Clark v. Sullivan

• Decision Date: 16 July 1891
• Citation: 49 N.W. 416,2 N.D. 103
• Parties: Clark v. Sullivan et al.
• Court: North Dakota Supreme Court

2 N.D. 103

49 N.W. 416

Clark

v.Sullivan et al.

Supreme Court of North Dakota.

July 16, 1891.

Syllabus by the Court.

A surety jointly bound with his principal may, independently of statute, offset against such joint indebtedness his individual claim against the creditor in such joint indebtedness, where both the creditor and the principal are insolvent.

Appeal from district court, Morton county; W. H. Winchester, Judge.Louis Hanitch and B. W. Shaw, for appellant. H. G. Voss, for respondent.

Corliss, C. J.

The demurrer of plaintiff to counter-claim of defendant Sullivan having been sustained, he challenges by this appeal the ruling of the trial court in this respect. It is not pretended that the answer does not state a good cause of action in favor of defendant Sullivan and against the plaintiff; but it is insisted by plaintiff that, as the plaintiff's cause of action is a joint debt of defendant Sullivan with his co-defendant King, and as the claim sought to be offset against it is the debt of the plaintiff to the defendant Sullivan alone, it is not the proper subject of counter-claim; that Sullivan must sue upon it in an independent action. The complaint states a cause of action arising out of the execution of an undertaking on appeal by Mead as principal and the two defendants herein, King and Sullivan, as sureties, followed by the affirmance of the judgment appealed from. The claim set forth in the answer is a judgment recovered against the plaintiff, Clark, by Fairbanks, Morse & Co., which was assigned to defendant Sullivan before the commencement of this action. The liability of the two sureties on the undertaking is joint. No words expressing a several liability appearing on the face of the instrument, it was the joint, and not the joint and several, obligation of the parties executing it. Wood v. Fisk, 63 N. Y. 245; 1 Pars. Cont. 11; 1 Story, Cont. § 53; 1 Pom. Eq. Jur. § 409; Pickersgill v. Lahens, 15 Wall. 140. Statutory enactment in this state has left this rule unaltered, where at least one of the parties liable upon the obligation is a mere surety, Comp. Laws, §§ 3425, 3574. The counter-claim, therefore, cannot be sustained under the statute. The statutory counter-claim “must be one existing in favor of a defendant and against a plaintiff between whom a several judgment might be had in the action.” Comp. Laws, § 4915. See Roberts v. Donovan, (Cal.) 9 Pac. Rep. 180;Wood v. Brush, (Cal.) 13 Pac. Rep. 627. No several judgment against the defendant Sullivan could be rendered. Had plaintiff failed to make his co-defendant, King, a party, this defect of parties would have abated the action as thus commenced, the defect being legally brought to the attention of the court by demurrer or by answer, according as the defect might or might not appear upon the face of the complaint. Although only one of two joint debtors is served, the judgment must be against both jointly, to be enforced against their joint property and the separate property of the defendant served. Comp. Laws, § 4901, subd. 1. The plaintiff having no right to a several judgment against defendant Sullivan, the latter could not, therefore, under the statute offset his separate claim against the plaintiff. But we may look elsewhere for the proper rule to govern this question. The right to offset a claim is recognized by equity independent of any statute. We are very clear that the facts alleged in the answer bring this case within this principle of equity jurisprudence. The defendant avers the insolvency of the plaintiff. This creates an equity, for it is unconscionable that the plaintiff should insist that the defendant pay him, and then leave the defendant powerless because of plaintiff's insolvency to enforce his (defendant's) claim against the plaintiff. But a further equity appears. Defendant alleges the insolvency of his principal in the undertaking. Therefore not only will he be without the ability to collect his judgment from the plaintiff, but he will be without ability to reimburse himself out of his principal, who should save him from all loss. It would not be creditable to an enlightened administration of justice to deny the operation of this equitable rule under these facts, which appeal so strongly to the conscience. It is well established that the surety, when sued upon the joint obligation of himself and his principal, may offset the separate claim of the latter against the plaintiff in case of insolvency. Coffin v. McLean, 80 N. Y. 560;Becker v. Northway, (Minn.) 46 N. W. Rep. 210. Certainly this court would be open to the criticism of sacrificing substance to form if it refused to allow the surety to set off his own separate demand against the plaintiff when the latter is insolvent. May he reach out, and, seizing without assignment, interpose his principal's claim as an offset, and yet is he powerless, under the same circumstances, to plead his own demand as a counter-claim? Had defendant Sullivan been principal, his claim, upon the favorable consideration of a court of equity, would have been trifling when compared with that high claim to the favor of equity which all the adjudications agree is the peculiar property of a surety. One of the very elements of the law is that he is a favorite of a court of equity; and yet, as a principal debtor, Sullivan could have offset this separate claim against the plaintiff under the statute without showing any equity, because he would have been severally as well as jointly liable to plaintiff on the undertaking under our statute, and therefore a several judgment between him and plaintiff could have been rendered. But as surety, the favorite of the court, with strong equities pleading in his behalf, he may not, it has been decided, in this case, even under an equitable rule, have the same measure of relief and justice. The doctrine on which that decision must rest can have no place in the more advanced system of jurisprudence, which, unlike the old system,-before equity achieved its memorable triumph, ere reform in procedure had supplanted technical...