Duncan v. Lyon — 3 Johns. Ch. 351

Majority

p. 351

Duncan against Lyon.

May 10 and 18.

Headnote

After a verdict at law, the party comes too late with a bill of discovery.

After a trial at law, or a report of referees, a party cannot have the aid of this court, unless he can impeach the justice of the verdict or report, by facts or on grounds of which he could not have availed himself before, or was prevented from doing it, by fraud or accident, or by the act of the opposite party without any negligence or fault on his part.-

A set-off is not Lllowed where the demand is for uncertain damages arising ty,from a breach of covenant.

A Court of Equity follows the samegeneral rules as a court of law, as to set-off.

There must he mutual debts, to authorise a set-off.

Equity has not an exclusive jurisdiction between co-partners in matters of account.

An action of account lies at law, by one partner, against his co-parther; and it seems, that there is no good reason why that action is not, sometimes, resorted to, instead of a bill in equity.

An action of covenant at law, lies by one partner against another, where the articles contain a covenant to account.

THE bill, filed Jlugust 27th, 1817, stated, in substance, that the plaintiff and defendant entered into an agreement under seal, dated the 20th of July, 1809, which was set forth in this bill, and which related to the plaintiff’s furnishing timber, &c. which the defendant was to take to Montreal or Quebec, &c. and to pay the plaintiff half the proceeds, &c. and furnish him with an account thereof, &c. The bill then detailed, at length, the transactions and conduct of the defendant, &c. and stated, that the plaintiff, before and since 1809, was a resident at Schenectady, and had no opportunity from personal in

p. 352

spection, of becoming acquainted with the acts of the tie-fend ant. That the plaintiff is willing to come to a fair account with the defendant, and make all just allowances, but the defendant refuses to render to the plaintiff any detailed accounts of his transactions, and has sued the plaintiff at law, in an action of covenant on the agreement, and alleged breaches, &c. to which the plaintiff pleaded the general issue and gave notice of special matter to be given in evidence, &c. The bill contained a particular interrogatory, that the defendant may discover and set forth a detailed account of all the staves and lumber, &ci and the sales, &c.

That the defendant, under an affidavit, that the suit at law would require the examination of a long account, obtained an order of the Supreme Court for a reference, and had noticed the cause for a hearing, before the referees, on the 38th of August, 1817. “That the plaintiff cannot make out his defence, nor obtain a report of the referees in his favour, from the account of the defendant being fraudulently withheld, and from the facts stated, which are essential to his defence and set offj resting, in a great measure, in the knowledge of the defendant, and therefore, not to be made out but from a full discovery of the defendant.” Prayer, that the defendant may be decreed to come to a fair and just account with the plaintiff, and to pay what shall appear to be due to him, and for an injunction to stay proceedings at law, &c. The injunction was granted the 37th of August.

The answer of the defendant, filed October 31st, 1817, after giving a minute detail of the transactions, which it is unnecessary to notice, stated, that the plaintiff owed on the account, 435 dollars, and 33 cents, over and above the great damages he had sustained by occasion of the refusal of the plaintiff to perform his part of the contract. That the defendant sued the plaintiff at law, in January, 1816, in an action of covenant on the agreement, and assigned breaches in

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his declaration; that the plaintiff pleaded, and gave notice of special matters of defence; that the issue was joined in July, 1816; that the Supreme Court ordered a reference of the cause, and the plaintiff nominated one of the referees; that in October term, 1816, another referee was appointed, in the stead of the one chosen by the plaintiff; and in May term, 1817, other referees were appointed, one of whom was nominated by the plaintiff That on the 7th of August, the cause was regularly noticed for a hearing on the 28th of August, before the referees. That the referees met on that day, and heard the proofs and allegations of the defendant; that no person appeared on the part of the plaintiff; and the referees reported in favour of the defendant for 2,500 dollars, damages, and delivered their report to him; that about three or four hours after the report was delivered, the injunction obtained in this cause was served.

May 18

That on the hearing before the referees, the defendan. gave in evidence a true account of the moneys for which all the timber he had taken from the lands of the plaintiff, was sold, &c.; a true account of the expenses in and about the same, &c.; the original covenant between the parties;, the lease to J. S.; the order of the plaintiff, forbidding the defendant to take timber after the lease; the seisureby J. S. under that order, and prosecutions by him; and the refusal of the persons employed by the defendant to work, after such prohibition, &c.

The defendant, on the 25th of March, 1818, put in a further answer to the plaintiff’s bill.

Cady, for the defendant, now moved that the injunction, heretofore issued in this cause, be dissolved; and if not, that leave be granted to the defendant to enter up judgment on the report mentioned in his answer, or that the plaintiff bring into court and deposit a sum equal to the amount reported in favour of the defendant.

p. 354

He. contended, that the equity of the bill was fully de~ nied by the defendant’s answer; and that the plaintiff ought to have made his defence, if he had any, to the suit at law, before the referees. This court cannot award a rehearing before the referees. If the plaintiff wanted á .discovery to aid him in his defence at law, he ought to have applied sooner; that he had been guilty of gross negligence, and if the referees heard the cause ex parte, it was „ owing to the wilful and inexcusable default of the plaintiff, who had due and regular notice of the time and place of hearing before the referees. That this is not the case for a set-off, as the claim of the defendant was for uncertain and unliquidated damages, arising ex delicto. This court could not assess the damages. There could be no set-off here in such a case, any more than at law; but the principles of set-off were the same at law, as in equity; that no unliquidated damages could be set-off. He. cited, 1 Johns. Ch. Rep. 320 . 432. 465. 2 Johns. Ch. Rep. 228 .552. 1 Madd. Ch. 108. 315. 3 Mk. 223. 1 'Caines’ Rep. 147. 3 Vesey, 248. 1 Vernon, 176. Neioland’s Ch.Pr. 100.

J. V. Henry, contra,

contended, that this was a case of partnership which repelled every objection to set-off The injunction issued before the report of the referees; and the hearing before them was altogether ex parte. That in equity a set-off will be allowed, when it would not be permitted at law. That this is a case of mutual claims, under a partnership agreement, arising from the acts of the parties relative to the subject matter of the partnership. It is a case of partnership account, and the breaches of the articles of partnership must be ascertained on a reference to a master, or by an issue. The uncertainty of the damages on the breaches of the partnership contract, is no objection to, the jurisdiction of the court. Partnership dealings are the proper subjects of equitable interference, and a court of law will not direct an account to be taken between partners. The jurisdic

p. 355

r.on of this court attached on the filing of the bill- Nothing but gross negligence draws after it a loss, in equity. He cited Montague on Set-off, Append. 68. and notes. 1 Mad. Ch. 75. 3 Bos. & Pull. 289. Watson on Partner. 60, 7 East, 353. 356. 1 Johns. Ch. Rep. 65 . 103.

After a vcrdi(:i ofa^Y’tooPutc with a bill o'; discovery.

The reasons which have been suggested, or which have occurred to me, for retaining the injunction, may be arranged under the following heads:

1. That the plaintiff did not make his defence before the referees,.and that the recovery is unjust.

3. That his demands against the defendant ought to be liquidated and admitted, by way of set-off against that recovery. ■

3. That the demands of the parties all arise out of partnership articles, and ought to be heard together, and adjusted in this court.

1. The bill was not strictly a bill of discovery, for it had a prayer for relief, and yet the necessity of a discovery would seem to have been the cause and chief object of the bill. It stated, that the plaintiff had been sued at law, and that issue had been joined, and a reference awarded, and it then added, that he “ could not make out his defence, nor obtain a report of the referees in his favour, from the account of the defendant having been fraudulently withheld, and from- the facts essential to the defence and set-off resting, in a great measure, in the knowledge of the defendant, and, therefore, not to be made out but from a full discovery of the defendant.” This is the language of a bill of discovery; and I take it for granted, that this plain and avowed purpose was the ground of the allowance of the injunction. But it appeared afterwards, that the bill was filed too late for such an object, provided the discovery was intended to have been used before the referees.

.After a verdict at law, a party comes too late with a bill of discovery. (Barbone v. Brent, 1 Vern. 176.)

p. 356

After a trial at refcreeafa party afdoftbiscourt! impeach*® th! verdict °L fe- or 0¿ ground! of no^ haveavaüed hitoself, or was prevented „ .-dor ing.it, by fraud or accident, Or the act of the opposite party, without any ne'gligence or fault bn bis-yart,

There is nó reason assigned why the bill was hot presented before the 2-7th of August, being only the day before the one for Which notice of the hearing at the reference had been given. It ñtiw appe'ars, that the referees met on the day appointed, and heard the Cánse iti the absence of the plaintiff; and that they had made their report, and delivered it to the defendant, some hours before notice Of the injunction whs sérvéd. The Causé (as It appears, frorii the answer to that part of the bill relative to Sé suit át law) had been at issue abófe a year, and the Supreme Court had, at three different terms, been applied to, in respéct to the appointment of referees, and in tWo instances, One of the referees hadbeén nominated by,- or on behalf of the present plaintiff. The notice of the reference had alSO been duly gifen, a's early as tlie 7th Of ¡August, and yet üó bill wáS filé cl, Or application for an injunction made, until the 27th of August. Here was extremé delay On the part Of the plaintiff, in the exhibition Of his bill, whether Se object of the bill Was discovery in- aid of the defence at la#, or Whether it wás for final rélief here. If 'a party will riot apply iri dh'e season to this court, and áppéárs to have had sufficient time, and Sufficient information to éháble him to do it, the casé stands precisely On the same ground, as if he had applied s/tor the trial Or reference at law.

It is á settled principle, that a páfty will hot be aided after a trial at law, Unless he cáñ impeach the justice Of the verdict Or report, by facts, Or on grounds of Which he could not have availed himself, or was prevented from d°ing it, by fraud or accident, Or the act of the opposite Pariy, urimixed with negligence 'or fault oh his part. This Point bas been 80 often ruled, that it cannot he héc'essáry' 0r exPe(bent to discuss it again; ahd it is One by Which I

p. 357

mean to continue to be governed. In some of the cases in this court, referred to by the defendant’s counsel, it was shown to be the rule of the English Chancery, and it appears also to have been frequently noticed and recognized in the Courts of Equity in this country. (Marshall, Ch. J. in Marine Insurance Company v. Hodgson, 7 Cranch, 336 . Chancellor Desaussure, in Winthrop and others v. Lane and others, 3 Desaussure’s Rep. 324, 325. Noland v. Cromwell, 4 Munf. 155 .) If the principle was to be materially relaxed, the departure from it, as I apprehend, would soon be perceived and felt to be a great public grievance, by encouraging negligence, protracting litigation, exhausting parties, and drawing within the cognizance of this court the general review of trials at law.

There is nothing before me impeaching the justice of the report of the referees. If the suit there was in a case of which a court oflaw had jurisdiction, (and which point I shall presently consider,) I do not know of any ground entitling the plaintiff to the continuance of his injunction. If there be any sufficient cause for a rehearing, or for setting aside the report, he will have an opportunity of applying to the Supreme Court, which has competent powers for the purpose, as-the report has not as yet been made to that court, and confirmed. I do not think I ought to assume the control of a matter of relief which has previously attached, and fitly belongs to that jurisdiction.

2. The matters of account stated in the bill were not proper-subjects of set-off in the action of covenant; and if-the discovery had been obtained in season, I presume it would not have aided the defence. The breaches assigned in the action at law were, that the plaintiff had refused to perform his part of the covenant, in furnishing timber and provisions, &c. and the demand at law was in the nature of redress for a wrong or injury committed, and not for a debt due. It rested entirely in uncertain and

p. 358

unliquidated damages. There cannot be a set-off even of a debt against the demand .of the plaintiff, unless that deman¿ be of such a .nature .that it could be set-off by a debt, if it existed in him. There must be mutual debts. This is the settled doctrine in the courts of law. (Colson v. Welsh, 1 Esp. N. P. Rep. 378.) Lord Mansfield, said Howlet v. Strickland, (Cowp. Rep. 56.) that not only the statute, but the reason of the thing, related to mutual debts only, and that unliquidated or uncertain damages, arising from a breach of covenants, were no debts. The same doctrine was held in Weigall v. Waters, (6 Term. Rep.) and in Gordon v. Bowne, ( 2 Johns. Rep. 150 .)

not' seíi°ff where the decertain damafrom a breacf of covenant.

BquityC°ní °f the same gene-court of as 0 set off,

same rule prevails, also, in Courts of Equity, The practice may, perhaps, be more liberal in respect to mutual credits, but there is no case in which a set-off has been allowed, where the demand was for uncertain damages arising on a breach' of covenant. The courts of law and equity follow the same general doctrines on the subject of set-off. This appears from the opinion of Sir Thomas Clarke, in Whitaker v. Rush. (Amb. 407.) The cases of Ex parte Stephens, and Ex parte Hanson, (14 Ves. 24. 12 Ves. 346.) only established that under certain circumstances, there may be a set-off, in equity, when there can be none at law; and as late as the case of Addis v. Knight, (2 Merivale, 121.) it was observed by the Master of the Rolls, that in equity, as well as at law, a joint eould not be' set-off against a separate demand. Until the statute of 2 Geo. II. Courts of Equity followed the rule of law, and would not allow mutual, unconnected debts to be set off “ If they had done otherwise,” said Lord Mansfield, in Green v. Farmer, (2 Burr. 1214.) “they would have stopped the course of law, in all cases where there was a mutual demand.” It was the observation of Lord Hardwicke, (1 Atk. 237.) that he did not know that a Court of Equity had gone further than the courts of law, in cases of a set-off

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There must ® “"thorize6 a set off

The doctrine of set-off was borrowed from the doctrine of compensation in the civil law. Sir Thomas Clarke shows the analogy, in many respects, on this point, between the two systems; and the general rules in the allowance of compensation or set-off by the civil law, as well as by the law of those countries in which that system is followed, are the same as in the English law. To authorzie a set-off, the debts must be between the parties^ in their own right, and must be of the same kind or quality, and be clearly ascertained or liquidated. They must be certain and determinate debts. (Dig. 16. 2. de Compensationibus, Code 4. 31. 14. and Code 5. 21. 1. Inst. vol. 2. 525. 527. Pothier, Trait, des Oblig. No. 587. to 605. Ferriere sur Inst. tom. 6. 110. 113.)

Courts of Equity, before the statute of Geo. II. (and when courts of law had no power on the subject,) have enforced a set-off, after judgment of law, where it clearly appeared to have been the intent of the parties, that the one demand should be set off against the other. Lord Macclesfield, in a strong case of this kind, (Hawkins v. Freeman, 2 Eq. Cas. Abr. 10. pl. 10. 8 Viner, 560. pl. 26.) interfered with hesitation, and put his interference on the ground of the manifest intent

I observed that the practice might be more liberal in cases of mutual credit, and, for the more accurate understanding of that observation, I would refer to the case Ex parte Deeze, (1 Atk. 228.) in which it was held, by Lord Hardwicke, that if a man had a debt due from a bankrupt, and had, at the same time, goods of the bankrupt in his hands, which could not be got from him without the assistance of law or equity, the assignees ought not to take them from him, without satisfying his whole debt. Mutual credit was not to be confined to pecuniary demands, but it reached to a case like this, of goods in the hands of the creditor. This case was cited by Ch. J. Gibbs, in Olive v. Smith, (5 Taunton, 56.) as a just decision; and he observed, that this

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Base, and the doctrine in it, had always been supported. Where one party being indebted to another,-intrusts that other with goods, it was a case of mutual credit; and the statute of 30 !Geo. II. c. 5. 'has been carried beyond money transactions, and extended ato cases of mutual ‘trust. (4 Term Rep. 211.) (a)

Equity has sive a” jurldic" co°-parZnerTe<in ?ountrs °f

-If the recovery at law is to be taken, -under this -present motion, asa just recovery, then it would be unreasonable to delay the defendant until-the accounts between the-parties can'be taken and stated, and the balance struck in this court. ’One judgment -may be set tiff against another; but here is a demand on one- side raised to a débt 'certain by a legál assessment, and an uncertain-claim on the other, depending on a settlement tif accounts. 'Those accounts Were not the subject of set-off; and (there is no case to warrant me to stay execution on the-one-demand,-untiHhe Other is settled, and in a condition-lo be set-off. -It may be -a long-time, béfore the accounts betweentheseparties canhe stated, and the balance struck, and until that be-done, it cannot be known even on which sid e the balance will fall.

The only colourable ground against the motion, -that the demands on each side arise out of partnership articles ; and that the cognizance tif the Whole case, (belongs properly, if not-exclusively,'-to this court.

But, 1 do not find, that-even matters tif account between co-partners, bélongexélusivély to (this -court, though .in practice, they may -be confined here. Courts of-law and equity have concurrent jurisdiction in matters of account; it is-conceded,‘thát an action: of-account-at law may

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be brought by one partner against another. (Co. Litt. 171. a. Montague on Partnerships, vol. 1. 45.) In that action, the auditors have all the requisite powers, for they can compel the parties to account, and to be examined under oath; and I have not been able to discern any good reason why that action has so totally fallen into disuse,^[2] The practice, also, under the statute, of appointing referees in matters of account, is a new power given to our courts law, and it would seem to render the cognizance of causes much more suitable for a court of law here, than in England. This court has no better mode of settling accounts than by referees, and it is, in many cases, under the necessity of appointing a merchant or other skilful accountant, to assist the Master in taking and stating the accounts. Lord Hardwicke once said, (2 Atk. 144.) that the House of Lords frequently made such references in matters, of account, and he thought it the most proper method in a case then before him. In Chapman v. Koops, (3 Bos. & Pull. 289.) the undivided interest, of one partner was taken On execution, and the C. B. refused to make an order of reference to their prothonotary to take the partnership account, and the judges considered that such a step would be assuming equity jurisdiction In that case, and in such a collateral way, the measure proposed would have been changing the character' of the court; and, doubtless, it had not the jurisdiction in the mode asked for. But if such a point had directly arisen in the action of account, no such objection could have been

An action of brought at^law 1^,;°°® another* of^^tiTbc a|0' faction is ®pt resorted to, instead of a bill in equity.,

(a) (a) Vide Godfrey v. Saunders, (3 Wils. 73—117.) in which Ch. 3. Wilmot said, he was glad to see this action of account revived in that court. Some of the objections to this old common-law remedy were obviated by the stat. 4 Am. ch.16. s. 27. which allowed it between joint tenants or tenants in common, and against their executors and administrators! and the auditors are empowered to administer an oath, and examine the parties on oath, touching the matters in question. (1 Selw. N. P. 1. 1 Bac. Air. Accompt.) The same provisions are to be found in our statute. (Sess. 11. ch. 4. 1 N. R. L. 90.)

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made, and auditors would have been appointed; I believe, that the action of assumpsit has never been carried further, between partners,- than to the case of an account stated, and a promise by one of them to pay to the other the balance struck. (Foster v. Allanson, 2 Term Rep. 479. Moravia v. Levy, 2 Term Rep. 483. note.) Whether the action of assumpsit may not be further extended, (for it is a veiY liberal and remedial action,) so as to reach, and carry into effect the general powers of a court of-law, of settling account, by referees, it is not for me to determine. It is sufficient, for the present purpose, that the defendant had a suitable action at law provided for his case, and that the action of covenant mentioned in the pleadings was xvell brought; and the cases I have referred to, in the Term Reports, admit, that if the parties enter into articles of copartnership xvithin a covenant to account atstated times, an action at laxv will lie upon the covenant. We meet • . also with the same doctrine, applied even to an action of assumpsit, in Venning v. Leckie, (13 East, 7.) That xvas an action of assumpsit on g-promise in -writing to take Part °f certain goods, bought by the plaintiff on joint account, and for xvhich they xvere to be equally concerned in the profit-and loss. It was objected; that this xvas a partnership, and that-no action lay by one partner against the other; but the court said, that- there were many deed's of copartnership in xvhich the partners covenanted each to advance a certain sum, and that an action at laxv xvould lie to enforce the covenant, though there were accounts between them afterxvards, xvhich would require unraxrelling in equity.

An- action of covenant lies at law by one partner aginst anotherf“where ^ii’crct/a‘covcí nant to

Andan assump cti will also he, on a promise in partner,’totakeof Íought,inwhich cqualiyercon-íe fit and*loss. *ir°"

These cases approach, in principle, to the one under-discussion ; and though the plaintiff may be entitled to-go on, and have an account taken in this court, yet I see nothing to justity me in interfering in the mean time with the defendant’s action at law. The motion to dissolve the injunction must be granted.

Motion granted.

Footnotes

(a) (a) Tbese are hatórup teases; arising under the statute.ofbankruptcy, which speaks of mutual -credits. The statute, of. 2 Geo. II, ch. 22. s. 13., whiphfir/stellowed set-offs at law, speaks only of mutual debts; and the language of our.act, previous to the late revision; was, “ that if two or more persons dealing together be indebted -to each other;”!&c.i (L.fN. W,- .1 K. and R. :347.) iln the.rovised act (sess. 3(1. ch. 56, s. 1-, 1N. R.L, 515) the words.are, “ that iftwo. or tpore persons dealing together be indebted to each Other, or have demands arising mtreontract or credit against each other."