Birmingham Trust and Savings Company, a corporation existing under the laws of Alabama, Plaintiff in Error, vs. Jackson County Mill Company, a corporation existing under the laws of Florida, Defendant in Error, 41 Fla. 498

Mabry, J. (after stating the facts): This case must be disposed of on the demurrer to the plea filed by the defendant in error.

The cause of action sued on is alleged to be an obligation in writing whereby the defendant in error promised to pay to the order of a corporation called the Northington Munger Pratt Company two hundred and thirty-eight and 50-100 dollars, and all costs for collecting, including a reasonable attorney’s fee, being part payment for ginning outfit, and that said obligation was before maturity, duly endorsed, transferred and assigned, for valuable consideration, to the plaintiff, the Birmingham Trust and Savings Company.

The plea is in set-off, and alleges that at the date of the transfer of the cause of action the Northington Munger Pratt Company was, and still is, indebted to the defendant in the sum of three hundred and twenty dollars for commissions due by said Northington Munger Pratt Company to defendant upon the sale of certain machinery sold by said company to the firm of Dickenson & Erwin, in Jackson county, Florida, said commissions being due defendant as agent for the Northington Munger Pratt Company in said county.

The demand sought to be interposed as a set-off is not alleged to be connected in any way with the obligation transaction sued on, but is a separate and independent claim alleged to be due defendant from plaintiff’s assignor at the date of assignment. The question presented by the plea and demurrer thereto is whether such a demand can, under the conditions stated, be allowed as a set-off under our statute on the subject. The obligation sued on contains many stipulations, and we assume without discussion that it is not negotiable according to the law merchant.

It is an obligation in writing to pay money, and under the statutes of this State is negotiable to the extent of being assigned or endorsed and of authorizing the assignee or endorsee to sue thereon in his own name. The statute (§!073, Rev. Stats.,) authorizes the assignment or endorsement of bonds, notes, covenants, deeds, bills of exchange, &c., and vests the assignee or endorsee with the same rights, powers and capacities as might have been possessed by the assignor or endorser.

It also in terms authorizes the assignee or endorsee’of such obligations to bring suit thereon. ' As to obligations to pay money not negotiable according to the law merchants, it may be conceded, under the construction of the statute in this State, up to the time of the commencement of this suit, that an assignee or endorsee stands upon the same footing as thq assignor would have stood if the assignment had-not been made. Cotten v. Williams, 1 Fla. 37; White v. Camp, Ibid. 94; Sinclair v. Gray, 9 Fla. 71; Bellas v. Keyser, 17 Fla. 100.

This construction of the statute may necessitate the conclusion that an assignee or endorsee of such paper takes it subject to all legitimate defenses, connected therewith that the obligor had against the assignor, but it does not determine the question now presented, whether in a suit by an assignee or endorsee of an assignable chose in action against the payor, the latter can avail himself by plea of off-set of ah independent demand against the assignor. This question must be determined by a proper construction of our statute of set-off.

It reads as follows: “All debts or demands mutually existing between the parties at the commencement of the action, whether the same be liquidated or not, shall be proper subjects of set-off, and may be pleaded accordingly. The defendant, at the time of the filing of the plea, shall file therewith a true copy of the subject-matter of such set-off; and upon the trial of the cause, in case the jury shall find a balance for the defendant, such defendant may claim a judgment for the same, and take out execution accordingly.” It was held in Buffington v.

Quackenboss, 5 Fla. 196, that the statute gives the defendant the right to> have judgment for the balance which the jury on the trial of the cause may find in his favor. In Kilcrease v. White, 6 Fla. 45, the endorsee after maturity of a promissory note sued the maker and he interposed a plea of set-off for goods sold and delivered to the payee after the making of the note and before the commencement of the suit.

On demurrer to the plea this court said “that the question thus presented does not rest upon our statute of set-off (which is in substance the same as that of the English statute, so far as regards the set-off of mutual debts), but upon the principles of the law merchant; the statute does not apply to it.” The plea was held bad, and the ruling of the court was that the endorsee of an overdue promissory note takes it as against the maker, with all the equities arising out of the note transaction itself, but not subject to a set-off in respect to a debt due from the endorser to the maker of the note, arising out of collateral matters; and that this doctrine was based upon the law merchant, and not the statute of set-off.

This case is cited by counsel for plaintiff in error. It is insisted by counsel for defendant in error that this case can not be regarded as an authority adverse to the right of set-off of collateral matters against the assignee of a chose in action not negotiable according to the law merchant. In a case reported in the same volume, Hooker v. Gallagher, 351, text 356, it is said “a promissory note payable to order, is a negotiable instrument, and must be endorsed to give the holder (other than the payee) a right to call on the maker for payment, or to bring suit against him in his own name.

The defendant, however, did not rely upon this principle, but put in several pleas, in two of which he attempted to set-off debts alleged to be due tof him from one William Butler, an intermediate holder of the note. These pleas were clearly bad, whether the note was in point of fact endorsed or not, as our statute of set-off (Thornp.

Dig. p. 347 §2) only allows a set-off between the parties to the action.” This statement, though it may not have been necessary in disposing of the case, shows that in the year 1855 the court was of the opinion that the statute allowed off-sets only between the parties to the action. In the case reported in the 7th Fla. 329 (Mitchell v. McLean), the court held that a set-off was in the nature of a cross-action, and, to maintain it, the same principles must govern in the one as in the other.

The^ English statute of set-off, said in one of the cited opinions to- be in substance the same as ours so far as regards mutual debts, provided that where there are mutual debts between the plaintiff and defendant, or if either party sue or be sued as executor or administrator, where there are mutual ' debts between the testator or intestate and either party, one debt may be set against the other. It also provided that such demands might be given in evidence under the general issue with notice or be specially pleaded. 8 Bacon’s Abr. 640 (A).

There was no provision for judgment in favor of defendant when his demand exceeded that of the plaintiff, as is found in our statute. In the case of Isberg v. Bowden, 8 Exch. (Welsby, H. & G.) 851, it was, after mature deliberation, held that the statute of set-off was confined to legal debts between the parties to the suit, the sole object being to prevent cross-actions between the same parties.

The concluding language of the opinion is: “In this case the party whom the defendant agreed to- pay was the plaintiff, but the plaintiff was not the party who agreed to- pay the defendant the debt sought to be set-off; and we think that, looking at the plain words of the statute, we best give effect to the true rule now adopted by all the courts at Westminster for its construction, by holding that, inasmuch as the debts are not mutual debts between the plaintiff and defendant, the one can not be a set-off against the other.

This is acting upon the rule as to give effect to all the words of the statute, a rule universally applicable to all writings, and which, we think, ought not to be departed from except upon very clear and strong grounds, which do no-t, in our opinion, exist in this cause.” It is true that under the influence of the decisions in Bottomley v. Brooke, and Rudge v. Birch, referred to in the case of Winch v.

Keeley, 1 Term, 619, it appeared for a time that the English courts would put such construction upon their statute of set-off as would sustain the plea in the case before us, but these decisions were overruled and the rule established as announced in Isberg v. Bowden. An early statute in New York was very similar to ours (Raymond v. Wheeler, 9 Cowen, 295), and it appears that the New York court was of the opinion that the provision in the statute in reference to giving judgment for defendant when his demand was the greater, showed that the set-off must'be against the plaintiff on the record.

The court seem to concede that under the English decisions of Bottomley v. Brooke and Rudge v. Birch an off-set would not be excluded by the New York statute on the ground of not being against a party to the record in the absence Of the provision in reference to giving judgment for defendant when the jury returned an amount in his favor. This question was very much debated at an early day in that State, as will be shown by the cases of Wheeley v. Raymond, 5 Cowen, 231; Raymond v. Wheeler, 9 Cowen, 295; Johnson v. Bridge, 7 Cowen, 693; Bridge v. Johnson, 5 Wend. 342.

In the last case the judgment was affirmed by a tie vote. The legislature, it seems, amended the statute soon after it was so construed by the court, and it is doubtful if such construction was ever thereafter generally regarded even by judges as correct, still the last decisions on the statute before its amendment were against the right of set-off.

The text-books and digest-makers assert as a general and well-settled rule that an assignee of a chose in action holds subject to all equities and off-sets which ex-, isted at the time of the assignment, and it is also sometimes stated that the assignment of the cause of action under statutes with right to sue in the name of the assignee does not affect such rights of the parties.

So far as equities and defenses connected with the transaction itself are concerned, the statement is entirely correct, but in reference to- the right of a defendant at law to set-off an independent demand of any kind against the plaintiff, it must depend upon statutory regulation. There was no such defense at common law as set-off and it can be allowed only by a statute.

Statutes in many States in authorizing the assignment of choses in action expressly provide that assignees take subject to all proper off-sets, but we have no¡ such regulation, and our statute on the subject requires, we think, that the demands shall be between the parties to the suit at the commencement of the action. The foregoing was substantially the opinion filed in this case before a rehearing was granted, which was done in order that the question might be again considered by a full bench. After such consideration we are. of opinion that the conclusion reached is correct, and adhere to it.

The question decided in the case of Howe v. Hyer Bros., 36 Fla. 12, 17 South. Rep. 925, we regard as different from the one presented in the present case, and not in conflict with our present views. The right of set-off is dependent entirely upon statute, and the construction we put upon ours is that at law the demands that may be set-off must mutually exist between the parties to the suit at the time of the commencement of the action.

The right of set-off in cases of assignments by operation of law, such as in bankruptcy, insolvency or administrative proceedings, may present questions not determined in this decision. The judgment will be reversed with directions for the Circuit Court to sustain the demurrer of plaintiff in error to the plea of set-off by defendant in error, and for such other proceedings as may be consistent with law. So ordered.