I. Respondent says: " Conceding appellants had a personal judgment, the same was against James T. Ryan and James R. Duff, jointly with ten others, and it could not be tendered as an off-set in this action." All that is said in support ofthis objection is replete with error.
It is a mistake that the right of set-off " is founded exclusively on statute." Courts of Equity " were in possession of the doctrine of set-off long before the law interfered." (2 St. Eq. sec. 1432.)
The statement that Courts can entertain no set-offs, except such as are based upon " legal rights," is erroneous; for " Courts of Equity will extend the doctrine of set-off, and claims in the nature of set-off, beyond the law, in all cases where peculiar equities intervene between the parties." (2 St. Eq. sec. 1437 a; Naglee v. Palmer , 7 Cal. 546; Russell v. Conway , 11 Id. 101.)
It is also a mistaken view that " a judgment is not allowed to be pleaded as a counter claim, either at law or in equity." A judgment is a contract of record. Debt will lie upon it as such, and it is therefore within the express words of the Practice Act. " The assignee of a judgment may offset it." (Barb. on Set-off, 37.)
These statements are all that counsel advance to sustain the principal objection, viz: that on our theory of the case, the appeal bond belongs to Ryan and Duff, and that the offset tendered is due from them jointly with ten others.
Asopposed to the objection, we say that the debt in the foreclosure suit of A. K. Fisher was evidenced by a money bond for $ 15,000, bearing interest at the rate of four per cent. per month, payable monthly, and that the bond was executed by J. T. Ryan and J. R. Duff jointly with the ten others--all acting as principal parties.
At law, the bond is joint, and the judgment upon it at law is also joint. But even at law the judgment could be enforced by execution levied upon the several estate of any one, or the joint estate of any two of the debtors. Though at law the bond and judgment are joint, still in the eye of a Court of Equity they are each of them joint and several. (Devagnes v. Noble, 1 Merrivale, 530; Wilkinson v. Henderson, 1 Mylne & Keene, 176; 2 Sto. Eq. Ju. sec. 162; Thorpe v. Jackson, 2 Younge & Coll, 533, referred to in 1 Chit. Eq. Dig. 599, sec. 11.)
Our claim to set-off is to receive the same resolution exactly that it would receive if Ryan and Duff had sued the appeal bond in their own names, averring that they were its real owners. Whether they would sue in their own names, or in that of their trustee, was a matter of choice with them. They havechosen to sue in the name of their trustee; but our right to offset does not wait upon any choice of our adversaries. They have made Wm. R. Duff their representative for the purpose of attack, and have thereby accredited him as their representative for all the purposes of the general warfare. (8 Pick. 342, and the cases there cited; Story Ag. sec. 390; 7 Cal. 543; Barb. on Set-off, 210.)
Suppose, then, the suit upon this appeal bond to have been brought by J. T. Ryan and J. R. Duff, could our offset have been successfully resisted, on the ground that it was due from them and " ten others jointly" --the whole twelve being hopelessly insolvent.
1. An execution on our judgment might be levied not merely upon the joint property of the twelve, but upon the several property of each of them; and upon the joint property of any two of them as well.
2. The original mortgage debt, and the judgment or the " balance" upon it, are several liabilities in equitable effect though joint in form.
3. The authorities show that our offset ought not to be rejected, on the ground that there is a partial want of technical " mutuality" in face of the fact that all our judgment debtors areinsolvent. (Jackson v. Robinson, 3 Mason, 145; Barber v. Spencer, 11 Paige, 517; Pond v. Smith , 4 Conn. 302; Robbins v. Holley, 1 Monroe, 194; Chamberlain v. Stewart, 6 Dana, 33; Mitchell v. Oldfield, 4 T. R. 123; Naglee v. Palmer , 7 Cal. 543.)
VI. We admit that the " cross demand must be based on contract, for which an action might be maintained," but deny that it is essential in equity, if the proper equitable circumstances are established, that the cross demand should be one for which an " action at law" would lie against the plaintiff in the action. (See cases previously cited, and particularly 8 Pick. 432, and Naglee v. Palmer , 7 Cal. 543.) The case cited from 3 Wend. 400, was at law--there was no pretense of " equitable circumstances."
VII. It is further insisted " that if James T. Ryan and James R. Duff were plaintiffs in the place and stead of respondent, appellants could not tender this set-off, whether it be a debt, judgment, or balance of a decree."
All the authorities cited by counsel from Conn. and N.Y. are in harmony with the views heretofore presented by us. Those cases establish the position, that at law the claims mustbe mutual, and that they must lie between the parties to the record. They further establish that the same requirement obtains in equity as a general rule, and as to that we have not expressed a doubt. All the Connecticut cases cited were decided by the same Court that decided the case of Pond v. Smith, (4 Conn. 302) in which it was held, that cases of insolvency constitute an exception to the above general rule.
The case of Alsop v. Cimes, (10 John. 396) relied on by counsel, was at law; but Chancellor Kent expressly recognizes the doctrine that in equity the want of mutuality would under proper circumstances be of no moment. The general answer to respondent's authorities is, that they do not meet the question.
VIII. It is urged that equity never interferes unless the party is remediless at law, and it is added, that the defendants " have made no attempt to enforce their judgment by execution or otherwise."
We add that no such attempt had been made in 8 Pick. 342; nor in 4 Conn. 302; nor in 1 Monroe, 194; nor in 6 Dana, 33; nor in 4 T. R. 123; nor in 7 Cal. 543. The party must be remediless in fact, but that may very well be, even though he have not tried everydescription of legal experiment in order to demonstrate it. We have averred the fact of insolvency, and for all the purposes of the present hearing the allegation must be taken as true. Assuming the insolvency as a fact, we have the exact pivot upon which alone the cases above cited rest the doctrine which we invoke.
To issue execution against the debtors in the Fisher judgment, would be to do a " vain thing," and if done, and returned " nulla bona," the return would be evidence merely of the fact of insolvency. As a matter of pleading the fact should be stated, and not the evidence of it. (Walker v. Sedgwick , 8 Cal. 398; Heyneman v. Dannenberg , 6 Id. 376, are cases bearing directly upon the question.)
IX. It is said that " the only remedy of the defandants is in equity." To this we assent, and add, that it is to " equity" we have made our appeal. But from the proposition that we can under no circumstances bring our cross claim to the notice of a Court of Equity except by " original bill," we dissent. The plea of set-off is itself in the nature of a cross action. The cases that we have cited show that an equitable offset may be presented by plea or answer as well asby original bill.
This is not an attempt on the part of judgment creditors " to reach equitable assets in the hands of a fraudulent trustee." In proceedings looking to that result, the initiative is always taken by the creditor. Here the initiative was taken by the judgment debtors acting covertly through a naked trustee, thereby subjecting the judgment creditors to the necessity, and at the same time affording them an opportunity of opposing their claim to the claim so sought to be enforced.
Our answer is not based upon the idea that William R. Duff has assets presently in his hands belonging to our judgment debtors, which we could not reach by execution, and which we seek to have converted into money and applied by the trustee or the Sheriff to the payment of our judgment. The answer does not charge that the plaintiff has any " assets" in his possession belonging to our debtors, but that our debtors are themselves the owners of a certain " thing in action," in which thing we ourselves figure as debtors. Whatever of available " assets" there may be involved in this predicament, belonging to Ryan and Duff, are in our hands and not in those of Wm. R. Duff.
JUDGES: Norton, J. delivered the opinion of the Court. Field, C. J. concurring.
OPINION
NORTON, Judge
This is an action on an appeal bond in which the defendants claim the right to offset the balance of a decree in a foreclosure suit, which they have purchased and now hold, against James R. Duff and James T. Ryan, and eleven other defendants in that foreclosure suit, upon the ground that James R. Duff and James T. Ryan are the parties beneficially interested in the claim in suit in this action, and that they and all the other eleven defendants in the decree sought to be offset are insolvent. The statute of this State applicable to this subject provides that a counter claim, which may be set up in answer, shall be one existing in favor of the defendant against a plaintiff, between whom a several judgment might be had in the action, and that if the counter claim exceeds the amount of the plaintiff's claim, the jury shall find the amount of the recovery, and judgment shall be given for the defendant for the excess. (Civil Prac. Act, secs. 46, 47, 176, 199.) Under these provisions of the statute, the set-off proposed in this case cannot be allowed; as well by reason of the provision of section forty-seven, which requires it to be between the parties to the record, as of the provisions of sections one hundred and seventy-six and one hundred and ninety-nine, which would require a judgment for the excess to be given against the plaintiff, although as against him it is not claimed that the defendants have any demand. The cases of Wheeler v. Raymond, (5 Cowen, 231) Warner v. Barker (3 Wend. 400) and Spencer v. Babcock (22 Barb. 326) are to this effect. By section five of the Civil Practice Act it is provided, that in the case of an assignment of a thing in action, the action by the assignee shall be without prejudice to any set-off or other defense existing at the time of or before notice of the assignment. In such a case if a set-off should be allowed, it would be in conflict with the provisions of section forty-seven, and hence it has been decided that in such a case the set-off cannot be pleaded as a counter claim, but must be set up as an equitable defense, on the ground that the assignee takes the demand subject to an existing equity. (Ferreira v. Depew, 4 Abbott's Pr. R. 131.) Whether this be the proper answer to what otherwise might appear to be a conflict between these sections, or whether section forty-seven must be considered as subject to an exception in the case mentioned in section five, is not important in this case, because this case is not one falling within the provisions of section five. The plaintiff is not an assignee, and at the time his interest in the bond in suit accrued--this is, at the time the bond was executed, as well as at the time when the defendants' liability on it became fixed, the defendants had no defense, or counter claim against it, whether considered as the property of the plaintiff or of James R. Duff and James T. Ryan, the defendants at that time not having become the owners of the demand now sought to be offset. It is insisted, however, that the insolvency of the beneficial owners of the demand in suit, and against whom the defendants have their claim, is an equitable ground, independent of and beyond the right given by the statute upon which this offset may be allowed. Under the old system by which legal and equitable rights were administered by different tribunals, Courts of Equity did in come cases allow or enforce an offset which was not within the provisions of the statute, and under our present system an equitable defense may be interposed by answer to a legal action. But the matter set up in the answer in this case is not a defense equitable or legal, in any other sense than as being purely an offset, and as such it meets an insuperable obstacle in the provisions of the statute which require offsets to be between parties to the record. Those statutory provisions which have introduced the new system of proceedings under which equitable defenses are allowed to be made in legal actions, are portions of the same law which defines the conditions under which alone an offset can be made. They are the different sections of the Civil Practice Act, and there is no authority for holding that the sections regulating counter claims were not intended to apply, as by their terms they do apply to all actions that can be prosecuted under that Act. No exceptions are contained in the statute in favor of offsets affected by equitable circumstances. It may be that in providing but one mode of proceeding, and in taking its provisions partly from each of the old systems, some of the provisions taken from statutes regulating proceedings at law are, from inadvertence, left too restricted to embrace all the cases to which they might properly have extended, and on the other hand it may be that it was deemed expedient to leave the proper relief in some cases of a complicated character to be obtained by a distinct action. But whatever the reason, the statute as the Legislature have enacted it must control the proceedings of the Court. The two cases cited by the defendants, decided by this Court, (Naglee v. Palmer , 7 Cal. 543; and Russell v. Conway , 11 Cal. 93) do not stand in the way of this view of the law. In deciding the case of Naglee v. Palmer, the Court say: " It may be granted, that if this were an action at law, and not a proceeding in chancery, the defendant would not be entitled to his set-off. But this is a proceeding in equity; the defendants have been brought in by the plaintiff, and it is competent for the Court to administer that substantial relief to which the parties show themselves entitled." The case before us is what would be called an action at law. If it should be said that there is no proper foundation under our present system for the distinction here taken between an action at law and a proceeding in equity, then it may be said that the case was wrongly decided and is not authority on this point. In the case of Russell v. Conway, the offset was not brought forward by way of answer to a complaint, but by a distinct action, and thus was not obnoxious to the objection arising from the restrictions of the statute.
The view we have taken of this point renders it unnecessary to decide whether the insolvency stated in this case creates such an equity as is claimed, or whether the other facts stated show that the plaintiff is not the real party in interest.
Judgment affirmed.