Ellis v. Smith , 38 Me. 114 ( 1854 )

Appleton, J.

— The right of the plaintiff to recover being established by the production of a copy of the judgment declared on, the material inquiry presented for consideration, relates to the claim in set-off, upon which the defence entirely rests. The note of the plaintiff’s intestate payable to William Weston & Co., and by them indorsed, was seasonably filed, and upon representation being made that the estate of Benjamin H. Ellis was insolvent, and the appointment of commissioners, the same was duly presented for their consideration, and by them allowed to this defendant.

The note was shown to have been in the hands of defendant before the decease of Ellis, and has remained his property to the present time. Under the statute of this State regulating the right of set-off, it could not have been filed as against the plaintiff’s intestate, but death and insolvency having ensued, it remains to consider how far these facts may have changed the relative rights of parties.

The right of compensation, as set-off is termed in the civil law, is of the highest equity. “It is established upon the common interest of the parties between whom it is made; it is clear that each of them had an interest to compensate rather than to pay what they owe, and to have an action to recover what is due to them.” Evan’s Pothier, Part 4, art. 3, c. 4. The equity of this principle is peculiarly manifest in case of mutual and reciprocal claims between an insolvent estate and a solvent creditor. It would be in the highest degree unjust to compel the solvent creditor in his capacity as debtor, to pay the entire debt he may owe the estate and to receive back by way of dividend such fraction of the money paid, as the insolvency of the estate may permit.

The creditor of an insolvent estate cannot commence a suit against the administrator, without having first presented his claim before commissioners, and if disallowed, the statute then gives him a right of action. The statute regulating the distribution of the assets of insolvent estates, contemplates a fair adjustment of all demands existing between the parties at the time of the death of the insolvent, and that a creditor of the estate should be compelled to receive a dividend only upon such balance as may be due him. In making this adjustment, the statute of set-off, as between the original parties, has not been regarded as applicable.

The statutes of Massachusetts are substantially the same as those of this State, as regard the settlement of insolvent estates and the right of set-off, and the decisions of their Courts on these subjects are entitled to the highest consideration. In McDonald v. Webster, 2 Mass. 498, the Court say, “ that by force of the statute for the distribution of insolvent estates, all the mutual demands subsisting between the insolvent and his creditors were to be liquidated and balanced. If the balance be against the estate, it must be laid before the commissioners, and by them reported to the Judge, that the creditor may receive his dividend.” In Lyman v. Estes, 1 Greenl. 182, the doctrine of McDonald v. Webster, was reaffirmed, and it was then held that an equitable claim against an insolvent estate, though never presented to the commissioners, may be shown by way of set-off to an action oí assumpsit by the administrator. “Strict principles of the common law, and the technical rules of pleading must not be applied,” remarked Mellen, C. J., “ to cases where the parties have not mutual remedies at law, which they can enforce, as in cases of insolvency.” In Knapp v. Lee, 3 Pick. 452, the Court held that a demand not presented before the commissioners might be pleaded in set-off, and the judgment rendered for either party, as the balance should appear. In Bigelow v. Folger, 2 Met. 255, it was decided that a debt of the insolvent intestate not yet due might be set-off in a suit brought by the administrator. In Phelps v. Rice, 10 Met. 128, a claim against an attorney for professional neglect, which had been presented before the commissioners and by them been disallowed, was permitted to be pleaded in set-off to a suit brought by the administrator of the negligent attorney. The Court expressly recognize this as a claim not within the statute regulating set-off. “ But the demand sued in this case,” says Hubbard, J., “being that of an administrator of an insolvent estate, the right of set-off is not limited to cases provided by the statute of set-off. It extends to all cases where mutual demands exist which survive the death of the party, and a defendant, therefore, when sued, may set np in defence, claims not liquidated, as well as those, the amount of which are ascertained.” To give effect to the principles involved in the statute providing for the settlement and distribution of insolvent estates, the creditor is permitted to plead his counter claims, whether they were presented before the commissioners or not, and whether they could have been filed in set-off or not in a suit by the deceased intestate.

The defendant insists, that by virtue of R. S., c. 109, the commissioners were bound to report only the balance due from the estate to the defendant, that the claim by them allowed is such balance, and that consequently the judgment in suit is to be regarded as having thereby been extinguished.

The evidence reported satisfactorily proves, that the original demand which resulted in the judgment in suit, was on Jan. 14, 1842, assigned to Messrs. Bradbury & Rice to secure the sum of about seventy dollars due from B. H. Ellis to them. The demand having been assigned as security, to the extent of the interest of those accepting such assignment, the rights of the assignees must be protected. By the assignment the control of the demand vested in the assignees subject to the right of the assignor upon payment by him of the amount due, to be restored to his original title. As no suit could be maintained in the name of the assignee, the assignment conferred authority to use the name of the assignor, and in case of his death, that of his administrator or executor, to enforce by suit the payment of the demand. The demand having been assigned, it is immaterial whether the amount to be secured was great or small. In either event the control of the demand passed from the assignor. The commissioners were not a tribunal by whom the validity of the assignment, the amount due, or any other facta affecting the interests of the assignee were to be determined. As the whole demand was assigned for security, they could not diminish that security by canceling any portion of the demand assigned. The assignee, then, was the legal ■owner of the demand for the purposes for which the assignment was made, and as such, was under no obligation to present his claim before the commissioners, and if it was not presented, he would be in no way affected by their determination in relation thereto.

The assignment having been drawn by Messrs. Bradbury & Rice, it is obvious they must have known its terms, and ■as it was beneficial to them, their assent may be presumed. From the testimony of Ballard, the attesting witness, it appears, that no other creditors who were to be secured by this assignment were present. There is no evidence, that it was made at the instance of any creditors, save that of Messrs. Bradbury & Rice. Indeed the fair inference from the proof is, that it was made without the knowledge of the other creditors at the time. They do not appear subsequently to have been apprised of its existence. Without knowledge of that fact, they could not have assented thereto. Without their assent it remains a mere proposition, for nothing is clearer than that to constitute a binding contract, there must be. the assent of the minds of the contracting parties to its terms.

The death of Ellis operated as a revocation of the assignment, except as to those who had previously assented thereto, and left his remaining interest in the demand a part of the assets of the estate to be distributed among all the creditors, so far as the sanie could be legally enforced. As no assent appears previously to have been given, so none subsequent would be of any avail.

The attention of the Court has been called to the Act of 1854, c. 98, § § 2, 3, as having a bearing on the questions here presented for adjudication. The contracts of the parties, out of which the present litigation has arisen, refer to-a period of time as early as 1842. The present suit was commenced in 1851 and the report of the case was drawn up two years subsequently. The statute changes the law as it existed at its passage, but the change is prospective in its effect, and nothing indicates an intention that it should in any way affect or alter rights which had been acquired under prior laws.

The assignees, Messrs. Bradbury & Rice, hold the entire demand as security for what may be due them. Upon and after payment to them, of their debt and the costs of this suit, the remainder of the judgment is to be set off against the defendant’s claim. Judgment will be rendered for the balance thus found and certified to the Judge of Probate as the claim upon which a dividend is to be paid. Bigelow v. Folger, 2 Met. 255.

Shepley, C. J., and Tenney and Cutting, J. J., concurred.