Smith v. Warner

16 Mich. 390, 1868 Mich. LEXIS 17

Opinion

Cooley Ch. J.

When this case was presented for our consideration before, the principal question which arose upon the record was, whether the claim of the plaintiff of damages for the non-delivery of a portion of the personal property which, by the contract, the defendants were to transfer to him, was to be considered a claim for unliquidated damages or not. It was not disputed, as we understood it, that an allowance had been made by the referee for such damages; but whether that was so or not, there was nothing in the referee’s report to show that he had not done so, and the inference that he had was fairly deducible. We did not intend, in our decision, to go beyond the case then before us to discuss other questions; and the decision was carefully restricted to the precise points then presented by the record.

The present record presents a different case. It now appears distinctly from the report of the referees, whose con-, elusions of fact we must receive as correct, that although the plaintiff presented for their consideration a claim for unliquidated damages, yet that claim turned out on investigation, to be baseless, and that the only claims which the plaintiff was able to substantiate before them were claims which are subject to set-off under the statute. Upon this report the question arises, whether the joinder by the plaintiff of an unfounded claim for unliquidated damages in the same suit with other claims which are subject to set - off, will preclude the defendants from that legal right which they would have had to reduce the plaintiffs’ just demands by counter claims, had the latter been sued alone?

If this question is decided in the, plaintiff’s favor, it must be upon the mere fact that the claim lo unliquidated damages is asserted by Mm. It cannot depend upon his motives in making the assertion, because in most cases it would be impossible to determine what those motives were. It is very easy where parties hare had mutual dealings to assert an unfounded claim; and if the mere assertion, and perhajos the offer of some evidence in its support, will be sufficient to exclude the legal right to a set - off, it will be easy enough to accomplish that result and defeat the purpose of the statute of set-off in a large proportion of the cases where it is justly applicable.

There is nothing in the statute, however, which makes the right to a set-off depend upon the form of the plaintiff’s declaration, or upon his having asserted other claims than those to which the set-off is made. If the demand of the defendant is one in other respects within the statute, so as to be a proper set-off, the only restriction upon the right is, that the plaintiff’s action shall be “founded upon demands which could themselves be the subject of set-off according to law.” Now, when it appears by the record that a demand was asserted that was baseless, but that others were not only asserted but established by evidence, it seems to us somewhat difficult to say that the plaintiff’s action was based upon the unfounded claim. The contrary is clearly the legal inference; and as it also gives effect to the plain intention and purpose of the statute — which is to make claims of a certain nature offset each other — we think the referees were right in holding the case to be one in which set-offs were allowable.

There may be difficulties in the practical application of this ruling in some cases; but the practical administration of the law of set-off is always open to difficulty, and this fact, therefore, is not sufficient reason for an attempt to put a construction upon the statute different from that which a reasonable interpretation of its terms will warrant. There are many cases where it is admissible for a defendant to put in evidence of a set-off, which after all may require to be rejected by the jury, because their finding upon some disputed fact makes the set-off not allowable, when, had their finding on that fact been otherwise, it would have been admissible. This may happen where the plaintiff’s claim has been assigned, and the time of the assignment is disputed, and also when the defendant gives evidence of. an assignment as a foundation for introducing a set-off against the assignee; and the plaintiff denies that any such assignment has been made. We suggest these cases as presenting the same difficulty which is supposed to be so formidable here; but many others might also be indicated.

It is also insisted that the allowance of set-off was erroneous because the principal portion of the plaintiff’s demand was established under the special count in his declaration; while the offer of set-off was expressly confined to the common counts. This objection, however, does not seem to us well founded. The plaintiff declared specially for the non-performance by defendants of an agreement in writing; but while he averred in general terms that the defendants had failed to make good and perform the contract in each and every other particular, the only special breach alleged was in the delivery of the personal property The claim upon that was for unliquidated damages; and as without that special assignment of breach, the declaration would have been subject to special demurrer, the defendants were justified in supposing the plaintiff’s claim, under that count, was confined to that one demand; especially as he joined the common counts, which were sufficient to cover all his other claims. The notice of set - off was evidently confined to the common counts because the 'special count asserted a claim which was not the subject of set-off; and we think all the allowances made to the plaintiff by the referees, must be considered as made under the common counts.

The plaintiff also claims that all the demands allowed to the defendants should have been excluded because purchased by them under such circumstances as would preclude their claiming to be owners thereof in good faith; and to this point a number of oases were cited. All of those cases, however, were cases where the plaintiff’s demand had become, either legally or equitably, a fund for the payment of his debts, and where it would be plainly inequitable to creditors to allow the set-off to be made. They evidently have no application to the case at bar. The plaintiff’s demand in this case has been assigned, but not to creditors, and the assignees in law are not recognized as having any greater rights or equities than he would have had himself. All the demands of the defendants were owned by theni at the time of the assignment save one, and that was purchased before notice of the assignment, and before the suit was commenced. The statute makes the demands a proper set-off if they belonged to the defendants in good faith before notice' of the assignment. The plaintiff says they did not, because the defendants well knew he was insolvent, and had been for a long time; and the defendants were bound to presume that under such circumstances he had disposed of the demand against them. But a party can hardly be bound, in the law, to presume things which do not exist; and in this case it affirmatively appears that plaintiff did not dispose of his demand until defendants had become owners of more than enough to extinguish it. But it is also objected that the fact that defendants bought the demands at a very great discount, is evidence that they do not hold them in good faith. This objection, however, evidently proceeds upon a misapprehension of the meaning of the terms “good faith,” as used in the statute in reference to the ownership of the claims offered in set-off. All that the statute contemplates is, that the demands shall be actually, and not merely colorably, owned by the defendants; and the actual ownership by defendants is not disputed in this case. The amount they paid for them is immaterial.

The judgment of the court below must be affirmed, with costs.

Campbell and Graves JJ. concurred. Christiancy J. did not sit.