Duff v. Hobbs

California Supreme Court Jul 1, 1862Published

Before: Norton

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Holding. The court held that a defendant cannot offset a claim against a third party against the plaintiff in an action at law, as the Civil Practice Act requires offsets to be between the parties to the record. Equitable insolvency of a beneficial owner does not override these statutory requirements for counterclaims in legal actions.

Issues

Whether a defendant may offset a claim against a third party against the plaintiff in an action at law.
Whether insolvency of a beneficial owner provides an equitable basis to bypass statutory requirements for offsets between parties to the record.

Disposition. affirmed

Quotations verified verbatim against the opinion

“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”

“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”

Synopsis

Action on an appeal bond, in which defendants claim the right to offset the bal anee of a decree in a foreclosure suit, which they have pm-chased and now hold against James It. Duff and James T. Ryan, and eleven other defendants in that 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 the other eleven defendants in the decree sought to be offset are insolvent: Held, that the set-off cannot be allowed, as well because of the provisions of section forty-seven of the Practice Act, which require a counter claim to be between parties to the record, between whom a several judgment might be had in the action, 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 defendants have any demand.

Held, further, that the matter setup in the answer is not a defense, legal or equitable, in any other sense than as being purely an offset, and therefore such matter cannot be relied on as an equitable defense, independent of and beyond the right of offset given by the Practice Act.

Naglee v. Palmer (7 Cal. 543) and Russell v. Conway, (11 Cal. 93) upon this subject of offset, and the distinction, if any, under our system between actions at law and in equity, commented on.

Norton, J. delivered the opinion of the Court Field, C. J. concurring.

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.

[658]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 (hat 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 —that 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.

Duff v. Hobbs

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