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Brown v. Cuming

2 Cai. 33 Court N.Y. Sup. Ct. English

Delivered by Livingston, J.

Contents

Majority

p. 33
Brown, assignee of Dawson, a bankrupt, against Cuming.

Headnote

In an action by assignees of a bankrupt for money due their bankrupt as supercargo of a ship, the defendant cannot set off a claim against the bankrupt for not keeping his vessel fully insured, the same being then unliquidated.
Assumpsit by the assignees of a bankrupt for work and labor, care and diligence, about the defendant’s business, with a count for money had and received.
The circumstances of the case were simply these: The bankrupt had been supercargo of a vessel belonging to the defendant, on a voyage from St. Croix to Philadelphia, and from thence to Amsterdam, with orders to keep the ship fully insured. He, in the course of her voyage, advanced ,noney for repairs, and also for prosecuting a claim for her recovery, which he interposed on her being captured and carried into a British port. The vessel, however, though insured for 10,000 dollars, was not covered for the amount of the ^‘repairs, and the sum which she thus stood short insured, the defendant claimed a right to set off.[6] Whether he was entitled to this or not, was the only question.
p. 34
Hamilton, for the defendant.
Wherever there is a par* tieular individual agency, all omissions, relating to the subject matter, which induce loss, are objects of set-off. Where a party omits to insure, he becomes an insurer. This right
we contend for, is in a more empiratical degree to be insisted on in this case, which arises under the bankrupt laws, because they admit of a more liberal set-off than any
•other, by extepcling.it to all cases of mutual credit. 1 Cooke’s B. L. 569 ; Ex parte Deeze, 1 Atk. 228. So in the case of Smith v. De Sylva, Cowp. 469.[6]
Riggs, contra.
Two points may be made ; 1st. Whether the demand of the defendant can be set off under the general statute? 1 Rev. Laws of N. Y. 347. If not, 2d. Whether under the bankrupt law of the United States ? As to the first point, there must be mutual debts; debts mutually due at the commencement of the action. Montagu on Set-off. 17.[6] The demand of the defendant must be a debt, certain and liquidated; for uncertain, or unli-quidated damages cannot be set off. It must be such a claim, that for it indebitatus assumpsit will lie. Freeman v.
Hyett, 1 Black. Rep. 394 ;[6] Howlett v. Strickland, Cowp. 56. Therefore, uncertain damages, requiring the intervention of a jury, do not admit of set-off Weigall v. Waters, 6 D. & E. 488. Here, had the defendant sued, it could not have been by indebitatus assumpsit, but by a special option on the case, sounding in tort, and bottomed on negligence, in which the plea would have been not guilty. Hancock v. Entwistle, 3 D. & E. 434. Suppose the case of a claim for demurrage, and the sum not fixed in the charter party,could it be set off before the amount had been ascertained by a verdict ? Clearly not. Then how can the sum not covered be settled, but by a jury, before whom the value of the vessel, and the amount insured could be made to appear ? Besides, the bankrupt was vested with a discretionary power as to the quantum to be insured; it is only ori a gross neglect, or wilful abuse of such power,[5] that the agent becomes liable to his principal, and stands in the place of insurer. Where there has been a tort in law, the equity of courts has allowed a set-off in cases where the ^damages were reducable. to arithmetical certainty, v/ithout the aid of a jury; or, rather, where the jury must have been governed by such a calculation. In trover against a carrier for delivering goods to a wrong person, the sum due for carriage becomes, on this principle,, a matter of set-off. But that reasoning cannot apply in this case. As to whether it could be set off under the. bankrupt law, the only difference between that and our state act is, that in the former the words mutual credit are used. They mean either where a credit is given ; as for goods sold, and payment to be at a future day, debitum in presentí, solvendum in futuro ; or, where a person is intrusted with the property of another, and it turns out in the event that he is a debtor upon the sale of that property. Russell,.
p. 35
arguendo, in Smith v.- Uodson, 4 D. & E. 211; Prescott's case, 1 Atk. 230 ; Ex parte De Seze, ibid. 222 ; French v. Fenn, Montagu on Set-Off, Append. 19. In these the credit is •iven in the very transaction ; the sums certain, or reduca-ble to certainty, by calculation. Here it can be done only by jury intervention. Lord Kenyon, in Hancock v. En• twistle, 3 D. & E. 435, says it is a principle that no debts can be set off under a commission but such as are provable ; for they are controvertible expressions. Cullen’s B. L. 110. If provable, it must have been such a one as could be fo.und by the commissioners, on striking- a balance. Ibid. 192, 197. The defendant’s demand could not have been a debt due before bankruptcy, and ascertainable afterwards ; for, till his negligence or misconduct be found, he cannot be a debtor; because, till the contrary appear, every man is believed to have acted right, and if Dawson acted bona fide, then there is nothing due from him.
Hamilton. In cases where a quantum valebat or a quantum meruit will lie, there may be a set off, and the principle of those will equally apply.[6] How much were the goods-worth, or how much did he deserve, would be the inquiries there; and in this it is how much was insured, and how much not. This is as plainly matter of arithmetic as any other. If not, the plaintiff may recover the whole amount of the contract; and yet the subject matter of the contract have been totally lost and destroyed by the ill conduct of the supercargo. This would be to make us pay wages for inj ury instead of service. There is no decision against the right we claim; it is *not inequitable ; in all cases of equitable interposition, the courts have gone step by step from the strict law, to favor and extend justice. The rule adopted in trover is one instance ; this will, it is hoped, be another, especially as it is confined to cases in which the set-off claimed relates to the
p. 36
matter on which the plaintiff’s action is grounded. It would be hard when we have lost our ship, to make us pay the ull amount of a demand about that very ship, and then uurn us in-under a commission which pays only sixpence in the pound.
Riggs. We say you cannot come under the commission, but have your remedy against the person.

delivered the opinion of the court. We have considered this case with great inclination in favor of the proposed set-off, and with some solicitude to discover adjudged cases which would justify our going this length. It does not seem right that a supercargo who has violated his employer’s instructions, and thereby subjected him to a heavy loss, should recover any moneys expended during such agency, without permitting the latter to deduct or set off the sum which has been lost by his neglect and breach, of orders; and when it is recollected that the plaintiff is a bankrupt, the defendant’s case, if the set-off be refused, is still harder, as he will still have to pay the whole of the present recovery, and come in only for a dividend on his demand against Dawson’s estate, provided it were capable of being liquidated at the time of his bankruptcy. But strong as our leaning is, we cannot find that courts have as yet gone thus far. Where transactions constitute an account betwen parties, composed of mutual receipts and payments, it is contrary to reason as well as the understanding of the parties themselves, to consider any thing but the balance to be the real debt betwixt them. Yet the form's of law render it necessary for each party to sue the other in separate actions. This inconvenience, says a writer on this branch of law, for a long time remained a reproach to English jurisprudence ; several statutes were at length passed to remedy this mischief, the first of which applied to cases of bankruptcy. In this state also we have an act on the same subject: and the legislature of the United States in like manner have provided for cases of this kind.

*Our state law delares, (vol. 1, p. 437,) that, “where there has been mutual credit, or where mutual debts subsisted between the insolvent and any other person, the assignee shall state an account between them, and one debt may be set against the other; and what shall be due on the balance of such account, and'on setting such debts against one another, and no more, shall be claimed or paid on either side respectively.” The bankrupt act of the United States provides for cases of mutual credit, and mutual debts, and declares, in like manner, that after stating an account between the bankrupt and the other person, one debt may be set against the other.

Mutual credit, in common acceptation, is certainly confined to pecuniary demands; and as both acts speak of setting off one debt against the other, it can hardly be doubted that the legislature intended to embrace no other kind of demand. How can an account be stated between these parties? or how can a claim, made for breach of orders in technical or other language, be turned into a debt ? The case in Ex parte Deeze, 1 Atk. 228, cited by the defendant, Was in chancery, and Lord Ilardwicke determined nothing more than that a packer of goods should not be compelled to deliver them to the assignees of the owner who had become a bankrupt, without paying both the cost of packing and pressing, and also a debt due on another account: but even in this case, the chancellor considered the goods in the hands of Deeze, (as Lord Oowper had done on a former occasion,) and the note given, as forming an account current between the parties. He took notice also of Deeze being indebted to Nichols, the bankrupt, for wine about the same sum which the packing of the goods cost, and that those items also constituted an account between them. But here there is nothing which can form an account between the parties; on one side there is a demand for moneys laid out in repairs and supplies for the- defendant’s

p. 37
hip; but on the other, no moneys which he has received, >r with which he has been intrusted, or property which has been, committed to his care, for which he has to account.

The demand is also of a nature too uncertain and contingent to be set off.

In Freeman v. Hyett, 1 Black. 804 , in an action for *money due for a parcel of cloths, the court would not permit the defendant to show by way of set off, that a former parcel of cloths bought of the same plaintiff were burnt in pressing, which had greatly lowered their value ; but put the party to his special action on the case. In Howlett v. Strickland, Cowp. 56. Lord Mansfield and the other judges would not permit unliquidated damages, occasioned by the breach of other covenants to be performed by the plaintiff, to be pleaded by way of set-off. “ These damages,” says his lordship, “ are no debts and Mr. Justice Msforawas clear that “ an unliquidated demand, or uncertain damages, could not be set off” So in Weigall v. Waters, 6 D. & E, 488, to an action of covenant for rent, the defendant was not permitted to set off damages which he had sustained by reason of breaches of certain covenants on the part of the landlord. “ The sum to be recovered,” says Lord Kenyon, “ is uncertain ; it must be assessed by a jury, and there is no pretence to say that those uncertain damages may be set off in the present action.”[1]

In the present case the damages are still more uncertain, and the trial must be complicated to a great degree. Why the defendant did not insure ? or whether he could have insured fully? and what damages have been sustained? would be questions which ought not to be tried in this collateral way. The two cases last cited furnish also an answer to one argument of the defendant’s counsel, which is not without force, that as the set-off related to the same

(a) (a) Therefore where an agreement is entered into for performance of covenants with a penalty, and the covenants are broken,, the penalty cannot- be Sat off. Nedriffe v. Hogan, 2 Burr. 1024.

p. 38
agency on .which the plaintiff’s claim is founded, it ought to be admitted; and yet in the cases just referred to; we find the claim of the defendants arose out of the same instruments on which the actions were brought, but was rejected. The judge, therefore, who tried the cause, was right in overruling the testimony, and the plaintiff must have judgment.[2]

Postea to the plaintiff

[1] [1] The presel t doctrine of recoupment appears to be applicable to this ease.