Martin v. Kunzmuller

Tire firm of Graydon, McCreery & Co. made a general assignment to tbe Plaintiffs, for the benefit of their creditors, on the 7 th of May, 1861. At the time of making the assignment they had a demand against the Defendants for goods sold, amounting to 13,101.42, to recover which this action is brought.

The Defendants held and owned, at the time of the assignment, three promissory notes made by Graydon, McCreery & Co.; the first for $671.28, which became due April 4, 1861; the second for $998.35, which became due April 11,1861; and the third, which had not matured at the time of the assignment, but became due May 28,1861. None of these notes had been paid. The action was commenced after all the notes matured, and the Defendants sought to offset the amount of these several notes of Graydon, McCreery & Co. against the demand which said firm had so assigned to the Plaintiffs.

The Court, upon the trial, allowed the first two notes, which had matured at the time of the assignment, as legal offsets against the Plaintiffs’ demand, but instructed the jury that the third note, which did not mature until after the assignment, was not a legal offset. To this the Defendants excepted.

If the Defendants might have set it off against Graydon, McCreery & Co. at the time of their assignment, provided that firm had sued the Defendants on this assigned demand, it was a proper subject of set-off in this suit, otherwise not; for the case depends entirely upon the statute, which is as follows : “ If the action be founded upon a contract, other than a negotiable promissory note, or bill of exchange, which has been assigned by the Plaintiff, a demand existing against such Plaintiff, or any as-signee of such contract, at the time of the assignment thereof, and belonging to the Defendant in good faith before notice of such assignment, may be set off to the amount of the Plaintiff’s debt, if the demand be sueh as might have 'been set off agamst sueh Plaintiff, or sueh assignee, while the eoni/raei belonged to him.”

The fact that, under the Code, the action is brought in the name of the assignees, and not of the assignors, as Plaintiffs, does not change the rights of the parties, and the Defendants are still entitled to the set-off, precisely as if the action had been brought by the assignees in the name of Graydon, McCreery & Co. as Plaintiffs, as it must have been when the' Statute of Set-offs was passed (Myers v. Davis, 22 N. Y. R. 489); and the statute is now to be read and construed with reference to such change in the mode of bringing the action.

The simple principle applicable is this — that the assignee takes the contract assigned to him, subject to the right of set-off which the debtor had against it at the time of the assignment.

It would seem to be very clear, then, that the Defendants had no right to set off the third note against the demand in suit — for, at the time of the assignment, this note had not become due, and was not then such a demand “ as might have been set off against” the assignees “ while the contract belonged to them.”

An allowance to a party by way of set-off is always founded on an existing demand in presentí, and not one that may be claimed in futuro (Aymar v. Astor, 6 Cow. 266 ; Myers v. Davis,

The firm of Graydon, McCreery & Co., on the 7th of May, 1861, made a general assignment of all their property to the Plaintiffs for the benefit of their creditors. At the time of making said assignment the Defendants were indebted to the assignors in the sum of $3,107.42, for goods sold by them to the Defendants on eight months’ credit, from August 9 to Oct. 20, 1860. The Defendants held and owned, at the time of said assignment, three promissory notes made by said firm of Graydon, McCreery & Co.; the first for $671.28, which had matured April 4, 1861; the second for $998.35, which had matured April 11, 1861; and the other for $1,400.78, which did not mature until May 28,1861; and none of said notes had been paid. This action was commenced Oct. 3, Í 861. After all of said notes had matured, this action was commenced to recover the price of said goods, and the Defendants then sought to offset the amount of the said three several notes, all then due and unpaid.

The Court charged the jury, that the Defendants were entitled to offset the amount of the promissory notes held by the Defendants, due at the time of making the assignment, with interest from date of maturity, from the amount of the Plaintiffs’ claim. Said Justice further charged the jury, that the Defendants were not entitled to offset the amount of the note thirdly above described, and which did not mature until after the making of such assign

Judgment on the verdict was affirmed at General Term, and the Defendants appeal to this Court.

The only question presented for the consideration of this Court upon this appeal is, whether the Defendants were entitled to set off, against the Plaintiffs’ demand, the amount of the note made by their assignors, which was not due at the time of the assignment to the Plaintiffs of the demand against the Defendants.

The provisions of the Revised Statutes applicable to set-offs are as follows : “ If the action be founded upon a contract, other than a negotiable promissory note, or bill of exchange, which has been assigned by the Plaintiff, a demand existing against such Plaintiff^ or any assignee of such contract, at the time of the assignment thereof, and belonging to the Defendant in good faith before notice of such assignment, may be set off to the amount of the Plaintiff’s debt, if the demand be.such as might have been set off against such Plaintiff, or such assignee, while the contract belonged to him.” The Code has introduced no new rule affecting set-offs. The alteration made by it allowing the beneficial owner of a chose in action, not negotiable-at law, to sue thereon in his own name, does not change the actual rights of the parties to any assignment of it. The Defendant is entitled to the same defence which he would have had if the former rule had continued to prevail, and the action had been brought in the name of the assignor, and to no other or different defence. The assignee would have been protected in his equitable rights, notwithstanding the non-negotiable nature of the contract, to the same extent that he is entitled to have them protected now that the pwnor or holder can prosecute in his own name. The change effected bj the Code is simply as to the form in which the action is to be carried on (Per Denio, J., in Myers v. Davis, 22 N. Y. 489 ).

This precise point was distinctly presented in Wells v. Stewart (3 Barb. S. C. Rep. 40). Stewart, on the 14th of April, 1845, made his negotiable note, payable to one Coym, ninety days after date, and which, on the 26th day of May, 1845, was assigned to and became the property of Wells. On the 28th of May, 1845, Wells owed Stewart $75.10, which account on that day was assigned by Stewart for the benefit of creditors. The action was in Stewart’s name, by his assignees, against Wells, to recover the amount of the account, and Wells claimed to set off the note of Stewart. The action must have been brought months after the note became due. Hand, J., in the opinion of the Court, said that the last clause of the statute above quoted is fatal to the claim set up by Wells. “ At no time while this account belonged to Stewart, could this note have been set off against the account. Had Stewart sued Wells on the account, on the’ day he made his assignment, or had the assignees sued him within some weeks after-wards, 'the note would not have applied. The words £ if the demand be such' do not apply to the nature only, but also to the condition or state thereof.” In Watt v. The Mayor of New York

Beckwith v. Union Bank (4 Sandf. S. C. 604) is to the same effect. The suit was by Beckwith, an assignee of the Messrs. Hunters. At the time of this assignment there was standing upon the books of the Union Bank a sum of money to the credit of the Hunters. The assignee brought suit to recover this money. At -the time of the assignment the bank held a bill endorsed by the Hunters, which subsequently fell due, and was protested, and the Hunters charged thereon as endorsers, and the bank charged the amount thereof against the credit of the Hunters. The Superior Court held that the assignment having been made in good faith, and transferring to the Blaintiff all the property of the Hunters, of every description, the deposit to their credit in the bank thereby became vested in the assignee. Therefore, when the bill fell due, and the Hunters became liable to the bank for its payment, there were no demands existing between them and the bank which could be the subject of set-off. The money to them credit belonged to the Plaintiff. The judgment in this case was approved in this Court (5 Seld. 211); this Court holding that the Code had effected no change in the substantial rights of the parties. In other words, the provision is, that the

In Chance v. Isaacs (5 Paige, 592) a similar question arose and was decided. Tbe Defendant, Isaacs, being indebted to the Complainant in tbe sum of $687.28, gave to him a negotiable note for that amount, payable four months after date; which note the Complainant soon after endorsed and transferred to a third person, in tbe ordinary course of business. Some time afterward tbe Plaintiff became indebted to Isaacs in about tbe sum of $700, for which be gave him two promissory notes, payable at four and six months. A few days before tbe note of Isaacs fell due be became insolvent, and made an assignment of bis property to tbe Defendant, Smyth, for the benefit of bis creditors, including tbe two notes of the Complainant. "When tbe note given to tbe Complainant fell due it was protested for non-payment, and tbe Complainant, as the endorser, was obliged to pay and take it up. He therefore filed tbe bill in tbis cause to restrain tbe Defendant, Smyth, from parting with the two notes given to Isaacs, and to have tbe note of Isaacs offset. Tbe Yice-Chancellor decided that tbe offset could not be allowed, as tbe creditors under tbe assignment had acquired an interest in tbe notes of the Complainant before tbe note given to and endorsed by him had been protested for nonpayment and taken up by him. The bill was dismissed with costs, and on appeal to the Chancellor tbe decree was affirmed. So in Bradley v. Angel, Executor, etc. (3 Comst. 475), where tbe Complainants were indebted to tbe Defendant’s testator in tbe sum of between $3,000 and $4,000, to recover which tbe Defendant, as executor, brought an action at law. Tbe Complainants thereupon filed their bill to compel a set-off of certain notes given by tbe testator which were not yet due, and to restrain tbe action at law. Tbe estate of the testator was insolvent. It was held, nevertheless, that tbe bill could not be sustained.

I have looked at the case of Maas v. Goodman (2 Hilton, 275), and it certainly seems to conflict with the authorities above re

We see no sufficient reason, from any of the suggestions made by the counsel for the Appellants, for departing from the doctrine so often enunciated and affirmed.

The judgment appealed from must therefore be affirmed, with costs.

All affirm.

JOEL TIFFANY, State Reporter.