Wilson v. Exch. Bank

• Decision Date: 25 March 1905
• Citation: 122 Ga. 495,50 S.E. 357
• Parties: WILSON. v. EXCHANGE BANK.
• Court: Georgia Supreme Court

122 Ga. 495

50 S.E. 357

WILSON.

v.EXCHANGE BANK.

Supreme Court of Georgia.

March 25, 1905.

ACTION ON NOTE—SET-OFF BY INDORSER—DISMISSAL OF ACTION.

1. In an action against the maker and indors-er of a promissory note, joined in the same suit, the indorser may set off an individual claim against the plaintiff growing out of the transaction which gave rise to the execution of the note Threlkeld v. Dobbins, 45 Ga. 144, distinguished.

[Ed. Note.—For cases in point, see vol. 43, Cent. Dig. Set-Off and Counterclaim, §§ 80, 82, 85.]

2. After a valid plea of set-off has been filed, the plaintiff is not entitled to dismiss his action so as to interfere with the rights of the defendant, except upon sufficient cause shown.

(Syllabus by the Court)

Error from City Court of Atlanta; A. B. Calhoun, Judge.

Action by the Exchange Bank against Frank Williams and May C. Wilson. Judgment for plaintiff, and defendant Wilson brings error. Reversed.

Frank A. Arnold, for plaintiff in error.

Rosser & Brandon, for defendant in error.

CANDLER, J. The Exchange Bank brought suit against Frank Williams, as maker, and May C. Wilson, as indorser, on a number of promissory notes. The petition alleged that the notes were made by Williams to the J. C. Wilson Coal & Lumber Company, under which name May C. Wilson was at the time doing business, and were indorsed by May C. Wilson. The defendants filed a plea In which they denied that at the time the notes were executed May C. Wilson was doing business under the name of the J. C. Wilson Coal & Lumber Company, and averred that that company was a corporation under the laws of Georgia. They also denied Indebtedness on the notes, and averred that "plaintiff has received from defendant May C Wilson $874 on account of the transaction sued upon, and said plaintiff is indebted to defendant May C. Wilson the difference, $474, which she pleads in recoupment, and asks judgment against plaintiff for said sum." Subsequently Mrs. Wilson offered an amendment to her plea, which the court, on objections of counsel for the plaintiff, disallowed. The court also, on oral motion, struck the plea of set-off, and later passed another order, "without the knowledge or consent of defendant May C. Wilson, " permitting the plaintiff to dismiss the case at its cost. Mrs. Wilson excepts to the refusal of her amendment, the order striking her plea, and the order allowing the plaintiff to dismiss.

1. As no reference is made in the brief of counsel for the plaintiff in error to the refusal of the amendment offered by Mrs. Wilson, the assignment of error on this ruling will be treated as having been abandoned, and we will pass to the controlling question in the case, viz., whether, in a suit on a promissory note, where both maker and indorser are joined In the suit, the Indorser may set off an individual demand against the plaintiff's cause of action. This question is not without considerable difficulty. In the case of Threlkeld v. Dobbins, 45 Ga. 144, it was held broadly that "a debt due by the plaintiff to one of several defendants in a suit cannot be pleaded by the defendants as a set-off, unless there be some special cause shown." That case, however, was decided by only two judges, and hence Is not binding upon us as authority; but, aside from that consideration, an examination of the facts upon which it was based will show that the headnote, from which the foregoing quotation was taken, is much broader than the actual question decided. It appeared that Threlkeld and another had executed to Dobbins their joint promissory note; that Dobbins owed Threlkeld a sum of money for cotton which he had sold for him, and for which he had not accounted; and that Dobbins bad agreed that this sum should be entered as a credit on the joint note. It was held that this agreement was "such special claim" as could be set off against the plain-tiff's demand on the note. The cases cited by counsel for the defendant in error as being in harmony with the decision in Threlkeld v. Dobbins are also cases where a joint demand was the subject of the suit, and one of the defendants sought to set off an individual claim. With one exception, they were suits against partnerships, the exception being a suit against joint makers of a promissory note. It seems to be well settled in Georgia, as in most of the states, that in a suit against two or more persons on a joint obligation set-off is not available to less than the entire number of defendants. The reason of this rule is plain. A joint obligation is indivisible. Each one of the obligors is bound to the same extent and in the same manner as all the others. A separate judgment against less than the entire number would be impossible; and in this very fact of indivisibility lies the security to the obligee of accepting a joint obligation. That, however, is not this case. The maker and the indorser of a negotiable promissory note are severally, not jointly, bound by the instrument Their contracts are essentially different. That of the maker is to pay the note when due, according to the terms of the writing. That of the indorser is that he will pay only on certain well-defined conditions precedent. Owing to the several nature of the contract, a suit against the maker and indorser in one action was not known to the law merchant; and it was necessary to obtain a judgment against the maker before the liability of the indorser was established. The suit against maker and indorser in one action is entirely of statutory origin (14 Enc. PI. & Pr. 452, and authorities cited in note), and the Georgia statute on the subject was not enacted until 1826. Beckwith v. Carleton, 14 Ga. 693. And see generally on this subject Vinson v. Piatt, 21 Ga. 135; Lamar v. Cottle, 27 Ga. 265; Davis v. Bank, 31 Ga. 69; Ware v. Bank, 59 Ga. 844. The defense of set-off was also unknown to the common law, because "the primitive notion of an action did not admit the possibility of a defendant being an actor and interposing a claim against the plaintiff to be tried in the one suit." Pomeroy, Code Remedies (3d Ed.) § 729; Waterman, Set-off (2d Ed.) § 10. By the statute of 2 Geo. II, c. 27, § 13, it was enacted that, "where there are mutual debts between the plaintiff and defendant, * * * one debt may be set off against the other, " etc. The different states of this country have all passed statutes the practical effect of which is the same as that of the English statute, though varying somewhat in phraseology. In Georgia it is provided that "between the parties themselves any mutual demands existing at the time of the commencement of the suit may be set off;" and that "set-off must be between the same parties, and in their own right." Civ. Code 1895, §§ 3746, 3747. The exact meaning to be given to the expressions "mutual de mands" and "same parties, " as used In the statute, is the important question now to be decided. It seems to us nothing more than reasonable to hold that in a case like the present where two or more defendants are joined in an action to which they are severally liable, and in which a separate judgment may be taken against them, a cross-demand in favor of any one of the defendants against the plaintiff would come within a fair construction of the requirement of mutuality; nor can we see the necessity, in such a case, of construing the words "same parties" to mean "all the parties." We are aware that this view is in conflict with the English rule on the subject, and with the decisions of many of the courts of last resort of this country; but it is also in harmony with many American authorities of eminent respectability.

In Pomeroy's Code Remedies (3d Ed.) § 755, the author says: "The provision found in nearly all the Codes that the counterclaim must exist 'in favor of a defendant and against a plaintiff between whom a several judgment might be had in the action, ' implies that whenever the single defendant or all the defendants jointly may recover against one or some of the plaintiffs, and not against all, or whenever one or some of the defendants, and not all, may recover against the single plaintiff or all the plaintiffs jointly, or whenever both of these possibilities are combined, a counterclaim may be interposed against the one or some of the plaintiffs, and not against all, and by the one or some of the defendants and not by all. Such a severance in the recovery is possible when the right sought to be maintained on the one side and the liability to be enforced on the other are not originally joint." After a full discussion of numerous cases bearing on the subject, the author, in section 761, lays down the following rules: "First. When the defendants in an action are joint contractors, and are sued as such, no counterclaim can be made available which consists of a demand in favor of one or some of them. Secondly. When the defendants in an action are jointly and severally liable, although sued jointly, a counterclaim, consisting of a demand in favor of one or some of them, may, if otherwise without objection, be Interposed. Thirdly. Since it is possible, pursuant to express provisions of all the Codes, for persons severally liable to be sued jointly under certain circumstances in a legal action—that is, in an action brought to recover a common money judgment—a counterclaim in favor of one or more of such defendants may be pleaded and proved." In Roberts v. Donovan, 70 Cal. 108, 9 Pac. 180, 11 Pac. 599, it was held that one of two joint obligors could not set off an individual claim against the plaintiff's demand on the action; but in the opinion (page 114 of 70 Cal., page 182 of 9 Pac.) the following language was used: "The action wasbrought upon the Joint bond of all the defendants. Were it a Joint and several bond, no difficulty would arise; for where the cause of action is several, as well as joint, a several judgment may be entered without reference to the mere form of the action." In some of the states it is held flatly...