Cumings v. Morris — 16 N.Y. Super. Ct. 560

Majority

p. 560

Abijah P. Cumings, Plaintiff and Respondent, v. Gouverneur Morris, Appellant.

Headnote

1. It is essential to a counter-claim, as defined by the Code, that it be a cause of action in favor of the defendant, and against the plaintiff in the action.

2. In an action by the indorsee of a note against the maker, (where the note by its terms, is payable “ on demand after date,” and where it was transferred by the payee over two years after its date;) the maker cannot set off a demand against the payee growing out of a partnership between such maker, the payee, and a third person; when there has been no accounting between such partners, nor any balance agreed upon, as due from the payee to the maker, prior to such transfer of the note.

3. Such a demand, although an accounting between the partners might establish its existence, is, until the accounting has been had, unliquidated, .and nob capable of being ascertained by “ calculation,” within the meaning of that word, as, used in sub. 3, of § 32, of 2 B; S., 354. Such a demand cannot be set off at law.

4. Neither could such a demand be enforced as a set-off against the notes, in " a suit brought for that purpose against the payee at about the time of and before its transfer, without alleging and proving, inter, aMa, that the payee was then insolvent; or some other fact which would prevent the maker from collecting from the payee any sum that, upon such, accounting, it might be adjudged the payee owed and should, pay to the maker.

5. The indorsee and holder of a note, (who brings a suit upon it against the maker,) is “the real party, in interest” within the meaning of § 111 of the Co'de; if he - has purchased it absolutely and in good faith; although by the terms of his purchase he is not to pay the contract price until the note is collected. . . ■'

6. A plaintiff who has an absolute right to.the money due on a note, and to receive and appropriate it, to his own use, when recovered, is the real party in interest; although the payee of the note may be interested' in the event of the suit, in such wise, that if the note be not collected he will not receive anything as its price, or by. reason of his indorsement and sale of it.

7. Exceptions taken on the trial of a cause, and not called to. the attention of the Court on the argument of an appeal from the judgment, taken by the party excepting, nor alluded to in the points submitted by him on such argument, will be deemed to have been abandoned by him.

(Before Boswobth, Oh. J., and Hoffman," J.)

Heard, November 4th;

decided, December 4th, 1858.

This is an appeal by the defendant from a judgment entered against him, March 27, 1858, on the .report of Hamilton W.

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Robinson, Esq., as referee. The" action was commenced about the 7th of June, 1856, against the defendant as the maker of two several promissory notes, which with the indorsements thereon, read as follows, viz.:

“$1,000. New" York, October 25th, 1852.

“ On demand of one day after date, I promise to pay to the order of James B. Sargent, ten hundred dollars, with interest at the rate of 7 per cent per annum, value received.

“ GrOUYERNEUR MORRIS,

“qf Morrisania.”

(Indorsed)

“ Pay Samuel J. Prime, or order.—Jas. B. Sargent.”

“ Pay to A. P. Cumings, or order.—Samuel J. Prime.”

“ $2,119tW. New York, November 13th, 1852.

“ On demand after date, I promise to pay to the order of James B. Sargent twenty-one hundred and nineteen dollars, with interest at the rate of 7 per cent per annum, value received.

“G-ouverneur Morris,

“ of Morrisania.”

“Pay to A. P. Cumings, or order.—Samuel J, Prime.”

The complaint is in the common form of a complaint by the second indorsee, against the maker of a note, and counts upon each note separately.

The answer does not .deny the making or indorsing of the notes, but avers, that on the 18th of September, 1853, this defendant, Joseph W. Allen and said James B. Sargent “ were contractors and copartners in the business” of building and equipping the Flushing railroad. That Allen and Sargent, had each one-fourth, and this defendant one-half interest in said business ; that “ this defendant was, from the commencement of the work, under the same, (the contract for building said road) largely and constantly in advance to the said copartnership for

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money advanced them, and laid out and expended in and about the said work, and for railroad iron and other materials furnished therefor.”

That the notes were not indorsed by Sargent to Prime, or by Prime to the plaintiff, until more than two years after that date ; that they were then “ open and subject to all and any equitable or legal offset which the said defendant herein might have against the said James B. Sargent by reason of their age;” that Prime and the plaintiff were, and that each of them was bound to take notice, and knew at the time of the transfer t.o Prime and to the plaintiff, that there was at that time an open, unsettled partnership account between the said Morrris and Sargent, on which the said Sargent was then indebted to the said Morris, defendant herein, in certain large sums of money, much more than the whole amount of both of said notes, with all interest .and charges thereon.”

It also avers, that the notes were indorsed and delivered by Sargent to Prime, “ with intent to avoid the payment by him of so much of his just indebtedness at the time to the defendant herein, and to avoid the set-off which he knew the said Morris had against the whole amount of the said notes, and the interest and charges thereon.”

That Prime, in receiving the notes from Sargent, and the plaintiff in receiving them from Prime, were acting in collusion with Sargent and seeking to assist him “ in avoiding the payment of so much of his just indebtedness to this defendant, and to avoid the set-off, which this defendant had against the whole amount of said notes;” that neither Prime nor the plaintiff paid more than a nominal consideration for the notes, and that said “ Sargent is stiff the true party interested in said notes, and that this action is prosecuted for his benefit, and in fraud of the rights of this defendant to his set-off against said notes.”

It also avers, that since the 1st of January, 1854, Sargent has always been indebted to Morris “in a sum of not less than the whole amount of both of said notes, with all interest and charges thereon, by reason of money advanced the said copartnership, and laid out and expended in and about the said work on the Flushing railroad, and for railroad iron and other materials furnished therefor by this defendant to and for the said copart

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nership, and for their benefit. Which indebtedness the said Sargent has heretofore refused to pay off and settle; and an action was commenced before the commencement of this action and is now pending in Chancery before the Chancellor of the State of New Jersey, in which this defendant is complainant, and the said Allen and Sargent defendants, to 'compel them to render an account, with this defendant, in and about the affairs of said copartnership, and to pay over to him the amount which shall be found due on such accounting, in which action both of the said defendants have appeared.”

At the trial, the referee decided, “ that the matters stated in the answer by way of set-off or counter-claim, did not constitute a defense to the plaintiff’s claim and that he would hear no evidence on them, but that there was an allegation in the answer that the plaintiff was not the real party in interest, and that upon this point he would hear the defendant’s evidence. To the former part of this decision the defendant excepted.”

The defendant called as witnesses in his behalf; the plaintiff and said Prime, and no others. Mr. Prime testified that he and Sargent married sisters; that -the latter died in March, 1857. That he received the notes sued on, from Sargent about September, 1855, a few days before he parted with them to the plaintiff. That he received the notes from Sargent under the following circumstances: “Mr. Sargent was in delicate health, and I was anxious that his affairs should be arranged with reference to the interests of his family, in case of his sudden removal by death; I stated to him my anxiety on that head; that his business was railroad business, exposing his life to particular hazard; I asked him to give me any properly that he might have, that I might make it available to his family in case of his death; not long after that conversation he gave me these notes; I paid him nothing for these notes; they were given to me to hold and make such use of for his family as I might please, entirely subject to my control; Mr. Sargent gave no special reason for transferring to me these notes in preference to other property; there was no writing in trust in reference to them.”

“ Q. What cause had you for desiring to transfer these notes to Mr. Cumings ?

“A. Because Mr. Cumings was residing in Westchester

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county in the neighborhood of Mr. Morris, and ás I was a clergyman and not much accustomed to financial affairs, I preferred to pass the notes to Mr. Cumings.” . . .

“ I received from Mr. Cumings for said notes his promise to give me Cemetery of the Evergreens stock; it was worth, I understood, seventy-five per cent; I was to receive a sufficient amount to satisfy the notes; it has never been transferred to me on the books of the company or otherwise; I have not this promise of Mr. Cumings in writing; it never was put in writing; I have no control over the stock except Mr. Cumings’ word for it; he repeatedly offered it to me, it is solely through my neglect, I have not received it.” . . „ “I presume I did state to him the manner in which I became possessed of these notes; but I cannot state this positively; I can’t say that I did; I indorsed the notes over to Mr. Cumings.” . . “My agreement with Mr. Cumings was that he was i,o give me Cemetery of the Evergreens stock, or an equivalent; I did not agree with Cumings they should bean equivalent if returned.” . . “Mr. Sargent never mentioned to me that he had any controversy with Mr. Morris, or that Morris had any claim against him; I had no notice that there was any claim, offset or defense to the notes.”

Cumings testified, that the notes were to be paid for in Cemetery of the Evergreens bonds, at 75 per cent of their par value; that they were worth that sum; “Mr. Prime was to guarantee the notes to me.” . . “ In case the notes should not be collected, the bonds will remain with and belong to me; I shall not part with them.”

The defendant offered to prove

“1st. That James B. Sargent, the payee of the notes in question, was from the eighteenth day of April, 1853, to February -21st, 1856, a co-contractac with Couverneur Morris, defendant herein, and a certain Joseph W. Allen, in building, constructing and equipping the Flushing Railroad in Queens county, New York, in which said contract, and in carrying on the business’ thereof, the defendant was from the commencement Of the work under the same, to the finishing and delivery thereof, largely and constantly in advance to his said co-contractors for money advanced them and laid out and expended in and about the said

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work, and for railroad iron and other materials furnished therefor, at no time less than thirteen thousand dollars, and generally more than fifty thousand dollars, of which sum said Sargent was indebted to said Morris, on the first day of August, 1855, not less than six thousand five hundred and forty-three dollars, and has continued so indebted ever since.

“2d. That the contract was finished and the work delivered to the Flushing Eailroad Company, and accepted by them in May, 1855; and that the said James B. Sargent was on that day, and has ever since been, indebted to the said G-ouverneur Morris upon the said contract, and upon account stated by said Morris, in the sum of six thousand five hundred and forty-three dollars.

“3d. That the said James B. Sargent is dead, and his estate is insolvent and insufficient to pay the said sum of six thousand five hundred and forty-three dollars, by the sum of more than four thousand five hundred dollars.

“The referee stated that he would allow the defendant to give evidence of such alleged facts, if the defendant would accompany the same, with proof to show an account stated between Morris and Sargent.

“ The defendant not offering such proof of account stated, the referee refused to receive evidence of the facts so offered to be proved by the defendant, and excluded the same. To which ruling and refusal to receive evidence, the defendant then and there duly excepted.”

After the defendant’s counsel had summed up, the referee allowed the plaintiff to prove, by William G. Prime that “the. bonds of the cemetery are the only stock or evidence of the stock that exists,” and that “the bonds are transferable without consent of the company, by assignment or other legal way.”

The introduction of this evidence was objected and excepted to “on the ground that the case on both sides having been closed, and having been summed up by the defendant, the plaintiff had no right to open the case, and supply such testimony as he might find necessary to fill up the gaps in his proof, after the evidence already in had been commented on by defendant’s counsel.”

The referee in his report states, as follows; “I do find as matters of fact:

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“ That James B. Sargent, the payee of the promissory notes in the complaint mentioned, transferred said notes by indorsement thereof to Samuel J. Prime, and delivered the same to said Prime to hold and make such use thereof for the benefit of the family of said Sargent, as he, the said Prime, might in his discretion choose to make. That in a few days after said notes were so transferred to said Prime, to wit, on the 29th day of September, 1855, he transferred the said notes to the plaintiff for a valuable consideration agreed to be given or paid therefor by the plaintiff, to wit, the plaintiff agreed to give said Prime therefor, when the said notes were paid, the amount thereof in the bonds of ‘ The Evergreens Cemetery Company,’ estimating such bonds at seventy-five cents on the dollar.

“ That it is not shown or proved on the part of the defendant that such transfer to said Prime was made under any collusion with said Sargent, or with any purpose or intent to assist him in avoiding the payment of any such indebtedness to the defendant, or any set-off which the defendant had as against said notes in the hands of said Sargent. That said James B. Sargent was not at the time of the answer in this cause the party interested in said notes, and - this action is not prosecuted'for his benefit or in fraud of any rights of the defendant, but that the plaintiff was and is the holder and owner of said promissory notes as is alleged in the complaint.

“ And I do further find, that the affairs of the copartnership between said defendant James B. Sargent and Joseph W. Allen, in said answer mentioned, were, at the time of joining issue in this action, open and unsettled, and no adjustment, settlement or other statement of any indebtedness of 'any of said copartners to said copartnership, or to one another on account thereof, had ever been made.

“ And I do further find as matter of law that the defendant is not entitled to any equitable set-off against said notes for or in respect to any rights or claims which he might have had against 'Sargent on account of said copartnership matters.

“ That the plaintiff is entitled to recover against the defendant the amount of said two promissory notes in the complaint mentioned, together with eleven hundred and sixty-two dollars and eighty-four cents, interest thereon,” amounting in all to $4,286.53;

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and that judgment ought to be entered in favor of the plaintiff against the defendant for that amount, besides costs.

The defendant excepted to the referee’s conclusion of law, and also, specially, to several of his conclusions of fact.

Judgment having been entered on the report, the defendant appealed from it to the General Term.

William Rutherford & Robert 0. Embree, for appellant.

I. The referee erred in deciding “that the matters stated in the answer by way of set-off or counter-claim did not constitute a defense to the plaintiff’s claim, and that he would hear no evidence on them.”

1. Because the notes sued upon being drawn payable on demand, and transferred by the payee three years after date; the plaintiff holds them subject to all the equities between the defendant and James B. Sargent. (Furman v. Haskin, 2 Caines, 369; Loomis v. Pulver, 9 J. R., 244; Losee v. Dunkin, 7 J. R., 70; Ferreira v. Depew, 4 Abb., 131 ; 13 How. Pr. R., 84; 12 id., 310; 2 Duer, 640 ; Code, § 112; 8 How. Pr. R., 335; Vassear v. Livingston, 3 Kern., 252; Miller v. Losee, 9 How. Pr. R., 357; Beardsley v. Stover, 7 How. Pr. R., 294; Kneedler v. Sternbergh, 10 How. Pr. R., 70.)

2. To make the answer a perfect defense to the notes sued on, it is not necessary that the indebtedness of the plaintiff’s assignor to the defendant should be a liquidated demand, and it matters not in equity whether such demand be liquidated or unliquidated; arises under a partnership or any other contract, if the indebtedness by such assignor is proved. ( Dillaye v. Niles, 4 Abb., 253 ; Ferreira v. Depew, 4 Abb., 131 ; Wolf v. H-, 13 How., 84 ; Davidson v. Remington, 12 How., 310 ; Gleason v. Moen, 2 Duer, 640 ; § 112 of Code; Spencer v. Babcock, 22 Barb., 335 ; Gage v. Angell, 8 How., 335 , a parallel case to this so far as it goes.)

H. The referee erred in excluding the testimony offered by defendant; to prove the indebtedness of Sargent to Morris, the death of Sargent, and that his estate was insolvent.

For the reasons stated in the first point above, and because insolvency of the assignor, rendering resort to him by the defend

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ant unavailing and worthless, raises a peculiar equity in favor of defendant on account of the necessity of the case, and the defendant would be otherwise without redress. {Lindsay v. Jac/cson, 2 Paige, 581; Gay and others v. Gay, 10 Paige, 370; Chance v. Isaacs and others, 5 Paige, 594. Ives v. Miller, 19 Barb. S. C. E., 202, overrules Gage v. Angelí, 8 How., 335 , but states when a court of equity will set off)

III. The referee erred in finding “that it is not shown or proved on the part of the defendant that such transfer to said Prime,” [the transfer of the notes in question by Sargent to Prime,] “was made under any collusion with said Sargent, or with any purpose or intent to assist him in avoiding the payment of any just indebtedness to the defendant, or any set-off which the defendant had against said notes in the hands of said Sargent.” [He does not find at, all, on the allegation of the answer, that there was collusion for that purpose between the plaintiff and Prime.]

Because the finding is against the evidence before the referee. The necessary inference from the facts, proved, standing unexplained, is, that there was such collusion to avoid the payment of a just indebtedness from Sargent to Morris, not only between Sargent and Prime, but between both together and the plaintiff herein.

IV. The referee -erred in finding “that James B. Sargent Was not at the time of the answer in this cause, the party interested in said notes, and this action : s not prosecuted for his benefit, or in fraud of any rights of the defendant.”

And also in finding “ that the plaintiff was and is the holder and owner of said promissory notes as is alleged in the complaint.” For the reasons abo ve stated.

And because the said James B. Sargent having been shown to have been insolvent at the time of the transfer of said notes to Prime and Cumings; and. defendant offering to show on the trial that Sargent’s estate was then insolvent. The proof offered to be made by the defendant that Sargent was indebted to him before the trsmsfer of said notes, and down to the time of trial, in an amount greater than the amount of said notes, was competent to show a good and equitable set-off and defense to said notes; and especially when coupled with the

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fact that no consideration whatever was paid, or agreed to be paid for said notes, either by Prime or Oumings, and that by failure of plaintiff to collect these notes, neither of them lose anything.

The equitable presumption of ownership at least is that the notes really belonged to Sargent in his lifetime, and to his administratrix on the trial of this action, and all equities are open against them. (§ 111, of Code of Procedure.)

Every action must be prosecuted in the name of the real party in interest. (Farrington v. Frankfort Bank, 24 Barb. S. C. R., 561; Killmore v. Culver, 24 Barb. S. C. R., 656; McBride v. Farmers’ Bank of Salem, 25 Barb. S. C. R., 657; McKnight v. Hunt, 3 Duer, 615 ; James v. Chalmers, 2 Seld., 209.

Y. The referee erred in finding, as matter of law, “ That the defendant is not entitled to any -equitable set-off against said notes, for or in respect to any rights or claims on account of said copartnership matters.”

Because the insolvency of Sargent is sufficient to open all equities, even if they were not open for the other reasons above set forth.

Dan. Marvin & Wm. G. Prime, for respondent.

I. The plaintiff, after reading the notes, and computing the amount due, was entitled to move for judgment upon the pleadings. (New Rules of the Superior Court, April 11th, 1857, Code, § 247; Seeley v. Engell, 17 Barb., 530 ; Flammer v. Kline, 9 Practice, 216; Catlin v. Gunter, 1 Duer, 265 .)

II. The referee did not err, in point of law, in excluding the evidence offered on the part of the defendant to establish payment, a set-off or a counter-claim.

The averments of the answer amount to this: that there was a copartnership between the defendant and Sargent and Allen; that defendant had made advances, and the firm owed him.

It is not alleged that the firm had dissolved, nor that a settlement had been had, or the accounts or the balance stated.

The offer -of proof, was to prove that from April 18th, 1853, to February 21st, 1856, the defendant was a co-contractor with Sargent and Allen in building and equipping the Flushing

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railroad, and was, at all times, largely in advance to his co-contractors, at no time less than $13,000, and generally more than $50,000, of which sum Sargent was indebted to Morris, on August 1st, 1855, not less than $6,543, and has continued so indebted ever since; that the contract was finished in May, 1855; that Sargent is dead, and his estate insolvent.

(The referee offered to receive such evidence, if defendant would prove an account stated between Morris and Sargent.)

This presents the question, whether as between the parties to the present action an unliquidated partnership account could be set up by way of payment, set-off or counter-claim against the notes in suit?

HI 1. The proposed defense was not available as a counterclaim under the Code. A counter-claim is defined to be

a. A claim in favor of the defendant on the record.

b. A claim against the plaintiff on the record. (Code, sec. 150.)

The claim here is not against the plaintiff, but against Sargent, and that is not allowed by the Code. (Dillaye v. Niles, 4 Abb. Prac., 253 ; Ferriera v. Depew, id., 131; Wolf C. E. H., 13 How. Prac., 84; Ives v. Miller, 19 Barb., 197 ; Spencer v. Babcock, 22 id., 326 ; Vassear v. Livingston, 3 Kern., 248; Gleason v. Moen, 2 Duer R., 639.)

2. The facts set out in the answer or offered in proof, do not establish a set-off to the notes.

a. In an action on a promissory note, a set-off must have existed before the transfer and must have then belonged to the defendant. (Code,"sec. 112; 2 R. S., 2ed., 354, sec. 32, subd. 9.)

b. It must have been a demand for real estate sold, or for personal property sold, or for money paid; or services done, or else it must have been liquidated, or be capable of being ascertained by calculation.

c. It must have been a demand against the former holder or payee, and not against him and another jointly. (Beebe v. Bull, 12 Wend., 504 ; Plets v. Johnson, 3 Hill, 112 ; Ladue v. Hart, 4 Wend, 583 ; Belknap v. McIntire, 2 Abb., 266 .)

d. The present demand is not for real estate nor personal property sold, nor for money paid, nor services done. JSTor is it liquidated, nor can the amount be ascertained by calculation.

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It is not pretended that any settlement of the partnership affairs has ever taken place.

IY. The unliquidated partnership accounts, where there has been no settlement between the partners, and especially where, as in the present case, the partnership was between three persons, only one of whom is a party to the suit, cannot be made a defense in any way to the present action.

1. There is no case made out for a contribution.

2. There is no demand for which an action would lie against Sargent.

3. The defendant’s sole remedy, and which he has pursued, is a bill for an account against his copartners.

4. Until the affairs of the firm are wound up and settled, what one copartner may owe is not a debt due to one copartner, but to the firm; nor is the indebtedness of the firm to one of the members a debt due to him, from the other partners individually. (Ives v. Miller, 19 Barb. R, 1855, Gen. Term, 4 Dist., Hand, Cady, Allen and James, Justices, and cases cited.)

5. In the absence of all statements to the contrary, it is to be presumed that the copartners were paid for their work, especially as the statement in the offer of proof was, that the railroad company accepted the work, and before there can be any debt established, the amount received must be accounted for and applied.

Y. The exceptions of the defendant to the admission of the evidence taken after the defendant had commenced summing up, are not well taken. No objection to this testimony was taken on the ground of relevancy, and its admission by the referee was an exercise of discretion which was right, and proper in itself.

YI. The exceptions taken to the referee’s report, as to the ownership of the notes, and as to collusion, are not well taken.

The evidence makes out a good title to the notes, and it does not show ownership of the notes in Sargent or any one else.

1. The transfer from Sargent to Prime'was absolute. Prime was to take the notes, and to hold them and make such use of them for Sargent’s family as he might please, entirely subject to his (Prime’s) control.

2. The transfer from Prime to Cumings was upon a valuable consideration, and vested in Cumings an absolute title to the

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notes. He had a right to collect and receive the money, and no one else had any claim to it.

VII. 1. To these considerations must be added the following: That there is nowhere in the answer any denial of the plaintiff’s ownership of the notes, nor e u averment that any other person is the true owner.

2. The referee has reported that the notes were transferred to the plaintiff for a valuable consideration agreed to be paid therefor, to which finding no exception is taken.

VIH. The exception that toe transfer was collusive, and with the intent to prevent a set-off) is wholly unsustained by the case, either in law or in fact.

IX. On the subject of the t itle necessary to maintain an action on a note, the Code has not changed the law as it existed previously and has always been held; and when the Code speaks of the real party in interest in an action on a bill or note, it means the holder of the paper, whether his title be legal or equitable.

And the rule is, that the actual possession of a bill or note is prima facie evidence of the fact that the holder is the owner of the note, and that he has paid or rendered value for it. (Ross v. Bedell, 5 Duer, 462 , and cases cited; Westervelt v. Allcock, 3 E. D. Smith, 243; James v. Chalmers, 2 Seld., 209, affirming S. C., 5 Sand., 52.) The judgment should be affirmed.

By the Court,

—Does the new matter, contained in the answer and which, the defendant at the trial offered to prove, constitute “ a defense or counter-claim ?”

The Code has defined the word; “counter-claim,” as used in section 149. It must be a cause of action “in favor of a defendant, and against a plaintiff, between whom a several judgment might be had in the action.” Id., section 150. However the claim may arise, which the defendant seeks to enforce, unless it is a cause of action against the plaintiff, it is not a counter-claim. The new matter, which the defendant offered to prove, constituted no cause of action against the plaintiff. It in no way affected him. He was not a party to the contract or transaction sought to be proved, nor did he ever have any connection with it. It is clear, therefore, that it does not constitute a counter-claim.

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(Vassear v. Livingston, 3 Kern., 248; Gleason v. Moen, 2 Duer R., 639.)

Does it constitute a defense? The Code has not declared what shall constitute a defense. It has provided that, matter which constitutes a partial defense only, if properly stated in an answer, will make the answer sufficient, as a pleading. (McKyring v. Bull, 16 N. Y., 297 .) But this affects the mode of procedure only. • Whether new matter, set up in an answer, constitutes a total or partial defense, either at law, or in equity, must be determined by pre-existing law. The Code has not prescribed any new rules as to what will, or will not constitute a defense.

The contract or transaction, sought to be proved, is not, in any way, connected with the plaintiff’s cause of action, nor is it one to which he is directly, or indirectly, a party. If available, to prevent a recovery by the plaintiff upon the notes described in his complaint, it must be so for the reason that, either at law, or in equity, it constitutes a set-off in this action, against the notes sued on.

The notes, in suit, were transferred to the plaintiff, on the 29th of September, 1855, and by the payee to the plaintiff’s immediate indorser a few days prior thereto. One of those notes is dated on the twenty-fifth of October, and the other on the 13th of November, 1852. The first of them is payable “ on demand of one day after date,” and the other “on demand after date.” The claim, which the defendant seeks to establish and enforce, ■ as a set-off, against them, is in brief this:

From the 18th of April, 1853, to the 21st of February, 1856, the defendant, and one Joseph W. Allen, and James Sargent; the payee of the notes, were co-contractors with a railroad company for the construction of a railroad. The road was completed and accepted in May, 1855. In the construction of such road the defendant was greatly, and at all times, in advance to his co-contractors, for money advanced in and about the work, &c., and to an amount, at no time less than $13,500. On a proper accounting, it will appear that, of this amount, there is owing, and ever since May, 1855, there has been owing from said Sargent to the defendant, the sum of $6,543. Sargent is dead,. his estate is insolvent, and insufficient to pay said sum of $6,543,

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by the sum of more than $4,500. These are the facts offered to be proved.

In considering the effect of the facts offered to be proved, it should be borne in mind that, this suit was commenced in June, 1856, and that the defendant’s answer was served in the same month. The answer does not allege that Sargent was insolvent, either at the time he transferred the notes, or when the answer was put in. Eor did the defendant, by the offer made at the trial, propose to prove that Sargent was insolvent when the notes were negotiated by him. Sargent died in the spring of 1857.

This claim could not be set off in an action at law, commenced by Sargent at the time this was. The demand is unliquidated. To authorize a set-off of a demand which a defendant has against the plaintiff, unless it arise out of one of the causes enumerated in subdivision 3, of section 32, [sec. 18,] 2 R. S., 354, “the amount must be liquidated, or be capable of being ascertained by calculation.” Id. It must have been due, when, (as in this case, it is sought to be enforced against the payee of a note upon which the plaintiff sues as indorsee thereof,) at the time the payee negotiated it, and the note, sued on, must, also, have been due when so negotiated. (Id., subs. 2, 4 and 9.)

The transaction between Sargent and the defendant, which the latter offered to prove, was not one between them alone, but one to which they and one Allen were parties, and as to which, they were, as between themselves, partners. The transaction was open and unsettled between them when this suit was commenced, and yet is. Eo action at law could be maintained by either of them against the other alone, on the facts offered to be proved. (Murray v. Bogert, 14 J. R., 318.) Whether either of them ought, in respect to such transaction, to pay anything to the defendant, and if so how much, could only be ascertained and determined by an action of account, or a suit in equity, to which the three would be necessary parties. A claim, recoverable only by action of account, or by a suit in equity, cannot be set off at law. (Sherman v Ballou, 8 Cow., 304 .)

Such a claim, being one which must be established, if at all, upon an accounting between Sargent, Allen and the defendant, in a suit instituted for the purpose, and to which the three must

p. 575

be parties, it is not one the amount of which is capable of being ascertained by “ calculation,” within the meaning of that word, as used in subdivision 3, of section 32, 2 Revised Statutes, 354. It is not a set-off at law.

Can the demand be set off on the established principles of equity jurisprudence?

The article of the Revised Statutes, entitled “ Of the General Powers, Duties, and Jurisdiction of the Court ” of Chancery, provides that, “ in suits for the payment or recovery of money, set-offs shall be allowed in the same manner, and with like effect, as in actions at law.” 2 R. S., 174, § 43. [Sec. 40.]

As a general proposition, the Court of Chancery and a Court of law follow the same rules as to set-offs. (McDonald v. Neilson, 2 Cow., 139 ; Van Beuren v. Van Gaasbeck, 4 Cow., 495 .)

There is nothing in the new matter set up in the answer, nor in the facts offered to be proved at the trial, which brings this case within the rule by which the Court of Chancery, in some cases, will enforce a set-off of distinct and disconnected demands, when such a set-off could not be enforced by a Court of law. Even if it be assumed, on the facts offered to be proved, that, at the time Sargent negotiated the notes in question, the defendant could have commenced an action against him and Allen for an accounting, and that the result of such an action would have established that, in equity there was, then, due from Sargent to the defendant, in respect to the partnership or joint transactions of the three, the sum of $6,543, and that sum had at all times since, in equity been due, still one essential element is wanting, to make a case which would have given to the Court of Chancery jurisdiction of an action commenced against Sargent, at the date of his negotiation of the notes in suit, to compel a set-off of such equitable indebtedness against such notes. It is not alleged that Sargent was then insolvent. The existence of that feet would be essential to the maintenance of such an action, if then instituted, even if there were no other obstacles in the way of sustaining it. (Keep v. Lord, 2 Duer, 78 , and authorities there cited; Bradley v. Angel, 3 Comst., 475.)

If an action had been commenced by the defendant against Sargent and Allen, on the day Sargent transferred these notes to Prime, the Court, would not, on a complaint and affidavits

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stating the matters offered to be proved on this trial (omitting the allegations as to the death of Sargent, and the insolvency of his estate), have enjoined Sargent from transferring, or proceeding, at law, to collect the notes in suit. Without an allegation of the insolvency of Sargent, or of some other fact, which, if true, would prevent the defendant from collecting any sum which, upon an accounting, it might be adjudged that Sargent owed and should pay him, there would be nothing to show the existence of a right, in equity, to demand the set-off. (Keep v. Lord, and Bradley v. Angel, supra; Gay v. Gay, 10 Paige, 369; Barber v. Spencer et al, 11 Paige, 517; Dade v. Irwin et al, 2 How. U. S. R., 383; Story’s Eq. J., §§ 1434 to 1437 inclusive.)

I, therefore, conclude that the facts, offered to be proved, do not establish that any equitable right of set-off existed, or had attached, at the time the notes were transferred to the plaintiff The answer alleges, inter alia, that, “the said James B. Sargent is still the true party interested in said notes, and that this .action is prosecuted for his benefit, ” &c.

The referee has found, as facts, that Sargent transferred and delivered the notes “to Samuel J. Prime to hold and make such use thereof for the benefit of the family of said Sargent, as lie, the said ■ Prime, might in his discretion choose to make.” That in a few days thereafter, and on the 29th of September, 1855, Prime “ transferred the said notes to the plaintiff for a valuable consideration agreed to be given or paid therefor, by the plaintiff, to wit: the said plaintiff agreed to give said Prime therefor, when the said notes were paid, the amount thereof, in the bonds of ‘The Evergreens Cemetery Company,’ estimating such bonds at seventy-five cents on the ¿ollar.”

Is this action prosecuted in the name of “the real party in interest,” within the meaning of the words “the real party in interest,” as used in section 111 of the Code ? A plaintiff, who has an absolute right to the money due on a note, and to receive it and appropriate it to his own use, when recovered, is the real party in interest. (Hastings v. McKinley, 1 E. D. Smith's R., 273; and Selden v. Pringle, 17 Barb., 468 .)

The plaintiff had possession of the notes in question, when this suit was commenced. Ete also held the legal title. His purchase was absolute. The money, due upon the notes, is,

p. 577

both at law and in equity, owing to him; when recovered, it must be paid to him.

It is true that Prime as representing Sargent, (or “ the family ” of Sargent for whose use and benefit he received the notes), and that Sargent or his estate are interested in the result. A failure of the plaintiff to recover in this action, might be as great, and possibly a greater loss to Sargent, (if living,) than to the plaintiff. But that feature only illustrates the extent to which a person, not a party to an action, may be interested in the event of it, notwithstanding it is prosecuted by the legal and equitable owner of the cause of action stated in the complaint.

The plaintiff has a right to a complete execution of the contract for the sale of his “ cemetery bonds.” Whether he will make little or much by it is not a question for the Court to consider.

In considering the question, whether the plaintiff is to be defeated on the ground that he is not the real party in interest, it is to be borne in mind that, if this defense fails, there is no defense.

And hence, if this defense prevails, it must be held that, a person owning a note, as to which the maker has no defense, cannot sell it to a third person so as to enable such third person to sue upon it and recover in his own name, no matter how absolute and Iona fide the sale, if, by the terms of the sale, payment for the note is to be made, when the note is paid.

The referee has, substantially, found that, the transfer of the notes by Sargent to Prime, was not “ made under any collusion with said Sargent, or with any purpose or intent to assist him in avoiding the payment of any such indebtedness to the defendant, or any set-off which the defendant had, as against said notes in the hands of said Sargent.”

As the case stands, upon the papers before us, the defendant had no defense to the notes in the hands of Sargent. The notes were transferred by the latter to Prime, without any intent to defeat or avoid the enforcement of any claim that the defendant might have had against him. The plaintiff bought them absolutely and unconditionally, and thereby acquired a title to them, and the right to receive and retain, as his own property, any money that may be paid or collected on them. We think, there

p. 578

fore, that he was “the real party in interest,” as the owner of the notes, and that the action was, properly, brought in his name.

The exceptions taken to the decisions of the referee, permitting Wm. 0. Prime to be sworn after the parties had rested, and in receiving the testimony given by Dan. Marvin, are not noticed in the points submitted by the appellant on this appeal, nor was either of them argued by his counsel, on the argument of such appeal, nor was it intimated by such counsel that he relied on either of these exceptions. We therefore consider them waived "and abandoned.

Rule 43 of the Supreme Court (adopted in August, 1858).

The defendant having failed to establish any defense, either total or partial, to the notes, the judgment must be affirmed. Judgment affirmed.