Chance v. Isaacs and another, 2 Edw. Ch. 348

The Vice-Chancellor.: When this cause was before me upon the demurrer, the latter was overruled, upon the ground alleged in the bill: that the defendant, Smyth, held the two notes given by the complainant to the defendant, Isaacs, merely as trustee for Isaacs. This did not interfere with the complainant’s right of set-off, especially in equity. The answer of the defendants has, however, placed the matter on different ground. . It shews that Isaac F. Smyth holds the notes—not in trust for Solomon J.

Isaacs : but for his creditors, under a general assignment for their benefit, made on the eighteenth day of January, one thousand eight hundred and thirty-four, and which was previous to the notes on either side becoming due. As the cause is now submitted on bill and answer, the question is, upon the facts presented by the answer, whether the complainant has a right to set off Isaacs’ note for six hundred and eighty-seven dollars and twenty-eight cents, which he holds, against the two notes he gave to Isaacs and which passed by his assignment to the defendant' Smyth ?

In order to give him this right, the note for six hundred and eighty-seven dollars and twenty-eight cents should have been due and payable and held by him when the transfer of the two notes was made by the assignment. At that time the complainant was not a creditor of the defendant Solomon J. Isaacs, with a right of any action against him. The note was outstanding in the hands of a third person, with the complainant’s endorsement, but not payable until the thirtieth day of January, one thousand eight hundred and thirty-four; when, he was compelled to take it up as endorser.

Then, for the first time, a right of action accrued upon the note; but, previous to this, Isaacs had parted with the two notes given to him by the complainant and thereby the mutuality of indebtedness between the complainant and Isaacs, (and which is necessary to a set-off,) was destroyed. In order to bring this ease within the principle of Lindsay v. Jackson, 2 Paige’s C.

R. 581, the note, which the complainant now seeks to set off, should have been due and held by him while the other notes were in Isaacs’ possession; and then, by reason of the insolvency of Isaacs and the complainant being willing to forego the credit upon his own giotes, and choosing to treat them as due, he would have an equitable right to make a set-off at once; and if refused, then to apply to this court for an injunction and for relief, Not being in the situation of a creditor, with a right to demand payment at the time the transfer to Smyth was made, the complainant has lost that right.

He has now no such equity against the assignee. Upon the failure and insolvency of Isaacs, he, Isaacs, was at liberty to make such disposition and appropriation of his property in good faith for the benefit of his creditors as he thought proper. The complainant had no equity to prevent him from so doing; and I see nothing to impeach the validity of the assignment. Smyth has a legal title, and may be regarded as a bona fide holder of the two notes for a valuable consideration in behalf of creditors generally under the trusts of the assignment.

The notes being negotiable by endorsement, he may sue upon them in his own name. This is not a case where an equitable set-off can be allowed to interfere with such legal right. The assignee has the legal right; and there is as strong a natural equity that the whole of the estate of .the insolvent should be distributed rateably among the creditors, as that a part of the assets should be first set apart and applied to compensate the particular debt of the complainant. Where the equities are as strong on one side as the other, the legal right must be left to prevail. In Miller v.

The Receiver of the Franklin Bank, 1 Paige’s C. R. 444, a set-off was allowed : but there a clear right to it existed at law when the affairs of the bank were placed in the hands of a receiver and that step could not divest the party of his legal right. I think this case is different; and, upon no principle, can the complainant have the relief for which his bill seeks. Bill dismissed, with costs.