; and by the same reasoning, a surviving partner by bis misconduct, may destroy the. whole share of his deceased partners. This is incompatible with the rule, and cannot be law : a partner by contracting private debts, cannot affect the whole partnership. When there is a judgment against him, and execution issues, the Sheriff can only sell his share, so as to make the ven-dee a tenant in common with.the other partner. Salk. 392. If the whole cannot be affected by an action, neither can it by a ser off; and consequently a private debt as this is, cannot be set off against a partnership debt, when you cannot take from any part of it by a set off without affecting the interest of the other partner. He cited 4 Term 12.3. As to Campbell’s share,-admitting it to have been liable to this set off had no assignment been made, yet as it actually was made and confirmed before the recovery of this judgment, it is in the same situation as if it had been the transfer of an interest legally assignable ; such as a note of hand or the like, which clearly would be exempt from any after debt due from the assignor; and consequently no part of these effects and debts, neither the share of Campbell, nor of the deceased, can be a~ ny ways liable to this demand of the Defendants.

Judge Haywood — In 1778, the bond was executed upon which Ibis action is founded ; in 1780, the surviving • partner assigned ail his interest in the, partnership effects; in Í786, th<‘ 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 iniend to introduce so much fusion, 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 he set off; but it is not for unliquidated damages — it is for a sum certain, reduced in trem judicatam, by the judgment. It is therefore in itself andtof its ow n 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, cart debt or indebitatus assumpsit, he brought upon the demand offered to he set off. If it mayr, then the sum is such au one as ma.y 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 setoff, I take tiic distinction to he 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 off-red 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 tiie Defendant to a person not liable to it without the act; butonly 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 ;Jhe 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 Salk, and several other hooks, and this is the meaning of the casé cited by Mr, Williams, from Term Be. 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 ain disposition he may think proper to make ; they cannot lay claim to any particular article.; they cannot sue as \ miff ee 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 tobe 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 oi> 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 sues in jure proprio ; and that debtor, if he has a demand against him in his private rigid, 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 setoff. 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 (heart of Assembly comes in and legalizes the assignment, and gives it the effect of legally vesting the whole interest the assign- or had in the assignee ; and ttiat 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 lie 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 artion of other persons, whose recovery will go to increase the fund of the assignee, 'which is not liable to pa\ the debt due to (lie Defendant ; and consequently, the Plaintiff’s are not such persons against whom the Defendant’s demand can be set off.

StoNE, Justice — i am of ihe same opinion with Judge . Haywood as to the principal point, that this set off ought not to be allowed.

Davie for the Defendant

The opinion of the court proceeds entirely tapón the offeri of ¡he act of Assembly. I did not foresee this, and hope, i shall be indulged with another argument.1 1 can shew very clearly that tlie act has not the meaning given t.o it by the court.

Per curiam — 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.

Davie for the Defendant

It was argued the. other day by the Plaintiff’s counsel, that where partners sue, a debt due from one of them only, cannot be set off. That is not denied, but it will not from thence follow that where the surviving partner sues, a debt due from him may not he set off. The law is, that il may. The court knows no right but his — lie is an.swerulre to the executors of the deceased for the debts due to the partnership — it is perfectly immaterial to them ¡u>\v lie. disposes of these debts— whether by discharging his own private debts or otherwise. In case, of a debt due from him in his private capacity, if he is sued for it, and execution issues, it will take hold of all the partnership effects, and they may be all sold to satisfy it. There is no moiety of his, distinct from that of the dead partners ; there is no longer any partnership existing. 3 Term493, is in point. The surviving partner may join a partnership action, and one in his own right, in the same writ J which proves both ac-i tions to he in jure prop rio, and therefore the law will allow a debt due from him to be, set off in such action_ The liability of the survivor to the executors of the deceased, is no argument against it; neither is if any hard- . ship (hat the partnership effects should be liable to the debts of private creditors, to the prejudice of partnership creditors, who it is said trust upon tin* credit of no particular fund, but from his personal credit generally. According to Mr. Williams’ own argument, a private creditor may sell a share of one partner, to satisfy his private dpbt j then why not the whole partnership effects, when concentered in the hands of the survivor. I* i« no hardship, for a debt due to tin partnership may be set off by the survivor, against a debt due from himself. I think it cannot be doubted, but that the surviving partner holds in jure proprio, and that ari execution for a debt slue from himself, may be levied on the whole partnership effects to satisfy it. As to the act of Assembly, it is in derogation of the common law, made'for a special purpose, to answer-the convenience of particular individuals, and ought to be construed strictly according to its literal meaning. — 5 Bacon’s Abridgement 650. 10 Modern 182. [Here he read the art of 1786, ch. 56 ] By (his act those persons who were the executors of Robert Hogg, are empowered to sue, naming themselves executors <-f Hogg but they do not sue as executors — they are put in the place of the .surviving partner, they represent him, they are-elt-abled to recover for the purpose of paying thf partnership debts, not for the purpose of paying over to the as-signee. They are, for ought that is contained to the cotv trary in this act. to pay the balance to such persons as by law are entitled to receive it, and that is the surviving partner — they can only recover in cases where he might, were he not disabled — and are subject as he would be, were the suit in his name.

Williams, in reply

The reason of allowing a set off in the case of an action against the surviving partner is, because he may recover the partnership debt, and pay his own private debt with it; but if he sues, the court will not compel him to admit the set off of a debt due from himself in his private capacity. It is at his election when Defendant, to set off’ or not. He may dispose of the partnership debts in discharge of his own private debts if he thinks proper, but the law will not force him to do so. It will not compel him todo injustice by breaking the trust reposed in him by his partner at the time of commencing tiie partnership. He then cited 2 Vern, 293, 706. P. Wil. 182. 4 Term 123, !o shew that in cases of bankruptcy, ilie partnership debts shall be paid out of the partnership effects before the private debts of the partners. Partnership effects in the hands of a surviving partner, cannot be taken to satisfy a private debt by execution. A Court (if Equity would protect the share of the deceased partner, upon pi oper circumstances laid before it. The Defendant in the present case, had notice of the assignment by Campbell, and a payment made by him !<> Campbell afterwards, would not' have been allowed. The act of Assembly recognizes the assignment, and imparts to it a legal effect and operation. With respect to assignments in general, they arc protectable in a Court of Equity, and no payment made after notice of an assignment for valuable' consideration, shall defeat the interest of the assignee, 1 Salk. 79. 1 Atk. 294. 2 Bl. Re 269, 1137. 1 Term Re. 26. 4 Term 340.

* Cuña advisari — A few days afterwards, Stowe 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 chases in action. is much altered now from wiial it was formerly.— Conns of Equity for a long time have protected such as-signmnits when for valuable consideration. Courts of Law also have lately come into ihe resolution of taking notice of them ; and vedy prop.-rly : 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 a Court of Equity ? Many of the ancient common law rules have been changed, merely because they would not do that which Courts ofEquity would. Accordingly Courts of Law now view the assignor of a chose in action for a valuable consideration, as a trustee for ihe 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 charges of the assignor, especially where the third person has notice of ihe 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 tiie tiling, but ahm upon a case in 1 Term Be. 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 — by timt o! Smith and Powell, decided at. Halifax, on the l ist circuit ; and by hat of McDaniel and Tate, decided at Morgancon, some years ago.

It is said however, (hat these cases proceed- d upon fraud; but is not every case of -< fair assignm-nt f..r value, attempted to lie defeated by me assignor to <h. p e-judioe of the assignee, a case of fraud ? I think this mo-det'ii doctrine respecting chases 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 Lavs 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 suing 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.

Note.— Vide S. C. Con. Rep. 1 Wofford v. Greenlee, Ibid. 79. Roberts v. Jones, 1 Murph. 353. Noble v. Howard's Ex’rs. 2 Hay. 14.— Smith v. Powell, ante 452.