Fera v. Wickham

• Decision Date: 04 October 1892
• Citation: 31 N.E. 1028,135 N.Y. 223
• Parties: FERA v. WICKHAM et al.
• Court: New York Court of Appeals Court of Appeals

135 N.Y. 223

31 N.E. 1028

FERA

v.WICKHAM et al.

Court of Appeals of New York.

Oct. 4, 1892.

Appeal from supreme court, general term, first department.

Action by Henry Fera against Daniel H. Wickham and others. From a judgment of the general term (15 N. Y. Supp. 892) affirming an order of the special term overruling a demurrer to the complaint, defendants appeal. Reversed.

Hess, Townsend & McClelland, (Chas. A. Hess, of counsel,) for appellants.

Goldsmith & Coherty, (saml. J. Goldsmith, of counsel,) for respondent.

GRAY, J.

The firm of Wickham & Co., having become insolvent, made a general assignment for the benefit of their creditors. On October 27, 1890, at the time of this assignment, the plaintiff held their unmatured acceptance of a draft to the amount of $1,390.60 for goods sold. The assignee became, by the assignment, the holder of a promissory note made by the plaintiff to Wickham & Co.'s order for $536.25. The accepted draft was payable November 6, 1890, and the plaintiff's note was payable on June 9, 1891. The plaintiff has brought the present action to secure an equitable offset of the debt to him from the insolvent estate as against the debt due by him. Upon the defendants' demurrer to his complaint the courts below have held the relief within the power of a court of equity to award, and therefore gave plaintiff judgment. In the opinions delivered at the special and general terms of the supreme court the learned justices relied upon the decision in Rothschild v. Mack, 42 Hun, 72. The opinion of the general term of the fifth department in that case was affirmed by this court as to the correctness of the conclusion arrived at. 115 N. Y. 1, 21 N. E. Rep. 726. But the appeal was not decided in this court on the ground taken by the general term in their opinion, but solely because a cause of action on contract did exist in the complainant's favor against the insolven assignor at the time of the assignment. The learned justices below, in the present case, have felt themselves constrained, apparently, to follow the decision in the fifth department, inasmuch as in this court, in the Rothschild Case, the correctness of the general term views was not expressly denied. It must be conceded that the opinion of this court in the Rothschild Case seemed to leave open for further discussion the question passed upon by the general term, namely, of the right to an equitable offset where, at the time of the assignment,the party was only contingently liable. It was the opinion there that the general rule in equity should obtain if the liability of the insolvent estate had become actual prior to the time of the maturity of the demand due to the estate. This view, however, I think to be untenable, if we are to be guided by the authority of previous decisions in this court. In the Rothschild Case, neither plaintiffs' claim on the note nor the assignee's claim against them was due at the time of the assignment, but because of the fraud practiced upon the plaintiffs in the manner in which the moneys were obtained from them it was held that a cause of action in assumpsit arose at once in their favor for the recovery back of the moneys. It existed the moment the insolvent assignors obtained the money; and, being a proper subject of set-off in any action which might have been brought by the parties against whom it existed, it could properly be offset against the debt due from the plaintiffs to the assignee pro tanto.

The subsequent case of Richards v. La Tourette, 119 N. Y. 54, 23 N. E. Rep. 531, was that of an action by the assignee of an insolvent firm to foreclose a mortgage. The defendant demanded that the assignee set off in reduction of his indebtedness upon the mortgage the indebtedness due from the assignors to him. The particular and only question presented was whether, as the defendant's debt upon the mortgage was not due at the time of the assignment, the debt owing to him from the assignors, and which was due at that time, could be equitably applied in reduction of the mortgage debt. The right to the offset was upheld, because of the immateriality of the fact that the debt owing to the insolvent was not due when the assignment was made. The debtor to the insolvents could elect to treat his debt as presently due, and waive any defense on any such ground. Where this case differs from the Rothschild Case is that there was no cause of action in favor of the plaintiff at the time of the assignment. The question here is whether the plaintiff has an equitable right to an offset of his demand against the insolvent estate, which had not matured at the time of the assignment, but which did subsequently mature before the demand held by the assignee against him matured. In the solution of this question we might find some embarrassment in endeavoring to reconcile expressions of opinion by the judges in the early cases; and, after a very careful consideration, I am disposed to hold that by an assignment in trust for the assignor's creditors what natural equities previously existed become suspended by an intervention of the rights of other creditors. The natural equity in offsetting cross demands, which had its rise in the rules of the civil law, was soon adopted by the court of chancery, in cases where, from the situation of the parties, cross actions at law were inadequate. Hence, if one of the parties should become insolvent, the insolvency was recognized as presenting a case for equitable interference. But the rule was limited in its application to cases where the equitable rights of others were not interfered with. Thus, in Lindsay v. Jackson, 2 Paige, 581, the bill was filed to restrain the defendants from negotiating complainant's notes to others, and for a set-off of cross demands, and the insolvency of the...