McKenna v. Kirkwood

Gbkves, G. J.

The complainant on the first of August, 1871, hired of James Mathews, then a banker of Negaunee, the sum of $700 for the period of one year, with interest, and to secure the payment of this loan executed and delivered his promissory note and also his mortgage on lot nineteen in a subdivision of the village of Negaunee. The mortgage was duly recorded.

In the fall of 1873 and prior to October 16th the complainant left with Mathews $200 at one time and $100 at another; the object of the latter being to assist Mathews during a ran upon his bank. October 16th the complainant made a deposit’ with him of $591 and received a certificate therefor payable to complainant’s order with interest at seven per cent, on return of the certificate properly endorsed. But no interest was to be paid in case the certificate should be presented within three months. October 21st, 1873, and more than a year after the maturity of the mortgage debt from complainant to Mathews, and some time subsequent to the origin of the debt from Mathews to complainant for $300 and five days subsequent to the certificate of deposit, the defendant received from Mathews an assignment of the note and mortgage. He paid a full consideration and had no *547 actual notice of any set-off or counter claim. On the 22d or 23d of October Mathews stopped payment and on the last day of the same month he was proceeded against in bankruptcy, and on the 17th of the following November he was adjudged a bankrupt. December 2d, 1873, complainant proved his entire claim as an unsecured creditor, and in June, 1875, received a dividend of $90.25 and in July, 1882, and subsequent to the commencement of this suit, he received a second and final dividend of $85.43.

About December 9th, 1874, complainant apprised the defendant of his claim and insisted on its application against the mortgage debt, but the defendant refused. This suit was instituted June 11, 1877, to compel such application .and obtain a cancellation or discharge of the mortgage or other relief in the nature of a redemption. At that time, however, the bankruptcy proceedings were still pending, but at a later date they were fully closed and the entire assets distributed, and the complainant brought the new matter before the court by supplemental bill. The court decreed in his favor and the defendant appealed.

At the time of Mathews’ transfer to defendant the note and mortgage were long past due. They were taken subject, therefore, to whatever equitable right, if any, which complainant then held to set off his claim. The position which the defendant gained as assignee was precisely the position which Mathews, his assignor, occupied at the time: Dutton v. Ives 5 Mich. 515 ; Helmer v. Krolick 36 Mich. 371 ; and there is no room for controversy in regard to the nature of that position. The claims held by complainant were ripe for assertion on his part. They were just as mature and perfect as grounds or matters of set-off as were the note and mortgage as cause of action. Neither time nor ceremony was necessary to render them actionable. The right was complete. Had Mathews brought an action upon the note nothing could have kept out the certificate of deposit and the demand for $300 as matters of set-off.

The right of set-off existed, therefore, at the time of the assignment, and defendant took subject to it. Was it *548 lost subsequently because of complainant’s connection with the bankruptcy proceedings ? There is no evidence that the chance to realize out of the estate of Mathews was lessened or impaired by any action or inaction of complainant, and there is no presumption that the defendant could have obtained any more than he did. Moreover we discover no effort or desire of the defendant to interpose and look after matters for himself.

Whether a duty which a court of equity would enforce rested on complainant to secure from the bankruptcy assets the' utmost dividend as a means to diminish as much as possible the defendant’s loss it is not necessary to inquire. The duty was assumed, and so far as the case discloses any thing on the subject it seems to have been well performed, and the Court is aware of no principle on which to consider this service as operating to preclude a set-off of the amount unobtained by it. The provisions of the bankrupt law do not affect the question. In short we find nothing subsequent to the assignment to impair the right which the com-X>lainant held at that time, except in so far as he succeeded in realizing from the assets in bankruptcy.

The decree finds that complainant’s claim was in excess of the mortgage debt $35.46 ; but that the dividends in bankruptcy so far exceeded that balance that complainant held at the date of the decree an overplus of $165.64, and it ordered him to pay it in thirty days to defendant’s solicitor or to the register of the court, less, however, the complainant’s costs. It also appears from the case that at the filing of the bill the complainant held a small balance produced by the first dividend in the bankruptcy proceedings. The decree should be varied so as to require the payment of the $165.64 within some proper time and in case of default to provide for a sale as on foreclosure. Fosdick v. Van Husan 21 Mich. 561 .

Except as here mentioned the decision below is affirmed. The case must be remanded with directions to modify the decree as suggested and for such further proceedings as may be necessary. As the complainant failed to tender before *549 suit the amount to which defendant was equitably entitled, it would have been proper to award costs against him in the circuit court. Under all the circumstances the affirmance will be without costs of either court.

Campbell and Cooley, JJ. concurred.