Thompson v. Sickles

Geo. G. Barnard, P. J.

The plaintiff is entitled to recover, unless the set off is established, according to. 2 Revised Statutes, page 354, subdivision 9 of section 12, Avhich provides that in an action upon a promissory note which has been assigned to .the plaintiff after it became due, a set off to the amount of the plaintiff’s debt may be made, of a demand, existing against the person Avho assigned such note after it became due, if the demand be such as might have been set off against the assignor while the note belonged to him. This statute has • been preserved by the Code, section 112.

Tavo questions are presented; first, one of pleading. Was it necessary to take the objection that the set off was barred by the statute of limitations, by a reply. ? By the practice existing before the Code, the defense presented would have been by a notice annexed • to the defendant’s plea, and no reply of the statute of limitations could be taken thereto; and if the set off was not proved to have accrued in time it would be rejected. (Martin v. Williams, 17 John. 329 .) The Code has provided for no reply to an answer which does not aver a counter-claim, Avhich it defines; *53 but which does not include the set off contained in the answer, unless the defendant moves the court for it. (Code, § 150. Vassear v. Livingston, 3 Kern. 250.) If the plaintiff’s assignor had been plaintiff he would therefore be entitled to recover the note and interest; and thus is presented the second question. Can the plaintiff avail himself of the statute of limitations to destroy the offset ?

The case of Quantock and others v. England, decides nothing upon the point in question. It was an action by the assignees of a bankrupt, against a debtor of the bankrupt. •The debtor set up that the commission was involved, because the debts of the petitioning'creditors were over six years old. The bankrupt had appeared and been examined, and made no. objection to the petitioners’ debts, and it was held that the bankrupt’s debtor could not take the objection, as the bankrupt had made none.

Murray v. Judson, ( 9 N. Y. Rep. 83 ,) only decides that a debtor may decline to set up the statute of limitations to bar a, claim without its being the slightest evidence of an intention to defraud creditors. In Peck v, Randall, 1 John. 164 ,) it was held that the defendants, who were trustees of the estate of a debtor who had absconded could set up the statute “equally as if their principal was himself the defendant that the trustees succeeded “ to the rights of their principal, and consequently to his means of defense.” Because the .trustees were vested by statute with the debtor’s estate they might protect it by this statute. It is difficult to see why the principle decided in that case does not permit the plaintiff to use this objection. He owns the note in suit. Can he not use this statute to prevent its destruction, the same as the assignor to whose rights he has succeeded; and among these rights are his means of defense. Can the plaintiff not prove payment of this .set off ? The lapse of time is but evidence of the fact of a discharge of the debt.

In Martin v. Gage, (5 Seld. 398,) the Court of Appeals permitted executors to set up the statute to bar a claim *54 which was ñot barred at their testator’s death, and when by the testator’s will he had provided for the “payment of his debts.”

I think, therefore, the learned referee erred in allowing the set off; and that there should be a.new trial at the circuit; costs to abide the event.

Clerke, J.

There is, at all events^ no preponderance of precedent, to enable us to decide this question on authority. We must, therefore, have recourse solely to principle.

Although, the note was transferred to the plaintiff aftei* it became due, it is admitted that he is the lawful owner and holder of it; and) it is not disputed that he is a holder iii good faith and for value. He is, consequently, entitled to the general.legal protection and immunities, to which any person, who may have received it before it became dtie, would have been entitled; with the single exception, that, as he received it after it became due, it is subject) in his hands, to every defense which existed in favor of the maker before it was indorsed. In this case, such .a defense did exist; namely, that the payee was indebted to the maker in a certain amount of money. for professional services. If, then) the plaintiff is the owner in good faith and for value, and has received it with the burthen and liability which adhered to it in the hands of the payee, would it be consistent with the dictates of natural justice, and the elementary principles of our law, to deny to him the rights, Which adhered to it while belonging to the payee ? If the burthen of the adhering liability has devolved on him, should he not have the benefit of the adhering right ? Are not the burthen and the right correlative ? Every evil, every duty, every, liability has its compensation; and,, if by a technical rule) the holder of a note, to whom it has been transferred after it became due, is subject to the liability referred to, it would be unjust, I think, to deny to him the couhtervailing compensation, which tjie former holder possessed.

*55 Again; I think, the maxim, which applies to grants of real estate, may-, with the same propriety, he applied to transfers of dioses .in action,. and other kinds of personal property. “Accessorium sequitur suum principale.” “The incident shall pass by the grant of the principal.'” Indeed, this maxim has been, frequently, applied to contracts and mercantile transactions^ The right, which the payee in this case possessed, to set up the statute of limitations against the maker’s demand, may, with great justice, be deemed an incident to the note—its principal.

But, it is said, the statute was made only for the benefit of the debtor himself, and that it only affects the remedy. It is not correct to say, that it was made for the benefit solely of the debtor. It was made for the general good of society ; it is a bar founded on public policy; it was designed to be a statute of repose. In the words of Mr. Justice Story, “It is a wise and beneficial law, designed to afford security against stale demands after the true state of the transaction may have been forgotten, or be incapable of explanation by reason of the death or removal of witnesses." It is just as expedient, that an assignee or transferee should have this protection, and that he should have security against such demands, as that the original owner should have them. The thing to be protected against, and the benefit arising from the protection, are as important to the one as to the other; and the repose which it secures is equally beneficial to either. The demands of public policy, upon which the statute is founded, are equally complied with, whether the claim is made against the original owner of a chose in action or his transferee.

As to the assertion that the statute only affects the remedy; if this remedy amounts to a right in effect, we have only to consider, as we have been considering, what, as in other cases, was the purpose of the statute, in order to ascertain whether it should be extended to .the position which the plaintiff occupies in this case,

*56 [New York Genebai, Term, April 2, 1866.

I can. discover no substantial reason why the benefit of the statute should not be extended to the assignee or transferee of any assignable demand.

I concur with the presiding justice in thinking, that the judgment should be reversed and a new trial ordered; costs to abide the event.

Sutheeland, J. concurred.

Judgment reversed.

Geo. G. Barnard, Olorice and Sutherland^ Justices.]